Fiscal Policy

Detroit bankruptcy is doing bondholders a favor

22 Jul 2013

The failed city wants to include bonds in its restructuring that the $3.7 trln muni market considers sacrosanct. It’s another example of investors ignoring the limited options governments have to honor debts. The sooner bondholders focus purely on credit risk, the better.

Time for victorious Abe to roll up shirtsleeves

22 Jul 2013

Turning on the money-printing tap was easy. But having won control of the upper house of Japan’s parliament, Prime Minister Shinzo Abe must now attend to the broken plumbing. Passing laws that make the economy more vibrant and public finances stronger are the priority.

Bankruptcy isn’t radical enough to save Detroit

19 Jul 2013

Scrubbing Motown’s $18.5 bln of debt can only be a first step. The sprawling city suffers from blight, woeful infrastructure, a population exodus and falling revenue. The private sector has a role to play, but fixing so many broken windows needs longer-term government help.

Jefferson County is back – bondholders beware

18 Jul 2013

The bankrupt Alabama county became synonymous with fraudulent financing when it defaulted on its debt five years ago. Now it needs the municipal bond market to give it a second chance. To pay off creditors, it needs $1.9 bln. The initial terms, however, don’t look promising.

Does Ben Bernanke fancy himself a Jedi knight?

17 Jul 2013

The Fed chairman implied his most important duty is to ensure markets understand where monetary policy is heading. The past month has shown how hard that can be when investors hear what they want to hear. Unless Yoda he is, tapering and rate hikes will cause painful lurches.

Brazil’s economy reacting the old-fashioned way

15 Jul 2013

Aggressive monetary policy with the cost of money falling sharply has been followed by an inflation surge causing the central bank to raise rates three times. That’s a cycle all too familiar in the 1970s developed world of public sector overspending and private underinvestment.

Congress could force Yellen over Summers at Fed

11 Jul 2013

Setting aside their strengths or weaknesses, President Obama needs to figure out who can actually pass muster with cantankerous legislators. Even after Bernanke saved the financial system, lawmakers only weakly endorsed him. Politics, more than skills, may decide the next Fed boss.

Fed transition could look positively Reaganesque

10 Jul 2013

The timing of Fed chief Bernanke’s fate may be just as important to markets as the name of his replacement. Alan Greenspan gave investors a heads-up before the White House tapped Bernanke. Markets would be better served by a seamless 1987-style handoff.

Wall Street’s former sheriff saddling up again

8 Jul 2013

Eliot Spitzer is the model for local crusaders against financial powers that be. But the ex-NY governor’s scorched-earth style may not play in the city comptroller’s office, which he now seeks. While Spitzer may have big plans, he must re-establish trust and credibility first.

Hugo Dixon: How the euro zone can muddle through

8 Jul 2013

Three years on, debate still rages over what is to blame for the crisis and what to do about it. Looser monetary and fiscal policy are a small part of the answer, as is greater integration. Most important is to press ahead with reform, on a national and supranational level.

U.S. Basel embrace puts foreign watchdogs on spot

2 Jul 2013

The Fed is giving a thumbs-up to the Swiss-sanctioned global bank capital rules. The FDIC and OCC should follow suit soon. That quiets overseas critics skeptical that America would play ball. It should also coax Europe and Asia to show a similar team mentality on other issues.

Student loan rate hike is a D.C. dysfunction bonus

1 Jul 2013

Congressional inaction means Uncle Sam-backed college borrowing costs double to 6.8 pct. That should curb the rapid rise of such debt, now at nearly $1 trln. It might even slow education inflation. It’s a rare case of useful policy that doesn’t require waiting for the Fed.

Finance 101 would get U.S. pensions back on track

27 Jun 2013

Illinois, Connecticut and New Jersey are among the states that neglected the most powerful force in retirement saving: compound returns. Their pension burdens are much heavier because they short-changed the funds, a Moody’s study finds. It’s time to revisit the basics.

Market bloodletting may be more 2003 than 1994

26 Jun 2013

Bankers are smart to ask if the recent jump in rates could cause a replay of bond pain two decades ago. A better comparison may be 2003. Markets threw a hissy fit when the Fed signaled easy money would end. It didn’t last long. More importantly, nothing big blew up.

Wall Street finds itself in a 1994 state of mind

26 Jun 2013

Back then a jump in rates inflicted mega damage. Goldman Sachs partners even had to recapitalize their firm. Bank bosses are confident today, saying they’re no longer holding inventory and ceded prop trading to hedge funds. If true, maybe they have regulators to thank.

Bernanke should be international man of mystery

20 Jun 2013

The Fed chairman has embraced a far more communicative approach than his predecessors. The benefits, however, aren’t obvious. Based on the latest reaction in the markets, investors are parsing his comments as much as they did Alan Greenspan’s. Maybe fewer words would say more.

End of QE could create a healthy stimulus

20 Jun 2013

Ben Bernanke has upset investors with talk of lifting off the monetary gas. But the Fed chairman’s bond-buying accelerator has stoked markets for commodities and other assets more than GDP growth. Less acceleration could deflate energy prices and provide a broad economic boost.

Bernanke’s legacy at Fed won’t be his to forge

19 Jun 2013

Obama says the chairman has done enough. If so, his successor will face the task of rolling back years of ultra-easy policies. Jittery markets make that tricky even for a known Fed boss. After Wednesday, Bernanke may have only five FOMC meetings left to help set a new direction.

Detroit bankruptcy won’t solve its people problem

18 Jun 2013

Motown took a step closer to bankruptcy last week when the state-appointed fix-it man called on bondholders and public workers to accept steep cuts. Trouble is Detroit needs more than debt relief. It needs to build up its tax base if it’s to become functional as well as solvent.

Smallest U.S. state faces big financial quandary

12 Jun 2013

Rhode Island is on the hook for $113 mln of debt incurred by a failed videogame venture it backed. The Ocean State has a moral obligation to pay up, but not a legal one. Short-term, it would be savvier to walk away. The more pragmatic, long-term decision is to honor the promise.