ARAB TIMES, SATURDAY, SEPTEMBER 3, 2011
Darling attacks ‘arrogant’ bankers bankers plot course as sovereign debt clouds loom
Britain’s former finance minister In “Back From The Brink: 1,000 utive of the stricken HBOS, as Top European bankers will gather in shelter, halting the takeovers and of 6.4 billion euros ($9.1 billion) in pre-
Alistair Darling has attacked “arro- Days At No 11”, Darling said: “My “looking like he was about to Frankfurt for a two-day conference on stock market listings that are the tax profit for this year was becoming
gant and stupid” bankers in his new worry is that they (the bankers) explode” when confronted with the Monday to share insights on whether lifeblood of the bloc’s investment more difficult and required a quick
memoir of life during the most tur- were so arrogant and stupid they scale of the banks’ difficulties. the latest sovereign debt crisis squall banks. Deutsche Bank Chief and sustained resolution of the
bulent period of the financial crisis. might bring us all down.” The book, which is to be seri- could yet turn into a financial market Executive Josef Ackermann will set European sovereign debt crisis.
Darling was particularly critical of Darling compared Goodwin’s atti- alised by a Sunday newspaper, will storm. the tone on day one of the conference The crisis has kept banks hostage
some senior bankers, saying the tude to the crisis with someone “off to also give an insight into former Predictions of dark clouds over the with a review of the macroeconomic to market concerns about their capital
former chief executive of Royal play a game of golf”, according to prime minister Gordon Brown’s German city’s annual Banks in and regulatory changes that many strength and access to funding, con-
Bank of Scotland (RBS), Fred extracts from the book reported on “brutal and volcanic” demeanour. Transition conference are a fitting bankers say are crimping banks’ abil- cerns that were stoked again this
Goodwin, “deserved to be a pariah” the Labour Uncut website. Darling was finance minister backdrop for the gloom in the capital ity to earn their way back to health. week when the International
for refusing to give up his pension The former finance minister, or from 2007 to 2010, when Brown’s markets, where fears over sovereign Germany’s largest lender and glob- Monetary Fund said Europe’s lenders
after the bank required a huge Chancellor of the Exchequer, Labour government was voted out defaults in euro area periphery coun- al investment banking player has needed urgent recapitalisation.
state bailout. describes Andy Hornby, chief exec- of power. (AFP) tries have sent investors scurrying for already warned that reaching its goal (RTRS)
Osborne puts manufacturing at center of his policies
Services, not industry, to drive UK rebalancing act
LONDON, Sept 2, (RTRS): Britain is find- On reducing debt, some progress has driver of long-term growth. but both look enviously at Germany, whose however, manufacturing shrank in July for All respondents said Britain’s attractive-
ing its way to a new and better-balanced been made. The government is inching “The rebalancing process away from high-end industrial output accounts for the first time in two years and contracted ness relative to other countries had declined
version of its economy, but it will still be closer to its deficit reduction targets, and financial and consumer services and around a fifth of GDP. All three have seen further in August, the latest survey of sector over the last decade, with taxation, regula-
services that lead the way and not the households and companies are cutting their towards industry is unlikely to persist indef- their role in global production steadily purchasing managers showed this week. tion and access to loans and grants cited as
revival of manufacturing promised by debt. initely,” consultancy Capital Economics decline in the face of cheaper factories in The sector’s prospects will brighten the biggest deterrents.
politicians. Likewise, some manufacturers have wrote in its latest quarterly review. “In the Asia and other developing economies. when the global economy improves, and The government has announced a host of
Three decades after fellow Conservative defied the economic gloom with bumper longer run, manufacturing is likely to con- It is Rolls Royce’s brand of sophisticated analysts say the full benefits of the weaker reforms in an attempt to assuage such con-
Margaret Thatcher dealt a series of death profits and expect further growth. tinue its structural decline in response to manufacturing, and new businesses in life pound are yet to come through. cerns, including cuts to corporation tax to
blows to heavy industry and refocused the “For several years beyond 2012 we see 8 competition from abroad.” sciences and green energy, that Osborne But other obstacles remain. make it the lowest in the G7 by 2014, and
economy on booming property and servic- to 10 percent of revenue growth in aero- Manufacturing, excluding energy, and others want to boost. A year ago a leading business lobby CBI to promote advanced manufacturing.
