Wolf Richter: Panicked Hedge Funds Now Praying for a Miracle in Greece

Lambert here: What sort of miracle, now, that’s the question. Sorry to be “All Greece, all the time!” but readers do seem interested….

By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Originally published at Wolf Street.

After chaotic emergency meetings, this weekend culminated, for this Greek banking system, with an ECB press release that contained this harmless-sounding but deadly line:

Emergency liquidity assistance maintained at Friday’s (26 June 2015) level.

It meant no more cash for Greek banks from taxpayers of other countries, no more cash for Greeks depositors to withdraw and stuff under the mattress. Banks were now illiquid. They’ve been insolvent for a long time. Only the fresh cash, recently supplied on a daily basis, has kept from toppling altogether. What has been rumored since June 18 has become reality: the banks are toast [read LEAKED (Denied then Confirmed): ECB Not Sure If Greek Banks Can Open Monday].

Greek Prime Minister Alexis Tsipras got on TV and announced that his government decided to close the banks for over a week, impose capital controls, and close the stock market for as long as banks are closed. When – or if – they reopen on Tuesday July 7, it will be to a different world.

He blamed everyone but his inept government and the silly game theory or whatever they’ve been pursuing. Tsipras also appealed for calm and tweeted this Cyprus-like promise:

The bank deposits of the Greek people are fully secure.

On Monday, the US-listed Greek ETF (GREK), a substitute measure for the closed Athens stock market, plunged nearly 20%, an indication of where the already battered Greek stocks might be headed. The ETF was started in crisis-year 2012, as part of the early hype to invest in Greece. It’s down 61% from its peak in March 2014. Greek bonds too plunged in value, with the 10-year yield shooting up over four percentage points to 15.1%, the highest since 2012.

Jean-Claude Juncker, back on May 19, 2014, when he was “campaigning,” as he said, for the presidency of the European Commission, gave a speech in Athens, where he proclaimed: “I take it as a call for the new Commission President to reunite Europe after the crisis.” The crisis was long over, and now it was time to move forward under his leadership.

He then tweeted: “I say to all who bet against Greece and against Europe: you lost and Greece won. You lost and Europe won.”

But by that time, hedge funds were already betting on, not against, Greece. With ceaseless hype during 2013 and 2014, they inundated the media with their buy-Greece meme, how Greek markets would rally as the reforms would push the economy forward, how banks, stuffed to the gills with more bailout money, would get back on their feet, and how Greeks would somehow become confident that their banks were solid. This hype about Greek stocks, bonds, and a myriad other “opportunities” become so deafening that the ultimate smart money started believing it themselves.

Now, as the New York Times reported, they’re panicking….

I just can’t believe these guys are willing to torch their own country,” one investor with a large holding of Greek bonds lamented in an email. “They thought this was a game. Now, when the supermarkets run out of food, gas stations run out of gas, hospitals have no medicine, tourists flee, salaries don’t get paid because banks shut — what are they going to do?”

During peak hype a year ago, there were perhaps 100 hedge funds plowing what they thought was fertile financial soil. But when things began to curdle again in late 2014 and in 2015, many of them bailed out, selling what they could.

But 40 or 50, according to local broker estimates, kept their bets and hopes alive that it would all get worked out somehow, that the ECB or Germany or whatever would swoop in and allow them to make a killing, as they’d done with Greek bonds in 2012. So these funds have about $11 billion stuck in these shut-down Greek markets. The Times:

The largest investors include Japonica Partners in Rhode Island, the French investment funds H20 and Carmignac, and an assortment of other hedge funds like Farallon, Fortress, York Capital, Baupost, Knighthead and Greylock Capital.

A number of hedge funds have also made big bets on Greek banks, despite their thin levels of capital and nonperforming loans of around 50 percent of assets.

They include Mr. Einhorn at Greenlight Capital and Mr. Paulson, both of whom have invested and lost considerable sums in Piraeus Bank. Fairfax Financial Holdings and the distressed investor Wilbur Ross own a large stake in Eurobank, one Greece’s four main banks.

Big positions have also been taken in some of Greece’s largest companies. Fortress Capital bought $100 million in discounted debt belonging to Attica Holdings, Greece’s largest ferryboat holder. York Capital has taken a 10 percent stake in GEK Terna, a prominent Greek construction and energy firm.

