Wall Street: Gupta accused of big tip-off
In a major insider-trading trial this week, businessman Rajat Gupta was accused of illegally passing on financial data that one witness called “as top secret as you could get,” said Grant McCool in Reuters.com. Prosecutors say Gupta, once the head of consulting firm McKinsey and a director of Goldman Sachs, tipped off hedge-fund manager Raj Rajaratnam to Warren Buffett’s $5 billion investment in Goldman Sachs at the height of the 2008 financial crisis. Rajaratnam was sentenced last year to 11 years in prison for trading on that and other insider information. But Gupta’s lawyers say the government lacks hard evidence that any valuable tips came from their client.
Even as the government trumpets its post-crisis efforts to root out insider trading, said Gretchen Morgenson in The New York Times, some Wall Street insiders say the practice “may be as common as ever.” In their quest for ever-bigger profits, they say, major firms have institutionalized the practice, and regulators simply do not have enough resources to keep up. “Prosecutors say insider trading won’t be tolerated,” says Ted Parmigiani, a former Lehman Brothers analyst who blew the whistle on insider trading before the firm’s collapse in 2008. “But they refuse to acknowledge that their widespread net has a very big hole in it.”
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Euro crisis: ‘Severe recession’ on the horizon
The Organization for Economic Cooperation and Development warned the 17 countries of the euro zone this week that they risked falling into a “severe recession” unless more was done to stem the debt crisis, said Greg Keller in the Associated Press. The OECD said the euro zone economy could shrink by 2 percent this year, and it urged European leaders and the European Central Bank to act quickly to prevent the crisis from dragging down the rest of the global economy.
Banks: Competitors gain from JPMorgan losses
JPMorgan’s massive $2 billion trading loss is “shaping up as a boon for some of the bank’s biggest rivals,” said Gregory Zuckerman and Liz Rappaport in The Wall Street Journal. About a dozen banks, including Goldman Sachs and Bank of America, are scoring profits that could total as much as $1 billion thanks to bets that sometimes pit them directly against JPMorgan’s positions. This week, JPMorgan announced it was suspending a $15 billion share buyback program announced in March, in order to preserve capital. Some reports say that the bank’s trading losses could rise to as much as $7 billion.
Companies: Hewlett-Packard makes layoffs
Hewlett-Packard announced this week that it would cut 27,000 jobs, or 8 percent of its workforce, to reduce costs, said Aaron Ricadela in Bloomberg.com. CEO Meg Whitman, who took over in September after former chief Léo Apotheker was ousted, is hoping to reverse the company’s declining profitability by trimming the workforce and investing in new products. HP, the world’s largest maker of computers and printers, has been “slow to adapt to the shift toward cloud computing” and has seen its PC sales decline as tablets grow in popularity.
Brands: Apple still on top
Apple is the most valuable brand in the world for the second year in a row, said Georgina Prodhan in Reuters.com. Seven of the top 10 global brands were either technology or telecommunication companies, a measure of “the central and transformative role” tech companies have in our lives, according to market-research agency Millward Brown. IBM took second place, pushing Google to third, while McDonald’s and Microsoft placed fourth and fifth, respectively. Coca-Cola, Marlboro, AT&T, Verizon, and China Mobile rounded out the top 10.
