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Getting Angry at the Banks – for a change.

The stock price charts of the major banks look like the brain trace of man having a series of violent seizures while slowly sinking towards a flat-line coma.

The US FHFA (Federal Housing Finance Authority – Fannie and Freddie’s overlord) filed suit against every major global bank in America and Europe for fraud – every trace went in to major, limb convulsing decline. The German court decided German participation in the first Greek bail out was constitutional – all the patients sat bolt, white-knuckle upright. Italy agrees to impose austerity measures upon its people to save its banks and the wealthy who own them – they restart ragged shallow breathing. Then U-turns on every aspect of austerity- eyeballs roll back and start choking. And then, while Greece continues its slow motion default on its bonds, Italy passes ‘austerity plan 2.0’ amidst union occupation of the Milan Bourse – the trace is all over the place and the patients don’t know what is happening, their veins stand out like ropes, muscles lock sold and teeth grind. The Swiss peg their currency to the Euro and say they will buy whatever amount of Euros and Euro paper it takes – speed-ball euphoria takes hold. But for how long?

And it’s not going to stop. Though thankfully this metaphor is.

So what next? Well late yesterday night ZeroHedge ran this story based on an article from DN.no which says simply that the gargantuan Norwegian Sovereign Wealth fund is suing Bank of America, CountryWide which Bank of America bought and KPMG (the auditors who saw nothing going wrong with sub prime securities at all, no nothing at all Your Honour) for fraud. Now that is very important. potentially heart fibrillating,  news. Why? Because there was the lurking suspicion, crystallized in this article on ZeroHedge that the FHFA suit might eventually be deliberately scuppered by higher powers in Washington in order to save the banks from certain justice and well deserved ruin.  It may sound fantastical but a cursory look at the political maneuverings concerning the State Attorney cases against the banks and how they are being pushed and seduced into settling for paltry sums makes it clear that such subversion of justice is the new American way. As, I hasten to add, it is here too.

The article simply pointed out that the politicians in DC could milk the political advantage from being seen to be tough on the only to make sure they lost on some technicality and settled out of court to ‘avoid losing’ and one such judgement would undermine, if not stop dead, all pending cases. The banks would get to keep their cake and the politician would be able to eat some of it too.

BUT the Norwegian case puts a troll in that ointment. Because its one thing to sort out a judge and some US Lawyers in a plush, quite Washington office. It’s quite another to stop a pissed off and still sovereign nation, which Norway still is.

It will be interesting to see how the markets react. I think it will take a few days for it to sink into their fevered crania.

In the mean time the FHFA suit has prompted me to take a look at what it might mean for one bank – RBS.  Not out of simple curiosity but because, if RBS were to lose, then as owners of 80% of the bank, our tax money is what would be on the hook. The bank is already on life support. Where do you think RBS would turn to get cash for a settlement? If it had to sell assets to meet settlement costs – it would do so at fire sale prices far below what we paid for them. The suit concerns $30.4 billion of Residential Mortgage Backed Securities sold by RBS between ’05 and ’08. How much would the FHFA would want paid back? Even a fraction of the 30 billion, say only 30 cents on the dollar – kills RBS without the tax payer being sacrificed –  again.

So, I have been at looking at two documents – which could not be more different, even though they are both about RBS. One the one hand is the FHFA law suit, which you can read in full here which paints a picture of not systemic but epidemic fraud.  And the other is the latest report from the UK government’s Asset Protection Scheme. The scheme under which the UK tax payer is ‘protecting’ £282 Billion of RBS ‘assets’ the bank could not insure in the market and which, if it had to keep on its own books, would kill the bank stone dead. The UK report essentially says everything is marvelous.

Now one way of reading the UK report is to say, well its written by professionals who have many years of experience in finance and banking, so they should know what they are talking about. The other way of reading it is to wonder if the financial experts involved are overly happy to not question any figures and assurances the bank gives them and collude in painting a positive picture that serves the interests of the financial industry they work in and come from. As well as please the politicians who want to make sure the public think only what the bankers want them to think.  I incline toward the latter reading.

It is hard to reconcile the Asset Protection report with the FHFA suit. Of course you could argue that the FHFA suit is based on RBS’s American activities and what was done there might have been unconnected with and unknown to RBS HQ.  Which might stand if the FHFA was suing some rustic outpost of RBS.

RBS in America was and is huge. The FHFA names as defendants RBS securities Inc (Formerly known as RBS Greenwich Capital), RBS Financial Products Inc and RBS Acceptance Inc.  as well as the principle officers of the above. In 2006 RBS Greenwich Capital securitized $102 billion in Mortgage backed Securities and was the 4th largest “non-agency mortgage backed security underwriter” in America and the third largest Sub Prime underwriter.

