Sunday, February 19, 2012

more nonprofit profit

I don't often link to the Daily Hell but this is a special occasion. A4E in police fraud inquiry.

On a similar theme, here's a piece on Tory discontent with the NHS bill that names names. Specifically, Gove, IDS, Osborne, NI Secretary Owen Paterson, and horrible old thatcherite gargoyle Sir George Young. That sounds like a nice roundup of the hard right/neocon stahlhelm fraktion, so why are they unhappy? Apparently they don't think it's extreme enough now, but then that might be just pushing the blame on the Lib Dems.

contacting the Government's media-buying function

Back in the summer, as the News International scandal (well, beyond the scandal of its very existence) cranked up, we had a look at how the government buys newspaper display advertising and made an effort to reach out and touch the people in charge of it. I see no reason not to go round the buoy with this for another try. Back then, the Central Office of Information still existed, with a sword hanging over it. Now, we have Novated Frameworks. What?

Well, rather than having its own media-buying desk, the government has contracted the job out, via the Government Procurement Service. Some details about novatin' a framework are here. Although it does seem that the end of COI is sliding right, there is a contact for the supplier here. Presumably, though, every agency now contracts with them on a per-project basis, thus saving literally thousands of pennies.

non-profit, but nonprofit for who?

This Afghan news item is telling.
Mr. Hasas' seven-mile road construction project went so awry that his security guards opened fire on some of the very villagers he was trying to woo on behalf of his American funders.

Mr. Hasas was a point man in a $400 million U.S. Agency for International Development campaign to build as much as 1,200 miles of roads in some of the Afghanistan's most remote and turbulent places.

Three years and nearly $270 million later, less than 100 miles of gravel road have been completed, according to American officials. More than 125 people were killed and 250 others were wounded in insurgent attacks aimed at derailing the project, USAID said. The agency shut down the road-building effort in December..

The project was managed by an NGO, IRD, which managed to set a record for the price of road construction per mile, cause serious political tension, hire its own militia, fire with live ammunition into a protesting crowd, fund an Afghan flower-arranging project, and pay its executives one-quarter of the $269 million funding provided by USAID. Like our own dear A4E, it was mostly a "non-profit" organisation by virtue of considering the money its founders got paid to be salary rather than a dividend.

This is important. As the piece points out further on:
Officials at USAID and IRD say that the Afghanistan Strategic Roads Project wasn't a roads program in the usual sense. They said building roads was, in many ways, a secondary goal; the main objective was spreading jobs and money to win over rural communities that harbor insurgents.

"As a grant, this was never intended to be a major road construction project," says Jeff Grieco, a former USAID official who now serves as communications director at IRD. "It was intended to be a capacity building program. We have dramatically improved Afghan capacity to build roads and to do community development work."

This now sounds like whistling past the flowers, abandoned building materials, and of course the graveyard. However, it was a genuinely important idea - David Kilcullen's Accidental Guerrilla is full of roads, notably in eastern Afghanistan. Armies have always tried to control the landscapes they operate in, and in this case road-building was meant to alter the terrain in several different ways.

Hard surfaces and wide cleared shoulders would make it harder to place (respectively) on-route and off-route IEDs, and easier to find them if they were placed. Better roads would change the economy of mobility, letting Afghan troops and police in light vehicles move around quickly where before, coalition forces had to use helicopters and medium armour the Afghans would never be able to afford.

It was hoped that better transport would lead to economic growth, of course. And the process was meant to be important. Beyond just spending money, it was hoped that the negotiations regarding road projects would be an opportunity for traditional leaders and Afghan officials to demonstrate that they had influence, a way of improving the government side's mobility in social terms.

All this activity though, was embedded in a wider context - the economy of the Afghan & Iraq wars, a huge and dubiously policed zone of opportunity on the borders of the US government, its contractors, and the NGO world. Fertilised with money, this swamp blossomed all kinds of strange flowers, and in this case, IRD seems to have recapped the Iraq war on a small scale.

Ajab Noor Mangal, a local construction-company owner hired to work on the project, said Mr. Hasas alienated the community by only hiring workers from two of the five local clans.

Afghans excluded from the project looted Mr. Hasas's construction sites and stripped them bare. At one point, Mr. Hasas said, four men affiliated with the project were kidnapped, killed and dumped in public with a warning note signed by insurgents. The deaths brought construction to a halt. "We couldn't find a single person to work on the road," Mr. Hasas recalls.

