Latest Entry
- Tim Weber
- 27 Jan 08, 03:50 PM
So that was it: Davos 2008.
This year felt different than the past two or three annual meetings of the World Economic Forum.
Less glitz and glamour, more 'back to business' - and you can read all about it in our.
The good people of Davos are getting their town back. This lunchtime the squads of riot police marched back to their buses and left town, the road blocks are disappearing, the high wire fences and - on step mountain sides - the roles of barbed wire are being dismantled.
I will later post an article about the big themes of this year's forum.
Let me just tell you about the very last session this Sunday, just before lunchtime, because it encapsulates a little bit of what Davos is all about.
Yes, the agenda is packed with hardcore business topics: what risks do companies face; what's the heatmap for mergers and acquisitions; how do central banks try to tackle the current market turmoil.
But it is spiced with sessions that teach you the unexpected. The power of scents, for example, or radical advances in biotechnology.
My favourite session, though, was today. is the conductor of the Boston Philharmonic Orchestra, and he gave a talk about music and leadership.
After all, a conductor may have to control hundreds of musicians and singers.
But what could have been a boring talk about people management, turned out to be the most inspiring 90 minutes I have had for a very long time.
Ben Zander did not tell his audience how to change other people. He told them how they had to change themselves, to become better bosses, teachers, parents, partners, husbands and wifes.
Playing his audience like an instrument, he took them on a tour de force of emotions - exhilaration, hilarity, sadness and deep insight. There was much laughter and there were many tears, from both men and women.
His audience were Davos men and women, bosses of big companies and social entrepreneurs, academics and religious leaders from a whole rainbow of cultural and ethnic backgrounds.
He taught them what he calls the "art of possibility", an approach of positive thinking that - he admitted - might not sit well with the feeling of being in a "downward spiral" of workload and pressure and regulations.
Still, it was hugely inspiring, and fun - not least when he persuaded the audience to participate in an enthusiastic rendition of Schiller's Ode to Joy, from Beethoven's ninth symphony.
Many of the forum's open sessions can be found on the and I hope that Mr Zander's talk will soon be featured there. It would be worth watching.
This is probably the last of our Davos blogs. I hope we gave you a good flavour of what was happening here on the ground.
Until next year!
Recent entries
- Tim Weber
- 27 Jan 08, 08:58 AM
Davos is almost over.
Most proceedings wound down late on Saturday afternoon, with sessions on many heavy-weight topics like the role of central banks in the current financial crisis (with ECB boss Jean-Claude Trichet on the panel), and an from the world's top trade ministers (EU, US, India, Brazil, Australia).
After the sessions participants lingered in the halls and corridors for longer than usual, for one last bout of intense networking, sharing of ideas and swapping of business cards.
But then everybody got ready for some serious partying at the annual Gala soiree on Saturday evening.
Festivities are usually sponsored by one or two countries, and last night it was the turn of France and Turkey to impress the world's movers and shakers.
Soon, the millionaires and billionaires were bobbing along to the stomping rhythm of Turkish pop music.
A bit later, in the main Congress Hall, France got its party under way - keen to drive home the new government's message that "France is on the move".
It was a stunning show.
For entertainers, the World Economic Forum is always a bit of a challenge, because the networking and talking never stops. So when a pianist, a cellist and an opera singer took to the stage for a few arias from French operas, they found it hard to cut through the noise from all the chitter chatter.
But then the show morphed into a breathtaking but very French mix of Cirque du Soleil, break dance, techno music, modern ballet and opera that wowed even the jaded Davos crowd.
The French event managers understood that there is only that much French culture that Davos man and woman are prepared to take.
A group of singers was brought on stage (the women showing off slightly improbable cleavages) that delved deep into the canon of globally popular pop, rock and blues - most of it in English.
It got the Congress Hall dancing and the crowd was still going strong at two o'clock in the morning. I even spotted a notoriously pessimistic economist smiling broadly as he propped up one of the bars.
I was just wondering: when the French singers were belting out AC-DC's "Highway to Hell", were the dancing millionaires thinking about the state of their share portfolios after this wild week on the stock markets?
- Tim Weber
- 26 Jan 08, 02:04 PM
Today's Davos quote of the day comes courtesy of David Rubenstein, co-founder of private equity giant The Carlyle Group, which manages an investment pool worth $75bn.
"We can't really call economies like India or China 'emerging' anymore, and lump them in with countries like Chad. I don't know what to call them, but emerging doesn't fit.
"Anyway, what are Western economies right now? Submerging?"
- Robert Peston
- 26 Jan 08, 08:47 AM
France has one, Switzerland too. The UK has a big'un, Germany numbers two or maybe more, and the US has a veritable epidemic of them.
