18 December 2008

Commonwealth Bank dribbles a bibful

What do bankers get paid for again?

Yeah, I know there's an element of schadenfreude in commenting further on this parochial little cock up by the Commonwealth Bank in fumbling its $2 billion excluded-offer equity placement to institutions on Tuesday afternoon, but it truly shows again how "experts" can stuff up.

What is it that all those thousands of spectacularly highly paid executives, lawyers, corporate governance consultants and compliance advisers at Merrill Lynch and the Commonwealth Bank do for a living when a mistake as fundamental as this can occur during a placement of this size in a market as skittish and as vulnerable as we have at present?

As I understand it from the press:

On Tuesday afternoon, with CBA stock still being traded on the ASX at around $29 a share, Merrill Lynch received acceptances to place $2 billion of CBA shares from institutions at $27 a share. This placement was apparently to top up CBA's tier one capital adequacy levels to bring it in line with its major Australian banking peers, so as to keep perceptions of its stability in tact in the current international credit crisis. The placement seems to have been completed at around 4.30pm after the ASX market close at 4pm . At around 7.30 pm CBA announced a successful $2 billion placement in a media release. The release also had tagged on to it disclosure of a material downgrade in CBA's bad debt provisioning for 2009 (apparently partly arising from its contemporaneous decision to continue to extend credit to the struggling Centro Property Trust).

All hell then apparently broke loose amongst the institutions who had taken shares in the placement during that afternoon, without knowledge of impending material change in CBA's bad debt provisioning. Overnight a significant number of them withdrew from proceeding with the placement on the basis that there has been a material change in circumstances not disclosed to them. At some point overnight Merrills advised CBA that they were not proceeding with $1.6 billion of the placement (approx $400 million was locked in).

On Wednesday morning the CBA board , understandably, had an emergency meeting and UBS (who had previously unsuccessfully tendered for the placement) were, amazingly, on hand to offer an alternative placement for $1.6 billion at the lower price of $26 a share. UBS apparently successfully placed the CBA stock with institutions at this lower price during Wednesday morning.

At this point all you can say is "shit", what a stuff up, and "boy", how lucky were CBA that UBS could step into the breach and raise $1.6 billion in such a short time?

But here's where it really gets interesting for a ghoul like me, looking at the entrails of this near catastrophe after the event. Sure Ralph Norris the CBA CEO is hunting for culprits for this monumental stuff up, but it is possible that he is directly implicated in what may be the biggest stuff up of all here. This is not the astonishing failure to disclose the market sensitive information before the placement. That was indeed an act of stupidity. But worse, in pointing the finger of blame at Merrills after the event this is what CBA apparently said: ...

"Merrill Lynch did not inform potential investors of the various disclosures made by the Bank in its announcement to the ASX at 7.30 pm on Tuesday", it said. "The Commonwealth Bank is disappointed Merrill Lynch did not meet its obligations."

Is this an admission by CBA that CBA actually knew what it disclosed at 7.30 pm on Tuesday, earlier in the day when Merrills were putting the placement away at $27/share, and expected Merrills to tell the institutions this news then? It sure looks like it. If so then CBA appear to be saying that it had planned for the institutions to apply for shares at a price below the prevailing market price, with different and materially adverse information about CBA, that CBA had not disclosed to the market. Who knows? I'd have thought their easiest defence to allegations of impropriety by CBA would have been for them to claim it did not know the adverse position on bad debts 'til after the market closed and the Centro financing had finalised. But they seem to have taken that line of argument away from themselves by suggesting that Merrills had already been told the bad news by CBA, and CBA expected Merrills to pass that bad news on to the instos, when pitching the placement to them.

Although you may be forgiven for thinking otherwise, my experience is that, thankfully, this not how private securities placements are normally done on the Australian market.
Selective disclosure of market senstive information by or on behalf of a listed company to potential placees of its stock whilst the market is open is not customary and is seldom if ever admitted to.

The biggest stuff up therefore may, yet again, lie in the attempted cover up. The haste with which CBA have decided to place the blame for the absence of disclosure on their broker, may have seen them stumble even deeper into hole that they are digging for themselves.

08 December 2008

Weatherman: cold weather is not climate related

Just who is it that is denying climate change here?

James Randerson in The Guardian tells us:

"The relatively chilly temperatures compared with recent years are not evidence that global warming is slowing however, say climate scientists at the Met Office. “Absolutely not,” said Dr Peter Stott, the manager of understanding and attributing climate change at the Met Office’s Hadley Centre."

That "Absolutely not" is crying out for an exclamation mark, but it also lends the "Hadley Centre" an appropriately Alice in Wonderland feel. Let's just slip down a credulity hole into some playful Lewis Carroll universe if the going gets awkward. As the people at Climate Resistance point out, Dr. Stott is more than just over-egging the pudding a bit with this stentorious absolutism.

In what universe does the experience of colder weather this year than last year, that most of us have just lived through, not constitute, like you know, actual evidence that global warming is slowing? I suppose it could be a universe in which global warming is not a description of a planet that is experiencing steadily higher temperatures, but a universe that prefers acting out the very human condition of not liking it when it gets colder.

