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Will bank supervision in Ohio and Austria be similar? A transatlantic view of the Singl... - 0 views

www.voxeu.org/...w-single-supervisory-mechanism bank supervision ohio austria single mechanism
shared by Gene Ellis on 25 Mar 13 - No Cached
  • At the inception of the euro, it was thought possible to have a centralised monetary authority and decentralised bank supervision, but the inability to separate sovereign-debt problems from those of bank stability has led the leaders of the member states of the EU to agree to centralise supervision in the Single Supervisory Mechanism.
  • The states retained their powers to supervise the small number of state-chartered banks that seemed little threat to the stability of the new more tightly regulated national system.
  • What was not anticipated was that the more stable national banks would fail to adequately supply credit to the economy.
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  • States, not the federal government, regulated securities markets and insurance, leaving little oversight for interstate business.
  • The 1930s New Deal reforms added more agencies, including the Securities Exchange Commission and the Federal Deposit Insurance Corporation, complicating political oversight by giving them distinctive missions,
  • Yet, it was the trust companies, lacking access to emergency liquidity that caused the 1907 crisis to erupt and spread to the banks.
  • To remedy these defects, the Federal Reserve System, established in 1913, was to act as a lender of last resort, bringing all systemically important institutions – national banks , large state banks and trust companies – under the federal supervision of the Office of the Comptroller of the Currency or the Federal Reserve banks.
  • Consequently, when onerous rules, such as the prohibition on branch banking prevented banks from financing the emerging giant corporations, markets, assisted by more lightly regulated trust and insurance companies, stepped in.
  • But, they have not converged, especially with regard to state banks that often pressure state regulators.
  • Surveillance of a bank is not dependent on the geographic scope of its operations, as in the US, but on its systemic significance measured in several dimensions and whether it receives financial assistance from the European Stability Mechanism.
  • the ECB’s direct authority is more encompassing.
  • The ECB will not be directly involved in crisis management and bank resolution, which will be the responsibility of the national authorities. This autonomy will not be incentive compatible until EU directives are adopted for a unified deposit insurance system and a funded single resolution authority.
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Greek Credit-Default Swaps Are Activated - NYTimes.com - 0 views

dealbook.nytimes.com/...it-default-swaps-are-activated greek
shared by Gene Ellis on 17 Jun 12 - No Cached
  • The decision by the International Swaps and Derivatives Association ends months of speculation that a Greek default might not set off the swaps, a result that could have undermined their role as insurance against debt defaults.
  • Still, doubts about the instruments’ effectiveness may linger. European officials initially shaped the Greek debt restructuring to avoid activating them. The concern is that future restructurings could be arranged to stop swaps from paying out.
  • the restructuring activated the swaps only after the country made a legal move on Friday.
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  • The Greek government chose to apply so-called collective action clauses, which it had earlier inserted into its bonds registered under Greek law. The deal maximized total debt relief for the country,
  • but it also forced losses on bondholders — a credit event, and therefore a trigger, for the swaps.
  • Since then, banks and regulators have taken steps to strengthen the market, mostly by making sure that investors can pay out the money they owe on swaps.
  • Nearly $70 billion of swaps are currently outstanding on Greek debt. But after both sides settle their accounts, the amount that will need to be paid out should be no more than $3.2 billion.
  • Some investors entered swaps on Greece as a way of effectively insuring themselves against losses on their Greek bonds, while others used them as a way to bet on a default happening.
  • Before investors doubted Greece’s solvency, the swaps offered insurance at what turned out to be an extremely cheap price. At the start of 2008, an investor buying protection on Greek debt had to pay only $22,000 annually to insure against default on $10 million of Greek bonds over five years, according to Markit, a data provider. Now, the protection would cost about $7.6 million.
  • Investors will most likely continue to want default swaps to protect against losses on Greece’s new bonds. These bonds, to be issued Monday, are expected to have yields of well over 15 percent, according to advance pricing. This suggests investors have strong doubts about Greece’s creditworthiness even after its restructuring. Fitch Ratings said on Friday that it would probably give Greece’s new bonds a low, junk-bond rating.
  • Gene Ellis on 17 Jun 12
     
