US inches closer to financial reform
By Tom Braithwaite in Washington
Copyright The Financial Times Limited 2010
Published: June 24 2010 00:57 | Last updated: June 24 2010 00:57
http://www.ft.com/cms/s/0/bc9dcc46-7f1e-11df-84a3-00144feabdc0.html
Congress edged closer to a landmark financial reform on Wednesday as Democrats patched up differences over restrictions on bank investments in hedge funds and private equity firms.
The battle between lawmakers urging moderation for Wall Street and those demanding punishing terms for banks came to a head in private meetings, producing a compromise that should see the language agreed late on Thursday and sent to the White House next week.
People involved with the talks said banks would be allowed to invest up to 3 per cent of their capital in hedge funds and private equity firms alongside clients – a significant concession to Wall Street and a compromise to the so-called Volcker rule, which is designed to stop deposit-taking banks from investing in risky activities.
Scott Brown, the freshman Republican senator from Massachusetts, whose vote is crucial to getting the reform through a final vote in the Senate next week, had pushed for the change, which met resistance from Carl Levin, a Democratic senator from Michigan, and Paul Volcker, the former Federal Reserve chairman.
A proposed rule to force banks to spin off their swaps desk into separately capitalised affiliates is set to stay in spite of opposition from New York-based Democrats, although there will be a phase-in period and exceptions for banks hedging their own risk.
Chris Dodd, Senate banking committee chairman, said he was “trying to find that sweet spot that people can agree with” that would fall in between clamping down on riskier activities by banks and allowing some such activities to remain.
He dismissed concerns from Spencer Bachus, senior Republican on the House financial services committee, that the Volcker rule amounted to “unilateral disarmament”, with US banks facing restrictions while overseas institutions continued to be allowed to trade for their own account.
“I think a good part of the world is looking to see exactly what we’re doing in this area,” said Mr Dodd. “I wouldn’t draw the conclusion that the rest of the world is going to move in a different direction – particularly Europe.”
Meanwhile, the conference committee charged with finalising legislation has quietly agreed on a mechanism to allow regulators to wind down a failing financial institution and create new systemic risk regulation.
Gillard replaces Rudd as Australian PM
By Elizabeth Fry in Sydney
Copyright The Financial Times Limited 2010
Published: June 24 2010 09:46 | Last updated: June 24 2010 09:46
http://www.ft.com/cms/s/0/e3291436-7f6b-11df-9973-00144feabdc0.html
Australia has its first female prime minister after Julia Gillard toppled Kevin Rudd in a stunning leadership challenge early on Thursday morning.
Ms Gillard, 48, ousted Mr Rudd as leader of the ruling centre-left Labor party after a late-night push on Wednesday to dump the prime minister by his party’s factional bosses, who represent the interests both of union power brokers and different state-based groupings.
While Mr Rudd lost political support over a number of policies, he was fatally damaged by the backlash from mining companies over the government’s decision to impose a so-called superprofits tax on the resources sector.
The leadership challenge emerged on Wednesday evening when Ms Gillard told Mr Rudd that she would challenge his leadership. The initially defiant Mr Rudd planned to fight on by contesting a leadership poll of the parliamentary party.
However, on Thursday morning, lacking credibility and party support, he stood down as prime minister to avoid the ballot.
The Welsh-born Ms Gillard was duly elected unopposed and Wayne Swan, the Australian treasurer, was elected her deputy.
Ms Gillard indicated a speedy reshaping of the contentious resources tax by stressing the need for certainty. She vowed to jettison the government’s pro-resource tax advertisements and asked that the mining industry abandon its anti-tax advertising campaign.
“I am not going to talk parameters [of the tax] but the door is open and I’m asking the mining industry to open its mind.”
Global miner BHP Billiton said it was encouraged by Ms Gillard’s comments and would suspend its anti-resources tax advertisements immediately. The company said it looked forward to working with the government to find a solution.
A well-funded campaign against the tax, led by some of the country’s richest people in tandem with mining companies such as BHP Billiton and Rio Tinto, had seen Labor support plummet in resource-rich states such as Queensland and Western Australia.
Shedding tears in his farewell address, Mr Rudd declared that he had “given it my all”. The Chinese-speaking former career diplomat now has the distinction of being the first Australian prime minister to be kicked out by his party within a first term.
The fall from grace is staggering given that Mr Rudd was one of Australia’s most popular prime ministers in his first two years in power after his election in 2007, which ended 11 years of centre-right rule.
However, his autocratic leadership style, his retreat over climate change policy – which he called the “greatest moral challenge of our time” – and policy mishaps with refugees caused a collapse in voter support. Towards the end of his tenure, voters came to view Mr Rudd as all spin and no substance.
