вторник, 14 августа 2012 г.

Can breaking up banks fix the financial crisis?

An over 80-year-old idea is on the table in the United States and Germany: separating risky investment activities from everyday banking. But views differ on how strict the separation should be and if it will even help.
In October 1929, the New York stock market crash plunged the American economy into ruins. Within just a few years, the US government implemented reforms that drastically changed the financial sector. The Banking Act of 1933, otherwise known as the Glass-Steagall Act, saw the separation of banking activities. It barred commercial banks, which provided clients with normal savings and checking accounts as well as loans, from underwriting stocks and bonds or otherwise dealing in risky investments.
"As early as the 1920s, Senator Carter Glass, one of the authors of the act, believed that too much money was being pumped into speculative investments," said Hans-Joachim Voth, economic historian at Pompeu Fabre University in Barcelona. "With the Great Crash and ensuing Depression, Glass saw an opportunity for pushing through a clear separation of commercial banks from investment ones."

An excavator destroying a building (Mario Vedder/dapd)
Reform fervor back then, a fear of reform now
The Glass-Steagall Act was not the only change made in the US banking sector. The US Securities and Exchange Commission (SEC) was established one year later - in 1934. It continues to enforce federal securities laws and regulate the industry in the United States. The Federal Deposit Insurance Corporation (FDIC), which protects deposits in member banks, was also created at this time.
In contrast, - nearly four years after the collapse of Lehman Brothers - politicians have few fundamental reforms they can say will protect future generations. "It's bordering on the criminal that we have not learned one lesson from the crisis [that began in] 2007 and have not really managed to improve regulatory mechanisms," Voth said. "I think it also reflects a failure of intellect."
The banking business, the complex financial products, its interdependencies with the mainstream economy - all this seems so complex to the politicians that they are afraid of doing something wrong, Voth said.
"They listen to experts from the financial sector, and then they leave everything the way it was before," Voth added. The reforms so far have been limited to small changes in the equity rules, he said. "There is no way we will be able to prevent the next crisis with them."

Above all, the new capital adequacy rules known as Basel III have not even entered into force. In the United States, the attempt to ban banks from speculating on their own account has been postponed for now. Britain is planning a series of reforms, but no law is expected before the summer of 2015.
The appeal of the old system
Senator Carter Glass and Rep. Henry B. Steagall Senator Carter Glass and Rep. Henry B. Steagall wanted to help end the Great Depression

No wonder then that some now wish a return to the major reform of the past, the separation between commercial and investment banks of 1933. That was finally eliminated in 1999 under President Bill Clinton. The decision suited a time in which deregulation was the magic word.

Even before 1999, the legal separation of banking had been gradually weakened. Thus, in 1998 the financial giant Citigroup, itself the result of a merger, was allowed to buy the investment bank Salomon Brothers.

Ironically, Sandy Weill, head of Citigroup until the outbreak of the financial crisis and one of the major beneficiaries of deregulation, is now demanding the reintroduction of the separation between commercial and investment banks. "The New York Times," which had fought the Glass-Steagall Act for years is now a convert. "Having seen the results of this sweeping deregulation, we now think we were wrong to have supported it," the newspaper said in an editorial.
In Germany, Social Democratic Party leader Sigmar Gabriel and Nikolaus von Bomhard, CEO of reinsurer Munich Re, have come out in favor of separating banks. They said there should be no banks that are so important for a country that they need to be rescued with taxpayers' money: "If something is system-relevant, something is wrong with the system," von Bomhard said.

Size isn't everything

"I'm not a big fan of a black and white policy that says we should break up the banks and keep them seperated," said Georg Fahrenschon, president of the German Savings Bank Association.
He defended universal banks that do everything - account keeping, lending, securities trading and foreign exchange transactions. "Over the last three years, we have seen how important it was to have regional banks that could also help mid-sized companies with currency risk management."

Senator Carter Glass and Rep. Henry B. Steagall Senator Carter Glass and Rep. Henry B. Steagall wanted to help end the Great Depression
Economic historian Voth also said he does not believe that a two-tier banking system would have prevented the financial crisis. But added that a separation is necessary to prune banks back down to a size that does not threaten the entire economy. Until the beginning of liberalization in the 1980s, the world managed to get by very well without banks that were "too big to fail," and economic growth was strong.

