Opinion

Ben Walsh

from Felix Salmon:

Counterparties: Europe’s longest recession

Ben Walsh
May 15, 2013 22:37 UTC

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Europe is in the midst of its longest recession since it began keeping records in 1995 -- even surpassing the calamity that hit the region in the financial crisis of 2008-2009. While the German economy grew 0.1% from the fourth quarter of 2012 to the first quarter of this year, just about everyone else in the eurozone is shrinking.

France’s economy shrank 0.2% quarter on quarter, and is now officially back in recession after just one quarter of positive growth. It’s not alone: Cyprus, Finland, Italy, Greece, the Netherlands, Portugal, and Spain are all in recession right now. And while the UK managed to just barely avoid a triple-dip recession by growing 0.3% in the first quarter, its economy is still 2.6% smaller than it was 5 years ago.

Yesterday, Pew’s latest eurozone survey confirmed that the continent’s sentiment matches its dour economic data. The survey’s disconcerting conclusion:

The European Union is the new sick man of Europe. The effort over the past half century to create a more united Europe is now the principal casualty of the euro crisis... The prolonged economic crisis has created centrifugal forces that are pulling European public opinion apart, separating the French from the Germans and the Germans from everyone else.

from Felix Salmon:

Counterparites: Split personalities

Ben Walsh
May 6, 2013 22:11 UTC

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Institutional Shareholder Services’ message is clear: no one man should have all that power.

More specifically, ISS has declared Jamie Dimon shouldn’t be JP Morgan’s chairman and CEO. The firm, which advises shareholders on corporate voting, is also recommending that its clients not support the reelection of three of the bank's directors. Each of those directors -- David Cote, James Crown and Ellen Futter -- sits on the bank’s risk committee. The proposal to split the roles of chairman and CEO is non-binding; the re-election of board members is binding. It’s unclear whether either measure will pass.

from Felix Salmon:

Counterparties: Masters of overcharging

Ben Walsh
May 3, 2013 21:25 UTC

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JP Morgan may be going back to banking basics. Instead of losing billions in arcane, illiquid credit instruments, the bank’s latest scandal is a classic: overcharging unwitting customers.

Jessica Silver-Greenberg and Ben Protess report that JP Morgan is in some very hot water with the Federal Energy Regulatory Commission (FERC). According to an agency memo, the bank turned “money-losing power plants into powerful profit centers”.

Growth after the financial crisis

Ben Walsh
Apr 25, 2013 23:35 UTC

It’s easy to blame the UK’s weak post-crisis economy, which just barely avoided a triple-dip recession, on its large financial sector.

This chart, however, shows that austerity measures play a bigger role than the size of the financial sector when it comes to depressing post-crisis growth. Post financial crisis GDP growth is on the x-axis, and financial sector assets as a percentage of GDP is on the y-axis:

The Swiss economy is more highly financialized than the UK’s, and has had strong post-crisis growth. Meanwhile, Spain, with a much smaller financial sector, implemented austerity measures along with the UK and has also seen its economy shrink considerably.

from Felix Salmon:

Counterparties: To coin a phrase

Ben Walsh
Apr 12, 2013 21:24 UTC

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“To say highly speculative would be the understatement of the century.” – Steve Hanke

“People say it’s a Ponzi scheme, it’s a bubble... We have elected to put our money and faith in a mathematical framework that is free of politics and human error.” – The Winklevii

from Counterparties:

The last big Lauder gift?

Ben Walsh
Apr 11, 2013 15:30 UTC

The big news early this week in the often overlapping worlds of art, philanthropy, and sophisticated tax strategies was Leonard Lauder's $1 billion donation of cubist art to the Met. It's Lauder's largest charitable donation to-date, and even though he has a long history of philantrophy and is still worth more than $7 billion according to Forbes, it's unlikely he'll ever make a bigger gift. Lauder's wealth is tied up in Estée Lauder stock you see: he simply isn't rich enough to give away much more money or add to his museum worthy art collection, and maintain his controlling stake in the family's business.

The more likely scenario is that Leonard, along with his brother Ronald, will maintain their earlier level philanthropy. While large, their earlier gifts were far below the billion dollar level. Leonard has given $131 million to the Whitney, and Ronald is a large supporter of Jewish charities. Both brothers and their wives have also founded, endowed, and serve on the boards of numerous non-profits (the full lists run for text dense paragraphs on the Carnegie Foundation and Estée Lauder websites).

Despite their giving, the Lauder brothers' net worth has increased.  According to the AP, they inherited a total of $5.1 billion in 2004. Per Forbes, Leonard's wealth grew to $3.6 billion in 2008, and topped $8 billion just before his gift to the Met. Ronald's net worth in 2008 was $3.4 billion, took a dive to $2 billion in 2009 and is now $3.6 billion. Particularly for Leonard, that's not the pattern you'd expect from a lauded  philanthropist. Personal net worth should decline, not dramatically increase. That's especially true late in life.

from Felix Salmon:

Thatcher’s economic legacy

Ben Walsh
Apr 8, 2013 22:05 UTC

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Margaret Thatcher, Britain's longest serving Prime Minister, died today at the age of 87.

Thatcher famously said “there's no such thing as society. There are individual men and women and there are families”. The BBC’s Stephanie Flanders sums up Thatcher’s economic legacy by saying that before her, there was “no such thing as the consumer. When she left, politicians spoke of little else... she helped force the rise of the individual at the expense of the collective”.

from Felix Salmon:

Counterparties — Richie Havens: Here Comes the Sunlight

Ben Walsh
Apr 4, 2013 22:22 UTC

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The International Consortium of Investigative Journalists has quantified the size of the offshore tax haven bubble, and is doing its darndest to burst it.

The group, led by Gerard Ryle, and working with 38 media outlets, has amassed 2.5 million documents containing details of more than 120,000 offshore companies and trusts, as well as the identities of almost 130,000 individuals.

from Felix Salmon:

Counterparties: The most profitable insurer in America

Ben Walsh
Apr 2, 2013 22:41 UTC

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If you’re looking for evidence of just how far the housing market has come since its implosion triggered the financial crisis, consider Fannie Mae. The housing giant seized by US government five years ago reported a record profit of $17 billion for 2012, after a roughly equal loss in 2011. It’s Fannie’s first annual profit since 2006; as  Clea Benson notes, the profit eclipsed that of companies like Wal-Mart, GE and Berkshire Hathaway.

Drilling down into Fannie’s filing gives you a snapshot of the American housing market. The company set aside less to cover future losses on loans it guaranteed ($62 billion, compared to $76 billion in 2011); suffered lower delinquency rates; had higher loan volume and higher fees; and saw the value of its derivatives positions improve. Bill McBride at Calculated Risk pulls out another bright spot: Fannie says that there was a “4.7% increase in home prices in 2012 compared with a home price decline of 3.7% in 2011.”

from Felix Salmon:

Counterparties: Hoard of directors

Ben Walsh
Apr 1, 2013 21:32 UTC

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Of the 27 million Americans working part-time jobs, very few land positions that pay $488,709. That’s the average annual pay for a director at Goldman Sachs, Susanne Craig writes:

Some of the firm’s 13 directors make more than $500,000 because they have extra responsibilities... Goldman’s board is the best compensated of any big American bank and the fifth-highest paid of any company in the country... Some of its rivals are not that far behind. The nation’s biggest banks paid their directors over $95,000 a year more on average in 2011 than what other large corporations paid.

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