Archive for February, 2010

Goldman and Greece

February 23, 2010

… and I ain’t talkin’ about the musical.

There was an interesting article by the BBC’s Robert Peston on what financial services Goldman offered the Greek government. The services themselves are pretty dubious, giving the Greek government little real benefit aside from reducing its on-book debt. Even Goldman do not seem to pretend that it was anything other than, ahem, financial engineering.

Peston’s question was: is it ethical.

The answer is: probably not. But ethics are troublesome, and I don’t mean troublesome in that “oh dear that stops us making lots of money” way, but in that “oh dear ethics is inherently based upon a point of view and therefore is difficult to capture in an abstract sense which can be applied equally to all parties and all cases” way. Typically, clients’ transactions are judged in terms of “but would their or our government think this a bit dodgy” kind of way (a test the Greek trades would have failed). But when there is no government it becomes a bit of a tougher test to apply.

“Efficiency” is a key selling point of any financial product; typically that means the product is easier to manage, has lower risk, has lower transaction costs and, sometimes, less tax. In a Daily Mail sort of way this must  seem unethical – but this is no different to a retail bank saying “you can have an ISA (which is tax free) or a savings account (which isn’t)”. Is it wrong for that bank to help its customers minimise their tax bill?

Goldman, presumably, felt the emphasis was on the Greek government. Interestingly, their ethics don’t seem to be under debate.

Advertisements

Longevity forever

February 23, 2010

» Long live longevity

Back in the heady days of 2006, some experts were predicting that London would become the centre of a huge new global market in trading the “longevity risk” faced by pension funds. It could eventually outstrip the huge credit derivatives market, they said.

Investment banks got very excited about it. But nothing much happened. In recent months, however, there have been a number of big longevity insurance deals that could change things.

Yesterday, BMW’s UK arm revealed it had bought insurance from Deutsche Bank’s Abbey Life that will protect it against the risk that the 60,000 members of its pension scheme live longer than expected.

Hmmmmm, I foresee a financial product called a longevity swap.

This is how financial engineering starts: a specific requirement which gets resold and resold and resold. What is more depressing is that most people will think of these securities as “complex financial engineering”, an almost wilful misunderstanding of them. Yet just today I was watching a very nice advertisement hosted by that very nice Michael Parkinson about some very nice life assurance product (I was ill, if anyone was wondering what I was doing) where people paid a very nice regular amount per month and, after two years of paying, were assured a very nice life assurance payment on their death.

Insurance is all about risk, and so are the financial markets – measuring it, controlling it, charging for it. And generally, for a purpose (admittedly a purpose which can later by absorbed by the larger world of speculation). Financial products such as derivatives and swaps did not come into life for no apparent reason. It’s a point I always feel is underplayed: these fancy financial products are useful to someone.

The hours

February 12, 2010

“The Hours” was a charming little film about Virgina Woolf, a dramatisation of a (in my opinion) less charming book. That is not what I am talking about.

Banks tend to invest a lot in individual employees (or, if you prefer, give them disgusting perks and pay, flying in the face of common sense and public opinion and assuredly ushering-in the end of civilisation as we know it), but with it, many would assume, comes some nasty hours. There is an element of truth to this: European markets open at 8am, so getting in between 7am and 8am is sensible. Ending work at 6pm means a bare minimum 50 hour week, with 55 hours seeming more likely. For the past week my working day has got to a rather silly 13hrs, which would make a 65 hour week (assuming 8 hrs of sleep, that’s a rather depressing 87.5% of time spent in the office).

There is a temptation to see this in a “long hours for big rewards” sense, but I doubt it is that simple. It’s not as if we’re paid by the hour.

Nor is it about being a young person’s game: I am the oldest in my team and the others were out of the door at 6pm on the dot (albeit, this could be about them having a life and me being a sad, old git).

So what is it about?

Christ, if only I knew then I could isolate it, find it somewhere else and leave everything else behind.

I strongly suspect it’s about a job well done. But that is nowhere near evil enough. So perhaps its about my plans to take over the world (possibly starting with Belgium).

Goldman Sachs, Goldman Sachs, clicking in the votes?

February 11, 2010

» Goldman Sachs, Goldman Sachs, clicking in the votes?

Between 3.41pm and 3.57pm yesterday, little more than 24 hours after the Robin Hood tax campaign’s high-profile launch, supporters noticed a sudden spike in the number of people rejecting the plan in their online poll. More than 1,700 came from a Goldman-registered server, with the rest from what appeared to be a personal address. It was unclear whether the stunt involved an individual or a number of people. Goldman said: “We have just received this information, and we are investigating the matter fully.”

Someone at Goldman Sachs has far too much time on their hands. They may find that may not be a problem for much longer.

I doubt Goldman would particularly care what we voted for in a poll, and certainly wouldn’t waste more than ten minutes trying to influence it: even Goldman is firmly aware that, as an industry, most individuals rate us lower than the leech.

