Bill Winters - Financier HARDtalk

dramatically. Those are the headlines. Now it is

The UK appointed a commission to recommend it making banking reform.

This should help to prevent future bail-out by the taxpayers. My guess

today is Bill Winters. He sat on a commission and is also one of

London's best-known financiers. Can the greed of the bankers be stopped

Apology for the loss of subtitles for 48 seconds

The most important thing that comes to my mind was whether it was

earned. Many people tend not appreciate the contribution of any

individual generating the kind of money the bankers are getting paid,

including myself. You cannot imagine that you should be paid

that much. Of course I can imagine it. The important thing is that

this interest closely with the profitability of the bank. And

other stakeholders. The head of the Independent high paid commission

has said the UK levels have rose 50% in the past year. She said it

is a bit of a myth, people are in a closed club. Companies are made up

of executives from other companies with the interest of keeping pay

higher. I never saw it as a closed club. I am not sure what she is

referring to precisely. It is an end and -- international market.

That is why the great attractions of Britain. It is a fabulous place

to work. It is a wonderful environment. There is nothing club-

like. She said closed clubs. If you're not sure she Seren, Planet

Hollywood the Deputy Prime Minister is saying about the same topic.

There is not enough accountability, he said. He said there is not a

close enough relationship between the people at the top and the

performance of the company itself. He is absolutely right. About

shareholders not knowing what is being paid in a candid? It is clear

that many banks paid out extraordinary bonuses to a large

number of employees. It destroyed a lot of value for the shareholders.

It also plans de-seed of economic destruction for the broader economy.

There is no question about that assessment. You're given $12

million after you left JP Morgan in 2009 and you are saying it is a

perfectly acceptable sum. It is a fantastic a man of number. I do not

actually say that. Do you think you are worth that? The important thing

is that I did not get paid anything during the financial crisis. All

the senior managers forewent their entitlements. That was because the

firm was having a difficult time. We thought it was appropriate for

all of us to recognise that clearly. The amount of money and received

break before the crisis and for my departure was locked up for a long

time. It was locked up in the JP Morgan's stock. If I performed

badly, I would lose it. The key point I want to make is that people

see bankers, like yourself, getting huge amounts of money. Another

chief executive received a bonus of $10.5 million. The head of page SPC

received a bonus around $14 million last year. -- his SPC. People start

to think bankers are paying themselves millions of dollars. And

people want to know why. The people that are paying the bankers are the

banks. The banks are run by a board of directors. They do not earn that

kind of money. The primary responsibility for setting this a

proper levels resides with the owners of that bank. Shareholders

are sometimes kept on the dark. Shame on them by allowing

themselves to be kept in the dark. It is a closed club at that decided.

I do not get it close a club part. Deith in a bank should be paid

billions of dollars as a bonus when the British Prime Minister gets

$228,000 a year? That comparison is irrelevant. The important thing is

that the amount of money that a banker is paid is consistent with

the value with by individual and their contribution to the firm over

a period of time. There is the idea that a large and - a -- a large

amount of money is going out. The money that we took from JP Morgan,

resulted from the fact that we did well. A former chairman other

financial institutions said he has worked in the city of London for

three decades. He said he has seen several recessions but he said in a

party days, I cannot recall the underlying, sustained anger across

all sorts -- social levels aimed at Bank shows and the market economy

as a whole. -- bankers. He has never seen such anger. We see the

protest in Wall Street and other cities across the world. This is

unprecedented. Why do you think this is happening? Do you feel

embarrassed in any way by the huge bridges that people are except in?

-- India's. The sources of these protest very. What caused this

crisis? We have to live with his dead as a result of this financial

crisis. Where did it come from to mark it came from a long period, at

a decade, of outrageous complacency on the part of those who were

borrowing money and those who were lending money. As well as the part

of the government who was steered - - stimulating the economy along the

way. And the parts of the bankers who acted as litter came -- the

litigant in between. Asset bubbles were created. And a pot. Many

individuals and firms generated wealth for themselves. The anger is

perfectly legitimate and reasonable and understandable. Do it you need

to address this anger at how the free market operates thank you this

is a personal view. What we are operating in is a market that was

read in many ways. It was primarily raid by a combination of regulators

and the government who were quite happy with taking every little bit

of the economy and pumping it back again to keep things going. The

spare ball rolls back downhill and crashers things in its path. --

snowball. Banks were subsidised by their governments. It came about as

a result of the people who lend money to banks. They think they

will get the money back because the government was guaranteeing it. It

was not a real guarantee. It was bassoons. As a result, banks were

borrowing money at the wrong cost. All of it was wrong. That is one

way of looking at it. The points others were making it is that you

need to reconnect the financial with the moral. You agree with her?

They have to meet many ways. The past 10 up to 15 years are in the

process of working themselves out. You have to look at the strife in

the banking market over the past three months, including this week

and next week. We will talk about back reforms in a moment. Speaking

philosophically, do not think there is an alternative? Capitalism is to

be recruited somehow, as Bill Gates said in 2008. It has to look work

not only for wealthy people but also the poorer people. It is a

philosophical issue. It works if there is a equal playing field. It

is difficult to achieve. It starts with giving every charity a good

education. It is as simple as that. What level playing field is there

if the kids do not have the same chance to succeed? That is what

governments have strived for. To your immediate moral question, what

do we need to do to change the business today? To my mind, it goes

back to the same concept of the level playing-field. We have to

remove the advantages of an established quick. Like the closed

clubs Europe prone to before. I have not seen that. When we talk

about creative capitalism, it is interesting how people at by

demonstrating, not against people like Bill Gates or Steve Jobs. They

are people to create is a bit hit and two made billions of dollars in

a process. When you see the reaction to the death of Steve Jobs,

you cannot imagine that been done for a banker. No you cannot. Far

from it. But why? Yd you'd think that? Banking is an abstract

concept to most people. Most people relationship with the bank is

paying money and taking money out. It is not an exciting experience.