Voth said the argument that growth was not possible without large international financial groups is a myth: "Nothing that is important to the economy was really worse 20 or 30 years ago. We wouldn't really miss any of the economic functions that investment banks perform today due to their size."

Because of its size Deutsche Bank is also "a risk to Germany that would be really hard to bear," said Voth. "I do not know how many crises we need to go through before we learn to regulate things well."

Stiff breeze batters German wind energy sector

A quarter of German electricity already comes from renewable energy sources. Far out front, the wind energy sector is growing faster than it has for years. However, business could be a lot better.
Politicians love it when they get the chance to present a successful investment project - Germany's transport minister Peter Ramsauer was able to talk about "pioneering work with worldwide relevance" when he visited an offshore energy plant in Cuxhaven on Germany's North Sea coast this week. A harbor and industrial area has been built there in which offshore wind turbines, along with all the necessary components, can be built and shipped. Wind energy on the high seas could become a winning export with which Germany could score points worldwide, said Ramsauer.
But there's actually not a lot of energy being generated right now off the German coast. There were just nine offshore wind turbines with a total output of 45 megawatts supplying the electricity grid in the first half of 2012. For Thorsten Herdan, director of the wind industry association VDMA Power Systems, that is below expectations: "It's highly unsatisfactory in comparison to federal government targets, and highly unsatisfactory in comparison to the industry's targets and investment efforts." That applies to everyone who invested in the industry, trusting in the government's Energy Industry Act and its timetable for the provision of a network to bring the electricity to land.
Billions of euros in investments
But there's still nothing much for the offshore wind turbines to plug into. And it's not yet clear who is legally liable when things go wrong. Who has to pay if the network isn't completed on time, or if a technical error occurs on the cables? The question of the financing of the network also seems to be still unresolved. Herdan says neither he nor the banks understand how a network operator with an annual turnover of one billion euros ($1.23 billion) could be expected to manage a borrowing requirement of 15 billion euros.

Offshore wind turbines with a small service vessel steering between them The wind will be blowing in a distinctly less favorable direction for the industry in 2013
The lack of clarity is ending up costing the offshore investors. The manufacturers and suppliers have delivered what was ordered, says Herdan, and they'd been paid. "Whoever wants to see how things are, should go to Bremerhaven, then they will see everything just stored there - it's all been paid for and it should already be standing in the water and what has been paid for and what should actually already be standing in the water. And we're talking about billions of euros."
More onshore wind turbines
The onshore wind industry also views the future with skepticism. The clear pattern of growth last year seems to have continued in the first half of 2012. An especially high number of tall wind turbines with large rotor-blades were installed in the states of Brandenburg, Saxony-Anhalt and Rhineland-Palatinate. Now, 22,664 wind turbines across the country provide a total output of more than 30 gigawatts. Around 25 percent more wind turbines were erected in the first half of 2012 than in the first half of 2011. With wind power forming the backbone of Germany's move to renewable energy, there'll soon be enough to replace nuclear power entirely, says Hermann Albers, President of the Federal Association for Wind Energy (BWE).
However, the wind will be blowing in a distinctly less favorable direction next year. Foreign markets, which are very important for German manufacturers, will be much tighter. Albers points out that construction of wind energy turbines in the US, for example, has nosedived. China also looks set to push its "gigantic surplus capacity" onto the global market in 2013. The outlook is bleak for German producers, who plan to tackle the situation with efficient and cost-effective technology. There are few options left if they don't want to find themselves in the same position as the majority of German solar panel manufacturers. They have already been forced to capitulate to China's superior power.

