Wednesday, December 31, 2008
Robert O'Harrow Jr. and Brady Dennis
Third of three parts
The contracts were flying out of AIG Financial Products. Hardly anyone outside Wall Street had ever heard of credit-default swaps, but by early 2005, investment banks were snapping them up to insure all kinds of deals in case of default, fueling one of the great financial booms in U.S. history.
During twice-monthly conference calls that originated from the company's headquarters in Wilton, Conn., president Joseph Cassano would listen as marketing executive Alan Frost listed the latest swap transactions for associates in the firm's offices in London, Paris and Tokyo.
Once a small part of the firm's business, the increasingly popular contracts had helped boost the company's profits to record levels. The company's computer models continued to show only a minute chance that the firm would ever pay out a dime on the contracts, and it turned down deals that didn't meet its standards. After their reviews, Cassano and his team would consult with AIG executives, sometimes including chairman and chief executive Maurice "Hank" Greenberg. "We rode pretty tight rein on them," Greenberg recalls.
more: Downgrades And Downfall
Full Report: The Origins of the Financial Crisis
Pearlstein: Universal Pay Cuts May Ease Recession
Economy Watch: In Focus Today: Jobs, Madoff
Ill. Drama From Obama's Past
Explanation: Still need to come up with a good new year's resolution? Consider one appropriate for 2009, the International Year of Astronomy; just look up -- experience, learn, and enjoy the changing sky. This 4-minute, time-lapse video is composed from a series of 7,000 images highlighting much of what you could see. Arcing through the sky in a stately reflection of planet Earth's own rotation are Moon, Sun and stars. But the sequence also features satellites and meteors streaking overhead, clouds moving along the horizon changing in a beautiful iridescence, and beaming crepuscular rays.
Tuesday, December 30, 2008
Presidente da República promulgou Orçamento de Estado para 2009
Carga fiscal aumentou no ano passado para o nível mais elevado em 13 anos
Obras públicas até cinco milhões de euros podem ser feitas por ajuste directo
Nos próximos dois anos, as obras públicas cujo valor não exceda os 5,15 milhões de euros podem ser atribuídas a uma empresa ou consórcio de empresas por ajuste directo, aprovou hoje o Conselho de Ministros.
THE CRASH What Went Wrong
By 1998, AIG Financial Products had made hundreds of millions of dollars and had captured Wall Street's attention with its precise, finely balanced system for managing risk. Then it subtly turned in a dangerous direction.
For months, several executives at AIG Financial Products had pulled apart the data, looking for flaws in the logic. In phone calls and e-mails, at meetings and on their trading floor, they kept asking themselves in early 1998: Could this be right? What are we missing?
Monday, December 29, 2008
Cavaco Silva promulgou Estatuto dos Açores mas denuncia abertura de "precedente muito grave"
O Presidente da República, Cavaco Silva, anunciou esta noite numa declaração ao país que promulgou hoje o Estatuto Político-Administrativo dos Açores, documento que tinha vetado, apesar de considerar que este abre um “precedente muito grave”, “abala o equilíbrio de poderes e afecta o normal funcionamento das instituições da República”.
[Publicado por Vital Moreira] [Permanent Link]
Não me lembro de nenhuma declaração presidencial tão dura em trinta anos de democracia, como esta sobre o Estatuto regional dos Açores. Se ela traduz o estado de espírito de Cavaco Silva -- e não há nenhuma razão para pensar o contrário --, então só a ingenuidade pode admitir que este episódio não terá consequências funestas no futuro para a relação entre Belém e São Bento.
First of three parts
By Robert O'Harrow Jr. and Brady Dennis
Greed on Wall Street and blindness in Washington certainly helped cause the financial system's crash. But a deeper explanation begins 20 years ago with a bold experiment to master the variable that has defeated so many visionaries: Risk.
Sosin, a 35-year-old reserved finance scholar who had honed his theories at the famed Bell Labs, projected an aura of brilliance and fierce determination. Rackson, a 30-year-old soft-spoken computer wizard and art lover, arrived on Wall Street with a Wharton School pedigree and a desire to create something memorable.
