Bank of England gives less away than the Fed 22 Apr 2008 The Bank of England s new programme allowing banks to swap assetbacked securities for government bonds is similar to one of the US Fed s liquidity schemes. There are some important differences, but broadly speaking, the BoE is being less generous than the Fed. That s wise.
UK Tories guilty of serious misjudgement 21 Apr 2008 Shadow Chancellor George Osborne decision to endorse the government's bailout of UK banks without even waiting to hear the details was daft. He has handed the government a blank cheque. Bankers will no doubt be grateful, but taxpayers may end up footing the bill.
Pennsylvania primary offers poor choice in housing bailouts 21 Apr 2008 Both Democratic presidential candidates favour risky housing bailouts. McCain favours a more limited one. Housing bailouts that support asset prices at unsustainable levels prevent the market from clearing. That can turn an economic downturn into a rout.
Bank safety net should be woven more tightly 17 Apr 2008 The Basel Committee reaffirmed its Basel II rules that allow large banks to rely on their own risk modeling. That's got it the wrong way around. Banks deemed to be too big to fail should be tightly regulated, with innovation left to smaller houses that can do less damage.
Can Dmitri Medvedev ever be Russia’s president? 15 Apr 2008 Vladimir Putin, the presidentelect s mentor and current job holder will head the ruling party on top of becoming prime minister as planned. This looks like overkill, but might be a sign that Putin doesn t feel quite secure that Medvedev will be his obedient creature.
Paulson prods hedgies to look more like Goldman 15 Apr 2008 That s not a bad thing. The recommendations, from a US governmentsponsored group of fund managers, make sense. Many funds should improve disclosure, valuation and risk management. But even those at the vanguard will remain exposed to the risks that have roiled Wall Street.
Berlusconi re-election is bad news for EU 15 Apr 2008 If the EU was hoping for a period of unity post the Lisbon Treaty, the Italian prime minister s reelection provides a reality check. Berlusconi s attacks on the ECB could undermine the eurozone. And his close links with Putin s Russia makes a common energy policy less likely.
McCain gasoline tax plan offers little for grownups 15 Apr 2008 McCain s plan to abolish the gas tax this summer would worsen the US budget deficit, lower the savings rate, and increase gas consumption as well as dependence on Middle East oil. He wants to double the child exemption, too maybe he s decided they re his constituency.
Stark monetary choice between food and housing 14 Apr 2008 Further monetary expansion might help the US housing market. Yet it would force up commodity and energy prices, particularly hurting food supplies to poor countries. US homeowners may have to suffer to quell global inflation, feed the poor and restabilise the world economy.
Anchored Europe struggles with its disparate crew 10 Apr 2008 The European Central Bank was right to keep rates on hold this month. With inflation almost twice its target, it didn't have much choice. But the price will be paid in terms of a stronger euro and slower growth particularly in Spain and Italy. The euro ship will be tested.
China’s currency dilemma adds to US problems 10 Apr 2008 For years, the renminbi s close tie to the dollar helped China grow fast and create jobs. But at seven to the dollar, it s nowhere near strong enough to fight inflation. But a big revaluation would risk disrupting Chinese growth and add to US inflation.
Hedge funds pick good time to ratchet up PR effort 9 Apr 2008 Different industry groups have been busy banding together. With talk of tighter financial regulation on everyone s lips, hedge funds are easy targets for lawmakers. But they re looking relatively blameless for the credit crunch, so it could be a good time for a charm offensive.
Bank of England needs to cut before UK becomes US 9 Apr 2008 Mervyn King, the Bank's Governor, warned in November that the UK was a pale shadow of the US. The shadow is darkening. Without swift help the UK housing market is going to dive, creating huge risks for consumers and banks. It's time for the Bank to cut hard.
Sunshine could help regulate Wall Street 8 Apr 2008 Forcing investment banks to disgorge more information could help stop them running excessive risks. They d know that smart market operators could use such information to trade against them and would therefore be more conservative in the first place.
Greenspan’s charm offensive has high stakes 8 Apr 2008 And not only for the former Fed boss s reputation. A lot of his beliefs still underpin the US central bank s regulatory policies. The proposed increase in its oversight authority could give its Greenspantinged worldview even greater sway.
Greenspan should bear blame for bubble and crash 7 Apr 2008 The former Fed chairman grew US M3 money supply 3% faster than GDP for 11 years, flooding the world with cash. He also allowed US banks to build huge webs of obligations on inadequate capital. That makes him a prime suspect as an architect of the current mess.
Liquidity risk can’t be regulated away 3 Apr 2008 The SEC s boss supports tweaking capital rules to cover liquidity risk. But Bear Stearns collapse shows how lightningfast a liquidity crisis can strike. It s unlikely a bank could act fast enough to raise capital when its counterparties are running for the exits.
Iceland will find bear trap hard to set 2 Apr 2008 The precedent is Hong Kong in 1998. Then, a small country s government unexpectedly bought shares in the open market. Speculators were crushed. Iceland s prime minister has threatened its own predators with a similar fate. But Iceland s position is much weaker.
Germans worth their pay raises, Italians aren’t 2 Apr 2008 Public sector workers in Germany have just won a big pay deal. They deserve it. They have helped propel German competitiveness. The bad news is in Italy and Spain, where labour costs have been soaring and devaluation no longer offers an easy escape.
Bernanke’s Bear bailout backing reveals Fed’s bind 2 Apr 2008 Of course the Fed chairman doesn t see it as a bailout. But he says the investment bank s problem was liquidity, not capital, and that in less fragile markets the US central bank might have let Bear go under. Such nuances highlight the challenges faced by regulators.