UK Only Article:  standard article Issue:  A way out of the woods Fly Title:  European financial regulation Rubric:  Lots of rules, but not all good ones Location:  BRUSSELS WHEN Michel Barnier, a former French foreign minister, became European commissioner for the single market two years ago, he pledged that “every financial actor, financial market, financial activity and product” would be properly regulated so that taxpayers never again pay for speculators. His staff have churned out draft laws as he seeks to enact a battery of G20 commitments by the end of his term in 2014. Mr Barnier likes to hold up a chart tracking his 20-odd proposals as they change from green (forthcoming rules) to orange (under negotiation) and mauve (adopted). The spreadsheet highlights the differences with the parallel regulatory process across the Atlantic. America’s Dodd-Frank act is a single overarching law that directs agencies to issue more detailed regulations. The EU, by contrast, is methodically regulating sector by sector, …

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UK Only Article:  standard article Issue:  A way out of the woods Fly Title:  The best and worst stocks of the past decade Hindsight can be frustrating. We kick ourselves for not buying Apple shares ten years ago, when they were $12.50 each. On February 13th they rose above $500. So $100 invested in Apple in February 2002, around the time it unveiled its redesigned iMac, would be worth almost $4,000 today. The same investment in Sberbank, Russia’s biggest state-owned bank, would now be worth more than $3,700. But cheer up. We can at least be grateful that we didn’t buy shares in Allied Irish Banks or AIG. Bets of $100 in those firms ten years ago would now be worth $1.33 and $2.21 respectively. Western financial institutions have been by far the worst investment of the past decade. As for the next one, who knows? (Because this chart looks at the 200 biggest existing companies that also existed in 2002, it ignores both new and recently bankrupt firms.) In this sectionToo many cars, too few buyers Fallout A dark day for LightSquared FRAND or foe? »Invest in a time machine Mind your language From summit …

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Investments in dotcoms and national giants a decade ago would have reaped great rewardsHINDSIGHT can be illuminating and frustrating. Ten years ago a share in Apple would have set you back $12.50. Yesterday, thanks partly to recent news of record profits for the final quarter of 2011, the technology giant’s share price rose above $500 for the first time. A hundred dollars invested in Apple in February 2002, around the time it unveiled its redesigned iMac, would have swelled to almost $4,000 today. The same investment in Sberbank, Russia’s biggest state-owned bank, would now be worth more than $3,700. The decade has not been so kind to a number of western banks. A $100 stake in Allied Irish Banks and AIG would be worth $1.33 and $2.21 respectively. As the chart looks at the 200 biggest existing companies that also existed in 2002, it necessarily ignores both new and recently bankrupt firms. 

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MY PRINT column this week looks at the British debate about high pay, and suggests that the row is about more than bonuses and banks. Somewhere in amongst the public rage, I think the British are losing faith in the idea that they live in a meritocracy.TWICE during the 1970s, a stroppy decade, leftish British politicians tried to turn the monarchy into a nationalised industry. There were plans to place Queen Elizabeth II and a few close relatives on state salaries and sack the rest of her family, and—a few years later—for a Department for Royal Affairs, bringing the crown under Whitehall’s management. Both attempts were resisted. Since then, royal aides have cannily worked to secure autonomy and arms-length financing from government. Just now, the mood behind palace walls must be giddy relief. The queen has rarely been as popular as she is now, in her Diamond Jubilee year. The contrast with other arms of the establishment is striking, and revealing. For most people at the top of the public sector, this is a perilous time.For months there has been angry scrutiny of the sums paid to the bosses of public or publicly controlled bodies, from the BBC to the railways and the bailed out Royal Bank of Scotland (RBS). The BBC says that its next director-general will take a big pay cut. Network Rail directors this week bowed to ministerial nagging and promised to donate …

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UK Only Article:  standard article Issue:  How to set Syria free Fly Title:  Schumpeter Rubric:  Being gay-friendly is cheap and good for business Main image:  20120211_WBD000_0.jpg IN “LITTLE BRITAIN”, a television comedy, Daffyd Thomas, who insists he is “the only gay in the village”, tries to expose the homophobia of his fellow Welsh villagers by wearing outrageous clothes (bright red rubber shorts are a favourite) and picketing the local library. But he is constantly frustrated: the inhabitants of Llanddewi Brefi are all either tolerant or gay themselves. The corporate world is not yet as gay-friendly as Llanddewi Brefi. But attitudes have changed dramatically. Some 86% of Fortune 500 firms now ban discrimination on the basis of sexual orientation, up from 61% in 2002. Around 50% also ban discrimination against transsexuals, compared with 3% in 2002. The Human Rights Campaign (HRC), an American pressure group, measures corporate policies towards sexual minorities in its annual …

