Mercosur searching for alternatives to Adam Smith 23 Dec 2011 With members led by leftists, it’s not surprising the Latin trade bloc is raising tariffs and promoting anti-market policies. Mercosur has lots of commodities but relatively uncompetitive manufacturing, even in Brazil. One risk of economic experimentation is a return to poverty.
Global bank capital rules add “G-Sifi envy” to mix 20 Dec 2011 Labeling 29 lenders as globally systemic will introduce a new dynamic to finance in 2012. Banks on the list must hold more capital, yet gain a too-big-to-fail halo. Smaller competitors may try to join the club. It’s a race to the top, but not in the way regulators envisaged.
Fannie, Freddie role funding tax cut is perilous 19 Dec 2011 U.S. lawmakers are struggling with the details of extending the payroll tax reduction. But both sides want to pay for it by raising the mortgage finance giants’ guarantee fees. That’s a needed change - but siphoning the extra money straight to Treasury sets a dangerous precedent.
UK’s tough talk on bank reform masks concessions 19 Dec 2011 The government has accepted the central proposal of its independent banking review, and expects universal banks to build a costly ring-fence between wholesale and retail businesses. It has also called for RBS to shrink further. But the fine print reveals a more lenient approach.
Directors and officers insurance declaws clawbacks 19 Dec 2011 Forcing bosses to repay undeserved rewards is central to U.S. financial reforms. But new D&O policies are now covering the risk of lost comp - at shareholder expense. Insurers deny helping executives skirt accountability. Investors and watchdogs may see things differently.
Did MF Global clients forget Lehman’s lessons? 16 Dec 2011 The bankrupt broker stands accused of misusing client funds. One theory is that it used customers’ money through a legal process called rehypothecation. The U.S. imposes limits on the practice, but the UK doesn’t. It’s a lesson investors could have learned from Lehman’s collapse.
Weibo set to get duller but more valuable 16 Dec 2011 China’s Twitter has proved a thorn in the side of the Party. Now comes the clampdown, including new plans to force microbloggers to use their real names. Being brought to heel will make Sina Weibo less controversial and less interesting. But it needn’t hurt its commercial value.
Bernanke birthday brings holiday from new stimulus 13 Dec 2011 With U.S. unemployment down and growth up, the Fed’s latest statement zeroed in on global problems - and didn’t introduce a QE3 program. Under such conditions, and with money supply strong, the chairman’s gift of low rates to markets may expire by the time he turns 59.
Frackers need to get ahead of the regulatory curve 12 Dec 2011 A report linking hydraulic fracturing to polluted drinking water is a significant setback for U.S. shale gas. Fracking’s economic benefits are huge, but drillers risk losing public support. To avoid a backlash, they should embrace more centralised regulation.
EU banks’ Coco escape route misses a trick 12 Dec 2011 The European Banking Authority will allow banks to issue contingent convertible bonds to plug their 115 bln euro capital hole. That could allow states to help without winding up with direct equity stakes. But to entice private investors, the EBA may need to allow more leeway.
JPMorgan faces tangle in cable M&A 9 Dec 2011 The U.S. bank agreed to be a backstop buyer if Liberty Global’s takeover of Germany’s KabelBW is blocked. But JPM wouldn’t find it hard to sell KabelBW on, and it shouldn’t lose money. A clean execution of the JPM plan B could be a boost for devices neutralising regulatory risk.
EU bank recap alone won’t restore confidence 8 Dec 2011 Forcing European lenders to raise 115 bln euros in extra capital is an improvement on previous efforts. But regulators will have to be vigilant to make sure banks don’t hit the targets by shrinking loans. And trust will only return when euro zone governments fix their debt woes.
Headless financial watchdogs needn’t be toothless 8 Dec 2011 Senate Republicans blocked another Obama nominee to lead a key agency, the Consumer Financial Protection Bureau. Politics is making it tough to solidify leadership at a handful of top regulators. But as the FDIC is proving, acting directors can still get things done.
IMF cracks the door for Europe’s ‘bystanders’ 22 Nov 2011 The fund’s new loan plan would allow some countries to borrow chunky sums in the heat of the crisis without the typical policy demands. The $400 bln or so will help but can’t alone save Europe. Making cash easier to access also risks allowing “innocent” nations to delay fixes.
China’s regulatory reshuffle avoids real change 31 Oct 2011 Three retiring top financial regulators have been swapped with former bank heads, trained for life in the system. Overlapping roles mean their powers will be constrained. It suggests China’s banks won’t get the sweeping reforms they need.
Sahara’s $5 bln savings spat is India’s loss 28 Oct 2011 The Indian savings house has been ordered to return a whopping $4.9 bln raised from nearly 30 million mostly rural investors. The episode is unlikely to help confidence among small savers. Yet accessing their capital is vital to help India’s development.
Hungry watchdog could curb websites’ data appetite 24 Oct 2011 Suits accuse Facebook and others of violating privacy with “cookies” tracking users online. But reluctant judges and dusty statutes mean the cases are toast. The better recipe is to require clearer consent before a poke into people’s lives. That’s a task for regulators to tackle.
Bailout-free banking may be unattainable goal 18 Oct 2011 Policymakers want to stop taxpayers rescuing banks. That is the aim of the UK’s Vickers report. But regulators will still fret about letting lenders fail in a future crisis. Meanwhile, Vickers’ plan could perversely increase pressure on the state to direct lending.
Kinder pays top dollar to enter energy big league 17 Oct 2011 If regulators give the nod, a new $94 bln pipeline titan will be born, becoming among the biggest U.S. energy firms. Kinder is paying more than is justified by the synergies for El Paso. But Kinder’s chief has done investors proud in the past and is not to be underestimated.
Rajaratnam sentence shows value of court process 13 Oct 2011 The 11-year term handed to the Galleon fraudster may seem excessive to those who think insider-trading penalties are overdone. But it looks about right in context - and it has unusual credibility. Not only was there no shortcut deal, the legal battle was also fully engaged.