Tag Archives: Jeroen Dijsselbloem

June 28, 2013 · 13:02

Exploitation fears for tax-payers

The Dutch NOS reported another go with banks in the view of business. Bernhard Wientjes has been voicing the opinion that some of the banks (ABN/AMRO and SNS Reaal) should be sold. It was brought in the air of ‘when you have no more money you start selling the silver cutlery’ would be the next step. As the Dutch government needs to cut 6 billion, the cutting spree could be a lot less. Well, in this matter I personally stand with Finance minister Jeroen Dijsselbloem who is not that eager to do that. There is logic for not doing this, as this relief would be for one year only and after that the cuttings would still need to be found next year. I am worried that certain business men are now in a state to strong hand certain political decisions. I leave it up to the reader whether those decisions are purely for the need of greed.

If business is linked to greed (often called ‘enterprising solutions’) then that would clearly fit in the views of Bernhard Wientjes. As chairman of the VNO-NCW it would be an enterprising solution that is right up his alley. The VNO-NCW is a fusion of the VNO (League of Dutch Commercial Enterprises) and the NCW (Dutch Christian Business Society). Their mission is to support and further the needs of Dutch corporations both on a National and international level. In this he is doing exactly what he is expected to do.

Yet, in this light, at a point where two banks would be sold far below value and at the expense of the tax-payers, one should clearly ask and look at the possible windfall for Bernhard Wientjes and his friends should this work out in that way.

There is a clear valid question whether the Dutch Silver cutlery is currently in a safe position. The reality of 6 billion of cutbacks will start to show a strangling result, yet, this was the danger all along when previous political alliances (2006-2010) were clearly pushing the outstanding invoice forward. Now that there are no more options, the consequences are likely to be dire, and as such in his position Bernhard Wientjes is clearly trying to look forward for Dutch corporations. I see this specific step as a dangerous one and until Dutch banks are clearly on a minimum set standard nothing should change. In addition, I am all in favour at present to keep these institutions nationalised to prevent their boards to just seek additional high risk gains at anyone’s expense to meet personal commission goals, whilst ignoring local needs (mortgages and such).

Even seeing these banks as possible training steps for younger jobseekers on the dole, to give them short term jobs whilst staying on the dole, would give them additional food for job experience. The answers that some view that this is not how it is supposed to be, I would counter, with ‘what solutions do you have?’. We need to change the way we think and operate. Instead of trying to balance which pocket the money is coming from, we should accept that the money is coming from the suit the government wears and see how far we can walk with this suit. Instead of staying on principle of keeping tabs what pocket it comes from, use the principle of it comes from us anyway and focus on instilling knowledge and experience. That will strengthen the young to get a good shot in getting something better with a decent chance. If you have any doubt, then consider that the Netherlands is only one of 3 countries where youth unemployment rates are below 10%. Many of the Southern European countries are way over 40%. If the future of youth employment is about experience, then make sure that the youth are getting a running start now is going to be important down the line. If their future could be a decent job in Germany, then giving them an edge as they compete with desperate youthful jobseekers from Spain, Italy or Greece is essential. Do not think that those kids are any less. Those who graduated from Universidad Complutense de Madrid are more than top Notch. 7 of their graduates ended up with a Nobel price and graduates from there ended up with 2 dozen of other internationally acclaimed awards. So, if we are looking at future events, getting the youth ready NOW will be an essential step.

Yet, this week has even more issues involving banks. A report that is due to be released tomorrow on advised banking changes. The ‘advice’ is to change the mortgage market. In the Netherlands it is currently possible to get a 105% mortgage so that the house and the notary costs and change of owner registration can all be covered. The commission chaired by Herman Wijfels is now advocating that the mortgage cannot be any higher than 80%. This is to prevent that the debt of selling a house at loss would end up hitting the banks. It seems that the banks are all over their need for ‘securing’ for the little man (read the average consumer). Taking into account that the average house in the Netherlands is around $350,000 the question, especially in this era of lack of funds is where on earth will a person get $70,000 in savings when the Dutch taxation system makes it almost impossible to get that kind of money saved up. They also mentioned that this should not be done until the housing market is stronger and prices are on the rise. Like that will help people to get the money. It is interesting that there is no mention of the much more reliable and fair Swedish system. Perhaps the report due out tomorrow will mention it, but I have not been privy to the full report. In the Swedish system a house often has a two tiered mortgage. You have the bottom part which envisions the gross off it (let’s say 80% for argument sake) at a low base percentage. The rest goes into the top part. Now that part (in my case) was almost 2.5% interest higher, but the mortgage was 105% covered. So instead of the unaffordable savings needs, we have a slightly higher mortgage. So, even if we have to accept a slightly cheaper house, we at least can get a house and not be looking at houses, never being able to afford any of it. The question becomes on what it was about. The fact that a report leaks is no news, but that the report leaks just around the same time Bernhard Wientjes is making a play to sell banks is a rather convenient coincidence.

These events are important to consider. This is because the same issues are playing in the UK. Consider that Lloyds is in need of an extension as they are selling 631 branches. This and the issues around the Royal Bank of Scotland do have links, as the UK government needs to cut cost by a lot more than 6 billion (having a Trillion in deficit makes that an awkward necessity). So will we see the same play as some are now seeing if they can sell banking interests at no more than tuppence on the pound? There is absolutely no known plans at present (in case you got scared or overly enthusiastic), but the issues remain, and the solution as such would be there in equal measure. To allow the young unemployed to become part of the bank on internships and training places, so that we can offer a solution where those seeking jobs will have actual work experience in their CV. These measures might seem small, yet the confidence boost that the younger jobseekers gain, could be the winning factor. In addition, extra hands, helping to boost the value of these banks would mean that when sold, they will go for a much better and more realistic value then they are currently set at. All this in a combined effort to strengthen commonwealth economy and their assets, for the simple reason that the European Economic outlook remains grim at best and relying on overly confident reports of economic prospects, that get downgraded quarter after quarter is not doing anyone any good.

 

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June 1, 2013 · 00:50

Government ministers, be warned!

Preowned_GamesB

This is a call, not to the gamers, but to the finance and Justice Ministers in those nations. Whatever plans you have to boost your economy/security, as present indicators go, Microsoft and likely Sony too, are uniting to make it a lot harder for you.

They will come with all kind of presentations, half-baked spins and flat out misrepresentation. The goal is for some of the fat-cat executives, who are already on 6 and 7 figure incomes to get more bonuses. Guess what! They will not pay taxations, and your economy will become harder challenge if you do not act NOW!

So, here are the facts.