They combined forces with Barry Goldman, a Drexel colleague with a PhD in economics and a genius for constructing complex financial transactions. "Imagine what we could do," Sosin would tell Rackson and Goldman as they brainstormed in the spring of 1986.
The three men had earned plenty of money through short-term deals known as interest-rate swaps, a clever transaction designed to protect banks, corporations and other clients from swings in interest rates that threw uncertainty into the cost of borrowing the money necessary for their business operations.
They believed their revolution could never happen if they stayed at Drexel. Swaps in those days typically lasted no longer than two or three years. The trio envisioned deals lasting decades that would lock in profits and manage risks with unprecedented precision. But the junk-bond firm's inferior credit rating sharply raised its borrowing costs, making it a dubious and risky partner for such long-term deals.
Sosin and his team needed the backing of a company with deep pockets, a burnished reputation and the very top credit rating, a Triple A institution as unlikely to default as the U.S. Treasury itself. One name topped their wish list that fall: American International Group, or AIG, the global insurance conglomerate considered one of the world's safest bets.
They would find a partner for their venture. They would create an elegant and powerful system that earned billions of dollars, operating in the seams and gaps of the market and federal regulation. They and their firm would alter the way Wall Street did business, particularly in the use of derivatives, and eventually test Washington's growing belief that capitalism could safely thrive with little oversight.
Then, they would watch in disbelief as their creation -- by then in the hands of others -- led to the most costly rescue of a private company in U.S. history, triggering a federal investigation into AIG's near-collapse and making AIG synonymous not with safety and security, but with risk and ruin.
Over the past two decades, their enterprise, AIG Financial Products, evolved into an indispensable aid to such investment banks as Goldman Sachs and Merrill Lynch, as well as governments, municipalities and corporations around the world. The firm developed innovative solutions for its clients, including new methods to free up cash, get rid of debt and guard against rising interest rates or currency fluctuations.
Financial Products unleashed techniques that others on Wall Street rushed to emulate, creating vast, interlocking deals that bound together financial institutions in ways that no one fully understood and contributed to the demise of its parent company as a private enterprise. In the panic of mid-September's crash, the Bush administration said that AIG had grown too intertwined with the global economy to fail and made the extraordinary decision to take over the reeling giant. The bailout stands at $152 billion and counting -- almost 10 times as large as the rescue for the American auto industry.
Many of the most compelling aspects of the economic cataclysm can be seen through the story of AIG and its Financial Products unit: the failure of credit-rating firms, the absence of meaningful federal regulation, the mistaken belief that private contracts did not pose systemic risk, the veneration of computer models and quantitative analysis.
Marinho Pinto é mesmo assim: Dá umas no cravo e outras na ferradura, quando não faz ao contrário.
Ninguém pode discordar dele quando afirma que há dois pesos e duas medidas no julgamento de crimes em Portugal. Segundo ele, e eu acredito, 97% dos presos são pessoas pobres; os crimes de colarinho branco regra geral ficam impunes. Também não se pode deixar de concordar com ele quando afirma que os offshores são muitas vezes criados para cometer crimes e o segredo bancário para os camuflar.
Já é menos consistente quando pergunta, afirmando, "pelos vistos, nenhum banco pode ir à falência". E ainda menos quando compara os bancos com as restantes actividades económicas não financeiras. É evidente que os bancos também podem ir à falência. O problema são as consequências, os chamados efeitos sistémicos, sobre o resto do sistema e da economia em geral.
A questão que deve colocar-se é outra: Se os bancos não podem ir à falência que requisitos deve a sociedade impor aos bancos para lhes assegurar a solvabilidade e a liquidez perenes.
A questão dos offshores é complicada porque a sua extinção não depende apenas da decisão tomada por um país ou por um restrito número deles, ainda que o conjunto dos maiores mercados financeiros pudesse, se quisesse, impor regras radicais na matéria.
