Barrett Sheridan

Stories by Barrett Sheridan

  • Readers Head to the Alps

    This blog has only been live for two days and already we're getting excellent comments from our readers. We want Wealth of Nations to be a conversation, and when you say something smart, we plan to highlight it.I was pleasantly surprised by the reaction to my post on the end of Swiss banking secrecy. I wasn't sure international banking regulations and cross-border information-sharing would interest many readers, but apparently secret offshore accounts stir the imagination.Several readers noted that Hollywood's fascination with Swiss banks might stem from more than just their usefulness as plot devices. "Never mind making a movie about the Swiss bank," writes sgm17. "It looks like the very...
  • The Short, Wondrous Life of the International Reserve Currency

    We posted a couple times last week on the kerfuffle surrounding remarks by China's central bank governor, Zhou Xiaochuan, that advocated "creat[ing] an international reserve currency that is disconnected from individual nations." To many, this sounded like an attempt to displace the dollar from the top of the currency heap, and a sign of China's growing ambitions.Brad Setser, a macroeconomist at the Council on Foreign Relations, who I quoted in my earlier post, took the weekend to read Zhou's comments more closely and came up with a different interpretation: "In some ways Zhou’s call is a sign of weakness as much as a sign of strength," he wrote on his blog yesterday.Zhou stopped short of calling for a new global currency like a Bancor. What he actually advocated is a larger role for some arcane device called "special drawing rights." SDRs were created by the International Monetary Fund in 1969 because the Fund didn't want its loans...
  • Shedding Light on the Alps

    Pity Hollywood. The credit crunch has killed -- or at least maimed -- one of the favored tropes of spy movies and action thrillers: the secretive Swiss bank. Celluloid terrorists and criminals (and probably a few real ones, too) used them to stash their ill-gotten gains, and uber-assassin Jason Bourne found secrets to his true identity (and a gun and wads of cash) in an Alpine vault. By and large, the Swiss bank as Hollywood knew it no longer exists. U.S. officials have long wanted to make a dent in the European nation's famed banking secrecy laws; they saw it as a refuge for tax evaders and terrorist financiers. In June, they secured a guilty plea from Bradley Birkenfeld, a former banker for Zurich-based UBS who admitted to helping a wealthy California businessman hide assets from the IRS. The always-helpful Birkenfeld even smuggled diamonds in a tube of toothpaste on a flight into the U.S. for his client. Then, in February, UBS agreed to hand over to U.S. authorities the...
  • Cramergate Continues

    You probably thought the Jim Cramer vs. Jon Stewart feud was over. And it is, for the most part. But I just stumbled on this video from PBS. It's a clip from an episode of the investigative journalism series Frontline from way back in 1997, and the first couple minutes show Jim Cramer in action as a hedge fund manager. He's just as frenetic and ridiculous-looking as he is now, except he's shouting derivatives orders at traders instead of bopping oversized sound effects buttons. (He's also a lot heavier -- clearly the markets are more stressful than television.) It's mostly just a curious aside to the larger financial story, but it does remind us that the roots of the current crisis run deep. Cramer and people like him have been hyping stocks since at least the 1990s -- as Frontline puts it, he's "a born huckster for the market." That helped cement in peoples' minds the idea that Wall Street is where fortunes are made -- and if you're...
  • It's All About the Benjamins

    As an American, I of course love the fact that the dollar is the world's reserve currency. I just took a trip to Costa Rica, and was able to pay for almost everything in greenbacks. Globally traded commodities like oil are priced in dollars. It's the de facto language of global finance. And since every country needs some dollars for international transactions, the U.S. has access to lots and lots of cash, enabling us to borrow cheaply.  So naturally, all this talk of the dollar losing its preeminent status worries me a little. A small furor began on Monday when Zhou Xiaochaun, China's central bank governor (i.e. their Ben Bernanke), released an essay calling for an "international reserve currency that is disconnected from individual nations." Translation: "Now that you guys are printing money to prop up your banks, we expect inflation in the U.S., which will erode the value of the $1 trillion in U.S. currency we hold and cause us to lose our shirts. We...
  • Playing Catch-Up

