Year: 2009

RBS bonuses put state ownership to tough test

2 Dec 2009

The arm'slength UKFI entity is supposed to reconcile the government's political needs and the board's shareholder value goals. But the two sides are now at each other's throats over pay at RBS. UKFI failure could lead to the bank's board storming off and even nationalisation.

City shouldn’t panic over Brussels

2 Dec 2009

Britain has been outmanoeuvred over the new European Commission, but those anticipating the City's emasculation by a French former agriculture minister might reflect that rescuing the banks has condemned the UK to higher taxes for worse services. A little humility is in order.

Tax the wrong tool for pricking housing bubbles

2 Dec 2009

A Bank of England interestrate setter wants to tax housing to stop future booms. Adam Posen is right that monetary policy alone won't work. But it is naïve to expect politicians to cede control of taxes. Regulators should instead focus on reining in mortgage lending.

RUSAL deal won’t end Russian debt woes

2 Dec 2009

The aluminium group has agreed to restructure $7.4 billion in foreign debt, paving the way for an IPO. That will be a relief to western lenders and controlling shareholder Oleg Deripaska. But foreign banks may struggle to reach similar deals with other Russian borrowers.

Irish banks face perverse state-aid twist

2 Dec 2009

European authorities are blocking Allied Irish from paying out bond coupons and dividends to investors. But this bailout stick could boomerang painfully by giving Ireland an even bigger stake in its banks. The EU should be more flexible to prevent this unwanted result.

Record gold price isn’t only about insecurity

2 Dec 2009

Sure, the huge uncertainties in financial markets help. But hedge funds, retail investors, retirement funds and even central banks are rediscovering the yellow metal. If gold is regaining its lost status as a key portfolio component, that should up to a point support prices.

CoCos ride again in Chelsea rescue

2 Dec 2009

Hot on the heels of their use in recapitalising Lloyds Banking Group, contingent convertibles are featuring in the merger of Chelsea and Yorkshire Building Societies. Both are special cases. But the more examples there are, the higher the chance of a market developing.

Are Fannie and Freddie America’s Dubai Worlds?

2 Dec 2009

Not yet. But creditors of the two housing giants shouldn't forget that, like Dubai World, they have only implicit backing from their government. It may seem farfetched that the US would cut Fannie and Freddie loose. Even so, longterm investors shouldn't ignore the possibility.

Obama jobs summit may not help US labor market

2 Dec 2009

The president's heart may be in the right place. But no hiring will come of this initiative if it adds yet another layer of policy uncertainty. From healthcare to energy to taxes, Washington is delivering plenty of that right now with loads more on the horizon.

Station bankruptcy shapes up as bare-knuckle brawl

1 Dec 2009

The US casino operator run by the Fertitta family, also owner of Ultimate Fighting Championship, is restructuring. Rival Boyd Gaming wants to buy it and could offer a good price. But the Fertittas look poised to block a deal. Station s creditors shouldn t let them play rough.

China’s banks don’t spook world – but might yet

1 Dec 2009

A list of 30 financial institutions subject to new crossborder supervision includes expected heavyweights from the U.S., Europe and Japan. Missing are Chinese lenders which include three of the world s biggest by market cap. But not interconnected doesn t mean insulated.

Anglo might shine brighter without De Beers

1 Dec 2009

The mining giant's 45 percent stake of the diamond producer is largely a financial investment and De Beers' cash needs are eating into Anglo's capital. An Anglo spinoff might be good for De Beers, and correct a valuation gap for Anglo, killing two birds with one sparkly stone.

GM needs to explain why it’s replacing its driver

1 Dec 2009

Removing Fritz Henderson as CEO may be a good thing. He was part of the old guard who drove the company into bankruptcy. As Fiat and Ford have shown, new blood from outside the industry helps power a turnaround. But the lack of an explanation from GM sends a worrying signal.

Dubai guilty of encouraging sovereign confusion

1 Dec 2009

Until falling on hard times, the emirate rarely distinguished between the $26bln of sovereign debt, equal to only 40% of GDP, and the much riskier $50bln owed by government entities such as Dubai World. Investors should have been more careful, but Dubai should have been clearer.

Dubai World guarantee might prove worthless

30 Nov 2009

The emirate s holding company guaranteed a $3.5bln bond issued by its now troubled property subsidiary Nakheel. Dubai World has some juicy assets, including control of ports operator DP World. But foreign creditors might find it hard to convince local lenders to sue.

