Wrong to move the goalposts

In essence, the establishment made the rules up as it went along to ensure that the men in white hats were always the winners and the outsiders were kept firmly in their place - on the outside.

Elliott perhaps overstated his case, but the issue has not gone away in the intervening years.

This week has seen a mass of speculation that the Competition Commission will declare that BSkyB has to reduce its shareholding in ITV from its current 17.9% to something under 10%.

Most of the comment thus far has focused on the fact that a forced sale will cost Sky several hundred million pounds because the price of ITV shares today is much lower than when Sky made its purchase. But even if that loss is painfully large, it is surely not the central point. The real story here is that Sky followed the rules, but the powers that be don't like the result so the rules have been changed.

This is a big issue. The whole point about well-regulated markets, and indeed countries, is that there is certainty about what the rules are, and that their enforcement is fair and evenhanded.

The fact that such a basic principle can be so casually ignored is frankly astonishing. There were howls of outrage when President Putin retrospectively changed the rules to undermine deals done by Western companies to exploit Russia's natural resources; there are sanctions threatened against Third World countries that selectively enforce laws to their own advantage.

Yet here we are doing something that in principle is all too similar - finding a way to change the rules because someone does not like the outcome. It is a dreadful example for the rest of the world.

The 2003 Communications Act - a legal framework not yet five years old - was passed specifically to regulate the changing world of communications. It deemed that outsiders would be allowed to buy up to 20% of ITV's shares. It did not say all outsiders except James Murdoch or his father.

Parliament, when debating and passing the law, tacitly accepted that it would be OK for Sky to buy a fifth of the company, if that was what it wanted to do. In doing so it followed a long-established convention that investments of up to that level did not allow the outsider to exert undue influence over the target company.

What the lawmakers perhaps overlooked, and which Sky used to good effect, was its realisation that a stake of about 20% could be used to prevent any other outsider exerting undue influence over a company - in this case it blocked Virgin Media's attempt to take over ITV.

That, however, is business, and while Sky can be arrogant, and Rupert Murdoch is certainly powerful, that is still no reason for the rules to be changed arbitrarily.

Laws passed by Parliament should not be so easily set aside.

I HEARD the other day that several London banks had hired outside advisers to tell them what was inside the Structured Investment Vehicles (SIVs) they might soon have to take back on to their balance sheets. The boards had no idea what they had been lending against and were likely to end up owning, or what the assets were worth. Rather late in the day, they have decided they should try to find out.

That is one take on the credit crunch. Another is that what these assets are worth might well depend on which department of the bank holds them, and the difference in valuation between different desks can be significant. This uncomfortable truth has come to light following the insolvency of International Security Trading Corporation, an Irish group set up to invest in bank capital that became a victim of the sudden change in credit-market conditions.

It financed itself with what were in effect repos, and these were held on its lenders' trading desks. Hawkpoint, the investment boutique that has landed the job of salvaging something from the wreckage, needs to be able to value the assets.

Its problem is that the traders holding the repos have a pretty brutal approach to valuation. They slash the price until they get a buyer. But this is at odds with the valuation of those same assets if they were held, for example, in the banks' restructuring department. The experts there would be more likely to look through the current market turmoil towards the fundamental value of the assets in more stable conditions. Their longer view might deliver significantly higher valuations.

The twist is that ISTC specialised in bank capital, so these doubts and differences of view are in fact doubts about the fundamental value of the investments in banks' capital. That is uncomfortably close to home, and does nothing to encourage banks to lend to each other, or have confidence in the value of each others' collateral. Rather, it is a further example of the spreading contagion.

IS that it then? The central banks on Wednesday announced an unprecedented injection of liquidity into the banking system in an attempt to get interest rates back to normal and close the gap between the rate banks were charging each other and their customers and the official rates set by the central banks.

Some £50 billion of liquidity later, the London interbank offered rate, Libor, has fallen by 15 basis points or 0.15%. If that much support delivers such a negligible change, it promises to be a very expensive exercise.