中国和阿根廷签署货币互换协议

新华社(Xinhua news agency)周一报导，中国和阿根廷签署了一份人民币700亿元的货币互换框架协议。根据该协议，阿根廷从中国进口商品时可以使用人民币结算。 报导称，该协议于周日在美洲开发银行(Inter-American Development Bank)年会间隙签署，地点位于哥伦比亚麦德林市。 据报导，中国已成为阿根廷第二大贸易伙伴。 报导还称，目前中国已与韩国、马来西亚、印度尼西亚、白俄罗斯等国签署了货币互换协议。

Distressed Bank Investors Are Aiming for Preferred Treatment

By PETER EAVIS No investor has nine lives. But those who think the recent bank-stock recovery is more than a dead-cat bounce are making some interesting bets. As well as buying banks' common shares and certain types of bank debt, they are dabbling in banks' preferred stock. These preferreds have been mauled as the financial system has come under stress -- and tend to move with whiplash volatility. Certain institutions have seen their preferreds wiped out completely, or their dividends rescinded, which destroys their value. And if the government's bank rescue shows signs of failing, preferreds could tank again, even at the stronger banks. But to some, the preferreds look enticing. They have recently rallied after the government detailed plans to bolster bank capital and after Citigroup announced plans to convert a large amount of its preferreds into common shares at reasonable terms. The PowerShares Financial Preferred ETF is down 59% over the past 12 months. But it is up more than 66% since its low on March 9, compared with a 44% increase since then for the BKX Bank Index, a common-stock index. The case for the preferreds can be seen in Bank of America's noncumulative, Series L preferreds, which trade around 38% of par value. These could do well in two possible scenarios. First, what happens if the government stress tests prompt Bank of America to convert these into common shares to boost its tangible common equity ratio, as happened at Citi? The Citi example suggests that a bank preferred holder could convert at 85% of par. That would mean each Series L preferred collecting $850 in common shares. The government bank plan already has set a formula for converting preferreds into common, and at Bank of America that prices the latter at around $6.20. Dividing $850 by $6.20 would give the preferred holder 137 common shares. At Monday's stock price of $6.03, those would theoretically have a combined value of about $826 -- well above the $380 the Series L costs. There are risks. To lock in such a gain may mean shorting the common, which could be seriously expensive, as proved by the Citi deal. Unhedged investors, meanwhile, would need to worry about the common-stock price being hit by severe dilution. The second potentially positive scenario is that Bank of America has enough common equity, and doesn't need to convert preferred to common. This would imply that the bank is out of the woods and the discount on the Series L preferreds would likely shrink, as investors bet that the bank can pay the 7.25% dividend. Investors again fled the sector on Monday. But for those able to pick the survivors, preferreds could yet offer preferential returns. Write to Peter Eavis at peter.eavis@wsj.com

General Growth Avoids Chapter 11

Unpaid Debts Mount at Mall Owner, but Bondholders Continue Talking in Hopes of Greater RecoveryArticle By KRIS HUDSON General Growth Properties Inc., struggling under a mountain of debt, said Monday that it latest effort to win a reprieve from bondholders had fallen short. But a bankruptcy filing isn't imminent for the mall giant, according to people familiar with the matter, and General Growth's ability to remain out of bankruptcy shows the unusual dynamic between lenders and distressed companies in the recession-ravaged commercial-real-estate market. Sally Ryan for The Wall Street Journal Bondholders have refrained from forcing mall owner General Growth Properties into bankruptcy court, despite lack of a deal on a debt extension. Under normal circumstances a company with as much past-due debt as General Growth would have been forced into Chapter 11 bankruptcy protection by now. Creditors so far have been willing to let deadlines pass because they believe there is little to be gained and much to be lost through a bankruptcy. General Growth's mall operations are stable and many bondholders hope for a greater recovery outside of bankruptcy court. "This is really rare," said Kevin Starke, an analyst at CRT Capital Group LLC, a research company that tracks distressed securities. "It is corporate-bond limbo like I've never seen before." With the credit market for real-estate deals frozen, there is little hope of General Growth selling enough malls or development land to pay off debts expected to reach $3 billion by June, according to the people familiar with the matter. Creditors also recognize that bankruptcy is a long, expensive and unpredictable process that could produce less of a payout then they would get by working out the problems outside of Chapter 11. General Growth declined to comment on the standoff, but a spokesman said, "We continue working with our syndicate of lenders on our current debt situation." Many creditors say that General Growth's management is doing a good job running the company. Its 200 U.S. malls, a portfolio second in size only to Simon Property Group Inc., generate enough cash to cover interest on the debt. But its properties are overleveraged and it lacks the borrowing capacity to retire those debts as their principal comes due. "There's no question that General Growth is a liquidity issue," said Jeff Spector, an analyst with UBS AG. "The properties, for the most part, aren't broken." General Growth, based in Chicago, isn't the only real-estate borrower that is getting a reprieve from its lenders these days. Hundreds of property owners have had loans come due without a repayment made in recent months. But most lenders have agreed to extend loan terms, hoping that the credit market will improve. Often to win extensions, property owners have had to give up equity or agree to higher interest rates. Australian shopping-center owner Centro Properties Group, which owns 650 U.S. open-air shopping centers, last year sought one short-term extension after another. Finally, in December, after nine extensions, it averted a liquidation by agreeing to eventually grant its lenders 90% of its stock in exchange for two- and three-year payment extensions on $7 billion of debt. To be sure, General Growth may still be forced to seek bankruptcy protection soon. Trying to dig out from under $27 billion in debt, the company until this month has had the relative luxury of negotiating primarily with dozens of banks on more than $4 billion of past-due debt and debt that could become due because of other defaults. General Growth became even more vulnerable after a March 16 deadline passed for repaying $395 million in bonds. Now, rather than dealing only with several dozen banks holding past-due debt, General Growth must negotiate with hundreds of bondholders. Some holders bought the bonds at face value and are hoping for a recovery. Others bought the bonds at depressed prices and might want to force a liquidation to receive a quicker payout. On Monday, General Growth said that it concluded efforts to get holders of $2.25 billion of bonds to grant it a nine-month reprieve from paying principal and interest on those bonds. It had three times extended the deadline on its so-called "consent solicitation" because not enough bond holders signed up. In exchange, General Growth offered the bondholders quarterly payments of 62.5 cents for every $1,000 of bonds, with interest accruing. But that offer wasn't accepted because many bondholders were unwilling to forfeit their ability to demand immediate payment for nine months, these people said. General Growth said Monday it continues to negotiate with the holdout bondholders. The result is an unusual situation in which borrowers have allowed the due date for corporate bonds to pass without the issuer either paying them or filing for bankruptcy protection. Often when a company defaults on corporate bonds, bondholders will force an involuntary bankruptcy petition. A person familiar with the bondholder talks said that, while some creditors are angry, none appears ready to insist on an involuntary bankruptcy petition yet. It is possible that bondholders didn't go along with the consent solicitation primarily because they feared that making such a pledge would reduce the value of their bonds. General Growth has told lenders that they'll have more influence over the outcome if it restructures outside of bankruptcy court, according to people familiar with the talks. A bankruptcy filing could force the company to liquidate its assets for less than the whole company would be worth if it remained a single entity for the long term, these people said. Another deterrent to an involuntary petition is that bankruptcy wouldn't bring immediate payment of General Growth's debts. "It's such a large company that the bankruptcy would definitely last at least a couple of years," said Heidi Sorvino, a lawyer leading the bankruptcy practice of law firm Smith, Gambrell & Russell LLP. The timeframe could be shorter if General Growth did a prepackaged bankruptcy in which the creditors agree to terms prior to the company entering bankruptcy, Ms. Sorvino added. But wrangling so many creditors without the threat of a judge making and enforcing decisions is "almost impossible," she said. General Growth's shares on Monday fell 17%, or 11 cents, to 55 cents in 4 p.m. composite trading on the New York Stock Exchange. Write to Kris Hudson at kris.hudson@wsj.com

Rally Gets Boost as Quarter's End Leads to Performance-Chasing

Forget about whether the plans in Washington will hit stumbling blocks. Never mind that recent 'improved' economic data merely mark a rebound from truly dismal figures. Sometimes, rallies beget rallies, and that may be particularly true as the quarter comes to a close. The Nasdaq Composite Index ended Thursday in positive territory for the year, despite all the hand-wringing after stocks had fallen markedly through the early part of this month. The widely followed indexes have rebounded 20% since the closing lows of March 9, and March looks like it will close out on a high note, though there still are three trading sessions left in the month. Should the Dow industrials end the month higher, March would be the first positive month for the Dow since August. It is at this point in rallies that performance-chasing really starts to come into play. For short-term investors, missing a rally is anathema, particularly the sharpest one since the market started to sink in late 2007. After several quarters of poor performance, the mutual fund that shows lackluster returns in this three-month period is going to invite quizzical looks. 'Whether or not the rally is warranted, it's gotten more of a push,' says Joseph Saluzzi, co-head of trading at Themis Trading. 'You've got the end of the quarter, so you've got that fun game where they try to chase performance. If you're looking at a good month [in the market] and there's nothing on your book, people are going to think, 'Where you been?'' Rallies in this bear market have been teases, and so it is understandable that some would start to think that this rally may start to top out. But market attributes don't suggest that. Bespoke Investment Group notes that in this bear market, rallies tend to fizzle when 75% to 80% of S&P 500 stocks are above their 50-day moving average; only about 71% of stocks have reached that point. Meantime, the Federal Reserve's efforts to lower interest rates has caused investors to maintain interest in riskier assets that are valued more attractively, according to John Brady, head of hedge-fund sales at MF Global. Investors believe the pressure of at least showing a reasonably decent performance at the end of the quarter will buoy shares, at least through the early part of next week. 'Window dressing is a phenomena we deal with at the end of the quarter, where people sell losers . . . but this quarter may be different -- people could be buying to make sure winners are in the portfolio,' says Richard Hughes, co-president of Portfolio Management Consultants, an investment consultancy. David Gaffen

Life Insurance Sector Disparity

Amid the life-insurance group, analysts say some companies seem in better shape than others. Insurance giant MetLife, for instance, has solid cash flows from its extensive businesses that can help carry it through the turmoil, analysts say. The largest insurer in terms of assets, MetLife also has about 11,000 internal agents, making it less vulnerable to customer poaching by rivals. Some insurers, such as Hartford, sell much of their products through third-party agents who are more likely to switch allegiances in volatile times. Hartford declined to comment. MetLife also faces hurdles. It is saddled with $29.8 billion in unrealized losses that, due to accounting rules, it doesn't need to immediately recognize on its bottom line. If the economy continues to weaken, the company may need to realize more of those losses. MetLife declined to comment. Hartford also is losing room to maneuver. It is saddled with more than $8 billion commercial mortgage-backed securities, which have come under increased pressure as the economy has weakened. In October, Hartford received a $2.5 billion investment by German insurer Allianz SE. If the market makes another major move lower, the risks for life insurers will mount. "If the S&P 500 were to drop below 650 and stay there for a significant period, we would certainly have some very grave concerns about some of the major [variable annuity] writers," said Citigroup analyst Colin Devine, who is generally bullish on the sector and particularly MetLife.

现在买房 40年后血本无归?

