Posts Tagged ‘Banking’
For those who read the previous article on the topic of last minute chaos and confusion in Cyprus, and Europe, it will come as no surprise that the previously scheduled Monday bank holiday (akaGreen Monday) has been extended into Tuesday. So prepare to not be surprised.
The Cypriot cabinet has declared Tuesday a bank holiday, for fear of capital flight, and this may even be stretched to Wednesday, as depositors are certain to withdraw huge sums from the Cypriot banks after the haircut imposed.
Nicosia postponed from Sunday to Monday the tabling in Parliament of the bill including the measures for the Cypriot bailout – including a bank account haircut and a tax hike on interest and corporate earnings – but the European Central Bank insists on a rapid voting because there are already signs a domino effect will follow across European lenders and markets from Monday.
There is genuine fear of market unrest on Monday morning when stocks may crumble in the eurozone and bank accounts in other southern European bank may suffer.
Skai radio reported on Sunday that the Bank of Greece has sent between 4 and 5 billion euros to Cyprus in order to help Cypriot banks respond to cash requirements by their clients.
So, if the official name of the March 18 holiday was “Green Monday“, will the March 19th ad hoc holiday be called “Red Tuesday“? Inquiring minds want to know.
Since it seems that Parliament can’t manage to muster the votes, perhaps something a bit more instructive is in order. Like history and natural law, for example. Let’s go down the (reasonably short) list:
- Private property, including the privately-held funds of the people is, in fact, private.
- Taxation for public good is an accepted and necessary part of living in a society. However, putative “taxation” to bail out people who did irresponsible things, like gambling with other people’s money on Greek sovereign debt, is nothing other than theft to cover a bad marker at Vegas after someone loses. This is in fact felony, not taxation, and those who solicit or commit such felony deserve to be tried for treason and punished according to their guilt thereof.
- No legitimate government has a right to cross the line between taxation and theft.
- All legitimate governments obtain their power from the freely-given consent of the governed, and that consent may be withdrawn at any time.
If and when that consent is withdrawn those putative members of government have two choices — leave quietly and willingly to be replaced by those who will honor the four principles above or risk be deposed by force as the people always outnumber the government. Further, the people cannot be compelled to effort at anything approaching a sufficient level of output to cover government’s expenses once it finds itself trying to bail out the irresponsible or criminal with other people’s money, so it is not necessary that the people shoot or otherwise engage in violence — a work stoppage is sufficient to guarantee the government’s collapse, should the people choose to maintain it for a sufficient time.
However, history also says that most of the time the people will choose to hang, burn, shoot or loot either in concert with or in place of a general work stoppage.
Thus ends our history lesson for today.
Let’s see whether today rhymes with the past 5,000 years of recorded human experience.
If there was ever a reason to hang some banksters from the nearest light pole, you’ve now seen it:
BRUSSELS—Depositors in Cypriot banks will be hit with a one-off tax on their savings, as part of a €10 billion ($12.96 billion) bailout for the Mediterranean island from the euro zone and the International Monetary Fund.
The deal, announced early Saturday, marks the first time in the euro zone’s five-year-old financial crisis that depositors in bloc’s banks will lose money. Accounts with more than €100,000 will be taxed at 9.9%, those with less at 6.75%, raising an expected €5.8 billion for the near-bankrupt nation.
Taxed? Like hell that’s a tax. That’s direct confiscation of the funds of people who did nothing wrong!
Oh, and if you think this is something you can get around? Think again:
Mr. Sarris said the Cypriot Parliament would adopt the taxes over the weekend and the money would be extracted from accounts before banks take up business Tuesday. Monday is a public holiday.
They have blocked electronic transfers over the weekend too.
Now let’s see if the Cypriots go for it, or if there is an instant uprising.
The EU, of course, claims this is a “special situation.” Like hell it is, never mind that this is basically imposed from the outside.
And they have the balls to call it a “contribution.”
I call it what it is — theft for the purpose of “making whole” those who did wrong, while they skate on their offenses. Those who were in a regulatory role and should have put a stop to it (like Bernanke over here, or for that matter the OCC when it comes to the London Whale) while the people get screwed to the wall.
The argument for this “action” is that Cyprus, which is a whopping 0.2% of the Eurozone economy, is of “systemic importance” to the whole. Therefore when someone (or a few someones) do something outrageously risky and blow up their banks, it is the people, not the malefactors, who take it up the chute.
Now we shall see if any of the following two things happen:
- Justice is imposed by the people so-assessed.
- The people realize that this is not a “one-off” and it can happen to them — and they act in a protective fashion up front rather than take the risk (how do you spell “bank run”?)
Incidentally, everyone knows Spain (along with Italy) have a bunch of banks that are sitting on bad assets, right? And that they’ve not been written down, right? And they’re functionally insolvent, right?
Oh, and let us not forget that Cyprus just protected all the bondholders, who are allegedly behind depositors in terms of their protection in a bank’s capital structure and thus should have been wiped out before one Euro was lost by said depositors.
And what just happened in Cyprus would never happen in either of those places…. or anywhere else important, like here in the United States……. right?
PS: $100 bills in your hand have just been declared to be worth somewhere between 7-10% more than those “deposited” and “stored” in a bank. May I ask the following pertinent and rather timely question: Where are yours?
Greece is merely prelude; the global chain of risk recognition lies just ahead.
The essence of financialization is also the heart of our economy: the counterfeiting of risk-free assets.
