Just 2 years ago RBS was bailed-out by the UK Taxpayer to the tune of £45 BILLION. RBS, like so many banks, got in to this situation because of their cavalier attitude toward taking risks.
No matter how good your charts are, and how good your predictions, gambling on the stock market is exactly that…gambling.
No matter how secure an investment seems there is an element of risk, because without risk there is no reward. When playing the stock market the risk is particularly big, and as we have seen recently much of the gains made over relatively long periods can be lost very quickly.
Unfortunately it would seem in the wake of today’s bonus announcements that no lessons have been learned from the last couple of years.
The fundamental problem with trading markets is that bankers are going to the races with our money. All the fun of a flutter but none of the risk.
THIS MUST CHANGE if future episodes like this are to be avoided.
Perhaps introducing a similar structure to Lloyd’s may be the answer?
At Lloyd’, investors (or names) invest in syndicates and take a share of the profits made by the syndicate. But, and this is the important bit, they are also liable for the losses of these syndicates and these losses are unlimited. So, as an example if you were a Lloyd’s Name with a 10% share of a syndicate you’d get 10% of the profit. But if the syndicate takes a hit for a £500 million you would be responsible for £50 million of it, and Lloyd’s would MAKE you pay, even if it bankrupt you as they did to many names in the late ‘80s.
This system helps to ensure prudence and limits any of the short-term profiteering without any thought for the consequences which beset the banking industry
Let the bankers be paid their huge bonuses, fine, but make them liable for the bank’s losses too. And, like Lloyd’s make it very difficult for them to abdicate these responsibilities in the future – this would help teach them the valuable lesson of responsibility for their actions.
Alternatively we can keep paying them huge salaries and bonuses for taking stupid risks and then bail them out when it all goes wrong again…and it will.
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