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DealBook: Treasury to Sell $18 Billion Worth of Additional A.I.G. Shares

September 9, 2012 by Leave a Comment

6:17 p.m. | Updated The Treasury Department said on Sunday that it plans to sell an additional $18 billion worth of shares in the American International Group, more than halving the government’s stake in the bailed-out insurer.

If completed, the offering would be the Treasury Department’s biggest divestiture yet of its holdings in A.I.G. It be nearly double the “re-I.P.O.” of May 2011, in which the government sold $8.7 billion worth of shares.

And it would reduce the government’s stake to well below 50 percent, a long-sought goal for both the insurer and the government. After the offering is completed, the Treasury Department would hold about 23 percent.

As part of the offering, A.I.G. has offered to buy back up to $5 billion of the shares sold. And should demand prove stronger than expected, the offering’s underwriters can expand the size of the sale by $2.7 billion, further reducing the government’s stake.

The latest stock sale is the latest move by the federal government to disentangle itself from one of its most significant bailouts from the financial crisis of 2008, in which A.I.G. received a $182 billion lifeline. The Treasury Department has already announced a number of stock offerings, beginning in May of 2011, that have whittled its stake in the insurer from 92 percent.

And last month, the Federal Reserve Bank of New York announced that it had sold off the final set of risky bonds that it had acquired from A.I.G. as part of the bailout. Collectively, the sale of those securities reaped about $9.4 billion in proceeds for taxpayers.

Treasury’s latest offering is being led by Citigroup, Deutsche Bank, Goldman Sachs and JPMorgan Chase.

Article source: http://dealbook.nytimes.com/2012/09/09/treasury-to-sell-18-billion-worth-of-additional-a-i-g-shares/?partner=rss&emc=rss

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DealBook: Lloyds Bank to Sell Private Equity Assets for $1.6 Billion

August 15, 2012 by Leave a Comment

António Horta-Osório, chief of Lloyds Banking Group.Carl Court/Agence France-Presse — Getty ImagesAntónio Horta-Osório, chief of the Lloyds Banking Group.

LONDON – The Lloyds Banking Group, the partly nationalized British bank, agreed on Wednesday to sell a number of its private equity investments to the British firm Coller Capital for around £1 billion, or $1.6 billion.

The move comes as the British bank, which received a government bailout, looks to shed so-called noncore assets in an effort to reduce its balance sheet.

Under the terms of the deal, the British private equity firm Coller Capital, which specializes in purchasing assets from investors, will buy a portfolio of investments from the Lloyds Banking Group worth around £1 billion. The agreement also includes the transfer of £220 million of unused investment capital to the private equity firm, according to a statement from the bank.

Last year, the portfolio of investments currently owned by the Lloyds Banking Group generated a £40 million loss, and will continue to be overseen by Lloyds, which will earn an annual management fee of £10 million.

Along with other European banks, the Lloyds Banking Group is selling assets in an effort to improve its profitability and reduce its exposure to risky investments.

During the first six months of the year, the bank reduced its noncore assets to £117.5 billion, a 27 percent decline from the period a year earlier.

The Lloyds Banking Group reported a £641 million net loss in the first half of the year after setting aside an additional £700 million to cover costs related to the inappropriate sale of insurance to customers.

The firm also said a number of its employees had received subpoenas or information requests from authorities related to the manipulation of the London interbank offered rate, or Libor.

Article source: http://dealbook.nytimes.com/2012/08/15/lloyds-banking-group-to-sell-private-equity-assets-for-1-6-billion/?partner=rss&emc=rss

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In Davos, Europe Is Pressed for Debt Crisis Solution

January 29, 2012 by Leave a Comment

DAVOS, Switzerland — World leaders turned up the pressure on Europe on Saturday to erect a more formidable wall of money against the sovereign debt crisis, warning that the euro zone continues to pose a severe threat to the global economy.

George Osborne, the chancellor of the Exchequer in Britain, said a bigger firewall was “a key to unlocking further confidence,” while Christine Lagarde, managing director of the International Monetary Fund, said the fund should be big enough to eliminate any doubts about European resolve.