    Global
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PrudentBear - 0 views

prudentbear.com/...featuredcommentaryview GEP com nytimes nytimes com global europe GDP crisis syndicate euro
shared by Gene Ellis on 09 Jul 12 - No Cached
  • German exporters were major beneficiaries of this growth. German banks and financial institutions helped finance the growth.
  • Exports have provided the majority of Germany’s growth in recent years. Germany is heavily reliant on a narrowly based industrial sector, focused on investment goods—automobiles, industrial machinery, chemicals, electronics and medical devices. These sectors make up a quarter of its GDP and the bulk of exports.
  • Germany’s service sector is weak with lower productivity than comparable countries. While it argues that Greece should deregulate professions, many professions in Germany remain highly regulated. Trades and professions are regulated by complex technical rules and standards rooted in the medieval guild systems. Foreign entrants frequently find these rules difficult and expensive to navigate.
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  • Despite the international standing of Deutsche Bank, Germany’s banking system is fragile. Several German banks required government support during the financial crisis. Highly fragmented (in part due to heavy government involvement) and with low profitability, German banks, especially the German Länder (state) owned Landsbanks, face problems. They have large exposures to European sovereign debt, real estate and structured securities.
  • Prior to 2005, the Landesbanken were able to borrow cheaply, relying on the guarantee of the state governments. The EU ruled these guarantees amounted to subsidies. Before the abolition of the guarantees, the Landesbanks issued large amounts of state-guaranteed loans which mature by December 2015.
  • While it insists on other countries reducing public debt, German debt levels are high—around 81% of GDP. The Bundesbank, Germany’s central bank, has stated that public debt levels will remain above 60% (the level stipulated by European treaties) for many years.
  • Germany’s greatest vulnerability is its financial exposures from the current crisis. German exposure to Europe, especially the troubled peripheral economies, is large.
  • German banks had exposures of around US$500 billion to the debt issues of peripheral nations. While the levels have been reduced, it remains substantial, especially when direct exposures to banks in these countries and indirect exposures via the global financial system are considered. The reduction in risk held by private banks has been offset by the increase in exposure of the German state, which assumed some of this exposure.
  • For example, the exposure of the ECB to Greece, Portugal, Ireland, Spain and Italy is euro 918 billion as of April 2012. This exposure is also rising rapidly, especially driven by capital flight out of these countries.
  • Germany is now caught in a trap. Irrespective of the resolution of the debt crisis, Germany will suffer significant losses on its exposure – it will be the biggest loser.
  • Once the artificial boom ends, voters will discover they were betrayed by Germany’s pro-European political elite. There will be an electoral revolt and, as in the rest of Europe, a strong challenge from radical political forces with unpredictable consequences.
  • In late May 2012, French President Francois Hollande provided a curious argument in support of eurozone bonds: “Is it acceptable that some sovereigns can borrow at 6% and others at zero in the same monetary union?”
  • Political will for integration
  • In the peripheral economies, continued withdrawal of deposits from national banks (a rational choice given currency and confiscation risk) may necessitate either a Europe wide deposit guarantee system or further funding of banks.
  • A credible deposit insurance scheme would have to cover household deposits (say up to euro 100,000), which is around 72% of all deposits, in the peripheral countries. This would entail an insurance scheme for around euro 1.3 trillion of deposits.
  • Given that the Spanish Economy Ministry reports that euro 184 billion in loans to developers are “problematic,” the additional recapitalization needs of Spain’s banks may be as high as euro 200-300 billion in additional funds (20-30% of GDP)
  • A Greek default would result in losses to Germany of up to around euro 90 billion. Germany’s potential losses increase rapidly as more countries default or leave the eurozone.
  • Austerity or default will force many European economies into recession for a prolonged period. German exports will be affected given Europe is around 60% of its market, including around 40% within the eurozone. In case of a break-up of the euro, estimates of German growth range from -1% to below -10%. It is worth remembering that the German economy fell in size by around 5% in 2008, the worst result since the Second World War, mainly on the back of declining exports.
  • For example, Greece owes about euro 400 billion to private bondholders but increasingly to public bodies, such as the IMF and ECB, mainly due to the bailouts. If Greece walks away as some political parties have threatened, then the fallout for the lenders, such as Germany, are potentially calamitous.
  • But the largest single direct German exposure is the Bundesbank’s over euro 700 billion current exposure under the TARGET2 (Trans-European Automated Real-time Gross Settlement Express Transfer System) to other central banks in the Eurozone.
  • by Satyajit Das
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Eurozone crisis will last for 20 years - FT.com - 0 views

