Wall Street pedigree a plus for new U.S. watchdogs 29 May 2015 One SEC commissioner is an economist, another hails from Congress and Chair Mary Jo White prosecuted fraudsters. Two vacancies give the regulator a chance to add market expertise. Critics may gripe about the revolving door, but it pays to know how the financial world works.
Dewey case puts legal eagles on precarious perch 29 May 2015 An accounting fraud trial kicked off this week against three of the defunct law firm’s leaders. Dewey & LeBoeuf’s methods may have been extreme, but big shops tend to play fast and loose with already fuzzy rules. What attorneys consider creative could turn out to be illegal.
Review: The slow, painful grind to safer banks 29 May 2015 It’s now received wisdom that America can’t afford to forget financial crises. Veteran FDIC bank examiner John Bovenzi manages to corral the evidence in a surprisingly readable book, joining the dots from the 1980s S&L rout to the start of too-big-to-fail and subprime stupidity.
Banks could get stuck in FIFA penalty area 29 May 2015 Over 20 lenders are mentioned in the U.S. Department of Justice’s 164-page soccer rap sheet. Even if FIFA officials are found guilty, banks may be blameless. But UBS’s recent experience suggests any sniff of wrongdoing could change how U.S. regulators view past misdemeanours.
German job miracle keeps defying gloom-mongers 29 May 2015 Most experts predicted that January’s imposition of a national minimum wage would lead to heavy job losses. But employment in Germany keeps rising and economists are confused. The fears may yet be vindicated, although it could take a recession to show they were right.
BYD’s electric dream is even racier than Tesla’s 29 May 2015 The Chinese group is selling nearly $2 bln of new equity to make more batteries and design more cars. Like Elon Musk’s company, this is a bet on a bright electric future, with added China hype. Even with Warren Buffett on board, BYD looks a longer shot than its U.S. rival.
Slowdown set to escalate China smartphone wars 29 May 2015 The world’s largest handset market will grow just 3 pct this year, down from 20 pct in 2014. Yet unlike mature Western countries, market shares in China are far from settled. Apple and local upstart Xiaomi have a narrow lead, but the fight for loyal customers is just beginning.
Dick Fuld spits right into perfect storm 28 May 2015 Lehman’s former CEO turned up for a rare public appearance since his bank went bust seven years ago. Most of Wall Street has moved past his distorted version of the crisis. Voices like Fuld’s could risk lessons learned being forgotten faster – if anyone takes them seriously.
Venezuela adds hazy Rosneft $14 bln to leaky pail 28 May 2015 President Nicolas Maduro is touting the misleading investment sum from Russia’s oil giant. Though U.S. sanctions have boosted his popularity, he can’t escape high inflation, low reserves and power shortages. A further run-up in crude prices may be one of the country’s last hopes.
The FIFA big boss guide to executive survival 28 May 2015 Soccer’s supremo Sepp Blatter may win a fifth four-year presidency at the scandal-wracked governing body. Even if he fails, his tenacity is remarkable. It owes much to FIFA’s financial success, but also cumbersome governance and tin ears. Those help all boardroom Machiavellis.
Yen slide will encounter little political friction 28 May 2015 Some Japanese officials sound ambivalent about their currency falling to 12-year lows against the dollar. But the drop isn’t unruly, and the economic pros probably outweigh the cons. Aided and abetted by monetary policy, traders can easily push the yen down further.
M&A virtuosi deliver more warning than blueprint 28 May 2015 A new study suggests corporate wheeler-dealers generating strong returns use riskier options like cross-border and hostile transactions. Plenty of research, though, shows most acquirers struggle to add value. CEOs would do well to recognize their limits before building empires.
Avago offers textbook case for chip consolidation 28 May 2015 The serial acquirer is buying semiconductor rival Broadcom for more than $36 bln. Cost cuts should just about cover the 30 pct premium. Avago’s track record, the cash-and-stock mix and the logic of industry mergers all add up, too. Only an interloper could spoil the party.
To fix FIFA, start with the sponsors 28 May 2015 U.S. prosecutors allege that shadowy marketing agencies diverted cash from the likes of Toyota, Santander and probably Nike to corrupt soccer officials. Big bucks are at stake. FIFA’s revenue from 2011 to 2014 was $5.7 bln. In future, contractual transparency will be paramount.
Russian banks find fragile shelter in macro storms 28 May 2015 Higher funding costs predictably hurt interest margins at the struggling state’s two biggest lenders in the first quarter. The pain at Sberbank and VTB was limited by trading gains, as the rouble and oil price both rose. But bad debts and political tension remain big threats.
