Roundup: September 22

Markets

We run-down the greatest hits of Hank Paulson’s bailout legislation and will be reviewing the plan (and Chris Dodd’s competing suggestions) tomorrow. And we collect reactions from around the web.

Following up our short-selling commentary, the Big Picture publishes a 1930 editorial about short-selling that reads as well now as it did then. It is clear that the impulse to ban short-selling stems from an emotional response to falling prices, and that no responsible observer can possibly think the SEC really believes extensive market manipulation is going on. The ban on shorting has led to a bear market rally; but no one thinks that short-sellers started the Depression…

The Australians have decided to follow a bad leader with a worse plan, and are banning short-selling on all stocks, not just financials. Banning short-selling kills liquidity in markets where no one is buying. As a result, spreads are widening and the entire convertible bond market is at risk of freezing up. Taiwan and the Netherlands have also implemented restrictions on short-selling.

Willem Buiter explains the need for a financial crisis plan for the UK. He reviews and criticizes the BoE's moves over the past year.

The Lehman wind-down is going smoothly; just days after Barclay's bought Lehman's North American unit in what Bloomberg quotes Barclay's CEO as calling "the deal of a lifetime," Nomura has bought Lehman's Asia-Pacific unit. The smoothness of Lehman's bankruptcy is beginning to undercut the Fed's arguments that a Bear Stearns bailout was necessary. Expect to see arguments that it should have been allowed to fail, taken into receivership, and given a bridge loan (way less than $30bn in loss guarantees!) while its assets were sold.

Meanwhile, Goldman Sachs and Morgan Stanley will become ordinary commercial banks. This marks the end of the large independent investment bank, as the last two of the Big Five have now become depository institutions. And Mitsubishi UFG, Japan’s biggest bank (with over $100mn exposure to Lehman), will take a 20% stake in Morgan.

Ameribank went into FDIC receivership on Friday, becoming the twelfth bank this year to fail. It is estimated that this will cost the FDIC $42mn from its insurance fund.


World

Hugo Chavez humorlessly expels the Americas director of Human Rights Watch for publishing a report that criticized Chavez for undermining freedom of expression and press in Venezuela.

Russian markets soared between 20% and 30%, as asset prices recovered in the wake of the Kremlin’s massive Friday bailout.

South Africa’s Thabo Mbeki will resign from office on September 25, ending an era that has been marked by his refusal to admit that AIDS is sexually transmitted, his obstruction of pan-African politics, and his unwavering support for Robert Mugabe. His main opponent in the ANC, Jacob Zuma, is not currently a member of parliament and is not therefore presently eligible to take Mbeki’s place. Mr. Zuma has endorsed Kgalema Motlanthe as a possible candidate for the ANC in the election.

The power-sharing agreement in Zimbabwe between the MDC and ZANU-PF remains deadlocked.

Ethiopia faces famine in the next six months because of a drought and high food prices, says the UN.

As Gordon Brown promises he will try and do better, Alistair Darling insists Labour will stick to its manifesto commitments on the base tax rate, which will not rise from 20p.


Science

Sightline has published a very good primer for non-specialists on carbon cap-and-trade, explaining the key criteria that impact a plan's likely effectiveness.

Beacon Power has announced that it has put 1 MW of a planned 5 MW of flywheel energy storage into testing. Energy storage is one of the most important barriers to adoption of renewables such as wind, solar, and tidal power, since these systems only generate power intermittently and unpredictably.

Volvo has announced the specs of its new heavy-duty, fourth generation hybrid drivetrain. It is intended to go into production by the end of 2009, with first deliveries to be made in 2010. The current specs indicate that it will have improved its fuel efficiency by 20-30% over its baseline, while cutting down non-CO2 emissions drastically.

Car industry arguments that the costs of increasing fuel efficiency substantially would vastly increase the prices of cars took another blow today, as the new Ford F-150 was announced. The 2009 F-150 class is about 8% more fuel-efficient than the 2008 class while maintaining a similar price point and retaining best-in-class towing capacity. How? Reducing the weight of the trucks and improving the aerodynamics. Maybe they should have talked to Amory Lovins years ago.

Though we are doubtful that oil produced from oil shale will ever have a substantial impact on the oil market, it turns out that oil shale development in Wyoming and Colorado will quickly overwhelm the capacity of the Colorado River Basin. As the Colorado River supplies water to seven states under the 1922 Colorado River Compact, this could exacerbate droughts and shortages in the Southwestern USA for years to come.

The number of endangered freshwater fish species in the U.S. has doubled since 1989. If we are not to see increased extinctions in the coming decades, the EPA will need to begin regulating substantially more than it has. For further reading, we point you toward this 2002 NRDC report on saving the Clean Water Act -- a fantastic history of the first thirty years of this piece of landmark legislation.

The EPA is expected not to set a drinking-water safety standard for rocket fuel component perchlorate, after a six-year battle between EPA scientists and the Bush Administration. The decisions of this, the worst EPA to date, will be among the most lasting legacies of Bush’s rule.