It’s Jackson Hole time again. The best of the best are gathering to, as MarketWatch describes it, ‘brainstorm’ ways of dealing with the economy. God help us. MarketWatch goes on to exclusively reveal that,
“The biggest puzzle of all is the sudden demise of the U.S. recovery.
Sometimes there is no satire nor irony strong enough. Two rounds of QE, the second telegraphed at last year’s Jackson Hole meeting, both ‘guarenteed’ by those clever FED chaps, to solve what we were told over and over was just a ‘liquidity problem’. And the result is that another year and several Debt Ceiling hikes later, the banks are back at the Fed’s table once again, banging their knives and forks. Famished fat men demanding to be fed.
The questions we have to ask is why, after so much money in the last three years, they still need more? Why, if this policy is the correct, the only one, are the banks selling each other’s stocks? What has caused the sudden collapse in European and American banks stocks? We need to find answers because it is obvious our financial experts are lost, but too arrogant and too afraid to admit it.
Until early August, Fed officials gave no sign that they were worried about the economy. They had forecast a pickup in activity for the second half and said that weakness in the first half was due to temporary factors.”
Not one official forecast of the last three years has been worth a pin. And the financial press, because they follow the same disastrously wrong ideological assumptions as those they report on, are equally clueless. Thus MarketWatch sincerely feels
A second puzzle is why the U.S. economy catches cold every time Europe sneezes.
So let me offer some thoughts.
The banks are want QE3. That much is obvious. At the start of this year Bank of America’s market value was $143 billion. Today it is around $63 billion. Their share price along with most of the European banks has been slaughtered day after day after day. Banks are traditionally big owners of bank stocks. So who is selling do you think?
Will another injection of easy money into the banks save them or help the economy? Well the last three years shows us quite unambiguously that the money, your money that is, will save gorge the fat men one more time but do almost nothing to help the broader economy. QE has never, in any country in this crisis been a stimulus for the economy. That was has been one of those unrelentingly told lies.
If Bernanke or King or any other expert wants to stimulate the economy – the real economy – they could easily do it, but NOT by putting the money in to the banks.
The US banks are not lending but not because they don’t have the money. The Big US banks have $1.7 trillion on overnight deposit in the NY FED. Most of that is QE money. It is doing nothing for anyone except the banks. ‘US tax payers ‘gave’ it to them and the banks are now being paid interest on it … by the tax payer. Nice deal.
But why the sudden collapse of bank stocks in the US and Europe? The financial press says it is due to worries about the slow down in the American economy and over debt worries in Europe. I think these are weaselly half truths at best, but let’s look at them anyway. MarketWatch claims they and the Fed have been surprised at the slow down in the US. I find that hard to believe. Unless these people really never, ever get out of their gated communities and sound proofed offices they cannot really have thought that two years of barely a pulse at all and even what there being purely due to two previous massive injections of QE – they cannot have thought this was evidence of a roaring recovery?
So why the sudden and massive decline in bank stocks? Of course the short answer is ‘the exact same reasons every other time the banks have reached the point of panic’. They are insolvent, their assets are rotting, their debts are increasing and they are not making enough real profit (as opposed to those conjured up by accounting jiggery pokery) to survive. But while I think think this is undeniably true it doesn’t answer the question of why such a savage sell off and why no one will lend overnight to European banks, not even other European banks?
I think the answer is summed up in three words – “Risk Weighted Assets.”
When ‘stress tests’ or risk managers, regulators or investors look at the health of a bank they look at what capital it has relative to it liabilities, debts and potential losses. Two such measures are The Capital Adequacy Ratio (CA) and the Tangible Common Equity (TCE) Ratio. Both are the ratio of Capital (what people have put in to the bank and which the bank must be able to pay back) over Assets (what the bank has loaned out and from which it expects a return from which it will pay off its investors).
People make a lot of the difference between these two measures. How they differ is in what they count as Capital. Basically Capital Adequacy counts all sorts of things as Capital, including deferred tax rebates on past losses. Tangible Common Equity is far stricter and is a far more accurate measure of how much equity there is in the bank for investors in the case of the bank going down.
