A peek into one of the deepest little cesspits in Europe

A squib from Bloomberg, quoting the German Newspaper Sueddeutsche Zeitung,

“Munich prosecutors plan to file embezzlement charges against all members of Bayerische Landesbank’s former board….”

Having the words “all former members” and “embezzlement charges” in the same sentence just makes my day. Ever since the worlds’ banks told us they were suddenly short of liquidity, the authorities who were supposed to oversee them, have been even shorter on balls than the banks were on cash. In fact regulators in several countries appeared to have had theirs removed almost as a requirement for getting the job.

So the Bloomberg headline is a thing to behold. The only other thing the article says is that Beyerishe LB lost 3.7 billion euros as a result of acquiring, in 2007, the Austrian bank, Hypo Alpe Adria. Which economy of reporting covers over a manhole which leads down into what is one of the deepest little cesspits in Europe. I say ‘one of’ because only a congenital regulator would imagine that Beyerishe is the only entrance into the sewer of European banking that ran a river of financial and political corruption, money laundering and dangerously shady arms deals from Croatia and Serbia to Austria, Bavaria, Italy and on to Ireland.

Beyerishe LB was either the witless dupe who was left holding a huge shit schnitzel or just the last in a long line of greedy and corrupt bottom feeding institutions who wanted the chance to siphon some of that fetid  underground nourishment for themselves.  I personally feel the latter is the more likely explanation for the Europe wide enthusiasm for buying Austrian banks. Austria, with its anonymous accounts had made itself into a major portal for dirty money seeking onward transfer into European banks. And European banks were drawn to Austria like flies to a sewer.

The fact is Beyerische bought a bank for 1.6 billion euros into which it had to immediately pour another 2.1 billion euros just to keep it afloat.  Which although it sounds blunderingly stupid is, by Bavarian banking standards little worse than average. Compare Beyerische to the saga of inept incompetence which surrounded two other Bavarian banks Beyerische Hypotheken-und Wecshel Bank and Beyerische Vereins-bank, whose billions in losses forced the shot-gun wedding whose issue was HVB (see Dominoes Falling from the East) and you wonder how Germany has any banks at all?

Today there is still another 3.1 billion euros of bad debts to be paid at Beyerische. The open question vexing both sides of the German/Austrian border is who will pay? Since Beyerishe sold Alpe Adria back to Austria for a whopping 1 euro it might fall upon the Austrian people. But it might still land back on Beyerishe and therefore on the German taxpayers. Both sides would love to find a way of claiming they were just innocent victims of foreign fraud.

How could Beyerishe have been so stupid?  Well at the time, buying Austrian banks was the must have item for any megalomaniacal European banker. After all Hypo Vereins (HVB), that other Bavarian bank, had got itself Bank Austria to play with. Bank Austria was the number one Austrian bank.  Poor Beyerishe had to settle for Alpo which was only number five.

And it wasn’t just the Bavarians. UniCredit of Italy got its snout into what was running through Austria simply by buying HVB as a whole and so getting Bank Austria as a subsidiary.

A German banker told me the Austrians bitterly resented the Bavarians buying up their banks and that the Bavarians in their turn had a deep loathing for being acquired in turn by the Italians.

And lest it seem that the taste for Austrian banks was limited to some axis of corrupt Mitteleuropa imbeciles let’s not forget Anglo Irish also had its own Austrian subsidiary. A subsidiary which, thanks to Kathleen Barrington’s work, we know had in it 600 million in cash deposits which Anglo sold for just 141 million to Valartis bank which needed a loan of 24 million euros in order to make the purchase. A loan Valartis got from…Anglo.  Hmmm?

My question is if any other authorities or regulators will feel emboldened and feel they too can belatedly start questioning the bankers they are supposed to regulate? I know questions have been asked in the Austrian parliament. Will they be taken further than mere questions?  Will someone in Austria have the moral rectitude to lift the lid on their sewer and see where it leads? Will the German’s pressure them to do so or force them to do the opposite if it looks like some of the dirt has ended up in German banks being bailed out by German tax payers?

And what about the Irish?  So far the Irish regulator has been a stand out disgrace.  When Senator Norris tried manfully to read the list of Anglo’s bond holders which I wrote about, in to the public and parliamentary record he was shut up.

