[REBORN FROM THE ASHES][comment][01.23]

番茄斗斗UID: 2720914

The weakest linksNew capital and liquidity rules will make the average bank safer. But what about the outliers?
Jan 21st 2010
From The Economist print edition

IT IS bonus season again. Bankers get bashed and governments inventways to tax them, most recently Barack Obama’s plan to charge banks anannual insurance fee. Amid all the rancour (see article),some say it is important to regain a sense of perspective. Banks havebeen bailed out throughout history. People hate it, but they would hatethe devastation that a collapse would bring even more. Besides,finance’s wild-west era is over. The Basel club of regulators istightening its rules and there is talk of new curbs on proprietarytrading.
Problem solved, then? Unfortunately not. The pact between societyand banks has changed dramatically over the years. Once, banks gotliquidity support from a lender of last resort. In the 20th centurythey got state-backed deposit-guarantee schemes. And now they enjoy animplicit blanket guarantee of all their liabilities, allowing them toborrow cheaply. All this has let the industry operate with smallersafety buffers than in the past, and balloon in size. Relative to thesize of the economy, Britain’s banks are ten times larger than in 1970.
That blanket guarantee is unfair. Some of the subsidy is passed onto banks’ customers, but much goes to their staff. It may beunsustainable: the assets of America’s banks are now as big as its GDP,taxpayers in most rich countries are underwriting systems several timeslarger than their economies, and it is unclear whether tiny Icelandwill honour its commitments. The guarantee is also dangerous. As anycapitalist knows, firms with subsidised funding and no risk of failureusually misallocate capital and can be dysfunctional, as the mortgageagencies Fannie Mae and Freddie Mac demonstrate.
The Basel club is making a decent fist of rewriting its rules oncapital and liquidity, forcing the banks to operate with larger safetybuffers. But regulators must be brutally honest about what thesereforms will achieve. The banking system is only as strong as itsweakest links, and even the new, bigger buffers would not have beenenough to prevent the worst blow-ups of the past two years (see article).That is understandable: banks’ capital would need to double to dealwith the risk that they might be the next Merrill Lynch or UBS. Passingthe cost of that on to customers could hurt the economy.
If the state is thus doomed to bail out tomorrow’s basket cases, itshould charge for the guarantee banks get. One option, which Mr Obamahas proposed and which this newspaper has supported, is a “liabilitylevy” on banks’ debt to recoup the subsidy they get from artificiallylow borrowing costs. Banks already pay a similar levy on their insureddeposits; a liability levy would hit investment banks, too. It shouldhelp to rein in bonuses somewhat, and could fund a bail-out kitty. Sucha levy addresses some of the problems that arise from the blanketguarantee, but in the long run it would be best to withdraw it. Thatwill not be easy. Banks’ creditors must suffer losses if taxpayers areto avoid bail-outs. Yet if all creditors and counterparties fear loss,they will run from a weak bank, creating a self-fulfilling prophecy.What is needed is a way to create the halfway house of partialbankruptcy.
Building a half-way houseOne option is for banks to issue so-called “Coco” bonds that convertinto equity if capital gets too low, although no one really knows howsuch instruments would behave in a crisis. Another is to give aresolution agency powers to deal with bad banks. This agency cannot bejust a glorified contingency planner, but it cannot be a despot either,otherwise terrified creditors and counterparties will run ifintervention seems likely. It needs absolute authority to imposelosses, but over only part of a bank’s balance-sheet. This wouldrequire banks to ring-fence the bits worth saving (such as retaildeposits), or force them to carry debt that gets a mandatory haircut ifthe state has to step in. All big banks would have an implicitguarantee, but it would not cover their entire balance-sheets.
It is all too easy to pretend that new capital and liquidity bufferswill be enough to prevent the need for future bail-outs, but it isunlikely to be the case. Devising a way to impose controlled losses onfailed banks’ creditors, and convincing markets that it really will beused next time there is a crisis, will be difficult. But anyone with asense of perspective can only conclude that public backing of financehas reached unacceptable levels. Solving that problem must beregulators’ priority.