As if you didn't know, I am talking about banks that have become chronically sick since last summer.
It's why the prevailing mood in Davos is anxiety - or at least among the business leaders and politicians from the wealthy, old economies of Europe and North America.
Among the roll-call of western banking shame, our own Northern Rock humiliation is special.
The damaged banks from the other countries were all terrible lenders, or foolish in the way they invested their capital. That includes Societe Generale, even if it was the victim of deception.
Northern Rock was a disastrously bad borrower, far too dependent on wholesale money markets for the finance needed to provide mortgages.
It was starved of vital sustenance last summer when those wholesale markets closed: its undoing was the crisis of confidence in the financial community precipitated by the disclosure of just how idiotic its international rivals had been as lenders.
Which is why the Rock had to demand succour from the Bank of England - and why it's now on a 拢60bn lifeline provided by the Treasury.
But, make no mistake, for a bank it's as much a sin to take excessive risks as a borrower as it is to do so as a lender. A drying up of access to funding or liquidity will kill a bank just as surely as lending to those who can't repay.
So who's to blame for the Rock debacle? Well, we now have the first official evaluation, in the form of a report by MPs on the cross-party Treasury select committee.
Most at fault, say the MPs, were the Rock's directors for constructing a flawed business model; then the City watchdog, the Financial Services Authority, for failing to spot the flaw in the business model till it was too late; then the Bank of England, for being unimaginative and inflexible in the way it provided funds to the banking market after it seized up.
Few will quibble with that verdict. And it's certainly fashionable to give the FSA a good kicking. That said, it is worth noting that no British bank has been exposed as a lethally poor lender - for which, perhaps, the FSA deserves modest credit.
However it's the select committee's prescriptions for reform that will prove more controversial.
It seeks to address the widely acknowledged holes in the powers of the authorities to cope with a bank that runs into difficulties.
What seems to be required is:
a) the ability by the authorities to obtain more information at an earlier stage from any bank facing trouble;
b) greater powers to direct the offending bank to mend its ways;
c) a system for formally taking control of a bank on the brink of crisis, to quarantine the depositors and take them to safe harbour, while reconstructing or deconstructing the rotten part of the organisation;
d) deposit-protection arrangements that provide comfort to depositors that they can't lose money or access to their money.
The logical place for most of these new functions to go would be the Financial Services Authority - or at least that's what the chancellor thinks, and he'll flesh out his reform proposals in the coming week.
By contrast, the Select Committee is proposing the creation of a new semi-independent financial-stability body that would sit within the Bank of England. It would be run by a re-invented deputy governor of the Bank of England, who would have no direct reporting line to the governor on banking remedial work.
The committee has put the chancellor in a tricky position. He can't really ignore the verdict of a Labour-controlled committee. But presumably he can't simply abandon most of his own ideas.
The big issues here are whether the creation of this new bit of the Bank of England would lead to excessive duplication of costs and functions with the FSA - and whether it will enhance or undermine effective decision-making.
One committee recommendation would, I think, be impossible for the chancellor to adopt. That would be for the banks to "pre-fund" a new deposit-protection scheme or make substantial cash injections into it.
Although it is vital that we all have total confidence in the robustness of such a scheme, right now none of our banks have a surplus of spare cash.
It may be better to take an IOU from the banks than to drain them of liquidity at a moment when they're feeling the pinch - and the economy is paying a price in the form of reduced availability of credit.
- Tim Weber
- 26 Jan 08, 01:34 AM
At the World Economic Forum one can usually gauge the popularity of a party by checking how many truly rich and famous people crowd the room early on.
I don't mean pre-arranged attendances, like Naomi Campbell's appearance at a party on Wednesday night. Very nice, no doubt, but somewhat fake.
Once again, the Google party on Friday night appears to have won the popularity stakes. Let's not engage in name dropping, but the line-up of top executives in the room was truly impressive. Nearly everybody who was anything (by Davos standards) seemed to be there - with the exception of Bill Gates, but then the Microsoft boss had his own party - running in parallel - to attend to.
At which point, I would ask you to spare a thought for Mr Gates, Google founders Sergey Brin and Larry Page, and Michael Dell, the boss of Dell Computers.
They, and a few others, are the true corporate stars. They are heroes to the movers and shakers coming to this mountain village during the last week of January.
No, no, I mean it. On Wednesday I felt sorry for Mr Dell, as he tried for 20 minutes to get more than five metres into a room - unable to move for photographers and people trying to shake his hand.
Tonight, the Google boys, Sergey and Larry, were similarly beleaguered at their very own party - ok, I admit it, for a handshake and a few words I joined the crush.
