Saturday, June 27, 2009

Trying to work out which banks are the world’s best is a bit like awarding the prize for prettiest war-torn village

--- The Economist, "A short list", survey of the world's best banks, May 23rd 2009

Extended quote:

TRYING to work out which banks are the world’s best is a bit like awarding the prize for prettiest war-torn village. It is a title that carries little kudos. It is also likely to prompt further shelling. Winners of industry awards in the past three years include Ken Lewis, the chief executive of Bank of America, for banker of the year (2008); Société Générale for its risk management; and Angelo Mozilo of Countrywide, a failed mortgage lender, for a “lifetime of achievement”.

Still, the question is becoming more pertinent. After months of indiscriminate fear, widespread losses and government hand-holding, the banking industry is gradually stabilising. Money markets are steadily calming. American banks that got a clean bill of health in this month’s stress tests are queuing up to repay government money. A first wave of escapees is likely to include Goldman Sachs, Morgan Stanley and JPMorgan Chase. Those banks that emerge from this crisis with reputations and franchises strengthened will find it increasingly easy to raise funds, win clients, attract employees and buy assets.

Wednesday, June 10, 2009

The more you value financial stability, the more you have to sacrifice financial innovation

--- Dani Rodrik in opinion piece on regulating global finance (or not), The Economist March 14, 2009

In context:

But the most fundamental objection to global regulation lies elsewhere. Desirable forms of financial regulation differ across countries depending on their preferences and levels of development. Financial regulation entails trade-offs along many dimensions. The more you value financial stability, the more you have to sacrifice financial innovation. The more fine-tuned and complex the regulation, the more you need skilled regulators to implement it. The more widespread the financial-market failures, the larger the potential role of directed credit and state banks.

Different nations will want to sit on different points along their “efficient frontiers”. There is nothing wrong with France, say, wanting to purchase more financial stability than America—and having tighter regulations—at the price of giving up some financial innovations. Nor with Brazil giving its state-owned development bank special regulatory treatment, if the country wishes, so that it can fill in for missing long-term credit markets.

In short, global financial regulation is neither feasible, nor prudent, nor desirable. What finance needs instead are some sensible traffic rules that will allow nations (and in some cases regions) to implement their own regulations while preventing adverse spillovers. If you want an analogy, think of a General Agreement on Tariffs and Trade for world finance rather than a World Trade Organisation. The genius of the GATT regime was that it left room for governments to craft their own social and economic policies as long as they did not follow blatantly protectionist policies and did not discriminate among their trade partners.

Art jewellery is "buying a bit of the artist's brain"

--- The Economist in a review built around a show of contemporary jewellery at the Saatchi Gallery

In context:

This is jewellery offering a very different expression of identity. The wearer of such pieces challenges preconceived notions. It can include a whiff of intellectual snobbery, as the wearer can be seen as “buying a bit of the artist’s brain”.