A Fix for Geithner’s Plan

With the world’s attention shifting to London and the upcoming Group of 20 summit, it’s possible that the Treasury’s proposal for dealing with banks’ “troubled assets” will become old news. It shouldn’t. The administration plans to provide as much as $1 trillion to privately managed funds that will buy troubled assets, which is indeed the […]

GCC sovereigns Resort to the Bond Market

In recent days and weeks, most of the GCC governments have announced plans (or hinted at) issuing sovereign bonds. Kuwait, Abu Dhabi, Dubai (of the UAE), Qatar and Bahrain have all suggested they would issue bonds in coming months, totalling several billion dollars.

In recent years, the issuance of sovereign debt by GCC governments has been quite limited to Bahrain and Oman in light of the enormous surpluses accrued in light of the once-soaring oil prices.  In fact a few sovereigns, and sub-sovereigns like Abu Dhabi, did not even have credit ratings. Instead most of the limited bond issuance was by government-linked companies throughout the region. Yet,  and as we have explained in a recent piece, with the reversal in hot money,  in addition to the the losses and continued losses in the region’s equity markets, the cost of long-term borrowing sky-rocketed, highlighting the vulnerability of relying on external finance even as new revenues began to fall as investment returns and oil revenues fell sharply. Also, with external finance expected to grow at a slower pace in the face of the continued global liquidity crunch, GCC countries are left with no other option but to try to explore other sources of financing to tap the latent funds available in the region and from foreign investors looking for relatively safer credit risks.

Me Too! Look Ma, I can Earn a Positive Interest Spread with Fed Funds Near Zero and Bernanke Stomping on the Yield Curve! It’s gonna be OK, Really!

Highlights   –     The near daily announcements over the past two weeks, by money-center banks and finance companies, that they are making money this year on an operating income basis, have become borderline irresponsible relative to continued deterioration in value of the assets on their balance sheets and the continuing impact of a worsening recession. […]

Sovereign wealth funds and financial stability

The present financial crisis has placed financial stability at the forefront of policy discussions. At the same time, sovereign wealth funds have become much more significant players over the past two years. This column summarises the results of some recent studies about sovereign wealth funds and their implications for financial stability. Overall, the existing research […]

The Real Cost of the Geithner Plan

Treasury Secretary Timothy Geithner’s toxic asset plan is a brilliant, highly complex and very expensive answer to the wrong question: How we can raise the value of bank portfolios without improving the quality of the underlying loans?   It is truly remarkable that an administration that preaches progressive economics intends to deploy $1 trillion – […]

Economic challenges might be opportunities for us

Despite all due respects to ministers and other managers of economic policies of our great country, It is disappointing to read statements where it is repeatedly held that the next year will be economically tougher, that GDP growth rate may further decline, that fiscal deficit may increase over the revised budget estimates and that Indian […]

Financing Dynamism and Inclusion

This commentary is based on an open letter sent to Prime Minister Gordon Brown and other leaders of the G-20 ahead of their summit in London on April 2, 2009. The unabridged version of the letter is published at http://capitalism.columbia.edu/files/ccs/CCSletterG20-2009_March%2024FINAL.pdf#. The letter sums up the main recommendations presented in New York City on February 20 […]

Bottom Up! Tomorrow’s “Real Economy”

Do you ever get the feeling like there’s got to be something more to what you’re doing? You’ve taken the time to become economically, politically and socially minded.   You read all the popular mainstream websites. …and then your knowledge grows. …and so does your thirst.  You find yourself discovering an entire world of eclectic […]

Big and Small

Yesterday, Treasury Secretary Geithner presented an outline of his approach to regulating the financial system. The four pillars of that approach seem to be:

  1. Increased power and regulatory centralization to deal with the problem of systemic risk
  2. Increased protections for consumers and investors buying financial products
  3. Closing regulatory gaps by shifting that organizes regulation based on financial functions, not types of financial institutions
  4. International coordination among regulators

This all sounds good to me, and an improvement over where we are today. But reading Geithner’s discussion of systemic risk – the topic he focused on yesterday – I kept thinking it had been too long since he read Frog and Toad to his children.

The Euro-Zone March PMI Holds Near February’s Record-Low

The Euro-Zone composite Purchasing Managers Index (PMI) rose slightly in March (to 37.6) from the record low of 36.2 registered in February. The PMI reading for manufacturing rose to 34.0 (from 33.6) while the services component was up to 40.1 (from 38.9). (You need to bear in mind that 50 is the neutral point (marking the boundary between expansion and contraction) on these indexes, and any reading below 40 means a very significant rate of contraction).

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