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Financial Fall-Out

Discussion in 'The Lounge - Off Topic' started by Rover977, Sep 23, 2008.

  1. Rover977

    Rover977 Byte Poster

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    I have been stunned at the news in the financial system over the past few weeks, with major banks going to the wall, and today's news regarding a $700billion bail-out by the US govt of Wall Street firms to get them back on their feet.

    I wonder whether people here on this forum, many of whom who will have jobs and careers potentially affected by this turbulent economic climate, think as regards this sort of payout. Is it really fair ? Normally if a business takes a gamble and loses then that is for them to carry. Is it fair that the financial companies should get special treatment ?

    There is also the issue of the huge bonuses that are paid out to executives in these financial companies - should this continue after they are given public money to save them from bankruptcy ?

    Personnally I just don't think this is fair at all. I just wondered what others on this forum think about this.

    :hhhmmm
     
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  2. Bambino1506

    Bambino1506 Megabyte Poster

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    Hi mate, wouldn't say I was shocked to see any of the recent events, its been brewing for a long time.

    Is it fair that taxpayers are footing the bill for banks stupid lending ? no, not really, but the alternative is a lot scarier. Aslong as the banks are regulated better in future I don't mind.

    TBH I think things are going to get worse still before they get better over here in the UK. We are about to fully experience what the states have had for the past year or so. Baton down the hatches lol, we'll survive.
     
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  3. BosonMichael
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    BosonMichael Yottabyte Poster

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    I don't think it's fair, no. I think that companies should be held responsible for bad decisions - nobody bailed me out for making a bad business decision and going $40,000+ in debt. The financial institutions made the decision to take the risk on people who couldn't afford mortgages and other loans, and now they're failing for it. Not our fault, and we shouldn't have to pay for it.

    That said, I don't know enough about the finance industry to know what would happen if those financial institutions AREN'T bailed out. The politicians and economists say that the "average citizen" WOULD be affected if they aren't bailed out, but nobody has really explained why that is or what exactly would happen. If that's true, what choice do we have? <shrug>
     
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  4. Arroryn
    Honorary Member

    Arroryn we're all dooooooomed

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    The fallout of the economic slowdown is already here.

    Again, I'm not exactly a City kiddie, and I'm not up to speed with what on earth these financial institutions get up to. A lot of people just think of the big guys when bubbles burst, but the fallout impacts right down to the foundations of the economy.

    The housing market is one of the biggest bubbles to burst.

    The main developers (Barratts, Wimpy Homes et al) are laying off people, not exactly hand over fist, but they're not being hesitant about it. With the slowdown in the housing market, a lot of independent contractors (builders, electricians, painters and decorators) are finding that the work is becoming harder to find.

    Couple this with the fact that mortgage take-up isn't exactly frenetic at the moment. Apparently, even the raise in the stamp duty threshold hasn't helped things to pick up much. Residential Development lawyers are being laid off in some of the 'big player' law firms and their support staff are either being relocated or going too. Conveyancers will also probably struggle to get work as a lot of people decide to stay where they are whilst the market is so turbulent.

    Then we have the Lehman fiasco.

    'x' thousands of jobs going in the City doesn't just impact on the financial institutions. I know big bonuses fly around these places, but they go with the territory of the jobs, and I don't think that's a culture that's ever going to change, no matter how many times the markets rise and fall. But there are a lot of smaller business in areas around the City that depend on the money these people make.

    Take Shoreditch in London. This place virtually shuts down at the weekend (I'm not counting Shoreditch market) but during the week it's full of 'suits' splashing their hard-earned cash. There are boutiques that charge £165 for kidney dish shaped side tables and £100 for small wooden clocks. There are dozens and dozens of small independent businesses that depend on these people being around during the week and spending their money.

    When I was entertaining getting a job in London a few years back, I was offered a job working behind a bar underneath one of the 'big banks'. It was literally minimum wage, but the bar manager said that if a few chaps had a good day on the market they'd slap their white card behind the bar and often leave a couple of hundred pounds worth of tips for the bar staff. Can't imagine that happening much at the moment, can you?

    Just look at what happened in the UK when Northern Rock went belly-up. And Northern Rock wasn't considered 'particularly big' compared to some of the more commonly-known High Street banks. There were queues of people taking their life savings out in case the bank went bankrupt - a lot of branches simply ran out of money. Panic withdrawing. Yeah. That's the way to save things. Like Bank Holidays when people swarm into supermarkets that will be closed for a day and mass-buy toilet roll. You know. Just incase the UK is overridden with flatulence for that one day, and no one can cope :rolleyes:

    I'm nervous, and probably rightly so. With a branch in London and working for a law firm that gets a good chunk of its work from Property and from transactional corporate work, it's going to be a nervous time. Companies aren't looking for buyouts, takeovers and the like (which is what Corporate Transactional teams deal with in the main). No one is interested in the risk, and they're keeping their cash where they can see it.

