Opinion

The Great Debate

Buttress bank tangible common equity

James Saft Great Debate – James Saft is a Reuters columnist. The opinions expressed are his own –

Whatever the results of the stress test are, increasing levels of tangible common equity (TCE) should be at the heart of the response. That implies painful and dilutive capital raisings to come, and not just for the banks being tested.

U.S. regulators will next week release information about the stress tests they are holding on 19 large banks. Expectations are that a substantial number will be forced to raise new capital and that some will be guided to converting existing preferred securities into plain old equity.

Tangible common equity, the bit that takes the first loss, is the foundation of banks’ capital structure and has been sadly eroded in recent years, worn away by losses and a preference for preferred securities and other types that count towards the Tier 1 regulatory measure of capitalisation.

The TARP money, in other words, has been aimed at the wrong part of the capital structure, probably at least in part as a tactic to stave off the nationalization question.

President Obama’s first hundred days

 Diana Furchtgott-Roth– Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute.  The views expressed are her own. —

In his first one hundred days, President Obama has shown himself to be one of the most radical U.S. presidents in history.  He is harming America’s defenses by publishing memos on interrogation of detainees and threatening to prosecute lawyers who drafted supportive memos.  He shakes hands with America’s enemies, such as Venezuelan leader Hugo Chavez, and sends mixed signals to its friends, such as Colombia’s President Uribe.

And, in the name of combating a recession, he is destroying the fundamental institutions of America’s free-market economy.

First 100 days: Grading Obama’s foreign policy

Michael O'Hanlon– Michael O’Hanlon is a senior fellow at the Brookings Institution. The views expressed are his own. –

It’s no great surprise in American politics these days, but already a great partisan debate has broken out about President Obama’s foreign policy effectiveness to date. For his enthusiasts, the United States has hit the “reset” button and is reclaiming its place as not only a strong country, but a respected leader among nations. For his detractors, Obama is making the world dangerous by apologizing for America’s alleged misdeeds of the past, naively talking with dictators, and cutting the defense budget.

And as usual, the truth is neither of these polar positions. But as a past critic of Obama, especially during his days of promising a rapid and unconditional exit from Iraq during the presidential campaign, I would nonetheless argue that he has done a good job overall, and that his supporters have the stronger case to date. Still, making too much of provisionally good decisions in the first 100 days verges on playing a silly game of Potomac Jeopardy that only the evening talk shows and political junkies really care about. The bottom line is that Obama is just getting started. But he is off to a more solid start than almost any of his recent predecessors.

Specter shift will not change reform prospects

John Kemp Great Debate– John Kemp is a Reuters columnist. The views expressed are his own –

Senator Arlen Specter’s decision to cross the aisle and join the Democratic Party hastens the extinction of moderate Republicans in the north-east and symbolizes their deep problems.

But it does not change the legislative landscape.

On the most contentious parts of the president’s program — cap-and-trade emissions program, healthcare and Social Security — the key divisions are among Democrats rather than between the parties. Specter’s defection numerically swells the party’s ranks but in practice brings the administration no closer to the magic 60 votes it needs to push through ambitious reform proposals.

A vaccine needed for bad statistics

ericauchard1- Eric Auchard is a Reuters columnist. The views expressed are his own –

If you look no further than the latest headlines, you might think a worldwide flu pandemic was already underway with a very real threat to millions of lives.

While there are many unanswered questions early on in the outbreak of flu from Mexico, it is crucial to remember that the number of deaths and reported infections remain small — even if its spread across the globe has proved worryingly rapid.

While the infected need access to medical care and anti-viral drugs, the rest of the world needs an inoculation against scary statistics and misinformation.

Not what the economy’s doctor ordered

James Saft Great Debate – James Saft is a Reuters columnist. The opinions expressed are his own –

Besides being a human tragedy, a deadly pandemic is, quite literally, the last thing a global economy suffering a huge drop off in trade and activity needs.

To be very clear, we’ve no idea how severe or widespread the evolving outbreak of a new form of swine flu will be and indications that it seems to be becoming milder as it travels from Mexico are reassuring.

Active funds, more high-paid value destroyers

James Saft Great Debate – James Saft is a Reuters columnist. The opinions expressed are his own –

While they have avoided the opprobrium heaped on bankers during the bear market, traditional active fund managers have quietly been proving that they too are often highly paid destroyers of value.

Active managers have few bushes left to hide behind, and the release of a new report from Standard & Poor’s uproots one of the few left: that somehow they provide protection during down markets, being able to go into cash and defensive stocks.

Fiat’s over-ambitious expansion strategy

paul-taylor
– Paul Taylor is a Reuters columnist. The opinions expressed are his own –

Could Italy’s cash-strapped Fiat, Europe’s sixth auto maker, build a workable alliance with Chrysler and Opel to become be a profitable global player? Or would it be a marriage of losers, doomed to fail?

Fiat CEO Sergio Marchionne has made clear that his interest in Opel, the European arm of ailing General Motors, is more than just a well-timed tactic to get better terms in the alliance he is negotiating with troubled U.S. number three Chrysler. Chrysler faces likely bankruptcy if a deal is not clinched by April 30.

Failure is the only success in stress test

James Saft Great Debate – James Saft is a Reuters columnist. The opinions expressed are his own –

The stress test of banks now underway in the U.S. is one exam in which failure will be the only true measure of success, at least in terms of speeding a recovery.

The U.S. will release some information about the methodology of the stress test of 19 major banks on Friday according to reports, with results slated for release in some form on May 4.

from The Great Debate UK:

Sri Lanka’s death zone

Donald Steinberg is Deputy President of the International Crisis Group, www.crisisgroup.org-- Donald Steinberg is Deputy President of the International Crisis Group, www.crisisgroup.org. The views expressed are his own. --

Civilians are dying by the hundreds and possibly thousands in the northeast of Sri Lanka. As government troops converge on the remaining forces of the rebel LTTE (Tamil Tigers) in a tiny strip of coastal land, tens of thousands of civilians remained trapped in the crossfire -- getting killed and maimed in large numbers both by indiscriminate army shelling and by the rebels preventing them from fleeing, with equally lethal force.

Many thousands have managed to escape the free-fire zone in recent days, all with horrific tales to tell of those they left behind. Just how many civilians remain in the killing zone is not entirely clear. The government is saying that as many as 170,000 are now in government territory, with more than 100,000 people fleeing the zone since Monday.

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