This pairing is great for stability. Commercial banks take deposits and make loans. They have a capital base to offset the riskier stuff that goes on in investment banks that underwrite securities and engage in trading.

The pairing also brings these investment banks within commercial banks and insurance companies under Federal Reserve regulation. That’s very good. The Fed sets capital requirements that limit how much risk a bank can take. Had these rules, or even some slightly more generous version, applied to investment banks like Lehman Brothers (OTC:LEHMQ), they would not have taken on so much risk that they destroyed themselves in the process.

Don’t count me among the totally anti-regulation crowd. It’s true that sometimes government interference strikes me as particularly stupid. The current ban on short selling is a perfect case in point. But the day-to-day guidelines that keep rogue traders within bounds are useful.

It comes down to this: when a business is so big that the government needs to step in if it fails, then that business should be monitored and held to sensible standards before it takes itself to the destruction point.

Leaving a business alone to do anything it wants and get into as much trouble as it desires then standing ready to bail it out is about as wise as handing your 16-year-old hothead the keys to the Porsche and your credit card and telling him there’s no curfew, either.

Source: The Keys to the Porsche Should Come with Limits

• Citigroup Inc. (C) may lay off more workers this week under a March plan to cut its trading and investment-banking workforce by about 6,000, or 10%. So far, about half of the jobs have been shed, a source with knowledge of the matter told Bloomberg.

• The Joint Center for Housing Studies released its annual State of the Nation’s Housing report yesterday (Monday), MarketWatch reported. According to the report, the slump still has further to run, as local markets continue to grapple with drops in housing starts, new home sales and existing home sales.

• Republic Services Inc. (RSG) said yesterday (Monday) that it would buy Allied Waste Industries (AW) in a $6.07 billion stock deal that would combine the second- and third-largest disposal companies in the industry. Republic Services Inc. will pay Allied Waste shareholders .45 worth of a Republic share for each share held, valued at $14.04 per share based on Republic’s Friday closing stock price of $31.19, the Associated Press reported.

• The euro fell 0.6% to $1.5516 at 4:31 p.m. in New York yesterday (Monday), from $1.5606 on June 20 after the Ifo survey showed German business confidence fell to its lowest level since 2005 in June, Bloomberg News reported. A separate study showed that Eurozone manufacturing and services both contracted in June, which also put downward pressure on the euro.

• Chemicals manufacturer Huntsman Corp. (HUN) sued Leon Black, head of Apollo Management LP, for more than $3 billion after a failed takeover. In a complaint filed yesterday (Monday), Huntman alleged that Black and Apollo co-founder Joshua Harris engaged in fraud and tortious interference to gain acceptance of a bid for Apollo’s Hexion Specialty Chemicals Inc. unit.

• General Motors Corp. (GM) announced it would increase prices on its 2009 line in response to soaring commodity costs, The Wall Street Journal reported. The struggling automaker will also extend its summer shutdown at six plants and offer more sales incentives in hopes of decreasing inventory on its larger vehicles such as pick-up trucks and sport-utility vehicles.

• French firm Safran SA (PINK: SAFRY) made a $300 billion cash offer for the secure ID business of Digimarc Corp. (DMRC) topping a previous offer from L-1 Identity Solutions Inc. (ID) put forth in March, Reuters reported. In a statement. Digimarc said its board has determined that Safran’s proposal “could reasonably be expected to lead to a superior proposal,” which would allow the company a chance to back on out on its deal with L-1.

• Shares of Motorola Inc. (MOT) dropped over 6% yesterday (Monday) after analysts downgraded the outlook for the mobile phone maker. The stock dropped 50 cents to close at $7.44 after analysts at Piper Jaffray Cos. (PJC) and Avian Securities lowered ratings on Motorola stock, Reuters reported.

Source: Global Investment Roundups Tuesday, June 24th, 2008