LyrArc Article Gist
Neal Wolin, Michael Barr and Diana Farrell who had roles in the Clinton administration are now key figures in the effort to get financial reform legislation through Congress against resistance from well funded lobbying groups. Farrell is one of two deputies to Lawrence Summers, Obama's senior economic advisor. Michael Barr is Assistant Treasury Secretary for financial institutions. Both Wolin and Barr worked at Treasury during the Clinton administration. After Clinton left office Wolin went to work for Hartford Financial Group and Barr went to teach at the University of Michigan. Barr has helped formulate much of the policy-making.

LyrArc Article Gist
Clive Crook points to the dangers of complacency in 2010. He reminds readers that the critical thing is as Charles Goodhart mentioned in the Financial Times, that capital and liquidity requirements must be time varying and strongly anti-cyclical. He points out that in good times when lending is expanding quickly and financial institutions are least concerned about capital, liquidity requiremets must tighten, something that is not happening under current rules. Repairs in areas of "too big to fail", separating investment banking and commercial banking, and others, will not succeed unless this principle is adopted. And this he says will be opposed by financial institutions because it reduces their growth. But this fight has to be won. It goes back to William McChesney Martin's idea of taking away the punch bowl before the party gets going.

LyrArc Article Gist
Concern about slowing growth in China with rising inflation. The problem of opaqueness of the financial system and of banks that are both listed companies and run by the government, and how this could accelerate a slowdown at some point with accumulated problems in the financial system. A sense that China's growth model has reached a limit, and whether there will be a soft landing.

LyrArc Article Gist
Joe Nocera compares the German insistence for tough austerity measures in Greece, Italy, Spain and Portugal, to the insistence ofthe Allies for large reparations from Germany after the First World War, which Germany was not able to pay and left it bankrupt by the late 1920's. He cites the failure of orthodox positions on financial and monetary policy to tackle complex issues such as the overvalued currencies of southern Europe, as productivity moved in opposite directions between Southern Europe and Germany. Austin Goolsbee, a former chairman of Council of Economic Advisors, makes the same point in an op-ed piece in the Journal, 11/29/2011. Nocera says this position is simiiar to the position on debt reduction for homeowners facing U.S. foreclosures with government intervention, where little action has been taken worsening the housing crisis and derailing the U.S. economy.

LyrArc Article Gist
The European Stability Mechanism made its first short term debt auction Jan. 8, 2013, by selling 1.927 billion euros of treasury bills. Japan remains a key investor. Japanese finance minister, Taro Aso, said Japan plans to to be an active investor in the ESM bond sales. He told a news conference: "Japan will purchase some ESM bonds using its foreign exchange reserves as it monitors progress in efforts to stabilize the European situation." Japan holds $1.27 trillion in foreign exchange reserves. The move pushed the yen lower. Investors pay the ESM to keep cash for three months- the ESM treasury bills had an average yield of minus 0.0324%. The ESM fund will be used for aid to Spain's banking sector, Greece, Ireland and Portugal. Plans are for the ESM to issue three month and six month bills twice a month to reach 18.5 billion euros by the end of 1st quarter 2013. The ESM fund rating is Aa1 by Moody's Investors Service, and AAA by Fitch Ratings.

LyrArc Article Gist
The dollar has reached the mark of 86 yen by the begining of August 2010. Japanese analysts see the dollar at 90-100 yen as reasonable for Japan's export based companies. One factor causing this is the Chinese government increasing its holding of Japanese government bonds. By May 2010 China had accumulated 1.27 trillion yen according to the Japanese government. This rise of the yen will have a negative effect on Japanese exporting companies.

LyrArc Article Gist
The practices of Bain Capital under Mitt Romney, as it merged management consulting with private equity to take stake in companies that it would be asked to turnaround. The main focus for this type of investing was to harvest as much capital out of the acquired company as early as possible, leading to management decisions that were driven by this overriding aspect. This meant large layoffs to reduce costs, loading the company with debt which in many cases led the company to bankruptcy yet benefitting the investors. The practices were adverse to the accumulation of human talent.