es sectors, finance minister George space,” the chief executive of industrials accounts for almost 13 percent of Britain’s “There’s no reason why we can’t be a asked 121 executives at big British and But Nomura economist Philip Rush
Osborne has put manufacturing at the cen- group GKN , Kevin Smith, said last month. GDP, while the finance and business servic- centre for strategic technology develop- overseas companies operating in Britain echoes many analysts in saying overall
tre of his policies. Profits at companies like Rolls-Royce es sector makes up 31 percent. The latter ment to service the global economy,” how attractive the country was as a place to manufacturing can at most raise its share
In his 2011 budget he talked of the need Holdings Plc , the world’s second-largest — dominated by business-to-business George Freeman, who had a 15-year career invest. of Britain’s GDP by several percentage
to rebalance the economy away from maker of aircraft engines, are also rising. services ranging from accounting and IT to in technology venture capital before Manufacturers’ rating of Britain was points.
unsustainable public and private debt and But while analysts expect a small revival media and advertising — is by far the becoming a member of parliament last much lower than the marks it received from Making more goods, which can be easi-
said he wanted “a Britain carried aloft by in manufacturing over the next few years, largest single contributor to national output. year, told Reuters. those working in services, and lower than ly traded, would help boost exports —
the march of the makers”. they say it is unlikely to become a major The picture is broadly similar in France, As demand at home and abroad slumped, the overall rating by all executives. another of Osborne’s ambitions.
British banks launch last-ditch
Murdoch’s tough guy
lobbying as ringfence hit looms
heavy pressure ‘ICB reforms could cost industry 10 bln stg/yr’
NEW YORK, Sept 2, (RTRS): Paul “Paul is a tough businessman, but
Carlucci’s name doesn’t appear on any he’s no different than any other guy
public list of News Corp’s power play- who has made a ton of money,” said a LONDON, Sept 2, (RTRS): Barclays and other leading try. Wouldn’t you expect the Chancellor to be in touch with the industry?” said one
ers. As CEO of News America longtime friend of Carlucci’s who banking industry source.
Marketing and publisher of the New asked to remain anonymous because
British banks have launched a last-ditch lobbying effort with Asked to comment on the situation, a spokesman for the Treasury replied: “The
York Post, he is the most influential of their relationship. Just because he the British government to try and fend off proposals to Chancellor meets with a range of banks and financial services leaders on an ongoing
executive you’ve never heard of inside screens scenes from “The ringfence their retail operations, sources with knowledge of basis.”
Rupert Murdoch’s empire. Untouchables” for employees “doesn’t Barclays declined to comment.
That could change as News mean he’s a mobster,” this source the matter said. The Independent Commission on Banking’s (ICB) findings on Sept 12. are set to
America Marketing’s alleged bare- added. Sources said it was likely that the banks’ top executives would seek talks back proposals made in an earlier interim report to ringfence banks’ retail arms from
knuckle business tactics come under John Kimball, the former chief mar- with British Finance Minister George Osborne ahead of the Sept 12 publica- riskier trading operations to protect taxpayers from future financial crises.
the regulatory spotlight in the United keting officer for the Newspaper tion of a report from a government-appointed commission that will propose However, Britain’s “Big Four” banks — Barclays, HSBC and part-nationalised
States amid the phone hacking scandal Association of America, who has been tough new regulations and restructuring for the industry. lenders Royal Bank of Scotland and Lloyds — have consistently warned that exces-
that has rocked News Corp’s News of friends with Carlucci for nearly three “We have a major report coming out that will have huge implications for the indus- sively tough regulation could harm the UK economy.
the World in Europe. decades, said, “He’s always been very
“Carlucci is a pretty savvy political The ringfencing approach would get
perceptive, intelligent, a quick study banks to form separate subsidiaries for
operator in that he has been able to and a tough, but fair negotiator.”
wield a lot of power while flying under different retail and investment banking
Carlucci, who walks with a confi- operations while keeping the same parent
the radar, but that’s not the case any- dence that adds several inches to his
more,” said a former News Corp holding company.
less than 6-foot frame, is big on one The ICB has also asked banks to hold
source. hallmark of the streets: loyalty.
US regulators and law enforcement more capital — targeting core Tier 1 cap-
“He treats his people well,” said the ital of 10 percent of risk-weighted assets
officials are taking a close look at the former News Corp employee. “If you
business practices of News America, — and the overall impact of the reforms
do right by him, he’ll move mountains is expected to hit banks’ profits, which
one of the nation’s largest providers of to do right by you.” That, in essence,
newspaper inserts, the coupon circulars could make it harder for them to lend to
embodies the News Corp credo. businesses.
that usually bulk up a Sunday edition. New York Post Editor-in-Chief Col
As part of an investigation which Earlier this week, the British Bankers
Allan is widely known to be dismis- Association (BBA) called for a delay to
began with so-far unsubstantiated sive of most News Corp executives.
claims that News Corp operatives ille- the ICB reforms.
