Unwarranted restructuring

Brendan Moynihan (no, not Brian Lenihan) has an interesting suggestion for Eurozone debt restructuring on Bloomberg: European countries should reduce the principal amount they owe by issuing gross domestic product-linked sovereign bonds as an incentive to creditors to take a haircut on the debt. Bondholders would accept, say, 70 cents on the dollar on their […]

Voting systems: what is fairer?

I used to be in favour of reform of the voting system. Unfortunately now I have seen what coalition governments are like, and I’m a lot less sure what the right answer is. The problem seems to be that it is easy to spend a lot of time thinking about fairness, and that tends to […]

Augustinian stability

The Bond Vigilantes have some thoughts on financial stability and bank bail-outs. Taxpayers should be protected. Deposits should fund loans, and loans shouldn’t outgrow deposits to too large an extent. As a result, taxpayers shouldn’t be on the hook again for the banks, and if they did, it would be far easier to tolerate than […]

The third systemic margin call

There were four horsemen, right? Well, the third has just cantered into the yard and asked if someone can sharpen his scythe. From LCH: In accordance with the Sovereign Risk Framework issued on 5 October 2010, and in response to the yield differential of 10 year Irish government debt against a AAA benchmark, LCH.Clearnet Ltd […]

Irish tax lawyers are smiling

The Irish tighten their belts in what the Guardian calls a tough four year austerity plan: The taoiseach, Brian Cowen, said no one could be sheltered from the plan. “It’s to bring certainty for our people,” he said. “It’s to ensure that they have hope for the future. To let them know that while we […]

Euro contagion…

… is a great opportunity, in my view. Portugal 2y CDS at 375 over? Wave it in. (Chart via Reuters.) Spain and Italy look quite attractive too.

If you read one thing about accounting this year…

… then this is a good candidate.

FED to banks: dividends are impossible

This is most amusing: The Federal Reserve Board on Wednesday issued guidelines for evaluating proposals by large bank holding companies (BHCs) to undertake capital actions in 2011, such as increasing dividend payments or repurchasing or redeeming stock… The guidelines state that any capital distribution plan will be evaluated on the basis of a number of […]

The campaign for professional standards in economics

If I had a letter published in a newspaper claiming that the Hubble constant was exactly 72 km/sec/Mpc, doubtless some physicist would read it and correct me, saying that situation was complex, the best measurements put H between 70 and 74 (or whatever the bounds are), that it might not be constant anyway, and so […]

Seniority destruction through resolution and covering

The Bond Vigilantes point out that in the new post-Basel III world, bank capital structure may well get a lot simpler: deposits, covered bonds, senior notes, CoCo’s and equity The covered bonds will be needed to meet funding requirements, but of course this process removes assets which would otherwise be available to meet senior creditors. […]

Jessica Alba naked and other news from the repo market

I use a tool to detect and remove spam comments. It’s pretty good. Occasionally I look through the list and check that the comments are indeed spam before deleting them forever. You can get a real sense of the internet economy from them too – fake designer sunglasses in summer, fake Ugg boots in winter […]

Who says irony is dead?

Bloomberg reports that Morgan Stanley CEO James Gorman said recently at a SIFMA conference: some individuals “who in many cases were frankly pretty average” made as much as 10 times that of people in other industries … Fixing the culture will require “creating a compensation system that better aligns or balances shareholders’ interests and the […]

Cometh the day, cometh the systemic margin call

From LCH, via FT alphaville: In accordance with the Sovereign Risk Framework issued on 5 October 2010, LCH.Clearnet Ltd has revised the risk parameters for Irish government bonds cleared through the RepoClear service. The margin required for positions of Irish government bonds will consequently be increased by 15% of net exposure. This will also apply […]

A chase to the bottom?

Stefan Collini writes in the LRB: Nobody should pretend that all is well with British universities in their present condition. For one thing, expansion of numbers on the cheap has dramatically diluted the level of attention to individual students that most universities can provide: nearly all parents with children at university hear disturbing reports of […]

Monoline death watch

In honour of Ambac, filing tomorrow (and with apologies to the Lucky Boys): Don’t you even try to jettison now This has gone, this has gone as far as I can allow This ships been sinking with you at the helm Straight to hell, straight to hell, take a bond straight to hell

Epistemic capital

In the old days, we used to say that a firm had enough capital if it could withstand a particular event and still be solvent. Thus we’d say $10B of capital is enough if, on a one year in a hundred event, you’d only lose $9B. That was a terrible idea. Just being solvent is […]

Hold to maturity?

Here’s an interesting idea from Daniel Beltran and Charles Thomas via FT alphaville. Talking about the role of asymmetric information in the collapse of private-label securitisation prices during the crisis, they recommend: the government buy relatively low value securities and commit to holding them until maturity. The government has no better information than any other […]