CAMBRIDGE, Mass.
IT’S not easy being gray.
For the first time ever, getting out of a car is no picnic. My back is hunched. And I’m holding on to handrails as I lurch upstairs.
I’m 45. But I feel decades older because I’m wearing an Age Gain Now Empathy System, developed by researchers at the Massachusetts Institute of Technology. Agnes, they call it.
At first glance, it may look like a mere souped-up jumpsuit. A helmet, attached by cords to a pelvic harness, cramps my neck and spine. Yellow-paned goggles muddy my vision. Plastic bands, running from the harness to each arm, clip my wingspan. Compression knee bands discourage bending. Plastic shoes, with uneven Styrofoam pads for soles, throw off my center of gravity. Layers of surgical gloves make me all thumbs.
The age-empathy suit comes from the M.I.T. AgeLab, where researchers designed Agnes to help product designers and marketers better understand older adults and create innovative products for them. Many industries have traditionally shied away from openly marketing to people 65 and older, viewing them as an unfashionable demographic group that might doom their product with young and hip spenders. But now that Americans are living longer and more actively, a number of companies are recognizing the staying power of the mature market.
“Aging is a multidisciplinary phenomenon, and it requires new tools to look at,” Joseph F. Coughlin, director of AgeLab, tells me, encumbered and fatigued after trying to conduct a round of interviews while wearing Agnes. Viewed through yellow goggles, the bright colors of Professor Coughlin’s bow tie appear dim. “Agnes is one of those tools,” he says.
AgeLab, like a handful of other research centers at universities and companies around the country, develops technologies to help older adults maintain their health, independence and quality of life. Companies come here to understand their target audience or to have their products, policies and services studied.
Often, visitors learn hard truths at AgeLab: many older adults don’t like products, like big-button phones, that telegraph agedness. “The reality is such that you can’t build an old man’s product, because a young man won’t buy it and an old man won’t buy it,” Professor Coughlin says.
The idea is to help companies design and sell age-friendly products — with customizable font size, say, or sound speed — much the way they did with environmentally friendly products. That means offering enticing features and packaging to appeal to a certain demographic without alienating other consumer groups. Baked potato chips are just one example of products that appeal to everybody but skew toward older people. Toothpastes that promise whitening or gum health are another.
Researchers at AgeLab are studying the stress levels of older adults who operate a hands-free parallel-parking system developed by Ford Motor. Although this ultrasonic-assisted system may make backing up easier for older adults who can’t turn their necks to the same degree they once did, the car’s features — like blind-spot detection and a voice-activated audio system — are intended to appeal to all drivers who enjoy smart technology.
“With any luck, if I am successful,” Professor Coughlin says, “retailers won’t know they are putting things on the shelves for older adults.”
THE first of about 76 million baby boomers in the United States turned 65 in January. They are looking forward to a life expectancy that is higher than that of any previous generation.
The number of people 65 and older is expected to more than double worldwide, to about 1.5 billion by 2050 from 523 million last year, according to estimates from the United Nations. That means people 65 and over will soon outnumber children under 5 for the first time ever. As a consequence, many people may have to defer their retirement — or never entirely retire — in order to maintain sustainable incomes.
Many economists view such an exploding population of seventy- and eighty-somethings not as an asset, but as a looming budget crisis. After all, by one estimate, treating dementia worldwide already costs more than $600 billion annually.
“No other force is likely to shape the future of national economic health, public finances and policy making,” analysts at Standard & Poor’s wrote in a recent report, “as the irreversible rate at which the world’s population is aging.”
Saturday, February 5, 2011
Treasury 10-Year Yield Reaches a Nine-Month High as Recovery Builds Steam
Treasuries tumbled, pushing 10-year yields to the highest since May, as an unexpected drop in the jobless rate and data showing growth by factories and service industries fueled bets the economic recovery is gaining steam.
Thirty-year yields had the biggest weekly increase since October as manufacturing also accelerated in Europe and China, making higher-yielding assets more attractive. The gap between U.S. 2- and 10-year yields reached the widest in almost a year as U.S. employers added jobs for a fourth month. The Treasury will auction $72 billion in notes and bonds next week.
“In context with the other data we’ve seen, the employment number is consistent with the idea of recovery -- net net, it’s taken as a bearish signal,” said Carl Lantz, head of interest- rate strategy in New York at Credit Suisse Group AG, one of 20 primary dealers that trade with the Federal Reserve. “The market probably won’t be able to catch its breath until we get through the auction process. Demand will be fairly strong.”
The benchmark 10-year note yield climbed 31 basis points to 3.63 percent yesterday in New York, from 3.32 percent on Jan. 28, according to BGCantor Market Data. It was the biggest weekly gain since Dec. 10. A basis point is 0.01 percentage point. The yield touched 3.66 percent yesterday, the highest since May 4.
The price of the 2.625 percent security maturing in November 2020 dropped 2 15/32, or $24.69 per $1,000 face amount, to 91 3/4.
Thirty-year bond yields advanced 20 basis points to 4.73 percent, the biggest jump since the five days ended Oct. 15. They touched 4.74 percent yesterday, the highest level since April 15. Two-year yields increased 21 basis points to reach 0.74 percent in the biggest rise since June 5, 2009.
Yield Spread
The yield gap between 2- and 10-year Treasuries widened to as much as 291 basis points, the most since Feb. 23, 2010.
Treasuries fell yesterday as the jobless rate decreased for a second month, Labor Department data showed. A Bloomberg survey had forecast it would rise to 9.5 percent, from 9.4 percent in December. Employers added 36,000 jobs, less than predicted, as storms swept the nation. It was the smallest increase in four months, the data showed.
“The weather distortions are so great that it’s hard to really extract any information about the strength of the labor market,” Gary Pollack, who helps oversee $12 billion as head of fixed-income trading at Deutsche Bank AG’s Private Wealth Management unit in New York, said yesterday.
Growth in Services
The jobs report came a day after data from the Institute for Supply Management showed U.S. service industries, which account for 90 percent of the U.S. economy, grew in January at the fastest pace since 2005. The ISM’s index of non- manufacturing businesses rose to 59.4, from December’s 57.1, the Tempe, Arizona-based group said.
A separate ISM factory index for the U.S. increased last month the most since 2004, the Tempe, Arizona-based group said on Feb. 1. Manufacturing in the 17-nation euro region, the U.K. and China also expanded, other reports that day showed.
Treasuries have lost 1.2 percent this year, according the Bank of America Merrill Lynch Treasury Master index. The Standard & Poor’s 500 Index has gained 4.2 percent.
