The country’s leading mobile operators, including Bharti Airtel, Vodafone Essar, BSNL and Tatas, have questioned the government’s move to direct the Comptroller and Auditor General of India (CAG) to audit their books. The CAG is a constitutional authority that conducts independent audits of all government accounts.
This is the second instance of the government wanting to examine the telcos’ books. The move follows allegations of under reporting of revenues. Since telcos pay 6-10% of their annual revenue as licence fee and 2-6% as spectrum usage charges, reporting lower revenue brings down the component they have to share with the government.
CAG officials, however, reportedly said that a 2002 notification authorises it to audit the accounts of telecom companies, as they share a part of their revenues with the government. So far, the CAG never exercised this power.
In April 2009, the government had ordered a special audit of the account books of top private cellphone companies, including Reliance Communications (RCOM), Bharti Airtel, Vodafone Essar, Tata Teleservices and Idea Cellular, to ensure that they have correctly reported and shared revenue with it. The audits aimed to establish if there were any discrepancies in the revenues reported by these companies. The special audit reports for Reliance Communications, Bharti Airtel, Vodafone Essar and Idea Cellular have already been submitted to the department of telecom (DoT) while Tata Teleservices’ is expected to be completed soon.
How should economic indices be built?
We all know that India has very few indices to monitor its economy effectively. Even those that it has, many economicsts rue, are rarely ever dependable. So, building indices de novo, is one solution to the problem. Take a look at what ET recommends in its editorial today in this regard:
India needs an official leading indicators index, to better gauge early growth trends, even as we have some such indices developed by non-government agencies. The objective ought to be to better monitor the Indian economy, detect early warning signals and firm up proactive policy in response. Leading indicators can include placement of new orders, intention to build and changes in profitability etc. In tandem, what’s called for is a suitable lagging index, encompassing levels of stocks, utilisation of sanctioned loans, the going rates of interest, etc, to clarify and confirm the emerging pattern in economic activity. Leading indicators come up before coincident indicators, which in turn are tabulated before lagging indicators. A composite index of the three indices would represent the broad industrial economy, able to iron out measurement errors due to statistical biases, cyclical trends and the like.
The status of regulating the petroleum sector
The PNG (Petroleum and Natual Gas) sector consists of four sub-sectors: exploration and production of PNG, oil refining and marketing, natural gas transportation and marketing, and crude oil and petroleum products pipelines. Of these four, the first, referred to as upstream, is supposed to be regulated by the directorate general of hydrocarbons (DGH) while the remaining three downstream sectors fall under the domain of the Petroleum and Natural Gas Regulatory Board of India (PNGRB).
As per the MoPNG order, the DGH has been mandated to regulate only one area —the preservation, upkeep and storage of data and samples pertaining to petroleum exploration, drilling, production of reservoirs etc — and to cause the preparation of data packages for acreages on offer to companies. In all other areas relating to various aspects of exploration and production, it is only supposed to advise the MoPNG. In reality, therefore, it is the ministry that regulates the upstream sector, with the DGH virtually functioning as an advisory wing of the ministry.
Before March 28, 2002, the marketing and pricing of petroleum products including transportation fuels, namely, motor spirit (MS) and high-speed diesel (HSD), were controlled by the government under a mechanism known as administered price mechanism (APM). The APM was dismantled by a notification dated March 28, 2002, under Section 3 of the Essential Commodities Act, 1955. Then, in 2006, the PNGRB came into existence. As a result of these two events, the theoretical position obtaining since October 1, 2006, is that all entities are free to price their products and the PNGRB is to regulate anti-competitive behaviour like predatory pricing. However, strangely, the government (read: MoPNG) still fixes the prices of MS and HSD and the PNGRB appears to be either powerless or disinterested in doing anything about it.
EPFO finally seems to be facing some heat
Reportedly there were over 46,69,330 withdrawals from the provident fund in 2008-09, a jump of 16% over the previous year.
Competition apparently is forcing EPFO to switch to electronic payments through NEFT (National Electronic Fund Transfer Network), which covers 95 banks with over 67,000 branches. NEFT is a nation-wide system that facilitates electronic transfer of funds between any bank branches in the country.
EPFO covers around five lakh establishments under its three schemes -- the Employees Provident’ Fund Scheme, Employees’ Pension Scheme and the Employees’ Deposit-Linked Insurance Scheme -- and has about five crore subscribers. It sends payments through cheques, a process that takes up to a month and leads to a large number of complaints.
There were around 11,75,160 claims pending till March 2009. Around 60,000 of these claims had been pending over for more than six months.
Asia may overheat on capital inflows
The World Bank predicts as much as $800 billion in global capital flows this year, compared with about an annualised $450 billion to developing economies in the second half of 2009.
Emerging markets need to take “urgent action” on the surge of liquidity and capital flowing into their economies because they could spur inflation and trigger another crisis.
While that is expertspeak, what does it point to us -- the laymen? Our markets will be on the upswing, barring a few hiccups now and then.
A regional term for 'creature' (especially for domestic animals)
The US government has reportedly agreed to take “suitable steps” to facilitate direct access for Indian authorities to Lashker operative David Coleman Headley.
The aforesaid agreement between India and US was reached at an April 27 meeting in Washington comprising solicitor-general Gopal Subramanium and US attorneygeneral Eric Holder. After detailed discussions on the Headley case, the two sides finalised a mutual commitment for the best possible co-operation in their common fight against terrorism.
Headley was arrested by FBI in October, 2009, for conspiring and plotting terror attacks in Indian and Denmark. He recently entered into a plea agreement with the US authorities, pleading guilty on all the 12 criminal counts against him, including his role in the Mumbai attacks conspiracy. In exchange, the US prosecutors agreed that he would not be extradited to a third country, including India, or face death penalty.
Finance & Economy
Ripple effect on D-Street as Europe crisis spreads
After Greece, it’s Spain, as the contagion seems to be spreading fast across Europe. Ratings major Standard & Poor’s (S&P) on Wednesday cut its ratings on Spain by one notch to AA from AA-plus. Indian shares joined the worldwide slide in equities and commodities, after S&P had lowered Greece’s debt rating to junk and that of Portugal by two notches on Tuesday.
In the global markets, yields on Greek two-year debt soared to a record 26% and the euro hovered around near a one-year low against the dollar as investors worried that the sovereign debt crisis in parts of Europe may soon spread to markets as well.