Needless to say banks prefer to talk about Capital Adequacy and so do their political and regulatory fluffers. But last year Deutsche Bank did a study of the stricter TCE of European Banks. What they found was while all the banks, of course, passed the European Stress Tests their real state was not good.
Deutsche found that on average Europe’s banks had a TCE ratio of a mere 3.2%. They should have about 6-8%. The study’s authors concluded – this is a year ago before things ‘started to get bad’ – that European banks would have to raise between €600 billion and €1 Trillion in new capital. Since then the banks, and particularly those most vulnerable such as UniCredit, have raised very little if any.
You have to ask why not? Especially as now they really need to raise that money and can’t because they are completely locked out. Genius and Prudence both equally absent.
This chart published recently by ZeroHedge looking at the health of Canadian Banks also happens to show how horribly exposed to ruin and loss the investors in Europe’s ‘Super banks’ are, should the banks go under. Suddenly you can see why certain banks have been hammered by investors dumping their stock in the recent weeks.
But I want to suggest that the real cause of the huge sell off and collapse in bank share price is due not the change in the top half of the ratio, the Capital, but to a collapse in the much less talked about bottom of the ratio – the ‘assets’ – the loans.
The key is that these are not ‘assets’ they are ‘risk weighted assets’. Banks are purveyors of and experts in managing risk – or so they have told us. They have whole departments of ‘Risk Managers’.
But in a nut shell this is what I think has happened.
Risk and Reward are directly related. The lower the risk the lower the Reward, the higher the Risk the higher the Reward. The ideal is to somehow get high return but not have any risk. Pure fantasy of course. Except that banks being banks it can be done. And has been. Take Sovereign debt. It is usually considered zero risk. In all the tress tests they state quite clearly they do not model a sovereign default – because it can’t/won’t happen. And if you ask a bank’s risk manger he/she will tell you how Sovereign Bonds are generally considered risk free from a Risk Manager’s point of view.
And yet, we have all heard the news about how the cost of CDS on Spain’s or Italy’s and even now France’s Sovereign bonds has been going up. Think about that for a second. The Risk Manager’s office in the bank says Sovereign debt is a risk free asset. While just down the corridor in the Bond trading room they are buying and selling insurance on those ‘risk free’ assets. And ‘of course’ the riskier ones form Spain or Italy come with a much more attractive coupon (Interest payment).
Son one part of the bank says – Sovereign bonds are a risk free asset and counts them as such if asked – by a regulator for example. While down the corridor they know they are anything but risk free because they are buying and selling insurance on those bonds and getting a handsome reward from trading the riskier ones. Risk free and rewardingly risky at the same time. The alchemy of modern banking.
Which, as this article form the Wall Street Journal breezily notes,
This can incentivize banks to build up their balance sheets during times of stability by holding assets whose risk weightings don’t accurately reflect the bank’s exposure during times of stress.
Exactly. During the two years of QE-heroine induced good times Banks wanted to get maximum growth but be able to have lots and lots of ‘risk weighted’ assets to underpin the health of their business, at the same time. And so they all bought ‘risk free’ but in actual fact very lucratively risky, ‘can’t ever default but we’ll insure them for lots of money for you just in case’ assets. They speculated on the riskiest Sovereign bonds they could find. Why else, when the sovereign debt crisis has been so obviously brewing for over a year, are the big banks all still holding billions upon billions of Euros of it?
But during the ‘good times’ when all the bank looked at the ‘recovery’ and made their bone headed growth forecasts and basically smoked their own dope – they thought there was no ‘risk’ and their Risk Managers’ confirmed it. But now, when the fiction of growth can no longer be sustained, suddenly everyone has remembered with a start, that the assets are ‘Risk Weighted’.
Hundreds of billions with zero risk weighting is zero. But go from zero to any number at all no matter if its still fairly small and the answer goes from zero to ‘A LOT’ in an instant. And that is what I think has happened in the risk Manager’s office of every bank in Europe and America. The denominator of the Capital Adequacy Ratio and the Tangible Common Equity Ratio just went through the roof. And when it did the ration went to zero. Suddenly the Risk Managers are telling everyone that the ‘safe’ banks are actually virtually insolvent. Quelle surprise! I think we’ll find Bank of America is in the same or worse state.