信源：凤凰网｜编辑：2009-03-29｜ 网址：http://www.popyard.org 抄送朋友｜打印保留 八阕 http://www.popyard.org 一份名为《土地管理法（修订草案征求意见稿）》的文件，因其住宅用地70年到期后的“按照国家有关规定自动续期”替换了原来表述明确的“无偿自动续期”，引发了全社会的热议。而有房地产开发商说，这个问题其实毫无意义，因为目前中国的住宅使用寿命，大多只有短短的50年时间。 “7050”矛盾，揭示了我国土地和住宅市场的深层次矛盾。很有可能发生的是：我们现在耗费毕生储蓄买房，40年后却血本无归。 可以看出，土地是政府实质的盈利性可再生资源，此次细微法规的调整，为政府未来再次收取土地费用预留了操作空间。而对于民众来说，土地却是一种具有明确使用年限的固定资产：其使用时间为70年，到期强制报废，残留价值为零；需要按使用年限计提折旧，末期20年的资产价值可能只剩下零头。而到期可以补缴费用的实质，依然等同于从市场购入新的土地固定资产，只不过我们现在期待着政府大发善心，使得补缴的费用低于同期市场新购入价格而已。 但既然中国的住宅设计使用寿命仅为50年，必然就会涉及到提前拆迁和重建问题。而且不拆迁不重建也不行，因为危房是谁也不敢住的。根据我国土地转让的相关规定，目前市场上出售的住宅，其土地使用权限是从房地产开发商从政府手中取得产权的那一刻开始的。经过开发商的先期拆迁、平整、空置、开发，再到民众收房、装修、正式入住，这一过程往往需要五年至十年的漫长时间。也就是说，民众从住进自己的房屋这一刻算起，已经只剩下60年的土地使用权限。而40年后住宅的使用寿命又即将到期，意味着民众从住进房屋起的第40年，就要面临重新购买房屋的问题. 那么，民众既然只拥有70年之土地产权，而当住宅到满50年使用期限必须拆迁或重建的时候，地方政府和开发商当然只会承认民众剩下的20年残留价值。无论是拆迁补偿、还是房屋二手交易，建立在20年残留价值基础上的住宅，其评估价值都是低到不可想象的。这笔补偿，即便是按照当时的价格，但和同等的市场住宅售价相比，依然很少很少。你现在掏出巨款购买的住宅，40年之后就会血本无归，自己还要掏很大一笔巨款，才能在市场上购入新的住宅。 此前，《物权法》的“自动续期”相关规定，曾经给予民众一个美好的期望。而现在新的法律修订方案，彻底使得这一期望破灭。我们似乎只能寄以希望于：政府能够迅速明确70年后需不需要续费这一敏感问题，而不是暂时搁置，留下悬念。 但在我看来，土地70年期限到期收费不收费的问题，却是属于次要。切切实实矗立在中国土地上的使用寿命只有50年的那些住宅，才是不可不解决的急迫矛盾。因为它们，都已经成为既定事实，既无法事后通过完善法律法规补救，也不能抹去重来。 对付矛盾，政府的经常性举措就是拖延。这种施政行为存在的最大隐忧是，国策（即一国政府因为执政理念基础而对某事物持有的基本判断和态度）的转变往往是极其缓慢而持久反复的，由此影响进而发展到相关法律法规的制定和更改，则更是一个缓慢的过程。也就是说，法律法规的制定和调整，大多严重迟缓于政府明确意识到问题和矛盾之后。 一个可以想象的事件演变过程是：由于70年土地期限和住宅50年实际使用寿命之间的矛盾，现有住宅在50年后面临拆迁时，地方政府和开发商引用即有法律法规，只承认剩余20年的土地残留价值，并按此标准给予补偿，并引发民众和地方政府、开发商的纠纷。而经过若干次同类事件发生之后，才会上升为社会共有现象，并引起大规模的社会纠纷和诉讼高潮，得到社会舆论和法律界的广泛关注和探讨之后，才有可能进入人大、政府等相关法律制定部门的议政日程。而等到相关法律法规的修改和完善，并回过头对司法诉讼和社会产生影响的时候，这一漫长过程起码需要5年以上的时间。 此过程实为最理想的推理过程，由于存在利益博弈、意识形态的斗争以及既得利益者的故意延缓和扯皮，5年时间能够圆满解决已属大幸（拆迁问题我们花了十几年时间也未能彻底解决）。但对于民众来说，只要这样的事情发生在自己的头上，几乎全无周旋之地和等待时间，被扫地出门的概率等于百分之百。由于法院只能按照即有法律法规进行审判，那么早期涉及“5070”大限问题的民众，败诉可能就极大，因为法院只能支持、维护剩下的20年的土地残留价值，而房子却又不搬不可。 我们还能期待什么呢？在《物权法》中规定的“自动续期”都可以摇身变为“有偿自动续期”的时候，可见现在的国策（我国政府因为执政理念基础而对某种事物持有的基本判断和态度）是何样的了。要想在40年之内彻底解决住宅矛盾，需要改变现有政府的执政理念、改变政府的施政目的和纲领，转变政府本质上的阶级特性，真正体现社会主义制度的优越性，40年时间，只怕不够。

Mortgage Defaults, Delinquencies Rise

By JAMES R. HAGERTY Defaults on home mortgages insured by the Federal Housing Administration in February increased from a year earlier. A spokesman for the FHA said 7.5% of FHA loans were "seriously delinquent" at the end of February, up from 6.2% a year earlier. Seriously delinquent includes loans that are 90 days or more overdue, in the foreclosure process or in bankruptcy. Since the collapse of the subprime mortgage market in 2007, most home loans for people who can't afford a sizable down payment are flowing to the FHA. The agency, which is part of the U.S. Department of Housing and Urban Development, insures mortgage lenders against the risk of defaults on home mortgages that meet its standards. FHA-insured loans are available on loans with down payments as small as 3.5% of the home's value. The FHA's share of the U.S. mortgage market soared to nearly a third of loans originated in last year's fourth quarter from about 2% in 2006 as a whole, according to Inside Mortgage Finance, a trade publication. That is increasing the risk to taxpayers if the FHA's reserves prove inadequate to cover default losses. As of January, the cities with the highest FHA default rates in January were Punta Gorda, Fla., at 18%; Detroit, 15.6%; Flint, Mich., 15.1%; Fort Myers-Cape Coral, Fla., 15%, and Elkhart-Goshen, Ind., 12.1%, according to a HUD report. Foreclosed FHA homes owned by HUD totaled 39,687 in January, up 22% from a year earlier. Write to James R. Hagerty at bob.hagerty@wsj.com

Spain Moves to Bail Out Regional Savings Bank

By THOMAS CATAN and JONATHAN HOUSE MADRID -- Spain's central bank will bail out struggling regional savings bank Caja de Ahorros Castilla La Mancha, marking the first time a Spanish financial institution has been rescued since the current financial crisis began. The Spanish government said on Sunday that the Bank of Spain will take over management of the troubled lender, known as CCM, and inject liquidity to keep it afloat, backed by government loan guarantees of up to €9 billion ($12 billion). However, Spanish Finance Minister Pedro Solbes said he hoped the final bill would be a fraction of that. He also played down fears that this could be the first of a rash of bank bailouts in Spain, as bad loans soar following the collapse of the country's housing market. "The Spanish banking system is extremely healthy," Mr. Solbes said, calling the CCM bailout an "isolated incident." He added that CCM holds less than 1% of the assets of the Spanish financial system. Spanish banks have so far weathered the global financial turmoil well, aided by regulation that forced them to build up unusually large provisions to cover bad loans during an economic downturn. Spain's banking regulator has also helped banks avoid the off-balance-sheet vehicles and toxic financial instruments that got many other countries' banks into trouble. Unlike many other banks in the U.S. and Europe, Spanish banks haven't yet needed capital injections from the government, though it has provided them with financing and guaranteed their debt issues. Nevertheless, almost half of Spain's lending business is in the hands of so-called cajas de ahorro such as CCM -- unlisted savings banks largely controlled by regional governments. This sector is seen by analysts as more vulnerable because of its relatively large exposure to real-estate investments. The decision to take over CCM came after negotiations broke down for it to be taken over by a larger rival, Unicaja-Caja del Sol. Several Spanish savings banks are in talks to merge with other competitors, though political rivalries have complicated the process. Mr. Solbes dismissed concerns that the savings banks were facing imminent problems, but said that no one was immune from the global financial crisis. "I feel pretty relaxed about the savings banks," he said. "Are they totally immune in the long term? If we keep having the liquidity problems we are seeing now I don't think anyone can say that." CCM, based in Spain's southeastern province of Cuenca, suffered a rapid increase in bad debt as the result of its high exposure to Spain's ailing housing market. At the end of the first half of 2008, its ratio of impaired loans to the total stood at 3.1%, according to the latest available data from the bank. CCM -- which has around €25 billion in assets under management and is Spain's 12th largest savings bank, will continue to operate under the administration of the Bank of Spain. Mr. Solbes said that the institution remains solvent but has run into liquidity problems because interbank lending markets have dried up. He said CCM likely won't need the entire €9 billion set aside for it. The Bank of Spain estimates it will initially need only around €2 billion to €3 billion of financing, he said. Because of their strong ties to local communities and businesses, savings banks have borne the brunt of the collapse in Spain's construction sector over the past year. Savings banks had delinquent loans equivalent to 3.79% of the total at the end of 2008, up from 0.89% at the end of 2007. By contrast, listed Spanish banks had a delinquency rate of 2.8% at the end of 2008, up from 0.77%. Analysts expect nonperforming loans for the overall banking system to reach 9% this year -- a level last seen during the 1992-93 recession in Spain. That number is expected to be higher for many savings banks. —Christopher Bjork contributed to this article. Write to Jonathan House at jonathan.house@dowjones.com