www.ft.com/...97-11e1-963a-00144feabdc0.html
shared by Gene Ellis on 09 Jul 12 - No Cached
  • They agreed that there shall be no common bank recapitalisation until a full banking union is established. And the Bundesbank has reminded us that the latter is not possible without a political union. The logical implication is that we won’t solve the crisis for the next 20 years.
  • What we know now is that Germany will not agree to mutualised deposit insurance. It cannot even agree to give the European Stability Mechanism a banking licence so that it can leverage itself.
  • A narrow majority is still in favour of the euro, but a majority is against further rescues.
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  • The banking union that is required is the one Germany will not accept: central regulation and supervision, a common restructuring fund and common deposit insurance. It would take years to create.
  • With interest rates on 10-year government bonds over 6 per cent, neither Italy nor Spain can sustain their membership in the eurozone. This is what Mario Monti and Mariano Rajoy should have made clear to Angela Merkel at the summit.
  • The message I took away from the summit is that the eurozone will not resolve the crisis. In that sense, it was indeed a “historic” meeting.
  • Gene Ellis on 09 Jul 12
     
    Wolfgang Munchau article
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German and French banks call the shots - European, Business - Independent.ie - 0 views

www.independent.ie/...ks-call-the-shots-2607577.html german french banks ireland debt
shared by Gene Ellis on 11 Jul 12 - No Cached
  • German and French banks call the shots Print Email  NormalLargeExtra Large ShareNew  0  0   Also in European Debt crisis: European shares edge lower and growth worries persist Bank of England's Tucker 'wasn't encouraged to lean on Barclays' Draghi keeps door open to further interest rate cuts Marks and Spencers sales hit by summer deluge Spain's debt tops 7pc danger level as Madrid gets more time European Home "Shocking" 2012 HoroscopeWhat Does 2012 Have In Store For You? Shockingly Accurate. See Free!www.PremiumAstrology.comExpat Health InsuranceQuick, Compare, Trusted Website Expatriate Health Insurance Quoteswww.ExpatFinder.com/Instant-Quoteshttp://www.googleadservices.com/pagead/aclk?sa=L&ai=BMEejVeb8T8fDKoSG_QaAhrTCB-q_1OYBmoqphxvAjbcB0NkREAMYAyDgw6kIKAU4AFD4gumFAmCpsL6AzAGgAairsfEDsgESd3d3LmluZGVwZW5kZW50LmllyAEB2gFfaHR0cDovL3d3dy5pbmRlcGVuZGVudC5pZS9idXNpbmVzcy9ldXJvcGVhbi9nZX
  • d, for reasons best
  • known to itself, the ECB -- in clear contravention of both previous market precedent and financial logic -- has insisted that the senior bondholders be repaid in full and has lent the Irish banks, institutions which it must have known were hopelessly insolvent, €70bn to do so.
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  • Top of the list are German banks, to whom we owe €92bn with a further €38bn of other exposures. Does the fact that Irish banks potentially owe their counterparts up to €146bn explain the German government's implacable opposition to any write-down of the Irish banks' debts? After the British and the Germans, it is the French banks -- with total Irish bank loans of almost €32bn and a further €23bn of other exposures -- who have the biggest exposure to Ireland. Does this provide at least a partial explanation for French president Nicolas Sarkozy's truculence when faced with Irish requests that senior bondholders be forced to accept a haircut?
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Work Like a German - NYTimes.com - 0 views