The law suit involves not just one or two rogue deals but 68 securities each of which is massive. And it was RBS committing the fraud – sorry doing the work – at every stage of the process.  The various parts of RBS chose the securities, evaluated them, guaranteed they were safe and well found, bundled them, underwrote them, costed them, set up the SIV’s in which they housed, before selling them on to Fannie and Freddie.

“Defendant RBS Group wholly owns RBS Holdings and is the ultimate parent of RBS Securities, RBS Financial Products, RBS Acceptance and FAS Corp.” (P.31)

“Unlike typical arm’s length securitizations, the securitizations here involved various RBS subsidiaries and affiliates at virtually every step in the chain” (P. 30.)

And at every stage RBS took a fat, incentivised, bonus guaranteeing fee.

“Further, RBS Securities is included in RBS Group’s consolidated financial statements and, according to RBS Groups 2010 annual report, RBS Securities serves as RBS Group’s ‘U.S. broker dealer and one of its ‘U.S. brands’ and one of RBS Group’s Global Banking and Markets Division conducts its business in the United States ‘principally’ through RBS Securities.” (P.31)

Which means there was a very close working relationship between RBS UK and RBS America. The consolidated financial statements means the UK would have seen and studied the details of what was going on in RBS USA. In short it means that RBS in the UK would have been aware at all levels up to the top, what was going on in RBS in America. So if there was, as the FHFA claims, systemic fraud being perpetrated year after year, RBS in the UK would have known and if not actively condoned then made sure it was ignored on purpose. Which in turn says to me, that the culture of fraud was not confined to RBS in America. And if that is so, then WHY has nothing questionable been uncovered in the £282 billion in US, UK, European, and IRISH mortgage backed securities, derivatives, CDS and interest rate swaps which RBS dumped in the UK’s Asset Protection Scheme?

The UK document says they have done due diligence. I think they asked the bank and accepted what was written on the bits of paper. Fannie and Freddie did ‘due diligence’ as well. Fat lot of good it did. It has taken focused and determined research – finally – and the sort of statistical tools I have written about here which people like Propublica and later the US insurer Allstate whose related suit on systemic bank fraud I wrote about here, developed and used on the securities, to uncover the web of lies embedded in the securities sold not just by RBS but many other banks as well. Why have such tests NOT been done by the UK Asset Protection Agency on RBS’s assets?

Are we to believe that securities involving US mortgage backed securities sold to Fannie and Freddie and fraudulent from top to bottom but American deals and loans hidden in the Asset protection scheme are 100 pure? How likely is that?  For there to be no fraud in  we have to suppose that RBS UK was in fact wholly ignorant of US fraudulent practices, had a totally different moral culture in the UK bank to its America part. We’ve already seen how closely they worked and cooperated.

If you read the Asset protection document it says all is well, losses will be less than the 60 billion RBS will pay before tax payer money is on the hook, and anyway the assets plus the fees RBS are paying for the insurance are going to make the tax payer a profit.  It does not deal with where RBS would get even a single billion never mind 60 of them, were it called upon. RBS doesn’t have billions lying around. If RBS has to pay our for losses or law suits it sells assets are fire sale prices or thieves your tax money again.

I have no faith at all that the Asset Protection Scheme or those running it can be trusted. And frankly why should I trust them. They are the same financial people who created the mess and oversaw its creation.  You may think I am unfairly tarring people with prejudices. I am not. I am ‘criminal profiling’ as the FBI does, as UK Border force does as the MET does with its stop and search. You may not agree with it but it’s official policy.  Who are the people most likely to be guilty of lying and fraud in finance? The current financial class of experts and bankers. That is just a plane brute statistical fact.

I am not going to accept a banker’s word for it. I want open, public and verifyable proof. I want the RBS assets and the entire Asset Protection Scheme open to forensic scrutiny. I am after all being expected to underwrite it.

And one last thing while my blood is seething.  I would like to suggest a new category of cheap, public humiliation – the FASBO.  If the tenor of our times is to enjoy the public branding and humiliation that is so much a part of the ASBO idea, then I would like to see Financial ASBO’s slapped on Fred the Shred and those legions like him.  I would like them to be branded in the papers, have restrictions on where they can go – not within a hundred yards of the City Mile for example –  and to have to wear one of those ankle monitors which tell the police where the offender is.

If we are happy to treat stupid thugs this way let us also treat the clever thugs in the same manner.

