The usual suspects show up for a line-up.
complete cartoon here.
Showing posts with label Financial Crisis. Show all posts
Showing posts with label Financial Crisis. Show all posts
Wednesday, October 8, 2008
Thursday, September 18, 2008
While You Were Sleeping... Federal Reserve Acts with Massive Global Liquidity Injection
The US Federal Reserve acted in the dead of night to try to stem the tide of the global financial crisis that rose to a economic tsunami level in recent days as major bank and insurance company failures in the U.S. and U.K. threatened a systemic failure of financial institutions around the globe.
In a press release dated 3 am, September 18, the Fed announced its Federal Open Market Committee (FOMC) has authorized a $180 billion currency swap with other central banks, namely the EU's European Central Bank, the Bank of England, the Bank of Japan, the Swiss National Bank, and the Bank of Canada. These arrangements will underpin the extension of greater liquidity to the financial systems of the respective countries in the hope that global financial markets will settle down after the wave of recent failures of large financial institutions.
No news yet out of the Reserve Bank of New Zealand as to its reaction to the moves.
On the good news front, the Reserve Bank Amendment Bill (No 3) was passed by Parliament on 3 September making the Reserve Bank the regulator of non-bank deposit takers such as finance companies, building societies, and credit unions. One fly in the ointment: the Reserve Bank will assign an important role to "reputable" credit rating agencies in the new regulatory set-up, the same kind of credit rating agencies implicated in failing to effectively monitor the sub-prime meltdown in the U.S. Huh?
Nothing like waiting till the horse has bolted. Shame on governments and policymakers both in the U.S and New Zealand for not having established effective regulatory regimes 30 years ago when they liberalized markets concurrent with a wave of new financial innovations in the form of financial derivatives.
Perhaps they would be singing different songs from these now:
Heard in many financial districts around the world this week:
Meantime, the Central Banker Chorus is wailing:
Wake Me Up When It All Ends...
In a press release dated 3 am, September 18, the Fed announced its Federal Open Market Committee (FOMC) has authorized a $180 billion currency swap with other central banks, namely the EU's European Central Bank, the Bank of England, the Bank of Japan, the Swiss National Bank, and the Bank of Canada. These arrangements will underpin the extension of greater liquidity to the financial systems of the respective countries in the hope that global financial markets will settle down after the wave of recent failures of large financial institutions.
No news yet out of the Reserve Bank of New Zealand as to its reaction to the moves.
On the good news front, the Reserve Bank Amendment Bill (No 3) was passed by Parliament on 3 September making the Reserve Bank the regulator of non-bank deposit takers such as finance companies, building societies, and credit unions. One fly in the ointment: the Reserve Bank will assign an important role to "reputable" credit rating agencies in the new regulatory set-up, the same kind of credit rating agencies implicated in failing to effectively monitor the sub-prime meltdown in the U.S. Huh?
Nothing like waiting till the horse has bolted. Shame on governments and policymakers both in the U.S and New Zealand for not having established effective regulatory regimes 30 years ago when they liberalized markets concurrent with a wave of new financial innovations in the form of financial derivatives.
Perhaps they would be singing different songs from these now:
Heard in many financial districts around the world this week:
Meantime, the Central Banker Chorus is wailing:
Wake Me Up When It All Ends...
Tuesday, September 9, 2008
And Another One Bites the Dust…
Yet another New Zealand finance company, Dominion Finance Group (DFG), has nose-dived into receivership with some 6,000 investors owed NZ$224 million.
This follows closely on the announcement that receivers project payouts to Lombard Finance investors to be reduced to 19 to 40 cents on the dollar for the $127 million owed them.
While Lombard’s receivers have flogged off the managing director’s company-owned Maserati Quattroporte sports car for $97,000 and the former chairman’s Volvo for $19,000, such asset sales have failed to offset the write down as bad debts of the coastal subdivisions owned by the company. The real estate market has treated these properties as if they were so many sandcastles facing the incoming spring tide.
In the past two years more than a dozen finance companies have been placed in receivership with 30 either in receivership or under financial stress affecting in excess of $3 billion in investors money.
