Year: 2009

Rating firms may have to eat their own cooking

15 Jul 2009

Calpers is suing the big three over $1bn of losses on tripleA rated SIVs. The big US pension plan says they re to blame since they helped structure the deals before rating them. That argument just might breach the raters' legal defences and unleash a flood of litigation.

Bank accounting standards need revamp

15 Jul 2009

Critics say the current rules for measuring asset values and loan losses have exacerbated the crisis and confused investors, as well being too complicated and sometimes barmy. Rulemakers have embarked on a major cleanup exercise. Hugo Dixon wishes them good luck.

Italy’s dangerous liaisons make for good business

15 Jul 2009

Italy hasn t been queasy about doing business with Libya and Russia. Libya is now more respectable, but some might still flinch at the prospect of a former terrorist state buying into defence group Finmeccanica. Even so, Italy will persevere with these profitable trade relations.

Fed should note signs of nascent inflation

15 Jul 2009

US consumer prices ticked up 0.7% in June, suggesting inflation not deflation is the danger. With negative real interest rates and huge monetary stimulus, the Fed will have to act fast if inflation emerges. Recent data could be blips, but it's safer to see them as warnings.

BA may need several trips to the market

15 Jul 2009

The UK airline plans to raise capital perhaps £400m through a convertible. A rights issue would be better, but BA can t get one away before its big restructuring is finished. Operating losses and a deepening pension hole might require further capital treatment.

Luxury industry tries on cost cuts for size

15 Jul 2009

The fashion set has never been known for parsimony. But dire times call for less caviar and champagne. So costcutting is the industry's new black. Anyone who doesn t get the hang of less is more risks not being around when the good times slink back.

Banks defer LBO reckonings

15 Jul 2009

Many private equityowned companies are teetering. But creditor banks are letting some of them tweak loans to stave off bankruptcy because they hate owning equity or, even worse, actually running companies. In most cases, the banks are probably only delaying the inevitable.

RHJ still faces uphill battle in Opel bid

15 Jul 2009

General Motors is promoting the Belgian holding company s bid for Opel. GM wants to put pressure on Magna, the Canadian group that was the division s original preferred buyer. But RHJ will find it hard to convince Germany s politicians and unions of its offer s merits.

Fiction of Fed independence is worth defending

15 Jul 2009

At least 175 economists have signed a petition in support of the US central bank s independence. The Fed's supposed autonomy is to some extent illusory anyway. Even so, the appearance of independence helps its credibility and effectiveness.

Goldman shows bailouts have worked – in part

15 Jul 2009

The broker s 23% return on equity after accounting for generous bonuses is a sign of renewed health in the trading business. Thank you, governments and central banks. But the financial system rescue hasn t done much yet for the real economy, or even for plain old banking.

Goldman proves its power in chastened markets

14 Jul 2009

The Wall Street firm s relative success in managing risk in the credit crisis is now paying off. As one of the few firms willing and able to put its own capital at stake, Goldman is cranking out healthy earnings even without the apparent benefit of huge dollops of leverage.

Lehman earthquake reshapes prime broker world

14 Jul 2009

The failure trapped hedge fund assets and rocked faith in Morgan Stanley and Goldman Sachs. A year on, the landscape has changed dramatically for those who service hedge funds. Richard Beales explains how the likes of Deutsche and Credit Suisse have muscled in.

Goldman’s biggest remaining risk: pay backlash

14 Jul 2009

Given its firsthalf results it would be easy for Goldman staff to forget we're in the middle of a financial crisis. The firm set aside $11.4bn in compensation the most ever. While on a per capita basis that s below boom year levels, Congress may not see it that way.

Markets rejoice as US deficit reaches $1 trillion

14 Jul 2009

It almost felt like boom times on Monday. US stocks soared on expectations of high profits from Goldman Sachs. And a new debt milestone was crossed without any signs of pain. The US government s borrowing spree could end happily. But it might lead the world into another crisis.

CIT’s life-and-death struggle could drag on

14 Jul 2009

The corporate lender needs liquidity desperately. Asset sales are problematic and CIT s tripleC rating precludes accessing debt markets without a government guarantee. Yet the firm has the means to soldier on for several more months in hope of a rescue.