48 Responses to Getting Angry at the Banks – for a change.

  1. richard in norway September 8, 2011 at 4:33 pm #

    I feel like I should apologize but I'm not sure why. Oh yes now I remember, cos this lawsuit will cost UK taxpayers loads and will in all probability have an adverse affect on your pensions, while it will preserve the value of my state guaranteed pension, but of cause the UK could have invested the oil money in a pension fund instead of wasting it on tax cuts

  2. shtove September 12, 2011 at 12:56 pm #

    I was enjoying that metaphor!

    What’s the distinction between systemic and epidemic fraud?

    Up till last year the asset protection scheme manager was making ominous noises about banks having to offload assets, but then he went quiet. Not sure what happened, but it was probably around the time of the election.

    As for the lawsuits, a big hurdle for plaintiffs is a kind of estoppel that arises from the fact they were sophisticated investors, and US courts make it very difficult to get past that. But if the allegation is of fraud then that doesn’t apply.

    Good luck, RBS, and I wish you well in all your endeavours. Wankers.

  3. Greg September 12, 2011 at 12:57 pm #

    Not your fault @Richard. And I have a feeling this is only speeding up the inevitable, which could be a tiny tasty strawberry stuck on the top of a massive pile of shit.

    We could’ve done what Norway did with our bit of north sea oil. Originally the BNOC (British National Oil Corporation) owned 51% of it. I think Tony Benn and others campaigned for it to be nationalised along Norwegian model lines but instead it was sold off to pay for some short term political expediency.

    What an absolutely disgusting waste of one of Britain’s greatest natural resources to sell it to oil companies so they could sell it back to us (sounds familiar, FED anyone?)

  4. Greg September 12, 2011 at 1:24 pm #

    Interesting article on said mismanagement of north sea oil. More from a Scottish nationalist perspective though than a general mismanagement thing

    How black gold was hijacked: North sea oil and the betrayal of Scotland

  5. 24K September 12, 2011 at 1:25 pm #

    There is a Zombie Banker flashmob this coming Monday at Canary Wharf but sadly I can’t make it.

    I almost feel sick thinking about missing it.

    There is a picnic the Saturday after on the 17th by the Bank of London at Threadneedle street 12:00-19:00

    I think I can make that one 😀

    It coincides with:

    #OCCUPYWALLSTREET in New York, USA – Read the plan of action. (Confirmed)
    #TOMALABOLSA in Madrid, Spain – Read the plan of action. Fb event. (Confirmed)
    #TOMALABOLSA in Valencia, Spain – Fb event
    in Paris, France (Confirmed, Assembly is deciding place)
    #OCCUPAZIONEPIAZZAAFFARI in Milan, Italy – Fb event. (Confirmed)
    #OCCUPYBANKOFENGLAND, #UKUncut and #OCCUPYCANARYWHARF in London, England – Read the plan of action. Fb event and other fb event. (Confirmed)
    #USDORSF San Francisco, USA – Read the plan of action.(Confirmed)
    #USDORLosA Los Angeles, USA – Read the plan of action. (Confirmed)
    #OCCUPYBAYSTREET in Toronto, Canada – Fb event.
    #OCCUPYMARTINPLACE in Sydney, Australia
    #OCCUPYBANKENVIERTEL in Frankfurt, Germany
    #OCCUPYMARUNOUCHI in Tokyo, Japan
    in Athens, Grece – Hellenic Stock Exchange Fb event. Also gathering in Syntagma square at 12:00 and then march to the Bank of Greece on Panepistimioy Avenue.Fb event.
    in Stuttgart, Germany – Occupy börsenstrasse Fb event.
    in Lisboa, Portugal – Fb event.
    in Porto, Portugal – Fb event.
    in #TAKETHESQUARE Madison(Wisconsin – USA)

    What a great day out.

  6. Golem XIV September 12, 2011 at 1:27 pm #

    24K

    the whole thing sounds brilliant. I wish I could be there!

  7. 24K September 12, 2011 at 1:28 pm #

    I wish you could too.

    Nice picture, I have that Finney.
    HERE is a collaberation of ZBDS Finney. He’s gonna hate me, I ‘cut’ his fact bit. It is the age of austerity though.

    AT LEAST UNTIL WE GET OUR SH!T TOGETHER PEOPLE!

    hehe

    Sorry Stevie 🙂

  8. steviefinn September 12, 2011 at 1:29 pm #

    @24K
    No probs, I think your version is better anyway 🙂

  9. Neil September 12, 2011 at 1:29 pm #

    Golem, the Asset Protection Scheme report you link to above is dated December 2009 – surely not the latest. The latest report should be available here: http://www.hm-treasury.gov.uk/apa.htm .

