Japan's recovery?

Today, the Yen (the Japanese currency) soars a 14 year high against US Dollar. It reaches a symbolic level of 88 Yen for 1 US Dollar. The Euro lost almost half a percent to reach 131.93 yen for 1 Euro. It has been observe that investor bought Yen when Japan reported that its exports improved and therefore boosts hopes for a more solid economic recovery.

The macroeconomic indicators of Japan are better than predicted, such as exports falling less than what analysts reported earlier in the year. As a matter of fact, exports grew in October for the third month in a role thanks to expending shipments to Asia. Indeed, the strong recovery in the region will support the country's export-driven economy for the rest of this year. Moreover Japan’s economy grew by 4.8% in the third quarter, due to a mix of government stimulus and an increasing domestic demand. Therefore, these last months, the Japanese currency the Yen rose significantly against the Dollar, the Pound and even the Euro, which is currently a trusted hard currency. And that’s exactly what analysts feared. As the currency appreciates, the competitiveness of Japan’s exportation will decline, and therefore will slow down the economical recovery of the country.

In my opinion, the Japanese central bank should intervene in a few days to stop this currency appreciation. The Japanese central is not independent, and by implication the government could ask to buy foreign currency in order to protect the country and its exportations. They could also put more currency on the market, but in the case Japan will face inflation. To set an adjusted monetary policy is not an easy task. They are many different way to solve the problem but each of them will have economical and macro economical consequences. At the moment, from my point of view, the best solution should be to buy foreign currency, especially US Dollars, to protect the currency’s rise.

This new story says more about the current situation than the rise of the Yen. As I wrote before, the economical power is shifting to the East, and obviously Japan is also recovering its economical power after years of recession. In my opinion, this new story is another proof this shifting.

This news story has an international scope, and therefore where reported in most of the international press, and more particularly in the economic press. We could find out two different types of headlines: The first type stress the growth in the Japanese exports, the second one the rise of the Yen against the hard currencies.

The BBC, Reuters and The Japan Times Online were from the first type. BBC published “Japanese exports fall at slowest rate in a year” (Nov. 25). It was a really short article with some facts and figures about the Japanese exports but the rise of Yen was not even mentioned. They didn’t really analyze these numbers and didn’t go through the whole subject. Their superficial analyze was based on quotations of two analysts. It could be described as a poor information-given article. By contrast Reuters gave a deeper analyze of the subject, covering different point of view, topics and implications. They published “Japan export rebound eases fear of new recession” (H. Sano, Nov 25). They wrote about the Japanese exports, the growth rate and the rise of the Yen quoting different analysts as well as making their own analysis. Moreover, they provide a chart of the Japanese exports of the last 18 months. The style of writing is always the same, short and straight to the point. The Japan Times Online didn’t write the article, they just copy the article from Bloomberg. I was expecting from this press organization some well written article with a different point of view, therefore I was quite disappointed.

On the other hand, the Financial Times and the Wall Street Journal stressed more the rise of the Yen. The FT wrote “Dollar hits 14-year low on yen” (L. Whipp, Nov. 26), which stress more that the dollar is weak than that the Yen is strong. As usual, the FT article was complete providing not too much figures but enough to understand the subject. Many analysts from around the world (Europe, United States and Japan) were quoted which gives a more impartial view of the situation. By contrast with the FT headline, the Wall Street Journal published Yen Hits 10-Month High Following Improved Trade Data” (A. Monahan, Nov. 25) which gave the opposite view of the situation. As a matter of fact, they underlined more the fact the Japanese Yen became stronger than the fact that the dollar became weaker and weaker these last months. This could be understood, knowing that the WSJ is an American press organization. Likewise, we have here some bias due to the nationality of the press organization, even if in this case, it is the Yen that became stronger (also against the Euro and Pound). The article itself could have been written by the same other. Indeed, the same facts and figure are used.


Q. Piloy


Source:
http://news.bbc.co.uk/1/hi/business/8377900.stm
http://www.reuters.com/article/economicNews/idUST32307220091125?pageNumber=1&virtualBrandChannel=11604
http://search.japantimes.co.jp/cgi-bin/nb20091126n1.html
http://www.ft.com/cms/s/0/f93521e2-da44-11de-b2d5-00144feabdc0.html
http://online.wsj.com/article/SB125910929664263229.html

Creating jobs on Main Street or saving Wall Street’s Bakers once again?

