Rush for safe havens as euro fears rise

Thursday, 31 May 2012

US benchmark borrowing costs plunged to levels last seen in 1946 and those for Germany and the UK hit all-time lows as investors took fright at what they see as a disjointed policy response to the debt crisis in Spain and Italy. In a striking sign of the flight to haven assets, German two-year bond yields fell to zero for the first time, below the equivalent rate for Japan, meaning investors are willing to lend to Berlin for no return. US 10-year yields fell as low as 1.62 per cent, a level last reached in March 1946, according to Global Financial Data. German benchmark yields reached 1.26 per cent while Denmark's came close to breaching the 1 per cent level, hitting 1.09 per cent. UK rates fell to 1.64 per cent, the lowest since records for benchmark borrowing costs began in 1703. "They are extreme levels because we are in an extremely perilous situation. People just want to put their money somewhere where they think they will get it back. People may soon be paying Germany or the US to look after their money," said Gary Jenkins, head of Swordfish Research, an independent credit analysis company. The flight to safety came as the situation in Italy and Spain, the eurozone's third- and fourth-largest economies, deteriorated further. Italy held a disappointing debt auction and saw its benchmark borrowing costs rise above 6 per cent for the first time since January. The euro fell 0.8 per cent against the dollar to under $1.24 for the first time in two years. Confusion over how the Spanish government's rescue of Bankia, the stricken lender, will be structured led the premium Madrid pays over Berlin to borrow to hit fresh highs for the euro era at 540 basis points. Analysts said the elevated level meant that clearing houses could soon raise the amount of margin, or collateral, that traders need to post against Spanish debt, a move that led to the escalation of crises in Portugal and Ireland. The European Central Bank has made clear to Spain that it cannot use the bank's liquidity operations as part of a recapitalision of Bankia. However, the central bank said on Wednesday it had not been officially consulted on the plans. Equity markets globally fell on the eurozone fears with bourses in Paris, Frankfurt and London all dropping 2 per cent. But Nick Gartside, international chief investment officer for JPMorgan Asset Management, noted that while US bond yields had halved since April last year the S&P 500 equity market was at the same level. "One of those two markets is mispriced. Core government bonds are an efficient market and they are ahead," he added. Investors said borrowing costs for the US, UK and Germany were likely to continue to fall amid a worsening economic backdrop and the threat of more central bank intervention. Wealth managers have been moving client assets into currency havens in recent weeks, with the Swiss franc and the US dollar among the biggest beneficiaries "Risk aversion, a rapidly slowing global economy and unusually low policy rates will pin these short and intermediate maturity bonds at unprecedented low levels for quite a while," said Mohamed El-Erian, chief executive of Pimco, one of the world's largest bond investors. Mr Gartside said he could easily see German rates going below 1 per cent, following a path that only Japan and Switzerland have taken among major economies, while the US and UK could dip under 1.5 per cent. Markets are increasingly resigned to more turmoil until policy makers take more radical action. The two most popular plans of action for investors are for the ECB to buy Spanish and Italian bonds in unlimited size or for eurozone countries to agree on a fiscal union involving the pooling of debt. "You have to throw everything at it. Spain is just too big for half measures. The next intervention has to be not just massive in size but it has to show a total commitment," said Mr Jenkins. He recommends that the ECB set targets either for the premium Spain and Italy pay to borrow over Germany or for their yields.

Euro break-up 'could wipe 50pc off London house prices'

Property prices in the capital’s most sought-after postcodes have been driven up by investors moving funds out of assets held in euros to buy into what is seen as a “safe haven” alternative. Foreign money seeking a refuge from the wider economic turmoil accounted for 60pc of acquisitions of prime central London property between 2007 and 2011, according to a report by Fathom Consulting for Development Securities. If the shared currency broke up completely, London property would initially be boosted by the continued flight towards a safe haven, the report predicts. But, once the break-up had taken place, demand for these assets as an insurance against this event would start to ebb. “Although fears about a messy end to the euro debt crisis may account for much of the gain in prime central London (PCL) prices that has taken place over the past two years, we find that a break-up of the single currency area is also the single greatest threat to PCL,” said researchers.

Europeans lose faith in EU but few want to drop euro

Tuesday, 29 May 2012

A growing number of Europeans in Britain, France, Spain, Italy, the Czech Republic, Poland and Greece say integration has weakened their economies and question whether membership of the European Union is a good thing, according to a report by the non-profit, Washington-based Pew Research Centre. The study aims to provide a greater insight into attitudes and trends in Europe and has been taken into account previously by U.S. officials when formulating policies towards the continent. Only in Germany, Europe's largest economy and biggest contributor to the bailout programmes supporting indebted Ireland, Greece and Portugal, has enthusiasm for the EU grown since 2009. Sixty-five percent of Germans see membership in a positive light, up 2 percent from a Pew poll in 2009. Yet even as 54 percent of Spaniards doubt the value of being in the European Union - a huge political and economic project created in the aftermath of World War Two - the fall in support does not translate into calls to ditch the euro currency.

House prices continue to slide except in London

Prices are likely to continue their "slow, downward grind" in the coming months, analysts said, as Land Registry figures showed a 1pc annual drop across England and Wales in April to reach £160,417 on average, continuing an unbroken negative trend stretching back as far as January last year. Meanwhile, house prices in London increased by 5.1pc both annually and month on month to reach £360,721. The capital city has not seen a year-on-year decline since September 2009. The "safe haven" of London is enjoying strong interest from overseas buyers as the eurozone crisis continues. A separate report published by Hometrack yesterday found that demand from buyers registering with estate agents has outpaced the number of homes coming to the market in the capital over the last three months. The Hometrack study also said that much of London's recent price rises have also come from the largely domestic markets of south west, south east and north London. The latest dip across the country also follows the ending of a stamp duty concession for first-time buyers in March, which saw a last-minute rush of people trying to snap up deals before the deadline ended.

Solicitor sues after being accused of charging client while playing golf

Property tycoon Colin Sullivan, 69, claims his lawyer, Stewart Wiseman, demanded more than £4,000 for thirteen and a half hours work, despite being on the golf course. Mr Sullivan was so enraged at the bill that he plastered his Range Rover vehicle with stickers accusing his solicitor of ripping him off and parked it outside his offices in Central London. The court heard one of the notices read: “Stewart Wiseman took a full day off to play golf, plus a half day for personal reasons, yet charged me for 13 and a half-hour days.” But Mr Wiseman, who has been in practice for more than 40 years, has vehemently denied fraudulently overcharging his client and is now suing him for defamation over the claims made on the stickers. At a hearing in the High Court in London, lawyers for Mr Sullivan explained that the disputed charges related to a day in November 2009, when Mr Wiseman admits he was playing golf at the prestigious Dryham Park Country Club in Hertfordshire.

Bank of England prepares plans for euro collapse

 

A senior official for the Bank said the measures would "again play [their] part in mitigating the impact" of Greece or other countries leaving the single currency. The comments come after the head of the IMF suggested last week that British interest rates may have to be cut to zero if the economic situation deteriorates. The Bank has already completed a quantitative easing programme, effectively printing more money worth £325billion and this may be extended again. Yesterday, David Cameron hosted a meeting with Sir Mervyn King, Governor of the Bank; Lord Turner, the chairman of the Financial Services Authority; and the Chancellor, to discuss contingency plans to deal with the collapse of the euro. There is growing speculation that Greece may be forced out of the euro following new elections next month, if a coalition government cannot be formed that will back austerity measures.In Britain, ministers have already overseen extensive contingency planning to prepare for the possible impact of the break–up of the euro. This extends from asking banks to insure their holdings in Greece to considering new border controls to prevent a wave of immigration from beleaguered European economies. A disorderly eurozone break–up could spark another deep recession comparable to that caused by the banking crisis. Yesterday, Dr Ben Broadbent, a member of the Bank's monetary policy committee and former Treasury adviser, said that the Bank was ready to intervene. He said: "Were the still unlikely worst case risks in the euro area actually to be realised, then our own monetary policy would again play its part in mitigating the impact." But he added: "While they are both necessary and effective, these domestic interventions have their limits. It remains the case that, for the time being at least, the most important policy decisions affecting the UK are being taken in other parts of the continent. "Fears have increased of a rare but bad economic outcome. These heightened fears may already have been affecting the growth of UK activity, investment and productivity for some time." The economist also indicated that the financial markets may already be overreacting to events in Europe. "Markets and businesses possess 'animal spirits' and can overreact to events," Dr Broadbent said. "They may have done so again." Yesterday, the Greek government announced another €18 billion (£14.4 billion) of funding for the country's beleaguered banks. The Spanish government reiterated assurances that it did not require an international bail–out, despite this now being seen as inevitable by many financial experts

Director Of Spain's Failed Bankia To Leave With €13.8 Million Termination

Bancaja and general Bank of Valencia, Aurelio Izquierdo, former financial director is entitled to a pension for cessation of 13.8 million euros, according to the annual report of bank financial and savings (BFA), matrix of Bankia, corresponding to 2011.   In accordance with the information contained in the report submitted to the National Commission of the market of values (CNMV) and Tuesday indicated in various media, Izquierdo would receive this payment in respect of the insurance policy contracted to his retirement, death and disability, which joins a savings insurance by early retirement.   “Box of the savings bank of Valencia, Alicante, Castellon, Bancaja, has made the following commitments with a person during the year 2011 was part of the high Directorate of the Bank and causing the same low 13 October 2011: 7.633 thousands of euros in a policy of defined contribution covering the contingency of retirement, death and disability”", and 6,285 thousands of euros in insurance of individual savings contribution defined to cover the option of that, under certain circumstances, the person taking by early retirement”, explains BFA in its report.   The compensation to which he was entitled was already known, but it is the first time that it appears fixed in a public document.   According to the newspaper ‘Expansion’, the now Chief Financial Officer of Bancaja, Aurelio Izquierdo, published in March has an armor that could charge about 14 million euros if he ceases the entity between compensation and pension, which has not gone through the governing bodies of the entity or it has been reflected in the report of the Council. So... with one hand taxpayers (either those of Spain, or of Germany, assuming Spain "bails out" Bankia with more debt, which is then pledged at the ECB as worthless repo further diluting the value of the joint currency, and whose unwind costs are now solely footed by Germany) are paying billions to preserve the illusions that Spain's zombies are in check, while on the other they fund the expatriation costs of the bank's former directors before all those who have lost everything - investment and deposits - come knocking on Aurelio's door? Fear not: according to El Pais: According to sources of the Finance and Savings Bank (BFA), that money will not come out of the accounts of the entity, but from Bancaja, and therefore "not a single euro" of the 23,500 million of public money will go to pay such compensation. Oh, ok, so this is money of the non-fungible variety. Something like the JPM deposit cash not being used to fund JPM's prop trading operations. Got it. That makes everything so much better.

