Here are my Top 10 links from around the Internet at 10 to 11am. I welcome your additions and comments below or please send suggestion for Thursday’s Top 10 at 10 email@example.com We do not set laughably unrealistic time frames at interest.co.nz....
1. Shooting down Plane Jane - Fran O'Sullivan at NZHerald has done an excellent job of criticising Securities Commission Executive Chairwoman Jane Diplock. She points out plenty of juicy detail on the amount of travel 'Plane Jane' has been doing and how disingenuous her claims of an under-resourced Commission are.
Fran points out that Jane's salary has almost doubled since she arrived as a non-executive chair in 2002 and her personal the commission's travel budget now makes up 20% of total commission expenses. It's worth almost half the total enforcement budget.
The perfectly coiffed woman who claimed to host Paul Holmes that she was kept awake at night by the thought that "people's hopes and dreams have been destroyed" by the collapse of the finance sector, hardly fits the profile of the globe-trotter who signed up for an unprecedented third two-year term as chair of the International Organisation of Securities Commissions at the very time the avalanche of Kiwi finance companies collapses in New Zealand was snow-balling.
Diplock complains of not having enough legal staff to work on the finance companies investigations. Yet she has also diverted staff budget to pay for an international team to support her international endeavours. The number of lawyers has come and gone. But she did not replace Norman Miller who resigned as director of enforcement midway into her reign. Something does not compute.
Diplock has proved quite a skilled blame-shifter.
2. New bank taxes - The BBC's Robert Peston has the scoop on the IMF's plans for two new taxes on banks to help repay the costs of bailouts. If implemented -- and politicians will love imposing a new tax on bankers to help them lower their deficits -- this will be passed on to customers in the form of higher lending rates and relatively lower deposit rates. It's all part of the de-leveraging story.
All institutions would pay a bank levy - initially at a flat-rate - and also face a further tax on profits and pay. The measures are designed to make banks pay for the costs of future financial and economic rescue packages.
The IMF documents were made available to governments of the G20 group of nations on Tuesday afternoon and seen by the BBC soon afterwards. The plans will be discussed by finance ministers this weekend. "The proposals are likely to horrify banks, especially the proposed tax on pay," our business editor said.
"They will also be politically explosive both domestically and internationally."
Insurers, hedge funds and other financial institutions must also pay the taxes, the IMF argues, despite them being less implicated in the recent crisis.
3. IMF warning - The IMF has warned that growing sovereign debt is a new threat to the stability of the global financial system. These are not nutters. This is the IMF.
Governments not only took on many of the bad assets from private institutions but due to the recession face continuing heavy borrowing needs for the next few years. Slow growth in the real economy and high unemployment will retard tax revenues and require higher government spending—such as on unemployment benefits and job creation activities.
“In spite of recent improvements in the outlook and the health of the global financial system, stability is not yet assured,” Viñals said a news conference April 20. “If the legacy of the present crisis and emerging sovereign risks are not addressed, we run the very real risk of undermining the recovery and extending the financial crisis into a new phase.”
4. Boom boom boom boom - The Reserve Bank of Australia warned yesterday in its minutes explaining its recent rate hike that the mining boom was a major reason for the rate hike, Bloomberg reported.
Concern that Australia’s mining boom will stoke inflation was a key reason the central bank raised borrowing costs toward “more normal levels” two weeks ago and signaled further moves in 2010, policy makers said.
“On the question of timing, the fact that the prospective rise in the terms of trade was now likely to be noticeably stronger than had been expected was a factor suggesting that it might be prudent not to delay adjustment,” central bank officials said in minutes released today in Sydney of their April 6 meeting.
5. Indian rate hike too - India's central bank raised interest rates for the second time in a month overnight, but could have done more. The reason was India needed to sell more government bonds, Bloomberg reported.
India’s one-year interest-rate swap, a gauge of rate expectations, declined the most in a year, and the benchmark stock index climbed after Governor Duvvuri Subbarao refrained from a more aggressive step. Subbarao said that while inflation is worrisome, “supportive liquidity conditions” are needed to help the government sell more debt.
Subbarao estimated India’s $1.2 trillion economy, Asia’s largest after Japan and China, will expand 8 percent “with an upward bias” in the year ending March 31, according to today’s statement. Inflation may slow to 5.5 percent by March from 9.9 percent last month, he said, adding that the forecast is “contingent” upon normal monsoon rains this year and a fall in food prices.