Last week, some US democrat congressmen expressed themselves in favor of imposing a 0.25 percent tax on over-the-counter derivatives transactions. Friday 19th of November, House Speaker Nancy Pelosi said that this tax only could be imposed only if it is also levied internationally.
Several months ago, the idea of raising a tax on financial transactions was born. Since them, lobbyists from Wall Street attempt to put pressure on congressmen, particularly those from the state of New York, arguing that this will push Wall Street traders to take their business offshore. On the other hand, some “more democratic” congressmen are worried about employments. Some measure has to be taken to boost employment, and the time has come that Wall Street saves Main Street jobs: Let Wall Street pay for the restoration of Main Street. To avoid off shoring of the major banks and transactions, this tax must be international. The United Kingdom, France and Germany are studying the proposal.

First of all, in my opinion, this tax should be imposed only to bankers and financial institutions, and not the entire business sector. Congressman and lawmakers should be careful not to hit business that try to get out of the recession. They are not responsible for the financial crisis and therefore should not be imposed by this “recovery tax”. Moreover, they are not the ones that are making huge profits and paying scandalous bonuses while most of American families are still suffering. In addition, American taxpayers helped Banks and financial institutions when they were in trouble. It should be normal that the opposite works as well. Finally, from my point of view, the tax should be temporary. If the tax became permanent over the years, the raised money will be attributed to other purpose and will fill other budget gaps. Therefore, raising money to create stimulus employment plans is good idea under certain conditions. By contrast, what I do not understand is why Obama administration does not support this idea: Treasury Secretary Timothy Geithner said last week "not seen a version of that tax that I think would be appropriate for our country". For a democratic President, Obama seems to have conservative ideas concerning tax rising.

This news story concerns particularly the United States. Nevertheless, if such a tax is implemented in the US, it will affect the whole financial world. Therefore, international press organization such as Bloomberg and Reuters reported the news as well.

Let’s start with three American press organizations that reported the news. First of all, The New York Times reported the news with different headlines, but the content of those articles was similar. Here is one of them: “Wall Street Tax Must Be International, Pelosi Says” (Nov 20th). The entire article spoke about the democratic view of the case, avoiding to quote or to write about the republican point of view. They didn’t criticize the government for its immobility, neither the democratic over spending for stimulus. In my opinion, this article was relatively bias from a political point of view. Secondly, CBS News published on his website “Congressman: Tax Wall Street to Help Main Street” (B. Montopoli, Nov. 18th). Once again, this article focuses on one particular sub-topic. Most of the article spoke about M. DeFazio and his proposal, quote from the article:”The money raised "will be invested in the current needs of Main Street America," according to a message DeFazio sent….”We must make it clear to our constituents that we know Main Street is suffering and a restored Wall Street should now share in its recovery with everyone else..””. By contrast with the NY Times, CBS criticized more Wall Street and was in favor of M. DeFazio’s bill. Therefore, I will say that CBS was maybe more subjective than the NY Times but less bias. Finally, looking at the Washington Post website, I was really surprised that they didn’t have written any article about the topic. They copy the Reuters 'article and posted it on their website. This has a significant advantage: they will not suffer of any American bias or subjectivity.

Now, let’s have a look at the international press with Reuters and Bloomberg. Reuters published “Wall Street tax must be international: Pelosi” (A. Sullivan, Nov. 19th) and Bloomberg published the same day “Stock Tax Must Be ‘International Rule,’ Pelosi Says” (J. Rowley, Nov. 19th ). The two headlines are really similar as well as the articles. They are quoting approximately the same persons from the Democratic Party. By contrast, Reuters did mention any opinion by quoting Republican representative while Bloomberg did it. The two articles are explaining the topic quite objectively, almost without any political bias.

To conclude, I will definitely recommend readers to look at the Bloomberg article for several reasons: First of all, it’s one of the shortest one, but it include all the information you need. Secondly, it’s quite objective, quoting member from the Democratic Party as well as from the Republican Party. Finally, the lay-out used for this article is very clear, making use of bold letters for the persons they quoted, which makes the articles clearer for the reader.