3 Years After Taxpayer Bailout, Bank of America Ships Jobs Overseas

Bank of America, which last fall announced plans to lay off 30,000 workers, is about to go on a hiring spree—overseas. America's second-largest bank is relocating its business-support operations to the Philippines, according to a high-ranking Filipino government official recently quoted in the Filipino press. The move, which includes a portion of the bank's customer service unit, comes less than three years after Bank of America received a $45 billion federal bailout. Roman Romulo, deputy majority leader of the Philippine House of Representatives, bragged to the Manila Standard Today earlier this month that the Philippines "has secured its place as the world's fastest-growing outsourcing hub." Romulo pointed out that BofA is the last of the "big four" US banks to move their business-support network to his island nation, where the average family makes $4,700 a year. A spokesman for Bank of America, Mark Pipitone, was unable to provide additional information about the bank's offshoring plans on Friday. "We have employees and operations where we can ensure that we best serve our customers and clients," he told me in an email. Advertise on MotherJones.com The bank's outsourcing comes amid rising concerns about the security of customers' financial data in the hands of foreign contractors. In March, undercover reporters for England’s Sunday Times met in India with "IT consultants" who claimed they were call center workers, and offered to sell them credit card and medical information for 500,000 Britons—including account holders at major banks such as HSBC. To prevent similar scandals from rocking the Philippines, Romulo is pushing a law that would require Filipino companies to "protect the integrity and confidentiality of any personal information collected from their clients, in compliance with international privacy standards," according to the Philippines television network ABS/CBN News. US banks already are operating call centers in the Philippines, "despite the fact that they haven't actually passed this rudimentary legislation," says Shane Larson, legislative director for the Communication Workers of America, which represents 150,000 American call center workers. The Indian government is ahead of the Philippines in passing data privacy laws, notes the union, but those laws specifically exempt the call center industry. And that could lead to problems: In a 2005 survey by PricewaterhouseCoopers, 85 percent of the Indian outsourcing companies that responded said they had experienced information security breaches in the previous year. In a 2010 report on the offshoring of technical jobs, New York's Department of Labor concluded that data security in the medical and financial fields is "of critical concern" and that "other nations' legal systems (especially in developing countries such as India) require reform to match that of the US with respect to privacy and computer security." Don't miss the brilliant longread: "My Summer at an Indian Call Center" Needless to say, the outsourcing is bad news for an already hurting US call center industry, which has shed some 500,000 jobs over the past four years—about 10 percent of the total. The CWA hopes to reverse this trend by pushing the US Call Center and Consumer Protection Act, a bill that would make any company that outsources call center jobs ineligible for federal loans and grants. In recent years, local governments in the deindustrializing Midwest have tried to boost their economies by luring call center with generous tax breaks and economic incentives. T-Mobile, for instance, accepted more than $61 million in state and local recruitment subsidies to locate call center jobs here. But it recently announced it would close seven American call centers, putting around 2,000 people out of work—even as it continues to operate centers in the Philippines and Honduras. (The CWA called the company out in a recent report, titled "Why Shipping Call Center Jobs Overseas Hurts Us Back Home.") In addition to the "frustrations" of dealing with customer-service workers halfway around the globe, "there is the bigger picture of how opaque the process is, and, as a result, some of the security questions that are raised," says Larson of the CWA. "I think Americans deserve to know to whom they are speaking and to where their information is going."

JP Morgan Chase is London's problem

UK politicians and regulators may feel good. It was an American, bank, not a British one, whose CEO had grimly to announce that “errors, sloppiness, and bad judgment” would cost it $2 billion – and now probably more – in losses. And it’s American pundits who are doing the handwringing, wondering what went wrong with President Barack Obama’s two-year-old, 848-page financial-regulation law that allowed JPMorgan Chase to take such a risk.

Yet Britain should feel a bit queasy – for failing to heed the right lesson could cost HM Treasury.

The storyline is that JPMorgan absorbed this loss because it allowed a French-born London trader, Bruno Michel Iksil, to make reckless bets with money collected from the bank’s depositors. This narrative is fodder for regulators eager to implement the “Volcker Rule” part of American financial reform.

Crisis: US investment bank JPMorgan Chase is being investigated by the FBI over its shock £1.2bn trading loss

The Volcker Rule, the suggestion of Reagan-era Federal Reserve chief Paul Volcker, will forbid American banks from an engaging in an activity called “proprietary trading.” The point is to keep banks from speculating with customer deposits, because such deposits carry a government guarantee.

The concept is easy, but the practical reality is hard. It’s been difficult for regulators to figure out what, exactly, defines proprietary trading. Is a bank engaging in such forbidden activity if it purchases securities on the open market in the expectation that its clients will soon want to purchase those securities at a higher price?

The debate gets muddier when one considers that the Volcker Rule doesn’t apply only to old-fashioned banks such as JPMorgan; it applies, too, to market-makers such as Goldman Sachs.

Chief executive Jamie Dimon narrowly escaped a full-scale rebellion from investors

Because civil servants haven’t answered such questions, and because banks have been trying to confuse the civil servants further, the government has said that it won’t enforce the rule until, probably, 2014.

Now, we can expect a call for speed – and for fewer exceptions. If what JPMorgan did wasn’t an example of proprietary trading – and an object lesson in why it should be banned – what is? Moreover, if the Volcker rule were in place, it would have captured trading in London, proponents note, as overseas affiliates will have to comply.

The problem with the focus on the Volcker Rule is that it is only part of the story – the superfluous part.

What really happened in London is a tale not about regulating banks right, but about regulating markets right. This is where London should pay attention. It looks like JPMorgan made its ill-fated trades not in stock and bond markets, but in the credit derivatives markets.

The fact that these derivatives markets aren’t regulated like stock markets has something to do with their attractiveness to financial firms. Among other things, it’s likely that JPMorgan did not have to provide a lot of upfront capital behind its trades, meaning that the bank thought it could make a bigger profit. It’s likely, too, that JPMorgan thought it could reap a big fee from the institutions on the other side of its transactions – a fee made bigger by the fact that opacity in these markets hampers competition on price.

Half a decade ago, largely for these reasons, the insurance giant AIG employed credit derivatives to make the gambles on mortgages that eventually brought it down. AIG, another “American” company, made these trades from London.

On derivatives, American regulators got something halfway right. American regulators soon will force financial firms to bring derivatives trades out into the open. Banks and other investment firms will have to execute more of these transactions on exchanges and central clearinghouses, which, in turn, will require the firms to put up some cash behind these bets.

Damage: It's not just the financial fall-out that has been wounding for JPMorgan, but revelations about a culture of squabbling at the highest level

But the regulations contain too many exemptions for “custom” derivatives – including, possibly, some of the credit derivatives into which JPMorgan plunged.

Another thing: although American commodities regulator Gary Gensler told Congress that he wants the new rules to apply to overseas affliliates of American banks, there is no certainty yet that the rules will be global. It’s likely no coincidence that JPMorgan, as it’s been experimenting with new ways to make money, decided to try this experiment in London, not in New York.

That’s a warning for London. Europe, too, after a European Parliament vote two months ago, is creating rules to push derivatives onto central clearinghouses and exchanges and to require more cash down behind such bets. London regulators will be responsible for enforcement at home.

 

 

More...

• US investment bank JP Morgan Chase being investigated by FBI over shock £1.2bn trading loss
• London Whale that scuppered Dimon's reputation: How JP Morgan's perfect record was stained by a £4.4bn scandal

 

Their earliest task should be to ask: if the rules had been in place already, would they have forced JPMorgan to put hefty capital behind opaque transactions? If not, then the rules aren’t good enough.

Most important, U.K. regulators should make sure that financial firms cannot get away with putting little capital behind big speculations by virtue of their credit rating.

Warning: Goldman Sachs and Citigroup have warned that a Moody's ratings downgrade could force them to put more cash behind derivative trades

That is the case today. Over the past few weeks, firms including Goldman Sachs and Citigroup have warned that a Moody’s ratings downgrade could force them to put more cash behind derivative trades. That’s worrisome, not because highly rated firms shouldn’t be getting a break on cash-down requirements in the first place. As the JPMorgan incident shows, no firm should be able to engage in especially risky ventures because, firm-wide, investors and regulators consider that firm to be “safe.”

If London ensures that its derivatives regulations are as tough as – or tougher – than America’s, it may sacrifice some short-term profits, sure, but it also may protect its own taxpayers down the road.

Good regulation has global benefits. If Britain is tough in not allowing for exemptions that banks will exploit, America will have to be tougher, too.

