For China’s borrowers, bank lending is so passé 10 Jan 2013 Bank loans made up just half the economy’s financing in 2012, while long-term corporate lending contracted sharply in December. It’s now off-balance sheet finance that drives China’s growth. That makes monetary data less useful, and creates new risks when credit goes wrong.
Obama pick for Treasury more tweaker than reformer 9 Jan 2013 Jack Lew knows budgets and helped balance America’s books under Clinton. But he may be too liberal for today’s Republicans, and his boss wants to cut entitlements with a scalpel, not a cleaver. That makes it unlikely Lew will preside over a long-term answer to U.S. deficits.
Goldman typically quick to read money fund omens 9 Jan 2013 The U.S. bank will publish the value of its money market funds’ assets daily, rather than only months later. That’s a step forward in transparency, and might also help shape reforms that watchdogs and the industry can both accept. It’s an example for other fund managers.
Brazil’s power troubles dim economic prospects 9 Jan 2013 A bad drought could require electricity rationing. Brazil is already battling weak investment and higher labor costs as it prepares to be a global sports host. The 2001 energy crisis sapped 2.6 points of GDP growth. Dilma Rousseff’s troubleshooting list is getting awfully long.
Governance fixes don’t let Chesapeake CEO off hook 9 Jan 2013 New directors are cutting back outsized pay and perks at the U.S. gas driller. But cleaning house is separate from holding boss Aubrey McClendon to account for dodgy personal dealings. The only credible result of a lengthy board probe into conflicts of interest would be his exit.
ArcelorMittal strikes while market is hot 9 Jan 2013 The world’s biggest steelmaker is raising new capital to help cut debts. Arcelor sensibly waited for a warmer market to hold a $3.5 bln placing of shares and convertible bonds. This is easier than a rights issue but the controlling Mittal family will get diluted again.
Dublin-style tax cut for Belfast carries big risks 9 Jan 2013 Sectarian unrest and a bloated public sector may seem unrelated. But Northern Ireland’s heavy subsidy from London means greater pain under austerity. Cutting corporate tax rates, a la Dublin, could be a game-changer. But fiscal radicalism could also bring nasty side effects.
Ethical economy: What Islamic finance can offer 9 Jan 2013 Finance is about making promises and religion teaches people to keep them, so the two make good partners. Today’s Islamic financial products merely copy amoral conventional models, but the underlying principles could be used to improve a system built on a shaky moral foundation.
Sprint and Softbank forced into tactical warfare 9 Jan 2013 U.S. pay-TV company Dish put forward a highly conditional $2.3 bln offer for Clearwire, a spectrum owner integral to the ambitions of Sprint and its Japanese buyer. Though the Dish bid is unlikely to go far, it could pressure Sprint to pay more - or strike a deal with Dish.
Italian elections are complicated – and important 9 Jan 2013 February’s vote could determine Italy’s future, and affect broader euro zone policy. The country’s convoluted electoral system and unsettled political environment make a stable outcome far from certain.
Porsche’s real legal crash test is yet to come 9 Jan 2013 Porsche investors may think the legal risks stemming from its takeover bid for Volkswagen are subsiding. This would be a delusion. The carmaker may be off the hook in the U.S., but it will be haunted in the next few years by lawsuits in Germany that are not bound to fail.
Ping An flop could leave HSBC red-faced but richer 9 Jan 2013 The bank’s $9.4 billion plan to offload its stake in the Chinese insurer is in doubt. If regulators block the sale to a Thai billionaire, HSBC’s reputation will take a knock. Finding other buyers won’t be easy. But the recent market rally means the bank could end up better off.
Timing key for Qatar’s $2.5 bln lifeline to Egypt 9 Jan 2013 The aid package underscores the Gulf state’s support for the ruling Muslim Brotherhood. But it’s unclear when the funds were received. If the money came during the previous month, and has been spent, Egypt is in deep trouble. If it just arrived, sighs of relief are in order.
Big-shot banker class of 2012 gets back to work 8 Jan 2013 Though it’s not the top job at Barclays, JPMorgan’s Jes Staley is joining hedge fund BlueMountain for what could be a less stressful but lucrative role. He’s not the only Wall Streeter seeking a gig. Diamond, Taubman, Pandit & Co may find power and glory similarly elusive.
Tim Geithner wore more than firefighter’s hat well 8 Jan 2013 While part of the establishment that allowed the financial system to self-immolate, the departing Treasury secretary helped douse the flames effectively. While that should be his main legacy, Geithner also managed the role’s diverse duties in the toughest economic times.