  10. Golem XIV September 12, 2011 at 1:31 pm #

    Neil,

    Thanks, I was trying to be too clever. I had both open so I could compare them and linked to the old red one instead of the nice new blue one. Changed now.

  11. Neil September 12, 2011 at 1:31 pm #

    PS The Conclusions and Recommendations of the April 2011 report of the Public Accounts Committee on the Asset Protection Scheme states:

    “2. The Treasury conducted extensive investigations of the assets put forward for inclusion in the Scheme, but both banks [RBS and Lloyds] encountered major difficulties in providing all the data requested. Two of the UK’s major banks could not provide basic information on their assets and sufficient assurance that their assets were not linked to fraud or other criminal activity. As the Treasury did not have a complete picture of the risks the taxpayer would be taking on, it was put in a difficult position and the Accounting Officer had to ask for a Direction from Ministers before proceeding with the Scheme. The Treasury should take steps to ensure the banks address these gross deficiencies in basic data and, when considering the future role of financial services regulators, make sure that arrangements are in place to test whether this has been done.

    3. The gaps in information on the banks’ assets also begs questions about the role played by the auditors of banks ahead of 2008, when the full impact of the financial crisis became apparent. The Treasury and the Department for Business, Innovation and Skills have been working with organisations in the banking sector to improve the audit framework. They should now expand discussions to include the major professional audit and accountancy bodies. The Treasury should report back to us within a year on specific actions to ensure that professional audit standards and practices are up to the task of providing robust assurance on the internal control and governance of financial institutions, and on the valuation of assets.”

    http://www.publications.parliament.uk/pa/cm201011/cmselect/cmpubacc/785/78504.htm .

    I’m not holding my breath.

  12. Golem XIV September 12, 2011 at 1:33 pm #

    Neil

    Brilliant find. So why keep those assets in the scheme in the mean time?

    The only responsible course of action that protects US rather than the banks is to expell those assets until they are proven not to be fraudulent.

    To keep them while we wait for an answer is like holding a grenade from which the pin has been pulled waiting to see if in fact it is a dud.

    Thank you again for finding those quotes!!

  13. cringing2 September 12, 2011 at 1:33 pm #

    The FASBO. I love it.

  14. Neil September 12, 2011 at 1:33 pm #

    From today’s Telegraph:

    Germany pushes Greece to the brink in dangerous brinkmanship

    Germany and Holland have threatened to block rescue payments to Greece unless the country complies to the letter with bail-out terms, raising the spectre of default and a chain-reaction through southern Europe.

    More at http://www.telegraph.co.uk/finance/financialcrisis/8751180/Germany-pushes-Greece-to-the-brink-in-dangerous-brinkmanship.html .

  15. forensicstatistician September 12, 2011 at 1:34 pm #

    This statement is dynamite:

    “Two of the UK’s major banks could not provide basic information on their assets and sufficient assurance that their assets were not linked to fraud or other criminal activity.”

    How on earth is our taxpayer guarantee being used by the banks when they can’t give any basic assurances such as this?

    The politicians are clearly complicit in this as they are actively concealing it from the public.

  16. forensicstatistician September 12, 2011 at 1:35 pm #

    @Neil

    I suspect that Germany is pressuring Greece, because they themselves are feeling pressure from the USA.

    It seems like a similar strategy that was employed by the USA in (indirectly) extracting WW1 reparations. The USA imposed repayment terms on the UK and France, e.g. for lend / lease, which despite precedent that these assistances would typically be anulled was actually enforced.

    As a consequence the UK and France were incited to enforce their reparation claims on Germany (see Michael Hudson’s book SuperImperialism).

    The rest, as they say, is history.

  17. dave from france September 12, 2011 at 1:35 pm #

    Neil 22.18 yesterday

    Point 3 on the banks’ auditors.

    A House of Lords Select Committee, particularly Lords Lawson and Lipsey gave the Big Four a hard time , I think it was last november.

    Basically the accounts were approved as ‘going concerns’ despite evidence to the contrary because, well… er… the government would bail them out !

    As far as I know no unfortunate shareholders have taken them to court ?

    There were a couple of articles in Accountancy Age at the time.

    frog2

  18. steviefinn September 12, 2011 at 1:35 pm #

    steviefinn said…
    Ry Cooder’s latest song ” No bankers got left behind “, in a kind of Woody Guthrie style. Good to hear someone else singing about it, besides our own 24K. I can’t get the chorus out of my head.

    http://www.youtube.com/watch?v=ZXHckAFMzaw&feature=player_embedded

  19. Fungus FitzJuggler III September 12, 2011 at 1:36 pm #

    Ultimately,Bush and Greenspan opened the faucets and ensured a credit boom, postponing the depression by 7 years.