While Ms Gillard is regarded as a more consultative leader, she is locked into the policy decisions the government has already made, limiting her ability to distance herself from them. With a general election expected within months, she is facing a huge task.
Asked on Thursday at a press conference to explain how Labor policy would change under her leadership, Ms Gillard – a lawyer who has long been in politics – emphasised the importance of consultation. She also took some responsibility for the Rudd government’s record, including his mistakes.
Ms Gillard said she had asked her colleagues to make a leadership change because she “believed that a good government was losing its way”.
“I know the Rudd government did not do all it said it would do and at times it went off track,” said Ms Gillard.
Turning to Labor’s failed attempt to introduce an emissions trading scheme, Ms Gillard said she was disappointed that Australia had not managed to create a price for carbon.
“In the future we will need one ... but first we will need to establish a community consensus for action,” said Ms Gillard. “If elected as prime minister (at the next election), I will reprosecute the case for a carbon price at home and abroad.”
Facebook targets China and Russia
By Tim Bradshaw in Cannes and David Gelles in San Francisco
Copyright The Financial Times Limited 2010
Published: June 23 2010 14:36 | Last updated: June 24 2010 01:11
http://www.ft.com/cms/s/2/35b709ae-7ec4-11df-ac9b-00144feabdc0.html
Facebook is looking to China, Russia and Japan for its next phase of expansion as its overall growth has begun to taper.
Mark Zuckerberg, founder and chief executive of the world’s largest social network, said that with almost 500m members, Facebook was finding it impossible to maintain its breakneck growth.
“We saw our exponential growth rate continue for a very long period of time, and it still does at a super-linear rate, though not quite 3 per cent a week any more,” Mr Zuckerberg said in an interview with the Inside Facebook blog.
Mr Zuckerberg told an audience of marketers at the Cannes Lions advertising festival on Wednesday that after relying largely on organic growth, Facebook would soon begin to make its first strategic local moves.
“We are down to four countries that we are not the leading social network in,” he said, naming Japan, Russia, China and South Korea.
“Now for the first time we are focused on doing some specific things in specific countries.”
He did not specify whether that would involve local customisation of Facebook in those countries, or some sort of corporate activity.
“I think if we succeed, we have a good chance of being the company that brings [social networking] to 1bn people,” he said during an onstage interview.
Facebook faces large, established competitors, including Japan’s Mixi, Tencent QQ in China and Vkontakte of Russia.
In other markets, Facebook’s user base far outstrips past leaders in social media such as Bebo and MySpace.
Non-English languages, in particular French, Spanish, Turkish and Indonesian, are growing quickly on Facebook, according to the Inside Network.
Facebook had been used in broadly the same way all over the world, Mr Zuckerberg said at Cannes, reflecting the “core need” at the heart of the service for people to share things and be part of a community.
“That is really similar across every country,” he said, although advertising and applications developed for the platform were more varied.
Mobile internet would be a driver of growth in social media, Mr Zuckerberg said.
“We are getting our first crop of countries now that have more mobile usage than web usage,” he said, citing India. “I think most people think it’s only a matter of time before that starts happening more universally.”
China’s AgBank eyes $13bn HK listing
By Robert Cookson in Hong Kong
Copyright The Financial Times Limited 2010
Published: June 23 2010 19:12 | Last updated: June 23 2010 19:12
http://www.ft.com/cms/s/0/d58232e0-7eee-11df-8398-00144feabdc0.html
Agricultural Bank of China on Wednesday night took a step closer to launching the world’s biggest initial public offering when it set a price range for the shares it plans to sell to international investors in Hong Kong.
Agricultural Bank, the last of China’s big lenders to go public, plans to sell 25.4bn shares in Hong Kong for HK$2.88-HK$3.48 each. The offering could raise as much as $13bn but only if the shares sell at the top of the range and underwriters on the deal trigger a “greenshoe” option to increase the size of the offering by 15 per cent.
The bank had not decided on Wednesday night on a price range for the 22.2bn shares it plans to sell in Shanghai, although Chinese media were reporting that the range would be Rmb2.60-Rmb2.70. At that price, Agricultural Bank’s dual listing could raise as much as $23bn, exceeding the record $21.9bn that Industrial and Commercial Bank of China raised in 2006.
However, analysts say that Agricultural Bank, considered to be the weakest of the country’s big lenders, might have to settle for a price towards the lower end of the range.
The price range set for the Hong Kong portion of the IPO would give the shares an estimated 2010 price-to-book value, a widely watched metric of bank valuations, of 1.55 to 1.79, lower than many of the bank’s Hong Kong-listed peers.
The Chinese lender had hoped to raise as much as $30bn in the IPO but expectations have sagged in recent weeks as global markets have weakened. The Shanghai stock market has fallen about 20 per cent since mid-April on worries about the economy and concern that a flood of bank fund-raisings will hit the market simultaneously.
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