European Union finance ministers have agreed to establish a new framework for financial supervision, designed to help prevent future financial crises.

The measures include a European Systemic Risk Board to oversee the health of Europe's economy.

Ministers also approved a second instalment of emergency loans to Greece worth 9bn euros ($11.4bn; £7.5bn).

They were unable, however, to agree a new Europe-wide bank levy or bank transaction tax.

HSBC may move from London if the UK government decides to break up big banks, a senior executive has said.

Stuart Gulliver, head of the Canary Wharf-based bank's investment banking division, made the warning at a banking conference.

He said he was "genuinely concerned" that the UK's banking commission would recommend splitting up banks.

"[That] has significant implications clearly for where we may choose to headquarter our institution."

"I want to be crystal clear. Our preference is to be headquartered in the UK," added Mr Gulliver.

Nearly 10,000 jobs are at risk as the property and environmental services giant Connaught faces collapse.

The company, which specialises in social housing, said it was "in the process of appointing administrators".

The appointment is expected to be completed and announced formally on Wednesday morning.

President Barack Obama is to back new company tax breaks in a bid to regain the initiative as mid-term polls loom.

He will lobby Congress - including a blocking minority of Republicans in the Senate - to let companies in the US write off investment costs until 2011.

With unemployment stuck at 10% and the economy appearing to slow sharply, the president's Democratic Party could face big losses at the November elections.

On Monday, Mr Obama also called for $50bn of new infrastructure spending.

In addition to its roughly $400 billion (and growing) of outstanding government debt, the Greek number crunchers had just figured out that their government owed another $800 billion or more in pensions. Add it all up and you got about $1.2 trillion, or more than a quarter-million dollars for every working Greek. Against $1.2 trillion in debts, a $145 billion bailout was clearly more of a gesture than a solution. And those were just the official numbers; the truth is surely worse. "Our people went in and couldn't believe what they found," a senior I.M.F. official told me, not long after he'd returned from the I.M.F.'s first Greek mission. "The way they were keeping track of their finances--they knew how much they had agreed to spend, but no one was keeping track of what he had actually spent. It wasn't even what you would call an emerging economy. It was a Third World country."

As it turned out, what the Greeks wanted to do, once the lights went out and they were alone in the dark with a pile of borrowed money, was turn their government into a piñata stuffed with fantastic sums and give as many citizens as possible a whack at it. In just the past decade the wage bill of the Greek public sector has doubled, in real terms--and that number doesn't take into account the bribes collected by public officials. The average government job pays almost three times the average private-sector job. The national railroad has annual revenues of 100 million euros against an annual wage bill of 400 million, plus 300 million euros in other expenses. The average state railroad employee earns 65,000 euros a year. Twenty years ago a successful businessman turned minister of finance named Stefanos Manos pointed out that it would be cheaper to put all Greece's rail passengers into taxicabs: it's still true. "We have a railroad company which is bankrupt beyond comprehension," Manos put it to me. "And yet there isn't a single private company in Greece with that kind of average pay." The Greek public-school system is the site of breathtaking inefficiency: one of the lowest-ranked systems in Europe, it nonetheless employs four times as many teachers per pupil as the highest-ranked, Finland's. Greeks who send their children to public schools simply assume that they will need to hire private tutors to make sure they actually learn something. There are three government-owned defense companies: together they have billions of euros in debts, and mounting losses.

Wall St. at Harvard and Princeton: "A Communal Obsession"
As we continue to ask ourselves, "how could it all have happened," that is, the financial crisis that nearly plunged the world into a second Great Depression, we should not forget the nature of the salespeople who peddled the faulty investments which almost brought it on. That's conveyed to us in a startling way in Chapter One, which Ho has entitled "Biographies of Hegemony." In an interview (individual names are changed, the institutions' kept) with a "Robert Hopkins, a vice president of mergers and acquisitions at Lehman Brothers," the pitch is: "`We are talking about the smartest people in the world. We are! They are the smartest people in the world. If you (the average investor or the average corporation) don't know anything, why wouldn't you invest with the smartest people in the world? They must know what they are doing.'"(Page 40.) Now where do you find the smartest people in the world? Arguably, but conventionally, the answer would be mostly at Harvard, Princeton and the Wharton School at the University of Pennsylvania. Why not MIT, and Stanford, and what's the matter with Yale? Well, maybe it isn't quite all about smartness. In fact, it's about cultural projection too: clothes, confidence, aggressiveness contained within good manners, body image...in brief, it's smartness well-packaged, because salesmanship for financial products, deals and mergers, scanning the horizon for new customers, depends on wide business networking and social interaction with corporate America, and beyond...as we will see shortly. So sorry MIT, Ho tells us ("too nerdy"), Yale ("too liberal") and Stanford ("too far" - from Wall Street, that is)...