www.nytimes.com/...work-like-a-german.html
shared by Gene Ellis on 25 Apr 14 - No Cached
  • Work Like a German
  • In the German job-share model (known as “Kurzarbeit”), if an employer cuts an employee’s hours so that income is reduced by more than 10 percent, the government compensates workers for a large portion of wages lost. This enables companies to cut costs during downturns without having to lay workers off.
  • For the long-term unemployed who take significantly lower-paying jobs (typically, at minimum-wage levels), the unemployment benefits could offer stop-loss insurance to put a floor under their losses.
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  • The new program should also subsidize employers to provide paid sick days, family leave and child care support — measures that are especially important for disadvantaged women in the work force.
  • Taking another page from the German system — this time, its apprenticeship program — training should include both internships and postgraduate job placements.
  • Once workers go on the Disability Insurance rolls, it has proved very hard to get them off; all the while, their skills and contacts in the workplace atrophy. In the fiscal year 2013, the program is estimated to have cost a record $144 billion.
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Euro crisis based on 'design flaws' in monetary union, conference told - 0 views

www.thescore.ie/r-banking-union-634618-Oct2012 euro crisis based design union conference
shared by Gene Ellis on 14 Oct 12 - No Cached
  • Euro crisis based on ‘design flaws’ in monetary union, conference told
  • The European Central Bank’s current status, where it does not act as a ‘lender of last resort’ in a similar method to other central banks, was particularly criticised.
  • He said the current version of the treaty establishing the ESM, the new permanent bailout fund for the eurozone, would also not function as such a lender – and said it was “incapable of ending the crisis”.
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  • “What I am proposing is a guaranteed yet conditional [lender of last resort] which can reconcile moral hazard concerns with the need to protect sovereign borrowers from the kind of solvency issues we have witnessed since the onset of the economic crisis,” he said
  • McDonnell also called for a full banking union within the eurozone, saying a deposit insurance corporation should be established to fill this gap.
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Big trouble from little Cyprus - FT.com - 0 views

www.ft.com/...e5-11e2-ae9e-00144feabdc0.html little cyprus trouble
shared by Gene Ellis on 20 Mar 13 - No Cached
  • The banks stand on the edge of collapse. But it is the European Central Bank that has pulled the plug by threatening not to accept Cypriot government debt as collateral against liquidity support.
  • A restructuring of public debt is still likely. As Hamlet advises: If it be not now, yet it will come.
  • Is there no alternative to the bail-ins? Yes: direct bank recapitalisation by the eurozone, for which the sum required is a small matter. If the banking union had been up and running, that would have happened. It is not, presumably because core countries do not want to bail out mismanaged banking systems,
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  • A big question is why ordinary Cypriot taxpayers should rescue banks at all?
  • The first concern is the deal itself. The decision to impose losses on insured deposits is indeed a big error. (Yes, it is a default, not a tax.)
  • Banks have so little loss-absorbing capacity that they stand permanently on the edge of disaster.
    • Gene Ellis
      Gene Ellis on 20 Mar 13
       