“The names are Aberdeen Asset Management (London) Limited, AGICAM, Aktia Asset Management, Aletti Gestielle SGR, AllianceBernstein (UK) Limited, Allianz Global Investors France, AmpegaGerling Investment, Anima SGR…”

was as far as he got before he was interrupted and told what he had to say was not relevant. He continued anyway adding, ”One Swiss bondholder owns 40% of the bonds and will get millions of euro from us..” at which point the debate was terminated.

There is a trail of disturbing facts, like crumbs of dry excrement, running from bank to bank, country to country.  All it would take is courage and honesty to follow the trail.

So many of the details of the dishonesty and bottom feeding are already known but scattered in different countries, that it cries out for a prosecutor with Europe wide powers and authority to be charged with joining the dots.  Will it happen? Of course not. We will have do it ourselves - with the courageous help of the few honest men and women such as WhistleblowerIRL who have spoken up and who may just give others the courage to do the same.

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32 Responses to A peek into one of the deepest little cesspits in Europe

  1. allcoppedout May 3, 2011 at 9:36 am #

    The lack of policing of "business fraud" has scared me since I was a cop thinking of specializing in it 30 years ago. It's very expensive to investigate and as expensive to prosecute. I left to be an academic instead, though it was clear there was no honest and viable career policing fraud. It is as ignored in the business curriculum, though a few research it.
    The lack of grip from fraudulent trading to higher level machinations almost leaves no subject to teach.

  2. Hawkeye May 3, 2011 at 11:10 am #

    allcoppedout

    As we feared then, the sitation on policing fraud is bleak.

    However, as long as William K Black is still alive, I have hope:

    http://www.pbs.org/moyers/journal/04032009/watch.html

    "Fraud is deceit. And the essence of fraud is, 'I create trust in you, and then I betray that trust, and get you to give me something of value.' "

    Therefore the legal test for any business fraud should be based on:
    1) Demonstrate the extent of deceit (witholding information, mis-representing the quality or provenance of an asset)
    2) Show the abuse of trust (i.e. how the defendant gained at the expense of other parties)

    And to make it a fair fight whilst also preventing a legal gravy train, all legal costs should be capped and evenly shared between prosecution and defence.

    Complexity is society's enemy here, and so keeping it simple is actually in everyone's best interest.

    We need to accept a few Type 1 errors, in order to prevent a flood of Type 2 errors overwhelming us.

  3. Pat Flannery May 3, 2011 at 5:32 pm #

    Golem: just trying to understand this.

    Barrington: "Anglo Irish Bank announced the sale of its Austrian subsidiary to Swiss bank Valartis on September 5, 2008."

    Barrington: "The (Anglo) accounts also revealed that Anglo provided Valartis with a €24 million loan to part-fund the purchase price of €141 million."

    You: "A subsidiary which, thanks to Kathleen Barrington's work, we know had in it 600 million in cash deposits which Anglo sold for just 141 million to Valartis bank which needed a loan of 24 million euros in order to make the purchase."

    I assume this means that Anglo sold its entire Austrian subsidiary, not just its deposit of €600 million, for €141 million. If so the €141 million represented the subsidiary's net worth, with many other assets and liabilities netting out to €141 million.

    Unfortunately all I get is a Xerox add when I click on Barrington's link to the Anglo balance sheet and she does not provide a link to the subsidiary's balance sheet.

    Why would Anglo put a note on its balance sheet disclosing just one item of its subsidiary's balance sheet, a €600 million Anglo deposit, without providing that subsidiary's entire balance sheet? Or did Barrington just miss it?

    Also how do we know that the €600 million Anglo deposit was "cash" as you say? Could it have been €600 million in worthless bonds?

    It seems to me that differentiating between cash and bonds as bank "deposits" is the key to challenging all government bailouts.

    We bloggers have our work cut out for us as our governments, working through the mainstream media, are the chief agents of cover-ups using omissions and obfuscations.

  4. Golem XIV - Thoughts May 3, 2011 at 5:49 pm #

    Pat,

    I don't think Kathleen missed anything. My impression talking to her is she is both sharp and thorough. I know she has asked various questions about the irregularities of the deal of both the regulator, Anglo and the Government. All have met with a stoney silence.

