Jason Nissé: Have faith: Harvey's Wall Street banger will flush scandal from the system

A matter of life and death

George Michael is not popular in the US at the moment. His latest video is rather insulting to George W Bush and the Yanks do not appreciate people taking the mickey out of their commander-in-chief. But in these trying times, American investors should look to an earlier song from the former Wham! star, "Faith".

Then George wrote Oh but I need some time off from that emotion/Time to pick my heart up off the floor. In other words, take time out, relax, don't panic, consider your decisions.

The stock market in the past few weeks has been lurching dramatically, mostly downwards. On this page Bill Robinson considers where the bottom of the bear run will be, and Hamish McRae looks forward to what we will do when the markets settle. I'm going to put a date in your diary for when sanity will return – Friday 16 August.

Why then? Because it is the day after Harvey Pitt's deadline for the top US companies to swear to the veracity of their accounts before the Securities and Exchange Commission. Mr Pitt's decision to call for this public affirmation that all we see can be believed was initially decried by the market experts as a bit of "ass covering" from someone who was seen as just a little bit too close to Wall Street. It was also a slap in the face for the auditing profession, which was supposed to have put its integrity on the line to verify these accounts.

But Harvey's Wall Street banger was more subtle than people initially realised. As a lawyer, he realised that it would be easier to get company directors put away for perjury than fraud. So if they swore to the veracity of something that turned out to be false, then it would be straight to jail – and no £200.

Accordingly, as we get closer to 15 August, more companies will have to hold their hands up and say: "Aw shucks. We just got the numbers wrong."

As AOL Time Warner found last week, this leads to SEC investigations, a stock spiral and shooting the messenger. But at least the pain is over.

There may be some slippage on 15 August as companies claim they cannot get their act together in time. But not a lot, I suspect. Companies will want to get their clean bill of health so that they can be re-admitted to the hearts of investors. As more and more get the all-clear, more trust will be built in the market, and value will return.

As George (Michael, not Bush) said: "I've gotta have faith."

Now that school has broken up, London seems quite quiet. Yet travelling on the Tube in rush hour is still one of the most stressful events of anyone's day and will only get worse once the summer is over.

So how come Londoners still have confidence in their Mayor, Ken Livingstone? His climbdown on taking legal action against the Tube PPP has cost the poor council-tax payer some £4m in costs. But that's not the end of it.

His jiggery pokery on the PPP has delayed the completion of the deal by about six months, upping the legal, accounting, advisory and financial costs. What has also happened is that Mr Livingstone has increased the uncertainty in the deal – which in the City means extra risk and so requires extra reward.

The total extra bill – well it will be north of £100m and could be heading towards £500m. And where has it got Mr Livingstone? Nowhere.

The Pru was in a fiery mood last week, dismissing all those rumours about its solvency ratios. Elsewhere in the life and pensions industry, however, things are not so good.

The talk is that one smaller life company is about to go to the wall and another – which is owned by a well-known bank suffering its own share of troubles – has dumped its equities portfolio and will have to admit to holders of its with-profit policies that the future is in dull, but predictable, bonds.

The trouble is that once you are out of equities, it is damn hard to get back in. The regulators may be understanding about the solvency of life funds at the moment, but if you are trading close to your solvency limits they don't want you to take more risk. This turmoil has added another nail in the coffin of smaller life assurers. Big may not be beautiful, but it is safe.

j.nisse@independent.co.uk