Category Archives: Corporate governance

News Corp Targeted Former PM Gordon Brown: Hacked Police, Medical Records; Obtained Bank Information

The latest revelations in the widening News International scandal are simply stunning. “Uneasy lies the head that wears the crown” is apparently as true now as it was in Shakespeare’s day. The idea that a news organization would have the audacity to target a head of state, as News International papers the Sun and the Sunday Times did with Gordon Brown, and not with the usual tools of invective and gossip, but via the theft of personal information, raises the scandal to a whole new level.

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Summer Rerun: Geithner and Summers as Obama’s Cheney and Rumsfeld

Readers new to this site may be unfamiliar with Yves’ summer rerun series, in which she reprises vintage NC posts that have stood the test of time. I would like to add a post of mine from Credit Writedowns to the lot. The recent New York Times piece from Joe Nocera on Sheila Bair is […]

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News of the World Scandal: “The Murdochs Have Lost Control of Events” (Updated)

For those of us on the wrong side of the pond, it’s hard to appreciate the significance of the News of the World scandal. A 2009 investigation of this News Corp tabloid for interceptions of messages to royal aides led to a private investigator and a News of the World employee being convicted and sentenced to prison. The current scandal centers on the paper hacking into the voice mailboxes of over 2000 individuals. Sources allege the victims include Prime Minister David Cameron and Chancellor of the Exchequer (Treasury secretary) George Osborne.

But the event that galvanized opinion, as most readers know now, was the hacking into the phone and deleting messages of a girl who was abducted and murdered in 2002, Milly Dowler. The removal of the messages allowed the voicemailbox, which had been full, to take more messages, all for the purpose of getting more juicy messages from her desperate friends and relatives, at the ghoulish cost of giving them the false hope that she had deleted them and was therefore still alive.

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Clinton Pimps Some More for His Bank and Corporate Benefactors

Of the many low points of the Clinton presidency, one was its questionable money dealings. Remember how Hillary managed to turn $1000 into $100,000 via successful commodities trading? 70% of retail commodities traders lose money. Boy, for a newbie trader, the First Lady was clearly a natural!

A former contact of mine, low profile but with a serious reputation among professional traders, was asked to review Hillary’s trading records by some Congressmen (they apparently asked two other market professionals).

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Failing Upward, Version 3,452,227 (aka the Wages of Nearly Bringing Down the Global Economy)

Corporate American, and apparently important agencies, much prefer to hire people who’ve had Big Jobsno matter how poorly they’ve performed in them, that are very similar to the one at hand, rather than hire someone who relevant skills and experience but for whom a Big Job would be a step up.

You cannot make this up. From the Banking Times, “Ex-Lehman chief risk officer appointed World Bank treasurer,” hat tip Richard Smith:

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Durbin Bill Designed to Throw Wrench in Wall Street Infrastructure Heist

Since we so seldom have positive news to report on NC, we thought it was important to highlight a promising development. Senator Richard Durbin has introduced legislation that would considerably complicate the effort of Wall Street players to pillage privatize state and government assets for fun and profit.

It is key to understand what a bad deal these transactions are for ordinary citizens

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“Economics Upside Down” or Why “Free Markets” Don’t Exist

This is an instructive interview with Ha-Joon Chang, author of the new book “23 Things They Don’t Tell You About Capitalism.” He debunks some widely accepted beliefs, such at the existence of “free markets” or the necessity of “free trade” for the development of capitalism.

Enjoy!

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Some Background on How the Roosevelt Institute Got Into Bed With Pete Peterson, the Enemy of Social Security (Updated)

Readers may be aware of the firestorm this blog kicked off by criticizing the decision of the Roosevelt Institute to accept a grant from the Peterson Foundation (later disclosed to be $200,000) to have its Campus Network, a group of college students affiliated with the Institute, its Campus Network, to prepare a budget for a Peterson-funded event, the “Fiscal Summit”. The purpose of the exercise was to discuss ways to reduce the fiscal deficit, when the Roosevelt Institute has heretofore taken the position that budget cuts at this juncture are bad policy (we cited papers by Joe Stiglitz, Rob Johnson, and Tom Ferguson as examples;many other Roosevelt Fellows, including Bill Black, Jamie Galbraith, Randy Wray, Rob Parenteau, and Marshall Auerback, have made similar arguments).

The Roosevelt Institute has issued rebuttals on its own site (“Speaking Truth to Power” by Andrew Rich, the president of the Roosevelt Institute. Some people associated with the Institute have also spoken out in favor of the participation in the Peterson event, such as Mike Konczal, and Zachary Kolodin.

After writing a second post on this disgraceful episode, and cross posting one from Jon Walker, which analyzed the health care recommendations in the students’ budget and found them to be sorely wanting, I had wanted to step back from this fray a bit. However, readers continue to ask for an explanation as to how the Roosevelt Institute came to make the decision to cast its lot with Peterson.