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UK Only Article:  standard article Issue:  How to set Syria free Fly Title:  Bagehot Rubric:  A bitter row about executive pay is about something bigger Main image:  20120211_BRD000_0.jpg TWICE during the 1970s, a stroppy decade, leftish British politicians tried to turn the monarchy into a nationalised industry. There were plans to place Queen Elizabeth II and a few close relatives on state salaries and sack the rest of her family, and—a few years later—for a Department for Royal Affairs, bringing the crown under Whitehall’s management. Both attempts were resisted. Since then, royal aides have cannily worked to secure autonomy and arms-length financing from government. Just now, the mood behind palace walls must be giddy relief. The queen has rarely been as popular as she is now, in her Diamond Jubilee year. The contrast with other arms of the establishment is striking, and revealing. For most people at the top of the public sector, this is a perilous time. In this …

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UK Only Article:  standard article Issue:  How to set Syria free Fly Title:  The coalition’s performance Rubric:  A once resolute government has started being tugged by events Main image:  20120211_BRP003_0.jpg IMPRESSIVELY for a government led by a former public-relations man, the coalition avoided responding tactically to the news of the day in its first 18 months. David Cameron took big strategic decisions—on fiscal policy, education, policing, welfare, health care—and, for the most part, stuck to them. The government seemed to offer a sense of direction in convulsive times. Some of this has been lost in recent weeks. First the prime minister zig-zagged on the issue of a new European Union treaty designed to save the euro. Having refused to support it in December, to domestic acclaim, he has softened his opposition to the signatories using EU institutions to enforce their “fiscal compact”. Europhiles and Eurosceptics alike doubt that he ever had a diplomatic game plan to begin with. …

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WITH America’s economy seemingly accelerating toward a pleasing hum, several-times-bitten writers are looking about on the horizon for signs of imminent doom, of the sort that squelched bouts of optimism in 2010 and 2011. And looming large and ugly, as it did in 2010 and 2011, is Europe. What are the odds that continued European crisis will throw sand into the gears of America’s recovery?Paul Krugman points out that America’s trade exposure to Europe is relatively small, and I think it’s very unlikely that the trade channel has a significant, negative impact on America’s economy. European demand will probably be a small drag on America no matter what. If Europe’s periphery adjusts quickly then its net exports to America should hold steady (offsetting reduced exports from the core) or rise, keeping the euro area out of a deep recession and holding down the contribution of European demand to American growth. And if Europe’s periphery doesn’t adjust quickly, well, the resulting deep recession will be the thing that holds down the contribution of European demand to American growth. Rising American demand will primarily be driven by increased domestic spending and investment and improved sales to non-European markets.But in 2008, when economies around the world sank in near-unison, the trigger was not the impact of falling American demand on global trade flows but instead a …

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A MONTH ago, Konrad Hummler, managing partner of Wegelin & Co, the oldest Swiss private bank, said it was unlikely that an American court would charge his bank with tax fraud. Three of his employees, who managed accounts for American clients, had just been so charged. But indicting the bank itself would have “a destabilising effect” on the entire system, he argued. The Southern District Court of New York clearly did not care. On February 2nd it filed its indictment against Wegelin, for conspiracy to defraud the United States by concealing undeclared accounts from the Inland Revenue Service (IRS). Mr Hummler probably saw the writing on the wall: the week before, he sold the bulk of the bank to Raiffeisen, a Swiss mutual bank, but retained Wegelin’s American business and—according to the deal—any legal risk. That makes Wegelin, founded in 1741, a shadow of its former self. But the little bank based in St Gallen is a mere pawn in a much bigger game being played between Switzerland and America over banking secrecy and tax fraud. Since UBS, Switzerland’s biggest bank, paid a $780m fine in February 2009 and handed more than 4,400 names of clients to the American authorities, the country has been trying to negotiate a “global deal”. It would include a one-time cash payment (the sum being talked about ranges from $2 billion to $10 billion) and get the Department of Justice …

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LATE last year, I tweeted a question: what is the single most important reason that America doesn’t have internal balance-of-payment crises like that now afflicting the euro zone? My view, at the time, was that it came down to the Federal Deposit Insurance Corporation. The FDIC is backed by the federal government which is itself backed by the Federal Reserve. And the FDIC ensures that a state won’t fall prey to a nasty crisis in which a deteriorating local economy breaks local banks which then bankrupt the local government and further destroy the local economy.Today, Buttonwood quotes the Bank Credit Analyst:The problem in Europe is that deposit insurance schemes are administered at the national level. That is where the ECB comes in. While it would never admit it, through a rather circuitous route. the ECB has now assumed a role comparable to the US Federal Deposit Insurance Corporation (FDIC)…It’s an interesting point. In the absence of a federal government to back the banks and which the ECB can in turn feel comfortable backing, it has simply opted to support the banks itself. Now, there are legitimate questions about the extent and the duration of this backstop. It might change or go away, in which case the crisis would quickly intensify once again. And America’s federal government also has many fiscal and monetary institutions that work to align business …

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