Why would anyone but Janet Yellen chair the Fed? 31 Jul 2013 Ben Bernanke may quit the U.S. central bank chair after his term ends in January. Vice Chairman Yellen ticks all the boxes. She has experience, brains and plays well with others. If judged by credentials alone, Yellen should be a shoo-in for central banking’s most coveted job.
Larry Summers may be best suited for a crisis 31 Jul 2013 Like other Fed contenders, Summers is a top economist with a career of public service, including calamity management for Mexico and Asia, where he pushed the limits of U.S. action. Should things go awry Summers is also unwedded to current policy and capable of finding a new one.
Fed’s court slapdown puts regulatory nous on spot 31 Jul 2013 Judge Richard Leon has ruled the watchdog’s 2011 cap on the $16 bln debit card business “utterly indefensible.” The Federal Reserve now carries the taint of both misreading the law and cozying up to banks. Harsh or not, it’s a position no regulator should risk putting itself in.
Barclays’ top staff should share cash-call burden 31 Jul 2013 The UK bank may feel it was forced into its 6 bln-pound rights issue. But given Barclays’ professed concern for accountability, its bosses need to be seen to suffer with shareholders. The challenge is getting staff below board level to stump up. There are ways to rope them in.
Facebook mobilizes back to square one 31 Jul 2013 The social network’s stock finally traded above the price set at its messy debut 14 months ago. Founder Mark Zuckerberg has made Facebook’s platform work on smartphones and tablets as his tech rivals flounder. Even so, he doesn’t deserve a thumbs-up from investors just yet.
Boring U.S. growth is here, clear, get used to it 31 Jul 2013 Second-quarter GDP increased at a 1.7 pct rate, fed by 2.2 pct private-sector expansion even as government shrank. Global growth is robust, though America’s slice is smaller. The steady but unspectacular results could cool stocks while bringing the Fed closer to cutting stimulus.
ECB wrongly toys with transparency gimmick 31 Jul 2013 Two members of the central bank’s governing council want to publish meeting minutes. The road to hell is paved with this sort of good intention. Publication would constrain policy and turn the council into another political forum. As if the euro zone doesn’t have enough of them.
End in sight for European carmageddon 31 Jul 2013 Decent half-year results at Peugeot suggest even Europe’s weakest carmaker may have passed its darkest hour. Sales are still falling and overcapacities abound, but survival strategies seem to work. Hopefully, the crisis might make Europe’s volume manufacturers stronger.
Edward Hadas: Detroit, decay and solidarity 31 Jul 2013 Who is my neighbour? That question is as relevant to the bankruptcy of Motown as the decline of the American car industry or incompetent city governments. If the suburbs lived up to their neighbourly responsibilities, Detroit would not be such a mess. It’s not too late.
Dividend cut would help Santander and BBVA 31 Jul 2013 The regulator wants to limit payouts to 25 pct of 2013 earnings. That might sound superfluous for the top two Spanish banks, which should gain from a stronger domestic economy and lower provisions. But it’s sensible to hoard capital ahead of next year’s euro zone banking union.
BNP’s sturdy model will help German push 31 Jul 2013 France’s largest lender weathered a hit at its investment banking division thanks to an old-style universal model. It now hopes to balance its exposure to weak economies like Italy with a push into Germany. That may prove challenging, but BNP’s solid balance sheet should help.
Mongolia’s economic fairytale faces reality check 31 Jul 2013 The failure of its fifth-largest bank and delays to the development of a giant copper mine underscores the vulnerable foundations of the country’s boom. Weakness in emerging markets, and commodities, provide further tests. Yet greater economic realism may ultimately be welcome.
China index: Drinking, driving through a slowdown 31 Jul 2013 Demand for liquor, Audis and trucks helped take the edge off China’s slowdown in June. Despite Beijing’s curbs, strong home sales played a supporting role in lifting Breakingviews’ Tea Leaf Index. But exports put the brakes on, falling for the first time since January last year.
JPMorgan case is more regulatory bark than bite 30 Jul 2013 Taking a $410 mln chunk out of the bank’s hide may be three times what traders gained from alleged electricity market manipulation. But the U.S. energy watchdog isn’t sinking its teeth into top executives as it did in a similar Barclays claim. Individual attacks are a better deterrent.
Obama’s corporate tax plan lacks solid foundation 30 Jul 2013 The U.S. president wants to end a congressional impasse by rewriting the tax code and using new proceeds to fix roads and bridges. Both ideas make sense; combining them doesn’t. Politically, it probably won’t work. Economically, better ways exist to fund infrastructure projects.
