Carney’s stormy last act
You could almost see the power draining away from Bank of England governor Mark Carney as the Monetary Policy Committee decided to hold bank rates at 0.75pc.
Growth projections are slipping and unit labour costs are on the rise but it is easier not to change anything.
Truth is, everything is different. Britain has escaped the bullet of a fiscally incontinent Labour government and a sterling crisis. The US-CHINA trade war has been hosed down and Brexit is a done deal, even if the shape is still uncertain.
It is worth recalling that at the october meetings of the IMF, officials were clear that most of the impact of Britain leaving the Eu is already baked in the cake.
one trusts that Carney or his beleaguered chief operating officer Joanna Place ordered the MPC’s meeting room be swept for bugs before the latest vote, which saw two dissenters demanding a rate cut.
That information alone could have been worth millions to hedge funds.
Britain hosts the biggest foreign exchange markets in the world, with daily average turnover of $2.8trillion. Even a nano-second of advance information could potentially yield huge profits. The security around the Bank’s back-up feed of the Inflation Report press conference looks to have been mighty slack if it was hired out for use by City traders without anyone noticing.
This is the same secrecy-mad institution which locks financial writers away in a cellar with embargoed monetary reports, confiscates mobiles and switches off wifi.
There is nothing unusual in financial markets or sports betting about gaming the system. Horse racing aficionados will remember the tic-tac guys spying on odds on the bookies’ stands and feeding intelligence back to their masters using their own semaphore.
Football fans, preferring Radio Five commentary to the inane musings of Gary Neville on Sky, get the jump on goals scored because information travels down radio waves faster than on to TV screens. Readers of Michael Lewis’s Flash Boys will be familiar with how some hedge funds invested in laying their own ultra-fast fibre cable to gain millisecond advantage in trading on new data. Feeding the algorithms that drive computer trading using fractional time advantages can yield huge profits.
That is why the City has the best fibreoptic in the country, and gleaming skyscrapers are adorned with satellite dishes.
The European Central Bank has had similar problems with differential signal speeds and moved to computer streaming, which is almost instantaneous.
The public is meant to be reassured by the sight of the Financial Conduct Authority steaming in to conduct a probe.
The main focus will be on the supplier of the feed, but recipients, which allegedly include big financial global names, will be of interest too if the bona fides of the provider were not properly scrutinised.
The FCA is not known for its speed of action. The Bank has cancelled the feed supplier but unless the police become involved no one is likely to be led off in handcuffs. Booby trap
GOLDMAN Sachs has done its best to minimise the $4.5bn 1MBd scandal in Malaysia. up to 17 of its executives have been targeted by the authorities for money which went missing. Chairman david Solomon, who regularly DJS at music festivals, plainly would like to get the monkey off his back and is ready to admit guilt to the US Justice department in exchange for a $2bn fine.
Goldman will be expected to submit itself to an outside scrutineer of overseas activities. By admitting to the wrongdoing, Goldman will hope to clean the slate, although the fall out in Malaysia is unpredictable.
The scandal might cast a shadow over the bank’s plans to launch an alternative platform which will offer outside investors the chance to share in GS stakes in private equity, infrastructure and debt.
That sounds like a whizz idea. But without full transparency, which allows outsiders to look under the bonnet, it might be wise to steer clear.
Free at last
WHILE on the subject of financial sinners, spare a thought for Bernie Ebbers, who in 2006 began a 25-year prison sentence after an $11bn fraud at telecoms group WorldCom. Now said to be suffering with dementia, Ebbers, 78, is to be released on compassionate grounds.
The duration of his punishment contrasts dramatically with the freedom from prosecution of fat-cat bankers who escaped the financial crisis scot free.