For in a few months’ or years’ time, if an “American” firm uses looser London derivatives markets to make bets that bring down the global economy, there’s one thing upon which everyone else can bet: American voters and taxpayers are not going to tolerate bailing out a mess that originated across the ocean.

American regulators should realise that the opposite is true, as well. Let’s have a race to the top – not the bottom.

EU cookie implementation deadline is today

Friday, 25 May 2012

A year after its implementation in May 2011, the European Commission's Privacy and Electronic Communications Directive will finally start to be enforced as of tonight, meaning visitors to websites are required to be informed of, and given choice over, the site's intentions to store their data in cookies. Though there has been fierce opposition to the directive, some companies, such as the BBC, Channel 4 and the Guardian, have now begun implementing measures that range from multiple user choices in the level of information shared with the site, to a single message informing the user that, by continuing to browse, they have automatically agreed to have their information stored. Further reading EU cookie law is a 'restraint to trade online', says online retailer Most UK organisations not compliant with EU cookie law New EU cookie law set to come into force But the majority of companies, it is widely reported, will miss tonight's deadline. While the Information Commissioner's Office (ICO) still disagrees that a "one size fits all" policy of standardisation is not the way forward when enforcing cookie legislation, some believe such a framework is the only way forward. Society for engineering and technology professionals, the Institution of Engineering & Technology said, "The implementation of this directive is likely to prove very variable until the introduction of a set of standards on the best way to provide a balance between easy browsing and personal privacy. "We had hoped that more progress would have been made on achieving this in the 12 month implementation delay that the Information Commissioner, Christopher Graham, gave British organisations."

Google plans to warn more than half a million users of a computer infection that may knock their computers off the Internet this summer.

Unknown to most of them, their problem began when international hackers ran an online advertising scam to take control of infected computers around the world. In a highly unusual response, the FBI set up a safety net months ago using government computers to prevent Internet disruptions for those infected users. But that system will be shut down July 9 -- killing connections for those people.

The FBI has run an impressive campaign for months, encouraging people to visit a website that will inform them whether they're infected and explain how to fix the problem. After July 9, infected users won't be able to connect to the Internet.

LONG ARM OF SCOFFLAW

An online ad scam is having some unintended ramifications: The fix may prevent as many as 360,000 from getting online. Several sites will show if you're infected:

DNS Changer Working Group: can discern whether you’re infected and explain how to fix the problem.

DNSChanger Eye Chart: if the site goes red, you’re in harm’s way. Green means clean.

The FBI website: type in the IP address of your DNS server to find out if it is infected.

Read more on how to stay safe

On Tuesday, May 22, Google announced it would throw its weight into the awareness campaign, rolling out alerts to users via a special message that will appear at the top of the Google search results page for users with affected computers, CNET reported. 

“We believe directly messaging affected users on a trusted site and in their preferred language will produce the best possible results,” wrote Google security engineer Damian Menscher in a post on the company’s security blog.

“If more devices are cleaned and steps are taken to better secure the machines against further abuse, the notification effort will be well worth it,” he wrote.

The challenge, and the reason for the awareness campaigns: Most victims don't even know their computers have been infected, although the malicious software probably has slowed their web surfing and disabled their antivirus software, making their machines more vulnerable to other problems.

Last November, when the FBI and other authorities were preparing to take down a hacker ring that had been running an Internet ad scam on a massive network of infected computers, the agency realized this may become an issue.

"We started to realize that we might have a little bit of a problem on our hands because ... if we just pulled the plug on their criminal infrastructure and threw everybody in jail, the victims of this were going to be without Internet service," said Tom Grasso, an FBI supervisory special agent. "The average user would open up Internet Explorer and get `page not found' and think the Internet is broken."

On the night of the arrests, the agency brought in Paul Vixie, chairman and founder of Internet Systems Consortium, to install two Internet servers to take the place of the truckload of impounded rogue servers that infected computers were using. Federal officials planned to keep their servers online until March, giving everyone opportunity to clean their computers.

But it wasn't enough time.

A federal judge in New York extended the deadline until July.

Now, said Grasso, "the full court press is on to get people to address this problem." And it's up to computer users to check their PCs.

'We started to realize that we might have a little bit of a problem on our hands...'

- Tom Grasso, an FBI supervisory special agent

This is what happened:

Hackers infected a network of probably more than 570,000 computers worldwide. They took advantage of vulnerabilities in the Microsoft Windows operating system to install malicious software on the victim computers. This turned off antivirus updates and changed the way the computers reconcile website addresses behind the scenes on the Internet's domain name system.

The DNS system is a network of servers that translates a web address -- such as http://www.foxnews.com -- into the numerical addresses that computers use. Victim computers were reprogrammed to use rogue DNS servers owned by the attackers. This allowed the attackers to redirect computers to fraudulent versions of any website.

The hackers earned profits from advertisements that appeared on websites that victims were tricked into visiting. The scam netted the hackers at least $14 million, according to the FBI. It also made thousands of computers reliant on the rogue servers for their Internet browsing.

When the FBI and others arrested six Estonians last November, the agency replaced the rogue servers with Vixie's clean ones. Installing and running the two substitute servers for eight months is costing the federal government about $87,000.

The number of victims is hard to pinpoint, but the FBI believes that on the day of the arrests, at least 568,000 unique Internet addresses were using the rogue servers. Five months later, FBI estimates that the number is down to at least 360,000. The U.S. has the most, about 85,000, federal authorities said. Other countries with more than 20,000 each include Italy, India, England and Germany. Smaller numbers are online in Spain, France, Canada, China and Mexico.

Vixie said most of the victims are probably individual home users, rather than corporations that have technology staffs who routinely check the computers.

FBI officials said they organized an unusual system to avoid any appearance of government intrusion into the Internet or private computers. And while this is the first time the FBI used it, it won't be the last.

"This is the future of what we will be doing," said Eric Strom, a unit chief in the FBI's Cyber Division. "Until there is a change in legal system, both inside and outside the United States, to get up to speed with the cyber problem, we will have to go down these paths, trail-blazing if you will, on these types of investigations."

Now, he said, every time the agency gets near the end of a cyber case, "we get to the point where we say, how are we going to do this, how are we going to clean the system" without creating a bigger mess than before

Adam Smith texted Fred Michel 257 times during BskyB bid

Thursday, 24 May 2012

The extent of the contact between Mr Smith and Mr Michel was revealed at the Leveson Inquiry where both are giving evidence. Mr Michel agreed there had been a 'pattern of very frequent communication' between News Corp and the Department of Culture, Media and Sport which increased from December 2010. It amounted to 191 phone calls, 158 emails and 799 texts, 90 per cent of which were with Mr Smith. 257 of the text messages were from Mr Smith to Mr Michel. Mr Michel told the inquiry: "I was never of the view it was inappropate to make the arguments or representations to his (Mr Hunt's) office." But he admitted that no lawyer had ever explained to him the quasi-judicial process of bids.

UK economy in deeper recession than previously feared

The Office for National Statistics (ONS) had originally said in its first estimate that GDP was down 0.2 per cent between January and March, plunging the UK into a double-dip recession after the economy contracted in the final quarter of 2011. The news is a further blow to the coalition government's austerity programme amid signs from the recent G8 and eurozone summits that the mood over deficit reduction was changing. This week International Monetary Fund (IMF) chief Christine Lagarde praised chancellor George Osborne for tackling Britain's deficit but urged the UK to come up with a plan B of infrastructure investment and tax reform. Driving the ONS revision today was a 4.8 per cent fall in construction output, the steepest decline in 11 years. Household spending meanwhile slowed; up 0.1 per cent in the first quarter compared to 0.4 per cent at the end of last year. But government spending - driven by health and defence - was up 1.6 per cent, the biggest rise since the first quarter of 2008. Despite the UK being back in technical recession the current downturn is not expected to be as severe as its 2008/09 counterpart, which lasted for more than a year.

NHS 'paid £17 for gluten-free pizza base'

Two prescription gluten-free pizza bases can cost the NHS as much as £34, BBC Newsnight has learned. The NHS spent £27m on gluten-free prescriptions in 2011, but handling and delivery charges, which can quadruple the cost, are not recorded. Without prescriptions, health campaigners argue, sufferers can go on to develop serious illnesses. Health Secretary Andrew Lansley said the prescription area was "under ongoing review". "The aim of providing gluten-free food products on NHS prescription is to encourage patients with coeliac disease to stick to a gluten-free, nutritious diet so they do not go on to develop more serious illnesses, which can affect their quality of life as well as being much more costly for the NHS," he said in a statement. "However, we keep this area of prescribing under ongoing review and are currently considering how we might get better value from the prescribing of gluten-free products whilst ensuring patients continue to get the products they need." Gluten-free bread, cake mixes and bourbon biscuits are also available to people with coeliac disease, triggered by gluten intolerance. In an example from Rotherham, it was discovered that the NHS had been paying four times the original price for pizza bases. Continue reading the main story “ Start Quote This is a lifetime complaint. When you've got it there is no cure for it” Geoff Martin, who has coeliac disease The two pizza bases originally cost £8.95. But by the time manufacturing, handling and delivery fees were added on, the bill for the NHS had been driven up to nearly £34.00. Another example comes from Dr Fayyaz Choudri, a GP who was responsible for overhauling gluten-free prescriptions in Allerdale, Cumbria. "We saw there were occasions where there was a bread loaf costing £2.50 and there was a handling fee of £32.00," he says. Dr Choudri has coeliac disease himself and knows the importance of a gluten-free diet. Without it, symptoms can range from digestive disorders to very serious illnesses including osteoporosis and bowel cancer. Geoff Martin is one of a growing number of people in the UK diagnosed with the disease. "This is a lifetime complaint. When you've got it there is no cure for it," he says. The condition is triggered by an intolerance to gluten, a protein found in wheat, barley and rye - and therefore a common ingredient in many processed foods. Gluten-free biscuits and cakes are currently available on NHS prescription "The only solution to it," Geoff continues, "is eating food that is gluten free." Living as he does in rural Oxfordshire, this is a problem. In order to guarantee a varied and balanced diet, Geoff relies on his prescriptions for gluten-free food. Geoff's NHS trust is one of many now reviewing its policy on gluten-free food. With an estimated one in 100 people affected by gluten intolerance, campaigners want the NHS to continue providing staple foods like bread and pasta. These are increasingly available in shops, along with a wide range of gluten-free products. But they are often much more expensive than regular foods. Coeliac UK, which represents sufferers, worries that the hidden costs of prescriptions is giving the whole system a bad name. Coeliac disease leads to tiredness, anaemia, weight loss, diarrhoea and constipation Newsnight contacted one of the leading manufacturers of gluten-free food, Juvela. They blamed wholesalers for adding "extra charges, sometimes adding a £20 handling charge to a £3 loaf". This is questioned by the British Association of Pharmaceutical Wholesalers, which represents some of the biggest companies. They told us they would be "keen to investigate any relevant cases of alleged poor standards or distribution practice." To try to safeguard prescriptions, Coeliac UK has drawn up guidelines for NHS trusts on what sort of items should be prescribed - recommending that biscuits and cake mixes should only be given in "exceptional circumstances." But Newsnight has contacted five trusts which say they have not passed on the guidelines, and that cakes and biscuits are still available on prescription. With NHS budgets under relentless pressure, these are increasingly being seen as rations the NHS cannot afford.