Two things jolted me about this smartness motif and the recruiting process at Princeton and Harvard. One is the astounding numbers of undergraduates that want to ascend into this celestial orbit; at Princeton, from 37% of the class of 2001 up to 40% of the class of 2005 & 2006 "entered financial services," with similar numbers for Harvard. How could that be done? The answer is not pretty: Wall Street's presence "dominates campus life: recruiters visit the university virtually every week, even on weekends...the recruiting process saturates almost every aspect of campus life from the very first day of the academic year."(Page 45.) Ho presents us with a two page spread of "Goldman Sachs Recruitment Schedule at Harvard University, 2000-2001," and I count 30 or so events, multiples in every month from September through February. It's so Wall Street saturated at these schools that Ho says "a glance at the campus publications...demonstrates what amounts to a communal obsession..." (Page 53.)

It was in the light of Ho's illumination that I read with great interest Harvard President Drew Gilpin Faust's September 6, 2009 NY Times Op-Ed, "The University's Crisis of Purpose." It's a retrospective and lamentation at the same time, in the wake of the Great Financial Crisis, and what universities had become, unable to "expose the patterns of risk and denial" contained in that "bubble of false prosperity and excessive materialism..." She asks if "universities (became) too captive to the immediate and worldly purposes they serve" and, "has the market model become the fundamental and defining identity of higher education?" Noting the trend, since the 1970's, for business degrees to outnumber by a 2:1 ratio the next most popular major, she reaffirms a mission for higher education to "offer individuals and societies a depth and breadth of vision absent from the inevitably myopic present." This sounds hopeful, but the trends of 30 years of Market Utopianism, and the vast shadow cast by The Market, will not be lifted in an instant, barring a further economic catastrophe on the scale of the Great Depression.

Wow, the EU is increasingly taking steps to force foreign, meaning US and UK firms, to play by its rules or not have access to its investors. The first salvo occurred over private equity funds and hedge funds, where the EU will limit its investors to funds located in the EU, and is also limiting the ability of foreign funds to acquire firms in the EU.

The latest development is that the EU is implementing a rule called 122(a) which will have a significant impact on the private securitization market. EU investors will be penalized (via much higher capital requirements) if they invest in asset backed securities that they cannot understand. And of course, to understand them, the issuer has to make pretty complete disclosure (you can't assess in a vacuum). That disclosure in turn happens to be higher than the norm pre crisis.

....

The fact that the EU is muscling the US is a sign of both the US's weakening authority and a lack of strategic vision. As strange as it may seem now, the reason the US has had the deepest capital markets wasn't simply the size of our economy, but the perception that we had the most open and fairest regime for investors. The US markets are badly tarnished, yet the authorities continue to take their cues from the very same industry incumbents who created this mess.

The Japanese often would speak of "foreign pressure" as in using foreigners as an excuse to do things that the elite bureaucrats actually wanted to happen but found difficult politically. The worst is our top regulators still seem unable to believe that they can and must be much tougher with their charges.