Under the IRD contract, Mr. Hasas and the other Afghan firms working on their roads were responsible for providing their own security. So Mr. Hasas said he cobbled together nearly 100 gunmen and armed them with rented rocket-propelled grenades and heavy machine guns.

Things reached a nadir in the fall of 2010, when around 100 angry Afghans, including a small number of suspected insurgents, tried to storm the construction site, according to Messrs. Hasas and Mangal. Mr. Mangal, who was in Kabul at the time, says he ordered the contractor's gunmen to open fire on the demonstrators, including some armed protesters who he said shot at the security team. Mr. Mangal says he is still paying for the wounded villagers' medical treatment.

Villagers who took part in the demonstration told a different story. Two men involved in the protest said IRD security sparked a larger confrontation after opening fire on a dozen unarmed men protesting IRD's refusal to move staff from an office overlooking homes where outsiders could see into private family compounds—a major slight in the conservative culture.

Not particularly hidden persuaders

While we're back on the Murdoch trail, readers have probably seen this story, in which the police have taken steps to keep Rebekah Brooks' personal assistant from fleeing the country. And of course this bit:

Ms Carter was also a beauty editor for The Sun and is a partner in a cosmetics business with former model and celebrity make-up artist Sue Moxley, and has also offered beauty tips on the website

That's putting it mildly - the website mostly exists to sell something called a "Slimpod" described as follows:
A Slimpod is a 10-minute recording of the voice of Trevor Silvester, creator of a technique known as WordWeaving which uses language in a special way to gently retune your unconscious mind to think differently about food and exercise and the way you feel about yourself. For many people it is having a remarkable effect on their eating habits and their confidence and self-esteem.

Why is the unconscious mind important? Because it is responsible for most of what you do and feel every day. Listening to a Slimpod works like a guidance mechanism, retuning your unconscious mind to change your habits....It’s a bit like retuning a TV so that it no longer picks up the fat channel because it’s tuned to “slim” TV.

A lot of money has been spent on discovering how to influence our unconscious – mainly by advertisers wanting you to buy things. Now Thinking Slimmer’s experts have taken their specialist knowledge of the science of unconscious persuasion and are using it for your benefit.

Rated by the Sun as a Top Weight Loss Trend for 2012, apparently. Fuck the unconscious, it's the cross-promotion that does it, to say nothing of the ferocious devotion to looking after your pals.'s WHOIS record lists one Sandra Roycroft-Davis as its administrative contact, who is none other than Chris Roycroft-Davis's wife. Chris Roycroft-Davis? Who he? The former executive editor of the Sun, seen excelling in the aspirational job dismissal industry here, who also acted as its chief leader writer ('cos words of one syllabub take the cake) and David Cameron's speech writer, as well as being an editor of the Daily Diana Tits and a contributor to The Times's Thunderer column, and playing some part in the launch of Sky TV.

He's now available for media training, consultancies, and as an after-dinner speaker. No word on weddings or barmitzvahs, but if you're really unlucky he might be on the same bill as Smash It! That's if he's not editing his own wikipedia article. Someone who only ever edits his page, in a favourable sense, and uses the word "insuperior" to boot is still at it.

Chris, having been sued by the queen at least 3 times, being one of the co-owners of sky and being on first name terms with several prime ministers, has now settled down in Pinner with his family. Perhaps most notably his son, James, a notorious womanizer, much like his father, who prides himself to be a saracens-level rugby player who's rugby skill, until fairly recently, was insuperior to that of his 9 year old brother.

Meanwhile, who is this Silvester character? He turns out to be a former Metropolitan policeman according to his website.

We were Police Officers for many years before finding a fascinating new way of helping people. While trainers at the Metropolitan Police Training School in Hendon, we pioneered the use of NLP and hypnosis in a unit dedicated to improving the performance of students who were failing their training. Over a three year period we developed a learning system based on NLP principles that could guarantee an improvement of 10-30% with only two and a half hours of coaching. Simultaneously I (Trevor) was establishing a hypnotherapy clinic that I ran in the evenings and weekends – a busy three years!

Scroll down to the dog, it's worth it in a vomity sort of way. And what is it with News International and moonlighting coppers? Anyway, apparently Carole Caplin's phone was tapped, but in the light of all this one can only conclude they were after some kind of trade secret in the crystals-and-guff game, perhaps the patent formula for Peter Foster's famous slimming tea. That's cheap snark, of course, but it is telling that the Blair-Caplin-Foster pattern was closely mirrored among News International types.

