Tag: banks

The bassline thickens

Have we approached the point of statistical unlikelihood yet?

Yet another banker has committed suicide, with a JP Morgan forex trader leaping to his death from the top of the firm’s Chater House headquarters in Hong Kong.

Over the past few weeks at least seven bankers have died under mysterious circumstances, including another JP Morgan senior manager who jumped off the top of a skyscraper in London last month.

Speculation is rife that the series of deaths are connected to some kind of looming financial crisis or a huge legal case targeting bankers for malfeasance, although no definite link has been established.

Not that I’m any fan of bankers, but this is getting a little weird. Especially the suicide by nail gun.

Dum-dum-dum

And another one’s down:

Ordinarily we would ignore the news of another banker’s death – after all these sad events happen all the time – if it wasn’t for several contextual aspects of this most recent passage. First, the death in question, as reported by the Stamford Daily Voice is that of Ryan Henry Crane, a Harvard graduate, who is survived by his wife, son and parents at the very young age of 37. Second, Ryan Henry Crane was formerly employed by JPMorgan – a bank which was featured prominently in the news as recently as two weeks ago when another of its London-based employees committed suicide by jumping from the top floor of its Canary Wharf building….The circumstances surrounding his death are scarce, but what is most
notable is that not only is Crane the second very young JPMorgan banker
to pass in recent days, but is also the fourth banker death in under a month.

Curiouser and curiouser….

That makes foursix

This sounds rather like an Arkansas suicide:

The founder and CEO of American Title Services in Centennial was found dead in his home this week, the result of self-inflicted wounds from a nail gun, according to the Arapahoe County coroner.

Richard Talley, 57, and the company he founded in 2001 were under investigation by state insurance regulators at the time of his death late Tuesday, an agency spokesman confirmed Thursday. It was unclear how long the investigation had been ongoing or its primary focus.

A coroner’s spokeswoman Thursday said Talley was found in his garage by a family member who called authorities. They said Talley died from seven or eight self-inflicted wounds from a nail gun fired into his torso and head.

As Zerohedge points out, this “suicide” follows “the jumping deaths of 2 London bankers and a former-Fed economist in the US”. This seems a little strange considering how the financial companies are presently sitting very fat and happy. There have also been two suicides in Switzerland; the CFO of Zurich Insurance and the CEO of Swisscom.

The dark side of income inequality

Republicans, Libertarians, and Any Rand aficionados like to talk about income inequality as if it is an intrinsically socialist concept. And there is some truth to that. Socialists and other distributionists often appeal to income inequality in order to violate private property rights and rob from Peter in order to pay Paula, DaPaul and Pedro. Income equality can be, and has often been used to justify socialism.

However, superior talent, hard work, and luck combined with a capitalist system are not the only source of income inequality. Income inequality also comes from theft, fraud, government corruption and other evils. And that is the very sort of income inequality that is not only indefensible, but is ever bit as problematic economically as it is morally.  Zerohedge explains the dark side of income inequality:

This brings us to the second undesirable and unjustified source of income inequalities, i.e., the creation of money out of thin air, or legal counterfeiting, by central banks. It should be no surprise the growing gap in income inequalities has coincided with the adoption of fiat currencies worldwide. Every dollar the central bank creates benefits the early recipients of the money—the government and the banking sector — at the expense of the late recipients of the money, the wage earners, and the poor. Since the creation of a fiat currency system in 1971, the dollar has lost 82 percent of its value while the banking sector has gone from 4 percent of GDP to well over 10 percent today.

The central bank does not create anything real; neither resources nor goods and services. When it creates money it causes the price of transactions to increase. The original quantity theory of money clearly related money to the price of anything money can buy, including assets. When the central bank creates money, traders, hedge funds and banks — being first in line — benefit from the increased variability and upward trend in asset prices. Also, future contracts and other derivative products on exchange rates or interest rates were unnecessary prior to 1971, since hedging activity was mostly unnecessary. The central bank is responsible for this added risk, variability, and surge in asset prices unjustified by fundamentals.

The banking sector has been able to significantly increase its profits or claims on goods and services. However, more claims held by one sector, which essentially does not create anything of real value, means less claims on real goods and services for everyone else. This is why counterfeiting is illegal. Hence, the central bank has been playing a central role as a “reverse Robin Hood” by increasing the economic pie going to the rich and by slowly sinking the middle class toward poverty.

One need not be a socialist, or oppose capitalism, to oppose the income equality that is the result of theft. With the assistance of the Federal Reserve and Congress, the banks have financially raped the American economy and the American people through fraud and political corruption. A reckoning is overdue. Everything that has been done in the last five years has been done in order to postpone it. And yet, a reckoning is coming nevertheless, because that which cannot continue will not continue. The rich simply cannot consume enough to substitute for more equitable consumption; how many cars can a man drive? In how many homes can a man dwell?

Wall Street loses Krugman

Wow, I have to admit that I didn’t expect to see this out of the former Enron advisor:

Normal people take it in stride; even if they’re angry and bitter over political setbacks, they don’t cry persecution, compare their critics to Nazis and insist that the world revolves around their hurt feelings. But the rich are different from you and me.

