In Case Against Philip #Falcone, a Warning to Others - NYTimes.com

Hedge fund managers have long flown underneath the radar, doing pretty much as they pleased with little oversight from the Securities and Exchange Commission. Securities fraud charges filed against Philip Falcone and his firm, Harbinger Capital Partners, are a warning that funds can now expect the same scrutiny that Wall Street banks and brokerage firms receive.

See the article online here:  In Case Against Philip Falcone, a Warning to Others - NYTimes.com

US Supreme Court rules in favour of #Argentina and unfreezes #funds — MercoPress

US Supreme Court rules in favour of Argentina and unfreezes funds

The US Supreme Court on Monday rejected an appeal by two US investment funds - EM Ltd, which is controlled by investor Kenneth Dart, and NML Capital Ltd, which is an affiliate of the investment firm Elliott Management Corp - that seek to seize 105 million dollars of Argentina's central bank deposits in New York to satisfy their claims from the country's huge debt default a decade ago.

 

The disputed deposits have been at the US Federal Reserve Bank in New York since 2006

 

The justices let stand a ruling by a federal appeals court in New York that US law shielded the property of a foreign central bank used for traditional central banking activities, regardless of whether the bank was independent from its parent state.

The appeals court ruled the 105 million dollars must be unfrozen because of limits under a US law, the Foreign Sovereign Immunities Act of 1976, on the ability of Argentina's creditors to freeze or seize assets. It ruled the central bank and Argentina did not waive its immunity.
The disputed deposits held at the US Federal Reserve Bank in New York had been frozen since 2006. The case was part of the long-running litigation in New York over Argentina's 100 billion dollars default.
The two funds, EM Ltd, which is controlled by investor Kenneth Dart, and NML Capital Ltd, which is an affiliate of the investment firm Elliott Management Corp, appealed to the Supreme Court.
The funds said the lower court ruling “threatens to disrupt financial markets” and is “critically important for billions of dollars in financial transactions that will occur in coming years.”
The appeals court decision could have implications in the future for central banks in other countries, such as those in Europe in the event of a debt crisis, default and then similar litigation in New York.
Italian holders of Argentine bonds supported the appeal by the investment funds to the Supreme Court.
Argentina and its central bank urged the Supreme Court to reject the appeal and said there was no compelling reason for the justices to review the ruling.
US government attorneys last month filed a brief with the Supreme Court opposing the appeal and saying the appeals court correctly ruled the central bank's funds were immune from being frozen and seized. The ruling did not conflict with any decision by the Supreme Court or any other appeals court, the government attorneys said.
The case marked the second attempt by the two creditors to freeze and seize US dollar reserves of Argentina's central bank in New York after obtaining 2 billion dollars in judgments over the past eight years.
The appeals court rejected an earlier effort in a ruling that turned on whether use of reserves to repay the IMF constituted commercial activity. The Supreme Court in 2007 refused to hear that case.
The US Supreme Court denied the latest appeal without comment.
See the article online here:  US Supreme Court rules in favour of Argentina and unfreezes funds — MercoPress

Nelson #Peltz Takes 5.1% Stake in #Lazard - NYTimes.com

Nelson Peltz Takes 5.1% Stake in Lazard

JUNE 18, 2012, 3:54 PM

By MICHAEL J. DE LA MERCED

Nelson Peltz's Trian Fund Management said on Monday that it now owns a 5.1 percent stake in Lazard, stressing that it believes the investment bank is undervalued but on the right track with its strategic plan.

The stake makes the investment firm one of Lazard's biggest shareholders. Trian said in a statement that it was encouraged by several meetings that it had held with the bank's management team. The investment firm began reaching out to Lazard executives in the first quarter, noting that it had begun buying up shares and wanted to begin discussions, according to a person briefed on the matter.

It also approved of a strategic plan unveiled in late April aimed at bolstering Lazard's operating margins by 25 percent over the next two years and improving shareholder value through dividends and share repurchases.

Trian's investment could help stage a rebound for Lazard's shares, which have tumbled this year along with the financial sector as a whole. While the firm's stock leaped more than 5 percent after the announcement, it remains down 7.7 percent for the year to date.

While Trian's team, led by Mr. Peltz, isn't a stranger to shareholder activism -- it has agitated for change at the likes of Family Dollar and State Street over the past year -- it has also sought to work with management on a friendlier basis.

The investment is part of a bet that Lazard will outperform other parts of the banking industry. Much of a 38-page presentation that Trian published on Monday focuses on the relative strengths of the firm, including a strong asset-management arm, a blue-chip franchise and a relative freedom from the regulatory requirements that weigh down on universal banks.