And for once they are right. They all know the only thing that will stop this sell off is another round of ‘rape the tax payer’. Will Bernanke tell the Americans that while there is ‘no money’ for paying for social services’ – like schools and police – hundreds of billions can be found for the banks…again. And will the ECB and the BoE say the same to their people?
What really bothers me is that this game has been going on all during the time when our ‘regulators’ and the banks and the governments were all telling us how they had learnt their lessons. how we must let by-gones be by-gones and stop bashing the poor bankers etc etc, they were ALL conniving to play this game.
They all knew the banks and others were buying up sovereign debt of ‘unhealthy’ nations. Spanish banks were encouraged to buy Spanish debt. Greek banks Greek debt, Italian banks Italian debt and they all got it on with each other as well. So that the French banks obliged everyone.
They had learned nothing. They have not changed. The banks never intended to. The regulators are still gurning, toothless cowards and mountebanks and our political leaders just did what they do – they lied. AGAIN.
Just like last time, they have all been caught by their own lies and they want us to bail them out again. And our leaders will do it, if we do not say clearly “This was not in your mandate from us at the last election.” The time is upon us for civil disobedience.
Hard to disagree – and I don't. We used to teach 'asset evaluation' in finance in terms of taking a walk to see if the plant listed was working, saleable and there was a market. Questions have to arise in all this on how the losses are being hidden in what network of criminal means. We once looked for where the under-valued assets were!
I'm still looking for a spreadsheet linking the disappearance of liquid assets from the bottom half and the rise in the pot at the top.
This:
http://www.bbc.co.uk/news/business-14669071
can only be due to inside information confirming QE3 or some weasely equivalent.
…..and then this:
http://hat4uk.wordpress.com/2011/08/25/crash-2-slog-prediction-comes-true-within-hours-as-greek-banks-request-emergency-liquidity/
Kit,
Thanks for the links. The Greeks banks already last week had to bail out one of the smaller Greek banks or it was going under. That was obvioulsy just the start.
I would say look at EFG Eurobank.
Golem, you could do worse than to leave a few comments on that Marketwatch article. There are some real idiots debating over there.
Sublime1
Don't even start the debate about what constitutes an idiot. Just two days ago someone posted in the Telegraph that we will make a big profit from the banks. But i read this again and again how can anyone believe this?
I think, on first reading, Golem may have missed something here, I may be wrong but, risk free assets can be leveraged. Risk free is cash so why not buy x times more risk free assets with that "cash".
The point is I don't think anyone knows how much is at stake, it really all needs auditing.
Some bank shares have started to rise, investors betting on another taxpayer bailout.
I always wonder how the grossly overpaid,incompetent and lazy public sector keeps coming up with the cash.
Now here be a fine thing Golem.
Warren Buffet has just stuck $5B into BoA. Is it the start of the Bank of Berkshire Hathaway or a quick killing a la GS?
I loved the attempts by GS to smear Mr Buffet in the press just because he stiffed them in their own style.
But what is he up to with BoA? Takes a braver man than me to argue the toss with WB.
Sublime1,
Welcome. I like the name. Very clever.
I hesitate to post contrary opinions on MarketWatch simply because I don;t think the readers there are open at all to debate or entertaining different opinions. So I wonder if it would be wasted effort.
30-33K 'unique visits' here per week, by people who are at least curious enough to bother logging in. Here, I have the feeling not of preaching to the converted but debating with the interested and open minded.
Hope you comment again.
Bill,
I am with you. I have NO idea what WB is up to. I seriously wondered today if he wasn't indulging in a bit of King Canute "I'm so powerful I can turn the tide". Or some misplaced patriotism. Then I thought, no he didn't get to be a billionaire by being that daft.
The other obvious answer is that when we read reports of Obama consulting WB about the economy could it be WB said "BoA has to be saved" and Obama said "OK. You're the man." I'll do it!"
