New York’s credit derivatives plan is flawed 23 Sep 2008 The state wants its insurance watchdogs to oversee CDS. Proper marketwide clearing mechanisms which are in the works would do that more effectively. The New York plan could disrupt credit markets at the worst possible time, and push business out of the state.
B&B has won breather 22 Sep 2008 But for the mega US bailout, the UK mortgage bank would be reeling. After all, its credit rating has now been cut to one notch above junk. The bank still needs a longterm home. The problem is that Santander, the only obvious buyer apart from the UK taxpayer, doesn't look keen.
City regulator to crack down on banker pay 22 Sep 2008 The FSA is considering a neat scheme. Banks that continue with incentive structures that encourage excessive risk will have to hold more capital. Given that headsIwintailsyoulose incentive schemes were a big cause of the bubble, such action is legitimate.
Yell embarks on an orderly decline 22 Sep 2008 The yellow pages publisher has finally suspended its dividend. Critically, it s seeking looser terms on existing borrowings. This is all necessary but it s also an effective admission that Yell s longterm outlook is bleak.
Yahoo needs to hone its focus 22 Sep 2008 Tuesday is the company s first board meeting since Carl Icahn and his supporters joined the team. It can no longer just pine for Microsoft. And its new marketing efforts and search deal with Google won t solve its problems. Yahoo needs to decide what it wants to be.
Mitsubishi speeds up Morgan Stanley metamorphosis 22 Sep 2008 CEO John Mack has introduced the Japanese behemoth as a catalyst for transforming the Wall Street firm into a bank. Mitsubishi s involvement will allow Morgan Stanley to reduce leverage quickly, perhaps tap a gargantuan balance sheet, and add retail experience to the board.
Inequality blights South African outlook 22 Sep 2008 Thabo Mbeki s removal as president and Jacob Zuma s ascendancy promise an antimarket shift in economic policy. The country s huge inequality and noxious political legacy make its wealthy 20% minorities an attractive target. Zimbabwe s decline is the model to avoid.
What happened to Lehman Europe’s $8bn? 22 Sep 2008 The broker s European bankers are irate that $8bn was transferred to HQ. They are also miffed that the top dogs in NY, who had a say in how the business was run, are getting signon bonuses to join Barclays. There are serious questions to answer.
European banks can cope without Paulson’s largesse 22 Sep 2008 Congress could stop the US treasury secretary from giving foreign banks full access to his $700bn toxic relief fund although the US operations of foreign banks may be eligible. But even if they are excluded completely, European banks could benefit from the scheme.
Blaming global fat cats won’t save the UK 22 Sep 2008 Alistair Darling, the UK Chancellor, is happy to deflect blame for the UK downturn on to greedy bankers. But the truth is the government and the Bank of England also messed up. And all Darling is promising as a way forward is a bigger deficit and more debt.
Nomura gets Lehman’s eastern empire for a song 22 Sep 2008 The Japanese bank is picking up Lehman s Asian business, and a ticket out of Japan, virtually for free. But eager rivals are keen to lure Lehman s star bankers away. That's probably why Nomura has yet to nail down a deal for the US bank's European assets.
BoE woke up late again to bank dangers 22 Sep 2008 Mervyn King changed his mind on the special liquidity scheme for banks. But doubts about the BoE s position exacerbated market fears and HBOS s frailty. King was slow to see how thirsty UK banks are for liquidity. The lender of last resort needs to be closer to the play.
Microsoft offers $40bn salve for wounded shareholders 22 Sep 2008 The software giant s $45bn bid for Yahoo has lapsed but the damage remains. Promising to return a similar amount to investors is a good way to win forgiveness yet it hardly precludes a new bid for ever cheapening Yahoo.
Goldman, Morgan Stanley wave white flag on risk 22 Sep 2008 The last two big investment banks have agreed to become bank holding companies. That probably means a new funding model, greater regulation, less leverage and different accounting. Restoring shortterm confidence is the aim. But over time, it means less risk and less reward.
Inflation down but not out 22 Sep 2008 With economies slowing, commodities tumbling and banks hoarding, prices are no longer rising. But bailout money will make banks highly liquid, planting the seeds of future inflation. When the economy turns, governments may not have time or willpower to uproot them.