End note: The company, Thinkingslimmer Ltd., changed its name from Jenstar UK Ltd in 2010. The trademarks are registered to this company, but Sandra Roycroft-Davis's Linkedin profile describes it as a "celebrity management" company.

A slight return to 2004. Wasn't that fun.

Tom Watson runs for the gap, specifically yet another ugly little employment law story at the Sun. Readers will know that they're like that among themselves and there's something of a press tradition of not mentioning the names. On this occasion it's Our Boys Go In Editor "Tom" "Newton" "Dunn" vs. their Whitehall editor Clodagh Hartley.

The other story is that Watson is suggesting that Trevor Kavanagh took the credit for publishing the Hutton whitewash ahead of time when Hartley was in fact responsible.

Sadly this just recalls Labour's relationship with the Sun. A close reading of this explains all:

Kavanagh, who claimed he had been read the contents of the report over the telephone by an “impartial” source went on to tell the BBC “the source had nothing to gain financially or politically, no axe to grind, no vested interest"

Access to the document, no financial or political interest, someone who had Kavanagh (or Hartley)'s direct phone number = i.e. they were a civil servant operating with permission from their boss who was in contact with them, or to put it another way, a government press officer.

As is fairly well known, Alistair Campbell got powers to give the career COI officials orders in May 1997. His departure didn't end that. The source was probably Godric Smith or Tom "Walter Mitty figure" Kelly. Kavanagh was lionised by the media establishment for having what was, in fact, the government's line-to-take read out into his ear by a government press officer. It wasn't as if the Blair governments were averse to racking up brownie points with Murdoch where possible, was it?

On the other hand, perhaps the most repellent of the Murdoch/Met cases was the Forest Gate raid of 2006, when the police launched a miniature Operation OVERLORD (or rather, MOTORMAN - I don't think they used a boat) in Walthamstow in pursuit of a "chemical dirty bomb suicide vest" which was capable of attacking aircraft up to 5,000 feet overhead in their opinion, accidentally shot someone because their hand slipped, tore the building apart, found nothing, and satisfied themselves by having the News of the World smear the suspects as paedophiles, before spending ages trying to seize their savings. It wasn't so much a police operation as a sort of wildly overdone high-camp mashup of 2000s tropes. News International columnist Andy Hayman was in charge, but perhaps we were spared worse:

The police always argue that (many things they do) are a matter of operations and politicians should not be involved. Well, I'm afraid I have a big argument with that."

Citing the 2006 raid on a street in Forest Gate, he added: "At one stage the police were going to turn out all the residents of the street at 2am in the morning. John Reid was the home secretary and I was working with him.

"Andy Hayman, who was in charge, wanted to turn them out and I said to John Reid - no, you can't do that. He said 'John, it's operational'. I said 'S** operational, there are political considerations here' - turning out a street of Asians at 2am with the allegations of a gas plot and we don't know what the evidence is for that."

So when did they start tapping Prescott's phone?

It remains the case that Labour's half of the twisted relationship with Murdoch was very different to the Tories'. It was transactional and contingent and that's one of the reasons why it was so horrible at the time, but that also made it possible to leave. When you are one entity you cannot cooperate, said Montgomery. It's also very hard to stop.

Production note: part of this post was originally a comment on Tom Watson's blog and was never released from moderation. I might have been nice about this, but you know.

Thursday, February 16, 2012

How to control the newspapers (aka. Explicit is better than implicit)

Ho hum, a spun day at the Guardian with this piece covering a double page spread on 8-9. Amelia Hill interviews a panel of prominent feminists about the Prime Minister's new "women's advisor". You may have already guessed that they aren't particularly impressed (an accurate headline might have been Thinking Individuals Find Sop Unsatisfying, Faintly Offensive), but the problem is not the content of the story, but its existence.

A quick search on Journalisted shows what's actually going on here. Ever since the first weekend in October, roughly twice a month, the Government has been briefing the media that it's doing something "to listen to women voters".

Women as a demographic have turned sharply against the Tories quite some time ago. In fact, the polling shows a dramatic shift over Christmas, 2010, for reasons I've wondered about but never been able to make any conclusions on. See this chart of Anthony Wells's.

But this got very little press right up to September. A decision was taken at some point in early September to spin the issue in the run-up to the Conservative conference, and on the 13th, the story was trailed by leaking it to the Daily Mail (i.e. to the intended target audience).