    I can't answer your question aout cash or bonds. The assertion of cash is from Kathleen. But when I think about it, now you have pointed it out, I suppose it could have been bonds. You're right Pat. I hadn't taken the time to think it through. Sorry. Thanks for being clear about that.

    It makes no more sense to me than it does you.

    The suspicion has been that the deposits were perhaps belonging to prominent people who, for reasons undecalred, the government wished to protect above the public finances.

    All I can tell you is there are political people in Austria who want to get at the truth almost as much as you do. Their agenda is quite different of course. But there has been a dialogue going on for some months. I have hopes.

    I will write more about it when I can do so without betraying confidences or spoiling what we are trying to do.

  5. Pat Flannery May 3, 2011 at 7:21 pm #

    Golem,

    If you are in touch with Kathleen could you please ask her to provide us with links to both Anglo's and its former Austrian subsidiary's balance sheets, if she has them. If she doesn't then she is merely reporting the tidbits Anglo and the Government want her to report.

    Also, the thing that made me lose confidence in her report was The Post's fake links to relevant documents which turn out to be links to ads.

  6. ahimsa May 3, 2011 at 8:19 pm #

    @ Pat

    Did you read her article 6th Feb?

    How FitzPatrick sent a €600m deposit book waltzing to Vienna

    "The accounts for Anglo Irish Bank (Austria) AG, which have now been obtained by the Insider, contain new information which shows that the Austrian bank was deposit-rich, highly liquid and strongly capitalised."

  7. Pat Flannery May 4, 2011 at 12:21 am #

    Ahimsa,

    I did, but I still want to see the documents "the Insider has obtained". I must be a bad Catholic because I don't like priests telling me what the Bible says. I want to read it for myself :)

    With all due respect to Kathleen (and the priests) they might have missed something. Ya think?

  8. shtove May 4, 2011 at 6:44 am #

    From the Norris link:

    "Money as the symbolic representation of energy" – lol!

  9. Pat Flannery May 4, 2011 at 6:54 am #

    I found the Anglo accounts Kathleen Barrington is talking about. Here is the relevant page from its 2008 Annual Report.

  10. Pat Flannery May 4, 2011 at 8:19 am #

    Now that I have located the full 2008 Anglo accounts Kathleen Barrington was talking about I would like to direct her attention to Note 35 , particularly the more than €12 billion "Securities sold under agreements to repurchase".

    That is how the bond holders became guaranteed.

    Barrington and The Post should be asking how banks can sell billions of loan assets with "agreements to repurchase". I think such agreements are vulnerable to shareholder challenge and the taxpayer is now the shareholder. The directors acted "ultra vires".

    THAT is what the media seem unwilling to talk about. Seanie's €22 million director's loan is peanuts compared to this giant elephant in the living room. What if car dealers were to sell cars with "agreements to repurchase"?

  11. Golem XIV - Thoughts May 4, 2011 at 8:45 am #

    Pat,

    I see now what You mean. Sorry it took me till now to get up to speed. I am away for a few days so I can't do anything about this until Monday.

    But if you wanted to write a guest piece putting more fully what these "agreements to repurchase" mean for the tax payer I would be happy to publish it here for you.

    I think you are right to see these agreements as just a barely and possibly NOT even, legal way of benefiting a select few at the expense of the many?

    If you don't want to write it then if you talk to me to make sure I understand properly we could do that instead. Or if you would like to write it together then that's also possible.

    Whatever you are comfortable with.Let me know if you want to do anything. I just think you are right to put your finger on this issue.

  12. Frances Coppola May 4, 2011 at 9:53 am #

    Very interesting post, Golem – and Pat's comments. I don't know much about the European banking mess but I do have some (hopefully informed) views on bailouts, responding to Pat's comment about distinguishing between cash and bonds and the effect of repurchase agreements.

    I think the present assumption is that bondholders are de facto "guaranteed" because they are creditors of the bank rather than shareholders. Hence the reluctance to downgrade payments to bondholders in Irish banks. Repurchase agreements simply put a time limit on the loan – so securities sold with agreements to repurchase are in effect term loans.

