June 18, 2012 7:21 pm
Throwing more money at the banks - The Guardian
Larry Elliot (Comment, 18 June) misses the major problem that caused both this crisis and the Great Depression – an excessive and unsustainable rise in private sector debt as a result of excessive growth in commercial bank lending. This resulted in an asset price bubble that has burst and is being followed by necessary attempts by the private sector to increase their savings to pay off their debts. This has lead to contraction of the money supply and collapse of demand.
The real crisis is the failure to understand this core of the problem, and that the solution, as with the Great Depression, is to reverse the contraction in the money supply and collapse in demand through deficit spending supported by central banks. Only by running public sector deficits can demand be restored and private debt levels decreased. Misguided attempts to cut deficit spending while the private sector is trying to reduce their debts are doomed. The problem cannot be solved by improving competitiveness and thus increasing exports. We cannot all increase our exports and decrease our imports simultaneously. Attempts to do so will simply encourage protectionism.
Professor Anton van der Merwe
Sir William Dunn School of Pathology, University of Oxford
• Only the bankers of the money-markets and the wealthy benefit from this austerity. Let's remember that money in the form of paper or credit is only a way to harness the energies and skills of a people by paying it as wages or salaries to provide the goods and services a nation needs – food, clothing, housing and the staffing of factories, schools, hospitals and so on - a sort of lubricant for society to enable it to function. To take away much of it will make things to grind to a halt, needlessly and pointlessly.
The bankers gambled away vast amounts of the nations' money supply without any apparent benefit to the economies of Europe and America; governments should replace this lost treasure by printing money or providing credit and distributing it directly, via small businesses and government projects, to workers as wages and salaries, without giving it to the banks, which so far have only sat on whatever has been provided or reluctantly parted with it at high interest rates. Printing and distributing money like this would no doubt evoke cries of "inflation" from economists and politicians (who know nothing and have learned nothing) – but so what? There has always been some inflation in capitalist societies – look at the price of bread or of housing over the past 50 years. The money held by banks and the wealthy may then lose some of its buying power, but it would be fair to let them suffer a bit of austerity instead of passing it on to the workers. But the eurozone's bankers have a stranglehold on governments and are unlikely to let them do anything to help the people out of this austerity trap – even if right-wing governments wanted to – if they might lose the chance of making a fat profit.
Tony Cheney
Ipswich, Suffolk
• Does anyone else think the proposed £80bn to be given to British banks on the alleged condition they "pass it on to businesses and households in the form of cheaper loans and mortgages" is simply another government bail-out for a failed and failing banking system? This seems to be another £80bn to throw down the black hole where the other £800bn went at a time when people get jittery at Spain for requesting £100bn. If the government was serious about helping smaller businesses, surely a grant system would make better sense that throwing more money at banks where it, if past history is any indication, will merely be used for bonuses or to benefit shareholders.
Nathan Wild
Beverley, East Riding of Yorkshire
• Why is the government lending the banks more money at a special low rate so that the banks can lend it at a higher rate to the business sector to stimulate growth and thus make extra profit? Why not cut out the middleman and have the government lend it directly to those who want help? I recently heard Professor Steve Keen explaining the weakness of the whole system or, as he put it, the whole ponzi banking system.
David Walters
Oakamoor, Staffordshire
The results of the Federation of Small Business's latest Voice of Small Business Index are not altogether surprising (Squeeze on small firms tightens, 18 June). SMEs want to grow and banks say they want to lend, yet credit still appears to be unavailable. This is not entirely the fault of the banks. They are increasingly constrained by stringent regulation and the effects of the eurozone crisis as well as a depressed demand for any type of finance, caused by negative reports that it is unavailable. The government's conflicting messages of "batten down the hatches" and "invest to boost business growth" are simply incompatible, and SMEs are rendered immobile, not sure where to turn.
Our own statistics show that almost one-third of SMEs have no plans to invest in growth this year. This can't go on. Government, banks and businesses need to wake up to the idea that the traditional bank lending of the past is no longer the only option for business finance. There are other established alternatives such as invoice and asset based finance as well as private equity and business angels. The sooner they stop focusing on quick-fix credit, the sooner SMEs will be able to grasp other opportunities for funding and growth, boosting their own businesses and the wider UK economy.•
Peter Ewen
Managing director, ABN AMRO Commercial Finance
• There is little reason to believe that merely injecting money into the banks will do much to shake the grip of the recession. So far the most notable investment made by the effectively state-owned Royal Bank of Scotland was to finance Kraft's heavily leveraged takeover of Cadbury's. Predictably the deal resulted in both direct and indirect job losses as labour was shaken out to pay for it. At one stroke tax-payers became social security claimants with no perceptible benefit to the real economy of the UK, and British taxpayers, including those rendered unemployed, financed it. There is a sublime lunacy in this misuse of resources and we are about to see more of the same.
