While the stabilization of the economy over the short term is critical, we also discussed other challenges ahead of us. The crisis has revealed that there are some fundamental weaknesses in the global economy related to propriety, integrity and transparency. To address these issues in a comprehensive fashion, we agreed on the need to develop the Lecce Framework - a set of common principles and standards governing the conduct of international business and finance - which builds on existing initiatives and lays the foundation for a stable growth path over the long term (see the attached annex for details). We are committed to working with our international partners to make progress with this initiative, with a view to reaching out to broader fora, including the G20 and beyond. We discussed regulatory reform in our countries and at the international level. We are swiftly implementing the decisions taken at the London Summit and call on others to join our efforts to ensure global financial stability and an international level playing field.
While the stabilization of the economy over the short term is critical, we also discussed other challenges ahead of us.
The crisis has revealed that there are some fundamental weaknesses in the global economy related to propriety, integrity and transparency. To address these issues in a comprehensive fashion, we agreed on the need to develop the Lecce Framework - a set of common principles and standards governing the conduct of international business and finance - which builds on existing initiatives and lays the foundation for a stable growth path over the long term (see the attached annex for details).
We are committed to working with our international partners to make progress with this initiative, with a view to reaching out to broader fora, including the G20 and beyond.
We discussed regulatory reform in our countries and at the international level. We are swiftly implementing the decisions taken at the London Summit and call on others to join our efforts to ensure global financial stability and an international level playing field.
NEW YORK (Reuters) - The rapid rise in bond yields will force the Federal Reserve to "engage again" in the purchases of U.S. Treasuries and mortgage-backed securities, Mohamed El-Erian, the chief executive of bond giant Pacific Investment Management Co., said Friday. The surge in Treasury yields is lifting mortgage rates, threatening to dampen home demand and kill off the refinancing boom that is bolstering the health of some households. "What mistake can the U.S. economy afford to make? If you look at it that way, I suspect that we will see the Fed engage again in these markets," El-Erian, who oversees $756 billion at PIMCO, told Reuters Financial Television. Debate is brewing within the Federal Reserve over whether it should ramp up its purchases of Treasuries and mortgage-backed securities to keep a lid on interest rates, or scale them back to avoid an outbreak of inflation. Massive buying of securities by the U.S. central bank has doubled the size of its balance sheet to around $2 trillion as it flooded the economy with money to prevent a severe recession getting worse.
NEW YORK (Reuters) - The rapid rise in bond yields will force the Federal Reserve to "engage again" in the purchases of U.S. Treasuries and mortgage-backed securities, Mohamed El-Erian, the chief executive of bond giant Pacific Investment Management Co., said Friday.
The surge in Treasury yields is lifting mortgage rates, threatening to dampen home demand and kill off the refinancing boom that is bolstering the health of some households.
"What mistake can the U.S. economy afford to make? If you look at it that way, I suspect that we will see the Fed engage again in these markets," El-Erian, who oversees $756 billion at PIMCO, told Reuters Financial Television.
Debate is brewing within the Federal Reserve over whether it should ramp up its purchases of Treasuries and mortgage-backed securities to keep a lid on interest rates, or scale them back to avoid an outbreak of inflation.
Massive buying of securities by the U.S. central bank has doubled the size of its balance sheet to around $2 trillion as it flooded the economy with money to prevent a severe recession getting worse.
WASHINGTON (Reuters) - The U.S. Treasury Department is facing mounting pressure to ensure that taxpayers get a fair return on banks' warrants as the largest firms prepare to shake off government ownership stakes. At the same time, Treasury is mired in negotiations with the banks, who want to lower the warrants' multi-billion dollar price tag and avoid another big hit to their capital position. "The pricing of the warrants held by Treasury ... will be critical to ensuring an appropriate return on investment for the government and, consequently, American taxpayers," the two chief watchdogs of the financial rescue wrote this week in a letter obtained by Reuters. A financial industry source said banks' negotiations with Treasury over the value of the warrants are "calm" but said "the price ranges are all over the place." The debate over the warrants is coming to a head as next week 10 of the biggest banks will begin to repay almost $70 billion in Troubled Asset Relief Program (TARP) funds, freeing the firms of a public stigma and restrictions on executive pay. Repaying rescue funds will involve banks buying back the preferred shares that many sold to the government when financial markets were squeezed by a credit crunch last fall. But banks also wish to repurchase the warrants that give the government the right to buy common stock at a pre-set price for up to 10 years.
WASHINGTON (Reuters) - The U.S. Treasury Department is facing mounting pressure to ensure that taxpayers get a fair return on banks' warrants as the largest firms prepare to shake off government ownership stakes.
At the same time, Treasury is mired in negotiations with the banks, who want to lower the warrants' multi-billion dollar price tag and avoid another big hit to their capital position.
