THE DISTILLERY: ANZ pickle

The tone of the news feed out of Europe has been noticeably less dire – one wouldn't say it's been good, however – and the cost of funding for Australia's major banks has reacted accordingly. The Sydney Morning Herald's Elizabeth Knight says that, unlike last month, if ANZ Bank ignores the Reserve Bank and raises interest rates it'll have to make the case that it's taking out a safety net – that's a hard sell when mortgage holders drive the narrative. But Europe is in trouble and The Australian's Adam Creighton remakes the case for Greece to be allowed to exit the eurozone, which would certainly put pressure on ANZ's margins, as well as every other bank one can think of. Elsewhere, local councils in NSW have at least $300 million in unrealised losses in their investment portfolios, says one commentator, while another describes how vulnerable Australia's superannuation system is to holes in the global regulatory system.

First up in this morning's Distillery is The Sydney Morning Herald's Elizabeth Knight, who explains that the big four banks are still writing loans that are barely profitable. However, because a perceived easing of the European debt crisis has kept funding costs from rising in the last month, an out of cycle rate hike at today's ANZ meeting will be more difficult to pull off.

"In this new tactical game ANZ gained leadership but lost control. The only institution with less skin in the game is the Reserve Bank. Its decisions are noted by the banks but do not greatly influence them. The public still see the Reserve's cash rate decisions as important but over time will come to realise that the lenders are marching to a different beat. The cost of bank funding has undeniably risen – although not over the past month. If any of the banks move rates up over the next week it would be an aggressive act to improve margins rather than a defensive one to maintain them.”

Given yesterday's far-from-encouraging jobless numbers, ANZ boss Mike Smith mightn't have to wait long before he can increase margins by not passing on a full cut from the Reserve Bank. But margin pressure could very easily re-emerge from the Greek debt crisis, remedy efforts for which are predictably futile, The Australian's Adam Creighton explains.

"Scottish economist and philosopher David Hume wisely wrote 270 years ago that ‘contracting debt will almost infallibly be abused by every government'. As it wallows in debt, Greece is a case in point. Yet the country's supposed rescuers deserve their share of blame too. The latest attempt to prevent Greece from defaulting, whereby some creditors agree to accept less generous repayment terms on their loans, is doomed to fail. It prolongs Greece's economic pain, and obfuscates the unseemly transfer of wealth from ordinary European taxpayers to elite financial institutions."

The Age's Michael West brings word from Tony Hall and his campaign to explain to NSW councils that they're up for $300 million in losses from derivatives in their investment portfolios.

"This shortfall may be a conservative estimate. Gosford Council alone has been exposed to $160 million in toxic credit instruments. In trying to tell his story though, and in pushing for the rights of ratepayers, Tony Hall fell foul of his own council. He has even been subject to an investigation for suspension by the NSW Director of Local Government, which kicked off last May. It yet drags on. But Hall won't give up. Councils are hiding large losses, he says. They have neither the financial expertise nor the will to evaluate the risks and take the necessary writedowns to their investment portfolios.”

And fourthly, The Australian Financial Review's Chanticleer columnist Tony Boyd says the world's regulatory safety net is non-existent and Australian superannuation savings are vulnerable.

"A closer analysis of how American citizen Jack W. Flader jnr got away with $123 million in Australian superannuation savings without being punished shows that the world's regulatory safety net is a joke. The regulators paid to protect your super or enforce the law are no match for the new breed of scam merchants who operate in multiple jurisdictions. They are adept at using legal entities in several countries and they know how to take advantage of the benefits of regulated capital markets. The methods used to rip people off are quite elaborate and involve complex webs of companies incorporated in various jurisdictions including Cayman Islands, Hong Kong, Anguilla, Belize, Cook Islands and British Virgin Islands. Also, they make good use of the international banking system as well as networks of fiduciary bodies run by respected institutions."

Yesterday's employment numbers caught the attention of many commentators. The Sydney Morning Herald's Michael Pascoe and The Australian's Judith Sloan broadly argue that such a phenomenon can be put down to the fact that many business writers ignore the futility of commenting on monthly statistics, which can be terribly unreliable when isolated. In the same spirit, The Age's Tim Colebatch says Treasurer Wayne Swan has rightly been caught out bragging that the January jobs figures were a sign of improvement, when it was clear they were just statistical noise. The Herald Sun's Terry McCrann says Swan will totally earn his ‘world's greatest treasurer' award if he can deliver a budget in two months that puts Australia on a path for growth and surplus, while the same newspaper's Peter Martin gives a good rundown of the latest stats.

In company news, The Sydney Morning Herald's Malcolm Maiden says Telstra's agreement with the government is just the beginning of a company-wide transformation. The Australian's Richard Gluyas says CVC Asia Pacific's push towards asset sales at lower multiples than its debt buys time, but little else, while his colleague Bryan Frith touches base with Troy Harry's Trojan Equities. The same newspaper's Criterion columnist Tim Boreham looks at McMillan Shakespeare, QBE Insurance Group and the yet-to-be-listed Osprey Medical. Meanwhile, Fairfax's Insider columnist Ian McIlwraith lends a sympathetic ear to Clive Palmer who has been valued by Forbes magazine at $US795 million ($752.9 million), far less than the $5 billion BRW put the mining tycoon at.

In market news, The Australian's John Durie acknowledges that this year is going to be a tough one for Australian stocks, but there's reason to hope. Giles Parkinson explains in The Australian why investors haven't warmed to geothermal yet.

The Age's Michael West looks at Bob Carr's time at Macquarie and suggests his departure to become Australia's foreign minister could be a stunning example of good timing.

And finally, The Age's Asian affairs reporter Peter Cai finds a Chinese magnetite iron ore investment in Western Australia turning very sour.