China ordered developers not to take deposits for sales of uncompleted apartments without proper approval and barred them from charging “abnormally high” prices, stepping up efforts to prevent a property bubble.
Developers must disclose to the public all apartments available and prices, and start selling within 10 days of getting pre-sale approval, the Ministry of Housing and Urban- Rural Development said in a statement today. It vowed to punish developers that “artificially” create supply shortages.
7. About time too - The Bank of Canada has signalled that it is about to raise interest rates, making it the first G7 nation to do so, The Globe and Mail reported. It may well have spotted the double digit rise in house prices in Vancouver to an average C$1 million. About time too.
Central bankers also tweaked their growth projections for the economy, reflecting a wave of stronger-than-expected data in recent months both in Canada and abroad and a white-hot housing market that point to a ``more front-loaded’’ expansion.
When is our Reserve Bank of New Zealand going to hike the Official Cash Rate from a record low of 2.5%? Economists say July 29 is now more likely than June 10. We'll get a better idea next Thursday (April 29) when the RBNZ makes its next OCR decision. I think they should get a move on. Your views?
8. Magnetar hits back - I highlighted the great ProPublica piece a couple of weeks back on Magnetar, the US hedge fund that stoked the housing bubble so it could short it later. Now Magnetar has come out fighting, John Gapper reports in an FT.com blog, citing a letter to Magnetar investors. ZeroHedge has a copy of the letter and its own view. I can't pretend to know what actually went on here, but for fairness and Magnetar geeks it's worth checking out. HT Troy via email.
Magnetar argues that it was not shorting the subprime market but was arbitraging between different layers of CDOs, taking advantage of the fact that it could get a yield of 20 per cent on the equity and then hedge that by shorting the mezzanine layers.
The chart it provides on page three of the letter suggests that it would have made money as long as the CDO market held up with no or few losses, and also make money if there was a high percentage of losses. Its risk was that subprime losses ate through only the equity tranches.
As it turned out, almost all of the Magnetar deals defaulted, bringing it very high returns in 2007.
German finance minister Wolfgang Schauble has pleaded with his country's citizens to back a joint EU-IMF bail out for Greece worth up to €45bn (£40bn), warning that failure to act risks a financial meltdown.
"We cannot allow the bankruptcy of a euro member state like Greece to turn into a second Lehman Brothers," he told Der Spiegel.
"Greece's debts are all in euros, but it isn't clear who holds how much of those debts. The consequences of a national bankruptcy would be incalculable. Greece is just as systemically important as a major bank," he said.
Even the Chinese are worried.
An administrator of China's foreign exchange fund SAFE – the world's top investor – was quoted by Asia's newswire IGM-FX warning that Greece may set off a chain reaction in the eurozone, and that some states with big debts may default.
"China is becoming concerned about Europe," said Simon Derrick, currency chief at the Bank of New York Mellon. "Greece is going to struggle to find anybody to buy its debt. There is no road-show in Asia, and it may pull out of its show in the US."
Late last night the Greek 10 year bond yield went through 8%, a record post-euro high. Tyler Durden at Zerohedge thinks he knows why and the implications are ugly. I hope Graeme Hart is feeling lucky because if the European banks get hammered he will get hammered. HT Gertraud via email.
The reason: increasing market rumors that the country is contemplating a voluntary debt exchange in which a portion of the debt will be cut, in essence an out of court bankruptcy but for a sovereign. How this will be accomplished and whether it is at legal per the EU charter is uncertain. What is rumored is that since the transaction would be voluntary between debtor and creditors, it would not trigger CDS thus an event of default will not have occurred. On the other hand total Greek debt exposure may end up being cut by about 25% or more, which would trim the country's interest outlays.
As Greece is currently caught in a debt spiral in which its cost of debt is orders of magnitude over its growth rate, this would actually be the right thing to do. The question is if 25% of the total Greek debt of €305 billion is eliminated (there is $375 billion in debt and future interest for Greece alone), what will happen to the creditors, primarily European banks, and whether they have provisioned for over $100 billion in losses on the country. Furthermore, will this send a signal to the rest of the EU that out of court transactions are ok: how much debt will be eliminated in such a manner next time around when Portugal, Spain, Hungary, and everyone else that is comparably insolvent decides to "cut" some debt?
10. Totally irrelevant video - Here is a highlight/lowlight reel of mispronunciations of THAT Icelandic volcano. I am becoming a little obsessed....This will be the last mention. I am defeated.