Free banking a dangerous myth, says Bank official

Free banking is "a dangerous myth", according to Andrew Bailey, who is due to become the chief regulator of the financial services industry. He says customers may think their account is free, but the true costs are actually hidden. Those hidden costs would include the extremely low interest rate that many banks offer on current accounts. Mr Bailey - currently an executive director at the Bank of England - will take up his new role in July. "In short, I think that the reform of retail banking in this country cannot move ahead unless we tackle the issue of free in-credit banking, and have a much better sense of what we are paying for and how we are paying," Mr Bailey said in a speech. Continue reading the main story “ Start Quote He's saying you can't leave it to the banks to clean-up their act in this way” Robert Peston Business editor Read more from Robert He said the situation also made it difficult for banks to understand the cost of the services they provide, which may have contributed to the mis-selling of financial products. Between them, Barclays, Lloyds, Royal Bank of Scotland and HSBC are currently paying about £9bn in compensation for mis-selling loan insurance. "I worry also that this unclear picture may have encouraged the mis-selling of products that is now causing so much trouble," Mr Bailey said. However, Mr Bailey says it is a difficult situation for banks because the first one to start charging for accounts could lose significant amounts of business. Speaking on the BBC's Today programme, BBC Business Editor Robert Peston said: "He's saying you can't leave it to the banks to clean-up their act in this way." "That's why he is saying - which I think is really pretty significant because this chap is replacing Hector Sands as the senior regulator in the City of London - that either the regulators or the government actually have to intervene to end the myth of free banking."

Tax avoiders and cheats cost the public purse £35billion last year

The taxman is failing to collect more than £35billion a year from cheats who refuse to pay their taxes and others who find ways of avoiding them, a report from MPs will warn today. It also found that job cuts at HM Revenue and Customs has resulted in £1billion of tax revenue not being tracked down. The size of the country’s so-called ‘tax gap’ will infuriate millions of honest taxpayers. Hole: The country's 'tax gap' was £35billion last year after thousands avoided or simply refused paying taxes The tax gap is the difference between the amount of money collected by the tax authorities and the amount they should get if everybody paid the correct amount of tax. The report from the Public Accounts Committee said an extra £35billion should have been collected in 2009/10 – equal to eight per cent of the total tax bill – if everybody had paid the correct amount.   More... Can't save? won't save? Don't worry, the thrifty will pay your pension for you Single rate 30% income tax 'would boost economy' In a further blow, it said the amount which is going missing as a result of ‘error, avoidance and evasion’ could be ‘much greater’. The report warns: ‘It is clear that there is significant potential for additional tax revenue, which could help with the Government’s deficit reduction programme.’  It also raises doubts about the wisdom of slashing staff numbers. Between 2006 and 2011, it says the department’s compliance and enforcement division reduced staff numbers by 3,387 to 26,000. Big difference: The report also found that job cuts at HM Revenue and Customs has resulted in £1billion of tax revenue not being tracked down The report states: ‘It has estimated that around £1.1billion of additional revenue could have been generated had these staff reductions not been made.’ For every £1 which has been saved, it has lost around £10 in tax revenue, it added. An HMRC spokesman said: ‘We will bring in an additional £7billion by 2014 through tackling abuse of the tax rules.’ Last year, the tax system was described as ‘inefficient, overly complex and frequently unfair’, following a study by the Institute for Fiscal Studies.

Homeowners vent anger at PTSB's 'moral bankruptcy'

Wednesday, 23 May 2012

State-owned Permanent TSB was charging a 'standard variable rate' of 5.19pc to about 75,000 customers until very recently, when it cut the rate to 4.69pc. Some mortgage holders at AIB, which is also state-owned, pay 3pc; while some at Bank of Ireland pay 3.84pc. "Can you explain to us where you expect us to get this money?" asked Conor McNally, who said he had fallen €6,500 behind on his mortgage. "The Government has already milked us for additional tax, the income of most people in the population has been butchered. "I have a family and a greatly reduced income and a greatly increased mortgage thanks to your extortionate rates." Reckless Mr McNally went on to proclaim he was "committed to telling every person" he knew to pull their money out of Permanent TSB and that he would, along with thousands like him, "drop you like a hot coal if we could". "I'm so tired of paying for other people's reckless decisions," he said, drawing a cheer as he slammed the "disastrous foresight and risk management" that triggered massive losses at the bank and prompted the rise in interest rates. Fellow mortgage holder Karen O'Donohue told the meeting she was encouraging "all customers to close their accounts with the bank" and said the way they had treated homeowners meant it was "too late for an apology". Ms O'Donohue and her husband bought their home in 2005, when they were paying interest of about 3pc. "We're lucky because we have steady jobs so we're not in arrears," she told the Irish Independent last night. "But we're paying about €400 a month more in interest than we would with another lender. "We have a small child and another one on the way, that money would make a big difference," she added. Ms O'Donohue and her husband can't move their mortgage of "about €300,000" because they're in negative equity and "no other bank would have us". Mr Cook said hearing the stories of homeowners had "stiffened his resolve" to make Permanent TSB's mortgages competitive. But despite persistent shareholder questioning, he could not say when the next step might be taken, but said the bank's restructuring plan would go to the EU in June. "I'd be hopeful, but maybe I'm being naive," said Ms O'Donohue.

Individual bankruptcy fee to double

Labour has failed to block a plan to double bankruptcy fees after MSPs heard the hike would save taxpayers £1.5 million. People will soon have to pay £200 to enter bankruptcy after the agency that administers the applications found that the present £100 fee was not covering its costs. The hike was "insensitive" in the current economic slump and could push debtors "over the edge", forcing them to turn to loan sharks, Labour said. Finance Secretary John Swinney said debtors can pay in instalments and that the fee will still be over a third cheaper than similar fees elsewhere in the UK. Some people going through the relatively new Lila (low income low assets) bankruptcy route, which allows people to clear their debts without waiting for creditors to take costly legal action, have tried to hide assets that could be used to pay creditors, Mr Swinney said. "The cost of delivering an application for bankruptcy through the Lila route has increased from £138 in 2008 to over £200, based on projected volumes for 2013," he told Holyrood's Justice Committee. Labour MSP Jenny Marra, committee vice-convener, said: "Loan sharks and payday lenders are being approached for the £100 so people can declare themselves bankrupt. An increase to £200 puts these people in a much more vulnerable position to these loan sharks." She said: "Your Government delivers many services that are not operated at full-cost recovery and I feel that in this time, when the economy is particularly vulnerable and a lot of people are struggling, it seems a very insensitive time to double the charge." Labour MSP Graeme Pearson said Citizens Advice Scotland has been lobbying for the fee to be removed completely. "Even the fact that you can pay by instalments, for some of these applicants it may well just push them over the edge," he said. Miss Marra and Mr Pearson moved to quash the fee hike but they were outvoted 6-2 by the committee's SNP and Liberal Democrat MSPs.

Greece’s banking industry secretly gets €100 billion

Greece's struggling banking industry has been secretly injected with around €100 billion in emergency liquidity from the country’s central bank which was approved by the European Central Bank in Frankfurt, according to the FT. This follow reports of a ‘run’ developing on Greek banks last week, which were emphatically denied by the Greek PM’s office. Greeks were reportedly withdrawing up to 700 mln Euro every day – a rate that would have effectively broken their banking system. If Greece were to reject EU austerity and leave the euro zone the immediate reaction might be an ECB decision to pull the plug. An ECB threat in 2010 to do the same helped ‘persuade’ Ireland to accept an international bailout plan. No doubt, its governing council will hope to concentrate minds similarly in Athens. No specific details of the plan have been provided by the ECB but it is thought this use of its emergency liquidity assistance budget would be withdrawn should Greece leave the euro zone. Greece's four largest commercial banks are due to receive €18 billion in recapitalisation funds by Friday, a senior banker at one of the four was quoted by Reuters on Tuesday. "We will get the money by Friday at the latest. Maybe we will get it tomorrow," said the banker who declined to be identified. The funds, in the form of European Financial Stability Fund bonds will recapitalise Alpha Bank, National Bank of Greece, EFG Eurobank and Piraeus Bank respectively, and allow them resume funding operations with the European Central Bank "With this €18 billion in EFSF bonds we will participate again in ECB liquidity operations," the source said. The ECB banned some Greek banks from funding operations last week because their capital was too low, forcing them to get higher-cost funding from an emergency programme at the Bank of Greece. Greek banks saw a significant decrease in their capital this year because of losses in an historic bond swap that wiped out most of the value of their holdings of Greek government debt.

