March 1, 2024

Economix: Podcast: Insider Trading, Robo-Signing and Food Claims

The Galleon hedge fund trial was perhaps the most prominent insider-trading case in a generation — and the conviction of Raj Rajaratnam, the hedge fund’s co-founder, has been portrayed both as a great victory for the prosecution and as a chilling warning that lawbreaking, even by the very rich, will be harshly punished.

But will the case have broader implications for Wall Street and for law enforcement?

Peter Lattman, who covered the trial for The Times, addresses these questions in the new Weekend Business podcast. Investigations continue into the use of expert networks to provide information to hedge funds, and the use of wiretaps in the Galleon case may have a deterrent effect on those who may be tempted to violate the rules, he says. Still, the hedge fund investigations don’t bear directly on the major issues that arose in the financial crisis, he says, and very few criminal cases have been brought against those who might be responsible for the economic cataclysm from which the United States is still recovering.

In a separate conversation, Gretchen Morgenson focuses on evidence of widespread robo-signing and other shady practices by mortgage servicers who helped to force troubled borrowers out of their homes. Some of those firms have offered to pay $5 billion to settle allegations brought by state attorneys general, who have apparently demanded much more. Evidence of extensive and abusive servicing practices, meanwhile, has been amassed by the United States Trustee, the Justice Department unit that monitors the bankruptcy system. Ms. Morgenson writes about these issues in her column in Sunday Business.

A dispute over the validity of food companies’ health claims is the subject of a Sunday Business cover article by Natasha Singer and of a podcast conversation between Ms. Singer and David Gillen. Federal regulators, who require that statements about a food’s beneficial qualities are supported by scientific evidence, have maintained that some company marketing has crossed a line.

Darwinian economics — drawn from evolutionary theory — can provide insights that are lacking in the otherwise very useful theories of behavioral economics, according to a Sunday Business column by Robert Frank, a professor at Cornell University. As he explains on the podcast, because the human brain was forged through millions of years of natural selection, many of our instinctive responses are extremely useful, even if they cause us immediate discomfort and don’t make us happy.

Worrying about getting a specific job, for example, may seem to make little sense if you will be just as happy if you never get that job. But up to a certain point, that fretting provides motivation that helps us survive as individuals and as a species.

Surviving as investors is the subject of my Sunday Business column about gold and other commodities. I also discuss it on the podcast, recounting a parable written by John Ruskin, the English economist:

A rich man carrying a heavy bag of gold coins on a sea voyage decides, before his ship capsizes, to tie the bag to his waist and jump overboard. He sinks with his fortune, never to be seen again. “Now, as he was sinking, had he the gold?” Ruskin asks. “Or had the gold him?”

Investors may want to ask the same question today. Gold and other commodities have been very volatile. Should they be part of a typical investment portfolio? The answer isn’t simple. I explain why in the podcast and, in greater depth, in the column.

As articles discussed in the podcast are published during the weekend, links will be added to this posting.

You can find specific segments of the podcast at these junctures: the Galleon case (35:30); news headlines (28:00); investing in commodities (25:13) functional foods (20:45); Gretchen Morgenson on mortgage abuses (13:57); Robert Frank (8:36); the week ahead (2:18).

You can download the program by subscribing from The New York Times’s podcast page or directly from iTunes.

Article source:

Speak Your Mind