The Great Debate UK

from Reuters Investigates:

Intrigue in China’s U.S. Treasury buying

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A Reuters exclusive today describes a method China used recently to hide some of its U.S. Treasury purchases - "US caught China buying more Treasuries than disclosed."

Treasury officials said they were simply modernizing outdated procedures two years ago when they revamped the rules for participating in government bond auctions.

The real reason for the change, a Reuters investigation has found, was more serious: The Treasury concluded that China was buying much more in U.S. debt than was being disclosed, potentially in violation of auction rules, and it wanted to bring those purchases into the open - all without ruffling feathers in Beijing.

Stephen Culp, Reuters graphics editor, came up with a handy visual explanation for the practice that allowed China to mask billions of dollars worth of U.S. debt purchases at auctions. China placed its bids informally through primary dealers, who then placed their bids at Treasury auctions without naming China as a customer. The Treasury outlawed the practice in June, 2009, but kept the reason for the rule-change under wraps.

A long, hard slog in the right direction

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BRITAIN-BUDGET/By Dr Gerard Lyons

This was a good budget in difficult times. Trouble is, just how difficult the times are is still not fully appreciated. The economic environment the Chancellor inherited was not good. The recent economic performance has not been good. And there is no reason to think it will get better anytime soon. Indeed the scale of fiscal tightening previously announced will probably weaken growth further in the near-term. The UK economy faces a long, hard slog.

Today’s budget provided some clarity about what type of economy the Chancellor hopes to see in the future. And there the message was well directed. One of Britain’s biggest problems has been its lack of strategic thinking. It still has some way to go on this to compete with China, Germany and many other economies. The budget outlined four areas the government wants to focus on, all of which made sense:

A changing of the guard in UK regulatory structure

Press Action Head and Shoulders– Richard Saunders is Chief Executive of the Investment Management Association. The opinions expressed are his own. –

Last week I was among a number of people asked to appear before the House of Commons Treasury Select Committee to talk about the Government’s plans for reorganising financial services regulation.  It was an opportunity both to see the new Committee in action and to set out how I see the plans affecting the investment management industry.

from UK News:

Treasury tables challenge notion of a ‘progressive’ spending review

BRITAIN-SPENDINGDuring his speech to the House of Commons announcing how he would cut government spending, Chancellor George Osborne insisted that the richest 10 percent of Britons would bear the brunt of austerity measures.

But a glance at the tables in the Treasury's own Spending Review report suggest a different picture.

Sovereign default risk, fact or fiction?

-Jane Foley is research director at Forex.com. The opinions expressed are her own.-

If a gauge is needed to measure how concerned investors are at about sovereign default risk, we need look no further than the price of gold which has made fresh all time highs this week.

from Breakingviews:

Uncle Sam’s Citi exit partly vindicates bailout

Uncle Sam is ready to get out of Citi. The U.S. Treasury is set to unload its 27 percent stake in the banking behemoth roughly two years after rescuing it. The exit should deliver a healthy profit for taxpayers. That's a relief for skeptics of the bailout, and represents another financial success story for the authorities managing the crisis. But Citigroup has hardly been turned around since the government stepped in.

The sale will happen comparatively quickly for its size. Treasury has hired Morgan Stanley to trickle its 7.7 billion Citi shares into the market over the next nine months. The outline of the process will be pre-ordained to avoid the appearance of any inside knowledge or conflict on the part of the bank's largest shareholder. At today's price of about $4.20 a share, the government would reap a profit of roughly $7 billion on its $25 billion investment. That's a nice paper profit, especially when put against Britain's hefty bank investments, which remain in the red.

Tories panic with tax cut pledge

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NeilCollinsNeil Collins is a Reuters columnist. The views expressed are his own

National Insurance contributions make an unlikely battleground for the British election. They lack the sexiness of income tax cuts. But NI is a bad tax and the Tories are right to pledge to overturn Labour’s plan to raise it.

Unfortunately, their timing smacks of desperation as their poll lead melts away. More to the point, it flies in the face of their commitment to cut Britain’s vast budget deficit.

from Breakingviews:

Wall Street’s lobbyists deserve their bonuses

America's big banks aren't being broken up. Nor does it appear there will be strict new limits on their activities. And while lenders may have to cope with a new consumer regulator, its power and scope is evanescing daily. If there is any group from Wall Street deserving of fat bonuses this year, it's the industry's lobbyists in Washington.

The banks smartly recognized regulatory reform was inevitable after the greatest financial meltdown since the Great Depression. So rather than try to stop it, the industry helped mold and massage any changes into a shape it could tolerate. And early indications from Congress suggest they've been successful.

from UK News:

Send in questions for city minister Paul Myners

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BRITAIN-MYNERS/

City Minister Paul Myners is among a handful of people with first-hand experience managing the financial crisis over the past year.

On Dec. 16, at 9 a.m. British time, Myners will deliver a speech at an exclusive Thomson Reuters event in London on a proposal the government says will strengthen the City's role as a global investment banking hub. He will also announce a series of policy measures designed to enable an effective resolution for failing firms.

from UK News:

What do you think of Osborne’s bank bonus proposal?

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BRITAIN-OSBORNE/Shadow Chancellor George Osborne says British retail banks should be stopped from paying big cash bonuses and use the money instead to support new lending.

"I am today calling on the Treasury and the FSA to combine forces and stop retail banks -- in other words the banks that lend directly to business and families -- paying out profits in significant cash bonuses," Osborne said during a Reuters newsmaker event.

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