In 2014, Blackstone’s credit arm bought a 10 percent chunk of the Greek real estate developer Lamda Development. And Third Point, one of the earliest, most successful investors in Greek government bonds, has set up a $750 million Greek equity fund.

Among the most dubious of these was a 10 percent equity stake, then worth about $137 million, that Mr. Paulson’s hedge fund took last year in the Athens water monopoly. The company had little debt and was set to be privatized, making it an attractive prospect at the time. But the privatization process is now frozen, and the monopoly is struggling to collect payment on its bills from government entities that are nearly broke….

Now Greece’s financial system is shut down to control the chaos. Parts of the economy are shut down with it. Greek banks had already been reduced to penny stocks before the bank holiday, confounding these hedge funds that had invested in them. Now, they’re cutoff from the lifeline that has kept them from toppling.

“People are freaking out,” Nicholas Papapolitis, a corporate lawyer in Greece who has led some of the largest hedge-fund deals in the market, told the New York Times. He was working through the weekend, comforting and cajoling his frantic hedge-fund clients. “They have made some really big bets on Greece,” he said.

They weren’t betting on Greece, however. They were betting on the ECB, the European institutions, and taxpayers – as they’d done in 2012, when they’d made a killing – to shovel money their way. Only this time, it didn’t happen, leaving the ultimate “smart money” to twist in the wind.

But here is the thing: the Greeks could have solved the crisis on their own, if they’d wanted to. Or did they know something that others didn’t? Read…  If Greeks Did This, the Terrible Crisis Would Be Over

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About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.


  1. which is worse - bankers or terrorists

    Long-term leases for Russian naval bases. Problem solved.

    1. Ned Ludd

      What Russia Offered Greece

      That leaves commercial payment for a project as the one remaining option, and that is what the Russians proposed.

      Though it reverses what the Russians decided when they cancelled South Stream last autumn, what they proposed to Tsipras in March and April was the building of a pipeline across Greece taking gas from the hub. This would have come with a $5 billion prepayment paid out of Gazprom’s financial reserves. Greece could have used that payment to pay this month’s installments to the IMF.

      In April, Ambrose Evans-Pritchard also wrote that: “Sources in Athens have confirmed to The Telegraph that [the Turkish Stream] could also bring €3bn (£2.2bn) to €5bn in advance payments”.

  2. daniel

    Nice feedback on the counterparties to that Greek stuff. Thanks a lot.

    They weren’t betting on Greece, however. They were betting on the ECB, the European institutions, and taxpayers – as they’d done in 2012, when they’d made a killing – to shovel money their way.

    Quelle surprise!

    Greece is not a political issue, of course. It has been settled as such. It is a tragedy and, as in all tragedies, we known the end and cannot change it. Pouring money on the hero against the god is bad bet from a literary perspective.

    Plus ça change, plus c’est la même chose? Not exactly this time. In 2007, the subprime “packages” end-of-line buyers were massively continental ones as far as I can remember…. This time French (and other Euro-) banks got fully out of the mess when they got the picture fully clear. Quite glad to hear that there were “market participants” (what a joke) to pick their Greek assets up.

    By the way, is the thing is exactly over? I’d bet not. It will get either much worse or a lot better soon.

  3. Generalfeldmarschall von Hindenburg

    Tsipris is being called irresponsible in many quarters and I’m not sure how that description is in any way apt. What the EU seems to want is for a Greek government to continue to act as a conduit by which member state taxpayers’ money can be delivered to big banks in Germany, Netherlands and others. Meanwhile the population of Greece (or at least the commoners) are supposed to bear the weight of the moral opprobrium of northern europe’s hardworking and thrifty voters. And this is to prop up Greek banks that really should have been just nationalized and dissolved. But banks can’t ever be allowed to fold nowadays, regardless of what insane gambles they’ve undertaken? I just don’t believe the common Greek citizens were somehow soaking Germany for ten years and nobody knew it.
    None of it is sustainable. I gather it’s only a matter of time before Spain and then Italy start unravelling? How long could they squeeze Greece? Am I understanding all this right?

    1. which is worse - bankers or terrorists

      With reference to Tsipras being called irresponsible, I think it is difficult to draw a distinction between what is said as part of negotiation and what is about morality when Juncker does his “suicide/afraid of drowning” statement about the Greek people. Juncker is on record saying he wants a YES vote but with stupid statements like that it could be a NO if he makes them mad enough.

