Opinion

The Great Debate

UK takes right step on too-big banks

jamessaft1.jpg(James Saft is a Reuters columnist. The opinions expressed are his own)

So it can be done after all.

Britain is poised to take tough steps to break up the large banks it rescued, setting it in stark contrast to the United States, which seems set on a policy of shoring up the unfair advantages it grants its too-big-to-fail banks while regulating around the edges.

It is quite a change for Britain, which has a sorry history of self-serving self-regulation in financial services combined with limp and outgunned official control.

Chancellor of the Exchequer Alistair Darling on Sunday told the BBC that Lloyds, RBS and Northern Rock would be partly broken up and assets sold to new entrants into the banking market. Large existing competitors such as HSBC are expected to be blocked from making bids for the assets.

Britain took over Northern Rock after a run on the bank and its rescue of Lloyds and RBS left it with stakes of 43 and 70 percent, respectively.

It is worth noting that if anything Britain is more dependent on its financial services sector than the United States.

The death of the “punchbowl” metaphor

jamessaft1.jpg (James Saft is a Reuters columnist. The opinions expressed are his own)

Don’t expect the year-long rally in risky assets to be undermined any time soon by the Federal Reserve becoming concerned about inflation.

The old metaphor — that the Fed’s job is to take away the punchbowl just when the party starts getting good — just doesn’t apply in the current circumstances. That’s not to say inflation isn’t a threat in the medium term — it is virtually a promise.

But punchbowl thinking dates from a time when firstly the Fed was presumed to have a degree of control over events we now know is not true and secondly to an era when asset prices were the caboose rather than the engine of the economic train.

Winning the copyright battle in China

WeiGucrop.jpg– Wei Gu is a Reuters columnist. The opinions expressed are her own —

When it comes to protecting intellectual property in China, the United States often feels that its pleas are falling on deaf ears. Its best hope is that China recognizes that copyright protection is in its own interests. To achieve that, Washington needs to push for changes from within.

After a fruitless decade of lobbying China on intellectual property, Washington has reached for the microphone. This week, the U.S. Chamber of Commerce launched a high-profile international forum on intellectual property in Guangzhou, capital of Guangdong Province and best known as both China’s manufacturing hub and the global centre for intellectual property theft.

Time for a shareholder revolt

jamessaft1(James Saft is a Reuters columnist. The opinions expressed are his own)

There are encouraging signs that shareholders are becoming more assertive in defending their interests.

The Financial Times reported on Monday that some of Britain’s largest institutional shareholders – including Standard Life, Legal & General and M&G – are working on a plan to bypass investment banks by creating a club to underwrite new issues of equity by small and medium-sized British companies, a move that could save hugely on fees.

What, you may wonder, took them so long?

Second only to taxpayers, investors have been the great patsies of the financial crisis, paying massive costs to a financial services industry which has, to put it mildly, not served them well.

Venture capital harms your wealth

knobel– Lance Knobel is a guest columnist. The views expressed are his own. He is an independent strategy advisor and writer based in the United States. His professional site is www.lknobel.com

The promise was certainly seductive: Lock up your money with me for five years and I’ll give you double-digit annual returns.

For years, that was an accurate equation for venture capital. From 1981 to 1998, there were ups and downs, but the 10-year return generally hovered around 20 percent, well above most other asset classes. That return came at a price of course. It was illiquid and there was no secondary market. And there was a further catch. Most potential investors were excluded: Venture funds were relatively modest in size, there weren’t very many of them and they were picky about whose money they’d take.

An unhealthy privilege

jamessaft1–James Saft is a Reuters columnist. The opinions expressed are his own.–

When the U.S. dollar ultimately loses its status as the world’s premier reserve currency it will be painful for all involved, almost certainly disorganized, and very possibly a very good thing.

World Bank President Robert Zoellick outlined the risks to the dollar’s status in a speech in Washington on Monday.

China’s start-up market can win against the odds

wei-gu.jpg– Wei Gu is a Reuters columnist. The opinions expressed are her own —

It is hard to be very optimistic about China’s proposed stock market for start-up companies. After all, similar attempts in other countries have a decidedly mixed track record. Why would China, where small private companies face an uphill battle against state-owned firms, be any exception?

Nevertheless, there are reasons to believe that the start-up market, set to debut in October, offers better potential than previous efforts in Singapore, Germany and Hong Kong.

Criminal anarchy on America’s doorstep

Bernd Debusmann-Bernd Debusmann is a Reuters columnist. The opinions expressed are his own -

When Mexico’s president, Felipe Calderon, ordered 2,500 troops and federal agents into border city Ciudad Juarez 17 months ago to tamp down drug violence, the monthly murder rate ran at an average of 66. In retrospect, those were the days of peace and calm.

Ciudad Juarez has become the most active front in simultaneous and increasingly bloody wars. One is between drug cartels fighting each other for access to the U.S. market. Another is between drug traffickers and Mexican authorities charged with imposing law and order. They have been singularly unsuccessful.

Despite a vastly increased military presence (now about 7,000, plus 2,500 federal agents), the monthly body count this year has averaged more than 180 a month. In August, the body count exceeded 300, a record. According to a study published in August by a Mexican non-profit group, the Citizen Council for Public Security and Justice, Ciudad Juarez (population 1.6 million) has become the world’s most violent city.

Global imbalances: out with a bang?

jamessaft1.jpg(James Saft is a Reuters columnist. The opinions expressed are his own)

The simplest way to end the imbalances in the world’s economy is also sadly perhaps the most likely: for the Chinese to stop buying U.S. debt.

This is not going to happen anytime soon, for one thing deleveraging in the U.S. will for a time make U.S. Treasuries look good value, but a buyer’s strike is a heck of a lot more likely than the orchestrated rebalancing the U.S. will push at this week’s G-20 meeting of leading nations.

The U.S. plans to advance a plan at the Pittsburgh summit to fundamentally change the balance of the global economy, which over the past 15 years or so has been characterized by over-borrowing and consumption in the West provided and financed by savers and workers in Asia.

Don’t believe the hype

MARKETS-STOCKS/– Neil Unmack and Agnes T. Crane are Reuters columnists. The views expressed are their own —

By Neil Unmack and Agnes T. Crane
When some of the most influential financial thinkers of our time failed to call one of the biggest bubbles since the Great Depression before it burst, a little skepticism about the recent run-up in stocks is a healthy antidote to the cheerleading that typically accompanies big gains.

Given the enormous size of the last bubble, the current round of inflation in financial markets perhaps should be called by another name — maybe “bubblette” would better suit the times.

  •