Risk-pooling, or more poor transparency in banking (question mark)

I honestly do not have a firm view on this story:

Several of the world’s biggest banks are in talks to put up about $75 billion in a backup fund that could be used to buy risky mortgage securities and other assets, a move designed to ease pressure on a crucial part of the credit markets that threatens the broader economy.

Citigroup, Bank of America and JPMorgan Chase, along with several other financial institutions, have been meeting to come up with a plan to create a fund that could prevent a sharp sell-off in securities owned by bank-affiliated investment vehicles.

Although I have come across it a few times today.

While there are signs that the broader credit markets have begun to stabilize after the Federal Reserve lowered interest rates last month, a pocket of the commercial paper market remains under siege: structured investment vehicles, known as SIVs. The fear is that problems with these vehicles could infect the broader economy.

SIVs, which issue short-term notes to invest in longer-term securities with higher yields, are often organized by banks but are not actually owned or held by them. They are supposed to be financed through the issuance of commercial paper backed by pools of home loans and credit card debt, but the loss of confidence in the quality of subprime mortgage bonds has also tainted these securities.

Analysts say that investors have all but stopped buying SIV-affiliated commercial paper, and the worry is that the 30 or so SIVs will unload billions of dollars of mortgage-related assets all at once. That would put intense pressure on prices. Wall Street firms and hedge funds face potentially huge hits to their profits.

…

The proposal being floated calls for the creation of a “Super-SIV,” or a SIV-like fund fully backed by several of the world’s biggest banks to provide emergency financing. The Super-SIV would issue short-term notes to finance the purchase of assets held by the SIVs affiliated with the banks, with the hope of reassuring investors.

But whether the banks would buy the assets directly or just buy the short-term debt is still unclear, according to people briefed on the situation. So are other aspects, like the amount of capital each bank would need to contribute, how it would be administrated, and the fee structures and cost burdens.

The effort to create a backup fund began about three weeks ago, when the Treasury secretary, Henry Paulson Jr., called a meeting in Washington that included the chief executives of Citigroup, Bank of America, JPMorgan and other big banks.

With Wall Street firms having almost no luck finding buyers for mortgage-backed securities and derivatives, Paulson wanted to see what could be done to relieve the bottleneck.

My first problem is what looks, to me, like a logical inconstistency. If there was this great credit/liquidity problem, requiring loads of public money to be put at risk, where is this USD75-100bn coming from? If it’s coming from the banks, was there that great a problem in the first place? If banks are ultimately going to approach the Fed for loans to purchase debt from their own investment arms, is that not more public money being used to purchase debt instruments that no private profiteers will touch? If so, just who in hell have we put in charge of our money, anyway? (oh, right).

This is, of course, the same Paulson who routinely refers to the miraculous strength of the US economy. The same economy that relies on bullshit measures of inflation to look like it’s moving forward at all, and even then only if you don’t compare it to any other country (U-S-A! 79th-of-83-Stock-Exchanges! doesn’t have quite the same ring to it…). Honestly, what are these people carpeting their offices with, anyway?

Back to the banks, then: are they buying the assets in question, or the debt? If the former, do those assets get properly audited, with the correct values placed on their balance sheets? Or, is this just a scam for banks to protect one another and, such as way back when Bear Stearns first coughed up its own lungs, manage to prevent the market from ever getting a chance to point out that all these assets are worth exactly the paper on which they’re printed?

Ultimately I don’t have a problem with banks pooling risks – i.e. moving back towards the sort of no-nonsense re-insurance they left behind with common sense several years ago. I object to public money being used (or, worse, created!) to deal with this nonsense.

Monbiot on coal

George Monbiot has written about coal many a time. This time slightly differently, as he stands at the edge of, and describes in brilliant form, a burgeoning new open-cast mine out in Wales.

I recommend that you use his post for the references, rather than my shoddy efforts.