German investor sentiment cools down

Investor confidence among German entrepreneurs has fallen for the fourth month in a row. Expectations are gloomy despite the German economy's resilience to the eurozone debt crisis, a leading think tank says.
German investor confidence dropped for the fourth consecutive month in August, a fresh survey by the Center for European Economic Research (ZEW) showed on Tuesday.
The Mannheim-based think tank said its index measuring the mood among analysts and institutional investors fell deeper into negative territory, easing to minus 25.5 points, down from minus 19.6 points in July, thus reaching its lowest level this year.
"The indicator's decline in August signals that financial market experts still expect the German economy to cool down throughout the next six months," the ZEW said in a statement. "Especially export-oriented sectors may be affected."
Exaggerated fears
A separate indicator measuring the assessment of the current economic situation in Germany fell to minus 18.2 points, the lowest level since July 2010.
"The mood clearly is worse than the current economic situation justifies," BHF Bank Economist Uwe Angenendt told Reuters news agency. "We for our part believe that the German economy will be able to grow even in the third and fourth quarters of the year."
Expectations for the eurozone's economic development as a whole remained almost unchanged in the ZEW's survey, with a slight improvement of 1.1 points failing to signal a fundamental shift in appraisal.
hg/jlw (AFP, Reuters, dpa)

Israel helps India clean up the Ganges river

It has been 26 years since India embarked on a lofty plan to restore the heavily polluted Ganges river. But the project has seen many setbacks. Now, with fresh cash from the World Bank, the river might make a recovery.
On its journey south and east from the Western Himalayas, through the Gangetic Plain of North India and on to the Bay of Bengal, the Ganges flows for over 2,500 kilometers (1,553 miles). More than 400 million people dwell in its basin and depend on its life source. It's one of the world's 20 largest rivers - and also one of the most polluted on the planet.
In places, the once sacred, life-giving Ganges has become a cesspool, polluted with fecal waste, semi-cremated bodies, and water-borne disease.
In its $3 billion (2.4 billion euros) quest to restore the Ganges to health, the Indian government is turning to an unlikely source - Israel - a tiny, arid Middle East country that is producing world-leading water technology.
Israel NewTech, an initiative led by the Israeli Ministry of Industry, Trade and Labour, is matching Israeli clean-tech companies with Indian partners to tender solutions for the Ganges.
The Indian government aims to have no untreated municipal sewage or industrial runoff enter the Ganges by 2020, but according to Oded Distel, head of Israel NewTech, cleaning the Ganges is more like a 20-year mission.
"It's a huge project. It combines technological aspects and elements from waste water treatment and water management up to irrigation," he said. During dry season, "it becomes more a kind of canal for waste water rather than a real living river."

A man tries to collect garbage in a polluted Ganges (photo: pixel) The World Bank is investing in the clean-up of the Ganges
The World Bank is investing $1 billion (812 million euros) in loans and credits to India, to help with the first step in the Ganges River clean-up. The first goal is to reduce pollution in a sustainable way.
This may mean revolutionary changes to centuries old farming practices in India, where irrigation traditionally relies on the monsoon for flooding, resulting in chemical run-off into the Ganges.
One joint Israeli–Indian company, NaanDanJain, has established a test farm for drip irrigation in India. What is otherwise known as micro-irrigation is an Israeli technology that saves water and fertiliser by allowing water to drip slowly to the roots of plants through a network of valves, pipes, tubing and emitters.
According to NaanDanJain director Amnon Ofen, this technology already started to change the face of Indian agriculture.
"The irrigation business in India these days is above $0.5 billion a year, which in the next two or three years, will reach $1.5 billion - just micro irrigation," he said, adding this would be the reason why foreign companies are based in India.
Bypasses to help save the Ganges
Another Israeli company, bio-engineering firm Water Revive, is looking at natural constructed wetlands as a way to rehabilitate the Ganges. Water Revive marine ecologist Limor Gruber says it involves a series of bypasses, or channels, that divert domestic and industrial waste water from the river to cleanse it naturally, and make it drinkable by the time it flows back into the river. It has been tested successfully on Israel's Yarkon River, where more than eighty bypasses were installed.
"This technology - on the one hand it's sophisticated, but on the other hand it's a part of nature and it needs almost no maintenance. Now, when you go to a third world country and you put pumps, and you need electricity and you need very sophisticated systems, then people don't know how to maintain them," Gruber said.
Figures from India in 2003 show that only 27 percent of India's waste water is treated. According to figures by Israel's national water company Mekorot, 92 percent of Israel's waste water is treated and about three quarters of that re-used for agriculture.
Israel New Tech's Oded Distel says this technology is becoming so advanced that even left-over residue from waste water treatment is being considered as a possible source of energy. He puts Israel's success at water technology down to the fact that it has a 45 percent natural water deficit and must create solutions to sustain the population.