      Very good point.  
  • The eurozone must either make the industry far more robust, by hugely increasing equity capital, or consolidate fiscal capacity and tighten regulation, to ensure adequate eurozone-wide oversight and fiscal support.
  • Banking is dangerous everywhere. But it still threatens the eurozone’s survival. This has to change – and very soon.
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Some thoughts on German politics and the saver's tax in Cyprus | Credit Writedowns - 0 views

www.creditwritedowns.com/...-the-savers-tax-in-cyprus.html
shared by Gene Ellis on 18 Mar 13 - No Cached
  • Now, the large 82.8% German government debt to GDP ratio is a source of shame for many because Germany was a driving force in enshrining the 60% government debt to GDP hurdle into the Maastricht Treaty that set out terms for the euro zone.
  • Moreover, the interest rate policy of the ECB, geared as it was to the slow growth core, produced negative real interest rates and credit bubbles in Spain and Ireland during the last decade. German banks piled in to those countries as prospects domestically stagnated.
  • “The average German worker feels like a cash cow being sucked dry by a quick succession of reforms and bailouts that take money out of her pocket. First it was for reunification, then for European integration, then to right the economy, then to bail out German banks, and finally to bail out the European periphery. Fatigue has set in.”
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  • The bottom line is that none of the major political parties in Germany are going to vote for bailouts for other euro zone countries unless massive strings are attached, since these bailouts are political losers.
  • The anti-bailout part of the FDP platform is the one part of their rhetoric which could successfully take them over the 5% hurdle. The FDP’s complicity in using German taxpayer money to bail out the so-called profligate periphery is a one-way ticket out of Parliament.
  • “First, the Greek reports come via statements made by Michael Fuchs, CDU deputy Bundestag head and a senior member of German Chancellor Angela Merkel’s party. Fuchs warned earlier today that Germany would veto further aid to Greece if the country has not met the conditions of its previous bailouts.
  • “Second, all along Germany has indicated that it is resistant to increasing funding of the ESM and EFSF bailout facilities. This presents a problem in the case of Spain and Italy because of the size of those economies.
  • Willem Buiter, Chief Economist at Citigroup, has been most vocal in predicting that these facilities will be inadequate when Spain and Italy hit the wall and that more extreme measures will have to be taken.
  • The basic dilemma here is that almost all of the eurozone governments including Germany carry high debt burdens in excess of the Maastricht Treaty. For example, Germany has been in breach of Maastricht Treaty in 8 of 10 years since 2002, has been over the Maastricht 60% hurdle in each of those ten years, and now carries a debt to GDP burden above 80%.
  • The long and short of it was that the Germans had reached the end of their ability to support bailouts.
  • All evidence is that this levy has created panic in Cyprus. After all, what is the use of having a deposit guarantee if government can arbitrarily circumvent it to impose losses on your deposits anyway?
  • One can't just blame Cyprus for this fiasco. The ECB, EC and European Union finance ministers signed off on the insured deposit grab too]
  • My view? It was inevitable that we would be in crisis again. The austerity world view of crisis resolution is completely at odds with the capacity of the euro zone’s institutional architecture to handle a crisis.
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After Bangladesh, Seeking New Sources - NYTimes.com - 0 views

