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10/14/2009

Another crisis in the making

A crisis in the making or making waves? 70 banking staff from RBS Coutts defected or were poached by a Swiss private bank, BSI, because of curbs in bonus payments. The 70 can become 700 and then 7000 and the whole financial industry will be in turmoil. With all the banks making so much money, they can afford to pay their talented staff more, and those who are willing can go to the market and woo the best to their folds. Are we going to see a spate of defections and mass resignations from the more stingy banks? Or course I am exaggerating, an alarmist. But these are the exact reasons given in America and Europe to continue to pay their overpaid bankers more. And our local institutions may also sing the same song to pad up their pockets. And we will see the game of musical chairs being played in full swing. Will there be panic? Such high turnovers are bad and destabilising. Something must be done to make sure that these employees are not allowed to change their jobs at their fancies. How about introducing some regulations to prevent job hopping? Or how about the industry players work out some arrangements not to poach staff from each other by trying to outbid each other? I know that such practices are prevalent in some industries. The best part is that when there are only a handful of players and some smart alecs still think it is a clever move to outbid each other or to undercut each other for a better share of the business. What is important? A free market, free movement of staff with the accompanied little tsunamis or a stable and controlled market with seemingly orderliness? In a small little pool, how long can the game of musical chairs be played before the music stops? The high payout must come from somewhere. Any CEOs going to press the panic button?

5 comments:

Wally Buffet said...

Greed IS good. Good for the economy, good for competition and good to weed out the deadwoods.

This episode is not only about the defection of staff. In this industry, the money follows the money managers because save for it's rating, all banks are the same whether you bank with A or B. Forget about the hype. It's only what the advertising boys dream up when they are high on booze. Service quality is what counts.

Matilah_Singapura said...

There is no "free market" in banking. Banking is a monopoly-cartel where govt and business suck each other's cocks -- and screw the average jo and jane out of their money.

The sooner the state-controlled and regulated financial system collapses the better. The controls and regulations don't protect the (so-called) "innocent" -- the regulations and controls are designed to skew the game to the big govt quan xi buggers and engineered to look "fair" to the average brain -washed fool.

I'll be cheering the next time some bank goes under and I will be in a trance if the financial system collapsed and all assets were valued less than a Desker Rd whore's used tampon.

redbean said...

matilah, your wishes shall be granted, can be very soon.

the greedy bankers still did not know how serious is the harm they have done to the system. unproductive but selling worthless papers for profits.

Matilah_Singapura said...

redbean,

I always laugh when people such as yourself judge others by referring to certain human traits like "greed" or "evil" — as if there are such things in reality. I don't believe there are.

Bankers, like everyone else, respond to INCENTIVES. If the govt awards special privileges to certain groups which allow those groups to simply "create money from debt" and make huge profits, with very little downside (if all else fails, bail out the banks), and are protected from competition (like Ah loongs and other private lenders... a good local example is Hong Leong), then it is reasonable to assume that the bankers will max out their opportunity and make as much money as they can get away with by screwing as many people foolish enough to entangle themselves on the wrong side of a "financial" deal.

Sure, there is a place in a capitalist system for organisation and distribution of loanable funds, returns to lenders, allocation of capital etc.

But these days the finance industry is creating more and more casino games — any drunk or stoned fool can come up with an idea for a "derivative", price it to market, and sell it to an insurance or pension fund, collect the money and disappear — all this whilst the govt either looks the other way or supports this sort of "business".

Good game lah. Good deal for the bankers. What's more international borders and sovereignty actually protect them. Plus they do the classic thing: INDIVIDUALISE PROFITS, SOCIALISE LOSSES

Which means, they can't lose.

redbean said...

don't laugh can, matilah. the generalised term we use to describe greed is not the small fellows who wants to make that extra $200 or $2000. the negative connotation is reserved for those who have several millions or hundreds of millions and have practically anything they need and the rest of the money they just can't spend away, and still demanding more in their devious ways.

we are all greedy, wanting more of most of things that we don't have or don't have enough. this is different from the turkey who is paid in millions and wanting more millions.

and yes, individualise profits and successes but socialise losses or spread the shit.