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Thursday, December 27, 2012

Hubby and wife laying low — no thanks to debtor son

Hapless situation: Lee (right) relating Chan and Yong’s story during the press conference.< Hapless situation: Lee relating Chan and Yong’s story during the press conference.

IPOH: Chan Kwai Woh and Yong Yin Yoke, both in their 70s, have been moving from one budget hotel to another since Dec 17.

The elderly couple is trying to avoid being hounded and threatened by loan sharks from whom their 48-year-old son Voon Jiun had borrowed huge sums of money.

“I want to cut ties with my son for causing us so much trouble, and I request the loan sharks to find him instead of harassing us,” said Chan.

The 73-year-old part-time technician said their home in Taman Cempaka here was splashed with red paint on Dec 15 and Dec 23.

“We lodged a police report after the first incident and moved out without taking much clothes or even our high-blood pressure medicine,” he told a press conference at the office of Perak MCA Public Services and Complaints Bureau chief Datuk Lee Kon Yin here yesterday.

“After the first incident of paint being splashed in our porch we questioned our son about the matter and the next day he disappeared.”

Missing borrower: Voon Jiun has gone into hiding.

Chan and Yong, 70, have four other children but are afraid to stay with them as the loan sharks might also harass their families.

“It is stressful dealing with the loan sharks and we decided it was best to stay outside,” said Chan.

He believes Voon Jiun had fled after borrowing money from the loan sharks. His whereabouts are not known.

Showing photographs of his son, Chan said their relationship had been strained for some time.

“He had been staying for over 20 years in Australia, where he got married and has a 10-year-old daughter.

“However, he returned to Malaysia alone in June,” said Chan, adding that the family does not know what the son does for a living.

Meanwhile, Lee said he would write to the police to speed up the investigation on Chan’s report.

“I will follow them back to their house so that they can take their medication and other items.

“But I have advised them to stay put in their house. If there is any problem they can always contact the police, instead of staying in budget hotels,” he added.

By MANJIT KAUR
manjit@thestar.com.my 

Wednesday, December 26, 2012

The rotten heart of capitalism: interest rate-fixing scandals

The magnitude of the banking scam must be realised and tough action taken

The UBS building in Zurich. Photograph: Michael Buholzer/Reuters



This is the year the consensus changed. Around the world, policy-makers, regulators and bankers recognised that the legacy of the 20-year credit boom up to 2008 is more corrosive than all but a few realised at the time. The bankers – and the theorists who justified their actions – made a millennial mistake. Navigating a way out of the mess was never likely to be easy, but it is made harder still by not recognising the magnitude of the disaster and the necessary radicalism involved if things are to be put right.

If there were any last doubts they were dispelled by the record $1.5bn fine paid by the Swiss bank UBS for "pervasive" and "epic" efforts to manipulate the benchmark rate of interest – Libor – at which the world's great banks lend to each other. The manipulation was at the behest of the traders who buy and sell "interest rate derivatives", whose price varies with Libor, so that cumulatively billions of pounds of profits could be made. Nor was UBS alone. What is now evident is that all the banks that made the daily market in global interest rates in 10 major currencies were doing the same to varying degrees.

There was a complete disdain for the banks' customers, for the notion of custodianship of other people's money, that was industry wide. It is hard to believe this culture has evaporated with the imposition of a fine. No banker falsifying the actual interest rates at which he or she was borrowing or lending, or trader who requested that they did so, had any sense that there is something sacred about banking – that the many billions flowing through their hands are not their own. It was just anonymous Monopoly money that gave them the opportunity to become very rich. The UBS emails, which will be used to support criminal charges, could hardly be more revealing. This was about making money from money for vast personal gain.

Interest rate derivatives are presented as highly useful if complex financial instruments – essentially bets on future interest rate movements – that allow the banks' customers better to manage the risks of unexpected movements in interest rates. Whether a multinational or a large pension fund, you can buy or sell a derivative so you will not be embarrassed if suddenly interest rates jump or fall. Bookmakers lay off bets. Interest rate derivatives allow buyers to lay off the risk that their expectations of interest rate movements might be wrong.

What makes your head reel is the size of this global market. World GDP is around $70tn. The market in interest rate derivatives is worth $310tn. The idea that this has grown to such a scale because of the demands of the real economy better to manage risk is absurd. And on top it has a curious feature. None of the banks that constitute the market ever loses money. All their divisions that trade interest rate derivatives on their own account report huge profits running into billions. Where does that profit come from?

The answer is it comes largely from you and me. Global banking, intertwined with the global financial services and asset-management industry, has emerged as a tax on the world economy, generating much activity and lending that has not been needed, but whose purpose is to make those who work in it very rich. The centre-left thinktank IPPR reports that people with identical skills earn on average 20% more in financial services than in other industries, with the premium rising the higher the seniority. That wage premium does not come from virtuous hard work or enterprise. It comes from how finance is structured to deliver excessive profit.