    In my view the assumptions that need to be challenged are the status of failed banks and the seniority of bondholders as creditors. Bonds do not actually become worthless until a company actually fails, although the markets might regard them as junk long before that. Bondholders of failed companies join the long list of creditors who may or may not get their money back. At present bank bondholders have seniority over retail depositors (so would get their money back first), although there are proposals to change this at least in the UK. However, because the banks that were bailed out did not go into administration and are therefore not "failed", their bonds still have value and interest payments still have to be met at continuing taxpayers' expense. Recognising that the bailed-out banks did actually fail and should be regarded as being in "government administration" would allow payments to their bond holders to be quietly dropped.

  13. Golem XIV - Thoughts May 4, 2011 at 10:54 am #

    Frances,

    Very interesting point! Thank you. Regarding banks as in government administration would be, as you say, a major step forward for us all.

    Not that there is a hope in hell, I don't thnink, of the government here or anywhere for that matter, doing it. The whole point of the actions taken by our government was, in y opinion, to keep at arms length any suggestion that any of the banks had failed and had become government owned. I think it was and still is the government ownership more than the failure they are afraid of.

    And I feel sure they won't allow any classification such as you suggest because I think they would be mortally afraid of any suggestion that the banks were 100% government controlled/owned.

    I think a major part of their desire to never have 100% ownership – and let's face it they have gone to some lengths to remain at less than 100% – is because at 100% the bank would be a government/public entity and as such would be liable to Freedom of Information requests.

    Imagine the legal and PR stink of requests for info on the exact nature of the banks holdings? I for one would be requesting lists of CDO's and CDS's.

    The government and banks would never let such information out because if it did get out then the assets could be marked to market and then not only the failed bank but ALL the banks holding the same assets would go BOOM as the true market valuation of their 'assets' became known.

    That is a major part of the secrecy game I think they have been and still are playing.

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  15. Pat Flannery May 4, 2011 at 4:57 pm #

    Good morning Golem from the West Coast. I stayed up late last night reading Anglo's 2008 Annual Report. And good morning to you Frances. It's good to see a pretty face with an inquiring brain.

    As for writing a guest piece on "agreements to repurchase" I would love to but first I would need to actually read one, including the small print. There must be a standard version out there with which everybody in the securitization business is familiar. I am sure that many journalists and lawyers are already familiar with them. The mystery is "why all the mystery?".

    As a licensed California mortgage broker I am very familiar with the buyback agreements the bundlers (wholesalers/funders) make us brokers (retailers/originators) sign. These standard operating agreements are designed to protect the bond bundlers against fraud on our part, rather than against ALL risk, as the European bundlers seem to have done vis-à-vis their banks, who are no more than retailers/originators, as I am.

    As I said earlier, the Irish media has a long way to go before it exposes the government guarantee scam – (if it really wants to).

    I think the points raised by Frances are execellent but can only be answered by reading the actual contracts between the parties.

    In both Europe and America the principle of "freedom of contract" is sacred and fundamental to the legal system. The Courts essentially pass out "Declaratory Judgments", merely demonstrating that they can read, because that is all they are legally allowed to do.

    But in all contracts there is the key matter of capacity. Did the banks' boards have the power to bind depositors' and shareholders' funds in such contracts? Did they act "ultra vires"?

  16. StevieFinn May 4, 2011 at 9:30 pm #

    More power to you Pat.

  17. Blink May 5, 2011 at 9:13 am #

    The saying goes "Behind every successful man is a woman", the same applies to Austrian Banks which is "Behind every fraudulent Austrian bank is an Israeli" do not believe me then check the directors. That's the problem is in Austria you mention this and the anti-Semite card comes into force and that's the end of any debate, as if the immigrants from Poland or Baltic countries are Semites.

  18. wirplit May 5, 2011 at 10:07 am #

    Fascinating reads more and more like a financial thriller!
    One point: Followed your link to Senator Norris trying to read out the list of bondholders to the Irish Parliament and it did seem somewhat tangential to a debate ostensibly on renewable energy. He tried to define money as a form of renewable energy but even to me that is stretching it a bit. Obvious question is why didn't he or doesn't he bring it up in a debate on the debt? Its a vital question at the heart of the Irish situation so surely he could bring it up in a relevant debate when it would be impossible to shut him up for apparent deviation from the subject. all power to him for trying but to fire the pistol and miss… is a bit disappointing.