    The whole situation isn't really about 'fair' and when it comes to an economy like the one in the UK, it never can be.

    People complain about their 'tax dollars' funding supporting the banks, but keep in mind, these high earners also pay tax, and at a much higher rate than I currently care to pay! They run high risks with their work and they get great rewards, but I personally know a Lehman worker who had his life savings and pension tied up with firm shares - so now, he has literally nothing. A lot to gain, and a lot to lose. City traders know the risks they take.

    I would rather some amount of my tax went towards keeping the banks afloat, than watching the UK economy crumple quicker than a house of cards in a hurricane.
     
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  5. postman

    postman Byte Poster

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    I've no problem with us (the taxpayer) bailing out the financial institutions but all that I want in return is all the bonuses (from the past 3 years) that these banks have paid to their staff to be paid to the taxpayer.

    Otherwise they should not get any of our money and we should just let them fail (capitalism at work:blink)
     
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  6. dmarsh

    dmarsh Terabyte Poster

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    Unfortunately Bank Employees Bonuses, Government Stamp Duty Tax, Estate Agent Commissions all go up with more frequent trading and higher house prices. The net effect is a giant pyramid scheme, so much for Gordon Browns 'No Return to Boom and Bust'. The government ensuring the financial system does not fail and weak regulation means its a one way bet for the individuals involved.

    I had a large sum in Northern Rock which I was not allowed to withdraw, they effectively froze my assets, I'm very glad the government bailed me out on that occasion so my feelings are mixed !

    I think savers and pensioners absolutely should be protected, I was not aware until then that my funds were at risk, thats why I put my money in a bank not on the stock market! I'd never heard of the &#163;30k insurance limit, there'd also not before been a run on a bank in recent history.

    Borrowers put the bank at risk so they should pay in higher rates, not depositors.

    I also interviewed at Leeman Brothers one year ago, they were very keen to stress they had made record profits for the last five years, now we know why. Easy to make money in a bull market.

    I don't think institutions or shareholders in general should be protected, they were well aware of their risks. The dodgy accounting practices that allowed this to go on and for people to get bonuses should change, they can offset losses for years and claim false profits, look at Enron.

    I still cannot see anything that has changed, it happened before in the 90's recession, and I can't see any reason why it currently couldn't happen again. Theres still poor regulation and ineffectual government policies.

    Bankers knew they were breaking their own lending rules, self cert, 125&#37; mortgages, 5-6 time salary mulitples, dodgy bonds rated as triple A. They also knew the cheap credit from Asia would run out at some point. Every time this happens the big bosses walk off multi-millionaires and the little guy suffers, any other industry people would be in jail for fraud.
     
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  7. Arroryn
    Honorary Member

    Arroryn we're all dooooooomed

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    It's all well and good saying these things, and sure, it's probably going to make you feel better. But let's face it. They're not going to be handing bonuses over to the taxpayer. And could you actually put your hand on your heart and say you would like to see what would happen to the country if its financial institutions went belly-up?

    It's sticks and stones, at the end of the day. "The Taxpayer" is a much bandied around term. Everyone in the UK manages to pay some form of tax or another, whether they like it or not. Revenues aren't just from our wages, they are from road tax, VAT, fuel, capital, customes and excise (which is possibly still VAT...) as well as innumerate other things.

    Whilst I appreciate you're probably talking "tongue in cheek" Postman, if the bonuses over the last 3 years were theoretically paid back to 'the taxpayer' the City workers would still probably get a higher share because of the amount of tax they fork out :rolleyes:

    It'd be like handing a very much smaller portion of their ass back to them on a plate. A very back-handed compliment.
     
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  8. postman

    postman Byte Poster

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    Of all the billions paid out to these bankers they'd only pay a small percentage as tax (if anything at all due to smart accountants) so, sod them let them pay all their bonuses back because these have been shown to be (at best) unearned.
    http://www.guardian.co.uk/business/2007/aug/28/money.executivepay

    A capitalist system shouldn't be used to fund the nest eggs of incompetent gamblers, personally I'd like to see them all go to jail until they have paid off their debts (at least that would discourage them from reckless gambling).
     
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  9. Arroryn
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    Arroryn we're all dooooooomed

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    But... they're not going to pay them back, are they? No amount of stats are going to make you feel any better about the situation.