Enquanto tal não acontece, poderia avançar-se para meio caminho: Impor a separação dos bancos entre os que utilizassem offshores e os que decidissem colocar-se fora da rede. Tal como na lei do tabaco: espaços para fumadores e não fumadores.
Mas há um ponto onde a minha discordância com MP, e todos os que pensam como ele, é total, e que se refere à incapacidade congénita da Justiça para punir os prevaricadores. Diz MP que a solução não está no sistema judiciário mas no sistema político. O que é preciso é uma discussão acerca destes assuntos, diz ele.
Tudo conversa fiada, porque é sobejamente conhecida a arteriosclerose de que a justiça está atacada. O que é preciso, urgentemente, para salvar a democracia é operar a justiça removendo-lhe os tecidos lesados.
Se esta crise teve múltiplas causas, o crime generalizado de abuso de confiança potenciou-lhe os efeitos. O problema que MP detecta, mas não sabe de onde lhe cai, ao que parece, é outro: enquanto o mundo tecnológico e da informação avançou exponencialmente nas últimas décadas o aparelho judiciário quase parou no tempo. Assim sendo, só prende os pequenos infractores, aqueles que não dispõem de meios que lhes permitam escapar-se em lanchas voadoras.
As caricatas situações a que a justiça se presta, e que são frequentes em Portugal, demonstram à saciedade que os seus agentes estão impreparados para fazerem o que devem numa sociedade cada vez mais complexa.
Os cidadãos que esperam que a justiça se faça não podem, não devem, aceitar as escusas de MPinto ou de outro MP qualquer em realizar aquilo para que existem, e são pagos.
Sunday, December 28, 2008
A discussão à volta dos malefícios do neo liberalismo envolvendo o posicionamento relativo do binómio Keynes - Hayek, ou dos respectivos neos, pode ser intelectualmente estimulante mas não abrirá nunca qualquer outra janela por onde se possa vislumbrar uma oportunidade de recrear a herança de qualquer deles escalpelizando a semântica das suas palavras ou a filosofia subjacente às suas convicções. Será muito interessante do ponto de vista da história das ideias mas é muito provável que não se descortinarão outros contributos para a ultrapassagem dos muitos dilemas que continuam a colocar-se aos promotores de políticas económicas. Se a história se repete, a história económica repete-se mas as mesmas terapêuticas não conduzem a idênticos resultados. Se o Washington Consensus agudizou desastres, o keynesianismo já tinha falhado noutras situações. Mais do que discutir Keynes, ou Hayek, hoje, o que vale a pena é pensar as medidas, globais e específicas, que a ultrapassagem desta crise requer e adoptar os antídotos que possam prevenir as causas que a provocaram. Se estamos condenados a cometer erros, que eles sejam novos, a estrear.
Saturday, December 27, 2008
Friday, December 26, 2008
Queda mensal sem precedentes de 8,1 por cento da produção industrial japonesa
A produção industrial do Japão caiu 8,1 por cento em Novembro relativamente a Outubro, a maior queda jamais registada, ilustrando a regressão das exportações nipónicas devido à crise económica mundial, anunciou hoje o governo.
Investors Flee Stock Funds
Oct. Withdrawals Hit Record High
The bubble pops. Stock markets tumble. Investors flee.
It is the narrative of nearly every economic boom and bust, as investors scramble to find other places -- besides underneath mattresses -- to park their money.
Investors pulled $10.5 billion out of stock funds in the week ended Dec. 10, up from $3.3 billion the previous week, according to the Investment Company Institute, a trade group for mutual fund managers. A record $72 billion flowed out of stock funds in October, according to the ICI's most recent monthly data.
"We've seen major redemptions out of equity mutual funds," said Alec Young, an equity strategist with Standard & Poor's.
The hits are largely across the board, according to a report from Morningstar: "The heavy redemptions are likely due to the widespread losses that haven't been isolated to a few asset classes but have spread to more conservative asset classes and funds."