“The overall tone of economic data has been positive, and the market has been acknowledging that,” said Thomas Simons, a government-debt economist in New York at primary dealer Jefferies Group Inc. “It’s still not a tremendously satisfying pace of recovery, but things are moving right along.”
Not Enough Growth
The Fed is unlikely to raise interest rates for at least 12 months because the U.S. economy isn’t generating enough growth to lower unemployment, Pacific Investment Management Co.’sBill Gross said yesterday in a radio interview on “Bloomberg Surveillance” with Tom Keene.
The central bank would probably like to see the economy adding at least 200,000 jobs a month before considering rate increases, said Newport Beach, California-based Gross, manager of the world’s biggest bond fund. Policy makers have held the benchmark interest rate near zero since December 2008.
Fed Chairman Ben S. Bernanke said in a speech on Feb. 3 in Washington the nation needs to see faster job growth for a sufficient time before policy makers can be assured the economic recovery has taken hold.
The central bank bought $27.8 billion in U.S. debt this week, part of a $600 billion program to spur the economy. While Bernanke said in his speech that growth will pick up this year and the Fed’s purchases of Treasuries are “providing significant support to job creation and the economy,” he gave no indication whether he’ll maintain or adjust monetary stimulus after the asset buying-program ends in June.
The difference between yields on 10-year notes and Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the securities, widened to 2.36 percentage points from a 2010 low of 1.47 in August.
The Treasury will auction $32 billion of 3-year notes, $24 billion of 10-year debt and $16 billion of 30-year bonds next week in daily sales that begin Feb. 8.
Thirty-year yields had the biggest weekly increase since October as manufacturing also accelerated in Europe and China, making higher-yielding assets more attractive. The gap between U.S. 2- and 10-year yields reached the widest in almost a year as U.S. employers added jobs for a fourth month. The Treasury will auction $72 billion in notes and bonds next week.
“In context with the other data we’ve seen, the employment number is consistent with the idea of recovery -- net net, it’s taken as a bearish signal,” said Carl Lantz, head of interest- rate strategy in New York at Credit Suisse Group AG, one of 20 primary dealers that trade with the Federal Reserve. “The market probably won’t be able to catch its breath until we get through the auction process. Demand will be fairly strong.”
The benchmark 10-year note yield climbed 31 basis points to 3.63 percent yesterday in New York, from 3.32 percent on Jan. 28, according to BGCantor Market Data. It was the biggest weekly gain since Dec. 10. A basis point is 0.01 percentage point. The yield touched 3.66 percent yesterday, the highest since May 4.
The price of the 2.625 percent security maturing in November 2020 dropped 2 15/32, or $24.69 per $1,000 face amount, to 91 3/4.
Thirty-year bond yields advanced 20 basis points to 4.73 percent, the biggest jump since the five days ended Oct. 15. They touched 4.74 percent yesterday, the highest level since April 15. Two-year yields increased 21 basis points to reach 0.74 percent in the biggest rise since June 5, 2009.
Yield Spread
The yield gap between 2- and 10-year Treasuries widened to as much as 291 basis points, the most since Feb. 23, 2010.
Treasuries fell yesterday as the jobless rate decreased for a second month, Labor Department data showed. A Bloomberg survey had forecast it would rise to 9.5 percent, from 9.4 percent in December. Employers added 36,000 jobs, less than predicted, as storms swept the nation. It was the smallest increase in four months, the data showed.
“The weather distortions are so great that it’s hard to really extract any information about the strength of the labor market,” Gary Pollack, who helps oversee $12 billion as head of fixed-income trading at Deutsche Bank AG’s Private Wealth Management unit in New York, said yesterday.
Growth in Services
The jobs report came a day after data from the Institute for Supply Management showed U.S. service industries, which account for 90 percent of the U.S. economy, grew in January at the fastest pace since 2005. The ISM’s index of non- manufacturing businesses rose to 59.4, from December’s 57.1, the Tempe, Arizona-based group said.
A separate ISM factory index for the U.S. increased last month the most since 2004, the Tempe, Arizona-based group said on Feb. 1. Manufacturing in the 17-nation euro region, the U.K. and China also expanded, other reports that day showed.
Treasuries have lost 1.2 percent this year, according the Bank of America Merrill Lynch Treasury Master index. The Standard & Poor’s 500 Index has gained 4.2 percent.
“The overall tone of economic data has been positive, and the market has been acknowledging that,” said Thomas Simons, a government-debt economist in New York at primary dealer Jefferies Group Inc. “It’s still not a tremendously satisfying pace of recovery, but things are moving right along.”
Not Enough Growth
The Fed is unlikely to raise interest rates for at least 12 months because the U.S. economy isn’t generating enough growth to lower unemployment, Pacific Investment Management Co.’sBill Gross said yesterday in a radio interview on “Bloomberg Surveillance” with Tom Keene.
The central bank would probably like to see the economy adding at least 200,000 jobs a month before considering rate increases, said Newport Beach, California-based Gross, manager of the world’s biggest bond fund. Policy makers have held the benchmark interest rate near zero since December 2008.
Fed Chairman Ben S. Bernanke said in a speech on Feb. 3 in Washington the nation needs to see faster job growth for a sufficient time before policy makers can be assured the economic recovery has taken hold.
The central bank bought $27.8 billion in U.S. debt this week, part of a $600 billion program to spur the economy. While Bernanke said in his speech that growth will pick up this year and the Fed’s purchases of Treasuries are “providing significant support to job creation and the economy,” he gave no indication whether he’ll maintain or adjust monetary stimulus after the asset buying-program ends in June.
The difference between yields on 10-year notes and Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the securities, widened to 2.36 percentage points from a 2010 low of 1.47 in August.
The Treasury will auction $32 billion of 3-year notes, $24 billion of 10-year debt and $16 billion of 30-year bonds next week in daily sales that begin Feb. 8.
Friday, February 4, 2011
Afghans resist IMF pressure to sell off bank
The International Monetary Fund wants Afghanistan to wind down and sell off Kabul Bank to stabilise the financial system, according to the governor of the country’s central bank.
Afghan officials fear, however, that any move to place the country’s largest bank into receivership may trigger renewed panic in the banking sector, which was rocked by Kabul Bank’s near-collapse amid corruption allegations five months ago.
The scandal at the bank, in which a coterie of businessmen and politicians took out huge loans, has become an emblem of the crony capitalism that has flourished in Afghanistan since the fall of the Taliban in 2001.
A protracted dispute over the lender’s fate could complicate attempts by donors to boost aid flows to shore up the government of Hamid Karzai, president, against a spreading insurgency, while further straining its ties with the west.
