Repo transactions under a cloud

Reports that Lehman relied heavily on repo transactions in order to disguise problems with its balance sheet highlight the need for tighter restrictions on repo's. Like commercial paper, most repo deals are short-term in nature and therefore unsuited for the financing of longer-term assets. Funding based on repo's, commercial paper and similar instruments should be used exclusively for the financing of assets with a matching maturity profile and capital requirements should allow for a sufficient margin to provide for extreme events.

Geithner intervenes in EU hedge fund regulation

One has to wonder what Tim Geithner's priorities are at a time when the USA faces an unprecedented gap in its budget and the economy has just left the intensive-care ward. The USA puts massive restrictions on foreign fund managers that try to market their services or securities to its citizens, the boilerplate restrictions on most securities prospectuses and fund manager's brochures and websites bear witness to that. Why should the EU not have the right to protect its citizens? Any non-EU fund manager is welcome to set up a EU-compliant subsidiary and thus get access to a market of 500 million people.

Causes of the global credit crunch

It is too early to fully understand how it could happen that the World's Financial System got close to a global meltdown during the past 12 months. Some blame greedy bankers, others lay the blame squarely at the foot of the (US) consumers. Institutional Investors also appear entangled as they allowed managements too much leeway and even egged them on to pursue ever-more risky expansion plans. However, we tend to think that regulators - and their paymasters the politicians - may have to take a large part of the blame.
Unfortunately they are the party that is the least likely to bear the full cost of their mistakes. Shareholders have to suffer from dramatically shrunken share prices, scores of bankers have lost their jobs, or are about to in the near future. Bureaucrats are happily engaged in the blame game and are joined by academics and media people who often are also less than objective in their judgement.