Woman in front of the Ganges river (photo: Karlheinz Schindler
pixel) The Ganges River is a spritual place, where people go for ritual baths
"It's an industry that is classically based on 'necessity is the mother of innovation'," Distel said.
Distel also cites flexibility as a reason why Israeli companies are well suited to fashioning solutions for the Ganges. Some of Israel's top information technology professionals translate algorithms designed to analyze information flows into technology that detects water leakages.
"A very important element is the flexibility of Israeli companies to adjust their solution to specific problems. This is something that is unique in the clean-tech arena. The type of water in India is not like in Israel, it's not like [water] in California or in Florida,” Distel said.
As India and Israel celebrate 20 years of diplomatic ties in 2012, Israel NewTech has opened an office in India and an agreement was signed in February, aimed at fostering cooperation with a focus on urban water.
India's ambassador to Israel, Navtej Sarna hopes these business and environmental ties will lead to closer cooperation between the two countries in the future.

Photos prove rare Sumatran rhino is still alive

Seven of the world's rarest rhinoceroses have been found in a national park in Indonesia. This is the first time the creatures have been seen in 26 years. Deforestation is still pushing the Sumatran toward extinction.
Hidden cameras buried deep in an Indonesian national park have snapped images of seven critically endangered Sumatran rhinos. The rhinos haven't been seen in more than a quarter of a century and conservationists had feared the Sumatran was extinct. But, six females and one male rhino are now known to live in the Mount Leuser National Park, which is on the northern tip of Sumatra.
"I feel really happy. After 26 years, we have found the rhino in the Leuser ecosystem," said Jamal Gawi, who heads the Leuser International Foundation. "We attend international conferences on the plight of the Asian rhinos. When they talk about the Sumatran rhinos in Leuser, they always put a question mark. Now we can prove to the world, we found the rhinos! They alive!"

'Two-horned Sumatran rhinoceros (Dicerorhinus sumatrensis) ´Photo: Jamal Gawi, Leuser International Foundation Proof of life: an infrared camera placed deep in the forest captured this rare image of the Sumatran rhino
Gawi's team first discovered evidence that the rhino was alive while they were doing research on tiger populations in the north. They noticed track marks and droppings that belonged to the Sumatran rhino and set up infrared cameras to capture images proving the creatures are not extinct. They have gathered thousands of photos and believe the tiny population is in good health.
Immediate protection needed
"We are very pleased!" said Stefan Ziegler of WWF Germany's department for the protection of endangered species in a statement to DW. "This shows that the protection of the Sumatran rhinoceros isn’t doomed to failure." But he warned that quick action was needed to protect the animals because news of their survival could attract poachers.

Sumatran Rhinoceroses at the Cincinnati Zoo. Photo: Charles W. Hardin There are fewer than 200 Sumatran rhinos left in the world
According to the World Wildlife Fund, habitat loss due to the destruction of forests is pushing the Sumatran rhino toward extinction. Even in protected areas, the organization says illegal settlers are destroying forest stands in order to produce coffee and rice. But another threat is the continued interest of poachers. Hunting rhinos is illegal, but there is a strong demand for their horns, which are believed to have medicinal properties, especially in traditional Asian medicine practices.
Road to extinction
The Sumatran rhino is the smallest of rhinoceroses still alive today and is among the rarest large mammals on the planet. It is also unique because it is the only Asian rhino with two horns, though the posterior horn is often no more than a hump. They are solitary animals, often only approaching each other to mate. Their population has dropped by 50 percent over the past 20 years. It's believed there are now fewer than 200 left in the world.

