When he was in power, he was unreasonable and arrogant and considered citizens' rights and the law to be nothing

Rejection of Bo Xilai's Appeal Concludes Chinese Drama. By Jeremy Page
'This Is the Final Verdict,' Court Says om Widely Expected RulingWall Street Journal, Oct. 25, 2013 9:51 a.m. ET
http://online.wsj.com/news/articles/SB10001424052702304799404579157354280260862



Edited:

Mr. Bo burnished his political reputation there by presiding over a sweeping campaign against organized crime that many lawyers and rights activists say disregarded legal norms and [other things we won't mention in this blog.]

"When he was in power, he was unreasonable and arrogant and considered citizens' rights and the law to be nothing," wrote Zhou Yongkun, a professor at Suzhou University's law school, on his microblog.

"As soon as he became a prisoner, he realized the importance of rights, and that the law was his umbrella. But it was too late."

Liquidity stress testing: a survey of theory, empirics and current industry and supervisory practices

Liquidity stress testing: a survey of theory, empirics and current industry and supervisory practices
BCBS Working Papers No 24

October 2013

http://www.bis.org/publ/bcbs_wp24.htm

Stress-testing is an important tool in developing a complete picture of an institution's liquidity risk profile. What constitutes a good stress test is, however, not universally clear. Practices still differ widely, not only in the supervisory community, but also in the banking industry. The Research Task Force's Workgroup on Liquidity Stress-Testing was mandated to draft a survey on current practices, identify gaps and - where possible - suggest ways forward.

This survey has been written with the broader supervisory community in mind. The Workgroup believes this would include a wide range of functions: for example, micro-prudential line supervisors, staff of supervisory institutions involved with liquidity stress tests, macroprudential regulators and supervisors. Many of the findings are, however, also relevant for risk managers in banks, given their role in measuring their institution's liquidity risk profile and enforcing risk limits. The key messages could also be helpful in future efforts to develop more guidance with regard to liquidity stress-testing.

Hong Kong's Policies of Impoverishment - A poverty line is another step on Hong Kong's road to serfdom

Hong Kong's Policies of Impoverishment. WSJ Editorial
A poverty line is another step on Hong Kong's road to serfdom.WSJ, Oct. 14, 2013 1:02 p.m. ET
http://online.wsj.com/news/articles/SB10001424052702304106704579134973249439240

Hong Kong's decision to create a poverty line puts us in mind of John Cowperthwaite, financial secretary from 1961-71 and one of the chief architects of the territory's free-market system. Sir John famously refused to collect basic economic data on the grounds that statistics only increased the temptation for government to meddle. An arbitrary measure of poverty is a perfect example, since it encourages policies that will undermine the social mobility and economic growth needed to reduce poverty.

Hong Kong's new poverty line was set at one half the median income, which means that 20% of the population is considered poor. The most obvious objection to such a cut-off is that the number of poor will remain relatively stable regardless of their real conditions. If the government gives out money, this will tend to raise the median income and hence the poverty line, necessitating yet more handouts.

Then there's the problem of using income to measure poverty, since many residents, especially the elderly, live on their savings. Those without savings may rely on help from family members. So while poverty is a real problem in Hong Kong that deserves attention, this poverty line is a crude attempt to quantify it.

Nevertheless, many politicians in both the pro-Beijing and pro-democracy camps are eager to expand Hong Kong's small welfare state, and they will no doubt use this new tool to lobby for more benefits. Also, in 2011 a minimum wage came into effect, with the reassurance that it was set low enough to minimize job losses. Now the poverty line is a talking point for raising the minimum wage.

Those in favor of tempering Hong Kong's capitalism with socialist institutions common in the West often argue that they will do less harm since the territory's population has a strong work ethic and the government budget is in surplus. They little consider that these are the results of Sir John's laissez faire framework.

