More Squid Tentacles And Government Reaction


More Squid Tentacles And Government Reaction

Posted by Karl Denninger

Now we see what Greece has been hiding:

FRANKFURT (MNI) – Greece’s public sector deficit for 2009 was 13.6% of GDP, considerably higher than the 12.7% previously estimated by the Greek government, Eurostat, the statistical arm of the European Commission reported Thursday.

Oh, you mean the Greeks have been lying about their budget and government activity?  We’d never do something like that here in America, would we?

Nor would we ever allow a financial institution (or lots of them) to get involved in intentionally misleading people about government debts, right?

The official said that Goldman Sachs swaps aimed at concealing Greek government debt were also “not in the numbers yet.”

Oh wait – we did do that?

What was that about Birmingham again?  Yes, Alabama…. and that nasty little swap deal?

Of course this little bit of deception didn’t have any impact on Greek debt markets, did it?

Greece’s benchmark 10-year bond yield rose to 8.49 percent, the highest since 1998 and more than twice the comparable German rate. The cost of insuring government debt against default climbed to a record today.

Oh wait – it did?  That’s not so good.

Deficits have surged across Europe after governments were forced to bail out banks and spend on stimulus to fight the worst recession in 60 years. Greece’s shortfall last year was more than four times the EU limit, though it wasn’t the region’s biggest. Ireland’s budget gap was revised up to 14.3 percent, the largest for any country since the start of the euro in 1999, Eurostat said today.


Why not break up the banks and jail the bankers?  Especially the ones that got involved in hinky derivatives deals intended to conceal the true state of finances in various government deals – including Greece and our own Jefferson County?

This would seem to be particularly important to do when there is not only intentional and willful concealment (that is, fraud upon the public) but when people are actually engaged in bribery, which was the case here in the United States.

These very same banks don’t like Senator Lincoln’s bill that was voted out of the Agriculture committee yesterday:

April 22 (Bloomberg) — The U.S. Senate is poised to consider a proposal that would fundamentally change the operations of commercial banks such as Goldman Sachs Group Inc.. and JPMorgan Chase & Co.

Under one part of a derivatives bill approved yesterday by the Senate Agriculture Committee, banks would have to spin off their swaps trading desks, which have generated billions of dollars in profits.

Yes, billions in profits that were “earned” by siphoning them off from productive parts of society, and when that wasn’t enough, the squid got its claws into municipal governments, including being involved in deals that were laced through with bribery and other unlawful conduct, and since governments can always tax their citizens (even when the reason for the need to tax is that someone committed a felony!) the citizens wind up getting the bill.

Oh wait – that sounds like Greece again!  No, it’s right here folks – in America.

For most of the Congressional debate about how to regulate derivatives, the spinoff proposal was not even on the table. It emerged last week as part of the bill crafted by Lincoln, an Arkansas Democrat.

“For a handful of the largest banks that would be a major problem — of late the rates derivatives business in particular has been nothing short of an astonishing money maker,” said Raj Date, a former Deutsche Bank AG executive who is now executive director for Cambridge Winter Inc.’s center for financial institutions policy.

“A major problem” when you take the squid’s ability to play vampire and suck the life out of the economy away?  Yes, I would say that’s a major problem.

But if we want our economy and government to survive, we better make calamari out of the squid – whether they scream or not.

Lincoln’s spinoff provision would bar companies that deal in swaps from bank privileges such as accessing the Federal Reserve’s discount lending window emergency liquidity function and the Federal Deposit Insurance Corp.’s deposit guarantee.

The nation’s largest commercial banks are the most dominant in the market precisely because they have such access, according to Brian Gardner, an analyst at Keefe, Bruyette & Woods in Arlington, Virginia, who was staff director on the House Financial Services Committee for former Louisiana congressman Richard Baker.

Right – the big banks are doing this because when they screw up they know the government will step in and stop them from blowing themselves to bits.


“Either give us money to cover our bad bets or we BLOW UP THE ECONOMY AND TANKS WILL ROLL!”

That’s terrorism folks.  If you or I did it we’d all wind up in prison, with good cause.  But when Wall Street Banks do it, they get the money, and they get to do it again.  And again.  And again.

“I think we all want to make sure we don’t throw the baby out with the bathwater, that we tackle what has been clearly outrageous behavior that has hurt Americans at the same time that we allow a system to work as it should be working,” Senator Debbie Stabenow, a Michigan Democrat on the committee, said yesterday.

Riiight.  Debbie, you must love firearms – especially when the business end is in your mouth, among other places.  After all, you want to “avoid throwing the baby out with the bathwater”, even after you watched these very same bathwater-drawing folks stick that gun in your mouth just over 18 months ago and threaten you with the end of civil order unless they got $700 billion – right now, today, with no restrictions.

Michael Barr, the assistant Treasury secretary for financial institutions, wouldn’t comment on the provision when he was asked about it by reporters. Gary Gensler, the chairman of the Commodity Futures Trading Commission, wouldn’t support the provision, saying only that “the Federal Reserve and the Treasury has to think through these issues.”

When you’re held up at gunpoint, ladies and gentlemen, what is your response the next day, assuming you don’t get shot on the spot?

  1. Go buy a gun yourself and then get some training so you know how to use it.  Apply for a concealed carry permit.  Load your shotgun at night and have it next to the bed at night.  Buy a dog so the next time you have some warning that your door is about to get kicked in.


  2. Invite the armed robber to dinner, refuse to prosecute him, shake his hand and then give him your ATM card and PIN number so next time he doesn’t have to use the gun – he can just steal all he wants without any muss or fuss?  Oh, and yeah, sign agreements that surreptitiously bind your neighbor to pay for all future ATM thefts!

Ladies and gentlemen we were robbed in 2008. You’d expect the government and citizens to do #1.

What our government has done to date is #2, and you, America, are “the neighbor” getting the bills.