Trust in banking sector lost?

It was supposed to be a busy weekend and turned out to be even more busy than I had expected, so just a short note…

The bombshell of the week was the decision to levy a one-off tax on bank deposits in Cyprus. The tidings such a measure was about to be introduced struck me out of the blue. I was aware banks registered in the Mediterranean island divided between Greek and Turkish zones were ailing, I knew Polish banks for months had refused to accept letter of credits and guarantees issued by Cypriot banks, I realised how big exposure of those banks to Greek bonds was, I knew the country enjoyed the status of tax haven, thus attracting businessmen who eagerly had registered their holding companies there.

And now this small economy is on a brink of collapse, chiefly due to fragility of its overgrown banking system and reliance on income from low-rate taxation. The country will probably recover, with substantial help in form of emergency loans, but its citizens will be bearing the brunt of the crisis for years to come.

The recent plan to seize a percentage of deposits amassed in Cypriot banks is an unprecedented expedient undermining trust in banking sector. For years people have been taught to put their money to banks, as this guaranteed safety. Polish banking law defines banking activity as such where risk is taken away from a depositor by an entity having the status of ‘bank’. All developed countries have deposit insurance system which serves as safety valve preventing depositors from rushing to banks en masse to withdraw their money.

This seems to be the thing of the past. It turns out if a country is on a string of creditors, in order to avoid insolvency the country has to meet even the most unlawful requirements lenders come up with… After days of haggling and fighting growing social unrest, Cypriot government today reached a deal with EU / INF creditors. The one-off tax of 4% or 20% will be levied only on deposits above 100,000 EUR (the only question is whether it will cover only surplus above the threshold) and recent news say nothing of any form of compensation for depositors.

Exactly… The most interesting thing about the whole media coverage of Cyprus bank tax is that in most cases the aspect of compensation has been omitted. Several economists spoke about a brazen rip-off, while few stressed depositors at least a few days ago were planned to be given shares in their banks in return. This reveals the other side of the coin. If somebody does not need their money within a few months, this might turn out to be a great deal. If the price at which shares are granted reflect the banks’ dire standing and those bank are restructured successfully, depositors will earn a superb return. Why almost nobody mentioned this? In such shape, the Cyprus bank tax would be a classic example of conversion of debt to equity. Raising capital and reducing liabilities of banks would increase their resilience and help rebuild trust in them. With such compensation scheme in place, the whole plan hangs together and I would dare to say, is well-devised. Oddly enough, I am one of the few fellows discerning upsides of the operation; the operation which again proves the easiest way to raise money is to go where money can be found easily…

Executives’ salaries – should they be capped?

My employer, a stock-listed financial institution has recently published its annual report. Shareholders have a reason to be cheerful – despite tough macroeconomic conditions, shrinking revenues and assets base, the institution fetched a much higher net profit (thanks to successful downsizing, which if continued, may any day wipe out my position) than in 2011, but in the meantime earnings of management board members dropped by on average 20%. This is kind of peculiar, as we have already got used to ever-rising salaries and bonuses of fat cats…

Even if we have got used, it means we (as society) tolerate it as best, as we cannot change it. Cannot? The example of Switzerland, where 68% of voters supported in a referendum an initiative of capping salaries, bonuses and severance packages of top executives of stock-listed companies gives lie to such assertion. The news from Switzerland are staggering mostly because this country is perceived as home of liberal capitalism… Someone had enough power and determination to draw a line…

But even if you are a free-market advocate…Start over… Especially if you are a free-market advocate, should not you come to think something is amiss if one person earn a significant fraction of the whole big corporation’s yearly pre-tax income? In Poland people are outraged if a CEO of a big company or a bank earns 2 million zloty per year. In Switzerland amounts which evoked outrage are twenty times higher… Why so much? Is work of one man really so valuable for a company?

