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Another Enron?

 
#1 Another Enron?
07/01/2009 17:02

Anon

http://www.bloomberg.com/apps/news?pid=20601091&sid=aEgDa7rLBUDo&refer=india

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#2 RE: Another Enron?
08/01/2009 00:30

albert to Anon (#1)

How about all of the investment banks? Without support of the government, many of them would go under. Much bigger fraud than Enron, Satyam or Madoff

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#3 RE: Another Enron?
08/01/2009 00:32

Taxman to Anon (#1)

Just remember they have YOUR credit card details, and if this is how the executives behave then the staff, well make your mind up.

Its not the last one either, but others have been a little more 'clever'.

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#4 RE: Another Enron?
08/01/2009 14:25

MS to Taxman (#3)

What a load of tosh! Taxman. Credit card details, I mean Satyam is not just a call centre (even if it were how many credit card details have been leaked so far!). Seriously think before you speak.

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#5 RE: Another Enron?
08/01/2009 14:38

anon to MS (#4)

Taxman - what?!

And albert - how have the investment banks undertaken fraudulent behaviour? Miscalculating risk is not a fraud. Setting up shell companies to take increasingly leveraged positions amounting to trillions of dollars and lying about 3rd party ownership is a major fraud. Not to mention the incorrect accounts that were submitted repeatedly.

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#6 RE: Another Enron?
08/01/2009 15:22

Casio to anon (#5)

I would say the rating companies and CFD insurers are arguably guilty of fraud -

Derry v Peek - "false representation made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false".

In other words, the representor must have lacked an honest belief in the truth of his statement.

The CFD insurers and Rating Agencies must have known their risk models were tosh. Indeed many salesmen in banks were arguably guilty of fraud by the stroke - perpetual 5% default risk on lowest tranche housing debt? Did they really believe in that or similar models that backed up their products?

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#7 RE: Another Enron?
08/01/2009 15:23

Casio to Casio (#6)

* by the SAME stroke

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#8 RE: Another Enron?
09/01/2009 13:37

anon to Casio (#7)

I fully agree with the post by MS above. This idi*t Taxman is nothing more than an arrogant brit who thinks anything/anybody NOT british could be put down at will and that too in a public forum.

I have seen few of his posts and mostly he states the obvious maybe using high-sounding jargons. But then this is no big deal if english is his native language. Just read his 2nd post in article ID 51138 "issues facing banks?" what a load of bull.

He thinks he is an Oracle with much sought-after opinions about everything - from banking collapse in wall street to banana cultivation in costa rica. What he doesn't realise is, he is becoming bit of a joke in this forum - a La ZB. What does this smarta$$ Taxman know about Satyam and its operations or for that matter about the Indian IT sector? I guess his knowledge in this regard is as much as Alistair Darlings's knowledge of the britsh/world economy.

A sincere advice to Taxman - keep your mouth shut for few days, take a deep breath, try to read and UNDERSTAND (as much as your peanut sized brain can grasp) what's happening around you and THEN give some meaningful comments in public forum like this.

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#9 RE: Another Enron?
09/01/2009 14:38

Ferris to anon (#8)

Relax Anon, it's Friday! Although that did make me chuckle.

Don't you just love a nice big over-reaction from a bitter, insecure IT consultant who thinks every comment is racist against him!

You may not understand this analogy, but you sound like a scouser!

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#10 RE: Another Enron?
09/01/2009 14:51

IT Stooge to Ferris (#9)

Anon, I've worked for a company in the past who use Sataym for IT and frankly I found them to be a wee bit rubbish. No business process knowledge just ABAP monkey's. So before you big up Sataym too much sit on the other side of the table and try and get them to produce what you want them to. No offence I'm sure your not one of the bods I've worked with in the past.

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#11 RE: Another Enron?
09/01/2009 17:43

Taxman to IT Stooge (#10)

@Ferris, a scouser indeed :).