Hector Sants to step down from top FSA post

February 9, 2010

» Hector Sants to step down from top FSA post

The FSA faced criticism that it failed to prevent the credit crisis by not restricting risk-taking at banks such as Northern Rock, which built up huge liabilities.

Mr Sants led the fightback and oversaw an overhaul of banking regulation, saying banks “should be very frightened” of the regulator.

I think it is only regulators who think that the regulated do not fear them. On the other hand, I fear a toddler wandering around with a automatic machine gun for a teddy bear, it doesn’t mean I am in awe of their judgement.

Regulators are basically a bunch of people trying to control a system they have never experienced and do not understand. Occasionally bankers all get together and complain about:

  1. The regulator never actually doing anything, seriously, if you follow regulation very carefully and studiously (and spend a lot of money on it) then you get really tetchy when other people don’t and seem to get away with it scot-free;
  2. Them never understanding anything;
  3. How much worse than the FSA all the European regulators are;
  4. The lack of firm decisions;
  5. How much data we submit which is blatantly ignored.

Except we don’t like to say anything because you never quite know how the regulator is going to respond. And, really, we’re very British in that we don’t like to say anything (but, tsk, do you see what they’re wearing). Besides, that teddy bear might go off.

Former BP boss Lord Browne admits sexuality fears

February 8, 2010

» Former BP boss Lord Browne admits sexuality fears

Lord Browne did not reveal that he was gay until the end of his 40-year career at the oil giant.

A correction: he was forced to admit it when he was allegedly blackmailed about it, and then committed perjury.

Lord Browne said there was “a fear that was engendered in people’s hearts about being gay”.

“In corporate life it wasn’t something you talked about, and in the oil industry is was not something you did,” he said.

I do. But there again, I’m not running a FTSE-100 company and he was so perhaps I should focus on acting macho. Hmmm, whining for most of the afternoon that a good man is hard to find was not, perhaps, the best way to start my new straight image.

I may be a banker, but HE’S a journalist

February 5, 2010

I am a banker; I am scum. This is a given.I have accepted it. I am no longer in the closet. Others, though, remain there.

Two interesting examples of interactions with journalists (financial journalists, I have yet to come to the attention of the tabloid press) that our corporate communications department had …

“So, rumour has it you’re going to buy bank ‘X’.”
“We do not comment on this kind of market rumour.”
“So that’s a ‘yes’.”
“No, it’s a reflection of the fact that we don’t comment on this kind of market rumour.”
“So that’s definitely a yes. We’re going to print it.”
“Errrr …”
“Byeee.”
“Look, you really shouldn’t print it.”
“That’s definitely a yes.”
“You shouldn’t print it because it’s completely, utterly, unambiguously false. You’ll harm your reputation, our share price, artificially inflate the price of the stock, mislead the market and generally cause nothing but harm.”
“But I’ve written it now.”

And …

“So, we’re releasing this new product.”
“Sounds good.”
“Planning the press release next week.”
“I’m out next week.”
“Ri-i-i-i-ight. So could someone else write it?”
“No.”
“Would you feel comfortable with us giving the story to another newspaper?”
“No. I’ll write a very negative story when I’m back.”
“So, we’ll delay the go-live.”

I do not think anyone actually thinks journalists are nice people, but I suspect most people think they tell the truth. Well they do. If it’s useful. Otherwise they, errr, fill in the gaps. Truth is so last century. Even this, I suspect, is not a surprise to most people.

What is surprising is how riled we do get about what the press reports. Given that significant proportions of it are untruth, manipulation, distortion or taken out-of-context it does surprise me that we bother.

Paulson repeats claims that Britain ‘screwed’ US over Lehman rescue

February 1, 2010

» Paulson repeats claims that Britain ‘screwed’ US over Lehman rescue

In On the Brink, the first book by a key player in America’s $700 billion banks bailout, Mr Paulson concentrates on the crazy months surrounding Lehman’s filing for Chapter 11 bankruptcy protection on September 15, 2008.

Barclays negotiated to buy Lehman during the weekend before the bank’s collapse, but the talks fell apart after both countries put up obstacles to a rescue deal. The British bank eventually bought Lehman out of Chapter 11.

Yes, all those barriers. Surely buying the firm that is about to be the world’s biggest bankruptcy is not really that big a deal? Do we really need to vote on it?

Not being a shareholder, it’s hard to speak on their behalf. One of the few things I own is this laptop – if it had decided to buy Lehman Brothers (and, let’s face it, that would be weird in so many ways) then I might feel some resentment at not being consulted, but then my laptop screws me over in all kinds of ways so it wouldn’t surprise me if it was planning a short squeeze (oo-er) on Goldman as I write. Perhaps I should have a say, But then I am just the owner.

It is odd, a few years ago people thought Paulson was machinating on behalf of Goldman Sachs. Now it seems he was just a nutter.