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  #1041  
Old 04.06.2009, 13:47
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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Although I am on the side of the people who want to limit payment of bonuses some recent news made me wonder about the wisdom, or not, of governments playing around with how companies reward their employees.
Having started work in the UK in the 1970s and seeing the meddling of governments both then and more recently, I have grave reservations about such moves.

For a start, should bonuses be limited for the guy who achieves substantial cost savings by streamlining business processes? What about the sales guy who grows the business significantly?

OK, recent events have demonstrated problems in both those scenarios, but the problem is not only "Where do you draw the line?", but should politicians even have a say in the matter (given the current admissions of UK MPs fiddling expenses)?
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  #1042  
Old 04.06.2009, 14:10
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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OK, recent events have demonstrated problems in both those scenarios, but the problem is not only "Where do you draw the line?", but should politicians even have a say in the matter (given the current admissions of UK MPs fiddling expenses)?
Where you draw line is excessive payouts and actually it's not that hard to pick these out. Key people should and will be paid - just not all in one year like it was before, not all in cash but more in stock and payouts will be subject to clawbacks in future years if it turns out the payouts were unwarranted. Most banks are moving to this model anyway due to political/shareholder pressure and the days of a bonus free for all are over.

Politicians should only have a have a say in the comp of companies in which the taxpayer is a shareholder or which is being supported by public money. It's very early days yet - we've only seen one comp cycle and taxpayer outrage is still strong enough that politicians need to respond with strong rhetoric.

The way it works is after a short while the banks will all gravitate to a similar new model, they'll adopt similar payout scales. Banks have always spent a lot of time grading rank and file employees and checking pay scales with headhunters and with competitors directly to make sure they pay the going rate. Top managers and key revenue producers get paid according to performance and the government will become pragmatic and won't object to key players being paid the market rate - whatever that is! What will change is the rising tide syndrome. In the last decade and in the past five years in particular, bank profits have been fueled by cheap credit, excessive risk and excessive leverage. That meant there was plenty of money to pay fat bonuses to people who didn't deserve them - hence the rising tide lifts all syndrome. All that easy money has gone, profits aren't going back to where they were so what profits there are will be skewed much more towards bonuses of those who produce the profit.

The problem for some banks like UBS is a bigger one. As we saw in the last quarter, Goldman, JP Morgan and others made the bulk of their profits from Investment banking - the very business UBS is downsizing. As I said before, that's why UBS folks are jumping ship.

Last edited by Nev; 04.06.2009 at 14:51.
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  #1043  
Old 04.06.2009, 16:28
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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..........I don't think has much to do with bonuses though Marton. Morgan Stanley is also subject to scrutinization of bonuses and any new regulations brought in by the SNB to limit bonuses will affect Credit Suisse as much as UBS. What these defections will have more to do with is the appalling morale at UBS's investment bank given it's announced decision to downsize the investment bank and wind down risk taking there. It's difficult to operate a derivatives business in particular without the ability to take risk. Defections aren't surprising.
I am sure you are correct; I was having a contentious moment.

Interesting to see how the UK elections today will turn out. If people are really upset by the corrupt politicians or apathetic as usual.

Marton
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  #1044  
Old 10.06.2009, 15:59
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

Green shoots?
"Ten financial groups including JPMorgan Chase and Goldman Sachs were on Tuesday allowed to repay a combined $68bn to the US Treasury in a move that marks a turning point in the economic crisis but formalises the divide between healthy and fragile banks.

The companies, which also include Morgan Stanley and American Express, can now shed the restrictions on pay and hiring that came with the troubled asset relief programme launched last year at the height of the turmoil in global markets"

Looks like some light appearing at the end of the tunnel?

Marton

Last edited by marton; 10.06.2009 at 15:59. Reason: spelling!
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  #1045  
Old 10.06.2009, 19:50
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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Green shoots?
"Ten financial groups including JPMorgan Chase and Goldman Sachs were on Tuesday allowed to repay a combined $68bn to the US Treasury in a move that marks a turning point in the economic crisis but formalises the divide between healthy and fragile banks.

The companies, which also include Morgan Stanley and American Express, can now shed the restrictions on pay and hiring that came with the troubled asset relief programme launched last year at the height of the turmoil in global markets"

Looks like some light appearing at the end of the tunnel?