Q. Piloy


Sources:

http://www.washingtonpost.com/wp-dyn/content/article/2009/11/19/AR2009111902175.html

http://www.cbsnews.com/blogs/2009/11/18/politics/politicalhotsheet/entry5700582.shtml

http://dealbook.blogs.nytimes.com/2009/11/20/wall-street-tax-must-be-international-pelosi-says/?scp=1&sq=Pelosi%20tax&st=cse

http://www.reuters.com/article/domesticNews/idUSTRE5AI3ZV20091119

http://www.bloomberg.com/apps/news?pid=20601103&sid=a0THokhNGb5I

http://imarketnews.com/node/4963

Asia helps Western economies in recovery

Friday November 19th, a report from the Organization for Economic Cooperation and Development (OCDE) announced that Asian economies will lead the world out of the deepest world’s recession in the last decade. They point out that their growth forecasting has been doubled for 2010. China for instance will have a 10.2% growth in 2010. Even for industrialized economies, growth forecasting for 2010 increased but will be marred by a high unemployment rate and huge government debt.

This news has been reported by several media organizations around the world. Some of them focused on the fact that Asia will lead industrialized economies out of the recession others focused on the problems that Europe and the United States will have to manage: a growing debt and unemployment rate. In addition, some newspapers focused more on the Asian economies performances while others focused more on European and American faster recovery than predicted. In my opinion, both side of the news story are relevant. It depends more on what the author wanted to underline. As you know, this blog attempts to underline the shifting economical and financial power from the West to the East. By implication, from my point of view, the Asian side of the news will be more relevant.

Referring to my experience as blogger, statistics and numbers are difficult to comment. Nevertheless, the meaning of these numbers and the impacts of them could be interesting to analyze. First of all, Asia is taking more and more economical power in the world with growth rate that are twice or three times bigger than European and American growth rates. Moreover, due to Asia, world trade will raise by 6% in 2010. Since September, together we have experience through the news stories this shifting to the East. Secondly, Europe and the United States are slower and will face huge debt and a growing unemployment rate. This means that in a certain way, they will lend money to emerging economies to finance their debt and stimulus employment plans. Consequently, they will be more and more dependent on Asian economies. Several years ago, it was other way around. Finally, the gap between Europe (growth of 0.9% Euro zone) and the United States (growth of 2.5%) is significant. Are European leaders worse? Why can Europe not succeed in a fast-faster- recovery process? One of the possible answer could be the too strong European currency. It should be said that these numbers are predictions. Before doing further analyzes, we should wait until next years to experience what will really happen. Let’s hope that Europe will do better than predicted.

As I wrote, this new story has been reported by several newspapers. Bloomberg and Reuters presented the news in a quiet different way, which is, not usual. Bloomberg wrote “OECD Doubles 2010 Growth Forecast as Global Rebound Accelerates” (Mark Deen & Simon Kennedy, Nov 19th 2009). As the headline suggests, Bloomberg chose to stress the rise of the growth forecasting of Asia, Europe and the United States more than the fact that Asia lead industrialized economies out of the recession. They provided a complete analysis with numbers and percentages. By contrast, Reuters published “Asia helps feeble West in global recovery –OECD” (Nov 19th 2009). The headline speaks by itself. They underlined in their introduction the fact that Asia takes a dominant position. Further down the article, they provided a elaborate description of growth rates for the United States, Euro zone, Japan and China: quote of the article “U.S. growth, measured by gross domestic product, should rise 2.5 percent in 2010 after a contraction of 2.5 percent in 2009, and rise a further 2.8 percent in 2011, the OECD said. Euro zone GDP should rise 0.9 percent in 2010 and 1.7 percent in 2011 after a downturn of 4.0 percent in 2009, it said. Japan could expect GDP growth of 1.8 percent in 2010 and 2.0 percent in 2011 after a drop of 5.3 percent in 2009, it said...”. Moreover, they quoted the OCDE report several times which give the impression of giving the OCDE opinion without to many bias from the author: quote from the article “"The upturn in the major non-OECD economies, especially in Asia and particularly China, is now a well-established source of strength for the more feeble OECD recovery," said the OECD…”. From my point of view, Reuters’s article was better and more complete, providing the reading a better global overview.

The Deutsche Welle, which Germany's international broadcaster (can be compare with the BBC), published “Euro zone emerges from recession, as Asia leads recovery” (Trinity Hartman, Nov. 19th 2009). A quiet short article, but well written and well structured. The article focuses mainly on European concerns. They started the article with the growing growth forecasting contrasting it by a raising unemployment rate for the Euro zone. They quoted the OCDE report as well, but still focusing in European concerns: quote from the article “"The sharp contraction in euro area activity appears to have ended sooner than anticipated … However, headwinds from financial sector deleveraging and rising unemployment suggest that the recovery will be gradual," the OECD said”. The rest of the article was divided in the parts, rising unemployment and Asia leads the way. From their point of view it was obviously the two major concerns. In my opinion, it’s a very good article, giving not too many numbers so that everyone could understand the major facts.
Finally, the Telegraph published “OECD urges governments to sort out finances as recession recedes” (Edmund Conway, Nov. 19th 2009). The article spoke only about the European recovery, hiding the Asian side of the story. Later on, they spoke about the major British concerns. It was, from my point of view, the worse article I red covering the topic. It was relatively bias, giving British people false hope of a fast British recovery. They presented the story in a way that actually if the united Kingdom was not doing so well, it was because of the governments. The reader could find out quite easily that this newspaper is right-wing (conservative) and against the current government.