US opens second front on credit derivatives

14 Jul 2009

The Justice Department is asking banks that own data provider Markit for information as it investigates possible CDS market abuse. Its legal options aren't clearcut, but its ability to embarrass could threaten the lightly regulated environment favoured by derivatives dealers.

Aviva investors might welcome dividend cut

14 Jul 2009

The UK s largest insurer saw its shares slump by a third in March when it made a loss yet held its dividend. A cut at its interims next month would assuage concerns that the company is not set up for the downturn. It could maintain Aviva s share price better than holding firm.

Tax amnesty could give Italy liquidity boost

13 Jul 2009

The government is proposing a meagre 5% tax rate on its third effort to repatriate more of the suspected E600bn one third of GDP held offshore. The plan won t do much for balancing the budget, but the funds might help some squeezed entrepreneurs to keep going.

What does Steve Rattner do now?

13 Jul 2009

In almost five months as car tsar, the former Lazard banker fired General Motors boss, rode roughshod over both secured and unsecured creditors and took GM and Chrysler into and out of bankruptcy. A return to Wall Street might feel a bit dull after exercising such power.

Friends shareholders hold the key for Cowdery

13 Jul 2009

The UK life insurer s board has rebuffed an allshare offer at a meagre premium from the insurance entrepreneur. But many of its shareholders have also backed Cowdery s vehicle, Resolution. They must decide whether to back Friends reviving on its own or Cowdery s magic.

Housing and saving point to UK recovery – in 2016

13 Jul 2009

Monthly house price indices have fanned hopes of a quick recovery in house prices and in the UK economy. But if the house price boom of the late 1980s is a good guide, recovery will take years. Households have debts to pay back and will want to save much more.

Sorry CIT, you’re not too big to fail

13 Jul 2009

The $76bn US business lender finances everything from donuts franchises to daycare centres. Its faulty funding model has forced it to seek government loan guarantees which don t seem forthcoming. The lesson: only the biggest of reckless lenders get helping hands.

UK legal eagles divide into have and have-nots

13 Jul 2009

The financial crisis has been nasty for City lawyers overall. But Linklaters and Freshfields were aggressive with both costcutting and dealseeking. For now, they re doing fine. They will have to stay nimble, as the financial world is looking distinctly less lawyerfriendly.

Facebook goes for 65 cents on the dollar

13 Jul 2009

Russia s DST is tendering for $100m of the social networker s common stock at a price suggesting a $6.5bn valuation less than the $10bn implied by its purchase of preferred shares in May. But don t cry for Facebook given its embryonic business model that s still robust.

Godzilla of Beers could take on global giants

13 Jul 2009

A merger of Japan's Kirin and familyheld Suntory would create a superbrewer, albeit in a declining suds market. A backofthebeermat analysis suggests synergies worth $12bn but the real prize would be to create a new consumer giant big enough to stamp its footprint overseas.

BofA should pay US a break fee for guarantee

13 Jul 2009

CEO Ken Lewis never signed the deal he cut in January to backstop some $118bn in Merrill Lynch assets. But that didn t become known until May. In the interim BofA benefitted from investors belief that it had government backing. It owes US taxpayers something for that.

Bank rhetoric partly to blame for attempts to ban CDS

13 Jul 2009

Calls to outlaw them most recently by US lawmaker Maxine Waters appear unlikely to succeed. But they re affecting the larger debate over CDS regulation. If banks had been more forthcoming earlier about default swaps true nature, they might not be in such a bind now.

BusinessWeek looks like a tough sell

13 Jul 2009

McGrawHill may be set to offload the venerable magazine in an effort to clean up its portfolio of businesses. But it s unlikely to bring in much cash. BusinessWeek is in decline on multiple fronts, and even giving it away more or less intact would be a decent result.

Swiss and US try to untangle UBS tax mess

13 Jul 2009

At the last minute, the two governments have agreed to a threeweek delay in the informationdisclosure case against the Swiss bank. The US might be more conciliatory in private than in public. But even if the Swiss gain some concessions, the big secrecy battle is all but lost.

US tax hikes should target deductions, not income

13 Jul 2009

Democrats proposed 13% surtax on the rich may not yield enough revenue to fund healthcare reform. Instead, they should try to limit deductions on mortgage interest and charitable contributions. Such changes would be harder to evade and have fewer adverse economic effects.