Piper Alpha

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pages: 459 words: 103,153

Adapt: Why Success Always Starts With Failure by Tim Harford

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Andrew Wiles, banking crisis, Basel III, Berlin Wall, Bernie Madoff, Black Swan, car-free, carbon footprint, Cass Sunstein, charter city, Clayton Christensen, clean water, cloud computing, cognitive dissonance, complexity theory, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, crowdsourcing, cuban missile crisis, Daniel Kahneman / Amos Tversky, Dava Sobel, Deep Water Horizon, Deng Xiaoping, double entry bookkeeping, Edmond Halley, en.wikipedia.org, Erik Brynjolfsson, experimental subject, Fall of the Berlin Wall, Fermat's Last Theorem, Firefox, food miles, Gerolamo Cardano, global supply chain, Isaac Newton, Jane Jacobs, Jarndyce and Jarndyce, Jarndyce and Jarndyce, John Harrison: Longitude, knowledge worker, loose coupling, Martin Wolf, Menlo Park, Mikhail Gorbachev, mutually assured destruction, Netflix Prize, New Urbanism, Nick Leeson, PageRank, Piper Alpha, profit motive, Richard Florida, Richard Thaler, rolodex, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, South China Sea, special economic zone, spectrum auction, Steve Jobs, supply-chain management, the market place, The Wisdom of Crowds, too big to fail, trade route, Tyler Cowen: Great Stagnation, web application, X Prize

, speech in Wellington, 25 June 1990, http://www.nzbr.org.nz/documents/speeches/speeches-90-91/tariff-spch.pdf 179 High energy prices spur energy-saving patents: David Popp, ‘Induced innovation and energy prices’, American Economic Review, 92(1), March 2002, pp. 160–80, http://www.jstor.org/stable/3083326 180 Almost a tenth of the total contribution to greenhouse gas emissions: George Monbiot, ‘I was wrong about veganism’, Guardian,6 September 2010, http://www.guardian.co.uk/commentis-free/2010/sep/06/meat-production-veganism-deforestation 180 Australian scientists have realised that: ‘Quest to make cattle fart like marsupials’, The Age, 7 December 2007, http://www.theage.com.au/news/climate-watch/quest-to-make-cattle-fart-like-marsupi-als/2007/12/06/1196812922326.html 6 Preventing financial meltdowns or: Decoupling 181 ‘We have involved ourselves in a colossal muddle’: John Maynard Keynes, ‘The Great Slump of 1930’, first published London, The Nation & Athenæum, issues of 20 and 27 December 1930, http://www.gutenberg.ca/ebooks/keynes-slump/keynes-slump-00-h.html 182 The rig burned for three more weeks: BBC, On This Day, http://news.bbc.co.uk/onthisday/hi/dates/stories/july/6/newsid_3017000/3017294.stm; Piper Alpha Wikipedia page, http://en.wikipedia.org/wiki/Piper_Alpha; The Fire and Blast Information Group, http://www.fabig.com/Accidents/Piper+Alpha.htm 183 Parts of the spiral are still being unwound over two decades later: John Kay, ‘Same old folly, new spiral of risk’, Financial Times, 14 August 2007, http://www.johnkay.com/2007/08/14/same-old-folly-new-spiral-of-risk/ and personal communication with an insurance lawyer. 184 The connection is obvious: a number of researchers and writers have studied or commented o the link between finance and industrial accidents, including: Stephen J.

Schumacher 1 When failure is unthinkable On the morning of 6 July 1988, maintenance workers on Piper Alpha, the largest and oldest oil and gas rig in the North Sea, dismantled a backup pump to check a safety valve. The work dragged on all day and the workers stopped work in the early evening, sealing the tube off and filling out a permit noting that the pump was unusable. An engineer left the permit in the control room but it was busy and there were constant interruptions. Later in the evening, the primary pump failed and – pressed for time, not knowing about the maintenance, and unable to find any reason why the backup pump should not be used – the rig’s operators started up the half-dismantled pump. Gas leaked out, caught fire and exploded. The explosion, serious in itself, was compounded by several other failures. Normally, a gas rig such as Piper Alpha would have blast walls to contain explosions, but Piper Alpha had originally been designed to pump oil, which is flammable but rarely explosive.

Normally, a gas rig such as Piper Alpha would have blast walls to contain explosions, but Piper Alpha had originally been designed to pump oil, which is flammable but rarely explosive. The retrofitted design also placed hazards too close to the rig’s control room, which the explosion immediately disabled. Fire-fighting pumps, which were designed to draw in huge volumes of sea water, did not automatically start, because of a safety measure designed to protect divers from being sucked into the pump inlet. The safety system could have been overridden from the control room, but the control room had been destroyed. This also meant no evacuation could be coordinated, so platform workers retreated to the rig’s accommodation block. Two nearby rigs continued to pump oil and gas towards the blazing Piper Alpha, their operators watching the inferno but fretting that they lacked authority to make the expensive decision to shut down production.

 

pages: 415 words: 123,373

Inviting Disaster by James R. Chiles

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airline deregulation, cuban missile crisis, Exxon Valdez, Maui Hawaii, Milgram experiment, North Sea oil, Piper Alpha, Richard Feynman, Richard Feynman, Richard Feynman: Challenger O-ring, risk tolerance

The wall fell in immediately upon backfilling. AND THE GAS CAME SCREAMING OUT The price of failing to communicate in a clear and timely way tolled on the night of July 6, 1988, when an explosion and fire aboard the Piper Alpha platform killed most of the crew. This giant steel platform, standing in 475-foot-deep waters in the North Sea, had two jobs before it melted and collapsed. The Piper Alpha drilled for oil like any rig—producing 140,000 barrels a day—and it also had a gas-processing plant aboard that purified huge volumes of natural gas piped to it from other platforms nearby. The Piper Alpha then pumped the finished goods to shore. On the afternoon of July 6, a day-shift crew doing routine maintenance work disconnected a safety valve from a pump that removed liquids from the natural gas, but they couldn’t finish the job before the shift change.

The once-respectable attitude of “It’s not going to happen on my watch” is clearly not justifiable anymore, not when so many tasks cross from one shift to another. On the Piper Alpha, workers and managers had gotten sloppy about following the “permit-to-work” system, which was supposed to prevent the use of equipment that was in the midst of being repaired. Instead of holding a short but productive talk about high-risk repair work with the installation manager before getting under way, workers had gotten accustomed to throwing all permit-to-work papers on his desk. Covering all jobs big and little, this mound of paperwork swamped that key manager with unimportant checkoffs while monstrous risks went sneaking by. The garden-variety errors on the Piper Alpha—leaving a job half done and failing to make sure that the right people knew about an unsolved problem—would have been of little consequence had they happened two centuries ago.

These pipes were of about the diameter of tree trunks and carried two thousand pounds per square inch of pressure. When these “risers” let go, the flames shot hundreds of feet into the air and trapped people in the housing block at one end of the platform. The gas was “screaming like a banshee” as it shot out, one survivor said later. Another hour went by before the other platforms shut down their gas shipments to the Piper Alpha. Having no good escape route to the sea one hundred feet below, some workers stayed put and were killed by fumes and fire; others jumped. “It was a case of fry and die or jump and try,” one survivor told a reporter. In a scathing investigative report afterward, Lord Cullen went after the operator, Occidental Petroleum (U.K.), for its “superficial attitude” about safety precautions. No blast-resistant walls protected the worker housing, and the workers had no good escape route.

 

pages: 305 words: 79,356

Drowning in Oil: BP & the Reckless Pursuit of Profit by Loren C. Steffy

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Berlin Wall, clean water, corporate governance, Exxon Valdez, Fall of the Berlin Wall, North Sea oil, oil rush, oil shock, peak oil, Piper Alpha, Ronald Reagan, South China Sea, sovereign wealth fund

Because of the broken compressor, an aging gas line became pressurized and, weakened by corrosion, ripped apart. Natural gas was shooting from the gash in the line at supersonic velocity. The entire platform was one spark away from becoming a floating inferno. That scenario was what had happened on another North Sea platform, Occidental Petroleum’s Piper Alpha, in 1988. Gas from a ruptured line had ignited, engulfing the rig in flames and killing 167 men. Only 59 crew members survived. Even after the Deepwater Horizon explosion, Piper Alpha remains the industry’s shorthand for horror—its worst offshore disaster. Fortunately, the Forties Alpha had a different outcome. No one died that day, thanks in part to the high winds of the blustery late autumn in the North Sea. Disaster was averted by what Houston attributed to “sheer luck.” BP later admitted to breaching health and safety regulations and was fined £200,000.

