Xmas Thanks to UK Tapayers from AIB

[BOR]

Really nice hands-across-the-water story, with the news that the UK are effectively paying the bonuses for the public sector employees at Allied Irish Banks.

What a nice Christmas gift ! And yet, they say there's no money.

The Guardian said:

Let's get this right. Ireland has agreed a €85bn rescue package from the EU and the IMF; Britain, Sweden and Denmark are chipping in with bilateral loans. One of the largest portions of the bailout fund will be used to support Ireland's banks, including Allied Irish Banks, which is to be saved via 95% nationalisation. Now, just in time for Christmas, AIB will dispatch €40m in bonuses to employees.

Yes, that's the story, roughly speaking: in a roundabout fashion, EU taxpayers, including Britain's, will be funding AIB's bonuses from 2008, a year when the bank was already extremely sick. If the bust Irish banks had been allowed to go to the wall, the bankers owed bonuses would have had to join a long list of creditors.

The craziness is not lost on Ireland's opposition politicians, who today called for a 99% supertax on the bonuses. Such a retrospective measure might struggle to get through the Irish courts – one AIB trader has already taken legal action to secure his €161,000.

http://www.guardian.co.uk/business/2010/dec/09/aib-bonus-beggars-belief

[AndrewW-G]

No doubt the bonus payments are as part of a contractual obligation to the people recieving them.

As per when the idiots were complaining about UK bonus payments, it would cost far more if they weren't paid and highly likely that if taken to court over it AIB would lose

[Eric Mc]

The Irish tax payers are paying a lot more - as are the Germans.

It is a major upset in Ireland too.

[Odie]

What andrew said, plus ITS A LOAN we havent given them money, we will get it back eventually and hopefully make a profit,

unless our useless government write off the dept in 10 years or something equally idiotic.

[sirtyro]

If they are not performing how can they get a bonus? I thought they would be performance related!

[Neil H]

Contractual obligations no doubt, if they tried to avoid paying them, they'd no doubt be subject to legal action (as it appears is already happening).

sirtyro said:

If they are not performing how can they get a bonus? I thought they would be performance related!

Just because the bank as a whole is screwed, doesn't mean that individuals haven't made profits in their own particular area. The fact that they've done so, and that their contract states they're elgible for a bonus on xxx criteria, would make it difficult to get out of paying.

Just supposition since the details aren't clear.

[BOR]

Logically, the tax-payers from the uk and the rest of europe, should be giving even BIGGER bonuses to the AIB bankers to motivate them to not fk up any more. The less you fk up, the more money we will give you.

[Simond S]

Where's the issue. Have you seen the profit we are making from this loan?

[EDLT]

So because a few people near the top made some very bad decisions that means that nobody in the entire company is allowed a bonus (in The Guardian's eyes).

Not even the cashier who managed to sell enough PPIs/Loans/Credit Cards to whoever walked in the door, or have I misunderstood?

[Du1point8]

BOR said:

Logically, the tax-payers from the uk and the rest of europe, should be giving even BIGGER bonuses to the AIB bankers to motivate them to not fk up any more. The less you fk up, the more money we will give you.

sounds like you are talking about the public sector we have in the UK rather than a bank.

[Murcielago_Boy]

EDLT said:

So because a few people near the top made some very bad decisions that means that nobody in the entire company is allowed a bonus (in The Guardian's eyes).

Not even the cashier who managed to sell enough PPIs/Loans/Credit Cards to whoever walked in the door, or have I misunderstood?

YES.
Without a bailout the bank is insolvent - what bonus would staff receive then (if the bank went bust)?

As an employee, you're always at the mercy of management.

[EDLT]

Murcielago_Boy said:

EDLT said:

So because a few people near the top made some very bad decisions that means that nobody in the entire company is allowed a bonus (in The Guardian's eyes).

Not even the cashier who managed to sell enough PPIs/Loans/Credit Cards to whoever walked in the door, or have I misunderstood?

YES.
Without a bailout the bank is insolvent - what bonus would staff receive then (if the bank went bust)?

As an employee, you're always at the mercy of management.

Except the bank hasn't gone bust. If it was saved by private investors the staff would still get their bonuses and nobody would complain.

As an employee they are entitled to be paid whatever is written in to their contract, unless there is a "in the eveent that we nearly went bust but didn't" clause then they should get their bonuses.

[Murcielago_Boy]

EDLT said:

Murcielago_Boy said:

EDLT said:

So because a few people near the top made some very bad decisions that means that nobody in the entire company is allowed a bonus (in The Guardian's eyes).

Not even the cashier who managed to sell enough PPIs/Loans/Credit Cards to whoever walked in the door, or have I misunderstood?

YES.
Without a bailout the bank is insolvent - what bonus would staff receive then (if the bank went bust)?

As an employee, you're always at the mercy of management.

Except the bank hasn't gone bust. If it was saved by private investors the staff would still get their bonuses and nobody would complain.

As an employee they are entitled to be paid whatever is written in to their contract, unless there is a "in the eveent that we nearly went bust but didn't" clause then they should get their bonuses.

This is the essence of the problem. IT WASN'T ALLOWED TO GO BUST because allowing that would create systemic risk within the entire bank sector. Therefore the bad decisions of management and bonuses of employees is forever underwritten by taxpayers.

Any decent PE/VC/Private Investor would allow it to go bust and pick up the bank for a song (as Barclays did with Lehmans).

Bank bailouts should prevent systemic risk but
a) wipe out shareholders
b) have re-negotiated compensation structures that reflect company was actually bust (but wasn't allowed to, to save the sector)

Anything else is robbing the taxpayer.