And Bill Gates doesn't fare any better.
Here in Davos, we are all supposed to wear our name badges all the time. They are dangling just above our chests. It's good for security, and helps to spot people you want to talk to. But a few of the famous (but not yet recognisable) participants are trying to dodge this.
I spotted the latest dotcom wunderkind, Facebook founder Mark Zuckerberg, attending the Google party without wearing his badge. The strategy seemed to work, not least because Mr Zuckerberg, at 23, looks as if he's just about to graduate from High School.
And when I saw Larry Page earlier in the day in the Congress Centre, a strategically placed button somewhat obscured the name on his badge.
It may seem naff, but it buys them at least a few hours of normality. Sort of.
- Tim Weber
- 25 Jan 08, 12:40 PM
Yes, I agree, it's easy to get cynical about this.
Take a large stage, some of the world's richest business people, sprinkle with politicians, a highly photogenic Queen and a rockstar, and you have a perfect photo opportunity for a good cause, but no real result.
Were there real commitments, clear deliverables when UN Secretary General Ban Ki-moon, Bono, UK Prime Minister Gordon Brown, Microsoft founder Bill Gates, Jordan's Queen Rania, Cisco boss John Chambers and Nigerian president Umaru Musa Yar'Adua and many others took to the stage, holding up a poster with a ""?
No, of course not.
What we got was yet another timetable, to address the fact that the world had failed to meet its original timetable.
And yet.
Bill Gates made the observation that business people know all about benchmarks, and how to meet them. And that the Millennium Development Goals on poverty and hunger, education, gender equality, health, the environment etc were the world's benchmarks.
Ten years ago, Mr Gates started to get involved in development and aid projects.
In this time, he has achieved more than many official aid organisations - not least by setting clear targets, and applying a business mind to the at times haphazard aid industry.
Now he and other top bosses want to draw in more companies. Use their expertise and their money to help achieve these goals.
Will we see companies step forward at the proposed London summit and outline how they will take the lead in helping the world's "bottom one billion people"? Will we get a realistic action plan?
We have to wait and see. Of course, it could fail and we'd be left with nothing but colourful pictures in shiny magazines extolling the "corporate social responsibility" of various companies.
But speaking to business leaders here in Davos, I get the the feeling that many really want to make a difference.
Maybe I've been hoodwinked.
Bono certainly believes it is for real.
He extolled the contribution of Bill Gates, who from this summer will work full-time on the good causes of the Bill and Melinda Gates foundation.
"This man has changed the world before," said Bono, "now he's set to change it once again."
- Robert Peston
- 25 Jan 08, 11:45 AM
This is a transcript of a piece I did for the 6pm News on Radio 4 on Thursday.
At the world economic forum, the mob of bankers are agog at the Societe Generale debacle.
They simply don't understand how a trader earning around 拢70,000 a year was able to evade SocGen's risk controls - and bet the entire bank that stock markets in Europe would rise this year.
His ability to vaporise the bank's capital represents a massive dereliction of SocGen's responsibility to look after the savings of its millions of customers.
Regulators around the world will be seeking reassurance that the same flaw does not exist in their banks.
What also intrigues the Davos crowd is the extent to which SocGen's actions in reversing its rogue traders' bets on Monday and Tuesday were responsible for the sharp drop in European stock markets.
This matters - because that fall in share prices in part spurred the US Federal Reserve to announce its emergency cut in interest rates on Tuesday.
Sir Howard Davies, the director of the London School of Economics and a former central banker, explains.
Davies told me: "Did the Fed know this was going to happen? If it didn't know it was going to happen, then why on earth wasn't it told? And if it did know it was going to happen could it not then see that it was likely to have an unusual effect on the market - and then was it reacting to a false market in a sense because SocGen was dumping a lot of shares on to the market?"
The notion that this rogue trader could have bounced the most powerful central bank in the world into a savage interest rate cut is alarming, to put it mildly.
- Evan Davis
- 25 Jan 08, 11:20 AM
Is there such a thing as a "cathartic recession"? A recession that purges the demons of excess from the economy and punishes the badly-behaved for their sins?
I'm not sure there is. But I unwittingly found myself in an argument with the former US Treasury Secretary Larry Summers on the subject.
I asked him whether central banks should be modest about how much they can hope to achieve and whether they might sometimes have to accept that economies slowdown.
My question was motivated by a sense that there's a limit to the imbalances an economy can accumulate to keep itself running at a good speed. (You can hear the interview on Saturday's Today programme).
Maybe I shouldn't have raised the topic.
He certainly put me in my place, arguing that the very question betrayed an adherence to one of most cruel, fatalistic and mistaken beliefs of the economics profession. It was the view held in 1929 he said.
