Tag Archives: LIBOR

November 1, 2013 · 17:58

Crime still pays!

If the banks are any indication then there is plenty of indications that only amateurs become burglars, thieves or murderers. If you really want to move forward in strong financial ways, then one needs to become a banker. That is the message we read when we see the Dutch approach to their RABO bank in regards to the LIBOR scandal. The RABO received its 774 million euro fine. Part of the information is here at http://nos.nl/video/568494-rabobankbestuurder-schat-geschokt-door-renteschandaal.html

One of the issues is that they paid off the Dutch version of the CPS with a 70 million euro settlement.

The news mentioned that some got fired, some lost rank, and people lost commission (no explicit mention whether all lost it). This is part of the problem. Some got away and they can try again at some point. I personally found the mention that chairman of the board Piet Moerland’s departure to be a hollow one. Yes, this is just my personal view! He would have retired next year. Consider that the RABO puts a fine of three quarters of a billion in the books this month, which gives us that the next fiscal year the board is less likely to get any commission, which gives us the view that the RABO boss decides to retire and not work for free. Interesting is, that whilst the issues of LIBOR have been visible (for well over a year) that the final moment when the amount is known sends him to make a gesture resulting in his non-working near future. There is no evidence that the top knew what was going on. Yet another story by the NOS shows that even though traders got such lovely extras, no real internal investigation existed on how they got to these high commissions.

There is something to be said about Sipko Schat, who was in charge of the traders in that period and who remains with the RABO bank. That part is not negative. There was no indication of any sorts (or so it seems at present) that he had any idea what was going on. We can doubt that, yet considering the structures of the other involved banks, the viewpoint that Sipco Schat seems to be innocent and unconnected is a rational and acceptable one.

So why the issue on crime that pays?

It seems to me that if we consider the Dutch Banking law of 1998 that at present, there do not seem to be enough handles in place to successfully prosecute these transgressors and this issues goes vastly beyond the Dutch borders, which is the one part that truly bites the people of many nations (not just the Dutch). It is my conclusion that the Dutch prosecutions office was willing to settle for 70 million, for the realistic reason that the chance of getting true legal justice for the transgressors seems to have been unlikely and for those who got to feel the axe, the proceedings for the crown would have been a lot lower. Yet prosecuting them might have been a better option. This is because many are now seeing and feeling the same sting of the years of building frauds for the Amsterdam International tunnel (to name one of several events), where three constructors settled for 1 million each, even though the transgressions showed inaccuracies of well over 30 million. This was in November 2001. There were additional building fraud cases in 2002 and 2003. Isn’t it interesting how builders and banks seem to get to settle for the fraction of the transgressed amount?

Even though much of the actual damages will get returned, not all of it will and it seems to me that profit margins remain to be too good for people not to try a roll at the high yielding criminal slot machine.

I see the issue in several nations that non-violent crimes are not correctly weighted (so, not just in the Netherlands). Too many judges seem to remain oblivious on the consequences of non-violent crimes, often these events get trivialised in courts (not just the Dutch). Not enough power is placed on improved legislation and successful convictions against financial crimes and no one seems to be willing to rock the stable boat in these regards. Until the cutting knife of the law shows unreservedly that traders and bankers could lose their professional licences and qualifications for such transgressions too many remain willing to give the slot machine of ‘hefty returns’ a go, as $1 might give them $xn if they can roll the bars to F-RAU-D, because even if they get caught, there seems to be a decent chance for them to hold onto a fair share of the unfair gained amount.

 

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May 1, 2013 · 21:14

Another banking issue

People might have read a previous blog where I discussed the issues involving LIBOR and a resolution donation of over half a billion dollars of fines by the Royal Bank of Scotland.

Today’s article by Jill Treanor of the guardian at “http://www.guardian.co.uk/business/2013/may/01/vince-cable-rbs-prosecutions” gives notice of issues at play. Moreover, these issues have been at play for some time now and there is clear need for answers on several levels. The article mentions the issues as quoted: ‘Scotland’s Crown Office and Procurator Fiscal Service have been reviewing whether a case can be brought against any former directors since January 2012‘.
So, it seems that this investigation has been going on for 15 months. A letter was written to Lord Wallace in this matter. My question would be the why it is taking his Lordship the Advocate General of Scotland this long?

There is no doubt in my mind that it is a complex issue, yet overall, when it comes to banking issues, too often the public perceives this as the ‘out of sight, out of mind ploy’. The fact that this is the second bank involved in the LIBOR scandal and the fact that the fines are currently sailing close to 1 billion pounds in the UK alone, visibility should not wane for years to come.

This is not (just) about LIBOR. This entire issue is about the investigation into the directors who were in office at the time of the 2008 bailout. So, this is about a case 5 years old and this case seems to have only started in 2012 and now 15 months later there is still no final answer. This is interesting as the UK has the Limitation Act 1980. This statute has different limitations for different crimes, yet many of them is set at 6 years. This means that if defence can twist it that these crimes would fall under one of those statutes then prosecution has a lot less than 1 year left to take a stance and get started. The fact that these issues are still not for prosecution with the CPS are an additional matter of question.

If we look at the Limitation act and we consider this to be a tort, then Part 1, section 2 states: “2. An action founded on tort shall not be brought after the expiration of six years from the date on which the cause of action accrued. (Time limit for actions founded on tort)“.

The same time limit applies to actions founded on simple contract. The interesting question becomes where these issues are founded on. Is mismanagement a wrongful act, and there for a Tort? Are these wrongful actions and forms of mismanagement breach of contract?

Yet, we should not despair. There is a wise addition in this act that is stated in section 32 of that same act, which deals with ‘Fraud, concealment and mistake‘. Hip, hip, hurrah!
There it states “the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it.”