The central bank, which took over management of Kabul Bank after removing its top executives in September, believes it can nurse the lender back to health by working to recover assets from a loan book it values at $579m.
Abdul Qadir Fitrat, central bank governor, said he had secured commitments to return $315m of loans and was confident the bank could return to profitability by the end of this year and find a buyer by 2014.
“We tell them [the IMF] that we can achieve this without going into receivership, because we have now devised a rehabilitation plan,” Mr Fitrat told the Financial Times. “But they say no, we should do it through receivership.”
The IMF believes that placing the bank into receivership would represent the quickest and most effective option for resolving the scandal, officials in Kabul said.
The disagreement has emerged as a sticking point in Afghanistan’s attempts to regain the support of the fund, which was on the verge of signing a new support agreement when the Kabul Bank scandal erupted five months ago.
Afghanistan is keen to conclude a new deal, since many donor countries only provide budget support to governments with the fund’s seal of approval. An IMF delegation from Washington is due to arrive in Kabul this month.
Mr Fitrat was confident of signing a new agreement. “Once we negotiate I think everybody will agree, and I think our IMF colleagues will also understand our position,” Mr Fitrat said.
An IMF spokesman confirmed that a team would be visiting Afghanistan shortly to continue discussions on a possible fund-supported programme. “In this context, the authorities and the IMF will be discussing possible measures to reinforce the country’s financial system and a course of action with regard to Kabul Bank,” he said.
The IMF is expected to seek Afghanistan’s proposals for financing the money it has committed to shoring up the bank, perhaps by issuing debt. The cost of keeping it afloat is estimated to run into hundreds of millions of dollars.
The scandal widened this week when a series of media reports named prominent reformers in Mr Karzai’s government as among politicians who benefited from payments designed to buy their silence over illicit dealings at the bank.
Omar Zakhilwal, the finance minister, urged anti-corruption authorities to launch an investigation into the allegations against him on Wednesday. He and the other officials named in the reports deny wrongdoing.
Afghan officials fear, however, that any move to place the country’s largest bank into receivership may trigger renewed panic in the banking sector, which was rocked by Kabul Bank’s near-collapse amid corruption allegations five months ago.
The scandal at the bank, in which a coterie of businessmen and politicians took out huge loans, has become an emblem of the crony capitalism that has flourished in Afghanistan since the fall of the Taliban in 2001.
A protracted dispute over the lender’s fate could complicate attempts by donors to boost aid flows to shore up the government of Hamid Karzai, president, against a spreading insurgency, while further straining its ties with the west.
The central bank, which took over management of Kabul Bank after removing its top executives in September, believes it can nurse the lender back to health by working to recover assets from a loan book it values at $579m.
Abdul Qadir Fitrat, central bank governor, said he had secured commitments to return $315m of loans and was confident the bank could return to profitability by the end of this year and find a buyer by 2014.
“We tell them [the IMF] that we can achieve this without going into receivership, because we have now devised a rehabilitation plan,” Mr Fitrat told the Financial Times. “But they say no, we should do it through receivership.”
The IMF believes that placing the bank into receivership would represent the quickest and most effective option for resolving the scandal, officials in Kabul said.
The disagreement has emerged as a sticking point in Afghanistan’s attempts to regain the support of the fund, which was on the verge of signing a new support agreement when the Kabul Bank scandal erupted five months ago.
Afghanistan is keen to conclude a new deal, since many donor countries only provide budget support to governments with the fund’s seal of approval. An IMF delegation from Washington is due to arrive in Kabul this month.
Mr Fitrat was confident of signing a new agreement. “Once we negotiate I think everybody will agree, and I think our IMF colleagues will also understand our position,” Mr Fitrat said.
An IMF spokesman confirmed that a team would be visiting Afghanistan shortly to continue discussions on a possible fund-supported programme. “In this context, the authorities and the IMF will be discussing possible measures to reinforce the country’s financial system and a course of action with regard to Kabul Bank,” he said.
The IMF is expected to seek Afghanistan’s proposals for financing the money it has committed to shoring up the bank, perhaps by issuing debt. The cost of keeping it afloat is estimated to run into hundreds of millions of dollars.
The scandal widened this week when a series of media reports named prominent reformers in Mr Karzai’s government as among politicians who benefited from payments designed to buy their silence over illicit dealings at the bank.
Omar Zakhilwal, the finance minister, urged anti-corruption authorities to launch an investigation into the allegations against him on Wednesday. He and the other officials named in the reports deny wrongdoing.
Egyptian Riots Add Pressure on OPEC as Crude Exceeds $100: Energy Markets
OPEC is under pressure from consumers to boost supply as most of the world’s benchmark crudes surpass $100 a barrel amid political unrest in North Africa and the Middle East.
Oil prices are high enough to “derail” the global economic recovery, Fatih Birol of the International Energy Agency said this week. Saudi Arabian Oil Minister Ali al-Naimi said last week prices nearer $75 would be “appropriate.” Goldman Sachs Group Inc. says the Organization of Petroleum Exporting Countries has already raised output.
“OPEC needs to put in more barrels this year, given how strong demand has been,” said Amrita Sen, a commodity analyst at Barclays Capital in London. “Above $100 there would be a bit more urgency to increase their volumes, because at the end of the day what they want is more stability.”
Riots in Egypt that have led to concern of disruption to shipments through the Suez Canal sent North Sea Brent above $100 a barrel for the first time since October 2008 this week. Six of the world’s 10 most-used oil price markers, including Nigeria’s Bonny Light, Malaysia’s Tapis, Indonesia’s Minas and Louisiana’s Heavy Sweet and Light Sweet grades, have breached three digits, stoking speculation governments will struggle to contain inflation as economies recover from the recession.
‘Calm the Market’
“Naimi has announced they’re thinking of production increases; there will be some production increases,” Christof Ruehl, chief economist at BP Plc, Europe’s second-biggest company, said in an interview with Bloomberg Television on Feb. 2. “If markets are getting very worried about the political situation in the Middle East that could even foster production increases by OPEC to calm the market down.”
The world’s energy bill as a share of the economy will return to the 9 percent level of the 1980s, when oil costs tipped consuming nations into a recession, should crude advance to $115 a barrel this year, Bank of America Merrill Lynch said in a Jan. 25 research report.
Twelve European nations, recuperating from last year’s sovereign debt crisis, already face record gasoline prices, including taxes, European Commission data on Bloomberg shows.