  19. bill May 5, 2011 at 10:34 am #

    Just a quick question for those who know more than I do (ie everybody). Northern Rock is I believe 100% tax payer owned and therefore subject to FoI.

    Are there any smoking guns to be found there? The government claimed it saved 1.5 billions buying out the subordinated debt. Why did the subordinated debt of a failed company have to be bought at all?

  20. 24K May 5, 2011 at 6:34 pm #

    I love it when you say BOOM!

  21. JamieGriffiths May 6, 2011 at 2:39 pm #

    Northern Rock is wholly owned by UK Financial Investments Ltd which has one shareholder: HM Treasury.

    As such you'd expect it to fall under the category of what the FOI Act calls a Publicly Owned Company.

    However, Part II of the FOI Act contains many kinds of exemptions. Some of which are:

    29 The economy.

    (1)Information is exempt information if its disclosure under this Act would, or would be likely to, prejudice—

    (a)the economic interests of the United Kingdom or of any part of the United Kingdom, or

    (b)the financial interests of any administration in the United Kingdom, as defined by section 28(2).

    (2)The duty to confirm or deny does not arise if, or to the extent that, compliance with section 1(1)(a) would, or would be likely to, prejudice any of the matters mentioned in subsection (1).

    43 Commercial interests.

    (1)Information is exempt information if it constitutes a trade secret.

    (2)Information is exempt information if its disclosure under this Act would, or would be likely to, prejudice the commercial interests of any person (including the public authority holding it).

    (3)The duty to confirm or deny does not arise if, or to the extent that, compliance with section 1(1)(a) would, or would be likely to, prejudice the interests mentioned in subsection (2).

    So I think the chances of us seeing any of that information are pretty slim for the time being.

  22. John May 7, 2011 at 3:14 am #

    Hi Golem and fellow contributors. Great stuff from Golem, Pat and Frances – I'm learning a lot. Just writing to share this piece by Morgan Kelly

    http://www.irishtimes.com/newspaper/opinion/2011/0507/1224296372123.html

    dynamite

  23. Pat Flannery May 7, 2011 at 4:25 am #

    John,

    Thanks for the link to Morgan Kelly’s article in the Irish Times, which I just read. Unfortunately his entire effort is based on a basic misunderstanding.

    “Back when the euro was being planned in the mid-1990s, it never occurred to anyone that cautious, stodgy banks like AIB and Bank of Ireland, run by faintly dim former rugby players, could ever borrow tens of billions overseas, and lose it all on dodgy property loans.”

    The Irish banks did not “borrow tens of billions overseas, and lose it all on dodgy property loans”. Kelly is repeating this big lie about the bailout.

    The truth is that when each of these banks originated mortgages, bundled and sold them to the investment market, they did not “borrow” from the market – they SOLD an investment product called a mortgage-backed security, otherwise known as a “bond”.

    It would be good if somebody of Kelly’s standing understood that.

  24. 24K May 7, 2011 at 10:17 am #

    Adam Curtis has a new documentary HERE

  25. The MacPuddock. May 8, 2011 at 6:45 pm #

    I think that is a good referral, 24K. It is certainly getting into the analytical ball park of the current situation that I personally prefer to go for, although it is not easy, as it does not lend itself to nice definable, technical analysis.
    I think all the economic analysis and the banker bashing is quite good sport, and in many ways it is deserved, but I don't believe in the idea of super clever people motivated by the low imperatives of greed and power, to the exclusion of all other dimensions of consciousness or other people. People like Blankfein are really just 'very naughty boys' (to paraphrase Monty Python) who have managed to place themselves well to reap the rewards of a technical process, by a mixture of luck, personal contacts, early access and moderately clever moves. It is certainly sinister, but the sinister nature of the process we are in is not a ‘masterminded’ process, although it certainly has elements of contrivance.

    Essentially they are NOT 'supermen', doing what supermen do, an idea that has been promoted by ideas such as the Ayn Rand cult, and the cult of late capitalism, which in many respects, are the natural territory of the undeveloped, immature personality.