The intensity of oil well fires had created a cottage industry in the middle of the last century, as fearless entrepreneurs like Red Adair built companies that did nothing but combat the industry’s most ferocious mistakes. Adair, immortalized in the John Wayne movie Hellfighters, died in 2004, but the techniques that he pioneered lived on. Wright worked for Boots & Coots, a well-control company formed by two of Adair’s protégés, and his specialty was the drilling of relief wells. He’d been involved in 83 of them, including the one that killed the infamous Piper Alpha blowout in the North Sea in 1988. He had directed 40 projects himself and had never missed an intercept, and he had no intention of making Macondo his first miss.1 His margin of error in trying to hit the Macondo well two miles underground was about 3½ inches. The process involves directional drilling, in which the drill bit is turned at an angle as it nears the problem well. Using electromagnetic testing and other high-tech imaging equipment, the drill bit gradually closes in on its mark.

., 60 Meinhart, Paul, 15 Mergers, 43–47 Merritt, Carolyn, 92, 118, 119, 122 Michael of Kent, Princess, 126 Miller, George, 225 Minerals Management Service (MMS), 63 Abbott suit and, 161–162 abolishment of, 205 BOP and, 242 conflict of interest and, 196–198 environmental impact statements and, 203–204 hearing regarding BOP and, 201, 202 inspections and, 199 Louisiana field office of, 197 safety regulations and, 200 voluntary compliance and, 201 well design changes and, 166 Mitsui Group blame placed on BP by, 215 Macondo partners with, 181 Mobil Browne and, 43 merger with Exxon, 46 Seven Sisters and, 36 Mogford report, 89–90, 255 Moratorium on drilling, 212–214, 249–250 Morel, Brian, 167 Mossadeq, Mohammad oil assets nationalized by, 32 overthrow of, 33 Murray, Chad, 7–8, 10–11, 16–18, 177 National Iranian Oil Company, 33 Newman, Steven, 243 Nguyen, Hung, 201–202 Noble Corporation, 250 Norco refinery, 136, 137 North Sea, 55 Obama administration BP bankruptcy fears and, 216 BP gains leverage from, 224–226 Chu/Koonin and, 195–196 Louisiana economy and, 212–213 moratorium and, 213–214, 250 spill fund and, 220, 223 Occupational Safety and Health Administration (OSHA) BP fines and, 139, 140, 162–163 CSB report regarding, 121–122 Offshore oil exploration, 25–26, 249–250 Oil industry Alaskan, 37–38 BP’s alienation of, 214–215 Bush and, 194 Chu and, 196 competition/collaboration within, 181 congressional hearings and, 219 government conflict of interest with, 196–198 history surrounding, 26–33 Louisiana, southern, and, 212–213 Macondo spill cost implications on, 250–252 mergers in, 43–47 moratorium impact on, 249–250 safety record of offshore, 204–205 united front in, 50 Oil Pollution Act BP’s liability costs and, 185–186 Macondo spill cost implications and, 251 283 2 84 I N D E X Otto Candies LLC, 212–213 Oyster industry Chaisson and, 207–208 freshwater kill impacting, 211 Mississippi Delta and, 207 oil spill impacting, 207–208, 210–211 Pahlavi, Mohammad Reza Shah, 32 Parker, Bill, 210-211, 215, 216 Parus, Don, 65, 67 Petrofina, 46 Phillips, 46 Pillari, Ross, 90, 237 Piper Alpha, 57 P&J Oysters, 210–211 Pleasant, Chris, 177–178 BOP and, 171–172 , 177, 242–243 negative-pressure test discussion and, 173–174 well blowing out and, 176–177 Propane trading, 103–104, 142 Prudhoe Bay, 104, 109 Putin, Vladimir, 231, 233 Ramos, A.J., Jr., 81 Raymond, Lee, 50, 99, 150 Relief well, 190–191, 228 Reynolds, George Bernard, 28, 29 Rockefeller, John D., 39 Rodriquez, Katherine, 256–257 Rosenthal, Lee, 135, 140, 141, 256 Rowe, Eva, 140–141 Rowe, James, 79 Rowe, Linda, 79 Royalties, 196–197, 200 Russia Browne and, 229–232 early post-Soviet years in, 230 Sidanco deal and, 230–231 Safety, 4, 23, 57–58, 60–61, 92, 113–116, 119–120 BP lapses in, 57–58, 62–66, 87, 92–93, 113–115, 138–140, 162–163 CSB and, 90–93 Dudley and, 236 Gerard and, 144 Hayward and, 22, 23, 150 Horizon and, 9, 164–165 Safety (cont’d): Malone and, 143–144 MMS and, 200 oil industry record of offshore, 204–205 other Gulf operations and, 163–164 stack flare and, 91–92, 120 Texas City refinery health/safety division and, 67, 82 Texas City refinery renovations in, 143–144 Salazar, Ken, 191 Saraille, Allen, 176 Schlumberger, 172–173 Sedco.

 

pages: 478 words: 126,416

Other People's Money: Masters of the Universe or Servants of the People? by John Kay

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Affordable Care Act / Obamacare, asset-backed security, bank run, banking crisis, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Swan, Bonfire of the Vanities, bonus culture, Bretton Woods, call centre, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, cognitive dissonance, corporate governance, Credit Default Swap, cross-subsidies, dematerialisation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, Elon Musk, Eugene Fama: efficient market hypothesis, eurozone crisis, financial innovation, financial intermediation, fixed income, Flash crash, forward guidance, Fractional reserve banking, full employment, George Akerlof, German hyperinflation, Goldman Sachs: Vampire Squid, Growth in a Time of Debt, income inequality, index fund, inflation targeting, interest rate derivative, interest rate swap, invention of the wheel, Irish property bubble, Isaac Newton, London Whale, Long Term Capital Management, loose coupling, low cost carrier, M-Pesa, market design, millennium bug, mittelstand, moral hazard, mortgage debt, new economy, Nick Leeson, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shock, passive investing, peer-to-peer lending, performance metric, Peter Thiel, Piper Alpha, Ponzi scheme, price mechanism, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, railway mania, Ralph Waldo Emerson, random walk, regulatory arbitrage, Renaissance Technologies, rent control, Richard Feynman, risk tolerance, road to serfdom, Robert Shiller, Robert Shiller, Ronald Reagan, Schrödinger's Cat, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, sovereign wealth fund, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, Steve Wozniak, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Tobin tax, too big to fail, transaction costs, tulip mania, Upton Sinclair, Vanguard fund, Washington Consensus, We are the 99%, Yom Kippur War

If you can earn profit by selling reinsurance contracts, you can also earn profit by selling contracts for the re-insurance of re-insurance. You could even create contracts for the re-insurance of re-insurance of re-insurance. And so on. The outcome was a nexus of contracts known as the LMX spiral, so elaborate and complex that it was simply impossible to ascertain the underlying risks to which the holder was exposed. When the Piper Alpha oil rig went on fire in the North Sea in 1987, killing 200 people and triggering what was then the world’s largest marine insurance claim, underwriting names who had never heard of Piper Alpha discovered they had re-insured it over and over again. The total value of claims at Lloyd’s turned out to be ten times the value of the underlying loss. The trade in risk that had occurred was not the spreading of risk on more and broader shoulders. The operator of the rig, Occidental Petroleum, was better placed to assess, monitor and accept the risk than those people who ultimately had to pay for the costs of the accident.