To conclude, I would recommend for this story to read The Deutsche Welle for readers who do not want to go deeper in the details and numbers. On the other hand, for readers who prefer to understand and who prefer to go deeper in the numbers’ details, I would suggest to read the Reuters’ article, which gave the best analysis.


Q. Piloy


Sources:

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=act.kJSAK5wA
http://www.reuters.com/article/companyNewsAndPR/idUSLJ30532620091119
http://www.dw-world.de/dw/article/0,,4909081,00.html
http://www.telegraph.co.uk/finance/economics/6604331/OECD-urges-governments-to-sort-out-finances-as-recession-recedes.html

The rescue of CIT: Fact or Fiction?

Last week, CIT group filed for Chapter 11 bankruptcy protection. CIT group is America’s leading company in lending to SME, but has also as clients 80% of the companies listed in the Fortune 1000, such as Microsoft and Dell.

In the short term, the collapse of a 101 years old company, which survives two World Wars and the Great Depression, will be a blow for the American economy that relies on SME. In the long term, the management team hopes that this is going to enable the group to recover itself.
It’s the fifth biggest bankruptcy in American history, after it of Lehman Brothers ($ 691 billion), Washington Mutual ($ 327.9 billion) in 2008, WorldCom ($ 103.9 billion) in 2002 and General Motors ($ 91 billion) in 2009.

In December 2008, American Treasury lend the group $ 2.3 billion but refuse, this summer, to support the group again. They had $71 billion of assets and $64.9 billion of liabilities on June 30. However, they strongly believe that under the court protection, they will be able to re-emerge by the end the year by reducing them debt by $10 billion due to their reorganization plan. This was supported by the majority of the creditors of the group. Indeed, 85% of them participated in the consultation and nearly 90% of those involved have supported the reorganization program.

As a matter a facts, the group tried and actually succeeds in convincing the shareholder, investors and stakeholder that the group will restructure itself under Chapter 11 protection. Nevertheless, until now, only a few companies have succeeded to avoid the bankruptcy after filling Chapter 11. This goes particularly for financial companies.
Despite the fact that in the short term, the company may lose some of its costumers, who are going to be taking over by other lenders, this case is going to be, from my point of view, a good test to see if a company can survive a Chapter 11 filing,

Even if the group said that only its holding company was filing for bankruptcy, and that most of its important operating subsidiaries would continue to operate normally, I’m not totally convince that the group will re-emerge after Chapter 11 filing. I have several reasons for that. First of all, the confidence of the stakeholders has plunged dramatically at the moment they announced the Chapter 11 filing. This confidence, particularly if the top management doesn't change, will be very difficult to restore. Secondly, as I said below, most of the costumers will switch to another lender, that can be trusted. Nobody wants to work with a failing company. Finally, to restructure a company, you need time and money. That’s exactly what they don’t have.

This news was covered by most of the international newspapers as well as by the “local press”. I will first separate the international press in two parts. On the one side, we have The NY times, The Times and Le Monde and on the other side Reuters that has a quiet different way to report the news. Moreover, we will have a look at The Daily Mail and L’echo. Both are local presses, but also here we have two different ways to report the news.