    It certainly ties in with the social changes we have seen recently, where people have become more assertive and conscious of their capacity to demand recognition and the idea of a service economy and culture. It has two sides to it of course. We are both the served and the servers (most of us at least). At the same time as we access rewards for this perspective( we get 'service', we also suffer consequences such as social disempowerment as 'the servers'. It reminds me of the 'access' to once designer labels, we now see. The snag is that the real exclusive, high status stuff which people really wants, always mutates or moves out of reach, away from ordinary grasp just as we think we are empowered to grasp it. So there is a multi-layerd form of consumerism, which becomes bewildering, and ultimately infects all aspects of our thinking with a largely manufactured consumer complexity masquerading as social complexity.

    It is this false reality that must be challenged, so that a corrective process can be started.
    I think we have to see something like the whole picture, something that is of course impossible to achieve, although we should be able to approach some kind of wide understanding.
    Like Curtis, I am deeply suspicious of the way we adopt technology without much real thought for associated aspects, such as education, and ways to regulate disproportionate power created by early access to technology.
    There is a really serious philosophical deficit in our political process and the political players.

  26. Hawkeye May 9, 2011 at 8:30 am #

    24K / MacP

    Cheers for the tip-off. I'll be tuning in on the 23rd May. His films are always very thought-provoking (if potentially a bit disturbing!).

    (The MayFair Set was an excellent analysis of how the British & American Economy financialised itself during the 60s / 70s / 80s)

    Paul Mason had a somewhat creepy bout of technophilia the other week:

    http://www.bbc.co.uk/blogs/newsnight/paulmason/2011/04/ipad_the_great_nature_theatre.html

    To which myself and a few other posters tried to caution against. Foreseeing that obsessiveness with iPads etc could be descending us into this "complete social cultural and intellectual impoverishment". Technology merely serves to:

    - distract attention from genuine news
    - provide a source of revenue (walled gardens)
    - promote further consumption activity rather than production
    - bloat the mind with minutiae trivia served at rapid speed
    - render our society incapable of lengthy and weighty intellectual discovery and debate

    Next on my reading list (after Polanyi) is Lewis Mumford's "Myth of the Machine" (referenced heavily by Neil Postman).

  27. Rebecca May 9, 2011 at 1:56 pm #

    Hawkeye,

    '-bloat the mind with minutiae trivia served at rapid speed'

    I really like that! But I think that what truly and fatally 'bloats' the mind to the point of gout – is the self satisfaction and self regard that is promoted (in newspapers and previously 'serious' media especially) for those who can consume the most sought after goods. The minutiae trivia serves for idle moments and those who cannot afford to play 'lets pretend were Hello Magazine 'celebrities.'

    There is a generation in this country that is literally transfixed by its own consumerism. It is narcissism, except most of these people are not outstandingly beautiful. Modern advertising saves the day by saying, 'but dont worry you can still be a narcissist, we'll take care of that.'
    I also think it is related to the fall in religion – there is a generation that is so truly impressed with itself for throwing off conservative religion- that it cannot see all the babies it might have chucked out with the bath water. Chief amoung which was perhaps the last scraps of Western middle class humility.
    (I am not saying religion necessarily breeds humility between people -but I think it does anchor some sort philosphical humility to the meritocratic middle class).
    And I would therefore agree with MacPuddock that it is too simplistic to just make Blankfein Dr Evil (although actually when I saw The Inside Job – I thought 'OOOhh I get it – its Revenge of the Nerds Part II'). There are so many people who also just want another bubble to appear so they can go back to navel gazing, mindless consuming.
    There is a whole generation in Ireland that is so laughably like some awful characters out of Dickens/Thackeray/Austen that, either its shockingly illiterate, or has absolutely zero self awareness. There is so much Try going on that just being within a 10m radius of these people for more than five minutes leaves you feeling spent. And just by chance that is the generation that gave us the hedge-funder.

