LyrArc Article Gist
The People's Bank of China's decision to reduce the reserve requirement for deposits at banks by 0.5% is not likely to have much impact, as banks already have enough money to lend. The problem is more a lack of demand for loans as the economy slows. Inflation fears restrict the use of growth tools such as lowering interest rates and the housing bubble limits the use of construction spending to increase growth. Political uncertainty with a leadership transition, and economc uncertainty in Europe also limit options.

LyrArc Article Gist
Greek voters who would normally vote for the New Democracy party on the right are voting for the Syriza party of Alexis Tsipras, in the hope that he could negotiate new terms with the EU.

LyrArc Article Gist
Angela Merkel's Christian Democratic Union party suffered a major defeat in North Rhine-Westphalia. Exit polls show the SPD Social Democrats party winning 38.9% of the vote, increasing its vote by 4.4%. The CDU won only 26.3% of the vote, dropping 8.3% from the last election. The SPD state premier, Hannelore Kraft, proved to be a popular campaigner. Her opponent Mr Rottgen made debt-financed spending an issue and told voters this was a referendum on Merkel's policies for Europe. Ms. Kraft said after the win: "We made people the central focus again." This has overtones of the victory of Francois Hollande in France, a few days ago, and shows a fundamental shift in Europe. German media described it as debacle for the conservatives considering the size of the margin between SPD and CDU. The Greens secured 11.6% of the votes and this will enable Ms. Kraft to govern easily compared to an earlier minority government she led. This state is the largest in Germany, with one of every five Germans living here, with the capital in Dusseldorf. The Pirates party secured 7.8% of the vote, and the Free Democrats staging a recovery with 8.3% of the vote under a popular young leader Christian Lindner. Upto this point the SPD lacked an effective leader to challenge Merkel. The sense now is that Ms. Kraft will emerge as the SPD's challenger to Merkel in elections in 2013, or earlier. French president Hollande goes to Berlin on May 16, 2012, and the SPD win is expected to strengthen his position in negotiations....

LyrArc Article Gist
Mr Iksil, a trader in Chase's CIO London office made such massive bullish bets on CDX-IG-9 index of 121 companies by selling credit default swaps, to the point where it cost less for protection on the index than for the individual components of the index. This worked in Jan-Feb 2012 with hedge funds on the other side having paper losses. In subsequent months hedge funds realized that Iksil would have to unwind some of these bets to avoid large losses. As a trader at Bank of America put it in a memo, at that point "Fast money smelled blood." The result is that hedge funds accelerated their bets against Mr Iksil's bullish positions, leading to the large $2 billion losses at CIO unit of Chase- losses on depositors money from aggressive bets in a volatile market. Mr Iksil is a French born trader, who has worked for Chase since March 2007. He has earned $100 million each year for Chase. He travels to London from his Paris home each week, and works from home Fridays. Two junior traders work with Iksil, primarily placing bets for complex trades in credit markets....

LyrArc Article Gist
Reilly raises the question why asset allocation decisions of the type made by JP Morgan Chase since 2008, does not make it similiar to a mutual fund or a hedge fund, and why this should itself not be considered a form of proprietary trading. JP Morgan Chase had $600 million of corporate debt in its overall debt portfolio or 1% in 4th quarter 2006. By end of 2008 this increased to 5% or $10 billion. By end of 2009, this went up to 17% of the portfolio or $62 billion, and they are at that level today. The holdings of non-U.S. residential mortgage securities was also increased, going up to 20% of holdings or $75 billion at end of 1st quarter 2012, from $2 billion or 1% of the portfolio in 2008. Corporate debt holdings at Bank of America at the end of the 1st quarter of 2012 were about 1% or $2.4 billion, and at Citigroup were about 4.5% or $12 billion. The Chief Investment Office unit of JP Morgan handles this portfolio, which is the result of deposits of $1.12 trillion exceeding loans of $700 billion. The low interest rate environment after 2008 creates incentives for banks to look for ways to improve crimped margins and in the process adding risk....

LyrArc Article Gist
Hassett and Baker suggest learning from the German experience of the last decade in reducing unemployment, including "kurzarbeit" programs, work sharing, and cooperation between industry, unions and government to reduce unemployment. France is already taking action to learn from the German experience.