      I think guys like Juncker just love reading about themselves in the papers.

    2. Clive

      In trying to understand the current situation, it’s important to appreciate the federalist ambitions of the faction within the EU who are defining and implementing the current policies (here in respect of Greece). “Ever closer integration” (which is the stated aim) is in effect a United States of Europe. I won’t get into here whether this would be a good things or bad thing. But it is a thing which is desired and policy is being designed around it.

      Imagine if, say, Massachusetts instigated massive deficit spending within the state and encouraged the funding of it by ever increasing issuance of muni bonds, far in excess of what the market would tolerate in terms of private banks or hedge funds (etc.) risk appetites. Massachusetts, in my example, had also suffered a long period of poor tax collection and would not be immune from blatant pork barrelling and gerrymandering, but state authorities refused to believe it was anything other than a trivial problem (and a succession of different state governments blamed predecessors and argued that it wasn’t their faults’ so why should they now have to suffer the consequences). When a wave of county bankruptcies overtook the state, the state government for a time continued to encourage further deficit spending (because the county social programmes they funded were deemed red lines) and insisted that federal support be made available without offering anything much by way of spending reduction. This was justified because the state government insisted that the state needed inward investment due to being economically disadvantage and that it was the victim of predatory actions from the rest of the U.S. financial system in general.

      Then imagine this situation rumbled on for at least 5, getting on for 10, years.

      What would be the landscape of state and federal politics in the U.S. now ? Would there be a popular support in Massachusetts for leaving the Union ? How would the Union respond (both from in terms of individual states and the federal government) ? In that context, do some of the attitudes from other EU member states towards Greece and from Greece towards the rest of the EU — especially the real power brokers like France and Germany — make sense ?

      Getting back to reality, I am not saying there isn’t plenty of blame to go round. But rather than characterise the various actors as “good” and “evil”, it is I think helpful to at least attempt to understand their motivations and the reasons for their actions. SYRIZA has apparently, in my opinion, not been able to get over itself and as a minimum put itself in the positions of those with whom it is negotiating with. This hugely increases the odds of negotiations failing. If you are a member of a union which wants, in large part, to become a United States of Europe, it is astonishingly incompetent for SYRIZA to think that it can act in a way which is diametrically opposed to this goal and not face severe blowback.

      1. Will

        It also helps to characterize the actors reasonably. I don´t think of Greece as a single actor anymore, nor any other country – I think of governments like corportions: as legal fictions. Is it ¨Greece´s grandmas´¨ fault for all that Greek corruption? Or the elites with vastly disproportionately higher income and influence and disproportionately lower tax burden? I lived in Va for 20 years, and given that both Va. US Senators are democrats and are TPP Trade traitors, it doesn´t look like I had a major US Senate candidate to vote for to avoid supporting a Trade Traitor (almost 100% of Senate Republicans voted for fast track). Virginia´s grandmas, at least, didn´t have much influence on the TPP vote, I doubt Greeces´ are more influential.

        Here in the US, there´s plenty of bad behavior to go around, just as in every industrial nation. We shouldn´t trust the elites of any industrial nation or national or multinational institution or corporation to act in the public´s interest – the incentives just aren´t set up right; and the propaganda works too well (with the threat of and actual use of police force to follow up if needed).

        If I were in Greece, I´d be doing the same thing I´m doing now: stop identifying with institutions that don´t truly have my best interests at heart, and start responding to environmental issues, peak energy and mineral issues, and begin a new identity around a community that I can actully influence and trust. For a Greek, this would also be a positive hedge against the only two potential outcomes from these negotiations: continued ´austerity´ (living through an unending savage depression to serve foreign interests) or grexit (living through possible economic collapse to serve as an example to other servant societies for the benefit of foreign interests).

        As Greer says, collapse now and avoid the rush. And stop identifying with these insitutions that don´t serve us. Another side benefit is that it obviates the need for considerations of which ´side´ is good or evil, or deserves more or less blame or leniency in negotations. Let´s spend time on what matters: create human communities based on meeting members´ needs while being net benefits to the ecosystem rather than net drains, begin shifting away from industrial tech which won´t last long at any rate regardless of the negotations, etc.

