People in glass houses should throw more stones

Some glass houses are more fragile than others – in some, it seems you can throw bricks with impunity. In the relatively trivial and brittle glass house of UK television, Angus Deayton has discovered belatedly that the authorities take a somewhat sanctimonious view of those who are paid to throw stones and who choose to get stoned while they’re at it.

The details of Deayton’s nasal habits – and those of a good deal of the rest of his body – have occupied hectares of newsprint over the past fortnight. Meanwhile, the rather more important glass house of the US financial regulatory environment appears to be one in which boulders can be lobbed around with impunity – and one that we take little or no notice of.

I know the comparison is not a sound one. The majority of the British population may be concerned with the revelations contained within a weathergirl’s autobiography or the outcome of a royal butler’s court case, but no one has, as yet, threatened us with a nuclear weapon. When they do, the US and the way it conducts its business will have our undivided attention.

Until that time, the British newspapers will approach their work accordingly. Royals and rumpy-pumpy – preferably both together – will trump any of the serious and economy-threatening peccadilloes of the US markets.

It is, nevertheless, the case that while we have oo-ed and ah-ed at the firework displays of Deayton and his co-celebrities in sleaze, events have been unfolding on the other side of the Atlantic that have arguably been of greater import to our wellbeing. They have also contained elements of far greater hypocrisy and, far more seriously, crime.

Allow me to list some of the events that have been occurring at the other end of the nursery from our minor-celebrity glass house. You will recall that, in the aftermath of the Enron and WorldCom scandals and collapses, President George W Bush promised to hunt down the perpetrators of corporate crime in the US like dogs.

He seemed to adopt the same vocabulary and tone as deployed in the “war against terrorism”. Executives were paraded in hand-cuffs. Nothing short of regime change at the top of corrupt US corporations would apparently satisfy him.

Since then, those of us who have continued to peer in through the opaque glass of American regulation have had cause to wonder whether Bush has been constrained in his corporate crusade by a United Nations resolution. Because the manner in which the US’s financial markets have conducted themselves has managed, over the past ten days or so, to make them look about as sleazy as B-list celeb caught in clip-joint with his trousers around his ankles and half the illicit output of Columbia up his nose.

Take last Friday. The landmark anti-trust ruling on Microsoft was leaked to the equities markets a good two hours before the end of trading, meaning that the software leviathan’s shares rose on the back of what amounted to massive insider dealing. It was, in effect, institutional insider trading.

The deal struck between Microsoft and the federal authorities was highly beneficial to the company – investors had reason to be delighted by it. Some of them must have been even more delighted to have the opportunity to buy the shares ahead of any out-of-hours market announcement.

Now, Microsoft’s Croesus-like boss, Bill Gates has been, for the protracted period of these anti-trust inquiries, something of a hate-figure for powerful elements within the US computer industry, which wanted to see his near-monopoly status torn down.

But, if there’s one thing that American investors like more than breaking up uncompetitive practices, it’s making money. It’s not exaggerating to say that insider trading on Wall Street has been institutionalised.

Not so long ago, the US markets pretended to be shocked that some investment banks, such as Citigroup and Goldman Sachs, appeared routinely to be promoting to retail investors shares in companies that they privately considered to be “dogs” (or rather smellier similes).

The consequent regulatory deal that was being cut last week by New York attorney-general Eliot Spitzer is a complicated and self-serving proposal under which the banks that caused the problem in the first place get to dictate how it is to be resolved. And that resolution turns out to be some fairly cosmetic promotion of “independent research” alongside the banks’ own research.

Spitzer is said to have sidelined the US’s chief financial regulator, the Securities and Exchange Commission’s Harvey Pitt. This gentleman recently tried to appoint a new head of the US Accounting Standards Board – a fairly important role in the wake of Enron – but the accountancy profession somehow managed to veto the appointment.

The replacement candidate, William Webster, was head of an audit committee at a company accused of fraud – US Technologies. Pitt failed to mention that to the selection committee.

You couldn’t make this stuff up. But none of this behaviour is new in the US financial markets. We should just be aware that, while the President promises to clean up corporate America, the old ways still prosper.

We should also be careful to distinguish between celebrity sleaze and the real thing. And, finally, we should be under no illusions about why it’s difficult to see into the US corporate glass house, in which Bush throws his stones. It’s because it is covered in dirt.

George Pitcher is a partner at communications management consultancy Luther Pendragon