Employees should be told: "Forget your bonuses - your employer is insolvent."

Edited by Murcielago_Boy on Friday 10th December 14:30

[Fittster]

Simond S said:

Where's the issue. Have you seen the profit we are making from this loan?

Should the government being speculating with taxpayers money?

[Jasandjules]

Fittster said:

Simond S said:

Where's the issue. Have you seen the profit we are making from this loan?

Should the government being speculating with taxpayers money?

May I introduce you to the Gilt Market?

[elster]

Fittster said:

Simond S said:

Where's the issue. Have you seen the profit we are making from this loan?

Should the government being speculating with taxpayers money?

It isn't, it is the IMF's money. We are almost only acting as agents for them.

[DonkeyApple]

EDLT said:

So because a few people near the top made some very bad decisions that means that nobody in the entire company is allowed a bonus (in The Guardian's eyes).

Not even the cashier who managed to sell enough PPIs/Loans/Credit Cards to whoever walked in the door, or have I misunderstood?

Indeed. It's slightly ironic coming from the Guardian where they recieve a bonus but the business is loss making.

The reality is that AIB is a broad business and there will be many facets which are profitable and contain hard working and bright individuals who deserve their contractual bonus.

Trust me, businesses pay as little in bonus and salary as they can get away with.

They need to ensure the good people who add to the business and will be helping to ensure the loans are repaid don't bugger off and leave a company massively in debt staffed by pure dross. Exactly what you tend to see in your local councils.

[Neil H]

Murcielago_Boy said:

EDLT said:

Murcielago_Boy said:

EDLT said:

So because a few people near the top made some very bad decisions that means that nobody in the entire company is allowed a bonus (in The Guardian's eyes).

Not even the cashier who managed to sell enough PPIs/Loans/Credit Cards to whoever walked in the door, or have I misunderstood?

YES.
Without a bailout the bank is insolvent - what bonus would staff receive then (if the bank went bust)?

As an employee, you're always at the mercy of management.

Except the bank hasn't gone bust. If it was saved by private investors the staff would still get their bonuses and nobody would complain.

As an employee they are entitled to be paid whatever is written in to their contract, unless there is a "in the eveent that we nearly went bust but didn't" clause then they should get their bonuses.

This is the essence of the problem. IT WASN'T ALLOWED TO GO BUST because allowing that would create systemic risk within the entire bank sector. Therefore the bad decisions of management and bonuses of employees is forever underwritten by taxpayers.

Any decent PE/VC/Private Investor would allow it to go bust and pick up the bank for a song (as Barclays did with Lehmans).

Bank bailouts should prevent systemic risk but
a) wipe out shareholders
b) have re-negotiated compensation structures that reflect company was actually bust (but wasn't allowed to, to save the sector)

Anything else is robbing the taxpayer.

Employees should be told: "Forget your bonuses - your employer is insolvent."

Edited by Murcielago_Boy on Friday 10th December 14:30

It makes no sense to do that as you would hinder the bank's recovery.

If you've just loaned money to someone, do you then do your best to make sure their business fails? Or do you hope they succeed so you'll get your money back, with interest?

Answers on a postcard.

[Murcielago_Boy]

Neil H said:

Murcielago_Boy said:

EDLT said:

Murcielago_Boy said:

EDLT said:

So because a few people near the top made some very bad decisions that means that nobody in the entire company is allowed a bonus (in The Guardian's eyes).

Not even the cashier who managed to sell enough PPIs/Loans/Credit Cards to whoever walked in the door, or have I misunderstood?

YES.
Without a bailout the bank is insolvent - what bonus would staff receive then (if the bank went bust)?

As an employee, you're always at the mercy of management.

Except the bank hasn't gone bust. If it was saved by private investors the staff would still get their bonuses and nobody would complain.

As an employee they are entitled to be paid whatever is written in to their contract, unless there is a "in the eveent that we nearly went bust but didn't" clause then they should get their bonuses.

This is the essence of the problem. IT WASN'T ALLOWED TO GO BUST because allowing that would create systemic risk within the entire bank sector. Therefore the bad decisions of management and bonuses of employees is forever underwritten by taxpayers.

Any decent PE/VC/Private Investor would allow it to go bust and pick up the bank for a song (as Barclays did with Lehmans).

Bank bailouts should prevent systemic risk but
a) wipe out shareholders
b) have re-negotiated compensation structures that reflect company was actually bust (but wasn't allowed to, to save the sector)

Anything else is robbing the taxpayer.

Employees should be told: "Forget your bonuses - your employer is insolvent."

Edited by Murcielago_Boy on Friday 10th December 14:30

It makes no sense to do that as you would hinder the bank's recovery.

If you've just loaned money to someone, do you then do your best to make sure their business fails? Or do you hope they succeed so you'll get your money back, with interest?

Answers on a postcard.

Errr... If I may remind you - the business HAS failed. The company is insolvent.

IMO - the bank should be put into administration, the loan book should be unwound and assets removed in a way which poses the least systemic risk to the rest of the banking sector. Shareholders cry. Employees get zero bonus.

That's what happens in EVERY OTHER SECTOR.

Sadly, the idiots in government think the best way of doing this is by loaning this wrecked company money and saying "as you were..."

These bailouts are bullcrap - the way they've been structured increases moral hazard and in reality is just the taxpayer underwriting the bad decisions of some very very well remunerated finance imbeciles.

Edited by Murcielago_Boy on Friday 10th December 17:03

Edited by Murcielago_Boy on Friday 10th December 17:04