Financial history books 2 Apr 2008 Last month we argued that financiers should be made to study history. The current crisis might have been less severe if bankers knew something about past bubbles. Many readers asked which books they should read. Here are our picks.
EU should let Northern Rock rescue through 2 Apr 2008 Brussels is right to investigate the mortgage bank s nationalisation. But the British government finally seems to be making the best of a bad job with the Rock by hacking it back rather than running it as it used to.
Debt-for-equity swap could soothe Colonial’s woes 2 Apr 2008 Banks backing Colonial s indebted shareholders are considering swapping their loans for some 50% of the stricken Spanish property group. The banks would lose money initially, but stronger shareholders would give the company a chance to recover. It could be the least bad option.
Iceland will find bear trap hard to set 2 Apr 2008 The precedent is Hong Kong in 1998. Then, a small country s government unexpectedly bought shares in the open market. Speculators were crushed. Iceland s prime minister has threatened its own predators with a similar fate. But Iceland s position is much weaker.
False dawn 2 Apr 2008 Is the worst over? For the subprime crisis, the answer is probably yes. For the real economy, the troubles have barely begun. Banks may be over the hump, but it would be foolish to count on it, argue Hugo Dixon and Edward Hadas.
China seeks to lock up its energy supplies 2 Apr 2008 Its $50bn export credit promise to Nigeria provides an inside track to the country s energy reserves. Nigeria needs infrastructure, and exportbased lending enables projects to proceed. China s international strategy echoes Cecil Rhodes more than it does Adam Smith, but it works.
Banks seeking buyers – creativity required 2 Apr 2008 KeyCorp could reap synergies worth $11bn to its shareholders if it buys struggling rival National City. But Key still needs a capital boost, from KKR, to make a deal work. With so few banks sporting fortress balance sheets , further consolidation may require similar creativity.
Lehman ushers in era of lower Wall Street returns 1 Apr 2008 The investment bank isn t desperate for $4bn in cash just for the end of niggling rumours that it s the next Bear Stearns. But hoarding capital is likely to be the new reality for Wall Street. Combine that with less leverage, and returns across the board look set to drop.
British Airways defies gravity 1 Apr 2008 It s not just the planes that fly (sometimes), it s the shares. They re up, despite the ongoing disaster at the new Terminal 5. There are two perfectly rational explanations for this. But they only hold as long as the T5 bounces back quickly, and CEO Walsh regrows his wings.
Eads’ defence on insider probe is misguided 1 Apr 2008 The French stock market watchdog has made its probe into insider trading at Eads official. It alleges the FrenchGerman Airbus manufacturer misled markets on its airliners woes in 2006. Eads shouldn t side with the executives who bent the rules. It should fire them.
Credit crisis catches up with Deutsche Bank 1 Apr 2008 Writedowns of E2.5bn pale next to UBS whoppers, but are still double the 2007 tally. In keeping with its opaque approach, Deutsche isn t saying much. The stock rose on the news, but that looks premature. The German bank might need to yet again temper its earlier optimism.
Blackstone’s $10.9bn property fund will test its creativity 1 Apr 2008 The buyout firm just closed its biggest property fund ever. That seems brave when real estate debt is at least as scarce as LBO debt. Still, the fund might have some tricks up its sleeve. Distressed assets including those sold by Blackstone last year could be a start.
Tactics aren’t everything for activists 1 Apr 2008 Carl Icahn s campaign against Motorola has been masterfully executed. The tech group has now essentially given in to all of his demands by backing two dissident board nominees. Too bad the investment has been a disaster where it counts.
Would the Paulson plan have made a difference? 1 Apr 2008 The US Treasury secretary s regulatory revamp would give watchdogs more sensible beats and a clearer view into financial markets. But the proposals mostly skate over how regulators would be mandated to act differently. Without that, much the same credit crunch could happen again.
Sovereign funds stung by UBS terms 1 Apr 2008 When Singapore s GIC and an unnamed MiddleEastern fund agreed to buy SFr13bn of mandatory convertibles in the Swiss bank in December they prudently negotiated a safety net a lower price in case of a new megaissue. Sadly, that s still well above where UBS is trading.
Flowers should flash the cash to Friends Provident 1 Apr 2008 The buyout boss s dealmaking record is chequered which makes it tough for the stricken UK insurer to take his £3.5bn offer seriously. If Flowers proves he can follow through helped by his new Chinese running partner he may get a better hearing.
Feds shouldn’t pull all US state watchdogs’ teeth 1 Apr 2008 That may seem counterintuitive, given the states' mixed record overseeing small banks and insurers. It does make sense to centralise most regulation. But state regulators and politicians typically favour consumers over Wall Street. They can provide a useful measure of restraint.
Yahoo’s board missed opportunity 1 Apr 2008 Microsoft has made plain it intends to stand firm on its $31 a share cash and stock bid. No wonder if Google is any proxy it shouldn t pay more than $24. The flailing internet group s board should have locked in a stronger bid from Microsoft when it had the chance.
Quid pro quo time for banks 1 Apr 2008 In return for accessing central bank liquidity, they should be required to raise capital. Some of this is already happening. But if the authorities are to cushion the impact of the crunch on the real economy while minimising taxpayer bailouts, tougher action is required.
Sam Zell may go from leverage victor to victim 1 Apr 2008 The mogul made a fortune selling his REIT at the top of the LBO boom. But his Tribune deal looks to be spiraling. The company is barely complying with its loan covenants and has $3bn in shortterm debt to refinance. It may have to sell some core assets to stay solvent.
UBS fights to steady rudderless ship 1 Apr 2008 The Swiss bank is doubling its writedowns, raising another $15bn, ringfencing illiquid assets and parting ways with the chairman who sailed it into choppy waters. The market welcomed the decisive moves. But even the core businesses are suffering. UBS still looks at sea.
Obscure acronym threatens financial system 1 Apr 2008 Central banks have discovered that the financial system is riddled with highly toxic asymmetric investment products. These securities said to be dangerous enough to make bankers pine for subprime are so pervasive one regulator said banks are pretty much overrun by AIPs.