对改革国际金融监管体系的几点认识

中国人民银行金融研究所 随着金融危机的蔓延，大力改革金融体系、再造全球金融稳定框架的呼声渐高，各国政府和国际组织已经为此做了不少工作，提出了多种建议，并形成了一些共识。在扩大金融监管的范围、应对系统的顺周期性、重置资本和拨备要求、完善估值和会计准则等方面，G30完成了金融改革报告，金融稳定论坛和巴塞尔银行监管委员会也围绕金融监管和新巴塞尔协议框架的诸多问题展开了相应工作。一些监管机构和金融业已着手推动建立针对信用违约互换（CDS）等场外(OTC)金融产品的集中清算和中央交易对手机制。这些好的建议和举措，以及各方为完善金融监管框架所做出的努力，将有助于危机的应对及未来的风险防范。但我们也发现，主要发达国家金融监管体系存在的一些问题还没有得到各方的充分关注或达成共识，在此，我们希望通过对部分问题的深入讨论，提出相关改进建议。 一、金融危机暴露出金融监管存在多方面问题 本次金融危机源于美国次贷危机，通过各类金融产品、金融机构和金融市场等渠道，迅速在全世界蔓延。有效的金融监管是防范金融风险最有力的外部约束力量，而危机的快速蔓延暴露出了部分发达国家在金融监管理念、体制及国际合作等多方面的问题。 1.监管理念上过分相信市场的作用 在监管理念方面，部分发达国家过分相信市场，认为“最少的监管就是最好的监管”。事实上，无论是几年前的安然事件、世通事件涉及到的问题，还是这次危机前期的部分金融机构出现的流动性危机，都提醒监管部门必须加强监管，但多数监管当局并未采取系统性措施加以改正。这其中的一个重要原因，就是过度相信市场的自我修复能力，忽视了在资本逐利动机下隐藏的系统性金融风险隐患。这次危机的演变过程显示，微观主体存在逐利本性，仅仅依靠市场本身力量，要么容易导致资产泡沫，要么就是以金融危机这种破坏性方式清理市场，给全球金融和经济造成了巨大破坏。 2.监管体制须不断更新,以免落后于金融创新 近年来，金融创新使得金融系统性风险有了新的来源，其中包括各类场外金融产品以及投资银行、对冲基金、特殊目的实体等类银行金融机构（near-bank entities）以及资本流动的跨市场投机。上述类银行金融机构内部存在多重问题，与传统金融机构盘根错节，很容易引发系统性风险。而一些大型传统金融机构大规模拓展非传统金融产品和业务，规避监管，成为系统性风险的另类来源。 本次危机让我们深刻认识到，现行金融监管模式滞后于金融创新的实践。在现行监管模式下，吸引公众存款的商业银行等具有明显外部性的传统金融机构和传统金融产品接受较为严格的监管，而类银行金融机构和场外金融产品受到的监管较为松散甚至缺失。此外，不同类型和不同地区的金融机构和不同的产品面临不同的监管规则和制度，不同类型的金融机构即使从事同类业务，也因为监管机构不同，受到监管的标准高低不一，加上金融监管当局之间的配合与协调不足，为监管套利创造了空间。各类监管套利使得类银行金融机构和场外产品发展速度远远超过传统金融机构和产品，也是对冲基金乐于在离岸金融中心注册的重要原因。 近几十年来尤其是近十年来，金融市场和实体经济的迅速发展，使主要发达国家错误地认为现行的监管模式和体制是有效的，没有根据金融市场、机构和产品的发展，采取措施提高监管体制的有效性，减少不同监管机构之间的摩擦、内耗和推诿。有案例表明，本次金融危机爆发以来，部分发达国家监管机构与中央银行及财政部门之间的沟通障碍已经给金融救助和金融稳定工作带来被动，从一定程度上反映了监管体系的失效. 3.国际监管合作体系尚未形成 在国际合作方面，由于缺乏统一的监管标准和信息交换的平台与机制，监管者对国际性金融机构的跨境活动，尤其是国际资本流动，缺乏了解。这是一个全球性普遍问题。相关国际组织一直以来只是主要针对发展中国家进行宏观经济监测，特别关注新兴市场国家的汇率问题，但在监管全球资本流动上的作用强差人意。迄今为止，我们尚未厘清跨境资金的流动渠道和流动机制，特别是新兴市场国家资金流入与流出的渠道和机制，而且也还没有充分了解在经济不景气时，这些资金流动是如何逆转的。 为加强监管方面的国际合作，金融稳定论坛（FSF）近来选定了30家大型国际性金融机构，并为它们分别成立了由其母国监管机构为主、主要东道国监管机构参加的联合监管机制（supervisory college）。在运作一段时间以后，我们应该及时评估这些联合监管机制在加强跨国金融机构的国际监管方面的有效性与充分性，并提出改进建议。同时，作为全球风险预警工作的重要组成部分，国际货币基金组织应该加强对国际资本流动的监管和监测。 二、改革金融监管体系需要关注的几个问题 1.改进金融监管的第一步是监管的自我批评 中国古代先哲的教诲是：“吾日三省吾身” ，这句话浓缩了东方哲学对自我批评的重视。在分析当前危机并从中吸取教训的过程中，我们迫切需要不断反省，吸取教训，只有这样，才能启动深远的改革。近来，我们却不断听到一些对本次金融危机缺乏自我反省，试图寻求借口、推卸责任的言辞。这种缺乏自省的做法将会妨碍对当前金融监管系统性缺陷的客观审视。 实际上，缺乏自我审视的做法正是导致本次金融危机的重要原因。危机爆发之前，尽管有事实表明美国主体纷杂、权力分散的监管结构存在隐忧，但仍有看法认为这种金融监管结构运转良好。虽然部分机构在改进监管方面做出了一些努力，但一些人却以“没出问题就不用修理”为由，不愿意正视问题和解决问题。面对安然、世通事件中涉案金融机构的丑闻，仍然相信市场参与者的自我约束和市场主体的自我监管能力。从当前危机的影响来看，全世界为此付出了巨大的成本。要改革金融体系，首先要正视自身存在的不足。 2.引入宏观管理机构的周期参数，加强逆周期机制 有效克服现有资本监管框架中顺周期因素以及提升银行资本的质量是防止严重金融危机的必要前提。危机反映了银行机构在资本充足性方面存在许多脆弱性，表现在：Basel II对复杂信贷产品的风险重视不够；最低资本及其质量要求未能在危机中提供足够的资本缓冲；资本缓冲的顺周期性加速了动荡；以及金融机构间在资本衡量标准方面存在差异。 目前，多个国际组织和监管机构正在致力于强化资本约束的普遍性，包括对资产证券化、表外风险敞口和交易账户活动提出资本要求，以及提高一级资本的质量和全球范围内最低资本要求的一致性。此外，作为资本充足率要求的补充，构建适当的杠杆比率指标可以在审慎监管中发挥作用，既可以作为潜在承担过度风险的指标，也可以起到抑制周期性波动被放大的作用。 在克服现有资本充足率框架的脆弱性尤其是资本缓冲的周期性方面，负责整体金融稳定的部门需要开发使用逆周期乘数，抑制顺周期因素。当经济周期发生异常变化或经济系统需要非常规的逆周期调整和/或特殊稳定手段时，可以考虑让该部门发布季度景气与稳定系数，金融机构和监督机构可以使用该系数，乘以常规风险权重后得到新的风险权重。根据这个风险权重得出的资本充足率要求和其它控制标准（如内部评级法），可以反映维持金融稳定的逆周期要求。 具体地说,开发出一套景气指数后，逆周期乘数可以从中导出。目前，市场上已经有不少与经济周期、投资者和消费者信心相挂钩的各类指数，可以作为构建景气指数的基础。在市场繁荣期，资产价格一路走高，乐观情绪占主导地位，景气指数维持高位；经济衰退期则正好相反。当然，从景气指数导出逆周期系数时,还需要考虑其他因素，如产品类型、风险敞口的行业种类和国家类别。有了景气指数和逆周期乘数,就可以把它们运用到各种顺周期因素中,如上面提到的风险权重,以及用于评级的违约概率和金融交易中使用的各种抵押物的折扣率等。此外，景气指数和逆周期乘数还可以用于其他的顺周期因素。逆周期乘数的运用，不但有助于克服顺周期因素，还通过改善抵押品的管理和作用于信用评级的违约率，更好地管理复杂信用产品的风险, 从而提高资本金的质量。 3．监管机构须提高队伍素质,否则缺乏监管市场的经验和感觉 一些监管机构缺乏有市场经验和感觉的人才队伍,对市场发展的最新情况缺乏足够了解，不能掌握新产品对市场结构尤其是系统性风险的影响。由于缺乏对产品风险属性的了解，监管机构工作人员对抵押债务凭证（CDO）等结构性投资工具和信用违约掉期（CDS）等衍生产品可能引发的问题，以及金融机构资产负债表不能体现的表外业务活动，其中包括对结构性产品至关重要的评级方法的缺陷等风险隐患不够敏感。为提高监管水平，监管机构需要与金融市场进行常规的、系统性的人员交流，这种交流可以使监管机构提高对市场的敏感性,更好和更及时地掌握金融产业发展的前沿动态，更好地行使监督、监管职能。 4.强化对评级运用和评级机构的监管 主要评级机构对金融机构和产品的评级结果已经成为国际性的金融服务产品。在全球范围内，很多规定都要求投资管理决定和风险管理确保金融产品达到主要评级机构给出的一定水平的评级。只要某种产品满足了门槛评级标准，金融机构也习惯了不去担心该产品的内在风险。但是，评级不过是以历史数据为基础得出的违约概率的指标，不是产品的未来安全保证。发行人付费的盈利模式使得评级过程充满了利益冲突,评级机构不负责任地给于很多结构性产品过高的评级.此次危机中，市场的逆转使得评级机构深度下调金融产品评级，迫使评级结果的使用机构（资产管理公司、金融服务企业等）的资产减计大增,加重了危机的严重程度。 我们认为，金融机构应该对风险做出独立判断，而不是把风险评估职能外包给评级机构。在必须使用外部评级时，还要进行内部独立判断，并以此作为外部评级的补充。监管者应鼓励金融机构提高内部评级能力，减小对外部评级的依赖。中央银行和监管机构需要出台新规定，要求金融机构外部评级的依赖度和使用率不超过业务量的50%，至少对有系统重要性的金融机构应该这样规定。同时，有系统重要性的机构还应加强内部评级能力，对信用风险做出独立判断。 次贷危机还表明，仅在某个国家加强对评级机构的监管远远不够，各国需要共同行动，加强对评级体系的国际监管。国际证监会组织、国际清算银行和金融稳定论坛应当协调制定和执行标准，指定专门机构负责这些规则的贯彻执行，重点关注评级体系存在的问题、消除评级机构和发行人之间的利益冲突以及提升评级机构的独立性、公正性和透明度。此外，需要定期评估经主要评级机构评级的产品的实际表现纪录并评价各种不同评级的实际违约和损失的相关数据，其中包括对主权评级业务，尤其是对发展中国家的主权评级业务的评估。这些评估的结果要公之于众，使得市场参与者可以据此做出自己的判断并更好的使用信用评级服务。一旦发现问题，应责令问题机构及时纠正，并采取个别批评或公开谴责等措施，各主权国监管机构也可据此对相关评级机构处以包括市场禁入在内的相应处罚。 5.关注公司治理问题 有证据表明，部分发达国家的一些具有系统重要性的金融机构的董事会已沦为“绅士俱乐部”，其职能就是通过由董事会主席或首席执行官主导的管理层做出重大决策。很多情况下，独立非执行董事并不具备足够的专长，无法为公司的运营制定战略方向，有效的指导或支持公司的风险管理或内部控制。从相关实例中我们也可以发现，在部分规模庞大的机构中，风险管理人员受制于人，使得机构缺乏有效的制衡机制，放纵冒险行为，过度追逐短期回报。 管理层为季度业绩和年末奖金等短期指标所驱动，过分关注季报和短期行为。这些机构的薪酬结构具有顺周期性，对短期业绩给予丰厚回报，却无法约束过度冒险行为。此外，主席或首席执行官的选拔和任命有时并不是以候选人的资质和贤能为基础，而是根据一些与股东利益和公司长远发展利益相左的因素做出的。 对于那些具有系统重要性、业务活跃的跨国金融机构，监管机构应该制定更高的治理标准。至少，这些机构的独立非执行董事应该多数都具备金融知识，有能力为管理层提供实质性指导，在公司的市场战略定位、平衡业务扩张与发展质量之间的关系、金融创新以及高层选拔程序等方面为管理层提供意见。这些机构的年报应该对独立非执行董事是否以及如何积极行使职责的信息进行披露，使投资者能够了解董事会行使其受托责任方面的情况。在美国，有一人兼任董事会主席和首席执行官的惯例，这一做法急需改革。从导致危机的种种问题来看，在具有系统重要性的金融机构中，这两个职务应当由不同的人来担任。（完）

China Feeling a Chill From Down Under

By ANDREW PEAPLE It is Australia's turn to play tough with foreign investment. The government has a backlog of bids from Chinese companies looking to snap up assets in its resource sector, chief among them Chinalco's $19.5 billion proposal to raise its effective stake in Rio Tinto to 18%. Sentiment toward the deals is cooling, despite the financial straits faced by some of the targets. On Friday, Australia's Treasurer Wayne Swan blocked China Minmetals' takeover bid for OZ Minerals, a company that soon has to pay back 1.1 billion Australian dollars (US$772.5 million) of debt. The deal could be renegotiated: But Minmetals won't get its hands on OZ's key mine -- on land used for weapons testing. Foreign Minister Steve Smith also Friday declared Chinalco would be treated as government-controlled. That is important: A key principle guiding Australia's consideration of foreign investment is how independent the investing company is from a foreign government. The Chinalco deal might still go through. The OZ Minerals deal rejection could be part of an elaborate give-and-take play by Canberra, designed to show China it can't have everything its own way. If, instead, Australia does carry on blocking Chinese investments, some will feel Beijing is getting what it deserves after last week's ruling against Coca-Cola's bid for juice maker China Huiyuan. But that misses the bigger concern that blockages to capital flows are emerging just when the world could most do without them. On that front, Australia is key when it comes to Asia-Pacific. Dealogic says that 58% of the region's M&A flows were into Australia in the first quarter. Write to Andrew Peaple at andrew.peaple@dowjones.com