Is it so unthinkable that RBS could be turned into the first British state investment bank and the funds injected used to create useful enterprises creating stable employment, stimulating the wider economy and generating tax revenue? Europe is faced with a crisis on a scale rapidly approaching the second world war. The national response to that was the effective mobilisation of capital and labour, highly progressive taxation and an enormous and ultimately transforming economic and social effort. Much of that effort was directed towards the destructive power of the state and resulted in massive losses of life. Could we not devote a similar effort to creation and life enhancement
Phil Turner
Malvern, Worcestershire
Horizon Technology Finance Set to Join Russell 3000 Index - msnbc.com
FARMINGTON, Conn., June 18, 2012 (GLOBE NEWSWIRE) -- Horizon Technology Finance Corporation (Nasdaq:HRZN) (the "Company" or "Horizon"), a leading specialty finance company that provides secured loans to venture capital and private equity backed development-stage companies in the technology, life science, healthcare information and services, and clean-tech industries, today announced that it is set to join the broad-market Russell 3000(R) Index when Russell Investments reconstitutes its comprehensive set of U.S. and global equity indexes on June 25, 2012. Based on its membership in the Russell 3000 Index, which remains in place for one year, Horizon will also automatically be included in the widely followed Russell 2000(R) Index for U.S. small-cap stocks.
Annual reconstitution of Russell's U.S. indexes captures the 4,000 largest U.S. stocks as of the end of May, ranking them by total market capitalization. The Russell indexes are widely used by investment managers and institutional investors for index funds and as benchmarks for both passive and active investment strategies. In the institutional marketplace, an industry-leading $3.9 trillion in assets currently are benchmarked to the Russell indexes.
Robert D. Pomeroy, Jr., Chairman and Chief Executive Officer of Horizon, said, "We are excited to join the Russell family of indexes, significantly increasing Horizon's visibility in the investment community. Our membership represents an important milestone for Horizon that reflects the considerable success we have achieved in the execution of our investment strategy. As we maintain our focus on taking advantage of high-quality investment opportunities and generating attractive risk-adjusted returns, our inclusion in these key investment benchmarks will help further expand our Company's shareholder base."
The Russell 3000 also serves as the U.S. component to the Russell Global Index, which Russell launched in 2007. Total returns data for the Russell 3000 and other Russell Indexes is available at http://www.russell.com/indexes/data/US_Equity/Russell_US_Index_returns.asp .
About Horizon Technology Finance
Horizon Technology Finance Corporation is a business development company that provides secured loans to development-stage companies backed by established venture capital and private equity firms within the technology, life science, healthcare information and services, and clean-tech industries. The investment objective of Horizon Technology Finance is to maximize total risk-adjusted returns by generating current income from a portfolio of directly originated secured loans as well as capital appreciation from warrants to purchase the equity of portfolio companies. Headquartered in Farmington, Connecticut, with a regional office in Walnut Creek, California, the Company is externally managed by its investment advisor, Horizon Technology Finance Management LLC. Horizon's common stock trades on the NASDAQ Global Select Market under the ticker symbol "HRZN." In addition, the Company's 7.375% Senior Notes due 2019 trade on the New York Stock Exchange under the ticker symbol "HTF." To learn more, please visit www.horizontechnologyfinancecorp.com .
About Russell
Russell Investments ("Russell") is a global asset manager and one of only a few firms that offers actively managed, multi-asset portfolios and services that include advice, investments and implementation. Working with institutional investors, financial advisors and individuals, Russell's core capabilities extend across capital markets insights, manager research, Indexes, portfolio implementation and portfolio construction.
Russell has approximately $155 billion in assets under management (as of 3/31/2012) and works with 2,400 institutional clients, more than 580 independent distribution partners and advisors, and individual investors globally. Founded in 1936, Russell is a subsidiary of The Northwestern Mutual Life Insurance Company.
Forward-Looking Statements
Statements included herein may constitute "forward-looking statements," which relate to future events or our future performance or financial condition. These statements are not guarantees of future performance, condition or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in our filings with the Securities and Exchange Commission. The Company undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release.