So we might have a little more time left. Yet, we should not…. how is that expression again? ‘Dilly dally’. Yes, that was it. My grandmother told me that more than once. So we should not dilly dally to find the answers whether we have a case against those directors, lest we forgot that time ran out.

So you see, I am not convicting them, but I do want to see a case brought to trial where they can either be convicted, or where they can submit evidence that would exonerate them. Either will be the case, yet no case means there will not be any answers forthcoming. This would be interestingly unfair as that bank gave the taxpayer an additional cost of 45 BILLION pounds to the taxpayer. If you are from the UK and reading this then you should ask yourself. Did you make your GBP 666 donation to the save the Royal Bank of Scotland funds? Will you? If not then we should figure out what happened and get this to trial. Considering that the UK has a 1 trillion dollar deficit, then the added debt is costing its citizens GBP 225 million each year in interests. That is almost 3.5 pounds per citizen each year just to keep that part of the debt on par.

So yes, it is interesting to read the article by Jill Treanor. It is also interesting that she was not the only one to mention it; similar articles could be read in the independent, the Telegraph and on the website of the BBC. It seems to me that this is not some political ploy as both MP Vince Cable (Twickenham) and Lord Wallace (Shetland) both seem to be Liberal Democrats, unless Mr Cable prefers Shetland over Twickenham.

The Guardian refers to the report of April on Banking Standards. The report was described to be enthusiastically damning. In another fine piece of writing by Jill Treanor at: “http://www.guardian.co.uk/business/2013/apr/04/bankers-brought-down-hbos” is one sentence that I found ….hmmm, ‘hilarious’ just does not describe that sinking feeling in me. The sentence was “Under pressure from parliament Goodwin’s pension was halved to £340,000“. Are you guys for flipping real? My total pension will never even come close to that amount as a total sum. If there was ever a case of evidence that incompetence pays, then that would be the evidence at hand.

This gives way to a quote in a book by Robert L. Bradley it states: “The businessman who refuses to acknowledge, despite clear evidence, that his facilities are out-dated, his product uncompetitive and his cash flow inadequate, is dishonest just as the one who makes fraudulent claims to the customers is dishonest. Both are trying, at the deepest level, to fake reality.” (Bradley,‘Capitalism at Work: Business, Government, and Energy’,2009,p.66).

I think with this quote he hits the nail on the head for a truckload of cases. He also shows a graphical  bar of difference between incompetence and prosecutable fraud, whilst showing unethical behaviour and Philosophic fraud somewhere on the trajectory. This book is actually quite the little gem where they look at more than just ENRON and a few other devious little greed seekers. It even takes time to discuss the UK and ‘the Coal panic’ of 1865. So keep this book in mind please, it is a diamond in its own right.

So even though we get into the ‘Cloak and Kegger’ mindset that it is not a crime to be incompetent, then there is still the need to assure ourselves of a situation where those people do not run places like banks and corporate enterprises. Financial Services Authority (FSA) was supposed to have handled issues and cases, yet the Parliamentary Commission on Banking Standards seems to show a lack of actions on several levels. That committee on their web page reflected “The regulators also have a lot of explaining to do when it comes to their role earlier in the HBOS debacle. From 2004 up until the latter part of 2007, the FSA was ‘not so much the dog that did not bark as the dog barking up the wrong tree’”

From my view I wonder whether the regulator realised they were indeed the fore mentioned dog, whether they realised what a tree was and whether it ended up eating a bone instead.

The commission report which can be read at: “http://www.publications.parliament.uk/pa/jt201213/jtselect/jtpcbs/144/144.pdf” leaves us with another question that requires serious visible pondering by the press on several levels too. If we consider the issues of HBOS (20 billion) and RBS (45 billion) and the consequent fines that followed over the timeline until now then there are serious questions on those getting an income from the Financial Services Authority (FSA). Here comes the kicker! “and was funded entirely by fees charged to the financial services industry.” So basically we have a group that was not biting the hand that feeds them. How was this ever a good idea?

As per April 1st (no joke) its responsibilities have been split between two new agencies, the Prudential Regulation Authority, the Financial Conduct Authority at the Bank of England.

If we see what has happened here on several levels, it seems to me that self-regulation has failed on a massive scale. Both the Banking and Press industry seems to have scuttled justice, fairness and ethics on many levels and at many places. The question is not how they can restore their integrity; the question should be ‘Why are they presently allowed a place on the negotiation table in the first place?’

This brings me back to the bars as displayed by Robert L. Bradley. In my mind the distance between incompetence and prosecutable Fraud needs to be a lot smaller then I am currently comfortable with and the buffer called Unethical behaviour is a buffer zone that should be nothing more than a mere hairline. From those parts I wonder why massive visible and noisy steps have not yet taken place to remove options of self-regulation in several places at present.

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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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March 19, 2013 · 17:07

Banking the blame game

Yes, it took less than 72 hours, but Cyprus has broken more than just a little all over Europe. There was always the issue is the situation that the numbers did not add up. Looking at the news as it hits us from Sky News, NOS, Wall Street, Reuters, CNN and a few other sources, we get the distinct impression that politicians have heard of the concept of a spread sheet. There is however a decent chance they have never seen one. Consider that these politicians were involved with the Cyprus deal, we should wonder in how much problems Europe currently is.

First is the issue on the uniqueness of the plan in the first place. Those who saved all their lives, high and low savers, all have to chip in to prevent Cyprus from going bust. So, in this situation the people will be taxed twice. Once on the average of their income their savings will be cut up to an extra 9.9%.

