Wall Street Folly

Wall Street tactics akin to the ones that fostered subprime mortgages in America have worsened the financial crisis shaking Greece and undermining the euro by enabling European governments to hide their mounting debts.

As worries over Greece rattle world markets, records and interviews show that with Wall Street’s help, the nation engaged in a decade-long effort to skirt European debt limits. One deal created by Goldman Sachs helped obscure billions in debt from the budget overseers in Brussels…..

The Greek Government looked set on a collision course with the European Commission today as its finance minister denied demands that it needed to take further austerity measures to cut its debt.

Hours ahead of a two-day meeting of eurozone finance ministers in Brussels, being held to scrutinise Greece’s existing plan to cut is deficit, Olli Rehn, the new EU Commissioner for Economic and Monetary Affairs said: “Our view is that risks… are materialising, and therefore there is a clear case for additional measures.”

But George Papaconstantinou, the country’s Finance Minister, said the EU needed to show more support to Greece instead of expecting more detailed austerity measures…..

Barclays Plc, the U.K.’s second- largest bank, soared in London trading after second-half profit more than doubled, lifted by investment banking and the sale of a fund management unit.

Net income for the six months to Dec. 31 rose to 7.5 billion pounds ($11.8 billion) from 2.66 billion pounds in the year-earlier period, according to Bloomberg calculations based on full-year results posted today. That beat the 6.72 billion- pound estimate of 14 analysts surveyed by Bloomberg. Barclays Chief Executive Officer John Varley and President Robert Diamond declined bonuses for a second year, the bank said. Barclays gained as much as 9.7 percent, the most since April 30……

Bayh’s Retirement Adds to U.S. Senate Democrats’ List of Woes - Bloomberg

Indiana Democrat Evan Bayh’s decision to retire from the U.S. Senate complicates his party’s efforts to retain control of the chamber at a time when public disapproval of Congress is at its highest level in 18 years.

Bayh, 54, a former two-term Indiana governor who has never lost an election, announced yesterday he won’t seek a third six- year Senate term. There is “too much partisanship and not enough progress” in Congress, he said at a news conference in Indianapolis…..

JPMorgan Said Near to $1.7 Billion Purchase of RBS Sempra Units - Bloomberg

JPMorgan Chase & Co., the second- biggest U.S. lender, is close to a deal to buy the non-North American units of RBS Sempra Commodities LLP for about $1.7 billion to expand its energy and metals trading units, according to two people briefed on the talks.

The purchase may be announced as early as today, said the people yesterday, who declined to be identified because the talks are private. Royal Bank of Scotland Group Plc was forced to sell its stake in Sempra by the European Union after receiving a 45.5 billion-pound ($71 billion) taxpayer-funded bailout……

Cost of Dubai default insurance rises sharply - Financial Times

The cost of insuring against a Dubai default climbed to the highest level since March on Monday amid heightened concerns over the restructuring of Dubai World, the emirate’s troubled conglomerate.

Credit default swap (CDS) spreads on Dubai’s sovereign debt widened by 23 basis points since Friday’s close to reach about 660 basis points on Monday. The rise totals about 230 basis points since mid-December, according to Morgan Stanley…..

Fed’s Bear Stearns portfolio value falls - Financial Times

…..Maiden Lane I was funded with $28.8bn from the Fed and $1.15bn from JPMorgan, which agreed to take the first $1bn of any losses. It acquired $30bn of the more than $40bn in assets held by Bear’s mortgage desk.

These assets, which include everything from mortgage-backed securities to commercial real estate loans and credit insurance contracts, are now worth less than the June 2008 purchase price, a setback that has stirred the debate on Wall Street over whether the Fed cut a particularly good deal for taxpayers…….

Tags: Barclays, Bear Stearns, Bob Diamond, Bonuses, Compensation, Dubai, Evan Bayh, Fed, Goldman Sachs, Greece, JP Morgan, Off Balance Sheet Financing, Politics