www.nytimes.com/...adesh-seeking-new-sources.html
shared by Gene Ellis on 16 May 13 - No Cached
  • Dozens of impoverished countries make T-shirts and other very basic clothing. But only a few countries — really just China, Bangladesh, Vietnam, Indonesia and to some extent Cambodia and Pakistan — have developed highly complex systems for producing and shipping tens of thousands or even hundreds of thousands of identical, high-quality shirts, blouses or trousers to a global retailer within several weeks of receiving an order.
  • The clothing needs to be labeled correctly so that it travels smoothly through a large retailer’s distribution centers
  • The process requires formidable numbers of skilled workers who can oversee quality control as well as labeling and shipping of garments.
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  • Big retailers and fashion companies have repeatedly tried and failed to develop alternatives, experimenting in India, Africa and Latin America, only to run into infrastructure bottlenecks and shortages of skilled managers or workers.
  • India was not organized for large-scale, timely production,
  • Africa did not have enough workers with the right skills for high-volume labeling and shipping,
  • and Latin America did not have enough workers interested in operating sewing machines.
  • What may save Bangladesh from a sharp, immediate drop in export orders is simply that most Southeast Asian factories are already fully booked with orders from multinationals fleeing China’s ever-rising costs.
  • In Guatemala, the quality was excellent, he said, but, “They can’t handle big orders and they’re slow on delivery.”
  • “For this year, it’s impossible — we’re already full,”
  • Indonesia’s national training center for seamstresses — women make up 98 percent of the students — is here in Semarang, producing 12,000 graduates a year. But even that isn’t enough. Four factories with a combined employment of 30,000 are to open in the next year in Semarang, and many more factories are being built nearby.
  • “It’s going to take time, but it’s going to eventually filter out all over the place,” he said. “It’ll take two or three years.”
  • Newly opened factories have started competing for scarce seamstresses by offering free meals and free health insurance
  • Dozens of impoverished countries make T-shirts and other very basic clothing. But only a few countries — really just China, Bangladesh, Vietnam, Indonesia and to some extent Cambodia and Pakistan — have developed highly complex systems for producing and shipping tens of thousands or even hundreds of thousands of identical, high-quality shirts, blouses or trousers to a global retailer within several weeks of receiving an order.
  • He said that he and a couple of other suppliers of elite retail chains always worried about Bangladesh’s reliance on high-rise factories,
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Analysis: Euro zone fragmenting faster than EU can act - 0 views

www.theprovince.com/...story.html analysis euro zone faster act
shared by Gene Ellis on 14 Jul 12 - No Cached
  • Deposit flight from Spanish banks has been gaining pace and it is not clear a euro zone agreement to lend Madrid up to 100 billion euros in rescue funds will reverse the flows if investors fear Spain may face a full sovereign bailout.
  • Many banks are reorganising, or being forced to reorganise, along national lines, accentuating a deepening north-south divide within the currency bloc.
  • Since government credit ratings and bond yields effectively set a floor for the borrowing costs of banks and businesses in their jurisdiction, the best-managed Spanish or Italian banks or companies have to pay far more for loans, if they can get them, than their worst-managed German or Dutch peers.
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  • European Central Bank President Mario Draghi acknowledged as he cut interest rates last week that the north-south disconnect was making it more difficult to run a single monetary policy.
  • Two huge injections of cheap three-year loans into the euro zone banking system this year, amounting to 1 trillion euros, bought only a few months' respite.
  • Conservative German economists led by Hans-Werner Sinn, head of the Ifo institute, are warning of dire consequences for Germany from ballooning claims via the ECB's system for settling payments among national central banks, known as TARGET2.
  • If a southern country were to default or leave the euro, they contend, Germany would be left with an astronomical bill, far beyond its theoretical limit of 211 billion euros liability for euro zone bailout funds.
  • As long as European monetary union is permanent and irreversible, such cross-border claims and capital flows within the currency area should not matter any more than money moving between Texas and California does.But even the faintest prospect of a Day of Reckoning changes that calculus radically.In that case, money would flood into German assets considered "safe" and out of securities and deposits in countries seen as at risk of leaving the monetary union. Some pessimists reckon we are already witnessing the early signs of such a process.
  • Either member governments would always be willing to let their national central banks give unlimited credit to each other, in which case a collapse would be impossible, or they might be unwilling to provide boundless credit, "and this will set the parameters for the dynamics of collapse", Garber warned.
  • "The problem is that at the time of a sovereign debt crisis, large portions of a national balance sheet may suddenly flee to the ECB's books, possibly overwhelming the capacity of a bailout fund to absorb the entire hit," he wrote in 2010,
  • national regulators in some EU countries are moving quietly to try to reduce their home banks' exposure to such an eventuality. The ECB itself last week set a limit on the amount of state-backed bank bonds that banks could use as collateral in its lending operations.
  • In one high-profile case, Germany's financial regulator Bafin ordered HypoVereinsbank (HVB), the German subsidiary of UniCredit, to curb transfers to its parent bank in Italy last year, people familiar with the case said.
  • In any case, common supervision without joint deposit insurance may be insufficient to reverse capital flight.
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A Declining Euro Can't Cure All Ills - WSJ.com - 0 views

