"Taxpayer exposure amounts to 109 billion Swiss francs "
(Though that maximum is unlikely to be hit)
In the meantime, top managers extracted 32 billion in bonuses over the last 10 years.
Privatise profits, socialise losses.
UPDATE: My mind still boggles at the scale of the looting. 32 billion in bonuses. If that's a thousand "top managers" that would still a jaw-dropping and life-changing 32 million per person. If it's a hundred "top managers", then it's a mind-numbing 320 million per person
Let's go with the lower payout figure: 32 million would still be an insane amount even as the top payout for the singlemost important person, let's say the CEO, iff the company had been immensely profitable during that time and there had been significant personal risk. But the company wasn't profitable, there was no personal risk, and it wasn't a payout of that scale for the top one person, but for the top thousand or so (or whatever the number is, I don't know how many top managers there were...but if there were fewer top managers, the relative amount of the payout just gets larger).
UPDATE 2: Source (German)
"Denn was ist mit den verantwortlichen Top-Managern der Credit Suisse? Die, so hat es der "Tagesanzeiger" aus Zürich ausgerechnet, seit 2013 32 Milliarden Franken an Boni kassierten, während die Bank im gleichen Zeitraum 3,2 Milliarden Verlust machte."
Stripe is not guaranteed by the taxpayer and not holding on to other people's (deposit) money.
Banks are different.
One of the greatest coups of lobbying was when the finance industry convinced politicians all over the world that banking ist just like any other industry and thus should not be regulated more than other industries.
Stripe do hold money on account of other people. When a customer pay, it does hold the money sent by the customer until your forward it to your account.
On one hand, it's safer they only hold money for a day or two.
On the other hand, no FDIC insurance. If Stripe (or Visa or Mastercard) were to poof, what would actually happen to in-flight money? Seems like you could pretty easily lose a day or two where the client got charged, and it never got paid out.
It's not Stripe or Visa "going poof" that would be an issue it would the underlying banks they use that add risk. Stripe/Visa are not FTX. Payment processors don't use in-flight transactions to pay liabilities (salaries, rent, etc.). They also don't (as far as I'm aware) convert that cash into other assets like bonds.
However, the money may be stored in a money market account i.e short term bonds or even if it's a more normal savings account the bank itself depends on fractional lending and bonds.
I'm be very surprised if any major payment processor hasn't vetted the institutions that hold transaction funds. That said some payroll companies were hit by SVB's collapse but more so on not being able to accept checks than loosing already received funds.
It’s a mix. Payment processors holds user funds in fbo accounts at partner banks.
Fbo accounts are technically the banks, the processor keeps the records of whose funds are whose within the account and the fdic limit applies to the beneficiary (the person the processor is holding the funds for).
Source: I worked for the treasury group at a payment processor.
This doesn't mean that a bonus structure isn't appropriate. Bonus are supposed to be an incentive. Achieve bold goals -> get bonus.
If anything this is more important in growing companies than in stable, profitable companies, which have achieved a sustaining business model. Why pay a bonus to people just following the algorithm.
> on the bonuses of its employees from the last 13 years.
It feels like this is misrepresenting the situation quite a bit. This is not a tax bill on bonuses. This is a tax bill on equity, which is a part of the regular compensation package, and an awkward situation due to that equity being illiquid as Stripe has not gone public.
Where's the source for the bonus figure only being top managers, doesn't seem to be in article? At a bank, everyone gets a bonus - it's a standard part of annual comp.
You can see actual details of CS bonus sizes here - unsurprisingly it's considerably less that $32m each! https://www.fnlondon.com/articles/credit-suisse-hikes-pay-fo...
It really isn't only managers. Basically any trader/IB person expects a bonus if the had a good year and they don't particularly care about the whole company's profit situation as long as they know they made money. People still don't really seem to be aware of the fact that in a big bank you can have 5-6 people outside of management positions earning more than some of the C level employees.
Example: You have a credit trading desk and an equity trading desk. Your equity trading desk makes 1 billion, your credit desk loses 2 billion. Sure, you lose 1 billion in total, but you still pay the equity desk the bonus on the 1 billion profit.