In related news, a World Bank survey reports New Zealand is ranked second in the world (after Singapore) in the ease of doing business. The small Kiwi investor must be greeting this news somewhat ruefully with the thought that they meant “ease in losing your shirt – and pants” while the managing director tooled around in the corporate Maserati trying to relive his days as a boy racer.
If politicians like Winston Peters, leader of NZ First, had spent less time tilting at windmills and doing a whip round for his legal expenses without regard to electoral financing laws and more time keeping the finance sector honest, some of the mismanagement and inadequate prudential supervision of finance companies might have been brought to the light of day.
Instead a macabre cannibalistic ritual is being enacted at Parliament to see which political party can disembowel the others first in the run up to the anticipated November general election, with Peters as perhaps the deserved first kebab on the spit. "This horrid practice", indeed, as Captain Cook might have put it.
Meanwhile, across the street at No. 2 The Terrace in the Windy City, the Reserve Bank is picked to cut interest rates by 25 basis points tomorrow (Thursday NZ Time). Don’t expect any mea culpas anytime soon from that quarter on the inadequacy of its prudential supervision of non-bank financial institutions. In true central banker smugness it reassures all and sundry that all is well with the financial system and its (regulatory) work is good. To do otherwise, in conventional wisdom, is to invite the barbarians at the door to the Governor’s whiskey and to precipitate financial crisis.
Expect, as in the US, a lot of finger pointing in the run up to the election instead of a thorough, honest policy discussion of how both legislatures and regulatory authorities in both countries dropped the ball repeatedly over the past couple of decades in the name of market liberalization. Let’s hope the All Blacks don’t take that page from the playbook when confronting the Wallabies in the final Bledisoe test on Saturday. It’s a losing strategy.
This follows closely on the announcement that receivers project payouts to Lombard Finance investors to be reduced to 19 to 40 cents on the dollar for the $127 million owed them.
While Lombard’s receivers have flogged off the managing director’s company-owned Maserati Quattroporte sports car for $97,000 and the former chairman’s Volvo for $19,000, such asset sales have failed to offset the write down as bad debts of the coastal subdivisions owned by the company. The real estate market has treated these properties as if they were so many sandcastles facing the incoming spring tide.
In the past two years more than a dozen finance companies have been placed in receivership with 30 either in receivership or under financial stress affecting in excess of $3 billion in investors money.
In related news, a World Bank survey reports New Zealand is ranked second in the world (after Singapore) in the ease of doing business. The small Kiwi investor must be greeting this news somewhat ruefully with the thought that they meant “ease in losing your shirt – and pants” while the managing director tooled around in the corporate Maserati trying to relive his days as a boy racer.
If politicians like Winston Peters, leader of NZ First, had spent less time tilting at windmills and doing a whip round for his legal expenses without regard to electoral financing laws and more time keeping the finance sector honest, some of the mismanagement and inadequate prudential supervision of finance companies might have been brought to the light of day.
Instead a macabre cannibalistic ritual is being enacted at Parliament to see which political party can disembowel the others first in the run up to the anticipated November general election, with Peters as perhaps the deserved first kebab on the spit. "This horrid practice", indeed, as Captain Cook might have put it.
Meanwhile, across the street at No. 2 The Terrace in the Windy City, the Reserve Bank is picked to cut interest rates by 25 basis points tomorrow (Thursday NZ Time). Don’t expect any mea culpas anytime soon from that quarter on the inadequacy of its prudential supervision of non-bank financial institutions. In true central banker smugness it reassures all and sundry that all is well with the financial system and its (regulatory) work is good. To do otherwise, in conventional wisdom, is to invite the barbarians at the door to the Governor’s whiskey and to precipitate financial crisis.
Expect, as in the US, a lot of finger pointing in the run up to the election instead of a thorough, honest policy discussion of how both legislatures and regulatory authorities in both countries dropped the ball repeatedly over the past couple of decades in the name of market liberalization. Let’s hope the All Blacks don’t take that page from the playbook when confronting the Wallabies in the final Bledisoe test on Saturday. It’s a losing strategy.
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