Think about what is totally dependent on the counterfeiting of risk-free assets:
1. The mortgage market and thus the housing market
2. The derivatives market and thus the entire hedging-risk mechanism of the global financial market
3. The sovereign debt market, i.e. government bonds that support deficit spending on a massive scale
Think about what happens in each of those markets when the real risk is recognized.
Consider housing. The housing bubble was predicated on the fabrication/ counterfeiting of risk-free assets and debt based on the phantom collateral of those assets.
For example: a no-down payment, no-document “liar loan” mortgage is issued to an unqualified buyer for a house with an inflated appraisal–i.e. phantom collateral. The buyer’s level of risk is masked, as is the collateral’s inflated value.
Given that the buyer cannot actually afford the house without a heavily gamed mortgage (interest only, etc.), the mortgage is toxic, i.e. doomed to default from its origination.
The lender takes this high-risk mortgage and bundles it in with higher quality mortgages and then sells them as a AAA-rated, essentially no-risk mortgage-backed security (MBS).
This risk-free asset is entirely counterfeit.
The same can be said of all the derivatives based on credit default swaps and other financial instruments with phantom collateral and masked levels of risk.
Everyone claims their government bonds are risk-free until they’re suddenly not. Greek bonds were risk-free until they were suddenly not, and Japanese government bonds are risk-free until they are not. The same can be said of U.S. Treasuries: they are risk-free until the risk that is being suppressed by the Federal Reserve suddenly breaks free of manipulation/suppression.
The same can be said of the stock market. The “Bernanke Put” has supposedly rendered the stock market nearly risk-free, as the Fed will always act to prevent any serious decline.
Enron and Lehman Brothers stock were essentially risk-free, for example–until they weren’t.
Counterfeiting risk-free assets inflates increasingly fragile bubbles of trust, phantom collateral and risk. When the counterfeit risk-free assets are recognized as intrinsically risky, the entire house of cards collapses: stocks, real estate, government bonds and the deficit spending those bonds supported.
Greece is merely prelude; the global chain of risk recognition lies just ahead.
Charles Hugh Smith – Of Two Minds
(Reuters) – Darden Restaurants Inc (DRI.N) warned on Tuesday that earnings for the latest quarter would miss expectations after unsuccessful promotions led to a decline in sales at its Olive Garden, Red Lobster and LongHorn Steakhouse chains.
Promotions my ass.
The simple reality is that the devaluation of purchasing power is biting the consumer and the more QE The Fed does to cover deficit spending, and thus the more deficit spending The Government does, the worse this problem is going to get.
You can cover it up for a while with more borrowing, such as in Student Loans. But eventually that “goosing” of the economy runs out, as acceptance of credit tops, and when that happens the trend re-asserts itself and the driver of it, which is the government’s deficit spending, comes back to the fore.
Bubble TV is trying to play this off as “fiscal cliff” concerns. Nonsense.
The trend was evident more than six months ago in the macro-level data and I’ve been talking about it since. There is no evading the impact of what the government has done with its handmaiden The Fed.
Remember that we were told that “Christmas would be strong” and other similar lines of crap. Well, if sales are going to be strong,why the profit warnings?
U.S. regulators probing potential fraud by China-based companies increased pressure on their auditors by formally accusing affiliates of Big Four firms of withholding documents from investigators.
Deloitte Touche Tohmatsu CPA Ltd., Ernst & Young Hua Ming LLP, KPMG Huazhen and PricewaterhouseCoopers Zhong Tian CPAs Ltd. have refused to cooperate with accounting investigations into nine companies whose securities are publicly traded in the U.S., the Securities and Exchange Commission said in anadministrative order yesterday. BDO China Dahua Co. was also named by the SEC in the action.
Refused to cooperate eh?
Sounds like two or more people conspiring to obstruct in a corrupt manner? Why I think we have a name for that, right?
“I don’t think there’s a resolution in sight,” Gillis, also an adviser to the U.S. Public Company Accounting Oversight Board, said from Beijing. “China is hypersensitive to the idea of foreigners operating within its borders and enforcing foreign law. The next step is likely to be the PCAOB trying to deregister accounting firms it can’t inspect. It’s eventually all leading to the de-listing of Chinese firms in the U.S.”
Good. The vast majority of these firms are frauds in some form or fashion anyway. Sino-Forest is just one example.
The cockroaches are circling however, and do not intend to die without being stepped on:
“Simply swinging the hammer of enforcement, while effective at garnering headlines, will likely not be enough to achieve the SEC’s goal,” McGovern, a former SEC enforcement attorney, said. “As capital flows from the U.S. to China at an increasing rate the pressure will grow on the SEC to find a way to forge compromise. The path to compromise may mean that the SEC has to recognize China’s sovereign interest in protecting certain industries or companies.”
Blow it out your butt McGovern.
What some other nation allows is up to them. If you take your money overseas and lose it because the firm in question (or exchange!) doesn’t meet US standards, that’s your problem.
But if you want to business here in the United States, including listing your stock here on our exchanges, then you follow our rules!
This is the same argument I’ve made for years on banks. Foreign banks break our laws all the time and our “regulators” look the other way. They argue that our money-launder laws “shouldn’t” apply to their operations, but the fact of the matter is that as a sovereign nation we have the right to demand of any company that it comply with our laws as a condition of operation in our nation.
This is no different, and de-certifying the affiliates is the right thing for the US Government to do.