Who konws. But teh markets in America all tanked in the second half of the day. Dow down 1.5%.
Ben has to have at the very least a seeming promise of easy money – "QE or BIG Reverse repos". I he hasn't then next week will NOT be pretty.
His only other option is to try to 'persuade' the Europeans to bail out their banks and so at least be able to tell the markets one of their problems is solved. Ben could try some more backdoor Euro bail outs as a sweetener. Because otherwise the German's are going to say "No" to almost any US pressure for the German tax payer to bail out anyone.
Berlin and DC are at war, in my opinion.
@bill
My guess would be that Warren is aware that BoA is considered to big to fail by Obama and the Fed so he invests 5 billion (to a bank who claimed they didn't need capital) at 6% interest, knowing that his preferred stock will be the first to be paid when the Fed has to bail them out. If they somehow manage to drag their carcass along for another 10 years he gets his 6% anyway. Lovely old warren gets a risk free investment because of his insider knowledge. Happy Days
Bill,
just read a good peice over at ZeroHedge http://www.zerohedge.com/news/wolf-sheeps-clothing
Tells that WB bought Preferred Stock! That means it sounds like stock but isbn't. It is more like a bond. The importnat thing is that Preferred Stock, in a bankruptcy is senior to all ordinary 'punter' stock and will be nailed out like the bond holders.
So WB's purchase is simply a way for BoA to appear to get 'investor confidence from no lesser immortal than WB' BUT is in fact just a highly secure loan form old WB. If teh bank goes down WB is seen as teh patriot who tried to save it AND still gets all his money back because he'll be senior to all other mere 'regular stock holders'.
There's you're answer.
Means WB is a clever old sod and BoA are out of money, out of credit and out of bullets.
Greg,
Sorry our comments crossed and I didn't see yours before I posted. If I had I wouldn't have bothered. You said it all already.
Of topic, I have heard that The Ascent of Man is likely to get an HD remastering / restoration from the original negatives. I look forward to seeing it.
Prepare for impact…
Thanks Golem, I've been lurking for a long time. I even bought your book!
Re commenting on Marketwatch, as the old adage goes "if even one life is changed, then yes my efforts were worth it". Although, you don't need to prove yourself – I think you have already done incredible work coming from a place of deep heart, and I thank you for that. For those of us, like me, who don't have the language, debating skills, 'smarts' if you will, to defend ourselves in these dialogues, the work you do is so important. I want you to know it's appreciated.
Good that you're aware of the dangers of preaching to the converted too. Unfortunately it's human nature to want to hear opinions that confirm our pre-existing received beliefs. Every now and then I read the Daily Mail to try and (genuinely) understand another perspective. It's definitely made me more centrist over the years (and that's a good thing).
Good luck! And let's be positive without losing our realism.
@Golum 30-33K 'unique visits' here per week … Excellent, but you must discount all the times I come here via Google in my attempts to boost your ranking. I think its working. You are now in bronze medal position when searching on your birth name.
@Golum I should add that my 'Search and Click' in no way eats into that encouraging 30-33K.
Anyone see Mark Steyn claim on Newsnight last night that 'subprime mortgages were a creation of the US government'? Did Kirsty Walk challenge him?
I suppose given the revolving door between the banks and the Fed/ Treasury one could actually say it was!
Cheers Golem and Greg.
I got the news as a footnote to a Telegraph article, I knew WB had an angle, you guys were on it before me.
To all the readers who come here but don't comment please do. Unless yoiu make a blatantly party (any) political point, you are very welcome. Above all don't forget the most importanr point about this site.
Nobody will think you are stupid ever. Open minds are welcome especially if you think the MSM are not telling the whole truth.
We are all searching for that on here. bill40 (AKA TPTB!)
@Golem
no probs. There were some interesting comments somewhere in the mass under that Zerohedge article.
Warren said "Bank of America is a strong, well-led company Brian… I wanted to invest in it." and said he was impressed with it's profit generating capabilities.
