Comment, analysis and other offerings from Monday’s FT,
Lloyd Blankfein: we must not destroy risk
The Goldman Sachs CEO writes on the mistakes banks made, the need for strong risk management, dynamic regulation and a reform of compensation.
Editorial: What the Obama bank plan must do
Half measures must at last be abandoned. What is needed is action so strong that no doubt over the health of surviving financial institutions can remain. The first requirement then is solvency: it is to ensure that surviving financial institutions are adequately capitalised to survive the losses ahead. The clear lesson from past bank crises is that zombie banks are death: an undercapitalised bank is inherently irresponsible. The government must either slay the living dead or bring them back to health.
Willem Buiter, Maverecon blog: Good Bank/New Bank bs. Bad Bank: a no-brainer
Many (probably most, possibly all but a handful) high-profile, large border-crossing universal banks in the north Atlantic region are dead banks walking – zombie banks kept from formal insolvency only through past, present and anticipated future injections of public money. They have indeterminate but possibly large remaining stocks of toxic – hard or impossible to value – assets on their balance sheets which they cannot or will not come clean on. This overhang of toxic assets acts like a tax on new lending.
Lina Saigol: Corporate lending is a sprat to catch a mackerel
Need help meeting your funding requirements? We’ll extend the credit if you give us all your future investment banking business.That’s the message banks such as JPMorgan and Bank of America/Merrill Lynch are delivering to their blue-chip clients before they open their cheque books.
Clive Cook: Politics is destroying the credibility of economics
My earlier confidence that economists are not wasting their own and everybody else’s time is diminishing. Are the leaders of the profession measuring up to the standards I mentioned? Are they helping to improve policy, or raise the standard of public understanding? You could easily argue the opposite.
Wolfgang Münchau: Global trade is in freefall
Consider this: the annual rate of decline in industrial production in December was 12 per cent in Germany, 20 per cent in Spain and 21 per cent in Japan. South Korean exports were down 32.8 per cent in January, compared with the same month in 2008. The International Air Transport Association said global international cargo traffic crashed 22.6 per cent in December, year on year.
Lex: a gigantic lock-up
Fund managers are showing remarkable ingenuity to restrict or bar redemptions – moving less liquid assets into untouchable “side-pockets”, cutting fees in exchange for longer lock-ups or offering Libor-hugging loans to investors that really need cash right now.
Tony Jackson: for a quick profit, try picking a pensioner’s pocket
The running sore of corporate pensions has flared up again. As recently as June 2008, according to official calculations, UK schemes overall were in modest surplus. They now show a record deficit of £195bn ($288bn) – worse than in the depths of the 2003 bear market.