Europe’s banks, sitting on $1.19 trillion of debt to Spain, Portugal, Italy and Ireland, are facing a wave of losses if Greece abandons the euro.

While lenders have increased capital buffers, written down Greek bonds and used central-bank loans to help refinance units in southern Europe, they remain vulnerable to the contagion that might follow a withdrawal, investors say. Even with more than two years of preparation, banks still are at risk of deposit flight and rising defaults in other indebted euro nations. Enlarge image UBS, the third-biggest manager of money for the wealthy, sees a 20 percent chance of Greece leaving the euro within six months, the bank’s chief investment office, led by Alexander Friedman, told client advisers in an internal note last week., Europe’s biggest bank by assets, tapped “a small amount” of ECB cash to help fund corporate and retail business in continental Europe, where it has sizeable operations in Italy and Spain. Photographer: Hannelore Foerster/Bloomberg “A Greek exit would be a Pandora’s box,” said Jacques- Pascal Porta, who helps manage $570 million at Ofi Gestion Privee in Paris, including shares in Deutsche Bank AG (DBK) and BNP Paribas SA. (BNP) “It’s a disaster that would leave the door open to other disasters. The euro’s credibility will be weakened, and it would set a precedent: Why couldn’t an exit happen for Spain, for Italy, and even for France?” The prospect of Greece leaving the 17-nation euro region increased after parties opposed to the terms of the nation’s second bailout by the European Union and the International Monetary Fund won most of the votes in May 6 elections. A fresh round of voting will be held June 17 after politicians failed to form a government. For the first time since the crisis began in November 2009, European leaders and central bankers are speaking openly of Greece abandoning the currency union. Deposit Flight The immediate risk for Europe’s banks, and for the euro region, would be a deposit flight from indebted nations such as Portugal, Ireland, Spain and Italy on speculation those countries also might quit the currency. Lenders in Germany, France and the U.K. had $1.19 trillion of claims on those four nations at the end of 2011, Bank for International Settlements data show. Should Greece go, its new currency probably would suffer an immediate devaluation of as much as 75 percent against the euro, forcing individuals and companies to default on foreign loans, economists at UBS AG (UBSN) said. Unless European leaders could make a credible case that a Greek exit was an exceptional and isolated incident, depositors in other nations might decide to withdraw euros from banks or shift them to countries seen as safer. “The highest risk facing the banks at the moment is the possibility of deposit runs,” said Andrew Stimpson, a banking analyst at Keefe, Bruyette & Woods Ltd. in London. “The more policy makers continue to openly discuss an exit, the more likely that people in Spain, Ireland and Portugal pull money out of their local banks.” Greek Withdrawals That already may be happening. Banks in Greece, Ireland, Italy, Portugal and Spain saw a decline of 80.6 billion euros ($103 billion), or 3.2 percent, in household and corporate deposits from the end of 2010 through the end of March, European Central Bank data show. Lenders in Germany and France saw an increase in deposits of 217.4 billion euros, or 6.3 percent, in the same period. Greek central bank head George Provopoulos told President Karolos Papoulias last week that savers have withdrawn as much as 700 million euros and the situation may worsen, according to the transcript of the president’s meeting with party leaders published May 15. Greece had 160 billion euros of bank deposits on March 30, down almost 75 billion euros from the peak in 2009, according to the latest data from the central bank. Greece’s pledge to inject 18 billion euros of capital in the nation’s banks may help staunch the outflow in deposits. The Hellenic Financial Stability Fund said late yesterday it approved terms of the recapitalization and the contract would be sent today to the lenders and the European Financial Stability Facility for final approval.

How Facebook's Revenue Is at Risk

Facebook's (Nasdaq: FB  ) IPO glow sure didn't last long, with shares promptly plunging on their second public day. There are plenty of other risks looming on the horizon, most notably increasing advertising rivalry from top dog Google (Nasdaq: GOOG  ) and social gamer Zynga's (Nasdaq: ZNGA  ) obvious interests in broadening its horizons. In addition, will Facebookers stay engaged forever? When all else fails -- advertise! We can break down Facebook's current figures for deeper insight. We know that the majority of Facebook's "payments and other fees" revenue comes directly from Zynga. We also know that of Zynga's player base, a disproportionately small number of players actually contribute to sales, and these players are affectionately known as "whales," just like the high rollers in Vegas. Last quarter, Zynga had only 3.5 million paying players out of 182 million monthly unique users, or MUUs. That's just 1.9% of the MUU base willing to pay up. By that rationale, an even smaller fraction of Facebook's overall MAU base actually contributes to the "payments and other fees" revenue, inflating the average revenue per user, or ARPU, for the rest of us who will never heed the call of a virtual tractor in FarmVille. I've never paid a cent for anything on Facebook's platform, and I never will. On top of that, Zynga is assuredly interested in eventually moving away from Facebook's payment platform in favor of its own. Backing out the payments segment and focusing on the core advertising business is useful for both of these reasons. Here's what happens to worldwide and North American (the segment with the highest monetization) ARPU if you back out payments revenue, which effectively looks at average advertising revenue per user.

Fraud warning: new card scam nets £1m in four months

Victims are telephoned by fraudsters and duped into revealing their PIN and then handing over their bank card to a courier in this new form of crime, which has seen more than £750,000 taken from customers since the beginning of the year. The scam involves a person being called by someone claiming to be from their bank. They are told that their debit or credit card needs collecting as it needs replacing following fraud on their account. The caller often suggests that the person hangs up and calls the bank back if they want to ensure the call is genuine, but stays on the line, tricking the person into thinking they’re calling their bank. The criminal will then ask the person to key in their PIN number, before sending a courier to collect the card. The victim is told the card is going to the bank to be changed but it is actually delivered to the fraudster to use along with the PIN obtained during the scam. DCI Paul Bernard, head of the Dedicated Cheque and Plastic Crime Unit, said: “Many of us feel confident that we can spot fraudsters but this type of crime can be sophisticated and could happen to anyone. While we have seen an increase in this type of fraud, we know collectively we can stamp it out. “If you become a victim of this type of crime, you should contact your bank in the first instance. If you have friends or relatives who you feel may be vulnerable to this, please help them to be more aware of the potential risks and what to look out for. Remember, if you are the innocent victim of card fraud you will not suffer any financial loss.”  The Payments Council found in a survey of account holders that more than three quarters feel confident that they would be able to spot a fraudulent telephone banking call. However, after hearing how the card fraud phone scam works, over half of the 4,000 people surveyed were surprised by how sophisticated it was, one third worried they were more vulnerable than they thought and four fifths felt that anyone could be a potential victim of the fraud. Mr Bernard said that customers should follow some simple tips to avoid being a victim. These include making sure you can hear the dial tone when you call your bank, and never handing over your card. Your bank or the police will never ring you and tell you that they are coming to your home to pick up your card, so never hand it over to anyone who comes to collect it. He added that your bank will never ask you to authorise anything by entering your PIN into the telephone. The only times that you should enter your PIN are at a cash machine or when you use a shop’s chip and PIN machine.

Three killed in northern Italy earthquake

Sunday, 20 May 2012

Three people have been killed in a 5.9-magnitude earthquake that struck northern Italy near Bologna, according to reports. The quake that struck at just after 4am local time was centred 21.75 miles north-northwest of Bologna at a relatively shallow depth of six miles, the US Geological Survey said. Italian news agency Ansa, citing emergency services, said two people were killed in Sant'Agostino di Ferrara when a ceramics factory collapsed. Another person was killed in Ponte Rodoni do Bondeno. In late January, A 5.4-magnitude quake shook northern Italy. Some office buildings in Milan were evacuated as a precaution and there were scattered reports of falling masonry and cracks in buildings. The tremor was one of the strongest to shake the region, seismologists said. Initial television footage indicated that older buildings had suffered damage. Roofs collapsed, church towers showed cracks and the bricks of some stone walls tumbled into the street during the quake. As dawn broke over the region, residents milled about the streets inspecting the damage. Italy's Sky TG24 showed images of the collapsed ceramics factory in Sant'Agostino di Ferrara where the two workers were reportedly killed. The structure, which appeared to be a hangar of sorts, had twisted metal supports jutting out at odd angles amid the mangled collapsed roof. The quake “was a strong one, and it lasted quite a long time”, said Emilio Bianco, receptionist at Modena's Canalgrande hotel, housed in an ornate 18th century palazzo. The hotel suffered no damage and Modena itself was spared, but guests spilled into the streets as soon as the quake hit, he said. Many people were still awake in the town since it was a “white night”, with shops and restaurants open all night. Museums were supposed to have remained open as well but closed following the bombing of a school in southern Italy that killed one person. The quake epicentre was between the towns of Finale Emilia, San Felice sul Panaro and Sermide, but was felt as far away as Tuscany and northern Alto Adige. The initial quake was followed about an hour later by a 5.1-magnitude aftershock, USGS said. And it was preceded by a 4.1-magnitude tremor. In late January, a 5.4-magnitude quake shook northern Italy. Some office buildings in Milan were evacuated as a precaution and there were scattered reports of falling masonry and cracks in buildings. In 2009, a devastating tremor killed more than 300 people in the central city of L'Aquila.

