Dally Mall, Monday, December 31, 2007 VI Page 63

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file after leaving otl'ice, forfear ofmuddying the mone-tary waters, Greenspan hasdone no such thing.

As a result, not only mustcurrent Fed chairman BenBernanke steer the USthrough its greatest eco-nomic threat for genera-tions, but he must do sowhile the man partlyresponsible seems deter-mined to make mattersworse with a torrent ofapocalyptic predictions.Greenspan ratcheted the

doom up another notchthis month when he warnedthe chances of a US reces-sion have increased Jrom30pe to 50pe.He went on to claim

America faces an incipientthreat of stagflation, inwhich near-zero growthcouples with soaring prices.Bernanke must have read

these headlines with some-thing approaching blindfury. Central bankers don'thabitually predict reces-sions, as such P£!~El~~siescan become self- . g.

GREENSPANwould never havemade such ableak claim when

he headed the Fed - on thecontrary, he prided himselfin his ability to obfuscate.Instead of grandstanding,

Greenspan should beengaged in a period of over-due reflection.The low inflation seen in

the 1990s and early part ofthis decade lulled manycentral bankers into a-falsesense of security.As Bank of England mar-

kets chief Paul Tucker saidin a speech this month, pol-icy makers must nowquickly learn the lessons ofthe credit crunch.How could a period of

apparent stability give wayso suddenly to a financialcataclysm?In a direct challenge to

Greenspan's philosophy,Tucker said it is 'distinctlyuncomfortable' for centralbankers to mop up themess after an asset bubblebursts, rather than trying toprevent it in the first place.I have a proposal forGreenspan: stop behavinglike the economic equivalentofMick Jagger, immersed ina perpetual world tour, andhead instead to the ivorytowers of academia.There he could devote his

time to undertaking a frankand thorough examinationof his policy record - wartsand all. Others are alreadydoing so.

Toxic aftermathof Greenspan'stime at the helmFOR a man once

hailed by GordonBrown as 'theworld's greatesteconomist', Alan

Greenspan's legacy islooking pretty tattered.America's property bub-

ble built up on the formerUS Federal Reserve chair-man's watch.His mantra - defiantly

reiterated in his self-con-gratulatory memoirs - wasto let asset bubbles burstand then sweep up thedebris afterwards.

This led him to keep ratestoo low in the late 1990seven as the internet boomled to massive over-invest-ment in tech and telecomsand the stock market sky-rocketed.He then responded to the

dot-com crash in the earlypart of this decade by slash-inglnterest rates to 1pc.This was ostensibly done

to prevent deflation (nevera genuine threat), but itstoked the fires fuelling aproperty boom that turnedmto a global economicmenace.Coupled with these mon-

etary policy errors were anenthusiasm for financialinnovations such as creditderivatives and a steadfastdefence of slack regulation.Credit derivatives were

supposed to distribute riskmore effectively around thefinancial system, but haveended up doing no suchthing.Instead, they were used to

make wild bets on sub-prime loans advanced toAmericans who couldn'tafford them.Greenspan failed to spot

the looming threat posedby sub-prime, ignoringwarnings from his late Fedcolleague Edward Gramlichas many as seven years ago.Instead he extolled the

benefits of extending thedream of home ownershipto poorer citizens, whilebrushing aside calls forthem to be better protectedfrom predatory lenders.Today losses stemming

from defaultinl: sub-primeloans are heading towards£IOObn,with no end in sight.Greenspan failed to rein

in the excesses of the worstspeculative orgy on WallStreet since the 1920s. Tothis must now be added atoxic epitaph.Paid vast sums for his

speeches, the octogenarianeconomist has carped fromthe sidelines ever since hisretirement.Whilecentral bankers have

traditionally kept a lowpro-

A CHILLwind is blowingthrough the corridors ofRoyal Dutch Shell as theoil titan gears up for anaggressive cost-cuttingexercise.Some 3,200positions

could be outsourced toexternal providers as theAnglo-Dutch firm slashesits information technologybudget, according to anemail from a Shell stafferdisclosed by 'gripe site'royaldutchshellplc.com.Financial jobs are also

set to be shed as Shellreduces cross-borderoverlaps and shuntsworkers into a handful ofmajor centres.A spokesman refused to

discuss job numbers butconfirmed Shell is aimingfor £250m a year of costsavings, including byoutsourcing a 'substan-tial' chunk of its IT divi-sion.Chief executive Jeroen

van der Veer has beentrimming fat as he grap-ples with the rising costof production.

Shell to axe3,200jobs

invests in young companiesmaking anything from Cor-nish pasties to hot air cur-tains. Its shares have beenlittle changed over twoyears and are now 8014p,valuing it at £38m.Chairing a low profile fund

must be a welcome respiteforRidley,49,after his annushorribilis at Northern Rock.His 2007chairman's state-

ment for Northern 2 pro-claims 'we have a sound bal-ance sheet'. A welcomereassurance.