Marton
The light at-the-end-of-the-tunnel may only be for the top management greedy for big bonuses. Not sure that anyone else benefits.
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  #1046  
Old 11.06.2009, 10:15
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

You should try listening to the UK media - as far as they're concerned the economic crisis is practically a forgotten memory. All the buzz is that the bullet has been dodged.

They don't seem to realise that all the bad debt of the banks has now been assumed by the state - ie themselves. In the meantime, no sign of the slackening of money printing or interest rates being raised even though equities and commodities appear to be recovering quite strongly.

Interesting times ahead.......
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  #1047  
Old 11.06.2009, 10:23
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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You should try listening to the UK media - as far as they're concerned the economic crisis is practically a forgotten memory. All the buzz is that the bullet has been dodged.

They don't seem to realise that all the bad debt of the banks has now been assumed by the state - ie themselves. In the meantime, no sign of the slackening of money printing or interest rates being raised even though equities and commodities appear to be recovering quite strongly.

Interesting times ahead.......
Yes I saw a headline something like "UK leading the way out of the global recession..."
All true about "bad debt of the banks" & "money printing".

I just hope it will not be a double dip recession. It is hard to see what is driving this recovery, until this is understood then there are significant risks.

Marton
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  #1048  
Old 11.06.2009, 10:33
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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Yes I saw a headline something like "UK leading the way out of the global recession..."
All true about "bad debt of the banks" & "money printing".

I just hope it will not be a double dip recession. It is hard to see what is driving this recovery, until this is understood then there are significant risks.

Marton
I think there are two things driving the 'recovery'

(1) The global financial system didn't implode even though most people had priced it in as a strong possibility

(2) All the various stimuli are kicking in. Enormous bailouts for the banks and selected businesses, almost zero percent interest rates so overborrowed consumers don't have to face up to their debts, massive amounts of money being printed.


The question is will it continue or will it collapse? As long as the governments keep with the zero percent rates and money flying out of the printing presses I don't see why the nominal value of commodities and equities should do anything but go up, up, up.

Of course, what happens to people's living standards and savings is another matter. I think we are in for stagflation - very low economic growth but prices shooting up.
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  #1049  
Old 11.06.2009, 12:05
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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Green shoots?
weeds, methinks...

The named banks did not need the cash in the first place but were forced to take it, just so that Citi, standing naked and alone in the corner wouldn't feel so naked

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Looks like some light appearing at the end of the tunnel?
and that light could well be a locomotive coming in the other direction

nothing has been done so far to fix anything that was wrong with the financial markets. thus 'liberated', the so called healthy banks are free again to take outlandish risk, expand their balance sheets, and to line their pockets with bonuses.

and of course, the bills for all this extravagance the US has indulged in recently, will come due soon in the form of debilitating inflation.

the financial system in the US (and UK) has far too much excess capacity. dozens of financial institutions (or parts of them) need to go through the "GM treatment" for anything useful to result.
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  #1050  
Old 14.06.2009, 19:57
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

I wondered around the end of last year what was going to happen when corporate debt matured and needed to be rolled over. I also wondered what the numbers looked like.

This article cites some numbers crunched by Barclays Capital. In 2010, about $25 billion per month of debt from US institutions alone.

Debts Coming Due at Just the Wrong Time

I don't think that what's coming next down the **** pipe next is going to smell too nice. 20-20 hindsight tells me that we should have just let the banks die and saved the planet a few trillion dollars of fiat money that will possibly cause some wide-spread inflation.

Meanwhile the banks are already crying about looming European regulation as if they had nothing to do with the ****ing mess we're all in now.

Perhaps if they had been allowed to die, then the remaining banks could have been allowed to make modest amounts administering the loans the Central Banks would make to the non-financial, and probably more useful, companies in the real economy.
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  #1051  
Old 15.06.2009, 00:36
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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I wondered around the end of last year what was going to happen when corporate debt matured and needed to be rolled over. I also wondered what the numbers looked like.

This article cites some numbers crunched by Barclays Capital. In 2010, about $25 billion per month of debt from US institutions alone.

Debts Coming Due at Just the Wrong Time

I don't think that what's coming next down the **** pipe next is going to smell too nice. 20-20 hindsight tells me that we should have just let the banks die and saved the planet a few trillion dollars of fiat money that will possibly cause some wide-spread inflation.

Meanwhile the banks are already crying about looming European regulation as if they had nothing to do with the ****ing mess we're all in now.