"The pricing of the warrants held by Treasury ... will be critical to ensuring an appropriate return on investment for the government and, consequently, American taxpayers," the two chief watchdogs of the financial rescue wrote this week in a letter obtained by Reuters.
A financial industry source said banks' negotiations with Treasury over the value of the warrants are "calm" but said "the price ranges are all over the place."
The debate over the warrants is coming to a head as next week 10 of the biggest banks will begin to repay almost $70 billion in Troubled Asset Relief Program (TARP) funds, freeing the firms of a public stigma and restrictions on executive pay.
Repaying rescue funds will involve banks buying back the preferred shares that many sold to the government when financial markets were squeezed by a credit crunch last fall. But banks also wish to repurchase the warrants that give the government the right to buy common stock at a pre-set price for up to 10 years.
With all the talk of "green shoots" of economic recovery, America's banks are pushing back on efforts to regulate them. While politicians talk about their commitment to regulatory reform to prevent a recurrence of the crisis, this is one area where the devil really is in the details - and the banks will muster what muscle they have left to ensure that they have ample room to continue as they have in the past.The old system worked well for the bankers (if not for their shareholders), so why should they embrace change? Indeed, the efforts to rescue them devoted so little thought to the kind of post-crisis financial system we want that we will end up with a banking system that is less competitive, with the large banks that were too big too fail even larger.It has long been recognised that those America's banks that are too big to fail are also too big to be managed. That is one reason that the performance of several of them has been so dismal. Because government provides deposit insurance, it plays a large role in restructuring (unlike other sectors). Normally, when a bank fails, the government engineers a financial restructuring; if it has to put in money, it, of course, gains a stake in the future. Officials know that if they wait too long, zombie or near zombie banks - with little or no net worth, but treated as if they were viable institutions - are likely to "gamble on resurrection". If they take big bets and win, they walk away with the proceeds; if they fail, the government picks up the tab.
With all the talk of "green shoots" of economic recovery, America's banks are pushing back on efforts to regulate them. While politicians talk about their commitment to regulatory reform to prevent a recurrence of the crisis, this is one area where the devil really is in the details - and the banks will muster what muscle they have left to ensure that they have ample room to continue as they have in the past.
The old system worked well for the bankers (if not for their shareholders), so why should they embrace change? Indeed, the efforts to rescue them devoted so little thought to the kind of post-crisis financial system we want that we will end up with a banking system that is less competitive, with the large banks that were too big too fail even larger.
It has long been recognised that those America's banks that are too big to fail are also too big to be managed. That is one reason that the performance of several of them has been so dismal. Because government provides deposit insurance, it plays a large role in restructuring (unlike other sectors). Normally, when a bank fails, the government engineers a financial restructuring; if it has to put in money, it, of course, gains a stake in the future. Officials know that if they wait too long, zombie or near zombie banks - with little or no net worth, but treated as if they were viable institutions - are likely to "gamble on resurrection". If they take big bets and win, they walk away with the proceeds; if they fail, the government picks up the tab.
Credit default swaps are "instruments of destruction" that should be outlawed as the world looks to re-regulate the global financial system in the wake of last year's credit crisis, the billionaire investor and philanthropist George Soros said on Friday.
Mr Soros, the Hungarian-born US fund manager, said that the swaps were `truly toxic', grossly distorting risk, encouraging speculation and with the potential bring ruin on financial institutions and companies.
Yield on Two-Year T-Bonds Spike Up Eric Roseman Sovereign Society Treasury Prices Buckling Under the Weight of This Year's Issuance (30-Year US Treasury Bond Prices) Dollar Treads Water Roseman's opinion: "The Treasury market is coming undone in a big way. This is not good news for the credit market or the U.S. dollar." He, of course, is happy to sell you some advice.
Treasury Prices Buckling Under the Weight of This Year's Issuance (30-Year US Treasury Bond Prices)
Dollar Treads Water
Roseman's opinion: "The Treasury market is coming undone in a big way. This is not good news for the credit market or the U.S. dollar." He, of course, is happy to sell you some advice.
Embattled British Prime Minister Gordon Brown won some backing from a Nobel Prize-winning economist today, who said the UK economy looked to be faring the best in Europe. Princeton University economics professor Paul Krugman praised Mr Brown's handling of the banking crisis and his economic policies as "intelligent". "I think the UK economy looks the best in Europe at the moment," he told The Observer. "The fact of the matter is that Britain did manage to stabilise the banking system." He added: "If the government can hold off having an election until next year, Labour might be able to run as 'the people who brought Britain out of the slump'."
Princeton University economics professor Paul Krugman praised Mr Brown's handling of the banking crisis and his economic policies as "intelligent".
"I think the UK economy looks the best in Europe at the moment," he told The Observer. "The fact of the matter is that Britain did manage to stabilise the banking system."
He added: "If the government can hold off having an election until next year, Labour might be able to run as 'the people who brought Britain out of the slump'."