He's once of the brightest economists around, Larry Summers and one of the most articulate. (His forthright views have got into trouble on more than one occasion). And his views need to be taken seriously.
As it happens, I don't actually believe in cathartic recessions, but his vociferous denunciation of them invites us to think carefully about exactly what it is we should believe of the economy at the end of a bubble. We might be right to tolerate a slowdown as part of a process of sensible rebalancing while also having to avoid a deep recession that wastes the potential of the population and needlessly makes people poorer than they should be.
My view is that the correction of imbalances probably involves some slowdown and we should live with that. Larry Summers' view (I think) is that we should not talk that way, because it will soon lead us into tolerating or creating the needless cathartic recession.
After he had finished with me, Professor Summers said he had been inspired by my questions (the sheer stupidity of them) to give a talk on this very subject.
It's good to know that my interview was so inspirational.
- Robert Peston
- 25 Jan 08, 10:00 AM
I can't escape Northern Rock even in Davos. What I've discovered is that the term sheet for the massive bond issue has now been discussed with potential issuers.
Much is still up for negotiation. But as of this moment the Treasury is insisting that it will have a claim on the assets of a rescued Northern Rock, were the new special purpose vehicle that would hold billions of the Rock's assets and would issue the Government-backed bonds to suffer a calamitous fall in the value of its assets and be unable to pay bondholders their due.
Or to put it in more technical terms, the term sheet provides that the Treasury would have full secured recourse against all other assets of the Rock in the event that the Treasury guarantee is called.
What does that mean?
Well it provides extra comfort to the taxpayer. In the event that the value of assets in the special purpose vehicle - dubbed 'crapco' by one of the putative rescuers - were not sufficient to repay bondholders, the taxpayer guarantee would only kick in after the reconstructed and rescued Northern Rock distributed all its capital to said bondholders.
I'd better translate further. It means that if crapco suffered a capital shortfall, it could wipe out the new equity to be provided by any successful rescuer of the Rock, such as Virgin, Olivant and/or the existing shareholders, inter alia.
So the Bond issue - which could be as big as 拢35bn or 拢40bn - isn't quite the gift that the supposed rescuers may have believed.
Also rules provide that holders of more than 15% of the shares of a bank must normally provide a comfort letter backing the bank 鈥 for the full amount of its liabilities.
So presumably the would-be Rock rescuers will take great pains to construct their participation in the Rock to ensure that only their Rock capital could be called were crapco's assets to be vaporised. Sir Richard Branson won't want to hand over a few jumbo jets to bondholders, in the event of a crash in the housing market.
It all rather suggests to me that the partial nationalisation of the Rock favoured by Gordon Brown may yet stumble and fall - so it's not quite 100% certain that nationalisation will be avoided.
- Tim Weber
- 25 Jan 08, 07:21 AM
Davos is a small town in a narrow valley. There are two main roads running in parallel, one called Tal (i.e. Valley) lower down, the other called Promenade (with all the swanky hotels and shops) further up.
The World Economic Forum, with its 2,500 participants and more than 10,000 support staff, brings a lot of traffic and never more so than this year.
For one week, Davos becomes a showcase for the latest in luxury four-wheel drive cars. Mercedes R class jostle with Audi Quattros, BMW X5s, Volkswagen Tuaregs and Porsche Cayennes for road space. It is a sight to make the heart of any German car industry boss beat faster.
The drawback, of course, is that the roads of Davos just can't take it.
Driving from venue to venue, whether you use one of the WEF's own shuttle buses or have the luxury of a VIP car, feels more like sitting in a parking lot.
Yesterday, I was late for a lunch session, stuck like many other participants in heavy traffic.
So I have resolved to stick close to the Congress Centre today. It won't lessen the traffic, but it will help keep me sane.
In case you wonder, the heavy use of all these cars with their big engines does not sit well with the professed green ambitions of many of the forum's participants.
One chief executive, who told me at length about his profound concerns for the environment, is using a large American SUV while in Davos. It's certainly eyecatching, with its chunky design and 6 litre engine.
How is the car, I asked the driver. Well, he said, I've driven 234 kilometres so far, and used up 70 litres of fuel.
Ouch.
- Tim Weber
- 25 Jan 08, 06:46 AM
One of the big talking points this year in Davos are investment funds controlled by governments - the .
Many of the richer folks here, though, are not fazed. As two friends from the hedge fund and private equity industry greet each other, one jokes: "Aren't you yourself a sovereign wealth fund?"
The answer: "Personally - yes!"
But enough of the banter among equals.
During a breakfast meeting I overheard this delicious exchange between the (Californian) spouses of two forum participants.
