Английский характер

В случае с «М-Джи Ровер» (MG Rover) английское правительство не только не против передачи «жемчужины национального автопрома» в руки китайцев, но и активно этот вариант продвигает. Оно, в частности, согласилось выдать «М-Джи Ровер» стабилизационный кредит размером в 100 млн ф.ст. При этом одним из основных условий выдачи кредита было наличие у компании четкого плана реструктуризации, сверстанного «под SAIG» (Shanghai Automotive Industry Corp.). Объясняется подобная сговорчивость британских государственных мужей просто: правительство уже сейчас несет значительные расходы на выплату социальных и отпускных пособий работникам «М-Джи Ровер», уволенным в период отчаянной борьбы за сокращение издержек. Каждый лишившийся своего места работник получил из казны 5000 фунтов. С учетом увольнений, намечающихся в компаниях-поставщиках и у дилеров «М-Джи Ровер», количество потерявших работу может достигнуть 20 тысяч человек. Таким образом, только на выплату выходных пособий государству придется заплатить более 100 млн ф. ст. В таком контексте стабилизационный кредит не кажется неоправданной роскошью.

SAIG, долгое время считавшаяся единственным «белым рыцарем», способным спасти «М-Джи Ровер», в апреле разочаровала британских правительственных чиновников, заявив, что «никогда не планировала обязательного приобретения «М-Джи Ровер», обсуждалась только возможность создания совместного предприятия». Китайцев смущает слишком требовательное трудовое законодательство Великобритании. Наконец, представители SAIG говорят, что «М-Джи Ровер» может представлять для них интерес только спустя пару лет, после того, как выйдет из процедуры банкротства.

Компания

Exercise 5. Make a report on one of the following topics.

Basel I and Basel II.

BCCI

The fall of Barings.

Operational risk — rogue traders.

Unit 19

• Text 1

Conflicts, conflicts everywhere Was America wrong to scrap the laws that kept commercial and investment banking apart?

WHY did all the safeguards in American capitalism designed to stop fiascos such as Enron fail to do their job? One answer is that many of those institutions or individuals who could have blown the whistle faced conflicts of interest that may have compromised them. Dealing with these conflicts is likely to be a priority as politicians and regulators seek ways to prevent similar collapses.

One area of scrutiny will be the role of Enron's bankers, notably J.P. Morgan Chase and Citigroup. These two financial conglomerates exist in their current form, and provide the range of financial services they did to Enron, only because of the abolition of the Glass-Stcagall act. This imposed statutory barriers between commercial banking, investment banking and insurance, and was introduced in 1933 following public protests about conflicts of interest on Wall Street in the aftermath of the 1929 stockmarket crash.

Rivals on Wall Street now whisper that conflicts of interest at these two banks may have played a role in Enron's collapse. Travelers (with its investment bank, Salomon Smith Barney) and Citibank merged in 1998, to form Citigroup. J.P. Morgan and Chase Manhattan merged in 2000. Since then the two have won market share in underwriting and advising on mergers and acquisitions from traditional investment banks, such as Goldman Sachs, Morgan Stanley and Merrill Lynch. They have done so in part by using their huge balance sheets to offer both loans and investment-banking services to clients.

Rivals complain that J.P. Morgan and Citigroup (as well as Bank of America and several foreign banks, such as Deutsche Bank and Switzerland's UBS) have made loans at a loss in order to win more lucrative investment-banking business. These banks, the rivals say. are able to avoid disclosing this, at least in the short term, thanks to favourable accounting rules that do not require commercial banks to mark their loan portfolios to market.

Might J.P. Morgan and Citi have let their lending standards slip in order to win investment-banking business from Enron, allowing the company to become over-leveraged? Did being both a creditor of Enron and an adviser create acute conflicts of interest as the company approached bankruptcy? As creditors, the banks may have had an interest in preserving whatever value Enron had left to maximise their chance of being repaid. As advisers, they may have had reason to promote riskier strategies in a bid to keep Enron alive and stop its shareholders being wiped out.

Both banks vehemently deny lowering lending standards to win investment banking business. J.P. Morgan had lent to Enron for many years. The banks also deny that they took advantage of their advisory role by getting Enron to pay off unsecured loans to the company with money raised during a secured refinancing late last year.

Bring back Glass-Steagall? Enron's collapse has triggered a new debate about whether it was wise to scrap Glass-Steagall. Even if it was not, more than the restoration of the old Glass-Steagall act would be needed to put things right. Before its repeal, its force had been eroded by the Federal Reserve, which had allowed commercial banks to edge into investment banking.

Moreover, other conflicts of interest that were not prohibited by Glass-Steagall might warrant inclusion in a new law. A $l00m settlement this week by CSFB, an investment bank, over its handling of initial public offering suggests that the firm exploited its own customers. One end to conflict there would be to separate Wall Street's investment analysts from the underwriters of initial public offerings.

Yet does the existence of conflicts of interest really justify regulation or legal separation? Recent studies of Wall Street's behaviour before Glass-Steagall was passed suggest that most of the abuses meant to have arisen from conflicts of interest actually did not happen. Securities sold by firms that combined commercial and investment banking were not, by and large, of a lower quality than those sold by pure investment banks. Any firms that fell foul of conflicts of interest would lose customers. The argument for a legal separation of auditors and consultants is different: unlike financial advice or lending, audit is a quasi-public statutory function that merits maximum protection.

Occasional blowups among banks provide an opportunity for market forces to show what behaviour is required. Charles Calomiris, an economist at Columbia University, reckons that Enron's failure is part of a pattern in financial innovation. The collapse of Penn Central in 1970 forced participants to improve governance of the market for commercial paper. Likewise, Enron will encourage better oversight of the growing number of companies with supposedly sophisticated financial hedging and trading.

As for the banks that serve future Enrons, says Mr Calomiris, if any new regulation is needed it should be to ensure full and appropriate disclosure of information, not a return to Glass-Steagall. There are already signs that market forces are addressing some other problems that arose after Glass-Steagall was abolished. Citigroup recently said that it will spin off Travelers, its property-casualty insurer, presumably because expected synergies with commercial and investment banking did not come about. "If we'd known that was going to happen when Citigroup was formed, Glass-Steagall might never have been scrapped," says Kay Soifer, an independent analyst.

On balance, that would have been a pity. There is at least one positive message in Enron's collapse. Despite its big losses on loans to Enron, J.P. Morgan's survival is not in doubt — unlike American banks in past crises. The bank's revenues now come from a sufficiently diverse set of businesses that it can survive bad lending decisions with nothing worse than a damaged share price and bruised self-esteem. For America's banks, that is progress.

The Economist

Note

Penn Central - a conglomerate formed in 1968 as a result of the nation's largest merger of the time. Penn Central owned railroad and other businesses. It filed for bankruptcy in 1970 and stopped operating trains and conducting business in 1976