Stock Take

ENDURING PAIN: Germany and the European Central Bank (ECB) have, to quote RBS analyst Harvinder Sian, a very high pain threshold. Short-term bond yields for Spain and Italy have doubled over the last month, while even Germany failed to offload some 40 per cent of a debt issuance auctioned last week.

Despite the growing threat of financial collapse, Germany refuses to countenance euro bonds or a larger role for the ECB, instead stressing the need for future budgetary discipline.

The problem is, as author and Naked Capitalism blogger Yves Smith puts it: “You don’t tell a patient in the throes of a heart attack to lose weight and start jogging. You stabilise him first.” Don’t expect the Germans to capitulate at next week’s EU summit. RBS reckon only “blind panic” – fears that countries are about to exit the euro, or bank runs, or both – will trigger the necessary changes.

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GETTING BY:Spare a thought for ex-AIG chief Hank Greenberg, who is suing the US government for $25 billion (€18.5 billion). The government took a stake of nearly 80 per cent in AIG in 2008 after providing it with an $85 billion loan that kept the company afloat. He cites the Fifth Amendment, saying that private property can't be taken for "public use, without just compensation". The government points out that the alternative was bankruptcy.

“I’ve lost my entire net worth, literally my entire net worth,” Greenberg cried at the time, before adding that he would “get by”. Days before the rescue, the one-time billionaire was complaining that his shares, then worth $100 million, were “virtually worthless”. In reality, he remains a multimillionaire with access to a private jet, an office on Park Avenue and homes in New York. Heart-rending stuff.

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MISSING MONEY: Up to $1.2 billion of customer money in MF Global, which recently filed for bankruptcy, is missing. Just six months earlier, PricewaterhouseCoopers (PwC), MF Global's auditors, praised the firm's "effective internal control over financial reporting".

The company had been fined in 2007 and 2009 for accounting cock-ups. In fact, the regulator had issued more sanctions against the firm than any of its 14 closest peers over the last decade.

If PwC missed the obvious, it wouldn’t be the first time. The US accounting regulator last week reported that it found deficiencies in 28 of 75 audits done by PwC. KPMG made errors in 12 of 54 cases, while Deloitte has also been criticised. Bloomberg’s Jonathan Weil notes that MF Global, with $41 billion of assets, was a “relatively small shop” for PwC, which also audits Goldman Sachs ($949 billion of assets) and JP Morgan ($2.3 trillion).