Investors also took money out of bond funds, to the tune of $4.2 billion in the week ended Dec. 10 and $2.8 billion in the week ended Dec. 3.
From the start of September through the middle of this month, about 3 percent of the assets in stock and bond funds had been yanked by mutual fund investors, according to the ICI. That's roughly comparable to investor behavior in other bear markets, according to Brian Reid, the chief economist for the group.
Who is moving all this money out of stocks and stock funds? The everyday investor, according to analysts and financial advisers. "The money moving in and out is the general public," Young said. "It's the regular investors or an adviser selling funds. But the general public is making the direction to move money out."
Bernie McGinn of McGinn Investment Management in Alexandria said investor angst really picked up in late November, particularly the week of Nov. 20, when U.S. stock markets suffered heavy losses. "People who I hadn't heard from that much called me to say: 'I can't take it anymore. I want out. I don't care where it goes, but get it out.' "
Where all the money went -- what was left of it, at least -- is hard to say, but assets of retail money-market mutual funds have risen in four of the past five weeks, according to the ICI. The biggest spike came in mid-November, when $8.4 billion flowed into money-market funds in a single week, bringing total retail money-market mutual fund assets to $1.27 trillion. As of Dec. 17, the total had climbed above $1.28 trillion.
U.S. Treasurys have also been a popular parking place.
But that doesn't account for all the money coming out of funds. Analysts at TrimTabs Investment Research estimate that retail investors pulled $86 billion out of long-term mutual funds in November. But the increase in the amount of money that went into savings, certificates of deposit and money markets from October to November was only $5.7 billion, according to Federal Reserve statistics.
Conrad Gann, the president of TrimTabs, thinks a lot of the money actually went to pay down bills, mostly mortgages. "Sadly, we are in code red on the economy right now," Gann said.
So much money is coming out that stock funds long closed to the public are reopening. Morningstar says dozens of funds have reopened this year.
But some mutual fund industry officials and financial advisers say they had expected to see more people flee the markets. Reid notes that in October 1987, investors pulled back 3.14 percent of their stock fund assets when the market collapsed. He said that in 1987 many stockholders were relative newcomers who got into the market during a good run in the mid-1980s -- and were the first out the door when stocks crashed.
Now more people have 401(k) plans through their employers. Currently about 54.5 million, or 47 percent of U.S. households, participate in the market through stock or bond ownership, according to a poll conducted earlier this year by ICI and the Securities Industry and Financial Markets Association. That's up from 39 percent in 1989, the first year for which comparable data are available.
These investors seem reluctant to move the goal posts when it comes to their long-term investment strategy, said Stuart Ritter, a financial planner with T. Rowe Price in Baltimore.
"There certainly are individuals who have done it, and I'm sure lots of people may have considered it, but when it comes to the actions people are talking, it's safe to say you're not seeing people take out everything they have in the stock market," he said. "While what we're going through is uncomfortable and frustrating, it doesn't mean it's time for a wholesale change in approach."
Thursday, December 25, 2008
Wednesday, December 24, 2008
Mulher mais rica do mundo investiu em Madoff
A lista dos investidores lesados pela fraude de Bernard Madoff não para de crescer. Também a mulher mais rica do mundo Liliane Bettencourt, filha do fundador da L’Oreal terá sido lesada pela maior fraude financeira de sempre. Os seus investimentos foram efectuados através do gestor de fundos que ontem se suicidou.
O BPN, BPP, sector automóvel, Finantia, Qimonda são todos casos diferentes onde já grassa o erro. Hoje escrevemos sobre isso. Não consta que Belmiro de Azevedo e Henrique Granadeiro tenham estado no Fórum das Esquerdas e sido iluminados pelo discurso de Manuel Alegre contra as ajudas aos bancos. O que os aproxima então, a eles e a Jorge Sampaio, na oposição ao intervencionismo estatal no BPN e BPP?