“If it is big enough, it will not get used,” she said on Saturday during a panel discussion at the World Economic Forum here.

Echoing comments by United States officials, including Treasury Secretary Timothy F. Geithner on Friday, leaders in Davos said that aid to the euro zone from the rest of the world would be contingent on a larger commitment by Europe. Some critics have said it is perverse that the I.M.F., which is financed partly by developing countries, should be aiding wealthy Europe.

“Europe has to be making more effort; otherwise, I don’t think developing countries will want to pay more for the I.M.F.,” said Motohisa Furukawa, the Japanese official responsible for economic and fiscal policy.

The firewall, known formally as the European Stability Mechanism, would have a lending capacity of 500 billion euros ($656 billion) when it begins operating in July, replacing a temporary fund. European leaders are debating ways to increase the bailout fund’s resources to aid overindebted countries, but they face powerful opposition from voters in countries like Germany and have so far failed to act boldly enough to reassure financial markets.

In the short term, though, leaders have gained some breathing room because of emergency cash that the European Central Bank has provided to banks, a measure that has calmed markets. Euro zone leaders are more focused on dealing with what they see as the more immediate danger of a Greek default, and less on testing their taxpayers’ patience by increasing the size of the firewall.

Top officials and economists from outside Europe warned of complacency, and on Saturday in Davos they presented a much more pessimistic view of the European crisis than has been heard in previous days. While many European leaders and businesspeople have argued that the risk of a catastrophic breakup of the euro zone has declined, leaders of other regions said the crisis still had the potential to sow global misery.

“I’ve never been as scared as now about the world,” said Donald Tsang, chief executive of Hong Kong. He said the effect on the world financial system is unpredictable. “We do not know how deep this hole would be when the whole thing implodes on us,” he said.

Ms. Lagarde said: “No one is immune. It’s not just a euro zone crisis. It’s a crisis that could have collateral effects, spillover effects around the world.”

The undercurrent of their remarks was that European policy still lacks credibility in the eyes of the world.

“This has got to have an effect on influence, on perceptions of power in the world that are going to be significant for years to come,” said Robert B. Zoellick, president of the World Bank Group.

Nouriel Roubini, a professor of economics at New York University known for his pessimistic views, forecast Saturday that Greece would have to leave the euro zone this year, and said that there was at least a 50 percent chance that the euro zone would break up within three to five years.

“The euro zone is a slow-motion train wreck,” Mr. Roubini said during a separate panel discussion.

Speakers on Saturday did not say how big they thought the European firewall should be. But, again echoing American officials, they agreed it should be so enormous that no investor would question its integrity. That has not been true of Europe’s financial commitment so far, which has consistently failed to restore market faith in the euro.

Without mentioning Germany by name, Ms. Lagarde said that European countries that are able to should do more to increase domestic consumer spending and slow down efforts to cut government outlays.

“Some countries have to go full speed ahead and do that fiscal consolidation that is so much needed,” Ms. Lagarde said. “But other countries have space and can do something. They should certainly explore what they can do to boost growth in order to help themselves but also to help the rest of the zone.”

The European Central Bank continued to draw praise for providing emergency cash to banks and avoiding a credit squeeze.

“There is not going to be a Lehman-style moment in Europe,” said Mark J. Carney, governor of the Canadian central bank, referring to the collapse of investment bank Lehman Brothers in 2008, which helped set in motion the financial crisis. But he added, “That is different than having a well, fully functioning banking system.”

The officials also drove home the message that Europe cannot expect more help from the outside world, by way of the I.M.F., unless it does more to help itself.

As the Greek government made slow progress on Saturday to reach a deal with creditors to reduce its overall debt, Mr. Osborne expressed amazement that such a tiny country continued to pose a threat to global stability.

“The danger is that the tail wags the dog throughout this crisis,” he said.

Article source: http://www.nytimes.com/2012/01/29/business/global/in-davos-europe-is-pressed-for-debt-crisis-solution.html?partner=rss&emc=rss

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Grim Economic Forecast for Greece as It Negotiates With Creditors

January 27, 2012 by Leave a Comment

The concerns, stemming from an analysis that the I.M.F. has been quietly sharing with European officials and Greece’s creditors in recent weeks, come at a crucial time for Athens.