Scandalous

The Libor scam is an object lesson in how finance taxes the rest of the economy. Plainly, the final buyers of the mispriced interest rate derivatives could not have been other banks, otherwise they would have lost money and we know that they all made profits. In any case, they were part of the scam. The final buyers of the mispriced derivatives were their customers. Some must have been large companies, but many were those – ranging from insurance companies and pension funds to hedge funds – who manage our savings on our behalf.

Here a second scam kicks in. One of the puzzles of modern finance is why the returns to those who buy shares in public stock markets are so much lower than the profits made by the companies themselves. One of the answers is that there are so many brokers, asset managers and intermediaries along the way all taking a cut. Sometimes it is through excessive management fees, but another way is not doing honest to God investing – choosing a good company to invest in and sticking with it – but through churning people's portfolios or unnecessarily buying interest rate derivatives to protect against interest rate risk, while charging a fee for the "service". Many of those mispriced interest rate derivatives will have ended up in the investment portfolios of large insurance companies and pension funds or, more sinisterly, in the portfolios of the banks' clients.

Most rotten

Bank managements are presented as ignorant dolts, fooled by rogue traders. They were no such thing. The interest rate derivative market is many times the scale than is warranted by genuine demand precisely because it represented such an effective way of looting the rest of us. The business model of modern finance – banks trading on their own account in rigged derivative markets, skimming investment funds and manipulating interbank lending, all to underlend to innovative enterprise while overlending on a stunning scale to private equity and property – is not the result of a mistake. It represents a series of choices made over 30 years in which finance has progressively resisted any sense it has a duty of custodianship to its clients or wider responsibilities to the economy. It was capitalism allegedly at its purest. We now understand it was capitalism at its most rotten. It needs wholesale reform.

The government's proposals to ringfence investment banking from the rest of a bank's activities, following the proposals from Sir John Vickers, is a start. But it is only that. Last week, Conservative MP Andrew Tyrie's cross-party parliamentary commission proposed " electrifying" the ringfence with the threat of full separation if malpractice continues. It also considered banning banks from trading in derivatives on their own account. But while tough, the commission should extend its brief. The issue is to create a financial system in its entirety that serves individuals and business alike, makes normal profits and, above all, embeds its public duty of custodianship in the bedrock of what it does. The government fears that more upheaval will unsettle banking and business confidence. It could not be more wrong. Reform is the platform on which a genuine economic recovery will be built.

Will HuttonComment by Will Hutton - Guardian
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Tuesday, December 25, 2012

To Malaysians, time to learn to live without maids!

 

I REFER to the report in “Maids may snub Malaysia” (The Star, Dec 24, reproduced below).

People may wring their hands in despair now but bear in mind a litany of abuse cases and the fact that Malaysian workplace laws regarding maids have been dragged into the 21st century with better wages and conditions is too late.

People have justified for too long the treating of maids as second-class humans by claiming all sorts of benefits that they bring to these women.

In the report, it states “If maids chose not to come here, many women would either have to give up their careers or demand for more childcare centres”.

My sister in Australia has for the last 20 years worked in a full-time job, undertaken part-time university studies, raised three children, seen to my ageing father and ran a house.

All this she has done without a maid, housekeeper or cleaner.

She has not given up her career.

What she has gained from this are children who are emotionally intelligent, responsible, able to undertake tasks such as simple cooking, cleaning their bedrooms, washing the car, walking the dog and discovering that being part of family is learning to be responsible.

I know of countless Malaysian families in the same boat as my sister. The world will not end if maids don’t come.

GORDON REID Kuala Lumpur

Maids may snub Malaysia

By PATRICK LEE patrick.lee@thestar.com.my

PETALING JAYA: Malaysia may soon be the last choice of foreign domestic maids.

With other countries paying higher wages and the current low exchange rate of the ringgit, domestic maids may prefer to go elsewhere, warn economists.

RAM Holdings group chief economist Yeah Kim Leng said that although there would be a greater demand for maids, especially with an ageing population, it would be harder to hire them.

“Unless our income is able to keep up with the rising costs, fewer people will be able to afford maids,” he said.

He said that with improving economies in countries like Indonesia, Malaysia may no longer be viewed as a potential job market.

Yeah said more locals might have to work as maids and predicted a greater demand for outsourcing of domestic chores and daycare.

“The Government will have to look into an alternative for working parents,” he said.

Yeah was commenting on an announcement by Prime Minister Datuk Seri Najib Tun Razak that both Malaysia and Indonesia had agreed to review the cost structure for recruiting maids.

There has been a trickle of Indonesian maids into the country despite the signing of an MoU between Malaysia and Indonesia on May 30 last year which set a RM4,511 agency fee for the hiring of maids.

The Malaysian Maid Employers Association (Mama) has since claimed that the cost structure was not sustainable as agents were reluctant to bring Indonesian maids into the country, leading to a shortage.

MIDF research chief economist Anthony Dass said locals would have to choose between paying more for their maids or not having any at all.

“If another country offers better (fees) for maids and agencies, why should they come here?” he said.

Dass said increased wages for maids would reduce Malaysians' disposable incomes, especially if salaries do not go up.

He said if maids chose not to come here, many women would either have to give up their careers or demand for more childcare centres.

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