How to Play Intel Volatility

By TENNILLE TRACY Intel's shares have bounced around in recent months, losing half their value between August and November and then gaining 25% during the past three weeks. The price of Intel's options, however, don't reflect the severity of recent moves and the situation presents a trading opportunity for investors who believe Intel shares will continue to travel a bumpy path. The options market is pricing in a lower amount of volatility than what the stock has actually shown. Specifically, the two-month implied volatility on Intel options clocks in at 51.3, whereas the two-month historic volatility is 57.5, according to Credit Suisse Group. Because volatility plays such a crucial role in options prices, investors might be able to take advantage of the disparity between the implied and historic volatility levels by conducting a "delta neutral" trade in Intel. These types of transactions are designed to give investors exposure to volatility in the company's stock. The success or failure of the transaction doesn't hinge on the direction of the stock. In this case, investors could buy Intel stock and couple it with a purchase of put options -- buying a May $14 put for every 36 shares they buy, said Sveinn Palsson, an equity derivatives strategist with Credit Suisse. "The trade is aimed at profiting from the fluctuation, or volatility, in Intel shares, regardless of the direction the stock moves to," Mr. Palsson said. He notes that the trade requires daily maintenance in order to stay delta neutral. Specifically, investors would want to sell shares if Intel moves higher and buy shares if Intel moves lower. Write to Tennille Tracy at tennille.tracy@dowjones.com

Convertibles Stage a Comeback

By ANDREW EDWARDS Convertible debt has staged an impressive turnaround in March, but low trading volumes in this niche of the credit market mean a protracted recovery could prove elusive. The key has been a snapback in the financial sector, which represents about 20% of the total market. Convertibles sold by health-care and technology companies, the other heavyweights in this market, have gained to a lesser extent. Driving the move is growing optimism that government measures aimed at shoring up banks will work. Over the past week, the government unveiled details of its new public/private partnership to buy toxic assets, while the Obama administration struck a more conciliatory tone. "A big part of it is a growing sense the government is not going to take over all of these banks," said Edward Silverstein, convertibles portfolio manager at MacKay Shields. Hope has taken convertibles into positive territory for the month and turned them around for the year. As of Thursday's close, U.S. convertibles were up 4.53% for the year to date, according to Merrill Lynch, compared with a 7.8% drop in the S&P 500-stock index. The financial sector is up 7.8% this month through Thursday, but off 7.3% for the year. Convertible bonds, a hybrid of stocks and bonds that pays investors a coupon smaller than a comparable bond but gives them the option to convert into stock at a later date, were battered when many traditional trades favored by hedge funds fell apart. This month's rebound has been driven by stock investors who were able to ratchet up prices amid low trading volumes. "It's mainly been a lack of liquidity that's driven the market up higher," said Richard Meatto, head of convertibles trading at Broadpoint Capital. "Now that [demand] has been broadened, the supply has just kind of dried up." According to TRACE data, volume is down sharply from previous years, with an average of $1.4 billion in bonds traded daily in March, compared with $2.37 billion a day in the comparable period last year. However, since the stock market turned around March 10, the bulk of those trades have been positive. Mr. Meatto said stock accounts used to "unlimited liquidity" are willing to bid up bond prices to get the convertible exposure they want. The convertibles allow the traders to participate in any stock upside while being paid, often handsomely, to wait. Company buybacks are sucking up supply and new issuance is slowing to a trickle. The U.S. market stood at $162 billion at the end of February, according to Merrill Lynch, down from $177.4 billion at the end of 2008.

Calpers Tells Hedge Funds to Fix Terms -- or Else

By JENNY STRASBURG and CRAIG KARMIN Calpers, the California public pension fund that is one of the biggest investors in hedge funds, is demanding better terms from funds, including lower prices and "clawbacks" of fees if performance weakens. The $172 billion pension fund is a bellwether in the money-management business. A Calpers investment can help money managers like hedge funds attract other clients. The move by the California Public Employees' Retirement System underscores the changing dynamics between hedge funds and their clients. Just two years ago, investors clamored to get into highflying funds, agreeing to pay fees that in some cases reached 3% of assets and 30% of profits. Lately, hedge funds have come under fire for failing to live up to their promise to perform in good and bad markets. While other investors are pushing for fee cuts, Calpers, which has $5.9 billion in hedge-fund investments, holds significant clout. "Calpers is the 800-pound gorilla, pushing so much money through the system," said Eric Roper, chairman of the hedge-fund practice at New York law firm Gersten Savage LLP. Calpers's demands were outlined in a March 11 memo sent to the 26 hedge funds and nine funds of hedge funds that do business with Calpers; it was reviewed by The Wall Street Journal. Some of the hedge funds that manage Calpers money include Tremblant Capital, Atticus Capital and Och-Ziff Capital Management, according to Calpers records and people familiar with the investments. Spokesmen for the funds didn't comment. Besides pressure on fees, hedge funds are likely to face closer scrutiny from regulators, threats of higher taxes and more constraints on their trading strategies, after a year of broad-based losses. Calpers said the changes are "extremely important" and required of "managers wishing to become, or remain" in Calpers's stable of managers. The pension fund said every hedge fund won't face the same demands and that it is willing to listen to counterproposals. One area Calpers is focusing on includes performance fees. Typically they are collected at the end of each year, but Calpers instead wants fees spread out over several years. Calpers also wants clawbacks, which allow clients to recoup fees from previous profitable years after a period of poor performance. The pension fund also seeks greater control of its investment funds, saying it would explore opening managed accounts. In that scenario, hedge funds would place Calpers's assets in a separate bucket from other investors' assets, so if a fund faces an exodus of investors and sought to freeze redemptions, Calpers wouldn't be limited from withdrawing its funds. Calpers also wants money managers to disclose every security held in a fund. "The only issue that keeps hedge funds from providing security transparency is their lack of cooperation," Calpers spokeswoman Pat Macht said in an interview Friday. She said that detailed fund information won't be made public. Calpers is basically trying to wield its investment clout to shape its relationship with hedge funds. The memo says Calpers "will no longer invest in managers" that adhere to industry standards with no regard for individual situations. At the same time, Calpers bills the directives as good for hedge funds as well as for institutional investors -- a means to "improving the relationship" for the long term. The sought-after changes would apply to new money added to existing funds and money put into new hedge funds, and will take about a year to implement, Calpers said. None of its hedge funds have formally agreed to the new terms, though discussions have started with most and cooperation appears to be widespread, Ms. Macht says. Calpers's demands come as other institutional investors are issuing similar requests in an effort to upend industry protocols. In January, the Utah Retirement Systems circulated a four-page letter to 40 hedge fund managers, and to many like-minded investors, that called for similar changes. "We clearly are on the same page with regards to most issues," said Larry Powell, deputy chief investment officer for the Utah fund, referring to the Calpers memo. Write to Jenny Strasburg at jenny.strasburg@wsj.com and Craig Karmin at craig.karmin@wsj.com

Economy Raises Tentative Hopes a Trough Is Finally in Sight

--green shoots: a.housing market showed signs of stabilization b.corporates demand for durable goods increased MoM c.retail sales showed signs of life By KELLY EVANS Just as the U.S. recession is set to become the longest since the Great Depression, some economic signs are encouraging, if tentative. April will mark the 17th month of the recession that began in December 2007, making it the lengthiest downturn of the post-Depression era. For the most part, forecasters don't see U.S. economic growth turning positive until early autumn, and even then, expect the unemployment rate to hit double digits this year or next. This week, though, has brought a spate of good economic news. Consumer spending rose marginally in February, the Commerce Department said Friday, as did consumer sentiment in a household survey by Reuters and the University of Michigan. The housing market also appears to have stabilized from its free fall, and an uptick in orders for big-ticket items is helping raise hopes of a future pickup in manufacturing. During a meeting with President Barack Obama and other bank executives Friday at the White House, Bank of America Corp. Chief Executive Ken Lewis and Northern Trust Corp. CEO Rick Waddell expressed cautious optimism that the economic downturn was either at or near the bottom of the cycle, according to people at the meeting. Nation's Unemployed: February Click on the image for state-by-state unemployment data from the Bureau of Labor Statistics, with year-over-year change in percentage points. "There's growing evidence supporting the optimists' view, and I am surprised at that," said Robert J. Gordon, an economist at Northwestern University and a member of the National Bureau of Economic Research committee that is the official arbiter of when recessions begin and end. "I was sort of in the pessimists' camp until I started looking at things." He points to one indicator in particular with a remarkable track record: the number of Americans filing new claims for unemployment benefits. In past recessions, it has hit its peak about four weeks before the economy hit a trough and began to grow again. As of right now, the four-week average of new claims hit its peak of 650,000 in the week ended March 14. Based on the model, "if there's no further rise, we're looking at a trough coming in April or May," he said, which is far earlier than most forecasts currently anticipate. But a turn toward positive growth is not the same as a recovery, particularly now with the current 8.1% unemployment rate at a quarter-century high and marching higher by the month. Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Mass., says unemployment could hit 10.5% by late next year, even if the economy is growing at a 3% rate by that point. "What comes next, I'm afraid, will be the mother of all jobless recoveries," said Bernard Baumohl, chief global economist at the Economic Outlook Group in Princeton, N.J. "While we may emerge from recession from a statistical standpoint later this year, most Americans will be hard-pressed to tell the difference between a recession and recovery the next 12 months." In a reflection perhaps of households' angst, the personal saving rate in February was 4.2% of disposable income, compared with the near-zero rates seen during the boom. A survey to be released Saturday by AlixPartners, a business-advisory firm, shows Americans' "new normal" spending levels will return to just 86% of pre-recession levels in the next 10 years. Income growth is showing signs of weakness after a decent performance in the past year. The Commerce Department said personal after-tax income fell 0.1% in February, its third decline in four months, and a reflection of U.S. companies' aggressive cost-cutting amid a difficult business environment. But aggressive efforts by the government and the Federal Reserve to counteract the financial-market meltdown are seen as kicking in to help offset that. The Dow Jones Industrial Average has rebounded by some 20% from its lows, though it lost some ground on Friday, and credit markets have calmed as well. The $8,000 tax credit included in the stimulus package for those who purchase a home before Dec. 1 is helping to draw buyers into the market, while mortgage applications to purchase or refinance a home jumped 32% last week, boosted by the Fed's efforts to drive down mortgage rates. Even so, IHS Global Insight estimates GDP fell at a 7%-8% annualized rate in the first quarter, topping the fourth quarter of 2008's steep 6.3% drop, as weakness shifts from consumers to businesses. Business investment and exports could both post nearly 30% annualized declines, Mr. Behravesh said, a severe restraint on growth, even if the largest component of GDP -- consumer spending -- is flat or shows modest growth. "We've passed the period where every indicator is plummeting, and that's good news," he said. "We may not be exactly at the turning point, but we're getting pretty close to it." Write to Kelly Evans at kelly.evans@wsj.com