Infra cos may get to borrow abroad to finance local loans
Government is reportedly in favour of allowing refinancing of domestic debt taken for equipment purchases with exeternal commercial borrowings. Such a type of facility was recently allowed for telecom companies.
This measure is expected to give the infrastructure companies access to cheaper loans as interest rates head higher in India because of monetary tightening.
India will need over $1 trillion of funds over the twelfth plan for the infrastructure sector. A greater access to overseas funds will help raise cheaper funds for executing infrastructure projects.
On cut motions in the Parliament
Here is a very good ET in the Classroom column that explains the process of passing of the budget in the Parliament and the associated process of cut motions. Worth a read. Take a look.
Plan panel makes case for hike in power tariff by states
Worried over the mounting power sector losses adversely affecting the finances of state governments, the Planning Commission has suggested an immediate revision in power tariff by state utilities.
Transmissiona and Distribution losses in 2009-10 are likely to exceed Rs 45,000 crore and may reach Rs 68,000 crore in the current fiscal.
The Thirteenth Finance Commission has also urged a speedy reform of power distribution. In its report, the commission has pointed out that even better performing states need a minimum of 7% increase in tariff on an annual basis (at 2007-08 subsidy levels) to bridge the gap between actual receipts and government subsidy.
As per assessment the losses of state utilities will rise from a level of Rs 68, 643 crore in 2010-11 to a staggering level of Rs 1,16,089 crore in 2014-15 if urgent steps are not taken to reform the utilities.
What is Maharatna status?
It is the PSUs. Maharatna status requires a three-year track record of annual net profit of over Rs 5,000 crore, net worth of Rs 15,000 crore and a turnover of Rs 25,000 crore. SAIL, ONGC, Indian Oil and NTPC are the only PSUs that meet the criteria. Only listed entities are eligible to become ‘maharatnas’.
Understanding the case against Goldman Sachs
The more we read about it the better could our understanding be. Take a look at how TT Ram Mohan explains the case:
The allegation against Goldman is that it sold packages of securities based on home mortgages to various investors without making several disclosures or making false disclosures. It did not disclose that the securities it was marketing and for which it earned a fee had been created by a client, Paulson and Co, which was betting against US home mortgages. It did not disclose that some of the securities in the package had been selected by Paulson and, instead, gave the impression that an independent agency had made the selection. It did not disclose that it was itself hedging its position on US home mortgages.
When the US home mortgage market blew up, Paulson and Co made $1 billion in profit on its position, IKB, a German bank that had bought the securities package, lost $150 million and Goldman lost $100 million (although the loss occurred because it failed to liquidate some of its positions).
More details about how the ABACUS deal was structured by Goldman Sachs is here. Worth a look to understand the complex nature of the transaction.
Is running after Goldman correct in the current context?
All banks are seen as villains in the present crisis. But to claim that the recent financial crisis was driven by conflicts of interest in investment banking would be quite a stretch. The financial crisis involved banks that failed due to bad risk management. Goldman Sachs was not among the failures. It did a better job of risk management than others.
The short point is that regulatory reform cannot be driven by Goldman Sachs-envy. The regulatory failures lie elsewhere: excess leverage, liquidity risk, banks that are too big to fail, and concentration in banking and investment banking.
The Barack Obama administration wants to push through reforms that will address these issues. The banking industry is lobbying hard to defeat the reforms and the US administration is understandably annoyed. But it’s hard to see how bashing Goldman Sachs will help matters.
Government's billion-$ plan to train youth in Red belt
Being aware that the spreading Naxal menace cannot be tackled purely as a law-and-order issue, the government is readying a ‘hearts and mind’ plan to send youth from Maoist areas to industrial training institutes in major cities such as Kolkata and Hyderabad, while simultaneously rolling out a network of brand new training centres in 34 districts across nine states. Under this plan, about 5,000 school dropouts and unemployed youth from the country’s so-called “red corridor” districts will, starting August this year, board trains to travel to the country’s best industrial training centres.
The second leg of the plan involves placing youth trained under this plan with industries in neighbouring states and cities such as Mumbai and Hyderabad.
Conceived by the labour ministry, the plan has the backing of the home ministry, which is at the forefront of battling the Maoist problem and suffered a major embarrassment after 76 paramilitary personnel were killed in the Dantewada jungles early this month. The plan is estimated to cost around $1 billion and will be bankrolled by the Centre.
More than 95% of administrative blocks in districts worst hit by left-wing extremism have no training institutes or higher education opportunities. Work is underway to build 1,500 new industrial training institutes (ITIs) and 5,000 skill development centres (SDC) across the country using the public-private partnership model, but this does not include Naxal-hit areas, as the private sector is reluctant to venture there.
To remedy this, the new plan wants to set up at least one ITI and three SDCs in every block of these 34 districts. That translates to 228 ITIs and 927 SDCs, and until they come up over the next couple of years, the Centre will sponsor school dropouts and unemployed youth in these districts to train at existing institutes outside.
Finance & Economy
What are the advantages of allowing the entry of foreign banks as subsidiaries?
In a very good debate -- wherein both the people are arguing for the same thing -- two experts tell us why allowing foreign banks as subsidiaries of their parents is a better choice.
So reads a healine. But what exactly comprises core sector?
It comprises of six industries — crude production, petroleum refinery products, coal, electricity, cement and finished steel. They have a combined weight of 26.7% in the index of industrial production.
States baulk at independent debt management office plan
Plans for an independent office to manage governments’ debt has not found favour with some of the states that want the central bank to continue to manage their borrowings and the existing stock of debt. The government had proposed to create a DMO in 2007-08 budget.
Some states are opposed to the idea for the simple reason that they do not want to disturb the existing arrangement, but others see it as altering the federal structure and are keen on maintaining their independence from the Centre.
These opposition from these states has come despite the finance ministry offering the states a stake in the National Treasury Management Agency that will act as government’s debt manager.
An independent debt management office will divest the Reserve Bank of India of the responsibility of managing government borrowings, removing the conflict of interest inherent in its role as the setter of interest rates and the banker to the government.
As an efficient debt manager, RBI should to try and minimise borrowing costs for the government, but this could interfere with its monetary policy management, especially in an environment of rising inflation. When inflation is high the central banks is required to maintain a tight monetary policy stance and raise rates.
The existing arrangement also interferes with efficient discovery of interest rates in the secondary market and comes in the way of development of a vibrant bond market.
World over central banks are only responsible for monetary management and do not even function as a regulator for banks. In the US, the treasury manages public debt, not the Fed. Other countries such as the UK and Portugal have set up DMOs to manage public debt.