RBS would be good fit for Northern Rock leftovers 28 May 2015 The UK state-held bank may bid for a 13 bln stg mortgage portfolio held by its fellow state-run entity. That sounds weird, but Granite could boost RBS’s weak profitability. That in turn could give a helpful shove to the UK’s efforts to sell the bank back to the private sector.
Hope yet for creditors in China property-bond saga 28 May 2015 Defaulting developer Kaisa has lost white-knight bidder Sunac. That leaves foreign bondholders dealing with the company’s discredited chairman. However, China’s real estate market is recovering. The Shenzhen-based company may even be able to hammer together a better deal.
Gold deposits can cushion India’s current account 28 May 2015 A proposal to let banks offer interest on gold deposits could lure some of the country’s hoard of yellow metal into the financial system. Turkey has shown such schemes can work. Even if Indians only partly kick their gold habit, it could meaningfully cut the nation’s import bill.
FIFA cover-up almost a dare for U.S. enforcers 27 May 2015 In November, the Zurich-based World Cup organizer whitewashed an internal investigation, according to the former U.S. attorney who conducted it. Swiss authorities were alerted, but FIFA largely dismissed corruption allegations. No wonder American prosecutors have gone in hard.
Chicago bonds catch mild version of Moody’s blues 27 May 2015 Two weeks after the firm cut the city’s credit rating to junk, underwriters priced about $670 mln of bonds with yields approaching 6 pct. That’s nearly double what triple-A cities pay, but well shy of broke Puerto Rico. It’s a fair reflection of Chicago’s simmering fiscal mess.
Fiat boss fights for car M&A with hand behind back 27 May 2015 Sergio Marchionne argues mergers would cut duplicative spending and boost shareholder returns. GM has already rebuffed him, probably because such deals are complex and hard to complete. But he also hurts his case by downplaying the benefits of lower costs and fewer employees.
Edward Hadas: Why Lehman Brothers lives on 27 May 2015 Almost seven years after the U.S. investment bank failed, the reputations of financial markets, central banks and economic theorists remain deeply tarnished. Worse, the shock permanently damaged already-weak governments, ever-fragile labour markets and the frayed social fabric.
U.S. well placed to blow whistle on soccer excess 27 May 2015 Americans already act as the globe’s legal enforcer and financial regulator. Now a federal prosecutor is filling soccer’s refereeing void with a direct tackle on its long-running corruption allegations. FIFA, the sport’s governing body, faces a long overdue reformation.
Britain could offer China ultimate FX sacrifice 27 May 2015 The IMF is likely to recognise China’s global clout with a place in its pseudo-currency. The UK, which is courting the rising power, no longer merits a place in the SDR basket. It could offer its place to Beijing. Currency obscurity would be a fair price for enduring gratitude.
BA owner flies in no-frills bid for Aer Lingus 27 May 2015 The Irish government has backed British Airways’ parent in its 1.4 bln euro offer for Aer Lingus. The 40 pct premium is less generous than it looks, given the wider rise in airline shares. Key shareholder Ryanair could push for more, but other investors shouldn’t bank on it.
Generali finds logical response to low-yield pain 27 May 2015 The Italian group’s pledge to hike dividends may look bold: ultra-low bond yields are hurting insurers. But bigger players are relatively better placed, and Generali just hit a set of multi-year targets. Besides, a shift away from guaranteed-return products could help profit.
China’s margin trading boom nears its limits 27 May 2015 Investors have pumped up mainland stock markets with more than $300 bln of borrowed money, prompting brokers to scramble for extra capital. But leverage is already high, while the number of eligible new customers is finite. Securities firms need more durable sources of income.
India in depth: Calm rupee could spur rate cuts 27 May 2015 The Indian currency is surprisingly more stable than the Brazilian real or Turkish lira. That gives the RBI room to cut interest rates and revive growth without having to fret about capital flight. A squeamish central bank could be a bigger risk to the economy than a bold one.
Congress makes Wall St look like paragon of virtue 26 May 2015 U.S. lawmaker Paul Ryan and colleagues claim a recent court ruling exempts them from a self-imposed ban on insider trading. That’s lame in any event, but also hypocritical: They’re mulling bills to expand constituents’ liability. They should get their own houses in order.
Rob Cox: Bolivarian bank dream faces Andean climb 26 May 2015 Brazilian lender Itaú has pursued a strategy to create the first truly pan-Latin America financial institution. Its biggest effort to date is at an impasse. The merger it thought it cleverly struck with Chile’s CorpBanca is backfiring in ways that may cost it treasure and face.