Apparently the G-20 will save the world from greedy bankers:
President Barack Obama and other Group of 20 leaders meeting in Pittsburgh are uniting behind a plan to force banks to tie compensation more closely to risk and tighten capital requirements, U.S. officials said. Treasury Secretary Timothy Geithner said there’s a “strong consensus” to tackle global imbalances. At the same time, divisions remain on how to overhaul control of the International Monetary Fund.
That’s a hoot, it really is. “Tie compensation more closely to risk”? “Risk” as defined how and by whom? It seems to have escaped the attention of the press that the Basel Committee (comprised of wise and omniscient bureaucrats) has been attempting to define “risk” in quantitative terms for over twenty years and the current crisis shows they’re not very good at it – no better than the bankers themselves.
Group of 20 leaders said they will crack down on risk-taking by banks and better align economic policies as they turned from crisis management to delivering a new set of rules for the world economy.
…
“We cannot tolerate the same old boom-and-bust economy of the past,” Obama said after the talks. “Never again should we let the schemes of a reckless few put the world’s financial system and our people’s well-being at risk.”
…
“They’re trying to ensure that bubbles don’t build up again,” said Kenneth Rogoff, a former chief economist at the International Monetary Fund and a professor at Harvard University. “There’s an element of genuine concern about pay policies, but they may also satisfy some of the public bloodlust.”
Public bloodlust is the key point – and way to whip up the old politics of resentment & envy, Mr. Obama! Now I understand what “Change” means … it means “Change in Targets”.
Banks were told to avoid “multi-year guaranteed bonuses” and a “significant portion of variable compensation” must be deferred, paid in stock, tied to performance and subjected to clawbacks if earnings flop. The G-20 stopped short of endorsing a French proposal to introduce specific caps on pay.
About the only good thing to be said for this is that it will lead a stampede of talent out of the regulated banks and into the hedge-fund sector. Technology’s made it very easy to blur the lines – there’s no reason why a hedge fund can’t call a market in any security and trade it off the exchange in an institutional pool.
Being buck-a-dime on ten-year governments may be less sexy than activist investment management, but it can be much more profitable.
If they can, the profits and share price of banks from Goldman Sachs Group Inc. to Barclays Plc will fall with their scope to invest and trade, said former Bank of England policy maker Charles Goodhart.
“Regulation almost certainly means the size of the banking industry will contract and its rates of return will go down,” said Goodhart, professor emeritus of banking and finance at the London School of Economics.
This will help hedge funds – and other shadow banks – raise capital.
FixedResets outperformed big-time today, returning +14bp against PerpetualDiscounts’ loss of 22bp, while also dominating the volume table on another day of very good volume.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
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| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.3539 % | 1,507.3 |
| FixedFloater | 5.75 % | 4.00 % | 52,604 | 18.59 | 1 | 0.4251 % | 2,669.0 |
| Floater | 2.43 % | 2.07 % | 37,435 | 22.27 | 4 | -0.3539 % | 1,883.1 |
| OpRet | 4.88 % | -3.75 % | 131,103 | 0.09 | 15 | -0.1483 % | 2,284.2 |
| SplitShare | 6.38 % | 6.55 % | 862,511 | 4.02 | 2 | 0.5752 % | 2,073.1 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1483 % | 2,088.7 |
| Perpetual-Premium | 5.78 % | 5.69 % | 150,817 | 2.81 | 12 | -0.2276 % | 1,873.9 |
| Perpetual-Discount | 5.74 % | 5.79 % | 204,453 | 14.21 | 59 | -0.2170 % | 1,795.1 |
| FixedReset | 5.49 % | 4.04 % | 456,934 | 4.09 | 40 | 0.1357 % | 2,112.1 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| HSB.PR.D | Perpetual-Discount | -2.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-09-25 Maturity Price : 21.35 Evaluated at bid price : 21.35 Bid-YTW : 5.89 % |
| MFC.PR.A | OpRet | -2.12 % | YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2015-12-18 Maturity Price : 25.00 Evaluated at bid price : 25.45 Bid-YTW : 3.81 % |
| ELF.PR.F | Perpetual-Discount | -1.65 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-09-25 Maturity Price : 20.90 Evaluated at bid price : 20.90 Bid-YTW : 6.48 % |
| TRI.PR.B | Floater | -1.09 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-09-25 Maturity Price : 19.05 Evaluated at bid price : 19.05 Bid-YTW : 2.06 % |
| ELF.PR.G | Perpetual-Discount | -1.01 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-09-25 Maturity Price : 18.67 Evaluated at bid price : 18.67 Bid-YTW : 6.50 % |
| BNA.PR.D | SplitShare | 1.02 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2014-07-09 Maturity Price : 25.00 Evaluated at bid price : 25.86 Bid-YTW : 6.55 % |
| BAM.PR.I | OpRet | 2.03 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2009-10-25 Maturity Price : 25.75 Evaluated at bid price : 26.10 Bid-YTW : -11.64 % |
| CM.PR.K | FixedReset | 2.16 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-30 Maturity Price : 25.00 Evaluated at bid price : 26.05 Bid-YTW : 4.27 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TRI.PR.B | Floater | 170,200 | Nesbitt crossed 169,500 at 19.40. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-09-25 Maturity Price : 19.05 Evaluated at bid price : 19.05 Bid-YTW : 2.06 % |
| TD.PR.E | FixedReset | 137,655 | National crossed 10,000 at 27.85; Desjardins crossed 100,000 at the same price; then National crossed a second block of 10,000 at the same price again. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-30 Maturity Price : 25.00 Evaluated at bid price : 27.90 Bid-YTW : 3.80 % |
| CIU.PR.B | FixedReset | 83,000 | RBC crossed 50,000 at 28.14; Nesbitt crossed 30,000 at 28.11. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-01 Maturity Price : 25.00 Evaluated at bid price : 28.10 Bid-YTW : 3.98 % |
| BNS.PR.T | FixedReset | 52,660 | National crossed 30,000 at 27.95. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-25 Maturity Price : 25.00 Evaluated at bid price : 27.97 Bid-YTW : 3.73 % |
| TD.PR.I | FixedReset | 47,400 | Desjardins crossed 33,000 at 27.85. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-30 Maturity Price : 25.00 Evaluated at bid price : 27.83 Bid-YTW : 3.96 % |
| TD.PR.G | FixedReset | 32,040 | National crossed 10,000 at 27.85. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-30 Maturity Price : 25.00 Evaluated at bid price : 27.87 Bid-YTW : 3.83 % |
| There were 54 other index-included issues trading in excess of 10,000 shares. | |||