From Volume 7, Issue 8 of EIR Online, Published Feb. 19, 2008

Global Economic News

UBS: Banks May Have To Write Off Another $203 Billion!

Feb. 16 (EIRNS)—The world's top banks may have to write off as much as $203 billion in new losses, on top of the $152 billion in writedowns already taken, Swiss banking giant UBS said in an analyst's report. UBS said the banks may have to write off as much as another $120 billion on their collateralized debt obligations (CDO) holdings, an additional $50 billion for losses in structured investment vehicles (SIVs), $18 billion for mortgage-related securities, and $15 billion for leveraged buyout (LBO) loans. "Risks are increasing and spreading and the liquidity situation is still far away from normal," the report said.

On Feb. 14, UBS revealed that it had an additional $26.6 billion exposure to American mortgages, on top of the $27.6 billion it had already admitted, plus a $2.9 billion exposure to monoline insurers. The bank took a $13.7 billion writedown in the final quarter of 2007, after a $4.4 billion writedown in the third quarter, giving it a net loss of $4 billion for the year.

Warning to Japanese Against Privatizing Tokyo Airport

Feb. 15 (EIRNS)—Under pressure to privatize Japan's airports and to encourage foreign investment to Japan, the Japanese Transport Ministry is planning to hand over part ownership of the Narita Airport of Tokyo. At the same time, the head of the International Air Transport Association (IATA) urged Japan on Feb. 14 to avoid repeating the same mistakes as in past airport privatizations, such as the "disaster" at London's Heathrow. Heathrow is now maintained by Spain's Group Ferrovial, the mother company of Cintra, a subsidiary that owns the Chicago Sky Way, among other U.S. infrastructure. "We have seen too many privatizations fail because governments sold the 'crown jewels' without appropriate guidance to the new owners," IATA director general Giovanni Bisignani said during a speech in Tokyo. "Look around Heathrow. Failed regulation allowed for a 42% profit margin. The new Spanish owner is happy, but Londoners suffer with terminal facilities politely described as a national embarrassment," he said.

Heathrow, along with Gatwick and Stansted airports, were put under control of Group Ferrovial by the British government under Prime Minister Tony Blair in 2006. Japan's Transport Ministry has drawn up the bill to limit foreign ownership of airports, after it emerged that Australia's Macquarie Airports Management Ltd. now owns nearly 20% of the operator of buildings at Tokyo's Haneda Airport.

New Funds Seek To Grab Mussolini Infrastructure Projects

Feb. 15 (EIRNS)—The meltdown of the financial system is sending speculators scrambling to get in on the privatization of government infrastructure, with 72 new funds established over the past 15 months; these funds intend to raise some $120 billion for infrastructure buyouts. In 2007, some $30 billion was raised internationally by 19 firms for infrastructure buyouts.

The people behind these funds expect to grab a portion of the income streams from privatized infrastructure projects as a way to survive in the post-bubble world, and are supporting the "Rebuilding America's Future" coalition fronted by California Gov. Arnold Schwarzenegger and New York Mayor Michael Bloomberg, whose undeclared Presidential campaign is intended to promote Mussolini-style corporatism in the United States.

The leading players worldwide are the Anglo-Australian Macquarie Infrastructure Group, interlinked with the Spain-based Cintra/Ferrovial, Cheney's Halliburton, France's Suez, plus Goldman Sachs, Morgan Stanley, Lehman Bros., and a few others. Their choice takeovers to date include highways and airports, but also long-term rights to school system properties, municipal cleaning services, and other government functions, especially military. A few examples, besides highways:

Schools. In 2006, a 30-year private initiative contract was awarded to a consortium involving Ferrovial, for £400 billion, to build, refurbish, maintain, and operate all the schools in Bradford, England.

Airports. Among those privatized in part or whole by Ferrovial, are Heathrow in London; Sydney, Australia; Belfast, Northern Ireland; and Niagara Falls, New York.

France: New Law Proposed for Infrastructure Takeovers

PARIS, Feb. 15 (EIRNS)—French Economics and Finance Minister Christine Lagarde on Feb. 14 presented a draft of a new law to extend the development of corporatist public-private-partnerships (PPPs). Under the draconian "no-spending" conditions of the Maastricht agreement and the Stability Pact, France has already turned to private capital to finance such basic infrastructure as energy and sports facilities. New targets for PPPs are transportation and prisons. Ten billion euros of PPP deals have been authorized so far, in projects ranging from airports, to school systems, highways, water treatment, and many basic government functions. Still, France lags far behind Britain, where PPPs represent 15% of all public services.

Lagarde's proposal intends to simplify procedures and lower the prohibitive taxes which have so far restrained PPPs in France. Until now, in order to get approval for a PPP deal, local and state authorities had to prove they were facing an "emergency" situation or extremely "complex" conditions. Lagarde's new proposal adds the criterion of "higher efficiency" to make PPPs easier, to the delight of the bankers.

With the economy collapsing, emergencies pop up everywhere, and "emergency" PPPs are in the works for education, research, security, defense, health, and transport infrastructure.

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