Brent crude dropped $1.90 to $99.86 a barrel on the ICE Futures Europe exchange in London as of 5:19 p.m. local time. It reached $103.37 during yesterday’s trade, the highest level in 28 months. West Texas Intermediate fell as much as 2.3 percent to $88.45 on the New York Mercantile Exchange after a U.S. government report showed that the economy added fewer jobs in January than economists forecast.
Derail Economy
“Just before the turmoil in Egypt we already had very high prices as a result of strong demand growth expectations for the next year,” Birol, the chief economist of the Paris-based IEA, which has advised energy-consuming nations since 1974, said in a Feb. 2 interview with Bloomberg Television. “The turmoil in Egypt has been a trigger. Brent over $100 is a risk to derail the economic recovery.”
The Suez Canal and the adjacent Suez-Mediterranean Pipeline have remained open throughout the Egyptian unrest, carrying about 2 million barrels a day, or 2.5 percent of world oil production, according to Goldman Sachs. Even before the unrest the links weren’t operating at full capacity which is about double this amount.
A halt of 1 million barrels a day or more would trigger a response from OPEC, according to the group’s Secretary-General Abdalla El-Badri. “If we see a real shortage we will have to act,” he told reporters in London on Jan. 31. “But I don’t think this will happen.”
The 11 OPEC members subject to production quotas pumped 26.85 million barrels a day last month, the most since it announced supply cuts in late 2008. The group accounts for 40 percent of global supply.
Curbing Rally
Saudi Arabia, the largest member, may already be seeking to curb the oil rally. State-run Saudi Aramco on Feb. 2 cut prices for its March crude sales to Asia, its biggest market, contrary to the expectations of five refiners surveyed the previous day by Bloomberg News.
OPEC is due to meet on June 2 to review its daily quota of 24.845 million barrels, which it’s currently exceeding by about 2 million barrels, according to data compiled by Bloomberg. Most OPEC ministers will also gather in Riyadh, Saudi Arabia, on Feb. 22 for a meeting of the International Energy Forum.
While OPEC has left its quota unchanged at seven consecutive meetings, global inventory levels suggest the group is raising output, Goldman Sachs said in a report on Jan. 24. The group’s effective spare capacity, which excludes Iraq, Nigeria and Venezuela, dropped below 5 million barrels a day in December, the first time in two years, according to a Jan. 18 IEA report. Stockpiles held by companies in the most developed economies were at 2.742 billion barrels in November, close to the top of their five-year range, it said.
‘No Shortage’
Plentiful supplies make any production increase unnecessary, according to Shokri Ghanem, chairman of Libya’s National Oil Corp. “We don’t feel there is a shortage in the market,” he said in a Feb. 3 Bloomberg Television interview.
The political turmoil in the region started in Tunisia with the Jan. 14 ouster of President Zine El Abidine Ben Ali has spread to Yemen, where thousands of demonstrators gathered yesterday in the capital and police used tear gas in the port city of Aden. More violence may occur in Egypt today after Friday prayers.
Any escalation of the crisis in Egypt would require Middle East producers to divert Suez shipments on a longer route that avoids the canal, rather than increase supply, according to Edward Morse, Credit Suisse AG’s head of commodities research. Additional barrels aren’t needed because demand will slacken as winter ends in the Northern Hemisphere.
‘Dangerous Time’
“This is a particularly dangerous time to open the taps,” Morse said in an interview in London on Feb. 1. “This is not a supply disruption. It just means that flows that would have occurred now occur in a more expensive way and take longer to get where they’re going.”
Rising demand means an extra 300,000 barrels a day is needed from OPEC to stem oil’s advance, Bank of America Merrill Lynch said on Jan. 25. JPMorgan Chase & Co. said that any premium caused by events in Egypt has already dissipated, and that $100 oil reflects levels of supply versus demand.
Rather than damping oil’s rally, additional OPEC exports may signal that demand is recovering faster than anticipated and that spare supply will shrink, according to Goldman Sachs.
Higher production “ultimately accelerates the draw on OPEC spare capacity,” analysts led by Jeff Currie in London wrote on Jan. 24. This may indicate “the market may already have moved into the second stage of its cyclical recovery to a structural bull market,” they said.
The four benchmark crudes that haven’t risen above $100 a barrel are WTI and Mars blend in the U.S., Oman and Murban grades in the Middle East.
Oil prices are high enough to “derail” the global economic recovery, Fatih Birol of the International Energy Agency said this week. Saudi Arabian Oil Minister Ali al-Naimi said last week prices nearer $75 would be “appropriate.” Goldman Sachs Group Inc. says the Organization of Petroleum Exporting Countries has already raised output.
“OPEC needs to put in more barrels this year, given how strong demand has been,” said Amrita Sen, a commodity analyst at Barclays Capital in London. “Above $100 there would be a bit more urgency to increase their volumes, because at the end of the day what they want is more stability.”
Riots in Egypt that have led to concern of disruption to shipments through the Suez Canal sent North Sea Brent above $100 a barrel for the first time since October 2008 this week. Six of the world’s 10 most-used oil price markers, including Nigeria’s Bonny Light, Malaysia’s Tapis, Indonesia’s Minas and Louisiana’s Heavy Sweet and Light Sweet grades, have breached three digits, stoking speculation governments will struggle to contain inflation as economies recover from the recession.
‘Calm the Market’
“Naimi has announced they’re thinking of production increases; there will be some production increases,” Christof Ruehl, chief economist at BP Plc, Europe’s second-biggest company, said in an interview with Bloomberg Television on Feb. 2. “If markets are getting very worried about the political situation in the Middle East that could even foster production increases by OPEC to calm the market down.”
The world’s energy bill as a share of the economy will return to the 9 percent level of the 1980s, when oil costs tipped consuming nations into a recession, should crude advance to $115 a barrel this year, Bank of America Merrill Lynch said in a Jan. 25 research report.
Twelve European nations, recuperating from last year’s sovereign debt crisis, already face record gasoline prices, including taxes, European Commission data on Bloomberg shows.
Brent crude dropped $1.90 to $99.86 a barrel on the ICE Futures Europe exchange in London as of 5:19 p.m. local time. It reached $103.37 during yesterday’s trade, the highest level in 28 months. West Texas Intermediate fell as much as 2.3 percent to $88.45 on the New York Mercantile Exchange after a U.S. government report showed that the economy added fewer jobs in January than economists forecast.
Derail Economy
“Just before the turmoil in Egypt we already had very high prices as a result of strong demand growth expectations for the next year,” Birol, the chief economist of the Paris-based IEA, which has advised energy-consuming nations since 1974, said in a Feb. 2 interview with Bloomberg Television. “The turmoil in Egypt has been a trigger. Brent over $100 is a risk to derail the economic recovery.”
