Agnes's Feed
Apr 14, 2011
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Banks need to guard against short-term debt creep

By Agnes T. Crane
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

NEW YORK — Borrowing short and lending long is the essence of banking. But the business model has some serious flaws when big banks dive too deeply into short-term debt, as they did before the 2008 financial crisis. There’s little danger yet that bad habits have returned, but recent data indicate some banks may be flirting with temptation.

Apr 13, 2011
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Financial engineers have a new playground: ETFs

By Agnes T. Crane
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

It didn’t take long for financial engineers to find a new playground. Fresh from dreaming up collateralized debt obligations (CDOs), structured finance specialists are applying the same techniques to exchange-traded funds. ETFs are wildly popular with big and small investors who love the liquidity and diversification such investments promise. But derivatives, special purpose vehicles and skewed incentives — hallmarks of the last boom — have found their way into ETFs as well.

Apr 1, 2011
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Fed transparency puts Goldman’s Cohn in a pickle

– The author is a Reuters Breakingviews columnist. The opinions expressed are her own –

By Agnes T. Crane

The Federal Reserve’s 25,000-page data dump on bank borrowings so far hasn’t unearthed any shocking revelations or sent financial markets into a tailspin. But it has caught out Goldman Sachs Chief Operating Officer Gary Cohn. Last year, Cohn told the Financial Crisis Inquiry Commission, under oath, that Goldman tapped the Fed’s discount window — the mechanism that allows banks to get emergency funding — once for a “de minimus” amount of money.

Mar 31, 2011
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JPM creates loan envy with $20 billion AT&T financing

JPMorgan is creating loan envy. Jamie Dimon’s record-setting $20 billion financing for AT&T is turning bankers green the world over. With this as the new benchmark for credit-hungry corporate executives the risk is that banks wind up competing in a game of one-upmanship that leads some to fly solo on far dicier deals.

Working with just one lender has many merits for companies. The borrower has a greater capacity to minimize leaks — an enormous perk when navigating regulatory briar patches like the one AT&T must to win approval for buying T-Mobile. For banks, of course, it means juicy fees and huge bragging rights. Andy O’Brien, JPMorgan’s dauphin of leveraged finance (if Jimmy Lee is still the prince), certainly has them.

Mar 31, 2011
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Warren Buffett’s succession plans hit turbulence

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Agnes T. Crane

Warren Buffett’s succession plans have hit serious turbulence. The shock resignation of David Sokol, the chief executive of Berkshire Hathaway’s NetJets airplane charter unit who was considered a prime candidate to run the whole shebang, highlights two huge obstacles to filling the Sage of Omaha’s wingtips. First, the candidate needs to be beyond reproach. Second, there may be better ways to make a pile of money.
Until today, Sokol had been a golden boy. Buffett praised him for the NetJets turnaround and the chattering classes put him at the top of the list of successors. His credentials seemed to have been burnished by bringing to Buffett’s attention the charms of Lubrizol, the lubricants maker Berkshire said it would buy for $9.7 billion just two weeks ago.

Mar 30, 2011
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U.S. gets religion on adopting mortgage standards

A time traveler from the 1950s would hardly blink at the standards American regulators are mulling for run-of-the-mill home loans. True, the new underwriting criteria that bank watchdogs have outlined for most standard mortgages appear to be a radical departure from the funky terms of products that borrowers had their choice of in recent years. But in fact, they are more a return to the conservative ways of the past.

The U.S. regulators — including the Federal Reserve, Federal Deposit Insurance Corp and Comptroller of the Currency — are hoping to rein in excessive risk-taking in the securitization of mortgages by issuing guidelines on “qualified residential mortgages.” In defining these, they’ve leaned on previous rules for safe lending. Notably, the 20 percent down payment — which had all but disappeared outside the rigid co-op boards of Manhattan — is back on the table, together with debt-to-income limits and lower home equity thresholds.

Mar 21, 2011
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Treasury offers test case for Fed’s exit strategy

By Agnes T. Crane
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

The U.S. Treasury will lead the way testing the $4.6 trillion mortgage-backed securities market’s mettle. Tim Geithner’s department said on Monday that it will begin offloading $142 billion of mortgage bonds accumulated during the financial crisis. The gradual sale of Treasury’s portfolio could hint at how markets will react when the Federal Reserve comes to sell its nearly $1 trillion stash.

Mar 17, 2011
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New York Times prices digital to keep print alive

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Agnes T. Crane

The latest move in the digital revolution looks designed to keep the status quo. The New York Times will finally put up an online pay-wall — $15 to $35 a month for readers who click on more than 20 articles a month. That’s still cheaper than the dead tree edition every day¬† — which costs around $50 — but not enough to create a huge incentive for inky-fingered readers, and the higher ad dollars they still attract, to switch.

Tactile romanticism, of course, still appeals to older readers, who continued to subscribe to the paper even when content was free on the web. Moreover, those bound by inertia have little incentive to ditch print for digital since current subscribers will be able to read articles from any platform. This matters not just for the Times, which is controlled by the dynastic Ochs Sulzberger family, but for all papers sensitive about prematurely killing the cash cow of print advertising.

Mar 16, 2011
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U.S. junk market takes forced but manageable break

By Agnes T. Crane
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

It was time for a breather anyway. Volatility is to blame for sub-investment grade companies like Toys R Us yanking more than $7 billion of issuance this week. But after a buoyant spell in the debt markets, the break is no disaster.

Mar 14, 2011
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Japan catastrophe could make U.S. debt costlier

By Agnes T. Crane
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

The U.S. Treasury market could feel financial aftershocks from Japan’s tragic earthquake. Offloading some of the Asian giant’s $1 trillion of foreign reserves could raise cash to help rebuild after Friday’s disaster. Meanwhile, the Federal Reserve is due to end its Treasury bond-buying program in June. If Japan, the second-biggest foreign holder, starts selling that’s another support gone — with the potential to make borrowing more expensive for the U.S. government.