Greek problems continue/MF Global funds found at JPMorgan (commingling)/Problems with Erste bank in Austria
I was recently challenged by a contributor to write something positive, and so I decided to write about the single most positive outcome of the current financial crisis in Europe: the complete collapse of the corrupt, predatory, pathological global banking sector and its dealers, the central banks. Exploring why this is so reveals the insurmountable internal conflicts in our current financial system, and also illuminates the systemic political propaganda which is deployed daily to prop up a parasitic, corrupting, pathologically destructive financial system. Our first stop is modern finance itself. Modern financial "products" and "instruments" are often highly complex and abstract, but the entire edifice can be distilled down to this: the system is based on the assumption that all risk can be hedged, and the difference between the initial position's yield/gain (i..e. placement of capital at risk for a gain) and the cost of hedging the risk of the wager to zero can be skimmed from the system risk-free. That is the entire system in a nutshell, and we can immediately see the advantages of this system over traditional Capitalism, where risk can be hedged but never to zero, and the return is correlated to the risk taken on.
The EFSF reminds me of the tooth fairy – there are those who believe because they are told it will work, and those who try to figure out how it will work, and come out on the non-believer side. This week, we are supposed to start seeing some real details, although they are already down-playing that. The prong that lends money to Greece, Ireland, and Portugal, so that they can pay back the people who lent them money in the first place, should be pretty straightforward. Borrow money in the markets, lend it to those countries, those countries pay the banks that own their debt, so that those banks can buy more EFSF bonds, the next time EFSF has to lend money to the PIGs to pay back the banks to free capacity to buy EFSF bonds – straightforward doesn’t mean it isn’t bizarre....So the EFSF is offering €250 billion of binary CDS in some form to entice the market to buy €1 trillion of Spitaly paper. I think Greece, Ireland, and Portugal are too far gone (the bonds trade at such a low % of face) that first loss protection does little to help them get new deals done. The first prong will have to suffice for them. While the bulls are all eagerly anticipating this tide of liquidity they are ignoring the fact that the EFSF pulled a deal this week! They were supposed to do €5 billion of 15 year bonds, which became €5 billion of 10 year bonds, which became €3 billion of 10 year bonds, which because a statement saying the deal was pulled because of market conditions. For clarity, these are straightforward, non-leveraged, EFSF bonds, where 3 similar issues already exist, and the deal was pulled! I am sure it was a matter of price, but still, how well does that bode for their bigger and far more convoluted scheme?
- GREEK MAIN OPPOSITION LEADER SAMARAS REPEATS CALL FOR ELECTIONS
- SAMARAS SAYS PAPANDREOU REFERENDUM GAMBIT MADE MATTERS WORSE
- SAMARAS SAYS PAPANDREOU REFERENDUM GAMBIT BLOCKED 6TH TRANCHE
- SAMARAS SAYS ASKED FOR TRANSITIONAL GOVERNMENT
- SAMARAS SAYS ASKED FOR PAPANDREOU TO STEP DOWN
- GREEK PRESIDENT TO SEE GREEK MAIN OPPOSITION LEADER TOMORROW
Earlier today we received the following email from a reader: "RBS systems are down today - ALL of them. I asked whether they knew that HSBC was down yesterday - replied yes - I suggested that they might do well to make an announcement to stop people from getting the right idea 8). The reason for the outage was given as "an update which did not go as expected" Some update - took out ALL their systems I was told. Pongs worse than the old Billingsgate fish market." We now have confirmation this is the case. From BBC: "RBS and NatWest customers have been unable to check accounts online because of problems caused by maintenance work, the Royal Bank of Scotland has said. Problems arose after the maintenance work went wrong and meant account balances were not updated overnight. Some accounts have not been credited when they should have been and there have been problems for some customers making withdrawals from cash machines. In a statement, the bank apologised for "any inconvenience caused". The Royal Bank of Scotland hopes to resolve the issue within hours." We find it odd how not only one but two banks are down on a Saturday, the same day that is incidentally Bank Transfer Day. So: who will be doing "maintenance work" next?
Update: Here is the full two page list
Yesterday, when Jefferies CEO Richie Handler issued his 3rd, and probably not last, public promise that "the firm is fine", he also promised to release granular level detail of every single European holding it has via a complete CUSIP dump. To wit: "These are fragile times in the financial market and we decided the only way to conclusively dispel rumors, misinformation and misplaced concerns is with unprecedented transparency about internal information that is rarely, if ever, publicly disclosed,“ said Richard Handler, Chairman and CEO of Jefferies. “Later today, after the markets are closed in Europe and we have completed our inventory control accounting, we will post on our web-site our day-end, CUSIP-level holdings in the securities of these countries. We care for our clients, shareholders, bondholders and employees and want to allay any concern that may have arisen. As was the case yesterday, the facts about our sovereign debt exposure and other matters are straightforward and easily understood. We encourage all market participants and interested parties to review our public filings that contain extensive disclosure of the nature, extent and financing of our assets. Our firm stands on a solid foundation of over $8.5 billion of long-term capital and we look forward to continued success." This was yesterday. Now, we can only assume we simply are unable to navigate the company's news release section quite efficiently, because it is now tomorrow, and all those clients, shareholders, bondholders and employees of the firm are quite curious just why the firm still has not released what it has promised. Just as they are curious why the firm's public net European exposure fluctuates materially in 48 hours.