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Adulterous Failed Banker Fred Goodwin’s New Human Shield

Back in March, and courtesy of Naked Capitalism’s US locale, we arbed away Fred Goodwin’s superinjunction, which banned UK reporting of his affair with a junior director at RBS. After more challenges by the UK newspapers, the superinjunction has now been amended: it’s OK to identify Fred Goodwin as the failed banker with the wandering body part; but still not OK to identify his partner, who is referred to in the official documents by the code letters “VBN”.

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Bribes Work: How Peterson, the Enemy of Social Security, Bought the Roosevelt Name

Bribes work. AT&T gave money to GLAAD, and now the gay rights organization is supporting the AT&T-T-Mobile merger. La Raza is mouthing the talking points of the Mortgage Bankers Association on down payments. The NAACP is fighting on debit card rules. The Center for Budget and Policy Priorities and the Economic Policy Institute supported the extension of the Bush tax cuts back in December. While it seems counter-intuitive that a left-leaning organization would support illiberal extensions of corporate power, in fact, that is the role of the DC pet liberal. This dynamic of rent-a-reputation is greased with corporate cash and/or political access. As the entitlement fight comes to a head, it’s worth looking under the hood of the DC think tank scene to see how the Obama administration and the GOP are working to lock down their cuts to social programs.

And so it is that the arch-enemy of Social Security, Pete Peterson, rented out the good name of Franklin Delano Roosevelt, the reputation of the Center for American Progress, and EPI. All three groups submitted budget proposals to close the deficit and had their teams share the stage with Republican con artist du jour Paul Ryan. The goal of Peterson’s conference was to legitimize the fiscal crisis narrative, and to make sure that “all sides” were represented.

Now this tidy fact is not obvious if you check the Peterson Foundation publicity for its “Fiscal Summit:”

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Row Over New IMF Chief Intensifies (Updated)

We wrote a couple of days ago about the young versus old economy struggle over who will be the next leader of the IMF in the wake of Dominique Strauss-Kahn’s resignation. Ever since its inception, the IMF had had a European in charge. Christine Lagarde, the finance minister of France, is the favorite, and the US and Europe have enough votes to determine the outcome.

Representatives of several emerging economies voiced their objections, pointing to a comment made by Jean-Claude Junker, president of the Euro group, in 2007: “The next managing director will certainly not be a European”.

The Financial Times reports that the unhappiness has gone beyond complaints in the media to an open rift.

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Battle Over IMF Chief: Proxy War Over Power of Banks?

There’s a fight afoot over who will be the next head of the IMF. Yours truly is not making odds on this one, save that Christine Lagarde is getting far and away the most attention in the media and more generally, a big push is on to have a European take the reins. The logic is that with the eurozone mess far and away the biggest priority, the new IMF chief needs to have credibility with the major actors, and that argues for a European choice.

The contrary camp is the “the countries formerly known as emerging” who point out that it is their turn to have an IMF head from one of their countries. The IMF has been led by a European since its inception. Even though votes have been rejiggered to give younger economies more weight, the mature ones still are in control of the outcome.

But what is intriguing are the arguments that follow, which reveal what the real stakes are.

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Rajat Gupta and McKinsey’s Dented Reputation

A new story by Suzanna Andrews for BusinessWeek on Rajat Gupta, the former McKinsey managing director alleged to have fed tips to convicted insider trader Raj Rajaratnam, is mainly about Rajat, but it does have a damning tidbit about McKinsey:

McKinsey had a culture of superiority, says one longtime client, who declined to be identified, adding that consultants at the firm really seemed to think they were better than anyone else in the business world. This CEO is still shocked recalling an incident in the late 1980s, when a McKinsey team offered to provide him with a road map of what his competitors were doing. When asked how they could produce such information, he was told that McKinsey also worked with his competitors, but he could trust McKinsey to know what was confidential information and what was to be kept private. He says arrogance permeated the firm.

Felix Salmon deems this revelation to be of what a “presumably-representative McKinsey team would do in the course of normal business.” Having been at the firm at around that time (the mid 1980s), the reality was more complicated, but in the end points to the same troubling conclusion: a lack of adequate (one might say any) meaningful controls on client work.

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On Short-Termism and the Institutionalization of Rentier Capitalism

Andrew Haldane and Richard Davies of the Bank of England have released a very useful new paper on short-termism in the investment arena. They contend that this problem real and getting worse. This may at first blush seem to be mere official confirmation of most people’s gut instinct. However, the authors take the critical step of developing some estimates of the severity of the phenomenon, since past efforts to do so are surprisingly scarce.

A short-term perspective is tantamount to applying an overly high discount rate to an investment project or similarly, requiring an excessively rapid payback. In corporate capital budgeting settings, the distortions are pronounced:

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