Sumatra-Tiger. EPA/BAGUS INDAHONO  +++(c) dpa - Bildfunk+++null The rhinos were first discovered by researchers studying Sumatran tigers
Gawi told DW that the number of poachers in the Leuser ecosystem has dropped because there are so few rhinos left. But he warned that the construction of roads intended to aid the timber trade also makes these areas easier for poachers to reach. "We object to new roads in this area," he said. "Roads are actually first step toward rhino extinction. We call them the roads to destruction."
But, Gawi hopes that the photos will renew international interest in preserving the habitat where the rhinos live. The team is already preparing to protect the rhinos from poachers. "We will set up a Rhino Protection Unit. This consist of patrol units. We'll gather information about hunters active in the area."
Benefits for all
The discovery of these rhinos may lead to better protection and more funding for conservation intiatives, says Andreas Dinkelmeyer of the International Fund for Animal Welfare in Germany. "I think there is a fascination with rhinos. They are impressive animals. And if we can protect environment of the Sumatra rhinos, we also protect other species," he explained in an interview with DW.
"There are certain animals considered umbrella species. It's hard to get funding and interest for a small insect that might be valuable for the ecosystem. But raise the funds for the rhino and the whole ecosystem sees a benefit," he said.
The discovery of Sumatran rhinos may renew interest in conservation across the region
Stefan Ziegler of WWF Germany also believes this discovery needs to be used to push forward a broad agenda for conservation. "We hope that we can make the Indonesian government take action to better protect endangered animals," he said. "There are international regulations that forbid commercial trading of the Sumatran rhino, but these rules are not enforced by at the national level. Poverty, corruption and poor compensation for the rangers creates ideal conditions for illegal poaching."

Insects benefit from plastic waste

Often invisible plastic waste in the ocean can harm birds, fish and other marine inhabitants. But not all organisms suffer because of it. Sea skaters use the waste as a deposit for their eggs.
Plastic has become an ever-present part of daily life. Plastic bottles, bags, furniture, electrical appliances, food packaging, construction materials - much of it ends up in the sea. Lighter than water, the plastic floats and is carried by ocean currents. All in all, there is an estimated 100 grams of plastic per square kilometer of ocean, which adds up to a volume of over 40,000 tons of plastic waste.
That's bad news for the many water birds, fish and turtles that eat the plastic and die because the cannot digest it. But there is also a sea creature that takes advantage of the plastic: the sea skater (Halobates sericeus). Like its freshwater relatives, this insect is about a centimeter long and stands on the surface tension of water. It skates back and forth above the sea. It lays its eggs underwater. But to do this, it needs a suitable substrate, such as any solid, floating debris.
An old plastic bottle floats on the water
(Photo: DW) Various organisms can use plastic as a habitat
Plastic replaces wood
The substrate does not have to be plastic: Traditionally, sea skaters lay eggs on algae, wood or floatable squid backbones known as cuttlebone.
"A very important substrate is pumice, which is released during volcanic eruptions, and is very similar to plastic in its characteristics. It is inorganic, it does not decompose easily and it's an ideal substrate to attach eggs to," said biologist Martin Thiel, who researches this particular habitat. Wood, for example, was much more important as a substrate in earlier centuries when large amounts of timber were still transported on waterways.
The industrial development of the 20th century led to barrages and dams that retain almost all the wood once used by the insects. But in the same period, the amount of plastic waste has dramatically increased. Today there is nearly 100 times as much plastic as there was in the 1970s. Researchers from the Institute of Oceanography at La Jolla University in California have now shown that the sea skater has much more room for its eggs. A lot of plastic collects in convergence zones where various currents come together.
Discarded fishing line 
(Photo: picture alliance/ Hinrich Bäsern) Fishing line: dangerous for some, but an ideal home to tiny organisms
While the sea skater once again has plenty of room for its eggs, that does not necessarily mean that it can also reproduce indefinitely. The limited food supply in the Pacific Ocean limits its growth. In addition, the sea skaters compete with the other inhabitants of the convergence zones.
"On this floating debris, there is a very particular community of organisms that has adapted to the conditions there," said Thiel, who reviewed the research of his Californian colleagues.
Advantageous for fishers
Each piece of plastic is first occupied by algae. Then other organisms establish themselves - like barnacles that are, in fact, shellfish. And then come the predators. The sea skaters are joined by slugs looking for nutrients on which they can prey.
"There are also moss animals and many other organisms that take hold on plastic. It goes all the way up to many little fish, some larger fishes and even tuna," Thiel said.
The plethora of life forms drawn to the floating ecosystems also have their uses for humans. Fishing fleets place satellite emitters on rafts and let them float. Along with other floating debris, the rafts eventually end up in the convergence zones filled with fish, and the fishers can go off in search of tuna.
A turtle found dead on a coast in Spain

