Reading the Reserve Bank. Being a cryptographer would clearly come in handy in trying to determine the signals given each month when the Reserve Bank Board releases the minutes of its meeting a fortnight earlier. Commentators without proficiency in that art clearly have great difficulty in working out what the words mean. This morning in The Age we had “Reserve goes cool on more rates cuts” but The Australian assured us “RBA ready to cut rates further”. All very confusing for we readers.

The best I can do to help is report that the Crikey Interest Rate Indicator, which is based on the prices at prediction markets, sys the probability of no change when the Board next meets in March is 25%. A cut of 0.25% is put at 22%, 0.5% at 30% and something more than that at 25%. That rates will actually go up is quoted as a 3% chance but I notice there are not any takers.

Guidance on corporate governance. Kevin Rudd might like to have a little chat with the officials at the Australian Securities & Investments Commission (ASIC) before he responds to the letter from his mate Andrew “Twiggy” Forrest complaining that his plan to get 50,000 Aborigines into jobs is being jeopardised by Federal Government bureaucrats who are creating roadblocks and not sticking to their end of the deal.

The Prime Minister surprised some of us when he became such an enthusiastic endorser of the Forrest Aboriginal employment plan for actions by ASIC in the past, suggesting that the corporate watchdog does not give the entrepreneurial developer of the Fortescue iron mine its top marks for corporate governance. Back in 2006, I recall, there was a little matter of charges that he misled investors over the exact state of negotiations with Chinese steel mills.

The impression given by Mr Forrest is that he is very much a crash-through type of man who orthodox Canberra-based public servants with an eye to questions from both the Auditor General and Estimates Committee Senators might find awkward to get on with.

Ready for the starter’s gun. The Queensland Labor Party is wasting no time in filling the vacancies in its line-up of candidates caused by three retirements this week. The member for Greenslopes, Gary Fenlon, and Townsville MP Mike Reynolds announced on Sunday that they would not be standing again while Main Roads Minister Warren Pitt announced his yesterday. Nominations for Greenslopes and Townsville closed at 12 noon today and the ALP’s Administrative Committee will name the successful candidates later in the afternoon. The candidate for Mr Pitt’s seat of Mulgrave will be announced tomorrow afternoon.

Time to tell it like it is. Surely the time is fast approaching when someone senior in the Liberal Party — perhaps the Leader Malcolm Turnbull himself — should stop pussy footing around when talking about Peter Costello and his possible future intentions. The presence of the man on the backbench is destroying the party’s chances of reviving its standing and he should henceforth be described bluntly as the great destroyer, not as some middle-aged Liberal statesman who is quite within his rights to keep everyone in suspense.

It just wasn’t cricket. We should have known something was amiss when a Texan with a knighthood bestowed by the Government of Antigua pretended to be the saviour of English cricket. It all seemed odd from the moment last June when Allen Stanford landed in a helicopter at Lord’s Cricket Ground to announce an annual Twenty20 series of matches between England’s national team and the Stanford Superstars, a team of West Indies players, for a winner-takes-all prize of $20 million. Back then Stanford plucked dollar bills from a crate he brought with him to illustrate the amount of money on offer but he is unlikely to be doing anything as flamboyant again for a while.

Overnight, the United States Securities and Exchange Commission charged him and three of his companies for orchestrating a fraudulent, multi-billion dollar investment scheme centering on an $8 billion certificates of deposit program.

“As we allege in our complaint, Stanford and the close circle of family and friends with whom he runs his businesses perpetrated a massive fraud based on false promises and fabricated historical return data to prey on investors,” said Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement.

“We are moving quickly and decisively in this enforcement action to stop this fraudulent conduct and preserve assets for investors.”

Rose Romero, Regional Director of the SEC’s Fort Worth Regional Office, added, “We are alleging a fraud of shocking magnitude that has spread its tentacles throughout the world.”

The SEC’s complaint, filed in federal court in Dallas, alleges that acting through a network of SGC financial advisers, SIB has sold approximately $8 billion of so-called “certificates of deposit” to investors by promising improbable and unsubstantiated high interest rates. These rates were supposedly earned through SIB’s unique investment strategy, which purportedly allowed the bank to achieve double-digit returns on its investments for the past 15 years.

According to the SEC’s complaint, the defendants have misrepresented to CD purchasers that their deposits are safe, falsely claiming that the bank re-invests client funds primarily in “liquid” financial instruments (the portfolio); monitors the portfolio through a team of 20-plus analysts; and is subject to yearly audits by Antiguan regulators. Recently, as the market absorbed the news of Bernard Madoff’s massive Ponzi scheme, SIB attempted to calm its own investors by falsely claiming the bank has no “direct or indirect” exposure to the Madoff scheme.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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