Tag: banks

Romney = President Goldman Sachs 2.0

The usual suspects have their sticky little fingers all over the supposed alternative to Obama too:

When Bain Capital sought to raise money in 1989 for a fast-growing office-supply company named Staples, Mitt Romney, Bain’s founder, called upon a trusted business partner: Goldman Sachs, whose bankers led the company’s initial public offering. When Mr. Romney became governor of Massachusetts, his blind trust gave Goldman much of his wealth to manage, a fortune now estimated to be as much as $250 million.

And as Mr. Romney mounts his second bid for the presidency, Goldman is coming through again: Its employees have contributed at least $367,000 to his campaign, making the firm Mr. Romney’s largest single source of campaign money through the end of September. No other company is so closely intertwined with Mr. Romney’s public and private lives except Bain itself.

I know I am shocked, SHOCKED, to learn that there is gambling taking place in the Washington establishment. It will be interesting to hear how all of the Romney Republicans who rightly deride Barack Obama as President Goldman Sachs will respond to the news that their favored candidate is owned by precisely the same corporation.

And it’s not as if Newt Gingrich is any better, being a Freddie Mac tool. You can complain about Ron Paul’s shortcomings, real and perceived, all you like. But the fact of the matter is that if you don’t support him, you are supporting more of the exactly the same thing that Obama is presently providing.

One could, of course, argue with the numbering system. There is a reasonable case to be made that George W. Bush was actually President Goldman Sachs 1.0, courtesy of his Secretary of the Treasury, Henry Paulson.

Sweeping it under the table

Obama is still trying to let the big banks get away with the massive quantities of criminal activity in which they engaged during the housing boom and bust:

The Associated Press reports that a proposed deal could be announced within weeks. Five banks—Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally Financial (formerly GMAC)—would pay the federal government $25 billion. About $17 billion would be used to reduce the principal that some struggling homeowners owe, $5 billion more would be used for future federal and state programs and $3 billion would be used to help homeowners refinance at 5.25 percent. Civil immunity would be granted to the banks for any role in foreclosure fraud, and there would be no investigations.

Once more, we see that there is absolutely no law whatsoever in the USA. There is barely even the pretense of it here. And looking at it from a political perspective, one would think the Republicans could easily ride this issue of tremendous bank-related corruption and abuse of the home-owning public to victory in November except for one small problem: both Romney and Gingrich are as wholly-owned by the banks as is Obama.

If only there was a candidate who wasn’t a banker’s puppet. Surely he would be the ideal presidential nominee under these circumstances!

When default isn’t default

The pretense of Greek solvency continues:

Talks between Greece and its creditor banks to slash the country’s towering debt pile broke down on Friday, with the Greeks warning of “catastrophic” results if a deal to swap bonds is not reached soon. The sides remain divided over the interest rate Greece will end up paying, which determines how much of a hit banks take….

The stumbling block in the negotiations was the low coupon, or interest payment, offered on the new bonds, one source familiar with the matter and one banking source said.

“The main problem was the (European Union and International Monetary Fund’s) insistence on a coupon lower than 4 percent on the new bonds,” the banking source said. It could mean an accounting loss of more than 70 percent for banks on their books, far more than the actual 50 percent cut in the original value of the old bonds laid down in the original deal.

The reason for the charade is that the banks are desperately attempting to avoid the Greek default triggering all the credit default swaps they have made with each other. In order to avoid a complete meltdown, it is necessary to pretend a 50% – or 70% – loss on a failure to repay a loan is somehow not a default.

To grasp how absurd this is, keep in mind that homeowners are in default when they fail to make a single mortgage paymentfall 120 days behind on their mortgage payments, never mind when they openly admit that they can’t make interest payments without taking out a loan to do so or repay more than half the principal of the original loan.

Redefining reality

One thing we see here again and again, primarily from evangelical atheists, but not infrequently from other ideologues of various strains, is redefining clearly defined, well-understood terms in order to protect their subjective reality from the objective one. Thus, we see absurdities such as an atheist state redefined as “religious” state while a state with an official state church is redefined as “secular” and so forth.