    They deepened and lengthened the depression by their deliberate acts, enabling profits to be stolen from capital that does not now exist. They knew that liars loans would live down to their reputation. It enabled a sacking of American households and to ensure that this happened quickly, they encouraged the sale of the pig to everyone who could offer capital, taking down the rest of the world.

    How can the aggrieved recover from America? How can America pay?

    There is the idea that D. Rockefeller is trying to bring in a world government by these means. The only certain way that revolution can be prevented is by such a system. But if this system does not come about, and there are many who have been vocal in opposing this for years, what then? People will not forget what America has done. Pax Americana, with the odd death squad and illicit drug ring, may be accounted for? Or curtailed.

  20. forensicstatistician September 12, 2011 at 1:39 pm #

    Things are kicking off regarding Greek default, judging by recent flurry of Tweets by Paul Mason:

    http://twitter.com/#!/paulmasonnews

    See also:

    http://www.zerohedge.com/news/greece-denies-germany-begins-greek-default-preparations

    Max Keiser is calling it the Lehman weekend sequel !

  21. shtove September 12, 2011 at 1:39 pm #

    @24k

    I noodled around for that flashmob thingy –

    http://www.tmponline.org/2011/09/06/zombie-bank/

    These guys are satirising, so I wonder if the flashmob is genuine. At least we’re finally getting an artistic reaction to the banking disaster:

    http://www.departmentofcorporatesustenance.org.uk/restricted

  22. Neil September 12, 2011 at 1:40 pm #

    Three stories from the Telegraph:

    Conservatives given millions by property developers

    The Conservative Party has received millions of pounds in donations from developers who stand to benefit from the Government’s controversial planning reforms

    http://www.telegraph.co.uk/earth/hands-off-our-land/8754027/Conservatives-given-millions-by-property-developers.html

    – and:

    Treasury loses five-year fight to conceal 40 names linked to collapsed bank BCCI

    The Treasury has lost its five-year fight to conceal the names of 40 individuals and companies linked to BCCI, the fraudulent international bank that collapsed two decades ago.

    […] One of the people whose name the Government was trying to protect is Agha Hassan Abedi, the Pakastani founder and former chief executive of BCCI, who has been dead for 16 years and was named by the Tribunal as playing a “pivotal role in both the development and decline of BCCI and the fraud and deception carried out by its management”.

    The Treasury had also redacted the names of states such as Dubai and Abu Dhabi, which had been connected as clients, plus companies, such as Bear Stearns, which was a broker to the bank.

    […]

    The full publication of the report marks a victory for Professor Prem Sikka, a freedom of information campaigner, who is an accounting academic at the University of Essex. On Friday night, he accused the Government of a pointless cover-up that needlessly cost taxpayer, given that almost all of the information has now emerged through other channels.

    “The UK Government has clearly been engaged in a massive cover-up and used taxpayers’ monies to fight the case,” Professor Sikka said. “Just look at the names of the individuals and organisations – these include well-known domestic and foreign banks from home and abroad, rulers from the Middle East, business advisers and sundry. Some of the people have already been convicted of criminal activity, but even 20 years later the Government was protecting their identity.” […]”

    – and:

    Government forced to scrap tax evasion measures

    The Government has been forced to perform a reversal and scrap its plans to overhaul Britain’s system of double-taxation treaties – even before the end of the consultation period on the subject.

    David Gauke, the Exchequer Secretary to the Treasury, conceded that the proposed legislation, designed to clamp down on tax evasion, would damage the UK economy.

    In a written ministerial statement, Mr Gauke said industry responses had already “made it clear that the proposed legislation, as drafted, could cause significant uncertainty for compliant UK businesses and overseas investors about its intended scope and its practical effect”.

    As a result the Government had “decided not to proceed further with the consultation” and omit the plans from next year’s Finance Bill.

    The UK has 120 treaties that allow companies and individuals to work abroad but not pay tax on their earnings both at home and abroad. The Government wanted to introduce rules to prevent the system being used for tax evasion.

    Chris Singer, of Ernst & Young, said the move had been “greeted with a sigh of relief”. He said: “Had the proposals gone ahead, UK competitiveness would have been eroded. It would have hit commercial transactions by restricting access to funding markets and hiked up the costs of investing into the UK.”

    http://www.telegraph.co.uk/finance/personalfinance/consumertips/tax/8753541/Government-forced-to-scrap-tax-evasion-measures.html

    PS how do you insert links into this blog, rather than just copying and pasting the URL?

