City profiles

John Paulson
It was famously "the greatest trade ever". But the more details we learn about the alleged Goldman Abacus fraud, the more "dog-eared" Paulson's multi-billion bet against subprime mortgages begins to look, says Richard Beales on Reuters Breakingviews.com. Paulson appears to have gone to ground. But, despite leading a playboy lifestyle in his younger years, he's never been exactly charismatic, remarks Heather Stewart in The Observer. One of his few distinguishing characteristics is that, despite his great wealth, he still likes to travel by train. A long journey may lie ahead. Although he hasn't been charged with any wrongdoing, he may yet face "serious legal consequences", says former IMF chief economist Simon Johnson on The Huffington Post. "John Paulson needs a good lawyer."

Back in early 2007, the self- styled "Fabulous Fab" was feeling pretty pleased with himself, says the FT. Not only was the 28-year-old French- man working for Goldman Sachs in New York, but he'd become a high-flying whizz in the booming field of CDOs. "The whole building is about to collapse anytime now," he emailed his girlfriend at the time. "Only potential survivor the fabulous Fab, standing in the middle of all these complex, highly leveraged exotic trades he created without necessarily understanding all the implication of these monstruosities [sicj!!!" Tourre now looks "rather less heroic". Goldman is standing by its man, for the moment, notes The Daily Telegraph. But he has been stripped of his licence to operate in the City of London.

Commantators

Keeping it in the family

Seven years after the death of Gianni Agnelli, the leadership of Fiat is back in
the hands of "the first family in the Italian motor industry", says Robert Lea in The Times. The carmaker's new chairman is John "Jaki" Elkann, an American-born grandson of Agnelli - the godfather of the post-war Italian industrial economy. Whether or not Elkann possesses his grandfather's political talents, he can't be faulted for
the thoroughness of his 13-year apprenticeship as heir apparent, which included a stint making headlights in Poland. He also ran the Agnelli family investment empire, which includes Juventus football club, and the Corriere della Sera and La Stampa newspapers.







IMF bank reforms need more welly
Nils Pratley
The Guardian


The International Monetary Fund seems to have a sense of humour, says Nils Pratley. Its proposed levy on excessive profits and pay is to be called the "financial activities tax", or FAT for short — a nod surely to the many fat cats still purring around the banking system. The fund has certainly picked a good moment to unleash its proposals: Goldman Sachs has just announced a 90% leap in profits and restored its bonus pool to 43% of revenues; other banks will no doubt follow. The IMF's second measure - dubbed the "financial stability contribution" - is a levy to pay for the cost of future government support for the financial sector. But here again there is a twist: insurers, brokers and hedge funds could also be included. "Unfortunately for them, there has to be a mechanism to prevent banks from dressing up in new clothes to dodge taxes." This report is "a big step in the right direction", but solving the "too big to fail" problem requires more than heavier taxation. We need real structural reform to accompany these tax changes.





Aviva hammers its nail into the pensions coffin
David Wighton
The Times


The not-so-slow death of the final-salary pension scheme continues apace, says David Wighton. All but a handful of large employers in the private sector have now closed their schemes to new recruits. "Now comes the more drastic phase two: closing schemes to everybody." Aviva (the former Norwich Union) is the latest to go the whole hog, disadvantag- ing more than 7,000 of its longest servers. As one of the leading players in Britain's pensions industry, Aviva's decision to pull the plug is particularly poignant. Among the big beasts of the financial services industry, only Barclays had gone this far - until now. Aviva's scheme was eye-poppingly generous: employees made no contributions, retirement was at 60, and benefits were clocked up at speed. Terms were recently toughened up, but even then its pension deficit kept ballooning. Meanwhile, newer recruits on inferior deals could only look on in envy. The new arrangement will certainly be fairer. "But capitulation by a company of Aviva's stature can only hasten the coming stampede.**





Black Swan is back with a vengeance
Allister Heath
City A.M.


