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.
Would the Paulson plan have made a difference? 1 Apr 2008 The US Treasury secretary s regulatory revamp would give watchdogs more sensible beats and a clearer view into financial markets. But the proposals mostly skate over how regulators would be mandated to act differently. Without that, much the same credit crunch could happen again.
Feds shouldn’t pull all US state watchdogs’ teeth 1 Apr 2008 That may seem counterintuitive, given the states' mixed record overseeing small banks and insurers. It does make sense to centralise most regulation. But state regulators and politicians typically favour consumers over Wall Street. They can provide a useful measure of restraint.
Who could execute Paulson’s regulatory blueprint? 31 Mar 2008 The Treasury secretary s plan to revamp US financial regulation looks comprehensive, but logistically and politically complex. Stitching it all together would tax an army of M&A experts, let alone stretched civil servants. Perhaps Paulson is bidding to extend his term in office.
Fed needs right incentives to play supercop 31 Mar 2008 Paulson's plan assigns a broad role to the Fed. Having responsibility for monetary policy, financial stability and any rescues in one place makes good sense provided the Fed is always required to think of bailout funds as real money, not free subsidies from taxpayers.
Tough to get good policies in Argentina 27 Mar 2008 Argentine farmers are right to protest higher export tariffs. However, as with most commodity and energy exporters, Argentine economic performance depends primarily on world markets. That makes it difficult for the electorate to figure out which economic policies make sense.
Homeowners shouldn’t wish for a Bear-like bailout 27 Mar 2008 Struggling borrowers objecting to JPMorgan s takeover of the Wall Street firm would probably be worse off under a similar deal than under existing relief efforts. What s more, the rapid drop in Libor has, for now, removed the risk of sharp rises in their interest payments.
The Fed should regulate Wall Street – all of it 26 Mar 2008 Hank Paulson seems to agree. The Fed is funding investment banks it doesn t, strictly, regulate. The Bear Stearns drama shows it s impossible to disentangle them from true banks. The Fed has real levers to deploy, too. It s wellplaced to lead a more coherent regulatory effort.
Sarko’s UK visit will be pleasant, but useless 26 Mar 2008 The French president, eager to boost his muchbattered image, will tell the Brits whatever is required to make his visit a PR success. But his conception of politics as the art of corporate meddling will find fewer takers in the UK than it does in Italy or Spain.
US federal spending, not consumers, stoking trade woes 26 Mar 2008 Incipient recession is widening the US budget deficit. It should exceed $500bn for the year to September 2008, compared to a declining traderelated current account deficit of $739bn in 2007. Soon, fiscal profligacy will more than account for US trade woes.
Russian pressure threatens neighbours’ market zeal 25 Mar 2008 Medvedev's sabrerattling about Nato echoes Putin's policies for the near abroad. Political pressure, and the example of Russia's oilfuelled economic success, may undermine neighbours' commitment to free markets. Russian contempt for property rights could prove contagious.
Will the Fed’s $75bn lubrication work? 25 Mar 2008 Traders are betting it will unblock the seizedup market for treasury repurchase agreements. But banks scrambling for liquidity before quarterend could easily mop that up. If they expect more losses, their defensive capitalhoarding could bring back market turmoil.
KMT win is no economic bonanza for Taiwan 24 Mar 2008 Taiwan s Taiex stock index rose 4% on March 24, on hopes that Ma Yingjeou s election win for the Kuomintang would bring closer ties with China. However China already represents 39% of Taiwan s exports and it is difficult to see how the DPP s economic record can be much improved.
Japan can get along without a central bank chief 19 Mar 2008 In most countries, that would precipitate a big crisis. But Japan's opposition is right not to want a central bank boss too closely tied to the Ministry of Finance. Interest rates need to be raised, and the next governor needs to be powerful enough to do so.
US economic pig now Fed and watered 18 Mar 2008 Bernanke is slopping nearly $450bn of new liquidity into the market's trough and is watering it with a 0.75% rate cut. But the US economic pig needs a diet and exercise, not more truffles. Until real interest rates are positive, the economy will remain in poor shape.
Markets too eager to celebrate over mortgage giants’ plan 18 Mar 2008 That s the only way to read the positive reaction to regulator Ofheo s relaxing Fannie and Freddie s capital constraints. Ofheo seems to be hoping that promises from the agencies not to gear up will encourage investors to pony up more capital. That seems a tad optimistic.
Fed draws a line in the sand 17 Mar 2008 Bear Stearns descent towards insolvency forced the US central bank to take drastic action: $30bn of support for JPMorgan s rescue of the Wall Street firm and discount window access for brokers to prop up the securitisation market. The Fed has rarely been this handson.
The Fed’s alphabet soup 17 Mar 2008 The US central bank has expanded its financing menu for banks and brokers. Dwight Cass explains how the TAF, TSLF and PDCF programmes work.
US should be congratulated on swift Bear bailout 17 Mar 2008 The contrast with the UK's months of dithering over Northern Rock is extreme. The Fed has had to oil a privatesector solution with $30bn of public money. But it has avoided nationalisation. What's more, the virtual wipeout of Bear's shareholders limits moral hazard.
What happens in Tibet may not stay in Tibet 17 Mar 2008 For the first time ever, the monks of Lhasa have political leverage from China s hosting of the Olympics. A successful revolt might embolden others particularly those hardhit by China s worryingly rampant inflation to rise up, too. There s a risk of general civil unrest.