.: Hyperion 220 Loomis, Carol 108 lotteries 65, 66, 68, 72 Lucas, Robert 40 Lynch, Dennios 108 Lynch, Peter 108, 109 M M-Pesa 186 Maastricht Treaty (1993) 243, 250 McCardie, Sir Henry 83, 84, 282, 284 McGowan, Harry 45 Machiavelli, Niccolò 224 McKinley, William 44 McKinsey 115, 126 Macy’s department store 46 Madoff, Bernard 29, 118, 131, 132, 177, 232, 293 Madoff Securities 177 Magnus, King of Sweden 196 Manhattan Island, New York: and Native American sellers 59, 63 Manne, Henry 46 manufacturing companies, rise of 45 Marconi 48 marine insurance 62, 63 mark-to-market accounting 126, 128–9, 320n22 mark-to-model approach 128–9, 320n21 Market Abuse Directive (MAD) 226 market economy 4, 281, 302, 308 ‘market for corporate control, the’ 46 market risk 97, 98, 177, 192 market-makers 25, 28, 30, 31 market-making 49, 109, 118, 136 Markets in Financial Instruments Directive (MIFID) 226 Markkula, Mike 162, 166, 167 Markopolos, Harry 232 Markowitz, Harry 69 Markowitz model of portfolio allocation 68–9 Martin, Felix 323n5 martingale 130, 131, 136, 139, 190 Marx, Groucho 252 Marx, Karl 144, 145 Capital 143 Mary Poppins (film) 11, 12 MasterCard 186 Masters, Brooke 120 maturity transformation 88, 92 Maxwell, Robert 197, 201 Mayan civilisation 277 Meade, James 263 Means, Gardiner 51 Meeker, Mary 40, 167 Melamed, Leo 19 Mercedes 170 merchant banks 25, 30, 33 Meriwether, John 110, 134 Merkel, Angela 231 Merrill Lynch 135, 199, 293, 300 Merton, Robert 110 Metronet 159 Meyer, André 205 MGM 33 Microsoft 29, 167 middleman, role of the 80–87 agency and trading 82–3 analysts 86 bad intermediaries 81–2 from agency to trading 84–5 identifying goods and services required 80, 81 logistics 80, 81 services from financial intermediaries 80–81 supply chain 80, 81 transparency 84 ‘wisdom of crowds’ 86–7 Midland Bank 24 Milken, Michael 46, 292 ‘millennium bug’ 40 Miller, Bill 108, 109 Minuit, Peter 59, 63 Mises, Ludwig von 225 Mittelstand (medium-size business sector) 52, 168, 169, 170, 171, 172 mobile banking apps 181 mobile phone payment transfers 186–7 Modigliani-Miller theorem 318n9 monetarism 241 monetary economics 5 monetary policy 241, 243, 245, 246 money creation 88 money market fund 120–21 Moneyball phenomenon 165 monopolies 45 Monte Carlo casino 123 Monte dei Paschi Bank of Siena 24 Montgomery Securities 167 Moody’s rating agency 21, 248, 249, 313n6 moral hazard 74, 75, 76, 92, 95, 256, 258 Morgan, J.P. 44, 166, 291 Morgan Stanley 25, 40, 130, 135, 167, 268 Morgenthau, District Attorney Robert 232–3 mortality tables 256 mortgage banks 27 mortgage market fluctuation in mortgage costs 148 mechanised assessment 84–5 mortgage-backed securities 20, 21, 40, 85, 90, 100, 128, 130, 150, 151, 152, 168, 176–7, 284 synthetic 152 Mozilo, Angelo 150, 152, 154, 293 MSCI World Bank Index 135 muckraking 44, 54–5, 79 ‘mugus’ 118, 260 multinational companies, and diversification 96–7 Munger, Charlie 127 Munich, Germany 62 Munich Re 62 Musk, Elon 168 mutual funds 27, 108, 202, 206 mutual societies 30 mutualisation 79 mutuality 124, 213 ‘My Way’ (song) 72 N Napoleon Bonaparte 26 Napster 185 NASA 276 NASDAQ 29, 108, 161 National Economic Council (US) 5, 58 National Employment Savings Trust (NEST) 255 National Institutes of Health 167 National Insurance Fund (UK) 254 National Provincial Bank 24 National Science Foundation 167 National Westminster Bank 24, 34 Nationwide 151 Native Americans 59, 63 Nazis 219, 221 neo-liberal economic policies 39, 301 Netjets 107 Netscape 40 Neue Markt 170 New Deal 225 ‘new economy’ bubble (1999) 23, 34, 40, 42, 98, 132, 167, 199, 232, 280 new issue market 112–13 New Orleans, Louisiana: Hurricane Katrina disaster (2005) 79 New Testament 76 New York Stock Exchange 26–7, 28, 29, 31, 49, 292 New York Times 283 News of the World 292, 295 Newton, Isaac 35, 132, 313n18 Niederhoffer, Victor 109 NINJAs (no income, no job, no assets) 222 Nixon, Richard 36 ‘no arbitrage’ condition 69 non-price competition 112, 219 Norman, Montagu 253 Northern Rock 89, 90–91, 92, 150, 152 Norwegian sovereign wealth fund 161, 253 Nostradamus 274 O Obama, Barack 5, 58, 77, 194, 271, 301 ‘Obamacare’ 77 Occidental Petroleum 63 Occupy movement 52, 54, 312n2 ‘Occupy Wall Street’ slogan 305 off-balance-sheet financing 153, 158, 160, 210, 250 Office of Thrift Supervision 152–3 oil shock (1973–4) 14, 36–7, 89 Old Testament 75–6 oligarchy 269, 302–3, 305 oligopoly 118, 188 Olney, Richard 233, 237, 270 open market operations 244 options 19, 22 Organisation for Economic Co-operation and Development (OECD) 263 Osborne, George 328n19 ‘out of the money option’ 102, 103 Overend, Gurney & Co. 31 overseas assets and liabilities 179–80, 179 owner-managed businesses 30 ox parable xi-xii Oxford University 12 P Pacific Gas and Electric 246 Pan Am 238 Paris financial centre 26 Parliamentary Commission on Banking Standards 295 partnerships 30, 49, 50, 234 limited liability 313n14 Partnoy, Frank 268 passive funds 99, 212 passive management 207, 209, 212 Patek Philippe 195, 196 Paulson, Hank 300 Paulson, John 64, 109, 115, 152, 191, 284 ‘payment in kind’ securities 131 payment protection policies 198 payments system 6, 7, 25, 180, 181–8, 247, 259–60, 281, 297, 306 PayPal 167, 168, 187 Pecora, Ferdinand 25 Pecora hearings (1932–34) 218 peer-to-peer lending 81 pension funds 29, 98, 175, 177, 197, 199, 200, 201, 208, 213, 254, 282, 284 pension provision 78, 253–6 pension rights 53, 178 Perkins, Charles 233 perpetual inventory method 321n4 Perrow, Charles 278, 279 personal financial management 6, 7 personal liability 296 ‘petrodollars’ 14, 37 Pfizer 96 Pierpoint Morgan, J. 165 Piper Alpha oil rig disaster (1987) 63 Ponzi, Charles 131, 132 Ponzi schemes 131, 132, 136, 201 pooled investment funds 197 portfolio insurance 38 Potts, Robin, QC 61, 63, 72, 119, 193 PPI, mis-selling of 296 Prebble, Lucy: ENRON 126 price competition 112, 219 price discovery 226 price mechanism 92 Prince, Chuck 34 private equity 27, 98, 166, 210 managers 210, 289 private insurance 76, 77 private sector 78 privatisation 39, 78, 157, 158, 258, 307 probabilistic thinking 67, 71, 79 Procter & Gamble 69, 108 product innovation 13 property and infrastructure 154–60 protectionism 13 Prudential 200 public companies, conversion to 18, 31–2, 49 public debt 252 public sector 78 Q Quandt, Herbert 170 Quandt Foundation 170 quantitative easing 245, 251 quantitative style 110–11 quants 22, 107, 110 Quattrone, Frank 167, 292–3 queuing 92 Quinn, Sean 156 R railroad regulation 237 railway mania (1840s) 35 Raines, Franklin 152 Rajan, Raghuram 56, 58, 79, 102 Rakoff, Judge Jed 233, 294, 295 Ramsey, Frank 67, 68 Rand, Ayn 79, 240 ‘random walk’ 69 Ranieri, Lew 20, 22, 106–7, 134, 152 rating agencies 21, 41, 84–5, 97, 151, 152, 153, 159, 249–50 rationality 66–7, 68 RBS see Royal Bank of Scotland re-insurance 62–3 Reagan, Ronald 18, 23, 54, 59, 240 real economy 7, 18, 57, 143, 172, 190, 213, 226, 239, 271, 280, 288, 292, 298 redundancy 73, 279 Reed, John 33–4, 48, 49, 50, 51, 242, 293, 314n40 reform 270–96 other people’s money 282–5 personal responsibility 292–6 principles of 270–75 the reform of structure 285–92 robust systems and complex structures 276–81 regulation 215, 217–39 the Basel agreements 220–25 and competition 113 the origins of financial regulation 217–19 ‘principle-based’ 224 the regulation industry 229–33 ‘rule-based’ 224 securities regulation 225–9 what went wrong 233–9 ‘Regulation Q’ (US) 13, 14, 20, 28, 120, 121 regulatory agencies 229, 230, 231, 235, 238, 274, 295, 305 regulatory arbitrage 119–24, 164, 223, 250 regulatory capture 237, 248, 262 Reich, Robert 265, 266 Reinhart, C.M. 251 relationship breakdown 74, 79 Rembrandts, genuine/fake 103, 127 Renaissance Technologies 110, 111, 191 ‘repo 105’ arbitrage 122 repo agreement 121–2 repo market 121 Reserve Bank of India 58 Reserve Primary Fund 121 Resolution Trust Corporation 150 retirement pension 78 return on equity (RoE) 136–7, 191 Revelstoke, first Lord 31 risk 6, 7, 55, 56–79 adverse selection and moral hazard 72–9 analysis by ‘ketchup economists’ 64 chasing the dream 65–72 Geithner on 57–8 investment 256 Jackson Hole symposium 56–7 Kohn on 56 laying bets on the interpretation of incomplete information 61 and Lloyd’s 62–3 the LMX spiral 62–3, 64 longevity 256 market 97, 98 mitigation 297 randomness 76 socialisation of individual risks 61 specific 97–8 risk management 67–8, 72, 79, 137, 191, 229, 233, 234, 256 risk premium 208 risk thermostat 74–5 risk weighting 222, 224 risk-pooling 258 RJR Nabisco 46, 204 ‘robber barons’ 44, 45, 51–2 Robertson, Julian 98, 109, 132 Robertson Stephens 167 Rockefeller, John D. 44, 52, 196 Rocket Internet 170 Rogers, Richard 62 Rogoff, K.S. 251 rogue traders 130, 300 Rohatyn, Felix 205 Rolls-Royce 90 Roman empire 277, 278 Rome, Treaty of (1964) 170 Rooney, Wayne 268 Roosevelt, Franklin D. v, 25, 235 Roosevelt, Theodore 43–4, 235, 323n1 Rothschild family 217 Royal Bank of Scotland 11, 12, 14, 24, 26, 34, 78, 91, 103, 124, 129, 135, 138, 139, 211, 231, 293 Rubin, Robert 57 In an Uncertain World 67 Ruskin, John 60, 63 Unto this Last 56 Russia defaults on debts 39 oligarchies 303 Russian Revolution (1917) 3 S Saes 168 St Paul’s Churchyard, City of London 305 Salomon Bros. 20, 22, 27, 34, 110, 133–4 ‘Salomon North’ 110 Salz Review: An Independent Review of Barclays’ Business Practices 217 Samuelson, Paul 208 Samwer, Oliver 170 Sarkozy, Nicolas 248, 249 Savage, L.J. 67 Scholes, Myron 19, 69, 110 Schrödinger’s cat 129 Scottish Parliament 158 Scottish Widows 26, 27, 30 Scottish Widows Fund 26, 197, 201, 212, 256 search 195, 209, 213 defined 144 and the investment bank 197 Second World War 36, 221 secondary markets 85, 170, 210 Securities and Exchange Commission (SEC) 20, 64, 126, 152, 197, 225, 226, 228, 230, 232, 247, 292, 293, 294, 313n6 securities regulation 225–9 securitisation 20–21, 54, 100, 151, 153, 164, 169, 171, 222–3 securitisation boom (1980s) 200 securitised loans 98 See’s Candies 107 Segarra, Carmen 232 self-financing companies 45, 179, 195–6 sell-side analysts 199 Sequoia Capital 166 Shad, John S.R. 225, 228–9 shareholder value 4, 45, 46, 50, 211 Sharpe, William 69, 70 Shell 96 Sherman Act (1891) 44 Shiller, Robert 85 Siemens 196 Siemens, Werner von 196 Silicon Valley, California 166, 167, 168, 171, 172 Simon, Hermann 168 Simons, Jim 23, 27, 110, 111–12, 124 Sinatra, Frank 72 Sinclair, Upton 54, 79, 104, 132–3 The Jungle 44 Sing Sing maximum-security gaol, New York 292 Skilling, Jeff 126, 127, 128, 149, 197, 259 Slim, Carlos 52 Sloan, Alfred 45, 49 Sloan Foundation 49 small and medium-size enterprises (SMEs), financing 165–72, 291 Smith, Adam 31, 51, 60 The Wealth of Nations v, 56, 106 Smith, Greg 283 Smith Barney 34 social security 52, 79, 255 Social Security Trust Fund (US) 254, 255 socialism 4, 225, 301 Société Générale 130 ‘soft commission’ 29 ‘soft’ commodities 17 Soros, George 23, 27, 98, 109, 111–12, 124, 132 South Sea Bubble (18th century) 35, 132, 292 sovereign wealth funds 161, 253 Soviet empire 36 Soviet Union 225 collapse of 23 lack of confidence in supplies 89–90 Spain: property bubble 42 Sparks, D.L. 114, 283, 284 specific risk 97–8 speculation 93 Spitzer, Eliot 232, 292 spread 28, 94 Spread Networks 2 Square 187 Stamp Duty 274 Standard & Poor’s rating agency 21, 99, 248, 249, 313n6 Standard Life 26, 27, 30 standard of living 77 Standard Oil 44, 196, 323n1 Standard Oil of New Jersey (later Exxon) 323n1 Stanford University 167 Stanhope 158 State Street 200, 207 sterling devaluation (1967) 18 stewardship 144, 163, 195–203, 203, 208, 209, 210, 211, 213 Stewart, Jimmy 12 Stigler, George 237 stock exchanges 17 see also individual stock exchanges stock markets change in organisation of 28 as a means of taking money out of companies 162 rise of 38 stock-picking 108 stockbrokers 16, 25, 30, 197, 198 Stoll, Clifford 227–8 stone fei (in Micronesia) 323n5 Stone, Richard 263 Stora Enso 196 strict liability 295–6 Strine, Chancellor Leo 117 structured investment vehicles (SIVs) 158, 223 sub-prime lending 34–5, 75 sub-prime mortgages 63, 75, 109, 149, 150, 169, 244 Summers, Larry 22, 55, 73, 119, 154, 299 criticism of Rajan’s views 57 ‘ketchup economics’ 5, 57, 69 support for financialisation 57 on transformation of investment banking 15 Sunday Times 143 ‘Rich List’ 156 supermarkets: financial services 27 supply chain 80, 81, 83, 89, 92 Surowiecki, James: The Wisdom of Crowds xi swap markets 21 SWIFT clearing system 184 Swiss Re 62 syndication 62 Syriza 306 T Taibbi, Matt 55 tailgating 102, 103, 104, 128, 129, 130, 136, 138, 140, 152, 155, 190–91, 200 Tainter, Joseph 277 Taleb, Nassim Nicholas 125, 183 Fooled by Randomness 133 Tarbell, Ida 44, 54 TARGET2 system 184, 244 TARP programme 138 tax havens 123 Taylor, Martin 185 Taylor Bean and Whitaker 293 Tea Party 306 technological innovation 13, 185, 187 Tel Aviv, Israel 171 telecommunications network 181, 182 Tesla Motors 168 Tetra 168 TfL 159 Thai exchange rate, collapse of (1997) 39 Thain, John 300 Thatcher, Margaret 18, 23, 54, 59, 148, 151, 157 Thiel, Peter 167 Third World debt problem 37, 131 thrifts 25, 149, 150, 151, 154, 174, 290, 292 ticket touts 94–5 Tobin, James 273 Tobin tax 273–4 Tolstoy, Count Leo 97 Tonnies, Ferdinand 17 ‘too big to fail’ 75, 140, 276, 277 Tourre, Fabrice ‘Fabulous Fab’ 63–4, 115, 118, 232, 293, 294 trader model 82, 83 trader, rise of the 16–24 elements of the new trading culture 21–2 factors contributing to the change 17–18 foreign exchange 18–19 from personal relationships to anonymous markets 17 hedge fund managers 23 independent traders 22–3 information technology 19–20 regulation 20 securitisation 20–21 shift from agency to trading 16 trading as a principal source of revenue and remuneration 17 trader model 82, 83 ‘trading book’ 320n20 transparency 29, 84, 205, 210, 212, 226, 260 Travelers Group 33, 34, 48 ‘treasure islands’ 122–3 Treasuries 75 Treasury (UK) 135, 158 troubled assets relief program 135 Truman, Harry S. 230, 325n13 trust 83–4, 85, 182, 213, 218, 260–61 Tuckett, David 43, 71, 79 tulip mania (1630s) 35 Turner, Adair 303 TWA 238 Twain, Mark: Pudd’nhead Wilson’s Calendar 95–6 Twitter 185 U UBS 33, 134 UK Independence Party 306 unemployment 73, 74, 79 unit trusts 202 United States global dominance of the finance industry 218 house prices 41, 43, 149, 174 stock bubble (1929) 201 universal banks 26–7, 33 University of Chicago 19, 69 ‘unknown unknowns’ 67 UPS delivery system 279–80 US Defense Department 167 US Steel 44 US Supreme Court 228, 229, 304 US Treasury 36, 38, 135 utility networks 181–2 V value discovery 226–7 value horizon 109 Van Agtmael, Antoine 39 Vanderbilt, Cornelius 44 Vanguard 200, 207, 213 venture capital 166 firms 27, 168 venture capitalists 171, 172 Vickers Commission 194 Viniar, David 204–5, 233, 282, 283, 284 VISA 186 volatility 85, 93, 98, 103, 131, 255 Volcker, Paul 150, 181 Volcker Rule 194 voluntary agencies 258 W wagers and credit default swaps 119 defined 61 at Lloyd’s coffee house 71–2 lottery tickets 65 Wall Street, New York 1, 16, 312n2 careers in 15 rivalry with London 13 staffing of 217 Wall Street Crash (1929) 20, 25, 27, 36, 127, 201 Wall Street Journal 294 Wallenberg family 108 Walmart 81, 83 Warburg 134 Warren, Elizabeth 237 Washington consensus 39 Washington Mutual 135, 149 Wasserstein, Bruce 204, 205 Watergate affair 240 ‘We are the 99 per cent’ slogan 52, 305 ‘We are Wall Street’ 16, 55, 267–8, 271, 300, 301 Weber, Max 17 Weill, Sandy 33–4, 35, 48–51, 55, 91, 149, 293, 314n40 Weinstock, Arnold 48 Welch, Jack 45–6, 48, 50, 52, 126, 314n40 WestLB 169 Westminster Bank 24 Whitney, Richard 292 Wilson, Harold 18 windfall payments 14, 32, 127, 153, 290 winner’s curse 103, 104, 156, 318n11 Winslow Jones, Alfred 23 Winton Capital 111 Wolfe, Humbert 7 The Uncelestial City 1 Wolfe, Tom 268 The Bonfire of the Vanities 16, 22 women traders 22 Woodford, Neil 108 Woodward, Bob: Maestro 240 World Bank 14, 220 World.Com bonds 197 Wozniak, Steve 162 Wriston, Walter 37 Y Yellen, Janet 230–31 Yom Kippur War (1973) 36 YouTube 185 Z Zurich, Switzerland 62