Currently game shops buy games and resell them. This is called the sale of pre-owned games. There is nothing illegal; the original purchaser is getting rid of his/her game. Often this does not even go for money, but for credit in the same store. This has been going on for at least a decade. With game shops living on the minimal margins as is, this boosts their shop enough for them to get by a little better. If this falls away, these shops will have to let go of more staff members and as such it will hurt the economy. This is what some would call: ‘the margin of the little guy’.

The last one is almost literal. Most kids, and at times also their parents cannot afford to buy new games all the time, many not even some of the time. A new console game is often between AU$80 – AU$139 (or equivalent). So, to be able to buy their kids a pre-owned game is a way to stop piracy. Personally I think it is a good solution.

This has been a thorn in the eye of some game makers as they imagine that their revenues are down because of this re-selling of games. Simply put, they are slightly nuts (yes, they might lose a little revenue, but nowhere as much as they claim). The overwhelming part CANNOT afford the amounts charged for new games. They will often buy 1-3 new games a year, but that is it. So if they want to play a little more they will have to rely on a few pre-owned games. That market is now more under threat. In addition, the solutions that will come into play, is that these people must buy an ADDITIONAL fee to unlock such a game. Interesting enough, that fee part is likely to be nicely arranged through a non-taxation nation, which means YOUR economy will not gain an inch, it will lose a mile.

There are two parts to this issue. 90% is the simple pre-owned game that is played by one person. The other part consists of games like Mass Effect 3, Call of Duty, Assassins Creed and a few others. They have a specific additional option to play online. Now often, these games have a voucher to freely unlock the multi-player part. This is only for the original buyer. Whoever buys a pre-owned game would need to buy such a seasonal pass. I do not object to that part. I think it is fair that these resources (server connections) are intended for the original buyer. This option often also affects the sport games. Information has been spread all over the gaming sites that indicate that Electronic Arts, Microsoft and likely Sony are now price arranging certain affairs to force people to such fees. This is an arrangement that is so unacceptable that Finance ministers need to step in.

Their intervention is required on two fronts!

1. In your own benefit, if these fees are forced, they are to be arranged, not only on a local level, but these fees are to be TAXATED! That means that Microsoft will start paying tax on every unlock they charge, in addition they will have to mandatory report all numbers in this regard. It might make the price of a game unlock a $3-$5 more expensive, but it is the only way to force these numbers out. These three companies are bleeding people dry and no-one is stepping up to the plate to protect them from this entertainment Cartel, because, simply put, that is pretty much what they are now.

1b. for decades the console industry has been numbered away in the margins whilst this is a multi-billion dollar industry (on a global scale). People get taxed, taxed and taxed again, whilst those big companies are taxed less and less, because it is all virtually done somewhere else. It is time that if new Digital legislation is passed in their favour, then it will not be allowed until the rights and duties on the consumers site is agreed upon, including setting the transaction location at the BUYERS location, not at some vague transaction point. Any minister looking at a deficit, well here is a possible option for more taxable revenue.

2. All the indication point to a certainty that these two companies are now expanding into data collecting on a massive scale. Soon, people will have no longer a private identity, but a digital one at the mercy of Microsoft/Sony, to use as they see fit. I think it is now becoming essential to protect your local business environment that also depends on collected data to prevent 2 companies to freely have access to hundreds of millions of records with no accountability to anyone. I feel that it is important that a digital identity must at any given time be free from all identifying marks before it is collected, not when it is cleaned. In 2011 Sony lost millions of account details including credit card details. The moment these events allow massive data files to come into the hands of cyber criminals, we will experience additional dangers to identity theft, large scale fraud and banking hazards. I regard that legislation in these fields are not ready on a global scale. When this happens it would quickly escalate to a point where the banks will no longer be able to take such damaging hits. What happens then? What happens when people lose all their money because their safety is now in the hands of 2 companies whilst the consumer has almost nothing to control in the matter?

Microsoft and Sony are both playing on hypes and marketing to unleash a sincere danger up on the world. Many will trivialise this, but when these consoles start to link to the social media, an abundance of data will be collected, including all kinds of personal details, including banking details. Should you the reader think it is all a joke, then question why Microsoft announced a growth from 15000 servers to over 200000 servers? This is a cost unlike any company has ever seen, and Microsoft does not do things from the goodness of their hearts (Neither does Sony for that matter). Whatever the business purpose it has, we can be certain that several segments of business all over the world will feel that result. It is important that business or not, it is the individual that has the right to switch these intrusions off without that hurting the option of playing a game.

It must be stated clearly that not all is known yet, however as both companies will release these systems on a global scale within 6 months, it is clear that not doing anything now, will mean that these companies will get free reign soon enough. Issues that must be properly investigated and it must be made clear to the consumer what they are in for.

First Source Gamespot (http://au.gamespot.com/news/xbox-one-has-preowned-fee-report-6408671): “Microsoft today confirmed with Wired that all Xbox One game discs must be installed to the HDD to play and that while installs to other hard drives are allowed, users will need to pay an unspecified fee to do so.”

– In this scenario a person cannot give an old game to a family member as a present. This is unacceptable. In the scenario I mention it is clear that only ONE system can access this game (as it should be). Again, I must underline that this is for single player option only. It is fair that the second person has no free access to an online option, options that cost resources and it is not fair to make these providers give away such resources for free.

In addition, as Microsoft calls their system an ‘all in one entertainment system’, whilst only adding a 500Gb drive, with all these installations and downloads, it becomes a debate whether such a system is properly equipped to deal with customer requests without forcing people to download under expensive broadband plans. An issue I raised in a previous blog (Source: https://lawlordtobe.com/2013/05/24/spin-dryers-by-microsoft).

Second Source (source: http://au.gamespot.com/news/german-commission-calls-out-xbox-one-privacy-issues-6408935): “Speaking with news site Spiegel (translated by Games Industry International), Germany’s federal data protection commissioner Peter Schaar likened the next-generation console to a ‘monitoring device.’”

– There are several issues involving the privacy of a person. If this is no longer a gaming console, but an all in one entertainment system, then this system is supposed to go to a much larger audience, and as such, monitoring activities of these advanced nature where all our actions are registered on the cloud (as some vaguely report) should raise a lot more questions then they currently are. In this case it was the German magazine Spiegel that had the inside track, yet it seems that many options to evade privacy remain possible. In another article the following quote was placed “a Microsoft representative said that the machine ‘is not always watching or always listening.’” So who decides this? Many people will not know the intricacies of such settings and as such we can paraphrase Nietzsche by “And the data collectors, they collected on”.