The Suez Canal and the adjacent Suez-Mediterranean Pipeline have remained open throughout the Egyptian unrest, carrying about 2 million barrels a day, or 2.5 percent of world oil production, according to Goldman Sachs. Even before the unrest the links weren’t operating at full capacity which is about double this amount.
A halt of 1 million barrels a day or more would trigger a response from OPEC, according to the group’s Secretary-General Abdalla El-Badri. “If we see a real shortage we will have to act,” he told reporters in London on Jan. 31. “But I don’t think this will happen.”
The 11 OPEC members subject to production quotas pumped 26.85 million barrels a day last month, the most since it announced supply cuts in late 2008. The group accounts for 40 percent of global supply.
Curbing Rally
Saudi Arabia, the largest member, may already be seeking to curb the oil rally. State-run Saudi Aramco on Feb. 2 cut prices for its March crude sales to Asia, its biggest market, contrary to the expectations of five refiners surveyed the previous day by Bloomberg News.
OPEC is due to meet on June 2 to review its daily quota of 24.845 million barrels, which it’s currently exceeding by about 2 million barrels, according to data compiled by Bloomberg. Most OPEC ministers will also gather in Riyadh, Saudi Arabia, on Feb. 22 for a meeting of the International Energy Forum.
While OPEC has left its quota unchanged at seven consecutive meetings, global inventory levels suggest the group is raising output, Goldman Sachs said in a report on Jan. 24. The group’s effective spare capacity, which excludes Iraq, Nigeria and Venezuela, dropped below 5 million barrels a day in December, the first time in two years, according to a Jan. 18 IEA report. Stockpiles held by companies in the most developed economies were at 2.742 billion barrels in November, close to the top of their five-year range, it said.
‘No Shortage’
Plentiful supplies make any production increase unnecessary, according to Shokri Ghanem, chairman of Libya’s National Oil Corp. “We don’t feel there is a shortage in the market,” he said in a Feb. 3 Bloomberg Television interview.
The political turmoil in the region started in Tunisia with the Jan. 14 ouster of President Zine El Abidine Ben Ali has spread to Yemen, where thousands of demonstrators gathered yesterday in the capital and police used tear gas in the port city of Aden. More violence may occur in Egypt today after Friday prayers.
Any escalation of the crisis in Egypt would require Middle East producers to divert Suez shipments on a longer route that avoids the canal, rather than increase supply, according to Edward Morse, Credit Suisse AG’s head of commodities research. Additional barrels aren’t needed because demand will slacken as winter ends in the Northern Hemisphere.
‘Dangerous Time’
“This is a particularly dangerous time to open the taps,” Morse said in an interview in London on Feb. 1. “This is not a supply disruption. It just means that flows that would have occurred now occur in a more expensive way and take longer to get where they’re going.”
Rising demand means an extra 300,000 barrels a day is needed from OPEC to stem oil’s advance, Bank of America Merrill Lynch said on Jan. 25. JPMorgan Chase & Co. said that any premium caused by events in Egypt has already dissipated, and that $100 oil reflects levels of supply versus demand.
Rather than damping oil’s rally, additional OPEC exports may signal that demand is recovering faster than anticipated and that spare supply will shrink, according to Goldman Sachs.
Higher production “ultimately accelerates the draw on OPEC spare capacity,” analysts led by Jeff Currie in London wrote on Jan. 24. This may indicate “the market may already have moved into the second stage of its cyclical recovery to a structural bull market,” they said.
The four benchmark crudes that haven’t risen above $100 a barrel are WTI and Mars blend in the U.S., Oman and Murban grades in the Middle East.
Singh Says India Needs to Slow Accelerating Inflation With `Great Urgency'
Prime Minister Manmohan Singh said India needs to urgently contain prices, that are rising at the fastest pace among major economies in Asia, signaling the government may withdraw fiscal stimulus.
“Inflation is something, which needs to be tackled with great urgency,” Singh said, addressing a meeting of government officials in New Delhi. The Indian economy “has been on a high growth trajectory, but inflation poses a serious threat to the growth momentum.”
Singh’s Finance Minister Pranab Mukherjee may increase taxes when he presents the government’s budget on Feb. 28, aligning fiscal policy with the central bank’s move to raise its policy rates, said Namrata Padhye, an economist at IDBI Gilts Ltd. Rising demand for Hero Honda Motors Ltd.’s motorcycles and Hindustan Unilever Ltd.’s soaps has fueled inflation, which averaged more than 9 percent last year.
“The monetary and the fiscal policy has to be on the same footing to control inflation,” said Mumbai-based Padhye. “The government will need to do its bit by way of fully rolling back fiscal stimulus measures as the monetary policy tries to curb demand.”
Governor Duvvuri Subbarao raised the benchmark repurchase rate by a quarter-point to 6.5 percent on Jan. 25 and urged the government to take steps to control spending on subsidies that is adding to inflation.
The “challenge to effective management of inflation by monetary policy arises from the persistence of a large fiscal deficit,” Subbarao said in a Jan. 25 statement. “While subsidies may contribute in the short term to keeping supply- side inflationary pressures in check, they may more than offset this benefit by adding to aggregate demand.”
Milk, Meat, Eggs
India’s benchmark wholesale-price inflation rate advanced 8.43 percent in December from 7.48 percent in the previous month, the biggest jump in ten months, due to higher costs of food and oil. The recent spurt in prices has been driven by an increase in the prices of vegetables, fruits, milk, meat, eggs and fish, Singh said.
The yield on the most-traded 8.13 percent bond due in September 2022 rose 3 basis points to 8.22 percent at 1:06 p.m. today, after rising 19 basis points since January. The Bombay Stock Exchange’s Sensitive Index fell 1.24 percent today and the rupee was little changed at 45.63 against the dollar.
Inflation may also rise as companies including Indian Oil Corp., the biggest state-run oil refiner, and rivals raise prices. Higher raw material costs will make Videocon Industries Ltd., India’s biggest consumer electronics maker, increase refrigerator and air conditioner prices by 2 percent, Shekhar Jyoti, chief operating officer of the company’s electronics and appliances division, said in December.
‘Lasting Solution’
Prime Minister Singh today said India will need to increase the production of commodities to meet rising domestic consumption, driven by higher incomes.
“The lasting solution for food price inflation lies in increasing agricultural productivity and production not only of cereals but also of pulses, oilseeds, vegetables and fruits, and augmenting the supply of milk and milk products, poultry, meat and fish,” he said.
Finance Minister Mukherjee, in his last budget increased the excise tax rate on manufacturers to 10 percent from 8 percent. It stood at 12 percent before the global financial crisis. He kept the service tax at 10 percent.