The new Greek government is in dual-track talks with private and public sector creditors, trying to make the case that its program for reducing long-term debt is working. The government seeks to persuade private creditors to provide relief by taking some losses on their bond holdings, and to persuade its public sector lenders to release a scheduled allotment of bailout money, possibly as much as 30 billion euros ($39 billion).

Without that next payout, the nation is almost certain to default when a bond repayment of 14.4 billion euros ($18.7 billion) comes due in March.

The repercussions of a default would be hard to predict. But it could create a contagion of financial fear that could spread to other weak euro zone economies and force Greece to become the first nation to leave the 17-member euro currency union, a departure whose social and political ramifications might also defy prediction.

A key to securing the next bailout payment could be Greece’s reaching a new debt-revamping agreement with its private sector bondholders. Charles H. Dallara of the Institute of International Finance, the group representing the private creditors, was to meet Thursday evening in Athens with the Greek prime minister, Lucas D. Papademos. There was no word about the status of those talks by late Thursday.

Negotiations between the two sides have foundered twice already over disagreement on how much loss private investors should be willing to absorb on bonds.

As Greece’s woes have escalated, so have its demands on the amount of loss the creditors should accept. While creditors have said they would be willing to accept a loss of 70 percent on their new bonds, Greece and its backers have been pushing for more by demanding that these securities carry an interest rate below 3.5 percent.

Greece is effectively bankrupt, staggering under a debt load that the I.M.F. now estimates as equal to about 160 percent of its gross product, with an economy so weak the government can no longer meet debt payments on its own. That is why it is to receive as much as 130 billion euros ($169 billion) in bailout money under an agreement struck last October with the so-called troika: the European Union, the European Central Bank and the I.M.F.

In return for regularly scheduled installments of that money, however, Greece is supposed to be meeting strict economic reform and budgetary targets.

Greece’s last bailout package was underpinned by an I.M.F. analysis that forecast a debt-to-G.D.P. ratio of 120 percent by the year 2020. Now the I.M.F. is forecasting a ratio that could rise to 135 percent by that year, largely because of a collapsing economy that shows no sign of reversing course.

The new projections cast new doubt on whether Greece can ever escape its downward financial spiral without defaulting on its debts.

Greece’s economy is estimated to have shrunk by more than 6 percent in 2011. Some specialists say they believe that the downturn for this year could be as much as 5 percent. And the general sense among economists from the troika of public institutions financially supporting Greece is that the economy has not yet found the floor.

“We have become much less optimistic on growth,” said one official from the group, who was not authorized to speak publicly. “And if growth falters, the debt-to-G.D.P. ratio goes up. One cannot be in denial of this reality.”

Bankers familiar with the details of the new I.M.F. forecast say it has been held up as the main reason private sector bondholders should be forced to accept a larger loss on their Greek securities. In recent days, top European officials and the managing director of the I.M.F., Christine Lagarde, have talked about how European institutions might have to contribute more funds to keep Greece afloat.

Article source: http://www.nytimes.com/2012/01/27/business/global/grim-economic-forecast-for-greece-as-it-negotiates-with-creditors.html?partner=rss&emc=rss

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DealBook: Hedge Funds Scramble to Unload Greek Debt

January 25, 2012 by Leave a Comment

So much for that big fat Greek payday.

Hedge funds that in the last month or so have purchased an estimated 4 billion euros ($5.2 billion) of beaten down Greek bonds that mature on March 20 are now trying to unload their positions, according to brokers and traders.

That is because it is becoming clear to one and all that Greece — under pressure from its financial backers — is preparing to impose a broad-based haircut that would hit all investors with a loss of 50 percent or more, whether they agree to the deal or not.

The problem is that while buying the bonds over the last few months was easy, as many European banks were unloading their positions, getting out now is proving to be near impossible. Liquidity has dried up and investors are avoiding Greek paper as if it were the plague.