The New York Times published several articles during the week. One of those was “CIT Reaches Agreements to Ease Bankruptcy Filing” (M. J. de la Merced, Oct 30th). Those articles were relatively positive, talking about the hope of recovering of CIT group, while they avoided to talk about the taxpayers’ losses of $ 2.3 billion. However,apart from this, I was impressed by the objectivity of the articles, which could be far more bias knowing the NY Times is an American press organization. Moreover, they structured their story and comments around facts and numbers, which give them some credits.
Le Monde wrote “CIT Group, le géant américain du crédit aux PME, dépose son bilan” (A. Faujas, Nov. 2th). It this article, Le Monde didn't use a lot of numbers to give strength to their arguments. They only reported the news quoting some analyst from Bloomberg. From my point of view, it was definitely not the best article. It was too vague, giving just some approximated facts without getting deeper into the subject. I was quiet disappointed of the quality of the news story, which are usually far better.
The Times published a really negative headline “CIT bankruptcy filing will cost US taxpayers another $2.3bn” (H. Power & A. Frean, Nov. 2th), which underlines the fact that again the “normal” citizens will pay for the cupidity of the bankers. By contrast, the article itself was not that negative, even if I could feel that it was quiet subjective in some way.
The three media organization reported the new story as a story. When you compare it with Reuters news story, we can find out that the purpose of the authors are not the same. The three fist media organization are writing articles not only to inform people, but to inform them in a friendly way, telling them a story.
On the other hand, we have Reuter that published also several articles this week. One of them was “CIT bankruptcy reassigned after recusal” (C. Emery & J. Stempel; editing by J. Wallace, Nov. 2th). It starts its article by a summary of the important points in bullet point, presenting facts and numbers with short analysis. As I said below, they are going straight to the point, without trying to entertain the reader. If you are looking for more crude information, Reuter is definitely the place to go.

What concerns the local press, L’echo, which is a Belgian newspaper, published “Le Groupe Cit depose le bilan” (Nov. 1th). For a local newspaper, the quality of the information was good. They took as source Reuter and the Financial Times which are two trusted sources to give them credits. It was simply written and complete.
By contrast, the Daily Mail article (“£1.8bn bondholder loan saves CIT Group from bankruptcy), was from my point of view, the worst. They didn’t write important facts and if you hadn’t read anything before about this news, you couldn’t understand what was going on with CIT group only by reading this article. It contains 10 sentences with a big unrelated picture.

To conclude, I would recommend to read The Times and The New York Times to have a balance view of the news story. Both articles covered the news fully, giving credits to their analysis with facts and numbers. I would definitely avoid tabloid, which are far away the worst for that kind of news.


Q. Piloy


Sources:

http://www.reuters.com/article/newsOne/idUSTRE5A01NX20091102
http://www.reuters.com/article/financialsSector/idUSN0243413120091102

http://www.lemonde.fr/la-crise-financiere/article/2009/11/02/cit-group-le-geant-americain-du-credit-aux-pme-depose-son-bilan_1261610_1101386.html#ens_id=863164

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article6898854.ece

http://www.nytimes.com/2009/11/02/business/economy/02cit.html?ref=business
http://www.nytimes.com/2009/10/31/business/31cit.html?fta=y

http://www.lecho.be/nieuws/archief/Le_groupe_CIT_depose_le_bilan-.8254239-1802.art?highlight=CIT

http://www.dailymail.co.uk/money/article-1200921/3bn-bondholder-loan-saves-CIT-Group-bankruptcy.html]

The Regulatory Wave strikes again

Sunday, November 1st, the FSA (Financial Services Authority) took over the responsibility to regulate most of the retails banks’ activities. It means the regulator will supervise direct debits, payments, instant access, savings accounts, overdrafts and notification of interest rate changes. FSA regulation promise to implement customer service standards in UK banking system.

Three weeks ago, it is the UK retails system that was hit by the regulation’s wave that blusters around the world for several months. In September 2009, a European Commission report said that information given to some banks' customers was unintelligible and that fees were frosted. According to a survey, only 9% of the European consumers are aware of the difference between banks. Thereof, UK officials try to find an agreement with the banking sector. A month later, October 7th, BBC reported that “Banks agree to 'charges clarity'”.

This new regulation will consist of three codes: (the Banking Code of Business (BCOB), which covers deposits; the Payment Services Regulation (PSR), which covers direct debits and other payment methods; and the Lending Code, which covers credit cards, overdrafts and other borrowing. FSA regulation replaces the Banking Code, by which the banks have regulated themselves.

At first sight, this is some kind of good news for all the UK customers. However, when you look for more information about the topic, you realize that some expert fear that the new rules from the FSA will not help the customers. Because of these three codes, they pretend that it will be too complicated for the customers to protect themselves against banks’ "abuses". It is true that on a few points, the new codes are too proscriptive. Indeed, I could find some example where it was the case. When it came to switching bank accounts FSA rules does not say in how many days the switch had to be done, it just says 'in good time'.