 

pages: 801 words: 242,104

Collapse: How Societies Choose to Fail or Succeed by Jared Diamond

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clean water, colonial rule, correlation does not imply causation, cuban missile crisis, Donner party, European colonialism, Exxon Valdez, illegal immigration, job satisfaction, means of production, new economy, North Sea oil, Piper Alpha, polynesian navigation, profit motive, South Sea Bubble, statistical model, Stewart Brand, Thomas Malthus, trade route, transcontinental railway, unemployed young men

However, in conversations over the last six years with dozens of lower-level as well as senior Chevron employees, employees of other oil companies, and people outside the oil industry, I have come to realize that many other factors as well have contributed to these environmental policies. One such factor is the importance of avoiding very expensive environmental disasters. When I asked a Chevron safety representative who happened to be a bird-watcher what had prompted these policies, his short answer was: “Exxon Valdez, Piper Alpha, and Bhopal.” He was referring to the huge oil spill from the running aground off Alaska of Exxon’s oil tanker the Exxon Valdez in 1989, the 1988 fire on Occidental Petroleum’s Piper Alpha oil platform in the North Sea that killed 167 people (Plate 33), and the 1984 escape of chemicals at Union Carbide’s Bhopal chemical plant in India that killed 4,000 people and injured 200,000 (Plate 34). These were three of the most notorious, best-publicized, and most expensive industrial accidents of recent times.

., for not requiring mining companies to clean up, or for continuing to buy wood products from non-sustainable logging operations. In the long run, it is the public, either directly or through its politicians, that has the power to make destructive environmental policies unprofitable and illegal, and to make sustainable environmental policies profitable. The public can do that by suing businesses for harming them, as happened after the Exxon Valdez, Piper Alpha, and Bhopal disasters; by preferring to buy sustainably harvested products, a preference that caught the attention of Home Depot and Unilever; by making employees of companies with poor track records feel ashamed of their company and complain to their own management; by preferring their governments to award valuable contracts to businesses with a good environmental track record, as the Norwegian government did to Chevron; and by pressing their governments to pass and enforce laws and regulations requiring good environmental practices, such as the U.S. government’s new regulations for the coal industry in the 1970s and 1980s.

.; see also Anasazi Tainos in Vinland natural experiment method natural gas Nature Conservancy, The Navajo people neighbors, hostile Netherlands, polders in Nettles, Bill Nevada, gold mines in Newfoundland New Guinea agriculture of and Australia landmass bottom-up management in deforestation of and El Niño government of indicator species of Kutubu oil field mining in plant domestication in population growth of settlement of silviculture in volcanic ashfall on wood supplies on Nordrseta hunting ground Norfolk Island Norse Greenland abandonment of agriculture in burial customs in climate in communal cooperation in conservative society of decline of deforestation of environment of Erik the Red in Eurocentrism in food in fuel in Gardar Cathedral Gardar Farm hunting in Hvalsey Church integrated economy of Inuit in iron poverty in isolation of native species in population of religion in Sandnes Farm settlement of social stratification in soil quality in starvation in survival of trade with tree shortage in turf cutting in Viking colony in violence in North Atlantic: map sea ice in North Sea, oil/gas in Norway, see Scandinavia nutrients, recycling of Nygaard, Georg Ogowila tephra oil industry disasters in double-hulled tankers in government regulation of Kutubu oil field long-range outlook in natural gas in Point Arguello and public opinion on Salawati Island technology in Oil Search Limited Ok Tedi copper mine Olaf I, king of Norway Olafsson, Thorstein Olav the Quiet, king of Norway Olmecs Ord River Scheme, Australia O’Reilly, David Orkney Islands Orliac, Catherine overgrazing ozone layer, destruction of “Ozymandias” (Shelley) Pacific islands: deforestation of disappearance of societies in Polynesian expansion in sustainable food production on Pacific Ocean: Andesite Line garbage transport to map Packard Foundation packrat midden analysis palynology (pollen analysis) Panguna Copper Mine Pa Nukumara Papua New Guinea, see New Guinea PCBs Peary, Robert Pegasus Gold Inc. Pennsylvania, forests in per-capita environmental impact in Australia in China defined in Dominican Republic in Polynesia in Tikopia Pérez Rancier, Juan Bautista Perry, Matthew Pertamina pesticides Peters, Thomas Phelps-Dodge Corporation photosynthesis Picts Pigman, Chip Piper Alpha oil platform Pitcairn Island collapse of and Easter Island evacuation of H.M.S. Bounty survivors on human impact on isolation of maps population of settlement of stone structures on trading partners of Platteau, Jean-Philippe Plum Creek Timber Company Point Arguello oil field polders political trouble spots (map) pollution-intensive industries (PII) Polynesia: ancestors of colonizing expansion of diet of human impact on interisland voyages in Lapita-style pottery of plants of “rocker jaw” of ropes of settlement of social divisions in Southeast, see Southeast Polynesia stone structures of see also specific islands population control population growth autocatalytic and available resources and complexity of society Malthusian problems of poverty Powell, Steve prisoner’s dilemma Procter and Gamble Proposition, California protein sources Prunier, Gérard Pueblo Indians racism Rainforest Action Network rainforests rational behavior Redford, Robert religious values Rennell Island Rio Tinto mines Roggeveen, Jacob Rolett, Barry Roman Empire, fall of Royal Dutch Shell Oil Company ruins, romance of Russia, population in Rwanda agriculture in civil wars in collapse in deforestation and erosion in economic crisis in environmental problems in famines in genocide in Hutu and Tutsi people in independence of inequality in Kanama commune in land disputes in population in Twa people in violence and crime in Salawati Island Salim, Emil saline seep salinization and agriculture and climate change and desalinization dryland and irrigation processes of and water quality San Nicolas Island Santa Barbara Channel, oil spill Scandinavia: agriculture in Black Death (plague) in bog iron in fuel in natural advantages in navigation in population growth in religion in trade with unification of Viking, see Vikings written accounts of Schwab, Charles Scientific Certification Systems Sea Peoples, invasions by selfishness Selling, Olof sheep: and forest fires overgrazing by and wool production Shetland Islands silviculture: in Australia in Japan in New Guinea Simon, Julian SmartWood Smyrill, John Arnason societies: archaeological studies of comparative studies of ice core studies of packrat midden studies of responses of tree ring studies of soil: acidification/alkalinization in Australia composting earthworms in and fisheries and glacier activity in Greenland in Iceland loss of, see erosion in Montana nutrient depletion salinization of, see salinization and turf cutting uplift of crust volcanic ashfall Sokkason, Einar solar energy Solomon Islands: British colonial government of collapse of illegal logging in Somalia, collapse in South Africa Southeast Polynesia collapse in habitability of Henderson human impact on interisland trade Mangareva metaphor of Pitcairn Southern California Southwestern U.S.: agriculture in Anasazi in arroyo cutting in bottom-up management in cannibalism in deforestation in disappearing cultures in dry climate of first humans in housing in prehistory studies of regional integration in water management in Soviet Union, collapse of species, introduced vs. native Stamford Bridge, Battle of starvation Steadman, David Stephens, John Stevenson, Chris Stiller, David Stillwater Mining Company Stonehenge sunk-cost effect sunlight: as energy source and greenhouse gases Sustainable Fisheries Fund Tahiti Taino people Tainter, Joseph technology in oil industry pollution-intensive industries side effects of Teller Wildlife Refuge Tembec timber company Teotihuacán terrorism Third World: cleanup costs in collapsing societies in disease in emigration from environmental problems of exploited by First World nations First World goals in and fisheries food distribution to and forests per-capita impact in population growth in Thomas, Jack Ward Three Gorges Dam, China Thucycides Tibito tephra Tiffany & Co.