“Inflation is something, which needs to be tackled with great urgency,” Singh said, addressing a meeting of government officials in New Delhi. The Indian economy “has been on a high growth trajectory, but inflation poses a serious threat to the growth momentum.”
Singh’s Finance Minister Pranab Mukherjee may increase taxes when he presents the government’s budget on Feb. 28, aligning fiscal policy with the central bank’s move to raise its policy rates, said Namrata Padhye, an economist at IDBI Gilts Ltd. Rising demand for Hero Honda Motors Ltd.’s motorcycles and Hindustan Unilever Ltd.’s soaps has fueled inflation, which averaged more than 9 percent last year.
“The monetary and the fiscal policy has to be on the same footing to control inflation,” said Mumbai-based Padhye. “The government will need to do its bit by way of fully rolling back fiscal stimulus measures as the monetary policy tries to curb demand.”
Governor Duvvuri Subbarao raised the benchmark repurchase rate by a quarter-point to 6.5 percent on Jan. 25 and urged the government to take steps to control spending on subsidies that is adding to inflation.
The “challenge to effective management of inflation by monetary policy arises from the persistence of a large fiscal deficit,” Subbarao said in a Jan. 25 statement. “While subsidies may contribute in the short term to keeping supply- side inflationary pressures in check, they may more than offset this benefit by adding to aggregate demand.”
Milk, Meat, Eggs
India’s benchmark wholesale-price inflation rate advanced 8.43 percent in December from 7.48 percent in the previous month, the biggest jump in ten months, due to higher costs of food and oil. The recent spurt in prices has been driven by an increase in the prices of vegetables, fruits, milk, meat, eggs and fish, Singh said.
The yield on the most-traded 8.13 percent bond due in September 2022 rose 3 basis points to 8.22 percent at 1:06 p.m. today, after rising 19 basis points since January. The Bombay Stock Exchange’s Sensitive Index fell 1.24 percent today and the rupee was little changed at 45.63 against the dollar.
Inflation may also rise as companies including Indian Oil Corp., the biggest state-run oil refiner, and rivals raise prices. Higher raw material costs will make Videocon Industries Ltd., India’s biggest consumer electronics maker, increase refrigerator and air conditioner prices by 2 percent, Shekhar Jyoti, chief operating officer of the company’s electronics and appliances division, said in December.
‘Lasting Solution’
Prime Minister Singh today said India will need to increase the production of commodities to meet rising domestic consumption, driven by higher incomes.
“The lasting solution for food price inflation lies in increasing agricultural productivity and production not only of cereals but also of pulses, oilseeds, vegetables and fruits, and augmenting the supply of milk and milk products, poultry, meat and fish,” he said.
Finance Minister Mukherjee, in his last budget increased the excise tax rate on manufacturers to 10 percent from 8 percent. It stood at 12 percent before the global financial crisis. He kept the service tax at 10 percent.
Germany and France Roll Out Plan to Boost Euro
BRUSSELS — Initiating a bold effort to strengthen the euro, Germany and France on Friday laid down far-reaching plans to deepen integration among the 17 nations that use the currency. The move prompted immediate opposition, but could lead to embryonic economic government for Europe.
After days of speculation, the proposal from the German chancellor, Angela Merkel, and the French president, Nicolas Sarkozy, was greeted with criticism from governments that fear they may have to raise corporate tax rates or scrap deals that link annual wage increases to inflation.
At a European Union summit meeting in Brussels, several prime ministers from euro-zone countries, including Belgium’s caretaker premier, Yves Leterme, criticized the proposal or questioned the way it would operate. Non-euro nations, including Poland, expressed fears they could be sidelined.
Mr. Sarkozy, reacting to the opposition from nations, including Ireland, over taxation, said that the aim was “not to impose the same thing on everyone.” Friday’s objective, he added, was not a detailed agreement but to reach a consensus on a desire “for a pact, economic government and convergence.”
The strength of the reaction underlines how high the stakes are. Analysts said that the Franco-German move potentially marked an important turning point, one that could lead to the euro nations agreeing on more of their key economic policies in a unified bloc.
Berlin, which once opposed the idea of greater decision-making among euro-zone leaders, now wants to make it a central part of a package of measures to be agreed upon in March. These will also strengthen the rescue fund for the euro zone by allowing it to lend its full, €440-billion ceiling figure, and perhaps use its funds more flexibly.
In exchange for bolstering the fund, Berlin hopes to use the new “pact for competitiveness” to force weaker euro-zone economies to mirror Germany’s more disciplined example.
Standing side by side, Mrs. Merkel and Mr. Sarkozy appeared to have reached the conclusion of many critics of the single currency who argue that the financial crisis exposed a flaw in the design of the euro by creating monetary union without either economic convergence or political union.
Under the plans outlined Friday, the leaders of euro zone will meet in March to draw up a blueprint for closer coordination of economic policy, a strategy that the remaining 10 E.U. nations would later be given the option of adhering to, Mrs. Merkel said.
“The E.U. — but above all those countries that use the euro — wants to grow together,” Mrs. Merkel said. “Politically we will grow step-by-step closer together.”
If other countries can be persuaded to go along, the initiative could lead to the fulfillment of a long-standing French demand for a stronger leadership of the euro zone, presided over by regular meetings of their leaders.
In exchange, however, Berlin laid down a series of criteria by which competitiveness would be judged, and which would be designed to bring other economies closer to the standards of competitiveness achieved by Germany, which has emerged from the financial crisis as Europe’s economic lodestar.
“I think we are seeing the beginning of a euro group which could become a more important organization politically as well as economically,” said Charles Grant, director of the Center for European Reform. “France has long wanted the euro zone to be on a basis that made it more important and the Germans have now accepted that logic.”
The criteria identified in a German policy paper that circulated before the summit meeting included abolition of wage indexation systems, creation of a common base for assessing corporate tax, alignment of pension system and legally binding commitments to tough fiscal policies.
The approach is controversial because it touches some of the most sensitive areas of policy — like taxation and wage policy — where many nations guard their sovereignty jealously.
“I totally disagree with the current proposals,” Mr. Leterme of Belgium said. “We will not let the cornerstones of this system be undermined.”
Belgium argues that its system of wage indexation has not delivered higher inflation than Germany.
Reservations even emerged from neighboring Holland, where the government generally supports Germany on economic policy.
“We welcome stronger economic coordination on the basis of best practices, but we will always remain the master of our taxes, pensions and wages,” said the Dutch prime minister, Mark Rutte.
The range of complaints from within the euro zone alone reflects how difficult it will be to make the pact work.
