Global Investing

On Bankers and Busing

Bankers are having a rough time of it lately.  It is not just that their companies are collapsing beneath them and their bonuses are the subject of global hate and derision. They also have to put up with the barbs of journalists (who are very familiar with being at the bottom of the popularity pile).

The latest example comes from Tim Dowling, scribbling away for Britain’s Guardian newspaper.  Mr Dowling has penned a useful primer for bankers who suddenly find themselves living in the real world.

You can read the complete guide by clicking here.  But Global Investing’s favourite tip concerns the use of London’s celebrated buses:

“When a bus comes into view, raise your right hand as if you were hailing a taxi. Get on at the front and tell the driver where you are going. He will name a price. Haggling is frowned upon, as is suggesting a route. Buses have no business class as such, but the top deck, if there is one, offers superior views.”

So cruel. So very cruel.

from MacroScope:

Political poster child?

George Alogoskoufis is a hardly a household name outside Greece and EU financial circles. But the newly sacked Greek finance minister could yet become a poster child for politicans struggling to fight off economic decline and banking industry collapse. His demise was in large part due to a public perception that he was helping out the banks but ignoring rising joblessness.

Greece, of course, is a special case at the moment, still recovering from riots over the police shooting of a teenager. But finance ministers, central bankers and other responsibles are probably not immune from Alogoskoufis Syndrome. Balancing the need to bail out the finance industry with rising economic misery among everyday people is not easy. Fat cats are not exactly in favour at the moment.

This could, indeed, come to a head later in the year. Investment cycles tend to recover before economic ones. So what happens when Wall Street, the City and the like start bringing in the money again just as unemployment lines start getting even longer?

The other side of bank secrecy

For many, the words bank secrecy and offshore centre tend to raise James Bond-like scenarios of illicit bags of cash smuggled across the border to be locked away in a coded safety box. But often the rich of this world have legitimate reasons to open a protected bank account in Switzerland or other tucked-away offshore locations.
 
Some, like the residents of oil-rich Gulf countries, do not even have worry about the tax man as these nations are largely tax free. “Offshore does not mean that the money is undeclared,” said Jonathan Ivinson, head of tax at international law firm Hogan and Hartson.
 
Despite a global crack-down on money-laundering and tax evasion, bankers say many affluent clients from places like Latin America will continue to keep their money away, safe from a potential coup.  In countries where corruption is rife, people would rather not let their local banker know how much money they earn for fear of kidnapping.
 
“It obviously depends a lot on how worried, how unhappy you are about the jurisdiction you live in,” said Prince Max, the second son of Liechtenstein‘s ruling monarch and the head of the
country’s largest bank LGT. ”If you live in a highly volatile and unstable country it is very rational for people to address this risk.”
- Lisa Jucca

Give and take in Switzerland

Switzerland prides itself for being a reasonably generous country. Each year it gives 1.2 billion Swiss francs, or about 0.4 percent of its gross domestic product, in aid to poorer countries, a higher portion of aid than larger states such as Britain.

But what you get with one hand ….
 
According to estimates by the Berne Declaration, a Swiss non-profit organisation, the poorest nations’ wealthiest have hidden between about 360 billion and 1.5 trillion Swiss francs in Switzerland, away from the taxman. This means that each year, between 5.4 billion and 22 billion Swiss francs are lost to tax authorities in developing countries, equivalent to at least five times what Switzerland gives to those countries in aid.

“Tax dodgers in developed and developing countries deprive governments of revenues,” OECD Secretary General Angel Gurria said last month, adding that if this tax money was collected billions of dollars would available for financing development. (Lisa Jucca)

Never Mind The Bankers

Malcolm McLaren, the man who gave us The Sex Pistols, has found the real punks — bankers. In an interview with Britain’s The Observer, he says punk was not just about spiky hair and ripped t-shirts.

“It was all about destruction, and the creative potential within that. It turns out that the bankers may have been the biggest punks of all.”

McLaren says we are now at a transformative moment.

“We’re at the end of the culture of desires; we may be going back to a culture of necessity.”

No Laughing Matter

The global financial crisis is no laughing matter for many people, but it has nonetheless laugh1.jpgresurrected some dreadful puns that were popular back during the Japanese banking fiasco in the 1990s. Doing the rounds by e-mail are the following:

Sumo Bank has gone belly up; Bonsai Bank is cutting its branches; Karaoke Bank is for sale and will go for a song; Samurai Bank islaugh32.jpg soldiering on; Ninja Bank is in the black; staff at Karate Bank have got the chop; and there is something fishy up at Sushi Bank.

The recent crisis has been less fruitful. Some people started cruelly referring to Northern Rock as Northern Wreck when the British laugh22.jpglender was nationalised and analysts have lately been toying with TARP, the Troubled Asset Relief Plan. Credit Suisse and Merrill Lynch both suggested that TARP could be a TRAP while Goldman Sachs suggested it had been TARPedoed by Congress.

Last wisdom from Lehman Brothers

Lehman“Dear readers, let us begin this week’s missive by acknowledging its partial incompleteness. For understandable considerations, there are some capital market situations that we cannot discuss. We thank all our readers for their support and look forward to continuing to provide you with timely analysis.”

This is how Lehman Brothers’ strategists began their last ever weekly research note, published on Saturday – only two days before the U.S. investment bank collapsed.

In the 146-page research, Lehman strategists argued that bonds are performing well in September thanks to rising risk aversion and financial institution uncertainties.

Dresdner, Commerzbank — a deal nobody likes?

rtr20qy8.jpgWhen stock markets this morning traded the news that Allianz had sold Dresdner Bank to Commerzbank, shares in both companies were down, defying stock market logic. Maybe nobody likes the deal?

Dresdner Kleinwort, the anaemic investment bank that raked up billions of credit write-downs, is not the jewel in the crown Commerzbank was looking for. Commerzbank slashed its own investment bank years ago and has said it will also scale down Dresdner Kleinwort.

Allianz is pulling the plug on bancassurance, a model that some say doesn’t work — though others have succesfully executed it. But the timing seems odd: selling a bank would probably have been a lot easier 18 months ago.

Fannie, Freddie fanning fears

More stress on its balance sheets is just about the last thing that the banking sector needs. The subprime mortgage crisis has already battered banks, leading to huge losses, scrambles for funding and free-falling banking shares. The S&P index of financial stocks has lost more than 30 percent so far this year. At its worst, the index plunged around 55 percent between a high in May last year and a low in June this year.

S&P Financial StocksNow, after a brief respite, comes more bad news. First, hedge funds still seem to be wedded to betting on further losses. Laurence Fletcher, who writes about hedge funds here at Reuters, notes that more than 6 percent of British banks’ equity is on loan to short sellers.

More worrying yet for banks, however, may be their exposure to embattled Fannie Mae and Freddie Mac. In a report, Societe Generale economists estimate that U.S. commercial banks hold about $1 trillion in Fannie and Freddie debt. That amounts to a whopping 9 percent of the commercial banks’ balance sheets.

UBS: no longer in one piece?

ubs.jpgIt is now official — Swiss bank UBS has ditched its much-cherished “One Bank” strategy.

The bank said it would split its business in three autonomous units, after taking yet another credit hit and posting a worse-than-expected second-quarter loss.

The news will spark further talk the bank may hive off business units such as its embattled investment bank. UBS in a conference call would not rule out divestments further down the line, though it said it was not now working on such plans.