G20 Website

The official website of the G20 is expanding:

https://www.g20.org/index.aspx

There is now a public area with publications and other information sources. The website states that

... as Chair of the G20 in 2009 the UK, working closely with Brazil and Korea 2008 and 2010 Chairs respectively, has established four working groups to advance this work for the next Leaders Summit on 2 April in London. Each working group is co-chaired by two senior officials from the G20, one from a developed and one from an emerging market economy. Each G20 country is represented on each working group. Experts from relevant international financial institutions, standard setting bodies, non G20 countries, business and academia have also been invited by co-chairs to input into the work of the groups.

The four working groups are

Working Group 1 - Enhancing sound regulation and strengthening transparency
Working Group 2 - Reinforcing international co-operation and promoting integrity in financial markets
Working Group 3 - Reforming the IMF
Working Group 4 - The World Bank and other multilateral development banks (MDBs)

The forthcoming London summit has its own website: http://www.londonsummit.gov.uk/en/

Clear Rules of the Road

President Obama has outlined seven key principles for the future regulation of capital markets. They are remarkably abstract and aloft. Everybody would agree, for instance, that there must be stricter oversight of financial institutions - but what institutions, and who should exercise supervisions? Nobody doubts that markets need to be strengthened - but how? And what does he mean by "actual data on how actual people make financial decisions"? In a statement, the President has underlined that financial markets need "clear rules of the road". But so far, he has not given any indication of what their content might be.

Did math formula cause financial crisis?

This is the title of a short interview on Marketplace, a US public website which is part of American Public Media. The subject of the interview are copula, a statistical device used in the pricing of collateralized debt obligations (CDOs) and in other applications of financial risk assessment. More on this can be found in Felix Salmon's article Recipe for Disaster: The Formula That Killed Wall Street in Wired Magazine.

New Capital Assistance Program for US Banks

The latest version of the US government's rescue plan for commercial banks - the Capital Assistance Program (CAP) - was published yesterday by the US Treasury Department: Joint Statement by the Treasury, FDIC, OCC, OTS and the Federal Reserve. The program will begin on February 25. Here is the key passage of the joint statement:

Under this program ... the capital needs of the major U.S. banking institutions will be evaluated under a more challenging economic environment. Should that assessment indicate that an additional capital buffer is warranted, institutions will have an opportunity to turn first to private sources of capital. Otherwise, the temporary capital buffer will be made available from the government. <...> Any government capital will be in the form of mandatory convertible preferred shares, which would be converted into common equity shares only as needed over time to keep banks in a well-capitalized position and can be retired under improved financial conditions before the conversion becomes mandatory. Previous capital injections under the Troubled Asset Relief Program will also be eligible to be exchanged for the mandatory convertible preferred shares. more...

The new program could result in the nationalization of major US banks, with Citigroup being the first. Cf. the reports in the Washington Post and the New York Times. Paul Krugman argues that nationalization is unavoidable: Isn’t nationalization un-American? No, it’s as American as apple pie. Treasury Sectretary Timothy Geithner disagrees: Nationalization is the wrong strategy.

Protectionism within Europe

... is rearing its ugly head and the EU Commission is getting increasingly concerned about it, as financial24.org reports:

The European Commission, increasingly concerned about protectionist tendencies in member states, has asked France, Spain and, on Friday, Italy to justify their auto sector aid packages.

The EU's executive arm has some concerns over Italy's plan to aid its ailing auto sector and was writing to Rome Friday to seek more details, a spokesman said Friday. The commission will write to the Italian authorities today asking them to provide precise details on the measures within five working days, he added. One particular area of concern is that the government help seems to be available only to businesses that sign a protocol with the government, he said. Such aid could be discriminatory against companies who do not want to sign and in that case it would be state aid because it would be selective and threaten the free circulation of goods, he added. more...

Barroso calls for curb on bankers' bonuses

European Commission chief Jose Manuel Barroso calls for curb on bankers' bonuses. This is a report by financial24.org, based on Barroso's interview with Hamburger Abendblatt. (Here the German original: Scheitern darf nicht belohnt werden). Excerpts from the English report:

The payment of excessive bonuses incites financial managers to take ill-considered risks, Barroso told the German daily Hamburger Abendblatt. Rather, a system should be established that curbs the greed to realise quick profits and that doesn't reward failure, he said. The European Commission would examine a proposal to this effect in April or May, he told the newspaper. more...