So, how did this get this weird? Well, reporters are giving us all kinds of reasoning; many of them make perfect sense. A good one was the issue that the bail out of Greece had to be paid by banks, and this is where Cyprus got into trouble. I am not judging whether it is ‘true’ or not, but there are two sides. I personally belief that this is NOT the full story and more has happened! The interesting part is that the side as mentioned is not given the visibility it should have. Yes, there is an issue, yes, a bail-out is needed. We can also see those reporters around an ATM with queues. Yet, this issue is naught compared to the question how the $12B is needed, and even more, as they scared people to lose faith in the banks and all are withdrawing of billions of Russian Cash, all really willing to take a hike to a safer banking place. Is no one wondering whether certain ‘made’ miscalculations were really this ‘unexpected’? This is what was stated by Bloomberg on the 16th: “‘Simply to leave Cyprus alone and see what happens would be, in my view, irresponsible‘, Merkel told reporters in the Belgian capital after a two-day European Union summit. In her wake, the finance officials arrived, along with European Central Bank President Mario Draghi and IMF chief Christine Lagarde, for the Cyprus talks.”

The other side is that, should this all be true, then the issue becomes that the bail-out of Greece is not just half baked. The solution the financial experts claim to be a solution, was not only not a solution, it is turning out to be a solution that is now dragging down other nations and the Eurozone as well. As markets opened, both Spain and Italy are feeling that like a painful stab in the back. Consider what was stated on Cyprus. They need $12B, they Cyprus is only 0.2% of the Eurozone economy. Whether they were given a bail out, can someone please explain how a market this small be such a financial tsunami creator?

Take the following facts into consideration

1. If the bailout of Greece has this effect on connected banks, what are the EEC and the IMF not telling us?
2. How can an economy this small be allowed to hold such a chunk of so much debt? Remember that the issues continued AFTER the bail outs. We can seriously ask questions on how the acts by the Eurozone ministers are cut down like this. Also interesting that a lot of this was never loudly questioned by members of the press either (if I am incorrect, please refer me to the evidence I missed and I will happily correct this).

3. The markets are now realising that the Eurozone issues are far from over. Bad management seems to be a clear factor. Perhaps that this scenario and the effects were always envisioned by certain players of the big money game! If so, what are they trying to do? Push savings from banks from place A to place B? Would they intentionally want to weaken banks, especially in Spain and Italy?

We could in my mind come to the thought that either the banks and the bailed out governments are in worse shape than ever reported and the IMF and its partners in managing the banking issues are deciding on issues behind closed doors, therefor missing issues that should have been dealt with, or it is not impossible that the lack of bank regulations on an international level are reason that there is no progress at present, and none is to be expected in the near future. More important, imply that part of this is either orchestrated, of that those in charge are a lot less competent then envisioned. There is one remote third option. I admit that this thought is far out there. What if money is ACTUALLY running out? Consider all these swaps, credit vouchers and derivatives. A derivative is a mathematical future. It is not real. If LIBOR represents, UK and US combined, a value of over $1000T (yes, trillions). Consider all the debt out there; no one can pay for it. What is really left? Traders, still dealing in make belief? Concepts and nothing seems real. Food is real, Land is real, and revenue COULD be real. All those governments all claiming to have so much, yet the US is minus 16T, UK is minus 1.5T, except for Germany, nearly ALL are deep in the negative. Now consider why Cyprus gets such a unique treatment. Is it about the $20 billion the Russians have stashed there? If so, then that would be a weird act, to endanger Euro markets to such a level. Those factors might give a little value to the third option I mentioned. I admit, it is a very thin line of thought.

People all over Cyprus are now considering the fact that their banks are all closed until Thursday. Cyprus seems to be hiding a larger secret. Part of this was reported. The issues on money laundering through Cyprus had been reported before, and last by CNN. This is hardly a secret. I know my lack of knowledge and my naive thought of replacing the ENTIRE banking management groups in ALL the Cyprus banks could have actually increased reliability. In addition, it would have given a strong message out to the banks too. None of this was done, no, the saving of people were initially cut, causing market unease. I feel there are enough thoughts proving more is going on than just a bail out.

Legally? The UK and Germany should step in setting up banking laws immediately (one common law and one civil law nation). Not the penny washing kind, but the kind that has sharp teeth. Real reforms start with laws and regulations. The Wall Street Journal reported by Lukas I Alpert reported this statement 4 hours ago: “Cyprus has always said it abides by international banking laws. Russia’s departing central bank chairman, Sergey Ignatiev, recently acknowledged that Russia saw illegal outflows of $49 billion in 2012”

Perhaps those international banking laws are a lot shakier then banks and politicians are willing to admit to.

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March 11, 2013 · 13:23

Start making sense

I have been tossing and turning for most of the night. Something has been bothering me all day, and as it seems most of the night. You see, the Dutch NOS reported on Saturday 9th of March an interesting footnote in their newscast. They suddenly had this short part on the news on how this is possible. (Source: NOS http://nos.nl/artikel/482586-record-op-record-voor-dow-jones.html)

This is interesting, as I asked pretty much the same questions in an earlier blog called “It hurts every time, but we love it”, which I published on Feb 6th, so slightly more than a month earlier. The Dow index is currently at 14,397 (which was a 2007 record). The issue is that we had the crash of 2008; one in six in the US lost their house. So, the economy is not in a good place. There was also the mention in their radio cast (English and Dutch). They seemed to focus on two parts. First was the fact that Economic recovery is gotten through revenue recovery without staffing (so 5 do the work of 10, and they are happy to have a job). Second is that the Dow is based on only 30 companies. Yet, when we look at the number I wonder what game is being played as I look at a 2 year index graph. This graph is Stellar. My issue is twofold. One I am NOT an economist, but a data miner. Second is that the given ‘excuse’ feels wrong. Especially given that the news had this production line backdrop of cars, and none of the 30 seems to be in the car industry. So why not present this with a pharmaceutical backdrop?

