Comment, analysis and other offerings from Wednesday’s FT,
Martin Wolf: No easy way out of the mire
Anybody who looks carefully at the world economy will recognise that a degree of monetary and fiscal stimulus unprecedented in peacetime is all that is prodding it along, not only in high-income countries, but also in big emerging ones. The conventional wisdom is that it will also be possible to manage a smooth exit. Nothing seems less likely. So let us consider the endgame, instead.
The Short View, video: Exit strategies
What exactly are we afraid of?, asks John Authers. Last week saw speculation that the Fed would implement its “exit strategy” sooner rather than later. Ben Bernanke will on Wednesday probably reassure Congress that rates will stay low for a good time yet. But maybe that is not so reassuring. Read text version here.
Lombard: Noble gestures won’t take bonuses off the table
Waive for the camera, everyone! Eric Daniels’ decision to renounce his bonus at Lloyds Banking Group for the second year running follows the template of John Varley and Bob Diamond at Barclays, who declined their pay-outs last week. These gestures may make it easier to persuade lower-profile subordinates to absorb a hit to their incentives. But if you want to curb recklessness and excess, it is wiser to rely on carefully calibrated regulation and keen oversight by wary investors than on top bankers’ public acts of humility.
Lex: Volcker – Running the rule over speculation
“There is not… a rationale for public funds protecting and supporting essentially proprietary and speculative activities.” Last weekend, these words by former Fed chairman Paul Volcker – the basis of the so-called Volcker Rule – enjoyed the support of no less than five ex-Treasury secretaries. All agree that taxpayers should not provide a backstop for speculation. But it is a tricky distinction: almost everything a bank does is a punt. If all is speculation, how to reconcile this with state-guaranteed funding?
Editorial comment: Hands in the dock
The no-holds barred struggle between Guy Hands and Citigroup over the fate of EMI is certainly entertaining. The British financier, who bought the music group in a leveraged buy-out that Citi funded just before the crunch, has sued Citi for its role in auctioning EMI – the value of which, he estimates, has more than halved since the £4.2bn deal. Mr Hands thinks he was tricked into paying up. This may seem like chutzpah on his part. But by holding the EMI deal up to the light, he is actually performing a useful public service.
John Plender: Populist measures will not fix Greece
In pondering their responses to the financial debacle, policymakers would do well to heed the wisdom of the American writer HL Mencken. For every problem, he said, there is a solution that is neat, plausible and wrong. Sure enough, neat solutions abound, as politicians on both sides of the Atlantic demonstrate an unerring capacity to address symptoms rather than causes.
An FT guide: A Conservative Who’s Who
The UK general election is widely predicted for May and the Conservative party is narrowly ahead of the incumbent Labour government in the polls. But who would hold the power in a Tory administration, and who are the most influential advisers? See the FT’s guide to the shadow cabinet and its key strategists in this interactive graphic.
Analysis – Europe, pursuit of a purpose
As European leaders accept that sustaining an inclusive social model and a voice in the world requires stronger growth, widespread doubts linger over the need for increased economic co-ordination, writes the FT’s Brussells bureau chief Tony Barber.
Special report: The UK’s road to recovery
The recession is over, but the hesitancy with which the UK has limped out of the downturn enourages the view that recovery may be slow and painful. Careful timing and strategic judgment is needed to capitalise on slow economic growth. Read the FT’s reports, comment and analysis on this crucial theme.
Tony Tassell: Bankers still don’t get it
All very well for top bankers to forego their bonuses, writes Tassell. But the trouble is that the pay restraint should have reached further down the ranks. It doesn’t say a lot for how chastened the banking industry is supposed to have become that it was collectively willing to push through large bonuses that owe a great deal to profits reaped from conditions put in place by central banks and governments to remedy the disaster caused by the financial sector. In risking a regulatory backlash, the industry largely bet the business to pay bonuses. That does not sound liked changed behaviour.