Dec 22, 2011 10:52 UTC

Bond market will grow at banks’ expense in 2012

By Peter Thal Larsen
The author is a Reuters Breakingviews columnist. The opinions expressed are his own

Can the bond market take the place of banks? That question will be partially answered in 2012, as borrowers seek to bypass strained lenders in search of cheaper sources of credit. For big companies, tougher regulation of banks has accelerated a long-term shift to seeking funds directly from investors. But small companies and consumers won’t find it so easy to make the switch.

Dec 20, 2011 21:07 UTC

Global bank capital rules add “G-Sifi envy” to mix

By Rob Cox and Peter Thal Larsen

The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

The G20’s decision to designate 29 banks as global systemically important financial institutions will introduce a new competitive dynamic to international finance in 2012: “G-Sifi envy.” Banks that made the list last month will be required to hold more capital. But they will also benefit from being codified as banks that are effectively too big to fail. That puts smaller rivals at a disadvantage. It’s a race to the top, but not in the way regulators envisaged.

Dec 15, 2011 10:27 UTC

Sino-Forest’s debt games are bad for creditors

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

Sino-Forest has sent a chilling message to its bondholders. The Chinese timber company, embroiled in an accounting scandal, has decided not to pay $10 million of interest, even though it purports to have more than enough cash to do so. That leaves it in breach of its debt covenants, and heading towards a default on its bonds. Why it has done this is a puzzle.

Dec 13, 2011 23:00 UTC

Morgan Stanley housecleaning will please Basel

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

Morgan Stanley chief James Gorman’s settlement with bond insurer MBIA puts a big chunk of the financial crisis legacy behind the firm. At $1.8 billion, it doesn’t come cheap. But it puts the investment bank on the right track by boosting regulatory capital and tidying up a very messy second year for Gorman.

Dec 9, 2011 20:07 UTC

UK’s euro isolation may backfire on City of London

By Peter Thal Larsen
The author is a Retuers Breakingviews columnist. The opinions expressed are his own.

The City of London may regret David Cameron’s euro isolation. Britain’s prime minister opted out of a pan-European deal to save the euro zone after failing to secure special protection for the UK financial services industry. But his stand leaves Britain’s dominant economic sector exposed – both in Europe and at home.


The British were never stupid enough to buy into the euro franc. Why would the collapse of this currency be to Britain’s detriment? How does delaying the inevitable by throwing away billions in British cash do the British people any good?

Posted by DrCruel | Report as abusive
Dec 8, 2011 12:11 UTC
Edward Hadas

Investors may decide to let the euro live

By Edward Hadas
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Speculators can make a fortune by making the highly likely become inevitable. In 1992, George Soros made one billion pounds by pushing the UK out of a fixed exchange rate it was not willing to maintain. Investors betting that the euro will break up may want to repeat the Soros accomplishment.


Investors – how kind of you, thank you for ‘allowing’ the Euro to live.

re. Soros in 1992. A totally different situation, Sterling was thrown out of ERM because it was not economically reasonable level to be fixed to the DEM.

Those who bet against the Euro will lose (in the medium term). Make no mistake.

Posted by RiskManager | Report as abusive
Dec 7, 2011 23:17 UTC

Fed needs better PR on last-resort lending, too

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

The U.S. Federal Reserve is working to improve its monetary policy communications. But its key role as a crisis lender is also now in the spotlight. Ben Bernanke’s Fed would get less flak if it managed this message better as well.


The war to preserve freedom somewhere in the world as a refuge from tyranny has been fought here against progressivism for 100 years. Progressives applauded the wonders of Soviet Russia under Stalin’s leadership, praised Mussolini, and named Adolph Hitler ‘Man of the Year” in 1938. The primary tool of progressivism is consolidation of the 3 fundamental authorities of government: lawmaking (legislative), executive (administrative), and judicial (dispute resolution). Administrative agencies are the engine that drives a wedge between governance and the People.

Article 1 of the US Constitution clearly states that THE (exclusive) legislative authority at the federal level, i.e. the power to make law, vests in Congress and NOT in the people who populate it. Legislators lack the power to transfer any portion of that lawmaking authority from the institution of Congress, although that is precisely the bluff that has derailed the United States’ republic for 100 years. All law-making power is supposed to be directly accountable to the people through elections, but none of us have ever cast a single ballot to elect the administrator of EPA, for instance. Furthermore, every regulation accomplishes only 1 thing: it creates a bully means–that masquerades as legitimate legal authority–for unelected bureaucrats to steal money from the target of the regulation. Across the country, we, and particularly business owners, must realize that regulation is NOT law.

