James Saft

Dec 26 (Reuters) – As well as too-big-to-fail it looks as if
we must think of our largest banks as too-big-to-punish as well.

After comments from top U.S. Justice Department officials in
the wake of the $1.5 billion settlement with UBS over
interest-rate manipulation, the bank’s counterparties,
employees, clients and competitors certainly will.

UBS was fined and a subsidiary pleaded guilty to one count
of felony wire fraud over its part in a wide-ranging effort to
doctor key benchmark interest rates such as the London Interbank
Offered Rate (Libor).

The combined fines and disgorgement UBS has made to
regulators in Britain, Switzerland and the U.S. were big – three
times larger than those paid by Barclays in a related scandal.

Comments made by U.S. Attorney General Eric Holder and Lanny
Brauer, head of the Justice Department’s criminal division,
however, indicate that UBS very likely got off more lightly than
you, me or the local credit union might have done had we
committed the same offenses.

By James Saft

(Reuters) – As well as too-big-to-fail it looks as if we must think of our largest banks as too-big-to-punish as well.

After comments from top U.S. Justice Department officials in the wake of the $1.5 billion settlement with UBS over interest-rate manipulation, the bank’s counterparties, employees, clients and competitors certainty will.

UBS was fined and a subsidiary pleaded guilty to one count of felony wire fraud over its part in a wide-ranging effort to doctor key benchmark interest rates such as the London Interbank Offered Rate (Libor).

Dec 20 (Reuters) – Look to 2013 to be the year of three
Ls: Low growth, low returns, and thankfully, lower risk.

The upshot for investors may be a calmer year, but possibly
one that is less lucrative. It could be quite a contrast from
2012, which featured plenty of drama, notably in the euro zone,
but also decent returns courtesy of a 12.5 percent gain in the
S&P500 stock index and a similar return from global shares.

Extraordinary monetary easing and pledges from the Federal
Reserve, the Bank of Japan, and the European Central Bank will
provide a safety net to investors in 2013. However, we still
face a global economy that is facing both deleveraging and a
drag from falling government spending in important economies.

Dec 19 (Reuters) – Proving yet again that history rhymes
rather than repeats, just a few short years after an epochal
crash the search for yield just gets wilder and wilder.

Perhaps the best place to see this is in the corporate bond
market, where yields are at or near all-time lows while, by some
measures in key sectors, investor protections have never been
weaker.

Don’t expect, though, to see a repeat of the bloodbath of
2008 and 2009, when markets froze and there was real fear that
normally viable companies would as a result hit the shoals. For
one thing, companies are more liquid and less leveraged.

By James Saft

(Reuters) – Japanese banks and pensioners will be first in line to feel the pain if Japan successfully reignites inflation and inflates away its debts.

Which are two very good reasons truly effective central bank action may not happen, and if it does will carry heavy unintended consequences.

Fresh from a landslide victory on Sunday, Shinzo Abe, Japan’s next prime minister, lost no time in hammering home the demands he’s made on the Bank of Japan, saying the electorate had ratified his calls for more stimulus.

By James Saft

(Reuters) – For an uncertain world – one with fiscal cliffs, eurozone recession and regime change at the Federal Reserve – it sure is quiet out there.

Volatility in financial markets is now trading more like we are in the pre-crisis world of 2006, rather than one in which most of the crucial questions are left unanswered.

Sometimes called the fear index, the VIX which gauges investor perceptions of how jumpy the S&P500 stock index will be in the coming month, is now trading at around 16, more than 60 percent below its 2011 peak and not too far above its median level for the past century. In fact, if we get through December without a major market upset, 2012 will be the first year in seven without a significant spike in the VIX.

Dec 14 (Reuters) – For an uncertain world – one with fiscal
cliffs, eurozone recession and regime change at the Federal
Reserve – it sure is quiet out there.

Volatility in financial markets is now trading more like we
are in the pre-crisis world of 2006, rather than one in which
most of the crucial questions are left unanswered.

Sometimes called the fear index, the VIX which
gauges investor perceptions of how jumpy the S&P500 stock index
will be in the coming month, is now trading at around 16, more
than 60 percent below its 2011 peak and not too far above its
median level for the past century. In fact, if we get through
December without a major market upset, 2012 will be the first
year in seven without a significant spike in the VIX.

By James Saft

(Reuters) – To say taxpayers made money from their investment in AIG is to libel the very concept of profit.

Come to think of it, it may well be a gross insult to the idea of investment too.

The Treasury Department announced on Tuesday it would get $7.6 billion from the sale of its remaining government-owned shares in American International Group, taking it to what was widely reported to be a profit of $22.7 billion on the bailout.

Dec 11 (Reuters) – U.S. student debt levels are surging but
along with degrees and skills the loans are producing perverse
incentives and unforeseen economic consequences.

Consumers upped their debt by a seasonally adjusted $14.2
billion in October, driven in substantial part by strong growth
in student loans, a market dominated by the government.

U.S. student debt has grown at a nearly 14 percent clip
annually since 2005, hitting $904 billion in the first quarter
of 2012, partly cushioning the impact on the economy of an
overall fall in outstanding debt as people sought to use a
period of slack growth to retool.

By James Saft

(Reuters) – What happens when an over-valued currency meets a political leader seemingly bent on imposing his vision on a battered central bank?

Watch Japan, soon-to-be Prime Minister Shinzo Abe and the yen in 2013 to find out. (Spoiler alert: the currency gets it in the end.)

Abe, whose Liberal Democratic Party is expected to be returned to power by a December 16 election, also is likely to deliver global financial markets about as much volatility as they can handle, as his comments about his plans for the central bank have been frequent, inconsistent and radical.