The poor outlook for early maturing Greek bonds was compounded on Wednesday when Christine Lagarde, managing director of the International Monetary Fund, said the public sector might have to participate in a restructuring deal with private sector creditors.

“There was a lot of volume going in, but not a lot going out,” said one broker, speaking on condition of anonymity. The broker said prices for March 2012 bonds had slipped to around 35 cents on the dollar from a range of 40 cents to 45 cents.

Starting in December, the counterintuitive, go-long Greece bet was one of the more popular pitches made to funds in New York and London.

Investment banks — Merrill Lynch was particularly aggressive in recommending the trade, investors say — argued that even though Greece was near bankrupt, those who bought the paper maturing in March could double their money when Greece received its latest bailout tranche due that month. The bulk of that tranche would be paid to bondholders to keep Greece solvent, just as was the case with past payments from the European Union and the International Monetary Fund.

Greece might well restructure its debt, brokers said, but added that was likely to happen later and would not affect the March payout.

Brokers estimate that of the 14.5 billion euros of these bonds outstanding, the largest holder is the European Central Bank, which bought these securities in 2010 at a price of around 70 cents in an early, ultimately futile attempt to boost Greece’s failing bond market. The brokers say that 4 billion to 5 billion euros of bonds are owned by hedge funds at an average cost of around 40 cents to 45 cents, with some of the larger positions being held by funds based in the United States that have large London offices.

Now, with momentum building in Europe for an agreement on a 50 percent-plus haircut to be reached before March 20 — one that would be legally binding on all holders — the smart money is not looking so smart anymore.

“It was a very binary trade,” said one hedge fund executive who listened to the pitch but took a pass. “If you got paid, you double your money in a month. But you may also look like an idiot.”

Article source: http://feeds.nytimes.com/click.phdo?i=3483c8f5ddd5aa485e27c01e8bc2e6a8

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Bank Bondholders to Be Paid While Irish Public Howls

January 24, 2012 by Leave a Comment

The payment is part of Ireland’s effort to shore up Anglo Irish, a state-owned bank now known as the Irish Resolution Bank Corporation, in a rescue that ultimately could top 47 billion euros, or $61 billion.

The European Central Bank put Ireland on notice last week that defaulting on payments to the bondholders could lead to dire financial consequences, the equivalent of a financial “bomb” in the Irish economy, according to Ireland’s transport minister, Leo Varadkar, who made the comments over the weekend on an Irish television program.

But that has not quelled a public debate about whether taxpayers should pay bondholders who bet on investments in a bank that was bailed out and nationalized in 2009 after the collapse of the Irish real estate market. In general, unsecured bondholders reap a higher return because the bonds are not guaranteed and therefore carry a higher risk.

The critics — among them labor unions, opposition parties and a newly formed coalition of social justice groups — are incensed that the corporation is about to pay out more than 1.25 billion euros on Wednesday and then a promissory note payment of 3.1 billion euros in March.

“We think it is irrational and indefensible,” said Mary Lou McDonald, a deputy leader of Sinn Fein, the left-of-center political party. “We take the view that those who take a gamble take a loss when their investments go south.”

“Right now there is a simmering rage that is still mainly below the radar,” she added.

Repayment is a divisive issue because Irish taxpayers face years of austerity to pay for the bailout of Anglo Irish and other Irish banks. Measures include budget cuts like the elimination of hundreds of nursing home beds, teacher layoffs and the closing of rural post offices and police stations.

Ireland’s current government rose to power with pledges to impose losses on bondholders in Irish banks, but it changed course under pressure from the European Central Bank to pay off the bonds.

During a news conference last week, an Irish television journalist repeatedly pressed a representative of the central bank, Klaus Masuch, for a clear explanation of the payout. He answered that it would ensure confidence in the banking sector.

The Irish government also fears that a default could raise borrowing costs for other state-controlled banks and power companies, pushing up mortgage and utility bills.

The identities of the senior bondholders have never been officially disclosed, though critics and some politicians have tried to pry out the information.

