Comment, analysis, and other offerings from Friday’s FT,
Philip Stephens: Wanted — a plan to save Europe
It has become something of a mantra among European leaders that we can be sure they will save the euro because they have to save the European Union. You can see where they are coming from, the FT columnist writes. European integration would struggle to survive the demise of its flagship project. The assertion, however, misses something rather important about the causality. The reason the single currency is in such terrible trouble is that governments across Europe have failed to persuade electorates that the EU itself is worth saving.
Frank Partnoy: On rogues, risk-taking and restoring trust in banks
The financial crisis should have taught regulators that they cannot effectively monitor private sector risk-taking with tools such as Value-at-Risk, Partnoy, law professor at the University of San Diego, writes. It is nearly impossible for them to specify in advance what risks banks may or may not take. Once a rule is set in stone, banks will find a way around it. This is a cat-and-mouse game regulators are doomed to lose. History also shows that rogue trading emerges predictably from activities that appear low risk. Nick Leeson and Jerome Kerviel engaged in low-VAR trading strategies that regulators would have thought safe.
Global Insight: Tea Party wolves try to blow the Fed down
There is one charitable interpretation of the assault on the Federal Reserve delivered by the Republican leadership in Congress this week, on the eve of the central bank’s latest effort to reinvigorate the US economy, the FT’s Richard McGregor writes. The Fed’s mission, enshrined in its founding legislation in 1913, does more than make the body independent of day to day politics. It also makes it a convenient whipping boy for politicians when they need someone to blame for the economy.
Inside Business: Grand Prix provides little traction for UBS
The Singapore Grand Prix has quickly established itself as one of the most glamorous and exotic races in the Formula One racing calendar, the FT’s Paul Betts writes. But the decision of UBS to hold a crucial board meeting on Friday in the city state on the eve of this year’s race, at which directors will discuss the $2.3bn loss it revealed last week due to an alleged rogue trader, seems strangely inappropriate.
Lex on the Twist tumble
When the Fed called “twist”, the market said “stick”. Risk assets reacted to a rather more aggressive attempt to push down long-term interest rates than had been expected, by staging a co-ordinated capitulation sell-off, Lex says. This was because, in the market argot, investors went both “risk-off” and “growth-off”. They have two interrelated concerns: the risk of renewed banking stress, and the prospects for global growth.
FT Tilt: The slipping offshore renminbi
The offshore renminbi (CNH) fell sharply on Friday as investors pared back their long-term positions in the Chinese currency amid a global market rout, and worries of slower yuan appreciation, FT Tilt’s Denise Law reports. Historically, this is highly unusual as the CNH tends to trade at a premium to the onshore renminbi. But the CNH-CNY basis has turned positive, implying that the offshore renminbi is now cheaper than the onshore one.