Behind Your Business

IT HAS taken almost two years, but the debate over the restructuring of American finance has at last reached the issue at the heart of the industry’s reregulation: systemic risk. The idea is simple, the execution controversial. Policymakers want to help prevent the ailments of a single institution from infecting the system as a whole by limiting the exposures that firms have to any one counterparty. The implementation, typically of the mind-numbing Dodd-Frank act, is horribly complex.The core provision on “single counter-party exposure limits” comprises only 81 words among the hundreds of thousands in the act. The final rules were supposed to be in place by January 22nd, but the Federal Reserve issued its initial proposal just weeks before, on January 5th, and the comment period, prompting a deluge of letters, ended only on April 30th. Some of the comments were incoherent rants. The ones from trade groups and financial firms are far from objective. But the depth and the extent of the criticisms will require a detailed response.The law calls for institutions to limit their exposure to any single institution to no more than 25% of their capital, but the Fed has gone beyond this (as permitted in the act). It has proposed that large, important institutions should have no more than 10% exposure to a counterparty. It also wants lenders to provide it with ongoing credit-exposure...

FAREWELL to the Canadian penny. The last one-cent coin, in circulation ever since Canada developed its own currency in 1858, was minted on May 4th. The coin had become a nuisance, weighing down consumers’ wallets and costing more to produce than it was worth.The penny is just the latest in a series of coins to disappear after centuries of use. The British farthing was worth just a quarter of an old penny, or one-960th of a pound, but it still lasted almost 700 years before it disappeared from circulation in 1960. Remarkably enough, half-farthings were also issued in the 19th century, and even smaller coins (third- and quarter-farthings) were used abroad.Inflation killed the farthing just as it has killed the Canadian cent. Small coins are living on borrowed time once they become useless for buying individual items. A single penny could buy the first British postage stamp, the Penny Black, in 1840 and was still sufficient to buy a small ice cream for a short-trousered Buttonwood in the late 1960s. Nowadays you would struggle to find a humble ice lolly selling for less than a pound.By the time the farthing...

THE sight of a pack of adults shouting at each other is rarely edifying. Unless, that is, the set-to is in the “ring” of the London Metal Exchange (LME), whose old-fashioned system of open-outcry trading does much to set global prices for industrial metals and which is now itself the subject of a bidding battle. Only Hong Kong Exchanges and Clearing had publicly said that it would submit an offer for the world’s leading metals exchange by this week’s deadline of May 7th, but CME Group, InterContinental Exchange and NYSE Euronext are also widely reported to be in the frame.The member-owned LME, which started business 135 years ago in premises above a hat shop in the City of London, resolved last year to see what it might be worth to globalising rivals. As one of the world’s few remaining member-owned exchanges it is an inviting target, even at an estimated price of £1 billion ($1.6 billion). Acquiring it would give all the likely suitors a bigger global footprint, important for any ambitious exchange group, and a ready-made business in non-ferrous metals, demand for which...

SIMMERING anger over bankers’ pay was fuelled afresh on May 9th when a British court ruled that Commerzbank, a serially bailed-out German bank, had to pay bonuses promised to some of its investment bankers in London even though it subsequently posted colossal losses and collapsed into the arms of the state. The court ruled, reasonably enough, that a promise made was one that really ought to be kept.

The answer of some policymakers is to restrict what can be pledged in the first place. On May 14th a committee in the European Parliament is due to vote on a proposal to limit bankers’ annual bonuses to no more than their base salaries. The proposed rule, which would be wrapped into a European regulation raising capital standards on banks, is thought likely to win parliamentary assent. How far it gets after that is not clear, but the banker lobby is desperately short of politicians who will publicly defend big bonuses. “You can talk to me about it but I won’t go anywhere near it,” was the response one lobbyist got from a sympathetic member of the European Parliament. Said another: “It makes absolutely no economic sense...

QUIET carriages on trains are a nice idea: travellers voluntarily switch phones to silent, turn stereos off and keep chatter to a minimum. In reality, there is usually at least one inane babbler to break the silence.A couple of problems prevent peaceful trips. First, there is a sorting problem: some passengers end up in the quiet carriage by accident and are not aware of the rules. Second, there is a commitment problem: noise is sometimes made by travellers who choose the quiet carriage but find an important call hard to ignore.The train operators are trying to find answers. Trains in Queensland, Australia, are having permanent signs added to show exactly what is expected; a British operator has invested in signal-jamming technology to prevent phone calls. Microeconomics suggests another approach: putting a price on noise.Fining people for making a din would surely dissuade the polluter and is a neat solution in theory, but it requires costly monitoring and enforcement. Another tack would be to use prices to separate quiet and noisy passengers—in effect, creating a market for silence. A simple idea would be to...