UK would benefit from a snap election 21 May 2009 With both the IMF and S&P warning about the country s finances, the UK needs to get a grip on the situation. Gordon Brown says calling an election in a recession would cause chaos. The truth is nobody is likely to take tough decisions before an election is out of the way.
California’s entrepreneurs aren’t going anywhere – yet 20 May 2009 The Golden State faces a host of problems stemming from its ballooning $21bn budget deficit. They ll likely lead to higher taxes, more regulation and fewer services. That will scare off some of California s entrepreneurs. But the alternatives aren t much better.
US sets low bar for Tarp warrant value 19 May 2009 So far, only one bank Old National Bancorp has bought back warrants issued to the Treasury to give taxpayers the chance of some bailout upside. Even on kind assumptions, the bank looks to have gotten the best of the deal. Use our new calculator to evaluate other cases.
China tries to take baby step away from dollar 19 May 2009 The dollar won t easily be displaced as the reference currency for commodities and almost everything else. A move to price ChineseBrazilian trade in local currencies is just a gesture. But it could be preparation for a new world order where the US can t fund its debt in dollars.
Gatwick auction moribund – but not quite dead 19 May 2009 BAA says the sale of the London airport is still on. But the highly leveraged airports operator got only one fully funded bid and it was painfully low. No wonder BAA has appealed the mandated breakup. A delay would buy precious time, and might keep it from crystallising a loss.
New opposition leader raises hope of Japan revival 19 May 2009 Since Taro Aso became its leader, Japan s ruling LDP has added bigger public deficits to a debt of 160% of GDP, producing a deep recession. In this summer s election the new opposition leader, marketoriented and opposed to the central bureaucracy, may give voters a way out.
UK hears echoes of 1930s – and 1970s 19 May 2009 Falling UK retail prices threaten a depression in wages and earnings. With unemployment spiralling, the deflationary menace is real. Perhaps current policies can restart the economy. But still more money printing and a bout of high inflation might prove the unlovely solution.
Long-term peace could turn Sri Lanka into Taiwan 18 May 2009 Sri Lanka has achieved reasonable economic growth in spite of its civil war. If peace lies ahead, the best way to quiet remaining unrest is through rapid growth. That could be achieved by becoming India s lowtax, highskill neighbour, like Taiwan s relationship with China.
US investors don’t need a Shareholder Rights Act 18 May 2009 Many elements of the bill being introduced in the US Senate are laudable: say on pay, an end to staggered boards and separation of the CEO and chairman roles. But shareholders are already tackling these matters themselves. A blunt act of Congress is the wrong way to proceed.
GM-like ultimatum might solve California disaster 18 May 2009 The state is about to vote on proposals to curb its $42bn deficit. All look set to fail. Now it needs the federal government to backstop its borrowing. That gives the feds leverage. As with GM, they should demand California make crucial changes before it gets any support.
Indian election delivers much needed stability 17 May 2009 Fears that the economic crisis would bring political chaos have proven wide of the mark in India. The world s largest democracy has given the ruling Congressled alliance a decisive victory. The next government will have a freer hand to make reforms. Investors should be relieved.
Accounting tricks can’t hide huge US need for cash 14 May 2009 The Obama administration wants to keep some bailout spending off its books more than $500bn for the IMF, part of the Tarp cost, and the Fannie and Freddie bailouts. This could improve budget deficit optics, but it won t change the borrowing need and that s the real test.
Obama should keep politics out of pay regulation 13 May 2009 He s right to want bank pay to reward longterm performance rather than big shortterm bets. But micromanagement of dollar compensation, say and headline grabs like the punitive bonus tax Congress tried with AIG are bad policy. Broader, commonsense rules are the answer.
EU’s idea of a stress test falls short 13 May 2009 The EU s national regulators are planning to conduct stress tests on their banking systems, just as soon as they agree on a common methodology. But these tests wouldn t be bankbybank and the results wouldn t be published. So it s hard to see the point.
Obama’s derivatives revamp has troubling loophole 13 May 2009 Overall, the plan is reasonable. Centrally clearing standardised products, requiring dealers hold sensible capital and demanding more disclosure makes sense. But unless bespoke products can be brought to heel, banks may focus on more profitable but riskier complex instruments.
Dubai: no green shoots in the desert 12 May 2009 The crisis came late to the emirate, where the mood was frothy until eight months ago. Dubai still has gargantuan debts and a real estate slump that is far from over. But recent support from cashrich neighbour Abu Dhabi at least suggests Dubai will survive to see a recovery.
Even China can’t live on stimulus alone 12 May 2009 Beijing can tell its workers to build, but it can t tell its customers to buy. Exports fell 22% in April. If trade doesn t return, China might run out of holes to dig before its consumers are ready to take up the slack. Maybe that s why it s bankrolling Uncle Sam's recovery too.
Germany can’t dodge bad bank dilemma 12 May 2009 With elections looming, politicians understandably want a scheme that s easy on taxpayers and tough on shareholders. But banks won t accept a deal they can t afford. If the government wants to boost lending, it may have to supplement the bad bank scheme with capital injections.
Fannie and Freddie still the biggest zombies 8 May 2009 Fannie lost a whopping $23bn in the first quarter amazingly, less than in the previous two periods. The US Treasury will keep it solvent and has quietly doubled its combined commitment to Fannie and Freddie to $400bn. Both should be delisted and put on the government s books.
So will stress-tested banks boost lending now? 7 May 2009 Don t count on it. The recession will keep both supply and demand muted for a while. And securitisation, which funded half banks' lending in the boom, remains moribund. Taking insolvency risk off the table simply means there s less reason for banks to crimp lending further.