ISDA’s Media Comment blog offers a great critique of the Wall Street Journal’s coverage of the process to determine whether Greek sovereign credit default swaps have experienced a credit event as a result of the country’s latest debt restructuring.

ISDA media.comment

Today we were treated to two news stories in two newspapers on one topic:  the process for determining whether a credit event has occurred with respect to Greek sovereign CDS.

On the one hand, there’s The Washington Post:  “For Greece, a critical conference call between London and New York.”  (A follow-up story is here.) On the other hand, there’s The Wall Street Journal’s “Hushed Up: Secret Panel Holds Fate of Greek CDS.”

An important part of the credit event process – and an important element in each story – are the ISDA Determinations Committees (DCs).  The DCs are 15-member panels of representatives from banks and investment firms.  A supermajority (12 of 15) of each DC’s members is required to make a determination.  Here’s how the Post describes the process and the DCs:

“The banks and other investors who buy and sell the swap contracts have agreed to the arrangement…

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Time for a Memorial to the Unknown Dead of 9/11?

It was appalling to read news reports that US Air Force officials dumped the remains of victims of the 9/11 terror attacks in a landfill. I can think of nothing more distressing for a victim’s family, nor shameful for a country, than to learn that these remains were treated so carelessly.   Perhaps the time has come to create a permanent “memorial to the unknowns” from the tragedy, just as we have done for the unknown dead of past conflicts.

Last year marked the 150th anniversary of the start of the US Civil War.  It provides a useful historical context for this incident.

The remains handled by the Air Force mortuary in Delaware were from sites at the Pentagon and Shanksville, Pennsylvania, where the attacks took place.  In the aftermath of the plane crashes there, identifying remains was extremely difficult.

But consider that conditions on the Civil War battlefields in 1863 were equally difficult for those who were given the grim task of identifying the dead at Chancellorsville or Gettysburg or Chattanooga.

Ultimately, the remains of 2,111 soldiers killed at Bull Run became the Tomb of the Unknowns of the Civil War at Arlington Memorial Cemetery.  Dedicated in 1866, it holds the remains of both Union and Confederate soldiers. It is a solemn reminder of the sacrifice endured by both North and South during the war, and it set a precedent for memorializing the unknown dead following both World Wars and the wars in Korea and Vietnam.

Creating a memorial as a repository for the unidentified remains of 9/11 victims would give families an opportunity to grieve and seek solace, while ensuring that the remains are treated with the respect they deserve.

 

 

Update: Climate risk

Here’s a brief update to my post on climate risk:  Today’s New York Times reports on the disappearance of climate change from the US policy agenda.  Abandoned by President Obama and scorned by Republicans, climate-change policy is dormant in the US, even while other nations take patient steps to control carbon emissions.  The Times piece observes:

“This fading of global warming from the political agenda is a mostly American phenomenon. True, public enthusiasm for legislation to tackle climate change has flagged somewhat throughout the developed world since the recession of 2008. Nonetheless, in many other countries, legislation to control emissions has rolled out apace. Just last Wednesday, Australia’s House of Representatives passed a carbon tax, which is expected to easily clear the country’s Senate. Europe’s six-year-old carbon emissions trading system continues its yearly expansion. In 2010, India passed a carbon tax on coal. Even China’s newest five-year plan contains a limited pilot cap-and-trade system, under which polluters pay for excess pollution.”

It’s too bad the article overlooked the support that emisisons-control policy enjoys among many US businesses, who recognize the validity of the science backing global warming.  Many of these businesses already participate in cap-and-trade programs overseas and have urged Congress to support it at home.  For an example of what one company has been doing, see this web page from Duke Energy, one of America’s largest utilities and a leader in urging a national approach to carbon regulation.

Morgan Stanley hides behind the “quiet period”

Tempers must be on the boil at Morgan Stanley today.  The lead business article in the New York Times reported on investor concerns about the firm’s exposure to European debt, its earnings power and its liquidity, which brought the stock down by 10.5% last week.

And to make matters worse, the piece noted – without attribution – that the firm has “never regained the prestige and power it had in the years before the 2008 crisis.”

Ouch.

So what did the firm say when asked about all this? A spokesperson declined to comment, “citing the quiet period before [the firm] reports third-quarter earnings.”

What nonsense. There is no such thing as a quiet period before earnings.

The “quiet period” applies to communications during an IPO, not earnings announcements by a public company.  It is the interval between the filing of a company’s offering prospectus and its approval by the Securities and Exchange Commission. But it’s commonly used by companies to avoid addressing a thorny issue.

Sure, companies need to be careful whenever they’re making public statements about their business. But citing a non-existent rule is cowardly and counterproductive.

If Morgan Stanley didn’t want to respond, it could have said “no comment” or “we do not comment on speculation.” Neither is terribly reassuring to clients, staff or shareholders, though.

In these situations there is a fine line to walk between saying nothing, which would leave the criticisms unchecked, and responding in detail, which would be impractical and could quickly lead to material disclosures that would need broad dissemination to the market, creating a whole new problem.

Though difficult, it is possible to offer a statement that responds to the issues and portrays the firm’s management as credible and engaged.  Here’s an example of what Morgan Stanley could have said:

“Rumors are as common as colds and just as difficult to shake. They’re a fact of life for financial firms during challenging markets. We believe in the strength of our franchise, both to serve clients and generate returns for shareholders. We’ll have more to say when we report earnings in a few weeks.”

At the very least, such a statement would but Morgan Stanley’s problems in context and remind people of the firm’s strengths.

It’s certainly better than hiding behind the “quiet period,” which might be a convenient way to brush off a reporter, but it isn’t effective communication.

 

Two interesting innovations in magazine publishing

There were two interesting items in the New York Times yesterday on innovations in magazine publishing.  The first, by David Carr, looks at Lucky Peach, a new food-centered magazine started by chef David Chang that’s rich in content and texture.  At 174 pages and printed on heavy matte paper, it turns magazine convention on its head but has found a fiercely loyal following.  At the other end of the spectrum, the Times reported on the new iPad app from The New Yorker magazine.  It emphasizes the reader’s experience of, well, reading, with few of the embellishments that other publishers have adopted when taking their titles to the digital realm.  Both examples show that risk-taking, experimentation and innovation are alive and well in an industry many had written off as lost.