AIG’s bailout helped, not harmed, shareholders 8 Jan 2013 The insurer’s pesky ex-CEO is suing the U.S. government and wants the company to sign on. It probably won’t, but the case is weak anyway. Shareholders did better than if AIG had gone bust, and the terms of the $182 bln rescue were kinder than private investors would have allowed.
New Anglo boss needs free hand to make changes 8 Jan 2013 Mark Cutifani’s operational nous and South African experience make him a good choice to run Anglo American. But the miner’s incoming boss should set his own agenda, including examining a breakup. Anglo’s institutional inertia already threatens to undermine his authority.
Markets behave too well to fix Spain 8 Jan 2013 Investors have made an official rescue less likely. Madrid’s bond yields are the lowest since March, and probably wouldn’t fall much more if Spain asked the ECB for help. Madrid and Berlin may like the new status quo, but the Spanish economy would benefit from unleashing the ECB.
Greece has started the long climb up 8 Jan 2013 An EU survey says the Greeks are the least pessimistic they’ve been in the last three years. That suggests Greece may finally be adjusting to life without many subsidies. A boom is not around the corner. But after a 19 percent GDP decline, there should be lots of room for growth.
Chuck Hagel is good choice for U.S. deficit hawks 8 Jan 2013 Obama’s pick for defense secretary mixes dovish foreign policy views - at least for a Republican - with budget-cutting fervor. The combination could actually slash Pentagon spending. Reducing it to the proportion of GDP seen in the late 1990s would save Uncle Sam $250 bln a year.
Chesapeake sets unlikely governance reform example 8 Jan 2013 The U.S. gas firm’s revamped board slashed CEO Aubrey McClendon’s bonus to zero and reined in other perks. They’re overdue steps for Chesapeake, which has a long way to go to restore credibility. Still, there’s hope for similarly abused shareholders elsewhere in the oil industry.
Rights issue rethink could ease sting for Deutsche 8 Jan 2013 Anshu Jain and Juergen Fitschen vowed to lift Deutsche’s capital without tapping shareholders. But U.S. capital rules, Libor costs and non-core losses up the ante. A 5 bln euro rights issue might nettle investors - but markets are looking favourable.
Financial sector still has room to shrink 8 Jan 2013 The number of approved professionals in the UK is only down 10 percent from the 2008 peak. That’s not a big decline for an industry that is widely regarded as engaging in vast quantities of socially useless activity. The right-sizing of the City is still a work in progress.
Rothschild’s Bumi shake-up puts cart before horse 8 Jan 2013 The British financier wants to sack most of the board of Bumi, the stricken coal miner, and its new CEO. His slate of replacements is impressive but his shake-up plan looks half-baked. The first priority should be completing a proposed split with Indonesia’s Bakrie family.
CDB highlights China’s dysfunctional finance 8 Jan 2013 China Development Bank raised $193 billion in 2012 to fuel an unusual mix of vendor financing, M&A lending and infrastructure loans. While it has a legitimate part to play in China’s growth, the policy bank’s habit of undercutting rival lenders smacks of capital misuse.
Oil barons and tech hipsters share a dark side 7 Jan 2013 They seem so different. But SandRidge’s CEO and some peers jet around at shareholders’ expense, while at Facebook and Google founder-bosses are insulated from owners by super-voting rights. Clubby boards also feature in both sectors. The oil business may prove easier to clean up.
Private lawyers could add oomph to SEC enforcement 7 Jan 2013 The U.S. regulator has scored big settlements from Wall Street banks. But a new study suggests shareholder lawsuits may do better, especially at pinning blame on individuals. Other government agencies find ways to co-opt private-sector legal talent. Maybe the SEC should try it.
Fed quandary shows finance lost in economic space 7 Jan 2013 The U.S. central bank says it’s concerned about the economic costs of money-printing. That probably means inflation. They should worry more. Extraordinary policies have distorted asset prices. After providing misinformation for four years, markets risk becoming irrelevant.
Airport mess shows limits of German expertise 7 Jan 2013 Berlin has delayed the opening of its high-tech airport - for the fourth time. The fiasco is all too typical of Germany. Ossified local politics and a penchant for over-engineering have led to many botched infrastructure projects. The legend of German efficiency is exaggerated.
Liquidity U-turn is sell signal for bank shares 7 Jan 2013 Prices rose on the news that global regulators watered down tough rules on minimum levels of easily tradable assets. Investors may see higher profits, but the decision suggests that authorities fear slower GDP growth. Without strong economies, banks will be worse off, not better.