It is also a bet that Lazard will be able to continue improving its core business, advising companies on mergers, restructurings and other corporate developments. Trian writes in its presentation that while the investment bank is the biggest advisory firm around, it commands only a 9 percent share of the total deal fees pool. In other words, the investment firm believes there's room to grow.

And compared with other major independent merger advisers, namely Evercore Partners and Greenhill & Company, Lazard earns more revenue as a whole and has more clients paying more than $1 million in deal fees.

In its statement, Trian says that if Lazard can pull off its strategic plan, it could raise its earnings per share to over $3.50 by 2014, potentially doubling its current stock price.

Lazard said in a statement: "Trian Partners are experienced and successful investors, and we appreciate their confidence in Lazard's franchise and strategy."

Nelson Peltz Takes 5.1% Stake in Lazard - NYTimes.com

Eurozone: #Italy is not #Spain is not #Greece is not #Ireland is not #Portugal

Eurozone roundup:

"Spain is not Greece." Elena Salgado, Spanish Finance minister, February, 2010.

"Portugal is not Greece." The Economist, April 2010.

"Greece is not Ireland." George Papaconstantinou, Greek Finance minister, November, 2010.

"Spain is neither Ireland nor Portugal." Elena Salgado, Spanish Finance minister, November 2010.

"Ireland is not in 'Greek Territory.'"Irish Finance Minister Brian Lenihan. November 2010.

"Neither Spain nor Portugal is Ireland." Angel Gurria, Secretary-general OECD, November, 2010.

"Spain is not Uganda" Spanish PM Rajoy. June, 2012

Uganda does not want to be Spain (Uganda foreign minister) jun 13th 2012

Italy is not Spain" – Ed Parker, Fitch MD, 12 June 2012

Courtesy of Fairfax Plc

Endless #QE? $6 trillion and counting | Reuters

Many more years of money printing from the world's big four central banks now looks destined to add to the $6 trillion already created since 2008 

is there any evidence that QE actually helps the underlying problem and what are the risks from all this?"

The heyday of independent central banking could be drawing to a close"

Analysis: Endless QE? $6 trillion and counting

Wed, Jun 13 2012 By Mike Dolan
LONDON (Reuters) - Many more years of money printing from the world's big four central banks now looks destined to add to the $6 trillion already created since 2008 and may transform the relationship between the once fiercely-independent banks and governments.
As rich economies sink deeper into a slough of debt after yet another wave of euro financial and banking stress and U.S. hiring hesitancy, everyone is looking back to the U.S. Federal Reserve, European Central Bank, Bank of England and Bank of Japan to stabilize the situation once more.
What's for sure is that quantitative easing, whereby the "Big Four" central banks have for four years effectively created new money by expanding their balance sheets and buying mostly government bonds from their banks, is back on the agenda for all their upcoming policy meetings.
Government credit cards are all but maxed out and commercial banks' persistent instability, existential fears and reluctance to lend means the explosion of newly minted cash has yet to spark the broad money supply growth needed to generate more goods and services.
In other words, electronic money creation to date - whether directly through bond buying in the United States or Britain or in a more oblique form of cheap long-term lending by the ECB - is not even replacing what commercial banks are removing by shoring up their own balance sheets and winding down loan books.
Global investors appear convinced more QE is in the pipe.
"It is almost as if investors are saying QE will happen no matter what," said Bank of America Merrill Lynch's Gary Baker.
BoA Merrill's latest monthly survey of 260 fund managers showed nearly three in four expect the ECB to proceed with another liquidity operation by October. Almost half expected the Fed to return to the pumps over the same period.
The BoJ has already upped asset purchases yet again this year and Bank of England policy dove Adam Posen said on Monday the BoE should not only buy more government bonds but target small business loans too.

