Comment, analysis and other offerings from Wednesday’s FT,
Martin Wolf: Europe should not control the IMF
The king is dead; long live the queen, says the FT’s Martin Wolf. Dominique Strauss-Kahn, the French erstwhile managing director of the International Monetary Fund, had not even resigned before Europeans started to coalesce around Christine Lagarde, the French finance minister, as his successor. Gone are past promises of an open selection. The Europeans insist on the principle that what we have we hold. The ancien régime survives. Mme Lagarde is a perfectly respectable candidate. She is French, almost a requirement, it often seems, for the European head of an international institution. She is an extremely likeable and impressive person. But she is not a perfect candidate: her economics are limited.
John Kay: Publishers badly need a new Sir Thomas Bodley
The Hargreaves report on intellectual property, published last week, is a landmark in the evolution of British policy, says the FT columnist. Ian Hargreaves concludes the existing intellectual property regime, far from being a spur to innovation and growth, gets in the way. The contrast between this document and the paper on the digital economy Lord Carter prepared for the last Labour government could hardly be more marked. Mr Hargreaves deplores the way government policy has been led by business interests and not evidence of its effects. The Carter report, unintentionally, illustrated his point in every chapter.
Jim Millstein: Learn AIG’s lessons to avoid another Lehman
The sale of the first tranche of the US government’s equity stake in AIG marks the beginning of the end of the largest “open bank assistance” programme in history, with $150bn invested in the insurance group to avoid a repeat of Lehman Brothers, writes Millstein, former chief restructuring officer at the US Treasury, where he led the AIG rescue. Yet despite the fact that this means the much-maligned Tarp programme is now close to making a profit for American taxpayers, the recent Dodd Frank Act actually outlaws similar assistance in future.
Editorial comment: Brazil and China: the ‘perfect match’
Probably no country has gained as much from the rise of China as Brazil. Each country has what the other lacks. China needs commodities to house and feed its population; Brazil has them in abundance. Brazil needs foreign savings to fund domestic investment; China has a surplus. Extra bonus: their shared history has no colonial baggage. As a result, a long distance relationship has flowered. Over the past decade, bilateral trade has increased 18-fold to more than $50bn annually. Yet, as an FT special report earlier this week made clear, the honeymoon for this “perfect match” is now over.
Lex on China’s housing problems
Theorists are out in force to find reasons for the recent slump in Chinese equities: slowing industrial production, unrestrained inflation, tightened monetary policy. Among the best explanations, though, is simple investor apathy. The mainland market has always been dominated by individual investors, who own the great majority of the 159m registered trading accounts. Yet the proportion of active accounts – those that made at least one trade within the past week – has steadily fallen, from an average 14 per cent in 2009 to 9.5 per cent so far this year.
Andrew Feldstein: Derivatives reform will not prevent next AIG
Recent proposed derivative regulations have caused a stir, writes Feldstein, chief executive officer of BlueMountain Capital Management. At issue is a requirement that parties to certain derivatives transactions secure their obligations by posting cash or other liquid assets as collateral. Proponents argue that it is necessary to reduce the odds of another financial crisis. Often their goal is framed as avoiding the next AIG. Opponents say it ties up capital that would normally go towards investments in growth and create disincentives to otherwise rational risk management decisions. They also argue the rules will drive derivatives users offshore, undermining the competitiveness of the US financial sector and potentially pushing systemically risky activity into the shadows of unregulated jurisdictions.