Social care 'at breaking point'

Friday, 18 May 2012

The social care system is at breaking point, with 88% of social workers fearing that cuts are putting vulnerable children's lives at risk. Nearly five years after the death of Baby P, Peter Connelly, the British Association of Social Workers (BASW) issued a warning about the "dire" state of the profession as a survey showed high proportions of social workers are concerned about unmanageable caseloads. Of 1,100 social workers surveyed by the association in two weeks in March, 88% said vulnerable lives could be put at risk by cuts to services, and 85% had seen notable cuts to services in the last 12 months. Some 77% were concerned about unmanageable caseloads; 65% were concerned about use of unqualified staff; and 46% said they were afraid to speak out for fear of repercussions. The BASW said despite Government pledges to protect frontline services, cuts had increased caseloads and stopped social workers from spending time with vulnerable children and adults. One social worker reported working at "dangerous caseload levels" while another described the situation in their team as "another serious case review waiting to happen". Peter Connelly was 17 months old when he died in Tottenham, north London, at the hands of his mother Tracey, her violent partner Steven Barker and his brother Jason Owen on August 3, 2007. He suffered more than 50 injuries despite being on the at-risk register and receiving 60 visits from social workers, police and health professionals in an eight-month period. The scandal prompted Government pledges to transform social services. But the BASW survey found social workers said cuts in back office staff meant they are spending even more time on administration than before, including having to clean toilets, buy their own stamps and clean their own offices instead of spending the time they need with children and adults at serious risk of harm. BASW said it has written to Education Secretary Michael Gove to raise its concerns about the state of social work, and is also urging the All Party Parliamentary Committee on Social Work to hold an urgent inquiry into the risks to vulnerable children and adults of an overstretched social work service. The association called on the Government and local authorities to take three steps, urging them to: take immediate measures to reallocate local authority administrative staff from less critical roles; place a moratorium on any further cuts to social work allowances or the introduction of any new charges; and to ensure that Ofsted and the Care Quality Commission (CQC) prioritise the risks of high caseloads in inspections and try to uncover bullying. Hilton Dawson, BASW chief executive, said: "The survey statistics are damning, and the hundreds of comments we have had from social workers are deeply alarming."

UK may need more QE, warns Bank of England's Adam Posen

In an interview published by newswire MNSI, Mr Posen also said he was not sure the UK had avoided falling into a Japan-style downturn. "I had been hopeful in the last few months that after we did an additional £125bn [quantitative easing] that was getting close to enough. And now I am debating whether ... I was premature to think that," he was quoted as saying. The Bank restarted its quantitative easing asset purchases last October, but halted the scheme this month having bought a total £325bn of UK government bonds. Mr Posen said he felt the latest round of QE had less impact than the initial £200bn programme, which was why he dropped his call for additional stimulus. But he said he may have underestimated the weakness of Britain's economy, which fell back into recession in the first three months of this year.

Payday loan borrowers 'trapped in debt spiral'

Almost two-thirds of people who took out expensive payday loans have used the money to pay household bills or buy essentials such as food, nappies and petrol, a survey by Which? has revealed. But while payday lenders say the loans help people ease through tricky points of the month, the research indicates many become trapped in a spiral of debt because they cannot afford to repay their loans by the agreed date, and so incur exorbitant penalty charges. A third of people said they experienced greater financial problems as a result of taking out a payday loan, while one in five were unable to pay it back on time. A quarter said they had been hit with high, hidden charges for reminder letters and failed payments. Which? highlighted the charges of lender QuickQuid, which has a £12 fee for a missed payment, while CashCall charges £30. Quid24 charges £25 for each of its first four letters to borrowers and £50 for a reminder on the 10th day. Dan McDonald, chief executive of the Medway Citizens Advice bureau, said his advisers frequently came across people who have borrowed to pay the rent or mortgage and have been drawn into a tangle of debts. "We recently advised a woman who had a £500 QuickQuid loan, £800 on a Vanquis credit card and £5,000 on an Aqua credit card, but still had £2,000 in rent arrears," he said. "Private landlords and housing associations are coming down very hard [on people who owe rent], and if people are desperate they will do anything they can to meet their rent payment. It's only going to get worse with the new housing benefit caps." Which? said the debt trap was compounded with 57% of borrowers being encouraged to take out further loans, and 45% rolling over their loans at least once. Borrowers are usually required to pay the outstanding interest before a loan is rolled over, meaning a lender can make hundreds of pounds in profit from a small loan even if the borrower eventually defaults. People were also potentially being allowed to take on credit they couldn't afford. Eight out of 34 companies do not carry out credit checks as part of their approval procedure, and nearly two-thirds of borrowers surveyed were not asked about any aspect of their financial situation apart from their salary. Some payday loan websites failed to provide any terms and conditions, and many of those that did had little or no information about a borrower's rights and obligations. or references to free debt advice. Fourteen out of 34 lenders failed to inform consumers about their complaints procedures. John Lamidey, chief executive of the Consumer Finance Association, a trade body which represents several payday lenders, said: "Despite the report's concerns that payday borrowers may get 'hooked', the fact is that payday loans actually make up a tiny proportion of overall consumer debt. "In fact, for every £100 of problem debt, payday loans never make up more than £1.20 of that debt, whereas credit cards and unsecured (mainstream) loans together account for between 60% and 70% of unmanageable debt. "Responsible payday lenders, such as the CFA's members, have no desire to lend to consumers that cannot afford to pay back their loans or trap them in a cycle of debt." But debt counselling charity the National Debtline said it had seen a huge rise in the number of calls about payday loans, from 288 in August 2010 to 1,547 in March 2012. The charity said it received 4,725 calls for help with payday loans in the first three months of 2012, 58% more than the previous quarter and 133% more than the same quarter of 2011. National Debtline spokesman Paul Crayston said: "Payday loans are fast becoming a very serious problem in this country. We have strong concerns over the lending and collections practices of many payday lenders. We have even heard from people who have been approved for payday loans despite being insolvent." Which? executive director, Richard Lloyd, said: "It is unacceptable for this rapidly growing number of people to be inadequately protected from extortionate charges and dodgy marketing techniques. The regulator should properly enforce the existing rules that apply to this industry, but they must go further and impose a cap on the amount that lenders can charge for defaulting."

Taxpayers may lose 2 billion pounds on Northern Rock rescue

UK taxpayers could lose up to 2 billion pounds from the government's 2008 rescue of mortgage lender Northern Rock by the time all the assets are wound down, according to the country's spending watchdog. The National Audit Office (NAO), an independent body that monitors value for money in government spending, said last year's sale of part of the bank was a good choice and the loss should be seen as part of the overall cost of securing the benefits of financial stability during the financial crisis.  Find out here UK Financial Investments (UKFI), the body that holds Britain's stakes in banks it rescued, has said the taxpayer will recover all of the cash provided to Northern Rock, but the NAO said that may be optimistic. Britain nationalised Northern Rock in early 2008 after failing to fund a buyer after providing emergency liquidity support to the lender the previous year. After nationalisation the business was split into two companies. A new stand-alone "good" bank, Northern Rock plc, was sold to Virgin Money at the end of last year. The second company, Northern Rock Asset Management, is running down the book of "bad" mortgages that were left, and remains in government hands. The taxpayer will lose about 480 million pounds of its original 1.4 billion pound investment in Northern Rock plc, the NAO said. Repayments of the support provided to NRAM will be spread over many years and be subject to changes in the economy. UKFI expects to recover all the support provided to Northern Rock, including the loss on the sale of the "good" bank, and reckons the taxpayer will earn a return of 3.5 percent - 4.5 percent a year by the time all the assets run off. But the NAO said a private-sector investor would require a higher rate of return as compensation for the risks taken. Its forecast of a loss of 2 billion pounds is based on applying a higher discount rate of 6 per cent a year to the cash flows. The NAO said UKFI ran the sale of Northern Rock Plc well and the price paid by Virgin Money compared well with market prices. Although Northern Rock Plc failed to meet its lending targets or deliver the performance expected during its two years of public ownership, no alternative was likely to have been significantly better, the report said.

Millions of British bank customers were left in panic today as Santander became the latest giant to be hit by the eurozone crisis.

The High Street chain saw its credit rating was slashed as anxious consumers in Spain withdrew £1bn -  sparking fears of a run on the country's banks. The move sparked fears of panic withdrawals at the UK arm of the Spanish bank similar to those last seen when Northern Rock went under in 2008. The shock downgrade compounds fears of contagion spreading from Greece and is the first time that the crisis now engulfing the ailing eurozone has been felt directly on British shores. Furthermore, hundreds of UK institutions that have lent on the interbank market to Santander could be rocked if the Spanish lender becomes a victim of the worsening single currency disaster.

‘Save euro’ plea to Germans as Spain slumps

BRITAIN yesterday piled pressure on German Chancellor Angela Merkel to save the euro. 6 comments Related Stories PM: Make or break for euro HE to issue plea to Merkel to fork out as only way to stave off meltdown New French Pres gets a soakingFrench warning for CameronSarky poll malarky will leave PM narky David Cameron and Chancellor George Osborne said she must use her financial clout to stop the single currency collapsing. The PM hammered the message home in emergency talks via video-link with Mrs Merkel and French president Francois Hollande. It came as the chaos in Greece spread to Spain — with fears of a run on banks in both countries. Greeks have taken £560million from local banks in the past week. And yesterday Spain’s Bankia bank was forced to deny reports customers had taken £800million out of its coffers in the past seven days. Last night the fears hit Santander UK as credit rating agency Moody’s downgraded the bank along with its Spanish owner and 15 other Spanish banks. And credit agency Fitch downgraded Greece on fears it will be booted out of the Eurozone. Earlier, Mr Osborne said the Treasury had drawn up emergency plans to cope with Greece quitting the euro. He told MPs: “Britain will be prepared for whatever comes.” Mr Cameron had warned countries such as Greece and Spain can only survive if richer countries did more to “share the burden of adjustment”. He also backed Eurobonds to raise billions to prop up crisis-hit countries — a proposal that would have to be bankrolled by Berlin. After the video chat, a Downing Street spokesman said the PM urged the eurozone to take “decisive action to ensure financial stability and prevent contagion”.

