"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.
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.
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.
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.
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
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.
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.
"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.
Readit News
(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...
Its the intrinsic arrogance that the profits are somehow due to the business prowess of these charlatans, while any losses are due to "the market"
In no year has Stripe ever made a profit.
For comparision in 2019 Stripe had 4,000 employees, Credit Suisse 50,000.
https://www.bloomberg.com/news/articles/2023-03-06/stripe-de...
Prev: https://news.ycombinator.com/item?id=35058846
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.
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.
No judgement on Stripe's specifics.
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.
Other than the word "raising" that statement is completely incorrect.
> $3.5 billion
Recent article mentioned this was north of 5B
> tax rate 22%
That's not accurate even for US and they have employees worldwide.
> In no year has Stripe ever made a profit
Source?
> (some of)
Almost all employees get stock based compensation at big tech companies
> bonuses
These are salaries or stock based comp, not bonuses
> comparision in 2019 Stripe had 4,000 employees
Source?
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.
'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.
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!
https://philip.greenspun.com/politics/israel/
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.
And I can’t speak about Switzerland but even state level ballot initiatives can be checked by the courts if they violate some other law.
CA voted to ban gay marriage via ballot initiative, their courts stuck that down.
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
I's worth looking up how it works. There is no "well lets just ignore the people".
https://www.weforum.org/agenda/2017/07/switzerland-direct-de...
right, but had you led with that, nobody would click
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.
But, Credit Suisse said it was a bad idea, and apparently the people believed them.
Why were they not there in the regulator approved, big 4 audited accounts from 3 months ago?
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.
Worth pointing out that in the US and the UK, this amount is zero (0) at the moment. In Switzerland this looks like 2.5%.
https://en.wikipedia.org/wiki/Reserve_requirement#Reserve_re...
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.
Credit Suisse bonds were hedged / short duration.
The bank run started because failing to make the annual report was the final straw after years of untrustworthy behavior.