By contrast, I strongly believe that these rules couldn’t be worse than self-made banks’ rules. By increasing the visibility, it will certainly increase competitions between banks by putting more in contrast the differences between the various institutions. Moreover, the FSA implemented in its new codes many clauses that give a better protection to the consumers. For example, if some money was withdrawn from a customer's credit or debit card, and it is more than they could reasonably have expected, the bank have to refund his client unless the bank can provide evidence not to.

This a typically a local news that wasn’t reported in media organization outside the United Kingdom. Let’s have a look at three different UK media organization that report quiet differently the news.

I wanted to started with which is, from my point of view, the newspaper that reported the most balance view of the topic. The Gardian reported “Payment Services Regulations mean better treatment for bank customers” (Hilary Osborne, Oct 31th). Its article was not too long, but presented the major facts. Moreover they quote both protagonist and antagonist who spook about the advantages/disadvantage of both systems. At the end of its article, it summarizes some changes that will directly affect the average customers. I think that this article was written to inform UK citizen of this change without any bias (even if in every article, there is some kind of bias). They achieve their goal. The only think I could criticize is the headline, which is; in my opinion, too positive.

On the other hand, was the BBC and the Times really subjective in their approach of the news. The BBC report “Fresh bank rules come into force” (Nov, 1st). The article was quiet long, giving a lot of information about the new regulation, which is good. The subjectivity came from the fact that they only presented the FSA's point of view. Without knowing that it was a state-own media organization, you could find it out by yourself. As a matter of fact, they only underline the positive points of the new regulation. From my point of view, the BBC is a very good international media organization, presenting a well balanced view on most of the subjects. But when it goes about typically British subject, they are often bias by presenting only government’s point of view.

As the BBC, the Times was also bias, but not in the same way. By contrast, they were criticizing the new regulation. They reported “Are new rules for banks good news for customers?” (Lauren Thompson, Oct 31th), with as subtitle “The FSA overhaul promises to benefit consumers — but the devil is the detail”. Only by reading this, you could understand the author’s point of view. They try to warn UK costumers against this new regulation, which is good. Nevertheless, they could be more objective in the article as a whole, presenting both sides’ positive aspects.

To conclude, I would definitely recommend the Gardian for that kind of subject, which gave a short but balance view of the topic. The BBC seems to be too bias and not able to report some topic where the government is involved in some way. Concerning the Times, it gave a lot of information but they are only useful for informed readers that will be able to recognize where the critics are justify or not.


Q. Piloy


Sources:

http://www.guardian.co.uk/money/2009/oct/30/payment-services-regulations-bank-customers

http://news.bbc.co.uk/1/hi/business/8333374.stm

http://news.bbc.co.uk/1/hi/business/8295320.stm

http://www.timesonline.co.uk/tol/money/consumer_affairs/article6897008.ece

www.myfinances.co.uk/news/bank-accounts/banking-practices-and-conduct/fsa-moves-over-into-bank-customer-protection-%241337791.htm+new+FSA+regulation+banks&cd=8&hl=fr&ct=clnk&client=firefox-a

Wall street’s bankers mock the world with record bonuses

Goldman Sachs is going to pay bonuses between $22 and $23 billion to its employees in 2009. Goldman Sachs' spokesman tries to defend the company on Wednesday’s press conference: “The easiest way to destroy our company would not pay our staff».


One year after Lehman's bankruptcy, Wall Street’s banks are going to pay record bonuses to their staff. We all know that bonuses encourage the risk taking behavior of brokers and analyst. Then why banks are still paying huge bonuses to them employees, knowing that bonuses reward only performances and don’t sanction any kind of high risky activities?

Hidden behind this shocking news that made the headlines for several days last week in most of the financial newspaper, the failure of Obama Administration is obvious. Two weeks ago, I wrote an article over the G20 regulations which was suppose to draw the basis for futures national law in every partaking country. In the United States, Obama Administration struggled against lobbyist to implement those reforms; and the bankers won.

My first reaction while I was reading this news was to smile. But I couldn’t believe that only one year after Lehman’s bankruptcy, Wall Street’s bankers could announce without any complex that they are willing to pay such fortune to their staff; while world’s economy is still struggling in the crisis they started; while American’s families are still struggling to get loan from banks; while so many people lost their jobs and are still unemployed. I couldn’t believe that after G20 reforms of last September Obama Administrations totally failed to avoid that kind of excess.

Moreover, one day later Reuter published on his web site: « Obama wins first financial reform victory in months »: “The Obama Administration scored its first financial regulation reform victory in months on Thursday when a U.S. congressional committee approved new rules for over-the-counter derivatives”. But which victory? I couldn’t understand how this headline could be so positive after such announcement from Wall Street. The regulation of the financial system in the United States takes too much time while the World is waiting for fast answers. From my point of view, there is no victory, only a weak US Administration scared of implementing necessary reforms.