  23. Golem XIV September 12, 2011 at 1:41 pm #

    Neil,

    thank you once again for providing great links.

    The abject climb down over the double/zero tax agreements are a disgrace. Nothing but grovelling to the wealthy tax cheats.

    On the links question – Due to the generosity and hard work of Marcus Cox, a regular reader on the blog, we should be migrating to WordPress.

    This should be a relief to the many of you who have had prblems with Blogger. I don’t know how you add links to comments in WordPress but I’ll find out.

    I expect a few teething problems at my end but once I have got the hang of it, it should make the blog easier to use.

  24. Dave September 12, 2011 at 1:45 pm #

    MikeHall 12.47 we’re being migrated and losing some posts …

    <a href=http://www.mecpoc.org/wp-content/uploads/downloads/2011/09/Wray-paper.pdf

    Last para p5 and p6+ on securitisation — originate and hold!

    Very good article from Randall Wray, proposing a completely different banking structure , back to human scale…

  25. Dave September 12, 2011 at 1:46 pm #

    dave from france AKA frog2

  26. Neil September 12, 2011 at 1:58 pm #

    Congratulations on getting the new-look blog up (and thanks to whoever helped do it).

    One teething problem: the posts after Golem’s at 1:41 on Sep 12 have disappeared (unless they’re in the pipeline, of course, in which case I hope posting now doesn’t mess things up).

  27. Neil September 12, 2011 at 2:17 pm #

    Slight correction: it wasn’t Obama who’s quoted as saying “…sometimes politics trumps the rule of law”, but Christopher Edley, Jr., a high-ranking legal academic member of Obama’s 2008 post-election transition team. The passage continues:

    “”It must not,” I [article author Andrew Kreig] said.

    “It shouldn’t,” he said, and walked off.

    This is the Dean of the Berkeley School of Law.”

  28. Neil September 12, 2011 at 2:17 pm #

    @ Mike Hall
    Many thanks for the Obama piece and your comments btw. One wonders whether similar factors lie behind (among other things) the Obama administration’s failure to prosecute financial fraud on Wall St. Perhaps a sort of internal Financial Hit Man job.

    Meanwhile, another article from the Telegraph, which despite its politics, comes up with good stories:

    Non-doms immune from Chancellor George Osborne’s Swiss tax raid

    Britain’s notoriously favoured taxpayers, the so-called “non-doms”, have been granted immunity from the Chancellor’s £5bn tax raid on Swiss bank accounts.

    http://www.telegraph.co.uk/finance/personalfinance/consumertips/tax/8723478/Non-doms-immune-from-Chancellor-George-Osbornes-Swiss-tax-raid.html

    (The so-called “raid”, of course, as previously noted, was deeply flawed in itself – and there are plenty of other tax havens the super-rich can use.)

  29. richard in norway September 12, 2011 at 2:17 pm #

    It seems like the game might be up for the Greeks, with lots of events that together look like preparations for Greek default. That the G7 issued a statement basically saying that they would backdrop any and/or all banks in the event of a crisis is not a good sign. The swiss have pegged their currency maybe because they got a tip off and didn’t want billions of euros flooding in sending the swiss franc to outer space(I was going to say moon but it is already there). The margin hikes in gold? The exit of stark from the ECB who is known as the most anti printing anti Eurobond member. The details of a German plan to recapitalize their banks, which we knew they had but that it becomes public now does nothing to reduce jitters about the prospect of default but does give hope that a default is survivable, to my mind you only let this stuff go public right before the default event. The were other things but I get shell shocked just thinking about it

    Anyhow we will know on Sunday/monday

  30. cynicalHighlander September 12, 2011 at 2:18 pm #

    Passing the Fiat Cash Grenade

    @Neil
    [a href=”url”]title[/a]

    replace [ ] with

  31. Neil September 12, 2011 at 2:18 pm #

    America’s Tahrir Moment

    On September 17, 20,000 people will swarm into lower Manhattan and occupy Wall Street. Last week Anonymous endorsed #OCCUPYWALLSTREET with a video that attracted over 60,000 views before being deleted by YouTube. The Department of Homeland Security has warned the nation’s bankers to be prepared. Corporate owned media is taking notice. Today, Paul Farrell, columnist for the Dow Jones owned MarketWatch.com posted this rousing portrait of what may now unfold.

    http://www.readersupportednews.org/off-site-opinion-section/72-72/7341-americas-tahrir-moment

  32. Neil September 12, 2011 at 3:26 pm #

    Big demonstrations in Greece’s second-largest city Thessaloniki today to mark a speech there by PM Papandreou outlining fiscal policy for the next year: http://www.occupiedlondon.org/blog/ .