I did mention in the very beginning that Electronic Arts is involved. How so? (Source: http://au.gamespot.com/news/ea-killing-online-passes-for-existing-games-6409065). In this article titled: “EA killing Online Passes for existing games” it was stated that EA was no longer charging for online gaming. I do not see this as an act out of the kindness of their hearts. I read this personally as an act to smooth the way for pre-owned charging. EA needs these two consoles and it is playing nice to smooth the way for certain people to charge in the field discussed earlier. That is my personal vision. The quote read: “We heard the feedback from players and decided to do away with Online Pass altogether.” This sounds great, but those online services cost money. Normally a new game gives access; so again, it seems to me that these passes are all about the pre-owners. This is likely to evade a future discussion of double dipping the credit card of this consumer group.

The question remains, what exactly will Sony do? Until the biggest console point in the year (the E3 in America) happens, we will likely stay in the dark. It is however likely that Sony and Microsoft have completed deals; as such an advantage would not be given to any competitor to avoid a massive global shift of the console market. Such an agreement could be seen as evidence to price fixing and a Cartel approach to a consumer market. Since when has that EVER been an acceptable step?

So, now it is time to get personal in this blog.

Australia
To Mr Wayne Swan, our current treasurer and Mr Joe Hockey, our current shadow Treasurer. Australia has a deficit and we are always looking at a solution that allows for the growth of our nation. Should these issues be allowed as they are? We all pay taxation, and as such it is in all our interests that if businesses get hurt in the way they are by charging for pre-owned gaming. No matter what solution Microsoft comes up with in regards to these charges, it is revenue, and as such it should be taxed in Australia. To Mr Prof John McMillan, Australian Information Commissioner (OAIC), how protected are we from this level of data collecting? I would like to raise the case R and Credit Reporting Agency [2011] AICmrCN 12. Specifically Section 18G(a) of the Privacy Act 1988 (Cth). Even though this is not just about credit information. These consoles will hold all kinds of information as well as in many cases Credit Card details. Specifically “(b)  ensure that the file or report is protected, by such security safeguards as are reasonable in the circumstances, against loss, against unauthorised access, use, modification or disclosure”. There is no way that this can there is any reasonable case of security and as such a case could be made that many levels of data collection should be controlled. I would like to add that this goes beyond normal safeguards to allow the case where an option of “Feely handed over details” is to be allowed as a defence by the collecting companies. If we consider that I showed from past events that these details can be obtained, then a clear option to block access to all these data segments should be clearly documented and should initially be switched off on all levels, so that access must be specifically allowed. However, apart from the normal credit card option, these systems should allow for alternative forms of payment (like the prepaid credit vouchers as they are currently sold by Microsoft and Sony).

United Kingdom
As our good old Australian point of historical origin, the UK also embraces the Common Law, and as such the financial parts would fall into the laps of The Rt Hon George Osborne MP and The Rt Hon Ed Balls MP. I reckon with well over a trillion pounds in debt and the additional issues they had with Google and Amazon they might be interested in a group that would not be able to get away with this. Consider that the UK has 400% more people living on an island decently smaller then Australia, the amount of revenue that this affects would be interestingly more than the numbers Australia has to deal with.

In the UK, data privacy falls in the lap of Christopher Graham who is the Information Commissioner. His office keeps eye on many issues, including Data Protection Act 1998 and the Privacy and Electronic Communications Regulations 2003. Both might have issues with these new next gen consoles and the information they could be gathering. How complete has these checks been in regards to the privacy of UK citizens?

Netherlands
Even though the Netherlands is based on Civil law (not common Law), they have their own issues with deficits. In addition, a massive source of revenue in the past from a national icon called the Free Record Shop (which is now bankrupt and also sold games) is no more, so it is even more pressing to keep a balance of affairs as they lost to all kind of on-line traders, many not operating within the Netherlands. Even at only 0.5% the size of Australia, it has the same size of population and many of those play games. They too deal with deficits and several issues where people are just too intensely taxed, whilst loads of online revenue gets away from them. In this case it involves funds that Jeroen Dijsselbloem loses as Finance minister. A man who likes the Dutch treasury coffers to be filled a lot more then they currently are. This is the man we all know as the Chairmen of the Euro group. As such he could even make a case that this is an issue that floats far beyond the Dutch borders.

The issues involving their privacy is set in “Wet bescherming persoons gegevens” (translation: “Law to protect personal details”). The law came in effect on September 1st 2001. Their Article 76 comes close to what we have in our privacy act as states in Section 18G (a). The question that rises again is on protection and security of these facts. We have learned in more than one occasion that the required level of security falls in the range of illusionary, hence again the question becomes, why allow it in the first place. (Did I oversimplify the issue here?)

In the Netherlands these issues seem to fall with the Justice department and as such it falls on the plate of Minister of Security and Justice Ivo Willem Opstelten. Another interesting fact is that his wife is Judge Mariette Opstelten-Dutilh. So these issues might make for an interesting conversation on more than one level. The second reason for adding the Netherlands in this regard is that their minister of Justice is also responsible for the coordination of counter-terrorism policy, which again gives thought to these data collection issues on another dimension. If these levels of collection enable an easier access to identity theft, then each of these members would need to take a stronger look at a danger they are trying to prevent on one side, and ignore them almost completely on the other side.

As mentioned earlier in this article. What Microsoft claims on their stated security measures comes from their ‘marketing and sales’ divisions. Their stated interest is never what we need it to be, do these politicians realise that?

Sweden
Sweden is one of the most liberal nations in the world, with a quality of life that is second to none. Civil law gets a new level of comprehension as you experience the politeness of the Swedish police officer (beyond the mass riot times we saw recently). What is interesting there is that it is regarded as one of the Nanny states (US expression), yet when we consider the Swedish Minister of Finance, Mr Anders Borg, we see a slightly different view. He is seen as the man who has been slowly dismantling the social democratic welfare state, giving it a more business like character. I think it is fair that he takes a look at this as well. Like the other nations, Sweden is dealing with unemployment rates. If we see business going the way it is on-line, whatever they have must be protected. In addition, Sweden like the UK has a sizeable segment on video games. Sweden has produced its share of games and is after the UK one of the larger producers in Europe. They have over 2 dozen developers, in a nation with a population less than half of either the Netherlands or Australia. So keeping that industry safe is in their interest, and personally, with the unacceptable steps currently under review, that industry could feel pressure.

When it comes to data matters you can see why I mentioned that if we take the previous mentioned issues. For Sweden there is the following statement in regards to data matters “Generally, it is prohibited to transfer personal data that are being processed to a country outside the EU/EEA that does not have an adequate level of protection for personal data, unless the data subject has explicitly consented to the transfer.” It is the ‘unless’ part that becomes interesting. So in these nations we have seen broadly similar, yet specifically different issues that are affected with personal data.

