Kidder denies portfolio plunge

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The Independent Online
KIDDER PEABODY, the Wall Street securities firm, emphatically denied reports yesterday that it is surviving thanks only to the financial support of its parent, the US General Electric Company.

The firm challenged speculation that the value of its portfolio of mortgage-backed securities - Wall Street's largest - had plummeted to the point where GE had been obliged to provide it with dollars 200m ( pounds 136m) in new capital.

The injection would be the second such contribution by GE since Kidder disclosed a huge fraud in its government securities department two months ago, and would mean that Kidder had reversed almost the entire dollars 439m it contributed to GE's profits last year. 'There has not been a second infusion,' a spokeswoman said.

GE, America's largest corporation, shocked Wall Street on 17 April by announcing that it would take a dollars 210m after-tax charge against its first-quarter earnings to cover losses at its brokerage subsidiary, resulting from alleged phantom trades in stripped US Treasury securities by Joseph Jett, the 36-year-old head of the desk. Mr Jett, who had been honoured as Kidder's employee of the year in January, allegedly exploited a flaw in the firm's computerised accounting system that automatically recorded profits on trades that were never consummated.

US regulators are reportedly investigating not only Mr Jett, who maintains his innocence, but the entire firm for possible violations of securities laws.

Kidder, following the example of Salomon Brothers in the wake of its bond-auction scandal in 1991, has slashed its trading positions to reduce its leverage, cutting its holdings of stripped Treasury bonds, for example, by 90 per cent, to about dollars 1bn. But Kidder remains the most highly geared firm on Wall Street, and analysts say further losses would be a cause for serious concern, were it not for Kidder's wealthy parent.

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