Gunning for Goldman

The announcement that ihe world's leading investment bank,
Goldman Sachs, had been charged in a US civil suit with a
securities fraud that caused SI bn in investor losses hit Wall Street
like a bombshell last week, said Patrick Jenkins in the II. At a
stroke, $!2bn was wiped off the bank's market value. Inside
Goldman's building in Manhattan, the vast trading floors fell intc
eerie silence. "I'm not sure I can talk,** said one shell-shocked
hanker. The accusation, said Dean Itaker in The Guardian, is thai
Goldman created a form of debt involving ultra-risky "sub-
prime" mortgages, then "found suckers to buy this huge piece of
junk". Allegedly, it created this so-called CDO (collatcriscd debt
obligation) in league with hedge fund manager John Paulson,
who selected the precarious mortgage-Kicked securities to go int<
the CDO and then made nearly $ 1 bn by betting they'd go belly
up, as they duly did. In short, Goldman was helping a favoured

client make huge tx'ts against the same dodgy CDOs it was selling to other clients.

Alas, this case is no longer about Goldman Sachs, said Jeremy Warner in The Daily Telegraph. The
bank is being made a scapegoat for the failings of bankers as a whole, and like a small-town
American posse, the public has already found it guilt)*, and won't be happy until "the men of Wall
Street are strung up from the nearest tree". The very timing of the announcement to prosecute looks
nakedly political: as Goldman executives point out, the probe into this CDO started two years ago,
yet only now, with mid-term elections pending and President Obama poised to introduce reform of
the financial system, has the SEC (the US regulator} made its move. Add to that Gordon Brown's
unseemly call for an investigation into the bank he once counted as his close City confidant, and you
get a real sense of "lynch-mob rule". It's a storm in a teacup, said The Wall Street Journal. Goldman
was just doing what investment banks are supposed to do: being the middleman between those (ie
Paulson) who bet that mortgages were on the verge of collapse - easy to predict in hindsight, but not
at the time - and those (ie the banks that bought the CDO) who still thought they were good
investments. Both sides involved were highly sophisticated operators who knew the risks. "Far from
being the smoking gun of the financial crisis, this case looks more like a water pistol."
But even if Goldman itself is exonerated, said Robert Peston on BBC News Online, the case is an
indictment of the system as a whole. Paulson was not alone. Hedge funds would routinely spur
investment banks into creating subprime-linked CDOs to sell on to other banks, then speculate on
these CDOs flopping. Such activity not only inflated America's housing bubble, it left the banks and
insurers on the other side of the hedge funds' bets (in the Paulson case. Royal Bank of Scotland) to
pick up the tab. "Those losses were a major contributor to the meltdown of the banking system that
led to a global recession and the biggest taxpayer bailout of banks that the world has ever seen."

John McCain

, the Republican candidate for president in 2008, has a
lot to answer for. By choosing Sarah Palin as his running mate, he
elevated a governor whom no one outside Alaslca had heard of into
a national figure on the American scene. And now it appears that her sense of her own importance
knows no bounds. The most recent example is her expenses demands for a trip to talk to students at
California State University. Six pages of a contract, found in a dustbin, reveal these demands, which
include first-class flights or a private aircraft which "must be a Lear 60 or larger", three deluxe hotel
rooms, the provision of a "laptop computer and printer (fully stocked with paper! and high-speed
internet" and - no detail being too small for her attention - two bottles of still water, unopened, with
bendy straws beside them. These requirements, as Alexander Chancellor says in The Guardian, ate
not normal. "They are the demands of a person with a huge sense of her own entitlement."

How ridiculous that a woman who won over the party faithful by pretending to be a no-nonsense
"hockey mom" on the side of ordinary, hard-working Americans should behave like this - while
getting up to $100,000 for a single speech and being greeted everywhere with fawning adulation by
Republican activists. Sarah Palin has become a diva, as spoilt and pampered as Mariah Carey or
Oprah Winfrey. Our battered MPs. enduring brickbats everywhere they go for _
their exoenses claims, must wonder how on earth she oeisawav with it.

