Opinion

James Saft

If Greece quacks like a default …

Jun 30, 2011 21:47 UTC

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

The proposed bailout of Greece probably can’t escape the scarlet D of default, at least if the ratings agencies follow their own guidelines.

Even if the deal goes through, it is insufficient to solve Greece’s debt problems, only buying time for those involved to work out how best to engineer a transfer of bank losses to taxpayers.

Greece approved an austerity package on Wednesday, removing one road-block to further support, but it is still unclear how to get banks to participate in debt relief — a German requirement — without prompting a destabilizing event of default on Greece as a sovereign creditor.

French banks have proposed a burden-sharing plan, supposed to be voluntary, which EU officials are pushing as a means to thread this particular needle.

Under the plan, holders of Greek bonds maturing in the next three years would agree to roll over half of their exposure into new Greek 30-year bonds. Another 20 percent would go to fund a vehicle to act as collateral against Greek default.

The unbelievable mercy of UK banks

Jun 28, 2011 15:07 UTC

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

What do you call an entire economy which sweeps its insolvencies under the carpet and hopes that something will turn up?

Britain.

An investigation by the Bank of England, reported in its Financial Stability Report released on Friday, found widespread evidence that banks are extending loan forbearance to weakened borrowers.

And because loans in forbearance often aren’t classified as impaired, banks may be skimping on loan provisions, giving a deceptively flattering account of their capital position and health.

The Bank of Japan’s ill-advised “1% rule”

Jun 21, 2011 14:36 UTC

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

The Bank of Japan seems to be running its own fun-house version of monetary policy, intervening in equity markets when they fall.

Dubbed by traders the BOJ’s “1% rule,” the central bank is apparently stepping in to buy Japanese shares on days when they end the morning down 1 percent or more on the previous day’s closing price.

While the BOJ will not comment on its purchases or policies, Japanese news organization Nikkei points out that since mid-December, the central bank has bought ETFs on each of the 18 days the Topix index fell by at least 1 percent in morning trading.

Prepare to be financially repressed

Jun 16, 2011 21:55 UTC

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

Financial repression, the capture by government of capital for its own needs, is coming, if it’s not already here.

If you are a saver, or just rich, for that matter, this means that some of your money will flow to debtors, mostly your government, in a kind of sleight of hand.

Financial repression, which takes many forms, has historically been a popular way for governments to dig themselves out of debt holes, as it can be slow and controlled, unlike a default, and, like the proverbial frog being slowly boiled, is hard for the victims to figure out.

Greek actors seek divorce from reality

Jun 14, 2011 14:34 UTC

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

Greece, Germany and the European Central Bank appear to be petitioning for a divorce, not from each other, yet, but from reality, citing irreconcilable differences.

As in all such divorces, reality will get by far the best end of the settlement and it will be the children, or should that be the citizens, who suffer.

Greece, shut out of the capital markets, needs money, and soon, and is willing to play along with the fiction that the next tranche of aid, perhaps 90 billion euros, from the European Union, International Monetary Fund and ECB will buy them enough time.

Jamie, is that a threat or a promise?

Jun 10, 2011 15:45 UTC

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

Jamie Dimon is just doing his job, which is why it is more important than ever that Ben Bernanke do a better job at his.

Dimon, JP Morgan Chase & Co Chairman and CEO, staged an unusual confrontation with the Federal Reserve Chairman at a conference in Atlanta on Tuesday, drawing a line between tighter banking regulation, heavier capital requirements and slow growth and joblessness.

“Has anyone bothered to study the cumulative effect of all these things?” Dimon asked.

You’re on your own, kids

Jun 7, 2011 14:59 UTC

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

First came the realization that U.S. economic growth was fading. Now comes the dawning feeling that no meaningful help is on the way.

There is no sign of significant new stimulative government spending and little chance that the Federal Reserve will be willing, much less able, to follow up with another round of quantitative easing.

As for the global economy, Europe is in its own crisis and that transition to a consumer economy in China is going to take a while.

Beware generous UK banks

Jun 2, 2011 20:09 UTC

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

HUNTSVILLE, Ala. — British banks are being surprisingly generous with troubled homeowners, raising red flags over the health of the housing market and their own earnings.

An investigation by Britain’s Financial Services Authority found that 63 percent of all troubled home loans have been switched onto some form of forbearance, typically ones that make the loan interest-only or extend the repayment period.

Some 3 percent of borrowers, or 300,000, with mortgages totaling 60 billion pounds ($97 billion) have switched to interest-only mortgages, under which no principal is retired, since the onset of the financial crisis in 2007, according to the FSA.

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