    Most of them would probably also stand their ground and say they did *earn* the money. I don't think any of us on CF understand enough of the ins-and-outs of what these people do to sit here and write that what they get wasn't deserved. Frankly, the ones who worked for places that went under (ie, Lehmans) have paid in more than that... they've lost their life savings, and their pensions. I couldn't care less what bonuses people had been purportedly paid in the past - if they were sensible, they probably saved it. And now, they've lost it. A lot of them have nothing left to give back.
     
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  10. AArcher

    AArcher Nibble Poster

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    Well just to let you know I work in the largest estate agents in the UK and we had the big talk about how we as a company could trade at a loss for two years so there was no concern etc etc etc now they are laying off people left right and center ! Branchs will be down to just a Manager and financial advisor soon ! I've had lots of Independants in my area already close up shop!
     
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  11. newkoba

    newkoba Byte Poster

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    all this bail out does is slightly delay the inevitable. it is called free market for a reason. the more we butt into it the more issues we have. several of our issues with economics were pointed out almost to the T back in 2002 by Ron Paul. who in my opinion should have been our republican nomination, but apparently that is not what millions of my fellow americans thought.
     
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  12. BosonMichael
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    BosonMichael Yottabyte Poster

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    Ron Paul means well... but I disagreed with his thoughts regarding the Iraq War, and his other reforms were far too drastic. I would agree with many of his ideas if they were implemented in small steps.

    Meh, I'm not happy with McCain... but there's nobody else even close to what I believe in.
     
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  13. dmarsh

    dmarsh Terabyte Poster

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    McCain, does he even know what he believes in ? "I fully support george bush...er No I don't, ... er yes I do... whats my name again ?" :D
     
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  14. BosonMichael
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    BosonMichael Yottabyte Poster

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    Don't believe what the media tells you. Or are you just looking for "change"? :D
     
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  15. dmarsh

    dmarsh Terabyte Poster

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    I just watch The Daily Show for all my US political needs, I support the 'God Boy' or the new 'Black Moses', but then I don't get a vote. :D

    Change is good, keeps the politicians on their feet, politicians are like nappies, they should be changed often because they are both full of s*&!t !
     
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  16. Johnd76

    Johnd76 Megabyte Poster

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    As with everything in the country, the tax payer has to bail these greedy companies out
     
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  17. BosonMichael
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    Ah, then no wonder McCain's your target... The Daily Show is heavily liberal. :)
     
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  18. tripwire45
    Honorary Member

    tripwire45 Zettabyte Poster

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    If we're going to talk about the US Presidential campaign (and it's bound to be "dirty" if for no other reason than it involves politicians), then you might find this CNN story interesting. :wink:
     
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  19. Rover977

    Rover977 Byte Poster

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    Thanks for a lot of interesting opinions expressed here. I would say on the whole that I agree with BosonMichael and Postman and others who feel that they just do not deserve this bail-out. For a start will $700billion be enough ? What if the same thing happens again. They must have been desperate in the first place to get involved in sub-prime - so are they kind of the people to trust with such a large sum of money ? Would you go out personnally and buy a whole load of their ‘toxic assets’ with your hard-earned cash ? Why let a government do it for you then ? Because that’s all you’ll be getting for your money.

    I’ve met hard-working socially responsible business people in the manufacturing sector who’ve been throttled by their bank and ‘foreclosed’ when they had substantial invoices that would be paid out to them soon. The bank just didn’t want to know. I also seen their draconian side on getting a mortgage some years ago when I was a contract worker. I closed my accounts with that bank as a result, after 14 years of banking with them. And now one of these banks, the Bank of Scotland, after being in business for 300 years, has effectively gone bust – they’d have been better off backing the manufacturing companies or temporary contract workers rather than investing with the ‘spivs’ in the subprime market.

    $700billion is an awful lot of money. Similar amounts may be getting paid out here in the UK when the financial system here follows suit and collapses in similar fashion, as it inevitably will. Think of all the improvements in society that could be made with that kind of money ? Like free sports facilities for all kids in every single neighborhood across the country, to create a healthier nation, and lower crime. Or money spent on educational facilities, infrastructure, or the environment, etc etc. Instead it will be spent on somebody’s ‘toxic’ assets, that nobody else wants or will touch with a barge pole.

    The irony here is on a truly COLOSSAL scale, that the financial system, the very paragon and epitome of free market values, now depends for its survival on the ‘state’, the very thing that should never ‘interfere’, and that should leave us all alone to do our own thing. Well its interfering now – and boy are they glad for it !
     
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  20. sunn

    sunn Gigabyte Poster

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    Regarding the financial bailout and a true capitalistic system, if there was no bailout, how many people would suffer using the savings accounts at these sites? Are you willing to let people lose all their money, not because they invested with a particular bank, but because they had a savings account?

    My problem with the true capitalistic view is that foreigners are able to buy out core pieces to the country's economic engine – that’s scary :eek:
     

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