My first guess is that level of executives’ remuneration is a matter of ‘rotten consensus’, saying those ‘top dogs’ simply have to earn zillions, which in turn influences market valuation of top positions – if all companies pay an outstanding (indeed?) manager 2 million per year, if another company decides to pay only 1 million, no outstanding manager would be eager to work there… Such mechanism, probably in practice, keeps salaries of top executives sky-high. Free market would not solve this problem, as all companies would have to concertedly cut salaries of their managers so that the new equilibrium of this narrow spot of labour market is set. If free market is helpless, citizens of Switzerland decided the government, as lawmaker, should get to grips with this pathology…

But actually why do we care? The first cries of outrage at flawed remuneration schemes were heard in first quarter of 2009, when bankers from bailed-out financial behemoths granted themselves bonuses, as if performance of their institutions had been exemplary. The key justification for bringing unruly bankers to the heel was the support they were receiving from taxpayers’ purses. OK, how about the current situation then, when taxpayers do not contribute to sky-high pays? If an executive’s remuneration is excessive, it may hit: other employees, who earn disproportionately less than the executive, the company’s clients, who indirectly bear costs of management and, at most, the company’s shareholders – salaries are expenses which bring down profit before tax, and consequently their income. This is why the Swiss law should cover only stock-listed companies – it is aimed at protecting shareholder’s value from being depleted by fat cats.

Going back to rationales why executives are so highly-paid – some argue it is by dint of the responsibility they take. They sign hundreds of documents, work out and approve strategies of companies they run. Without them a company could practically work, but due to formal limitations, it cannot, without their approvals it would cease to operate normally very quickly. But at the end of the day, this argument can be disproved easily – in the worst case if they make wrong decisions, they may be fired and nothing else bad happens to them – do they take responsibility with their own money for flawed decisions? No! Firstly because with such provision nobody would like to take up such job, secondly, because they acted in the best interest of the company, they cannot be called to account and they retain the right to claim a generous severance package…

When almost a year ago my company announced it would lay off 10% of its staff, the CEO organised a chat with all employees. One of them dared to ask whether the CEO thought it was OK to cash in a very big salary and fire hundred of people. The answer was nobody should be outraged at it, as if it was not him, someone else would earn that money. Rising to the position of CEO of a big company is only a matter of combination of luck, skill and hard work. So the door is open, but why so can climb to the top of their ladder? Incidentally my colleagues and I condensed his purport into one sentence: “any (moron) can become a CEO”. This means it is not a specific person, who, on account of their unique combination of skills, knowledge and experience, earns zillions, it is a CEO, who on account of holding such position, earns millions. The foregone conclusion is then that remunerations of top executives are loosely tied to value they add to companies.

Scale of scandals concerning disproportionate bonuses in Poland is much lower than in Western Europe. The most recent object of public outrage are executives of PL 2012 – the company which co-ordinated preparations for and execution of last year’s football championship in Poland. The event was not a complete disaster, so both guys received over a million-zloty high bonuses. Without going into details, the fact they were rewarded so generously was in the opinion of many immoral, but indisputably not illegal. Here is the case. If parties of a contract voluntary agree for a specific terms and conditions of employment and remuneration, should anyone be allowed to interfere? In the public sector indeed, as at the end taxpayers funds these bonuses, and even if it is private sector, there is a possibility of accusing the one who signed such contract with remuneration not tied to performance of mismanagement. The very act of accusation is simple, but path to proving this and holding somebody accountable is long, windy and full of potholes just like Polish roads after winter.

If we touch upon legal aspects, it is not purely about law, it is about circumventing it. And when big money is at stake, some money is worth being sacrificed to save or earn much more money. Managerial contracts, which are a form of self-employment in Poland are a way of circumventing the salary cap law which sets upper limits of remunerations in public sector. They have one more advantage – they allow to pay a flat 19% corporate income tax instead of falling into second, 32% bracket of personal income tax…

Do not worry about the rich, they are sly, powerful and resourceful enough to foster their interests. They will always hire lobbyists to protect themselves and lawmakers will always find it hard to put up resistance to powerful lobbies. Therefore I see a long way ahead before proponents of pay cap law in Switzerland. The lobby of executives will point out it will have negative impact on quality of management and will scare everyone with visions of the world falling apart without high-paid executives. The only plausible aftermath is that the new law will surely have loopholes and someone would benefit from advising how to circumvent it…

Fifty Shades of Grey - book review

Beware, it’s going to be nasty…

Funnily enough all reviews of the book in the Polish press somehow escaped my notice and it was mother from who I learnt about its existence and all the hype surrounding it. With hindsight I can tell there’s far more hype than it’s worth… OK, don’t I put cart before the horse…

It’s kind of hilarious my mother asks me whether I heard about recently translated into Polish, world-wide recognised erotic novel, which many deem to be the best-selling porn book ever. My mother found out about the existence of the book at the local library she visits frequently and signed up in a queue for the only copy of that book. So far, she has not borrowed it…

I turned out to be too impatient to wait weeks and too reluctant to spend over 30 zlotys on a book I’d read once (with hindsight – it’d sell on allegro for 20 PLN easily) and felt insecure about the quality of the translation (so much can be done into awkwardly, much can be lost), so I took a dive into search engine and within a quarter found a copy of original edition, put some scratch paper into my printer and came into possession of “Fifty Shades…”

“Fifty Shades…” are just a first part of trilogy. I went through it and despite having two other stored on my hard disk, I totally don’t feel like exploring their content… It took me four weekends to read all 26 chapters, while many readers found the book so riveting they read it from cover to cover without putting the book away.

