Journalists
Hugo Dixon founded Breakingviews in 1999. He is editor-in-chief and chairman. Before founding Breakingviews, Hugo spent 13 years at the Financial Times, the last five as head of Lex. He began his journalistic career at the Economist. Hugo was a Brackenbury Scholar at Balliol College, Oxford, where he gained a first class degree in Politics, Philosophy and Economics. Before that, he was a King’s Scholar at Eton College. He is the author of the Penguin Guide to Finance and Finance Just in Time. He was named Business Journalist of the Year 2000 in the British Press Awards. In 2008, he won the Decade of Excellence Award at the Business Journalist of the Year Awards. He is a visiting fellow at Oxford University’s Centre for Corporate Reputation.
The government plans legislation to cut the deficit in half in five years. That’s a worthy enough goal. But Brown probably won’t be PM in five years – and the law won’t carry any sanctions if the target isn’t met. There’s a better way to provide fiscal credibility.
With the idea of a Tobin tax on financial transactions fading, attention is focussing on forcing banks to pay insurance fees related to their riskiness. This is a promising proposal – especially if riskiness is measured by how much a bank relies on hot money.
BoE deputy Paul Tucker is keener on micro regulation of banks as a way to stop a future crisis than his boss, Mervyn King, who wants to break banks up. Tucker’s ideas have merit. But the fine-tuning required to make them work may be more than regulators can actually deliver.
The industry has enjoyed a windfall on the back of taxpayer support and is now proving extraordinarily insensitive in pushing ahead with plans for mega-bonuses. A windfall tax is normally a bad idea. But unless the banks rapidly get on-message, it will be unavoidable.
Pushing up the state retirement age to 66 from 2016 won’t deal with the immediate fiscal crisis. But it will start to address the more serious long-term demographic crisis. Other European countries, whose pension systems are in even more of a mess, need to get their skates on.
Critics say the current rules for measuring asset values and loan losses have exacerbated the crisis and confused investors, as well being too complicated - and sometimes barmy. Rule-makers have embarked on a major clean-up exercise. Hugo Dixon wishes them good luck.
The Porsche and Piëch families, who control the German sports car maker, want to maintain a 50% lock on an ultimate merged VW-Porsche. But even with nifty financial engineering, they’ll be hard-pressed to get up to 40%, say Pierre Briançon and Hugo Dixon.
Attempts to streamline the rules for bank accounting are running into problems with both the EU and the US. But this holy grail is well worth pursuing. The current hairballs helped confuse almost everybody – and exacerbated the crisis.
The government is pretending that disposals by Lloyds and RBS will create more competition in high street banking. But this was European not UK policy – and the banking sector is still less competitive than before the government blessed Lloyds’ disastrous acquisition of HBOS.
The Bank of England governor thinks breaking banks into utilities and casinos may be needed to solve the “too important to fail” problem. But such separation would be tricky and have adverse side-effects. Although the problem is real, there are better solutions.
The UK opposition party rightly argues that it’s too easy for the government to play politics with public borrowing: hence the soaring deficit. But the Tories’ solution – an independent budget watchdog – only does half the job. It needs to be able to bite as well as bark.
Brown, Sarkozy and Merkel have finally agreed a common line on bankers’ bonuses. But the new element – a possible cap on total bonus pools – is likely to have perverse consequences. There’s a better way of addressing voter outrage at the return of mega-pay.
Instead, stash away your bumper profits - and some of those accrued bonuses - to strengthen capital and prepare for a tougher regulatory regime. That’s the message of an imaginary email from the world’s top banking regulators to their charges, intercepted by Breakingviews.com.
Lord Myners, the UK City minister, has provoked outcry by proposing that long-term shareholders should have more votes than short-term flippers. The plan might deter activists from shaking companies up. But it could also encourage shareholders to act less like absentee landlords.