It is a necessary expense. Not unlike a relationship individuals

have with their water companies. You do not seen any warder bosses

being analysed a bell. It is not because they are bad. It is because

One of the key objectives was for the British Government to assure

that never again would they be taxed at their weight a financial

institution. What was the key recommendation to prevent this

recommendation to prevent this happening? Two things. A much

higher level of capital for the banks. For every dollar they lend,

rather than holding three or 4p, they need to hold 10p. That is the

first thing, more capital. In addition, it is important for not

just shareholders being exposed to losses of the bank, but the

creditors. If you buy a bond with a bank and the bank is in trouble you

should be at risk. That did not happen. Bond holders were bailed

out at the expense of taxpayers. Bond holders must take a risk. That

was recommendation number one. The second point was, we said that in

Britain we have a number of universal banks, combining retail

banking with investment banking. We said that at the end of the day

that package makes it difficult for the Government to go in and wind a

bank down without putting taxpayer money at risk. It would be easier

for the Government if we took the retail banking business, the

everyday banking business, and put it in a separate subsidiary from

the investment arm with its own capital. So if the investment arm

fails, it is left to sink. The retail arm is safe. That is right.

Once a banking group fails, what the Government can do is treat the

two pieces differently. Independent of which one causes the failure,

they can take the retail bank and put it into government ownership

temporarily and wind the investment bank down. Would that have helped

in the example of Lloyds Bank? �20 billion was used to bail out the

bank for a 43% stake. But Lloyd's does not have a significant

investment arm so it would not have helped. Our recommendations are

detailed. There are different specific recommendations. There are

some around capital. It would have prevented the Lloyd's problem

entirely. The Lloyd's problem was very specific. The bank did not

have enough capital or cash. Under the new rules they would have much

more of both. The extra cost of forcing banks to have this firewall

means the cost would be passed on to borrowers, the chairman of the

commission, Sir John Vickers, said that the proposal would effect the

profitability of banks, the remuneration of those who work for

the banks and also the consumers. On the margin, probably, yes. We

estimated the aggregate cost for the banking industry would be

between �4 billion and �7 billion. As a percentage of the banking

assets, it is tiny. Total assets in the UK are over �1 trillion. The

incremental costs, even if they were passed on to the borrowers,

which they will not be, would be very small. But there are other

things banks can do before passing on cost to borrowers, starting with

reducing the compensation for those who work for banks. In terms of

this discussion, ahead of the G20, about what is sometimes called a

Robin Hood tax, a tax on financial transactions, France, Germany

supported, the UK only if it is global. It is getting some traction.

Is it a good idea? I do not think so. Any time you look at taxation

policy, you must be clear on what you're trying to achieve. There are

two motivations for a transaction tax. The first is to raise money.

Take it out of the banks and give it to somebody who needs it. If you

want to take money from banks, just take the money from the banks,

rather than going through a complicated transaction tax. That

is what the Government did with the balance sheet levy in the UK.

Different countries have different approaches. But for the transaction

tax, the second objective is to reduce the velocity of speculation.

To make it harder for people to trade in and out of markets. Some

of the transaction tax would be paid by high fricassee traders,

speculators, but a lot would be paid by everyday end users.

Effectively the family going on holiday who takes out some euros

will end up paying a little before it. But it would curb speculative

trading. That is not a bad thing. When I look at the causes of this

crisis, speculative trading was down towards the bottom. Shadow

banking by hedge funds? It was important in one regard. Shadow

banks that were not really shadow banks. But it is all part of that

package. It is a misdirected tax. But the German Finance Minister

thinks it would be a good thing for the EU to take a lead on this. It

would help bring about tougher regulation of the bank's. I do not

think it will improve regulation. It will not reduce riskiness of the

banks. There is no indication that lots of trading has been damaging

to banks. To the contrary, in fact. There is the question, will this

make the world a better place to leave? My short answer is no.

you are against it? Yes. But for the EU to apply it single-handedly,

it would cause markets to move out of the EU. Perhaps that is what

they want. We're taking a different approach in the UK, trying to make

the banks safe. Once they are safe, let them do these things, but then

speculate, as long as they remain safe. That should create the

optimum conditions for growth. do you think when people ask, have

the banks learned the lessons? When you look at the collapse of MF

Global because it had a $6 billion bet on sovereign debt and has had

to file for bankruptcy, it makes one wonder. One wonders about the

gamblers who are risking money in this way. It does not look like

they have learnt their lesson. new commission on banking, the

first thing we agreed,we agreed, human beings will continue to make

mistakes for the rest of time. So to build a system on the

presumption that people will not be doing really stupid things would be

a fallacy. So the lessons have not been learnt by bankers?

interesting thing about MF Global is that it appears that that is a

firm run by shareholders and private creditors that made a bet,

failed, went bankrupt. The people who invested will lose, the

there is no relevance to the broader system. That is the

yourself? There have been rumours you may be going to the Swiss bank

UBS, who have also had problems with that rogue trader. Do you

fancy going back? Not immediately. I left JP Morgan very happy, 26

years there. I spent most of the last 18 months on this independent

commission on banking. This was very interesting for me. I think we

did good work. I believe we added to the greater good. No plans to go

to UBS. But would you go back to banking full-time? You never say