JPMorgan Chase this week became the second Wall Street bank after Goldman Sachs to face a large fine and a stiff warning over its sales of mortgage-backed bonds in the last days of the housing bubble in spring 2007. Others are to come, perhaps including Merrill Lynch, Deutsche Bank and Citigroup.
When a Rolls-Royce engine on a Qantas jet blew up last November, the engine-maker and the airline joined Toyota and BP in a list of companies fighting to repair damage to their global reputations.
But the Rolls-Qantas incident was of a different order and degree from the Toyota car recall and the BP Deepwater Horizon explosion. The settlement announced on Wednesday seems to reflect that. Read more
Some British banks don’t like the idea of having their retail operations “ringfenced” from riskier investment banking activities. Why would they? It sounds like another regulatory attempt to pen in capitalism’s animal spirits.
The impression I am left with from reading George Packer’s account in the New Yorker of the Raj Rajaratnam prosecution is of how the odds still favour the determined insider trader who takes precautions.
Packer recounts how the Rajaratnam case, which ended up as the biggest insider trading investigation ever known on Wall Street – claiming scalps including Rajaratnam and Anil Kumar, a former McKinsey partner — gained momentum as a result of a single instant message conversation:
rajatgalleon: u back
roomy81: i am here
roomy81: did not go any where
rajatgalleon: call me..just got back today
roomy81: please let me know on JNPR
roomy81: donot buy plcm till i het guidance
roomy81: want to make sure guidance OK
Not only was it very hard to mount a criminal case against Rajaratnam until that lead enabled prosecutors to tap his work and personal phones but it was incredibly labour-intensive for the lawyers and prosecutors. Read more
The official Chinese estimate that corrupt officials and executives of state-owned enterprises smuggled $124bn in bribes and ill-gotten gains out of the country over 15 years is a vivid confirmation of one of the country’s Achilles heels.
It follows the resignation of China’s railways minister in February after he was investigated for corruption. Liu Zhijun was in charge of the country’s vast and expensive (as well as lucrative for suppliers) high-speed rail network. Read more
Spider-Man at last opened on Tuesday night on Broadway, having already been playing to audiences for six months of “previews” that produced disastrously bad notices, injuries to five actors who fell off the set or crashed from the hanging wires, and the eventual firing of Julie Taymor, its original director.
“Ringfencing” is the word of the day – in the City of London at least. On Wednesday night, chancellor of the exchequer George Osborne will get his annual opportunity to excite, extol or excoriate the financial sector in his Mansion House speech. He’s expected to endorse proposals to “ringfence” banks’ deposit-taking and payment systems from their riskier investment banking arms. The aim is to keep customers’ savings safe in any future financial meltdown.
Like most plans for regulatory reform, this is easier said than done. Read more
My favourite bon mot from Richard Rumelt, the UCLA strategy expert whose interview fuelled my column this week, was his comment that in any boardroom discussion of strategic options, acquisitions should be “guilty until proven innocent”.
Prof Rumelt’s new book Good Strategy/Bad Strategy makes clear he is no fan of M&A. “The problem with engineering growth by acquisition,” he writes, “is that when you buy a company, especially a public company, you usually pay too much.” Read more