Shortly before Valentine’s Day I saw in it EMPIK among books on love. Love… Maybe much depends how you define love, I differentiate it markedly from desire, affection, sex, romance, fascination and other feelings and phenomena by means of simplification are often called love, but this is not a book about love. Putting it into such category seems to be a misunderstanding.

Having read the book, I find the extreme popularity of the book even more mind-boggling and its content anything but mind-blowing. Actually it has to be noted the book is really popular with women, while I read only one review of it written by a male and this “work of art” (watch out, overstatement in use) can bring about nothing more than erection - means “Fifty Shades…” have more or less the same cognitive value as a cheap porn film…

Curiosity killed the cat – I admit this was the first erotic book I read, and, without avowing, will quite likely be the last one. The book doesn’t lack the plot, but frankly speaking I found it too hackneyed, predictable to make the reading worthwhile. The narrative style of writing is often hard to follow and several times made me lose thread. Vocabulary used is in some parts exquisite (from 300 pages I learnt some 20 new English words), but generally, some words and expressions repeat far too often and descriptions of sexual practices strike with their simplicity (maybe it could be put down to the fact the heroine is just discovering sexual pleasures and loses her virginity as the story unfolds) and coarseness (I found the use of word “fuck” to describe intercourse absolutely unacceptable).

If anyone looks for a book about love… I’d rather you refrained from reading this at all. If you want to have a try anyway, I recommend you borrow it rather than buy, will be just a waste of time, but will save your money. What in my view best describes what the book deals with is “perverse fascination”. From the first page the relationship between the two main characters of the book is anything but normal. Right, there situations in life when you are enchanted with somebody the very moment you meet them for the first time. In the popular culture it’s called “love at first sight”; in my books this is a misnomer, as people grow to love with time, whereas what crops up at first sight might be only desire or fascination. Back on the track – I don’t find it conventional to found a relationship on a written contract stipulating rights and responsibilities of both parties and naming one of them “Dominant” and one of them “Submissive”. Well, truth be told I’ve never found such division of roles exciting, maybe I lack testosterone and this is the reason why the book doesn’t take my fancy.

I think I’m reaching the core – most readers found detailed (although crude) descriptions of sex most appalling in “Fifty Shades…”, while they simply didn’t strike me much. Maybe indeed many people’s sexual lives lack diversity, experiments, spontaneity and they blushed when reading about what the missed. What I found most dreadful passed unnoticed in all reviews and comments I read online, both in Polish and in English – it’s the book’s heroine, Ana Steel’s mindset – what she feels at certain stages of fascination of her totally unrealistic relationship with Christian Grey. Most women so captivated by the book identify with what she experiences and dream of being in her skin and as a man I’m horrified by their hidden dreams and stifled desires!!!

Christian Grey seems ideal and at first sight already unreal. A 27-year-old man might be extremely handsome and captivating, but will never be as rich beyond compare as Mr. Grey, CEO of Grey Enterprise Holdings Inc. is. Actually taking into account how much he buys Ana and how she (reluctantly) accepts these gifts, she at least appears to be his mistress (near the end of the book she realises it looks that way), not to call her a whore. But on the other hand Mr. Grey has a dark side – his broken psyche – he is unable to build a normal relationship with a woman. Do some women dream of having their relationship with a wealthy, handsome man governed by a contract setting do’s, don’ts, limits and obligations? Do some women dream of giving their partners pleasure by letting them cause them pain? It generally goes beyond my comprehension how a human can take (sexual) pleasure in causing somebody pain…

But as not all men dream of long-legged, big breasted, slender long-haired blondes dressed in low-cut top and mini skirt (I don’t), not all women (I hope!) have likes of Christian Grey as objects of their fantasies. This conclusion is quite reassuring, provided it holds true. If it’s not, and I can’t check it, I should probably settle on celibacy by the end of life, as by no means I don’t fully resemble Christian Grey (although on the other hand I’m not totally far cry from this character), and I don’t dream about being like him…

Once there was a Polish book, also very popular with females, “S@motność w sieci” (literally: “Loneliness online”). I read it in early 2004, prompted by my girlfriend and for some time, being under her spell, enjoyed it. Just after a while it sank in to me this was also a cheap novel, yet still I’d rank it much higher than “Fifty Shades…”. The Polish book at least was indeed about love, there was little sex in it; feelings, taken apart, were always in the foreground at least I understood why women were so fond of it and why they wanted to live through an affection with Jakub, the main male character of the book.

