Sunday, November 2, 2008

Goldman Sachs ready to hand out £7bn salary and bonus package... after its £6bn bail-out

By Simon Duke

Goldman Sachs HQ

U.S. investment bank Goldman Sachs HQ which has set aside £7bn for bonuses and salaries this year

Goldman Sachs is on course to pay its top City bankers multimillion-pound bonuses - despite asking the U.S. government for an emergency bail-out.

The struggling Wall Street bank has set aside £7billion for salaries and 2008 year-end bonuses, it emerged yesterday.

Each of the firm's 443 partners is on course to pocket an average Christmas bonus of more than £3million.

The size of the pay pool comfortably dwarfs the £6.1billion lifeline which the U.S. government is throwing to Goldman as part of its £430billion bail-out.

As Washington pours money into the bank, the cash will immediately be channelled to Goldman's already well-heeled employees.

News of the firm's largesse will revive the anger over the 'rewards for failure' culture endemic in the world of high finance.

The same bankers who have brought the global economy to its knees seem to pocketing the same kind of rewards they got during the boom years.

Gordon Brown has vowed to crack down on the culture of greed in the City as part of his £500billion bail-out of the UK banking industry.

But that won't affect the estimated 100 London partners working at Goldman Sachs's London headquarters.

The firm - known as Golden Sacks for the bumper bonuses it pay its top bankers - is expected to cut the payouts by a third this year. However, profits are

falling much faster. Earnings have plunged 47 per cent so far this year amid the worst financial crisis since the Great Depression.

This has wiped more than 50 per cent off the company's market value.


The news comes after it was revealed that even bankers working for collapsed Wall Street giant, Lehman Brothers, could receive huge payouts.

Its 10,000 U.S. staff are expected to share a £1.5billion bonus pool. The payouts were agreed as part of the rescue takeover of Lehman's American arm by Barclays last month.

The blockbuster handouts caused consternation among London employees of the firm, many of whom have now lost their jobs.

Even workers at the nationalised Northern Rock will scoop bonuses worth up to £50million over the next three years.

The extraordinary handouts include more than £400,000 for Rock's boss, Gary Hoffman, who is likely to become Britain's best-paid public sector worker.

The majority of Northern Rock's 4,000 workers will receive four separate bonus payments - the first of

which will be made next March. Staff will get an extra 10 per cent on top of their basic salary.

Lloyds TSB also intends to pay its employees bonuses despite taking a £5.5 billion emergency cash injection from the taxpayer.

News of Goldman's bonus plan came as the firm promoted 92 of its bankers to partner level. A quarter are based in Fleet Street, London.

Partnership is the holy grail of the investment banking world as the exclusive club shares around a fifth of the firm's total bonus pool.

New York Attorney General Andrew Cuomo last night warned that Wall Street firms taking government-money risk breaking the law if they hand the cash straight back to employees.

Cash-strapped workers are being penalised by pay rises which are far below the soaring cost of living, research reveals today.

Despite inflation soaring to a 16-year-high of 5.2 per cent, the average worker got a pay rise of just 3.8 per cent in September.

The research, from the pay specialists Incomes Data Services, highlights the financial problems facing millions of workers.

Most of their household bills, particularly food and fuel, are rocketing by up to 35 per cent. However, their meagre pay rise does not begin to cover the extra cost.

The majority of the 50 pay settlements investigated by IDS were in the private sector covering around 1.1million employees.

They range from just 2 per cent for workers at the BBC to 5.3 per cent for workers at a firm of dockyard workers.

Incomes Data Services warned pay rises are likely to fall even further over the coming year as inflation is expected to drop sharply.

Economists predict inflation will fall below the Government's 2 per cent target next year.

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China’s Tainted-Food Inquiry Widens Amid Worries Over Animal Feed

Andy Wong/Associated Press

Eggs were sorted in Beijing. Tests earlier this week found that eggs from three Chinese provinces were tainted with melamine.

By DAVID BARBOZA

SHANGHAI — Chinese regulators said Friday that they were widening their investigation into contaminated food amid growing signs that the toxic industrial chemical melamine has leached into the nation’s animal feed supplies, posing health risks to consumers throughout the world.

The announcement came after food safety tests earlier this week found that eggs produced in three provinces in China were contaminated with melamine, which is blamed for causing kidney stones and renal failure in infants. The tests have led to recalls of eggs and to consumer warnings.

The reports are another serious blow to China’s agriculture industry, which is already struggling to cope with its worst food-safety scandal in decades after melamine-tainted milk supplies sickened over 50,000 children, caused at least four deaths and led to global recalls of goods produced with Chinese dairy products earlier this fall.