And those bonuses have been criticized in the past as well, and might get even more scrutiny now again. I'm not particularly convinced by the arguments for the necessity of these bonuses (at least not at this magnitude). If you pay me to gamble in the casino with my employer's money, and I get a bonus when I win and only my base salary when I lose, that doesn't seem to make much sense.
> I'm not particularly convinced by the arguments for the necessity of these bonuses (at least not at this magnitude)
Constraining bonuses like this is only achievable via collective action.
Top performers in highly leveraged positions really do generate outsized returns. There are definitely people in certain positions who "take their margin with them" and so firms compete by offering that individual a higher percentage of the margin they generate and the nature of markets mean anyone who doesn't compete "loses".
You need a collective action mechanism (government) and the only solution we've ever seen in practice is a high marginal tax rate. Companies are less willing to pay exorbitant sums being taxed at 94% and individuals fight less for them.
Well, the catch is that most people who blow up will never again smell a high paying job in finance. It's not like 9/10 of the people who blow up just restart the casino at another firm, they simply never see the trading floor again except for what they do in their personal account.
No. Previous employers do not release any information about a trader's results. The only way that hiring managers can find this information is through personal contacts (or news stories if the blow up was really spectacular).
It reminds me of The Ragged Trousered Philanthropists where the capitalists conspire to make the local government purchase their failing electric company (written in 1910):
'Something will 'ave to be done, and that very soon,' Grinder was saying. 'We can't go on much longer as we're doing at present. For my part, I think the best thing to do is to chuck up the sponge at once; the company is practically bankrupt now, and the longer we waits the worser it will be.' [...]
'Sell out!' replied Grinder with a contemptuous laugh in which the others joined. 'Who's going to buy the shares of a concern that's practically bankrupt and never paid a dividend?'
'Who's to buy?' repeated Sweater, replying to Grinder. 'The municipality of course! The ratepayers. Why shouldn't Mugsborough go in for Socialism as well as other towns?' [...]
'Afterwards,' resumed Sweater, 'I'll arrange for a good report of the meeting to appear in the Weekly Ananias. I'll instruct the Editor to write it himself, and I'll tell him just what to say. I'll also get him to write a leading article about it, saying that electricity is sure to supersede gas for lighting purposes in the very near future. Then the article will go on to refer to the huge profits made by the Gas Coy and to say how much better it would have been if the town had bought the gasworks years ago, so that those profits might have been used to reduce the rates, the same as has been done in other towns. Finally, the article will declare that it's a great pity that the Electric Light Supply should be in the hands of a private company, and to suggest that an effort be made to acquire it for the town. [...]
'Come to think of it,' observed Rushton arrogantly, 'why should we trouble ourselves about the opinion of the ratepayers at all? Why should we trouble to fake the books, or declare a dividend or 'ave the harticles in the papers or anything else? We've got the game in our own 'ands; we've got a majority in the Council, and, as Mr Sweater ses, very few people even take the trouble to read the reports of the meetings.' [...]
'Well, 'ere's success to Socialism,' cried Grinder, raising his glass, and taking a big drink.
I thought that "socialism" has negative connotations for me, as an eastern European. But clearly it's nothing compared to how hated this word was in the US in 1910s. Interesting quote, anyway! Wikipedia says that the novel is semi-autobiographical by the author.
The book is from Britain and written by a socialist - this section is about how they try to twist it to their benefit, making the government take over their failing business and then blame the later failure on "socialism".
While I wholeheartedly agree with your sentiment, I wonder about the estimated figures.
What’s the staff size of CS - could it be 10,000 top managers. Or 1,000 top managers but over ten years becomes ~5,000 if turnover averages at every 2nd year.
Despite investment bank bonuses being very high compared with other industries, 32mil is just too insane to believe!
As others have said, there are 40000-ish employees almost all of whom will have some sort of bonus provision in their compensation. That doesn't mean every year they get one, it doesn't mean everyone gets a big one. There will be a handfull of big swingers who get or expect tens of millions, but the vast majority of folks in an investment bank would get a bonus in the thousands or tens of thousands. It's typically anywhere from 20% of base to a couple of times base depending on how well the firm did as a whole, how much your team/division contributed to that and how good your own appraisal/performance was.