It looks as if we are about to re-enter the coal age. Though the electricity companies spend millions telling us about their investments in renewable energy, at least four of them – E.On, RWE npower, ScottishPower and Scottish and Southern – are developing plans for new coal-burning generators, which produce roughly twice the carbon emissions of gas burners. According to one government document, there are “£20 billion of new coal-fired power stations planned to be built in the UK before 2020″(1).

The power companies are confident that the government will back them. Its Energy White Paper, published in May, begins by explaining the need to develop a low carbon economy. But buried on page 112 is a commitment to “secure the long-term future of coal-fired power generation”(2).

This is justified by the prospect that one day carbon emissions might be captured and buried in geological formations: a process known as carbon capture and storage, or CCS. But while the government has asked companies to build a demonstration plant by 2014, there are no firm plans for any commercial venture. The energy white paper admits that “CCS would not be commercially viable unless costs fell substantially … or unless the carbon price rose sufficiently to provide a larger financial incentive.”(3) In a parliamentary debate in May, Alastair Darling, then in charge of energy, acknowledged that the technologies required for CCS “might never become available”(4). We could be stuck with a new generation of coal-burning power stations, approved on the basis of a promise which never materialises, which commit us to massive emissions for 40 years.

There is another policy buried in the white paper which is already being implemented. This is to “maximise economic recovery … from remaining coal reserves.”(5) In 2006, British planning authorities considered twelve applications for new opencast coal mines. They rejected two of them and approved ten.(6) They have done so, the story of Ffos-y-fran shows, with the active support of the government.

And of the town?

The edge of the site is just 36 metres from the nearest homes, yet there will be no compensation for the owners, and their concerns have been dismissed by the authorities. Though local people have fought the plan, their council, the Welsh government and the Westminster government have collaborated with the developers to force it through, using questionable methods. I have found evidence which suggests to me that a member of Tony Blair’s government used false information to seek to persuade the Welsh administration to approve the pit. But perhaps the most remarkable fact is this: that outside Merthyr Tydfil hardly anyone knows it is happening.

…

At first the people of Merthyr Tydfil could not understand why their representatives were siding with the developers. Merthyr has a long Labour tradition of social solidarity. While many people lament the passing of the deep mines, open-casting is unpopular. Petitions circulated by the local protest group raised 10,000 signatures. But the council, which is dominated by the Labour party, the Labour assembly member and the Welsh assembly have all helped the mining company to fight the objectors.

There are 432 local authorities in the United Kingdom. Life expectancy in Merthyr comes 429th.(7) As a result of the legacy of heavy industry, smoking and bad diet, it has Wales’s highest rates of chronic obstructive pulmonary disease, strokes and certain heart conditions.(8) All these diseases are exacerbated by air pollution and stress. The pit will be dug into a steep hillside overhanging the town.

To put ‘overhanging the town’ into perspective, from the Ffos-y-fran Health Impact Assessment Steering Group:

The houses nearest to the mine are literally across the road.

The remainder of Monbiot’s article is well worth reading.

On discourse, modern and otherwise

Civics, discourse, etc. are obviously my bag. Although I link to it too rarely, Perceval Press seems to have a comment on the same, at the moment. Attending to the homepage, the following series of quotes is on offer:

It would seem from even a cursory reading of world history that there is no new horror under the sun, that we will perhaps always have to contend with destructive impulses in ourselves and others. That does not prevent us from making an effort to change, from working to find a better way. – Viggo Mortensen
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God gave us the earth. We have dominion over the plants, the animals, the trees. God said, ‘Earth is yours. Take it. Rape it! It’s yours. -Ann Coulter
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The first peace, which is the most important, is that which comes from within the souls of men when they realize their relationship, their oneness, with the universe and all its powers, and when they realize that at the center of the universe dwells Wakan-Tanka, and that this center is really everywhere, it is within each of us. This is the real peace, and the others are but reflections of this. The second peace is that which is made between two individuals, and the third is that which is made between two nations. But above all you should understand that there can never be peace between nations until there is first known that true peace which is within the souls of men. -Black Elk
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…a cruise missile is more important than Head Start. -Ann Coulter
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Everybody today seems to be in such a terrible rush, anxious for greater developments and greater riches and so on, so that children have very little time for their parents. Parents have very little time for each other, and in the home begins the disruption of peace of the world. -Mother Teresa
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We should invade their countries, kill their leaders and convert them to Christianity. -Ann Coulter
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A child understands fear, and the hurt and hate it brings. -Epictetus
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You can’t just let nature run wild!” -Alaska Governor defending wolf hunting