What are commodity currencies?
Answer as excerpted from today's First Principle column:
These are currencies which essentially derive their strength from commodity exports from their respective markets. Also, in these countries, commodity exports are major source of foreign exchange inflows. Traditionally lesser developed economies in Africa and Latin America have come under this category. Despite the weaker correlation between commodity exports and currency strength, the Canadian, Australian, the New Zealand dollar and the South African Rand are still considered commodity currencies. In recent times, they have emerged as global currency traders’ favourite as there has been a general surge in commodity prices globally.
Stocks, bonds, crude oil and commodities tumbled as investors feared a wave of sovereign debt crisis, similar to the 1997 Asian crisis, after Standard & Poor’s cut Greece’s rating to junk and lowered Portugal two notches. Safe haven gold rose.
Investors fear the downgrade of these two nations may be the beginning of a series of such moves as most governments are burdened with debt after they spent their way out of recession following the credit crisis. Even the US is under threat of losing its top rating.
Standard & Poor’s cut Greece three levels to BB+, or junk, and lowered Portugal two steps to A as they stare at a default. Greek notes slid earlier as concern deepened that the nation will ask investors to accept delayed or reduced debt payments. The European Union, which had pledged to support Greece, has been dragging its feet on the conditionalities to extend a bailout.
Emerging markets could be the worst-hit in a sovereign crisis as global investors pull out funds in a flight to safety.
Suggesting the horror of death and decay
eg: For the Left, the spectre of the Third Front now haunts its other parliamentary illusions, with predictably ghoulish results.
Evident without proof or argument; Containing aphorisms or maxims
Mr Amin, who has steered India’s oldest pharma company since 1983 to make it a Rs 1,100-crore giant, is not new to cricket. After the death of Fatesinh Rao Gaekwad in 1988, he took over the reins of the Baroda Cricket Association (BCA). In 2003, he edged out former BCCI secretary Jaywant Lele to continue at the helm.
This news story gives the government version of the phone tapping issue. Take a look.
UID has Aadhaar for new name, logo
The Unique ID number will now be known by its new brand name—Aadhaar.
The government plans to issue 600 million Aadhar numbers over the next four years, through various registrar agencies. It plans to rollout the first set of Aadhar numbers by February next year.
Along with the brandname, the logo of Aadhar in the form of a fingerprint was also released. Iris scan will be used along with fingerprints for collecting biometric data of citizens.
About 10 fingerprints, a photo and iris scan will be collected as part of biometric data per person.
India ranks third in malicious play, virtually
The country has emerged as one of the Big Three spawning grounds for web-based attacks. India, at third slot, stood next to the US and Brazil in 2009, in terms of countries where such malicious attacks originated, according to Symantec’s Internet Security Threat report. The web security firm says India figured 13th in the list during the previous year.
Additionally, we were the third-highest spam generating country in the world, contributing about 4% to worldwide spam volumes.
Some techie lingo worth our attention:
Spams are bogus mails targeted to extract sensitive information for wrongful financial gains.
A zombie, in tech parlance is a computer wired to the net that has been compromised by a hacker. Zombies are used extensively to send email spams — referred to as spam zombies and most owners of such PCs are unaware that their systems are being used in such ways.
Phishing, on the other hand, is an identity theft in which spammers use an authentic-looking email to trick recipients into providing personal information, such as credit card numbers or social security numbers.
A worm is a self-replicating malware computer programme. It uses a computer network to send copies of itself to other computers on the network all by itself.
Trojans and backdoors on the other hand are malware programmes which keep sending sensitive information to hackers from the infected computers.
Bots are malwares that turn computers into zombies.
Finance & Economy
What are the pros and cons of a food coupons based subsidy regime?
A list of the major problem areas in the present PDS:
Exclusion errors: families who deserve to be in the BPL list are excluded,
Inclusion errors: families who are not eligible are included,
Ghost cards: ration cards in the name of fictitious/non-existent families,
Leakage at fair price shop: simply stated, the quantum of food grain leaked/stolen by transporters/shopkeepers, and
Unacceptable quality: complaints of quality sometimes due to the replacement of procured stocks by lower quality at various levels.
How to delink growth from emissions?
Every unit of growth in the economy requires a corresponding input of energy and higher resulting emissions. How can we delink the two?
One possible way is to increase the contribution of non-polluting energy to total energy consumption and use more energy efficient devices. In this strategy even if the energy intensity of the economy – primary unit of energy it takes to produce one unit of GDP – remains the same, its emission intensity would drop.
A higher contribution to GDP growth from relatively clean sectors such as information technology and other services should also help reduce the correlation between GDP growth and emissions, other things remaining same.
The World Bank member-countries reached an agreement on a 3.13 per cent shift in voting power to give the emerging and developing nations greater influence in the Bank last week.
The voting pattern shift will increase the number of votes of the developing world to 47.19 per cent from 44.06 per cent. And China’s stake at the bank, in terms of voting power, rises from 2.78 to 4.42 per cent now, making it the third largest, next to the U.S. (15.85 per cent) Japan (6.84 percent).
Post-reforms, India has moved to the seventh spot with 2.91 per cent voting right.
Obama's far reaching proposals on financial reform
He has been served suspension notice through email by the IPL governing council soon after Chennai Super Kings beat Mumbai Indians in the finals of the third edition of the IPL.
The idea behind this move is to bar Mr Modi from attending the Governing Council meeting today at 10 am at the BCCI headquarters. In the event the IPL commissioner does show up for the meeting, the matter can immediately be referred to a three-member disciplinary committee for action. The committee consists of BJP leader and legal heavyweight Arun Jaitley, Shashank Manohar, the president of the Board of Control for Cricket in India (BCCI) and Chirayu Amin, the head of the Baroda Cricket Association and the owner of pharma company Alembic. This will set the stage for a formal in-house probe into the charges against Mr Modi.
The BCCI president has the power to suspend a member under Article 32 of the Board’s constitution. The suspended member then faces an inquiry.
People in BCCI believe there is a strong case against the IPL chief that takes into account various alleged financial irregularities linked to Mr Modi. He may also be rapped for breach of the franchise agreement's confidentiality clause.
But others say the case against him is far from water-tight. Breach of confidentiality seems to be the only concrete charge the BCCI will be able to raise against Mr Modi. While a number of other allegations are being investigated by various government agencies, there is no reason to believe BCCI has proof to indict Mr Modi in any of those charges, they say.