The milk crisis is fueling worldwide concerns about food from China. In Hong Kong, food safety officials announced this week that they would begin testing a broader variety of foods for melamine, including vegetables, flour and meat products. On the mainland, Shanghai and other cities are moving aggressively to test a wide variety of food products for melamine, including fish and livestock feed, according to the state-run news media, which in recent days has carried multiple reports on melamine in animal feed.

In the United States, worried consumers frantically sent e-mail messages to one another on Thursday and Friday about the possibility of melamine-tainted Halloween treats following a spate of news reports that some candies and chocolates made in China or made with Chinese ingredients had tested positive for high levels of melamine or had been destroyed in recent weeks as a cautionary measure.

On a list by the Food and Drug Administration of products that may be tainted with melamine, White Rabbit Candies were the only item that might be handed out on Halloween. Earlier this month, the Canadian Food Inspection Agency recalled 30-ounce containers of Sherwood Brands Pirate’s Gold Milk Chocolate Coins.

A spokeswoman for the F.D.A. said that the agency was constantly adjusting a nationwide sampling of products being tested for melamine as new potential threats were brought to its attention. The F.D.A. and state and local authorities have been sampling products in Asian food markets across the United States since mid-September for traces of melamine.

“Thus far, most of F.D.A.’s testing of milk and milk-derived ingredients and products from China focused on human foods, but have included animal feeds as well,” said the spokeswoman, Stephanie Kwisnek. “The F.D.A. is currently re-evaluating its overall approach to keeping these products out of the U.S. market.”

Asian food safety experts warned consumers not to grow too alarmed over the finding of tainted eggs because they contained much lower concentrations of melamine than the powdered baby formula that caused such widespread problems in China.

Hong Kong food safety officials said a child would have to eat about two dozen of the eggs in a single day to become ill.

Still, if eggs, milk and animal feed are tainted, there is the specter of an even wider array of foods that could come under scrutiny, including pork, chicken, bread, cakes, seafood and candy.

China is also one of the world’s largest exporters of food and food ingredients, including meats, seafood, beverages and vitamins.

Melamine was banned as an animal feed additive in China in July 2007. And last year, United States regulators put tough restrictions on the amount of melamine allowed in food products.

But interviews on Friday and over the past year with several Chinese chemical dealers who sell melamine suggested that melamine scrap, the substantially cheaper waste left over after producing melamine, continued to be added to animal and fish feed.

“I heard some melamine dealers still sell to animal feed producers,” said Qin Huaizhen, manager at the Gaocheng Kaishun Chemical Company in the city of Shijiazhuang, though he insisted that he had never done so. “In Shandong Province, many animal feed manufacturers buy melamine scrap.”

Two other melamine dealers in eastern and southern China said that only after the recent dairy scandal did government regulators begin to closely monitor the sale of melamine to animal feed producers.

Kidney experts said there had been very little research into how melamine disrupts kidney function. Dr. Fredric L. Coe, a professor of medicine at the University of Chicago, said that melamine is likely to be concentrated in the kidneys in the form of crystals that the body cannot dissolve. Those crystals clog many of the kidney’s nearly one million nephrons, which are tiny filtering units, Dr. Coe said. Urination slows or ceases, and patients suffer acute kidney failure, he said.

Some food safety experts are perplexed as to how melamine was allowed to seep into China’s food supplies after melamine-tainted pet-food exports from China were blamed last year for sickening dogs and cats in the United States, touching off international trade and food safety disputes between the countries.

“A year ago, everybody should have been in a complete panic about it and done something then,” said Marion Nestle, a professor of food studies and public health at New York University and the author of “Pet Food Politics: The Chihuahua in the Coal Mine.” “Someone should have required that melamine not be in any food product.”

The pet food case led to a vast recall in the United States and in other parts of the world, and it also incited a lengthy food safety crackdown in China, with regulators boasting that they had closed down thousands of illegal or substandard food factories and slaughterhouses.

Still, the Chinese government never made clear last year or even this year how extensively it had tested its own food and feed supply for melamine, even though melamine dealers acknowledged that it was common to sell melamine scrap to food and feed producers.

In the case of the tainted dairy, Chinese investigators have arrested dozens of suspects and have accused a group of rogue milk and melamine dealers of intentionally adding melamine to milk supplies as cheap filler in order to save money.

High-ranking government officials, including the head of the nation’s quality watchdog, have been fired in the wake of the recalls, and Beijing has acknowledged that “lax regulation” contributed to the scandal.

Similarly, last year, regulators in Beijing largely blamed a pair of small exporters for the pet food debacle. Regulators said the exporters had shipped feed or feed ingredients contaminated with melamine in order to save money and to cheat the buyers.

Beijing also insisted its food safety problems were exaggerated, perhaps partly as a protectionist ploy to slow the boom in Chinese imports.

