“Why are banks that we bailed out allowed to award themselves billions in bonuses?”

You can see they allowed the Murphmeister to do the PR copy there.

Sheesh.

@1

Seems like a reasonable question. If banks we helped prop up with taxpayers money are awarding themselves bonuses then logic follows that they are making vast profits – and if that’s the case, then why haven’t they paid back the billions we gave them? I thought we were all in this together?

No, that’s not what I mean. It should read “Why are the bankers in the banks that we bailed out…..”

Bit of a pedantic point, no? Most people understand banks to be made up of bankers, after all…

All I can say about Tim W and pedantry is….

http://leftoutside.wordpress.com/2011/03/29/chutzpah-tim-worstall-argues-against-pedantry/

pwned!

OUCH. I nearly feel sorry for Mr W.

5 – Well, the RNLI ended up £20 better off, so everyone was a winner from that one.

where did our money go?

well, mostly either loans that have been repaid with interest, or it was used to recapitalize banks in exchange for equity that we might even be able to sell at a profit.

honestly, why ask that question if you’re not really interested in the answer. I bet the last thing this event is going to do is present careful analysis of where they money went and what we repaid, what fees and interest was paid, and the value of our equity stakes.

@8

Hang on though Louis. Are you saying that the banks/bankers have paid back £850billion? Or that the gov could sell its shares and raise that back? http://www.independent.co.uk/news/uk/politics/163850bn-official-cost-of-the-bank-bailout-1833830.html
Cos if that’s the case I’m not sure why the government is cutting absolutely everything.

Explain please…& I actually value your opinion more than Mr W’s …

*sorry, should read Luis – bloody typos.

Mr S Pill I am flattered but don’t have too much faith in me – I get things wrong!

as far as I understand it, that £850bn figure includes things like £200bn “liquidity support” fund (i.e. something like a short-term loan fund) and other things that are analogous to insurance in the sense that there is a gross sum insured (up to £X!) but that might never be claimed and also against which fees are paid. The actual money handed out was much less than £850bn – that £850bn figure is more like the “amount of support” referred to by the NAO, for example here but if you read further down the page they start talking about the cost of that support and write “the most likely scenario is that there will be no overall loss on the main guarantees” – although a lot hangs on how much we manage to sell our shares in the banks for, and I think Northern Rock still owes us £50bn or so. If you google works like “bank repay bailout loans” you can find reports in dribs and drabs of the money coming back. As the NAO says, we won’t know the final cost of the bailouts (how much money we ended up spending) for some time, but some think (like I link to above) the taxpayer may even turn a profit.

The reason why the government is cutting everything is that the banks caused a titanic recessions, tax receipts collapsed, expenditures ballooned and we have discovered we’re not as wealthy as we thought we were when Gordon was planning his budgets.

So it’s still the banks’ fault, but because of what they did to the economy, not because of the bailouts themselves.

I presume the reason so few people on the “activist” side of the left-wing seem so uninterested in these distinctions, and continue to happily peddle the view that the cuts are because of the bailouts – is because people are more interested in compelling stories than accuracy.

Someone tell the organisers of the event that its the bankers and not the banks. There’s probably still time to cancel.

I think it’s questionable that the banks caused the recession. I think questionable lending encouraged by governments and banks caused an excess of liquidity from 2005-7 and the sudden end to this led to the sharp drop at the end of 2008. However, at the end of any credit cycle there is usually a recession of some kind. To blame it on individual bankers is fun but not particularly informative.

@. Luis Enrique

Thanks for that, looks like I’ve got some reading to be getting on with this evening then… out of interest (& wildly off-topic) could you recommend any economics books to get clued up about this kinda stuff? I’ve read some very beginners-type things but they never seem to deal with the complicated stuff for obvious reasons… somewhere between (say) Freakonomics and an undergraduate textbook would suit me!

oh blimey, there are tons of books on the crises itself, lots focussing on shenanigans and double-dealing …. I can’t immediately think of any books that are simply about the mechanics of how banks fail and how bailouts work, or alternatively just about how a financial crisis can cause a recession.

He’s partisan, and sometimes blind to the strengths of his opponents’ arguments, but Paul Krugman’s “The Return of Depression Economics” has to be a good place to start – he’s a very good writer, knows his stuff, and if you are a lefty you will share his sympathies.

I haven’t read it, but if you are after a better-than-freakonomics survey of economics, that tries to be accessible, I’ve heard Diana Coyle’s “The Soulful Science” is good. Here’s a short review by Tim Hartford:
http://timharford.com/2007/01/review-the-soulful-science-diane-coyle/

her latest, “The Economics of Enough” is supposed to be good too

I’m at the ballet that night, luckily.

I’m not sure my (otherwise bang on normal) blood pressure could stand the wibbling of that particular panel.

Luis – if yours could you should go!

re books, I’d avoid the much-praised book from Gillian Tett. The only area of expertise she has is derivatives (because she became friendly with one bank), so her understanding of the crisis is purely based on derivatives (which it wasn’t). It was largely because of frothy deals stemming from an excess of liquidity and lax regulation.

14 – “Whoops” by John Lanchester is accessible and quite funny. “Too Big to Fail” by Andrew Sorkin is also a great read. They’re both on the financial crisis itself, rather than the financial system as a whole.

Thanks for the suggestions everyone now, back to bickering…

@Mr S. Pill #9:

Luis has already given you a reading list – but you could usefully read the Independent story you linked. Of the £850bn they mention, £770bn is in the form of loans, indemnities to the BoE, guarantees and insurance:

“indemnifying the Bank of England against losses incurred in providing more than £200bn of liquidity support; guaranteeing up to £250bn of wholesale borrowing by banks to strengthen liquidity; providing £40bn of loans and other funding to Bradford & Bingley and the Financial Services Compensation Scheme; and insurance cover of over £280bn for bank assets.”

Since, as Luis points out, the insurance/indemnity/guarantees are unlikely to be called upon, and the FSCS is good for the money, the main actual expenditure is the £76bn paid for Lloyds and RBS shares – which may well be sold at a profit.

This may also help – there is mention of a figure of £2bn total cost of the bailout, once everything unwinds…

http://www.parliament.uk/briefingpapers/commons/lib/research/briefings/Snbt-05748.pdf