The Swedish data inspection board is run by Mr Hans-Olof Lindblom, Director General. Their public office takes into account the Personal Data Act (1998), the Data Act (1973) and the Credit Information Act (1973). It is important to note that these acts are at least 15 years old. There is decent question rising on technological issues that were not even an option until 5 years ago. So it stands to reason that there are concerns on issues when it involves security and cloud. Some parties have stated long before these consoles became an issue that the expressions ‘data cloud’ and ‘firm data security’ should not be mentioned in the same sentence.

In the end, this is not about just a pre-owned game. We seem to be embracing new hypes and new technologies without thinking through the danger we burden ourselves with. These new systems are about to set new levels of digital rights and new forms of data collection, where we become the marketing product on several levels. In addition, there is more and more moving towards some cloud we know not of how secure. In an age where identity theft can have a debilitating factor on us for a long time, serious questions must be asked to several companies and a non-marketing answer must be coming our way publicly, long in advance of any official hardware release. With their release dates now less than 26 weeks away, several parties on levels of government, commerce and Justice should be asking questions.

Perhaps they are, but apart from Microsoft Marketing we hear much spin and decidedly little final details. And what will Sony do?

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May 15, 2013 · 20:52

A noun of non-profit

The EU is getting a few more jabs using jibs, as it sails through the rough weathers of recession. Germany is up, France is down and the UK is about to remove their ship. If the Dutch economy does go up, it will be a plain victory through Nutricia as it shipped several containers of baby milk powder to China. As each container contains 20.000 boxes of Nutrilon (Source: http://www.nos.nl) this could be a first step to stem the tide of some safety for the Chinese baby nutrition. Yes, the article could not leave out the emotional side of crying mothers at the cash register. There is in opposition to the statement in the article little or no guarantee that supermarket hoggers will stop trying to ship baby food to China for now, as it is fast money for those involved and there are additional groups of tourists and foreign students trying to lend a helping hand to their families. This is the one consumer strongly aiding babies and the Dutch economy.

However, they are not there yet. The EU economy is no milk run as it is presently presented. It is not just the economy. If you think that just the local (read national) budgets are a problem, no it gets worse. The EU Budget itself is also coming up short. So that clearly reads that we have nations with a deficit, and now that the group that they belong, which also has a budget is ALSO in deficit. In an interview president of the Euro group Jeroen Dijsselbloem stated on the NOS journal in the Netherlands that the Dutch budget will get hit for up to a little over 500 million Euro (which was stated to be a worst case scenario). In addition the IMF stated the worrying condition of the Netherlands. The Dutch NOS reported the prediction that even though the Dutch economy will shrink another 0.5%, they do predict a growth of 1.1% next year. I personally join the group “Oh ye of little faith!” on that one and if they are able to get the economy up to 0.2% positive in 2014 than they would have achieved quite the small miracle.

The shortage, extra payments and several other ‘bad news’ moments we are likely to hear during 2013 would effectively prevent that 1.1% growth. We will know the actual number next year, but I am putting it out, right here, right now! I must admit that the idea of calling Christine Lagarde next year telling her “told you so!” seems definitely more appealing than a 2 week free for all in the Playboy Mansion (but then, as many have stated before, I was always wired slightly weird).

So, the Dutch government, who was unable to keep their budgets (like several other nations), and after getting a 1 year extension to get their budgets in order, this happens. The Netherlands is however not the only one, and this is not about having a go at the Dutch.

The French are also on the recession list. Or better stated, the French situation might soon become dicey to say the least. Even though their economy is not deep into the dip of bad economy, 0.2% is still an issue, especially as this is a continuing line of sub zero numbers goes on. If we look at the IMF Document called ‘World Economic Outlook‘, April 2013 (http://www.imf.org/external/pubs/ft/weo/2013/01/pdf/text.pdf) shows that these numbers who seem to be on par, are not that accurate. If we take the word from Dutch (NOS) and Belgium (VRT) sources we see that the Belgium shortage is now set past the 3% point, which is a big no-no as the EU had set an upper margin of 2.8%. So the account balance which was set for Belgium in the time range from 2012 to 2014 was supposed to be -0.5, -0.1 to 0.2 is now -0.5, -0.3 and ??? So we need to take into account that these were predictions, yet, if the numbers are off either by registration or by prediction (0.2% national difference is a lot of money), then we have another issue. What else is missed?

 

This is exactly why governments should not be allowed to skate to the edge of the ice (read maximum budget shortage) to that extent. All these predictors and good weather ‘reporters’ that the ice is good and the ice looks fine and the ice is thick enough feels to me that it would be part of the flim-flam confusion act. The issue is that even though these statements might all be correct, people forget that all involved parties neglected to check the quality of the ice below the surface. That part is now breaking off, in part due to many others jumping up and down on the ice for an extended period of time to the point that the skater now ends up taking a dive in the water and is starting to drown. There lies the problem! Should you doubt this part, than reflect on these events in regards to the Greece eternal debt.

Consider that the big nations are all in debt, even Germany. Yet Germany took a hard handle on their debts and fought it to lessen the power debt had. The issues that the other large players are stuck in a wrestling embrace with recessions and risk taking banks should not be lost on us. In addition several of them like France, Italy, Spain, Portugal, The Netherlands, Belgium and Slovenia are in a less good shape at present. When we then add Greece and Cyprus, we end up in a garden party with large portions of recession and deficits to go around for all players of the economy game.

I am not telling anything I had not blogged before, yet the issue remains and the game seems to be changing at present. If the UK, by pressure of its population is moved to walk away from the EU then we have a new situation. As long as the UK was part of the EU, they had a stable anchor in play.

Consider a large (really large) barge, that barge was kept in place by 4 strong anchors. UK, France, Germany and Italy. Yes, we to do know that most are in shabby state, yet, overall these nations are large, stable and democratic (that matters). They keep the Barge EU afloat in a stable place on the whimsy stormy sea called economy. If the UK walks away, then we have a new situation. None of the other nations have the size and strength of the anchor required and the EU now becomes a less stable place where the barge shifts. This will have consequences, but at present, the actual damage cannot be easily foreseen. Any claim that there is no consequence and they predict no issues, remember this moment! The Barge (as is), will lose stability and the smaller members thinking they are on a big boat are now thrown left to right then left again as the storm rages on. The smaller nations will get damaged and in addition, the weaker ones (Cyprus and Greece) could still collapse, especially if the UK takes a non EU gander.

