The Great Debate UK
Tiptoeing toward economic recovery after Lehman
- David Andrews is director of David Andrews Media, a financial public relations consultancy with high profile fund management and financial services clients based in the UK, Ireland, Cayman Islands, Cape Verde, Beijing, Europe and the U.S. The opinions expressed are his own. -
David is a former financial journalist best known for his weekly Daily Express and Conde Nast ‘Money Matters’ columns.
Few will be lifting a glass to toast the first anniversary of the collapse of investment bank Lehman Brothers a year ago this week. With billions of dollars under management and thought to be invincible, the private bank was generally regarded as a potential gateway to the riches of Croessus for the ordained Masters of the Universe who prowled its Jackson Pollock-lined corridors.
But when the bank started to drown in the treacherous quagmire of its collateralized debt obligations (CDOs) – a type of structured asset-backed security whose value and payments are derived from a portfolio of fixed-income underlying assets – America’s Federal Reserve elected not to send in the cavalry.
The virtual overnight collapse of Lehman Brothers in September 2008 was the catalyst which brought the world economy to its knees with breathtaking rapidity. The bank was so huge, a massive juggernaut reversing and elbowing its way in so many different markets that when the U.S. government allowed it to go to the wall, it caused a convulsion among its many counter-parties, which in turn caused global credit markets to seize up. “Normal” banking activity virtually ground to a halt.
from The Great Debate:
How G20 can unfreeze credit and cut bailout costs
-- Lena Komileva is Head of G7 Market Economics, Tullett Prebon --
One of the big historical lessons of this crisis for economic policy is that bringing down the risk-free cost of money - central bank rates or government bond yields - and injecting liquidity into the banking system cannot on their own fix broken credit markets.
Quantitative easing by central banks may help to solve short-term liquidity problems for domestic borrowers and lenders, by going around broken markets during times of extreme financial and economic uncertainty. However, this is no substitute for efforts to restore international credit markets back to health.
Barclays’ conjuring trick
– Margaret Doyle is a Reuters columnist. The opinions expressed are her own –
Abracadabra! Yet again, Barclays has pulled another rabbit out of its hat. With just days to go before the end-March deadline for the bank to apply for a government guarantee of its dodgier loans, it may again wriggle out of state control.
from The Great Debate:
The case for a broadband bailout
- Eric Auchard is a Reuters columnist. The opinions expressed are his own --
By Eric Auchard
LONDON (Reuters) - With world economies fast running out of steam, it may seem an unlikely time for cash-strapped governments to discover universal broadband access as an urgent national funding priority.
Yet in this financial plague year, the Great Broadband Bailout of 2009 is rocketing up the political agenda as the global economic crisis deepens further.