Ironically, the Chinese Communist Party appreciates Hong Kong's capitalist strengths more than local leaders. In the 1990s, after the last British Governor Chris Patten increased social welfare spending 88% in five years, Chinese diplomats warned that "Eurosocialist" policies were like "putting people on a F1 racing car which runs so fast it crashes and kills all its passengers."

Zhou Nan, Beijing's representative in the territory, complained, "The price of the future Special Administrative Region government being forced to live beyond its means would be budgetary imbalance, tax hikes, reduced financial market liquidity which will result in eroded foreign investors' confidence." Sir John couldn't have said it better himself.

Mustafa Alani: "We are learning from our enemies now how to treat the United States."

Our Former Friends the Saudis. WSJ Editorial
So how is that vow to repair America's frayed alliances working out?
Oct. 22, 2013 7:13 p.m. ET
http://online.wsj.com/news/articles/SB10001424052702303902404579151573907253280

President Obama likes to boast that he has repaired U.S. alliances supposedly frayed and battered by the Bush Administration. He should try using that line with our former allies in Saudi Arabia.

As the Journal's Ellen Knickmeyer has reported from Riyadh in recent weeks, the Kingdom is no longer making any secret of its disgust with the Administration's policy drift in the Middle East. Last month, Prince Turki al Faisal, the former Saudi ambassador in Washington, offered his view on the deal Washington struck with Moscow over Syria's chemical weapons.

"The current charade of international control over Bashar's chemical arsenal," the Prince told a London audience, "would be funny if it were not so blatantly perfidious, and designed not only to give Mr. Obama an opportunity to back down, but also to help Assad butcher his people." It's a rare occasion when a Saudi royal has the moral standing to lecture an American President, but this was one of them.

On Monday, Ms. Knickmeyer reported that Saudi intelligence chief Prince Bandar has decided to downgrade ties with the CIA in training Syrian rebels, preferring instead to work with the French and Jordanians. It's a rare day, too, when those two countries make for better security partners than the U.S. But even French Socialists are made of sterner stuff than this Administration.

Bandar's decision means the Saudis will not be inclined to bow any longer to U.S. demands to limit the arms they provide the rebels, including surface-to-air missiles that could potentially be used by terrorists to bring down civilian planes. The Saudis have also told the U.S. they will no longer favor U.S. defense contractors in future arms deals—no minor matter coming from a country that in 2011 bought $33.4 billion of American weapons.

Riyadh's dismay has been building for some time. In the aborted build-up to a U.S. strike on Syria, the Saudis asked the U.S. to beef up its naval presence in the Persian Gulf against a potential Iranian counter-strike, only to be told the U.S. didn't have the ships. In last year's foreign policy debate with Mitt Romney, Mr. Obama was nonchalant about America's shrinking Navy, but this is one of the consequences of our diminishing military footprint: U.S. security guarantees are no longer credible.

Then there is Iran. Even more than Israel, the Saudis have been pressing the Administration to strike Iran's nuclear targets while there's still time. Now Riyadh is realizing that Mr. Obama's diplomacy is a journey with no destination, that there are no real red lines, and that any foreign adversary can call his bluff. Nobody should be surprised if the Saudis conclude they need nukes of their own—probably purchased from Pakistan—as pre-emptive deterrence against the inevitability of a nuclear Tehran.

The Saudis are hardly the first U.S. ally to be burned by an American President more eager to court enemies than reassure friends. The Poles and Czechs found that out when Mr. Obama withdrew ballistic-missile defense sites from their country in 2009 as a way of appeasing the Russians.

The Syrian people have learned the hard way that Mr. Obama does not mean what he says about punishing the use of chemical weapons or supplying moderate rebel factions with promised military equipment. And the Israelis are gradually realizing that their self-advertised "best friend" in the White House will jump into any diplomatic foxhole rather than act in time to stop an Iranian bomb.

Now the Saudis have figured it out, too, and at least they're not afraid to say it publicly. "They [the Americans] are going to be upset—and we can live with that," Saudi security analyst Mustafa Alani told Ms. Knickmeyer last month. "We are learning from our enemies now how to treat the United States."