  28. Rebecca May 9, 2011 at 2:05 pm #

    That generation already is incapable of lenghty and weighty intellectual discovery not because of lack of access, or ability but because, unfortunately, when their heads first peeked inside their anuses, it coincided with a massive growth in their egos (from all they could consume)- leading to … permanent blockage.
    Almot every philosophical avenue of thought has been co-opted into making this generation feel as if they are indeed supermen and women.
    Hey Ladies – do you have your own job, do you earn your own money -then you're practically the Rosa Parks of feminism!
    Feeling spiritual- then we have a €3,000 break that you really deserve, to get in touch with the 'inner you'. New Age spirituality isn't for unfashionably clad losers like you'd see in your local church. We promise scantily clad picturesque brown people and designer clad devotees only!
    Feeling charitable- don't worry your head about why the Congo is such a mess (here's a clue – its cos they're 'tribal' – but not in the fashionable way) just give them A Standing Order and we'll tell you, you're Outstanding! We'll even send you letters from the cute tribal people for maximum showing off to your friends! Yay!
    Worried about thoughts forming in your brain? Hold it right there we have just the app for you. Disclaimer: Any thoughts inputted into the app are now property of..
    Personally I knew we'd reached the bottom when babies, and pregnancy got commercialised. Of all the things that make me go eeuww, those silly ass designer buggies are tops. They're all black because who gives a crap about the colours babies like when you need to look like you're still all miminalist and sexy. Eugh! Babies as status symbols= The Ultimate in Crass.
    Not being able to take a break from looking sexy for five minutes after giving birth= the Death of Feminism. Paid surrogates? – don’t get me started.
    Its like when religion got thrown away so did the ability to hold anything sacred at all. And by holding scared I don’t mean never making fun of, but its like a whole side of consciousness is just gone in some people. Nothing at all can be reserved from capitalism, it has to be allowed pillage everything.
    But where the media has really succeeded for the status quo – is in subtly and constantly associating real concern about certain serious issues – with being unfashionable and ..Horrors..unsexy.
    The media has done this consistently across all forms, from kids programs up, since the early 90s I would say. All in all we shouldn't be surprised that this Financial Crisis has been allowed to go largely unquestioned.

  29. Rebecca May 9, 2011 at 2:30 pm #

    Pat,

    Re bonds/loans. I think the two terms are used interchangably quite often. Selling bonds=issuing debt. Both involve repayment plus interest at some fixed future date. Selling bonds is not like selling shares, where you are selling title of assets in effect but not the right to convert those assets to a certain amount of cash at some specified date.
    I suppose its all down to the fine print of each contract whether such bonds are closer to debentures than to bank loans, i.e if they are secured using the assets of the debt issuer then they're probably more similar to bank loans, in terms of who gets paid first in the event of liquidation.

    I think the issue is that even if they were secured – they were secured using our loans from banks (loans being bank's 'assets') rather than our deposits (bank's liability) so surely it was up to those buying the bonds to assess
    the worth of those assets and if they made a mistake well tough!
    I doubt the were acting 'ultra vires' because they wouldn't have been binding depositors funds with these contracts – it is customer loans (banks assets) that would have been involved.
    It is at the point of bank failure that the problems arise. The madness is that ordinary depositers without the means to examine things like loan books or balance sheets are being treated like some sort of trade creditors – i.e ranked pretty low on the scale of who gets paid first in a liquidation.
    Ordinary deposit holders should be the first and primary creditors of any bank or similar institution, and any contracts making any creditors preferred to ordinary depositors should be illegal.
    As things stand the ordinary depositer has been taking a massive gamble in leaving their money in the bank, for very small returns while the bond holders have been making massive returns for taking no risks at all. It should all be illegal but I sadly don't think it is.

    • chris December 3, 2011 at 5:18 am #

      Rebecca,

      Those bonds you refer to, being secured by actual assets, are known as ‘covered bonds’. Those bonds usually have a dual security in that they get a general security over the general assets of the bank AND more importantly, are ‘covered’ also by a pool of specific and highest rated individual mortgage contracts. In essence, covered bonds are the most secure bond a bank can issue, and is apparently quite prevalent in europe. Unfortunately for depositors, those bonds rank above everything else! Here in NZ and Australia such bonds have only recently been allowed by governments/central banks. Australia actually had a law prohibiting those bonds…

  30. Martin Slavin May 10, 2011 at 9:32 am #

    Read: The Washing Machine, Money,crime and terror in the offshore system, Duckworth, 2006, http://bit.ly/maYcSg

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