      2. Brooklin Bridge

        Your explanation is very helpful for seeing how things developed in such a way as to understand points of view, but it seems far enough away from what happened in Greece to deserve mention. That doesn’t mean the following is any more accurate however, but it’s a respectful effort to include some of the issues hard to get around.

        First, keeping with your example, Massachusetts didn’t simply instigate massive deficit spending, it was encouraged to do so every step of the way by outside of state creditor interests that kept insisting that “there’s plenty more where that came from!” Moreover, these out of state interests did not make this point directly to the people of Massachusetts (who are – like the Greek people – cautious, not spendthrift by nature), but rather to woo key players in what ever current government Massachusetts had in place at the time to make available to private enterprise, to speculators and to banks that would repackage these funds as perfectly legitimate and OK to MA citizens. THOSE Key players,it should be mentioned, are the ones who stood to benefit massively either by campaign contributions from large private corporations that were benefiting from the cheap credit, or by revolving doors or by being a business interest that benefited from this cheap plentiful credit.

        Without getting into the whole messy and (very evil) situation of the second massive (2010-12 credit glut) where 90% of the loans were simply redirected backwards to protect the outside interests from taking a well deserved haircut, and where the Massachusetts residents would barely have seen a penny out of 100, the point is we are getting into territory where no matter how much one wants to remain neutral, it is structurally difficult to do so. There really are villains on both sides. Just not the people; they are not the villains, they are the victims, the ones that will have to pick up the pieces.

        Moreover, to complete the picture, the people in surrounding states, say Connecticut, are fed a diet of inflammatory half truths and outright lies by the media so that as they lounge around their gigantic mansions and swimming pools and tennis courts and so on, they hear nothing but tales of profligacy by the poor folk of Worcester and Springfield drinking into the night and racing around in sports cars bought with loans (from those industrious Connecticut folks) that have never had a single payment made on them.

        1. ambrit

          Go Bridge!
          Another aspect of it all is that the upper income Greek/Mass denizens have been taking their money out of the Athens/Boston banks and putting them in Rhode Island banks!
          There is an understandable antipathy of the Mass citizens to the ‘terms’ now being sought by the outside forces. We can call the other states banks and financiers as “outside’ forces with a straight face. The Confederation has indirectly been promising ‘full integratiion’ for years now, and is striving mightily to enact that in the private financial sector. When it comes to capital flows into depressed sectors of the Confederation however; suddenly the funds are no longer ‘development’ money, but fully recoverable debts. “Heads we win. Tails you lose.” Add to this the spectre of Plymouth Rock becoming a Mini Disney under outside private control.
          Suddenly, we have these “Committees of Correspondence” popping up in Lexington and Concord. What’s a Hegemon to do?

          1. Brooklin Bridge

            Thanks Ambrit, as always, you bring both humor and insight to it: When it comes to capital flows into depressed sectors of the Confederation however; suddenly the funds are no longer ‘development’ money, but fully recoverable debts. “Heads we win. Tails you lose.”.

            Note I wouldn’t have dared venture into this without being in the friendly sphere of a Clive comment.

            1. ambrit

              Yes that about Clives comments.
              I wonder if learning an inflected language has anything to do with it? Could that practice induce an integration of left brain right brain thinking? As anyone who has “been around” can attest, a doubling of the critical thinking faculty multiplies the effect, not adds to it. (I know, I know, correlation is not causation, but…)

        2. JTMcPhee

          One wonders if a Jubilee event can be afforded to “creditors” by unilateral actions of “debtors.” Instead of labeling what’s happening with those loaded terms like “default” and “failure to pay debts” and all, why not take advantage of a modality that has some history and tradition behind it, is based on notions of grace, in many senses of that word, and might provide a little pause in which us ordinary people could not only “get some relief” but reset the functions of what pretty inarguably is a dead-end idiocy of a predatory, malignant set of structures that lead only toward global collapse? It looks like an effective Jubilee, without the grace elements, is not far off, with Greece and most everywhere you look — and it will happen in violence and chaos.

          I for one thank the people commenting here who refuse the idiotic personification/reification/hypostatization of “nations,” and take the time to appreciate the manifold nature of the humans involved. And who reject the notion that “the Greeks” is a unitary entity that has pulled a fast one on the honorable banksters that are the termites and tapeworms in our global human edifice. Following the money is always a good plan for honest understanding of what’s afoot.