Arab Countries in Transition - Economic Outlook and Key Challenges - Deauville Partnership Ministerial Meeting

Arab Countries in Transition - Economic Outlook and Key Challenges - Deauville Partnership Ministerial Meeting
IMF Policy Paper, October 10, 2013
http://www.imf.org/external/pp/longres.aspx?id=4818

Summary: In an environment of heightened socio-economic tensions, regional insecurity, and strained public finances, the Arab Countries in Transition (ACTs) 1 face the difficult task of delivering on the expectations for jobs and growth. Despite patchy improvements in some countries, economic growth remains subdued, private investment is weak, and external and fiscal buffers are running low. Fostering social cohesion and avoiding a downward spiral of economic and political malaise calls for urgent implementation of economic reforms and coordinated support from the international community.


Regional economic outlook and key challenges (edited)
In an environment of heightened socio-economic tensions, regional insecurity, and strained public finances, the Arab Countries in Transition (ACTs, Egypt, Jordan, Libya, Morocco, Tunisia, and Yemen) face the difficult task of delivering on the expectations for jobs and growth. Despite patchy improvements in some countries, economic growth remains subdued, private investment is weak, and external and fiscal buffers are running low. Fostering social cohesion and avoiding a downward spiral of economic and political malaise calls for urgent implementation of economic reforms and coordinated support from the international community.

A. Background and recent developments
Three shocks undermine sentiment. The economic situation in the ACTs has become increasingly difficult amid a still weak external environment, rising regional tensions stemming largely from the civil war in Syria, and heightened domestic political uncertainty in many countries, at times accompanied by violence. As a result, private sector sentiment has worsened, private sector activity remains subdued, and private investment, particularly foreign direct investment, has slowed.

Growth is low and unemployment is rising. Average growth (excluding Libya) is expected to inch up to 3 percent in 2013 from 2½ percent in 2012, with the marginal pick-up reflecting a nascent recovery of tourism and exports, increased post-crisis capacity utilization, and a post-drought rebound of agriculture in Morocco. This moderate growth is not generating the jobs needed to stem the rise in the number of unemployed, which has increased by more than 1 million people since early 2010.

Progress with reforms has been uneven, further straining public finances. Budget deficits remain elevated, averaging 9 percent of GDP in 2012(excluding Libya) owing to weak revenue collection and weaker-than-expected fiscal consolidation efforts. In Egypt and Jordan, high levels of public debt (more than 80 percent of GDP) further limit fiscal space. Meanwhile, inflation pressures have begun to ease in most ACTs helped by lower food and energy prices and weak demand. Foreign exchange reserves have stabilized for now, reflecting a gradual narrowing of current account deficits and, notably in Egypt, external financial support. Nevertheless, reserve buffers remain low relative to the underlying vulnerabilities.


B. Short-term outlook
Private investment and growth are anemic. The current challenges faced by the ACTs are likely to persist over the near term. Revitalizing private sector activity will require political stability and strong policy efforts to improve the business climate. This will take time. Meanwhile, we expect only a gradual recovery in 2013–14, with average GDP growth at about 3 percent. Inflation is expected to stabilize in the upper single digits and the current account and fiscal deficits could begin to narrow gradually, but will remain elevated. Consequently, public debt and unemployment in most countries are likely to continue creeping up.

Significant downside risks. Risks to this already sobering outlook are significant, and mostly to the downside. The Syrian crisis, recent domestic political tensions, and incidences of increasing violence have the potential to intensify further and bring growth to a halt. This would have strongly negative consequences for labor markets in the region. First, an increased flow of refugees could overburden budgets of Syria’s neighboring countries, while damaging trade, confidence, and growth in the region more broadly. Equally damaging could be setbacks to the political transitions as well as an escalation of violence in Libya, Tunisia, Egypt, or Iraq, which would further delay economic reforms and deter investment. In some countries, new disruptions to energy supplies (for example, oil production in Libya or Jordan’s gas imports from Egypt) would take a toll on fiscal and external positions. Finally, and with somewhat lower probability, weaker global—notably European—growth could slow recovery of exports and foreign inflows.