The charge of breach of confidentiality consists of two counts — disclosing the shareholding pattern of the Kochi team and leaking internal BCCI communication to the media. Even in this, the latter allegation will have to rely on circumstantial evidence.
Why is the government in trouble over phone tapping issue?
Because the government had, in keeping with the guidelines issued on phonetapping by the Supreme Court in 1996, introduced numerous safeguards in the Indian Telegraph Act to ensure that privacy of individuals was protected. Only the Union home secretary or his counterpart in states, according to these rules, could permit any one of the seven notified intelligence agencies—Intelligence Bureau, Directorate of Revenue Intelligence, Enforcement Directorate, Narcotics Control Bureau, Economic Intelligence Unit and the Directorate General of Investigations, Income-Tax, besides the special branch of state police—to tap the phone of an individual, that too for a limited period. The National Technical Research Organisation (NTRO) was, obviously, not among the seven listed agencies.
You might remember that it was the NTRO that was used for phone tapping this time.
A good graphic that gives us a low-down on telephone tapping.
Here is an excellent article on the constitutionality or otherwise of telephone tapping. A must read for all of us. An excerpt worth our attention:
The Supreme Court in PUCL vs UOI (decided in 1997) had dealt with the aspect of telephone tapping and laid down the procedure in case the State decides to tap someone’s phone. The conditions are:
The order for telephone tapping can be issued only by the home secretary of the govt. of India and home secretary of the state governments. Only in urgent cases, the power can be delegated to an officer below the rank of joint secretary. Reasons have to be recorded for such order, which can continue only for two months unless extended which shall not exceed six months.
This order is subject to examination by a review committee, consisting of Cabinet secretary, law secretary and telecommunication secretary. The review should be done within 2 months of the order of interception.
The orders so passed should be specific with regard to the person, places, addresses and can be justified only on the ground that it was not possible to collect the information through other means. The invasion into privacy has to be minimum.
The authority shall maintain all the necessary records which shall be destroyed as soon as its retention is found unnecessary.
How to tap cell phone conversations legally?
To tap a phone legally in case of GSM phones, the GSM service provider can give you a line out, or a parallel connection to the “tapped line”.
This line out can be either routed to a speaker (for hearing) or to a recording system.
In case you can’t get a line out (the legit way) and if you have a few hundred lakhs to spend you can get a signal interception device.
It’s a small computer controlled, Windows 98 or NT machine that can tap or record GSM conversations even 2 km away. The equipment, manufactured primarily in Israel, is used by your GSM operator to monitor and test signal strength, call dropping, etc.
A method called cloning can also be used to tap a phone, both GSM or CDMA. A duplicate or cloned SIM (in case of GSM) or phone (in case of CDMA) is made and the duplicate phone is used to listen in to voice conversations.
Finance & Economy
Deciding what is ‘suitable’ in movie advertisements
This is about a job that hardly anyone knows that it exists. It is about America's top advertising enforcer.
Marilyn Gordon whose official title is senior vice president for advertising administration at the Motion Picture Association is the Motion Picture Association of America’s top advertising enforcer. Her job is evaluating and approving or disapproving all advertising for rated movies before it can be disseminated. In general terms, Gordon’s team evaluates promotional materials to determine whether they are suitable for the intended audience.
Last year, Gordon and her six lieutenants evaluated more than 60,000 submissions – trailers, television spots, Internet ads, press kits, print ads, radio commercials, online games.
A censorship of movie advertising, to put it one way. Do we have an equivalent in India?
Flight delay will soon entitle you to ‘cash & care’
Fliers would soon be entitled for cash and care in case their flights are cancelled, delayed or they are denied boarding even when they are holding a confirmed ticket. The aviation industry regulator Directorate General of Civil Aviation (DGCA) has come out with the draft guidelines on obligations of airlines towards passengers if they are inconvenienced.
Once finalised, the obligations on airlines would be incorporated in the existing civil aviation requirements (CAR), the aviation industry rule book for operation.
As per the draft rules, air carriers would have to pay up to Rs 4,000 to passengers if they are denied boarding despite confirmed booking. The airlines would have to offer either alternative flight or refund of air ticket in case flight is cancelled. The passengers would be entitled for meals, refreshment and accommodation in case a flight is delayed.
While most of the European countries have empowered passengers by implementing compensation rules broadly stated under the Montreal Convention, India is yet to implement it.
The proposed guidelines would be applicable for both scheduled and nonscheduled airlines. The new rules will require airlines to inform passengers as much in advance as possible about change of aircraft during journey, stops en route and transfer between the airports during the journey.
Why is India seeking a benchmark for levying penal duties by the West?
It is reported that India has suggested at the WTO that there should be an objective benchmark for countries levying penal duties on imports that originate from countries that provide various subsidies to their exporters.
This benchmark could be linked to the annual average yield on government securities, India has proposed.
Some countries levy stiff countervailing duties on imports from other countries if they feel the host country has subsidised the exports that could undermine its local industry.
Such penal duties are not very common but India is apprehensive that the discount it gives on interest rates on loans to crisis hit exports sectors such as textile, leather and marine products could invite action by importing countries. An objective benchmark would ensure that such action is not arbitrary and excessive.
What explains volatility in oil prices globally?
At one time or the other all of us have wondered about this question. But there were no sure-fire answers coming forth from any quarter.
His thesis is that oil prices are made volatile by the actions of two oil cartels -- the OPEC and the ICE. The former is the producers' cartel and the latter is the traders' cartel.
While a read of the article is a must for each one of you, some excerpts worth our attention include:
The ICE cartel includes Europe's oil majors BP, Shell and Total and the big banks — Goldman Sachs, Morgan Stanley, Society General and Deutsche Bank. Though the Opec cartel still controls 55% of the world's production, and the ICE cartel less than 15%, the price volatility has been dictated by the trading cartel. The Opec oil, having much larger physical volumes, but not active at the exchange, merely follows the Brent Oil price trends at the futures market, in a classic case of the ‘tail wagging the dog'.
OECD stocks during the last 10 years have risen from 840 million barrels to 1,020 million barrels, due to this volatility, despite a 5% drop in consumption.
Over 80 million barrels of oil are being hoarded in super tankers around the world today, as per Frontline which owns the largest tanker fleet worldwide.
Termed famously as the London Loophole, by Senator Feinstein, each barrel of oil is reportedly swapped 20 to 30 times at the ICE Exchange through high-speed computers before hitting the retail trade at substantially higher prices.