Now, we’re seeing a similar concept, which is basically the progressive language which Orwell described as Newspeak, being utilized in the financial world:

“China’s biggest provincial borrowers are deferring payment on their loans just two months after the country’s regulator said some local government companies would be allowed to do so….Hunan Provincial Expressway Construction Group is delaying payment on 3.11 billion yuan in interest, documents governing the securities show this month. Guangdong Provincial Communications Group Co, the second-largest debtor, is following suit. So are two others among the biggest 11 debtors, for a total of 30.16 billion yuan, according to bond prospectuses from 55 local authorities that have raised money in capital markets since the beginning of November.” So not even two months in and companies are already becoming serial defaulters, pardon, “loan payment deferrers?” And China is supposed to bail out the world? Ironically, in a world in which can kicking is now an art form, China will show everyone just how it is done, by effectively upturning the capital structure and saying that paying interest is, well, optional.

These sorts of linguistic gymnastics and redefinitions are going to serve the financial world little better than it has the argumentative atheists. It might fool a few of the more gullible for a short period of time, but sooner or later, objective reality will reassert itself. Unless the name of the game is simply to buy a little more time in order to allow the responsible parties to prepare for the consequences, this strikes me rather as an NFL team calling a timeout it doesn’t have in a futile attempt to buy time.

Loaning to your depositors

Tyler Durden explains why the latest Eurorescue deal is not only smaller than it looks, but even more ludicrous too:

On the day of the 3 Year European LTRO, in a whim of fancy we wondered if contrary to all expectations, the European banks would not instead of using the money for any real releveraging (carry Trade) or deleveraging (switching out of expensive into cheaper debt) purposes, just park it with the ECB’s deposit facility, an outcome which would be the worst possible case as it simply recycles ECB cash from on pocket into another without any incremental velocity. As it turns out, we were only half kidding: as of yesterday, the day after the LTRO, European banks parked almost half of the free €210 billion (recall that while gross LTRO proceeds were €489 billion, only €210 billion was net), or €82 billion, with the ECB’s deposit facility…. And that is what monetary policy failure is all about.

In other words, the ECB loaned $640 billion to 532 banks, but $365 billion simply went to roll over existing debt. Of the remaining $275 billion, $110 billion was simply deposited… in the ECB. That means that the much-publicized $640 billion in “new loans” meant to stimulize the global economy was actually $165 billion.

This behavior is in sync with that predicted by the debt-deflationist position. The money for loans is available, but there simply isn’t anyone who wants to borrow the money, even at interest rates that are effectively zero. In an inflationary environment, people are inclined to borrow as much as they can.

The Tea Party – Occupy Wall Street alliance

That would be a worthwhile third party:

Open Letter from a Marine Tea Partier to All Occupiers
Posted on 12/12/2011

First of all, I’m surprised you’re reading this. Thanks to the corrupt media, many of you might be clueless to the fact we share quite a bit of commonground.

Let me clarify: By “Tea Party,” I am in no way referring to the hijacked movement we know and love today. By “Tea Party,” I don’t mean Iran warmongers, bailout lovers, the “extreme right,” and people who think what happens in your bedroom affects them in any way. No, what I mean is the Tea Party as it started in 2007 as opposition to Bush policies.

The media loves to paint a picture of OWS vs. TP, “right” vs. “left,” etc. It’s an old tactic called divide and conquer. If we fight amongst ourselves, no one looks at the true criminals at work in society….

The system we live under is a corporatist model rapidly deteriorating into a fascist police state. The reason I added “Marine” to the heading of this letter was to (hopefully) attract active duty servicemembers, veterans, and law enforcement. We took an oath to the Constitution in order to join. The oath clearly gives us not only the option, but the responsibility to disobey ALL illegal orders. The police attacking peaceful protesters in the streets are in direct violation of that oath. If you are attacking peaceful people you are already on the wrong side of history.

Remember, focus on commonground. Just don’t look to government to be our saviors. Our politicians (yes, including our President) are bought and paid for by corporations and the mega banks. In fact, Obama’s biggest campaign donor is Goldman Sachs. His Treasury Secretary worked at Goldman Sachs himself. Why do you think some Europeans call us the United States of Goldman Sachs?

Semper Fi and Semper Occupare. Because nothing would terrify the establishment more than a united Occupy Tea Party movement.

– Cpl. Stephen Mark Allen, USMC

WND column

The Eurocrisis comes to America

Something is very rotten indeed in the city-state of Brussels. Last night, I had dinner with a friend of mine who works for a large bank in Europe. We talked a bit about the increasingly ominous state of the European financial situation, and he mentioned something rather worrisome. This week, his bank was holding a series of internal meetings to inform various financial services managers of the bank’s plans to respond to a serious financial event. My friend explained that this indicated the various scenarios have already been gamed out, and the bank is rapidly moving to prepare itself in case any of the more problematic scenarios turn out to accurately reflect the real world situation.