But several farmers and melamine scrap dealers said in interviews last year that melamine had been used for years in animal feed, particularly fish feed. Many melamine producers said they believed that melamine scrap was nontoxic and would not be harmful to animals or humans.

Melamine dealers say the government crackdown on the sale to feed producers occurred only this year, after Sanlu Group announced that its powdered infant milk formula was tainted with melamine. That announcement, which came in September, set off a nationwide recall and government announcements that other major dairy brands were also selling melamine-contaminated milk.

“Before the Sanlu scandal, we were not banned from selling melamine to anyone” Niu Qinglin, manager of the Hebei Jinglong Fengli Chemical Company, said in a telephone interview on Friday. “I had heard melamine dealers sell melamine to animal feed companies and food companies. It was common before the Sanlu scandal.”

Mr. Niu said, however, that he never sold melamine or melamine scrap to food or feed producers. And he noted that regulators had moved in on the trade. “Now,” he said, “the government regulates that melamine cannot be sold to any animal feed manufacturers or food processing companies.”

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Congo cease-fire holding, U.S. diplomat says

(CNN) -- Both sides in the Congo rebel fighting that has displaced thousands of people seem committed to maintaining the days-old cease-fire, the top U.S. diplomat for Africa said Saturday.

Children eat bread and porridge at a camp for displaced people 12 kilometers north of Goma in Congo.

Children eat bread and porridge at a camp for displaced people 12 kilometers north of Goma in Congo.

Assistant Secretary of State Jendayi Frazer, in an interview with CNN International, was asked whether troops of the Democratic Republic of Congo and followers of rebel Tutsi General Laurent Nkunda were intent on disengaging their forces.

"So far, yes," Frazer said from Kigali, Rwanda, one of Congo's neighbors.

"I think we're starting to move down a political track, but I certainly do think that it's very fragile," she said.

Frazer's comments came on a day when the United Nations and other relief agencies delivered food and water to a refugee camp north of Goma, where Nkunda established a narrow "humanitarian corridor" after the cease-fire started Wednesday.

Tens of thousands of hungry people scrambled and fought Saturday for their first meal in several days.

Foreign Affairs Correspondent Jonathan Miller of Britain's Channel 4 videotaped the "complete pandemonium" in the Kabati camp for displaced persons about 10 miles north of Goma, where he said people were "desperate, scared, hungry."

In one area, aid workers were handing out biscuits -- but only to children.

"You see how desperate the needs are. People haven't eaten in several days, since they fled Monday and Tuesday. It's a drop in the ocean," said an unnamed aid worker.

There were thousands of people beyond the camp that aid workers were unable to reach, the worker said.

A woman at the camp told Miller: "Since I left my home village ... I haven't eaten anything. We can't go back home because we fear those who forced us to flee. They're killing us, and they're raping the women."

The Kabati camp's population grew from 1,000 to about 50,000 over a few days this week as people fled the advance of rebel soldiers.

The United Nations' refugee agency estimated Friday that 1 million people had been displaced by the recent fighting.

Getting Nkunda's National Congress for the Defense of the People back into a political process, ensuring regional and international cooperation and enforcing the cease-fire are most important to returning eastern Congo to stability, Frazer said Saturday.

Both sides need to return to promises made in peace agreements signed in 2007 and early 2008 in Nairobi, Kenya, and Goma, capital of North Kivu province, according to Frazer.

Under the Nairobi accord, the Congolese government, among other things, agreed to rout Rwandan Hutu extremists who fled to eastern Congo after the Rwandan genocide of 1994.

The Tutsi government in Rwanda, in turn, is being pressured to stop supporting the Congolese rebels in Rwanda.

Frazer and diplomats from Britain and France have been shuttling between Goma and Kigali, meeting this weekend with leaders to determine how a peace process can get back on track.

British Foreign Secretary David Miliband was in Congo's capital, Kinshasa, with his French counterpart, Bernard Kouchner. He said of the humanitarian crisis, "It is essential it ends immediately. There is only a political solution to this." Video Watch Miliband respond to questions about the crisis »

France holds the rotating presidency of the European Union, which is weighing its options, officials have said.

"We're not at the moment looking at adding British troops to Congo" but want to be sure the 17,000 U.N. troops in the country are deployed most effectively, Miliband said.

Earlier Saturday, British Prime Minister Gordon Brown also stressed the need for a political solution.

"My worry is about the thousands of people being displaced at the moment by the violence that is taking place," he said in a statement from Britain's Foreign Office.

Britain's Africa minister, Lord Malloch-Brown, did not rule out the use of EU troops in the region.

He told BBC radio, "I think we've certainly got to have it as an option, which is on the table and developed if we need it, but frankly the first line of call should be deployment of the U.N.'s own troops from elsewhere in the country ... but we have to have plans. If all else fails, we cannot stand back and watch violence erupt."

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