SO FAR, SO SO
But aside from investor hopes of a market-based call and response, is there any evidence that QE actually helps the underlying problem and what are the risks from all this?
The "counterfactual", to use an economics wonk's term, is the most powerful argument in QE's favor - what would have happened if they didn't print at all and broad money supply collapsed?
But after four years in which, according to HSBC, the balance sheets of the Big Four have collectively more than tripled to $9 trillion and still not generated self-sustaining recoveries, the question is how long this can keep going on without creating bigger problems for the future.
For a start, there is no quick solution to the problem of mountainous indebtedness.
Recapitalizing banks; stabilizing housing and mortgage markets responsible for deteriorating loan quality; further deep integration of euro fiscal links to support the shared currency; and capping government debt piles in the United States, Japan and Britain will - even for optimists - take many years.
On top of that the rich economies face gale force headwinds over the next decade from ageing and retiring populations.
In the interim, the job of central banks looks increasingly like a blended mix of monetary policy and sovereign debt management. And that's on top of recently acquired roles as guardians of financial and banking system stability.
The concern is that monetary authorities are increasingly acting as government agents responsible as much for stabilizing bond markets and keeping banks clean as for fighting inflation.
The question is not whether central banks can withdraw this money again once broad money growth gains traction - most think that's mechanically easy - it's whether they will be able to resist pressure to carry on underwriting government deficits.
A series of papers prepared for a Bank for International Settlements workshop in May certainly saw the problem.
"Whatever view is taken of this, the boundary between monetary policy and government debt management has become increasingly blurred. Policy interactions have changed in ways that are difficult to understand," the BIS overview concluded.
The papers also made clear that this form of monetary policy has plenty of precedents throughout the earlier part of the 20th century during the gold standard. It's only since the 1980s and 1990s that consensus shifted squarely behind the idea of highly independent central banks pursuing narrow price stability and even strict inflation targets.
And given the level of credit chaos that ultimately emanated from the so-called Great Moderation, it's possible that history will see that system as the aberration rather than norm.
HSBC economists Karen Ward and Simon Wells reckon central bank independence is the biggest impact from ever-more QE and fear that, as in Japan, the price will be paid by persistently high if sustainable government deficits that stifle growth.
"The heyday of independent central banking could be drawing to a close," they wrote in a wide-ranging report on QE.
Hedge fund manager Stephen Jen said he thinks the temporary benefits of QE are outweighed by long-term costs such as removing pressure for fiscal reform and market volatility.
"At some point, the benefit-cost balance flips."
Then again, not everyone bemoans the greater responsiveness of central banks to the will of elected governments.
"The source of central bank independence is public support from elected officials that the central bank is pursuing desirable social goals," BoE's Posen said Monday.
(Editing by Ruth Pitchford)

© Thomson Reuters 2011. All rights reserved

Read the article online here: Analysis: Endless QE? $6 trillion and counting | Reuters

EURO BAIL PIPELINE SYSTEM

EURO BAIL PIPELINE SYSTEM, a photo by Colonel Flick on Flickr.

The money flows for Europe's bailout...

Argentina loses a third of its dollar deposits - US$100 mln withdrawn every day -Reuters

Great work Mrs. Kirchner, you really know how to instill confidence in your country/economy.  I guess with a friend like Chavez, what do you expect....

Argentina loses a third of its dollar depositsFri, Jun 8 2012

* Argentines reacting to foreign exchange restrictions

* About $100 mln in dollars withdrawn every day

* Rush toward greenback started in November

By Jorge Otaola

BUENOS AIRES, June 8 (Reuters) - Argentine banks have seen a third of their U.S. dollar deposits withdrawn since November as savers chase greenbacks in response to stiffening foreign exchange restrictions, local banking sources said on Friday.

Depositors withdrew a total of about $100 million per day over the last month in a safe-haven bid fueled by uncertainty over policies that might be adopted as pressure grows to keep U.S. currency in the country.

The chase for dollars is motivated by fear that the government may further toughen its clamp down on access to the U.S. currency as high inflation and lack of faith in government policy erode the local peso.

"Deposits keep going down," said one foreign exchange broker who asked not to be named. "There is a disparity among banks, but in total it's about $80 million to $120 million per day."

U.S. dollar deposits of Argentine banks fell 11.2 percent in the preceding three weeks to $11.5 billion, according to central bank data released on Friday. The run on the greenback has waxed and waned since November, after President Cristina Fernandez won a second term on promises of deepening the state's role in the economy.

From May 11 until Friday, data compiled by Reuters from private banks showed $1.9 billion in U.S. currency had been withdrawn, or about 15 percent of all greenbacks deposited in the country.

Feisty populist leader Fernandez was re-elected in October vowing to "deepen the model" of the interventionist policies associated with her predecessor, Nestor Kirchner, who is also her late husband.

Since then she has limited imports, imposed capital controls and seized a majority stake in top energy company YPF.

A spokesman for the central bank said on Friday that the rate of dollar withdrawal from Argentina's financial system shows signs of slowing.

"We have seen a tendency toward fewer withdrawals, to about $90 million (per day) over the last week from $120 million the week before," the spokesman said a day after the bank lifted daily reserve requirements on dollar deposits to help banks respond to steady drum beat of withdrawals.



DITCHING HER DOLLARS

The near-impossibility of buying dollars at the official rate is driving some savers and investors to pay a hefty premium in the black market.

Many are taking what dollars they can get their hands on and stashing them under the mattress or in safety deposit boxes, fearing moves by the government to forcibly "de-dollarize" the economy. Officials have strongly denied any such plan.

The president's battle to slow capital flight and fatten the central bank reserves needed to pay the public debt has prompted even tighter controls in recent weeks, making it almost impossible to buy dollars at the official rate. The effects have been felt throughout the South American country's economy.