There is however an additional look. Some could take at a paper by Edda Zoli called “Italian Sovereign Spreads: Their Determinants and Pass-through to Bank Funding Costs and Lending Conditions“. It is an impressive piece of work. and can be found at: “http://www.imf.org/external/pubs/ft/wp/2013/wp1384.pdf“.

The abstract states: “Volatility in Italian sovereign spreads has increased since mid-2011. This paper finds that news on the Euro area debt crisis and country specific events were important drivers of sovereign spreads. Movements in sovereign spreads affect CDS spreads and bond yields of Italian banks, and are transmitted rapidly to firm lending rates.”

Oops! That is interesting, as this is exactly the fear that drives some of us, especially when we saw Cyprus and recently the worries that the Co-Op Banking group is giving us and not to mention to unresolved issues on Barclays, Royal Bank of Scotland, SNS Reaal (now nationalised) as well as possible future issues with Banca D’Italia (The Bank of Italy), who currently seems firm and strong, yet if Italy continues to fend of the Austerity measures we will see an increased wave of issues that could have far fetching and long term consequences.

In regards to the UK, when looking at Barclays I found this with the New York Times in March 2013 By Julia Werdigier. “Despite the bank’s weak profit and legal woes, top executives at Barclays have been richly rewarded in the years since the financial crisis.” In addition it states “The payouts come at a difficult time for Barclays. While the stock was awarded before 2012, the compensation may still give additional fodder for critics, who have complained about the industry’s outsize pay packages.” That is not all! On May 7th Reuters reported that the Citigroup has sued Barclays PLC for over 140 million dollars for the 2008 Lehman Brothers party, a party from which some banks are still trying to recover from almost 5 years later. In addition there is the LIBOR rate ‘scheme’, which costed Barclays in the form of a fine exceeding a quarter of a billion pounds. Then we get Citigroup now claiming, wanting desiring and demanding over 140 million. Oh Joy! Yes the Barclay executives (around 430) ended up with a total bonus of over 650 million. So how much money did Barclays make? (Read on to learn)

This example shows exactly my fear. If we see the paper by Adda Zoli, we see part of the issue. If the national debt grows, the risk increases. The UK has a debt in excess of 1 trillion pounds. That is a lot! Banks seem to have less and less, and as such you and me (you know your average dopey lender) has less and less chance of any future in these dark days. Now, to be clear, Barclays was NOT bailed out by the government. They took the high road and decided to cut down on staff by almost 7000 (over a period exceeding one year). Like that is not additional pressure on the government? Yet, all these bonuses, which might have allowed them to hold all their staff for another 4 years for the price of 1 year of executive bonus.

In addition, Zoli’s paper is specific to Italy, yet that same approach might also be used to look at the danger levels in several EU countries. Take these facts and now extrapolate back to the big barge called EU. We can speculate that as people on the boat are thrown overboard. It changes the weight of the vessel as it loses, not gain stability. In addition, some get such high rewards, rewards that are kept to them, not used to maintain the barge! These factors will impede that barge even more and those additional factors are overseen and given to us in the form of ‘bad news’ moments that just pop up. Remember the extra EU payment at the beginning? So a barge, now less stable and a drowning population, all in the Economic Ocean, a restless pond, that is East of the Atlantic and West of the Pacific.

It is important to realise that these Barclays executives have not broken any laws. They were ‘rewarded’, yet Barclays reported a Nett loss of 1 billion for 2012. Seems utterly wrong doesn’t it?

 

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April 1, 2013 · 00:46

60% confiscated and counting in Cyprus!

We knew that the played situation of the Cyprus deal seemed to have a few more angles than foreseen. We saw the two-step dance routine by Jeroen Dijsselbloem and Christine Lagarde. We saw the final second meeting and agreements after hours of delay until the negotiations were set with its back against the wall. We saw the hard felt news on those Cypriots. Some of them were defiant; some of them were blaming different parties. The last part is all good and fine. But the news as stated on BBC and other stations now mention that those owning over 100,000 Euro, are likely to lose up to 60%.

A number of enormous strangling events have been placed in effect; ready to make sure that the money does not get out of Cyprus.

So what is wrong with this picture of the bail-out? Part of me does not disagree that a hefty price is to be paid. There is a very good run down to be seen on the BBC site at: http://www.bbc.co.uk/news/business-16290598

It gives a short and to the point timeline. So you all should check this out.

You see, the press might not be asleep at the wheel, yet, even after all these high pea-cock statements about the freedom of the press and the need for self-control and no charter and all these other statements of ‘fact’ as to what they should be allowed to do, seem to remain EXTREMELY quiet in regards to the underlying facts of Cyprus at present. We know they ran into trouble when they took massive losses on the Greek government bonds. So, the Cypriot situation had been known about for a long time.

This brings us all to an interesting question. With the Greeks all getting over 150 billion Euros in bail-outs and THEIR bank customers not being cut, how come the Cypriots are getting sliced to this degree? More important, how come these sides of information in regards to press freedom did not make it to the newspapers to the extent it should have been shown?

So, the bailing out bank in Cyprus, if given 2% out of that Greek tragedy could have prevented the need for many savers to be chopped. Let us not forget that the Greek bailout in total has topped 320 BILLION Euro and it is Cyprus who had bought some those Greek bonds (amongst others) that got them into this mess to some extent.

This had nothing to do with Chancellor Merkel or Germany itself (who many seem to blame). This situation seems to show an almost basic lack of arithmetic skills with many parties. How interesting that this did not come up in the Dijsselbloem-Lagarde show of statements and posturing. This is NOT to blame them; I am just asking a few questions.

More important, the fact that this had been going on since 2010, means that either a few people are dropping not one ball, but several left, right and centre. Or the game played is about a whole lot more than just a bail-out. There is the additional issue, which is that bankers are allowed to too much of wielding, weaving and transferring issues that should have been out in the open for others to be judged of before this all was allowed. There is NO way in my mind that this could not have been prevented if proper steps had been taken by several parties. Consider that even in the final days that Cyprus was flaunting options to gas reserves to several parties including the Russians. Could this not have been done sooner? Several businesses in Europe and US could have stepped in in this attempt to raise businesses. If we can believe the voice President Obama about moving forward the US economy, than the fact that they have not been loudly all over this option seems odd, irregular and in my mind definitely questionable. So are these gas reserves for real or was this a quick Cypriot horse to open the IMF bank vaults? (The Trojan horse was already used in Troy).

