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

The Federal Reserve on Wednesday finally published details of the institutions that clamored for its funds during the financial crisis. It’s hardly surprising that troubled banks like Bank of America, Merrill Lynch and Citigroup topped the charts for banks that lined up for federal money. But the disclosure illustrates the scope of the U.S. central bank’s measures to keep the financial system on life support. The scale of emergency lending — $3.3 trillion at its peak — could hold important lessons for Europe, too.

The Fed’s efforts through 11 different initiatives went well beyond Wall Street. American Express and General Electric were among those that borrowed billions from the Fed’s commercial paper facility, set up on the fly to make sure Corporate America didn’t get swept up in the post-Lehman credit seizure. Currency swap lines also channeled $171 billion in a single day to the European Central Bank as a dollar shortage threatened stability across the Atlantic.

Now, euro zone efforts to stop hemorrhaging in peripheral economies are looking inadequate — and that’s without much sign of a feared spillover into the banking system. The region’s $1 trillion bailout fund, anchored by the European Financial Stability Facility, impressed markets when there was only Greece to worry about. With Ireland already set to get a bailout, largely because of its banks’ weakness, and concerns growing over Portugal and even Spain and Italy, the EFSF-led package doesn’t look like the bazooka it once did.

The ECB has taken other measures of its own. But the euro zone banking system, with total assets of more than 30 trillion euros, is more than twice the size of America’s. The comparison is a very rough one, but against the amount U.S. financial firms needed from the Fed at the peak, even twice the bailout fund’s current firepower looks puny if the crisis intensifies beyond a few sovereign credits and envelops the financial system.

New plans could emerge at the ECB’s meeting on Thursday, with market participants keen to see if it will ratchet up purchases of sovereign debt. Speculation along those lines brought some stability to debt markets on Wednesday, where just the day before risk premiums soared to new highs for Spanish and Italian bonds.

But if things deteriorate badly, it’s hard to see how that kind of move will be enough. Policymakers may need to take a page out of the Fed’s playbook and set up contingency plans for all kinds of life support on a much larger scale.

Europe may be burning and the U.S. smoldering, but the comfortably-off are splurging on their blue-boxed trinkets. Tiffany is reaping the benefits, posting double-digit sales growth across the globe in its third quarter, most notably in Europe where receipts rose 22 percent in the period. Together with a bright outlook, that suggests well-heeled and aspirational consumers aren’t anticipating another painful downturn.

In 2008, the near-collapse of the financial system unnerved the usually confident, comfortable class. Tiffany’s sales tumbled. Its holiday season that year was a disaster, with sales plunging 21 percent. And it wasn’t just consumers wanting to spend their way up the social ladder that dropped off. Even the firm’s traditional customers cut back. That proved that even those with plenty of money — with the possible exception of the billionaires club — need confidence if they are to indulge themselves.

Now Tiffany’s customers are back. Net income rose 27 percent in the quarter ending in October, and the company managed something that has been unthinkable to many other retailers — it passed on price increases. The expectation is for a strong holiday season this year.

One implication of Tiffany’s rebound is that the wealthy don’t seem concerned about persistently high unemployment in the United States or the potential risks of central banks on both sides of the Atlantic printing money. In Europe, they don’t seem held back by worries that the Irish bailout could spill over or that the governments of Portugal and Spain are overstretched.

They didn’t see the 2008 crunch coming either. But having been bitten then, richer consumers don’t seem to be twice shy. Sure, they are insulated from many everyday financial concerns. But if Tiffany’s experience is anything to go by, there’s little fear of a slide back into the economic abyss. Events could change that, but for now it’s one indicator that should give economic worriers a glimmer of hope.

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

The normally staid U.S. municipal bond market is making headlines for all the wrong reasons. Yields on tax-exempt bonds, the parking lot for wealthy investors looking for tax breaks, have soared this week, a mini meltdown that has prompted the Gwinnett County Water and Sewerage Authority and others to pull more than $3 billion of deals.

There’s room for vigilance, especially given the steady drumbeat of warnings about the finances of state and local governments. The latest market weakness, however, seems to be rooted not in the corridors of Sacramento, Springfield or other state capitols but in extraordinary — but temporary — supply and demand factors that have whipsawed a market known for its illiquidity.