Before the crash, bank bonds were often bought by pension funds and insurance companies as a reliable way to earn interest. But after Anglo Irish was nationalized, many of the more conservative bondholders sold their securities on secondary markets at steeply discounted rates.

The corporation says it does not know who the bondholders are. It is making the payment through a clearing system using a bank, which in turn pays the bondholders.

“Such securities are free tradable,” the corporation said Monday, noting that “an issuer does not have access to the records of the clearinghouse.”

A year ago, David Norris, an independent member of the Irish Senate, used parliamentary privilege to read aloud the names of bondholders, including several London financial institutions, before he was ruled out of order. He had drawn his information from Paul Staines, a former bond trader who writes a blog from London under the name Guido Fawkes. Mr. Staines posted a list of bondholder names on his blog, although he did not disclose his source.

“My sense is that the holders of these type of bonds are completely different now, with a much greater sense of risk,” Mr. Staines said.

Bondholders and investment banks are reluctant to talk about Ireland’s repayment. The Institute of International Finance, the leading global banking lobby group, declined Monday to comment on the issue. The group is representing bondholders in negotiations in Greece for write-downs of its bonds.

Article source: http://www.nytimes.com/2012/01/24/business/global/bank-bondholders-to-be-paid-while-irish-public-howls.html?partner=rss&emc=rss

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Euro Woes Could Revive Bout of Market Volatility

January 17, 2012 by Leave a Comment

Investors are bracing for a return to volatility when markets in the United States reopen on Tuesday as renewed gloom about the debt crisis in Europe threatens to end the calm that has prevailed on Wall Street in recent weeks.

“We’ve had a lull, but I expect the pressure to start growing again with a renewed round of financial market agitation,” said Charles Wyplosz, a professor of international economics at the Graduate Institute of Geneva. “There will be a renewed sense of emergency, which doesn’t make for clearer thinking.”

Late last week, Standard Poor’s cut its ratings on shaky borrowers like Italy and Spain and stripped France of its once-sterling AAA debt rating. On Monday, it followed up with another downgrade, this time on a bailout fund aimed at shoring up weaker members of the euro zone. The rating on the European Financial Stability Facility was lowered to AA+ from AAA, and S. P. warned that more cuts could come if Europe failed to address its worsening fiscal situation.

Klaus Regling, chief executive of the facility, said the downgrade of the fund by a single agency would not reduce its lending capacity of 440 billion euros ($556 billion). The fund “has sufficient means to fulfill its commitments” until a permanent fund, the European Stability Mechanism, starts operating in July, he said.

Anxiety is also building over the fate of the country hardest hit by the European debt crisis, Greece. Representatives of the European Union, the European Central Bank and the International Monetary Fund resume negotiations with the Greek government Wednesday over the next step in a planned 130 billion euro bailout, even as they try to force hedge funds and other private holders of Greek bonds to accept large losses to make the country’s debt burden more manageable.

If Athens cannot secure concessions from the bondholders or the bailout money it needs from the so-called troika in the coming weeks, Greece could default by March 20, when 14.5 billion euros in debt comes due and must be repaid. The specter of a disorderly default, rather than the voluntary losses now being negotiated, unnerved stock markets around the world last fall and could prompt renewed selling now.

The next several weeks bring what are shaping up to be a series of turning points on both sides of the Atlantic. Even as the negotiations in Greece proceed, several debt sales by other European borrowers this week should provide clues to how seriously investors are taking the recent warnings by S. P. and other ratings agencies.

Highlighting the political stakes, European leaders are set to gather for a summit meeting in Brussels on Jan. 30. Investors had hoped for more clarity on Greece’s fate before they gathered, but that is looking much less likely, said Julian Callow, chief European economist at Barclays. What is more, Italy has 26 billion euros in debt coming due on Feb. 1, putting additional pressure on European leaders to reassure nervous markets.

In the first test of investors’ appetite for debt since the broader downgrade, France sold 8.6 billion euros ($10.9 billion) of short-term debt securities on Monday at yields slightly lower than in the previous auction. The yields on the country’s 10-year bonds had fallen 0.04 percentage point by late afternoon, to 3.011 percent.