(Photo: DW) Turtles that consume plastic can die from its effects
Plastic has clear downsides, though. Through the constant ebb and flow of the tide and the aggressive UV rays from the sun, the plastic gets worn down into smaller and smaller pieces until it can barely be seen with the naked eye. Most plastic in the oceans is now a microplastic of this form. And a great deal of plastic waste is already microscopically small when it lands in the ocean to begin with.
Invisible debris
"Most are synthetic fibers from textiles, components from cleaning products, cosmetics and catalysts used in chemical production. Debris worn away from tires and from countless other grinding processes gets trapped in rainwater and moved to rivers and eventually into the ocean," explained Heinz-Dieter Franke, who works as a researcher at the Alfred Wegener Institute on the Heligoland archipelago. Franke added that since this plastic is invisible to the human eye, the public has long ignored the problem.
The smaller the plastic particles are, the more dangerous they can be for ocean inhabitants. Products of plastic decomposition can remain for a very long time in water. And surrounding toxins can also lodge themselves on the surface of plastic particles.
The invisible debris can easily be swallowed, broken down during digestion and make their way into other parts of organisms and, ultimately, into the food chain at large.
"As plastic particles decompose more, there's a greater risk of them affecting the hormonal health of organisms and leading to bigger problems," Franke said.
A polluted beach near Mumbai (ddp images/AP Photo/Rajesh Nirgude) As cities grow rapidly, the amount of plastic waste does too
Although the problem of plastic waste in oceans has long been known, researchers are still unsure about what exactly changes biologically in areas where there is a lot of plastic floating around. Questions about the role bacteria plays in further decomposing plastic remain unanswered.
"We have to keep in mind that this is an environment located very far out in the ocean and that makes it extremely difficult to research. We know very little about the ecology of this unique habitat," Thiel said.
It is clear, though, that some ocean inhabitants profit from the changes, and others do not. A possible increase of the sea skater populations could be good for the small fish that prey on them. But for larger plankton-eating organisms, it represents a negative development, since sea skaters consume plankton.
"The flow of energy and materials is being shifted," Franke said. "What that means exactly depends on which viewpoint you adopt."
For those who fish, it is positive when certain fish populations increase. But "that is looking at things too strongly from the human perspective," which cannot necessarily serve as a scientific criterion, Franke said.

Pirate sentenced to 12 life sentences

A US court has sentenced a Somali man to 12 life sentences after being found guilty of his role in the deaths of four Americans in 2011 at the hands of pirates.
A US federal court judge in Norfolk, Virginia on Monday sentenced a Somali man to 12 concurrent life sentences and two 20-year sentences after he was found guilty of acting as a ransom negotiator for pirates who commandeered an American yacht.
"Mohammed Shibin was a key participant in two of the most heinous acts of piracy in modern memory," US prosecutor Neil MacBride said in a statement following sentencing.
Federal prosecutors presented claims Shibin was part of an elite group skilled in ransom negotiation. Court documents reveal he was paid up to $50,000 (40,400 euros) in cash for his services.
In evidence presented to the court, prosecutors proved Shibin used the Internet to research the background of hostages to establish how much ransom to demand and which family members to make contact with for the money.
U.S. District Court Judge Robert Doumar found Mohammad Shibin guilty in April on 15 counts, including piracy, hostage taking, kidnapping and conspiracy. He was ordered to pay $5.4 million in damages.
Taken hostage
Pirates seized a boat carrying four Americans off the coast off Somalia in February 2011. Despite US military attempts to negotiate the release of Jean and Scott Adam, Phyllis Macay and Bob Riggle, all four were killed. The court held Shibin made monetary demands to each of their families prior to their murders.
In 2010, Shibin acted as a ransom negotiator for pirates who seized the Marida Marguerite, a German-owned motor vessel carrying 22 crew members. The group took control of the ship for seven months, with reports of torture by those on board.
In a recent report by the International Maritime Bureau, Somali piracy cost the global economy more than $7 billion, with pirates earning some $160 million from ransom demands.
"[Shibin's] multiple life sentences should put all pirates on notice that the Justice Department will hold you accountable in a US courtroom for crimes on the high seas," MacBride said.

jlw/mz (DAPD, Reuters, AP)