United States of America

China’s U.S. home loan risks being a subprime idea

26 Jun 2012

China Development Bank may lend Lennar $1.7 bln to build two housing projects - one on a polluted man-made island in an earthquake zone. It has all the hallmarks of globally distorted economic incentives forcing yield-starved investors to take risky bets they don’t understand.

Sandberg does neither herself nor women any favors

26 Jun 2012

Becoming the first female director at a prominent company like Facebook should be good for all. But joining a rubber-stamp board the CEO treats haughtily won’t help Sheryl Sandberg’s sterling reputation. Women should fight for representation where they can make a real difference.

Jamie Dimon isn’t the New York Fed’s real problem

26 Jun 2012

Former IMF chief economist Simon Johnson is on a quixotic mission to oust the JPMorgan chief from the regional central bank. But it’ll take something far bigger - an act of Congress - to truly reform the institution and end the perception that it’s too cozy with big banks.

One Great Depression lesson is enough

26 Jun 2012

Economists point to the 1930s to justify current policy prescriptions. Their research may be enjoyable, but it is inconclusive and mostly irrelevant. The main exception is the danger of debt deflation. But that lesson has been learned - and probably too well.

Oil markets could snap at the shorts

26 Jun 2012

After Brent’s rapid collapse from $126 to $90 a barrel, oil traders appear to be dismissing Iran risks and China’s ability to stimulate growth. And today’s picture of excessive Saudi production and sputtering global demand could change by year-end if Europe muddles through.

Chesapeake leaves investors wondering what’s next

25 Jun 2012

The U.S. gas producer is feverishly trying to dispel a cowboy reputation, including by shaking up the board. But emails suggesting Chesapeake colluded to buy land on the cheap are a setback. With all that’s happened so far, it’s also hard to believe this scandal will be the last.

Hunt for legal eagle fraudsters aims too low

25 Jun 2012

Two U.S. law firms will cough up $88 million to settle mortgage Ponzi scheme charges. And the SEC’s after four attorneys for aiding dodgy stock deals. That’s a good start. But watchdogs should also draw a bead on bigger legal targets for their role in the financial meltdown.

Blaming London for bank botches is too convenient

25 Jun 2012

Say what you will about JPMorgan’s stupid trades, the bank has at least owned up to its failings. That’s more than can be said for U.S. authorities, who are instead pointing fingers at their UK counterparts. It should light a fire under dragging global coordination efforts.

Fiscal cliff “Cialis plan” deserves firm support

25 Jun 2012

That’s the love-pill codename for a bill Erskine Bowles, of Simpson-Bowles fiscal reform fame, is pushing in Congress to help Uncle Sam avoid severe dysfunction at year-end. Politicians fiddling with JPMorgan trades and Mexican guns could use a cure for when it’s urgently needed.

US hot money’s new crush: Canadian, Japanese banks

25 Jun 2012

It’s hard to blame US money market funds for seeking safer harbors than the turbulent euro zone. Yet Canadian and Japanese lenders - as well as the National Australia Bank - must remember not to become too enamored with the attention from their fair-weather friends.

Canada scraps to sidestep U.S.-like housing woes

22 Jun 2012

A new set of mortgage reforms will make it ever harder for Canucks to borrow. Yet ultra-low interest rates keep feeding a housing boom that three previous government initiatives haven’t stopped. Prudent regulation can only limit by so much the distortions created by easy money.

Bank regulators should get heavy on risk-weighting

22 Jun 2012

The financial and euro zone crises have shown the drawbacks of attaching varying weights to bank risk. Such models encourage unhealthy arbitrage. A tougher cap on the ratio of equity to total assets would limit abuse. So would banning risk measures that ignore extreme events.

Review: Is inequality a crisis or just capitalism?

22 Jun 2012

In “The Great Divergence”, Tim Noah offers a thought-provoking analysis of 30-odd years of widening U.S. income inequality. Yet some disparity is inevitable in any kind of market system. It’s the real decline in middle-class incomes that justifies serious concern.

Icahn may owe Goldman, but the reverse is true too

21 Jun 2012

The banking titan is suing CVR Energy, an oil refiner the uppity billionaire just bought. Goldman defended CVR and alleges Icahn blocked payment of $18.5 mln of fees. Theirs is a classic Wall Street rivalry. Maybe Icahn reckons Goldman has made enough off his activism already.

Downgraded banks should rush to borrow

21 Jun 2012

Most don’t need the cash. And despite the 15 Moody’s ratings cuts - by three notches at Credit Suisse and two at Morgan Stanley - short-term funding and collateral weaknesses should have already been fixed. But jumping back into markets quickly is the best way to show up Moody’s.

Regulator grudge match redux: Geithner vs Bair

21 Jun 2012

The former FDIC chief has formed an independent group to help push forward reforms in the U.S. financial system. The primary pressure point will be the council of regulators led by Treasury Secretary Tim Geithner. The two have sparred before. But their interests now look aligned.

Taking the leverage out of economic growth

21 Jun 2012

For two decades private sector debt in the U.S. and euro zone expanded at a faster rate than nominal GDP. The binge helped boost output, but led to the crisis. Reducing leverage without choking growth is a challenge that economists and central bankers have just begun to ponder.

Chesapeake gets short-term gravitas at the top

21 Jun 2012

At 73, former Conoco boss Archie Dunham can’t have plans to stick around and unseat Aubrey McClendon from the energy empire he has built. So investors are disappointed. But he does have his legacy to protect and the god-given heft to keep Chesapeake’s reckless founder in line.

Even crazy cheap debt can be cheaper still

21 Jun 2012

In a world of rock-bottom rates, some corporate issuers are finding ways to save even more. Time Warner Cable, a U.S. company with only U.S. customers, just sold $1 bln of 30-year paper denominated in sterling. The textbook arbitrage may save it 25 basis points. It’s easy money.

Corporate earnings hopes are still too high

21 Jun 2012

Analysts are paring back profit forecasts as euro zone worries clog the wheels of global commerce. Yet history suggests that when earnings go into reverse, the shift is rarely gradual. Investors may still be expecting too much from companies, at least in the near term.