Fed has upper hand in turf battle 25 Jul 2008 The SEC has belatedly staked a claim for a bigger role in US financial regulation. But the Federal Reserve, seemingly backed by the Treasury, looks more likely to get extra powers, including jurisdiction over investment banks. That looks like the right way to go.
US housing bill could turn into albatross 23 Jul 2008 Legislators want to be seen doing something. But the bill which President Bush now says he ll support has flaws. For instance, it entrenches Fannie and Freddie and adds fresh government exposure to mortgages. These and other temporary fixes could prove hard to shake off.
US campaign against oil speculators needs refining 23 Jul 2008 Legislation that determines who can trade oil futures is gaining steam. But even the futures regulator says speculators aren t driving prices. Yes, the watchdog could use sharper teeth. But with oil well off its recent highs, the new law could do more harm than good.
US Treasury turning into an investment bank 21 Jul 2008 It s run by the former Goldman Sachs boss, who has just hired an exsidekick to replace the one who left, to join a client in need. With the rescue of the GSEs, The Feds are big in capital markets. Why join this bank? Not the pay, but prestige and an unlimited balance sheet.
Trillion-dollar US deficit looms nearer 21 Jul 2008 The forecast US federal deficit for fiscal year 2008 is $413bn, with record revenues from tax on capital gains and bonuses. Since the fiscal effects of downturns lag and financial bailouts will increase spending, even a mild 2001style recession would bring a $1tn deficit.
How to restore UK fiscal credibility 18 Jul 2008 If Gordon Brown was boss of a public company, he would rightly be out on his ear after abandoning his fiscal rules. Of course, the UK prime minister had little option. But for a new fiscal framework to gain any credibility, there are three things the government must do.
SEC shows up at crisis in shambolic fashion 18 Jul 2008 The US regulator has been remarkably quiet as the Fed and the Treasury have tackled the worst financial troubles in decades. That is, until it unveiled new shortselling rules that are symbolic and confusing rather than effective. It needs to get serious.
CPI jump means US can no longer ignore inflation 16 Jul 2008 The 1.1% rise in the US Consumer Price Index puts inflation squarely into 1970s territory. Government outlays such as social security are linked to CPI, and will rise rapidly, compounding the problem. A period of Volckerstyle high interest rates is unavoidable in the long term.
UK job pain may be eased by migration patterns 16 Jul 2008 UK unemployment jumped in June by the most in a single month since 1992, but is still well below levels during the last recession. The big uncertainty this time is the impact of migration, but prosperous areas dependent on finance jobs look likely to be hardest hit.
Agency debt trades on Panglossian assumptions 16 Jul 2008 The proposed bailout of mortgage giants Fannie and Freddie has given a big boost to their debt. Spreads are now back in line with their historic levels. Yet terms of the bailout are unknown. With so much uncertainty, larger spreads seem warranted.
IndyMac’s bailout could add to taxpayer woes 15 Jul 2008 US authorities have stumped up some $300bn in emergency loans and are on the hook for untold billions more to support Fannie and Freddie. Depositor bailouts could add to the bill. Yes, they d be insurance payouts, but the FDIC s skinny capital puts taxpayers at risk.
UK Tories’ economic plans full of holes 15 Jul 2008 On fuel tax, house prices and now proposals for Chapter 11 bankruptcies, the main UK opposition party seems more concerned with political pointscoring and bucking markets than offering real solutions to the credit crisis. That can only further damage confidence in the UK.
Fannie and Freddie could swamp the Fed 15 Jul 2008 Opening its discount window to the mortgage giants poses a problem. If the GSEs are forced to borrow, the likely sums would strain the Fed s current balance sheet. Aside from anything else, that could make it harder to control interest rates.
Perfect storm makes Fed job nearly impossible 15 Jul 2008 With producer price inflation up 9% and real retail sales falling despite tax rebates, the US economy suffers both downturn and inflation. With the financial crisis, the Fed's job has become impossible. Emerging may take years; the Fed must first discover what went wrong.
Rumours shouldn’t be SEC’s priority 14 Jul 2008 Sure, the US regulator should go after actual wrongdoing. But negative rumours are inevitable when sentiment is at rock bottom and financial firms investments are in trouble. The priority ought to be executives who have assured investors all was well when it plainly wasn t.
Bureaucrats should stay out of CDO mire 14 Jul 2008 US legislators want to bar rating firms from slapping tripleAs on structured finance deals not first blessed by the SEC. But that's not regulators' expertise. Instead, they should eliminate perverse incentives by forcing banks to hold more capital against newfangled deals.
US gives Fannie and Freddie iron-lung treatment 14 Jul 2008 The government has come up with various stopgap measures to keep the GSEs in business. Fine. But they are left like someone awaiting a heart transplant, kept alive by technology. Eventually the decision has to be made to give the patient what it needs or to pull the plug.
Should rescued GSEs now be slowly killed off? 14 Jul 2008 Fannie Mae and Freddie Mac distort the US economy, and one option now available is gradually to kill them off. They can t be closed immediately, but if they were run down though higher fees and lower salaries, market forces would probably replace them within five years.
Fannie-Freddie containment is crucial 11 Jul 2008 If US policy wonks handle the crisis poorly, the mortgage giants woes could spread throughout the economy with dire consequences for banks, consumers and the government itself. Decisive action is called for, but the pain should be spread gradually.
Paulson must be gritting his teeth 10 Jul 2008 The US Treasury secretary and exGoldman boss implied in March that the regulation of Fannie Mae and Freddie Mac, the US mortgage giants, needed an overhaul. Now, with investors alarmed, he has little choice but to repeat their regulator s sanguine remarks. It can t be easy.