Geithner’s two-tier regulatory plan looks smart 26 Mar 2009 The US Treasury secretary wants to identify banks, insurers and others that are too big to fail and make them hold more capital. There are big technical problems, but the mere threat of capital charges could help by encouraging many firms to become small enough to fail.
Mervyn King’s salvo first in wider war 25 Mar 2009 The BoE governor s warning that the government can t afford another big fiscal boost should be seen as an attempt to avoid no fewer than three crises that could be looming: a fiscal crisis, an inflation crisis and a constitutional clash.
YouTube snub shows China’s desire to disconnect 25 Mar 2009 China has blocked the US video site before. But the latest clampdown is another sign of the Middle Kingdom s dwindling faith in the West s sacred cows. It wants to deal with the rest of the world, but on its own terms. Next week s G20 meeting should make for compelling viewing.
Geithner plan won’t reveal fundamental value 24 Mar 2009 The US thinks pumping liquidity into toxic assets will remove the illiquidity discount depressing valuations. It will certainly drive up market prices but only by giving investors headsIwin tailsyoulose bets financed by taxpayers. Don t confuse that with fundamental value.
Japanese political mess threatens economic future 24 Mar 2009 Prime minister Aso is at 10% in the polls, while the DPJ s Ozawa faces a funding scandal. Both party leaderships favour 1990s Keynesian spending while their freemarketers are sidelined. Elections in September need to provide a shakeup and new policies but that looks unlikely.
US super-liquidator for non-banks faces challenges 24 Mar 2009 The bosses of the US Treasury and Federal Reserve want a mechanism to shut down troubled nonbanks. A FDIClike institution sounds like a great idea. But nonbank covers a lot of territory. Different liquidation mechanisms may be needed for different institutions.
Myners shouldn’t carry can for Goodwin bonus 23 Mar 2009 Calls are mounting for the UK Treasury minister to quit because he let the former RBS boss get a £700,000 pension. But remember how that weekend last October Myners was also negotiating a £37bn rescue scheme for three big banks. Critics should get a sense of proportion.
Fully baked Geithner plan produces relief rally 23 Mar 2009 US stocks surged nearly 7% after the Treasury boss unveiled a plan to get toxic assets off bank balance sheets. It wasn t so much that he surprised the market with innovation. But he seems to have overcome earlier concerns about his battlereadiness, at least for now.
Geithner juices up subsidy for bad bank plan 23 Mar 2009 The besieged US Treasury secretary has finally delivered a plan and it appears more feasible than anything that s come before. There are still potential problems, including the government s generous provision of cheap debt. But at least it sounds like a plan, not a pipedream.
Bailouts will hobble US economy, even if they work 23 Mar 2009 The latest bad bank plan sounds plausible. But with a huge budget deficit, massive lending support and mortgage rescues in the pipeline, lots of government money is flowing to economic losers. Throw in excessive federal borrowing, and the headwinds to a recovery are rising.
AIG backlash could endanger global economy 20 Mar 2009 Outrage over the $165m bonuses has turned financiers into devils and further undermined Geithner s credibility. That will make it harder for Obama to ask Congress for more funding to bail out banks. But until US banks are shored up, the whole global economy will feel wobbly.
Dead zone for foreign investment expands 20 Mar 2009 Venezuela s nationalisation of the Grupo Santander unit is symptomatic. When a wellrun bank from a friendly social democrat country can t keep its assets, foreign investment has become impossible. Country by country, the Latin American dead zone is rolling back globalisation.
Bonus pitchfork mob makes for lousy tax policy 19 Mar 2009 Outraged US legislators are planning punitive taxes on bonuses not just at AIG but at all recipients of government funds. The hotheaded and unfairly retroactive changes could hurt investor confidence, undermine Obama s credibility and damage the still valuable US finance sector.
Fed stimulus accelerator is inflationary 18 Mar 2009 The Fed is increasing its balance sheet by another $1 trillion, including $300bn of Treasury bonds. Yet the pace of US economic decline seems to be slowing, while deflation is nowhere visible. Fed policy is now highrisk, and resurgent inflation may strike sooner than expected.
Germany pays for past and future virtues 18 Mar 2009 During the boom years, Germans practised restraint but exported to overspenders. Weak exports mean the recession looks worse in Germany than in the US. Stimulus? Yes, but not too much. Future inflation is a worry. So is the cost of expensive bailouts for reckless neighbours.
Liddy needs to open up to taxpayers 18 Mar 2009 AIG s CEO is under fire for paying out retention bonuses. The public outrage means future bailout funds could be at risk. Taxpayers already own 80% of AIG. But Liddy still sounds like a typical cautious company boss. However tough it may be, he must answer to his new owners.
Taxing AIG bonuses would waste time and effort 17 Mar 2009 The payouts rightly raise popular and political ire. But one idea for redress loading tax on recipients risks the same damaging fallout as breaking the contracts: uncertainty. Besides, they're a historical distraction. US lawmakers have more than enough to do for the future.
AIG’s disclosure should just be the beginning 16 Mar 2009 The US insurer finally revealed that nearly twothirds of its $180bn bailout cash has already gone, mostly to US and foreign banks. AIG should disclose more, but it s a start. At least annoyed policymakers now have data to inform their critique of the AIG bailout and others.
US backtrack on mark-to-market is badly timed 16 Mar 2009 FASB s imminent easing of rules for reporting financial asset values looks like a rush job under bankled political pressure. It will also confuse investors the group supposed to benefit from accounting standards at an already volatile moment. It s bad policy at a bad time.
Citi’s new board picks hit the right note 16 Mar 2009 The ailing bank sorely needs some experienced and respected market heavyweights as directors. Pimco s former head honcho, a retired Fed president and two savvy bank bosses could do the trick assuming they and Citi chief Vikram Pandit can work together effectively.