All around the world, some media organizations report the news with shocking headlines, others try to explain/defend bankers’ point of view.

Most the US press was shock Wednesday 15th after Goldman’s announcement, and complain about the excess. However, some of them try to explain the next day these excess.
The New York Times wrote on 15th 2009 “Bonuses Put Goldman in Public Relations Bind” (G. Bowley). In this article, he criticized Goldman Sachs’ decision of paying high bonuses: “While many ordinary Americans are still waiting for an economic recovery, Goldman and its employees are enjoying one of the richest periods in the bank’s 140-year history.. For Goldman employees, it is almost as if the financial crisis never happened..” even if after the author propose a more balance view. One day later, on Thursday 16th2009, they published “Bailout Helps Fuel a New Era of Wall Street Wealth” (G. Bowley) which was more comprehensive with the bank’s decision. They try to explain how it was possible for these banks to pay colossal bonuses starting the article by: “Many Americans wonder how this can possibly be. How can some banks be prospering so soon after a financial collapse, even as legions of people worry about losing their jobs and their homes?”. It also focus more on the current welfare of the company rather focuses on bonuses, trying to minimize these shocking facts. I was really surprise by the subjectivity of these words, because the NY Times was from my point of view a quiet objective newspaper, giving some comments without defending one side.
On the other hand, the Wall Street Journal wrote on 14th 2009 “Wall Street on track to award record pay” (A. Lucchetti & S. Grocer). It was more objective, describing the fact without too many comments around them. They didn’t put the sensational element in their articles.
However, from my point of view, it is interesting to point out that none of them (US press) spoke about any failures of Obama Administrations in the regulation’s process.

In France, Le Monde published on Wednesday 15th: « L'exubérance retrouvée de la finance américaine » and the Belgian newspaper L’echos wrote “Les bonus bancaires en passe de battre des records”.Both newspapers report the news the same way. They gave an objective view of the news quoting the Wall Street Journal for the numbers and figures. During their analyses they also quote Peter Kennen, professor at Princeton University, saying the banks didn’t learn anything from the financial crisis of 2008. They also described Obama Administration failure in the regulation process.

However, while I compare the NY times & the Wall Street Journal with Le Monde & L’echos, I could easily find the two major streams in the modern finance back: The American view and The European view. The American view is based on the shareholders’ wealth maximization model while the European view is base on the stakeholders’ wealth maximization.

Finally, Bloomberg published almost the only articles that went deep in the Obama Administration’s failure. They published on 16th “Obama Administration Pushes Back at Bank Lobbying on Regulation”( J. Goldman), an article describing the frustration of White House officials: “We are disappointed by the lobbying of anyone in the financial industry against regulatory reform, considering the obvious need for change on that front,” Valerie Jarrett, a senior adviser to Obama, said. I was happy to read finally about the real news covered by the shocking headlines. They went really deep in the subject, quoting different personalities and thus giving the opinion of the most important protagonist.


Q. Piloy

Sources:

http://www.reuters.com/article/wtUSInvestingNews/idCNN1529956320091016?sp=true

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a6arFvXkIf_8

http://www.nytimes.com/2009/10/17/business/economy/17wall.html?em

http://www.nytimes.com/2009/10/16/business/16bonus.html

http://online.wsj.com/article/SB125547830510183749.html

http://abonnes.lemonde.fr/archives/article/2009/10/15/retour-a-l-exuberance-pour-la-finance-americaine_1254197_0.html

http://finance.blog.lemonde.fr/2009/10/15/140000000000-les-bonus-2009-de-wall-street/

http://www.lecho.be/nieuws/archief
/Les_bonus_bancaires_en_passe_de_battre_des_records.8245620-1802.art?highlight=Bonus

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=axePKeIA7Xx8

Asia tries to support US$

Without any official announcement, some analyst report on friday morning that Asian central banks are trying to stabilized the plummeting dollar by selling them currencies, or (in the same way) massively buying dollars. South Korea, Indonesia, Thailand and Hongkong steps in the hurry on Thurday.

Reading this news on the FT front page on Friday, I wasn’t really surprise. Like every week, it is easy to find out some kind of element describing the current situation of the new financial world. In my opinion, this is clearly another signal that is financial world is strongly changing, shifting to the East.
Still, I was wondering if Asian counties were strong enough to save the US currency? From my point of view, no yet… and particularly not without China. But then, why are they trying? Another key element to analyse would be how was this story reported around the world?

