Wednesday, October 15, 2008

Roundup: October 15


Smaller banks are protesting the Bush administration's $250bn plan to buy equity stakes in banks -- understandably enough, as government anoints the large banks, consolidation, and central control of lending as the way forward, leaving community banks in the dust. Economists' View asks why the Treasury has opted to structure the bailout through preferred stock purchases rather than subordinated debt, and comes to the conclusion that the only reason to go for preferreds is to game capital requirements. Macroblog discusses options for auction design under the TARP for the purchase of stressed securities. Bernanke summarized central bank actions so far in a speech before the Economic Club of New York today.

The ECB has expanded the scope of its liquidity operations and is now accepting, for instance, subordinated debt as collateral for lending. Hong Kong has backed bank deposits through 2010.

Both Libor and the TED spread have proved unresponsive to the bailout plans of the last week, but at least they haven't worsened significantly. The situation is perhaps best characterized as extremely stressed-but-stable. The NY Fed's Empire State Manufacturing Survey and the Retail Sales numbers both plummeted in September. US August business inventories rose 0.3%, with sales falling 1.8%. The Beige Book warned of slowing economic activity across the country.

Ross McKibben in the LRB describes British economic history leading up to the current crisis and what David Cameron could do about it as a Tory, if elected. UK unemployment numbers today showed the largest one-month increase in joblessness in 17 years, with 1.79mn Britons now out of work.

The BBA is raising the specter of regulatory arbitrage, saying the prohibition on RBS, Lloyds, and HBOS paying dividends and the 12% payout on the preference shares bought by the UK government disadvantage the banks with respect to foreign banks whose bailout terms are more lenient -- like the American giants.

Calculated Risk takes a look at the best bits from this morning's JPMorgan earnings call -- and floats the idea that Jamie Dimon might be a candidate for Treasury Secretary in an Obama administration.

Angry Bear looks at the capital gains provision of the Mad Hatter economic stimulus plan offered by John McCain's camp. Only something so boneheaded makes Obama's face-saving irrelevancies look good.

Wells Fargo Q3 profits fell 25%; JPMorgan Q3 profits fell 84%. Failed deals today: Sterlite for Asarco (copper producers), Synacor IPO (Internet aggregation), and Linens 'n Things, which is owned by private equity, will liquidate. Daimler said it would cut production; InBev has delayed its rights issue Rio Tinto warned on Chinese growth. And auto workers may oppose an eventual merger of GM and Chrysler.

Iceland's negotiations with Russia for a bailout loan of as much as $15bn continue apace, as does speculation about considerations Moscow may receive in exchange for her generosity. Russia will also provide $9bn to its energy sector to help it weather the credit crisis and refinance outstanding debt.

GMAC has restricted the eligibility of 43% of U.S. borrowers for new car loans in a side effect of the credit crisis. This bodes poorly for GM's auto sales, which rely on the availability of cheap car loans for their ever-increasing numbers.

The Baltic Dry shipping index is at its three-year lows after falling 80% from its peak: the Chinese slowdown and frozen credit markets seem to be bringing international trade to a grinding halt.

David Brooks yammers on and on but nobody seems to care. Robert Reich, however, gets his look at the root causes and future effects of the crisis and at the American middle class dead right.

Lehman's administrator will be making margin calls on securities frozen at the failed bank.


On 2008's Blog Action Day for poverty, This is Zimbabwe publishes a series of posts looking at the crushing poverty induced in that country by Mugabe's rule. Thabo Mbeki may be about to save the power-sharing deal between Mugabe and Tsvangirai. Zimbabwean generals' fears of prosecution over their role in the violent crackdown on MDC supporters in advance of the election may be holding the process back.

The Bush administration explicitly endorsed the waterboarding of suspects held at secret prisons in a pair of memos to the CIA in 2003 and 2004.

Stephen Harper and the Tories were reelected in Canada, probably signaling the end of hopes for a nationwide carbon tax in the near future.

A Russian human rights lawyer, Karinna Moskalenko, may have been poisoned by mercury placed in her car. She was to appear before a military court in Moscow today in the inquiry into the murder of Russian dissident journalist Anna Politkovskaya.

World Politics Review publishes a set of articles looking at doctrinal change in American warfighting, including the use of social scientists in nation-building operations in Iraq and Afghanistan, and the army's role in "winning the peace."

HRW reports on the biggest sellers of arms to Sudan, who include Iran and China. Time reports that the global arms trade has never been better.

The Asahi Shimbun says it is crucial that six-party talks with North Korea over denuclearization be reopened as a next step, after the Bush administration finally took the country off the list of state sponsors of terrorism.

Talks between Georgia and Russia in Geneva have "collapsed," say Georgian officials.

Aravind Adiga has won the Booker Prize for his novel The White Tiger, a bitter and sarcastic first-person account of inequality in the new India told from the perspective of a hired driver.

Afghanistan's defense minister said that foreign fighters are flowing from Iraq to Afghanistan.

Richard Weitz reviews the recent Russian military exercises at World Politics Review, saying the exercises show the limits of Russian power.

Thai and Cambodian troops exchanged fire on their mutual border.


Japanese investors in a large Australian LNG project have warned that the Australian carbon trading system may make investment in that country uneconomic, underscoring the need for cross-border governance structures -- or activism in local capital markets of countries without carbon targets, something hard to imagine in Japan -- to impose hard carbon caps.

Rising temperatures may cause peat bogs to dry up and emit more carbon dioxide, a study in Nature Geoscience suggests -- warming renders yet another natural carbon sink ineffective.

The underwater pipelines which move Iraqi oil to tanker fueling terminals offshore are so corroded that they might burst at any time -- causing an ecological disaster and the collapse of the Iraqi economy.

CO2 may have played a greater role than the IPCC though in pre-industrial climate changes. Using measurements derived from preserved plants instead of from ice cores, the variation in CO2 concentrations in pre-industrial times suggests that, even then, CO2 concentration changes may have represented a first-order forcing.

Researchers at GE have developed a way of treating metals so that they become "super hydrophobic." By reducing the ability of water to stick to metals, these treated metals could be used to help aircraft wings withstand icing, or to decrease contaminant buildup in turbines, leading to better efficiency and less maintenance.

Particle formation in the Himalayas is not well enough understood, as changes to the atmospheric system in the South Asian area may represent one of the most important regional effects of climate change and air pollution, impacting the monsoon and the Himalaya glaciers.

Green Car Congress has a detailed look at the water intensity of various standard and alternative fuels, such as ethanol, electricity, diesel, gasoline, and other non-conventional fuels. This is an interesting look at an under-discussed aspect of the arguments over the environmental impacts of alternative fuels.

Brazil's deepwater subsalt oil reserves pose no challenge to the dominance of the Middle Eastern oil producers.

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