I think he is simply one of the Indian IT workers who are waiting with baited breath to see if the US bails out the IT industry. He offers nothing but aggression and spitting the dummy, not a constructive point, never mind they are all like that :).

As for Indian pure play players, who cares, not me.

Im off to cultivate my bananas (via liverpewl).

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#12 RE: Another Enron?
09/01/2009 18:32

PL to Taxman (#11)

Taxman,

Your posts are irritatingly semantically challenged.

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#13 RE: Another Enron?
10/01/2009 11:13

taxman to PL (#12)

@PL - Your correct.

However, it depends what you mean by semantics, as your average IT bod will te;ll you its the meaning of programs or functions, whereasontologies of semantic meaning are used by psychologists.

However I belive you refer to lingustics and 'dynamic turn' as in 'I like cheese' which tells you that I may want to eat cheese, or I may want to hold or indeed keep cheese.

For the above to be semantically correct for our non English readers i would need to use 'I like to eat cheese' to ensure that the statement is semantically correct.

I therefore usually omit this as we tend 'in the real world' to be a little smarter and use implied meaning to read, understand and form opinions and replies.

If you really want to see statements devoid of semantics, then read Socrates.

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#14 RE: Another Enron?
12/01/2009 01:06

UK Bloke to taxman (#13)

@ Taxman

"Many [Indian] firms have become so convinced of their own invincibility that they do not even bother denying irregularities when confronted with the evidence. They simply threaten you."

Analysts say that creative accounting techniques, such as recording revenue ahead of time, booking fictitious sales, manipulating expenses and the disbursal of cash to outside companies in which a group's directors have an interest are commonplace in India.

Looks like its rife dont understand the comment about liverpool mind you, or is that where the IT Bloke who was both angry and blinkered originate from?

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#15 RE: Another Enron?
12/01/2009 16:06

Banker to UK Bloke (#14)

I heard the auditor of Satyam was/is PwC, which happens to be a british firm. Why nobody is highlighting this? Does anybody know what role did this british firm play in this fiasco? I don't mean to defend Satyam's actions. But it takes two to tango.....

Talking of myopic vision, the british firms (e.g. banks) are not far from Satyam in this regard. I work in one such bank so I know what I am talking. Look at yourself before pointing fingers at others.

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#16 RE: Another Enron?
12/01/2009 16:29

what? to Banker (#15)

Ridiculous. PWC is a huge organisation. A simple look on Wikipedia would have made you realise the invalidity of your statement.

"The legal structure of a limited liability partnership is very different to that of a company, and as such the global firm is in fact a collection of member firms, that are run autonomously in their respective jurisdictions. The senior partners of member firms sit on a global board of partners and there is also an 'umbrella' organisation called PricewaterhouseCoopers International Limited, a New York[15]-based company which provides co-ordination. The current global CEO is Samuel DiPiazza."

It's had a presence in India since 1880. It's not like a bunch of Londoners just went over there and started lying about audits.

Also it's still possible that this isn't PWC's fault. All we know at the moment is that Satyam has acted fraudulently.

I'm afraid I don't believe you know what you are talking (sic).

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#17 RE: Another Enron?
12/01/2009 20:54

Anon to what? (#16)

I come from a very small country (less than a million people). PWC surprisgingly has an office there but in effect that office just pays a license to use the name PWC. The main organisation has no control or any real influence over the activities of that autonomous entity. It can disallow the use of its name if it suspects that the office is operating outside the law which is probably so hard to do that it never happens till it is too late.

I believe the only negative impact on PWC UK and US is the negative impact on its reputation. However, my understanding is that it has a better reputation than the 3 major players and as such I can conclude that the damage will be probably be minimal.

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#18 RE: Another Enron?
12/01/2009 22:30

longsight to Anon (#17)

PwC may be a global partnership, but so was Andersen and so was every one of the long-lost accounting Big X names. Not to say that PwC will be brought crashing to earth by Satyam, but this will undoubtedly do long-term damage to the firm's ability to do business in Asia. As a result it is likely to miss out on the high-margin growth opportunities coming out of the downturn and end up overtaken (if not taken over) by its competitors.

