Care Home Fees – An Investment Scandal

This is a guest post by Biljana Dimovska

Summary

This article explores the recent HSBC bond mis-seliing, how it affected those saving for care home fees, and explains how to avoid getting caught out.

Stories about care home fees are pretty common in the news at the moment. There are some serious concerns in the UK, as it has an ageing population and the amount of investment required for care of the elderly is likely to increase significantly over the next few decades. There are suggestions that people should do more, wherever it is possible, to put money aside for their own care in old age.  The fact is that many people are turning to different types of investment in order to make sure that the money is available when they need it.
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Unjustified Bonuses Paid By Taxpayers

AIG bonuses are ‘an outrage’ says President Obama, and he speaks for us all.  How can the senior executives in AIG be so out of touch with reality that they rely on legal niceties to do what is so morally wrong?  Perhaps that lack of judgment and apparent unawareness of how the real world functions explains their appalling track record.  Well they seem to have shot themselves in both feet this time:

Barack Obama is vowing to pursue “every legal avenue” to stop a clutch of top executives at American International Group Inc. from pocketing multimillion-dollar bonuses, including some to employees who designed the risky credit instruments that helped topple the insurance giant.

The U.S. President joined congressional leaders and state regulators on Monday in demanding that the failed insurance giant, which has so far received more than $170-billion (U.S.) in government bailout cash, roll back $165-million in bonuses paid to employees over the weekend.  Outrage was the word of the day as news spread of the payouts, some reportedly as high as $6.5-million.

Not surprisingly, the Bonuses overshadow foreign bank payments, which could have drawn equally violent reactions.

When it emerged on Sunday that foreign banks had received more than $50bn of US federal funds as part of the AIG bail-out, big beneficiaries such as Deutsche Bank and Société Générale must have braced themselves for an outcry in Washington.

Any senior executive of any financial institution should have a keen awareness of what is going on around the world and consider carefully the most appropriate reactions. In the UK, the Financial Services Authority (FSA) will set out a banking clampdown.

Britain’s financial regulator, the FSA,  plans to clamp down on risky mortgage lending and City bonuses in a shake-up of banking rules due this week according to the British Sunday newspapers.

The FSA is planning a crackdown on management bonuses that reward short-term risk taking and will propose new rules on how banks should be run, including forcing them to hold more capital against risky trading, according to the Financial Sunday Express.  The regulator will also table new vetting procedures to ensure bank bosses are qualified to run financial institutions.

This follows up on assertion by the UK Prime Minister, Gordon Brown, that We won’t pay for bankers’ one-way bets.  He laid out a four-point plan to end the excesses of the bonus culture

Everywhere I go in Britain, I sense and share the anger and dismay of millions of hard-working people who have watched in disbelief during a year in which irresponsible practices in global banks have brought the world’s financial system close to collapse.  Only bold action to protect those endangered through no fault of their own will do.

Responsible senior bank executives should not need to have the politicians clamp down on them in this way.  It goes beyond the issue of legality, it is a simple question of morality.  President Obama has a massive popular movement supporting him as he tries to do whatever it takes to re-establish this in the financial world.

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UK Banking Meltdown Consequences

It is hardly surprising, given the UK banking meltdown to see headlines such as Era of big bonuses for bankers to end as Lloyds attracts scrutiny.

Ministers joined ranks in condemnation of the payments.  David Cameron, the Tory leader, proposed that bonuses in taxpayer-funded banks be capped at £2,000.  Sources close to the Prime Minister said that a cap on such payments could not be ruled out.

The pressure for new curbs increased after reports that Lloyds planned to pay out £120million in bonuses for last year. On Friday the bank gave warning that its subsidiary HBOS had lost £10billion – £1.6billion more than expected.

That is only one of the consequences of this devastating situation.  More importantly, questions remain over who carries the can for the banking meltdown

How much did the bankers know about the impending crisis and how much advice did they ignore as their businesses headed to the edge of a cliff.

Paul Moore, former head of regulatory risk at HBOS, alleged that he had been sacked, threatened and gagged four years ago after raising concerns that HBOS was growing too fast. He claimed Sir James Crosby, head of HBOS, had dismissed him and that it was “his decision and his alone”. Moore sued HBOS for unfair dismissal under the whistle blowing legislation and the bank settled while subjecting him to a gagging order.

The article goes on to explore how well the Financial Services Authority (FSA) has been fulfilling its mandate.  The culture there is too relaxed and chummy.  There is a greater need for ‘challenge’.  Competent people must be in place and the right questions must be asked and answered.  Truth and consequences must be the new order as a result of this horrendous banking meltdown.

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