Developing nations to have more say in World Bank: Geithner
World Bank members have agreed to pour more capital into the lender and give developing countries a greater voice in running the bank, Treasury Secretary Timothy Geithner said on Sunday.
He also said that the US, which holds the largest voting share in the World Bank at 16.4%, would not seek any increase for itself under a revised voting formula that is to better reflect developing countries’ economic heft.
The World Bank had asked for a capital increase of $3 billion to $5 billion, allocated proportionally among its members.
With hubris; contemptuous, proud
eg: Lalit Modi, the talented but hubristic creator of the IPL, will lose his job today.
Surreptitious interaction or cooperation; Touching someone else's feet with one's own (e.g. under a table) as a means of flirtation
eg: If playing footsie with Ms Mayawati pays off, the UPA would be able to breathe easy as far as numbers go.
In a startling revelation that is bound to unleash a political storm that could even eclipse the IPL controversy temporarily, the UPA government, it is alleged, used the latest phonetapping technology to monitor and tape phone conversations of important leaders within the ruling alliance, in the Congress party, and in the Opposition for routine surveillance as well as to gain an upper hand over rivals at crucial times like the 2008 trust vote.
Among those whose phones were tapped, are the likes of Congress leader Digvijay Singh, Bihar chief minister Nitish Kumar, CPM general secretary Prakash Karat and even NCP chief and Union agriculture minister Sharad Pawar.
The National Technical Research Organisation (NTRO), an agency created specifically to look after technical intelligence gathering after the Kargil war, was used for tapping and recording the conversations. NTRO is monitored by the NSA - National Security Advisor. NSA being directly responsible for the PM, the issue raises questions about the role of the Prime Minister's Office in the operation. It not just brings up legal questions but also highlights ethical issues about using spyware meant for enemies of the State on political rivals and opponents.
A blistering editorial comment in the wake of the torching of Dalit homes by a group of upper-caste Jats in a village in Haryana, which led to the death of a 17-year-old girl and her father:
Not only is it a slap in the face of ‘inclusive growth' and the Constitution's promise of liberal democracy, it is also a searing indictment of the sort of politics practised in India, in which politics focuses on power and pelf, leaving the task of bridging the gap between the reality of a divided, hierarchical society and the ideal of democracy to no one in particular. Since the dominant paradigm of politics continues to be competitive identity management, social fissures are reinforced and more powerful groups, with the collusion of elements within state institutions, often resort to violence against weaker sections who might be seeking to assert themselves.
How is the implementation of the Forest Rights Act faltering?
A must read for those with an eye for detail. But some suggestions made by the article to improve its implementation:
FRA will succeed if government commits to ensure that, the structures of implementation at the central and state levels are strengthened; civil society groups and PRI members are involved and the provision of social audit is built in; funds are allocated to support the verification and recognition of rights; the information system on Forest Rights Act is updated; action is initiated to bring in changes in laws and policies like Wildlife Protection Act, joint forest management (JFM), plantation programmes; and above all implementing agencies become proactive in the implementation process.
What is your take on foreign universities' entry into India?
Are they going to do any good? Is allowing their entry bad in any way? If so, why?
This article from V. Raghunathan offers very good answers for such questions. He identifies four serious concerns raised by our academic community in this respect and goes on to show that barring one, none of the four actually pose any serious problem for the country. Take a look.
Finance & Economy
Yet another committee on small savings?
Faced with another tough decision on deregulating interest rates on small savings instruments, the government is reportedly toying with the idea of appointing a committee.
But already three committees have gone into this aspect and have submitted more or less similar reports. They were headed by R V Gupta back in the 1990s, Y V Reddy and Rakesh Mohan later. All three had come to much the same conclusion: scrap the present anachronistic system of administered interest rates and link interest rates to some market-determined rate. But their reports have all been moth-balled. So, why one more committee?
The Met predicts normal monsoon
The weather office has predicted normal rainfall in the June-September monsoon period, offering hope to the country’s farm sector that was savaged last year by the worst drought in 37 years.
Rainfall is likely to be 98% of the long-term average, the Indian Meteorological Department (IMD) in its first monsoon forecast for the year. Average rainfall for the 1941-90 period is 89 cms.
A good monsoon is vital for crops such as rice, sugar cane, soybeans, sugar, corn, groundnut, pulses and cotton. The drought had resulted in a close to 12% drop in kharif, or summer crop, output in 2009, leading to high food inflation of around 18%. Kharif crops contribute to over 50% of the country’s farm production.
Over 60% of cultivated land in India is still rainfed and even the irrigated regions depend heavily on the summer rains to recharge groundwater levels and key reservoirs ahead of the winter sowing season. In most parts of India, the monsoon accounts for 75-90% of the total annual rainfall.
What is India's interest in joining the FATF - Financial Action Task Force?
India is preparing to join FATF, an inter-government body founded by the G-7 countries in 1989 for developing and promoting national and international policies to combat money laundering and terrorist financing. FATF is currently evaluating India’s preparedness for its membership, which will allow the country to gain access to real-time exchange of information on money laundering and terror financing.
Keen to push through the Civil Liability for Nuclear Damage Bill, the government reiterated its offer to make changes in the proposed legislation, including increasing the liability amount.
The government is now saying that the idea of joining an international convention on nuclear liability got incubated since 1988 when the government began negotiating with the then USSR to set up a nuclear power plant in Kudankulam. The issue has been under the consideration of successive governments. The government maintains that contrary to perception, the Indo-US civil nuclear cooperation deal is not the trigger for the proposed legislation.
Stressing on the need to have a legal framework to protect victims of nuclear accidents, the government argued that the bill would provide “immediate and prompt compensation. This money will be given immediately.” Victims could seek further compensation under tort law.
The Opposition has questioned the manner in which the law does not fix liability on the supplier, limiting it to the operator. In the Indian context, this would mean that only the government or a government-owned company will be liable. It appears that as per international practice liability is on the operator.
Let us await more details on this debate as time progresses.
The Brahmaputra issue with China
Brahmaputra river, which is 2,906-km long, starts in Tibet and weaves through India and then through Bangladesh. The China stretch is 1,625 km, while the next 918 km is in India and the remaining 363 km is in Bangladesh.
The Chinese call it the Tsang Po.
China is building a dam on it in Tibet to generate about 450 MW of electricity. Naturally India is concerned that water flow into India would be affected because of this. But the Chinese side has reportedly assured our Foreign Minister during a recent visit that the construction of the dam is not going to affect water flow in anyway to India as the project is not an irrigation project but a project for generating only power.