In the first degree:
The Cyprus government had a first responsibility to take firm control. When the banks are over 85% of your GDP, a government does not get to look out of a window, blow their nose, then state ‘Did we miss something?‘ This level of utter incompetence (for a lack of a better word) is beyond belief. To me this reeks strongly of two partners (politicians and bankers) enabling each other, and then settling others with the bill. The issue for me is that there has been a total lack of transparency. That evidence becomes a lot stronger if we consider that their bad fortune is linked to borrowing to Greece. So when were those government bond deals done, and why were they not dealt with when they were giving hundreds of billions in Euro’s to clean up the Greek issue?

In the second:
All this reads like banks are moving huge chunks of money from place to place (or from loan to loan), with likely 1-2 executives getting a decent (read 7 figure number) commission out of that. Could this thought be true? (I was making a commercial assumption there). So why are these transactions not a lot more open and visible? This question should be taken a lot more seriously when you consider the 2004 and 2008 bank burns. Beyond that we are now likely to see a bail-out strategy between 2010 and 2013 that is more than just flawed. This entire implementation of bad banks will haunt us all down the track.

And should you consider that the money moves are not happening (which might be fair enough), then consider that people do NOT stick their necks out to THAT degree without a decent pay check behind that. These people would have known that there was a decent danger of bankrupting a nation. So whatever the deal was, it would have needed to be mucho sweet for whoever was adding his signature at the bottom.

Now let us look back at those points. The press has been too blatantly absent from all this. Yes, groups like BBC and Guardian have been active, but these are just two of a very small group that is actually digging deep. Most parties seemed to have repeated very little more than the Reuters newsflash, with all these hundreds of investigative journalists that seem to be all over the place does that not seem a little strange? Add to this the famous Cyprus bailout press meeting. How Mr Dijsselbloem was carefully phrasing abstracts like structures and solutions. Yet, until the Guardian asked their question, the ‘solution’ bad-bank seemed to be pussy footed around. Even after that, that phrase was carefully circumvented as much as possible by all parties.

This is why this last blog reads a lot more emotional than the other ones. From my point of view it is a simple approach. We are being managed. The situation is managed to a certain degree, the events are managed to a certain degree and the Cyprus Crises is shown in details, but people tended to focus for the most on the emotional parts. The people, their savings and the daily impact the banks had on their lives. A real proper timeline that gives us an account on how it drove itself over the edge is often sketchy. I find it all too sketchy.

Last is a smaller element which was reported in News.com.au on the evening of March 30th “Lawmaker Mavrides, meanwhile, confirmed that a committee appointed by President Nicos Anastasiades would investigate a list published by Greek media of Cypriot politicians who allegedly had loans forgiven”. This is a smaller part, yet, that means that there is more than just one link where politicians are making personal deals with bankers is not really that far-fetched. We should wait until the facts are investigated and reported, however, that investigation might take a lot longer with all the issues around. It does however give more credence to my earlier statement regarding the interaction between bankers and politicians.

Should you doubt me? That is fair enough!

Consider another avenue. On 30th November 2010 Jullian Assange revealed that the next target of his whistle-blowing website will be a major U.S. bank. The same date a red notice was issued by Interpol. It was around that time that the hunt for Assange intensified by a lot. Perhaps the one bank was just the beginning? If we look back at the issues we know now, then there is a chance that someone made mention of the LIBOR percentage tweaking issue.
If this is what frightens the US, then consider the consequences of a system like LIBOR being manipulated through the total value of trade. If that would have been off by 11.2%. Out of $1000T (UK and US combined) then that difference would be $112T.

I would love to get 1% finder fee of that! It would make me the FIRST Trillionaire in history (not bad for a person only dreaming to be a Law Lord some day).

This is however not about greed (I would be happy to settle on 1% of 1% of that amount), it is about the amounts that are in play here. We knew about the LIBOR percentage manipulation games played and those fines are still being sent out to the involved banks during this year. Yet the total amount does not seem to be under investigation. At least, not by a range of those loud shouting reporters we heard so much about in the last 6 months (who keep on shouting on how unfair Lord Justice Leveson was). When you look at the total value then you will read about statements of complications, non-clarity and other statements that give way to non-revealing reports. Interesting that something THIS important seems to be lacking transparency.

All this connects straight back to the IMF and Eurozone issues in play. For the chosen few it is extremely important that the slow waltz controlled by Mr Dijsselbloem and Mrs. Lagarde continues as is. Because this is NOT about what George Soros says in Inside Job (2010) “We have to dance until the music stops“. This same analogy was used in the movie Margin Call (2011). It is however the issue that in our reality the dance itself is the nightmare that keeps many financial institutions up at night. The moment that proof of large scale manipulations becomes visible (and proven) to the many, that is the moment Wall Street ends, the US goes bankrupt and our way of life stops quite literally. At that point it all stops. Then what?

So why not regulate these banks in tougher Draconian ways? These situations go beyond normal. Well, consider that there is not just the chance to lose a lot; there is the potential for these banks to win big. The problem becomes that the speculating approach banks have taken could be seen as one casino with too many independent well trained quality gamblers. To continue to remain in existence the banking system needs two factors.

First they need the one point advantage like in Blackjack (or the zero in Roulette); the second advantage is that they need more cash. This is the entire danger! The bank is no longer THAT rich and they are up against high stake gamblers who know the game through and through. So now their only playable assets left are the bonds no one wants and what is left of your pensions. So how long do you think you have any money left?

Last thoughts, how come the markets keep on going up? Financial markets are in the dump, Cyprus is in an utter depression, whilst the UK, the Netherlands, France, Spain and Italy remain in a state of recession. All these issues give me a clear impression that we are being managed in more ways than one.

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March 22, 2013 · 21:33

Asleep at the wheel of the banking industry?

Cyprus is fast spinning out of control. The banks are still closed; the people are near civil revolt. All this was not just implied by me; it seemed to me that these acts were clear as day. So are people asleep at the wheel of the Eurozone finance?

The problem is that I am not that overly intelligent. In addition, I never had a degree in economy. So what on earth are the parties involved up to?

Last night on the 21st another Cyprus meeting was set in motion. And here, now the new game comes into play. Yes, they might have an alternative! They have offered a solution opting with two banks, a good and a bad bank. (Source: NOS News) Is this it? Is this the wave that we will see? It seems that Goldman Sachs has been very active. It was Goldman Sachs who initially mentioned such a solution in a few cases. This included the SNS bank, however the solution was rejected there and it caused the nationalisation of the Dutch SNS bank. I spoke about this in an earlier blog, and likely you might have read it in a league of other sources discussing this.