"Which airline did you fly in on?," one asks innocently.
"Oh no, we came in our private jet," the other replies.
- Tim Weber
- 24 Jan 08, 07:53 PM
A few years ago, the WEF organisers tried to ban ties - in the hope of recreating the more informal atmosphere of the forum's early days.
It was not a complete success, but most participants (except politicians and people invited to sit on panels) have indeed discarded their ties.
Maybe it is time to issue another ban - of blackberries and similar mobile e-mail devices.
These phones are often dubbed crackberries, because of their addictive nature.
And indeed, in past years many blackberry owners reminded me of smokers, rushing out at the end of a session, not to grab a cigarette but to check their e-mail.
This year, however, I have seen unprecedented numbers of people during sessions who were constantly checking their e-mail and the latest headlines.
Now, there are two possible explanations for all this: either they can't live without their e-mail fix anymore, or the turbulence on the stock markets compels them to stay always in touch.
It's made easy by the fact that Davos is definitely the mountain valley with the best mobile phone reception in the world, at least during the forum's annual meeting.
But make no mistake, should the WEF organisers try to ban blackberries during sessions, they'll have a fight at their hands.
Watch out for rioting millionaires.
- Evan Davis
- 24 Jan 08, 01:57 PM
Sometimes it's the "Davos fringe" which provides the most stimulating discussions.
To that end, I just enjoyed a constructive 15 minute diversion from the sub-prime blues, chatting with an American anthropologist called about love. (You should be able to hear it on Friday's Today programme).
She is addressing a couple of sessions here and her message is essentially that love is very important to all of us. But she's not echoing the usual John Lennon type calls for world leaders to reject war, and find love and peace. She has performed brain scans on lovers of different types to see what effect it has on us.
I won't tell you everything she has to say, except the two practical tips she offered me. First, don't get married in the first euphoric phase of a romantic attachment 鈥 wait for the love to settle down. And secondly, once it has settled down, to keep it alive do novel things together and don't let it become routine.
As we recorded our conversation on a rather unromantic sofa in one of the lobbies, I noticed that people sitting nearby were listening in.
John Lennon would probably have been pleased.
- Tim Weber
- 24 Jan 08, 09:46 AM
It was an early start for more than 200 people here at the World Economic Forum, but the room was packed with people who wanted to hear rockstar and anti-poverty campaigner Bono, and the former US vice president, Nobel laureate and global warming campaigner Al Gore.
You can
"If anybody sees my band, please don鈥檛 tell them that I鈥檝e been up this early," joked Bono.
It was not just celebrity that drew the audience, the topic was weighty as well - actually, it was a tad pretentious. Mr Gore and Bono promised to discuss a "unified earth theory: combining solutions to extreme poverty and the climate crisis".
In other words: can we fight extreme poverty without raising global consumption to levels that totally wreck our world?
In a fashion, Mr Gore and Bono did have an answer. 鈥淭he climate crisis is unfolding more rapidly than the most pessimistic assumptions,鈥 warned Mr Gore. Within a few years the polar ice caps could disappear completely during the summer months, and any formula of success would have to include the marriage of fighting both extreme poverty and climate change.
The link works both ways: a richer developing world consumes more resources, said Bono, but 鈥渢he brunt of this climate crisis will be focused on the people in the developing world鈥. Rising sea levels would make it impossible to create the extra agricultural areas needed to feed a richer world.
And he complained that the media were losing interest in global poverty.
鈥淚f you were to say: 10 million kids are going to die because of climate change, you鈥檇 read about this. Well, they are going to die next year, because of extreme poverty.鈥
Both Mr Gore and Bono have been discussing these issues since last October, bringing together aid experts and climate scientists in a series of 8 sessions and workshops.
So while they have identified the issue, and sort of have identified an answer, they are still short of a solution.
Al Gore once again called for a revenue neutral way of putting a price on the cost of carbon, where the negative impact of carbon is added to its price, and the tax revenue is used to release money elsewhere.
Bono, for his part, demanded an 鈥渁daptation fund鈥, programmes that would provide 鈥渟ocial protection for farmers and prepares them for floods鈥. Education was the second tool, he said, because 鈥減roviding people with a chance鈥 was the best albeit 鈥渃ounter-intuitive way of controlling the growth of population鈥.
But was that the promised 鈥渦nified earth theory鈥?
It wasn鈥檛, but it certainly was a first move to broaden our approach both to poverty and climate change.
And it would not be easy, said Bono.
鈥淚f you have blue suede shoes with a large carbon footprint like a rock band, then it鈥檚 difficult,鈥 said Bono, examining his own use of carbon.