Some of the words, phrases and concepts that the article explains very beautifully:
Theories of trade
Theories of division of labour -- NIDL
Dependency in orthodox economic relationships
Explaining these things along the way, he concludes that a deep structural shift is occurring in the world and the slow forward movement in the Doha Development Round is a manifestation of the tectonic changes. Indian negotiators have the opportunity to ride on the crest of the global structural changes if they are able to expand trade in sectors that promote symmetric coupling with the West and encourage slow decoupling where asymmetric trade and investment relationships exist.
Technology Trends - Idiot box to get smart
The idiot box is getting smart. Television makers such as LG, Samsung and Sony are launching internet-capable models that will offer video on demand, access to websites such as YouTube and podcasts in tieup with websites and local content providers.
Within days after rolling out 3D TVs, top television makers are looking to use Web add-ons to differentiate their top-end hi-definition models from droves of flat-panel sets flooding the market.
The industry feels the potential is huge for Net TV due to rising broadband penetration and the craze for infotainment in the country. Another positive is the growing popularity of websites such as YouTube, Picasa and AccuWeather.
Here is a good graphic that gives us a peek into the expected performance of the Monsoons this year. Worth a look.
FTA proposed with Israel
The free trade agreement was proposed by Israel around four years ago. It will cover goods, services as well as investment.
Israel’s tariffs are lower compared to India’s implying that the latter would have to take on steeper tariff reduction commitments. But the country is not apprehensive about a steep increase in imports as Israel’s manufacturing industry is much smaller in size.
India exported goods worth $189 billion in 2008-09 whereas Israel’s exports were only $65 billion, indicating the smaller manufacturing economy of the latter. India-Israel bilateral trade in 2008 was at $4 billion.
The main gains for India is likely to be in the area of technology transfer and joint manufacturing. Israel has cutting edge technology in areas such as bio-tech, nanotechnology, medical equipment, water management & drip-irrigation and solar energy. Other areas where India could gain is in services such as IT and telecom.
Greece deficit worse than feared
Greece's budget gap last year was worse than feared. This news triggered a fresh slide of asset prices in Greece and other debt-choked European countries. The news hurt financial markets’ waning hopes for Greece to bring its swelling national debt under control, and increased pressure on Athens to seek billions of euros of emergency loans from the EU and the International Monetary Fund.
The Greek government posted a budget deficit of € 32.34 billion or 13.6% of gross domestic product in 2009, not the 12.7% which it had reported earlier. The deficit might be revised again, by between 0.3 and 0.5 percentage points of GDP, because of uncertainty about the quality of Greece’s data and accounting procedures.
The incoming socialist government said Greece’s 2009 budget deficit would be twice as big as a previous estimates — and four times EU ceiling.
Research gap left airlines exposed to volcano’s blast
A shutdown of European airspace that cost carriers $1.7 billion following a volcanic eruption in Iceland was exacerbated by a lack of research into the effects of ash on jet engines and overreliance on computer modelling. While the blast was unusually disruptive because of a rare mix of ice and molten rock, together with a wind direction that blew dust to Europe, flight bans would have been shorter with a better understanding of engine tolerances and cloud density.
More than 100,000 flights were cancelled following the April 14 eruption amid concerns that glass-like particles formed when lava was cooled by ice might melt in aircraft engines and clog turbines. European transport ministers took five days to agree that airports could open with the dust still in the air.
Want to know some financial details of the riches football clubs in the world?
This graphic that appeared in today's ET gives a very good picture of it. Interesting. Where do our IPL teams stand in comparison?
An obvious truth
eg: It is not a mutually exclusive choice between use of force and development when it comes to combating Maoists — so said Prime Minister Manmohan Singh, rather, the strategy must have both prongs. This might appear a truism, so apparent as to merit no specific mention.
The loyalty that citizens owe to their country (or subjects to their sovereign)
What is it that the IT raids on IPL and its franchisees are focusing on?
It is all widely known to us all that the IT Department is on the trails of IPL and its franchisees. What exactly could the IPL and its franchisees have done wrong? What is it that the IT Department can hope to find through these raids? Let's look at some excerpts from today's lead stories to get an inkling:
The immediate reason for the survey in Mumbai is to obtain details of a socalled facilitation fee of $80 million connected to the restructuring of the telecast arrangements for the second edition of the IPL held in South Africa.
A report in The Times of India suggested that the $80 million fee was negotiated by Mr Modi without the consent of the governing council of the IPL. The amount was siphoned off to a middleman, the report had suggested.
Under income-tax rules, tax is required to be deducted before making payments to overseas entities and officials had been verifying whether WSG (World Sport Group) had sought the clearance of the tax department to remit the amount.
Some tax experts say since the money was sent from a bank in Singapore, WSG is likely to claim that there was no need to deduct tax as no money was sent from India. But in the recent past, Indian I-T authorities have aggressively tried to tax such payments if it is determined that the income paid to an overseas entity is generated in India. In a number of cross-border tax claims made by Indian tax authorities over the past three years, including the famous multi-billion-dollar tax claim on Vodafone, the nub of the income-tax department case is that the country has a right to claim tax on income generated in India, irrespective of the location where the transaction took place.
Some background information on IPL broadcast deal: In January 2008, WSG and MSM had bought the rights of the IPL for 10 years at a cost of $918 million and an additional $108 million for promoting the event. But a year later, BCCI/IPL served a termination notice to MSM to end its broadcast rights, accusing it of breaching the original contract on several counts. This had resulted in a bitter legal wrangle between MSM and BCCI. In March 2009, just before the IPL moved to South Africa, the deal was renegotiated and BCCI managed to sell the broadcast rights to MSM and WSG for $1.63 billion (Rs 8,200 crore) for nine years. This was the biggest-ever deal in Indian sports history, and is valid till 2017.
A little info on WSG: World Sport Group, a Singapore-based sports marketing, event management and media company, buys sponsorship, marketing, television, digital, team and athlete rights from sporting entities. It in turn sells them to corporates. WSG deals with cricket, football and golf events across Asia. It manages close to 600 days of sports events annually. Apart from BCCI and IPL, WSG works with the Indian Golf Union, Asian Football Confederation, the South Asian Football Federation (SAAF), West Asian Football Federation (WAFF) and Singapore Sports Council. It is headquartered in Singapore.
Power tussle in Mumbai
There is a big battle going on between Tata Power Company and Reliance Infrastructure in Mumbai over power supply and generation. The issue is quite complicated and is not amenable to be told in a few sentences. One should read this news story to comprehend it in full. Take a look.