As mentioned, I did not study economics, yet I am overwhelmingly against this solution. There is no denying that the Goldman Sachs boys (and girls) are loads more qualified than me in this field and this has to be solved by clever people. All this I agree with. Yet, sweeping loads of debt under a carpet so that those who created the debt to forget about it is not the solution. Getting rid of it by creating bad bank swaps is not a solution and to accumulate all these bad banks in an effort to offset the overvalued total global sum as set in LIBOR is not a solution either (even though that would have been VERY clever indeed).

The banks never ending ability to play quick and loose with bank funds at the expense of all their customers so that they can enjoy a quick raise in commission is clear evidence that after 4 years, doing nothing is just no longer an option. It is extremely frustrating to listen to politicians and journalists games for alleged infringement of their freedom to speech and the need for better budgets. The one party that needs some intense new levels of legislation is left alone to play the games they play.

Yesterday’s news on NOS, where we saw the head of the Eurozone finance ministers Jeroen Dijsselbloem getting flame baked by the German Peter Simon who is a member of the German Committee on Economic and Monetary Affairs. He went the route of dust, stating that he was taking responsibility for certain joint decisions. So is this all incompetence? If we consider that he met with Christine Lagarde earlier this week, it gives clear image that more is going on, because pardon my French, but she is one clever cookie. Should we therefore consider that they are considering another path?

I reckon that the entire SNS issue as it exploded earlier this year did not go the way certain groups wanted. Even then there were clear calls for the bad bank solution. It was stopped and the Dutch government stepped in by nationalising it all. It is not impossible that the bad bank solution was the only option from the beginning, however they not in a public position to offer it as a first option. The people would have to be a little more against the wall there (not the Cypriots, but the general population in the Eurozone). This is more than just a call. I think there are several reasons playing the field in regards to the bad bank issues.

Should you consider my thoughts to be wrong (which might be very valid), then consider the US eternal resistance against Russian activity in Western Europe. Now, there is utter silence when Russia is willing to come up with the billions saving the Cypriots and getting access to the Mediterranean Gas fields? There is no way that they would allow this, which means that either another tactic is played here, or the US is almost officially utterly bankrupt. (Not entirely unrealistic either).

It seems that this is turning into a Machiavellian play. A play where the banks hold the dagger that they are ready to stab straight into the backs of the people they should be protecting. Their own citizens! This is where the shoes are getting too tight to dance. The banks have not been a caring factor for their local population for a long time. It is all for greed, commissions and it all tastes sweeter on the international market. This is also a massive reason why it is harder and harder to get a mortgage. In the end the return on those investments does not yield the returns the banks are hungry for. This was clearly mentioned by several sources. They have been bending over backwards to not qualify customers for a mortgage. (Source: Trouw, a Dutch newspaper). Banks want to make money, lots of it. Mortgages just don’t slice the bread for a banker any more, leaving most of us all out in the cold.

So why am I against the bad bank? In itself, the bad bank could be a solution if people in charge would wake up and ACTUALLY get some true banking reforms in play. Stopping this group for needless risks should be punished severely. Like the press they claim to self-regulate, yet, like the press it is nothing less than a joke.

This was reported by CBS on May 14, 2012: “JPMorgan Chase’s admission last week that it lost more than $2 billion in one set of trades should be used as a wakeup call to end the practice of banks regulating themselves, Massachusetts Senate candidate Elizabeth Warren said on Monday.”

This is only one of MANY of these reports in a period between 2008 and now. 2009 with the reports by Lord Turner, and even now, or even in six months’ time when more fines hit the LIBOR banks. Self-regulation does not work. Show me a person with greed and I show you a person who does not care about the rules and often does not worry about the consequences either. Banks are filled to the brink and drowned in resources motivated by greed. It is the same reason why the press cannot regulate their ranks. Their need for greed (size of publication) and their ego trip to get the news first is why phone hacking started in the first place.

Yet, a royal charter will not work for banks. They will walk away too often without any severe consequences (because most dealings are international). A clear need to legislate beyond draconian is the only solution for banks, which must happen on a vast international scale. Also, my thought is that any banks on the international trading floor should have at least have 20% vested in local mortgages. The reason is that it will give most banks a better level of stability, it will serve people actually having a chance to work on a future and in the last it will give many a peace of mind.

All this is needed BEFORE we start playing with the bad bank solution. If we can tie these banks down with draconian measures making these transgressors homeless, income-less and future-less is the only way to ensure that not only will the current banks behave, it will give a realistic chance of the debt for bad banks to be resolved and paid.

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February 7, 2013 · 15:11

Banks, eunuchs of a new congregation

The times are still all over the place. As I finished the 5th part of my previous story, the stories from SkyTV UK and the news by the Dutch NOS started to hit my TV. The thoughts I had on issues that are currently playing out are nowhere near done. I get the distinct feeling that this is far from over. It is almost that there is a voice whispering in the ear of Dutch Finance minister Jeroen Dijsselbloem. The whispers seem to be about the Bad Bank and the whispers could involve Goldman Sachs. There is no doubt that this man knows his stuff. He got his finance papers in Wageningen, a renowned and highly respected Dutch University. There is however more at play. I know it is a personal feeling and I am not an economy graduate, so there are plenty who can run circles around me in this regard.
The first part is that this idea comes from Goldman Sachs. Is it wrong to call a spade a spade as the expression goes? This firm together with the Lehman Brothers were the massive cause of something that had us reeling in 2008, and this is not over, not by a long shot. THAT damage will take decades to overcome. No amount of fancy bookkeeping can brush this under any size of carpet. This is however not about emotions. That path will never ever give any solution. My issues remain clinical (or at least I am trying to keep them that way).
Consider the banks are all allowed to get all their failings into a small rejectable corporation. These costs should be paid by the failed implementers. Not the government, not the taxpayer. The bank must pay for their blunders!
If this continues as it currently seems to be going, then we get a legal situation where high risk bad ideas can just be written off the books and straight onto the taxpayers list of to pay, whilst those responsible will ever show improvement. Those people will just keep on playing high risk games. That had been shown already. This thought was also mentioned by Rolfe Winkler at the New York Daily News. How is it even possible that a company that seems to have been one of the major reasons for the financial meltdown be regarded, or even ALLOWED to make any continued presence?
Wherever I looked Spain, Netherlands, Ireland, and perhaps even more places. Goldman Sachs keeps on being named as a primary advisor. How many bad banks are there in America?
Let’s take a clinical jump into health care. Would the Dutch Minister of healthcare Mrs Edith Schippers consider someone for a position? You see, I know a person (well, kind of). Brilliant physician (so they say), over a decade of medical research experience and deep knowledge of improving the physical best in all of us. His name is Dr. Mengele. Would she please consider him as the new Surgeon General?
Are people feeling ‘slightly’ sick at this particular moment? So if a transgressor of THAT magnitude is so offensive, can ministers not understand that we have a massive amount of resistance against parties like Goldman Sachs and Lehman Brothers? Some things should just not be considered. This is not emotion, this is common sense. If groups like that can debunk a generation, why trust them again?
Again I say, this is not emotion, this is common sense. My reasoning is simple. When a board member moves into such a power position, that person will surround himself/herself with the golden boys and girl that made for this to happen. It is an evolutionary step. The board member rewarded is also the golden boy/girl reward. The top of the pyramid moved to the direct vicinity of that power circle. And they would have moved a few people into their vicinity too. So whatever was done to that board of directors did not stop when they left. We are looking at a minimum of two additional circles of power, some moved up, some moved away and some stayed. But the way of thinking of those who left remained in place. That is the real danger. This could happen again!