Switzerland has a direct democracy. If 100k people sign a petition, an initiative (bill) goes to a popular vote. If this move turns out to be highly unpopular, it may be dismantled by the people.
Does that hold up however? I can think of several ballot initiatives in the US which were approved by the voters and became law only to be struck down by the courts.
The US federal government does not have ballot initiatives.
Some states do have ballot initiatives but obviously those can't override the Constitution. For example, see California Proposition 187 on illegal immigration which was passed by voters in 1994 but then largely struck down in federal court.
That is the point I'm making. Voters could pass a ballot initiative that prohibits a bailout, but a court could find that the corporation has a right to a bailout or that the government can't be overruled on matters of national security by a popular vote.
I don't know enough about how Switzerland is established as a country to talk specifics. I only know that it isn't technically an EU member, but is part of the Schengen zone.
Most (all?) of the Swiss popular initiatives are implemented as constitutional amendments.
The closest we have in the USA is “Article 5” —- if you can get two-thirds of the state legislatures to ratify an amendment, it becomes part of the constitution, without any federal say in the matter. In
Except even in Switzerland there are topics we cannot actually push through with an initiative.
We had a vote in 2014 about a very specific way to restrict immigration into Switzerland, it was voted through, but Federal Government wasn't willing to nuke our economic relations with Europe so now if you are advertising for a job in Switzerland you first have to make sure Swiss people don't fulfil your criteria before you hire a foreign person(i.e that is the result of an initiative whose aim was to restrict asylum and Shengen agreement movement).
Even in this case if I remember correctly there was a version of it implemented in 2016, it is a strange edge case though which would endanger the EEC agreements already in place between the EU and CH.
This specific case of the Credit Suisse doesn't appear (to my as a layman) to be in contention of anything external to CH.
Your government should have implemented what the people voted. The fact that they could get away with it is a clear sign that they can ignore what you vote on without any consequence.
You would be surprized how well direct democracy works in Switzerland. Proper political culture and a fairly good standard of living is the trick. The same trick Athens used back then.
Once we run out of German maybe Austrian limousine, sir? We have enough for you and your entire family. I know the people will talk, but we're discreet and provide it with a driver - for life.
We haven't, if you have money you can put your own people or people you have influence over/with into positions of authority, or help get, shall we say friendly legislators elected who help set the regulatory frameworks. You could influence news media by advertising with them and threatening to pull your advertising if they criticise or investigate you. You can bully governments by threatening to move your offices and factories abroad.
There's so much that giant companies can do. Ordinary folk only have their word of mouth, their wallets, and their votes. We saw how the rise of the internet gave these people power and things started to change, and so the word of mouth power was taken away through the actions of social media companies, which then affects how people use their wallets and their votes.
Once again, freedom of speech turns out to be the most important freedom in a democracy.
There don't have to be actual losses in the confidence game that is our fractional-reserve banking system. Banks only need to hold a certain fraction of their depositors money in liquid reserves (hence "fractional-reserve"...). Every modern bank would be insolvent immediately if all depositors decide to withdraw their money, the money that they own but keep at the bank.
We rely on this being a very unlikely event, and it is unlikely as long as depositor behavior is uncorrelated. But if there's panic it becomes correlated and boom.
> What are the impaired investments?
Again, there don't even need to be impaired investments for this to happen, but the problem appears to be that safest of possible investments: government bonds. Which banks may even required to hold. The recent rise in interest rates means that the liquid value of the low-interest (we even had negative interest rates for Bunds, for example) bonds that banks are holding has declined massively.
These bonds will still get paid out in full when reaching maturity, so the money isn't really gone and there isn't a loss. If you can wait for them to mature. But if they have to sell those bonds now because an unexpectedly high number of depositors want their money, then they have to sell them at a loss.
So central banks are now facing a conundrum: raise interests rates to fight inflation, but risk the financial system going boom. Or lower rates again and risk inflation running out of control.
> bonds that banks are holding has declined massively.