The G20 summit - London calling

Mar 26th 2009 From The Economist print edition Trade is collapsing and protectionism is on the rise. Time for the G20 to get going THE first task for the leaders of the Group of 20, who will meet in London on April 2nd, will be to do no harm. Don’t fall out over whether Germany and China are spending enough public money to get the world economy going. Let’s not have a row over how to run the IMF. And spare us a tirade against “market fundamentalism”. The second task is to do something useful. Ideally, the G20 would boost government spending, partly by giving the IMF more money. And it would take five minutes to shunt the re-regulation of finance into groups that can deliberate now and act later, when there is more time and less ire: the last thing to fear from Wall Street today is irrational exuberance. It is the third task that is being neglected. Publicly, the G20’s leaders would be shocked, shocked if anyone were to turn against open markets. Even so, trade is collapsing and an insidious protectionism is on the rise (see article). As the storm rages, the London summit looks like offering nothing but pieties. The trading system needs more than that. Do as I say, not as I do On March 23rd the World Trade Organisation (WTO) predicted that global trade will plunge by 9% this year—the steepest drop since the second world war. Japan’s exports in February were half what they had been a year earlier; yet its imports had fallen so much that the country still recorded a surplus. This collapse is partly due to globalisation. The days are gone when something was made in one country and exported. Products now contain parts from all over the world. Trade statistics look at value, not value-added, so they include a lot of double counting as parts move across borders and back. When the economy shrinks, trade will shrink faster. But that is not the full story. The World Bank says that, since the G20 leaders last met in November in Washington, DC, 17 of their countries have restricted trade. Some have raised tariffs, as Russia did on second-hand cars and India did on steel. Citing safety, China has banned imports of Irish pork and Italian brandy. Across the world, there has been a surge in actions against “dumping”—the sale of exports, supposedly at a loss, in order to undermine the competition. Governments everywhere are favouring locally made goods. Some take comfort from the world’s interdependency. Producers in Brazil rejected protection, because Brazilian tariffs would have raised their own prices. Neither of France’s carmakers wanted to have to guarantee jobs at home as a condition for state aid, as President Nicolas Sarkozy had stipulated. But interdependency is a slender reed. Plenty of people argued against the Smoot-Hawley bill, which raised tariffs at the onset of the Depression. One danger today is that, under WTO rules, some countries have scope to put tariffs up without breaching their legal limits. Countries can indeed justify protection using safety or dumping, even if that breaks the spirit of open markets; and when protection reaches some (unknown) level, global supply chains will break down. If that happens, they will not be rebuilt for many years. After they met in Washington last November, G20 leaders said that they had united to support open markets. But promises alone will no longer do. In London they need to limit the scope for tariff increases—ideally by finishing the Doha round of trade talks; they should agree to put aside anti-dumping actions and the rest of the apparatus of legal trade protection; and should ensure that subsidies do not discriminate against foreign firms. Leaders were counting on trade to be the straightforward part of the summit, but if they think fighting protectionism is easy work, then they aren’t doing enough.

Handle with care

Mar 26th 2009 From The Economist print edition China suggests an end to the dollar era Shutterstock IN FUTURE, changes to the international financial system are likely to be shaped by Beijing as well as Washington. That is the message of an article by Zhou Xiaochuan, the governor of the People’s Bank of China. Mr Zhou calls for a radical reform of the international monetary system in which the dollar would be replaced as the main reserve currency by a global currency. It is a delicate issue, however. When Tim Geithner, America’s treasury secretary, discussed the proposal in New York on March 25th, his remarks sent the dollar tumbling before he made clear that, naturally, he thought the greenback should remain the dominant reserve currency. Mr Zhou’s proposal is China’s way of making clear that it is worried that the Fed’s response to the crisis—printing loads of money—will hurt the dollar and hence the value of China’s huge foreign reserves, of which around two-thirds are in dollars. He suggests that the international financial system, which is based on a single currency (he does not actually cite the dollar), has two main flaws. First, the reserve-currency status of the dollar helped to create global imbalances. Surplus countries have little choice but to place most of their spare funds in the reserve currency since it is used to settle trade and has the most liquid bond market. But this allowed America’s borrowing binge and housing bubble to persist for longer than it otherwise would have. Second, the country that issues the reserve currency faces a trade-off between domestic and international stability. Massive money-printing by the Fed to support the economy makes sense from a national perspective, but it may harm the dollar’s value. Mr Zhou suggests that the dollar’s reserve status should be transferred to the SDR (Special Drawing Rights), a synthetic currency created by the IMF, whose value is determined as a weighted average of the dollar, euro, yen and pound. The SDR was created in 1969, during the Bretton Woods fixed exchange-rate system, because of concerns that there was insufficient liquidity to support global economic activity. It was originally intended as a reserve currency, but is now mainly used in the accounts for the IMF’s transactions with member countries. SDRs are allocated to IMF members on the basis of their contribution to the fund. Mr Zhou’s plan could win support from other emerging economies with large reserves. However, it is unlikely to get off the ground in the near future. It would take years for the SDR to be widely accepted as a means of exchange and a store of value. The total amount of SDRs outstanding is equivalent to only $32 billion, or less than 2% of China’s foreign-exchange reserves, compared with $11 trillion of American Treasury bonds. There are also big political hurdles. America would resist, because losing its reserve-currency status would raise the cost of financing its budget and current-account deficits. Even Beijing might want to rethink the idea. Mr Zhou praised John Maynard Keynes’s proposal in the 1940s for an international currency, the “Bancor”, based on commodities. But as Mark Williams of Capital Economics says, central to Keynes’s idea was that a tax be imposed on countries running large current-account surpluses, to encourage them to boost domestic demand.

Guard Against Solar Cell Burns

Getting too close to the sun can singe your wings, investors in the solar-panel sector are sure to learn. Beijing's pledge to subsidize up to half of the cost of installing solar panels raised euphoria in the sector to a new pitch this week. On Thursday, New York-listed shares of Chinese solar-cell companies surged. On Friday those gains continued in shares of solar-panel makers from Mumbai to Tokyo. This short-term excitement belies some key long-term risks. Namely, the rush of companies entering panel production is reminiscent of the now oversupplied flat-panel and semiconductor markets. Companies in those sectors are losing money faster than they can raise it. In Japan alone there are over a dozen manufacturers of solar cells and modules, including Sharp, Hitachi, and Honda. The space is growing crowded. Sharp is building a plant that could increase production by as much as 69% when it comes online in about a year; Korean electronics giants Samsung and LG are looking to enter on a large scale; and India's Webel-SL Energy said Friday that it is investing in a second factory. That's not to mention the many Chinese firms already in the game. By one count there are at least thirty listed solar cell and module makers globally. None dominates. China's Suntech Power, Sharp, and Germany's Q-cell each control around 10% of the market, according to Macquarie Research. That isn't yet translating into profits for Sharp. In the year ending next March, Sharp will lose over $150 million at the operating level on nearly $1.6 billion in solar-cell revenue because of flat demand and a 40% drop in yen-based prices, Credit Suisse forecasts. Red ink is expected also for the following year. This week, China's Solarfun Power Holdings posted a fourth quarter loss of $61 million because average solar-cell prices fell 17% on soft demand and high inventories. Suntech too posted losses, and warned the current quarter could be worse than the last. News of China's subsidy trumped all this. Solarfun's shares rose nearly 42%, and Suntech's 43%. Elsewhere, Webel rose 11%, and Hong Kong's Solargiga Energy jumped 21%. But this sensitivity to subsidies can also bite. In Japan, nearly 90% of demand is for residential use and extremely sensitive to installation costs. When photovoltaic subsidies ended there in 2006, sales nose-dived 27% the next year, Macquarie says. This is one investment best made with a thick layer of protection.

Battling stigma

Mar 26th 2009 From Economist.com The IMF is in search of a role, and a happier reputation AP THE International Monetary Fund has been finding more to do in recent months, as various countries—including Hungary, Ukraine, Pakistan and Iceland—have come cap in hand in search of emergency aid. The fund has lent some $50 billion so far, and yet still has about $200 billion in its kitty. To some outsiders’ puzzlement, however, the fund has been scrambling to double its resources to $500 billion, and has succeeded in getting commitments for around $100 billion each from the European Union and Japan. Having addressed the supply side, it is now turning to stimulating demand for its resources. On Tuesday March 24th it announced increased borrowing limits on existing loan instruments. It has also rethought the way it monitors how countries fare in meeting conditions attached to its crisis-mitigation loans. But its biggest announcement was that it would create a new lending facility, the “Flexible Credit Line” (FCL). This would allow countries that are suffering from a worsening external environment, but whose macroeconomic policies are generally satisfactory, to draw on money from the fund in a precautionary manner. The idea would be to prevent, rather than mop up after, economic crises. The IMF hopes that this pre-approval feature, and the lack of conditions attached to the loan, will remove stigma that is usually associated with approaches to the fund. Yet much about the new facility sounds oddly familiar, because it shares many features with a Short-term Liquidity Facility, which it replaces. The IMF unveiled the previous facility with much fanfare at the end of October, around the same time that it made the first big loans to crisis-hit countries. Then the idea was to provide quick, no-strings-attached funding in the early stages of a crisis. As with the new facility, loans were only available to countries which the fund deemed to have sound macroeconomic policies but which were affected by factors outside their control, so to be stigma-free. One would have expected, then, that countries would queue up to be certified eligible for a loan. But it was never used in the five months of its existence. The IMF says that the problem with the previous facility was that borrowing limits were too low, and repayment periods were too short. The new facility tries to remedy all this by removing borrowing limits and extending loans for longer periods. But little new has been done to address the stigma concern. The fund is softening its stance on conditionality more generally, saying that it wants to rely more on ex-ante conditions (that is, qualifications to get a loan) rather than on forcing countries to adopt unpopular policies (such as curtailing public services) after they take a loan. Yet it seems unlikely that countries will, as a result, worry less about the stigma attached to IMF loans. The fund argues that it has designed the new facility in consultation with its members, who should therefore be less reluctant to apply for loans. It also points to the eagerness with which the Federal Reserve’s precautionary swap lines with some big emerging economies, unveiled in October last year, were taken up. But critics, while conceding that countries have sought loans elsewhere, point to the fund’s particular unpopularity. The reason for this is that most emerging and developing countries see it as unrepresentative and the fief of Europe and America, its largest shareholders. Unless this changes, and by more than the small reforms that are in the works now, the countries that could benefit from new loans will continue to be reluctant to turn to the fund. Some countries such as South Korea, a possible client, have reportedly already said that they are not interested in the new facility. If more countries share the scepticism, the new facility may not be much longer lived or widely used than the one it replaces.