Tuesday, December 23, 2008
Sixty-two years after Keynes’ death, in another era of financial crisis, it is easier for us to understand what remains relevant in his teaching, writes Martin Wolf
...The shorter-term challenge is to sustain aggregate demand, as Keynes would have recommended. Also important will be direct central-bank finance of borrowers. It is evident that much of the load will fall on the US, largely because the Europeans, Japanese and even the Chinese are too inert, too complacent, or too weak. Given the correction of household spending under way in the deficit countries, this period of high government spending is, alas, likely to last for years. At the same time, a big effort must be made to purge the balance sheets of households and the financial system. A debt-for-equity swap is surely going to be necessary.
The longer-term challenge is to force a rebalancing of global demand. Deficit countries cannot be expected to spend their way into bankruptcy, while surplus countries condemn as profligacy the spending from which their exporters benefit so much. In the necessary attempt to reconstruct the global economic order, on which the new administration must focus, this will be a central issue. It is one Keynes himself had in mind when he put forward his ideas for the postwar monetary system at the Bretton Woods conference in 1944.
No less pragmatic must be the attempt to construct a new system of global financial regulation and an approach to monetary policy that curbs credit booms and asset bubbles. As Minsky * made clear, no permanent answer exists. But recognition of the systemic frailty of a complex financial system would be a good start."
Keynes’s difficult idea (Paul Krugman)
Great piece by Martin Wolf today. I particularly liked this:
Keynes’s genius – a very English one – was to insist we should approach an economic system not as a morality play but as a technical challenge.
That’s the point of my favorite Keynes quote, where he declared of the Great Depression, “we have magneto trouble.”
What’s been striking me lately is how many people who talk and write about macroeconomics just don’t get Keynes’s essential point — the fact that economies can suffer from insufficient aggregate demand because people want to acquire liquid assets rather than real goods. Not to single out any one commentator, but this morning I read this:
Government spending doesn’t increase aggregate demand. All it does is transfer spending power from one party to another by borrowing from or taxing the public.
That’s exactly the infamous “Treasury view” from the 1920s, against which Keynes had to struggle. And it’s still out there.
Anyway, good for Martin; we’re going to need every possible voice to counter the niggling nabobs of negativism.
*Hyman Minsky (September 23, 1919, Chicago, Illinois – October 24, 1996), was an American economist and professor of economics at Washington University in St. Louis. His research attempted to provide an understanding and explanation of the characteristics of financial crises. Minsky was sometimes described as a radical Keynesian because he supported some government intervention in financial markets and opposed some of the popular deregulation policies in the 1980s, and argued against the accumulation of debt. His research, nevertheless, endeared him to Wall Street. .
Nouriel Roubini perguntava a 30 de Julho de 2007: "Are We at the Peak of a Minsky Credit Cycle?" - Transcrito aqui no Aliás.---------------------------------------
‘Helicopter Ben’ confronts the challenge of a lifetime
Central banks may resort to their most powerful weapons against deflation: the printing press and the ‘helicopter drop’ of money. Will this work? Yes. But returning to normality will prove far more elusive, writes Martin Wolf
"...Ironically, we are where we are partly because the Fed was so terrified of deflation six years ago. Now, a credit bubble later, Mr Bernanke has to cope with what he then feared, largely because of the Fed’s heroic attempts at prevention. Similar dangers now arise with the drastic measures that look ever more likely. This time, I suspect, the result will ultimately not be deflation but unexpectedly high inflation, though probably many years hence."
Monday, December 22, 2008
O primeiro ministro inglês, Gordon Brown, afirmou que se encontra “zangado” com os executivos dos bancos pelo papel que estes tiveram no despoletar da crise financeira. O responsável divulgou também algumas medidas que vão ser adoptadas para o próximo ano para estimular a economia.“Eu estou zangado, zangado por termos um sistema bancário onde as pessoas não sabem os riscos que estão a tomar ou onde não são abertos o suficiente quanto aos problemas que têm”, referiu Brown numa entrevista ao “Daily Mirror” citada pela Bloomberg.O primeiro ministro inglês referiu ainda que “se não tivesses agido há umas semanas os bancos teriam simplesmente entrado em colapso.”Para o próximo ano Gordon Brown anunciou alguns planos dos que vão ser divulgados em Janeiro como medidas para estimular a economia. Entre eles está a construção de novas escolas, a reconstrução das que se encontram em pior estado e ainda o objectivo de reforçar a rede de Internet de alta velocidade britânica. A crise de crédito está a levar o Reino Unido para a primeira recessão desde 1991, aumentando o número de desempregados e levando a uma redução das despesas dos consumidores. Em Novembro o número de britânicos a pedir subsídios de desemprego foi o mais elevado dos últimos 17 anos.
