04.10.2008

• Finally the Tatas pull out of Singur
• Though everyone was hopeful that somehow the Tatas pull out of Singur will not happen and that better sense will prevail on all parties to find a workable solution; the inevitable happened. The ET headline story is a must read for us. Read it here.
• Writing about this issue, today's ET editorial has some sanguine comments. Arguing that the temptation to put the entire blame on Mamata Banerjee be not resorted to, it made a couple of observations that I felt are worthy of excerpting:
• The point is not that Mamata be excused for her destructive politics. Driven purely by her electoral monomania to unseat the LF government, she has further sullied the already tainted credibility of Bengal’s industrial climate. Her politics has been both reactive and reactionary. The point is that the popular anxieties on which such retrograde politics has thrived are real. And the existence of such distress is equally due to the LF’s failure to posit an alternative politics of inclusive development.
• Wells Fargo, not Citibank to acquire Wachovia
• WELLS Fargo said it agreed to buy Wachovia for about $15.1 billion, without US government help, thwarting a planned Citigroup deal that had been seen as big boost for both Citi and Wachovia.
  
• Wells Fargo is one of the few major US banks that has remained consistently profitable during the credit crisis, while Citigroup has posted more than $17 billion in losses in the last three quarters.
• The US House of Representatives too clears the $700 bn bailout package; but markets are not calmed.
• As expected, the US lower house also cleared the bailout package; but it did not assuage the markets.
• LIBOR for dollars and euros touched new highs at 4.33% and 5.33% respectively.
• Even a celebrated author like Joseph Stiglitz has aired strong reservations on the ability of the bailout package to rectify the situation
• He is asking: They may rescue Wall Street, but what about the economy? What about taxpayers, already beleaguered by unprecedented deficits, and with bills still to pay for decaying infrastructure and two wars? In such circumstances, can any bailout plan work?
• He says that the plan won't work because it is based on a wrong approach -- trickle down economics. Throwing enough money at Wall Street expecting it to trickle down to Main Street, believing that it would help ordinary workers and homeowners, is flawed according to him.
  
• Moreover, the plan assumed that the fundamental problem was one of confidence. That is no doubt part of the problem; but the underlying problem is that financial markets made some very bad loans. There was a housing bubble, and loans were made on the basis of inflated prices.
• What needs to be done is a transparent bailout and repair of the holes in the financial institutions' balance sheets. This can be done by issuing preferred shares with warrants (options) as that reduces the public’s downside risk and ensures that they participate in some of the upside potential. It also provides both the incentives and wherewithal needed for lending to resume. It avoids the hopeless task of trying to value millions of complex mortgages and the even more complex financial products in which they are embedded, and it deals with the “lemons” problem — the government gets stuck with the worst or most overpriced assets. Finally, it can be done far more quickly.
• He goes on to give three suggestions for reducing foreclosures:
• First, housing can be made more affordable for poor and middle-income Americans by converting the mortgage deduction into a cashable tax credit. The government effectively pays 50% of the mortgage interest and real estate taxes for upper-income Americans, yet does nothing for the poor.
  
• Second, bankruptcy reform is needed to allow homeowners to write down the value of their homes and stay in their houses.
  
• Third, government could assume part of a mortgage, taking advantage of its lower borrowing costs.
• Look at the punch in his comments!
• But it is impossible for politicians to do nothing in such a crisis. So we may have to pray that an agreement crafted with the toxic mix of special interests, misguided economics, and right-wing ideologies that produced the crisis can somehow produce a rescue plan that works — or whose failure doesn’t do too much damage.
  
• Getting things right — including a new regulatory system that reduces the likelihood that such a crisis will recur — is one of the many tasks to be left to the next administration.
• Language lesson: Main street
• I underlined the phrase "Main street" above. Know what is meant by that?
• Main Street is the generic street name (and often the official name) of the primary retail street of a village, town, or small city in many parts of the world. It is usually a focal point for shops and retailers in the central business district, and is most often used in reference to retailing.
• Main Street is commonly used in the United States, Canada, Ireland, some parts of Scotland and also in some countries in central Europe. It also goes by different names in different geographies: High Steet (UK), Front Street (Jamaica, North East England), Fore Street (Cornwall, UK) and "rue Principale" (Quebec, Canada).
  
• Pay bonanza for Central University teachers
• THE long awaited UGC’s Pay Review Committee Report is likely to benefit more than five lakh teachers in central universities and colleges. The committee has recommended a 70-85% pay hike across levels. It has also proposed a new nomenclature for various teaching posts while suggesting creation of few more like associate professor, senior professor and professor of eminence.
• Obituary: RS Lodha
• Remember him? He is very well known for the controversial inheritance of the Birla family wealth -- from the MP Birla family.
• When Priyamvada Birla passed away in July 2004, it became known that she had bequeathed all the wealth to a rank outsider to the family Mr. RS Lodha.
• Since then he had been entangled in legal battles with the Birla family.
  
• Follow the link given above to read at least once, to get a glimpse of a professional career that is perhaps every CA's envy.
• Operation Chhamar Sar
  
• It is an eight-day long Operation by the Indian Army against militants occupying the indomitable Harmukh range in the Kashmir mountains. It resulted in the killing of 13 militants and one soldier. They are yet to retrieve corpses of two of the 13 slain militants buried under the debris of a blasted cave.