First, the $24 billion of new muni debt originally slated for this week was perhaps more than double the usual supply. That was bound to cause indigestion, especially after a spike in 30-year Treasury yields that was partly triggered by the Federal Reserve’s latest bond-buying program.

Issuers should perhaps have known better than to try to shift so much paper. But it’s hard to blame them when the expiry of a key federal subsidy could soon disrupt their market further. The Build America Bond or BAB program, which involves the feds subsidizing taxable borrowing by state and local governments, has lured as much as 25 percent of new bond issues away from the traditional tax-exempt market this year. If the program isn’t extended beyond the end of December, investors in the tax-exempt muni world could gain the upper hand as borrowers flood back.

Despite all this, though, issuers have been getting deals away. California, for instance, still sold a record amount of debt. It had to pay a little extra — debt due next year priced at a yield of 1.75 percent rather than the 1.5 percent the state had hoped — but it raised $10 billion at rates that are still very low.

With any uncertainty over BABs and the unusual glut of supply likely to be short-lived, the jitters shouldn’t last. Sure, the municipal bond market isn’t without longer-term challenges. Cities, counties and municipalities are vulnerable if the economy doesn’t pick up — and defaults aren’t as remote as they once seemed. But unlike, say, the fundamental concerns about Greece and Ireland in Europe, there’s little to suggest impending trouble for big states like California. The fire feeding the recent alarm doesn’t look like it has much more fuel.

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

When Ireland and Greece run big budget deficits, debt investors get angry. But when California says it will need more than $20 billion to balance its budget, bond buyers stay cool. The state is marketing $10 billion of short-term debt that matures next year to big and small investors at interest rates that would make Dublin or Athens green with envy.

The Golden State hopes to pay just 1 to 1.5 percent on its new notes, roughly matching what it coughed up on similar debt last year. Demand isn’t as robust as then, but considering the state legislature’s dithering over the last budget — they blew the deadline by 100 days — it’s remarkable that investors haven’t been more demanding. After all, California’s fiscal woes are far from over. California’s Legislative Analysts Office projects a $25.4 billion shortfall this year and next and chronic $20 billion gaps through 2016.

Rising borrowing costs can snap legislators out of any complacency, but investors in California debt aren’t showing any sign of forcing yields sharply higher. That’s partly because there’s little reason to believe the state will default. The constitution mandates that investors in its long-term debt are paid before almost everyone else, the exception being the education system. It also has built-in flexibility to honor its short-term commitments. With debt service costs expected to peak below 10 percent of revenue, California shouldn’t have to stretch to stay current on its interest payments.

That means buy-and-hold investors — a good portion of municipal bond buyers — can feel comfortable donning their ear plugs when the scaremongering of bankruptcy and default inevitably reemerges around budget negotiations. Investors in local municipal debt, however, can’t afford to be so sanguine. Counties, for example, are heavily dependent on state funding. Any cuts from Californian legislators in Sacramento could put them on shakier ground.

There are limits to investors’ patience, however. If California were to lose its top notch ratings for short-term debt, for example, money market funds — big buyers of such debt — would have to stop loading up. For now though, voters and taxpayers will have to whip Sacramento into shape. The bond market isn’t likely to help them much.

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

The tax deductibility of mortgage interest is almost as inviolable a part of the American dream as is the U.S. Constitution. The co-chairs of the White House deficit commission have boldly, and rightly, put this almost century-old sacred cow on the chopping block. Now they just have to convince legislators to swing the axe. They could start by killing the myth that the subsidy is all about middle class homeownership.

For starters, the deduction disproportionately helps those who can easily afford a home anyway. According to the Urban-Brookings Tax Policy Center, the richest 20 percent of taxpayers reap 70 percent of the benefit of mortgage and property tax deductions. A married couple able to take out a $1 million loan — the current cap for the deduction — reduce their taxes by more than $15,000 a year at a 6 percent interest rate. A more typical middle-class couple with a $200,000 loan saves only a few hundred dollars more than they get anyway from an alternative standard deduction.

