Wednesday, November 18, 2009

Round-up from the last few days

Here's a quick round-up of developments in the last few days:

Goldman Sachs apologised after protesters bearing squid placards and too-big-to-exist signs converged on its Washington DC office and the home of Lloyd Blankfein. Blankfein had earlier caused uproar when said the bank does god's work. He later made things worse when he said he had been joking. The pressure had some effect as GS then pledged USD 500m to help small businesses.

Gordon Brown called for a new social and economic contract between financial services and society. His ideas include a self-policing insurance fund and a Tobin tax, which Timothy Geithner quickly rejected. Newspapers attacked Brown for fumbling but few explored his ideas or questioned Geithner's instant rejection of a transaction tax.

The FSA is to have powers to tear up bankers employment contracts if they conflict with FSA guidelines. The BBA howled loudly, as did City employment lawyers despite the prospect of more litigation.

Also in the Queen's speech, the FSA will have greater powers to investigate and discipline wrongdoing. Commentators treated it as a purely political story, with Labour beefing up the regulator and the Tories planning to re-house it.

John Varley wrote a full page article for the Sunday Telegraph in which he defended investment banking and distanced himself from prop trading. Is he preparing for an era without prop desks?

Former corporate financier Nick Anstee was inaugurated as new Lord Mayor of London in a rain-soaked but enthusiastic procession of 6,000 community participants. He used his speech to say the City must play its part in wider society but spoiled it by adding that bonus culture was not part of the crisis.

Stuart Popham of Clifford Chance will reportedly chair the new City lobby group,  TheCityUK, to promote the City's interests.

Clive Briault, former FSA regulator, warned that too many new regulatory initiatives could weaken reform, so better to focus on a few.

Peter Sands of Standard Chartered lost patience with all this talk of regulatory reform. In a Gerald Ratner moment, he claimed banks will pass all the extra costs on to their clients.

Coincidentally, Lord Myners said bankers whose egos cannot be subordinated to financial stability should leave the industry.

Will Hutton told an audience at the LSE about his new book, Them and Us, in which he will call for agreement on a definition of fairness to provide a philosophical underpinning to regulatory reform, and an end to society's “grotesque bargain” with financial oligarchs. Hutton became a New Labour guru on stakeholding in 1997, perhaps sensing regime change he later published an email exchange with George Osborne about his ideas.

Josh Kosman called the private equity industry to account with his new book, The Buyout of America, in which he warns of a second credit crisis from failing LBOs.

John Kay wrote about the thin line between rent-seeking and theft, saying that a concentration of market power has turned today's corporate executives and investment bankers into rent-seekers like the old bandit toll-seekers of the Rhine.

Phillip Booth from the Institute of Economic Affairs wrote that ethics alone are not the answer. To illustrate, he said dodgy CDOs were seen as ethically positive for extending homeownership to the poor, and only become bad after the crash (begging the interesting question of whether ethical values go up and down with bubbles too). Leave it to the market, he concluded.

Cass ethics professor Roger Steare responded with a letter saying we have plenty of philosophical perspectives that worked well for thousands of years. But corporations and markets have no persona, soul or conscience, a bit like Frankinstein's monster, so cannot work in a moral way unless they are humanised. This means giving company directors and shareholders full legal and financial responsibility.

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