Anthony Faiola and Glenn Kessler
Only a few weeks after world leaders vowed at a Washington summit to reject trade protectionism and adhere to free-market principles as they combat the global financial crisis, a host of nations are already breaking that promise.
Moving to shield battered domestic manufacturers from foreign imports, Indonesia is slapping restrictions on at least 500 products this month, demanding special licenses and new fees on imports. Russia is hiking tariffs on imported cars, poultry and pork. France is launching a state fund to protect French companies from foreign takeovers. Officials in Argentina and Brazil are seeking to raise tariffs on products from imported wine and textiles to leather goods and peaches, according to the World Trade Organization.
The list of countries making access to their markets harder potentially includes the United States, where critics are calling the White House's $17.4 billion bailout of the U.S. auto industry an unfair government subsidy that would put foreign competitors at a disadvantage.
Though still relatively narrow in scope, the moves, observers warn, in the coming months may grow into a broader wave of protectionism. That could worsen the global financial crisis by further choking world trade, which is already facing its first decline since 1982 as the world economy sharply slows and demand dries up.
In hard times, analysts say, nations are more inclined to take steps that inhibit trade, often with dire consequences. Trade restrictions imposed by countries trying to protect domestic industries in the 1930s, for instance, escalated into a global trade war that deepened and prolonged the Great Depression.
"Exporting firms tend to be innovative, dynamic and capable of generating good job growth," said Eswar S. Prasad, a professor of trade policy at Cornell University and senior fellow at the Brookings Institution in Washington. "If trade restrictions caused by trade wars shut them down, their suppliers shut down, job losses get worse, and you can quickly have a spiraling downward effect on the entire economy."
To be sure, most of the measures taken to date appear to be within the limits of current international trade treaties, which grant countries some room to raise tariffs and contain loopholes that can be exploited to protect domestic industries.
But the general trend toward protectionism could undermine what has been the steady march of free trade during the era of globalization, with export-dependent countries such as China standing to lose the most.
Seeking to avoid such a reversal, leaders from 20 major and emerging economies gathered in Washington on Nov. 15 for a global economic summit, issuing a pledge to refrain from protectionist measures for at least 12 months. They also vowed to reach a breakthrough this year on a stalled global trade deal that would bring down tariffs on a wide variety of exports, injecting as much as $100 billion into the global economy.
But nations have failed to comply with both of those promises, with many not waiting for the ink to dry on the summit agreement before reversing course.
For example, on Nov. 18 -- just three days after the summit -- India levied a new 20 percent duty on imports of some soybean oils to protect domestic farmers as international prices have dropped during the global economic slump. Experts in India think the government may soon raise taxes on other types of foreign-made cooking oils.
Increasingly, nations are rolling out support for battered domestic industries that critics are decrying as trade-distorting government subsidies. The United States, under fire for bailing out General Motors and Chrysler, on Friday announced that it was taking legal action against China at the WTO for allegedly offering unfair support of its export industry -- including the award of cash grants, rebates and preferential loans to exporters.
more : Trade Barriers Toughen With Global Slump: Despite Free-Market Pledge, Many Nations Adopt Restrictive...
As deficiências no registo de despesas e receitas do Estado no ano passado levam o Tribunal de Contas a não garantir o défice do Estado em contabilidade pública de 2007.
Governo desorçamentou 452 milhões em 2007...
Dívidas a fornecedores excediam os dois mil milhões no final de 2007...