 

pages: 368 words: 32,950

How the City Really Works: The Definitive Guide to Money and Investing in London's Square Mile by Alexander Davidson

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accounting loophole / creative accounting, algorithmic trading, asset allocation, asset-backed security, bank run, banking crisis, barriers to entry, Big bang: deregulation of the City of London, capital asset pricing model, central bank independence, corporate governance, Credit Default Swap, dematerialisation, discounted cash flows, diversified portfolio, double entry bookkeeping, Edward Lloyd's coffeehouse, Elliott wave, Exxon Valdez, forensic accounting, global reserve currency, high net worth, index fund, inflation targeting, interest rate derivative, interest rate swap, London Interbank Offered Rate, Long Term Capital Management, margin call, market fundamentalism, Nick Leeson, North Sea oil, Northern Rock, pension reform, Piper Alpha, price stability, purchasing power parity, Real Time Gross Settlement, reserve currency, shareholder value, short selling, The Wealth of Nations by Adam Smith, transaction costs, value at risk, yield curve, zero-coupon bond

Syndicates and insurance companies would pay a first slice of a loss, and would pass the next slice onto a reinsurer. A third slice would be passed to another reinsurer, and the spiral would continue through the market, sometimes winding back to the original insurer or reinsurer, which might take another slice, effectively reinsuring itself. A series of major catastrophes happened. In 1988, the Piper Alpha oil platform caught fire and fell into the North Sea. In 1989, Hurricane Hugo struck Puerto Rico, St Croix, South Carolina and North Carolina and, in the same year, oil tanker Exxon Valdez ran aground off the Alaskan coast. In 1990, there were severe storms across Europe. Lloyd’s Names ended up paying many of the claims. Some loss-making Names alleged that certain members’ agents had known of pending legal actions affecting the syndicates that they advised them to join.