To bail out or not to bail out? 22 Sep 2008 Last week the US and UK authorities engaged in no fewer than 12 separate bailouts of the financial industry. And that s before adding in Russia, China and the rest. Hugo Dixon analyses to what extent they were justified.
Questions Congress should ask Paulson 21 Sep 2008 The Treasury boss wants $700bn of taxpayers money for fixing the financial system, with little accountability. As proposed, it looks like the Patriot Act for Wall Street. Legislators should ask questions and impose checks and balances now.
Short-selling bans court trouble 19 Sep 2008 Truly predatory investors will find myriad ways to circumvent the rules. But legitimate shortsellers longshort investment funds, options market makers, bank risk managers and many others will face significant problems. The bans could further destabilise the fragile system.
Conflicted Paulson should be reined in 19 Sep 2008 Friday s money market fund bailout, and the Treasury secretary s giant plan to help banks, look like overreach by the former Goldman banker. Sure, few would relish politicians leading market intervention. But it s taxpayers money, and Congress should keep him under control.
Giant US bailout would run into politics 19 Sep 2008 Investors like the sound of a big government fund to absorb bad financial assets at taxpayers expense. But one model the RTC of the 1990s called for a fiscally disciplined approach and nonpartisan management. It also took 6 months to set up, without an intervening election.
Toxic Relief Fund won’t be a panacea 19 Sep 2008 Markets jumped for joy at the prospect that Uncle Sam will absorb banks illiquid securities. But even if that happens and it will expensive and rife with moral hazard it probably won t stop the wave of deleveraging. That might require a cruise missile rather than a bazooka.
Informa’s shares will struggle to recover 19 Sep 2008 Private equity bidders have abandoned their 450p bid for the UK media group, a 40% premium to the current share price. Two years ago, Informa insisted 630p undervalued the business. That level was never reached. Without another bid, Informa s shares aren t likely to revive.
Mega bailout is creating lots of winners 19 Sep 2008 Top of the list is Morgan Stanley. Yesterday it was on the ropes; now it may even hang onto its independence. Though the details of Uncle Sam s toxic cleanup plan are vague, the rest of the banking sector and maybe other market participants may also hit paydirt.
Regulators should stop shooting the messengers 19 Sep 2008 Shortselling is essential to financial markets. Governments bear ultimate responsibility for most bubbles, by facilitating bankers greed. Shortsellers perform the invaluable function of identifying systemic rot after they burst.
The big bailout unlikely to scupper Lloyds/HBOS 19 Sep 2008 The UK lender s shareholders are angry. Three months after supporting a £4bn rights issue, they now have to accept a lower price from Lloyds. Yet the subsequent government lifeboat may not be enough to embolden them to take a stand. Their best hope is a rival bid.
Insuring money market funds is a bad idea 19 Sep 2008 The US plan to insure the funds without overseeing them could encourage unwise risk taking. And the Fed s plan to lend to banks seeking to purchase commercial paper from the money market funds adds insult to injury.
Lehman contagion hits top-rated borrowers 18 Sep 2008 Regulators hoped the firm could fail without too much pain. But fallout from its bankruptcy hit moneymarket funds and so sucked liquidity out of the $1.8tr commercial paper market, causing borrowing costs to soar. Such unpredictable consequences make the watchdogs' job harder.
Buffett’s MidAmerican swoops in on Constellation 18 Sep 2008 The regulated US utility became a big energy trader. It depended on credit, but rising leverage undermined its rating. That made it vulnerable to the credit crunch. Warren Buffett s MidAmerican rode to the rescue, driving a hard bargain. It probably won t be his last.
Santander won’t rush into US bank bargains 18 Sep 2008 The Spanish bank has always wanted to grow in the US, and it might have the firepower to do so. But the Sovereign deal could make other acquisitions tricky. And Santander may lack the synergies of other USbased bidders and the appetite to take on toxic balance sheets.
EDF squares British Energy circle – for the brave 18 Sep 2008 EDF s £12.5bn agreed offer for British Energy gives investors just 1% extra in cash, at 774p a share. The CVRs could boost the value to 1275p, but only on heroic assumptions about prices and output. Not instruments for the fainthearted. Many will take the money and run.