CONTACT: Horizon Technology Finance Corporation Christopher M. Mathieu Chief Financial Officer (860) 676-8653 chris@horizontechfinance.com Investor Relations and Media Contacts: The IGB Group Leon Berman / Michael Cimini (212) 477-8438 / (212) 477-8261 lberman@igbir.com / mcimini@igbir.com
© Copyright 2012, GlobeNewswire, Inc. All Rights Reserved
MONEY MARKETS-Spanish bond shortage distorts repo - Reuters UK
* Spanish bond shortage distorts repo market
* Italian rates rise but market still functioning
* Interbank cash rates fall on rate cut expectations
By Kirsten Donovan
LONDON, June 18 (Reuters) - A lack of available Spanish government bonds, due to so many being used to obtain funding at the European Central Bank, is distorting pricing in repo markets and causing investors headaches as they seek to cover hefty short positions.
As international investors sold Spanish government bonds this year, domestic banks bought them and parked them at the ECB in return for funds - particularly during the two recent three-year funding operations.
As a result, investors who need the bonds because of their own short positions must pay a premium for the paper.
When this happens in repo markets - where banks commonly use government bonds as collateral to raise funding - bonds are said to be trading "special".
Effectively, the investor who needs the bonds pays a premium to their counterparty in the trade - the opposite of a typical repo trade where the party borrowing cash pays the premium.
"There's some good evidence of a collateral shortage out there," said ICAP rate strategist Chris Clark. "Quite a lot may be being used at the ECB and the market short (positions) out there will be increasing the demand for specific bonds."
It is the opposite of what might be expected when a country's debt comes under pressure. Then counterparties are usually more reluctant to be left holding the bonds.
"The collateral just isn't there. That's one of the problems and the few bonds that are still available are highly sought after by people who want to cover their short positions," said Commerzbank rate strategist Benjamin Schroeder.
Ten-year Spanish government bond yields have risen more than 130 basis points since the start of May, while two-year yields are up over 2 percentage points.
That prompted international clearing house LCH.Clearnet SA to increase the cost of using Spanish bonds to raise funds via its repo service last month. Analysts said their trading desks had since seen volumes over the platform drop.
"It's a further segregation of European money markets, where banks are retreating from central clearing houses and going back to domestic clearing or bilateral agreements," Schroeder said.
As the euro zone debt crisis intensified this month, mainly due to worries about Spain's banking sector, Italian general collateral (GC) repo rates, paid to borrow funds against a basket of government bonds, have been pushed higher.
There is little trade in the Spanish general collateral market but banks are still able to borrow using Italian bonds as collateral, despite Italy being seen as vulnerable to contagion from worries about Spain.
Three-month Italian GC rates rose to 0.42 percent at the end of last week, compared to the Eonia overnight rate at around 30 basis points, according to ICAP. The Italian rate had traded below Eonia from the time of the ECB's second three-year funding operation at the end of February until the end of May.
"There's been a rise in Italian general collateral rates, both outright and relative to the Eonia OIS curve," ICAP's Clark said. "Despite a reduction in the amount of term activity that goes on, the Italian market is still very much functional."
RATE SPECULATION
Three-month Euribor interbank lending rates eased again, hitting their lowest since the second quarter of 2010 as speculation grew the ECB may cut interest rates.
ECB president Mario Draghi heightened expectations the bank could cut interest rates or take further policy action soon after saying on Friday that the euro zone economy faced serious risks and no inflation threat.
September and December Euribor futures contracts rallied to contract highs, pushing implied rates lower.
Markets are pricing in a 50 percent chance of a 12.5 basis point cut in the ECB's 0.25 percent deposit rate this year, and a 25 percent of the rate being cut to zero, according to RBS.
German finance minister welcomes Greek conservatives' win as decision to push on with reform - Greenfield Daily Reporter
BERLIN — Germany's finance minister greeted the conservative New Democracy party's projected win in Greek elections Sunday as a decision to "forge ahead" with implementing far-reaching reforms. Germany's foreign minister said it's important for Greece to stick to its agreements with creditors, but held out the prospect that Athens might be given more time to comply with them.
New Democracy party beat the radical-left Syriza party into second place on Sunday and immediately proposed forming a pro-euro coalition government — a development that eased, at least briefly, fears that the vote would unleash economic chaos.
Germany — Europe's biggest economy — has been a major contributor to Greece's 2 multibillion-euro rescue packages and a key advocate of demanding tough, and highly unpopular, austerity and reform measures in exchange.
If New Democracy's win is confirmed, Germany "would consider such a result a decision by Greek voters to forge ahead with the implementation of far-reaching economic and fiscal reforms in the country," German Finance Minister Wolfgang Schaeuble said in a statement.
The austerity and reform program aims only "to put the country back on the path of economic prosperity and stability," he added. "This path will be neither short nor easy but is necessary and will give the Greek people the prospect of a better future."