Index 419 fraud 204 9/11 terrorist attacks 31, 218, 242, 243, 254, 257 Abbey National 22 ABN AMRO 103 accounting and governance 232–38 scandals 232 Accounting Standards Board (ASB) 236 administration 17 Allianz 207 Alternative Investment Market (AIM) 44–45, 131, 183, 238 Amaranth Advisors 170 analysts 172–78 fundamental 172–74 others 177–78 Spitzer impact 174–75 technical 175–77 anti-fraud agencies Assets Recovery Agency 211–13 City of London Police 209 Financial Services Authority 208 Financial Crime and Intelligence Division 208 Insurance Fraud Bureau 209 Insurance Fraud Investigators Group 209 International Association of Insurance Fraud Agencies 207, 210, 218 National Criminal Intelligence Service 210 Serious Fraud Office 213–15 Serious Organised Crime Agency 210–11 asset finance 24–25 Association of Investment Companies 167 backwardation 101 bad debt, collection of 26–28 Banco Santander Central Hispano 22 Bank for International Settlements (BIS) 17, 27, 85, 98, 114 bank guarantee 23 Bank of Credit and Commerce International (BCCI) 10, 214 Bank of England 6, 10–17 Court of the 11 credit risk warning 98 framework for sterling money markets 81 Governor 11, 13, 14 history 10, 15–16 Inflation Report 14 inflation targeting 12–13 interest rates and 12 international liaison 17 lender of last resort 15–17 Market Abuse Directive (MAD) 16 monetary policy and 12–15 Monetary Policy Committee (MPC) 13–14 Open-market operations 15, 82 repo rate 12, 15 role 11–12 RTGS (Real Time Gross Settlement) 143 statutory immunity 11 supervisory role 11 Bank of England Act 1988 11, 12 Bank of England Quarterly Model (BEQM) 14 Banking Act 1933 see Glass-Steagall Act banks commercial 5 investment 5 Barclays Bank 20 Barings 11, 15, 68, 186, 299 Barlow Clowes case 214 Barron’s 99 base rate see repo rate Basel Committee for Banking Supervision (BCBS) 27–28 ____________________________________________________ INDEX 303 Basel I 27 Basel II 27–28, 56 Bear Stearns 95, 97 BearingPoint 97 bill of exchange 26 Bingham, Lord Justice 10–11 Blue Arrow trial 214 BNP Paribas 145, 150 bond issues see credit products book runners 51, 92 Borsa Italiana 8, 139 bps 90 British Bankers’ Association 20, 96, 97 building societies 22–23 demutualisation 22 Building Societies Association 22 Capital Asset Pricing Model (CAPM) see discounted cash flow analysis capital gains tax 73, 75, 163, 168 capital raising markets 42–46 mergers and acquisitions (M&A) 56–58 see also flotation, bond issues Capital Requirements Directive 28, 94 central securities depository (CSD) 145 international (ICSD) 145 Central Warrants Trading Service 73 Chancellor of the Exchequer 12, 13, 229 Chicago Mercantile Exchange 65 Citigroup 136, 145, 150 City of London 4–9 Big Bang 7 definition 4 employment in 8–9 financial markets 5 geography 4–5 history 6–7 services offered 4 world leader 5–6 clearing 140, 141–42 Clearing House Automated Payment System (CHAPS) 143 Clearstream Banking Luxembourg 92, 145 commercial banking 5, 18–28 bad loans and capital adequacy 26–28 banking cards 21 building societies 22–23 credit collection 25–26 finance raising 23–25 history 18–19 overdrafts 23 role today 19–21 commodities market 99–109 exchange-traded commodities 101  fluctuations 100 futures 100 hard commodities energy 102 non-ferrous metals 102–04 precious metal 104–06 soft commodities cocoa 107 coffee 106 sugar 107 Companies Act 2006 204, 223, 236 conflict of interests 7 consolidation 138–39 Consumer Price Index (CPI) 13 contango 101 Continuous Linked Settlement (CLS) 119 corporate governance 223–38 best practice 231 Cadbury Code 224 Combined Code 43, 225 compliance 230 definition 223 Directors’ Remuneration Report Regulations 226 EU developments 230 European auditing rules 234–35 Greenbury Committee 224–25 Higgs and Smith reports 227 International Financial Reporting Standards (IFRS) 237–38 Listing Rules 228–29 Model Code 229 Myners Report 229 OECD Principles 226 operating and financial review (OFR) 235– 36 revised Combined Code 227–28 Sarbanes–Oxley Act 233–34 Turnbull Report 225 credit cards 21 zero-per-cent cards 21 credit collection 25–26 factoring and invoice discounting 26 trade finance 25–26 credit derivatives 96–97 back office issues 97 credit default swap (CDS) 96–97 credit products asset-backed securities 94 bonds 90–91 collateralised debt obligations 94–95 collateralised loan obligation 95 covered bonds 93 equity convertibles 93 international debt securities 92–93  304 INDEX ____________________________________________________ junk bonds 91 zero-coupon bonds 93 credit rating agencies 91 Credit Suisse 5, 136, 193 CREST system 141, 142–44 dark liquidity pools 138 Debt Management Office 82, 86 Department of Trade and Industry (DTI) 235, 251, 282 derivatives 60–77 asset classes 60 bilateral settlement 66 cash and 60–61 central counterparty clearing 65–66 contracts for difference 76–77, 129 covered warrants 72–73 futures 71–72 hedging and speculation 67 on-exchange vs OTC derivatives 63–65 options 69–71 Black-Scholes model 70 call option 70 equity option 70–71 index options 71 put option 70 problems and fraud 67–68 retail investors and 69–77 spread betting 73–75 transactions forward (future) 61–62 option 62 spot 61 swap 62–63 useful websites 75 Deutsche Bank 136 Deutsche Börse 64, 138 discounted cash flow analysis (DCF) 39 dividend 29 domestic financial services complaint and compensation 279–80 financial advisors 277–78 Insurance Mediation Directive 278–79 investments with life insurance 275–76 life insurance term 275 whole-of-life 274–75 NEWICOB 279 property and mortgages 273–74 protection products 275 savings products 276–77 Dow theory 175 easyJet 67 EDX London 66 Egg 20, 21 Elliott Wave Theory 176 Enron 67, 114, 186, 232, 233 enterprise investment schemes 167–68 Equiduct 133–34, 137 Equitable Life 282 equities 29–35 market indices 32–33 market influencers 40–41 nominee accounts 31 shares 29–32 stockbrokers 33–34 valuation 35–41 equity transparency 64 Eurex 64, 65 Euro Overnight Index Average (EURONIA) 85 euro, the 17, 115 Eurobond 6, 92 Euroclear Bank 92, 146, 148–49 Euronext.liffe 5, 60, 65, 71 European Central Bank (ECB) 16, 17, 84, 148 European Central Counterparty (EuroCCP) 136 European Code of Conduct 146–47, 150 European Exchange Rate Mechanism 114 European Harmonised Index of Consumer Prices 13 European Union Capital Requirements Directive 199 Market Abuse Directive (MAD) 16, 196 Market in Financial Instruments Directive (MiFID) 64, 197–99 Money Laundering Directive 219 Prospectus Directive 196–97 Transparency Directive 197 exchange controls 6 expectation theory 172 Exxon Valdez 250 factoring see credit collection Factors and Discounters Association 26 Fair & Clear Group 145–46 Federal Deposit Insurance Corporation 17 Federation of European Securities Exchanges 137 Fighting Fraud Together 200–01 finance, raising 23–25 asset 24–25 committed 23 project finance 24 recourse loan 24 syndicated loan 23–24 uncommitted 23 Financial Action Task Force on Money Laundering (FATF) 217–18 financial communications 179–89 ____________________________________________________ INDEX 305 advertising 189 corporate information flow 185 primary information providers (PIPs) 185 investor relations 183–84 journalists 185–89 public relations 179–183 black PR’ 182–83 tipsters 187–89 City Slickers case 188–89 Financial Ombudsman Service (FOS) 165, 279–80 financial ratios 36–39 dividend cover 37 earnings per share (EPS) 36 EBITDA 38 enterprise multiple 38 gearing 38 net asset value (NAV) 38 price/earnings (P/E) 37 price-to-sales ratio 37 return on capital employed (ROCE) 38 see also discounted cash flow analysis Financial Reporting Council (FRC) 224, 228, 234, 236 Financial Services Act 1986 191–92 Financial Services Action Plan 8, 195 Financial Services and Markets Act 2001 192 Financial Services and Markets Tribunal 94 Financial Services Authority (FSA) 5, 8, 31, 44, 67, 94, 97, 103, 171, 189, 192–99 competition review 132 insurance industry 240 money laundering and 219 objectives 192 regulatory role 192–95 powers 193 principles-based 194–95 Financial Services Compensation Scheme (FSCS) 17, 165, 280 Financial Services Modernisation Act 19 financial services regulation 190–99 see also Financial Services Authority Financial Times 9, 298 First Direct 20 flipping 53 flotation beauty parade 51 book build 52 early secondary market trading 53 grey market 52, 74 initial public offering (IPO) 47–53 pre-marketing 51–52 pricing 52–53 specialist types of share issue accelerated book build 54  bought deal 54 deeply discounted rights issue 55 introduction 55 placing 55 placing and open offer 55 rights issues 54–55 underwriting 52 foreign exchange 109–120 brokers 113 dealers 113 default risk 119 electronic trading 117 exchange rate 115 ICAP Knowledge Centre 120 investors 113–14 transaction types derivatives 116–17 spot market 115–16 Foreign Exchange Joint Standing Committee 112 forward rate agreement 85 fraud 200–15 advanced fee frauds 204–05 boiler rooms 201–04 Regulation S 202 future regulation 215 identity theft 205–06 insurance fraud 206–08 see also anti-fraud agencies Fraud Act 2006 200 FTSE 100 32, 36, 58, 122, 189, 227, 233 FTSE 250 32, 122 FTSE All-Share Index 32, 122 FTSE Group 131 FTSE SmallCap Index 32 FTSE Sterling Corporate Bond Index 33 Futures and Options Association 131 Generally Accepted Accounting Principles (GAAP) 237, 257 gilts 33, 86–88 Giovanni Group 146 Glass-Steagall Act 7, 19 Global Bond Market Forum 64 Goldman Sachs 136 government bonds see gilts Guinness case 214 Halifax Bank 20 hedge funds 8, 77, 97, 156–57 derivatives-based arbitrage 156 fixed-income arbitrage 157 Hemscott 35 HM Revenue and Customs 55, 211 HSBC 20, 103 Hurricane Hugo 250  306 INDEX ____________________________________________________ Hurricane Katrina 2, 67, 242 ICE Futures 5, 66, 102 Individual Capital Adequacy Standards (ICAS) 244 inflation 12–14 cost-push 12 definition 12 demand-pull 12 quarterly Inflation Report 14 initial public offering (IPO) 47–53 institutional investors 155–58 fund managers 155–56 hedge fund managers 156–57 insurance companies 157 pension funds 158 insurance industry London and 240 market 239–40 protection and indemnity associations 241 reform 245 regulation 243 contingent commissions 243 contract certainty 243 ICAS and Solvency II 244–45 types 240–41 underwriting process 241–42 see also Lloyd’s of London, reinsurance Intercontinental Exchange 5 interest equalisation tax 6 interest rate products debt securities 82–83, 92–93 bill of exchange 83 certificate of deposit 83 debt instrument 83 euro bill 82 floating rate note 83 local authority bill 83 T-bills 82 derivatives 85 forward rate agreements (FRAs) 85–86 government bonds (gilts) 86–89 money markets 81–82 repos 84 International Financial Reporting Standards (IFRS) 58, 86, 173, 237–38 International Financial Services London (IFSL) 5, 64, 86, 92, 112 International Monetary Fund 17 International Securities Exchange 138 International Swap Dealers Association 63 International Swaps and Derivatives Association 63 International Underwriting Association (IUA) 240 investment banking 5, 47–59 mergers and acquisitions (M&A) 56–58 see also capital raising investment companies 164–69 real estate 169 split capital 166–67 venture capital 167–68 investment funds 159–64 charges 163 investment strategy 164 fund of funds scheme 164 manager-of-managers scheme 164 open-ended investment companies (OEICs) 159 selection criteria 163 total expense ratio (TER) 164 unit trusts 159 Investment Management Association 156 Investment Management Regulatory Organisation 11 Johnson Matthey Bankers Limited 15–16 Joint Money Laundering Steering Group 221 KAS Bank 145 LCH.Clearnet Limited 66, 140 letter of credit (LOC) 23, 25–26 liability-driven investment 158 Listing Rules 43, 167, 173, 225, 228–29 Lloyd’s of London 8, 246–59 capital backing 249 chain of security 252–255 Central Fund 253 Corporation of Lloyd’s 248–49, 253 Equitas Reinsurance Ltd 251, 252, 255–56 Franchise Performance Directorate 256 future 258–59 Hardship Committee 251 history 246–47, 250–52 international licenses 258 Lioncover 252, 256 Member’s Agent Pooling Arrangement (MAPA) 249, 251 Names 248, one-year accounting 257 regulation 257 solvency ratio 255 syndicate capacity 249–50 syndicates 27 loans 23–24 recourse loan 24 syndicated loan 23–24 London Interbank Offered Rate (LIBOR) 74, 76 ____________________________________________________ INDEX 307 London Stock Exchange (LSE) 7, 8, 22, 29, 32, 64 Alternative Investment Market (AIM) 32 Main Market 42–43, 55 statistics 41 trading facilities 122–27 market makers 125–27 SETSmm 122, 123, 124 SETSqx 124 Stock Exchange Electronic Trading Service (SETS) 122–25 TradElect 124–25 users 127–29 Louvre Accord 114 Markets in Financial Instruments Directive (MiFID) 64, 121, 124, 125, 130, 144, 197–99, 277 best execution policy 130–31 Maxwell, Robert 186, 214, 282 mergers and acquisitions 56–58 current speculation 57–58 disclosure and regulation 58–59 Panel on Takeovers and Mergers 57 ‘white knight’ 57 ‘white squire’ 57 Merrill Lynch 136, 174, 186, 254 money laundering 216–22 Egmont Group 218 hawala system 217 know your client (KYC) 217, 218 size of the problem 222 three stages of laundering 216 Morgan Stanley 5, 136 multilateral trading facilities Chi-X 134–35, 141 Project Turquoise 136, 141 Munich Re 207 Nasdaq 124, 138 National Strategy for Financial Capability 269 National Westminster Bank 20 Nationwide Building Society 221 net operating cash flow (NOCF) see discounted cash flow analysis New York Federal Reserve Bank (Fed) 16 Nomads 45 normal market share (NMS) 132–33 Northern Rock 16 Nymex Europe 102 NYSE Euronext 124, 138, 145 options see derivatives Oxera 52  Parmalat 67, 232 pensions alternatively secured pension 290 annuities 288–89 occupational pension final salary scheme 285–86 money purchase scheme 286 personal account 287 personal pension self-invested personal pension 288 stakeholder pension 288 state pension 283 unsecured pension 289–90 Pensions Act 2007 283 phishing 200 Piper Alpha oil disaster 250 PLUS Markets Group 32, 45–46 as alternative to LSE 45–46, 131–33 deal with OMX 132 relationship to Ofex 46 pooled investments exchange-traded funds (ETF) 169 hedge funds 169–71 see also investment companies, investment funds post-trade services 140–50 clearing 140, 141–42 safekeeping and custody 143–44 registrar services 144 settlement 140, 142–43 real-time process 142 Proceeds of Crime Act 2003 (POCA) 211, 219, 220–21 Professional Securities Market 43–44 Prudential 20 purchasing power parity 118–19 reinsurance 260–68 cat bonds 264–65 dispute resolution 268 doctrines 263 financial reinsurance 263–64 incurred but not reported (IBNR) claims insurance securitisation 265 non-proportional 261 offshore requirements 267 proportional 261 Reinsurance Directive 266–67 retrocession 262 types of contract facultative 262 treaty 262 retail banking 20 retail investors 151–155 Retail Prices Index (RPI) 13, 87 264  308 INDEX ____________________________________________________ Retail Service Provider (RSP) network Reuters 35 Royal Bank of Scotland 20, 79, 221 73 Sarbanes–Oxley Act 233–34 securities 5, 29 Securities and Futures Authority 11 self-regulatory organisations (SROs) 192 Serious Crime Bill 213 settlement 11, 31, 140, 142–43 shareholder, rights of 29 shares investment in 29–32 nominee accounts 31 valuation 35–39 ratios 36–39 see also flotation short selling 31–32, 73, 100, 157 Society for Worldwide Interbank Financial Telecommunications (SWIFT) 119 Solvency II 244–245 Soros, George 114, 115 Specialist Fund Market 44 ‘square mile’ 4 stamp duty 72, 75, 166 Sterling Overnight Index Average (SONIA) 85 Stock Exchange Automated Quotation System (SEAQ) 7, 121, 126 Stock Exchange Electronic Trading Service (SETS) see Lloyd’s of London stock market 29–33 stockbrokers 33–34 advisory 33 discretionary 33–34 execution-only 34 stocks see shares sub-prime mortgage crisis 16, 89, 94, 274 superequivalence 43 suspicious activity reports (SARs) 212, 219–22 swaps market 7 interest rates 56 swaptions 68 systematic internalisers (SI) 137–38 Target2-Securities 147–48, 150 The Times 35, 53, 291 share price tables 36–37, 40 tip sheets 33 trading platforms, electronic 80, 97, 113, 117 tranche trading 123 Treasury Select Committee 14 trend theory 175–76 UBS Warburg 103, 136 UK Listing Authority 44 Undertakings for Collective Investments in Transferable Securities (UCITS) 156 United Capital Asset Management 95 value at risk (VAR) virtual banks 20 virt-x 140 67–68 weighted-average cost of capital (WACC) see discounted cash flow analysis wholesale banking 20 wholesale markets 78–80 banks 78–79 interdealer brokers 79–80 investors 79 Woolwich Bank 20 WorldCom 67, 232 Index of Advertisers Aberdeen Asset Management PLC xiii–xv Birkbeck University of London xl–xlii BPP xliv–xlvi Brewin Dolphin Investment Banking 48–50 Cass Business School xxi–xxiv Cater Allen Private Bank 180–81 CB Richard Ellis Ltd 270–71 CDP xlviii–l Charles Schwab UK Ltd lvi–lviii City Jet Ltd x–xii The City of London inside front cover EBS Dealing Resource International 110–11 Edelman xx ESCP-EAP European School of Management vi ICAS (The Inst. of Chartered Accountants of Scotland) xxx JP Morgan Asset Management 160–62 London Business School xvi–xviii London City Airport vii–viii Morgan Lewis xxix Securities & Investments Institute ii The Share Centre 30, 152–54 Smithfield Bar and Grill lii–liv TD Waterhouse xxxii–xxxiv University of East London xxxvi–xxxviii