鈥淚 had [Al Gore] around my home, and it鈥檚 like meeting an Irish priest in the supermarket and starting to confess your sins.鈥
鈥淔ather, I鈥檓 not just a noise polluter, but a diesel sucking, methane producing, Gulfstream flying sinner.鈥
鈥淎nd Father Al asks me: 鈥榃ill you try to kick the habit, my son?鈥欌
鈥淎nd I say: oil has been good to me鈥 articulated trailers when we are on tour, using oil products like hair gel鈥︹
Then Bono got serious. 鈥淕oing cold turkey on carbon emissions is actually a bit dangerous.鈥
鈥淚 do remember the unemployment in Ireland in the 1970s. Throwing away the prosperity that we are enjoying is more dangerous than we think.鈥
Sure, at the end of the 75 minute debate, we didn鈥檛 get a solution. But the audience got plenty to think about.
- Robert Peston
- 24 Jan 08, 08:50 AM
Only one thing will be discussed here in Davos today: the alleged fraud by a trader at which has cost the French bank 鈧4.9bn, or 拢3.7bn.
I feel slightly sick thinking about it, as I sit surrounded by snow-capped peaks. The sheer scale of the loss is overpowering.
It takes the crisis in the global banking markets into a whole new area.
So here are the questions:
1) Did it take place in London, where SocGen has a big presence?
2) Is the loss related to mis-valuation of structured finance products, abuse of what is known as the "mark-to-model" approach to assessing the value of stuff like collateralised debt obligations?
Funnily enough, there were strong rumours at a big bank's party last night that there was a nasty lurking in the French banking system.
I wonder whether this debacle will add to or lessen the unusually strong mood of anti-Americanism here, which is particularly conspicuous among continental bankers and politicians.
Many of their banks are reeling from losses on investments linked to sub-prime - and they blame Wall Street for manufacturing and selling this poison.
I have to say that there is a plausible counter-argument, which is that at least some of the fault lies with the foolish German and French bankers who bought the toxic stuff.
Rather than simply whinge about the excesses of Anglo-American financial capitalism, the Franco-German contingent might ask why their own banks were so easily seduced into buying securities whose intrinsic risks they plainly did not comprehend.
UPDATE 09:05
Well London and Wall Street may well be able to breathe a sigh of relief, in that it looks as though the great financial centres are not implicated at all in the SocGen scandale.
The alleged fraud took place in Paris, and - in SocGen's words - was carried out in "plain vanilla futures hedging on European equity market indices". So there was no connection to CDOs or structured finance.
SocGen says that a single trader - who had "in-depth" knowledge of the group's control procedures having previously been employed in an administrative role - concealed massive trading positions built up over 2007 and 2008 through "a scheme of elaborate fictitious transactions".
In other words, its significance is in showing the vulnerability of a mighty bank to the mischief-making of a single rogue trader. It鈥檚 eerily reminiscent of the Barings disaster of the early 1990s - which was supposed to have prompted all banks to put in place better checks and controls on the activities of their trading desks.
UPDATE 12:11
Bankers in Davos are saying three things about the fleecing of Soc Gen:
1) They don't understand it. For a trader in "plain vanilla" index futures to exceed his limits to that extent should be impossible, given the controls that exist in most banks.
2) The Americans, Germans and Brits, all of whom have seen crises at their local banks, are unattractively relieved that the French have joined the international roll call of shame.
3). There is a widespread fear that other horrors are lurking in Europe's banking system - and a wish that the Europeans follow the example of the Americans by 鈥榝essing up to their mistakes as soon as possible.
As Mervyn King, the Bank of England Governor, said earlier this week, the financial system can't be healed till the severity of its illness is fully disclosed.
- Tim Weber
- 24 Jan 08, 05:50 AM
I'm looking forward to a breakfast session this morning that either will turn out to be really exciting - or just a lot of hot air.
This is at stake: It's great to help lots of people in developing countries out of poverty. But as they get richer, they start to consume more. And that means more pollution, more pressure on global resources. Anybody mention climate change?
Yes, on a balance sheet there's an easy solution. The rich countries just have to consume less. In real life, though, we can count ourselves lucky if some people may swap their gas guzzling SUV for a slightly smaller model.
So this morning the rockstar and anti-poverty campaigner Bono, and the former US vice president, Nobel laureate and global warming campaigner Al Gore will get together and debate how to square the circle.
Can we end poverty without wrecking our planet?
The title of their session: a unified earth theory: combining solutions to extreme poverty and the climate crisis.
I鈥檒l keep you posted how they get on.
- Tim Weber
- 24 Jan 08, 12:03 AM
Davos is all about meeting people.