An excellent editorial comment on the current Gujjar agitation
The current march on Jaipur by members of the Gujjar community came after their demand to freeze government hiring while the reservation issue was sorted out. The whole mess represents the race among social groups to reach the bottom of the pyramid in an attempt to get a share of the reservation pie. A clear consequence of the malaise of political parties envisaging the electorate as competing caste groups.
...In the quota-based patronage system, the Gujjars feel they are losing out. And the agitation is a reminder of the violence that attends on this socio-political process. Some make-shift reprieve may yet be found, but the whole situation posits the need to break the paradigm of competitive identity politics.
Finance & Economy
What are MSS bonds?
We have noted this earlier also. But a recap will not be a waste of effort.
When the central bank purchases dollars, it injects fresh liquidity into the system. To prevent such a flood of rupees created as a result of dollar purchases from pushing up the money supply above the desired level, the RBI then absorbs the rupees by selling government bonds. The bonds used for this purpose are the so-called Market Stabilisation Scheme (MSS) bonds. Right now, their supply with the RBI has dwindled to some Rs 2,700 crore.
How valid is the criticism that financial super regulators will not deliver?
It has become fashionable to poohpooh the idea of unified regulation of the financial sector, citing the example of Britain's Financial Services Authority, which failed to prevent the financial meltdown after the collapse of Lehman Brothers, although it was a single, unified regulator for all banking, insurance, debt, stock and derivative markets in Britain.
This is populism, not analysis. It neglects two factors.
One, finance in Britain was and is globally integrated, whereas regulation was still mainly national and it is only now that substantive efforts are being made for global coordination in the regulation of finance, through the G20 mechanism.
Two, while structure determines what kind of functions it can sustain, it does not guarantee that function will necessarily follow.
An excellent excerpt that explains the concept of securitization and maturity transformation.
Consider a securitised mortgage. A loan is given by a bank to help someone buy a home. The bank now converts the loan into thousands of units and sells these to investors. These investors now have claim to the debt servicing carried out by the borrower. The bank gets its money back upfront and can now lend again to another home loan seeker. At the same time, a perfect maturity transformation takes place, with minimal cost. A bank has short-term, relatively speaking, deposits while its loans will be repaid over a long time. There is thus a mismatch between the maturity of its liabilities (deposits) and the maturity of its assets (loans). Using short-term deposits to finance longterm investment is maturity transformation, a key task of financial intermediation. Securitisation of loans achieves this at minimal cost. The investors who buy the securities into which the loan has been converted know that the bonds would be redeemed only after a long period — the maturity profiles of the asset and the liabilities now match.
Someone who is a detective
eg: The gumshoes also dropped into the offices of the owners of three IPL teams—Deccan Chargers in Hyderabad, Chennai Super Kings in Chennai and Kolkata Knight Riders in Kolkata.
Reckless or malicious behaviour that causes discomfort or annoyance in others; The use of tricks to deceive someone (usually to extract money from them)
eg: The shenanigans surrounding the Indian Premier League (IPL) may be grabbing all the eyeballs, but away from the headlines a little noticed battle has broken out between energy companies belonging to two of India’s largest business houses, the Tatas and the Anil Dhirubhai Ambani Group (ADAG).
The Supreme Court on Monday upheld the conviction and life impris-onment awarded to Manu Sharma, son of senior Congress leader and former Union minister Venod Sharma, in Jessica Lall murder case. The SC also upheld the conviction as well as sentence of 4 years jail term of Vikas Yadav and Amarjeet Singh Gill for destruction of evidence.
Tamilnadu nominates AR Lakshmanan on Mullaperiyar row
Reversing its stand not to participate in the five-member empowered committee constituted by Supreme Court to resolve the long pending dispute on the Mullaperiyar dam with Kerala, Tamil Nadu government on Wednesday nominated former Judge of Supreme Court Justice A. R. Lakshmanan in the committee.
The Supreme Court, while hearing petitions by Tamil Nadu and Kerala governments on the dam issue, had constituted a committee headed by Justice A. S. Anand, former Chief Justice of the Supreme Court, to resolve the dispute.
The committee consisted of two representatives of the Centre, one each from Tamil Nadu and Kerala besides Justice Anand.
Kerala government has already nominated Justice K. T. Thomas, former Supreme Court Judge, as its nominee.
Finance & Economy
Monetary policy review by RBI
The RBI raised the two key policy rates—reverse repo and repo—by 25 basis points each, and left banks with Rs 12,500 crore less to lend with a 25 bps increase in the cash reserve ratio (CRR).
This rate hike is seen as moderate by any standard in the current circumstances. Therefore, most bankers think RBI will have to raise rates as well as increase the CRR in small doses during the year.
Banks borrow from RBI at the repo rate while parking (or lending) surplus funds at the reverse repo rate. After Tuesday’s rate action, the repo and reverse repo rates are 5.25% and 3.75%, respectively. The CRR, which is like a tax on lenders, is the slice of customer deposit that banks have to set aside as cash with RBI. After the 25 bps CRR hike, from 5.75% to 6%, banks will have Rs 12,500 crore less to lend from the fortnight beginning April 24.
RBI began tightening in January when it raised the CRR by 50 bps in two stages. This was followed by the 25 bps increase in repo and reverse repo in March. While RBI has been slower than its counterparts in Australia and Israel in raising rates, it has been quicker in reversing the cycle than the Chinese central bank and monetary authorities in many advanced economies.
What are the extant rules governing sweat equity?
Is the current regime good or bad? And why?
Take a look at this ET editorial on the subject. Well worth a read. Makes a strong case for not just retaining sweat equity; it even calls for a further liberalization.
Is there a caste basis for Indian socialism?
SSA Aiyar emphatically argues and proves that there in fact is. To understand the whole concept a read of his op-ed piece is a must. But an excerpt worth our attention to get a quick peek:
Nehru and Co felt that Indian Brahmin-intellectuals were superior to whites, but also that Indian marwaris and banias were inferior. Their superiority complex on the moral and intellectual plane co-existed with a deep inferiority complex on the business plane. Their solution was to go for central planning. This approach assumed that benevolent planners knew better than producers or consumers what should be produced or consumed. The licence-permit raj asserted that people were best off when they had no power at all to decide what should be produced or consumed — that was best left to the rulers!