Well, if that is the case why didn't he just buy normal stock like the proles have to, why did he feel the need to guarantee his investment? For someone who pitches himself as an everyman done good he's got no qualms about enriching himself through avenues not available to his fellows, jumping the queue and making sure that he gets his huge slice of the pie before any of them get back their savings and pensions should BoA go down. As it almost inevitably must.
It does appear that the Fed are no longer playing ball with QE3 with Bernanke saying that the answers lie elsewhere now. I think he is right to me the most important question is about the ECB in that in this new situation the European banks can no longer take advantage of US cheap or free money. Where will the money to support the rotten system come from ? Either the ECB prints or Euro banks go down (and soon )
reneecharles,
It seems to me the Fed has been desperate for someone to bail out Europe's banks for more than a year and equal;ly desperate to find the way of forcing the ECB to do it.
Germany has blocked all attempts so far and this has, I think angered the Americans. Is this the Fed trying to up the pressure by saying – we're not going to do it – and hope the ECB blinks first?
In the mean time the markets are telling themselves that the Fed's 'other tools' for promoting growth prove effective and arrive fast. Question for me is how long will warm promises keep the markets going? A month? seems inlikely to me. But then again I am sure the banks are being told a lot more than the public. Lot's of phone calls over the weekend I am sure priming the markets for next week.
Greg,
Seems to me WB made his money the old fashioned way — he had a compulsion and was in the right place at the right time. He was a compulsive money-maker from birth apparently, and with daddy's brokerage and his own compulsions, well, lets just say investing in America from 1950-1975 was pretty much a no-brainer. He even made money off a tenant farmer's sweat by buying the farm before he finished college. Now that's what I call capitalism! God forbid the world was made up of people like him — is he really supposed to be our role-model — a money-hungry investment fanatic?
I keep thinking Endgame, but the poker players keep throwing in a few more chips & lots more bluff. They kind of remind me of addicts, who need their fix no matter the consequences to their respective communities. You gotta keep playing the game, because what else is there ?
The alternative, turn in your chips, admit that the game is lost. The high rollers having to face the downer of diminished returns, no, like cocaine addicts they have a need to increase their dose in order to keep their sharks swimming.
And then, the fall & possible retribution, status shattered, to be brought down from high, a mere worm amonst the many, as the seething masses, hopefully, (for us that is), finally realise the fact that they are being bled dry, to feed the habit of a gigantic parasitic host.
I fancy frau Merkel to see the bluff of the US gamesters, though a politician, compared to the US male machismo mafiosa, she is grounded in good housekeeping, mindfull of her electorate, the eurobonds plan ruled out & as Golem pointed out, the ECB & the EFSF havn't got the necessary funds anyway, plus she has the Bundesbank now saying that bailouts in the EU are unconstitutional.
" Nothing can come of nothing "
I saw a rather pertinent question that has so far gone unanswered and I' just wondering if anyone on here knows. It is about the fragrant head of the IMF ChristineL.
Is she there to do something DSK would not, or not do something DSK was going to do? Any Ideas?
@steviefinn said "
I fancy frau Merkel to see the bluff of the US gamesters"
Read this here http://www.thelocal.de/money/20110825-37191.html
Well German Finance Minister Wolfgang Schäuble said "If I were American I would ask myself if the dollar will still exist in 10 years," he quipped. It was "wrong" to believe that the euro will disappear, in reaction Greenspan's remarks on Tuesday that "the euro is breaking down" and that uncertainty stemming from the process was holding back the US economy.
So there's definitely a spat developing there.
Maybe America is withholding Q3 to put pressure the Euro Zone.
Not sure if that's right what do others think?
46martman,
I think your suggestion about America witholding QE3 to pressure the Europeans is spot on. From as early as last May it seemed clear to me that Germany had decided it was not going to allow America to dictate events or policy and that this had infuriated Washington.
Schäuble has been at the centre of the bitter fight between Berlin and Washington from the start. I wrote a couple of posts suggesting this back in May '10.
The situation hasn't changed much just the stakes are higher. Washington wants Europe's banks bailed out which means bailing out teh Nations whose debt the banks are all holding. Washington wants this done to protect its own US banks. Germany does not want to foot the bill. But if Germany doesn't do what Washigton orders, then this leaves Washington with having to pay instead.
