Comment and analysis from Thursday’s FT:
View From The Top video: Stephen Schwarzman
The Blackstone boss talks to Chrystia Freeland about the credit crunch, Lehman Brothers, Blackstone’s IPO, sovereign wealth funds, taxes, unions and philanthropy.
Comment: A party pooper’s guide to financial stability
Few will envy Lord Turner’s new position as chairman of the UK’s Financial Services Authority, writes Charles Goodhart, of the London School of Economics, and Avinash Persaud, chairman of Intelligence Capital and emeritus professor of Gresham College, London. Almost 12 months on from the start of the credit crunch and eight months since the run on the Northern Rock bank, there is a developing consensus on how to make the financial system less vulnerable to crisis. The bad news is that it is largely the same consensus we reach after every crisis, ultimately to little effect: more disclosure, more regulation and reform of bankers’ compensation.
John Gapper: The Panglossian approach to debt
In the best of all possible worlds envisaged by the Panglossian Tony James, president of Blackstone, covenant-light loans may well allow a company to go through a temporary dip in fortunes and then recover with no permanent harm done. But how can a debt-holder know that will happen? After all, the expertise of the private-equity-appointed managers did not avoid trouble in the first place.
Bernanke and the dollar (I): Lex
The last thing the Fed, or any central bank should do, is comment on currencies. On Tuesday, Ben Bernanke, Fed chairman, made it clear he favoured a stronger dollar – or at least not a weaker one – to help stem inflation. Central bankers should keep schtum for two reasons. First, they have as little chance of influencing currencies as the finance ministers who comment regularly. The second problem is one of signalling. Bernanke’s comments were widely interpreted as meaning there would be no further cuts in interest rates.
Bernanke and the dollar (II): View of the Day
The chances that the Fed will intervene in the markets to support the dollar are low in the short-term, although it has now served notice that it will act should another financial crisis send the US currency sliding, says Pomery, head of foreign exchange at IDEAGlobal. The real worry, however, is that the Fed might know more about the health of the financial sector than it has let on
Insight: How to lessen systemic risk
Recent events, particularly the run on Bear Stearns, have highlighted the vulnerability of our financial system write Lewis Alexander and Kim Schoenholtz, respectively, Citigroup’s current and former chief -economists. As policymakers take on the complex task of securing the financial system after the storm, we encourage them to consider the potential of expanding the role of clearing houses with centralised clearing counterparties (CCPs) in markets for financial derivatives to advance their objectives.
Short View: Selling the pound
The pound is the whipping boy of international currency markets at present, says John Authers. Trading at $1.98 last week, it had hit $1.955 late Wednesday. In taking an aggressively negative attitude towards sterling, traders are doing little more than mirroring attitudes within the UK, if recent confidence surveys are anything to go by. In the shorter-term, the selling of sterling reflects a bet that the Bank of England will spring a surprise on Thursday and cut its base rate. This seems less likely.