The best meetings, though, are not necessarily with the rich and powerful.
Tonight I met two young men who are inspiring.
Johann Olav Koss is the chief executive of , an organisation based in Canada. His organisation is active in Africa, the Middle East, South Asia and the region devastated by the Tsunami three years ago. His teams go into these countries and help traumatised children to learn to play.
Adults teaching a child how to play? It may sound daft, but it is vital work.
Child soldiers in Africa that have laid down their weapons have gone through hell - and once they are back in civil society, many of them are aggressive, don't know how to play, are deeply disturbed.
Right to Play sends in trainers that help local volunteers learn the right skills, so that they can get traumatised children involved in team sports. Aggression is channelled, the rules of sport help the children to learn boundaries, a society is helped on the road to recovery.
Or take Van Jones. He is the founder of .
He lobbied for and helped to draw up legislation that has just been passed by the US Congress and signed by President Bush.
A section of the law provides $125m of funding to create what Van calls "green collar jobs".
"Urban youths" - in the UK we would call them inner city youths - will be taught the skills they need to work in green industries. That should help them get secure jobs that can't be outsourced.
It helps to fight poverty and drugs, and saves the environment.
The WEF has given Van the title "Young Global Leader" (the young global leaders, by the way, are themselves an interesting bunch; many of them run multimillion dollar operations with thousands of employees).
If Van can pull off his vision, he definitely deserves the title.
Both are participants here at the Forum, and talking to them is just as (or even more) inspiring as being able to walk up to Michael Dell and ask him a question.
- Evan Davis
- 23 Jan 08, 11:35 PM
I only arrived in Davos a few hours ago, but I've had three conversations and they've all ended up coming back to the same kinds of issues 鈥 protectionism and free trade, economic nationalism and the shift of economic power in the world.
If you'll forgive the name-dropping, two of those conversations involved George Soros and Henry Kissinger, who I actually spoke to before I arrived. (You can hear Soros online and Dr Kissinger will be broadcast on Thursday's Today programme).
But my not-very-representative sample of three conversations is clearly not altogether off-agenda, because I notice that David Cameron is here this evening, giving a speech on the subject as well.
"The heroes will be those who held their nerve and stood up for free trade" is his line, (while commending John McCain for doing that in the US election campaign).
It is not surprising the issue of trade has come up.
First, the US election has displayed some signs of gentle (or not so gentle) economic nationalism.
Secondly, it is 鈥 as you might have noticed - an interesting time in the world economy, and there might be a temptation for countries to retreat into the language and diplomacy of "looking after their own workers".
It might make sense at a selfish level for individual nations to put up trade barriers - although few economists would concede even that 鈥 but it rarely makes sense for the whole world to look after their own workers, because what we gain by protecting our workers, we lose by others protecting theirs.
Anyway, I expect the general issue of America's response to the rise of the emerging economic powers to absorb quite a few people here.
I'm not going to suggest it will dominate the Davos coffee-bar conversations of the investment bankers and private equity guys, but it does have a resonance at the moment.
- Tim Weber
- 23 Jan 08, 06:11 PM
The Davos quote of the day comes from Cheng Siwei, vice chairman of the Standing Committee of China's National People's Congress, and thus a communist (well, in a Chinese kind of way).
In one of the many discussions about the state of the global economy, several Americans called on Chinese consumers to spend more, to make up for the downturn in the United States. After all, China's savings rate stands at 50%, the US savings rate is in single digits.
Persuading the Chinese to flock to the shops would be tricky, said Mr Cheng: "The Chinese save today鈥檚 spending for tomorrow, and the Americans spend tomorrow鈥檚 saving today."
Touch茅. The whole room collapsed in laughter and applause.
- Tim Weber
- 23 Jan 08, 02:02 PM
A short while ago, wandering through the bustling congress centre, I ran into Marc Benioff, the chief executive of software-as-a-service firm , a company that expect to hit a revenue target of $1bn this year.
Marc was just being interviewed by Robert Scoble, the and extraordinaire.
Robert was filming Marc not with a big video camera but a small Nokia mobile phone, that sent a live video stream of the interview to his website. So far, so ambitious. Now comes the stunner. While he was doing the interview, Robert saw live on his phone screen the comments and questions posted by his viewers.
Just to illustrate how it works: When Marc pulled me into the conversation, within half a minute Robert had live on his screen a reader's query about the 大象传媒's video-on-demand policy. Robert asked me the question straight away, and as we continued talking about the mobile phone industry and video on the web, more 大象传媒-related queries piled up.
Now that's what I call interactive television! Is it scaleable? Probably not. If the 大象传媒 were to do the same for an interview on say the Ten o'clock news, we'd probably be swamped by a deluge of questions.
