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    Assessing the US Treasury’s bail out plan

    It had to happen. In the face of catastrophic losses, massive unemployment and an economy that is still scratching its head as to how the whole crisis unfolded, the US government has stepped into the breach in an effort to bail out the country’s banks, protect consumers, and restore investor confidence so that the economy can pick up some momentum and leave the dark days of the sub-prime mortgage crash behind. In February Treasury Secretary Timothy Geithner unveiled his raft of measures aimed at restoring investor and consumer confidence in the country’s banking sector, while also curbing executive pay in those financial institutions whic...
    On April 21, 2009 / By
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    UK government seeks to prevent cost claims

    As part of the UK government’s latest plan to curb taxpayer-funded legal spending, companies and directors cleared of criminal charges in the UK could be barred from recovering their defence costs – potentially leaving businesses and individuals acquitted of fraud, price-fixing, corporate manslaughter and other serious offences with legal bills ranging up to several million pounds. The Ministry of Justice is considering whether the public should be “subsidising” the legal fees of defendants that choose to hire teams of high-priced lawyers to defend them, as opposed to solicitors working on more reasonable legal aid rates. For example,...
    On April 21, 2009 / By
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    Rumble in the jungle

    Moses Singo is an African exception. A black farmer with green fingers, he has probably had to overcome more obstacles than faced by most entrepreneurs anywhere else in the world to get his family business off the ground. A little more than a decade since launching the Singoflora Nursery in Tswane (Pretoria), he now exports some four tonnes of lilies, agapanthus, strelitza, ruscus and snake grass to Europe, the Middle East and Asia every week. From its origins as a humble plant farm the nursery has since expanded in size and scope, and now has its own export packing division and delivery trucks. It employees more than forty people. Today Moss...
    On February 20, 2009 / By
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    Investigating fraud at Satyam

    Oh the irony. “Satyam” means “truth” in Sanskrit,?a fitting name then for the fourth largest company in India’s booming information technology sector –?a company that named the World Bank and a series of international blue chip businesses among its clients. But not anymore. The company, it now turns out, was a scam. Its chairman and founder, Ramalinga Raju, resigned in January after sending a letter of confession to his board. Some $1.5bn of the company’s funds were “non existent”, Mr Raju said, as was 95 percent of the revenue it reported in its last financial statements. Naturally, this was bad news for Satyam’s investor...
    On February 19, 2009 / By
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    Do we need the IMF?

    “We were all Keynesians now,” said Richard Nixon, back in 1969. If it was true then, it didn’t stay true for long. The rise of monetarism and neo-liberalism in the 1970s sidelined the once-dominant theories of British economist John Maynard Keynes Nowhere was the decline of Keynes’ ideas, and their replacement with the ideology of neo-liberals like Ronald Reagan and Margaret Thatcher, more apparent than at the global financial institution created after the second World War to implement his style of economic management on a global stage: the International Monetary Fund. Now the wheel has turned again. In our new financial crisis, Keyne...
    On February 19, 2009 / By
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    Crunch costs

    After the crisis, comes the litigation – and the regulation. The financial turmoil of 2008 will lead to tougher regulatory action, and a wave of law suits, this year, as governments and market authorities try to plug the gaps exposed by the market meltdown, and investors try to get at least some of their money back. Life is going to get tougher from the boardroom down, with experts saying financial companies will come under tougher scrutiny across their operations: from the way the business is governed, to the way it archives its email. Starting with the tone at the top, the depth of the current global economic crisis, and the fact that gov...
    On February 18, 2009 / By
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    Charting a new map

    Managers say the focus this year will be on restructuring and shopping for value assets. As heads of investment banking survey a new year, some of the most crucial documents in their possession are the detailed lists kept by their subordinates of the expected dealflow. These extensive lists, referred to as the pipeline, are kept rigorously up to date by all investment banking teams, but in 2009 they are looking thinner than in previous years. Some managers say they might well be virtually useless in providing them with a guide to what activity to expect in the next 12 months. Two years ago, in what must seem like another age, managers could l...
    On February 18, 2009 / By
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    Fixing the bank?ng system

    What element of the crisis has most surprised you?The scale of leverage and underpriced risk on banks’ balance sheets. I was more conscious of household and government debt in thinking about possible problems, and not aware how vulnerable the banks were. Simply put, the world got lazy about balance sheets and more attention was being paid two years ago to hedge funds and private equity. There was an assumption that banks and investment banks must know what they were doing. I don’t think I was aware how their leverage was creeping up. Did I say creeping? – racing up, and I don’t think I was aware how they were juicing their returns thr...
    On February 18, 2009 / By
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    More failure for the Securities and Exchange Commission

    When America’s biggest banks began to collapse during the presidential election campaign, the SEC became the butt of criticism from both candidates. Then when giant insurer AIG had to be rescued, the candidates agreed on one thing: SEC Chairman Christopher Cox had to go. But the revelation that Madoff affair triggered a demand for an overhaul of regulatory structures. As President Obama observed in the wake of the Madoff shock, “there’s not a lot of adult supervision out there.” In these circumstances the President can hardly be expected to praise regulators, but his statement begs questions. First, what exactly does he mean by “adu...
    On February 18, 2009 / By
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    On your marks… get set… go

    In the past five years, and including 2008, the Ministry of Finance in Finland has launched many packs of patchwork on tax laws and the systemic tax reform has been much awaited. Now the Ministry has appointed a new working group to consider the Finnish tax regime as a whole. Not a task to be accomplished in few weeks: the deadline is to issue the report by the end of 2010. Tax regimes are generally reconstructed in pieces. This piece-meal approach may have a negative impact on decisions by companies and households. Corporations make long term plans and consistent tax system and practice is an important element in planning. This holds true al...
    On February 12, 2009 / By