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.
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.
UK right to play tough with Jaguar Land Rover 7 May 2009 The government is seeking its pound of flesh from the lossmaking luxury carmaker in return for facilitating a £800m bailout. If the demands drive parent Tata Group to decide it can do without state help, it s a winning move.
US shouldn’t give up value in Tarp warrants 7 May 2009 The bank stress tests scores are out, and the graduates are keen to repay the government's investment as fast as they can. That s understandable. The feds should take the money back but shouldn t let industry lobbyists push them into easing the terms of related stock warrants.
Tarp exit conditions miss the point 6 May 2009 Like the strings Congress attached to the cash, the conditions the US government wants to tie to its repayment could do more harm than good. Chief among them is weaning banks off governmentbacked loans. Sure, that s crucial but it s too important to mix it up with Tarp.
Fiat’s dealing will change Italian capitalism 5 May 2009 The probable dilution of the Agnelli family Fiat s controlling shareholders who are as iconic as its 500 car will mark a gear shift for the country. Italy s traditional way to do business is waning. But not necessarily an improvement. Berlusconism would be a deterioration.
Mexico’s malaise goes deeper than the flu 5 May 2009 The global downturn and the H1N1 flu outbreak will give Mexico its worst year since the 1995 Tequila Crisis. But when the flu passes, Mexico will still lose out to Asia. It is developing badly: education languishes, oil production falls and political challenges are ducked.
US government bond bubble may soon deflate rapidly 5 May 2009 Seasonal funding needs, huge government borrowing requirements, green shoots of economic stabilisation or recovery and the inflationary effect of Fed liquidity creation are combining to send Treasury bond yields upward. They may go a lot higher, quite quickly.
US corporate tax crackdown is only a start 4 May 2009 President Obama's plan may raise the effective corporate tax rate above 20% still below the 1994 level. If profits revert to trend, the extra revenue won t lower US deficits much. But combining fewer loopholes with a reduction in the 35% headline tax rate would be helpful.
China pays Taiwan geopolitical dividend 4 May 2009 Financial turmoil has brought the two closer. Taiwan, its economy slammed by a 30% fall in exports, will gain from opening up to Chinese capital and tourists. Investors will welcome the reduced political risk. China may yet win with finance what threats of force didn t get.
US pension insurer minor sinkhole in bailout world 1 May 2009 Chrysler s bankruptcy may add to its deficit, but only by $2bn because of payout limits. Even so, it remains insolvent however diligently it tries to hide it. But its freeze on benefits and the decline of definedbenefit pensions limit the hole US taxpayers must fill.
Chrysler holdouts should keep fighting Obama’s cramdown 30 Apr 2009 It s politically expedient to blame recalcitrant hedge funds for forcing the carmaker into bankruptcy by not accepting 33 cents on the buck. But treading on their rights as secured creditors is bad for capitalism and may hamper Obama s exit strategy from Bailout America.
Chrysler may face a bankruptcy battle 30 Apr 2009 The US wants the car company to use an expedited process to get in and out of Chapter 11 quickly. The socalled section 363 approach sounds smart. But some of the company s creditors feel shortchanged and could wage a legal challenge. They have decent grounds to do so.
Obama has what he needs to restructure Chrysler 29 Apr 2009 With banks holding 70% of Chrysler s secured debt agreeing to the Treasury s 30 cents on the dollar offer, the reorganisation can move ahead. Of course, with the other 40 lenders still willing to fight, it means Chrysler is hardpressed to avoid bankruptcy.
Asian economies’ flu defences already compromised 28 Apr 2009 SARS hit Asia hard in 2003, in part because there was no warning. But even with a headsup, Asian governments have less flexibility to respond now. Stimulus plans have stretched government budgets and the recession is hurting export revenues. Antiflu measures will slow recovery.
GM takes first real stab at Ch 11 – minus the name 27 Apr 2009 The teetering carmaker is slashing dealers, factories and workers, cutting brands, offering bondholders shares only and even wants the US to swap half its loans for equity. But it may still leave GM s balance sheet laden with tens of billions of dollars of liabilities.
Germany wise to ignore new protectionist law 27 Apr 2009 A new law allows the government to limit foreign investments on security grounds. With the recession hitting hard and the exportdriven economy shaken to the core, the timing is terrible. Germany needs all the foreign capital it can get. And guess what: the government agrees.
Is Fed stretching numbers to justify looser money? 27 Apr 2009 The US central bank has calculated the optimal interest rate based on inflation and GDP. But its conclusion minus 5% doesn t add up. The socalled Taylor rule suggests a rate around 2%. The Fed is either underrating current inflation or overrating the output gap.
Cameron protects UK from its budget folly 27 Apr 2009 One reason the markets aren t freaking out about soaring budget deficits is that investors don t think the government will last beyond next year. Meanwhile, David Cameron, leader of the opposition Tories, is banging on about fiscal irresponsibility and the need for painful cuts.