So let us take a look at some of these Dow Jones Index companies.

1. Bank of America. A bank, and after 2008, we could wonder in what state it is in. This quote comes from Forbes and was written by Halah Touryalai, one of the Forbes Writers “No bank knows that better than Bank of America which has agreed to pay a jaw-dropping $42 billion, settling credit and mortgage-related legal battles in just the last three years“.

OK, if we take that into consideration, then seems a little weird that their stock graph has the same shape as that of the DOW. (As one of the 30, it would make sense that the graphs are shaped similar, however, such confidence after such a legal fee settlement bill?)

2. JP Morgan Chase. Another Bank! It had two more dips then BofA, yet overall it is in an upwards movement as well. It was also mentioned in the same Forbes article as before on settlement fees, but those fees were a lot lower. The Bank of America had to chew on 66% of the total settlement fees by itself, so for the other 5 big banks, the damage was relatively small in that regard. However, In April and May 2012 they had lost more than six billion dollars on derivative trades that had gone bad. There was a report of 9 billion in total, which also involved Bruno Iksil for part of the mentioned amount, he is also known as ‘the London Whale’. The numbers and the names vary when we look at UK and US papers, but overall they pretty much tell the same story. It is interesting that JP seemed to bounce back within 6 months to stock values higher than before the June 4th 2012 dip. Last on my list is Boeing. It is a giant, but we have all heard of the 787 issues and it’s now named ‘Nightmare liner’. The issue is all about batteries, yet the news from January as reported by Reuters : The new production forecast raised some eyebrows. Russell Solomon at Moody’s Investors Service was forecasting 100 787 deliveries and said Boeing’s forecast of more than 60 was “significantly weaker than we had expected.” Interesting that what analysts expect and what the vibe says Boeing will be delivering is off by almost 40%. Suddenly NOT meeting expectations has almost no impact? 40% less on a firm the size of Boeing should have a very visible effect (imho).

Now the DJI is about 27 other companies and there are only two banks in it. It is also a fact that these banks work with securities and values in the hundreds of billions, so are my concerns just a storm in a teacup?

It is a valid question, and I also ask myself this question. Let us take a look at the two following thoughts.

1. US debt. It is set at 16.6 TRILLION dollars. The total US debt is a lot higher. That one is $59.1 TRILLION.
Can anyone even imagine those numbers? Now consider that someone has that kind of money. To be honest is that really true? Is there a group of nations with that level of wealth? the only nation capable of owning that much is one with an abundance of oil, so basically the United Arab Emirates (UAE) is the only one that wealthy. Either the US is labelled UAE-west, or my thoughts are not that correct in this instance. So perhaps I am wrong (I will be the first one to admit that).
We know that most value trades are now done digital. It is the only way for the market to move such amounts of wealth. However, who checks this?

I have seen my share of digital forms of miscommunication by loads of people in several fields. Often they seem connected to the corporate headquarters of Bloated, Botched, Bungled and Baboon. An always newly formed enterprise, coming to a local public stock market near you. Consider that this is done on the electronic super highway. Now consider that Hackers come at a dozen a dime and greed is eternal, these last two are given facts. Also realise that ANY system can be gotten at. DARPA and the NSA proved that more than once.

The valid question loudly remains: “Who truly checks the validity of trade and the numbers they are traded at?”

2. LIBOR scandal. I wrote about it, the news has talked about it in abundance. Last week in an article by Mark Scott in the NY Times on March 5th the following was stated “The review published by the Financial Services Authority, the country’s regulator, said there had not been a major failure of oversight by local authorities, but it added that officials had become too focused on containing the financial crisis to analyse information connected with the potential rate-rigging”

This is a fair enough statement (it did seem shallow in relation to the handed fines), and them be hefty fines, so why are these two events related? Well, in my mind there are two parts of the LIBOR that were in play. From my point of view there are two variables that might be played with. The first one we know. It is the interest rate; the second one is the bigger issue. You see, those percentages are linked to a total sum of $350 trillion in UK registered derivatives. That is 20 times the US national debt. If people play with one, there is every reason to suspect that they might have played with the other. So again, who controls those totals that are being traded in? If derivatives include hedge funds, swaps and forward rate agreements then we should be worried. Consider as well that the US Bank for International Settlements holds almost twice the value the UK seems to be registering.

So, we are now confronted with just in excess of 1000 TRILLION dollars. How can this even be monitored? Now let us add one more part. The US LIBOR rate is set by 18 banks. The two banks in the DJI are members. Are we all on the same page now? The third bank (Citi) is to be given a fine in regards to percentage ‘tweaking’. According to Reuters, later this year, a new set of settlements will be ‘delivered’. In their publication of March 8th by Kirstin Ridley and Philipp Halstrick it states that: “Deutsche, Citi and JPM are the banks named in regulatory circles as those candidates near the next settlements,” said the second source. So now we have both a DJI member and libor member in this illustrious ‘donation’ scheme. What else is at play?

What if the total value is not correct? What if they did not just play with the percentages, but the total package of the trade able amount? Let’s just take a fictive 5%. Mainly because I feel not so comfortable with the value they say they have and in part because I cannot even comprehend that much, as we get above the $200 trillion range. So, if 5% is taken off the total amount of over $1000 Trillion, would mean that we might all be devaluated by a total of 50 trillion dollars. That comes down to $8400 for every citizen on the planet. Did we sign up for that invoice?

It might be just be me (and I can happily live with that notion), but can bankers and financial corporations be allowed to continue on this track? We have seen clear evidence that those places cannot be trusted with even a small speckle of such amounts. Even though they NEVER broke any laws initially, LIBOR shows that some are very willing to do that. With the US on the edge of bankruptcy (or on the wrong side of a fiscal abyss), with the financial industry in such disarray, what can be done?