          There was discussion of the state of “water law” in the American Wild West yesterday, and yep, as long as there was a drop to be drained toward those with “superior rights” or “superior clout,” the System sort of worked. Looks like what seemed to me to be inevitable, when I studied water law in law school in 1975, has finally happened, by a combination of external effects (no rain) and internal dysfunction (unrestricted overdevelopment ov dysfunctional pleasure-and-greed-driven idiostructure) — sh#t, meet fan blades… And what a surprise that people who actually NEED water just to not die of thirst are thinking it’s time to stop growing water-greedy crops in desert land, end the swimming-pool fixations, stop pushing toxins doen deep wells, all that stuff. In essence, a Jubilee reset of “water rights.” Not that, as with other parts of the effed-up political economy of the world, those with clout or “prior appropriation superior rights” will yield to the common good without a violent fight…

      3. Norb

        “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.”
        ―Warren Buffett

        Doesn’t the Greek situation and the TPP negotiations illustrate this very point? The failure of SYRIZA is in thinking on any level that those in a more powerful position would yield ground or modify their goals. If you are waging war, your destroy your enemies.

        It is the only explanation of Austerity that makes any sense. How do you deal with people who think this way? Apparently, trying to reason with them is not very successful.

      4. Steven

        What seems to be at stake here is a political order FOR THE GLOBAL FINANCIAL ELITE in which debt is substituted for taxes on fortunes so vast even after the most wild extravagance there is nothing to do with all the money that keeps rolling in from the ‘miracle of compound interest’ but loan it out again. The two most prominent characteristics of the neo-liberal, post-2008 world are austerity and privatization. Both can be seen as attempts to keep this order in place.

        To sustain the fiction that all the debt being accumulated in their financial accounts somehow can be repaid, the debtors must at least be able to pay the interest – hence the need for ‘austerity’. For the creditor (say German banks) and its accountants, there really isn’t a choice between the provision of vital public services and the payment of interest that keeps the fiction of the creditor’s vast monetary wealth alive.

        The privatization part has two drivers: 1- the need for ‘something real’ in which to invest as opposed to more “debt that can’t be repaid (and) won’t be”; 2- the lack of private sector opportunities as private sector “effective demand” dries up in response to the short term policies like labor arbitrage / off-shoring employed to book more immediate profits and longer term trends like automation.

        By the 1970s the ruling elite in the US had basically given up trying to preserve the private sector as a source of effective demand, at least for the products of its own workers. Public sector, mainly military-industrial, contracts provided much less competitive and more secure investment opportunities than continuing attempts to deep-market increasingly shoddy and useless products to the private sector. Much of the financial engineering and the dot-com and housing bubbles can be seen as little more than attempts by an increasingly financialized US economy to allow its citizens to ‘pay for’ the wealth they used to create themselves and which now comes from beyond their borders.

        But perhaps the biggest stakeholder in the post-Bretton Woods financial order is the US military-industrial complex (MIC). If the world finds something better to do with its wealth than continuing to support its encirclement, the MIC and the Empire of Debt are in trouble.

        1. flora

          But the privatization process is now frozen, and the monopoly is struggling to collect payment on its bills from government entities that are nearly broke.

          Seems the privatization part has run into the brick wall of the austerity part.

      5. reslez

        > Imagine if, say, Massachusetts instigated massive deficit spending within the state and encouraged the funding of it by ever increasing issuance of muni bonds

        How is this analogy at all relevant? The deficit spending was a direct result of the economic collapse caused by the banks in 2008. Furthermore Greece immediately implemented austerity policies in 2009 and later — on the no doubt well intentioned advice of the troika — which tanked their economy further, which made the deficits even worse!

        It would be more like if Massachusetts banks had gotten in trouble and the US government stepped in, forced Massachusetts to stew in economic depression instead of doing anything to help, and now sits around and carps about the economic fallout it insisted on imposing. Oh, and maybe helped by haircutting some of the debt along the way (though not nearly enough to improve the fundamentals).

  4. pretzelattack

    i like reading about greece. i don’t know if it’s a harbinger of things to come, but nc and posters here seem to have some insight into what is happening there.

      1. kj1313

        Agreed. I predict the TPP will backfire on the elites. Just waiting for it to play out.

        1. timbers

          Agree that TPP will backfire, in that it will benefit China as TPP f@cks it’s member nations.