EU-based central clearing for CDS

EurActiv.com reports on an agreement reached among banks and brokers involved in the credit default swaps industry: Industry commits to central clearing for credit swaps. Excerpts:

Major banks and brokers involved in the credit default swaps industry committed yesterday (19 February) to use EU-based central clearing for their trades, bowing to pleas from regulators to lower the risks of this business which stands accused of worsening the ongoing financial crisis. ...

Credit default swaps are a particular type of credit derivatives aimed at guaranteeing a creditor against the risk of default or delays in getting back the credit. ... The idea of establishing a central clearing house is considered a moderate way to reduce systemic risks related to derivatives. Instead of being exchanged privately ("over the counter", according to the jargon), they will be processed through a third intermediary, which will decrease costs and risks while raising guarantees. ...

Following pressures from the Parliament and the Commission, the main firms active in the market of credit default swaps agreed to use central counterparty clearing for the "eligible" EU contracts by end-July. They confirmed their engagement with a letter sent to commissioner Charlie McCreevy responsible for the EU internal market. The signatories of the letter are Barclays Capital, Citigroup Global Markets, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, J.P. Morgan, Morgan Stanley and UBS, all members of the International Swaps and Derivatives Associations (ISDA). more...

The slightly discordant note in this piece of good news is that the agreement seems to refer only to European contracts -- which would contradict the stated intentions of Chancellor Angela Merkel. In Mehr internationale Regeln für Finanzmärkte (also here) she states:

Wir wollen sicherstellen, dass es in Zukunft keine weißen Flecken mehr auf der Landkarte unserer Welt gibt, wenn es um Finanzmarktprodukte geht, wenn es um die Teilnehmer des Marktes geht und wenn es um die Instrumente geht.

Hedge Funds As Innocent Bus Crash Victims

In the current financial crises, the finger is sometimes pointed to hedge funds, which amass huge amounts of capital without being subject to public oversight. One hedge fund manager has now denied any responsibility. Marshall of Marshall Wace told the U.K. House of Commons Treasury Committee that "Blaming hedge funds is like blaming the passengers in a bus crash."

Banker-Boni

... sind derzeit im Gespräch. Gier, Neid und Niedertracht -- das Thema hat Massenappeal. Stellvertretend aus einer Vielzahl von Berichten hier ein Artikel aus dem Spiegel: Investmentbanker kassieren Millionen trotz Boni-Stopp. Dies ist keine "typisch deutsche" Neid-Debatte, kein deutscher Sonderweg. Dasselbe Thema erhitzt auch anderswo die Gemüter. Vgl. dazu die Google-Suche zum Stichwort executive pay caps. In der Tat ist es nicht einzusehen, dass Banker Boni in Millionenhöhe kassieren sollen, wenn sie so schlecht gewirtschaftet haben, dass ihre Institute nur mit staatlichen Finanzspritzen überleben können. Dies wirft wirtschaftliche, ethische und juristische Fragen auf.

Aus wirtschaftswissenschaftlicher Sicht macht gerade eine nüchterne empirische Analyse Furore, und zwar die Studie Wages and Human Capital in the U.S. Financial Industry: 1909-2006 von Thomas Philippon (New York University) und Ariel Reshef (University of Virginia). U.a. das Handelsblatt (Banker sind überbezahlt wie schon 1929) und Associated Press (Wall Street's culture of entitlement hard to shake) greifen sie auf. Die Autoren belegen mit ökonometrischen Methoden, dass die Gehaltsentwicklung im US-Finanzsektor nur mit einer anderen historischen Epoche vergleichbar ist: der Boom-Zeit vor der Großen Depression, die mit dem Aktiencrash vom Oktober 1929 endete. O-Ton der Studie:

This finding is prima facie evidence that the financial sector is not in a sustainable labor market equilibrium, and that short term rents are likely to diminish.

Klartext: Die Gehaltsentwicklung im Finanzsektor war nicht nachhaltig. Ein beträchtlicher Rückgang der dort erzielten (bzw. erzielbaren) Einkommen ist unvermeidlich.

Doch das Thema hat auch eine ethische Dimension. Offenbar tut sich hier ein Abgrund auf zwischen dem, was für Normalbürger ethisch selbstverständlich ist, und dem, was in der Welt der Investmentbanker als normal gilt. Unter der Überschrift John Thain fällt in Ungnade*/ macht die LA Times dazu eine kluge Beobachtung:

The long hours many bankers work help feed an attitude of entitlement, Freeman said."I've had former students talk about sleeping under their desks," he said. "This leads to this idea of, I'm entitled to being rewarded. But sometimes, that's disconnected from performance."