online.wsj.com/...3754904577531032942698056.html
shared by Gene Ellis on 17 Jul 12 - No Cached
  • but what would in normal times be a boon for the region may not help as much now, experts say.
  • Before the crisis, actions such as the European Central Bank rate cuts two weeks ago would have had a twofold effect in reviving the economy: Banks would have passed the lower rate on to their clients, while foreign-exchange markets would have marked the currency down, giving exporters better chances to sell their products abroad.
  • In today's polarized euro zone, it isn't that simple. For one thing, tThere is no certainty that euro-zone banks will pass on the cut in borrowing costs.
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  • Even if they did, he explained, the euro zone's problems are now so acute that few companies seem to want to borrow.
  • Mario Boselli, chairman of the Italian Chamber of Fashion, frets that larger emerging economies still account for only 10% of total Italian exports. "This is not enough" to offset the weakness in developed economies, he says.
  • Both Mr. Boselli and Philip Halpin, an adviser to the Irish Exporters' Association, say the euro would have to fall as low as $1.10 (from about $1.23 currently), to produce a robust export-led recovery.
  • Ludovic Subran, chief economist at French trade-credit insurer Euler Hermes, warns that might not be enough. Such a depreciation would have little effect in France because high taxes and rigid labor costs reduce the potential benefits, he says.
  • Any euro-zone economy would benefit from a drop in the euro to the extent that it can redirect more resources to external markets. But the willingness and ability of businesses to do that differs across the region. Nadio Delai, chairman of Italian research and consultancy firm Ermeneia, say a host of smaller, less prestigious Italian shoe and textile companies have started to export to emerging markets, riding the coattails of more famous names.
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Steel Industry Feeling Stress as Automakers Turn to Aluminum - NYTimes.com - 0 views

www.nytimes.com/...detroits-aluminum-diet.html steel industry stress aluminum feeling
shared by Gene Ellis on 25 Feb 14 - No Cached
  • Steel Industry Feeling Stress as Automakers Turn to Aluminum
  • These are headed for Mexico, to Navistar’s stamping plant there.Continue reading the main story
  • Now, they are trying to respond, making lighter, stronger steel in a bid to retain one of their most important customers, the automakers.
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  • chief executive of Severstal North America, the United States subsidiary of Russia’s Severstal Group, which now owns the Rouge steel operations.
  • At Severstal’s Dearborn factory, for example, carmakers including Ford and others account for 70 percent of sales,
  • The shift to aluminum is gaining momentum. Automakers are under increasing pressure to meet strict new fuel-economy standards by 2025
  • United States Steel has invested $400 million in a joint venture with Kobe Steel of Japan to make advanced high-strength steel in a Leipsic, Ohio, factory expected to produce 500,000 tons annually.
  • Inside Severstal’s steel mill on a cold January day, hissing heavy machinery removed oxides from steel sheets, reducing their thickness to the equivalent of five human hairs.
  • For nearly a century, Ford’s River Rouge factory and its neighboring steel mill have worked in close harmony
  • Steel makers argue that they still have advantages in price — aluminum can cost as much as three times more — and flexibility, both for the manufacturer and the mechanic who will be fixing the car.“When you build a mass-produced vehicle, you really need to think about the consequences of the supply chain and repair and insurance costs,” Mr. Dey said.
  • new federal fuel-efficiency standards that will require a fleetwide average of 54.5 miles per gallon by 2025, a significant boost from the roughly 25 m.p.g. that vehicles average today.
  • “Sometimes there is a push from the aluminum side, and they win over with a particular model, and steel tends to be the comeback kid, with more innovation,” said Felix Schuler, a Munich-based partner in the Boston Consulting Group’s metals and mining practice.
  • What seems certain is that ordinary steel is likelier to lose out to its new and improved cousin than to aluminum, Mr. Schuler said.
  • Novelis is investing nearly $550 million to upgrade plants in Oswego, N.Y., and Nachterstedt, Germany, and to build a new factory in Changzhou, China, to triple its capacity from a year ago to 900,000 tons annually.
  • Alcoa, the country’s biggest aluminum producer, is investing about $670 million in its Iowa, Tennessee and Saudi Arabia facilities.Continue reading the main story
  • “Henry Ford was a control freak, and he wanted to control as much of the manufacturing as possible,” Mr. Casey said. “He made the steel, he made the glass, he made the tires.”
  • Gene Ellis on 25 Feb 14
     