复制粘贴上来，好几个字都粘着的了，大家觉得看不习惯的话可以直接到网页上看哈～地址附上：
[url=http://www.economist.com/opinion/displaystory.cfm?story_id=15330497]http://www.economist.com/opinion/displaystory.cfm?story_id=15330497[/url]

番茄斗斗UID: 2720914

Bankers get bashed and governments invent waysto tax them
Amid all the rancour(怨恨) ,somesay it is important to regain a sense of perspective.
The Basel club of regulators is tightening itsrules and there is talk of new curbs on proprietary trading.
All this has let the industry operate with smaller safetybuffers than in the past, and balloon in size.
honour itscommitments.
The Basel club is making a decent fist of（试图把事情做的很成功） rewriting its rules on capitaland liquidity.
If the state is thus doomed to bail out tomorrow’s basket cases
fund abail-out kitty(共同资金).
Sucha levy addresses some of the problems that arisefrom the blanket guarantee.
Building a half-way house One option is for banks to issue so-called“Coco” bonds that convert into equity（普通股） if capital gets too low, althoughno one really knows how such instruments would behave in a crisis.Another is to give a resolution agency powers to deal with bad banks.This agency cannot be just a glorified contingency（偶发事件） planner, but itcannot be a despot either,otherwise terrified creditors andcounterparties will run ifintervention seems likely. It needs absoluteauthority to impose losses, but over only part of a bank’sbalance-sheet. This would require banks to ring-fence（圈定）
the bits worthsaving (such as retaildeposits)

COMMENT:
Economic crises last year was brought by a novel idea of propriety trading. With shrinked safety buffer, banks in US & UK are times bigger than in the past and devoted mostly to its GDP. However, guarantee like this is none the less dangerous. Once mislocation like Fannie Mae and Freddie Mac, bankruptcy is doomed to come.

To avoid its future devastation, Basel Bank is now rewritting its rules on capital and liquidity, forcing a bigger safety buffer. While doubled capital is a must for prevending the risk, liability levy is instead a better option. In addition, a bad bank dealer, resolution agency, with absolute authority to impose losses, eanbles an implicit guarantee for the banks, without covering its entire balance-sheet.

To review the bygone crises, we never miss banking system, one of the outcomes of economics. Product of its own, can be intriguing as well as out of rein, due to the lack of relevant laws. Unlike others, with the economic foundation, any change of banking system can not be forseen, and can only be testified by time.

plukaUID: 2721764

NOTE
IT IS bonus season again. 

COMMENT
Policies to handle the economic crisis remains tricky. With the larger bank size due to the shrinked safety buffer, some people are concerned about the possible malallocation and dysfunction that banks may endure under the governmental subsidy. There have already enough controversies on to what extent that the government should interfere the economy. By and large, financial experts admit that the urgent issue right now is to fight for the welfare of all and to stand through the crunk. Yet worries are never alleviated. 
I'm not familiar with financial things. Facing with those puzzles which baffle top economists, all I can see is murky murky murky cloud......

splendidsunUID: 2723757

1-23
Comment:
Economic topic is still difficult for me to grasp the ideas. I couldn't wholly understand that why banks bankruptcy could lead to the economic crisis throughout the world. What's the function of invest banks which could sell products that are still not be produced? From this article, the author tries to propose that the all banks need to have greater buffers so as to prevent the recession from happening again. Also in this bonus season, the government of America asks for the charge for liability levy from banks which is regarded as guarantee for the banks. However, the functions of banks is just collect the spare money from the rank and file and put them into the big projects that need a large amount of money. Why do banks invest money to some products that do not exist?   

错字：
Gurantee—guarantee

Words:
devastation毁坏，荒废
pact合约
a lender of last resort最后贷款人
liability 负债
underwriting 保险
levy征税
rein in 放慢
self-fulfilling prophecy自我验证的预言

miki7catUID: 2533330

My comment
I cannot be well aware of the links between bank and society, and between bankruptcy and economic crisis. And I even know little about how the economy is running in the capitalist societies, of course as well as in the socialist ones. Though economic topics always make me confused, a sentence enlightens me as to the main point of this article: finance's wild-west era is over. In my view, the capitalist economy is regulated by the market and the socialist economy by the government, right? And the main point of this article is to impose more government regulation on proprietary trading?