That would be an impaired investment. We know that of the ~200bn at SVB around 50% of it was in their hold-to-maturity accounting bucket with no provision of any loss.
CS complied with all regulations, even in the weeks before the bail out.
The problem was that customers lost trust in CS and in particular its management and were withdrawing all their deposits.
Which pointed out that regulating the banks is mostly pointless. They always find loopholes. The only sensible regulation is to make sure that banks never gets too big to fail. This way a bankruptcy will be mostly inconsequential even if the government insures deposits.
I think this is my point - If Credit Suisse went bust, it is the biggest regulatory failure in banking.
The regulations in switzerland are no different to any other bank in the world, likely they were more stringent requirements to hold larger quantities of capital and mark-to-market more instruments on their balance sheet.
> make sure that banks never gets too big to fail
Well the regulators just took two too-big-to-fail banks and merged them ...
During the early 80s (neoliberalism, Reagan, Thatcher, Kohl, etc.) regulations were relaxed and banking deregulated. The first big bank crisis + bailout (Savings and Loan crisis) followed a year later.
Banking is not a regular industry, for a bunch of reasons.
"We found material weaknesses in our reporting, with a result that we cannot issue our annual report as scheduled" does not sound like "complied with all the regulations".
The bank run started because failing to make the annual report was the final straw after years of untrustworthy behavior.
Stuff like this will lead to the rise of socialism again tbh.
It's like Tucker Carlson said - it's no wonder that the young people support socialism, when they can't afford a house and face massive economic uncertainty even in professional fields, etc.
Everyone knows that the super-rich executives will benefit massively from this (or have already taken huge bonuses and dividends in prior years), and they basically run the government and will face no consequences.
They get rewarded for failure, meanwhile normal working people face mass lay-offs, high interest rates and high inflation.
the execs definitely miss out on a lot of money because bonus programs are typically multi year.
There are always
-short term (how did we do this year, the classic everyone gets)
-long term (bonus defined today, paid out over a few years if you meet the strategic goals, typically director and exec level, we are easily talking 100k+/year here in bonus money)
bonusses. So, yeah, still a financial letdown for them. But they still got paid quite a lot of money of course. The average swiss person had no stakes or no culpability at all (except maybe choosing them, clients could have walkd away)
But they've already made out like bandits in the meantime, and can move on to the next company to raid (I mean, be an executive of).
Like you can make $5 million a year now, but have things suddenly end on you at some point when things come crashing down, but probably not for several years, or you can make $1 million a year, but play it safe, and in five years get a $7 million long-term bonus.
Might as well get as much out of the company now and trust the government will bail you out (or not, what do they care, they can just move on to the next thing, and even if not, they've already made a shit ton of money, they could just retire, no big deal).
In my country it’s not illegal when you punch somebody in the face, but we have another deterrent that works very well. If you punch somebody in the face, then he pulls out his wallet and gives you $50, then presents his face for you to punch again if you’d like. Once you stop punching, he gives you $100. So you see, assailants quickly learn that face punching is an action of grave consequence and loss, and the fact that everybody here is punching each other in the face all the time is probably because of something else.
> It's like Tucker Carlson said - it's no wonder that the young people support socialism, when they can't afford a house and face massive economic uncertainty even in professional fields, etc.
What? Tucker Carlson said something sensible and actually correct for once in his life?
For real though - remember the saying "If at age 20 you are not a Communist then you have no heart. If at age 30 you are not a Capitalist then you have no brains"?
It's just the same: by age 30, the generations of my parents and before generally had a stable job with one earner earning enough to feed a family, afford to buy a house and a car. Basically, back when that quote was said, people at 30 had actual assets to their name which (at least fundamentalist) Communism would have threatened to take away... but our generation? What do we have that actually belongs to us? Our homes are rented, our cars are beaters barely road-worthy, financed/leased or we don't have cars at all, our computers are often enough simply the machines we get from work, our phones are rented from our phone providers and our "pensions" are a virtual joke - the pensions in the US are a gamble on the stock market (and heaven forbid if there is an actual correction - stocks are fundamentally overvalued by at least 50%, but correcting that downward would wipe out so many people that politicians have no other choice than to feed the beast), and thanks to medical debt being a thing and elderly care costs exploding as well we can't even expect to inherit meaningful wealth. Oh and the old tale our boomer parents told us from "you have to waste your childhood with learning and learning and learning otherwise you end up poor" turned out to result in "we are poor anyway".