    "said"
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Europe's banking union: Till default do us part | The Economist - 0 views

www.economist.com/...s-it-solves-till-default-do-us
shared by Gene Ellis on 29 Oct 13 - No Cached
  • Almost a year ago, as the euro crisis raged, Europe’s leaders boldly pledged a union to break the dangerous link between indebted governments and ailing banking systems, where the troubles of one threatened to pull down the other.
  • Almost everyone involved agrees that in theory a banking union ought to have three legs.
  • a single supervisor
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  • the powers to “resolve” failed banks
  • these powers also require a pot of money (or at least a promise to pay) to clean up the mess l
  • The third leg is a credible euro-wide guarantee on deposits to reassure savers that a euro in an Italian or Spanish bank is just as safe as one in a German or Dutch bank.
  • He dryly notes that Germany couldn’t even force its own savings banks to join its national deposit-insurance scheme.
  • Each country in the euro has its own bankruptcy code
  • Putting the European Central Bank (ECB) in charge of the region’s biggest banks should end the cosy relationship between banks and regulators that allowed Irish and Spanish banks to keep lending during property bubbles and the likes of Deutsche Bank to run with so little capital. If the ECB proves itself an effective supervisor
  • without ready access to a pot of money to fill these holes, the ECB could be reluctant to force banks to come clean. “It is madness to expose capital shortfalls if you don’t know where new capital is going to come from,” says one bank supervisor.
  • “If you wanted to challenge a decision, where would you go to court?” asks the head of a European bank regulator.
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Germany's strange parallel universe - FT.com - 0 views

www.ft.com/...89-11e3-8905-00144feab7de.html
shared by Gene Ellis on 29 Oct 13 - No Cached
  • Germany experienced a mild recession in 2003; today’s vulnerable countries are suffering depressions.
  • today’s vulnerable countries are pursuing adjustment in a period of chronically weak demand.
  • They have to improve their competitiveness. But the only one in which nominal wages have fallen substantially is Greece. Elsewhere, it is rising productivity that has improved competitiveness. But that is the other side of the coin from the unemployment.
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  • All these countries are going to end up with gross public debt at more than 100 per cent of GDP. This will be hard to manage.
  • Ongoing fiscal transfers seem neither desirable nor feasible.
  • But better insurance mechanisms for sovereigns and banks are needed in the long run. Yet all this will be academic if the eurozone does not allow its members to return to economic health over a reasonable time period.
  • Meanwhile, Germany is redirecting its surpluses outside the eurozone.
  • But it also will not work, for two reasons: first, the eurozone is far too big to achieve export-led growth, as Germany has done; and, second, the currency is likely to appreciate still further, thereby squeezing the less competitive economies all over again.
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No Big Deal - NYTimes.com - 0 views

www.nytimes.com/...krugman-no-big-deal.html
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  • No Big Deal
  • Basically, old-fashioned trade deals are a victim of their own success: there just isn’t much more protectionism to eliminate.
  • Implicit protection of services — rules and regulations that have the effect of, say, blocking foreign competition in insurance — surely impose additional costs.
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  • What they’re really about, in particular, is property rights — things like the ability to enforce patents on drugs and copyrights on movies.
  • What the T.P.P. would do, however, is increase the ability of certain corporations to assert control over intellectual property. Again, think drug patents and movie rights.
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