Spain’s banking crisis reached Britain’s high streets last night when the credit rating of Santander UK was cut.

In a sweeping reassessment, ratings agency Moody’s announced in Madrid that it is downgrading 16 Spanish banks because it could not be sure of the ability of the country’s government to provide the necessary support.

Santander UK was among the banks highlighted after the ratings agency took aim at its parent Banco Santander, based in Spain. 

The Spanish banking crisis has hit the British high street, with the news that Santander has had its credit rating cut

Santander is one of the biggest players in UK retail banking, having taken over the former Abbey National, Alliance & Leicester, Bradford & Bingley and most recently the English branches of the Royal Bank of Scotland.

The new lower A2 credit rating is certain to be a cause of anxiety to Santander UK’s millions of British customers. 

Nevertheless, they can be confident that their deposits up to £85,000 are guaranteed by the British government should there be a loss of confidence.

JP Morgan's $2 Billion Trading Loss Is Already $3 Billion

Thursday, 17 May 2012

Jamie Dimon said it could get worse... and it is. The JP Morgan trading loss that was $2 billion four days ago is now $3 billion, report Nelson Schwartz and Jessica Silver-Greenberg in the New York Times. Why? Because every hedge fund in the world knows JP Morgan is stuck in a position so big that it can't unwind it... and they're taking the other side of the trade. Can JP Morgan fire those risk managers and traders all over again? Nope. Can it claw back the massive bonuses it paid to those risk managers and traders in prior years? Nope. The good news is that JP Morgan was expected to earn $6 billion this quarter. So it has only wiped out half of that profit so far. Another $3 billion to go..

Cost of Greek exit from euro put at $1tn

The cost of a possible Greek exit from the euro has emerged as Mervyn King warned that Europe is ‘tearing itself apart’. Photograph: Chris Ratcliffe/Getty

The British government is making urgent preparations to cope with the fallout of a possible Greek exit from the single currency, after the governor of the Bank of England, Sir Mervyn King, warned that Europewas "tearing itself apart".

Reports from Athens that massive sums of money were being spirited out of the country intensified concern in London about the impact of a splintering of the eurozone on a UK economy that is stuck in double-dip recession. One estimate put the cost to the eurozone of Greece making a disorderly exit from the currency at $1tn, 5% of output.

Officials in the United States are also nervously watching the growing crisis: Barack Obama on Wednesday described it as a "headwind" that could threaten the fragile American recovery.

In a speech in Manchester before flying to the United States for a summit of G8 leaders, the British prime minister, David Cameron, will say the eurozone "either has to make up or it is looking at a potential breakup", adding that the choice for Europe's leaders cannot be long delayed.

"Either Europe has a committed, stable, successful eurozone with an effective firewall, well capitalised and regulated banks, a system of fiscal burden sharing, and supportive monetary policy across the eurozone, or we are in uncharted territory which carries huge risks for everybody.

"Whichever path is chosen, I am prepared to do whatever is necessary to protect this country and secure our economy and financial system."

Officials from the Bank, the Treasury and the Financial Services Authority are drawing up plans in the expectation that a Greek departure from monetary union – increasingly seen as inevitable by financial markets – could be as damaging to the global economy as the collapse of Lehman Brothers in September 2008.

With a second election in Greece called for 17 June, King dropped a strong hint that the Bank would take fresh steps to stimulate growth if policymakers in Europe failed to deal with the sovereign debt crisis.

"We have been through a big global financial crisis, the biggest downturn in world output since the 1930s, the biggest banking crisis in this country's history, the biggest fiscal deficit in our peacetime history and our biggest trading partner, the euro area, is tearing itself apart without any obvious solution," he said.

Doug McWilliams, of the Centre for Economic and Business Research, said a planned breakup of the single currency would cost 2% of eurozone GDP ($300bn) but a disorderly collapse would result in a 5% drop in output, a $1tn loss. "The end of the euro in its current form is a certainty," he added.

Alistair Darling, who was Chancellor of the Exchequer under the former Labour administration, said: "This has the seeds of something disastrous. It is madness. If it spreads to bigger countries, this could be really disastrous for Europe. It could consign us to years of stagnation."

Capital flight from Greece has increased since it became clear that a coalition government could not be formed after the election earlier this month. The Greek president, Karolos Papoulias, said citizens were withdrawing their money amid "great fear that could develop into panic" at the risk of a debt default and exit from the euro area, according to minutes of their meetings posted on the presidency's website. In little more than a week following the election on 6 May, €3bn was withdrawn from bank accounts. The central bank reported that €800m was taken out in a single day earlier this week.

The head of the International Institute of Finance banking lobby, Charles Dallara, said money was leaving Greece at a growing pace due to political uncertainty. "There has been a pickup of deposit flight from Greece, but I think that is stabilisable once you get a new government in place, if that government reaffirms its intention to remain in the eurozone." The damage to the rest of Europe if Greece were to leave the euro would be "somewhere between catastrophic and armageddon", he said.

The Spanish prime minister, Mariano Rajoy, told parliament that his country faced trouble financing itself as borrowing costs shoot up to "astronomic" levels. The Irish finance minister, Michael Noonan, said Dublin's plan to return to capital markets in late 2013 might not be achievable because of the uncertainty.

The first meeting between French president François Hollande and German chancellor Angela Merkel helped to calm nerves in the markets at one stage, with suggestions that Berlin might be amenable to initiatives to boost growth in Greece and the other austerity-stricken nations of the eurozone.

But the jittery mood was underlined by a fall in European shares and the single currency late in the day amid reports that the European Central Bank was cutting off its funding lifeline to Greek banks that had failed to amass enough capital to protect them from future losses.

The ECB later said it expected the Greek central bank to use part of the €130bn bailout from the EU and IMF to ensure that the country's banks were safeguarded from collapse, and that they would receive additional help from Frankfurt only once this had happened. Already delayed by the political uncertainty in Greece, €18bn is now expected to be released to recapitalise the banks.

Sony Kapoor, of the Brussels-based Re-Define thinktank, said: "The high-stakes game of chicken between Greek and other EU politicians must end now. Those saying that a Greek exit from the eurozone will not be a big deal either don't know what they are talking about, or have some ulterior motives. The social, political and economic damage to the EU from a Greek exit is potentially incalculable."

At the G8 summit, which starts on Friday, Obama will press Merkel tolean more towards a growth package for Europe, instead of pressing so hard for the austerity measures that were rejected by Greek voters.

But foreign affairs analysts said that Obama's leverage with the European leaders is minimal. Although the US has the economic muscle to help Europe out of its mess, the Obama administration has taken the strategic decision not to become involved directly.

Instead, Obama is to use the Camp David summit for some quiet diplomacy, hoping to sway Merkel to endorse some immediate actions to help growth.

King, speaking at the publication of the Bank of England's quarterly inflation report, said growth in Britain was weaker and inflation higher than Threadneedle Street had expected three months ago. It would take until 2014 for output to return to where it was in 2008, when Britain's deepest post-war recession began.

"What is so depressing about it is that this is a rerun of the debates in 2007/08 – these are not liquidity problems, they are solvency problems," King said. "Imbalances between countries in the euro area have created creditors and debtors and at some point the credit losses will need to be recognised and absorbed and shared around," he said.

"Until that is done, there will not be a resolution. That is why just kicking the can down the road is not an answer. The European Central Bank has performed heroically in trying to buy time but that time hasn't been used to put in place fundamental underlying solutions."

Eduardo Saverin Might Not Be Allowed Back In The U.S., According To Citizenship Law

Facebook co-founder Eduardo Saverin might not be allowed to return to the United States. Billionaire Saverin, who ditched his U.S. citizenship ahead of Facebook's mega IPO, is said to own a 4 or 5 percent stake in the social network. Bloomberg reported last week that he is moving to Singapore, possibly to slash taxes he might owe the U.S. government. According to a U.S. immigration law highlighted by Talking Points Memo (TPM), Saverin might face difficulty re-entering the country due to the timing of his expatriation. From Sec. 212. [8 U.S.C. 1182] of the law, per TPM: Former citizens who renounced citizenship to avoid taxation.-Any alien who is a former citizen of the United States who officially renounces United States citizenship and who is determined by the Attorney General to have renounced United States citizenship for the purpose of avoiding taxation by the United States is excludable Facebook is seeking to raise as much as $18 billion in it what is expected to be the largest Internet IPO ever. Based on a regulatory filing the social network submitted to the Securities and Exchange Commission on May 16, the stock's planned price range is currently between $34 and $38 dollars per share; the company may be valued as high as $104 billion as a result. Bloomberg reports that Saverin likely saved himself $67 million in federal income taxes on his shares; the Times pegs his savings at $100 million or more. A separate TPM post links to a document that one would have to file with the U.S. State Department's Bureau Of Consulate Affairs in order to relinquish citizenship. An item in that document also mentions possible exclusion of a person who has renounced citizenship in order to dodge taxes: My renunciation/relinquishment may not exempt me from United States income taxation. With regard to United States taxation consequences, I understand that I must contact the United States Internal Revenue Service. Further, I understand that if my renunciation of United States citizenship is determined by the United States Attorney General to be motivated by tax avoidance purposes, I will be found excludable from the United States under Immigration and Nationality Act, as amended. A spokesman for Saverin has emailed multiple media outlets to say that Saverin, who was born in Brazil, did not become a resident of Singapore to avoid taxes in the U.S. "Eduardo recently found it to be more practical to become a resident of Singapore since he plans to live there for an indefinite period of time," the spokesman wrote. "He still has very strong ties to Brazil and is extremely passionate about not only his homeland, but also the U.S." Saverin told the New York Times in an interview, “I’m not a tax expert [...] We complied with all the known laws. There was an exit tax.” An exit tax is applied to an expatriate's capital assets, including unsold stock. Forbes estimates that, even though Saverin settled up with the government before the imminent spike in the value of Facebook's shares, he probably paid nearly $500 million to leave the country. While still a Harvard student, Saverin served as the first CFO of Facebook. He held that position from 2004 until Mark Zuckerberg and other execs muscled him out in 2006 and diluted his 34 percent stake in the company. Saverin established his current stake in the social network as a result of a settlement with Facebook in 2009. Exact terms of the settlement were not disclosed.