Will heißen: Die 24/7-Kultur, die bei Investmentbankern gepflegt wurde (wird?), führt bei ihnen zu dem Gefühl, die Millionenboni verdient zu haben. Dass sie mit ihrer Arbeit -- der Erzeugung von toxischen Finanzprodukten -- keine oder sogar negative Werte geschaffen haben, passt nicht in ihr Weltbild. Anders gesagt: die Investmentbanker beurteilen sich selbst nach ihrem Input (und der ist enorm), der Rest der Welt beurteilt sie nach ihrem Output - und der ist derzeit negativ.

Und schließlich der juristische Aspekt. Angeblich sind die Boni - da arbeitsvertraglich zugesichert - nicht kürzbar. In seinem Interview Geld des Steuerzahlers nicht für Boni erklärt der Staatsrechtler Otto Depenheuer von der Universität zu Köln, warum dem (nach seiner Ansicht) nicht so ist.

*/ John Thain (früher Merrill Lynch) war 2008 der Topverdiener an der Wall Street: Executive Pay: The Bottom Line for Those at the Top aus der New York Times.

Bail out: transatlantic differences

Recent developments on both sides of the Atlantic are puzzling. Looming defaults of some Euro area countries like Ireland, Spain or Greece put the Euro under pressure while at the same time the imminent danger of a default of California does not cause a weakening in the US dollar (see FTD) .

The most interesting thing about this: For members of the Euro area there is no doubt that a bail out will take place once a member has to default (see the statement given by the German Federal Minister of Finance in the final paragraphs of this piece). As for California, a bail out cannot be taken for granted.

Does this imply that markets do not demand bail outs but actually punish them?!

Maybe the answer is that markets expect that California, as the world's economically strongest region, could afford an increase in taxes for paying down its debt, while this option is not available to Euro area countries like Ireland, Spain and Greece...

Gesetz zur weiteren Stabilisierung des Finanzmarktes

Hier findet sich der am 18. Februar 2009 vom Bundeskabinett beschlossene Entwurf des Gesetzes zur weiteren Stabilisierung des Finanzmarktes, mit dem u.a. die vieldiskutierten Enteignungen von Banken möglich werden sollen.
Zum Inhalt des Gesetzes heißt es in der offiziellen Vorlage wie folgt:
"Der Entwurf sieht vor allem Anpassungen und Verbesserungen bei den Begleitregelungen im Gesellschafts- und Übernahmerecht vor, damit Stabilisierungsmaßnahmen schnell und effektiv greifen können und Übernahmen zum Zweck der Stabilisierung erleichtert werden. Diese Änderungen gelten nur für Unternehmen, die die Leistungen des Stabilisierungsfonds in Anspruch nehmen oder nehmen wollen. Darüber hinaus schafft der Gesetzentwurf die zeitlich eng befristete Möglichkeit, zur Sicherung des öffentliches Gutes „Finanzmarktstabilität“ Anteile an einem Unternehmen des Finanzsektors und Wertpapierportfolien gegen angemessene Entschädigung zugunsten des Bundes oder des Finanzmarktstabilisierungsfonds zu verstaatlichen. Die Verstaatlichung ist nur zulässig, wenn andere rechtlich und wirtschaftlich zumutbare Lösungen zur Sicherung der Finanzmarktstabilität nicht mehr zur Verfügung stehen."

Aida - nicht von Verdi und auch keine Kreuzfahrt

Das Handelsblatt beschreibt die sich nunmehr abzeichnende Aida-Lösung für die geplante Bundesanstalt für Bad Banks:

... Kern des Modells sei eine Holding, die nach dem Vorbild der staatseigenen Förderbank KfW von den Vorschriften des Kreditwesengesetzes (KWG) befreit wäre. Diese Holding bildet sozusagen das Dach einer Halle, in der dann die Bad Banks der einzelnen Institute stehen. Sie wären ebenfalls Anstalten des öffentlichen Rechts und damit „Anstalten in der Anstalt“ – kurz Aida. Deshalb heißt das Projekt auch „Aida-Modell“. mehr ...

In German - Wissenschaftliche Beirat beim Bundeswirtschaftsministerium zur Bankenregulierung in der Finanzkrise

Eine ausführliche Stellungnahme des wissenschaftlichen Beitrages beim BMWi zur Bankenregulierung in der Finanzkrise ist hier verfügbar.

IMF Gains New Funding, Puts Focus on Bank Clean Up

Warning that the global economic crisis is set to bite emerging markets and low-income countries harder this year, IMF head Dominique Strauss-Kahn says he aims to double the Fund's lendable resources to $500 billion and boost loans for poorest. See here