    Goodness knows what the response will be after Greece defaults and all the banks go bust.

  33. Neil September 12, 2011 at 3:27 pm #

    Latest from Zerohedge:

    Moody’s Downgrade Of French Banks Imminent, Risk Waterfall To Follow?

    “[…] Bloomberg reports that the abovementioned banks [SocGen, BNP and Credit Agricole] “may have their credit ratings cut by Moody’s Investors Service as soon as next week because of their Greek holdings, two people with knowledge of the matter said.
    […]
    The point is that while the French banks will likely receive the implicit support of the G-7 which is meeting in Marseilles as we type, the ramifications are that an even weaker financial system will case the French sovereign rating in an even weaker light, and a cut to the country’s AAA rating will hence be inevitable. When that happens, Europe will have no choice but to completely redo its entire bailout struture, as a French downgrade will throw the EFSF-CDO mechanism, and the European bailout crusade, in terminal flux.”

    http://www.zerohedge.com/news/moodys-downgrade-french-banks-imminent-risk-waterfall-follow-0

    (Societe Generale shares, illustratively, fell 10.5% on Friday.)

  34. cynicalHighlander September 12, 2011 at 3:28 pm #

    11 September 2011 10:45

  35. mikehall September 12, 2011 at 3:28 pm #

    @ Neil

    Thanks for your various posts & links – always good 🙂

    I came across a recent piece by Michael Hudson, somewhat long but gives an excellent historical context to the domination of, well, finance (& debt) for its own sake & the blindness of authorities to its detrimental effects on the real economy.

    I would add the perspective that the potential of the ‘economics for the rich’ paradigm to self destruct (& take all with it) has been there for a very long time. The computer & communications technology revolution of the last 15yrs or so enabled a dramatic acceleration to its logical conclusion.

    http://www.paecon.net/PAEReview/issue57/Hudson57.pdf

    A thoughtful piece by Steve Keen too (much shorter) relating the movement of credit (debt) to recession & unemployment over the last few years.

    http://www.paecon.net/PAEReview/issue57/Keen57.pdf

    Looks like this week could see a new major crisis break out around Greece eh?

    Absolutely inevitable given the Euro policies adopted, ‘austerity’ etc. But totally unnecessary.

    I hope they exit the Euro. Their economic prospects could be be infinitely better, notwithstanding the democratic deficit they share with the rest of us.

  36. 24K September 12, 2011 at 3:29 pm #

    shtove, I found them at the hub of intelligence gathering and quite a few people said they were attending. Be nice if nobody turned up, I wouldn’t feel so gutted then.

  37. steviefinn September 12, 2011 at 3:29 pm #

    Good article from Independent.ie pointing out how the Irish MSM is colluding with the Irish governments, ” There is no alternative ” mantra, by ignoring the Uncatd report. Great to see Diarmuid O’Flynn of Bondwatch from Ballyhea get a mention.

    http://www.independent.ie/opinion/columnists/gene-kerrigan/gene-kerrigan-hooray-were-back-on-track-again-2873035.html

  38. Neil September 12, 2011 at 3:32 pm #

    The Telegraph’s International Business Editor’s take on Germany vs Greece:

    http://www.telegraph.co.uk/finance/financialcrisis/8755881/Germany-and-Greece-flirt-with-mutual-assured-destruction.html

  39. Neil September 12, 2011 at 3:32 pm #

    And a tough stance by Liam Halligan on the separation of retail and investment banks:

    http://www.telegraph.co.uk/finance/comment/liamhalligan/8754561/Nothing-less-than-the-total-separation-of-retail-and-investment-banks-will-do.html .

    “The core function of a financial services industry is to link savers with investors and creditors with borrowers. What we’ve created in the West, instead, is a group of institutions that comprise a financial oligarchy – that has us, and seemingly our leaders, over a barrel.”

  40. forensicstatistician September 12, 2011 at 3:33 pm #

    @Neil

    The Halligan article is a good start, but I’m constantly surprised that so many so called expert commentators still don’t understand how modern banking works!

    The co-mingling of banking activities will remain in situ as long as the practice of Securitisation is in place! Repeal of Glass-Steagal was just an acknowledgement of its futility in the face of the more profound de-regulations which permitted secondary market trading of retail loans. The umbilical link between retail and investment banking was a de facto consequence of this de-regulation regardless of any formal institutional amalgamation:

    “The important shift in modern banking is not the emergence of the universal banks per se, but the fragmentation of the loan process, i.e. the principle of Securitisation……evidence collected and published on the cusp of the crisis in 2008 demonstrates that securitised loans severely underperformed!