Perhaps if they had been allowed to die, then the remaining banks could have been allowed to make modest amounts administering the loans the Central Banks would make to the non-financial, and probably more useful, companies in the real economy.
That was the counter argument to "just pump as much money into the pit as it takes to fill it". Let the poorly run banks go bust, then nationalise and recapitalise. Their shareholders, bondholders and creditors take the hit. The problem is that creditors included savers and bondholders were largely pension funds. However, I still think it would have worked out cheaper and we'd now be in a place now where there could be real recovery.

However, the people who own the banks are very rich and very powerful. When it came to choosing between them and taxing the plebs for decades, no real dilemma for their pet politicians.
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  #1052  
Old 15.06.2009, 09:16
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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Yes I saw a headline something like "UK leading the way out of the global recession..." ....I just hope it will not be a double dip recession. It is hard to see what is driving this recovery..

Marton
Thanks only to massive intervention, all that's changed is we've gone from "pear shaped" to "L" shaped
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  #1053  
Old 15.06.2009, 09:52
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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Perhaps if they had been allowed to die, then the remaining banks could have been allowed to make modest amounts administering the loans the Central Banks would make to the non-financial, and probably more useful, companies in the real economy.

you can thank the lobbyists for that .. (the ones that work in the background, and of course the 'Barney Frank's of this world)

not many people know that Fannie and Freddie, which are essentially Government Sponsored businesses, were allowed to spend millions 'lobbying' the very same government until very recently...
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  #1054  
Old 15.06.2009, 15:33
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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Thanks only to massive intervention, all that's changed is we've gone from "pear shaped" to "L" shaped
Hockey stick? Sorry, wrong thread...

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you can thank the lobbyists for that .. (the ones that work in the background, and of course the 'Barney Frank's of this world)

not many people know that Fannie and Freddie, which are essentially Government Sponsored businesses, were allowed to spend millions 'lobbying' the very same government until very recently...
Are government schemes promoting house ownership intrinsically doomed to failure?

Obsessive Housing Disorder

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Nearly a century of Washington’s efforts to promote homeownership has produced one calamity after another. Time to stop.
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  #1055  
Old 15.06.2009, 20:42
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

New warnings about UBS.....

http://ftalphaville.ft.com/blog/2009...for-downgrade/

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Just as the ECB warns that commercial banks in the euro-zone may lose another $283bn by the end of next year on financial writedowns, Moody’s finds equivalent cause for concern at Switzerland’s most beleaguered bank, UBS.
In fact, the rating agency is worried enough to consider downgrading the bank by more than one notch, which considering half of the banks’ assets are already the property of the Swiss National Bank is not really that reassuring for Switzerland itself.
It just gets worse and worse for UBS. I guess the pain will stop for it when it is taken over but how much damage will it do to Switzerland first?
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  #1056  
Old 16.06.2009, 07:39
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

cmooon people calm down, if there is one thing to be sure about then it is that the UBS will survive, be sure about it
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  #1057  
Old 16.06.2009, 08:04
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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cmooon people calm down, if there is one thing to be sure about then it is that the UBS will survive, be sure about it
What will that survival look like? I still reckon another year till recession shows a real turn around.
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  #1058  
Old 16.06.2009, 08:11
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

Is this important? Moody's places UBS on review for downgrade https://www.theasianbanker.com/A556C...5?Opendocument
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  #1059  
Old 16.06.2009, 08:32
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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What will that survival look like? I still reckon another year till recession shows a real turn around.
UBS has already "failed". That's why the government had to step in and rescue it. So yes - with government sponsorship it'll survive.... as a smaller, leaner bank. Or it'll be taken over because despite all it's woes there are parts of the business which still have a lot of value. And with the stock price where it is, if push came to shove, it wouldn't be too big for some bank to swallow as part of a government sponsored merger/take over. But UBS's problems aren't going to be solved simply by a turnaround in the wider economy. With it's investment bank being downsized, it's wealth management business hemorrhaging clients, a high turnover of demoralized staff, continued losses from legacy risk positions on it's fixed income book and an aggressive cost cutting programme, reengineering it's business model and rebuilding its franchise are going to be a long haul effort. It'll take years.
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  #1060  
Old 16.06.2009, 18:33
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Re: Financial Crisis Bank News [was: How Safe is UBS?]

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cmooon people calm down, if there is one thing to be sure about then it is that the UBS will survive, be sure about it
GM 'survived' too...
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