news blog from Gladys

Ex-US insurance executive, Reds owner Lindner dies

At one time he owned controlling interests in Great American Insurance Group, General Cable Corp, Hanna-Barbera Productions, Kings Island Company, the former Taft Broadcasting Company, The Cincinnati Enquirer, and The Provident Bank.Lindner bought and sold a wide range of businesses from banana company Chiquita Brands International Inc. to the Penn Central railroad.He bought the Cincinnati Reds, one of the venerable teams in Major League Baseball, in 1995 and bristled at criticism of his losing team, selling his majority stake five years later.He launched his financial empire with a savings-and-loan and insurance company. Eventually, he shed many outside businesses except for American Financial Group, an insurance holding company with assets in excess of $30 billion.The conservative Lindner was among those behind a Cincinnati anti-pornography group, Citizens for Decency through Law, that sparked controversy in 1990 when it tried to block a Robert Mapplethorpe photography exhibition.Early on in Norwood, Ohio, he drove his family’s milk truck on dates, and much later he was sometimes spotted driving one of his Rolls Royce convertibles.He is survived by his wife Edyth and three sons.

IFR-COMMENT: IMF missing piece in a leveraged EFSF

IFR has previously highlighted how without the involvement of the balance sheets of the ECB or IMF, any move toward a leveraged EFSF will likely pose risks to the AAA ratings of the core Eurozone members. While the ECB is still baulking at the prospect of being a bank for the EFSF there are reports that the IMF is willing to play a more extensive role in helping Europe.While movement toward recapitalizing the banks and building a wall around Italy and Spain are positive, policy makers should worry about the price action at the core especially France.We have had movement on the two objectives: Firstly, banks will be recapitalized based on more stringent stress tests and a pass mark as high as 9%. This will require recapitalization of as much as 275bn for many of the 90 banks which were included in the stress tests this summer. Now, despite resistance, the Eurogroup is starting to think in terms of forced bank recapitalizations.We still have to take a look at the extent of stress in the stress tests for the banks in order to pass the 9% hurdle for core tier one, but movement is in the right direction. The German plan of recapitalization happening at the national level and only then going to the EFSF seems to be grudgingly accepted.Second, to build a firewall for Italy and Spain, there is the idea of the EFSF increasing its firepower beyond 440bn, via acting as an insurer. This has been gaining traction recently. The original idea (FT Alphaville) came from a 2010 paper from Redefine, which is a European consultancy. It has more recently made a reappearance in plans suggested by the German insurer Allianz.Today there is more coverage in a FT Op-Ed by Paul Achleitner, who is the board member responsible for finance at Allianz. The idea being that instead of outright purchases, the EFSF funds could instead be used to provide first loss cover (say 20/25%) for bonds issued by Eurozone member countries such as Italy or Spain.ECB STAYS ON SIDELINES, IMF COMES INTO THE PICTURE.But without the ECB or IMF involved, the risk is the markets will perceive the EFSF as having too little firepower to achieve its aims. The ECB continues to shy away from acting like a bank, and ECB President Trichet seems to confirm this aversion to do more by saying in an interview to the FT today that the “ECB has done all it could to be up to its responsibilities in exceptional circumstances”.Which is where the IMF may come in via the help of emerging market countries, by “either funding an IMF-run special purpose vehicle or lending to the IMF by buying special bonds” (FT today).The involvement of the IMF is also not a new idea, and seemed to have been leaked out by Antonio Borges, head of the IMF’s European department, earlier this month when he withdrew a statement he had made about the IMF joining the EFSF in buying government bonds.At the time Borges highlighted that any alternative lending model would require a “different legal structure” and the use of a “different source of financing”. If EM countries are willing to step in on an alternative lending model then there is the potential for the IMF/EM to play a larger role in leveraging the EFSF.An IMF willing to play a larger role in supporting peripheral debt would also leave more firepower for Europe to deal with recapitalizing its banks should the EFSF route be required.There are many risks heading into the Oct 23 European summit and Nov 3-4 G20 meeting, where politics may once again get in the way of delivering an effective solution. But the pressure from the G20 is immense as it looks for Europe to come up with a plan which is seen as an important step toward soothing concerns over the global growth outlook.STICKING WITH 10-YEAR ITALY/FRANCE NARROWING TRADEWhile the involvement of the IMF will help Italy and Spain it might do little to help alleviate concerns over France’s AAA rating. More generally the European debt crisis has simply morphed into a crisis that is impacting the core/semi-core with France and Belgium firmly in the spotlight.We have been looking for post-EMU wides on the 10-year France/German spread and we have it today with a spread of 94bps and at a spread not seen since the mid-1990s. We are still biased toward effectively playing for a narrowing in the spread between 10-year Italy/France as we see a dilution of creditworthiness as Italy is provided a lifeline while France is forced to take risks with its AAA rating (see “Risks to the AAA’s, consider 10-year Italy/France narrowing”; Oct 10).What is happening to the 10-year spread on France should worry policy makers as it suggests that more needs to be done than just recapitalizing the banks and insuring Italy and Spain.ECB intervention on Italy and Spain does little to mask the markets concerns over the AAA countries with France (+8bps) and Austria (+6bps) being the top two underperformers in the 10-year today excluding Greece. A bank recapitalization that happens via the EFSF should be considered to help contain a crisis that has spread to the core.For a graphic of France/Germany 10-year bond spreads, please see:

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Eleven arrested in San Francisco protest

The 11 arrested at Wells Fargo were issued citations for trespassing after occupying an entrance to the building, prompting bank officials to briefly shut down the office tower, San Francisco police officer Albie Esparza said.A separate Wells Fargo bank branch around the corner was closed for the day due to the protests, Esparza said.”Our role here was to allow and facilitate First Amendment rights and make sure peace was maintained. And it was a peaceful protest,” Esparza said.The gathering was part of a growing number of rallies that have sprung up from Wall Street demonstrations that began last month, protesting against unemployment woes, disparities in wealth and government bailouts of major banks.Earlier in the day, a rally by anti-Wall Street protesters prompted the San Francisco Municipal Transportation Agency to halt service on its famed cable car lines for nearly two hours, transit spokesman Paul Rose told Reuters.”From what we could gather, we don’t think they were trying to block service,” he said. “They had just gathered in that area, and we held service until they cleared.” No arrests were reported.Roughly 100 to 200 protesters marched to the Wells Fargo site from the U.S. Federal Reserve building, according to Pete Woiwode, 28, a protest organizer who spoke with Reuters by cell phone from the scene.”Wells Fargo is a good target because they have been very involved in the foreclosure crisis, kicking people out of their homes,” Woiwode said. “Our message is: Stop kicking people out of their homes, start paying your taxes.”Police escorted Wells Fargo employees in and out of the headquarters through a secure entryway after first closing access to the entire building for about 15 minutes, company spokesman Ruben Pulido said.”Wells Fargo recognizes that Americans are demanding more from their financial institutions during these difficult economic times,” Wells Fargo said in a written statement.”In addition to repaying the U.S. government $25 billion for the TARP (Troubled Asset Relief Program) funds in December 2009, Wells Fargo paid an additional $1.4 billion in dividends to the U.S. Treasury as well; that was a strong return on investment for the government.”By midday, the protest had dispersed from the area.

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Eleven arrested in San Francisco protest

The 11 arrested at Wells Fargo were issued citations for trespassing after occupying an entrance to the building, prompting bank officials to briefly shut down the office tower, San Francisco police officer Albie Esparza said.A separate Wells Fargo bank branch around the corner was closed for the day due to the protests, Esparza said.”Our role here was to allow and facilitate First Amendment rights and make sure peace was maintained. And it was a peaceful protest,” Esparza said.The gathering was part of a growing number of rallies that have sprung up from Wall Street demonstrations that began last month, protesting against unemployment woes, disparities in wealth and government bailouts of major banks.Earlier in the day, a rally by anti-Wall Street protesters prompted the San Francisco Municipal Transportation Agency to halt service on its famed cable car lines for nearly two hours, transit spokesman Paul Rose told Reuters.”From what we could gather, we don’t think they were trying to block service,” he said. “They had just gathered in that area, and we held service until they cleared.” No arrests were reported.Roughly 100 to 200 protesters marched to the Wells Fargo site from the U.S. Federal Reserve building, according to Pete Woiwode, 28, a protest organizer who spoke with Reuters by cell phone from the scene.”Wells Fargo is a good target because they have been very involved in the foreclosure crisis, kicking people out of their homes,” Woiwode said. “Our message is: Stop kicking people out of their homes, start paying your taxes.”Police escorted Wells Fargo employees in and out of the headquarters through a secure entryway after first closing access to the entire building for about 15 minutes, company spokesman Ruben Pulido said.”Wells Fargo recognizes that Americans are demanding more from their financial institutions during these difficult economic times,” Wells Fargo said in a written statement.”In addition to repaying the U.S. government $25 billion for the TARP (Troubled Asset Relief Program) funds in December 2009, Wells Fargo paid an additional $1.4 billion in dividends to the U.S. Treasury as well; that was a strong return on investment for the government.”By midday, the protest had dispersed from the area.

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