Uber-Wealthy Venture Capitalist Gave A TED Talk Saying Rich People Don't Create Jobs

As the war over income inequality wages on, super-rich Seattle entrepreneur Nick Hanauer has been raising the hackles of his fellow 1-percenters, espousing the contrarian argument that rich people don't actually create jobs.  The position is controversial — so much so that TED is refusing to post a talk that Hanauer gave on the subject.  National Journal reports today that TED officials decided not to put Hanauer's March 1 speech up online after deeming his remarks "too politically controversial" for the site.  In an email obtained by the National Journal, TED curator Chris Anderson told his colleagues that Hanauer's speech “probably ranks as one of the most politically controversial talks we've ever run, and we need to be really careful when” to post it. He added: “Next week ain't right. Confidentially, we already have Melinda Gates on contraception going out. Sorry for the mixed messages on this.” TED regularly posts speeches about sensitive political issues, including global warming and contraception, so it's not clear why Hanauer's talk would be singled out for censorship.  We've emailed Hanauer to see what he thinks, but in the meantime, here's an excerpt for you to judge for yourself:  I can say with confidence that rich people don't create jobs, nor do businesses, large or small. What does lead to more employment is a "circle of life" like feedback loop between customers and businesses. And only consumers can set in motion this virtuous cycle of increasing demand and hiring. In this sense, an ordinary middle-class consumer is far more of a job creator than a capitalist like me.  So when businesspeople take credit for creating jobs, it's a little like squirrels taking credit for creating evolution. In fact, it's the other way around. Anyone who's ever run a business knows that hiring more people is a capitalists course of last resort, something we do only when increasing customer demand requires it.  In this sense, calling ourselves job creators isn't just inaccurate, it's disingenuous. That's why our current policies are so upside down. When you have a tax system in which most of the exemptions and the lowest rates benefit the richest, all in the name of job creation, all that happens is that the rich get richer.

The Banksy rat, punched through to make way for a drainpipe.

 Photograph: EPA

A Melbourne builder has inadvertently destroyed a valuable piece of street art by the British graffiti artist Banksy by drilling a hole through it to put in a bathroom pipe.

Melbourne resident Tina McKenzie told Australia's Network Ten she had lived above Banksy's Parachuting Rat for almost a decade.

"Anybody that understands street art and recognises it as more than just vandalism understands that it is something we need to preserve," she said.

It is the third work by Banksy in the city to be destroyed in the past two years, including one that was painted over in 2010 in a council cleanup.

Jacqui Vidal, a local gallery owner, said the council needed to be more careful in avoiding the destruction of graffiti artwork.

"There should have been something noted on the planning permit that that Banksy work had to somehow be avoided," she said.

Banksy, whose identity is unknown to the public, first drew attention in the early 1990s with stencilled graffiti seen by some as subversive and by others as satire.

JPMorgan's Trading Loss Is Said to Rise at Least 50%

The trading losses suffered by JPMorgan Chase have surged in recent days, surpassing the bank’s initial $2 billion estimate by at least $1 billion, according to people with knowledge of the losses. When Jamie Dimon, JPMorgan’s chief executive, announced the losses last Thursday, he indicated they could double within the next few quarters. But that process has been compressed into four trading days as hedge funds and other investors take advantage of JPMorgan’s distress, fueling faster deterioration in the underlying credit market positions held by the bank. A spokeswoman for the bank declined to comment, although Mr. Dimon has said the total paper trading losses will be volatile depending on day-to-day market fluctuations. The Federal Reserve is examining the scope of the growing losses and the original bet, along with whether JPMorgan’s chief investment office took risks that were inappropriate for a federally insured depository institution, according to several people with knowledge of the examination. They spoke on the condition of anonymity because the investigation is still under way. The overall health of the bank remains strong, even with the additional losses, and JPMorgan has been able to increase its stock dividend faster than its rivals because of stronger earnings and a more solid capital buffer. Still, the huge trading losses rocked Wall Street and reignited the debate over how tightly giant financial institutions should be regulated. Bank analysts say that while the bank’s stability is not threatened, if the losses continue to mount, the outlook for the bank’s dividend will grow uncertain. The bank’s leadership has discussed the impact of the losses on future earnings, although a dividend cut remains highly unlikely for now. In March, the company raised the quarterly dividend by 5 cents, to 30 cents, which will cost the bank about $190 million more this quarter. A spokeswoman for the bank said a dividend cut has not been discussed internally. At the bank’s annual meeting in Tampa, Fla., on Tuesday, Mr. Dimon did not definitively rule out cutting the dividend, although he said that he “hoped” it would not be cut. John Lackey, a shareholder from Richmond, Va., who attended the meeting precisely to ask about the dividend, was not reassured. “That wasn’t a very clear answer,” he said of Mr. Dimon’s response. “I expect that shareholders are going to suffer because of this.” Analysts expect the bank to earn $4 billion in the second quarter, factoring in the original estimated loss of $2 billion. Even if the additional trading losses were to double, the bank could still earn a profit of $2 billion. And many analysts and investors remain optimistic about the bank’s long-term prospects. Glenn Schorr, a widely followed analyst with Nomura, reiterated on Wednesday his buy rating on JPMorgan shares, which are down more than 10 percent since the trading loss became public last week. What’s more, the chief investment office earned more than $5 billion in the last three years, which leaves it ahead over all, even given the added red ink. But the underlying problem is that while these sharp swings are expected at a big hedge fund, they should not be occurring at a bank whose deposits are government-backed and which has access to ultralow cost capital from the Federal Reserve, experts said. “JPMorgan Chase has a big hedge fund inside a commercial bank,” said Mark Williams, a professor of finance at Boston University, who also served as a Federal Reserve bank examiner. “They should be taking in deposits and making loans, not taking large speculative bets.” Not long after Mr. Dimon’s announcement of a dividend increase in March, the notorious bet by JPMorgan’s chief investment office began to fall apart. Traders at the unit’s London desk and elsewhere are now frantically trying to defuse the huge bet that was built up over years, but started generating erratic returns in late March. After a brief pause, the losses began to mount again in late April, prompting Mr. Dimon’s announcement on May 10. Beginning on Friday, the same trends that had been causing the losses for six weeks accelerated, since traders on the opposite side of the bet knew the bank was under pressure to unwind the losing trade and could not double down in any way. Another issue is that the trader who executed the complex wager, Bruno Iksil, is no longer on the trading desk. Nicknamed the London Whale, Mr. Iksil had a firm grasp on the trade — knowledge that is hard to replace, even though his anticipated departure is seen as sign of the bank’s taking responsibility for the debacle. “They were caught short,” said one experienced credit trader who spoke on the condition of anonymity because the situation is still fluid. The market player, who does not stand to gain from JPMorgan’s losses and is not involved in the trade, added, “this is a very hard trade to get out of because it’s so big.” He estimated that the initial loss of just over $2 billion was caused by a move of a quarter percentage point, or 25 basis points, on a portfolio with a notional value of $150 billion to $200 billion — in other words, the total value of the contracts traded, not JPMorgan’s exposure. In the four trading days since Mr. Dimon’s disclosure, the market has moved at least 15 to 20 basis points more against JPMorgan, he said. The overall losses are not directly proportional to the move in basis points because of the complexity of the trade. Many of the positions are highly illiquid, making them difficult to value for regulators and the bank itself. In its simplest form, traders said, the complex position assembled by the bank included a bullish bet on an index of investment-grade corporate debt, later paired with a bearish bet on high-yield securities, achieved by selling insurance contracts known as credit-default swaps. A big move in the interest rate spread between the investment grade securities and risk-free government bonds in recent months hurt the first part of the bet, and was not offset by equally large moves in the price of the insurance on the high yield bonds. As the credit yield curve steepened, the losses piled up on the corporate grade index, overwhelming gains elsewhere on the trades. Making matters worse, there was a mismatch between the expiration of different instruments within the trade, increasing losses. The additional losses represent a worsening of what is already the most embarrassing misstep for JPMorgan since Mr. Dimon became chief executive in 2005. No one has blamed Mr. Dimon for the trade, which was under the oversight of the head of the chief investment office, Ina Drew, but he has repeatedly apologized, calling it “stupid” and “sloppy.” Ms. Drew resigned Monday and more departures are anticipated.

Rebbeca Brooks learned this morning that she will be taken to court over accusations of perverting the course of justice in relation to the phone hacking scandal.

Tuesday, 15 May 2012

The former editor of the News of the World and the Sun is to be charged with five others, including her husband Charlie Brooks.

Alison Levitt QC, principal legal adviser to the Director of Public Prosecutions, announced the decision at 10am, days after Mrs Brooks appeared at the Leveson inquiry into press ethics.

Mr and Mrs Brooks said: "We deplore this weak and unjust decision. After the further unprecedented posturing of the CPS we will respond later today after our return from the police station."

^{Rebekah Brooks arriving at the Leveson Inquiry}