United States of America

The letter Carlyle’s Bill Conway didn’t write

18 Sep 2012

Missives from the U.S. buyout firm’s co-founder are eagerly anticipated each year, especially after the early 2007 edition foresaw a credit crisis. Conway hasn’t produced one for 2012 - with Carlyle seemingly bullish on new investments - so Breakingviews has drafted it for him.

Leveling bank playing field just got jostled

18 Sep 2012

The FDIC’s Thomas Hoenig urged a revamp of global capital standards a year after Jamie Dimon called them anti-American. Risk ratings are flawed and simpler rules better, as BoE’s Andy Haldane says. But signs of resistance only stoke fears about the U.S. commitment to new rules.

Leap off fiscal cliff is bad option, but not worst

18 Sep 2012

If U.S. politicians can’t compromise, higher taxes and spending cuts will kick in at year-end. That could bring recession. But it would also reset the political battle lines, improving the chances of a real fix. That’s better than Washington continually deferring tough decisions.

Inept Fannie/BofA deal highlights US mortgage mess

18 Sep 2012

A new report shows the agency paid too much to pull some loan servicing business from the mega-bank for doing a bad job. This double incompetence doesn’t just reflect badly on the two firms. It’s a reminder that the backbone of U.S. housing finance is in dire need of repair.

Brazil banks need better handle on consumer credit

18 Sep 2012

Banco Cruzeiro’s failure stems from fraud, but it specialized in loans to Brazil’s middle class - a group that grew by 40 mln in 10 years. That’s as short a record as U.S. subprime mortgages had in 2008. The comparison is extreme, but Brazil’s banks need both data and caution.

U.S. Treasury stake not the millstone GM makes out

17 Sep 2012

The automaker argues the government’s 26.5 pct ownership hurts its image and its ability to hire people. The former is overblown, the latter manageable. And Uncle Sam isn’t weighing heavily on the company’s stock price, either. The Treasury can afford to exit on its own schedule.

Falling income should be Occupy rallying cry

17 Sep 2012

A year after protests began on Wall Street, the movement lacks momentum and focus. Yet middle-class American incomes are going down. More than inequality itself, that’s reason to want change. Oddly, neither Occupy nor the Tea Party has grabbed what could be a defining issue.

Obama trade hypocrisy good politics but bad policy

17 Sep 2012

The U.S. president is accusing China of an unfair $1 bln subsidy for its auto industry. That might resonate with voters. But the Asian giant, a vital trading partner for the U.S., has already hit back. And lauding his own $80 bln bailout of Detroit leaves Obama on shaky footing.

Motorola: the breakup that keeps on giving

17 Sep 2012

Splitting the company has been good for shareholders. Google bought the cellphone arm for a chunky premium. Motorola Solutions, its emergency communications business, has done even better. And there’s room for more. It could buy back a third of its stock without financial strain.

Embassy attacks underline Mid-East transition risk

17 Sep 2012

Arab governments eventually condemned the violence, but the U.S. embassy attacks highlight their vulnerability to radical minorities. This isn’t new in the Middle East, but investors will weigh the risk more heavily when considering opportunities in the Arab spring economies.

Fed’s approach to monetary policy looks Chinese

14 Sep 2012

Critics accuse the People’s Republic of using an artificially low exchange rate to promote job creation at home. Now the U.S. central bank says it will keep on stimulating until unemployment falls. The approach is the same, but the Fed’s domestic bias carries more global risks.

Uncontrollable gas troubles U.S. energy firms

14 Sep 2012

U.S. production keeps rising even though companies like Chesapeake promise to cut it. Blame efficient techniques and bad luck. But failure to curb supply means low prices, depriving large producers of cash to drill for more profitable oil and leaving smaller players vulnerable.

Review: "Bond Girl" goes for broke, ends up short

14 Sep 2012

“Bond Girl” moves from the modest heights of corporate expense accounts to the imagined depths of the financial crisis. With an eye drawn more toward the decadent than the daily deal, let’s hope this is more soft-core fantasy than Wall Street reality.

Fed action is good news – at least for gold bulls

13 Sep 2012

The U.S. central bank announced a new mortgage bond purchase program of $40 bln per month, extended indefinitely, and lengthened its zero-rate outlook to mid 2015. This will help gold and stock prices. But the benefit of Bernankeism on the real economy still looks elusive.

Ford understandably clings to its rock star CEO

13 Sep 2012

The carmaker seems reluctant to let go of Alan Mulally after he saved it from going bust. Naming him co-chairman would make for quirky governance and suggests the board doesn’t yet have full confidence in his successor. But keeping Mulally’s magic touch trumps these downsides.

American bank mergers will be a messy affair

13 Sep 2012

Mid-market consolidation is a no-brainer in a post-crisis world. Bulking up against cheaply-financed too big to fail banks is an existential necessity. But as FirstMerit’s $1 bln-plus takeover of Citizens Republic suggests, the going will be rough on shareholders.

U.S. stock market set for new high – in 2066

13 Sep 2012

Stocks track economic growth, but not closely. It took 56 years and a six-fold rise in GDP before the S&P composite regained its 1929 high, in real terms. If the past is a guide, it will take another 54 years before the more recent peak of 2000 is finally consigned to history.

No good deed unpunished for U.S. corporate citizens

13 Sep 2012

The likes of Apple and Whole Foods draw more protests than rivals that pay less attention to social responsibility, new research shows. Presumably, activists get more out of targeting big names. That may make admirable firms even better, but it gives dodgy ones a free pass.

Apple’s iPhone offers subtle and sublime charms

12 Sep 2012

The unveiling of the company’s latest handset was a bit of a snooze. It is lighter, comes with a bigger screen and longer battery life. Better isn’t as exciting as new. But throw in improved software and it’s enough to be a big hit with consumers - and Apple investors, too.

Fed can’t avoid politics as it prepares stimulus

12 Sep 2012

This week’s monetary policy move could have a bigger political than economic impact. Investors have factored in more easing, so inaction might ding Obama’s chances in November at the margins. But a big dose of juice will infuriate the GOP and further jeopardize Fed independence.