One of the most powerful lessons in life is that unexpected events always tend to derail even the best and most carefully thought- out plans, says Allister Heath. This week we saw three major disruptions to received wisdom, and all will have severe consequences. The first was Nick Clcgg's victory in the first election debate, with all the implications that has for a hung parliament. The second was the "horrible realisation" that a volcano in Iceland could cripple the airline industry, disrupt freight and put in question the easy movement of people. The third was the SEC's decision to accuse Goldman Sachs of fraud - a move that "shattered the widely held view that a new, relatively reasonable settlement was going to be struck between politicians and the financial system". All these stories qualify as "Black Swan events", to use Nassim Taleb's phrase: they are unexpected events of large magnitude with important consequences. And in all three cases, "markets have been caught off guard - and have still not understood the magnitude of what is happening". When will we learn?

Seven days in the Square Mile

Tesco chief Sir Terry Leahy delivered an upbeat assessment of the economy, claiming he is confident that Britain "is out of recession and will stay out". But there was a further slew of worrying data. The ONS reported that unemploy- ment rose by 43,000 to 2.5m in the three months to February, bringing the jobless total to its highest since 1994. Mean- while, rising transport costs - notably the price of petrol - pushed inflation much higher than predicted by analysts. The consumer price index (CPI) shot up to 3.4% in February. The Retail Price Index (which includes housing costs) also rose sharply from 3.7% to 4.4%.
The Financial Services Authority said it would launch a formal inquiry into the activities of Goldman Sachs, following the US Securities Commission's decision to pursue civil charges of fraud. The case is likely to spark a wave of further litigation centring on the mis-selling of mortgage derivatives: the Dutch bank, Rabobank, accused Merrill Lynch of a similar misdemeanour. The IMF released proposals for two new international levies on banks, amid calls for a ban on the trading of "synthetic CDOs" at the heart of the Goldman case.
The International Air Transport Association reported that global airlines have lost about $1.7bn as result of the Icelandic volcanic eruption. At its height, the crisis hit almost a third of global flights. The OFT fined two tobacco groups and nine retailers a record £225m for cigarette price-fixing. Apple shares hit an all-time high after the company reported a 90% increase in Q2 profits.

The City: paradise for teenage boys Rosamund Urwin London Evening Standard

"The City is often made to sound like the fantasy workplace of a
L3-year-old boy," says Rosamand Urwin. No-one complains if
you look at porn at your desk; smutty comments and silly
nicknames are encouraged; and when the day's slog is over, "your
main concern is whether your £50 notes are best used for
snorting cocaine or for tucking into lapdancers' thongs". No
surprise, then, that two women demanding £3m from the
Japanese bank Nomura for unfair dismissal report that their
breasts were referred to as "honkers" and that they were told
they "belong at home cleaning floors". The tribunal ruled that
the remarks were only "trivial" banter and Nomura was cleared
of wrongdoing. It wasn't just banter, though: it was bullying, and
women are hardly the only ones who fall victim to such trading
room taunts. If you're young, ginger, fat or foreign - in fact, if
you have any distinguishing characteristic - you'll be picked on.
"Is the City still sexist? Sure, parts of it are, but it can be
everything-else-ist too."

Companies in the news...and how they were assessed

Eruption disruption: who pays?
I "If this continues, there won't be any more airlines left in J Europe, apart from Aeroflot," declared Russian Prime I Minister Vladimir Putin. He's not the only one warning of I bankruptcy, noted Sarah Arnott in The Independent. With J the number of airlines in distress already running some 40% higher than a year ago, insolvency specialist Bcgbics Traynor warns that the volcano could claim several victims. Big players, including BA and Lufthansa (which is reporting losses of €25m a day), appear to want it both ways. While keen to stress the resilience of their cash reserves to prevent a share-price rout, they're clubbing together to demand government help. "Eruption disruption" has sent passengers, tourists and the companies that carry them rushing to the small print of insurance policies and EU legislation, said Andrew Hill in the FT. Who will pay? The widely held assumption that "acts of God" invalidate claims is a myth, and many insurers will honour claims from individuals. But package tour operators and airlines arc largely uninsured for the cost of getting passengers home and putting them up in the meantime. Hence the campaign for Government subsidies. Whether it means higher insurance premiums or higher taxes, ultimately "the bill for EyjafjallajokulPs burst of bad temper will land in the lap of the hapless European consumer".