Federal Reserve can’t have it both ways

30 Nov 2009

The US central bank wants to retain its distance from Congress, particularly on monetary policy while keeping or even expanding its already beefed up responsibilities for bank regulation. It s a tricky balance. There are arguments for both, but reconciling them is a challenge.

CDS defenders protest too much

30 Nov 2009

Credit swaps are under fire. Now ISDA, the derivatives trade body, is fighting back. It s right to debunk the idea that CDS traders can make an easy killing from a company s death spiral. But CDS do modify creditors behavior. ISDA should be looking for solutions, not objecting.

Living wills should be open-minded on bank models

30 Nov 2009

Blueprints for dismantling failing banks are in vogue. The dominant idea is that firms should reorganise into separately capitalised subsidiaries. But that might hurt business without necessarily making things safer. Living wills should be flexible towards bank structures.

Depositors at risk in Hugo Chavez-land

30 Nov 2009

Venezuela's closure of four banks probably isn t a sign of wholesale bank nationalization. The group s owner was a proChavez tycoon who is now under arrest. But Chavez's harsh views on banks suggest further seizures to come, and deposit insurance is very limited.

Liberals and Tories point right way on UK taxes

30 Nov 2009

The Liberal Democrats plan to raise the tax threshold substantially would help the poor and the country, but their mansion tax on the rich doesn t seem worth it. Conservative ideas on corporate tax look good. The UK needs to rethink its tax system to encourage work and output.

Dubai pain looks manageable for Abu Dhabi lenders

30 Nov 2009

Banks in Abu Dhabi have reportedly lent over $2.2 billion to finance Dubai s property follies. Recapitalisations may be needed. Abu Dhabi can afford to shore up its banks, but the Dubai debacle could still have a lasting impact on their funding costs and topline growth.

Abu Dhabi pick ‘n mix bailout sounds sensible

29 Nov 2009

The rich emirate seems about to support its struggling neighbour Dubai but only on a casebycase basis. Abu Dhabi s priority should be to stop a bank run. And although it may also make sense to cherrypick some Dubai assets, that doesn t mean bailing out Dubai World.

Borders UK’s demise was written on the wall

27 Nov 2009

Don t blame overleveraged private equity investors or the recession. UK bookseller Borders went into administration for a good old fashioned reason its business model didn t work any more. Online retailers and supermarkets have made life tough for highstreet booksellers.

UK commercial property needs more Dubais

27 Nov 2009

Prime real estate yields are tightening fast. Historically low rates are inflating a bubble, because global demand for yield is chasing a shrinking stock of prime assets, bidding prices up. Indebted foreigners who need to sell rather than keep buying could relieve the pressure.

Dubai shock won’t sink foreign banks

27 Nov 2009

Shares in banks that lent to Dubai World plunged after the stateowned holding company announced a standstill on debt payments. But the possible losses don t look very large, unless the whole oilrich UAE comes undone. Dubai s neighbours are more likely to reduce lenders pain.

Dubai’s careful plan claim a bad joke

27 Nov 2009

The emirate may have needed to restructure Dubai World s $59bln debts. But the way it has communicated its intended default is appalling. Dubai now says the move was carefully planned and a sensible business decision. But its reputation will struggle to recover from the blow.

Further yen rise would provoke intervention

27 Nov 2009

The yen shouldn t be climbing. A soaring yen will make Japan's newly returned deflation worse. And with government debt rising towards twice GDP, deflation is the last thing Japan needs. If the yen keeps rising, the authorities will step in. Intervention would be the lesser evil.

Dubai’s debt writedowns don’t look huge

27 Nov 2009

Facts are scarce, but Dubai World is supposed to hold three quarters of the emirate s debt. The holding company had $59bln of liabilities at the end of 2008, and $40bln of equity. Even after a deep fall in the property market, it s hard to see how losses can exceed $1020bln.

Markets overreact to Dubai damage

27 Nov 2009

Even a total meltdown in the emirate would probably cost foreign lenders far less than enough to justify the huge global selloff in risky assets. Dubai s problems might presage another credit crunch, but for now it looks more like markets are getting carried away.

Limits to stimulus start to appear

26 Nov 2009

Huge fiscal deficits and ultralow interest rates have boosted many markets and helped end the global recession. But Dubai s troubles show the official blitz can t erase all the excesses of the credit boom. And the dollar s fall looks like a dangerous side effect of easy money.