If they turn it into a movie, how about: Enron -- Italian-style? The news that the financial cupboard of the Parmalat dairy group in Italy contains a bare corner where there should be US$4.8 billion in cash and securities certainly livened up the pre-Christmas financial pages.
According to Parmalat, the US$4.8 billion was deposited with the Bank of America in New York by -- wait for it -- a subsidiary (Bonlat) based in the Cayman Islands.
According to one Italian banker: "This is all financial engineering cooked up by US banks. Parmalat raised cash with bonds, then took the cash and put it all in these offshore accounts in order to borrow yet again off the balance sheet."
It remains to be seen what share of the cooking was done by whom, but the episode has immediately escalated into an Italian political crisis, involving a power struggle between the Italian treasury and the Bank of Italy as to who should be controlling financial supervision (at present it's the Bank), with Prime Minister Silvio Berlusconi promising a bail-out even as the administrators sharpen their red pencils.
There are question marks over other accounts, with some US$8.7 billion gone missing, according to the London Financial Times.
Wall Street and Italian banks involved with Parmalat are reported to be "bickering among themselves" and, as it were, running for cover.
Modern capitalism depends heavily on trust and goodwill, but this is a timely reminder during the season of goodwill that trust in business affairs sometimes hangs by a thread. With the Maxwell pension fund scandal in the UK and the Enron affair the anti-globalization movement should, perhaps, be paying less attention to globalization per se, and more to that very old-fashioned issue, the ethics of capitalism.
Lord Acton is often quoted on political power -- "Power tends to corrupt, and absolutely power corrupts absolutely" -- but the same applies to financial power. Often, of course, the corruption begins before the first penny is raised. There is no shortage of crooks out to deprive the public of its money.
But sometimes the rot sets in later, in apparently honest enterprises, where charismatic financiers and businessmen retain trust long after they have ceased to deserve it -- Robert Maxwell was a classic example. Indeed, in Maxwell's case, he almost certainly did not set off intending to deprive pensioners of their cash -- he just gambled on being able to use it to rescue his company. In different circumstances he might have got away with it and have been able to replenish the pillaged pension fund.
But often outside investors just don't want to know that something might be amiss. Already the Financial Times is saying: "With hindsight, signs that Parmalat might not be a good company to invest in had been growing ever since it was first quoted on the Milan stock exchange in 1987, nearly 20 years ago."
Apparently Parmalat was not too forthcoming in explaining its results, and far from keen to meet analysts. As long as the results, however dependent on financial engineering, looked good, investors did not ask too many questions.
It will be interesting to watch how the credit and blame for this fiasco is shared out between the Italian end of the job and Wall Street. It has all the makings of a great movie.
What began on Feb. 28 as a military campaign against Iran quickly became the largest energy-supply disruption in modern times. Unlike the oil crises of the 1970s, which stemmed from producer-led embargoes, US President Donald Trump is the first leader in modern history to trigger a cascading global energy crisis through direct military action. In the process, Trump has also laid bare Taiwan’s strategic and economic fragilities, offering Beijing a real-time tutorial in how to exploit them. Repairing the damage to Persian Gulf oil and gas infrastructure could take years, suggesting that elevated energy prices are likely to persist. But the most
In late January, Taiwan’s first indigenous submarine, the Hai Kun (海鯤, or Narwhal), completed its first submerged dive, reaching a depth of roughly 50m during trials in the waters off Kaohsiung. By March, it had managed a fifth dive, still well short of the deep-water and endurance tests required before the navy could accept the vessel. The original delivery deadline of November last year passed months ago. CSBC Corp, Taiwan, the lead contractor, now targets June and the Ministry of National Defense is levying daily penalties for every day the submarine remains unfinished. The Hai Kun was supposed to be
Most schoolchildren learn that the circumference of the Earth is about 40,000km. They do not learn that the global economy depends on just 160 of those kilometers. Blocking two narrow waterways — the Strait of Hormuz and the Taiwan Strait — could send the economy back in time, if not to the Stone Age that US President Donald Trump has been threatening to bomb Iran back to, then at least to the mid-20th century, before the Rolling Stones first hit the airwaves. Over the past month and a half, Iran has turned the Strait of Hormuz, which is about 39km wide at
There is a peculiar kind of political theater unfolding in East Asia — one that would be laughable if its consequences were not so dangerous. Chinese Nationalist Party (KMT) Chairwoman Cheng Li-wun (鄭麗文) on April 12 returned from Beijing, where she met Chinese President Xi Jinping (習近平) and spoke earnestly about preserving “peace” and maintaining the “status quo.” It is a position that sounds responsible, even prudent. It is also a fiction. Taiwan is, by any honest definition, an independent country. It governs itself, defends itself, elects its leaders, and functions as a free and sovereign democracy. Independence is not a
RSS