错字
propri(e)tary

123runfordreamUID: 2697608

Comment：
Banks play a unreplacable role in the finacial industries, which has been bailed out throughout the history even people hate it. The blanket guarantee has changed to allow the lenders to borrow cheaply and is unfair nowadays. That makes the taxpayer lend so much money that they don't even have the ability to pay back. That’s a start of bankrupcy. Low cost of borrowing money from banks require banks to recoup the subsidies. Given the supports from the government, the banks needs to adjust the capital liquidity. Since the economic is the society’s most connection, it has to be put in the first place.

jinziqiUID: 2387034

liquidity  资产流动性
bash 猛击
rancor  深仇（长期的怨恨）
devastation  (尤指大面积的)毁灭，破坏
pact  协定
implicit  含蓄的
rein   缰绳；v 控制
subsidy  补助金

My comment
Well, this is again an economic article which contains many new words even terms which I have never known before. So, it increases the difficulty in understanding the meaning. Seeing from comments of yours, it seems that most people find it hard to understand with financial things. The passage is talking about the safety of a bank. During the past years, the pact between and the bank has changed a lot. I can't figure out what is the relationship between the policy of the bank and the society. I believe this is too complicated.

敛寒影UID: 2613052

Comment:

The banks got state-backed deposit-guarantee schemes,allowing creditor borrow money cheaply. The assets of America’s banks are now as big as its GDP,taxpayers in most rich countries are underwriting systems several times larger than their economies. Such a levy addresses some of the problems that arise from the blanket guarantee, but in the long run it would be best to withdraw it. All big banks would have an implicit guarantee, but it would not cover their entire balance-sheets.

ieyangj08UID: 2743219

Sentence

IT IS bonus season again.
The pact between society and banks has changed dramatically over the years. Once, banks got liquidity support from a lender of last resort. In the 20th century they got state-backed deposit-guarantee schemes. And now they enjoy an implicit blanket guarantee of all their liabilities, allowing them to borrow cheaply.  
The Basel club is making a decent fist of rewriting its rules on capital and liquidity, forcing the banks to operate with larger safety buffers.

Comment

After last year’s Sub-prime Crisis caused by the real estate bubble, the U.S. government issued a series of related economic policies. Recently, the Obama government plans to charge banks an annual insurance fee to prevent banks bailed out. However, this might cann’t solve the problem, for the crux is the pact between society and banks are changed dramatically in recent years. Loan guarantees needed are getting lower and lower in the past few years, which reduced safety buffer and also do harm for both banker’s customers and their staff. The Basel club will modify rules on capital and liquidity, and the new buffer might work out, yet it still have to resolve some issues in implement.

海王泪UID: 2673613

Useful Expressions
Banks have been bailed out throughout history.
All this has let the industry operate with smaller safety buffers than in the past, and balloon in size.
The Basel club is making a decent fist of rewriting its rules on capital and liquidity, forcing the banks to operate with larger safety buffers.
This agency cannot be just a glorified contingency planner.

Materials
As any capitalist knows, firms with subsidised funding and no risk of failure usually misallocate capital and can be dysfunctional, as the mortgage agencies Fannie Mae and Freddie Mac demonstrate.

My Comment
Agencies with subsidy from governments usually misallocate capital and operate dysfunctionally. “Easy come, easy go.” It is not hard to understand why Fannie Mae and Freddie Mac prompt a big bubble in real estates.

Governments mostly earn their money from people. Such a big deal of money represents collective material and human resources aiming at market failure when people are in pursuit of individual interests without concerning a larger picture. Ironically, where and how to allocate resources does not always work effectively when a few group of people hijack our governments.

Banks successfully play this trick aboveboard. As what the author said “Banks have been bailed out throughout history.” when “People hate it, but they would hate the devastation that a collapse would bring even more.” The only thing we can do is to learn from history and make sure never does a similar dilemma reoccur in the future.