    At the time of the crisis in 2007/2008 both Northern Rock & Lehman Bros already sat either side of the notional banking firewall. This argument has been used to dismiss the potential effectiveness of such a compulsory demarcation. Such a split would indeed be little more than a Potemkin firewall; a flimsy masquerade that would provide no genuine safeguards at all. But this should not be concluded at the expense of ignoring a more fundamental point. These two fragile institutions shared in common a heavy reliance on Securitisation. Much of the debate about the market structure of banking seems to ignore this crucial issue, yet it seems certain that this was the underlying cause of their financial distress.”

    Potemkin Firewalls

  41. dave from france September 12, 2011 at 3:33 pm #

    forensic 08.28 – thanks for link back. Very good analysis.

  42. Neil September 12, 2011 at 3:34 pm #

    @ forensicstatistician

    I would hardly disagree, but it’s useful to be reminded – thanks. The ring-fencing of retail and investment banks has been presented as some sort of panacea, which clearly it’s not.

    Indeed, it’s been persuasively argued from the Right that government guarantees for retail banks will only encourage them to take more risks (see Andrew Lilico’s comments on the earlier interim report from the Independent Commission on Banking, http://conservativehome.blogs.com/platform/2011/04/the-vickers-report-some-useful-ideas-but-many-lacunae.html ).

    This, like the Telegraph articles, is part of a broader phenomenon of incisive critique from the Right which John Harris highlighted in an article in Saturday’s Guardian:

    Now we have to rely on the right to fight the feral rich

    Let’s hear it for Charles Moore, the Spectator and FT. Their attacks on the feral elite contrast with a virtually silent Labour

    (http://www.guardian.co.uk/commentisfree/2011/sep/09/right-feral-rich-silent-labour )

    One good thing about this is that it suggests there may be (some) common ground on this issue, which will be badly needed if it’s ever going to find a political solution.

  43. Neil September 12, 2011 at 3:34 pm #

    The real action this morning, though, is in Europe, with sharp falls in French financial shares in particular.

    At the time of writing, BNP Paribas is down 13.26%, SocGen, Credit Agricole and AXA all down 9-10%. In Germany, Deutsche Bank is down 8.9%.

  44. mikehall September 12, 2011 at 3:34 pm #

    @ FS etc

    Yes, Randall Wray points to securitisation as the main problem.

    Good piece here from Wray on the causes of the GFC and the reforms needed to prevent them in future.

    http://www.mecpoc.org/wp-content/uploads/downloads/2011/09/Wray-paper.pdf

  45. Neil September 12, 2011 at 5:00 pm #

    Just in case my reply on the earlier blog to Mike Hall at 3:34 gets lost, Wray makes this point on p.5:

    “Many people think that European banks are more fragile than American banks, so the problem could start in Europe, then spill over to the United States. There is a very easy path from US money market mutual fund holdings of Eurobank assets to a global financial crisis.

    That is $3 trillion of extremely short term liabilities that are like deposits but not insured. Last time the US government extended the guarantee to all of them; Dodd-Frank [the US financial reform bill brought in last year] outlaws such intervention. So appearance of a problem among Eurobanks could bring down that whole market—about twice the size of the US subprime mortgages that brought on the global financial crisis last time.”

    Wray was writing in May this year, and if things carry on the way they’ve started in the European (and especially French) financial markets, we could be reaching the end of the beginning. It would be an irony of world-historic proportions if a measure aimed at preventing a recurrence of the last global financial crisis was the trigger for the next one.

  46. Neil September 12, 2011 at 5:28 pm #

    “The [Greek] government is facing the possibility of not being able to pay wages and salaries in October if its international creditors do not approve the pending 8-billion-euro sixth installment immediately.

    The country’s foreign lenders have made disbursement conditional on the government’s adoption of new measures that will target the collection of at least 1.7 billion euros. Without the sixth tranche, the public purse will be 1.5 billion euros short on October 17.

    The prospect of a freeze in payments appeared even more serious on Thursday, after Greek commercial banks failed to cover the sum of 300 million euros of supplementary, noncompetitive bids for Tuesday’s auction of T-bills, providing only 155 million. The shortfall is interpreted as a clear message by banks to the government that they are unwilling to fund future issues of T-bills.

    The gravity of the situation is indicated by the fact that the government has frozen all disbursements apart from salaries and pensions.”

    http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_08/09/2011_405503 .

  47. Hawkeye September 13, 2011 at 12:07 pm #

    @Neil & Mike

    Thanks for the links. Plenty of bedtime reading for me, again!

    – Hawkeye (the forensic statistician)

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