    Okay, I get it -- you're busy, you've got kids, a job, a mortgage to (hopefully) pay. You haven't had time to navigate the alphabet soup of the financial crisis -- CDO, LBO, CDS, SIV. But it's getting a little hard to ignore, what with even late-night talk show hosts talking about hedge funds and derivatives with the President.Luckily, there are plenty of accessible, easy-to-understand resources out there by now, so it's easy to get up to speed.The most recent one we've seen is this video by Jonathan Jarvis, a graduate student at Pasadena's Art Center College of Design. It is not only hugely informative (my Newsweek colleague Adam Kushner calls it "the best distillation I've seen") but also a great piece of eye-candy. Design and graphics snobs will rejoice.Part 1:Part 2:If you've got a bit more time on your hands, public-radio show This American Life put together two hour-long programs about The Great Panic of 2008. The first,...
  • AIG: A Backlash Against the Backlash?

    The list of most dangerous professions includes jobs like Bering Strait crab fishermen and Pacific Northwest logger. A new contender: AIG executive. After the collapsing insurance giant, which has accepted $170 billion in taxpayer bailout money, announced it was paying out $165 million in bonuses to top employees -- including many in the Financial Products division, the Mordor-like seat of financial evil -- populist rage crescendoed. Fed Chairman Ben Bernanke said he wanted to sue to prevent the payments. Protesters arranged bus tours of the execs' lavish Connecticut mansions, where some have had to hire private security guards. Sen. Charles Grassley said the lucky execs should "resign, or go commit suicide." You know you're unpopular when a sitting senator wishes hari kari upon you. But are we beginning to see a backlash against the backlash? Maybe not, but at the very least some of the targets of the fury are beginning to strike back. Last night, the New York...
  • A Killed Manuscript Might Be Another Bank Casualty

    To most publishers, it would've been a touch of golden luck: a manuscript about the worst economic crisis in decades, written by a financial insider and finished months before rivals had even a rough draft ready. Instead, Wall Street investor Barry Ritholtz's "Bailout Nation: How Easy Money Corrupted Wall Street and Shook the World Economy" appears to have become a parable for the same corporate shenanigans that it catalogs. In early 2008, McGraw-Hill paid a five-figure advance to Ritholtz, a frequent CNBC guest and author of "The Big Picture," a popular finance blog. When Congress passed its $700 billion bailout bill, McGraw-Hill's contract with Ritholtz looked prescient. The imprint started taking pre-orders and set a March release date. Then, in early February, it dropped the book.Ritholz claims that he and McGraw-Hill butted heads over scathing passages about bond-rating agencies, which accepted large fees from investment banks while giving sterling ratings to subprime mortgages...
  • 5 Myths of the Global Recession

    Remember "decoupling"? It was the notion that emerging economies had detached themselves from the developed world, and that Asian consumers could make up for falling demand in the rich world. An Indian steelmaker would not only fail to sneeze at the first sign of a cold in the United States, but might even hold the key to a cure.So much for that theory: emerging-market stocks have plummeted some 50 percent in the past year, even further than the S&P's 36 percent nose dive. Decoupling was a powerful myth, but only one of many in this global recession. The crisis is moving so fast, and in so many different directions at once, that the shelf life of conventional wisdom is shrinking exponentially. Just a few weeks back, analysts were saying the worst had passed for the financial sector; today Citigroup is imploding. Throughout 2008, forecasters predicted the demise of the dollar. Now it's the euro and sterling that are falling. What's behind these and other recession myths, and why...
  • Even In Crisis, U.S. Banks Best Europe's

    Everyone is aware—sometimes gleefully so—that the global recession was made in America. Wall Street served as the beating heart that pumped toxic debts into global circulation and almost wrecked the entire financial system. It would follow, then, that New York banks were the hardest hit. But that's not so. According to new research by the Boston Consulting Group, U.S. banks were among the best performers in the developed world last year. That's relatively speaking, of course—the total shareholder return, which takes into account stock prices and dividend payouts, fell by 44 percent. But banks in Britain and Western Europe fared worse. Germany ranked last, returning negative 62 percent, followed by France, down 61.5 percent. Only Australia, Canada and Japan bested the Americans. The disease born in America has hit hardest across the Atlantic.
  • Buy America Clause Benefits Foreign Companies