Zardari signs bill to clip own wings
Pakistan President Asif Ali Zardari on Monday signed a historic bill seeking amendment in the country's constitution to strip off the sweeping presidential power and strengthen parliamentary democracy.
The 18th Constitutional Amendment Bill was signed at a ceremony attended by Prime Minister Yousaf Raza Gilani, his cabinet members, opposition PML-N Chief Nawaz Sharif and others.
The new law will cut some of the major powers of the President such as appointing the chiefs of the country's three armed forces, dissolving parliament and dismissing a democratically elected government.
The amendment will repeal changes made to the constitution by former military rulers Zia-ul-Haq and Pervez Musharraf to strengthen their power.
An artificial language used for trade between speakers of different languages
eg: ...It has been so since the time he air-dropped himself on to the constituency, and led a typhoon-like campaign that sidelined long-time party workers, relied on electronic campaign ideas and charmed himself into the hearts of youth and women with his flowing hair, pidgin Malayalam and a man-in-a-hurry image.
Adjective: Feeling or caused to feel uneasy and self-conscious
Verb: Cause to be embarrassed; cause to feel self-conscious
eg: Most state police forces would be abashed if there were seven crude bombs found just outside the gates of a cricket stadium where a high-visibility Indian Premier League (IPL) match was being played.
As expected Mr. Shashi Tharoor was asked to put in his papers and he promptly resigned over the IPL row.
The noose around Mr. Modi appears to be fast tightening with the government -- especially the IT Department -- revealing lot of muck about him ranging from his manipulation of land deals in Rajasthan and the existence of a maze of shell companies and offshore entities used to route payments and equity stakes worth hundreds of crores of rupees. The IT Department's report also makes the startling allegation that Mr Modi—through his associates—was ‘involved’ in ‘betting’, while “insider information and outcome fixing of IPL matches were hinted at”.
Want to know more on this sordid saga? Look at page 4 of the ET Mumbai edition.
CK Prahlad is no more
Even as we were taking a Sunday break, came the news that this Management Guru is no more and that he died of an illness of the lungs in the US.
He was 68.
Take a look at this obituary penned by none other than Kumar Manglam Birla on this great management thinker.
More on this on page 8 of the ET Mumbai edition. Recommend a read.
Finance & Economy
On the challenges that a typical central banker faces:
Monetary policy is a notoriously imprecise tool. Moreover, it acts with a long time lag, especially in the Indian scenario where financial markets are fragmented; we still have administered interest rates in some sectors and interest rates on government debt, that sets the floor for all other borrowing, is not exactly freely-determined by market forces.
A very good graphic that discusses the RBI's monetary policy review due tomorrow.
Irda tells postal dept to fall in line, triggers row
The insurance regulator has demanded that the country’s postal department adhere to its norms while selling insurance products, triggering a potentially damaging row between the two and forcing the finance ministry’s intervention.
The postal life insurance has over 15 million policy holders. It offers two life insurance schemes, Postal Life Insurance and Rural Postal life Insurance with a corpus fund of Rs 14,000 crore and Rs 4,000 crore, respectively as on March 2009. All insurance products offered by the DoP are not covered by IRDA’s rules and regulations.
Under the Insurance Act 1938, Section 118 (C), life insurance schemes run by several state governments for their employees and the Postal Life Insurance Scheme of the central government don’t come under the IRDA purview. The insurance regulator is looking to extend its reach.
Quantitative restrictions on imports may be back
India had to remove QRs on over 700 items in 2001 after it lost a case in WTO against the US which had challenged these restrictions on import of large number of industrial and agricultural items.
Under the QR mechanism, a country can impose a restriction on imports up to a limit on items which are sensitive to its domestic industries. For availing this facility, the country is required to have an enabling domestic law.
Now, the country proposes to make good this lacuna by bringing changes in the domestic law enabling it to protect its industries against import surges. The Standing Committee of Parliament has more or less approved a provision in a bill to amend the Foreign Trade (Development and Regulation) Act.
HDFC Bank edges out ICICI as India’s top pvt retail bank
HDFC Bank, the country’s second-largest private bank, has moved to the top of the pile in the retail banking segment, displacing ICICI Bank as the recovery in demand and robust economic growth helped the bank to lend more to customers buying cars, homes and two-wheelers.
How did this come about?
Part of the reason for the surge in retail lending could be because of increasing consumer confidence and rising wages.
Retail banking brings in close to 70% of the revenues for HDFC Bank and constitutes 55% of the asset book. The retail and corporate banking business contributes equally to the profits of the bank.
After 2008-09, ICICI Bank, which was seen as the aggressive face of retail lending in India, changed track and started shrinking its retail loan book. The bank is now focusing only on secured loans having cut down on its loan exposure to unsecured loans. The bank has also pruned its credit cards from a peak of 8.5 million to close to 5 million now. At its peak, ICICI Bank used to disburse over Rs 1,200 crore in auto loans compared with HDFC Bank’s Rs 500 crore.
What exactly is the charge against Goldman Sachs in the SEC prosecution?
The SEC said that in early 2007, as the US housing market teetered, Goldman Sachs created and sold a CDO linked to subprime mortgages without disclosing that hedge fund Paulson & Co helped pick the underlying securities and bet against the vehicle, known as Abacus 2007-AC1.
Very complicated to understand know? In the words of Sudeshna Sen:
It’s all terribly complicated, but simply, SEC says Goldman deliberately sold stuff they set up to fail, to help make profits for John Paulson’s giant hedge fund, which wanted to bet against the subprime mortgage market. Paulson, who made a billion dollars when that product collapsed, and wrote a bestseller as well, is supposed to have helped pick the worst portfolio he could think of, but Goldman didn’t tell unsuspecting buyers this — ABN Amro, now government-owned RBS, took the worst hit of $800 million.
It would be the same if your mutual fund manager, for instance, created a portfolio he knows is full of junk stocks, and then sells it to you while he’s selling it short. Or the dealer in the casino rigs the table to benefit one player.
The firm denies any wrongdoing.
But it will be a long haul for Goldman before it can extricate itself from the current mess.
A very interesting article on the problem of too big to fail
Take a look at this article by Simon Johnson. It explains the problem being posed by banks which are too big to fail.
He goes on to discuss why the current administration's efforts at handling them will not succeed. There is an element of cross-border challenge that cannot be easily handled by legislation in a single country.
A disorderly outburst or tumult
eg: Neither the burps of an unpronounceable volcano in Iceland nor the Kochi kerfuffle are to blame for the latest bug to hit world cricket, but the portent is equally calamitous.