The stability facility is set to auction bills Tuesday, while Spain and Portugal have debt sales later in the week, all of which will be closely watched by investors, said Ron Florance, the managing director for investment strategy at Wells Fargo Private Bank. “Everyone is just kind of holding their breath to see how these auctions go,” Mr. Florance said. “Investors are just going to have to be able to ride through the volatility; it’s going to be bumpy.”

Since late November, Wall Street has taken a more optimistic turn, with the Dow Jones industrial average rising by more than 1,000 points, to close at 12,422.06 on Friday. Signs of improvement in the job market have led some observers to conclude that what had been a very anemic recovery in the United States might be finally gathering some steam.

But if the European banking system seizes up and economies in the region go into a steep recession, the chances that United States can insulate itself are slim, analysts said. “It seems pretty clear to me that once Europe reaches a tipping point, nowhere else in the world can decouple,” said Benjamin Bowler, global head of equity derivatives research at Bank of America Merrill Lynch.

In addition to the news from Europe, American markets will also be affected by earnings news as large companies report their fourth-quarter results, including several financial companies over the next few days. Citigroup and Wells Fargo will announce earnings on Tuesday, with Goldman Sachs reporting on Wednesday and Bank of America on Thursday. Slow capital markets activity is expected to weaken profits across the board, but analysts will be looking for clues about the health of consumer spending and corporate borrowing in the latest results.

David Jolly and Peter Eavis contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=ccb63b65cb46176158cd3bf870fca0e5

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Markets in Europe Little Moved by French Downgrade

January 16, 2012 by Leave a Comment

Analysts said that markets were watching a flurry of activity in the coming days ahead of the European Union’s next big summit meeting, which is to be held Jan. 30 in Brussels. Much of the attention is focused on Greece, where talks on the amount by which private-sector lenders would write down the value of their Greek bond-holdings broke down last Friday.

Greek officials were traveling to Washington on Monday for debt talks, according to Reuters, while the so-called troika of international lenders — officials from the E.U., the International Monetary Fund and the European Central Bank — was due to return to Athens on Tuesday. The Institute of International Finance, which was negotiating on behalf of private holders of Greek debt, was to resume talks by midweek.

The Greek prime minister, Lucas Papademos, told CNBC television in an interview
broadcast Monday that “the next few weeks are particularly challenging.” Officials must both conclude discussions with private investors while formulating “a new economic adjustment program for the period 2012-2015” in light of Greece’s worsening budget figures, so as to meet conditions set by the troika for new bailout loans.

Mr. Papademos said the goal was to have both worked out “over the next two to three weeks.”

“The progress or otherwise of these negotiations will probably dictate how the market trades over the next few weeks,” said Gary Jenkins, a director of Swordfish Research, according to The Associated Press.

Also Monday, the French president, Nicolas Sarkozy, was in Madrid for talks with the Spanish government, while Herman Van Rompuy, the president of the European Council, was meeting with Prime Minister Mario Monti of Italy in Rome.

The decision by Standard Poor’s late Friday to cut France’s AAA credit rating by one notch had been widely expected. The agency cited a deteriorating economic situation and disappointment with leaders’ efforts to address the euro crisis. S.P. also cut Austria, Italy and six other European countries.

Moody’s Investors Service, a rival to S.P., on Monday said it was maintaining its own rating of France at AAA for the time being, with the results of a review that is currently under way to be announced before April.

In afternoon trading, the Euro Stoxx 50 index, a barometer of euro zone blue chips, and the FTSE 100 index in London were little changed.

French 10-year bonds were unchanged at 3.05 percent. Italian 10 year bonds were yielding 6.65 percent, up 5 basis points, while Spanish 10-years were yielding 5.16 percent, up 1 basis points. A basis point is one-hundredth of a percent.

Reuters cited unidentified traders as saying the European Central Bank had intervened in the secondary bond market again, buying Italian and Spanish securities to relieve some pressure on yield.

German 10-year bonds, the European benchmark, were unchanged, trading to yield 1.76 percent.