The 2nd of October saw the full-scale launch, with the local press being especially targeted (load the search - they hit syndication like a hammer and pretty much every local rag got it). Bypassing the nationals and briefing the local papers is an old Alistair Campbell trick you may remember from the Iraq war spin campaign, of course.

Since then, it's been regularly re-announced, about twice a month. One can presume that there is a recurring item on the No.10 media grid for it.

So far, the sum total of actual action on this front consists of double-hatting the head of Francis Maude's office, a bit of title inflation that the Guardian interviewees were rightly scornful of. But the real point here is that hours of work and a hugely prominent chunk of a national newspaper were dedicated to discussing this utterly content-free paper shuffle. And this has been going on for months, needing only a one-line e-mail to the cabinet secretary to support it in reality.

The return on investment is enormous. Great chunks of media space, time, and effort have been essentially neutralised, man-marked out of the game, all with a few press releases. This is the point of the exercise. If you are discussing the latest eye-catching initiative you are by definition not discussing anything else. Your eye has been caught. It's why they're called that.

Meanwhile, the latest on the Sun. Note this bit:

The source said that the investigation is not to do with "sources or expenses" claims by journalists.

Well, no, why would it be? Operation ELVEDEN is explicitly an investigation into bribes paid to police officers. What has it got to do with journalistic expenses, a private and trivial matter internal to News International? The answer is almost certainly that during Trevor Kavanagh's comedy Ardennes Offensive earlier this week, it was privately briefed to the media that the police were arresting people over "£50 dinners for sources" (the figure actually appears in another Guardian story). This is clearly guff. But it achieved its purpose; in terms of cognitive anchoring, putting the notion out there sets the limits of what is expected. Even without its being mentioned explicitly, it controlled the content of this story!

It would obviously have been better if the Guardian had stated in so many words that "Representatives of News International [ideally NAMES TO GO HERE] have repeatedly suggested that journalists were arrested over expenses. The police source denied that this was the case and specifically said that the investigation has nothing to do with expenses". Then we could, at least, make up our minds.

Sunday, February 05, 2012

non-Thursday music link


Bonus extra:

If I scripted something to chuck random music links into a G+ hangout, would anyone listen?

we know where your dog goes to school

A while ago I noticed that a detailed story in Le Monde about their telecoms-interception-scandal-of-the-week had bizarrely vanished from their archives. It is baaack and I can share it with you! So if you read French and want to know what happens, in operational detail, when a prosecutor orders an illegal trawl of call-detail records to find out if a journalist has spoken to another prosecutor, there you go.

Actually, there is no dog, but they did track down his daughter's pony.

nonlinear response to interest rates

Just to recover something from my twitter feed, last Friday, BT announced its Q4 results and (among other things) its management said that they were scaling down their capital investment plans, and that one of the reasons was low interest rates. What? Well, as a UK company BT has to capitalise the net surplus or deficit in its pension fund every year and take a charge to profits for it. As pension funds have to hold a lot of bonds, low interest rates mean a bigger notional pension deficit. Whether or not BT has to put more cash into it, or whether it might just be more expensive to raise money, doesn't really matter. The impact is the same, completely counter-intuitively. Lower interest rates shouldn't discourage economic actors from undertaking capital projects.

A couple of things as a result. One, this tends to support the idea that there is no such thing as an economy-wide (Wicksellian) interest rate. If BT's pension fund were big enough, lower interest rates on its bonds might actually drive up rates on BT's own borrowings. Two, what about other companies? US firms often have big health insurance liabilities, and insurers typically have to own lots of bonds (and it wasn't the insurers that blew up, now was it, so best not fiddle). Do they experience this? Three, this may not be a thing as it may just be management spinning a pretty dreadful quarter, and Verizon in the US, a very similar business, decided to go ahead and lay a lot more fibre.

Churchill was wrong for most of his career, you know...

This Ha'aretz piece is interesting for the insight it gives into Israeli policy and especially into process, but also for a couple of other things. Notably, it's remarkably frank about the Obama administration deliberately trying to stop Netanyahu going to war, and the role of dodgy casino guy Sheldon Adelson in both US and Israeli right-wing politics, and it provides the new information that the Americans have given up on the formal diplomatic channel and concentrated on influencing the Israeli military directly, on a brasshat to brasshat basis. The implied conclusion is that the IDF leadership are interested in external reality while Bibi is too busy being Winston Churchill, and further that they are interested in getting information from the Americans about what their own prime minister is thinking.