ECB Eyes Corporate Bonds

Central Bank Mulls Asset Purchases on Secondary Market By NINA KOEPPEN and JOELLEN PERRY FRANKFURT -- The European Central Bank could start buying corporate bonds in an unorthodox move to support the euro-zone economy, policy makers said Thursday. ECB Vice President Lucas Papademos said that risk-averse banks are denying credit to companies and consumers, and that is contributing to the economic downturn. Reuters Lucas Papademos said the ECB may buy corporate bonds on the secondary market. He told a conference in Brussels that the ECB may decide to buy corporate bonds on the secondary market to help ease companies' financing problems, and will also consider extending the maturity of its lending to banks beyond six months. "It may be warranted that the central bank purchase private-sector bonds in the secondary market," Mr. Papademos said. His comments are the strongest signal yet as to how the ECB could ramp up its efforts to keep funds flowing through clogged euro-zone credit markets. The remarks indicate that policy makers are prepared to take more-aggressive steps. Up to now, the ECB has concentrated its efforts on keeping euro-zone banks flush with funds. But the ECB has been criticized by private-sector economists and businesses for its reluctance to follow major central banks -- including the U.S. Federal Reserve and the Bank of England -- in buying assets. Mr. Papademos's comments are an indication that policy makers now believe more drastic steps may be needed. It remains unclear how the ECB would finance such action. It could buy the bonds using freshly created money, a process known as quantitative easing. Figures released by the ECB Thursday showed the extent of the problem. Lending to businesses fell by €4 billion ($5.4 billion) in February from January, the second drop in three months, the ECB said. The ECB has cut interest rates by 2.75 percentage points since October, and it is widely expected to lower its key rate by a half point, to 1%, at its April 2 policy meeting. Economists say rate cuts alone won't be enough to get euro-zone economies going. Unlike the Fed and the BOE, the ECB so far hasn't increased the money supply by buying government bonds and other securities. Ivan Sramko, another governing-council member and Slovakia's central-bank chief, said Tuesday that a decision about expanded use of unconventional policy measures could come within a month. There is a continuing debate about a more intense use of unconventional policy measures, including asset purchases, he said. "Clearly these are just ideas at this stage, but it does show that the ECB is at least considering all of its options," said Gary Jenkins, head of fixed-income research at Evolution Securities in London. The ECB so far has shied away from buying debt securities directly, but European Union business groups have called on the ECB to start buying short-term corporate debt, known as commercial paper, to soothe companies' funding problems. The ECB is prohibited by statute from funding the governments of the euro zone's 16 nations by directly purchasing their debt instruments, shutting it out of the option taken by the Fed. But the ECB could buy such government bonds in the secondary markets, as the risk premiums some countries pay on their debt have increased sharply. Those countries include Ireland, Greece and Portugal, which all have large budget deficits. The news emerged as new data underlined the dire state of Europe's economy. Housing starts in Spain fell 42% last year to 360,044, less than half the peak level of 2006, when Spain built more houses than in France, Germany, Italy and the U.K. combined. In the U.K., the euro-zone's largest export market, retail sales fell 1.9% in February from January. —Adam Cohen in Brussels contributed to this article. Write to Nina Koeppen at nina.koeppen@dowjones.com and Joellen Perry at joellen.perry@wsj.com

Scepticism over BoE debt move

By Paul J Davies Published: March 25 2009 20:22 Last updated: March 25 2009 20:22 The Bank of England kicked off the £50bn corporate bond side of its £175bn ($254bn) programme to inject freshly printed cash into the heart of the economy on Wednesday when it bought almost £87m worth of debt. Anglo-American, British Telecom, Cadbury Schweppes, France Telecom, General Electric Capital, United Utilities, Vodafone and WPP were among the 17 companies to see the Bank added to their creditor list as it bought small chunks of 21 different bond issues, mostly at a premium to market value. Analysts and investors said the move could only be positive, but have questioned whether a programme sized at £175bn in a market worth more than £1,000bn would be too small to make any real difference to the economy. The initial auction alone was not expected to give any indications of whether Mervyn King, the Bank governor, would succeed in slashing borrowing rates for companies broadly, but it is a strategy some feel sits awkwardly between different stools. The market for buying and selling corporate bonds between investors – known as the secondary market as opposed to the primary market where companies themselves first sell bonds – has been just as much a victim of bank troubles as the business of making new loans. This is because banks historically have played a very important role in facilitating activity in all markets where trading is not based on exchanges, but over the counter – and, to some degree, in exchange-based markets as well. But the forced shrinking of bank balance sheets in the wake of the credit crisis, which has led to the drought in new lending activity to consumers and companies directly, has also stopped banks from trading in bonds and other securities quite so freely as before. Many have retrenched to a pure broker-style trading model, whereby they will only stand between buyers and sellers when they can match both sides exactly. This is because they no longer want to hold bonds, or much else on their trading books for any period, be it days or weeks. “Banks are very constrained. They are no longer dealing in the market because they cannot afford to take even temporary positions,” says one senior manager at a large institutional investor. “In the secondary market there is still no liquidity. You cannot sell a bond without a significant markdown.” The Bank of England and other central banks have focused their activities mostly on efforts to provide liquidity to the financial system in the form of extra cash. But Wednesday’s purchase of corporate bonds, while still pumping new cash into the system, is also aimed at supporting liquidity in the sense of how easy it is to buy or sell a bond. One of the measures of its success – separate from the absolute cost of borrowing for companies versus government bonds – will be the differences in the market between bid prices and offer prices. This bid-offer spread is an indicator of how liquid, or how readily tradeable, is any instrument. A wider spread indicates a bigger profit margin for those prepared to “make markets” in a security, but this profit is built in because there is a greater risk that the market maker will not be able to cover their positions by buying or selling the same asset later on. “The Bank wants to create more liquidity in a market that is suffering from the low risk appetite of market makers,” says Willem Sels at Dresdner Bank. “But, by buying corporate bonds, the Bank seems to be attempting to treat the symptoms rather than the causes.” Mr Sels and others believe that the solid investment-grade bond market, where the Bank is focusing its operations, is not the area most restricting bank risk appetite. Rather it is the triple B rated area, on the border between investment grade and junk, that most needs support. Mr Sels also thinks for the move to truly be effective in cutting the “liquidity premium” built into many corporate bond spreads, other central banks will have to embark on a similar path. “We think that market makers’ credit trading risk limits are likely mostly global as well, and reducing the overhang on the sterling book may do little to improve their overall risk appetite,” he says. Another concern is that the Bank’s actions will split the market, aiding liquidity and cutting both borrowing costs and bid-offer spreads for those groups whose bonds are involved, but doing nothing for those outside the scheme even if they are highly rated investment grade issuers. “As a smaller brother to quantitative easing [the printing of money to buy government bonds], it might help,” says Gary Jenkins head of credit strategy at Evolution Securities. “But the kind of companies that are benefiting from this process are all more than capable of raising finance in the markets.” Moreover, given the deteriorating economic outlook, some worry that, while it could help some companies raise extra cash, they are only hoarding it anyway. “Anything that helps to lower the overall cost of funding for corporates is a positive,” says Suki Mann at SG CIB. “This move in itself will not help the corporate investment side of the equation because any advantage garnered by corporates in terms of lowering their funding costs will be used to hoard liquidity.” Adekunle Ademakinwa, strategist at Deutsche Bank, said: “The scheme will undoubtedly be a short-term positive stimulus for sterling credit markets, if only because at the margin there is an additional buyer of corporate bonds.”

Commercial Property Faces Crisis

--$700 billion securitized loans, 1/4 of total CRE loans; 35%-30% are expected to default while loss rate might reach 10% --7.9% of outstanding debt was lost in S&L crisis between 1991-1995, 1000 thrifits went bankrupt --This time might be different since developers showed more restaint. But lax lending practices still existed. --Different from home mortgages - which was concentrated in top 10 major institutes -, hundres of banks and thrifts are loaded up on CRE loans. --Maturity mismatch might undermine TALF's effort to clean CRE --major risk of CMBS is exntension risk, not default risk --current Q4 default rate is 5.6% from Fed and 2% from slides Delinquency Rate at 1.8%, Near Peak of Last Recession; Parallels to S&L Debacle By LINGLING WEI Commercial real-estate loans are going sour at an accelerating pace, threatening to cause tens of billions of dollars in losses to banks already hurt by the housing downturn. The delinquency rate on about $700 billion in securitized loans backed by office buildings, hotels, stores and other investment property has more than doubled since September to 1.8% this month, according to data provided to The Wall Street Journal by Deutsche Bank Research. While that's low compared with the home-mortgage delinquency rate, it's just short of the highest rate during the last downturn early this decade. Some experts say it now looks as if the current commercial-real-estate downturn will rival or even exceed the one in the early 1990s, when bad commercial-property debt played a big role in dragging the economy into a recession. Then, close to 1,000 U.S. banks and savings institutions failed. Lenders took about $48.5 billion in charges on commercial-real-estate debt between 1990 and 1995, representing 7.9% of such debt outstanding. Foresight Analytics in Oakland, Calif., estimates the U.S. banking sector could suffer as much as $250 billion in losses this time. The research firm projects that more than 700 banks could fail as a result of commercial real estate. General Growth Properties Inc., one of the biggest shopping-mall owners, has been teetering on the brink of a bankruptcy filing and recently failed to repay maturing loans on two shopping centers in Hayward, Calif., and Humble, Texas, according to Trepp, a firm that tracks the commercial property debt market. John Hancock Tower in Boston is being sold in a foreclosure action. Recent additions to the list of properties with delinquent mortgages include an office building in Stamford, Conn., a hotel in Las Vegas and a shopping center in Ohio. The problem was underscored when Moody's Investors Service downgraded Bank of America Corp. debt Wednesday, citing likely increases in soured "credit cards, residential and commercial real estate loans." The Federal Reserve and the Treasury are moving to adapt a government funding program to make it attractive for investors to buy debt backed by office buildings, hotels, stores and other income-producing property. The program, called the Term Asset-Backed Securities Loan Facility, or TALF, was begun to finance purchases of debt backed by consumer credit and officials will expand its use to include commercial property debt. Commercial-real-estate debt is potentially more dangerous to the financial system than loan classes such as credit cards and student loans because of its size. The Real Estate Roundtable estimates that commercial real estate in the U.S. is worth $6.5 trillion and financed by about $3.1 trillion in debt. The commercial real estate debt market is almost three times as big now as in the early 1990s. Expanding the TALF program to commercial-real-estate loans would carry additional challenges. One is the commercial mortgages' duration, typically 10 years. The Fed is an institution that traditionally makes short-term debt available. In the TALF program, loans run just three years, which might not be long enough to spur investor demand for the longer-duration securities. See the Data Read the report provided to The Wall Street Journal by Deutsche Bank Research: "Commercial Real Estate Outlook Q1 2009." Real-estate industry executives have been trying to resolve these issues with Fed and Treasury officials in meetings led by William Dudley, chief executive of the Federal Reserve Bank of New York, according to people familiar with the matter. The government officials are considering extending the TALF to accommodate the needs of the commercial-real-estate industry but no decisions have been made. In a statement on Monday, the Treasury Department suggested the Fed might alter the terms of its loans to investors to make them more attractive for long-term securities. "The Federal Reserve is working to ensure that the duration of these loans takes into account the duration of the underlying assets," the Treasury said. Jeffrey DeBoer, chief executive of the Real Estate Roundtable, said, "The danger is a repeat of what happened on the residential side: A complete choking up, foreclosure disasters and increased stress on the banking system." As recently as last summer, delinquency rates on commercial mortgages were at historically low levels. Many experts thought problems wouldn't be as bad in this downturn because commercial-property developers had showed more restraint. But another issue is now looming: lax underwriting standards that some lenders used. Owners were able to borrow so much on the expectation that property values and cash flows would keep going up that some are at risk now that rents and occupancy rates are falling. Burdened by heavy debt loads, some commercial-property owners and developers are teetering, from General Growth to Broadway Partners, a privately held real-estate fund manager. "In just seven months, we've gone from the best of times to the worst of times," said Richard Parkus, head of commercial mortgage securities research at Deutsche Bank AG. Even some performing loans could face trouble because the values of the properties have fallen, making it hard for owners to refinance when loans come due. Currently, many banks are agreeing to grant short-term extensions on loans. But "that's just kicking the can down the street for awhile," said William Rudin, an owner of New York City office buildings. "That doesn't solve the problem." Of some $154.5 billion of securitized commercial mortgages coming due between now and 2012, about two-thirds likely won't qualify for refinancing, Deutsche Bank predicts. Its estimate assumes declines in commercial-property values of 35% to 45% from the peak in 2007. That would exceed the price drops in the downturn of the early 1990s. The bank estimates the default rates on the $700 billion of commercial-mortgage-backed securities could hit 30% and the loss rates -- which figures in the amounts recovered by lenders -- could reach more than 10% the highest levels seen in the last real-estate bust. Besides securities backed by commercial-real-estate loans, about $524.5 billion of whole commercial mortgages held by the nation's banks and thrifts are expected to come due between this year and 2012. Between 40% and 45% of those loans wouldn't qualify for refinancing in a tight credit environment, as they exceed 90% of the underlying property's value, estimates Matthew Anderson, partner at Foresight Analytics. Today, lenders generally won't make loans that account for more than 65% of a property's value. In contrast to home mortgages -- the majority of which were made by only 10 or so giant institutions -- hundreds of small and regional banks loaded up on commercial real estate. As of Dec. 31, more than 2,900 banks and savings institutions had more than 300% of their risk-based capital in commercial real-estate loans, including both commercial mortgages and construction loans. Risk-based capital is a cushion banks can dig into to cover losses. At First Bank of Beverly Hills in Calabasas, Calif., , the amount of commercial-property debt outstanding was 14 times the bank's total risk-based capital as of the end of last year. Delinquencies reached 12.9%, compared with the average of 7% among the nation's banks and thrifts. Its lending is concentrated in Arizona, New Mexico and Nevada. "In perfect hindsight, we would have done less commercial real-estate lending," said Larry B. Faigin, president and chief executive. The bank this month announced a deal with a leveraged-buyout and restructuring firm in Chicago, Orchard First Source Asset Management, under which Orchard will provide new capital to the bank. Within two years after the deal closes, expected by August, First Bank will significantly reduce its concentration in commercial-real-estate lending and have less than half of its assets in the sector, Mr. Faigin said. —Maurice Tamman and Jon Hilsenrath contributed to this article. Write to Lingling Wei at lingling.wei@dowjones.com