Washington is not used to be defied. But it has far less leverage than it used to.
well said Bill, there is a nice 'atmosphere' on this comment roll. can't stand the trolling on various other websites.
http://www.ft.com/cms/s/0/1a430216-cf29-11e0-86c5-00144feabdc0.html#axzz1W3kRseSf
US funds show true state of eurozone banks
"Is there any solution? In the long term, some eurozone banks probably need to rethink some of their funding profile. In the short term, however, Huw van Steenis, an analyst at Morgan Stanley, has recently been promoting another interesting idea: eurozone authorities should offer joint guarantees for debt issued by banks, as a form of “circuit breaker” to counteract panic. After all, the argument goes, the US offered such guarantees during its banking crisis, with considerable success. So did the UK. And if the eurozone authorities were to repeat this trick across the region – say by using funding from the European financial stability facility, supplemented with a fee recouped from banks – it might well tempt money market funds (and others) back. After all most US money market funds are frantic to find somewhere – anywhere – safe to stash their cash, other than US Treasuries.
Will this happen? Don’t bet on it soon. After all, the official line from the eurozone policy world is that nothing is really wrong with the eurozone banks; thus they do not want to introduce crisis measures that echo 2008. Nor do they want to start arguing about how to price or fund any such guarantees, since that might force them to state which banks – and national banking systems – look risky."
Paddy Fields said something I have been pondering for a while – that we should have our houses in order. what does this all mean for our own personal finances? If i have a certain amount of money saved with the intention of paying off a student loan would i be advised to pay off what i can or should i keep what i've got in anticipation of the day it all goes pear-shaped? I don't have a mortgage and i work in a sector heavily dependent on Saudi government money…
any thoughts?
Great article Golem. So where to from here? I think we're approaching the rock-and-a-hard-place situation. Fucked, unless a 'plan B' is adopted, to use the technical term. The essence of plan B has only one option – revive the real economies of US UK EU etc. But do it without the creation of more debt, because it is impossible to milk the herd for any more 'rent'.
So, if the taxpayers stump up for the revival of the real economy 'agregate demand' – direct investment & job creation – I think we're due a 'rent holiday'. And some compensation from those of wealth, ultimately to be made whole, from capital gains they have never deserved. Then change the system.
Paddy Fields said… Very well put, every time I see the start of the end they come up with another idea to keep it all alive.
It looks like the one they devised in the Euro Zone is coming unstuck.
This at the Guardian today http://www.guardian.co.uk/business/2011/aug/28/eurozone-demands-collateral-greek-bailout
Finland is demanding collateral for support and the Finnish minister reportedly said they would accept assets already earmarked for privatisation.
Not really sure how that will work, if they take a sizeable asset already earmarked for sale to reduce the Greek budget deficit then surely its the robbing Peter to pay Paul kind of economics.
Now Austria, Slovenia and Slovakia, responded by saying that if Finland was getting collateral, they wanted some too.
So if this continues a deal already devised and everyone though was in place looks like collapsing.
The article goes on to say resulting alarm among investors sent the yield on Greek bonds – the interest rate the government would have to pay to borrow in the open markets – back to record highs last week. It's as if the July rescue never happened.
So maybe Paddy the body isn't as alive as many once thought. If the demand for collateral keeps up it may be its final twitches.
Golem
Looks like you were dead right about this being a battle between Washington and Berlin. I was just asking why ChristineL got the IMF and up pops this in the Sunday Telegraph. http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8727542/Christine-Lagarde-EU-banks-must-raise-more-cash.html
The article in a nutshell is that ChristineL says all the banks in Europe must recapitalise, ie, more mass bank outs wether they need or want them.
I wonder if they will raise all this new lovely capital privately? bill40 rolls on floor laughing.
I suspect that DSK sided with Berlin and the taxpayer.
This is probably one of my flights of fancy. I have a Santander credit card, which I hardly use. I often forget to make the payment, which is about a tenner. I forgot to make the last payment & for the last 6 or 7 days have recieved about 3 calls a day demanding I pay it.