Even if you believe that the globe is warming, as many quite respectable people seem to, then you are not compelled, by the holding of that belief, to also say that data showing lower temperatures compared to a previous corresponding period, is not evidence of cooling. That is just silly. If temperature goes down then that is evidence of a temperatute drop, otherwise known as, cooling. Surely, even in these fractious times, it is not too contentious a propostion to suggest that we and Dr Stott can together agree that cooling slows warming, since cooling is the opposite of warming? If so, what's absolutely clear here is that Dr. Stott is absolutely wrong when he says "absolutely not".

Dr. Stott's predicament is delightfully dramatised by Alex Cull, the commenter at the Climate Resistance post, where he says:

"The Hadley Centre’s attitude reminds me of being in a car driven by someone who is stubbornly refusing to admit that they are lost, someone who cannot even contemplate the idea that they might be horribly wrong…

Kids: Are we nearly there yet?
Dad: Yes, we are - we should be arriving at Global Warming any minute now. We’ll be reaching the first tipping points in a moment, you’ll see.
Mum: Honey, I think we passed the turning to Global Warming some time back in 1998. I don’t think we -
Dad: We are definitely on the road to Global Warming. Just let me drive without your constant -
Mum: Well, I don’t think we’re heading towards Global Warming. We missed the turn! And look, you’re holding the map upside d-
Kids: Daddy’s lost, Daddy’s lost, nyah nyah ni nyah naa!
Dad: Shut up, everybody just shut up!! Who’s driving this car? I am! And if I say we’re on the road to Global Warming, that’s exactly where we are! It’s settled! I don’t want another word from anyone else, you hear? The debate’s over."

01 December 2008

Westminster: truly a Mother of a Parliament

UK Government uses anti-terrorism police to arrest shadow minister of immigration over a leak of government information about immigration

Even the leaders of the oldest democratic institution in the world no longer seem to have even the vaguest notion what freedoms the West is fighting for in resisting terrorism. In the same week that Pakistani Muslims invaded India on a carefully planned and executed suicide terrorist raid targeted at western tourists in Mumbai and killed and tortured over 180 people, the Speaker of the Parliament in Westminster allowed an anti-terrorism police unit to raid an Opposition parliamentarian's Westminster offices. This was apparently because he was getting access to public service information leaks on immigration data.

Of the many things that really stick in my craw about this astonishing descent into totalitarianism by the UK Government, the one I'm having most difficlulty dislodging is that this police operation was presided over by the Assistant Commissioner Specialist Operations with the Metropolitan Police Service, with responsibility for Counter-Terrorism, a Mr Bob Quick.

From this distance:

Either: the Metropolitan Police treats leaks of Home Office information about immigration statistics in the same Police department that deals with Anti-terrorism operations, which itself is an amazing conflation of responsibilities, that belies a profound misunderstanding of the comprehensively different character of the exceptional use of intrusive anti-terrorism powers from the democratic process which countenances and protects political challenges to a government by an opposition without access to taxpayer funded government department information.

Or: the Commissioner of Police or a Minister specifically ordered that the Counter-terrorism Chief oversee a Home Office immigration department leak investigation.

Which ever way it is, it looks conspicuously like Westminster democracy has just entered the latest version of of an early form of totalitarianism.

The arrest of a member of Parliament for embarrassing a government with the Government's own information is an act of totalitarianism by that government.

This seems even clearer now that the Met Police have indicated that they were advised by the Cabinet Secretary that this leak enquiry into Home Office immigration information was a matter of "national security". This was said apparently to explain away why they used "counter terrorism" police on the investigation. But this only confirms that the executive government were responsible for directing the way the Police were to handle this enquiry. The idiot British journalists are suggesting in their oh so clever parsing of this development that it puts pressure on the Tories trying to make too much fuss over a police bungle. The bloody press can't even recognise that this line of defence from the Met points the finger at the Government, not the Opposition. And the idiot Fleet Street journalists can't even see the consequences of this spin for what it is. No wonder British democracy is in such peril when even the fourth estate (or should that be fifth?) can't do its job.

The fact that the Speaker of the House of Commons gave approval for the Seargent-at-Arms of the Palace of Westminster to allow the Metropolitan Police access to a member of Parliament's office, over an enquiry into a politically embarrassing information about immigration held by that member of Parliament, means the Speaker has no conception of what fundamental liberties and constitutional protections his role entails.

If, as seems inevitable, even the Speaker of the House of Commons was complicit in this travesty of constitutional principle, then British democracy and freedom no longer have any real guarantors or protectors in its system of government.

Westminster democracy has suffered a mortal blow. Whether it survives depends on whether this is seen by its participants (including the press) for the shameful travesty that it is. Many of us who first learnt the shape of our ideals and aspirations about government and democracy by studying British parliamentary history and its traditions, feel a deep sense of foreboding that society's persistent trivialization of principle and constant elevation of the trivial, may have finally fatally undermined constitutional protection of individual freedoms in the birthplace of modern democracy.