So when this all falls over (not if it falls over), what will we be left with?

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February 27, 2013 · 13:49

The ugly unspoken truth

It is nice to get your thoughts confirmed. So, my ego was taking a nice leap forward when I saw how ministers all over Europe agree with my views on blogs I had written in the last few months. Foreign ministers Margallo from Spain and Westerwelle from Germany as well as French Minister Moscovici from France voiced pretty much literally the issues I had on several finance issues plaguing debt driven Europe. The Italian election is not as much a solution as it has now become an issue of less trust and security then before the elections.

So, it is nice that they agree however, the issue I have is that the Italian population seems to ignore that THEIR predicament comes from massive irresponsible spending. The other part is that Germany, when needed did tighten the belt and therefore they are now in such a strong state. Other nations are still fighting with issue they have (like the Netherlands). This is not because they are not doing anything, but because, from my humble opinion, they started too late, and as such they are now in this ‘mess’. They still have more issues to come. As they reflected that 2014 would bring a 1.1% increase, my thoughts are nowhere near that optimistic. I cannot vow on the issue that they are wrong, yet, over positive thinking is a hampering Anvil for them. I would think that if they could pull of a 0.3% positive growth in 2014, then that might be nothing less than a decent miracle.

Whether they get this through ‘clever’ bookkeeping is to be seen. Even in the most optimistic events. This means that the Trade ministry would need to get their International options like in Qatar and Bahrain. This would definitely help towards the 0.3% growth but not the 1.1%. In addition, the issues currently plaguing the gas winnings in the state of Groningen could hamper income for the Dutch government. They reported over 11 billion euro revenue from gas. However, as areas in Groningen were disturbed by Quake’s that seem to grow in intensity due to the method of extracting, could have two effects. First it is not inconceivable that revenue from Gas might fall below 10 billion, as well as the fact that damages from these quakes mean that payments well into the millions would be added as costs. In addition, there have been newscasts that current events are NOT events the current industry buildings are protected against, so not limiting gas extractions could have far fetching consequences. Not just to the revenue, but also to an area with culture and architecture that is quite unique to that nation.

The final straw is the involvement of the RABO bank in the LIBOR scandal. They have been given a penitent company donation of 330 million Euro. Even though they are not state owned like the SNS, there will be consequences. The first one would be whether Moody will adjust the bank even further. It was downgraded in June 2012 from AAA to AA2. Will the fine as well as the implication of lessened revenue and profit (as resulted from the LIBOR effect) mean this bank is downgraded even further? That part I do not, and do not claim to know, but it stands to reason that additional drops in government donations (read paid taxes) will dwindle a little. All these facts mean that the target of 3% budget deficit is not likely to be achievable. This links of course to the issues in Italy. As they miss their targets we are now with 2 players who become a question mark and Italy being number 3 on the ranking list of Europe, THAT impact will be a prominent one.

This European cart which is in definition pulled by the current two champion stags (France and Germany) will only slow them down too, meaning that a strong European economy (or at least less debt driven) is not likely to become a reality before 2016. If I had any faith in my predictions (remember, I am not an economist), then I would speculate that 2014 will be Europe’s hardest year. Not because of the economy as it gets through 2013, but because the drag from 2011 through to 2014 will have exhausted both people and companies to the brink of collapse (of financial exhaustion). For those thinking that I am so far of the mark, consider the greying population and the issues they are already in a group that cannot make ends meet in January 2013. The issue here is that this is not limited to places like the Netherlands and Spain. A fear of clear shortage is also hitting France, Italy and Germany. It will be hit on both sides of the equation. On one side, there is a clear danger that less money can be paid towards pensioners and stronger on the other side is the ever increasing cost of living. Whether it is because of food, Electricity and/or gas/fuel prices. Retiring before 2018 does not seem to be a healthy option, and NO guarantees are forthcoming any day soon.

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February 10, 2013 · 01:14

The Italian menace?

The Italian menace?

Just when you thought it was safe to think of any kind of future again, the abyss opens up right in front of you and your savings are again in danger.

The first topic of discussion as presented by the Dutch NOS was of course the European budgets. To a budget of 960 billion, the Dutch contribute 6 billion and they got a one billion dollar discount. Yes, this seems to be the Marks and Spencers approach to budgeting. Now, they seem to be happy, and I am not sure how to feel. It does however give a clear picture that the Dutch, always visible as a high player, are anything but that big. When you are profiles as a larger player and their contribution is less than a tenth of 1 per cent, that it means that they are not that big a player at all (or so it seems).
So, the Dutch politicians are going home with a satisfied feeling until the end of the decade. So how is this impacting? It is what followed that could become the real worry. It is a newscast of the return of Mr Berlusconi. Yes! He is returning to Italian politics with elections less than 3 weeks away. Does he have a chance? Not sure and not really my worry to be honest.

What is interesting is how he pulls people in with his dreams of giving back the real estate taxation of 2012. So, if that is done then Italy would be withdrawing from their promise to get their budget and deficit under control. If that happens, then what is next for Europe?
The bigger issue is that this might be a clear indication that Goldman Sachs is back and actively trying to meet their share in the Game of Greed.
They seem to be a clear controlling and influential party with most European governments. Forbes already reported this as a ‘danger’. They did mention the Monte dei Paschi banking scandal as part of their news cast as well. They also remained soft in their ideas of nations no longer being governable. I am less subtle. From my viewpoint I am willing to contemplate the opinion that the European governments are about to become the bank’s bitches with Goldman Sachs leading them the way to population enslavement. I agree, the thought is a little strong!

