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How to Improve the Financial-Reform Law – Now that the Dodd-Frank financial-reform bill has become law, the real battle begins. Despite the law’s 2,000 pages—or possibly because of them—there is much ambiguity about what its eventual impact will be. The Wall Street Reform and Consumer Protection Act, as the law is officially known, grants the Federal Reserve enormous regulatory power. The Fed can now unilaterally decide that any financial institution is “systemically important”—meaning that its failure could destabilize the financial system itself—and impose any sort of regulation on it, such as requiring that it hold more equity capital, limiting the amount of short-term debt it can issue, forcing it to write up a living will, and so on. Unfortunately, the law does not adequately define what “systemically important” means. The largest banks can in theory be exempted from the classification (though this is unlikely), while the smallest hedge funds—should many of them pursue similar strategies, meaning that they might all fail simultaneously—can fall under it. The lack of a clear criterion will likely make the designation difficult to appeal; it’s really up to the feds to decide. For many institutions, the “systemically important” label could amount to a regulatory death sentence, without a fair trial.
 
The End of Cheap Coal? – As early as the mid-1990s energy forecasters warned about the demise of cheap oil. But was the world overlooking a potentially larger problem: the end of cheap coal? In a comment article in the Nov. 18 issue of Nature, Richard Heinberg and David Fridley of the Post-Carbon Institute in California argue that growing demand for coal—particularly in China, where it is needed for steel making.—cannot be met by global coal reserves because estimates of the amount of easily retrievable coal are outdated and optimistic. China, the world’s biggest producer and consumer of coal, has coal resources of 187 billion metric tons, second to the U.S., according to data collected in the 2000-10 national resource survey by China’s Ministry of Land and Resources. That’s about 62 years’ worth of coal, according to Heinberg and Fridley. But the duo are skeptical of that claim, and say that coal is often more scarce and more difficult to retrieve than current estimates.
 

Spanish, Portuguese Bonds Drop as Europe’s Debt Crisis Deepens – Spanish 10-year bonds fell for a sixth straight week, the longest run since the period ending June 22, 2007, as officials raced to complete an aid agreement for Ireland in an effort to contain the meltdown of its banks. The Irish yield premium over benchmark German bonds reached a record after Prime Minister Brian Cowen requested an international bailout on Nov. 21.  “The market has lost faith over the likelihood that the Irish problem can be ring fenced,” said Steven Mansell, director of interest-rate strategy at Citigroup Global Markets Ltd. in London. “It’s a transformation from a market thinking the problem resided in the weaker periphery to a situation where the market is worried about a broader-based contagion.”

Countries Pare Ambitions for Talks on Climate Change – With the push to cap greenhouse-gas emissions all but dead in the U.S., world diplomats will meet in Mexico starting Monday to try to eke out a less-ambitious attack on global warming. At a two-week United Nations climate conference in the Mexican resort city of Cancun, negotiators will focus not on the stick of mandatory emissions limits but on the carrot of tens of billions of dollars in subsidies from industrialized countries to help developing nations grow on a greener path. Almost all growth in global greenhouse-gas emissions in coming years is expected to come from developing countries. The subsidies likely would, among other moves, help China build more-efficient coal-fired power plants, Brazil preserve forests, and an array of developing countries build wind farms and solar projects.

 

Banks Start to Dig Out From Troubled Loans – AFTER several years of decline, this is shaping up to be the year in which the problems of America’s banks began to recede.  The Federal Deposit Insurance Corporation reported this week that the proportion of troubled loans on bank books fell to 9.1 percent at the end of September, down by more than a percentage point from the record 10.3 percent figure posted at the end of 2009.  “The industry continues making progress in recovering from the financial crisis,” said Sheila C. Bair, the F.D.I.C. chairwoman. “Credit performance has been improving, and we remain cautiously optimistic about the outlook.”  The improvement was not across the board. Loans secured by commercial real estate became a little worse, and some smaller banks that specialize in such loans have reason to be worried. The number of banks labeled as troubled by the F.D.I.C. continued to rise.

Thousands Protest Against Irish Bailout – More than 100,000 Irish citizens took to the streets of Dublin today to protest against the international bailout and four years of austerity. Despite overnight snow storms and freezing temperatures, huge crowds have gathered in O’Connell Street to demonstrate against the cuts aimed at driving down Ireland’s colossal national debt. So far the march has passed off peacefully although there is a huge Garda presence with up to 700 officers on duty working alongside 250 security guards for the Irish Congress of Trade Unions.  Among the marchers there is deep anger that most of the more than €80bn (£67bn) from the EU and the International Monetary Fund will be given to shore up Ireland’s ailing banks.

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