Here's my top 10 links from around the Internet over the last day or two, which will be published every weekday morning at 10am from now on. My apologies for the non-appearance of my Top 10 for a few days. Just got a bit hectic. Stock market celebrates The Dow and S&P 500 have ralled 7% overnight after Barack Obama's administration unveiled a 'Public-Private Partnership' to clean up the toxic debt on bank balance sheets by creating a 'Bad Bank' jointly owned by the government and private investors. The idea is this 'bad bank' would create liquidity to price the debt and shift it off balance sheets, allowing banks to get lending again. The risk for the taxpayer is that they overpay for the debt and that the private partners make all the profit (while not sharing the losses) Here's the latest at MarketWatch. But there's a catch Paul Krugman at the New York Times reckons, however, there's a big public subsidy involved in the plan. Liquidity or solvency? John Authers at the FT.com has a quick but sober view. Here's a taste.
Like the original troubled asset relief programme, which set off a big rally in September, it assumes that the problem is one of liquidity. It aims to put a price on securities that are not trading. But, if the problem is really one of solvency "“ that current prices for these assets are accurate "“ the gains may not be durable.
And it may not be big enough Alistair Barr at MarketWatch also points out the US$1 trillion plan may not be big enough to deal with a US$2.5 trillion problem. Here's a taste
"Purchasing $1 trillion in toxic assets won't be enough to solve the banking system's problems; the program probably needs to be at least twice as large," said Mark Zandi, chief economist at Moody's Economy.com.The first half of the plan focuses on loans sitting on bank balance sheets. U.S. banks may be holding as much as $2.5 trillion of toxic assets that haven't been written down yet, Zandi estimated."To cover losses on these assets, the government will ultimately need an additional $300 billion to $400 billion," he added. "The up to $100 billion that officials plan to commit now is a good start, but they will eventually have to ask Congress for more."
The bank jitters are back. US Authorities seized three failing banks and two major credit union financing companies over the weekend. The credit union groups had US$57 billion in assets. Here's the details at Marketwatch.com.
The now infamous Bernie Madoff Here's the mugshot we've all been waiting for. Bernie Madoff the other day when he plead guilty to multiple fraud. It's amazing that he still wants to live at home until he's sentenced. The judge was suitably unimpressed and he's now in jail. The New York Times is running a nice series on Madoff, the most hated man in New York. Watch out Agent 99, he's got a CDO and knows how to use it America could use the Credit Crunch as an opportunity to wage 'financial warfare', says Wired's Danger Room National Security Blog. Here's a taste. With economies around the world on edge, they argue, a weakened-but-still-gargantuan USA has new opportunities to pressure adversaries through the strategic application of market trades and bank transfers. They call their theory "financial warfare." Will the Commerce Commission lose its mojo? Nick Smith and Jenny Keown have an interesting piece here at The Independent on Stuff on how the new Commerce Commission chairman Mark Berry appears to be pro-big business and anti regulation. Glad I'm not the only one Jim Hopkins at the NZHerald puts an amusing boot into plans to electrify Auckland rail. "It's a Ponzi-Palooza out there" Old independent music listeners like myself will understand the comment by the head of US Commodities and Futures Trading Commission that Ponzi schemes were emerging all over the place as the tide went out. Here's a taste. "There's a Ponzi-palooza out there," Chilton told reporters today in Arlington, Virginia. "As people are looking at these Ponzi schemes in the media, they start thinking, well, are my investments OK? So we get tips." Chilton is referring to a very old American word called Lollapalooza, referring to a big, wonderful thing. The use of the word came back in the early 1990s after Jane's Addiction's Singer Perry Farrell set up a bunch of alternative acts as a touring circus of sorts that he called Lollapalooza. It is the template for the Big Day Out in Australia and New Zealand.