There are two, however, whom he “Ringfencing becomes unattractive
gally hacked into the phones of 9/11 treats with utter respect. One is
victims, federal authorities are review- to investors of all types as it reduces
Murdoch, the other is Carlucci. the benefits of diversification, gives
ing lawsuits brought against News “I never heard Col badmouth
America by several competitors that borrowers a worse deal, and is ineffi-
Carlucci and I never saw him try to cient from a capital, funding and oper-
have cost about $650 million in settle- push Carlucci around,” said the second
ments. ational perspective,” said BBA head
former News Corp employee, who Angela Knight.
Claim added that he witnessed Allan do both The ICB has said it expects the indus-
One of the cases that federal author- with plenty of other executives. try-wide costs of its interim proposals to
ities are looking at, according to a US Though Carlucci is not part of be well below £12 billion, while analysts
law enforcement official, is a 2004 Murdoch’s inner circle, the two talk say the industry would face a hit of about
claim by Floorgraphics that accused regularly. Brian Tierney, the former £10 billion ($16 billion) a year, with
News America of breaking into its owner of the Philadelphia Inquirer and Barclays and RBS most at risk.
computers and taking corporate data Philadelphia Daily News, recalls that Britain set up the ICB after its banks
that ultimately caused it to lose some after buying the newspapers in 2006, got badly burnt during the 2007-2008
clients. Floorgraphics was a rival of Carlucci served as guide to the indus- credit crisis.
News America for grocery store mar- try newcomer. The government had to fully nation-
keting until the company bought it as a “When I first bought the papers, alise Northern Rock and ended up with
way to settle the lawsuit. within one month two people reached stakes of 83 percent in RBS and 41 per-
Investigators want to see if this case out to me to welcome me to the club,” cent in Lloyds after having to rescue RBS
and other, similar litigation form a pat- said Tierney, who now serves as chief and Lloyds with billions of pounds of
tern of illegal activity at News Corp. executive of marketing firm Real Time taxpayers’ money.
The US inquiry is only beginning and Media. “One was (Washington Post Shares in Britain’s beaten-down bank
may ultimately amount to nothing. Co Chairman) Don Graham and the stocks rose sharply on Thursday on hopes
Carlucci, through a representative, other one was Carlucci.” Traders work the crude oil options pit at the New York Mercantile Exchange, Sept 1, in New York. Gasoline is near the that reforms might be delayed, but those
declined comment. After Tierney expressed interest in highest it’s ever been for this time of year, just ahead of the Labor Day weekend. (AP) stocks slipped back on Friday.
Born in New York and of Italian the Wall Street Journal’s pay system, Lloyds and Barclays fell by 4 percent,
descent, Carlucci started his career in Carlucci quickly brokered a meeting RBS declined by 2.8 percent, and HSBC
advertising sales at the New York for him with Murdoch. Brands, customer relationships, technology are factors fell 2 percent in mid-morning trade, amid
Daily News and rose to high-level ad “I spoke with Paul about possibly a growing sense that some form of
executive positions at retail stalwarts using their technology, and within two restructuring is inevitable.
Macy’s and Caldor.
He joined News Corp in 1991 as
executive vice-president of News
hours I got a call from Murdoch’s
office and met with him within a
week,” said Tierney. Another newspa-
US firms tried to get ‘intangibles’ on books The ICB’s proposed reforms could
take years to implement.
After the final ICB report is issued, it
America, eventually replacing Les per executive recounted a meeting he CHAPEL HILL, NC/NEW YORK, Sept other hand, like the patents Google will be largely ignored by analysts and will be up to the government — through
Hinton as the division’s chief execu- had with Carlucci that was interrupted 2, (RTRS): With intangible assets such as acquire with its Motorola bid, are record- investors. EBITDA is earnings before a Cabinet committee on banking chaired
tive. Hinton resigned from News Corp by a 30-minute phone call from patents dominating so much of the mod- ed at fair value. interest, taxes, depreciation and amortiza- by finance minister George Osborne —
earlier this year as a result of the UK Murdoch to go over ads for a Sunday tion. to choose what to implement into law,
ern economy, why are they still largely Critics say that the difference makes it
phone hacking scandal. edition of the New York Post. Some accounting experts counter that probably starting later this year or early
off the balance sheets of America’s difficult to compare corporate finances
In 2005, Carlucci took on the role of As tough and shrewd as Carlucci is moving patents and other intangibles to in 2012.
largest corporations? and often hides a company’s most impor-
publisher of the New York Post after as a publisher, however, the fact the balance sheet would be subject to British media reports this week said
remains that the New York Post is an Some headline-grabbing patent sales tant assets.