Atlantic can afford may be critical toyour lifestyle and if that is the case youshould--considerworking elsewhere.'Rising tensions at Virgin come at a

critical time for airline passengers asworkers at Heathrow operator BAAgear up for industrial action.Crunch talks are looming this week

after thousands of Unite members atthe seven BAA-owned airports votedto walk out over a decision by its Span-ish owners to close the company's finalsalary pension scheme to new entrants.

doctoral thesis was on themating habits of pheasants,Ridley is the author of sev-eral books. One>-'The RedQueen: Sex and the Evolu-tion of Human Nature', sug-gests sex developed as a wayof keeping ahead of 'con-stantly mutating predators'.Sadly it may not work

against hedge funds orshort-sellers.Northern 2VCT,one offive

funds run by NVM, a New-castle venture capital firmwith a good track record,

unusual given he is no longer involvedin day-to-day operations.He said: 'There comes a time in any

negotiation when a good managementteam has to draw a line in the sand andI agree with them that time has come.'To go further would result in unac-

ceptable risks and would set a danger-ous precedent to the company as awhole. Itwould be irresponsible of ourmanagement and they, rightly, are notgoing to take that risk.'For some ofyou more pay than VlI'gin

In happier times: Sir Richard Branson with Virgin Atlantic cabin crew

HSBC faces renewed pressure to overhaul its strategyafter a powerful US pension fund tabled a set of swinge-ing demands.The UK bank was told by investment giant Calpers to

address its share-price underperformance, refocus thegroup and set testmg new financial targets by July 1.Calpers has been quietly backing activist shareholder

Knight Vinke, which has become a major thorn in themanagement's side during 2007.But its decision to publicly intervene will create an

additional headache for chairman Stephen Green andchief executive Michael Geoghegan.

THESerious Fraud OffIce Is stepping up Its probe IntoUKcompanies Involved In the Iraqi oll-for-food pro-gramme.

Drug giants GlaxoSmlthKllne and Astraleneca havebeen ordered to hand over confidential documentsrelated to the SFOInvestigation of alleged bribes paidto the regime of deceased tyrant Saddam Hussein.

A spokesman for the SFOsaid It had served requestson 'a number of companies' In December, as part of a'deepening' of Its probe. Glaxo and Astra confirmedthey have received demands for documents. Theyhave both denied any wrongdoing.

The programme allowed Iraq to sell 011to buy foodand medicines, but Hussein's regime used It as anopportunity to demand kickbacks.

More than 2,200 companies were named In a 2005report by former USFederal Reserve chairman PaulVolcker.

SFOprobes drug giants

HSBCunder pressure

Ridley quit the Rock onOctober 19after three yearsas chairman, latterly at£315,000 a year. At theNorthern 2 trust, which hasa £43minvestment portfolio,he collects a modest £15,000,though he also holds 217,000shares which offer himattractive tax savings.venture Capital Trust(VCT) investors get incometax relief at 30pc, a valuableperk for top rate taxpayers.Itused to be 40pc.A brilliant scientist whose

FORMER Northern Rockchairman Matt Ridley istapping investors for cashfor another business propo-sition.Ridley, who quit the Rock

in October after the bank'sdramatic meltdown, is backin the market to raisemoney. This time it is amodest £16m share offer byNorthern 2, a venture capi-tal trust he chairs.

By irian O'Connor

By sam fleming and Ray Massey

SIR RICHARD Branson dramaticallyintervened in a standoff with VirginAtlantic staff, warning their paydemands could create a 'dangerousprecedent' threatening the company'sfuture.The bearded tycoon wrote a hard-hit-

ting letter to all 4,800 of the long-haulfirm's cabin crew pointing out historyis 'littered with carriers that have gonebust' because of disputes between staffand management.Branson, whose mother was one of

the world's first air hostesses, saidemployees insisting on bigger wagepackages should quit rather thanendanger the airline.Virgin Atlantic is braced for two 48-

hour stoppages next month, on Janu-ary 9th and 16th. The carrier haspledged to operate nine out of 10nights as scheduled, cancelling threeservices on each strike day. Passengerson those flights have already beennotified.Virgin Atlantic offered cabin crew an

8.3pc two-year wage package, but1,400 employees voted to walk outeven after Unite union bosses backedthe deal.Branson's personal intervention is

MERRILL Lynch boss JohnThain was reported to be intalks with Chinese and MiddleEastern investors over theweekend seeking new injec-tions of capital.The bank raised £3.8bn earlier

this month, partly by sellingshares to Singapore's invest-ment firm Temasek, after suf-fering massive sub-primerelated losses.But that capital infusion may

have been insufficient becauseof the scale of the hits the WallStreet brokerage has suffered.A spokeswoman declined tocomment.A number of leading banks

have been forced to beginvestors for cash after makingunwise bets on America's mort-gage market.

Rock's ex-chair taps market

This newspaper adheres to tile system ofself-regulation set out In tile Editors' Codeof Practice overseen by the PressComplaints Commission - a copy ofwhlchcan be found at www.pec.org.uk

Merrill mightneed more cash

Sunday tipsSUNDAYTIMES:Flltronlc, Ari-com, AVlva, Berkeley Group,LoglcaCMG,Hammerson, Gall-form, GlaxoSmlthkllne.

Sir Richard swoops-nto Virgin dispute

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