This example suggests that, at a minimum, the cap is currently set too high. Not only that, it encourages homebuyers to borrow as much as possible whether or not they really need to, inviting the excessive leverage that helped produce the recent financial crisis. The deduction even applies to second homes, an absurdity if the ostensible goal is to help ordinary American families own their homes — and an inducement to speculate.

The deficit commission’s leaders, Alan Simpson and Erskine Bowles, have offered a menu of ideas. One would eliminate this and other deductions completely while reducing tax rates. Another would keep the deduction in place, but cap eligible mortgages at $500,000 and exclude home equity loans and mortgages on second homes altogether.

The first option might seem politically impossible, but courageous lawmakers shouldn’t dismiss the second. It would reduce the benefit diverted to the rich. And crucially, with more than 90 percent of new U.S. houses sold this year priced under $500,000, it would minimize the further shock to an already weak housing market — one argument used by those who say that now is not the time to tinker with the deduction.

Longer term, lawmakers should go further. Other countries like the UK manage to achieve high rates of homeownership with little or no tax subsidy. The eventual goal should be to eliminate the deduction altogether.

Investors feel better when risky bonds come with flak jackets. Drive-by deals, so named for skipping over the conventional road-show route in favor of a one-day turnaround, don’t give investors much time to ensure they’re protected. Shoddier bondholder provisions in a slew of recent, often rushed, deals indicate many are not.

MetroPCS is a case in point. The cellphone service provider secured itself considerably more leeway than other similar borrowers in a hastily arranged $1 billion sale last week. To ensure they’re paid back, bond holders like to restrict a heavily indebted company’s spending, investment and borrowing. As a general rule, high-yield issuers have been able to tap only about 5 percent of their available assets, according to Moody’s Investors Service median estimate. MetroPCS was granted access to close to 30 percent.

It gets worse. MGM Resorts, the casino operator, and Tenet Healthcare, the hospital operator, represent the worst credit available. Each is rated Caa1 from Moody’s. Covenant-lite deals are nothing new, yet both still-recovering companies managed to arrange debt with the more lenient provisions reserved for those with far less risk of missing payments.

Of course, most of the money being raised in high-yield markets these days is to refinance existing debt. And such balance sheet management is healthy, especially when rock-bottom interest rates make capital cheaper. Yet issuers are taking advantage of the fast and furious race for yield to weaken covenant language wherever possible.

The Federal Reserve’s commitment to low interest rates means there will probably be more opportunities. With corporate defaults slowing and investors craving better returns than the shrunken yield on U.S. debt, few will have the stomach to miss out. Junk bonds have generated around 15 percent this year against barely 1 percent on a five-year Treasury note.

Still, investors should beware how creative the bond engineers are getting. They’ve already wheeled out the “springing lien,” which sounds like it just might bounce right back into buyers’ faces. Momentive Performance Materials included the provision in a $635 million offering. Instead of providing collateral upfront, the specialty chemicals maker will provide it at some later date — when it is finished being pledged to other debt holders. When promises replace secured holdings, it’s surely time for better armor.

Nigeria has a bad rap in the developed world. Renowned for email scams and widespread corruption, Nigeria runs the risk of being judged, perhaps unfairly, by investors looking warily at its $500 million bond offering scheduled for later this year or in early 2011. But Africa’s most populous nation, in a post-crisis world, actually looks deserving of the funds.

First, Nigeria has very little debt—it stands at just 16 percent of GDP. Compare that with the United States, where public debt stands at 88 percent of GDP, or worse, Greece, where the debt load has soared to 133 percent, according to JPMorgan. That also means a scarcity of Nigerian paper may appeal to investors wanting to diversify into frontier economies.

Second, it’s Africa’s largest producer of crude. With oil prices trading around $85 per barrel, Nigeria, which assumes a $60 per barrel price in its budget, should have little difficulty staying current on its debt payments. Ballpark estimates for the offering would put the yield at less than 6 percent, hardly crippling. Moreover, Nigeria’s non-oil economy looks relatively robust, with growth clocking in at 8.3 percent in 2009.

