Tag Archives: fail

Germany No Longer a Safe Haven | Bloomberg

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Source: Bloomberg Business Week

Photograph by Eric Herchaft/Reporters/Redux

When your ship is sinking, there is no safe room on board. Likewise, when Europe is sinking, there is no safe country in which to stash your money. No, not even Germany.

Investors have been remarkably slow to grasp this simple truth. Look at the muted reaction to Moody’s decision to place Germany’s AAA-rated sovereign debt under review for possible downgrade. The yield on the country’s 10-year bonds rose, as one would expect, but by a puny 0.07 percent. They’re still yielding just less than 1.24 percent. That’s down from 2.8 percent a year ago.

The yield on 2-year debt is still negative—meaning investors have to pay Germany for the privilege of lending it money.

Considering how deeply Germany is enmeshed in Europe’s extreme financial difficulties, it’s hard to imagine how it could escape without huge payouts to its troubled neighbors—and most likely bailouts for its own big banks, which are highly exposed to Spain and Italy.

“There is just not enough firepower to withstand the onslaught without consequences,” Mark Grant of Southwest Securities said in a note to clients today.

Germany’s Finance Ministry reacted predictably to Moody’s action by saying Germany remains “in a very sound economic and financial situation.”

The more sophisticated response came from the Free Democrats, the coalition partner of Chancellor Angela Merkel’s Christian Democrats. Otto Fricke, the Free Democrats’ budget spokesman, viewed the Moody’s action as a welcome recognition of the jam that Germany is in.

“Germany can only stay on the top of the heap if the countries we’re giving aid to conduct economic reforms and make an effort,” Fricke said. For that reason, he said, Moody’s rating action “is more helpful than harmful because it’s a warning to other European countries that the limits of what Germany can do will be reached eventually.”

That’s exactly right.

U.S. Is Building Criminal Cases in Rate-Fixing | N.Y. Times

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Source: New York Times

As regulators ramp up their global investigation into the manipulation of interest rates, the Justice Department has identified potential criminal wrongdoing by big banks and individuals at the center of the scandal.

The department’s criminal division is building cases against several financial institutions and their employees, including traders at Barclays, the British bank, according to government officials close to the case who spoke on the condition of anonymity because the investigation is continuing. The authorities expect to file charges against at least one bank later this year, one of the officials said.

The prospect of criminal cases is expected to rattle the banking world and provide a new impetus for financial institutions to settle with the authorities. The Justice Department investigation comes on top of private investor lawsuits and a sweeping regulatory inquiry led by the Commodity Futures Trading Commission. Collectively, the civil and criminal actions could cost the banking industry tens of billions of dollars.

Authorities around the globe are examining whether financial firms manipulated interest rates before and after the financial crisis to improve their profits and deflect scrutiny about their health. Investigators in Washington and London sent a warning shot to the industry last month, striking a $450 million settlement with Barclays in a rate-rigging case. The deal does not shield Barclays employees from criminal prosecution.

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MSM Reporting JP Morgan’s trading loss now stands at $9 Billion

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Reporting on this is silly in a way, because it has always been postulated that the “$2 billion” trading debacle that had Jamie Dimon in front of congress might actually be for a much larger, undisclosed amount.

Well, here’s confirmation that those initial reports were true – however it remains to be seen whether even more losses will be uncovered.  As Max Keiser has reported, these banks are simply insolvent and it is only the artificially intelligent trading platforms that are giving the system any semblance of stability.  Undeterred, the cabal continues on as it is now being reported that JP Morgan is down 5% before trading opens as it has been revealed their trading loss has been unwound a bit and now totals 9 Billion!  Interesting development given the greenlight by Drake as well as the report from yesterday detailing a series of “living wills” developed by the biggest banks in case they fail.  Read on for the official piece:

(Reuters) – JPMorgan (JPM.N) (JPM.F) shares fell 5.3 percent in Frankfurt on Thursday after a newspaper reported that losses from a bungled credit derivatives trade could reach $9 billion in a worst-case scenario.

The U.S. bank’s shares in New York are also trading down 5.4 percent in pre-market trading.

The story was “likely disappointing today” for the shares, Evercore Partners said in a research note.

JPMorgan said in May that it had lost $2 billion on the trades, but these losses have mounted in recent weeks as the bank has unwound its positions, the New York Times reported on Thursday, citing people briefed on the situation.

An internal report at the bank projected in April that the losses could reach $8-9 billion, assuming worst-case conditions, the newspaper said.

JPMorgan declined to comment.

(Reporting by Sarah White and Douwe Miedema)

“Audit the Fed” bill advances…

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Washington Times

By Stephen Dinan

The House oversight committee voted Wednesday to demand a broad audit of the Federal Reserve System by congressional investigators — a major move that lawmakers said is designed to bring accountability to the murky workings of the independent central bank.

The bill was sponsored by Rep. Ron Paul, the Texas Republican who turned the push for an audit into a powerful presidential campaign slogan and whose criticism of the Fed’s monetary policy drew hundreds of thousands of voters into the political process.

It passed by voice vote, signaling the growing sense among lawmakers that the time has come for a full review.

“Clearly the Fed must be made too big to fail, and too big to fail requires a considerable amount of oversight,” said Rep. Darrell E. Issa, California Republican, who is chairman of the committee.

Federal law right now specifically prohibits such a broad audit, and opponents fear undermining the independence of the Fed.

The bill would direct the Government Accountability Office to complete a broad audit that presumably would include a peek at the Fed’s decision-making and many of its lending policies.

The committee defeated an amendment sponsored by Rep. Elijah E. Cummings, Maryland Democrat, that would have prevented auditors from getting a look at the minutes of internal board discussions.

“This whole idea about ‘Well, we can’t touch the Fed‘ is baloney,” said Rep. Dennis J. Kucinich, Ohio Democrat. “We have to be able to have control over the Fed because it’s controlling every aspect of our economy.”

The Federal Reserve consists of a board of governors and 12 regional banks, which act as lenders of last resort to the country’s banking system.

Last year, a more limited audit by GAO found that the Fed repeatedly invoked emergency authority to expand its lending during the Wall Street crisis in 2008 and 2009, including major loans to prop up the housing market.

The audit also found that the Federal Reserve Bank of New York, which had a major role in the lending, did not have sufficient controls to prevent conflicts of interest for its employees.