PrefBlog

The Fed appears to be winning the bureaucratic turf-fight over the nascent CDS Clearinghouse industry:

The Federal Reserve is working on a plan that would give it authority to regulate the clearing of trades for the $33 trillion credit-default swap market, according to people with knowledge of the proposal.

The Fed, the U.S. Securities and Exchange Commission, the Treasury Department and the Commodity Futures Trading Commission are discussing a memorandum of understanding that lays out oversight of clearinghouses that would become the central counterparty to credit-default swap trades, said the people who asked not to be named because the discussions are private.

VoxEU has announced a new collection of essays titled “What G20 leaders must do to stabilise our economy and fix the financial system”. The article “Returning to narrow banking” by Paul De Grauwe looks most interesting, but I have not yet been able to read it:

Bubbles and crashes have been part of financial markets for centuries. Allowing banks – which inevitably borrow short and lend long – to get deeply involved in financial markets is a recipe for disaster. The solution is to restrict banks to traditional, narrow banking with traditional oversight and guarantees while requiring firms operating in financial markets to more closely match the average maturities of their assets and liabilities.

The Globe and Mail reported further evidence that Canada’s political leadership has the collective intelligence of a peanut:

The premiers also want Ottawa to delay the age at which seniors must begin taking money out of their Registered Retirement Income Funds. Several premiers expressed concern that, in the current economic climate, forcing Canadians at 71 to begin liquidating their RRIFs would cause significant losses on portions of their earnings that depend on stock holdings.

Um … bozos? Nobody says they have to sell their holdings. They just have to withdraw the holdings from the RRIF, stick them in a regular account and declare the withdrawal as income. Collapsing their RRIFs with the least amount of declared income is a Good Thing.

SunLife’s common got whacked:

Manulife Financial, Canada’s biggest insurance company, slid 3.4 percent to C$25.75. Sun Life Financial Inc., the third- largest, fell 6.7 percent to C$27.24.

Goldman Sachs Group Inc. reduced its rating on the life- insurance industry to “cautious” from “neutral,” saying investment losses may force insurers to raise more capital and threaten credit ratings.

… and their prefs were caught in the downdraft. SunLife’s 3Q08 Financials show they took a $636-million hit on credit-related and $326-million on equity-related issues. SLF does not yet know the effect of OSFI’s MCCSR Rule-Change on capital. They have $69.0-billion in segregated fund assets, compared to $16.6-billion in equity including preferred shares.

A description of the equity risk associated with policyholder obligations is included in Note 9 of the 2007 annual consolidated financial statements. The estimated impact from these obligations on the Company from an immediate 10% increase across all equity markets would be an increase in net income of $159 [-million]; conversely, the impact of an immediate 10% drop across all equity markets would be an estimated decrease in net income of $222 [-million]

There were twenty-seven other index-included $25-pv-equivalent issues trading over 10,000 shares today.

This entry was posted on Tuesday, November 11th, 2008 at 11:59 pm and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.