Japan Exports Fall 49%, as U.S. Trade Plunges

By YUMIKO ONO and ANDREW MONAHAN TOKYO -- Japan reported a 49% fall in exports in February from a year earlier, showing the vulnerability of the world's second-largest economy, which has relied heavily on global demand for its products to drive growth. February marked the fifth consecutive month of decline and set a record for sharpest fall for the fourth straight month as demand dropped in all key markets -- the U.S., Europe and China. In January, exports sank by 46% from January 2008. Japan's flagship exporters, which just a year ago were posting record profits, are slashing hundreds of thousands of temporary workers and idling factory lines as they strive to adjust. Earlier this week, Toyota Motor Corp. said it halved global production in February amid slower demand. Honda Motor Co. and Nissan Motor Co. also cut global production by similar amounts. "Every major product for every major market is falling at a similar steep pace," said Richard Jerram, an economist with Macquarie Research in Tokyo. The export decline, announced Wednesday, has dire consequences for Japan. Big manufacturers are cutting orders from suppliers, who then must make production and job cuts of their own. As the recession spreads to the broader economy, mounting job insecurity prompts consumers to spend less, affecting the service and leisure sectors. That downward spiral was partially responsible for the 12.1% annualized fall in Japan's gross domestic product in the September-to-December period -- a sharper rate of contraction than in the U.S. or Europe. Analysts say the GDP may contract by a similar degree in the first three months of 2009. Some say Japan may be experiencing its worst recession since World War II. Weaker domestic demand and lower prices of oil and other commodities contributed to a 43% year-to-year fall in imports in February, the fourth straight month of declines. That left Japan with a trade surplus of 82.4 billion yen ($845.7 million), its first in five months. Economists had expected Japan to post a trade deficit. View Full Image European Pressphoto Agency A container ship docks at Odaiba wharf in Tokyo Bay, Japan. According to the Ministry of Finance, Japan's February exports fell by a record 49% from the previous year. "Japan's economy is going through big cuts in output, which are causing sluggishness in its domestic demand and thereby decreasing imports," said Azusa Kato, an economist at BNP Paribas Securities. Other worrying economic indicators are expected in the next week. Some economists expect Friday's core consumer-price index for February, which excludes fresh food prices, to show its first year-on-year decline since the fall of 2007. More negative figures could mean Japan has slipped back into deflation, a widespread fall in prices, which dogged the nation from 1999 to 2005. Deflation can damp economic growth by discouraging consumers from spending and companies from investing. Next week, the Bank of Japan is expected to announce the tankan survey of corporate sentiment fell sharply to levels not seen since the oil shock of the mid-1970s. Government officials, including the finance minister, have begun to say publicly that more spending is needed to help the nation recover. But Prime Minister Taro Aso, weakened by political gridlock and swooning popularity, has had difficulty getting political support for his stimulus programs. Write to Yumiko Ono at yumiko.ono@wsj.com and Andrew Monahan at andrew.monahan@dowjones.net

Weak Demand for Five Year Treasury Notes

The indirect bid -- demand from domestic and foreign institutions, including foreign central banks -- for the $34 billion five-year Treasury note auction was 30%, compared to 48.9% from the previous auction in February and an average of 30.1% for the last 10 auctions. The weak U.S. auction came after a sale of U.K. government debt Thursday failed, the first failed auction of conventional U.K. government bonds since 1995. Like the U.S., the U.K. is hoping to sell a large quantity of new debt as it looks to stimulate its economy, but there are signs that investors are balking.

New-Home Sales Rise as Prices Fall

--mom sales increased 4.7% in Feb --house inventory dropped from 340k to 330k --ratio of houses for sale to houses sold dropped from 12.9 to 12.2 By JEFF BATER WASHINGTON -- New-home sales climbed for the first time in seven months during February, another favorable sign for the housing sector, but the data also showed prices tumbled. Shares of retail companies rose on Wednesday after government data showed durable goods orders and home sales rose more than expected. Home Depot was a leading gainer. (March 25) Separately, durable-goods orders unexpectedly climbed during February, but demand in the prior month was revised down deeply, an adjustment countering the idea of a rebound in the slumping manufacturing sector. Sales of single-family homes increased by 4.7% to a seasonally adjusted annual rate of 337,000, the Commerce Department said Wednesday. January new-home sales plunged 13.2% to an annual rate to 322,000; originally, the government said January sales fell 10.2% to 309,000. Economists surveyed by Dow Jones Newswires expected February sales down 2.9% to a 300,000 annual rate. The last time sales had gone up was July 2008. The unexpected increase marked another hint of stability in housing, long suffering from the boom in the early part of the decade. The government last week said home construction in February increased 22.2% to a seasonally adjusted 583,000 annual rate. And realtors this week reported existing-home sales advanced last month. But year over year, new-home sales were 41.1% lower than the level in February 2008. Sales have fallen because rising layoffs pushed people from making big purchases. As sales drop, inventory stays high. That's pushed down prices. A steady decline in price can, ironically, hurt demand; reluctance to sign on the bottom line tends to grow when a would-be buyer thinks the price might drop significantly in the future. And with increased foreclosures swamping the existing-home market, new homes have been priced out. The median price of a new home tumbled 18.1% to $200,900 in February from $245,300 in February 2008. The average price decreased 16.7% to $251,000 from $301,200 a year earlier. And prices month over month fell, too; in January 2009, the median price was $206,800 and the average was $239,100. A glut of unsold houses on the market has forced prices lower. But inventories are coming down. At the end of February, there were an estimated 330,000 homes for sale. That's below the 340,000 for sale at the end of January. The ratio of houses for sale to houses sold dropped to 12.2 from January's 12.9. Regionally last month, new-home sales increased 6.6% in the West and 9.7% in the South. Sales fell 9.1% in the Midwest and 3.3% in the Northeast. An estimated 27,000 homes were actually sold in February, up from 23,000 in January, based on figures not seasonally adjusted.

In Fashion, Some Like It Haute

By JOHN JANNARONE Shoppers are turning up their noses at high-fashion labels and choosing brands to fit a recession. But would a stake in a fashion icon suit a well-appointed investor? Wreckage among luxury retailers makes it hard to imagine. Saks and Neiman Marcus have been hit by credit downgrades even as they slash prices and eliminate staff. Italy's Bulgari plans to shutter underperforming stores, while Tiffany & Co. will close its chain of pearl jewelry boutiques. But some elite labels are still glittering. LVMH Moet Hennessy Louis Vuitton and Hermès International reported higher sales in the fourth quarter. Hermès said last week that sales have continued to rise so far in 2009. Both Hermès and LVMH's Louis Vuitton unit, which accounted for about half the company's operating profit last year, are helped by their exposure to branded leather goods. Handbags are expensive, but luxury jewelry sells at an even higher price point. Shoppers can easily find cheaper substitutes for engagement rings and other items that don't bear logos. But recognizable handbags have protected Hermès and Louis Vuitton from such "trade down" purchases. What's more, splurges needn't be frequent. Hermès, in particular, entices customers with waiting lists that can last more than a year for exclusive products. Hermès and Louis Vuitton also have been shielded from shrinking inventories at high-end department stores. Those reductions can be painful for companies that sell watches and accessories on a wholesale basis. But Hermès gets roughly 80% of revenue from its own retail network. Louis Vuitton sells strictly through its own shops or boutiques it owns and operates within department stores. Hermès is trading at a luxurious multiple of 28.9 times this year's expected earnings. That is mostly because of speculation that the Hermès family, which owns a majority of the stock, will bid for the outstanding shares. LVMH offers a better opportunity for investors with a multiple of 12.7. Of course, LVMH's businesses include champagne and perfume sales that will suffer in a weak economy. But the stock is still attractive compared with a multiple of 14 for Tiffany. The jeweler said this week it expects revenue to fall 11% in 2009. LVMH's balance sheet also should give investors assurance. The company had €4.5 billion ($6.1 billion) of net debt at the end of 2008, equal to 1.3 times last year's operating profit. Most of its debt is long term and the company has plenty of undrawn credit facilities to cover debt coming due this year. In contrast, Tiffany, looking to bolster its balance sheet, sold $250 million in bonds to Warren Buffett with an expensive 10% coupon last month. Economic crisis doesn't mean the end of luxury. But while many brands have been battered, those that show grace under fire should be coveted investments. Write to John Jannarone at john.jannarone@wsj.com