And yes, that’s partly because they have more money, and the power that goes with it. They can and all too often do surround themselves with courtiers who tell them what they want to hear and never, ever, tell them they’re being foolish. They’re accustomed to being treated with deference, not just by the people they hire but by politicians who want their campaign contributions. And so they are shocked to discover that money can’t buy everything, can’t insulate them from all adversity.

I also suspect that today’s Masters of the Universe are insecure about the nature of their success. We’re not talking captains of industry here, men who make stuff. We are, instead, talking about wheeler-dealers, men who push money around and get rich by skimming some off the top as it sloshes by. They may boast that they are job creators, the people who make the economy work, but are they really adding value? Many of us doubt it — and so, I suspect, do some of the wealthy themselves, a form of self-doubt that causes them to lash out even more furiously at their critics.

Nice call-out to F. Scott Fitzgerald there on the part of the quasi-Nobel winner too. But Krugman fails to notice that there is an amount of truth to Perkins’s complaint about the coming Kristallnacht of the so-called One Percent, especially given that a disproportionate amount of the parasitical One Percent are Jewish.

It’s not paranoia when someone really is out to get you. And self-doubt is more than justified when you know damn well that you eminently deserve to have people out to get you. The financial skimmers of Wall Street not only don’t make the economy work, they have destroyed the wealthiest economy history has ever known through the massive malinvestments their massive credit bubble has created. And they have made matters worse by coopting the federal government into making good their losses at the expense of the American people.

When the final crash comes, I expect a considerable portion of the One Percent to be wiped out by an angry and well-armed populace. And no one should shed a tear for them, because they eminently deserve their such bitter desserts. The wolves of Wall Street who preyed upon the helpless for decades will become the hunted.

China: two stories

First, this Forbes report is NOT true: “The People’s Bank of China , the central bank, has just ordered commercial banks to halt cash transfers.” The false report was particularly worrisome in light of the way it appeared to coincide with HSBC’s recent attempt to crack down on all withdrawals of more than 3,000 pounds in the UK. (HSBC appears to have backed down on that following widespread outrage.) However, that does not mean that all is well with the Chinese economy, which you will recall has been engaged in much bigger credit inflation and government spending stimulus programs since 2009 than the USA or the European governments. From Zerohedge two weeks ago:

the big problem in big China remains that of an out-of-control credit creation process that is blowing up. As we previously noted, instead of crushing credit creation, the PBOC’s liquidity rationing has forced distressed companies into high-interest-cost products in the shadow-banking world. Investors on the other side of “troubled shadow banking products” had assumed that ‘someone’ would bail them out but this evening Reuters reports that ICBC has confirmed that it will not rescue holders of the “Credit Equals Gold #1 Collective Trust Product”, due to mature Jan 31st with $492 million outstanding.

A single $492 million default sounds very small compared to the overall size of the shadow banking market, but the problem is that what expands by the multiplication effect will contract even faster. There are many multiples of credit dollars stacked upon each actual dollar, so a default has a domino effect that is one or two orders of magnitude greater than the size of the default itself.

It’s probably not a coincidence that the banks appear to be a little nervous leading up to this default, because it’s not possible to know exactly what the effects of the Friday default will be. I expect next weekend will be a very busy one throughout the financial industry as the markets position for the fallout on Monday; I imagine the central banks’ printing presses will be smoking.

It’s not your money

In case you were wondering why a bank can refuse to give you “your money” when you ask for it, it is because the terms of the loan you provided them permit it.

Stephen Cotton went to his local HSBC branch this month to withdraw £7,000 from his instant access savings account to pay back a loan from his mother. A year before, he had withdrawn a larger sum in cash from HSBC without a problem.

But this time it was different, as he told Money Box: “When we presented them with the withdrawal slip, they declined to give us the money because we could not provide them with a satisfactory explanation for what the money was for. They wanted a letter from the person involved.”

Mr Cotton says the staff refused to tell him how much he could have: “So I wrote out a few slips. I said, ‘Can I have £5,000?’ They said no. I said, ‘Can I have £4,000?’ They said no. And then I wrote one out for £3,000 and they said, ‘OK, we’ll give you that.’ “

He asked if he could return later that day to withdraw another £3,000, but he was told he could not do the same thing twice in one day.He wrote to complain to HSBC about the new rules and also that he had not been informed of any change.

The bank said it did not have to tell him. “As this was not a change to the Terms and Conditions of your bank account, we had no need to pre-notify customers of the change,” HSBC wrote.

The only way you can be certain to get your money back is by calling the
loan, or to put it in more common terms, closing your account.

Is Germany’s gold gone?

