Inside the world of business
IBRC playing the longer game too
The chief executive of Irish Bank Resolution Corporation has been left looking a little naive by the latest revelations in Paddy McKillen’s epic battle with the Barclays.
Giving evidence this week, McKillen waxed lyrical about his relationship with Mike Aynsley, claiming they speak each week and that Aynsley had rung him only days before to express his full support.
Strange then that McKillen appears to have never sought to mention to Aynsley that he had some €40 million in cash last year following a property disposal. The money was reinvested in Argentina and France rather than used to reduce his his personal borrowings of €300 million with the former Anglo, never mind his companies’ debts of circa €1 billion.
It makes the relationship look more than a little unbalanced and once again raises the question as to whether or not IBRC harbours ambitions to take on Anglo’s mantle of banker to Ireland’s golden circle rather than to just get tax payers’ money back and exit the stage.
In Aynsley’s defence, he does not hold the strongest of hands.
It also emerged last week that the bank is not entirely happy with the security it holds against McKillen’s personal debts and was trying as recently as December to get him to give them more security.
Aynsley’s supporters would no doubt argue that he is playing the longer game – not necessarily out of choice – and believes he will get more back in the long term by playing along with McKillen.
There is some logic to this, but only if there is a safety net – in the form of adequate security – and also a modicum of trust.
Based on last week’s evidence it looks as though Anglo is struggling to the mend the holes in its safety net.
Whether or not McKillen’s failure to disclose his windfall from last year has damaged trust remains to be seen.
London Whale gives JPMorgan Chase that sinking feeling
Bank loses billions of dollars at a secretive unit that has been investing in complex instruments that seem to be poorly understood even within the world of banking.
No it’s not 2008, but JPMorgan Chase in 2012.
Perhaps the biggest irony of JPMorgan boss Jamie Dimon having to fess up to an unexpected loss in the bank’s “synthetic credit portfolio” is that the unit which made the trades was supposedly designed to reduce the risks it faces on its day-to-day business.
Dimon and other JPMorgan executives will find it hard to dismiss the activities of the “chief investment office” in the same way that other banks have laid the blame for massive trading losses at the door of rogue traders.
The London-based unit had made headlines as recently as last month when hedge funds complained that its outsized bets were distorting the market.
The activities of the office, headed up by a trader variously nick-named “the London Whale” and “Voldemort”, couldn’t come at a worse time, not just for JPMorgan but for the entire US banking sector.
Since early 2010 Wall Street has been lobbying against the Volcker rule, named after the former Federal Reserve chairman, which would ban banks from proprietary trading. But it seems unlikely JPMorgan’s trades would have fallen under the remit of Volcker as it is currently framed.
In its own lobbying on the rule, JPMorgan had warned that the hedging activities of its chief investment office would be curtailed and its business damaged.
With JPMorgan now admitting to losses of $2 billion, which could rise considerably as it attempts to unwind its position, Dimon will be hard pressed to argue against an even tougher form of the Volcker rule.
Some things in banking never seem to change.
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