Also, Netanyahu considers himself an expert on US politics. The danger here is that the America he is an expert on may not be the same America everyone else is dealing with. If, as I suspect, he is getting a lot of his information from his Republican contacts, he's living in an alternate universe. In so far as people like Sheldon Adelson are impressed by US politicians who know Bibi Netanyahu personally, his contacts are literally being paid to tell him what he wants to hear. It's ironically similar to Bush before the Iraq war, just with the stove-pipe reversed.

However, I was astonished by this quote:
While the Fifth Fleet of the U.S. Navy is operating in the Straits of Hormuz, just as the Pacific Fleet was anchored at its home base near Honolulu on the fateful morning of December 7, 1941, the two instances are not really comparable.

Well, no, they're not, are they? Some tabloid journalists keep a few paragraphs of general-purposes "sexy" in a file they can drop into a story as required and just change a couple of parameters to fit. This sounds like the same thing, but with Churchill!

Meanwhile, Colin Kahl, and this. It does look like there's a coordinated push-back against the bullshit, which is good news for those of us who remember 2002. The US Navy bombs Iran...with love. Of a purely Platonic form between comrades of the sea. Oops. while also bringing the carrier back.

US policy does look like it's trying to achieve three goals - 1) no war with Iran, 2) reassure the GCC countries (so they don't start one), 3) restrain the Israelis (without pressing so hard they freak and start one). These are partly contradictory, but then what isn't? Certainly, the combination of being ostentatiously nice to Iranian sailors while also sailing a giant carrier up and down the Gulf does fit the needs of 1) and 2).

fighting the real enemy

Con "WMD" Coughlin's piece in the Torygraph is worthy of close reading. You'll note that this:

Whitehall was caught off guard by the seriousness of the situation in Helmand province, where British troops were deployed in Nato’s reconstruction programme. Most Labour ministers supported the view of John Reid, the defence secretary at the time, that “we would be perfectly happy to leave in three years’ time without firing one shot because our mission is to protect the reconstruction”.

Intelligence assessments conducted in southern Afghanistan concluded that they would receive a hostile reception.

isn't actually sourced to either General Richards, who is the ostensible subject of the piece, or to Sandy Gall's book mentioned later in it. Also, the piece contains extensive quotes from Richards that turn out to have been dug out of Gall's book, when a over-rapid look at the piece might give you the impression Coughlin spoke to Richards.

Reid's remark has gone down in the annals of stupidity, but the notion that "most Labour ministers" agreed with him isn't sourced to anyone at all. In fact, the policy was repeatedly re-debated and altered, as I blogged here over the winter of 2005-2006, which doesn't suggest everyone agreed on it. Further, it's news that "intelligence assessments" accurately forecast what would happen - especially as any assessment carried out before the deployment would have been an assessment of the original plan, not the plan as it was radically altered in the field.

I suspect Coughlin is talking the secret services' book here, and they are fighting the real enemy - the uniformed services' Defence Intelligence Staff, which would have been responsible for such an assessment. Further, DIS was notoriously right about Iraq (if you believe Brian Jones' telling) and this is inexcusable to the spooks (who weren't) or Coughlin (who wasn't, and who culpably published their nonsense).

Further, does this quote sound convincing to you? For an American general, he sounds a lot like a British journalist trying to sound tough.
Sir David also recounts a heated argument between Brigadier Ed Butler, the first British commander in Helmand, and an US general who took exception to him. “I nearly punched that damn Limey’s [Butler’s] lights out, he was so arrogant,” the US general said.

This is not a mafia business. This relies on credit!

Via Jamie Kenny, a must-read translation of a Chinese investigative report into the case of Wu Ying, a Chinese businesswoman who is in deep trouble with the law. What's interesting here is that the report provides a deep view into some of the most important interfaces in the political economy of China - between the official and shadow banking sectors, between both and the Party, and between the Party and organised crime. It's been suggested by quite a few people, notably Ken Livingstone's economic advisor John Ross, that Chinese macro-economic policy is basically all about investment - whereas other countries might target inflation, the money supply, nominal or real GDP, an exchange-rate peg, or full employment with a range of fiscal or monetary tools, Chinese policy makers have a primary policy target of maintaining sufficient employment growth to keep up with the growth of the urban workforce, and a primary policy tool of controlling the rate of capital investment. This is achieved through a combination of fiscal policy through the government budget, both formal regulation and informal influence over the banking sector, and monetary policy, specifically the management of the RMB exchange rate and the terms on which central bank intervention is sterilised or not.

