Posts from Wednesday Feb 13 2013

The Closer


Jack Lew placed tax reform “at the very top” of his priorities if confirmed as Treasury Secretary. Lew pledged to look at business tax cuts and brushed off questions on his past as a Citigroup executive, in a mostly placid Senate Finance Committee hearing on his nomination by President Barack Obama (Reuters, Financial Times). Read more

Isda committee decision on SNS Bank CDS weird or what?

We’re confused about the restructuring credit event that the Isda determinations committee voted for on Wednesday. It took them three meetings to do it, and Bank of America Merrill Lynch doesn’t agree, but there you go.

Oh, and the Q&A document that Isda published about CDS written on Greece has a line that appears to be in contradiction to decision, but there you go… Read more

Exorcising eurozone ELA as we know it

Yes the IMF calls for common eurozone deposit insurance, in this new banking union paper. But also look at what they suggest on emergency liquidity assistance:

Lender of last resort. The lender of last resort makes liquidity support available to solvent yet illiquid banks. Centralizing all LOLR functions at the ECB would in the steady state eliminate bank-sovereign linkages present in the current ELA scheme (see Box 1). This would require changes to the ECB’s collateral policy, as by definition euro area banks that tap ELA cannot access Eurosystem liquidity owing to collateral constraints. Until such time as all banks are brought under the ECB’s supervisory oversight, ELA would be sourced through both the ECB (for banks brought under its purview) as well as national central banks (for banks that remain under national supervision, albeit with adjustments made to the national ELA limits).

Which would be nothing short of a revolution. Read more

Currency handbags at dawn [updated]

The currency war meme rumbles on as the G7 does its very best to avoid a coherent message amid arguments about whether drawing a distinction between “domestic objectives” that weaken a currency and just plain weakening it actually matters. Ho hum. Read more

Isda nationalisation of SNS Reaal a credit event? Yes it is

SNS Reaal’s sub expropriation was a restructuring credit event after all, according to 14 of the 15 Isda determinations committee members on Wednesday:

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Global financial assets, there are lots

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The non-precedent setting, own-law making, secretive CDS committee is having a seriously bad month

Oh boo, the committee that decides on whether credit default swap contracts should payout appears to be having trouble reaching a conclusion about whether the nationalisation of SNS Bank counts as a “credit event”. While the quantity of swaps that hang in the balance is teeny tiny, the issue itself is a big deal because it reveals some of the problems that might crop up in future bank rescues and bail-ins of debt while demonstrating yet again that CDS don’t appear to do what a reasonable person would think they do. Read more

Markets Live: Wednesday, 13th February, 2013

Live markets commentary from 

The (early) Lunch Wrap

Obama drive to ‘reignite’ US economy || Neither US party swallows a compromise || G7 fails to defuse currency tensions || Comcast in $16.7bn NBCUniversal buyout || Banks in capital race to top as Sweden’s 12 per cent rule sets pace|| Ailing Peugeot posts record net losses || Australia banks on housebuilding boost || Apple downplays Einhorn suit as ‘sideshow’ || Intel to launch internet-based TV service || Markets: Mixed opening of European trading, but stocks close to multiyear highs Read more

On cash hoarding

Krugman’s had a go, Cowen’s had a response and now Roche has weighed in.

So why are corporates hoarding cash, and is this good or bad for the economy? Read more

Currency wars. You’re doing it wrong.

A predictable response to the utter confusion around yesterday’s G7 statement:

Nikkei 1day chart - Feb 13, 2013  Read more

Further reading

Elsewhere on Wednesday,

– Can intangible investment really explain the UK productivity puzzle?

– Space tourism is go.

– How fiat money turned into commodity money in Somalia.  Read more

The 6am Cut London

Japan stocks fall, yen rises || Obama challenges congress on wages, guns, climate || Public IT suppliers’ tax scrutinised || BlackRock hires MS banker as CFO || Comcast buys remainder of NBC from GE || Dell buyout opposition grows || UBS’ Kengeter to resign || Helicopter money, for and against Read more