 

pages: 753 words: 233,306

Collapse by Jared Diamond

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clean water, colonial rule, correlation does not imply causation, cuban missile crisis, Donner party, European colonialism, Exxon Valdez, illegal immigration, job satisfaction, means of production, new economy, North Sea oil, Piper Alpha, polynesian navigation, prisoner's dilemma, South Sea Bubble, statistical model, Stewart Brand, Thomas Malthus, trade route, transcontinental railway, unemployed young men

However, in conversa-tions over the last six years with dozens of lower-level as well as senior Chevron employees, employees of other oil companies, and people outside the oil industry, I have come to realize that many other factors as well have contributed to these environmental policies. One such factor is the importance of avoiding very expensive environmental disasters. When I asked a Chevron safety representative who happened to be a bird-watcher what had prompted these policies, his short answer was: "Exxon Valdez, Piper Alpha, and Bhopal." He was referring to the huge oil spill from the running aground off Alaska of Exxon's oil tanker the Exxon Valdez in 1989, the 1988 fire on Occidental Petroleum's Piper Alpha oil platform in the North Sea that killed 167 people (Plate 33), and the 1984 escape of chemicals at Union Carbide's Bhopal chemical plant in India that killed 4,000 people and injured 200,000 (Plate 34). These were three of the most notorious, best-publicized, and most expensive industrial accidents of recent times.

., for not requiring mining companies to clean up, or for continuing to buy wood products from non-sustainable logging operations. In the long run, it is the public, either directly or through its politicians, that has the power to make destructive environmental policies unprofitable and illegal, and to make sustainable environmental policies profitable. The public can do that by suing businesses for harming them, as happened after the Exxon Valdez, Piper Alpha, and Bhopal disasters; by preferring to buy sustainably harvested products, a preference that caught the attention of Home Depot and Unilever; by making employees of companies with poor track records feel ashamed of their company and complain to their own management; by preferring their governments to' award valuable contracts to businesses with a good environmental track record, as the Norwegian government did to Chevron; and by pressing their governments to pass and enforce laws and regulations requiring good environmental practices, such as the U.S. government's new regulations for the coal industry in the 1970s and 1980s.

 

pages: 307 words: 94,069

Switch: How to Change Things When Change Is Hard by Chip Heath, Dan Heath

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Atul Gawande, Cass Sunstein, clean water, cognitive dissonance, corporate social responsibility, en.wikipedia.org, fundamental attribution error, impulse control, medical residency, Piper Alpha, placebo effect, publish or perish, Richard Thaler, shareholder value, Silicon Valley, Steve Jobs

Coming from backgrounds deeply steeped in traditional psychiatric wisdom, they firmly believe that people cannot be treated unless they are motivated for treatment.” And being “motivated” required a rock-bottom crisis. Speaking of the perceived need for crisis, let’s talk about the “burning platform,” a familiar phrase in the organizational change literature. It refers to a horrific accident that happened in 1988 on the Piper Alpha oil platform in the North Sea. A gas leak triggered an explosion that ripped the rig in two. As a reporter wrote, “Those who survived had a nightmarish choice: to jump as far as 150 ft. down into a fiery sea or face certain death on the disintegrating rig.” Andy Mochan, a superintendent on the rig, said, “It was fry or jump, so I jumped.” He was eventually saved by a rescue mission involving NATO and the Royal Air Force.

 

A Sea in Flames: The Deepwater Horizon Oil Blowout by Carl Safina

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big-box store, clean water, cognitive dissonance, energy security, Exxon Valdez, hydraulic fracturing, North Sea oil, oil shale / tar sands, oil shock, Piper Alpha, Ronald Reagan

By the end of 1985, when Reagan’s administration and Congress have allowed tax credits for solar homes to lapse, the dream of a solar era has faded. Solar water heating has gone from a billion-dollar industry to peanuts overnight; thousands of sun-minded businesses have gone bankrupt. “It died. It’s dead,” says one solar-energy businessman of the time. “First the money dried up, then the spirit dried up.” 1988. Occidental Petroleum’s North Sea production platform Piper Alpha produces about a tenth of all North Sea oil and gas. When it explodes on July 6, it kills 167 men. March 1989. The 987-foot supertanker Exxon Valdez has just been loaded with 50 million gallons of crude oil piped across the vastness of Alaska from the North Slope to a terminal near the tiny village of Valdez, on Prince William Sound. After altering course to avoid ice, the crew fails to get the ship to respond to efforts to resume course.

 

pages: 554 words: 168,114

Oil: Money, Politics, and Power in the 21st Century by Tom Bower

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Ayatollah Khomeini, banking crisis, bonus culture, corporate governance, credit crunch, energy security, Exxon Valdez, falling living standards, fear of failure, forensic accounting, index fund, interest rate swap, kremlinology, LNG terminal, Long Term Capital Management, margin call, Mikhail Gorbachev, millennium bug, new economy, North Sea oil, offshore financial centre, oil shale / tar sands, oil shock, passive investing, peak oil, Piper Alpha, price mechanism, price stability, Ronald Reagan, shareholder value, short selling, Silicon Valley, sovereign wealth fund, transaction costs, transfer pricing, éminence grise

Enterprise had been created in 1983 by a Conservative government ideologically opposed to the state producing oil and gas, and keen, regardless of Britain’s long-term energy security, to immediately receive a large amount of cash. Convinced that there would always be a surplus of oil supplied by BP and Shell, Margaret Thatcher privatized the North Sea’s reserves in 1986, just as prices crashed. This was followed in July 1988 by an explosion on the Piper Alpha platform, killing 167 workers. By then, civil servants had fled from the shrinking Department of Energy. Floundering without any considered policy, over the following years the government repeatedly altered the tax rates, replaced ministers of energy and changed policies. “NIMTO” — Not in My Term of Office — became a Whitehall spoonerism describing deliberate inactivity. Compared to other oilfields, North Sea costs were high — $5 a barrel compared to $2 in Indonesia.