So, why should we defend a capitalist system that doesn't even give us anything in return? Why should we defend the right of rich people to exist when we have to struggle to make rent and food each month? Why should we not take up the pitchforks?!
US citizens are too lazy to consider voting for candidates other than the ones lambasted by their corrupt news sources. Picking up a pitchfork and deciding who to stick it into requires even more effort.
> Oh and the old tale our boomer parents told us from "you have to waste your childhood with learning and learning and learning otherwise you end up poor"
It's not incorrect... the problem is again, that what was true for the generations before is no longer applicable for my generation. A career in academia usually means sacrificing a lot of personal life - in way too many cases also sacrificing having a family, simply because of being constantly on the move chasing whatever grants you can and working ridiculous hours all for shit wages in the end, not to mention you can't really get approved for credit to buy a house or whatever when all you have to show for your credit history is a ton of half-year contracts.
And even academic degrees per se outside of academic careers aren't a guarantee for higher paying jobs any more, not since large companies started to use having an academic degree as a proxy to legally discriminate against wide swaths of the population, including normally protected classes: it's hard to get academic degrees with a variety of mental health disorders, and many people from socioeconomically disadvantaged castes (immigrants, poor people, people of color) get filtered out by the educational system way before they can even enter university.
So why should one go for an academic degree or otherwise put in unhealthy amounts of effort if you finish at 25-30 and still only get exploitative, underpaid labor? The entire "social contract" framework underpinning our societies is broken at a fundamental level and I don't see the political will to fix any of that unless the boomers are removed from society's high positions.
There ought to be legislation requiring proof that a skills earned through a college degree are strictly necessary for job openings which are strict about requiring a degree as a filter.
I would say I’m 36 and still a PhD student but as far as marginalized people in graduate programs goes I think the process of transition of power from an advisor to a student would be and is very difficult for people for marginalized groups who aren’t used to that kind of slow motion power struggle ending well for them.
The youth today have no agency and boomers are the problem. As king of the cop-outs myself I would love to be able to live in that sentence instead of doing something. May I suggest you read some historical literature to get a perspective on this magical world that must exist or somehow existed in order for you to live a happy life? Do you think minorities had it better in the 70s? People with mental health issues? You know pre 1950 young people lived in those big hotels in cities and had shared bathrooms down the hall, etc that are now treated as one step above homeless housing, right? If the youth today were willing to live like they affordability would match historical norms. I lived with my mom as long as I could to save until I had a girlfriend with a good income to share an place (and I was a software developer in the bay area in the 90s at the time). My boomer parents borrowed the money from their parents to put down on their house. I don't know what magical world is denied my kids but they sure seem to think it existed.
> I don't know what magical world is denied my kids but they sure seem to think it existed.
My father in the 90s was able to afford a SAHM with two children and a car on the salary of a low-level police officer, and by the time he was 30, to buy a large 3BR+kitchen+living room flat in Munich.
I'm as old as he was back when he bought that, and I have absolutely zero in savings, with the combined income of my s/o and me barely keeping up with rent and cost of living despite earning above average in an IT job. I couldn't afford to have a car but thankfully don't need it as public transport in Munich is actually worth the name. No, moving out of Munich is not really an option, as house prices and rents have exploded just the same in the entire area and rural areas are, as I described, absolutely left to rot in terms of infrastructure.
The world back then may indeed have not been as rosy as many of my generation paint it - but it sure was objectively better than today. Our only hope is that we can inherit something from our parents, assuming that there is something left over after elderly care will have robbed them of all their savings and assets.
That's a really American government/welfare-based view though.
I'm in a trade union and here in Sweden we support the Left party because they support trade unions - e.g. in the 80s there were proposals for having union members on the board, having unions own a stake in the companies, etc. - these all would have helped a lot with the current mass layoffs and inflation.