I shall discuss the content of the book with some people who I know won’t be ashamed to talk about this “forbidden fruit”, but I’m unlikely to change my mind about it. The fascination with the book, which according to one of the interviews with its author, who said it depicts her unleashed fantasies, just proves humans have an animal spirit lying dormant deep inside. If humans can’t contain these primeval instincts, their existence is profoundly worrisome, but at least prevents the mankind from extinction…

Construction site inspection

The first whiff of spring (very tentative and, according to recently updated weather forecasts, short-lasting) creates a great opportunity go out and check the progress of Southern Bypass of Warsaw construction. I last ventured to junction Lotnisko on the last weekend of November, being also the last weekend before onset of proper winter. I went there with my father, but without a camera (old broken-down, new still on a shopping shelf), this time my father preferred to sit in front of TV while I, with the new camera by my side, took a bus (more economical, practical and healthier solution than going by car), alighted it behind the intersection of ul. Puławska and ul. Ludwinowska and headed west towards the junction.

To the right – on my way towards the junction I pass by notorious ul. Poloneza. Funnily enough when I last strolled there, on 24 November 2012 some road-builders were dumping rubble there to harden the road. Makeshift arrangement has not withstood the thaw and some part of the dirt track turned into muddy swamp. For some strange reason the first section closer to ul. Ludwinowska is in a bearable condition, while the section adjacent to the state-of-the-art viaduct is not passable even for 4WD vehicles. The silver Nissan SUV’s driver made an attempt to make its way to the viaduct, but having got stuck on the first metres of the muddy hell reversed and turned around. As a matter of principle I keep my car away from such roads.

To the right – I turned up to my destination, having walked through underground technical track. The photo is badly focused (my fail!), but progress since my last visit here is not impressive. The junction has taken shape, if you are familiar with its plans, you can easily make out what is where, but the builders have a long way ahead of them.

To the right – the same place, looking towards ul. Puławska. The almost finished roads start east of ul. Hołubcowa (viaduct there still not ready), but west of the place where asphalt is cut short little has been done. The progress on A2 motorway sections forsaken by Chinese Covec and then by DSS could have been even worse in early March 2012, but builders got their act together and by some miraculous effort finished the road before football championships. The official deadline for completion of this road is the beginning of summer holidays of 2013. Given there is no incentive to open the road before a specific day, I find it hard to believe I will drive there before the end of summer holidays. By the end of the year, they are likely to make it, even despite their dreadfully sluggish pace…

A trip to junction Okęcie is also an opportunity to take some more snaps. Here’s where roads are built, rail infrastructure is developed and a place just below approach to Runway 33 of Warsaw airport. To the right – a blend of industrial scenery captured with use of max. 12.5x optical zoom. With such close-up the camera is sensitive to any movement of hands and despite picture stabiliser built-in, taking a good photo is a challenge. Here the task is exacerbated by various distance of different objects – rail posts, tracks, mounds of soil, lamp posts of S79 road, airport buildings, cranes. Still, despite adversities, I’m satisfied with the final shot.

The junction is a good, albeit not a perfect spot for plane-spotters. Here – the most uncanny picture of several taken yesterday. At first you might find it hard to find where the plane is. I was reluctant to try to venture the western side of the junction, where works are nearer to completion and from where photographing planes would be easier. Too much mud, too many working machines and security guards to violate health and safety rules…

And such was the state of my shoes after trudging out of the construction site. Totally soiled with mud, yet only them. My parents bought me these shoes in 2002 in a shop in Piaseczno for 49 PLN. The shop has long been wound down, but the shoes endured 11 years of every-day use – over that period I estimate they were worn on average every fourth day. Two years ago, when boarding a train on my way to work I caught on doorstep and sole of the right shoe came away. I glued it back at home and it has been holding together well until now. Who knew it would be they best purchase of footwear in my life? These days it would be much harder to buy such a durable item…