Wednesday, 27 January 2010

Worth reading today

Athens invites Beijing to buy bonds
Goldman Sachs is acting on Greece's behalf in promoting up to 25 billion euros in government bonds to Beijing, the Financial Times reports. The newspaper says that sources close to the investment bank think a 5bn-10bn euro deal more likely.

A principled Europe would not leave Greece to bleed
Nobel laureate economist Joseph Stiglitz argues that Europe's knuckle-rapping of Greece has worsened its economic problems and exposed a double standard. And he compares favourably America's model of federalisation: "Part of the reason for the success of America's "single market" is that there is this sense of social cohesiveness, and a large federal budget to support it: when one part of the country has difficulties, federal spending can be diverted to help those parts that are in need." (The Guardian).

Why did AIG's clients get a full bailout, but not SCA's?
A congressional committee is to grill US Treasury Secretary Timothy Geithner on why, when he was chairman of the Federal Reserve Bank of New York in 2008, he forced banks insured with Bermuda-based Security Capital Assurance to accept as little as 14% of their entitlements, whereas AIG's clients were paid in full. The implication is that taxpayer money was paid too liberally to AIG. The hearing comes on Wednesday, hours ahead of a State-of-the-Union address by President Barack Obama, in which he is expected to announce a government spending freeze for the remainder of his first term in an effort to reduce the US deficit, forcast at 12% this year.
"By paying AIG’s counterparties in full, the Fed sidestepped one of the thorniest issues facing financial markets: how to value securities that were so complicated that no one – not the credit agencies, not the bankers, not the issuers themselves – knew how to price them."

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