But it clearly shows how the media landscape is changing and how quickly technology is developing. Even two months ago this would not have been possible.
Oh - there's still one drawback: The phone's battery allows for about 25 minutes of video streaming. Still, it was very impressive.
- Tim Weber
- 23 Jan 08, 09:30 AM
"Boy, do we have a lot to talk about," were the opening words of Michael Elliott, editor of Time International and chair of the session on the state of the global economy.
So what did we hear? To sum it up in a few words: the bears are loose.
In financial market speak, bears are economic pessimists.
And this morning, nearly every speaker was deeply concerned about the state of the global economy.
We won't see a global recession, everybody agreed, but if the panellists were right, then the United States and - to a lesser extent - Europe are in for a really rough ride.
The world's poor, meanwhile, will have to brace themselves for sharply rising food prices. Good news for farmers, not so good news for the rest of the developing world.
Hold on to your seats.
- Tim Weber
- 23 Jan 08, 07:28 AM
Can you make millionaires queue?
Of course you can. Long lines formed inside the Davos Congress Centre this morning, because for the first 45 minutes of the day the computer system that allows participants to sign up for sessions had crashed.
And if you can't sign up, you could miss your chance to reserve a space in one of the more eagerly sought-after events. Like Thursday's breakfast with Al Gore and Bono to discuss a "unified earth theory".
As a result everybody had to queue at one of the few sign-up desks and do it face-to-face. But there were no grumbles, only banter and comparing of notes on which sessions might turn out to be the most interesting.
In a few minutes the first sessions begin, and I will attend "Update 2008: Economics".
The past three or four years, the panel of five usually featured four optimists, and for a bit of balance one bear, a certified economic pessimist.
This year, not one but two bears are sitting on the panel, Morgan Stanley's Stephen Roach and Nouriel Roubini.
Are the organisers trying to tell us something about the state of the economy?
Update:
There was a simple reason why the sign-up system fell over: too much demand.
During the first three minutes, there were 1,200 attempts to log on to the mobile sign-up system. That equates to nearly half of all participants trying to get their sessions sorted first thing in the morning (although some people tried to log on several times, of course).
- Tim Weber
- 22 Jan 08, 08:26 PM
It's snowing in Davos. As the first delegates arrived this afternoon the town was barely visible, hidden behind clouds and swirling snow.
But it's not the winter wonderland that's keeping the attention of the forum's participants. It's the economy, and the .
Everywhere phones and blackberries started ringing to alert stunned business leaders to the dramatic events.
At this evening's welcome reception, there was talk of little else.
For many, this is a difficult call: Should they be back in their offices in Wall Street, the City or Frankfurt to help sort out the mess, or would it make more sense to stay here, and have a good think and discuss how bad things are, how to sort them out - or how to survive them.
One session on Wednesday night is called "Just in case ... " and top executives will discuss what they can do to shelter their businesses should the global economy really head for a nasty recession.
It may well be worth attending. Just in case.
- Tim Weber
- 18 Jan 08, 05:32 PM
Welcome to our second ever blog from the World Economic Forum in Davos. This year my fellow bloggers will be the 大象传媒鈥檚 business editor Robert Peston, our economics editor Evan Davis, and 大象传媒 business presenter Declan Curry.
We want to give you a good feel for what鈥檚 happening at this annual meeting of the world鈥檚 movers and shakers: the big stories; the mood music, and what it鈥檚 like when 2,000 top business leaders and politicians pack into a narrow valley in the Swiss Alps.
This annual meeting of the World Economic Forum may well be less glitzy and glamorous than in previous years - but it will be one of the more interesting.
A year ago many economists in Davos were oozing economic confidence. Yes, there were a few wrinkles here or there, but the global 鈥淕oldilocks economy鈥 鈥 neither too hot nor too cold 鈥 was set to continue on its upward path.
Twelve months on we have a credit crunch and the economic train is close to derailing. Banks are poring over their books to track down assets that have gone bad; governments worry about a possible banking crisis; and bosses whisper the 鈥渞鈥 word 鈥 recession 鈥 and wonder whether financial markets will continue to provide their companies with much-needed credit.
But are things really that bad? Here in Davos we will hear from plenty of companies that are set for growth, and meet technology pioneers at the cutting edge of innovation. We will also find out how whether global leaders have strategies to tackle the economic and political volatility.
And we鈥檒l have some fun watching the world鈥檚 most powerful networkers in action.
Join us here on our Davos blog 鈥 and check out our . Compare them to the blog and we did in 2007.
And don鈥檛 miss out on the , which tracks Davos blog posts from around the world.
It will be fun.
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