And you were wondering why the SEC and certain politicians with extensive connections to the financial services lobby are starting to stir now that it is common knowledge that every single hedge fund and trading desk's woes are a function of HFT run amok (which is exaggerated BS of course, but from Wall Street's darling, HFT has now become the one thing everyone loves to hate, and blame their own underperformance on). And as we suspected, there is a far more structural issue underlying the recent faux-move to restore confidence in markets, namely imminent pain for Wall Street headcounts... and bottom lines. According to Meredith Whitney, who had been relatively quite in recent weeks, Wall Street faces the departure of about 80,000 staffers, or 10% of all, within 18 months, not to mention a major drop in Wall Street compensation. The reason is the same as the one we pointed out earlier: slowing revenue growth, primarily due to the complete collapse in trading volumes, as computers have used their binary elbows to push everyone else out of the markets, and with Wall Street's primary revenue model now being exclusively reliant on trading, this is equivalent to a partial extinction event as many trading firms will have to close. This also means that the New York City economy is facing another major solvency crisis as tax receipts are sure to plummet.

More from Bloomberg, citing Whitney:

   "The key product drivers of Wall Street's revenues and profits over the past decade have been in a structural decline over the past three years," Whitney said in the report. "2010 marks the first year in many in which Wall Street-centric firms will go through structural changes."

    Barclays Plc, Credit Suisse Group AG and Royal Bank of Scotland Group Plc may lead a slowdown in hiring in Europe as the fixed-income trading boom fizzles out, recruiters said last month. Barclays Capital's income from trading bonds and commodities fell 40 percent in the first half amid the sovereign debt crisis. Fixed-income, currencies and commodities trading was the biggest revenue contributor at investment banks from Deutsche Bank AG to Goldman Sachs Group Inc.

    While regulatory reform, including higher capital requirements, will force some of these shifts, there will be a "deeper secular change" due to declining revenue in businesses such as securitization, Whitney wrote.

    Even though emerging markets will continue to expand, they won't do so fast enough to offset the declines in the U.S. and Europe, Whitney said.

Guardian - Jonathan Freedland - An economy kept afloat by mafia cash is not just the stuff of Le Carré thrillers

Leading banks around the world, desperate for cash in the financial crisis, turn to the proceeds of organised crime as "the only liquid investment capital" available, eventually absorbing the greater part of a staggering $352bn of drugs profits into the global economic system, laundering that vast sum in the process.....

I'd arrived in Athens just a few days earlier, exactly one week before the next planned riot, and a few days after German politicians suggested that the Greek government, to pay off its debts, should sell its islands and perhaps throw some ancient ruins into the bargain. Greece's new socialist prime minister, George Papandreou, had felt compelled to deny that he was actually thinking of selling any islands. Moody's, the ratings agency, had just lowered Greece's credit rating to the level that turned all Greek government bonds into junk--and so no longer eligible to be owned by many of the investors who currently owned them. The resulting dumping of Greek bonds onto the market was, in the short term, no big deal, because the International Monetary Fund and the European Central Bank had between them agreed to lend Greece--a nation of about 11 million people, or two million fewer than Greater Los Angeles--up to $145 billion. In the short term Greece had been removed from the free financial markets and become a ward of other states.

That was the good news. The long-term picture was far bleaker. In addition to its roughly $400 billion (and growing) of outstanding government debt, the Greek number crunchers had just figured out that their government owed another $800 billion or more in pensions. Add it all up and you got about $1.2 trillion, or more than a quarter-million dollars for every working Greek. Against $1.2 trillion in debts, a $145 billion bailout was clearly more of a gesture than a solution. And those were just the official numbers; the truth is surely worse. "Our people went in and couldn't believe what they found," a senior I.M.F. official told me, not long after he'd returned from the I.M.F.'s first Greek mission. "The way they were keeping track of their finances--they knew how much they had agreed to spend, but no one was keeping track of what he had actually spent. It wasn't even what you would call an emerging economy. It was a Third World country."

As it turned out, what the Greeks wanted to do, once the lights went out and they were alone in the dark with a pile of borrowed money, was turn their government into a piñata stuffed with fantastic sums and give as many citizens as possible a whack at it. In just the past decade the wage bill of the Greek public sector has doubled, in real terms--and that number doesn't take into account the bribes collected by public officials. The average government job pays almost three times the average private-sector job. The national railroad has annual revenues of 100 million euros against an annual wage bill of 400 million, plus 300 million euros in other expenses. The average state railroad employee earns 65,000 euros a year. Twenty years ago a successful businessman turned minister of finance named Stefanos Manos pointed out that it would be cheaper to put all Greece's rail passengers into taxicabs: it's still true.