Category Archives: Credit markets

Troika Demands Another €6 Billion from Cyprus, Making “Rescue” Bigger Than GDP

Nothing like dramatic proof that austerity is a failure

Banks Resorting to Old Tricks to Reduce Capital Levels

Wow, did I miss it? Didn’t we have a crisis just a bit over four years ago? And wasn’t one of the big drivers the fact that banks were overlevered and took on too much risk?

Well, not only do we seem to be rerunning that playbook, banks are using strategies right under regulators’s eyes last time around to create phony capital. Worse, are pulling the exact same tricks they did last time around. Worse, regulators seem to be doing nothing to stop it.

Fed Argues that Mortgage Abuses are Trade Secrets, Meaning Institutionalized Fraud

When the media discusses how banks have ridden like a steamroller over borrowers and investors, the typical response is a combination of minimization and distancing: that the offense wasn’t such a big deal and that it was a mistake. Recall the PR barrage in the wake of the robosigning scandal: its was “sloppiness,” “paperwork errors”.

Two major government settlements later, this position is looking awfully strained. And the Fed, in stonewalling Elizabeth Warren’s and Elijah Cumming’s efforts to get more information about the Independent Foreclosure Reviews, presented the bad practices as servicer policies, which means that they were deliberate, hence, fraudulent.

Why Gary Gensler Should be #2 at Treasury

Last week, Simon Johnson pumped for Gary Gensler, now chairman of the CFTC, to become the Deputy Treasury Secretary. Frankly, it would have been better if Gensler were Treasury secretary (an idea Johnson also promoted), but we are past that point. Obama is serious about selling catfood futures via deficit scaremongering, and he’s tagged budget maven Jack Lew as his perfect front man.

Gensler, along with Sheila Bair, has been one of the few financial services regulators who has stood up to industry demands and scored some wins.

QE Forever?

Ambrose Evans-Pritchard, in a provocative column, argues that the monetary authorities are not going retreating from QE, and that might not be a bad thing. But in its current form, it probably is.

Euro-da-Fé

By Dan Kervick, who does research in decision theory and analytic metaphysics. Cross posted from New Economic Perspectives

(Brussels) Nonplussed by this week’s unemployment report showing the Eurozone jobless rate rising to an unprecedented 12%, members of the European Parliament and Europe’s national governments pressed ahead on Wednesday with passage of a stringent new package of austerity measures. Dubbed “hyperaustérité” or “Übersparpolitik” by its backers, the new program of ruthless cuts and social demolition promises to deliver even higher levels of joblessness, misery and hopelessness than has been achieved so far by earlier rounds of austerity.

Pop Quiz: How Big Is the Bailout Of Cyprus?

By Antonis Polemitis, a venture capitalist based in Manhattan. Cross posted from Ledra Capital

Most publications talk about the €10 billion or €17 billion Cyprus bailout. Let’s take a pop quiz on the right answer.

Obama Plans to Sacrifice Ordinary Americans Yet Again in “Public/Private Partnership” Infrastructure Scam

Apparently Obama’s idea of a Holy Week sacrifice is to feed American citizens to rapacious bankers, this time through the device of “public/private partnerships” to support infrastructure spending.

Michael Hudson Discusses Why We Need Public Banks to Prevent Cannibalization of the Economy on Real News Network

Michael Hudson continues his discussion of banking on Real News Network by focusing on the role banks played in different economies in the early period of industrialization.

Will Slovenia Be the Next Victim of German Politics?

The IMF says that Slovenia will need to issue €3 billion in bonds this year. The country may be forced to seek painful assistance from the Troika. Will Germany be the heavy as it was with Cyprus?

Yanis Varoufakis: The Good, the Bad and the Extremely Ugly (Aspects of the Cyprus Deal)

Yves here. The longer you look at the Cyprus “rescue,” the worse it looks. As you can learn from our compendium in today’s Links, the Cypriot economy is already reeling. It’s straining under the extended bank holiday, which is scheduled to end Thursday. Moreover, the impact of losses radiating from number two bank Laiki are already propagating through the island.

And that’s before we get to the wider ramifications. Whether Germany understands it or not, it has delivered a fatal blow to the Euro project. How long it continues is anyone’s guess, but the Balkanization of the financial system that the Eurocrats have set in motion means they won’t be able to go the US/Japan zombification route.

Free Trade and Unrestricted Capital Flow: How Billionaires Get Rich and Destroy the Rest of Us

Yves here. This post highlights an issue that gets far too little attention: how the “free trade” agenda has been used to promote a capital mobility agenda, and why that works to the detriment of ordinary citizens. It focuses on the real economy side of the free-flowing capital experiment; we’ll discuss next week how the Trans-Pacific Partnership is an alarming advance in this process of grinding down what is left of the middle class to benefit of the rich.

Michael Hudson Explains How Deficit Hysterics Target the Wrong Type of Debt

I was at the Atlantic Economy conference the week before last, and Michael Hudson got in one of the best quips: “Helicopter Ben has taken off and has been dropping money all over Wall Street. But he hasn’t dropped any on Main Street.” He has an informative talk with Paul Jay of Real News Network on why the fixation on public debt is wrongheaded, and we should worry about private debt instead.

Will Cyprus Be Contained? (Updated)

In March 2007, Fed chairman Ben Bernanke said that he thought the impact of losses on subprime mortgages was likely to be contained. It took five months for events to start proving him wrong. August 2007 marked the onset of the first acute phase of the global financial crisis, when the asset backed commercial paper market seized up.

Last week, in a press conference, Bernanke indicated that he thought the likelihood of the crisis in Cyprus having larger ramifications was limited, and avoided using the “c” word. But the message was similar to that of March 2007.

So are we likely to see the sort of delay between the assessment and the onset of trouble, as we did in 2007, or is Cyprus a nothingburger, as the Troika and many investors contend?

Repeat After Me, Cyprus Is (Was) Not a Tax Haven

Cyprus is over as an international banking center, which the Financial Times reports was one of Berlin’s objectives for its rescue. However, the business press (and yours truly following them) has referred to Cyprus as a tax haven. That description is part of the PR campaign to justify punishing the island.