Tesco: trolley dash
"The grocer that goes on growing" is obsessed with finding out what its customers want and then giving it to them, observed Neil Collins on Reuters Breakingviews.com. And how. From dominance in groceries, Tesco has marched into elcctricals, clothes, toys and banking - and this week reported annual profits of £3.4bn. Tesco says it takes £ 1,700 a year from the average British household. But Sir Terry Leahy's world domination plans aren't doing too badly either, said Nils Pratley in The Guardian. Not all of their overseas adventures are unqualified successes: there are still hefty trading losses at Tesco's US Fresh &c Easy stores. But it's the "big-picture" Asian story that should get investors salivating. "In 10 years in Korea we've done what took 60 years in the UK," noted Leahy. Expect more of the same in China next. If Leahy is right about the world coming strongly into recovery, the next couple of years "could see an acceleration". Investors - homing in on slowing growth in the UK - made Tesco shares the biggest loser in the FTSE 100 on Tuesday. "They won't be on a one-, five- or ten-year view."



Royal Bank of Scotland: God's gift?
They'll be cheering on the US Securities &c Exchange Commission (SEC) on The Mound in Edinburgh. If the SEC makes its charges against Goldman Sachs stick, RBS - one of the biggest losers in the affair - stands a chance of recouping some of the £550m it forfeited, said Martin Flanagan in The Scotsman. No wonder RBS shares piled on healthy gains while those of other banks rumbled last week. Analysts suggested the Goldman debacle could be a "gift of God". Taxpayers should be cheering, too. Having risen above the 49.9p per share that the Government paid when it took an 84% stake, the stock is now "above break-even" mark. It is reckoned the taxpayer gains just over £900m for every penny gained above 49.9p. Analysts seem agreed that RBS is no longer a basket case - and is indeed "rather well capitalised", observed Dominic Rushe in The Sunday Times. No doubt politicians will be wondering "how long it will be before the state can realise some of its investment". They should hold their horses. With so much uncertainty in the banking world, "it's too early to start cashing in just yet".


Metro-Goldwyn-Mayer: Dr No
He might be one of Hollywood's "most bankable franchises", bur that hasn't protected James Bond from the ructions in the movie industry, said Matthew Garrahan in the FT. Continuing uncertainty over the future of MGM has forced producers to suspend making the 23rd movie in the series. It's the usual plot, said Richard Beales on Reuters Breakingviews.com. "MGM's woes stem from a 2005 leveraged buyout that saddled the company with too much debt." Its owners - a private equity-led consortium - have been trying to sell it since November, to no avail. MGM's lenders were unimpressed by a Sl.5bn offer from Time Warner, and a second proposal, led by film-making brothers Tony and Sir Ridley Scott, is now being considered. But it looks like MGM will be forced to sell off other prize assets, including its 4,000-title film library and even its signature "roaring lion", said The Daily Telegraph. Presciently, the villain in the 2006 update of Casino Royale was a rogue trader who shed tears of blood, noted Beales. Bond's recent brushes with the moneymen should supply plenty more inspiration.

The man who made Britain love computers

The man who made Britain love computers

Guy Kewney
1946-2010

Guy Kewney, who has died aged 63, was one of the UK's most influential IT journalists, said BBC Online. Sometimes referred to as "the man who made Britain love computers", he predicted the technology revolution in the very first issue of the magazine Personal Computer World (PCW), back in 1978. "From here on in," he wrote with remarkable prescience, "the history of the computer will be the history of society, not just of calculators." And throughout his long career as columnist and interviewer, he displayed the same uncanny knack of foretelling the technological future. It was Kewney, for example, who foresaw the dominance of Google from the moment its first, minimalist website appeared in the late 1990s. Yet by a quirk of fate, Kewney would achieve widest fame for an interview in which he didn't even participate. In 2006 he was due to speak to BBC News 24 about a legal wrangle between Apple and the Beatles, when, in an extraordinary blunder, another man - a Congolese job applicant named Guy Goma — was ushered on in his place. Goma's evident terror and meaningless replies to the presenter's questions on live TV became a YouTube sensation.
Born in South Africa, Kewney moved to Britain in the 1960s,