    The great irony of the "buy American" clause snaking its way through the U.S. Congress is that it would force Americans to buy steel from factories that, while on U.S. soil, are owned mainly by foreigners. In its current form, the clause would require that projects paid for by the $900 billion stimulus package, like new schools and wind farms, use only American-made steel. (Some versions of the bill extend the requirement beyond steel to all "manufactured products.") Proponents say it would create jobs, critics say it violates international law, but everyone agrees that most U.S. steel mills are now owned abroad. During the commodity boom of the last few years, global players like ArcelorMittal (Britain), Gerdau (Brazil), SSAB (Sweden) and Severstal (Russia) snatched up ailing or shuttered factories, including prized pieces of Americana like the Bethlehem Steel mill in eastern Pennsylvania. All in all, foreign firms now control around two thirds of the U.S. industry. Buy American?...
  • OPEC May Not Be Able To Halt Oil's Nosedive

    OPEC, the once mighty oil cartel, is looking increasingly impotent. When prices skyrocketed to $150 a barrel, producers claim-ed they didn't have the spare capacity to pump more oil and bring the cost of crude back to earth. They now seem equally incapable of halting a slide. Investors ignored a production cut of 1.5 million barrels in late October, and prices fell by 5 percent the same day. In November, the Saudi oil minister tried to prop up the market by calling for $75-a-barrel oil. The following week, prices hit a four-year low at $41. OPEC will likely announce substantial cuts at its Dec. 17 meeting—but analysts anticipate the move, so lower production is already baked into futures contracts. With world growth braking fast, demand, not supply, has become the real driver of oil prices. Merrill Lynch projects that crude could dip to $25 if the global recession migrates to China. That would mean a winter of discontent for OPEC, and joy for consumers.
  • As Crisis Grows, Countries Turn To The IMF

    The International Monetary Fund has roared back from irrelevancy, with a central role in the fight against the global credit contagion. Only poor debtor nations have doubts, because once again, the IMF is urging budget austerity on some borrowers, even as rich nations roll out eyepopping spending plans to fight recession.Already, Hungary and Ukraine have reluctantly tapped the fund for loans totaling $32 billion, in exchange for belt-tightening. Ukraine, with a budget deficit of 1.7 percent of GDP this year, will have to balance its books in 2009. Hungary will have to keep interest rates sky-high while it works to tame inflation.The IMF's demands were unpopular during the 1998 Asian financial crisis, and many emerging markets subsequently got their economic houses in order, precisely to avoid dealing with the IMF again. But as the crisis grows, even newly rich nations worry they may have to go back to the IMF, which has also learned its lesson—creating a new $100 billion fund that...
  • Web 2.0 and Social Networking Come to Health Care

    As the U.S. Presidential debates have shown, Barack Obama and John McCain can't agree on much. One rare exception: electronic health records. Obama has proposed spending $50 billion to help doctors and hospitals digitize their files and build patient databases. McCain agrees that electronic recordkeeping could lower costs and save lives—say, by helping doctors more easily recognize which patients are on dangerous drug combinations. Their proposals are part of a larger trend to bring the U.S. medical system, which still runs on paper and pens rather than bits and bytes, into the 21st century. Many businesses, from IBM to Procter & Gamble, have embraced the Web 2.0 ideals of transparency and decentralized problem-solving—what technologists call "open source." But is it a good idea to apply those values to private health matters? Some Web-savvy health-care practitioners are coming to the view that making data about your health freely available to family, friends and doctors could...
  • Biggest Personal Losers In Wall Street Crisis

    The credit crisis has taken many barons of Wall Street (and their $10,000 suits) to the cleaners. Who, though, has suffered the biggest losses? One way to get at that question is to look at leaders of the hardest-hit companies, and how much the value of their in-house shares has fallen from recent peaks. We asked Insiderscore.com, which tracks executives' trades in the stock of their own companies, for the number of shares held by some Wall Street titans, and then crunched the numbers to see how far they've fallen.In fourth place is James (Jimmy) Cayne, the former chief executive of Bear Stearns. Over the course of 2007, during which Cayne took extended vacations to play bridge and golf and purchased two Plaza hotel apartments for $28 million, investors' faith in the firm evaporated. Bear's stock, which traded as high as $170 in 2007, sank lower and lower until a bank run forced the Fed to intervene. In March 2008, JPMorgan Chase snapped up Bear for a bargain: $10 a share. Cayne...