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.
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.
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.
Lack of made in UK becomes central to crisis 24 Apr 2009 The UK economy contracted by 1.9% in the first quarter. That was worse than expected, and undermines the government s brand new growth forecast. Manufacturing, on which any recovery will depend, plummeted. The government s growth gamble keeps on looking riskier.
UK just doesn’t feel triple-A OK 24 Apr 2009 The rating agencies aren t formally considering a downgrade yet. But the latest government budget showed no concern for the risks of huge deficits. That isn t consistent with a top rating. If ratings accounted for possible inflation, the UK would probably have been cut already.
It’s still Ken Lewis’s fault 23 Apr 2009 Hank Paulson made me do it is no excuse for the BofA boss s disastrous Merrill deal. Despite government pressure to proceed, he could have renegotiated the price once Merrill s losses became clear. Lewis s responsibility was to shareholders who should still show him the door.
Zuma enigma is key to South Africa’s future 23 Apr 2009 The presidentelect is from the ANC s left and has faced corruption and other charges. Yet his apparent wish to keep finance minister Manuel suggests economic rationality. South Africa can become Nigeria, Zimbabwe or a larger, richer Ghana. Zuma will get to determine which.
Darling understates cost of bank bailout 22 Apr 2009 The UK chancellor says he s being conservative in setting aside £50bn for keeping the banks afloat. But he s not counting the full cost of all the official guarantees and aid especially if the recession deepens. The IMF s £130bn estimate looks more plausible.
Budget leaves UK at risk of financing crisis 22 Apr 2009 What should the chancellor do in the face of a deep recession? Alistair Darling took flight from reality. He resorted to unrealistically optimistic economic assumptions and the pretence that gargantuan deficits would not be a problem. Financial markets may yet change his mind.
UK snubs Mervyn King by rejecting Glass-Steagall 22 Apr 2009 The Bank of England boss had called for a debate over whether banks should be split into utilities and casinos. The government has now closed the debate. The lesson for King: if he wants to influence such matters in future, he had better state clearly what he thinks.
EU Commission is paper tiger on bank bailouts 22 Apr 2009 The EU wants to force staterescued banks to shrink their balance sheets. That's unrealistic and could push back regional integration as the Bundesbank's Weber fears. Europe deserves a stronger regulatory response to the crisis than the current commission seems able to provide.
UK likely to regret soaking the rich 22 Apr 2009 The Budget is a hammer blow to the City of London, landing multiple punches on high earners. The measures are likely deter foreigners from working in UK financial services. And in removing incentives to make more money, they may reduce the country s taxable revenue base.
Freddie exec’s death shows perils of vilification 22 Apr 2009 Even if David Kellermann s suicide had little to do with his job, the vitriol directed at those toiling at crisiswracked firms can t have helped. Yes, the financial meltdown has cost trillions. But public rage over it can contribute to needless human losses, too.
Japan should forgo $500bn equity crash-mat 22 Apr 2009 A planned emergency fund for buying shares would pad out the market but reinforce banks bad habits. History has left lenders groaning under $200bn of stock, which they don t seem keen to sell. The taxpayers money would be better spent buying shares directly from the banks.
UK green budget looks bad value for taxpayer money 22 Apr 2009 The government s £1.4bn green budget is meant to help reduce carbon emissions and create a low carbon economy. Taxpayer money may have been better spent giving indirect support to existing hightech industries that are less speculative.