U.S. hospital M&A treats symptom not disease 30 Jul 2013 HMA agreed to sell itself for $3.9 bln at an odd moment. Shareholders are set to vote on whether to oust the board, the CEO is decamping for a Mormon mission and government scrutiny of its practices is growing. The deal looks hasty and may leave money on the operating table.
Barclays shows what CoCos can and can’t do 30 Jul 2013 The bank is plugging only a fraction of its 13 bln pound capital shortfall using contingent convertibles. That’s because the UK regulator insisted that only very equity-like bonds would help reduce leverage. But in absolute terms this will be a big issue - and a tough sell.
Alcatel recovery still has a long way to go 30 Jul 2013 The French-U.S. telecom equipment maker reported strong results and a smart R&D deal with Qualcomm. Shares soared. A U.S. spending boom is allowing new boss Michel Combes to bask in a honeymoon of sorts. But it’s very early days for the group’s third turnaround CEO.
Siemens’ new CEO shows lack of a better choice 30 Jul 2013 Joe Kaeser, the current CFO, is to become new chief of the troubled German group. While a member of the old regime, he’s not a bad pick. His attention to detail, in-depth knowledge of Siemens and long-standing focus on profitability are what the company needs at the moment.
Too early to cheer potash cartel’s death 30 Jul 2013 The world’s biggest potash producer, Russia’s Uralkali, has abandoned a cartel that set prices of the key fertiliser, sending the sector’s shares plunging. If the pact is truly dead, billions of people will enjoy cheaper food. But there’s a risk the split won’t last.
"Fab" Tourre verdict can only make SEC look bad 30 Jul 2013 The trial of the ex-Goldman CDO banker is ending. Tourre’s lawyers seem sure the U.S. regulator has blown it. If so, the SEC will seem inept. But even a win would only highlight the failure to bag a high-level boss. Stronger cases are needed to give the Wall Street watchdog bite.
Barclays’ rights issue is worth supporting – just 30 Jul 2013 The UK bank’s shares dipped on news of a 5.8 bln stg rights issue. Investors can gripe that the cash call delays the advent of reasonable returns on equity, but it will bring fatter dividends closer. Supporters of Barclays’ turnaround strategy shouldn’t jump ship now.
Deutsche’s gains look smaller than UBS’s 30 Jul 2013 The German bank made impressive progress on capital and leverage in Q2, and has plans to go further. But it is still hostage to capital-market shocks and litigation. While shares in Swiss peer UBS are more expensive, its turnaround and strategic re-shaping are more convincing.
Gift coupons could sweeten Japan’s sales tax pill 30 Jul 2013 A plan to double the country’s consumption tax is crucial to convince bondholders that public debt won’t spiral out of control. But the increased levy risks undermining Japan’s economic revival. Shopping vouchers would make the shift more palatable to consumers.
BP lacks leverage over share-price discount 30 Jul 2013 Higher taxes, a lower-than-expected contribution from Russian partner Rosneft and mounting Gulf of Mexico spill costs marred the UK major’s latest quarter. As long as BP remains at the mercy of forces outside its direct control, the derisory valuation will be hard to correct.
Spain moves steadily towards a slow recovery 30 Jul 2013 GDP hardly shrank at all in the second quarter. A 0.1 percent decline signals the end of a two-year slump. But the next phase is likely to be stagnation. Sustainable strong growth requires more credit, stronger exports and a lasting cure for unemployment.
Barclays learns that capital delays don’t work 29 Jul 2013 The UK bank is set to raise at least 5 bln stg of capital, despite stating in February it would bolster solvency over time. Regulatory caprice over leverage ratios may be to blame. But as Deutsche Bank also learned, time doesn’t create a robust capital plan: equity does.
Shale trailblazer leaves a world awash with crude 29 Jul 2013 The fracking technique pioneered by George Mitchell, who died at 94, unleashed a torrent of U.S. oil and gas output and an environmental backlash. Controversy aside, Mitchell’s 17-year struggle to develop fracking offers a lesson in escaping the tyranny of quarterly reporting.
Paying old debts would set Peru on right track 29 Jul 2013 Peru’s 1970s land reform bonds have become cheap fodder for speculators. But as with U.S. revolutionary war debt and frozen Yugoslavian savings in the 1990s, a genuine effort to pay off creditors can earn a government valuable market confidence. Lima should try it.
WPP can sit out this bout of adland M&A 29 Jul 2013 A merged Publicis Omnicom would overtake the UK group as the largest advertiser. That must gall WPP boss Martin Sorrell. But he could poach clients, and charge more in a consolidated market. The benefits of gatecrashing this deal, or finding a consolation prize, look dubious.