As we are up in the hills, there is usually no signal, so only one call got through at the beginning of the week. As we had previously had a phone call from scammers, I wouldn't talk to them, but they asked me to go into the branch with 2 sets of ID ?
I got sick of the constant phone calls, so I raang them on the landline, but there was no way to get through, always " All our customer representatives are busy". They did finally get through to me on the mobile, i tried to pay the balance with my Santander current A/C laser card, but it wouldn't work, rather strangely, so I said I would pay in the branch on Friday when we go into town. The phone calls continued, 4 yesterday on a Saturday.
Sorry for being so long winded, but what I found strange was that normally when I am late, I might get one bored sounding individual ringing to give me a polite nudge. They have all of a sudden gone frantic. In the background you can here a cacophony of other callers.
It started me thinking, so I had a look at Santander's worldwide website. They have over 66 million customers in 40 countries. So if people have been maxing out on their ccs as has been reported, they are probablly conducting this exercise in these other countries too.
I did a few calculations, if it is assumed that 20 million of those customers are behind with a payment averaging £50.00. & they succeeded in clawing that in, that would raise 1 billion.
As to wanting me to go into the branch with 2 sets of id, they only ask you to do that if they want you to sign a credit agreement, which in my case would probably mean doubling up my cc limit. I wasn't asked for id however, when I went in.
I just wonder whether in a desperate effort to raise cash they are wanting people to further max out on their cards, whilst trying to scrape in as much cash as possible from what's already owed, seems a pretty shortsighted stupid plan, if it's true, but what's new about that ?
If 10 million of their customers had their limits raised by £500, & spent that money, they would have 5 billion extra owed to them which as Golem pointed out could be used to show as assets or maybe, & now I am really getting out of my depth, tied into some sort of complicated investment packages.
It just strikes me that there seems to be suddenly something even more rotten in the state of Santander. I had a quick look at their derivatives, trading & risk management page, all well under control, it seems, they have lots of lovely UK residential & commercial property derivatives.
I wonder how many tins of beans I can get for 500 quid.
Two articles from the Telegraph:
Market crash 'could hit within weeks', warn bankers
A more severe crash than the one triggered by the collapse of Lehman Brothers could be on the way, according to alarm signals in the credit markets.
http://www.telegraph.co.uk/finance/financialcrisis/8721151/Market-crash-could-hit-within-weeks-warn-bankers.html
– and this calling for 'full disclosure' of banks' losses with all that goes with it:
http://www.telegraph.co.uk/finance/comment/8727080/Ben-Bernanke-realised-printing-yet-more-money-would-look-desperate.html .
When you read this sort of stuff in the mainstream media, you know the game is up.
Stevefinn
I have been wondering about santander as well, they seemed to have come from nowhere and grown by buying up other banks. I suspect that their buying spree involved a lot of leverage which would make them very vulnerable. But I know nothing, I just started thinking about them a few days ago after seeing a TV advert
RE my previous post ; perhaps DSK was going to suggest default by Ireland and Greece as a way of saving the wider EU economy ( monies already pumped into these could have gone towards saving the financials of the biggest losers on Greek default)..
Golem
With regard to the US Berlin battle, I've read lots of posts and comments on this, I am getting other ideas on this now, could it be that Germany will drop out of the EU and make some sort of alliance with the US to save it's ass. There is a game being played here under all of this crap, Merkel et al are not up for a eurobond because, let's face it we all still remember the past and do not trust each others motives/ intentions so will not have a big group hug and share each others assets to move forwards in a stronger union. This leaves a break-up as the other option so do the PIIGS go or do the Germans leave? My money is on Germany running – to America.
@erictheking
If I were in your position I would pay as little as possible right now, invest in silver(not paper silver, get physical and if in Irl get scrap as no vat that way if you have currency silver) When it hits the fan the value of silver will rise a lot, sell when you feel it's peaking and then go and make a settlement with loans/credit cards for a reduced amount.- just my thinking on it in the absence of other ideas!