An investment-centric view of the economy could be characterised as both palaeo-Keynesian - investment, driven by animal spirits and radical uncertainty, is the swing item in the national accounting identity and therefore the driver of the business cycle, and should be managed by government in order to maintain a stable growth path - and also Marxist, in that it puts the accumulation of capital and its allocation between sectors centre-stage and suggests that it's too important to be left to capitalists.

An alternative view, which we might pin on Patrick Chovanec, is that investment is the driver of the Chinese economy but that nobody's in anything that could be described as control. In this view, Chinese economic policy is more orthodox, leaning against the world recession in 2009 with a major stimulus plan and a monetary expansion, but its impact is very noisy. Much of the stimulus money went into an unsustainable property bubble, which is now deflating messily.

In a sense, these arguments are not all that different. The major differences are the degree of agency the central government is perceived to have, and the underlying call on the future of the economy. John Ross would argue that the surge in investment is creating the capital goods needed for future growth and removing inflationary constraints. Some Americans wonder at the system's capacity to pour money into a massive windpower infrastructure. On the other hand, the San Francisco Fed reckons that a very large proportion of Chinese goods exported to the US consists of imports to China, notably from the US - it's been estimated that out of the production cost of an iPhone, more of the value-added represents US than Chinese production. Isn't this strong evidence that there has been huge overinvestment in a very particular kind of low-margin export processing, plus property?

Now, back to Wu Ying's cell. This story is all about how the system tries to control investment, how Chinese entrepreneurs and officials try to subvert this control, what happens when it breaks down, and how it is then restored. It's fairly typical of economies with strong official controls on bank balance sheets that a big market in direct inter-company lending develops (it happened in post-war Britain). If you can't get a loan from the bank, perhaps you could arrange something with a business that happens to be awash with cash. Obviously, this is a lot easier if there is some sort of intermediary who can make the deal. And in China there are specific, geographically linked networks of entrepreneurs who have become specialised in this unofficial shadow-banking sector. Technically it is entirely illegal, so it's up to the intermediary to enforce the terms of the contract in their own sweet way. Which of course brings in another actor, organised crime or privatised protection.

This being China, though, it's more complicated than that. Wu Ying's creditor, Lin Weiping, was a former Cultural Bureau official turned moneylender or rather "funding coordinator", who acted as a sort of broker between savers and borrowers. Well, it started off like that but the business prospered and pretty soon people were depositing spare cash with him overnight. This is an important moment - he wasn't just introducing the two parties to a private arrangement any more, but rather, he was now operating a bank. The demand for credit outside the official system, and for high-yielding (2-5% monthly interest) deposits, was enormous. Fascinatingly, it turned out that the official banks were also keen to find sources of wholesale funding that let them get around the People's Bank of China's monetary policy - they started borrowing from him on overnight terms. This was implemented by sending a straw-man to open an account and deposit the cash. Lin, having turned himself into a bank, now went a step further and became a central bank. You might wonder how long it would have taken him to start issuing his own currency.

But Wu Xing would bring him down. He very rarely extended credit outside his home province, but made an exception for two of her projects, a tourist resort and another unofficial banking operation (which he may have thought of as being a branch of his own). It turned out, though, that she actually had an entirely different project in mind, in real estate. She justified this as necessary to influence important officials. In fact, the story was about to become a classic case of an entrepreneur who over-does the leverage and eventually runs out of credit, with the twist that one lot of creditors had her kidnapped by thugs in an effort to collect payment. However, Wu had become too big to fail, and eventually there was something like a race between Lin's shadow-banking empire and the very official Agricultural Bank of China to put together a lifeboat package, which Lin eventually won. A syndicate of unofficial lenders bought out the loan portfolio at 70% of its face value.

It seems that this was intolerable to the authorities, as Wu and Lin and many others were then arrested. Lin got six years and is now back on the out and apparently dedicated to studying Chinese culture, specifically the bits relating to keeping his mouth shut. Wu is still in the court system, facing charges of running an illegal bank.

Chinese regulators quoted seem to be more interested in the sources of capital going into the shadow-banking system, on the grounds that quite a lot of it is deeply illegal in nature, and also that concentrated rather than diversified sources of funding tend to cause systemic risks. In so far as it's the marginal transaction that matters, if this was to work it would represent an effort to make sure that it's the official financial sector that represents the marginal lender and that state control of investment continues.

But that's going to be very difficult in an environment where the central bank might be you.

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