What the commentators said

Until last week, the airline industry did not allow its planes "anywhere near volcanic ash", said
Jad Mouawad in The International Herald Tribune — for very good reasons. The ash is fine-
grained, sharp and abrasive: it hangs in the air "like millions of pieces of shredded glass", ready
to "sandblast" windshields, clog filters and cause engines to flame out. There were three
incidents in which airliners hit ash in the 1980s. two above Indonesia and one above Alaska. In
all three cases, their jet engines cut out, turning the planes into "overweight gliders" that lost
thousands of feet before their pilots managed to restart them. Ash clouds are also hard to spot:
they often resemble water vapour. As a result, the International Civil Aviation Organisation has
bad a "zero tolerance" policy, said Victoria Gill on BBC News Online. The advice was: "If you
sec ash, you fly 100 miles away from it". But this was before it was spewed over Europe's
busiest flighrpaths - something unknown in living memory. Six days of discussions between
scientists and aviation engineers followed, resulting in a new safety threshold: the experts
examined the results of test flights and concluded that the levels of concentration above the UK
mostly pose no threat. "It often takes a major incident such as this to effect reforms."
We should be grateful that EyjafjallajokuU has brought only mild "inconvenience", said Bill
McGutre in The Times. The eruption was nothing compared to that of Loki, another Icelandic
volcano, which in 1783 "spawned a sulphurous cloud" that hung over Europe into 1784,
killing many and withering crops (the famines it caused helped spark the French Revolution). In
1815, the biggest eruption of the last millennium, at Tambora, Indonesia, "wrapped a veil of
gases around the entire planet, blocking the sun's rays and leading to the so-coifed year without
o summer". And the "cataclysmic" eruption of Toba, also in Indonesia, 74,000 years ago,
nearly wiped out the human race. All in all, "things could have been much worse".


What next?
Scientists say the volcano is
still erupting, hut the ash
me is now shrinking.
However, "a far bigger
volcano is tipped to erupt in
the coming months",
reports The Independent.
Each time Eyjafjallajokull
has erupted in the past
2,000 years-in 1612 and
1821-23 - its neighbour
Katla, which is ten times
larger, has exploded within
six months. Iceland's
President Olafur Grimsson
said that his country had
been preparing for this
event for years. "I think it is
high time for European
governments and airline
authorities to start planning
for the eventual Katla
eruption," he said.

What the commentators said

"You were the future once." Thus did Cameron mock Tony Blair during his first Prime
Minister's Questions in 2005. It was an effective line, said Rachel Sylvester in The Times, but
one that the Lib l>cm leader could now throw back at him. " Ireatcd — for the first time — as an
equal to Brown and Cameron", Clegg seized his chance, nimbly winning support from the
many voters who arc "fed up with labour but unconvinced by the Conservatives". Cameron
assumed he would automatically win the "change" vote, said lain Martin in The Wall Street
Journal. Now he finds himself in a nasty spot, with the Lib Dems tapping into popular
disenchantment even as his own "Big Society" message fails to gain traction. If Clegg can retain
the momentum — a "big if" — the old two-party system could be "blown apart", ushering in a
"new era of almost permanent coalition government".

Cameron mus! be nicing the day he agreed to the debates, said Andrew Rawnsley
in I he Observer. But Clcgg's success threatens Labour, too. While a modest Lib
Dem advance would help Brown by denying the Tories marginal seats in southern

and, a major surge would cat into Labour's core vote. So how to tackle the
rampant third party? Tory frontbencher Michael Gove has tried one line of attack,
describing the Lib Ucms as "outside the mainstream and a little bit eccentric". But
that argument is only likely to make the Lib Dems more popular with the public.

No leader can defeat the "anti-politics mood" in the next two weeks, and
Cameron shouldn't even try, said Matthew I'arris in The limes. But he can contest
the Lib Dcm's claim to be "the rightful beneficiary of the voters' rage". For all
Clcgg's righteous rhetoric in the leaders* debate, it "simply isn't the case that he or
his party arc in a different league of straight-talking, no-nonsense politics". He's a
party leader like the other two, "prey to the same constraints, the same small
dishonesties, the same necessary accommodations with the truth".

What next?

So what happens if we end u
with a hung parliament? As
the incumbent. Brown woult
Ik- entitled to stay in office
until he lost a motion of no
confidence, says Robert
I lazcll in I Tie Guardian.
Clcgg would have to decide
which party to negotiate wit!
- "he has no obligation to
choose the party with the

most scats – and

can pick the one
that makes him the
best office 1 Ic
would also have to
decide whether to
support a minority
government or seek
a coalition. The
latter might give
the Lib Dems more
power, but could
entail "hitching up
to a Labour Party
in decline".

It wasn't all bad

It wasn't all bad

A book handed in to a branch of
Oxfam in Teignmouth, Devon,
has sold for £37,000 - the most
the charity has ever raised at
auction from a single item
donated through a shop. A Trip
to the Highlands of Viti Levu
(1882), which describes an
expedition to Fiji and consists of
44 portraits of Fijians, was one
of seven books handed in by a
dignified gentleman, who told
the staff he had worked in
publishing. "I think you're going
to find this one interesting," he
said, before disappearing.

A unique visual archive of 19th
century British life has gone
online. The Illustrated London
News documented key events
from the Great Exhibition and the
construction of Tower Bridge in
1894 (right) to the Boer War.
Among the more unusual items
in the archive - at first only
available to libraries and educa-
tional institutions - are an 1850s
illustration of a "sea serpent"
spotted in the West Indies, and a
column by an early feminist who
describes using cocaine to
combat sea sickness. "All
chemists keep it," advises
Florence Fenwick Miller.