There’s no getting around corruption in Nigeria, however. According to Transparency International, the country scores 2.4 on a scale of 10, with 0 being highly corrupt. While bad, it’s actually better than Russia, which scored 2.1. Moreover, investors handed over $5.5 billion this year to that one-time defaulter, and consonant of the BRICs.

Political uncertainty surrounding presidential elections in January may give some investors pause. But there is a good chance the deal will not hit the market until after voters go to the polls, not least because of the difficulty of shopping a debut dollar-denominated bond during the holiday season.

That should give investors plenty of time to see that Nigeria’s debt offering, rather than suggesting markets have lost their marbles, shows that old assumptions and stereotypes are rightly being questioned.

You know the global refinancing fiesta is raging when a newspaper publisher can join in the fun. The New York Times is paying just 6.6 percent on $225 million of debt sold Monday. A good chunk should help repay Carlos Slim Helu—the Mexican billionaire who lent a similar amount at a hefty 14 percent when no one else would. That said, the publisher has already paid plenty for the favor.

Slim swooped in to help out the Times in January 2009. Not only did the newspaper’s prospects look dim at the time. The global financial system was on its knees. As a result, some thought Slim had a bigger motive in mind, namely becoming a newspaper mogul. In hindsight it looks as if Slim was simply, and smartly, in it for the money.

At the 14 percent interest rate, the $250 million loan would have paid out roughly $70 million in just two years. Slim’s Banco Inbursa and Inmobiliaria Carso, which arranged the loan, stand to earn a prepayment fee should the Times pay back the debt before it matures in 2015, according to the original terms of the deal. Moreover, the deal awarded Slim’s businesses 15.9 million in Times stock warrants. With a strike price of around $6.36, the warrants are in the money to the tune of about $21 million.

Now, The New York Times has the Federal Reserve to thank as much as Slim for the turnaround in its financing fortunes. Rock bottom interest rates and a booster shot of promised quantitative easing have convinced investors to open their wallets. Indeed, the company raised around $25 million more than it had originally anticipated.

With markets this robust it’s hard to believe The New York Times will be the only company looking to reduce expensive crisis-era funding with cheaper stuff. After all, far healthier firms like Goldman Sachs and General Electric are paying similarly hefty dividends on preferred stock to Warren Buffett. This is a party they’d be crazy to miss.

The wrangling over AIG’s Asian insurance unit AIA clarifies what Prudential’s board should have known all along: AIG is beholden to the U.S. taxpayer. While accepting a lower price might have been a rational business decision, it also would have further opened AIG to charges of shortchanging its owners — this time to help Pru.

Prudential Chief Executive Tidjane Thiam may be fighting for his job. His shareholders couldn’t get past sticker shock on the $35.5 billion deal to buy the pan-Asian insurer. That forced him to try to renegotiate at a lower price.

Had he been dealing with a run-of-the-mill distressed company, this might have seemed reasonable. Market turmoil clobbered valuations, with life and health insurers in the S&P 500 down 10 percent last month. Moreover, there are no other obvious contenders for AIA and the government-controlled insurer’s aborted plans to spin off a portion of the unit in an IPO would have brought far less than Pru was willing to pay.

But AIG isn’t just any old insurer. Its bonus fracas last year and the messy use of bailout funds to pay counterparties including Goldman Sachs  have already put the U.S. government in the hot seat for not doing more to protect taxpayer funds. The $132 billion AIG bailout has become a symbol of all that went wrong with the rescue of reckless financial institutions.

U.S. voters are already losing patience. With Thiam on the ropes with his shareholders, the pitch would have been especially tough. Taxpayers are still irate at the help provided to Wall Street titans, and could easily take umbrage with the perception of a deal alteration to save the Pru CEO’s job at their expense.

The IPO of AIA may now be back on the cards. Any flotation would delay a full exit for some time and runs the risk of fetching a lower valuation. The AIG board probably knew full well that explaining such financial nuance wouldn’t have worked against a screaming headline of “AIG gives away $5 billion of taxpayers’ money.” At least other suitors for AIG assets should now be fully aware of the considerations on the other side of the negotiating table.