          1. Mbuna

            Color me confused on these TPP comments- I always felt the whole point of the TPP was to (formally?) begin the process of international corporations superceding national governments. The point of the TPP is to screw those nations who join it by handing power to corporations, whose lobbyists wrote the damn thing to begin with.

            1. NotTimothyGeithner

              It is, but Obama isn’t directly a servant of Wall Street as much as a useful idiot. Obama wants to cut China (Russia too) out of markets to protect tech, arms, drugs, and entertainment industries from competition. The pivot to Asia stuff is happening.

              Let’s be honest right now, much of the world buys goods made by the U.S. or its colonies. At some point, the Chissa alliance will offer better deals and U.S. linked companies will be hammered without an American consumer or receptive electorate towards propping up companies.

              There is nothing the U.S. can do that the Russians and Chinese can’t do despite the bs peddled by free trade types. Obama wants to protect “our” companies while maintaining U.S. hegemony through economic dependence.

              American corporations are separate entities and don’t care as much as they want their specific industry protected.

    1. EmilianoZ

      I agree. What’s happening to the Greeks now is gonna happen to us sooner or later because we have similar kleptocratic elites. Whos gonna be our Varoufakis? I hope we get one every bit as charismatic.

      1. Fool

        What’s happening to the Greeks now is gonna happen to us sooner or later because we have similar kleptocratic elites.

        Woah, sir! You must be really informed. Please, go on, tell us how our “similar kleptocratic elites” will beget a crisis in our sovereign debt.

        1. Alejandro

          Would you assent, that municipalities are and have been vulnerable, e.g., Detroit, Jefferson County and others?

          1. Fool

            lol. Detroit and Jefferson County were both deeply impoverished counties. Has nothing to do with “kleptocratic elites” nor Greece nor the United States sovereign debt.

            1. Alejandro

              IMO, what distinguishes this site from most is that there’s always honest attempts to connect the dots that aren’t obvious…as opposed to the mindless psittacism available elsewhere, that mostly take the form of empty claims based on claims of being an ‘expert”, e.g., bankers…especially given their lost credibility since the “crisis”…

  5. Expat

    The salient point made is that these vultures were betting on the ECB like they have been betting on the Fed. More to the point, they have been raking in billions betting on taxpayer money. Even more to the point, none of this taxpayer money is theirs. Hedgies DO NOT pay taxes; not even the 20% capital gains tax. They pay zero.

    So Paulson, Einhorn, et al have been raping and pillaging American and European taxpayers for years. Their obscene wealth is perhaps the greatest theft from society ever. Now they will lose a few bucks in Greece. boo hoo! Call me when you need some rope…I have enough for four or five hedgies.

    1. German native speaker

      MF Global went down because Corzine took a Euro bet, and he then sent Geithner to sit on Merkel’s lap in order to influence her. It did not work. Apart from being reading how many obscure hedge funds there are, looks like they didn’t do much research about investment risks in Greece. Not feeling sorry for them whatsoever.

  6. Ben Johannson

    . . .It meant no more cash for Greek banks from taxpayers of other countries.

    ELA is central bank money, not taxpayer. It isn’t funded through some fiscal appropriation nor is there a requirement in the statute that governments will have to make up for the expenditure.

    1. tegnost

      Yes, the semantics are revealing….Dean baker this am calls out another one, paraphrasing, story said central banks spent 10 trillion when they actually lent 10 trillion

      1. John Smith

        As if lending money into existence is better than spending it into existence? At least with the latter there is no bust to go with the boom.

        1. tegnost

          The point is that the language is deceptive, if I spend money on something the assumption i think is i’ll get something back, while if i lend money someone else gets something, particularly with zirp…as to no bust to go with the boom i don’t understand that please explain?

          1. John Smith

            Money lent into existence = boom
            The repayment of that money = bust

            Roughly speaking, that is.

    2. John Smith

      Well, central bank money is legal tender for taxes (fiat) so it IS taxpayer money in that sense.

      People should question why a central bank is allowed to create fiat, not for the general welfare, but for private banks.

  7. Disturbed Voter

    There will be no freedom until every private country club has freed its caddies, so that players have to carry their own equipment (without golf carts … it is healthier that way). And for good measure, break in two their favorite putter!

    It doesn’t bother me to see criminals have a hard time … especially the Carlyle Group.

