Happy hump day, View fans. Here are your morning links.
Why worry about moral hazard when bailouts seem so painless?
Andy Xie, former chief Asia economist at Morgan Stanley, asks who in China should pay for trust products that go bad. And he has this novel, mindboggling idea that the investors who bought them should bear the losses, rather than the government. "If the government bails everyone out this time around, it will be hit with an even bigger tab when the music's over in the property market," he writes in an article for Beijing-based Caixin Online. "While preventing a systemic crisis in coping with failing trust products should be a priority, indiscriminate bailouts would merely delay the inevitable and leave a bigger blowup in a year. In resolving the current problems, the central government must deal with two evil forces that are poisoning China's financial system: moral hazard and adverse selection." As you might have guessed, China's government has decided to do the opposite of everything Xie says.
Speaking of which, Chinese homebuyers are flocking to Australia.
Great article here by Bloomberg News reporters Nichola Saminather and Iain McDonald: "Tina Ford, an Australian public servant, said she could hardly believe it when her three-bedroom apartment sold this month for A$1 million ($877,000) at an auction in which all 16 registered bidders were ethnic Chinese." Such buying "by locally resident Chinese and those from mainland China is inflating housing bubbles in and around Sydney, where prices in some suburbs have surged as much as 27 percent in the past year. That's almost three times faster than the overall market." So if China ever let those trust products default, Sydney's housing market probably would feel the effects.
And on a related note, Hank Paulson says we're laying the groundwork in the U.S. for another market blowup .
The former Treasury secretary also said the U.S. should have wound down Fannie Mae and Freddie Mac when it had the chance. But too late now, because they're reporting profits again. So the government isn't going to do what is needed.
The SEC was too chicken to bust KPMG for getting too tight with its $100 million-a-year audit client, General Electric Co.
Francine McKenna, who first broke the story in 2011 that KPMG was lending tax employees from its own staff to GE, explains the whole auditor-independence mess and why the Securities and Exchange Commission wimped out. "These egregious violations are the result of complacency and coziness borne of long symbiotic relationships, rather than independent, skeptical, objective ones," she writes. The SEC looks really bad here -- even worse than usual -- especially when you consider that Mary Schapiro was the SEC's chairman when this investigation began, and now she sits on GE's board. Why aren't more people raising a stink about that?
Why did a crow and a gull attack two peace doves released by Pope Francis and two children in Vatican City?
Because the doves were white, writes Mel White at National Geographic: "If I had to bet on whether this is the End of Times or just a couple of predatory birds doing what they do naturally, I'd choose the second as more likely."
(Jonathan Weil is a Bloomberg View columnist.Follow him on Twitter.)
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