The first question is a quiet easy one for someone how knows something about international economy. First, South-East Asian economy is strong related with the US economy, and some of the South-East Asian countries’ currency is on a fixed exchange rate with the dollar. Secondly, most of these countries export a lot to the United States. If the dollar is weak, the value they will get for the sold goods will be lower. Therefore the balance of payment of the country will be affected by the falling dollar. Other way around, the balance of payment of the United Stated will be boosted by the falling dollar. That is one of the well know explanation for the current situation of the US dollar, and why the US government didn’t do anything to stop the fall.

However such gross information should normally not be distorted, media organisations this week reported the news with quiet similar headlines. Still the way to report the news could, in my opinion, influenced readers incapable of self analysis.

Starting with American point of view, the New York Times didn't report the news at all. I have been searching through the whole web site without finding anything. Knowing that the NY Times is one of the major newspapers in the country, this fact teaches us lot about the American point of view. Going deeper in my research, I could verify my first impression: American press wrote more the last few months about why it is good for American economy to have a weak dollar than about Asian countries gaining power on the international scene.
The Financial Times, standing in my point of view as an objective western press, was the first to report the news on Thursday. We can find a lot of article on the web site talking about the same subject, with approximately the same facts. Headlines were quiet similar: Asia steps in to slow dollar's fall (Kevin Brown in Singapore, October 8 2009), Asia tries to slow decline of dollar (Kevin Brown in Singapore, October 9 2009), Dollar's slide forces Asian central bank action (Chris Flood, October 9 2009). On the one hand, they explain the dynamics, issues and solution quoting some economist and analyst such as Marco Annunziata, chief economist at UniCredit, but on the other hand they cover the news quiet briefly, without going deeply in the detail of the amount of money that were injected by the central banks and what exactly could happen in the future.
In the same way, the French newspaper Le Monde wrote “Pour enrayer la chute du billet vert, les banques centrales d'Asie interviennent” (To stop the falling US currency, Asian central banks step in). This newspaper could be compare with the Times in the way they report the news. As in the FT, Le Monde didn’t get in deeply in the story. They also reported but this time with more detail the dynamics, issues and solution quoting some economist and analyst. In my point of view, Le Monde is an objective newspaper supposes to hit the intellectual range of the population. However, we don’t get a lot of information about pure economical or financial data.
Although, this article covers what we can call the 2 versions of the story: How the dollar hit the Asian countries and in which way the Asian counties are trying to save the US currency or in which way Asian countries become economically stronger. The Financial Times didn’t cover it.
Going back to my local press in Belgium, the Flemish economical newspapers De Tijd wrote :"Aziatische landen snellen dollar te hulp" (Stijn Demeester, Oct 8 2009). It has an interesting introduction quoting the Financial Times : "the several Asian central banks trying to keep the dollar up". I couldn't really learn more about the story, basically because De Tijd used as source the FT, on which I already red about the story. However, it didn’t really surprise me that local press, with a limited budged, used reliable international press to built up some of there articles.
Finally, I had a look on the Bloomberg web site, which provides a lot of different articles that were each specifically dedicated to one fact with specifics economical and financial data. Knowing exactly what I was looking for, it was really interesting to read about specific data. On the other hand, it can be confusing for a not acute person.

To conclude, American press still doesn't want to see the world changing and try to put Asia as the cause of their fall, while the European press is more balanced. The FT didn't really get deep in the story while Le Monde covers both side of the story. So did Bloomberg too. But with more data, percentages and details analyses where a non acute person can get lost.

QPiloy

Sources:

FT :
http://www.ft.com/cms/s/0/1c21d6fc-b469-11de-bec8-00144feab49a.html
http://www.ft.com/cms/s/0/7023f75e-b468-11de-bec8-00144feab49a.html
http://www.ft.com/cms/s/0/a697ef1c-b43a-11de-bec8-00144feab49a.html

Le Monde :
http://www.lemonde.fr/la-crise-financiere/article/2009/10/09/pour-enrayer-la-chute-du-billet-vert-les-banques-centrales-d-asie-interviennent_1251690_1101386.html#ens_id=1216746

De Tijd :
http://www.tijd.be/nieuws/economie-financien/Aziatische_landen_snellen_dollar_te_hulp.8242901-600.art

Bloomberg :
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aCpqAvAofcPU