  8. Mario Panzieri

    Apparently Juncker is offering a last minute proposal. An about face or a sensible one? We’ll learn soon enough.

  9. DJG

    The jump from this article leads to a fascinating article about why people have to pay taxes. It may not save Greece, but I note that tax avoidance and destruction of the IRS are the policies of the Republicans and the Democrats. Like Greece, the USA has an elite that doesn’t want to pay taxes, as well as much of the upper-middle class reluctant to pay taxes. This situation does not bode well.


  10. zapster

    Now, as the New York Times reported, they’re panicking….

    I just can’t believe these guys are willing to torch their own country,” one investor with a large holding of Greek bonds lamented in an email. “They thought this was a game. Now, when the supermarkets run out of food, gas stations run out of gas, hospitals have no medicine, tourists flee, salaries don’t get paid because banks shut — what are they going to do?”

    Not a thing. because the people are *already dealing with gas stations out of gas and no medicine in hospitals*. It’s already happened.

    They’ve had food shortages, medicine shortages, gas shortages, mass homelessness and suicide for years now. So what else is new?

    I have a hunch there’s a different mindset now. Like “F the Hedgies.”

  11. Fool

    He blamed everyone but his inept government and the silly game theory or whatever they’ve been pursuing.

    Wolf, would you prefer that Syriza follow your advice of making those slippery Greeks pay their taxes and invest in Greek cheese or whatever? I like you better when you’re doing the adorable doomsday soothsaying routine involving the Illuminati Fed. The situation in Greece might be a bit over your head.

    Yves, you work too hard and write too perceptively to be dragged down by this level of commentary.

  12. RUKidding

    Thanks for the “All Greece, All the Time” posts. This is important info, and NC does it better than nearly anyone else out there.

    I’m still something of a dummy about the whole suckingly messy (to put it one way) situation there, but I am better informed that most in the Yew Ess Aaay due to good coverage here.

    I have to go with what one commenter said above: what? the elitist MBAs just thought this little “problem” would pan out for THEM because they thought it “should”?

    What a buncha maroons. Loathsome parasites, the lot of ’em.

    I am now crossing my fingers again that CalPers really stuck to what it said about divesting from all Hedge Funds. I surely hope so.

    Otherwise, I hope those overbred suckers go down in flames…. sadly, though, somehow I’ll have to pay for it… ’twas ever thus.

    1. NotTimothyGeithner

      There won’t be anymore bailouts. The votes don’t exist. TPP passed because it wasn’t on TV, and the 2008 round passed because every election was more or less set with the exception of Franken/Coleman. Congress will never pass another bailout.

      1. ambrit

        If Congress sets the next ‘bailout’ as part of a trade deal, Fast Track will enable the looting to continue.

      2. RUKidding

        Congress will never pass another bailout.

        I hope you are correct, but as always I fear you are not. How much do you want to, uh (cough cough), hedge your bet on that??

      3. MyLessThanPrimeBeef

        If I have learned from history, any future bailout will fail the first time but succeed on the second try.

      4. John Yard

        Bailouts are an everyday event. In California Southern California Edison did maintenance on the San Onofre nuclear power plant . They screwed up the maintenance causing the closure of this very expensive piece of metal. In the summer of 2013, California Public Utilities Commissioner Michael Peevey held a secret meeting in Warsaw , Poland (!) with SC Edison execs where he agreed – and put down on paper ! – that he would transfer $3.4B – that’s billion – of the loss to the taxpayer. Peevey came back to LA and pushed through the bailout. The PUC and the public were unaware of Peevey’s committment to Edison.
        You may not call this a bailout – but it was a bailout of SC Edison.
        Happens every day. This would have not come to light except that this sordid deal was put on paper – Edison took notes. BTW Peevey calls himself a Clinton ( Bill ) Democrat.

  13. Jerry Denim

    Ha ha suckers. If only a few hedge funds go down in flames that would be a nice silver lining to the horrible human toll of this ongoing Greek tragedy. Unfortunately I’m sure my corrupt government will figure out a way to rob me to make those reckless hedgies whole because no banker left behind and privatized gains socialized losses and all that. Gotta love crony capitalism.


    ” So these funds have about $11 billion stuck in these shut-down Greek markets”

    well if true, thats at least $11bn that the ECB won’t need to write off..

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