Comment, analysis and other offerings from Thursday’s FT:
Online discussion and poll: Don’t blame mark-to-market
Short-selling was criticised, then banned. Now the practice of mark-to-market accounting has come under attack. The key question is whether mark-to-market accounting is in any way responsible for the current financial crisis – is it villain or scapegoat? Have your say and vote in FT.com’s poll.
Maverecon blog: Increasing the insured deposit limit is a bad idea
Grandson of TARP is still alive and offering a free toaster for every depositor. The increase in the insured deposit limit is a bad idea. Anyone holding more than $100k in a single bank should be encouraged to monitor the investment and spread it around, says Willem Buiter in his blog.
The future of Wall Street, video: Irwin Stelzer
Stelzer, senior economic policy director at the Hudson Institute, discusses the future of Wall Street and financial industry regulation, together with issues of moral hazard, ‘new capitalism’, and the global financial crisis.
The Short View: Recession and the ‘real world’
Even before the credit crisis degenerated into melodrama, the developed world had unambiguously lurched into recession, says John Authers. Wednesday’s US manufacturing data jolted the gauge even more firmly towards recession, helped by Japan’s Tankan survey of manufacturing and data from the eurozone. The world is diving into recession, and we’re all diving together; theories of “decoupling” can be ignored.
Insight: Gillian Tett – Seeds sown in ‘murky’ finance
The most pernicious problem right now is that many voters and politicians remain so confused about how finance works that they have no idea whether a bail-out is a good idea or not. All they do know is that the events have shown that modern finance is rife with complex interlinkages that are poorly understood, if not downright murky. Thus, suspicions are rife that any bail-out for the banks will inevitably end up bailing out bankers too. In the longer term, the real lesson from these events is that policymakers should never have permitted such a yawning information gap to emerge between bankers and everyone else.
John Gapper – The fatal banker’s fall
It is hard to imagine Wall Street dusting itself off and getting back to business as usual this time, writes Gapper. Bankers’ unpopularity has been propelled to greater heights than before and investment banking is unlikely regain its hegemony for a very long time, if ever. What then, comes next?
Lex: Tanked in Japan
Gloom has spread to the factory floors of Japan. Business sentiment has turned negative for the first time in five years, according to Wednesday’s Tankan survey. Japan Inc expects recurring profits to dip 8 per cent this fiscal year, on a year-on-year basis. It could not have been otherwise. But more sobering still is the fact that sentiment is some way off the depths plumbed in the past three recessions. With Japan halfway to a technical recession, that is worrying.
European banking crisis (1): Editorial comment – A confidence crisis
No financial institution could survive if all its depositors asked for their money at once. That is the risk facing Europe’s banks as the financial crisis that has engulfed Wall Street sweeps across the Atlantic. There is a clear and urgent need to shore up confidence, as well as capital, in the banking system. Rather than offering blanket guarantees, governments should take a more surgical approach and also spend more time on treating the causes of the financial crisis and not just the symptoms.
European banking crisis (2), interactive map – Are European banks too big to fail?
Some of Europe’s banks are bigger than its governments: their assets are greater than their home countries’ economies. FT.com’s interactive graphic explores the relative size of business and government
European banking crisis (3): Lombard – Irish guarantees only go so far
Irish hospitality is legendary. But before you transfer sterling deposits into the welcoming arms of one of the six Irish banks now guaranteed by Dublin, consider: The confidence instilled by government promises to stand behind all deposits and bank debt could be as evanescent as mist on the Liffey. Given the relative size of the banking system and the Irish economy, simultaneous claims from failing banks would be hard for even the optimistic Irish to bear.
View of the Day – banking crises and currencies
The recent collapse of global financial institutions and severe malfunctioning of the interbank lending markets have fuelled concerns over the fallout from a systemic banking crisis but should not spark a run on the dollar, says Lee Hardman at Bank of Tokyo-Mitsubishi UFJ, citing an IMF report that finds banking crises tended to coincide with a currency crisis.
Paul Betts: SWFs and old world trophy assets
Sovereign wealth funds from the Middle East and other resource-rich emerging countries have been taking huge bets by buying large stakes in western financial institutions and industrial groups. Some may already be regretting their enthusiasm for splashing out their petrodollars so early on in the current apocalyptic cycle, given the hefty paper losses suffered on many of their initial investments. Others, despite the financial meltdown, have shown no sign of losing their appetite for picking up new trophy assets in the old world.