28 January: George Soros says banks must be broken up
- Branko Brkic
- 28 Jan 2010 11:28 (South Africa)
Also today: French president Sarkozy says capitalism needs to be re-invented; Democrats keep eyes on healthcare reform, despite severe setbacks; US Fed seeks way out of stimulus without crashing economy; Kazakhs ink last link in supply chain for Afghan war; US Treasury Secretary Geithner fights for political life; Fear abounds after Sri Lanka election.
George Soros says banks must be broken up
US President Barack Obama wants to do it; the governor of the Bank of England thinks he may want to do it, and now investor extraordinaire George Soros says it’s time the banks that are "too big to fail" were broken into pieces. That must have stunned the delegates gathered at Davos, where the atmosphere is surely more subdued than in years past, but a little less gloomy than at last year’s event. During a press lunch, Soros also said Wall Street bankers are tone-deaf. Despite all sorts of public hearings, they just can’t hear the anger both sides of the Atlantic that says it’s not business as usual. The assembled bankers were on the defensive, muttering away in dark corners to anyone who will listen, as regulators look for ways to separate their commercial banking operations and their investment businesses.
French president Sarkozy says capitalism needs to be re-invented
The French president is taking remedies for the global financial crisis a step further than George Soros and US President Barack Obama. Nicolas Sarkozy, in a keynote speech at the World Economic Forum in Switzerland, said it’s time for a fundamental rethink of capitalism, in the context of “moral” imperatives. Regulators in Europe and the US are on the warpath over banks and their lending practices. The French and British have already cracked down hard on bankers’ bonuses, while Obama is seeking widespread changes to the size and scope of big banking operations.
Democrats still want healthcare reform, despite severe setbacks
Despite huge setbacks a year after they won the White House, Democrats say that dumping healthcare reform is not an option. Just last week they lost former liberal Senator Edward Kennedy’s safe seat of 46 years in Massachusetts, putting more spokes in the wheel of governing a nation beset with problems. They’ve been given a recent fillip by US Catholic bishops and the head of the country’s largest labour federation, who wrote to Congress saying that providing affordable, quality care to all is a policy priority. This issue has caused many a US administration to stumble, as some 46 million Americans don’t have health cover. Obama’s Democrats have grasped the nettle with both hands, and are now feeling its sting. The Catholic bishops won't support a bill that includes taxpayer funded abortion, while unions oppose a proposed tax on high-cost insurance plans.
US Fed seeks way out of stimulus without crashing economy
The US Federal Reserve is focusing on how to stem the flow of taxpayer funds injected into the economy to battle the October 2008 markets collapse. Fed boss Ben Bernanke, who was appointed by the former Bush administration, looks like he’ll keep his job. While no major changes in interest rates or current economic support programmes are expected, the nation’s central bank is looking to exit the $700 billion stimulus without killing the renewed energy in the economy. A raft of proposed legislations, including limiting the size and scope of banking activities to reduce systemic risk, is in the pipeline, and bankers are aggrieved that this will constrain their industry.
Kazakhs ink last link in supply chain for Afghan war
Kazakhstan will now permit Nato to ship cargo through its territory to supply the troops in Afghanistan. US President Barack Obama has added another 30,000 military personnel to the Afghan theatre, and they need a way to get into the landlocked country other than through the Khyber Pass in Pakistan, where Taliban attacks are common. The shipments will now travel overland from Europe to troops through Russia, Ukraine and Uzbekistan. But the accord with Kazakhstan will allow Nato to ship only non-lethal cargo by rail through the country. As Napoleon once said, an army fights on its stomach, so this move is crucial to the war effort.
US Treasury Secretary fights for political life
US Treasury Secretary Timothy Geithner is fighting public animosity that may still cost him his job. He’s accused of having allowed giant insurer American International Group to pay huge bonuses to staff when it was at gates of hell during the peak of the nation’s financial crisis. Even worse, he’s also suspected of having allowed AIG to keep payments on debt obligations to banks secret after it took the lion’s share of Wall Street bailouts, leaving accountability for public funds in the dark. Geithner was head of the New York Federal Reserve at the time, and Congress hasn’t taken kindly to AIG receiving some $180 billion in public money and then paying that on in secret to big banks to cover sub-prime losses for which they also received billions in taxpayer funds. Geithner says the NY Fed never authorised secrecy, but agreed to confidentiality regarding who the payments went to. No wonder public representatives aren’t buying his explanations in hearings in Washington. Geithner states that the collapse of AIG would have brought down the entire financial system. He’s probably right, but Americans want to know how their hard-earned cash was spent, so much so, that Geithner has appeared on Capitol Hill 22 times since becoming Treasury secretary a year ago.
Fear abounds after Sri Lanka election
Sri Lanka’s President Mahinda Rajapaksa has been definitively re-elected with 57.8% of the vote, killing off a challenge from his former army chief, Sarath Fonseka, who got 40%. The one-time allies fell out after the army finally put an end to a 25-year civil war against the separatist Tamil Tigers last year, and now it looks like Rajapaksa is using the army to send Fonseka to political purgatory, surrounding his hotel with troops and causing him to fear for his life. Rajapaksa has told the country that from now on he’s the president, whether they voted for him not, after Fonseka refused to accept the results and said he’d start legal proceedings to have the vote annulled. He claims Rajapaksa misappropriated public funds for his election campaign, and prevented displaced minority Tamils from voting. Sri Lanka’s election commissioner agreed with Fonseka, saying state media violated poll guidelines, and is now wanting to resign because of ensuing tensions. That doesn’t bode well for democracy in a country where the killing of politicians and journalists is rife, and political parties are riddled with nepotism.
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