You see, there is method to my madness, or my madness is methodical (either way works). So, let us take a look at how I got to that conclusion.

In the Dutch newscast on this, as well as in Forbes and as well as mentioned in other sources “Berlusconi, who said he won’t seek the executive position but rather prefers to become Finance Minister, has seduced the masses saying he will repeal a property tax imposed by Monti, returning about €4 billion ($5.4 billion) to the people by refunding taxpayers’ 2012 payments” so with all the shortages, they add to the non-debt resolving side. We can debate whether it is the right or the wrong thing to do. In my view it is an Italian choice and it is their right to choose. Whether right or wrong, it is however interesting that Berlusconi seeks the Finance Ministers position. With him being a connection to Goldman Sachs as a (former) international advisor? It also means that the Italian deficit will be upped by another 5.4 billion dollars. This implies that Italy is less interested in getting their deficit down.

My issue is that according to the numbers Goldman Sachs is one of the banks retaining their gains these last years. I have nothing against that as I do have a capitalistic side. There is however a realistic side to profit, and many greed driven organisations seem to remain very unrealistic. With the ties he had/has, and the rules of the game so unaltered. I worry about what will happen to the Italian debt during the next government term.

Here is the link between this all. This was discussed by the Independent. “What price the new democracy? Goldman Sachs conquers Europe”. In there they made the following statement: “Instead what you have in Europe is a shared world-view among the policy elite and the bankers, a shared set of goals and mutual reinforcement of illusions.” (Nov 18th 2011). I could not have said it any better.

Now we get to the juicy part. Should Berlusconi get elected, and then we will suddenly read on how certain realignments of bad banks will be needed? There will be a change, and of course Goldman Sachs will get their share. It is all nice and legal. No matter how they react, whether Europe breaks apart, whether the costs will once again be set into other places. We are looking at an additional total debt increase of half a trillion dollars (across the EEC) and Goldman Sachs will get their share. So why are the European legislations not dealing with this clearly visible weak flaw?

Now, here is where I get to go on thin ice. The conspiracy theorist in me might think that this is what the power players from the US had in mind from the beginning. From their point of view governments are obsolete! Especially when these governments are getting in the way of highly desired profits, commissions and personal wealth goals.

Politicians seem to get pushed into an ego trip (in some cases they are simply with their backs against a wall). They do not cover their budgets and get the back of these strong players to get visibility and media to do the things that should be investigated and questioned on many levels. The Dutch SNS was a clear example. However other banks and acting parties should not be forgotten. The ABN/Amro Bank was one of these banks that required nationalisation. They are linked in all this with connections to the Royal Bank of Scotland (who was having a nice go at acquiring ABN/AMRO). And again here comes Goldman Sachs around the corner, having a nice juicy finger in all of these matters. They were in an investigation regarding Collateralized Debt Obligation (CDO) traders. They were not guilty, as some people forgot to disclose certain matters. However, the LA Times reported this on October 12th 2010: “Hedge fund operator John Paulson a key player in SEC case against Goldman Sachs. His firm made $15 billion in 2007 by betting that Americans would default on their home loans in droves.” From my point of view, that is not all they betted against.

Why am I so against Goldman Sachs? The issue is not Goldman Sachs; they are not breaking any law. It is the politicians that walk away with golden futures, creating bad banks and leaving the population to work of the debt through taxation, a population left with forever less and less. Soon this can no longer remain affordable and Italy seems likely the next one moving into this direction. This is where banks and large corporations become in charge and we get to work past retirement ages to fill the need of their greed. This is a need that is eternal and will never be satisfied. If you doubt me, then look at the list of nations that was able to keep their budget. It seems that only Belgium made their budget, and that might only have been because they were without a parliament racking up cost for the most of 2011. They even celebrated their new parliament after a record 541 days without a parliament on December 11th 2011. So that would definitely helped in keeping the cost down.

So back to the headline I started with “The Italian menace?”
Is it Silvio Berlusconi the menace? Possibly! If he continues on a path that does not stop the rising debts.
Is Italy the menace? Possibly! If they do not get a handle on their debts. In this case I mean a solution where they pay for their massive overspending from more than the last decade, mostly under Silvio Berlusconi.
Will the Italian menace end the EEC? Likely! If debts keep on rising, and as insurmountable debts are taken as write off’s against retirement funds and national treasuries. It is not impossible that Italy becomes the straw that breaks the camel’s back. Should you consider that this could never happen, then think again. The same was said about the SNS bank and that puppy is now a nationalised one (but it seems that for now it is not house broken).

This has happened again and again. This is not just about the banks. Politicians are also to blame. For that I would like to mention papers like “Investing in Greece: an Olympic opportunity”. It came from Costas Bakouris in 2001. The thoughts were all fair enough. However, how much came to happen? How much money did come in?

Most facts point towards the information that the Olympics cost double from what was budgeted and out of the amount approaching 10 billion a lot less then budgeted came in.
There was the article called “Business and investment prospects strong after Olympic Games triumph” Which was released after the games of 2004. In December 2004, through the newspaper USA Today. It was published in December 2004. The interesting part of the second story is that there was no name attached to it. So what was THAT source?

Even though the Olympics are a unique event, the financial consequences are real and high. Yet, there were no visible budget cuts and massive cuts were required. But wait, here is super hero/villain Goldman Sachs to help with the presentation of it all.

The Olympics were the most visible, but not the only one. This is what Felix Salmon wrote for Reuters on February 9th 2010 (exactly 2 years ago). “It’s a bit depressing that EU member states are behaving in this silly way, refusing to come clean on their real finances. But so long as they’re providing the demand for clever capital-markets operations like these, you can be sure that the investment bankers at Goldman and many other investment banks will be lining up to show them ways of hiding reality from Eurostat in Luxembourg.”

