Global Economic News

Japan To End 'Firewalls' Amid Financial Crisis

Dec. 24 (EIRNS)—Japan will abolish the "firewalls" separating its banks and the rest of its financial system, in a radical market reform to be completed in about two years, the Financial Times and AFP report today. The likelihood of these measures actually going through in the midst of the ongoing crash of the global financial system is in serious doubt.

In this latest step in its "big bang" financial reform, the Japanese Financial Services Agency (FSA) will end the ban on creating a comprehensive financial market for banks, stocks, bonds, and financial and commodity derivatives, the FSA announced on Dec. 21. The FSA plan is "to strengthen the competitiveness of financial and capital markets" with deregulation and liberalization, the agency announced. This is the biggest financial reform in Japan since deregulation began in 1996, and includes some 60 new deregulation measures. Tokyo rated only tenth in the world in competitiveness as a financial center by the Financial Times, below Frankfurt and Sydney. Kyodo wire service quoted Financial Services Minister Yoshimi Watanabe as saying: "I hope to implement the plan as soon as possible so that the competitiveness of Japanese markets will revive."

The "firewalls" separating banking and securities companies will be lowered, to let banking, securities, and other financial services cut legal barriers among these institutions. The Finance Ministry will also completely exempt offshore funds from any Japanese taxes, while allowing more deregulation of what can be traded on Japanese markets.

Bail Out Merrill Lynch? But, It's Already Dead!

Dec. 25 (EIRNS)—The latest lunacy of sovereign funds purportedly bailing out already drowned banks and investment firms, was puffed with yesterday's sale by Merrill Lynch, the nation's largest brokerage, of a $5 billion stake to Temasek Holdings, a sovereign fund run by the Singapore Finance Ministry. As the New York Times notes, Merrill is getting smashed with mortgage-related losses, and is expected to "write down its mortgage investments by an additional $8 billion or more in the fourth quarter." So, yesterday, it not only sold stock at a "discount" to Temasek to get $5 billion in cash, but also agreed to sell an additional $1.2 billion in discounted stock to Davis Selected Advisers, and likewise signed a deal to sell most of its commercial finance business to the General Electric Company, to raise an additional $1.3 billion. Grand total: $7.5 billion.

Other recent sovereign fund mega-deals include:

* UBS: got $11.5 billion on Dec. 10 from the Government of Singapore, and an unnamed Middle East investor.

* Citigroup: got $7.5 billion on Nov. 26 from the Abu Dhabi Investment Authority.

* Morgan Stanley: got $5 billion on Dec. 19 from the China Investment Corporation.

* Bear Stearns: got $1 billion on Oct. 22 from Citic Securities.