Toxic Europe Is Bust.

May 5, 2013

Dedicated to President Higgins http://www.independent.ie/irish-news/president-higgins-criticises-failures-of-eu-leaders-on-banking-crisis-29237692.html

English: U.S. FDIC banking profits - Q2 2008

English: U.S. FDIC banking profits – Q2 2008 (Photo credit: Wikipedia)

The financial system we all take for granted is in a deep crisis. It’s far from over. Kevin Spacey in the movie ‘Margin Call’ http://www.examiner.com/review/margin-call-how-wall-street-crashed-the-economy-5-stars in a pivotal moment “He delivers one final speech to his team, urging them to sell worthless, mortgage-backed securities for million dollar bonuses. True empathy is never shown in Margin Call, except by Sam for his dog.”

We see the fund managers at their desks facing their screens as they shout calls to their clients in a desperate attempt to sell everything they know is toxic on their books. We are not told nor see who the buyers are.

For example, In Germany were German banks involved,one suspects banks throughout Europe were heavily involved in such losses.

What was the involvement of central bank, state banks or large commercial banks  eg the following out of a list of many many more such banks across the EMU?

Deutsche Bundesbank, Frankfurt, Deutsche Pfandbriefbank, Frankfurt, Landesbank Berlin

Dresdner Bank, Frankfurt
Dresdner Kleinwort
Comdirectbank, Quickborn
EuroHypo, Frankfurt (real estate bank)

Those toxic derivatives still exist and they are hidden under stress test radar. We need to open their black boxes of toxic derivatives. They need to be fully accounted for and audited and posted on public exchanges to examine and expose them. We need further banking regulation, more public banks and new rules enforcing the requirements that investment banking be made public through the sanitisation of derivatives by means of public exchange traded derivatives.

Fraud, so-called derivative €30trillion + insurance scams  need windows opened to see what is inside such black boxes.

http://marketswiki.com/mwiki/Exchange-traded_derivatives

Do you recall when Minister Michael Noonan announced he would be pursuing the burning of senior bondholders with the ECB – he met with Timothy Geithner’s meeting with Minister Noonan in Washington in June 2011. The meeting ended that pursuit with the widespread belief that Tim Geithner refused to countenance such a position. Noonan capitulated and the bill instead was passed to Irish taxpayers.

Largely to blame is the toxic domino effect as follows: Ireland burns senior bondholders, losses are realised in European and US banks. Banks refuse to lend because of liquidity fears. European banks now require bailout and cannot fund their loan book. Losses to

Bank of America,
JP Morgan Chase
Citibank
Goldman Sachs

http://demonocracy.info/infographics/usa/derivatives/bank_exposure.html

To avoid such losses the losses are to be shouldered by poor Irish taxpayers.

Let’s look at the meaning of this burden sharing for Irish taxpayers for a moment.

In spite of all the austerity, new taxes, property taxes, salary cuts, job losses, emigration, destruction of the local economy that is ongoing, enough is not enough.

Dan White in an excellent article writing in Business, Sunday Independent, states final cost of fixing the Irish banks will be €100bn, “Irish Banks need another €30bn at least” . This could be a conservative estimate , €27bn SME lending on Irish bank books of which 50% is currently in distress, €37bn of compromised mortgage loans could yield €18.5bn losses without speaking of the €50bn of tracker mortgages. The list of potential losses goes on and on. The NAMA basket case is not mentioned.

Currently the only target to pay up on such losses is the Irish taxpayer, no burden sharing, no debt write-down to alleviate the pain of the Irish economy suffocated by debt.

Up the creek bailout economics with bailout loans at skullduggery lending rates that will extort further profits for institutional lenders is the only item on the Irish menu for taxpayers.

Currently some of the large institutional funds that should be sharing in the losses of the Irish economy instead of bailing out Irish taxpayers are bailing out of the Irish economy. Some of the major players in the global financial industry are handing back their licenses and leaving the IFSC. Deputy Chairman of Allied Irish Bank Dr Michael Somers:

http://www.rte.ie/news/2013/0504/390367-aib-michael-somers/

Michael Somers is against regulation and capping bankers pay. However, there is probably another reason banks are pulling out of the IFSC rather than the fear of regulation imposed by the ECB, at the imminent collapse of the Irish economy is not where you want to be.