Maurice Greenberg: State and federal agencies are hurting shareholders and undermining confidence in the banking system

The Regulatory Attack on J.P. Morgan Feels Familiar. By Maurice Greenberg
State and federal agencies are hurting shareholders and undermining confidence in the banking system.http://online.wsj.com/article/SB10001424052702303464504579109563311240116.
The Wall Street Journal, October 3, 2013, on page A13

A thriving financial-services sector requires a delicate balance of regulation and risk management. Realizing how vital this industry's health is to the economy, regulators and private businesses have spent the past century trying to create a system that ensures stability while encouraging investment. Responsible regulators understand just how difficult this is to accomplish. Others who ignore that reality often keep markets from functioning properly.

Regulators can help minimize risk to the investing public by learning from past regulatory mistakes. But it doesn't appear that they have. Now they're after J.P. Morgan Chase Co., a great American company led by arguably the best chief executive on Wall Street.

I experienced regulatory overreach first-hand at AIG. For nearly four decades, I led a team that included some of the most honorable and competent professionals in the insurance industry. We built the world's largest and most respected insurer, employing more than 90,000 people and opening markets across the world. That made AIG an attractive target for Eliot Spitzer, then New York's attorney general, in 2005.

Displaying an astonishing lack of knowledge of the insurance industry, Mr. Spitzer, by threatening to criminally indict the company, succeeded in separating the industry's most accomplished group of executives from a company that insured virtually every business sector across 130 countries. The replacement management took steps that made AIG vulnerable to the world-wide financial collapse of 2008. That provided a set of federal regulators with the opportunity to seize tens of billions of dollars from AIG's shareholders.

Nearly all of Mr. Spitzer's original allegations of accounting irregularities have been discarded or quietly dismissed by him and his successors. The remaining claims—on which no damages are sought—involve the accounting for reinsurance transactions that were not material to AIG. The real scandal, of course, is the fact that the attorney general brought this lawsuit and continues to prosecute it even today.

History seems to be repeating itself with the case of J.P. Morgan. The global bank is now under siege by federal and state regulators. The most ironic claim against J.P. Morgan is an allegation from current New York Attorney General Eric Schneiderman of mortgage fraud at Bear Stearns that allegedly took place prior to J.P. Morgan's acquisition of that firm. J.P. Morgan acquired Bear Stearns at the urging of federal officials who feared that fallout from Bear's collapse would damage the entire economy.

Like AIG, J.P. Morgan plays a central role in both the U.S. and world economies. There are no more than a handful of executives with the requisite experience, talent and intelligence to lead that bank. Its chief executive, James Dimon, is one of those rare individuals. By diverting his attention from his responsibilities, government officials are hurting shareholders, pension funds, countless employees, the City of New York, and the national and global economy—not to mention undermining confidence in our banking system.

Those regulators have pushed their dubious claims to the point of requiring the bank to pay over $11 billion in fines. I hope the board of directors at J.P. Morgan will have the wisdom and courage to support their CEO and not cave to demands from regulators that can only harm the company and its stakeholders. That would send a strong message to the nation's business community and allow J.P. Morgan to continue to benefit from Mr. Dimon's leadership.

I have spent my entire career opening markets in China, Eastern Europe and across the world. When we took AIG public in 1969, we chose New York as the company's place of business because the state offered a predictable regulatory environment. And yet what I see in New York and Washington is a regulatory culture that seems manifestly determined to make this state and nation the last places where any responsible CEO would want to do business. Incredible as it seems, federal and state regulators are now negotiating for their share of the "credit"—their cut of the cash—for the damage they are currently inflicting on J.P. Morgan, competing with one another to inherit Spitzer's "Sheriff of Wall Street" title. Some people never learn.

Mr. Greenberg is chairman and CEO of C.V. Starr & Co.