U.S. equity index futures fell modestly. Wall Street markets were closed Monday for the Martin Luther King Jr. holiday. The Dow Jones industrial average fell 0.4 percent on Friday.

The dollar was mixed against other major currencies. The euro ticked up to $1.2658 from $1.2656 late Friday in New York, while the British pound fell to $1.5303 from $1.5317. The dollar fell to 76.80 yen from 76.97 yen, but gained to 0.9535 Swiss francs from 0.9524 francs.

Asian shares were broadly lower. The Tokyo benchmark Nikkei 225 stock average fell 1.4 percent. The Sydney market index S.P./ASX 200 fell 1.2 percent. In Hong Kong, the Hang Seng index fell 1 percent and in Shanghai the composite index declined by 1.7 percent.

Article source: http://www.nytimes.com/2012/01/17/business/global/daily-stock-market-activity.html?partner=rss&emc=rss

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France’s Treasury Chief Works to Guard Credit Rating

January 3, 2012 by Leave a Comment

Mr. Fernandez, the head of the Treasury within the Ministry of the Economy, Finance and Industry, has already been through a similar crisis-management exercise. That came in early August, when Standard Poor’s cut the top credit rating of the United States government while most of the French elite was on vacation.

Within hours on a summer Saturday morning, Mr. Fernandez helped organize a series of emergency calls with his boss, Finance Minister François Baroin, and others in Paris’s circle of policy makers, to prevent the American crisis from sending a financial tsunami across the Atlantic.

Later that day, Mr. Baroin appeared on French television to question the validity of the United States downgrade. President Sarkozy interrupted his vacation in a show of engagement. But behind the scenes, Mr. Fernandez did much of the heavy lifting.

It was not the first time in the two-year-long European crisis that Mr. Fernandez has quietly kept things moving. And it probably will not be the last.

As France and Germany take the lead in trying to hold the euro currency union together, Mr. Fernandez has emerged as one of Paris’s top power brokers — whether in promoting the French position on the banking sector’s participation in a Greek bailout, or the creation of a rescue fund for troubled countries, or the recent deal by most European Union governments to shore up the foundations of the euro zone.

So much confidence has been placed in Mr. Fernandez that the French news media have started calling him the “guardian of the triple-A.”

But Mr. Fernandez, at 44 a youthful technocrat whose soft blue eyes belie an inner sang-froid, chuckles about the moniker with an almost embarrassed air.

“I’m a civil servant,” he said demurely. “I do what I have to do.”

What he must do now could prove crucial to how well France weathers the country’s seemingly inevitable debt downgrade. Because the demotion has been widely telegraphed by the three major credit rating agencies, Mr. Fernandez and other officials do not expect the impact to be devastating.

Still, a lower credit rating will probably make it more expensive for France to service its debt, and more difficult for the Europewide rescue fund — of which France is a major backer — to operate. That, in turn, could renew tensions between France and Germany over how to manage the euro crisis.

For every photo op in which Mr. Sarkozy and Chancellor Angela Merkel of Germany trumpet a new step forward, Mr. Fernandez has spent countless hours behind the scenes with an influential man in the presidential cabinet, Xavier Musca, Mr. Sarkozy’s powerful chief of staff, and Berlin’s point man, Jörg Asmussen, to smooth and soothe the sometimes testy French-German relationship.

Mr. Fernandez also exchanges e-mails frequently with officials at the Treasury Department to keep up on developments across the Atlantic. And his ability to parse mind-numbing financial issues better than nearly any other French civil servant helped French leaders look smart during the Group of 20 meetings to which France played host in 2011.

Doing all this largely below the public radar is apparently the way Mr. Fernandez prefers to work. In a country where discretion is a highly prized commodity, his effectiveness comes from operating in the shadows.

“Ramon is the right man in the right place,” said Christine Lagarde, who worked with Mr. Fernandez until last summer, when she resigned as France’s finance minister to become the managing director of the International Monetary Fund.

“He is smart, experienced, a good negotiator, but also a critical part of a close-knit network of advisers to the leading political figures,” Ms. Lagarde said.