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#19 RE: Another Enron?
13/01/2009 16:04

Sparky to Casio (#6)

Casio, I'm intrigued...CFD Insurers? Who on earth insures Contracts for Difference?

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#20 RE: Another Enron?
13/01/2009 16:05

Sparky to Casio (#6)

Casio, I'm intrigued...CFD Insurers? Who on earth insures Contracts for Difference?

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#21 RE: Another Enron?
13/01/2009 16:15

Casio to Sparky (#20)

Sorry Sparky, quite right. Meant CDS (Credit Default Swap) issuers.

I hope you understood the rest of what I said. I personally find it amazing no claims have been brought against these people - although I guess it's just not worth the hassle.

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#22 RE: Another Enron?
13/01/2009 16:54

Sparky to Casio (#21)

Casio, I may be wrong but I think you actually mean CDOs (Collateralised Debt Obligations) seeing as you mentioned tranches. Indeed, in Europe a lot of these structured vehicles comprise of CDS, i.e synthetics.

V difficult to bring a prosecution I'd think. In the good times, investors (typically the hedge funds) that bought the lower tier/toxic/equity tranches enjoyed massive returns with 25% PA being not out order.

I think there was a massive degree of misunderstanding out there about the "what if" scenario and when it all went "tits up" they were virtually impossible to price especially those that contained sub- prime stuff. The rating agencies are certainly going to get flak for this as gthey have looked at the structures seen that it has been insured and then given it a AAA rating

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#23 RE: Another Enron?
13/01/2009 17:49

Sparky to Sparky (#22)

Sparky,

Excuse me if I have the terminology wrong – I know what I know from the media, certainly not an expert.

I think I do mean CDS though. I understood the reason banks could buy so much of this subprime stuff – despite Basel II regulations - was due to the fact they could insure it through CDS’ (issued by AIG etc.). By buying these CDS’ they could record it as AAA debt. Of course the ratio of AAA debt to deposits you are allowed is much higher than the ratio of Sub Prime debt to deposits.

AIG and the other CDS issuers priced based on bullsh*t models (far too low default risk, purely historical in outlook), sold obscene volumes, got bonused hard and waited for it all to unravel.

Yes, no?

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#24 RE: Another Enron?
14/01/2009 11:06

Sparky to Sparky (#23)

In short no.

I still think you are referring to CDOs which are very different to CDS. CDS aren't issued. They serve as essentially insurancde contracts againt the value of their reference entity defaulting. If you own a bond(debt) of say Barclays and the bank subsequently goes bust then the value of the CDS that you purchased (bought protection) will pay out.e.g you own £1m of a Barclays bond and you but a CDS for a period of time to the value of £1m and during that period Barclays goes bust then the seller of the CDS owes you £1m. For that privilage you pay the seller permiums in much the same way you pay insurance premiums on a car.

The higher the likelihood of an entity going bust the higher the price/premium of the CDS.

CDOs on the other hand are investment vehicles backed in many cases by really quite rubbish assets such as sub prime mortgages.

When people stopped paying the mortgage premiums the whole game unravelled. The models no longer worked, it was extremely difficult to get out of the trades as the issuer/structurer wouldn't or couldn't bid it back.

The vast profits made originally had indeed already been paid out in bonus years before the maturity of these structures. The buyers really didn't understand what they had bought...nobody put a gun to their heads to buy them. They were driven by greed and got their fingers well and truely burnt. Much of these purchases were done on huge margins of leverage and when the bubble bust the providers of said leverage wanted their cash back and so the holders had to get it by selling other assets such as stocks, bonds etc thereby exacerbating the crash we've all recently witnessed.

Problem now is...how much more is still out there waiting to be deleveraged/sold. Unfortunately the fat lady is still not ready to begin her song!

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