Understand that Congress has nothing to do with regulation. Congress makes laws by passing bills, and the president may either sign those bills passed by Congress, thus converting the bills into laws, or veto any bill. Regulation, on the other hand, is written by the myriad administrative agencies which have been created by acts of Congress during the past 100 years (e.g. CFTC, FTC, EPA, OSHA, CPSC, TSA, FAA, FCC, etc.). That’s right–a total and blatant violation of the separation of powers doctrine inherent in the Constitution, i.e. the executive (administrative) branch has NOTHING to do with making laws, but ONLY with enforcing them. Furthermore, all members of the executive branch, whether they be police officers, governors, etc. are citizens of the United States first, and officers of the government second, which means that each of them must determine whether a law passed by the legislature (either Congress or a state legislature) is consistent with the Constitution (US and of the particular state). If not, don’t enforce it. We are ALL stewards of the Constitution first and foremost. Obviously, the same applies to regulation. None should be enforced, because the executive lacks any authority to create law or quasi-law, but it will take diligence and repetition for the truth to take hold.

Posted by RegsarentLaw | Report as abusive
Dec 6, 2011 22:17 UTC

UK banks need government to solve funding squeeze

By George Hay
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.The Bank of England is tooling itself up. The UK central bank announced on Dec. 6 a new facility to help domestic lenders if the euro zone crisis causes a fully-fledged freeze in short-term funding markets. But banks may still need more help.

The BoE already has two ways to combat liquidity squeezes. It allows banks to borrow against liquid collateral for three or six months through its Indexed Long-Term Repo (ILTR) auctions. And it allows desperate banks to swap illiquid collateral for gilts for up to a year via its Discount Window Facility (DWF) – in return for a fat fee and big haircuts.

Dec 6, 2011 12:01 UTC

ECB bazooka may be short on credibility ammo

By Neil Unmack
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The European Central Bank may be readying its bazooka. Euro zone bond markets are rallying amid hopes that an agreement by European governments on fiscal reform may clear the way for the central bank to start massive bond purchases. But bazookas can backfire.

Ideally, an intervention would create a virtuous circle whereby investors were once again willing to hold peripheral debt. That might allow the ECB to calm markets without actually buying that much.


Bondholders need to substantially scale back their expectations of a “miracle cure” for the eurozone crisis.

The reality is that:

(1) no eurozone nation or organization has the ability to “buy unlimited quantities of debt”, and

(2) the eurozone cannot become the United States of Europe for a multitude of political and economic reasons.

The sooner bondholders face these two realities, the sooner the crisis can be dealt with in a more constructive manner.

Right now, simply demanding an unlimited supply of (printed) money will not solve anything, and probably worsen the situation by creating more unsustainable debt levels, and may actually bring on the global financial crisis everyone fears.

Forcing nations to reduce their standard of living will only create political tensions on top of the already existing economic problems.

This is a massive financial crisis that was allowed to build up over time when things were going well, but now they aren’t, and it is unrealistic to expect a quick and easy solution.

The reality is this will take years to resolve, if it can be resolved at all.

Posted by Gordon2352 | Report as abusive
Dec 5, 2011 04:11 UTC
Hugo Dixon

from Hugo Dixon:

Euro Disziplin may store up trouble

The euro zone will probably get another short-term fix at its summit this week. Exactly how the fix will work isn’t clear. But both Germany and the European Central Bank have softened their positions so much that some sort of solution is in the works. The ECB will probably cut interest rates and spray more liquidity at the troubled banking system; it may also step up its purchases of government bonds; and some scheme for assembling enough money to bail out Italy and Spain -- probably by getting national central banks to lend money to the International Monetary Fund, which could then pass it on to Rome and Madrid – may be unveiled.

All this would be cause for celebration. The problem is the price that Germany and seemingly the ECB are demanding for their help: fiscal discipline, embedded in a treaty. Merkel wants the European Commission in Brussels to have the power to overturn irresponsible national budgets and for the European Court of Justice to fine governments that step out of line.


The global financial crisis was created by corruption on Wall Street, the US Congress, and the real estate industry and lenders. Fraudulent securities were exponentially multiplied and sold all over the world. Europe is now being forced within a few months to reorganize itself and is taking care to not leave itself vulnerable to more predation by investment banks and is trying to balance the need to meet immediate financial reforms with maintaining national sovereignties. Europe will survive intact. America may survive if it stops selling its soul to the devil for a few pieces of silver.

Posted by Greenspan2 | Report as abusive