You have to respect a dose of Epictetus. Or Ann Coulter. Opinions differ (some people, as I understand it, even find her an appealing person).

The shocking extent of England’s binge-drinking culture

In honour of the Pogues, and from today’s Guardian Observer:

Previously unpublished NHS data obtained by The Observer reveals that the number of people who had to be taken to hospital over the past five years has risen sharply in every region of the country.

…

The number of men admitted nationwide has risen from 714 per 100,000 in 2001-02 to 909 per 100,000 in 2005-06, a rise of 27.3 per cent, while, over the same period, the number of women has gone up from 396 per 100,000 to 510 per 100,000, a jump of 28.9 per cent.

The north-east has the worst problems. It had the highest number of admissions per 100,000 population for both men and women, with 1,232 per 100,000 for men and 689 per 100,000 for women. That equates to about 15,700 men and 8,800 women.

The north-west was close behind, with 1,215 admissions per 100,000 men and 674 per 100,000 among women (about 41,600 men and 23,100 women).

So much for the new licensing laws – who would have thought a system could possibly turn out worse than punters bingeing before time was called, only to hit the streets absolutely drenched in the stuff? Well, me, actually – and many other people at the time. Brits aren’t alcoholics, don’t get me wrong. The Brits who are, the ones who seriously drink, well, seriously drink.

I wonder if any statistics are being gathered on the amount of rubbish being left lying around from drunken wanders eating half their pizza or kebabs before dropping it all or just tossing it aside (York on a Saturday night was not pleasant. Although the sight of half-naked Northern Lasses in the freezing cold was always entertaining).

This also is doing little for the North-South divide in England.

The figures reveal that a north-south divide is emerging in England’s drinking culture. Nine of the 10 areas with the highest rates of emergency admissions are in the north, with Liverpool, Manchester and Middlesbrough in the top five for both men and women.

Most of the regions with the fewest emergency admissions are in the south, including Wokingham in Berkshire and Lewisham in south London.

Which is not at all surprising. Heavy drinking has always been thus – it stands to reason that any worsening of it would follow a similar pattern.

I look forward to the figures from the HES data being released properly on Tuesday. I look forward to some cost estimates for hospitals, too (binge drinking costs the NHS a hell of a lot of money).

While we’re on the NHS, here’s another book that is well worth your time:

Blood, Sweat and Tea: Real Life Adventures in an Inner-city Ambulance

Have you ever wondered what’s going on inside that ambulance you see screaming past with its sirens on and blue lights flashing? Does it contain a heart attack victim fighting for their life, while trained medical professionals administer emergency treatment? Or have you considered that it might be yet another ‘maternataxi’ ordered by a woman who can’t be bothered to book a real cab and who then complains she can’t smoke on the way to hospital?

Meet Tom Reynolds. Tom is an Emergency Medical Technician who works for the London Ambulance Service in East London. He has kept a diary of his daily working life since 2003, first as a website called ‘Random Acts of Reality’ and now for the first time as a no-punches-pulled book. His award-winning writing is, by turn, moving, cynical, funny, heart-rending and compassionate. From the tragic to the hilarious, from the heartwarming to the terrifying, the stories Tom tells give a fascinating – and at times alarming – picture of life in inner-city Britain, and the people who are paid to mop up after it.

Picture from Wikipedia.

Tom Reynolds’ blog is called Random Acts of Reality (trying to kill as few people as possible). Basically it’s the life and times of a London NHS Ambulance driver, and it is pretty fascinating. The book is excellent.