sutton038

The ease with which the Libor scandal has brought down the towering figure of Bob Diamond, master of the universe and investment banker extraordinaire, is truly momentous. It reveals how small cracks in corporate structures can turn into gaping chasms that engulf whole management teams. For those that haven’t been following the scandal, the gist of it is that traders have been caught submitting inaccurate figures to manipulate the Libor rate – an index which tries to reflect the average rate that banks can borrow on the 'interbank market' (aka. from each other) – for various dubious schemes. Libor relies on banks submitting honest figures to the British Bankers Association (BBA), the organisation that calculates the index. Interestingly enough, I was at a debate a few weeks ago on the topic of financial sector corruption, which pitted investigative journalists Ian Fraser and Nick Kochan against a representative of the British Bankers Association. Kochan and Fraser argued th...

[Note: for my more recent article about bitcoin, see How to Explain Bitcoin to your Granny ] By now many people will have heard about Bitcoin. That’s the global, decentralised, online crypto-currency (check out this Wired Magazine article for some background). You can either buy it on online exchanges , or your can ‘mine’ it by running algorithms that are likely to cause your laptop to catch fire. You can then use it to buy things from vendors who’ll accept it, albeit Sainsbury’s still only accepts British Pounds. There are even mainstream currency traders who actively trade Bitcoin now . I’ll bet all the Bitcoins I have though, that very few people actually understand what the hell Bitcoin is. I myself do not understand it. Try listen to this guy explain it, and feel your mind frazzle. More than anything, I have the sense that Bitcoin is a cult . A strange cybernetic cult. An anarchic techno-pirate, quasi-mystical collective on a dystopian mission to subvert the global monetary sys...

Yesterday's Jubilee caused great jubilation, or at least that's what BBC was saying. I kind of missed it, but I did think it was fitting to at least commemorate the occasion by writing a modest proposal in Bright Green Scotland , entitled Securitise the Queen . I proposed that the British Government issue Monarch-backed securities. Here's a quote: "Monarch-backed securities are innovative new financial instruments that will securitise the Queen, using her as collateral against which the government can borrow money...  ...The technicalities of the monarch-backed sovereign debt could be ironed out fairly quickly. We put the Queen into an SPV (a special purpose vehicle, of financial crisis fame), which issues 20-year bonds to investors. The SPV is bankruptcy remote, which means that if the entity defaults, the investors can claim the Queen, but no government assets. Of course we tranche the returns: Risk-averse investors take the upper tranches, backed by the stable cash ...

If you were a bank employee with information about wrongdoing in your division, would you be happy to approach your senior management about it? The Whistleblower Improvement Act of 2011 would require just that, making financial whistleblowers report their concerns to company management rather than approaching government agencies directly. The act has been backed by Rep. Michael Grimm, a former FBI agent who spent a couple years undercover trying to bust dodgy stock brokerages for securities fraud. You’d think that experience would make him attuned to the problems of financial crime, but Michael Smallberg of POGO argues that “Rep. Grimm’s legislation would hobble SEC and CFTC enforcement, chill the flow of high-quality insider tips, imperil the safety and livelihood of whistleblowers, and give law-breaking companies an accountability escape hatch”. I don't know enough about the proposed legislation to hold any definite views, but in any case  GovTrack reckons that there’s only a 2...

Globalisation can lead to surreal situations. For example, several weeks ago I got a call from a Kenyan guy called Karim Ajania , who's based in San Francisco, and who runs a website for a Mozambican forestry project called Mezimbite. You'd think the website would be focused on, well, Mozambican forestry, but it features contributions on a variety of topics from some pre-eminent global economists, including Sir Partha Dasgupta and Oxford's Paul Collier . Karim told me that h e'd managed to get respected Harvard professor  and former economic advisor to Bill Clinton,  Jeff Frankel , to write him a short blog on commodity speculation. Karim wanted me to write a reply. Karim had seen a  previous article  I'd written on food speculation , where I'd suggested that excessive involvement of financial players in agricultural futures markets could distort prices of real food, potentially leading to negative impacts on the welfare of the world's most...

Over the last year I've become somewhat intrigued by Glencore and other physical commodity traders. Part of that interest comes from my work on commodity speculation , and the fact that much of the analysis around that issue has focused on investment banks and hedge funds rather than the companies that actually deal in physical  commodities. Part comes from my fascination with figuring out how the global trade system works. Glencore has the added draw of being a notoriously opaque and secretive company, with a controversial and swashbuckling ex-captain who made a name for himself by doing deals that no-one else would do. Trying to figure out how their vast commodity operations work is a detective mystery if ever there was one. In May 2011 they went public and listed on the London Stock Exchange. That means they sold ownership stakes to investors via the UK market. Technically speaking though, they only sold about 12% of the company, and technically speaking, they're not base...

I tried to spend Christmas day at the London Occupy camps, but truth be told, I couldn't stay there long and ended up wondering the City instead. Maybe I was just melancholic at spending another solitary Christmas, but I couldn’t help feeling that the original dynamism of Occupy was lost. I sat on the stairs of St. Paul’s and looked at a tent calling for everyone to become a vegan. There’s something slightly futile about that message. There's also something highly prescriptive about it, allowing little space for those who might sympathise in principle with the broad critique of finance, but who don't feel included in the ragtag countercultural facade. The Occupy movement is showing real signs of losing steam, and part of it is simply down to the fact that, when push comes to shove, it doesn't really offer that much to the everyday person. That’s why I’m so pleased MoveYourMoneyUK  arrived on the scene today. The campaign asks people to withdraw their money from the huge...