I never understood unions, since all they seem to care is to force companies to keep people employed no matter what, even when they're not needed anymore.
Speaking of the US, the unionised work there is terrible: at 4PM they would drop everything and come back the next day. No overtime, no nothing. You can't do a rush job or anything, they worked at their own pace and they didn't care about our deadlines and stuff. Its like dealing with government employees.
On the other hand, working with non-union people was great. They would put in the hours with no fuss, and obviously get paid for overtime and stuff. But you could actually get them to work as much as possible in a day.
For me I never understood companies, since all they seem to care about is to force wages as low as possible instead of caring about the good of their people (and a company is nothing but a grouping of people) and to take on contracts/projects/commitments they can't meet out of greed.
When given a choice, people prefer not to be overworked due to poor management/scheduling/greed. When given a choice, people prefer to have stability in employment. This is demonstrated by the fact that when they have collective power these are two of the common items they negotiate for. Unions are created to promote their members interests. There, now you understand unions :) They represent the interest of their members not the companies interests and not letting workers pay the price for poor management/scheduling/overcommitments (I think this is where you are getting confused).
Unions don't care to 'force companies' anything, They care to represent THEIR members priorities. What you are promoting are a company's priorities which the company already looks out for and would be a strange thing for unions to form to then also promote.
Why do you think they are no longer needed? i have you seen the state of workers rights in much of the world? (e.g. working seven days a week with maybe a single day off every few months)
I think discourse is hard when people don't really define what they mean by socialism or capitalism.
It's fair to say a capitalist system is based on private ownership and free markets. With the first one really being the key that differentiates it to other systems and particularly socialism.
Now, socialism is a bit more muddy because you can either go the state route or the co-op route. Or of course, a mix of both. In a country like Norway for example a large part of the production is owned by the state (because StatOil is state-owned and it's the largest contributor to the Norwegian economy) the state also manages their wealth fund which as well generates revenue for the people. In Norway there's also a large quantity of co-ops, consumer or worker so all in all, in Norway the economy is to a high degree "socially owned". Of course, it's still a country that has private ownership and there are no particular restrictions to it. So is it a socialist country, is it a capitalist country? It's really hard to say, I think it's probably accurate to call it a mixed economy.
But if we were to simply say "socialism is when the government owns the means of production" then... it would still probably be a mixed economy? But an economy that is entirely run through co-ops, I would hardly call it capitalist even though it would have no more state intervention than current economies do. How a state intervenes is as important as how much it intervenes. I mean, I don't think anyone would call Keynes a socialist yet he argued in favour of state intervention.
A lot of people think that socialism might also be tied to planned economies, but that sort of forgets a whole diverse range of economic thinking like market socialism (Xi recently talked about the Chinese economy in this light).
So it seems to me like you're aggregating things too much and not really looking at the system through the complex lens that this discussion requires.
(Though that maximum is unlikely to be hit)
In the meantime, top managers extracted 32 billion in bonuses over the last 10 years.
Privatise profits, socialise losses.
UPDATE: My mind still boggles at the scale of the looting. 32 billion in bonuses. If that's a thousand "top managers" that would still a jaw-dropping and life-changing 32 million per person. If it's a hundred "top managers", then it's a mind-numbing 320 million per person
Let's go with the lower payout figure: 32 million would still be an insane amount even as the top payout for the singlemost important person, let's say the CEO, iff the company had been immensely profitable during that time and there had been significant personal risk. But the company wasn't profitable, there was no personal risk, and it wasn't a payout of that scale for the top one person, but for the top thousand or so (or whatever the number is, I don't know how many top managers there were...but if there were fewer top managers, the relative amount of the payout just gets larger).
UPDATE 2: Source (German)
"Denn was ist mit den verantwortlichen Top-Managern der Credit Suisse? Die, so hat es der "Tagesanzeiger" aus Zürich ausgerechnet, seit 2013 32 Milliarden Franken an Boni kassierten, während die Bank im gleichen Zeitraum 3,2 Milliarden Verlust machte."
https://www.tagesschau.de/wirtschaft/weltwirtschaft/credit-s...