U.S. Durable Goods Orders Unexpectedly Jumped 3.4%

--orders for US durable goods rose 3.4%, first rise in seven months and biggest gain in more than a year --ex transpotation, orders gained 3.9%, the largest since 2005 --demand for non-defense ex aircrafts gained 6.6% after declining 11.3% in the prior month By Courtney Schlisserman March 25 (Bloomberg) -- Orders for U.S. durable goods unexpectedly rose in February on a rebound in demand for machinery, computers and defense equipment. The 3.4 percent increase, the biggest gain in more than a year and the first in seven months, followed a 7.3 percent decrease in January that was larger than previously estimated, the Commerce Department said today in Washington. Excluding transportation equipment, orders gained 3.9 percent, the most since August 2005. Combined with reports showing improvements in retail sales, residential construction and home resales, the figures indicate the economy is stabilizing after shrinking last quarter at the fastest pace in a quarter century. Stepped-up efforts by the Obama administration and Federal Reserve to ease the credit crunch may help revive growth later this year. “It’s not going to be downhill forever,” said Stephen Gallagher, chief U.S. economist at Societe Generale in New York, who had forecast no change in durable goods orders. “Once businesses achieve a reduction in their inventories they will pick up their new orders and production.” ‘Some Stability’ Gallagher expects the economy to resume growth in the third quarter. “I’m feeling better about that with this type of news. After some horrific data, we’re seeing some stability.” Stock-index futures and Treasury yields were higher after the report. The benchmark 10-year note yielded 2.72 percent as of 8:51 a.m. in New York, up 2 basis points from yesterday. Economists projected total durable goods orders would fall 2.5 percent, according to the median of 69 forecasts in a Bloomberg News survey. Estimates ranged from a drop of 4.1 percent to a 0.7 percent gain. Excluding transportation, orders were expected to decline 2 percent, according to the Bloomberg survey. Demand for non-defense capital goods excluding aircraft, a proxy for future business investment, climbed 6.6 percent after falling 11.3 percent the prior month, a decline that was almost twice as large as previously estimated. Shipments of those items, used in calculating gross domestic product, increased 0.6 percent last month. GDP Estimate Business investment in new equipment fell last quarter at the fastest pace since 1958, according to figures from Commerce. The government will issue its advance estimate on first-quarter gross domestic product in April. Economists surveyed by Bloomberg News earlier this month forecast the economy will contract 5.2 percent in the first three months of this year and 2.5 percent for all of 2009. Orders excluding defense equipment increased 1.7 percent. Transportation equipment demand rose 2 percent, led by a 32 jump in defense aircraft and parts. Auto bookings fell 0.6 percent and demand for commercial aircraft slumped 29 percent after surging 166 percent in January. Boeing Co. received four aircraft orders in February, down from 18 a month earlier, according to company data. The Chicago- based company may have to finance jet sales itself if it wants to maintain current production levels, according to aircraft lessors such as International Lease Finance Corp. Boeing has enough unfilled bookings to sustain output through the rest of the year as long as buyers can find financing. Fed, Treasury The administration and Fed are working in conjunction to end the credit crisis. The Treasury Department earlier this week announced details of a public-private partnership plan to purchase as much as $1 trillion in devalued real-estate assets and other securities to revive lending, using $75 billion to $100 billion of its remaining bank-rescue funds. The Fed, meanwhile, last week said it will buy as much as $300 billion in Treasury securities and an additional $750 billion in agency mortgage-backed securities, and that the central bank will keep the benchmark interest rate near zero for an extended time. The slump in spending is global. U.S. exports dropped for a sixth straight month in January, falling to the lowest level in more than two years, Commerce also reported this month. U.S. sales of automobiles, semiconductors, telecommunications gear and drilling equipment to overseas buyers all dropped. National Semiconductor Corp., the maker of chips for the five largest mobile-phone makers, said it plans to cut more than 1,700 jobs, or about 25 percent of its workforce. “The worldwide recession has impacted National’s business as demand has fallen considerably,” Chief Executive Officer Brian Halla said in a March 11 statement. Regional reports indicate demand may be slumping once again this month. The Philadelphia Fed’s index of new orders fell in March to the lowest level in more than 27 years, and a similar measure from the New York Fed decreased to a record-low. Housing Recession The housing recession is making a bad situation worse for factories. Weyerhaeuser Co., North America’s largest lumber producer, said it closed mills in Oklahoma and Oregon because of weak demand from homebuilders. “Extraordinarily weak market conditions in the homebuilding industry require that we take decisive action,” Tom Gideon, an executive vice president, said in a March 17 statement. Today’s goods report also showed order backlogs dropped and companies trimmed stockpiles. Inventories fell 0.9 percent last month and unfilled orders declined 1.3 percent. Smaller backlogs indicate manufacturing will be slow to recover even after the economy gains traction. Bookings for military gear jumped 35 percent. Lockheed Martin Corp. won a U.S. military contract with a potential value of $5 billion to support and supply special operations forces worldwide, the Pentagon said March 3. The so- called indefinite delivery, indefinite quantity contract runs through March 2018 and would reach its full value only if all options are exercised. To contact the report on this story: Courtney Schlisserman in Washington Cschlisserma@bloomberg.net

Public Private Invesment Program

Details on Public Private Partnership Investment Program -Legacy Loan program capital: US gov and private financing: FDIC garantee debt and leverage up to 6:1 (private buyers will issue debt garanteed by FDICs) (whole loans) -Legacy Securities program capital:private and USG capital and potential USG leverage 1:1:1 financing: builds on existing TALF framework (ABS) http://www.ustreas.gov/press/releases/tg65.htm http://www.treas.gov/press/releases/reports/ppip_fact_sheet.pdf (with samples)

A Partnership To Buy Toxic Assets - Q&A

by Tom Gjelten A Sample Investment In Toxic Assets Step 1: A bank has a pool of residential mortgages with $100 million face value that it's seeking to divest. The bank would approach the Federal Deposit Insurance Corp. Step 2: After conducting an analysis, the FDIC would determine that it would be willing to leverage the pool at a 6-to-1 debt-to-equity ratio. Step 3: The pool would then be auctioned by the FDIC, with several private sector bidders submitting bids. The highest private bid — in this example, $84 million — would be the winner and would form a Public-Private Investment Fund to purchase the pool of mortgages. Step 4: Of this $84 million purchase price, the FDIC would provide guarantees for $72 million of financing, leaving $12 million of equity. Step 5: The Treasury would then provide half of the equity funding, or $6 million, and the private investor would contribute $6 million. Step 6: The private investor would then manage the servicing of the asset pool and the timing of its disposition using asset managers approved by and subject to FDIC oversight NPR.org, March 23, 2009 · The Obama administration Monday released its plan to remove billions of dollars of tarnished mortgage-backed securities and other toxic assets from banks' balance sheets so that they resume lending. Treasury Secretary Timothy Geithner said the plan would use government and private resources to purchase $500 billion of toxic assets, but he said the program eventually could grow to $1 trillion. Below, a look at some of the details and questions remaining to be answered about the proposal: How is this plan different from previous plans to deal with toxic assets? The original plan was for the U.S. government to purchase those bad assets from the banks. This plan adds a significant role for private investors. The assets will be purchased by Public-Private Investment Funds (PPIFs), using both private and government money. With the inclusion of private investors in the process, it will be easier to create a market for these securities. That hasn't existed for months, largely because no one was sure what the securities were really worth. The banks and other financial institutions that held these bad mortgages and other loan products didn't want to give them away, while buyers were wary of paying too much. With so much uncertainty over their value, the market was essentially frozen. Why couldn't the government set the value? The government couldn't on its own establish market prices for those assets, because without competition from other possible investors, the price would be set arbitrarily. For their part, private investors haven't been willing to establish a market for the assets, because they have regarded it as too risky. Under this new plan, the government takes away much of the risk for the private sector, but the investors who participate should still have enough at stake that they will compete seriously to buy the assets. Some semblance of a market price for the securities should thereby be established, at least in theory. How exactly will the plan work? The centerpiece of the program is the creation of the Public-Private Investment Funds. Those PPIFs will then purchase bad loans and mortgage securities from the banks that hold them. Private investors will actually manage the funds and direct the bidding for the securities, but they will have access to government money and financing. The government will also promise to cover a significant portion of the potential losses that investors could face. Should a toxic asset investment prove worthless, the private investor may lose only his cash down payment. How much will this plan cost U.S. taxpayers? The Treasury will immediately contribute $75 billion to $100 billion it has remaining from the Troubled Assets Relief Program (TARP) that Congress approved last fall. That money, which can be tapped without congressional approval, will go to provide the government share of the initial equity in the PPIFs. The federal role and potential risk to taxpayers don't end there, however. The federal government promises to guarantee most of the financing for the toxic asset purchases. That stands to be hundreds of billions of dollars if the plan achieves its goal of absorbing up to $1 trillion in bad debt. What's a specific example of how this would work? Let's say the Treasury finds a private investment partner to purchase a pool of mortgages for $84 million. The Federal Deposit Insurance Corp. would guarantee $72 million of the financing. Treasury puts up $6 million; the private investor does the same. So they put down a comparatively small cash down payment that's backed up by the much larger FDIC guarantee. All is well and good if that pool of mortgages winds up being worth more than $84 million. But if that's not the case, the taxpayers are on the hook. What key developments should taxpayers watch for as this program moves forward? One of the most important is the price that these securities fetch in the marketplace. At the moment they are hardly ever traded. And when they are, they're sold at depressed prices of pennies on the dollar. Getting the pricing right is absolutely crucial. If the offers for toxic assets are very low, banks won't sell because they would absorb even bigger losses and put their solvency at risk. And if the investors pay too much for the assets, it puts the taxpayer investment at risk. The Treasury is hopeful that private investors will get the prices right: They won't pay too much because that's not in their interest. And they won't make offers that are ridiculously low because there are profits to be made on assets whose values may have plummeted too far in a climate of fear and panic. Is there any indication yet how the private sector will respond? The early reaction from the stock market was quite positive. The Dow Jones industrial average shot up at the opening bell, with bank shares in particular rising sharply. The market retained its gains, with the Dow closing up 497 points, or nearly 7 percent. Bill Gross, the founder and chief investment officer of PIMCO (the world's largest bond fund family) immediately praised the program and said that his fund will participate and compete to manage one of the private investment funds to be set up under the program. Aren't there concerns that the government would be going too far in adopting a congressional measure to tax bonuses for executives of American International Group and other companies that have received government bailouts? Some Wall Street executives — notably Kenneth Lewis, the Bank of America CEO — have warned that investors may be reluctant to sign up as partners with the government if they see a possibility Congress might decide down the road to change the rules and enact new taxes on them as a consequence of their receiving taxpayer dollars. The Obama administration is clearly worried that these tax proposals will undermine the public-private partnership. When President Obama was asked about the bonus tax plan passed last week by the House, he made clear he didn't like it. "We can't govern out of anger," he said. He even suggested that the tax plan approved by the House may be unconstitutional, in the way it targeted a very specific class of individuals. Would President Obama actually veto the legislation to tax bonuses if it passes? He wouldn't say. The Senate still has to consider it, and we can assume that if a bill does emerge it will in all likelihood be a different version of what the House passed. There will clearly be some new pressure on Wall Street executives to take more responsibility than they have taken so far. Obama, in an interview on 60 Minutes, said he thinks some people on Wall Street haven't yet realized that if they want the taxpayers to help them, they can't enjoy all the benefits they had before the crisis. "You get a sense that at some of the institutions, that has not sunk in," Obama said. It appears that the administration would like to distinguish between "good executives" and "bad executives." The bad guys are the ones who are becoming a burden on the taxpayers, taking both big government bailouts and big pay bonuses. The good guys are the executives who are acting more responsibly and are willing to work with the government to get the ball rolling again. "What we're talking about now are private firms that are kind of doing us a favor," Cristina Romer, the chairman of the President's Council of Economic Advisers, said Sunday on Fox News. "And I think they understand that the president realizes they're in a different category." She seemed to be suggesting that if Wall Street executives cooperate with the government, the Obama administration will try to protect them from the backlash that's being directed at Wall Street more generally. What's the biggest complaint about the toxic asset cleanup program? Critics such as New York Times columnist Paul Krugman say the program is overly generous to Wall Street. If the value of the assets purchased by the PPIFs go up, the private investors make a hefty profit. If on the other hand the assets prove to be worthless, the private investors will lose only their cash contribution. Their debt will be excused. From this perspective, U.S. taxpayers are subsidizing the private investors' purchase of the toxic assets, the critics say. If this toxic-asset cleanup works, will the banking sector become healthy again? The problems in the banking sector are too large for this program to solve on its own. Even if the PPIFs work as planned, they will absorb only about $1 trillion worth of bad assets. But analysts believe the total value of toxic assets in the banking system is close to $5 trillion. This program is at best only a start.