LyrArc Article Gist
Hugo Dixon says the deal made by eurozone leaders for Greece in July 2011 favors private creditors. The bondholder haircut was much smaller, eurozone governments and taxpayers will make up the difference. This he says is like a cat in the bag presented to the receiver as a pig as long as he does not look inside, called a "poke." Dixon says that if Greece cannot implement austerity measures under a new government and the deal has to be renegotiated bondholders may face a larger haircut than the 20% under the current arrangement. It would have been better he says to do this now but the ECB's threats may have led to the German and French governments treating private creditors with kids gloves.

LyrArc Article Gist
The Chicago Sun Times files for bankruptcy. It owes the IRS $510 million in back taxes for 1996-2003 when Hollinger International, which controls the Sun Times, was owned by Conrad Black, who was convicted of fraud. It had an operating loss of $344 million in 2008. Its newspaper the Sun Times has a circulation of 313,000. The Sun Times had expected advertising revenue to drop 30% this year. The Tribune Company, which owns the CHicago tribune and the Los Angeles Times filed for bankruptcy in 2007 Dec. Other papers that filed for bankruptcy include the Philadelphia Newspapers and the Star Tribune Holdings of Minneapolis. Sun Times stock which was at $6 in early 2007 was at 2 cents in April 2008!

LyrArc Article Gist
Japan is suffering from deflation, the public debt is a record 883 trillion yen or $9.78 trillion, and Premier Hatoyama was unable reduce spending. Yet the Japanese yen went up by 4% in May 2010. It went up by 11.5% vs the Euro. The causes lie in the weakness of the U.S. and European economies and the huge trade surpluses from Japanese exports, over $28 billion in 2009.

LyrArc Article Gist
The risks of the Fed's reinflation policy in 2010-2011. It risks increasing "bad" inflation, the kind that fall heaviest on low income households. Commodities are on fire, and the increase in the price of oil and food, would only leave consumers drowning in the new inflation, says Kelly Evans.

LyrArc Article Gist
ECB president, Mario Draghi, is interviewed at his office in Frankfurt by the Wall Street Journal's Blackstone, Karnitschnig, and Thomson. Draghi quotes economist Rudi Dornbusch, who told him in the old days that the Europeans were rich enough to afford paying for it if everybody didn't work. Draghi, was head of the Bank of Italy, before becoming president of the ECB. He is acutely aware of the problems faced by Italy and other countries like Spain which have let labor markets become rigid, with extensive job protections and generous benefits for the unemployed. The result is that employers are reluctant to hire and young people face high unemployment rates- as high as 50% in Spain. For this reason Draghi sees the old social model in Europe as obsolete and already out. Draghi's sees austerity measures and spending cuts with the structural changes underway in Spain, Italy and other countries as the only way to generate economic renewal. On the Long Term Financing Operation launched by the ECB in Dec. 2011, Draghi says there was agreement within the ECB and the decision was unanimous. He makes it one of his objectives to achieve as much consensus as he can, to do what is right for Europe and to do it together with his colleagues in the ECB and the EU. That financing operation, and the binding deficit controls achieved at a recent summit of European leaders, he sees as all part of the pathway to fiscal union. ...

LyrArc Article Gist
Angela Merkel is faced with the problem of getting German public opinion to support the bailout of Greece, Ireland, and then Portugal and next Spain. At the same time she wants to be seen as committed to the euro and the European Union. She is pushing for bondholders to bear a part of the costs of the bailout as part of their responsiblity for decisions they made, so that the German government and taxpayer is not left with the burden. This is not working out well and she is losing public support.

LyrArc Article Gist
Francesco Gurrerera, Money and Investing Editor for the WSJ points to the risks in the U.S. and global economy in April 2012- overdependence on the U.S. Federal Reserve and the European Central Bank, not enough "de-leveraging" of financial institutions after the 2008 global crisis, and the increasing risk associated with individual investors and businesses investing in risky securities in search of yield in a low-interest rate environment.