Ireland sees its low rate of corporate tax as one of its few weapons in the battle to revive an economy so badly battered by the crisis that it accepted a bailout last year. Estonia and Slovakia also want to protect their low tax regimes.
But France and German politicians have long complained at being undercut by the E.U. nations with lower corporate tax.
Some countries also dislike the fact that the new structure would be orchestrated by governments, rather than the bloc’s executive, the European Commission, which is seen by many smaller nations as a protector of their interests.
Many issues remain to be resolved, including how the new group would operate, how its rules would be enforced, and whether nations that do not use the euro — like Britain, Poland or Sweden — would want to join and be invited to join in.
After days of speculation, the proposal from the German chancellor, Angela Merkel, and the French president, Nicolas Sarkozy, was greeted with criticism from governments that fear they may have to raise corporate tax rates or scrap deals that link annual wage increases to inflation.
At a European Union summit meeting in Brussels, several prime ministers from euro-zone countries, including Belgium’s caretaker premier, Yves Leterme, criticized the proposal or questioned the way it would operate. Non-euro nations, including Poland, expressed fears they could be sidelined.
Mr. Sarkozy, reacting to the opposition from nations, including Ireland, over taxation, said that the aim was “not to impose the same thing on everyone.” Friday’s objective, he added, was not a detailed agreement but to reach a consensus on a desire “for a pact, economic government and convergence.”
The strength of the reaction underlines how high the stakes are. Analysts said that the Franco-German move potentially marked an important turning point, one that could lead to the euro nations agreeing on more of their key economic policies in a unified bloc.
Berlin, which once opposed the idea of greater decision-making among euro-zone leaders, now wants to make it a central part of a package of measures to be agreed upon in March. These will also strengthen the rescue fund for the euro zone by allowing it to lend its full, €440-billion ceiling figure, and perhaps use its funds more flexibly.
In exchange for bolstering the fund, Berlin hopes to use the new “pact for competitiveness” to force weaker euro-zone economies to mirror Germany’s more disciplined example.
Standing side by side, Mrs. Merkel and Mr. Sarkozy appeared to have reached the conclusion of many critics of the single currency who argue that the financial crisis exposed a flaw in the design of the euro by creating monetary union without either economic convergence or political union.
Under the plans outlined Friday, the leaders of euro zone will meet in March to draw up a blueprint for closer coordination of economic policy, a strategy that the remaining 10 E.U. nations would later be given the option of adhering to, Mrs. Merkel said.
“The E.U. — but above all those countries that use the euro — wants to grow together,” Mrs. Merkel said. “Politically we will grow step-by-step closer together.”
If other countries can be persuaded to go along, the initiative could lead to the fulfillment of a long-standing French demand for a stronger leadership of the euro zone, presided over by regular meetings of their leaders.
In exchange, however, Berlin laid down a series of criteria by which competitiveness would be judged, and which would be designed to bring other economies closer to the standards of competitiveness achieved by Germany, which has emerged from the financial crisis as Europe’s economic lodestar.
“I think we are seeing the beginning of a euro group which could become a more important organization politically as well as economically,” said Charles Grant, director of the Center for European Reform. “France has long wanted the euro zone to be on a basis that made it more important and the Germans have now accepted that logic.”
The criteria identified in a German policy paper that circulated before the summit meeting included abolition of wage indexation systems, creation of a common base for assessing corporate tax, alignment of pension system and legally binding commitments to tough fiscal policies.
The approach is controversial because it touches some of the most sensitive areas of policy — like taxation and wage policy — where many nations guard their sovereignty jealously.
“I totally disagree with the current proposals,” Mr. Leterme of Belgium said. “We will not let the cornerstones of this system be undermined.”
Belgium argues that its system of wage indexation has not delivered higher inflation than Germany.
Reservations even emerged from neighboring Holland, where the government generally supports Germany on economic policy.
“We welcome stronger economic coordination on the basis of best practices, but we will always remain the master of our taxes, pensions and wages,” said the Dutch prime minister, Mark Rutte.
The range of complaints from within the euro zone alone reflects how difficult it will be to make the pact work.
Ireland sees its low rate of corporate tax as one of its few weapons in the battle to revive an economy so badly battered by the crisis that it accepted a bailout last year. Estonia and Slovakia also want to protect their low tax regimes.
But France and German politicians have long complained at being undercut by the E.U. nations with lower corporate tax.
Some countries also dislike the fact that the new structure would be orchestrated by governments, rather than the bloc’s executive, the European Commission, which is seen by many smaller nations as a protector of their interests.
Many issues remain to be resolved, including how the new group would operate, how its rules would be enforced, and whether nations that do not use the euro — like Britain, Poland or Sweden — would want to join and be invited to join in.
Thursday, February 3, 2011
JPMorgan Hid Doubts on Madoff, Documents Suggest
Senior executives at JPMorgan Chase expressed serious doubts about the legitimacy of Bernard L. Madoff’s investment business more than 18 months before his Ponzi scheme collapsed but continued to do business with him, according to internal bank documents made public in a lawsuit on Thursday.
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Daniel Acker/Bloomberg News
Irving H. Picard, center, the trustee, leaves federal bankruptcy court on Tuesday with his lawyer David J. Sheehan.
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Madoff Trustee’s Lawsuit Against JPMorgan Chase
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On June 15, 2007, an evidently high-level risk management officer for Chase’s investment bank sent a lunchtime e-mail to colleagues to report that another bank executive “just told me that there is a well-known cloud over the head of Madoff and that his returns are speculated to be part of a Ponzi scheme.”
Even before that, a top private banking executive had been consistently steering clients away from investments linked to Mr. Madoff because his “Oz-like signals” were “too difficult to ignore.” And the first Chase risk analyst to look at a Madoff feeder fund, in February 2006, reported to his superiors that its returns did not make sense because it did far better than the securities that were supposedly in its portfolio.
Despite those suspicions and many more, the bank allowed Mr. Madoff to move billions of dollars of investors’ cash in and out of his Chase bank accounts right until the day of his arrest in December 2008 — although by then, the bank had withdrawn all but $35 million of the $276 million it had invested in Madoff-linked hedge funds, according to the litigation.
The lawsuit against the bank was filed under seal on Dec. 2 by Irving H. Picard, the bankruptcy trustee gathering assets for Mr. Madoff’s victims. At that time, David J. Sheehan, the trustee’s lawyer, bluntly asserted that Mr. Madoff “would not have been able to commit this massive Ponzi scheme without this bank.” But with the case under seal, there was no way to gauge the documentation on which the trustee based his $6.4 billion in claims against the bank — until now.
