Talk Back

A reader responds to a recent column, “FX MATH: Bright Skies And Foreign Flows, If Italy Avoided The Euro”:

“Vincent Cignarella and Stephen Bernard’s article is highly interesting and shows the insanity of the common currency since the same is probably true for Greece.

“I would be highly interested in a similar analysis for the French, who have got a pretty good savings rate, as far as I know, but obviously very bad public spending habits, which could get worse if Hollande were to win the election and to get a comfortable majority in Parliament, events that I believe are likely to happen.

“Many thanks for your attention.”

Werner Strohmeier Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Derivatives are as ancient as civilization.

Greek farmers insured crops with investors prepared to speculate on the weather, just as life insurers hedge mortgage-backed securities by purchasing credit default swaps.

When written against real assets, whether farmers’ crops or homes, derivatives spread risk, lower capital costs and foster growth.

Like any other financial contract, derivatives can be abused, and the big-bonus culture on Wall Street has given us some high-profile shenanigans.

How derivatives are regulated or overregulated is central not just to curbing excess, but to ensuring that farmers can plant, home buyers can borrow and businesses can invest.

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These are the personal views of Martin Fridson, chief executive of Fridson Investment Advisors.

Are you in favor of forcing companies to pay higher borrowing costs by making it harder for them to dispel unfounded doubts about their debt repayment capability?

No astute politician would support a proposal framed in such terms, yet that is the predictable effect of a provision in the Wall Street Reform and Consumer Protection Act (H.R. 4173), passed by the U.S. House of Representatives in December.

If Section 6007 of the bill is adopted by the Senate and signed by the President, bond-rating agencies will lose their exemption from Securities and Exchange Commission Regulation FD, also known as the fair disclosure rule.

Regulation FD bars public companies from selectively disclosing material nonpublic information to investment professionals such as money managers and securities analysts.

The exception for rating agencies has existed ever since the rule went into effect in 2000. In the interim, there has been no rash of insider trading violations traceable to Standard & Poor’s, Fitch Ratings, or Moody’s Investors Service.

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These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Goldman Sachs, J.P. Morgan and other big Wall Street banks are awarding multi-million dollar bonuses to the same financiers who pushed the nation to the brink of financial ruin.

President Barack Obama voices outrage but fails to stem the abuse.

Wall Street leaders argue those bonuses were earned, much like jewel thieves refer to a big heist snatched from an impenetrable safe.

Wall Street has kept its mischief legal by salting the pockets of politicians running for Congress and president, and by making certain that key policy makers at the Treasury Department and the Federal Reserve are faithful Goldman Sachs alumni. Continue reading…

These are the personal views of David M. Walker, former U.S. comptroller general from 1998-2008, president and CEO of the Peter G. Peterson Foundation, and author of “Comeback America”:

It’s been over 10 months since President Obama held a Fiscal Responsibility Summit in the White House. During 2009, we saw a huge amount of increased federal spending, some of which was “emergency” spending designed to stimulate the economy and address several housing and financial services related non-business cycle challenges. There have also been a number of unprecedented federal government interventions (e.g., General Motors) and various proposals to expand the size of government, especially in the health care area. In addition, based on the fiscal 2009 and 2010 annual appropriations bills, the level of annual “discretionary” federal spending will increase by more than 20 percent over fiscal 2008 levels.

At the same time, there has been no meaningful progress to establish a process that will enable us to address our nation’s huge and growing structural deficits and increasing debt levels.

Increasingly, Americans are not just focused on today, they are also concerned about what tomorrow may bring. They are fearful that life for their children and grandchildren may not be as good as theirs has been. They know that business as usual in Washington is unacceptable and they want to see more action in connection with a range of key sustainability challenges that serve to threaten our collective future. Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

For Democrats, the chickens are coming home to roost. Badly conceived efforts to rescue homeowners facing foreclosure, regional banks and the unemployed are failing.

Bureaucracy and corruption are to blame.

The president’s program to restructure mortgages for homeowners facing payments too large for their incomes or who owe more money than houses are worth has only helped several thousand, not millions as expected.

The Treasury now proposes to shame some banks and invasively monitor, nag and cajole mortgage servicing companies–much like autocratic Beijing abuses Chinese financial institutions.

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By Neal Lipschutz
A DOW JONES NEWSWIRES COLUMN

The first paragraph of The Wall Street Journal article uses the verb “pushed” to describe the decision by outgoing Bank of America Corp. (BAC) Chief Executive Kenneth D. Lewis to go without compensation for 2009.

The pusher, of course, was Kenneth Feinberg, the so-called pay czar put in place by the Obama administration to oversee pay practices at the companies receiving major federal assistance.

Imagine for a moment that this is not about Ken Lewis (a Bank of America spokesman, it should be noted, told the Journal Lewis  voluntarily agreed to go without 2009 pay), but instead about a theoretical CEO at a theoretical company.

The company is performing badly. The shareholders over a sustained amount of time have taken a big hit on their investments. There is significant if not uniform disenchantment with the CEO’s performance based on a number of objective and even subjective variables. Continue reading…

The $8,000 new-homeowner tax credit is the culprit, fueled by inexperienced homeowners and easy credit.

It’s deja vu all over again.

This is how the U.S. Department of Housing and Urban Development (HUD) poses it to prospective home borrowers:

There are lots of good reasons to choose an FHA-insured loan, especially if one or more of the following apply to you:

You’re a first-time homebuyer.

You don’t have a lot of money to put down on a house.

You want to keep your monthly payments as low as possible.

You’re worried about your monthly payments going up. You’re worried about qualifying for a loan.

You don’t have perfect credit. Continue reading…

By Neal Lipschutz
   A DOW JONES NEWSWIRES COLUMN 

The fine imposed on Bank of America Corp. for allegedly misleading investors about big bonuses it agreed could be paid to Merrill Lynch & Co. executives just before the struggling Merrill was subsumed into BofA illustrates the Securities and Exchange Commission’s punishment conundrum.

There’s no doubt the BofA action, or lack of disclosure, is a serious matter. Yes, it was a frantic time in the annals of American capitalism. The system was rocked. Still, basic tenets of shareholder rights, such as disclosure of material information, must always be respected.

Imagine the position of a theoretical, long-time shareholder of Bank of America. He was an owner when the merger was coming together. He is  frustrated and angry by the SEC’s allegations against Bank of America.

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