Here's my Top 10 links from around the Internet in the last 24 hours or so at 10 am. I welcome your additions in the comments below. I'm glad it's not my birthday. 1. The Bridgecorp trainwreck is just getting worse. We heard yesterday from the NZHerald of a Companies Office report that Rod Petricevic used Bridgecorp as his "personal bank". Today the NZHerald has drip-fed out more of the report, including that Bridgecorp used a 'conduit' to shift money in a related party transaction. 2. The St Laurence/Albany City development struggles are also getting worse. The NZHerald's Anne Gibson reports that up to 350 mostly elderly investors risk losing a combined NZ$20 million because the NZ$500 million Albany 'Super City' is on the rocks. A bond payment appears it will default. 3. Standard and Poor's has downgraded Ireland's sovereign rating again to AA overnight, hammering Irish banks and Irish shares, the FT.com reported. It also drove down the Euro versus the US dollar. Ah but for the grace of god (S&P) go us... 4. The Bank of England plans to extend its Quantitative Easing (QE) programme of money printing/bond buying to wider forms of commercial paper and corporate debt, the FT.com reported. 5. The US 30 year mortgage rate rose through 5% overnight and has risen from 4% in the last six weeks, Tyler Durden at ZeroHedge points out. The global theme of rising long term interest rates could yet drive the United States into a double dip recession.
6. Remember the US plan to subsidise the creation of bad banks to buy toxic assets cheaply? It was supposed to be one of the big ideas to fix the insolvent US banking system. Now it's in deep trouble, according to the FT.com. US regulators and the Treasury believe, apparently, that there's not much need anymore.
The plan has fallen prey to concerns from potential investors and regulators and waning interest from the banks themselves. Investors fear that Congress may set caps on pay while regulators are beginning to doubt whether the plan is really necessary. Some experts, including the International Monetary Fund, worry that a failure to rid banks of bad assets could inhibit lending. The problem may be acute for small regional banks that have not yet taken substantial writedowns on their loan books. The Federal Reserve "“ which was to provide loans to investors to buy bubble-era securities "“ has only confirmed it will finance bubble-era commercial mortgage-backed securities. But it has run into problems on securities backed by residential mortgages where the value of the underlying loans is difficult to measure. "We have not made a final decision on whether it is doable and, if it is doable, whether it is worth the cost," William Dudley, president of the Federal Reserve Bank of New York, said on Friday.
7. Meawhile, Citigroup has managed to push FDIC chair Sheila Bair back into her corner after she tried to get Citi CEO Vikram Pandit sacked, Bloomberg reported. It's amazing, somehow, that the same managers responsible for ruinous sub-prime lending and toxic debt issuance remain in charge of their 'too big to fail' banks. Bair seems like a proper regulator. Geithner is a walkover for his mates on Wall St.
Bair, 55, who has a say in Citigroup's fate because of her agency's role as guarantor of a portion of the bank's $298 billion in U.S. deposits, was pushing for change because she didn't think management had enough commercial-banking experience to lift the bank out of its distressed financial condition, the people said. Her concern was driven partly by analysis by the bank's primary regulators, which include the Office of the Comptroller of the Currency and the Federal Reserve, a person briefed on the matter said. Geithner believes Pandit's turnaround plan should be given time to work, people familiar with the matter said. He also thinks that replacing management now might be destabilizing, the people said. Geithner plans to sign the agreement as soon as this week because Citigroup has addressed any lingering concerns from his agency, people familiar with the agency said.
8. The Chinese push to create some yuan/renminbi alternatives to the US dollar is very serious. The FT.com reported that that Guo Shuqing, the Chairman of China Construction Bank, was looking at offering renminbi denominated trade finance credit to make the Chinese currency more acceptable internationally.
His voice, the first from the head of a large Chinese bank, joins a chorus from senior government officials on currency matters that together reflect concerns about the stability of the US dollar and several efforts to promote the use of the renminbi more widely.
9. Reuters reported the same banking executive as saying the World Bank and the US Government should issue Yuan denominated bonds in Hong Kong and Shanghai to promote the yuan as a major international currency. Now that's a sight I'd like to see: the US government being forced to issue debt in Yuan because the US dollar is no longer trusted. HT FTAlphaville.
In an interview with Reuters, Guo said it was in American interests to see the yuan, also known as the renminbi, become a currency that is traded across the globe. He said that is largely because of the symbiotic relationship between U.S. purchases of Chinese goods and China's purchases of U.S. assets with the proceeds. Guo, who is a former head of China's foreign exchange administration, said there should be "mutual cooperation" between the U.S. and China to promote China's financial sector and markets.
10. Floyd Norris at the New York Times digs up this interesting gem about how some funds and banks are valuing their toxic assets. They are jumping all sorts of hoops to avoid having to write down these assets. He points out an example of one fund that valued a toxic bond at US$98.93 per US$100 when another fund had traded that bond at US$9.50.
So the fund valued the security at more than 10 times its market value, until it was forced to write down lots of securities. Is a multiple of 10 possible now? Or are banks raising market values by only two or three times when they decide sales were "distressed?" We don't know. But we know that only a year ago one mutual fund thought a multiple of 10 was quite reasonable.
And the American government wonders why the rest of the world, and the Chinese government in particular, don't really trust the US financial system? HT Felix Salmon