Jan 17th 2002
From The Economist print edition
The Enron scandal hit Washington, with links between Kenneth Lay, Enron's chairman, and George Bush and other Texas Republicans coming under scrutiny. Andersen, Enron's auditor, admitted that thousands of documents relating to the audit had been destroyed, some after an investigation by the Securities and Exchange Commission had begun. An inside letter came to light warning Mr Lay in August that Enron could “implode in a wave of accounting scandals”. And some reports suggested that Andersen knew of Enron's troubles as long ago as last February.
KPMG also suffered severe censure at the hands of the SEC. The “big five” auditor had invested funds with Short-Term Investments Trust, an investment firm that it also audited. KPMG pleaded that it had made the investment through a third party.
See article:
The real scandal uncovered by Enron
J.P. Morgan Chase announced a fourth-quarter loss of $332m, compared with a profit of $708m a year earlier. Much of the loss was due to Enron and Argentina. The bank earlier revised estimates for its total exposure to Enron from $900m to $2.6 billion.
Investors reacted angrily on discovering that Rhodia, a French chemicals company, had rejected an offer, with a hefty premium, from DSM, a Dutch rival. Rhodia has struggled in a consolidating industry but its management rebuffed the offer, perhaps as it would have lost influence.
Three rivals made a successful joint bid of euro2.5 billion ($2.2 billion) for Rodamco North America, America's third-largest shopping-mall company. Australia's Westfield Holding (which has a 24% stake in the company), America's Simon Property Group, the country's largest mall owner, and Rouse will divide up Rodamco's 35 malls.
Ford announced a fourth-quarter loss of $5.1 billion, bringing losses for the year to $5.5 billion. The loss included a $4.1 billion charge for a restructuring that will include capacity cuts, plant closures and the loss of 35,000 jobs.
General Motors said that profits for the fourth quarter were down by 58% to $225m from a year earlier. A faltering economy and an interest-free financing deal slashed profits at its mainstay North American vehicles business.
General Electric, the world's biggest company by stockmarket capitalisation, reported a 9% rise in profits for the fourth quarter, to $3.9 billion.
The online auctioneer, eBay, made record profits in the fourth quarter. Operating profits jumped by 56% over a year ago, to $42m.
AMR, the parent company of American Airlines, reported losses for the fourth quarter of $798m. The economy and the after-effects of September 11th contributed to the record loss.
Kmart suffered the indignity of a “JUNK” debt rating from Moody's and relegation from the S&P 500 index after its shares slumped and bankruptcy loomed. America's second-biggest discount retailer has failed to do better after its latest restructuring and suffered a dismal Christmas. Its shares hit a 36-year low.
The World Trade Organisation ruled in favour of the EU and ordered America to repeal a system of tax breaks for its exporters. However, Europe's right to retaliate with sanctions equal to the $4 billion hidden subsidy will be tempered by reluctance to start a full-blooded trade war.
See article:
Transatlantic trade
A possible successor to Sandy Weill at Citigroup emerged. Robert Willumstad assumed the newly created post of president. But Mr Weill, chairman and chief executive of the financial-services giant, may have acted to keep investors happy by seeming to anoint a crown prince while keeping his options open; he may stay put for many more years.
Deutsche Bank is preparing a big shake-up that would shift away from its consensus-based management board and instead give its prospective chairman, Josef Ackermann, power akin to an American chief executive when he takes over in May.
The chairman, chief executive and a senior manager at Société Générale became the latest bankers to be questioned by French police looking into money-laundering allegations. A wider probe by the French authorities has lasted three years and involved many of the country's leading banks.
America's consumer-price index
fell by 0.2% in December to 1.6% for the year as energy costs dived. The
diminishing fear of inflation may make it easier for the Federal
Reserve to consider cutting interest rates yet again at its next meeting at the
end of the month.
See article:
The case for using fiscal policy
NSP Lista isprobava demokratiju u praksi
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