In that time, banks wrote cheques for investment events no one could cover. This is clearly shown in the case of the Dutch SNS. And the fun does not stop here. The article “ABN Amro hiring spree targets Asian private wealth” 29 January, 2013 Written by Elliott Holley shows that they are hiring again, with at least 1 person from Goldman Sachs. It is interesting how this small circle gets to go everywhere.

Goldman Sachs does not seem to have broken any laws. Politicians all over Europe seem to have changed very little, and they seem to all extremely willing to get into bed with Goldman Sachs, their ‘golden’ solution. National politics does not seem to regulate banks to the degree that is needed and some governments do not seem to properly regulate themselves either.

When we look at the 2011 EEC numbers we see the following: the largest government deficits in percentage of GDP were recorded in Ireland (-13.1%), Greece (-9.1%), Spain (-8.5%), the United Kingdom (-8.3%). Whilst the Government debt kept on going up and was set at 10 421 987 million Euro, which boils down to 82.5 (% of GDP). (Source: Eurostat News release 62/2012 – 23 April 2012)
They also show that Even though the GDP was set to become negatively in 2012, it had been forecast slightly positive in 2013. There is no proof of that, and whatever taxation was acquired in 2012, Berlusconi wants to hand that back to the people. Consider these numbers. Now add three facts to this equation.

1. The LIBOR scandal (see previous blog) shows how within the UK the percentages had been tweaked. This means that the percentages were incorrect. Now consider that the LIBOR is based on 4 times the planets GDP (adding up to 300 trillion $ as mentioned in several articles).

2. The GDP is the market value of all the final goods and services produced within in a country in a given time period. We have seen how people are without work. Economies are shrinking and services are lost to families all over the EEC. So how does that number keep on going up?

3. The European Economic Forecast, Economic and Financial Affairs (Spring 2012) document shows a picture again way too optimistic. In several nations it seemed to predict that 2013 was a year when things would be turning up. There is NO sign that this is happening. The belts are tightening in nearly all European nations. In addition, when we consider the SNS Property moving into Bad banks, we see that the current need for business property is diminishing due to lack of revenues. From my point of view it implies that the mentioned government debt at 82.5% of GDP (2011) could be as high as 90% of GDP. If that is true, then the overall percentages will hit all harder as the interest rates for government debts should be higher, and their credit ratings might be lower as a consequence.

Now consider that should the debt grow and their rating goes one level down, then that nation might have to pay a percentage on their debt. With governments owning hundreds of billions, an example means that a debt of $300B, if the interest is only 1% that would come down to an annual payment of 3,000 million, just to keep it stable. That means every person pays between 50 and 300 dollars to pay the interest. EVERY PERSON! Now consider that this is not a real problem for most people, however Consider that in Spain 24% has no job, that means that this amount will be paid by 75% of the population with income, so they pay more now. Then consider that the debt needs to go away.

We cannot trust banks as LIBOR shows. The EEC papers show them to think of them in a better state then they are, and the presented numbers are debatable. And as shown from several sources Goldman Sachs is connected to nearly every stage, somehow in some non-criminal way.

So two years later (after the claim by Felix Salmon), where are we now and what bad news is yet to come?

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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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February 6, 2013 · 17:56

It hurts every time, but we love it

So, in this fifth part, we will have a little look at the UK banks that were hit lately. This is a progression from previous parts. Not because they were linked (they might be, but I gave no deeper look at that). The important reason is that the banks are doing more than setting a trend. This is all a continuation when banks became more then service providing organisation. They became profit driven. Instead of the normal profit of continuation it became driven to the optional profit of speculation. Even though most banks would argue that this is the way to go, the Netherlands showed how their banks lost to the amount of 40 billion Euros. This pretty much covers more their current deficit. There is also the continuation of thought on the decision makers. How can we be allowed to sit down and see how a group of less than 100 took decisions that would cripple a nation on narrated limitations like ‘miscommunications’, ‘blunders’ and sheer incompetence? More astounding is that following the acts, some decided to look at advices from corporations losing utter fortunes (Source: Telegraaf, 31st October 2012).

This is not just about the fact that we are dependent on a very small group of people. We are confronted that they are just people, with needs and dark desires. A group having ‘ideal’ dreams and writing checks a lot larger than their ego could ever cover.

So what to do?

Let’s take a look at three groups.
The Bank of Scotland, The Lloyds banking group (of which the Bank of Scotland is now a part) and Barclays.

In 2012 the LIBOR scandal got a hold of many (London InterBank Offered Rate), There were accusations and proof was given. As LIBOR affects the US market and it was seen as a violation of American law. The UK version of the Telegraph reported that the chancellor had made it clear that any financial penalty imposed by American regulators must be paid for by bankers, and not the taxpayer. (Source: The Telegraph).

From my side the first thought was that it might be nice if the US cleans up its own side first. I wonder how much money they reclaimed from upper management at Lehman Brothers? Interesting is the information, that those upper level ‘demons’ (aka members of the board of directors) got overall half a billion dollars in bonuses. How much was reclaimed? An example of this is Erin Callan (former CFO Lehman Brothers) who did get a nice payout and if I can believe the NY Times a new husband and moved to a high position with Credit Suisse. Now the next is really important. SHE BROKE NO LAWS! (As far as we know). Also, there does not seem to be any evidence of any kind that she lied. She has been portrayed as a ‘girl’ who was in over her head. That is hard for me to comment on, but it does raise certain questions. There seems to be a board of directors who seem to play the multi-billion dollar game like it is a round of Parcheesi. To debunk a trillion dollar company and then walk away with half a billion should result in more than just global questions. That part is important as at the end there were dealings with Barclays who had a small non illegal windfall. Now business is business, yet it does show that a certain game that was played in the US seems to be played in the UK to the extent that is now the LIBOR scandal.