Murdoch’s eldest son, Lachlan, quit have reignited interest in the question. The different treatment means a patent abuse. reforms may not come in until after the
the position. Rupert Murdoch briefly unprofitable newspaper that does not “I could see this becoming a very good planned 2015 general election, while
get ad rates that match its influence. Among them: the $4.5 billion auction of that was developed by one company and
served as publisher before naming Nortel’s wireless patents on July 1 and then sold to another can go from being way to manage earnings,” said Robert Britain would not want to be out of step
Carlucci. While profitable, News America has Willens, president of tax and accounting with the 2013 introduction of tougher
become a low-margin commodity busi- Google Inc’s $12.5 billion Aug 15 bid for valued at next to nothing, to being worth
“He’s not Australian or British, and Motorola Mobility Holdings Inc and its millions — or even billions — of dollars, service Robert Willens LLC. global bank capital and liquidity stan-
didn’t come up in publishing,” said a ness with high costs because it has to For example, companies could inflate dards, known as Basel III.
buy the paper, print the inserts and pay 24,500 patents and pending patent appli- almost overnight, said Esther Mills, pres-
second former News Corp employee cations, and other assets. ident of Accounting Policy Plus, a New profits by capitalizing both direct and However, politicians will be keen to
who had frequent dealings with newspapers to distribute them at a price indirect costs of developing intangibles, ensure that the general public does not
that advertisers are willing to pay. Setters York-based adviser specializing in com-
Carlucci. “He’s an outsider who has plex accounting issues. removing them from the income state- think that they have let the industry off
managed to become the ultimate insid- To fight the declining economics, Now Australian accounting standards ment as an expense, he said. the hook by watering down the ICB’s
er.” News America has been accused of setters, on behalf of a global group that Feel Determining the proper value of an proposals.
Carlucci, who wears his hair slicked engaging in a series of less than ethi- includes the US Financial Accounting Mills is among those who feel internal- intangible is not easy and can be espe- “They see the politicians bashing the
back and usually carries a Montblanc cal, and potentially illegal, maneuvers. Standards Board, may be moving the sub- ly developed intangibles should be on the cially challenging in such situations as banks and think they are doing a good
pen, has a penchant for finely tailored As New York Times columnist ject onto the global accounting agenda. balance sheet, either at their fair market Google’s. Beyond any value the job; but when they see them backing
suits and a reputation for step-on-your- David Carr put it, “The company has The Australian accounting rule maker has value or at an amount that more fully cap- Motorola Mobility patents may bring in off the banks, they wonder if they are
throat business tactics. come under scrutiny for a pattern of recently surveyed corporations, auditors tures the costs of the research and devel- terms of future cash flow, Google is also being paid off and in thrall to big busi-
An executive at Sara Lee once said conduct that includes below-cost pric- and regulators on the topic of intangible opment that went into producing them. counting on them as a defense against ness,” said Roger Mortimore, director
of her dealings with News America ing, paying customers not to do busi- accounting and whether changes should The accounting difference could competitor lawsuits. That’s especially of political analysis at polling firm
that it “feels like they are raping us and ness with competitors, and accusations be made. result in distorted behavior, warns subjective and tricky to value, experts Ipsos Mori.
they enjoy it.” of computer hacking.” In the United States, such intangible Abraham Briloff, a professor emeritus say. “It’s something the public think very
Carlucci, who turns 64 this year, Floorgraphics co-founder George assets as brands, customer relationships, of accountancy at Baruch College, The issue has become more important strongly about, even though they don’t
emphatically peppers his comments Rebh said in a deposition that patents and other information technology tempting companies to buy intellectual as the US economy has moved more and understand the ins and outs of the
with curse words and is known among Carlucci, over what was supposed to are accounted for in one way if created property rather than doing research more toward one dominated by intangible reforms or the way banks work ... but
friends as “Johnny Legit,” according be a friendly lunch, bluntly told him, “I in-house and another if acquired. themselves. assets. According to Ocean Tomo, a they do have this strong feeling the
to the first ex-News Corp source. will destroy you. I work for a man who Intangible assets a company develops The value of patents purchased are Chicago specialist in valuing assets, 80 banks have misbehaved,” he added.
But supporters of Carlucci view his wants it all, and doesn’t understand itself are valued at little more than the subtracted from earnings over their useful percent of the market value of the S&P British Prime Minister David Cameron
thuggish depiction as little more than anybody telling him he can’t have it legal and filing fees, because the research life, but in industries like telecommunica- 500 in 2010 could be attributed to intan- said on Friday that it remained vital to
an anti-Italian bias. all.” is deducted as an expense, not capital- tions where companies are valued on an gible assets, up from 68 percent in 1995 tackle elements of irresponsible behav-
ized. Assets that are purchased, on the EBITDA basis, those costs are likely to and 32 percent in 1985. iour in the banking industry.