Of course, these preparations don’t mean that anything is going to happen today, tomorrow or even next week. Boarded windows are not hurricane magnets.

Stage Three

European banks on the verge of collapse:

Senior analysts and traders warned of impending bank failures as a summit intended to solve the European crisis failed to deliver a solution that eased concerns over bank funding.

The European Central Bank admitted it had held meetings about providing emergency funding to the region’s struggling banks, however City figures said a “collateral crunch” was looming.

“If anyone thinks things are getting better then they simply don’t understand how severe the problems are. I think a major bank could fail within weeks,” said one London-based executive at a major global bank.

Stage 1 was the 2008 credit crunch that led to the autumn banking bailouts. Stage 2 is the “recovery” which was nothing but the banks borrowing free money and gambling it in order to “shore up” their balance sheets. Stage 3 is the 2012 credit crunch that leads to the collapse of many of the banks that were propped up in Stage 1 as the Stage 2 bets fail to prove sufficient.

One thing that hasn’t been much discussed is the way in which the EU’s designs on the City (London) would probably kill the majority of the big UK and US banks within months. That is probably why Cameron found the backbone to exercise the British veto; it wasn’t in the interest of the British people, but rather in the interest of the Anglo-American banks.

And as Ambrose Evans-Pritchard notes, the new Merkozy-led EU treaty has nothing to do with resolving the burgeoning financial crisis.

The leaders of France and Germany have more or less bulldozed Britain out of the European Union for the sake of a treaty that offers absolutely no solution to the crisis at hand, or indeed any future crisis. It is EU institutional chair shuffling at its worst, with venom for good measure.

Of course, Evans-Pritchard fails to note that for Britain, being bulldozed out of the EU would be the best thing for it.

Yowzers

The European banks are seriously desperate for cheap credit:

The European Central Bank said demand for three-month dollar loans surged after it cut the cost of the financing almost in half in a coordinated action last week with five other central banks including the Federal Reserve.

The European Central Bank, based in Frankfurt, will lend $50.7 billion to 34 euro area banks on Thursday for 84 days at a fixed rate of 0.59 percent. That compares with the $395 million lent in the last three-month offering on Nov. 9 at a rate of 1.09 percent. The E.C.B. also lent five banks $1.6 billion in its regular weekly dollar operation, up from $352 million last week.

On an anecdotal note, I’ve observed of late that even firms in the European distribution chain are preferring to buy and sell in USD wherever possible. I was discussing a new product with someone today and they said we didn’t need to bother with EUR pricing… not even for the European customers.

Suicide bankers

Bank of America arranges for mutually assured financial destruction:

Recently Bank of America transferred a bunch of derivatives into their banking arm. “A bunch” means somewhere around $80 trillion worth. Now pay very careful attention, because part of the bankruptcy “reform” law in 2005 placed derivative claims in front of depositors in a business failure – including a bank failure.

What JP Morgan is claiming in the MF Global case is that the derivative trade (which is exactly what a “Repo to Maturity” trade is – it’s a derivative) is entitled to preference in the case of MF Global over those who had cash there for safekeeping either as a margin deposit or just as free cash as you would hold free cash in a bank.

If a major bank blows up this very same claim, supported in existing Bankruptcy Law with the changes signed by George Bush in 2005, will be used to steal the entirety of your bank account, and if you detect the impending blowup shortly before it happens — say, 90 days before — you’re still exposed to the risk through clawback!

There is a fairly cogent argument to be made that what BofA did is tantamount to intentionally placing an armed financial nuclear device in the center of the board room table and then daring anyone — including the government — to come tamper with it and risk setting it off, knowing full well that if it explodes it is utterly impossible to contain the damage to our economy and financial system.

Translation: your FDIC guarantees won’t matter if you’re a BoA depositor. Whatever can be salvaged from the mass destruction will go towards paying back its derivative bookie, most likely Goldman Sachs. This sounds rather as if BoA’s executives are planning to abandon ship.

And notice that it was that conservative Republican, George W. Bush, who signed that law into place, again confirming that Republicans are part of the problem, and therefore cannot be part of the solution.