There seems to be a lot of articles across the newspaper media this weekend re the markets crashing/things turning for the worse, something big is on the horizon when the irish papers are printing about debt forgiveness and asking why none of our politicos or bankers have been prosecuted for their part in the ruination of the state.
Paul Woolley: "The Market Has Become Dangerous For Humanity…It Isn't Reaching Equilibrium, It Is Falling Into Chaos"
The developments in recent weeks have made it quite clear that the markets don't function properly. Things are spinning out of control and are potentially dangerous for society.
You can probably blame computer programs set up by humans as much as human traders:
"In the financial markets, code is increasingly becoming king as complex number-crunching algorithms work out what to buy and what to sell.
Up to 70% of Wall Street trading is now run by so-called black box or algo-trading.
That means, along with the wise guy city traders, banks and brokers now employ thousands of smart guy physicists and mathematicians.
But even machine precision, supported by the human code wizards, doesn't guarantee things will run smoothly.
In the so-called Flash Crash of 2.45 on May 6 2010, a five minute dip in the markets caused momentary chaos.
A rogue trader was blamed for the 10% Dow Jones index fall but in reality, it was the computer program that the unnamed trader was using that was really to blame.
The algorithm sold 75,000 stocks with a value of £2.6bn in just 20 minutes, causing other super-fast trading algorithms to follow suit."
http://www.bbc.co.uk/news/technology-14306146
interesting e mail just received
friend of mine had card repossesed by BNP whilst inside overdraft limit
when he phoned BNP, he was sent around 4 branches.
After #4 he went crazy
woman on phone said ' wait " – put him on private line
then the operator said : " you seem like a nice bloke…. so i have to tell you….THIS BANK IS GOING DOWN. SACKING ALL STAFF. NO ONE IS LEFT <TO HELP YOU. I SUGGEST YOU LEAVE NOW .
so he did.
Thanks for your thoughts Paddy.
Neil, I remember reading an article not so long ago about automated trading and its consequences for market volatility. Madness. But then as Golem pointed out the traders love a bit of volatility.
It's JG Ballard's psychopathies isn't it? We've had 'rational choice' theory rammed down our necks for over thirty years. I've lost count of the number of times ordinary people have told me, 'greed is human nature' (to the exclusion of all our other values and characteristics). And now we are seeing the fruition of that credo – the markets are falling apart. Perhaps this is why the gentlemen at the Telegraph are wringing their hands as much as anyone else – when trust goes, contracts go by the way-side.
But anyway I'm off to see if i make a killing on silver… ; )
@andrew
Sounds like a fake circular email to me. Wouldn't pay much attention to it
No, it was a personal e mail, recounting the experience that a long standing friend of mine had this afternoon in his bank ( twenty years client.
I would pay attention to such anecdotes. They are a local clue to some wider problems
Another brilliant analysis so thanks again. Amazing constantly to be reading stuff in the mainstream that you signaled six months or more back. i
ts a steep learning curve not least getting through all the Finance mystification acronyms but hey ho two more CA and TCE ratio! How to look at banks with a degree of understanding…
Cant help thinking that a certain degree of general economy crisis allows them to swing another bout of Bank stuffing to occur… Save them of we are all doomed…
These short sentences should be on car bumper stickers across the US …
"The US banks are not lending but not because they don't have the money. The Big US banks have $1.7 trillion on overnight deposit in the NY FED. Most of that is QE money. It is doing nothing for anyone except the banks. 'US tax payers 'gave' it to them and the banks are now being paid interest on it … by the tax payer. -Nice deal."
To spread you to wider audience constantly firing you off to Reddit etc but it might well be the Discussion Boards of Investors that the real take up comes alive.
But even as I write this I just hear on BBC News that Bank shares are rising again and things are "looking more positive"…
This blog updates a list of payments made for Irish banks to bondholders as they happen. It makes sickening reading in light of the vicious cuts.
http://bondwatchireland.blogspot.com/
It's headed by a guy named Diarmuid O Flynn, a sports journalist for the Irish Examiner. He has been banging his head against the wall of apathy in the Republic, even trying a bread & water fast to try & get publicity. He could do with a bit of support.
http://thechatteringmagpie14.blogspot.com/