"In order to succeed, the program requires political stability," Schaeuble said.
Foreign Minister Guido Westerwelle told ARD television earlier Sunday, shortly after exit polls showed a neck-and-neck race, that "we want Greece to stay in the euro; we want Greece to continue wanting to belong to Europe." But he stressed that it was for Greece to decide on its future path, and said that "you cannot stop anyone who wants to go."
Westerwelle said it was important for Greece to form a pro-European government that sticks to the agreements with creditors.
Debt inspectors from the EU, the European Central Bank and the IMF who are managing the Greek bailout regularly check progress in implementing its conditions to determine whether Greece can secure further aid payouts. Westerwelle insisted that the substance of the bailout agreements must remain unchanged, but signaled some flexibility on deadlines.
"There cannot be substantial changes to the agreements, but I can well imagine talking again about timelines, against the background of the fact that, in reality, there was a political standstill in Greece over recent weeks because of the elections," he said. "But there is no way past the reforms — Greece must stand by what has been agreed."
Masters in Finance: Edhec and Guanghua in pre-experience rankings - Financial Times
The demand for highly qualified finance professionals is increasing. As companies seek to navigate the worst of the economic storm, sound knowledge of financial tools and strong analytical skills are essential requirements.
This year sees the second Financial Time Masters in Finance rankings, compiled using the data from business schools and from a survey of their alumni who graduated three years ago.
The rankings include 35 pre-experience programmes for those with little or no experience, and four post-experience programmes for professionals who wish to develop their skills further.
In the pre-experience ranking, 31 schools are located in Europe with the majority of these in the UK (11) or France (seven). Three schools from the US and one from China complete the rankings.
The post-experience ranking is made up of one school based in the UK, and three for the US.
As in 2011, HEC Paris and London Business School top the rankings for pre-experience programmes and post-experience programmes respectively. HEC Paris was ranked first for value-for-money and placement success. It features among the top five places in three other criteria. London Business School tops the ranking for value-for-money, international mobility and international course.
A number of entrants feature in both rankings, notably, Edhec Business School in France and the Guanghua School of Management at Peking University enter the pre-experience ranking for the first time in sixth and eighth position respectively.
George Washington University and the Chapman Graduate School of Business at Florida International University make their entry in the post-experience ranking in second and fourth place respectively.
IE Business School in Spain is ranked second in the pre-experience ranking, the same place as in 2011. It is ranked first for career progress. On the other hand, only 9 per cent of its students are women, the lowest percentage in the ranking.
IE shares the second place with Essec Business School from France, which gained one place from the 2011 ranking.
Brandeis University is the highest ranked school from the US, at number 17 in the pre-experience ranking. It comes second for international mobility and sixth for aims achieved. However, with 62 per cent, it has the lowest rate of employment three months after graduation.
Peking University is the only school from China that features. It is ranked third for value-for-money and placement success and has a 100 per cent employment rate three months after graduation. However, it has the lowest international diversity rate for faculty and students.
Based on purchasing power parity rates used to convert all salaries into US dollars, students from Peking University also commanded the highest average annual salary at $96,800 three years after graduation, narrowly relegating the students from HEC Paris to the second highest.
The student survey showed that more than 95 per cent of its graduates work in finance in China.
Some 1,200 students who attended programmes at the 35 schools in the pre-experience ranking completed the FT survey.
The results provide useful insights on the profile of the average student: he is male and either French or Chinese.
When starting the course, he is 24 years old and has been working in finance for a year, most likely in accounting or investment banking, mergers and acquisitions as a graduate trainee with a salary of about €20,000.
Three years after graduation, he is likely to work in London in investment banking, mergers and acquisitions as a junior professional with a salary of £50,000.
Looking beyond averages, the data shows significant differences for students’ mobility. For example, 60 per cent of students in French schools were from France, but only 9 per cent of students in UK schools were British.
And only 9 per cent of overseas students who studied in France remained there in employment compared with 27 per cent of those who studied in the UK.
More than half who studied overseas returned to their home country after graduating and more than 80 per cent of them still work there three years later.
Just over half of students who studied overseas chose the UK and more than 40 per cent of graduates who work overseas are in the UK. This is hardly surprising, considering about 900 foreign-owned groups operate in the UK financial industry, according to a report by IMAS in January 2012.
Nonetheless, only 3 per cent of the students who completed the survey are from the UK. This compares with 13 per cent from both China and France. Cultural differences between these countries may explain this gap.
Students in the UK typically study humanities, whereas in China and France university education emphasises mathematics – the latter being better suited to financial techniques.
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