where he trained as a civil engineer, then worked as a programmer for English Electric Leo Mar- coni Computers. But his real gift was for journal- ism, said Kelvyn Taylor on Computeractive.co.uk. In his influential Newsprint column in PCW, or in publications such as PC Dealer and PC Magazine, he would come to the rescue of the general reader by "peeling away the obscuring layers of technology". In person he was eccentric - he habitually wore socks and sandals - but that only added to his charm, said Manek Dubash on The Register, as did a phenomenon that came to be known as the "Kewney Chaos Field"- an unknown force that prevented any piece of technology ever working in Kewney's hands.
Yet there was nothing clumsy about his interviews, said Dubash. With unfailing politeness, he would always ask just the right question, leaving respondents squirming and often revealing far more than they intended. (Yet some relished his directness. During the time he sold computers, Alan Sugar used to say that Kewney was the only journalist he'd speak to.) Since being diagnosed with cancer last year, Kewney documented his struggle with the illness on his blog with typical humour and insight. He is survived by his wife Mary and their two daughters.

Polish president who governed with his twin brother

Kaczynski 1949-2010
Poland's late president. Lech Kaczynski, had a lifelong obsession with the tragic history of his country, said The Guardian. Born in a Warsaw still racked by the depredations of the Second World War, he was brought up by his parents to sing the national anthem - sometimes known as Poland Is Not Yet Lost - every night after saying his prayers. Jailed during the Cold War for his dissident activities, he went on in later life to hound those he believed had collaborated with the communists. One of the defining moments of his three-year stint as mayor of Warsaw was the opening in 2004 of the Museum of the Warsaw Uprising, which he had promoted. And by a malign coincidence, it was while

Kaczynski was on his way to commemorate one of his nation's worst catastrophes, the murder of thousands of Poles at Katyn in Russia in 1940, that he was killed in a plane crash along with 95 others, including the governor of Poland's central bank, the deputy speaker of parliament, the head of national security, 15 MPs and his own wife, Maria.
The son of an engineer. Lech Aleksander Kaczynski was born in 1949, shortly after his identical twin, Jaroslaw. (In later life, they could often only be told apart by the mole on Lech's left cheek.) The pair had a moment of early fame in 1962 when they starred in the film The Two Who Stole the Moon. Yet "the swotty duo had little in common with the scamps they portrayed", said The Economist. Both were highly academic, and Lech became a respected professor at Gdansk University, specialising in labour law. He was then chosen to act as adviser in the disputes between the unions and the state in the 1970s and 1980s, disputes that culminated in the rise of the Solidarity movement and the fall of Communism in Poland. The struggle brought him together with Solidarity's leader. Lech Walesa (who had been one of his pupils in Gdansk), and Kaczynski went on to serve as security minister when Walesa became president. In 1992, however, he resigned



after the pair fell out, and the two men remained bitter opponents.
Kaczynski's career can be divided into two halves, said The Times. In the first half he was a freedom fighter; in the second, an advocate of traditional, right-wing sentiments. Returning to politics in 2000, he made a name for himself as a tough justice minister, winning wide support by cracking down on corruption and sup- porting the return of the death penalty. The following year he was sacked from the post, but he continued to push his policies both as mayor of the capital and as a founder member, along with his brother, of the conservative Law and Justice party. A devout Catholic, Kaczynski was also famously opposed to homosexuals. He

banned gay pride marches in Warsaw, bur allowed a counter- demonstration, the "Parade of Normality". (He became notorious for remarking that "the promotion of homosexuality would lead to the eventual destruction of the human race'*.) These popular - one might say populist - measures led to his being swept to power in 2005 as his country's president.
A small man at just 5ft 5in, Kaczynski "looked nervous" on the public stage and petulant defending Polish interests at EU summits, said The Economist. His foreign policy was excessively simple - America good, Russia and Germany bad - and he- pursued it clumsily. He offended Moscow by allowing the US to build part of its anti-ballistic missile system inside Polish borders; he rebuffed Chancellor McrkcPs friendly overtures in Germany, where he and his brother were dubbed "the Polish potatoes" by a hostile press. Even at home his popularity had recently plummeted, and he was thought unlikely to be re-elected later this year. Yet after his tragic death at the age of 60, Kaczynski will be remembered for his warmth in private and for the triumphs of his public career. He and his wife were laid to rest in the Wawel Cathedral in Krakow, alongside the poets, kings and heroes of his beloved Poland's past.