Zerohedge features an exchange of letters with the Deutsche Bundesbank:

Here is a recent correspondence from our friend Lars Schall, an independent financial journalist, and the German Central Bank, the Deutsche Bundesbank, regarding the exact whereabouts and specifications of Germany’s national gold reserve. From the correspondence below, it appears that the US Central Bank had already leased out Germany’s gold reserves in prior years and no longer has it, as the gold bars the US Central Bankers returned to Germany last year were clearly not the same ones that Germany originally deposited with them. The questions Mr. Schall’s revelations now beg is (1) if the Banque de France and the Bank of England have Germany’s original gold as well; and (2) if the various Central Bankers are deliberately returning Germany’s gold on a painfully slow timeline because they have already leased out Germany’s gold into the open market in prior years, no longer hold it, and must therefore scrape together Germany’s gold from the open market now.

The fact that it is taking eight years for Germany to obtain a portion of its gold upon request, and that those bars are not the same ones that were originally on deposit in New York tends to suggest that the USA’s gold is probably long gone from the Federal Reserve as well.

Fed failure within 10 years

Jim Rogers predicts the failure of the USA’s third central bank:

With Bernanke’s term due to expire in January, Rogers says he will be remembered as “the guy who set the stage for the demise of the Central Bank in America. We’ve had three central banks in America. The first two disappeared. This one’s going to disappear too in the next decade.”

“It’s not a possibility,” he adds, “it’s a probability. People will realise that these guys have led us down a terrible path. The Fed balance sheet has increased by 500 per cent in the last 5 years and a lot of it’s garbage.”

Unlike the wider market, Rogers does not set great store by the Fed’s decision shortly before Christmas to taper its bond buying measures from $85bn per month to $75bn. The announcement put pressure on gold and drove US equities to a new all-time high, in what Rogers views as a relief rally.

“The US went up because people said, ‘Now it’s done, we don’t have to worry anymore.’ But somewhere along the line, markets are going to start suffering. They’ll taper until the markets start hurting and then they’ll panic and loosen up again. They’ve got themselves in a terrible box.”

“It’ll turn into a bubble or a very inflated situation, but eventually the markets will say, we’re not going to take your garbage anymore, whether it’s treasury bonds or currency.”

As you know, I disagree with the inflation call, but I don’t disagree that the Federal Reserve will collapse in bankruptcy sooner or later. As I have repeatedly noted, I expect a political and financial collapse of the US empire by 2033. The pace of problematic events appears to be picking up speed; not even the reported 4 percent economic growth and new Dow highs appears to have dented the average American’s pessimism.

The stage is being set. But when the curtain will fall, I do not know. Every government and every financial regime comes to an end sooner or later, but it usually much easier to see the end date in hindsight than in real time.

This time it isn’t different

The astonishing story of a thrice-failed Spanish bank:

Consider the story of Bankia.

Bankia was formed by merging seven bankrupt regional Spanish banks in 2010. The new bank was funded by Spain’s Government rescue fund… which received “preference shares” in return for over €4 billion (from taxpayers). These preference shares were shares that a) yielded 7.75% and b) would get paid before ordinary investors if Bankia failed again.

So right away, the Spanish Government was taking taxpayer money to give itself preferential treatment over ordinary investors. Indeed, those investors who owned shares in the seven banks that merged to form Bankia lost their shirts. They were wiped out and lost everything.

Bankia was then taken public in 2011. Spanish investment bankers convinced the Spanish public that the bank was a fantastic investment. Over 98% of the shares were sold to Spanish investors.

One year later, Bankia was bankrupt again, and required the single largest bailout in Spain’s history: €19 billion. Spain took over the bank and Bankia shares were frozen on the market (meaning you couldn’t sell them if you wanted to). When the bailout took place, Bankia shareholders were all but wiped out, forced to take huge losses as part of the deal. The vast majority of them were individual investors (the bank currently faces a lawsuit for over 140,000 claims of mis-selling shares).

So that’s two wipeouts in as many years.

The bank was taken public a year a second time later in May 2013. Once again Bankia shares promptly collapsed, losing 80% of their value in a matter of days. And once again, it was ordinary investors who got destroyed. Indeed, things were so awful that a police officer stabbed a Bankia banker who sold him over €300,000 worth of shares (the banker had convinced him it was a great investment).

Which brings us to today.

Bankia remains completely bankrupt. But its executives and the Spanish Government continue to claim that things are improving and that the bank is on the up and up. Indeed, just a few weeks ago, the Wall Street Journal wrote an article titled “Investors Show Interest in Bankia.” The story featured a quote from Spain’s Finance Minister that, “… it is logical. The perception of Spain has improved and Banki has improved a lot.”

Bear in mind, this is a bank that has wiped out investors THREE times in the last THREE YEARS. So that’s three different rounds of individual investors being told that Bankia was a great investment and losing everything. Every single one of these wipeouts was preceded by both bankers and Spanish Government officials claiming that “everything had been fixed” and that Bankia was a success story.

And now the Spanish Government is trying to convince them to line up for a fourth round.

Keep this in mind when you read the reassurances that this time, the green shoots really have been spotted, that the economy is growing at more than 4 percent per quarter, and stocks are cheap at their all-time highs if you only look at them in just the right way.