Four chefs from Britain have
travelled to India to showcase
British curries, and they've
been welcomed warmly.
Although colonial travellers fell
in love with curry in Kolkata,
the dish has since been
Westernised to the point that
what we call curry is something
of an oddity in the city - hence
the ten-day Taste of Britain
Curry Festival. Organisers say
the event has been packed out,
and that the curries have gone
down so well that a leading
hotel is putting them on its
menu - albeit in a more spicy
form, to suit local tastes.

Ash over Europe

What happened


Britain's airports reopened on lucsday
night alter a six-day shutdown caused
by volcanic ash. [lie eruption of a
volcano under the Eyjafjallajokull
glacier in Iceland on 14 April had
produced a vast cloud of mineral dust
which soon spread over much of
Europe. The ash can cause fct engines
to stall or fail permanently, and the
UK's Civil Aviation Authority (CAA)
banned all flights. Governments across
northern Europe soon followed suit.



Some 95,000 (lights woe cancelled as a result, and more
than 300)000 British travellers were stranded abroad (see
page 20). The episode is thought to have cost the airline
industry about £l.lbn in revenue, and the British economy
more than illOOm per day. On Tuesday, the blanket ban was
lilted in Britain, amid strong pressure from the aviation
industry. The decision followed safety tests that showed
plane engines could cope in areas of low-density ash.


What the editorials said
"For the second time in three years, Iceland has been the
unlikely source of economic mayhem in Europe," said the Wall

Street Journal. This time, though, it was
not its banks, but the awesome power of
"Mother Nature" that was responsible.
The UK authorities must, however, share
some of the blame, said The Daily
Telegraph. "Stuff happens; but stuff can
also be planned for and dealt with more
effectively than seems to have happened
here." Only after six days of this "national
emergency" did they take firm action.
There has been a regrettable uncertainty
"over the scientific rationale for the closure
of UK airspace, and of its reopening".


The airline companies were certainly furious, said The
Independent - they described the blanket ban as unnecessary
and launched their own test flights to prove the point. But the
authorities were guilty of nothing more than speedily invoking
the international aviation rules on volcanic ash. If there is a
good case for reviewing those rules, "that must be done in a
proper scientific manner, not in the heat of public indignation".

Clegg seizes his chance

The main stories... ...and how they were covered

Clegg seizes his chance

The election race was thrown wide open last week

by a dramatic surge in support for the Liberal

Democrats. It followed Nick Clcgg's confident

showing in the first televised leaders' debate, in

which he repeated his call for voters to "try

something different". Capitalising on a platform

never before enjoyed by a third-part)' leader, Clegg

painted himself as a fresh alternative to the "old

parties" who had "played pass the parcel with

your government for 65 years". He was widely

judged to have won the debate, and in subsequent

polls the Lib Dems pushed Labour into third place.

The outbreak of what some dubbed "Clcggmania"
forced the other two parties to adjust their tactics.
David Cameron scrapped a planned TV election
broadcast and recorded a new one in which he
warned that a hung parliament could leave Britain

"stuck" with Brown. The Prime Minister, meanwhile,
emphasised Labour's pledge to push tor voting reform and
called for a "progressive alliance" with the Lib Dems to keep
out the Tories. Clcgg rebuffed the advance, describing Brown
as a "desperate politician" who had previously blocked reform
and was now "clutching at straws".

What the editorials said

There's only one "credible explanation" for the sudden
outpouring of support for the Lib Dems, said the Daily Mail:

"revenge". The public is lashing out at the
political classes. But they may come to regret it.
While the Lib Dems have an "admirable record in
defending civil liberties", many of their other
policies - ever-closer union with the EU, an
amnesty for illegal immigrants, scrapping Britain's
nuclear deterrent — bear less scrutiny- More

0

importantly, a Lib-Lab pact would change our
voting system forever by introducing proportional
representation, with all the "paralysis and
chicanery that involves". We're heading for an
"old-fashioned political stitch-up", agreed 1 he
Daily Telegraph, "guaranteeing that the one
absolutely clear wish of the electorate - to be rid
of the Labour government - is not met".

On rhc contrary, said The Guardian, the rise ot
the Lib Dems marks a welcome shake-up or our

politics. The debates have put the party on equal tooting with
the other two - and voters like what they sec. Clcgg's success
has also highlighted the iniquity of the first-past-the-post
system. If this week's ICM poll results were repeated in the
election, Labour's 28% of the vote would win 275 seats, the
Tories' 33% would win 245, and the Lib Dems' 30% just 99.