I am a bit more hopeful about the Tim Geithner’s latest plan to take troubled assets off the balance sheets of US banks than the sceptical economists led by Paul Krugman.
Mr Krugman does not like the plan – at all – because he regards it as a mere reshuffling of the original Tarp plan suggested by Hank Paulson last autumn, which seems like ages ago. He points out, rightly, that it involves a government subsidy to private investors in the form of guaranteed debt. Read more
Beware any financial legislation that passes the House of Representatives rapidly when both the Democrats and Republicans are angry. It will cause a heap of unintended consequences.
That was true of the Sarbanes-Oxley Act of 2002 and it may be even more true of the House’s bill to impose a 90 per cent tax on bonuses earned by employees of large banks that have taken US government capital. It is an ill-conceived and over-hasty piece of populism. Read more
Lex points out an interesting aspect of the Roche-Genentech deal:
If the middleman won’t lend to you except at usurious rates of interest, just cut him out. That’s what Roche did. The Swiss drugmaker has raised $39bn of the $47bn it needs to fund its recently agreed acquisition of Genentech, the US biotechnology group, by tapping directly into the bond market. There was no bank finance to be seen. Read more
Further to my column this morning, I am not in the camp of those thinking that Tim Geithner ought to step down as US Treasury secretary for failing to curb the AIG bonuses or coming up with a detailed plan to buy troubled assets.
The two sides of the case were put pretty well this morning by the FT and Gawker, the media and gossip blog – these days everyone has their opinion on credit default swaps and the Treasury secretary. Read more
My FT column this week is on the AIG bonuses: Read more
I have one initial thought about the uproar over the bonuses at AIG, although I plan to offer some more in my column this week.
The US Congress is now so angry about the $165m in retention payments to employees in AIG’s financial products group that it wants to impose a tax to recoup the money, or perhaps 90 per cent of it, from anyone who gets such a bonus. Read more
The list of Bernie and Ruth Madoff’s assets, which the US government is attempting to seize following his 11 pleas of guilty to counts including money laundering, is instructive as well as entertaining. It prompts three thoughts.
First, as far as Ruth Madoff’s attempt to retain about $70m of the couple’s estimated assets of about $825m goes, pull the other one. Read more
Floyd Norris has a go at bankers who want to dilute mark-to-market accounting this morning and he makes some good points.
However, just as an exercise, imagine what it would be like if all homeowners were forced to mark to market the value of their homes, and post cash collateral in cases of negative equity. Read more