Derivatives

Europe is bust with many of its leading banks in severe financial disarray exposed to investment loan accounts that are dicey. The only real movement to improve matters reminds you of those movies where the vehicle does not fall over the cliff but almost goes. Its held in balance along some invisible fulcrom. The occupants movement causes it to imbalance with the threat of imminent fall. So occupants step back again or become frozen in their seats. Such is the case with financial reform in Europe. Proposals to raid depositors money in Cyprus almost led to collapse of the Cypriot economy and ‘bailout’. It looks as though Europe is in danger of free fall and imminent collapse. In such a scenario, depositors are in the firing line across Europe.

Writing in CounterPunch online investigative journalism publication, Ellen Browne writes:

“The reason this risky move would subject the FDIC to insolvency, as explained in my earlier article here, is that under the Bankruptcy Reform Act of 2005, derivatives counter-parties are given preference over all other creditors and customers of the bankrupt financial institution, including FDIC insured depositors. Normally, the FDIC would have the powers as trustee in receivership to protect the failed bank’s collateral for payments made to depositors. But the FDIC’s powers are overridden by the special status of derivatives.  (Remember MF Global?  The reason its customers lost their segregated customer funds to the derivatives claimants was that derivatives have super-priority in bankruptcy.)

The FDIC has only about $25 billion in its deposit insurance fund, which is mandated by law to keep a balance equivalent to only 1.15 percent of insured deposits.  And the Dodd-Frank Act (Section 716) now bans taxpayer bailouts of most speculative derivatives activities.  Drawing on the FDIC’s credit line with the Treasury to cover a BofA or JPMorgan derivatives bust would be the equivalent of a
taxpayer bailout, at least if the money were not paid back; and imposing that burden on the FDIC’s member banks is something they can ill afford.”

So, if taxpayers can’t pay for losses in global or Irish banks, who else is left to pay. Right, DEPOSITORS.

And what do you get to pay for, unregulated aka Micheal Somers toxic banking hoovering up money skyward to bondholders and financial paper money merchants who’ve collapsed the real global economy.

I recall a story told to denigrate socialism ridiculing the state of affairs where A,B,C,D groups in society were treated as one and the same with the elite, hard workers having to pay for those who failed through laziness or some other poor excuse?

The story teller did not do a similar logic test on the question of all the assets of B,C,D being taken away from those groups swept upward to the ‘hard working elite’ pressing buttons on a computer screen amassing great wealth for their clients.

The poor and now the middle class are plundered to pay for the financial, toxic paper balloon scam Abraham Lincoln declared against in fighting the mandarins of private banking.

The toxic financial cancer of derivatives and unregulated investment banking will come to its own end as it destroys the fiat currency upon which it is based. This may precipitate a new Glass Steagal or return to the gold standard or both. Clearly Dodd Frank and Basil 111 do not go far enough in regulating the financial sector.

We need a new financial system that will take the banks out of private ownership and into public ownership. Irish taxpayers require new banks built and maintained and serviced to serve their needs. Banks already exist that serve such a model eg The Bank of North Dakota:

http://en.wikipedia.org/wiki/Bank_of_North_Dakota

This would be a bank where the profits are reinvested on behalf of taxpayers into the state/country/county/community and the profits not sent to anonymous private sources, to fund out of this world salaries/allowances and bonuses. This would be a new world of regulated banking where white-collar crime gets put behind bars with no immunity from prosecution and we finally find out who gave the guarantee on foot of what information in a Banking Inquiry worthy of taxpayers.

What Brooksley Borne warned ‘The Warning’ against has come to pass. depositors money is now the new target:

http://video.pbs.org/video/1302794657/

It will take a longer dissertation to describe how Germany has benefited from the euro keeping inflation down, keeping the overall value of the euro down as opposed to what the deutschmark would skyrocket to without the euro never mind all those loans handed out to debtor EMU members to buy their engineering output.

No need to worry that these nations crippled by debt are ripe for full takeover now they are financially hogtied to the new EMU with Germany taking over the helm. George Orwell does not rest easy in his grave

Can democracy be taken back from the financial sector or even be taken back from Germany and her allies?

End.

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