For example. Argentines, who normally pay for new homes with stacks of dollar bills, have been struggling to get their hands on U.S. currency since Fernandez started imposing stringent controls on dollar buying late last year. [ ID :nL1E8H6EZ8]

She wants Argentines to end their love affair with the greenback and start saving in pesos despite inflation clocked by private economists at about 25 percent per year.

Fernandez set an example on Wednesday by vowing to swap her only dollar-denominated savings account for a fixed-term deposit in pesos.

But savers in crisis-prone Argentina are notoriously jittery. Memories of tight limits on bank withdrawals and a sharp currency devaluation remain fresh a decade after the country's massive sovereign debt default.

"There is a lot of fear, considering everything that has happened before," another foreign exchange broker said. "Confronted by risk, whatever kind of doubt, depositors pull their dollars out of the bank and wait to see what happens. (Writing by Hugh Bronstein; Editing by Leslie Adler)


© Thomson Reuters 2011. All rights reserved.
Argentina loses a third of its dollar deposits | Reuters

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-- The MasterFeeds

IMF Says Spanish Banks Need More Capital in Stress Tests - Bloomberg

IMF Says Spanish Banks Need More Capital In Stress Tests

Spain’s banking system would need 37 billion euros ($46 billion) in additional capital to cope with worsening economic conditions, the International Monetary Fund said in a report, which the country will use to help determine what international support it may seek for its lenders.

“The team’s stress tests show that while the core of the system appears resilient, vulnerabilities remain,” the IMF staff wrote in a report assessing the stability of Spain’s financial system released yesterday. While “the largest banks appear sufficiently capitalized,” there is “a group of banks where vulnerabilities seem highest and where public support seems most critical,” according to the report.

Spain may seek European aid as soon as today when finance ministers from the euro region hold a conference call, said a German official and a European Union aide, who declined to be identified because the matter is confidential. A bailout would make Spain, which is reeling from a recession and the bursting of a real estate bubble, the fourth of the 17 euro nations receiving aid after Greece, Ireland and Portugal.

“European banks are at the epicenter of our current worries and naturally should be the priority for repair,” IMF Managing Director Christine Lagarde said in a speech in New York yesterday.

The IMF said the actual capital needs for Spanish banks would be higher than 37 billion euros to include other costs that may be later identified. “Some costs additional to provisioning for potential losses may be unknown ahead of time and are therefore not possible to incorporate in the stress tests,” according to the report.

Adverse Scenario

The IMF used an “adverse” scenario for the tests that would see the Spanish economy contract 4.1 percent this year and 1.6 percent in 2013. That compares with a “baseline” scenario that foresees it shrinking 1.7 percent this year and 0.3 percent in 2013, according to the report. It also considers that the banks will need to comply with a core Tier 1 capital ratio requirement, a measure of financial strength, of 7 percent.

Spanish Prime Minister Mariano Rajoy said June 7 that he will wait for the IMF report and the results of studies due by June 21 by two consultants before choosing how to finance the recapitalization of the banking system.

The IMF, which says its tests covered 96 percent of the country’s domestic banking industry, categorized banks into four groups. The most vulnerable banks are former savings banks that have received state support.

Domestic Lenders

Spain’s access to markets is narrowing as the Treasury increasingly depends on domestic lenders to buy its debt, government data show. Foreign investors cut their holdings of Spanish debt to 37 percent of the total in April from 50 percent at the end of last year, weakening the government’s capacity to backstop its banks.

The collapse of the Spanish property boom in 2008 left lenders with more than 180 billion euros of what the Bank of Spain calls “problematic” assets linked to real estate. The government, in power since December, has passed two decrees making banks recognize deeper losses on loans to the property industry and foreclosed assets.

Spain’s credit rating was cut to within two grades of junk by Fitch Ratings June 7. It said the cost to the state of shoring up banks may amount to as much as 100 billion euros in the worst case, compared with its previous estimate of 30 billion euros, as Spain will remain in a recession next year.

A bailout for Spain might hurt credit ratings as the threat looms of a Greek exit from the single currency, Moody’s Investors Service said yesterday.

Moody’s said it may review the ratings of several euro-area nations because of developments in Greece and Spain, where growing estimates of the cost of cleaning up banks may prompt a downgrade of the nation’s A3 rating.

-- Editors: Gail DeGeorge, Brendan Murray

To contact the reporters on this story: Sandrine Rastello in Washington at srastello@bloomberg.net Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net

To contact the editors responsible for this story: Chris Wellisz at cwellisz@bloomberg.net James Hertling at jhertling@bloomberg.net

Read the story online here: IMF Says Spanish Banks Need More Capital in Stress Tests - Bloomberg