 

How does this link to the Netherlands and the UK?

Well, look at the reports on how percentage bases are calculated and how it reflects not on ACTUAL debt, but based on how these debts relate to Gross National Product and how these things influence the DOW. So it is in the interest for all to keep certain numbers high. Especially for the greed driven! This is the real problem from my train of thought. Considering what I wrote over the last weeks means that the Greedy need the DOW index to move higher and higher. Yet, all the numbers give me an indication, especially when we see a global depression that those numbers should not go up the way they do. It feels to me that other factors are influencing it all. The US with the fiscal cliff (Fiscal Abyss seems more accurate). Many EEC nations are in massive debt, and then hit with waves of unemployment, higher costs, declining standard of living and no direct prospect that this will improve. People are not spending the way they did. The housing market is breaking down in several nations and so on.

So consider the next nightmare. If the DOW index drops 4,000 points to 10,000. What then? Too many people seem to ignore parts, others want to control parts and those in charge want to rule, so when it does collapse, they maintain whilst none survive.

This same view seems to be happening now in the UK. The controlling of percentages to LIBOR is only a first. A lot of these reports like the one the BBC showed in August 2012 mentioned that this system must change. This was spoken by Martin Wheatley of the Financial Services Authority. He also mentioned discrepancies going back to 1991. This means that some level of manipulation has been going on for over 20 years. So is this about ACTUAL justice, or is it that the US had become SO desperate for as strong as a hand as possible that they pulled a Benedict Arnold against their own banking ‘buddies’. For the UK readers, Benedict Arnold is the American version of Edward Devenney.

Another party in LIBOR is Barclays. They dealt in services that rely on LIBOR, by intentional misrepresenting information they got better deals and therefor more profits. The problem is that using Derivatives in this way and the involved banks’ lending money to each other it becomes a musical chair exercise in passing pieces of paper from one bank to the other. From my viewpoint it could be seen as adding funny money to the internal till and amassing profits from something that was not there. And as they moved hand to hand, they kept the margin of profit that LIBOR offers.

So the following step is reforming this. The UK government seems to be happy to accept all upgrades that Martin Wheatley suggested. However, Reuters reported on the 28th of September 2012 that these changes would add volatility to the short term markets. They also reported that the FSA (the place Martin Wheatley is from) mentions that this standard is too entrenched to replace. It seems that banks on a global scale are too afraid to rock any boat. Is it a fear that their united spread sheets are altered to remove their layer of manipulating? If that is so then their powers would soon be diminished. It seems clear to me that markets are manipulated on several levels and those in charge are in no mood to change any of it. That situation becomes a lot more volatile when you consider the US debt of 17 trillion dollars in addition to the Fiscal Abyss. Those two, when a change is set might mean that the US could be bankrupted overnight.

 

Any claim that this will never happen is slightly moot. Here we now get back to the Netherlands where the same was claimed of the SNS Bank. It is now nationalised. Many nations should now be contemplating massive change to remove the power of banks as we can no longer afford THEIR life style.

It is interesting that the UK is under such scrutiny by the US, yet the US is nowhere near on cleaning its own banks (in my humble opinion). This does not mean that nothing should be done. And it does not mean that they should not have done anything. There is however the question on how those could be improved (as I have asked myself and on my blog in several situations).

So we get to the Lloyds banking group. In January 2013, 8 people were charged connected to a $55,000,000 corruption scandal. (Source: AP). This is not the only issue. Ian Fraser, an award winning Journalist, who reported amongst others for the BBC and Thomson Reuters has a lot more on his blog http://www.ianfraser.org. If anyone wants to question his education? Well the man was ‘shaped’ by St. Andrews (the University, not the Saint), which means he should be regarded as a member of the highest echelon in his profession. In addition, when we look at the board of directors of the banks we mentioned earlier, then we see more than just casual links. Some of them had positions at Citigroup, the FSA, The Royal Bank of Scotland, the US Treasury, JP Morgan Chase, International Swaps and Derivatives Association (ISDA) and more. This seems to remain a very small inner circle in-crowd.

It is clear that a lot more has happened and even more is happening. This is not even the complete story, but we have clear evidence spanning 2 continents that several nations have a collection of banks where it is all about the profit. Looking at the ‘blunders’ where they were willing to bet the house on all of it. So I feel that clear, visible and vocal oversight of these parties is a given essential need!

Please consider this last part. The UK banks involved in regard to the corruption case and the LIBOR scandal consists of 4 of the 5 large UK banks. It sounds harsh however this implies 80% of the UK banks have prosecutable issues. This is more than a scary statistic. I would take a guess that these 4 banks are controlled by boards of directors and they would add up to less than 75 persons. What happens when they in the same fashion as the Dutch SNS agree that ‘blunders’ were made? Could the UK survive a hit that large? More important will be the question whether the results also impact their siblings Canada and Australia?

Several questions and I expect that no clear answers will be forthcoming (any day soon). A political step could be in the form of carefully phrased denials and years of closed door meetings.

For me the conclusion from what I have seen over the last few weeks is that oversight is a must, there should be a clear list of definitions that the financial world must openly agree on and that there must be an open list of those involved in those standards.

As I close this final part of my reflections, the hope is that you enjoyed these five blogs.

These series were my thoughts on the Financial Banking Blunders as set in:

  • Greed and the lack of common sense.
  • Time for another collapse.
  • The future of greed.
  • A solution by annexing greed?
  • It hurts every time, but we love it.

I will try to take an evolving look at banking laws in a future blog.

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