小灵易碎UID: 2733622

a sense of perspective 具有远见的
devastation 蹂躏，荒废
wild-west era 荒蛮时代
curb on （事情）被束缚在（……方面）
get liquidity support  顺利得到支持
state-backed 国家支持
making a decent fist of rewriting 得当地处理（某事）
dysfunctional 不正常的
doomed to 命中注定的
recoup 收回，取回
a self-fulfilling prophecy 自然会实现的
halfway house 中途歇脚的客栈（引申为暂时喘息的机会）
glorified 美其名曰的
to ring-fence 用栅栏围护的

comment
The motto "The government is best which governs least" seems to be not applicable in the Subprime Mortage Crisis last year, for it is necessary to exercise the governmental force when the whole nation is trapped in the economics delimma.The essay points that the relaitonship between the society and banks plays a significant role in addressing the problem and helping the US getting away from depression,however, the free market can not offer a morderate way to both investmental banks and the general, while it is time for Obama Administration to formulate constant stream of policies to keep a balance of two sides.

For a long-term run, the government should have a sense of perspective, instead of being curbed on political authority. After all, whether the banks could function well depends on domestic liquidity support rather than state-backed subsidy.

dingyi0311UID: 2627919

comment
This is another article about the recession this year. This topic was revisit because it is bonus season again. Last year heavy taxes was imposed on the bonus since many company use government bail-out to award managers who directly cause this economic crisis. The author present his viewpoint toward recent economic regulation in this work.
The author point out that the problem have not yet been solved now. the company get deposit guarantee from government is not fair and dangerous: some of the subslidies are not passed to customers and company let the industry operate with smaller safety buffers than in the past, and balloon in size. This may cause economic bubble in the future. Even ways was make out to avoid its happening-the Basel club is rewriting its rules on capital and liquidity, forcing the banks to operate with larger safety buffers, the author worries that a safety buffer may not enough to flat the blow-up and may hurt the economy.
Measures need to be take to prevent this happen again. Mr Obama propose a kind of  “liability levy” on banks’ debt to recoup the subsidy they get from artificially low borrowing costs. I have no idea what the liability levy is; I think it means that if the company make a good profit by using government’s guarantee, the interest will increase and vise versa.But this measure is not perfect. it may terrified investors.
In the final analysis, the author point out that It is all too easy to pretend that new capital and liquidity bufferswill be enough to prevent the need for future bail-outs. Devising a way to impose controlled losses onfailed banks’ creditors, and convincing markets that it really will beused next time there is a crisis, will be difficult. But anyone with asense of perspective can only conclude that public backing of financehas reached unacceptable levels. Solving that problem must beregulators’ priority.

emteddybearUID: 2699606

Basket caseMeaning
An infirm or failing person or thing - unable to properly function. Originally this referred to soldiers who had lost arms and legs and had to be carried by others. More recently it has been used to denounce any failing organisation or scheme and is rarely applied to people.
Origin In its original meaning it comes from the US military immediately following WWI. Strangely, the term was never used to describe anyone - only in order to deny that any such servicemen existed. This bulletin was issued by the U.S. Command on Public Information in March 1919, on behalf of Major General M. W. Ireland, the U.S. Surgeon General:

"The Surgeon General of the Army ... denies ... that there is any foundation for the stories that have been circulated ... of the existence of 'basket cases' in our hospitals."

This bulletin was reported on in many U.S. newspapers at the time. Many of them also defined what was meant by 'basket case'. For example, this from the New York paper The Syracuse Herald, March 1919:

"By 'basket case' is meant a soldier who has lost both arms and legs and therefore must be carried in a basket.

Given that the term was originally reserved for incapacitated servicemen, there wasn't much call for it until the next major war of English-speaking peoples - WWII. Again, it comes from the U.S. military and again in the form of a denial from the Surgeon General. In May 1944, in 'Yank', the then Surgeon General, Major General Norman T. Kirk, said:

"... there is nothing to rumors of so-called 'basket cases' - cases of men with both legs and both arms amputated."

