Yves here. This is the second part of an interview by Andrew Dittmer with the authors of an important new book on private equity, Private Equity at Work (see here for Part 1).
In this segment, Eileen Appelbaum and Rosemary Batt describe some of the ways that private equity firms make the companies they buy more vulnerable to bankruptcy, yet get away with it.
Read more...The new finance minister of Ukraine, Natalie Jaresko, may have replaced her US citizenship with Ukrainian at the start of this week, but her employer continued to be the US Government, long after she claims she left the State Department. US court and other records reveal that Jaresko has been the co-owner of a management company and Ukrainian investment funds registered in the state of Delaware, dependent for her salary and for investment funds on a $150 million grant from the US Agency for International Development. The US records reveal that according to Jaresko’s former husband, she is culpable in financial misconduct.
Read more...As the old adage goes, things have an annoying habit of occurring in threes. It’s particularly true in the case of crises, which tend to fuel each other in a potentially lethal feedback loop. And Mexico is already experiencing blowback from two separate but strongly interlinked crises.
Read more...Yves here. Financiers and their media amplifiers keep trying to blame their bad conduct, like mortgage appraisal fraud, on powerless customers, so people like Bill Black have to keep swatting down their misrepresentations. Sadly, this crisis topic is back all too soon due to lack of regulatory vigilance.
Read more...Et tu, Australia?
Read more...Yves here. Ebola is serving as a reminder that the fate of members of advanced economies isn’t necessarily divorced from those of citizens of poor, developing nations. And it isn’t as if those countries are completely neglected. They are simultaneously the recipients of foreign aid, while at the same time being de facto capital exporters. So while this study below is informative, it ignores the elephant in the room, which is the degree to which looting simply overwhelms the amount of funding provided by foreign aid.
As Nicholas Shaxson wrote in Treasure Islands (p. 157):
Read more...Global Financial Integrity (GFI) in Washington authored a study on illicit financial flows out of Africa (March 2010). Between 1970 and 2008, it concluded:
Total illicit financial outflows from Africa, conservatively estimated, were approximately $854 billion. total illicit outflows may be as high as $1.8 trillion… The GFI estimate – equivalent to just over 9 per cent of its $51 billion in oil and diamond exports during that time – simply has to be a gross underestimate of the looting. Many billions have disappeared offshore through opaque oil-backed loans channeled outside normal state budgets, many of them routed through two special trusts operating out of London.
I’ve been late to write up an important series published by the Chicago Tribune earlier this month on a costly swaps misadventure by the Chicago Public Schools. Like all too many state and local government entities, the Chicago Public Schools were persuaded to obtain $1 billion of needed ten-year financing not through the time-and-tested route of a simple ten year bond sale but the supposedly cost-saving mechanism of issuing a floating-rate bond and swapping it into a fixed rate. An impressive, expert-vetted analysis of the deal by the Chicago Tribune estimated that the school authority has in fact incurred $100 million in present-value losses on that $1 billion bond issue.
Read more...After a testy meeting, OPEC agreed to maintain current production targets. The failure to support oil prices via reducing production led to a sharp fall in prices on Thursday, with West Texas Intermediate crude dropping by over 6% and Brent plunging over 8% before rebounding to finish the day 6.7% lower, at $72.55 a barrel. Many analysts believe that oil could continue its slide to $60 a barrel.
Read more...Yves here. Bill Black continues to heap well-deserved scorn on efforts to defend New York Fed president William Dudley’s revealing performance in Senate testimony last week. In its efforts to pretend that the New York Fed can’t possibly be expected to regulate, the Grey Lady goes beyond the usual hoary canard that jailing banksters is just too hard (as in trying to say that what they perpetrated didn’t break any laws, when plenty of writers, such as Charles Ferguson, long form in Predator Nation, and yours truly, among plenty of others, have cited both legal theories and fact sets that show the reverse). The additional bogus claim is….drumroll…that keeping banks out of criminal and improper conduct is somehow inconsistent with making sure they “operate successfully”. In other words, the Times is effectively saying that banks have become so dependent on criminal and near-criminal conduct as profit sources that regulators dare not deprive them of that out of fear of weakening their financial performance.
Read more...We’ve been writing off and on about how the sudden fall in gas prices has been expected to put a lot of shale gas development on hold. In fact, quite a few analysts believe that one of the big Saudi aims in refusing to support oil prices was to dent the prospects for competitive energy sources, not just renewables like wind and hydro power, but shale gas.
Even though OilPrice reported that US rig count had indeed fallen as oil prices plunged, John Dizard at the Financial Times (hat tip Scott) gives a more intriguing piece of the puzzle: the degree to which production is still chugging along despite it being uneconomical. The oil majors have been criticized for levering up to continue developing when it is cash-flow negative; they are presumably betting that prices will be much higher in short order.
But the same thing is happening further down the food chain, among players that don’t begin to have the deep pockets of the industry behemoths: many of them are still in “drill baby, drill” mode.
Read more...Paul Martin, who was Canada’s finance minister before he became prime minister, is widely seen as implementing the policies that led Canada to get through the crisis virtually unscathed. This is the summary of Martin’s key actions as finance minister from INET: In general, Martin has received justifiable plaudits but often for the wrong thing. […]
Read more...William Dudley, the President of the New York Fed, is not a stupid man. He is, however, wholly unfit to be a regulator. He has now admitted that publicly. It is time for him to return to Goldman Sachs so that he can be replaced by someone expressly chosen to be a vigorous regulator who will embrace the most critical function of a financial regulator – to be the tough “regulatory cop on the beat.”
Read more...The creditors targeted by bail in would include to a large extent other banks, which would as a consequence fall in trouble as well.
Read more...This Elizabeth Warren grilling of New York Fed William Dudley over the revelations in tapes made by ex-New York Fed employee Carmen Segarra, is a bit more Socratic than her normal approach, presumably because she has more than the typical five minutes for questions. Don’t be deceived by her pacing.
Read more...Yves here. Readers may recall that we criticized the New York Times’ reporting on an important story on a criminal investigation underway involving both Goldman and New York Fed employees. A Goldman employee who had worked at the New York Fed and his boss were fired because the ex-Fed staffer allegedly had obtained confidential bank supervisory information. A New York Fed employee was also fired immediately after the Goldman terminations. The piece was composed as if the intent was to be as uninformative as possible and still meet the Grey Lady’s writing standards. Readers were left in the dark as to where the two Goldman employees fit in the organization and what the sensitive information was.
Bill Black dug through later news reports, did some additional sleuthing, and based on is experience as a regulator, concluded that there is no way the Goldman employee, Rohit Bansal, didn’t recognize that he was misusing confidential bank supervisory information. That matters because whether or not breach is criminal hinges on whether he “willfully” broke the law.
Read more...