In a statement, JPMorgan Chase strongly disputed Mr. Picard’s accusations and said it would “vigorously” challenge the claims in court.
The bank and Mr. Picard mutually agreed to unseal the complaint, which is one of dozens of big-ticket claims he has filed to recover assets for the victims of the Ponzi scheme. Other defendants include a half-dozen global banks, including HSBC in London and UBS in Switzerland, and the Wilpon family, the owners of the New York Mets.
To date, Mr. Picard has collected about $10 billion through settlements and asset sales; he estimates the total cash losses in the fraud at $20 billion.
In a statement released Thursday, the bank said the trustee’s complaint was “based on distortions of both the relevant facts and the governing law.” It denied that it had known about or played any role in Mr. Madoff’s fraud and dismissed the claim that it turned a blind eye to his activities to retain income from his business.
“Madoff’s firm was not an important or significant customer in the context of JPMorgan’s commercial banking business,” the statement said. “The revenues earned from Madoff’s bank account were modest and entirely consistent with conventional market rates and fees.”
As for Mr. Picard’s claim that the bank should have frozen Mr. Madoff’s bank account or reported his suspicious activity to regulators, the bank said, “At all times, JPMorgan complied fully with all laws and regulations governing bank accounts, including the regulations invoked by the trustee.”
Although lawyers redacted the names and specific positions of bank executives involved in the incidents described in the lawsuit, other information in the complaint makes it clear that many of them held prominent positions.
Deborah H. Renner, one of the trustee’s lawyers with Baker & Hostetler, reinforced that impression in a statement released Thursday. Ms. Renner said, “Incredibly, the bank’s top executives were warned in blunt terms about speculation that Madoff was running a Ponzi scheme, yet the bank appears to have been concerned only with protecting its own investments.”
One discussion of the bank’s “due diligence” on Mr. Madoff was aired on June 15, 2007, at a meeting of the bank’s hedge fund underwriting committee. According to the complaint, that committee was composed of “senior business heads and bankers, including individuals such as the chief risk officer and the heads of equities, syndicated leveraged finance, sales and hedge funds.”
News accounts identified the chief risk officer for Chase’s investment bank in June 2007 as John J. Hogan, who is currently a member of the bank’s executive committee.
The newly public material offers the clearest picture yet of the long and complex relationship between Mr. Madoff and Chase, the global institution that served as his primary bank since 1986.
Enlarge This Image
Daniel Acker/Bloomberg News
Irving H. Picard, center, the trustee, leaves federal bankruptcy court on Tuesday with his lawyer David J. Sheehan.
Back Story With The Times's Diana Henriques
Multimedia
Document
Madoff Trustee’s Lawsuit Against JPMorgan Chase
INTERACTIVE FEATURE: Cleaning Up the Madoff Mess
Add to Portfolio
HSBC Holdings PLC
JPMorgan Chase & Company
UBS AG
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Share your thoughts.
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Read All Comments (85) »
On June 15, 2007, an evidently high-level risk management officer for Chase’s investment bank sent a lunchtime e-mail to colleagues to report that another bank executive “just told me that there is a well-known cloud over the head of Madoff and that his returns are speculated to be part of a Ponzi scheme.”
Even before that, a top private banking executive had been consistently steering clients away from investments linked to Mr. Madoff because his “Oz-like signals” were “too difficult to ignore.” And the first Chase risk analyst to look at a Madoff feeder fund, in February 2006, reported to his superiors that its returns did not make sense because it did far better than the securities that were supposedly in its portfolio.
Despite those suspicions and many more, the bank allowed Mr. Madoff to move billions of dollars of investors’ cash in and out of his Chase bank accounts right until the day of his arrest in December 2008 — although by then, the bank had withdrawn all but $35 million of the $276 million it had invested in Madoff-linked hedge funds, according to the litigation.
The lawsuit against the bank was filed under seal on Dec. 2 by Irving H. Picard, the bankruptcy trustee gathering assets for Mr. Madoff’s victims. At that time, David J. Sheehan, the trustee’s lawyer, bluntly asserted that Mr. Madoff “would not have been able to commit this massive Ponzi scheme without this bank.” But with the case under seal, there was no way to gauge the documentation on which the trustee based his $6.4 billion in claims against the bank — until now.
In a statement, JPMorgan Chase strongly disputed Mr. Picard’s accusations and said it would “vigorously” challenge the claims in court.
The bank and Mr. Picard mutually agreed to unseal the complaint, which is one of dozens of big-ticket claims he has filed to recover assets for the victims of the Ponzi scheme. Other defendants include a half-dozen global banks, including HSBC in London and UBS in Switzerland, and the Wilpon family, the owners of the New York Mets.
To date, Mr. Picard has collected about $10 billion through settlements and asset sales; he estimates the total cash losses in the fraud at $20 billion.
In a statement released Thursday, the bank said the trustee’s complaint was “based on distortions of both the relevant facts and the governing law.” It denied that it had known about or played any role in Mr. Madoff’s fraud and dismissed the claim that it turned a blind eye to his activities to retain income from his business.
“Madoff’s firm was not an important or significant customer in the context of JPMorgan’s commercial banking business,” the statement said. “The revenues earned from Madoff’s bank account were modest and entirely consistent with conventional market rates and fees.”
As for Mr. Picard’s claim that the bank should have frozen Mr. Madoff’s bank account or reported his suspicious activity to regulators, the bank said, “At all times, JPMorgan complied fully with all laws and regulations governing bank accounts, including the regulations invoked by the trustee.”
Although lawyers redacted the names and specific positions of bank executives involved in the incidents described in the lawsuit, other information in the complaint makes it clear that many of them held prominent positions.
Deborah H. Renner, one of the trustee’s lawyers with Baker & Hostetler, reinforced that impression in a statement released Thursday. Ms. Renner said, “Incredibly, the bank’s top executives were warned in blunt terms about speculation that Madoff was running a Ponzi scheme, yet the bank appears to have been concerned only with protecting its own investments.”
One discussion of the bank’s “due diligence” on Mr. Madoff was aired on June 15, 2007, at a meeting of the bank’s hedge fund underwriting committee. According to the complaint, that committee was composed of “senior business heads and bankers, including individuals such as the chief risk officer and the heads of equities, syndicated leveraged finance, sales and hedge funds.”
News accounts identified the chief risk officer for Chase’s investment bank in June 2007 as John J. Hogan, who is currently a member of the bank’s executive committee.
The newly public material offers the clearest picture yet of the long and complex relationship between Mr. Madoff and Chase, the global institution that served as his primary bank since 1986.
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