For Mr. Fernandez’s efforts, he was made a chevalier of the French Legion of Honor in December, in a ceremony under the gilded ceilings of the Élysée Palace. Mr. Sarkozy cited Mr. Fernandez as a pillar in the management of France’s future.

Yet such moments are rare. Mr. Fernandez generally eschews the elitist trappings embraced by most other government dignitaries.

He rides a motor scooter to work, for example. The idea of being chauffeured around “gives me a headache,” he said. On the scooter, “you take some fresh air, and you are forced to focus on just one thing.”

Article source: http://feeds.nytimes.com/click.phdo?i=89d4e3e22c8c3d4a7241cd5fae9e99f3

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Ramon Fernandez, French Point Man, Keeps Out of the Limelight

January 2, 2012 by Leave a Comment

Mr. Fernandez, the director general of the Treasury within the Ministry of Economics and Finance, has already been through a similar crisis-management exercise. When Standard Poor’s cut the top credit rating of the U.S. government in early August, most of the French elite were on vacation.

To prevent the American crisis from sending a financial tsunami across the Atlantic, Mr. Fernandez scrambled on a summer Saturday morning to organize a series of emergency calls with his boss, Finance Minister François Baroin, and others in the circle of main policy makers.

Later that day, Mr. Baroin appeared on French television to question the validity of the U.S. downgrade. Mr. Sarkozy interrupted his vacation in a show of engagement. But behind the scenes, it was Mr. Fernandez who took on the heavy lifting.

It was not the first time in the two-year European crisis that Mr. Fernandez has been at the center of the storm. And it will not be the last.

As France and Germany take the lead in trying to keep the euro together, Mr. Fernandez has emerged as one of the top power brokers in Paris, advancing the French position on a range of issues, including the banking sector’s participation in a Greek bailout, the creation of a rescue fund for troubled countries and the recent deal to shore up the foundations of the euro currency union.

So much confidence has been placed in Mr. Fernandez that the French press have started calling him the “guardian of the triple-A.” At 44, a youthful technocrat whose soft blue eyes belie an inner sang-froid, Mr. Fernandez chuckles about the nickname with an almost embarrassed air. “I’m a civil servant,” he says demurely. “I do what I have to do.”

What he must do now could prove crucial to how France bears the brunt of the shock should the country be downgraded. Because the event has been widely telegraphed, Mr. Fernandez and other officials do not expect the impact to be devastating. Still, it will probably make it more expensive for France to service its debt, and more difficult for the Europe-wide rescue fund — of which France is a major backer — to operate. That could renew tension between France and Germany over how to manage the problem.

Indeed, For every photo opportunity in which Mr. Sarkozy and Chancellor Angela Merkel of Germany trumpet a new step forward in the euro crisis, Mr. Fernandez has spent countless hours behind the scenes with the other go-to man on the French team, Xavier Musca, Mr. Sarkozy’s chief of staff, and Berlin’s point man, Jörg Asmussen, the deputy finance minister, smoothing rough patches in the sometimes testy French-German relationship.

Meanwhile, Mr. Fernandez exchanges e-mails frequently with officials at the U.S. Treasury Department to keep current on developments across the Atlantic. His ability to parse mind-numbing financial issues better than nearly any other French civil servant helped French leaders look smart during the meeting of the Group of 20 leading economies that France hosted this year.

For all of his responsibilities, Mr. Fernandez barely registers on the public radar. That is the way he likes it. In a country where discretion is a highly prized commodity, his effectiveness comes from operating in the shadows.

“Ramon is the right man in the right place,” said Christine Lagarde, who worked with Mr. Fernandez until last summer, when she resigned as the French finance minister to become the managing director of the International Monetary Fund. “He is smart, experienced, a good negotiator, but also a critical part of a close-knit network of advisers to the leading political figures.”

In December, Mr. Sarkozy made Mr. Fernandez a chevalier of the French Legion of Honor, calling him a pillar in the management of France’s future.

Article source: http://feeds.nytimes.com/click.phdo?i=566bea3a7e8309ef73dd176707558aac

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