My fears are voiced in much better way by Professor Julia Black from the London School of economics in a paper from January 2011 “The financial crisis revealed weaknesses in regulation which went far deeper than organisational structure. The new legislation alone cannot provide the solutions – but it will be an important tool for guiding the future conduct of regulators, as well as determining the name of the institution for which they will work” (Black, J, ‘Breaking up is hard to do’, 2011).
So these weaknesses go deeper than just the casual parts. This is partially visible in an article in the Guardian written by Alan Travis on October 2nd 2012 (“Labour will introduce new laws against dishonest bankers, Cooper to say”). It is interesting that this happens more than a year after the paper by Professor Black and more than 3 years after the Banking Act 2009 (I reckon they could not delay it any longer). In the article Cooper says: “Cooper says that the public looked at what had happened and had seen no real sign of people being held to account.” This was Yvette Cooper MP, the current UK Shadow Home Secretary.

Really?

Many had that feeling since 2008 when retirement funds when to the local latrine and haven’t been heard of since. For me there are a few additional issues.

1. Can this happen in Australia? (Some might say No, we are not like that, but how clearly is this set in legislation?) We should find and test this BEFORE the Australian public is presented with a multi-billion dollar write off.
2. The UK has the Fraud Act 2006 (originally part of the Theft Act). The problem here is that the word ‘Dishonest’ is a factor in each of the variations of Fraud. That has the issue that the events that lead the 2008 meltdown were not illegal. When we look at the Banking Act 2009, the criminal links are not really there. More important, since its release there have been no additions, alterations or amendments to stop the bad credit ‘solutions’ the US banks employed. So it seems to me that proper protection is still not in place. This means that the impression remains with me that the financial top can continue to get their monthly shares of luxury items, real estate and yachts. It seems that this area is not filled with loopholes; it remains nothing less than an open gate. Beyond that is the statement of Martin Wheatley in regards to LIBOR and that this had been happening since 1991 is an indication of the remaining dangers. So how safe am I in Australia from our banks playing this game?
3. Which solutions and papers can we trust? Many of them are all about concepts, approaches and possible ideas. And nearly all of them are pleading against regulators, regulations and stricter control. It seems to me that those papers are all from financial experts who want a solution without hindering their need for freedom of movement. This is in the heart of my fears.

There are leagues of papers that proclaim ideas. An example is “CRISIS MANAGEMENT AND BANK RESOLUTION QUO VADIS, EUROPE?” written by Dr Barbara Jeanne Attinger. In the conclusions section of page 47 she writes: “National special resolution regimes are capable of addressing the characteristics of credit institutions at national level. The UK regime is exemplary in this respect, as it provides an effective toolbox for bank resolution”.
We might ask her about the LIBOR issues; that in itself does not invalidate her thoughts and approach to the Banking dilemma at heart. Stronger than that, her presentation on 29th January 2013 in Copenhagen reads direct, to the point, clear and pretty brilliant. I do not need to need a finance degree to read between the lines that this is a possible approach to a solution. The part I am missing starts to be visible when get to the resolution in the context of a banking union. She mentions this and focusses on the third pillar.

• Single supervisory mechanism
• Integrated resolution framework
• Common system for deposit protection

The first pillar is about the supervisory mechanism. From my point of view I see the specific need for a fourth pillar, which would require alignment over several nations (not all have the same acts, rules and legislations when it comes to banks).
My thoughts would go towards:

• Single supervisory mechanism
• Integrated resolution framework
• Common system for deposit protection
• Acts of Accountability for Banks and Financial Institutions

I have seen several papers that rely on a solution without regulations. There is no way to tell who’s right here (my lack of Financial degrees gives them the advantage), yet the fact has been shown that Banks cannot be trusted, and the LIMOS scandal just adds a bucket load to that belief.
The acts need to go further than the Fraud Act and the Banking act combined. It must clearly outlaw certain acts. It must also limit rewards. The utter need for a ruling that bad bank approaches are no longer rewarded. More important, any form of reward within financial institutions should be lessened by the amount moved to a bad bank, or bad investment write-off. Something they will not want, however, consider the fact that people end up with margin profits with swapping papers. That should no longer be rewarded.
The high risk use of Interest-Rate Hedging Products (IRHP) are reported to dent their net earnings prospects in the short- to medium-term. (Quote from the Guardian) Well, if it is impeding net profits, then it should not be rewarded in any way shape or form. You want to run risks, fine, but then the bank does it risking their own capital and own finances. What are the chances the banks agree to such measures?
There is an additional issue. This is the current instalments of Goldman Sachs creativity called Bad Banks. This is nothing to attack them on, as they do not seem to be doing anything wrong or illegal. However, I feel that this escape hatch will cause a lot more damage in the short and medium term than anything else. Even long term these Bad Banks are to be seen as issues. The required change would be that until resolved, no less than 5% of annual banking revenues MUST be transferred to the bad banks from the banks that had to be created because of their actions. In additions, the commission-able revenue must be based on the remaining profits AFTER funds are transferred into the Bad Bank. The need for this is shown as the Netherlands are already reporting the need for more and more financial assistance as Bad Bank properties are placed in financial duress. So SNS can just wave it off and sail to the future? It reads like the good old British days of Wine and Jousting: “Peasant Population Taxation! For a long lasting rule of Fun and Frolic”
The next issue goes beyond this. The Bad Bank might be taken care of in some way. Perhaps McKinsey & Company picks it up. Perhaps Moret & Young takes a creative accounting dip in that pool. The LIBOR scandal is however more than just an issue at hand, it will be a debilitating complication, allowing several parties to start muddy the water, leaving a solution hanging until sometime down the track, and at present no protection seems to be in place, and none to look forward to in the short term.

I reckon the current scandals show that this is not even the end of the beginning!

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