Tuesday, October 21, 2008

Roundup: October 21


Today is the fateful day of Lehman Brothers CDS settlement - likely to go off without a hitch. Money markets continue to ease.

Two Harvard professors argue in the NYT that banks receiving government support should suspend dividend payments -- and may have a fiduciary obligation to do so. Robert Reich says a bank that's too big to fail is too big, period. Dean Baker warns against using the bailout as an excuse to cut social security and Medicare benefits. Paul Volcker is said to have become a close economic advisor to Barack Obama. With Britain's public finance shortfall at a record since 1946, is there any grounds for thinking the bank bailout will restart the wider economy? (Max's former employers say no.) Iceland is to announce a $6bn IMF-led rescue package, with the participation of Nordic and Japanese central banks but without Russia, the FT reports.

France is injecting EUR10.5bn of subordinated capital into its six largest banks -- rumors yesterday that SocGen was facing liquidity troubles drove shares of that company down. Nicolas Sarkozy is calling for Europe to establish its own sovereign wealth funds to buy stakes in European companies. Part xenophobia, part protectionism, and part a gamble that European capitalism can follow the French model -- the French government owns large stakes in many of the country's largest and most successful companies, a system of which Sarkozy, though hailed by ill-informed and ideologically-driven English-language press outlets (the WSJ and Economist) as an avatar of neoliberalization, has always been an advocate. The state capitalist arms race is already underway -- the US's bank recapitalization plan is widely acknowledged to be less efficient and more costly to taxpayers than plans enacted in Europe, but the $25bn in subsidies offered to American car companies that should be allowed to fail is provoking an outcry from European carmakers, who want similar largesse from their governments -- France and Germany have already said that auto finance companies will be eligible to participate in their banking rescue plans.

FT Lex says Oleg Deripaska's scramble to refinance almost $2bn of a loan from western banks collateralized by 25% of Norilsk Nickel is "doomed." Kommersant says Deripaska has lost as much as $28.4bn -- meanwhile, in Britain, scandal is brewing over allegations Tory leaders solicited Deripaska for political contributions. The NYT runs a piece on the effects lower oil prices will have on the geopolitical ambitions of Venezuela, Iran, and Russia. Rumors that Russian banks are not honoring requests for foreign currency are said to be causing queues to withdraw money.

Kirk Kerkorian may sell his entire 6.5% stake in Ford. National City, Fifth Third, and KeyCorp reported losses; National City will cut 4k jobs. Q3 profits were down 47% at US Bancorp and 80% at Regions Financial.

Yu-Wei Hu talks with the Oxford International Review about China's sovereign wealth funds.

Unauthorized forex bets at China's Citic Pacific have lead to $2bn in losses -- in case you thought the breathtaking, sublime series of rogue trading incidents was over.

The FDIC is trying to claw back $4.4bn in cash from WaMu's holding company.

The ILO is projecting 20mn job losses worldwide by the end of 2009 as a result of the credit crisis.

The Washington Post looks at the regulatory turf war in the offing for oversight of the CDS market.

House sales were up in Southern California last month -- but 50% of houses closing escrow had been foreclosed on at some point in the previous year. Fitch is projecting an additional 10% decline in house prices over the next 18 months. The New York Fed publishes a beautiful interactive map of US credit card and mortgage delinquencies by county. Henry Blodget warns that without the ability to smooth consumption with consumer debt, this recession may be much rockier than the ones preceding it.


Businesses in Zimbabwe are now paying salaries in commodities, as government officials descend on enterprises to confiscate hard currency. The MDC has issued a statement on Mugabe's refusal to issue a passport to Morgan Tsvangirai, preventing him from traveling to Swaziland for multiparty talks. The MDC is calling for new elections, as is the government of Botswana. Meanwhile, the suspension of the interbank payments system has left aid agencies unable to buy and distribute food or pay wages.

President Bush never considered proposals to close the prison camp at Guantanamo Bay, the NYT reports, despite public statements to the contrary, and his administration is proceeding on the assumption the prison will be open "well beyond" the end of his presidency. A short piece in Foreign Policy argues that most of those detained at Guantanamo never posed any threat to the United States at all. The US has dropped war-crimes charges against a British resident and four others being held at Guantanamo, but won't send them home and is expected to file new charges after the election. Meanwhile, the DC Circuit Court has barred the release of 17 Uighurs detained at Guanatanamo until at least late November.

A road crossing between Indian- and Pakistani-controlled Kashmir has been reopened after sixty years.

The NYRB looks at the murder of Anna Politkovskaya.

Former Prime Minister Thaksin Shinawatra has been found guilty of corruption in absentia by a Thai court

Spain is trying to pay immigrants to leave the country.


India will launch its first lunar mission, Chandrayaan-1, today - you can watch the launch live on the internet at 00:20 UTC.

Italy is continuing to push for revision of the EU's carbon targets, raising fears that the economic downturn will put paid to any serious emissions reduction. It seems, however, that Italy is using inflated and possibly fraudulent numbers to support its case for industry exemptions. The EC will take a closer look at Italy's data, which it has questioned in the strongest terms.

Japan is kicking off planning for a voluntary ETS scheme for major Japanese companies. This may be a precursor to a larger domestic mandatory cap, in which the kinks of regulation, auction design, and participation are worked out.

eBay has banned ivory sales from its auctions, closing off a major corridor to illicit ivory trading, as monitoring the auctions for legitimacy proved too inaccurate and burdensome to meet the auctioneer's burden of regulation.

The GAO has revealed that mendacious reporting by the EPA has overrepresented the scale of polluter penalties exacted by the agency. Declining enforcement of existing regulations has been one of the many scandals of the Stephen Johnson EPA, whose days are thankfully numbered.

The National Marine Fisheries Service overweights the numbers of hatchery-born fish when assessing a species' endangered status. Although hatcheries play a role in preserving species that would otherwise go extinct, the intent of the 'endangered' and 'threatened' designators was never to measure the ability of humans to support a species; it was to measure the wild and independent viabilities of the species.

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