Clearly, given the scale of the casualties in both wars, there must have been cases of multiple amputation. It isn't recorded what term the U.S. Surgeon General used to describe these - clearly not 'basket case'.

blanket guarantee：A declaration by the government that all deposits and perhaps other financial instruments will be protected.

emteddybearUID: 2699606

rancour：仇恨
devastation：破坏
resort：求助
subsidy：津贴
mortgage：抵押
doom：注定
recoup：重新获得
rein：缰绳
prophecy：预言
despot：暴君
mandatory：命令
MY COMMENTS
Another report the economic crisis! I heard the news recent days that the adherents of Mr Obamahas are launching into a complaint to him. I am not a American, and I really konw 【know】 nothing about the situation about its polotical
【political】 indeed. But I believe that there are some reasons for that kind of news. As know to all Mr Obamahas is well-know to his speeches, which are used by many of my classmates to practise 【practice】 their English listening. All these speeches are reasonable and forcefull, which make people prospective and hopeful. Many people are inspired, no mention to Americans. However, politic is not only speeches, the leader should take measures to solve problems. That is the sticking points. As to the economy, it is apparent that Mr Obamahas' strategy irritates the dissatisfactions of people. Of coures 【course】, it does not eliminate this report given by antagonist, but time is the only way to test the truth. I believe that next year or later, the fact will tell us the right answer.

tequilawineUID: 2702008

outlier
['aʊtlaɪə(r)]

n.
露宿者; 外露层; 局外人

bash
[bæʃ]

n.
怒殴; 猛击

v.
痛击; 猛攻

rancour  ['ræŋkə]   

n. 深仇，怨恨

=rancor（美）

devastation  [ˌdevəs'teiʃən]

n. 破坏，劫掠

proprietary
D.J.[prə'praiətəri]
K.K.[prə'praɪɪ,tɛri]
adj.
私有的

pact
[pækt]

n.
契约, 条约, 协定

implicit
[im·plic·it || ɪm'plɪsɪt]

adj.
暗示的; 含蓄的; 盲从的

liability
[li·a·bil·i·ty || ‚laɪə'bɪlətɪ]

n.
责任, 倾向, 债务
（有复数形式）

buffer
[buf·fer || 'bʌfə]

n.
缓冲记忆体; 作用的人#缓冲器, 减震器; 起缓冲作用的人

underwrite
['un·der·write || 'ʌndəraɪt]

v.
签名于下, 承诺支付; 经营保险业

dysfunctional  

adj.
不正常的

basket case
n.
〈俚〉(因战争或灾难而造成)四肢不全的人,完全没有希望的人

doom to
注定; 判定

recoup
[re·coup || rɪ'kuːp]

v.
收回; 偿还; 取回; 归还给; 获得补偿; 请求扣除

prophecy
[proph·e·cy || 'prɑfɪsɪ /'prɒ-]

n.
预言, 预言能力

mandatory
['man·da·to·ry || 'mændətɔrɪ]

adj.
命令的; 托管的; 强制的

levy
[lev·y || 'levɪ]

n.
征税, 课税; 征收额; 征兵; 税款

v.
征收; 征集; 强索; 扣押; 征税; 扣押

1 It is bonus season again.
2 Problem solved, then? Unfortunately not.
3 That blanket guarantee is unfair.没有限制的担保是不公平的。
4 Passing the cost of that on to customers could hurt the economy.
5 It is all too easy to pretend that new capital and liquidity buffers will be enough to prevent the need for future bail-outs, but it is unlikely to be the case.
6 Devising a way to impose controlled losses on failed banks’ creditors, and convincing markets that it really will be used next time there is a crisis, will be difficult.

Comments：
On the perspective of future economy, our economists devised some ways to smash in the dilemma, on the bilateral behalf—taxpayers and bankers. All of the quarrel distribute to the bonus season that we know our big guns begin to stuff their pockets full of annual salary, what exactly irks our common tax-payer.



From each, according to his ability, to each, whatever he can get away with. Is that fair? Definitely not. Casting back our minds to finance’s wild-west era, from then on, the pact between banks and countries have changed dramatically, not better, even worse.

Now the blanket guarantee becomes more aggressive with no sense. Not to mention whether the regulators do it right or not, yet, we can foretell several lethal flaws in the impact. On the one hand, that is an utterly inadequate amount comparing the whole several times larger than their economies. On the other, it is also dangerous, as capitalists know, firms with subsidized funding and no risk of failure usually misallocate capital and can be dysfunctional.

It order to avoid that, the Basel Club initiates some action to avert the misleading trajectory. But more should be done. From our author stance, we have to undertake the impending of the finance problems, with two options to utilize, however, we don’t know how efficiency it would be. It’s too easy to pretend that new capital and liquidity buffers will be enough to prevent the need for future bail-outs, but it is unlikely to be the case.