- The Greek government
- One or two French banks
- The Finnish government
- Spanish banks, UK banks, hmm a few banks really
These are just some of the world-class institutions Joseph has managed to annoy with stuff he’s dug up over the years. He joined FT Alphaville way back in March 2010.
Joseph likes all the politically and legally fiddly bits of finance. He also likes credit, rates, global macro, tail risk, and all that stuff. (You should email him story ideas. He’ll take anything.)
He doesn’t have a finance background.
The CLO kind of got off lightly in Fed governor Jeremy Stein’s “Overheating in credit markets” speech.
Makes sense, given what Stein was mostly talking about — places in the market where the yield chase could be relying on assets that in turn rely on short-term funding. In other words, leverage that turns “overheating” into a supernova. Read more
ROUND-UP
Jack Lew placed tax reform “at the very top” of his priorities if confirmed as Treasury Secretary. Lew pledged to look at business tax cuts and brushed off questions on his past as a Citigroup executive, in a mostly placid Senate Finance Committee hearing on his nomination by President Barack Obama (Reuters, Financial Times). Read more
Yes the IMF calls for common eurozone deposit insurance, in this new banking union paper. But also look at what they suggest on emergency liquidity assistance:
Lender of last resort. The lender of last resort makes liquidity support available to solvent yet illiquid banks. Centralizing all LOLR functions at the ECB would in the steady state eliminate bank-sovereign linkages present in the current ELA scheme (see Box 1). This would require changes to the ECB’s collateral policy, as by definition euro area banks that tap ELA cannot access Eurosystem liquidity owing to collateral constraints. Until such time as all banks are brought under the ECB’s supervisory oversight, ELA would be sourced through both the ECB (for banks brought under its purview) as well as national central banks (for banks that remain under national supervision, albeit with adjustments made to the national ELA limits).
Which would be nothing short of a revolution. Read more
If there is anything that qualifies as protesting too much, surely this is it…
The finance minister of eurozone country X declares (as Vassos Shiarly of Cyprus did on Monday) that its bonds/its banks’ bonds/their depositors simply cannot be written down. Why? Eurozone country X’s constitution and laws just don’t allow it!
Well, on the contrary. Read more
A familiar saga pops up in the prospectus for Paraguay’s recent US dollar, New York law bond…
A great resource from Shearman & Sterling, in their note marking the end of the briefing war in the Argentine vs holdouts pari passu saga.
It’s a schematic of the arguments which the Second Circuit will likely consider when deciding appeals against an order for Argentina to pay holdouts alongside restructured bondholders. Some of the arguments are key. Some are not so key. Read more
A 6 per cent drop in Sony shares stood out as Asian stock markets fell. The Nikkei fell more than 1 per cent. Japan posted a current account deficit for a second month in December, leaving its 2012 annual surplus the lowest on record (Reuters). Sony posted an unexpected quarterly loss and cut its sales forecasts for TVs and games devices (Bloomberg).
Apple and David Einhorn clashed over its cash. The company said it would “thoroughly evaluate” Greenlight Capital’s call for it to issue preferred stock as a way of tapping its $137bn hoard, despite the activist fund’s decision to sue it over a proxy proposal that investors vote before this kind of share can be issued (Financial Times). “Apple has $145 per share of cash on its balance sheet. As a shareholder, this is your money,” Einhorn said in a letter to other investors. Greenlight has a 0.12 per cent stake in Apple, having advocated its shares since a fall in them began last year. But Einhorn has worked for months behind the scenes to convince Apple management of the preferred shares scheme, which they rejected for involving too high a dividend (Reuters). Read more
And why this could well have been the best possible deal for Ireland.
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Click for the feed from the Irish parliament, where legislators have until the morning to pass an emergency bill liquidating Anglo Irish’s resolution company, unlocking a promissory note deal which might be on its way, before creditors of Anglo hit the LITIGATE button. Or something. (The entire prom note deal is needed by the Irish government before the notes’ next circa €3bn interest payment, because that’s what they promised the public.) Read more
World’s oldest bank puts out a late-night statement confirming “the presence of errors” in three structured transactions. Click for the full release… (it’s in Italian)
*NOONAN SAID TO PLAN ANGLO IRISH SPEECH IN PARLIAMENT
A few hours later… Read more
Yeah, so “stupid Libor emails” is now an established sub-genre in banker literature.
Though the funny thing about Wednesday’s RBS revelations is that attempts at manipulation generally, at least at the start, weren’t written down. The whole problem was that people trading rates were sat right next to people in charge of submitting rates for Libor. That’s due to the “Short-Term Markets Desk”, RBS management’s October 2006 bid to “facilitate more communication”. Oops. Read more
Presenting the CFTC order against RBS, as part of the bank’s $325m settlement with the regulator over allegations of “hundreds” of attempts at manipulation of Libor (notably Yen Libor):
As if we could keep away from the latest paper mountain in the pari passu saga.
Argentina and its restructured bondholders (and Bank of New York Mellon) filed briefs to the Second Circuit on Friday, returning fire at the most recent salvo from holdouts. Read more
Hat-tip to the WSJ Law Blog, the full US government complaint against Standard & Poor’s:
Well, we think “Dutch-bottomed” is probably a better metaphor for what’s happened to SNS Reaal’s subordinated bondholders than Bond Vigilantes’ “Going Dutch”. That just means splitting the bill. Dutch-bottomed is empty, or perhaps fallen through the trap door.
The Netherlands government did an unusual thing when it nationalised SNS, a small and struggling mortgage bank on Friday. It expropriated subordinated bonds of the lender. Here’s the decree. It theoretically suggests the holders still have a claim on the value of the bonds, at some point: Read more
Andrew Dilnot strikes again:
Getting a favourable leader in the Economist is pretty Establishment, surely.
At the very least, it’s interesting that the red-top weekly has managed to endorse and explain a fairly specific nominal GDP target for the Bank of England. Read more
Yep, China again.
Here’s a table from a fresh IMF paper pondering the country’s Lewis Turning Point, the moment when people streaming into cities from farms will be fully absorbed, industrial wages will take off, and — an estimated 350m jobs later after it began — the era of cheap Chinese labour will end. Click to enlarge. Read more
And a dissent from Esther George. Full statement from the Fed’s open market committee:
Information received since the Federal Open Market Committee met in December suggests that growth in economic activity paused in recent months, in large part because of weather-related disruptions and other transitory factors. Employment has continued to expand at a moderate pace but the unemployment rate remains elevated. Household spending and business fixed investment advanced, and the housing sector has shown further improvement. Inflation has been running somewhat below the Committee’s longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices. Longer-term inflation expectations have remained stable. Read more
At times, pursuing a defaulted sovereign debtor for full payment can almost (almost) come across as a facetious exercise. As when NML’s latest brief in the Argentine pari passu case quotes Casablanca. Read more
