Thursday, May 1, 2014


Well, there I was sitting right in front of the TV at 2:15 yesterday afternoon, pencil in hand…and nothing happened.  Oh yes, the Fed announcement arrived precisely on time and contained absolutely nothing so everything about which I had dreamed writing evaporated and as a result I wrote nothing. I must admit that things aren't much better today, but there was one report that caught my eye that deserves some consideration in today's effort.

Way back in 2007, just before everything went to hell in a hand cart, an ongoing investigation began to reveal the extent to which various foreign banks, but especially BNP Paribas and Credit Suisse (or Debit Suisse as they have been known for years) had been systematically avoiding U.S. laws in regard to tax evasion in Credit Suisses' operations involving U.S. citizens and the avoidance of U. S. economic sanctions against a number of countries but especially Iran.  In both cases we're talking about a hell of a lot of money being involved but most folks can't get too fired up about skipping out on paying taxes, especially Europeans who have raised this activity to a pure life form, but trading with the enemy, so to speak..ah, that's a different thing altogether.  And so, it is the Frenchies who are catching most of the press as an entirely new development was reported today.

It seems our street thug turned Attorney General, Eric Holder, has been quietly been pressuring all involved in this case to drop the hammer on BNP and bring criminal proceedings against them, which of course Justice could do on their own but even here I'm told Holder would like a bit of bi-agency support as the ramification could be quite something.

Just as everyone knew that the Swiss banks were enabling tax evasion, everyone knew that the ignoring of U.S. sanctions was occurring and if there was anybody to point to directly it would probably be  a French entity as the Gaels have a visceral hatred of interference in their business with any creature of the night of their choosing.  This is not an institutional thing; this is a cultural thing.  Everybody, and especially the government hates it, and when the Americans are involved, Sacre Blue, it is foaming at the mouth time!  But this is also a very serious thing.  If a criminal charge were to be brought and proved, there is much speculation as to the fall-out.  There should not be.  BNP would be out of business in the United States.  In fact, I'm not even sure BNP could survive the indictment.  My problem is that I don't think anyone has thought this thing fully through to the end-game much less Holder who appears ready to do anything to nail another bank in the political march to financial chaos and there may be no one out there prepared to attempt to stop him.  The compromise might be what the legal guys call a deferred prosecution agreement in which the government stands still and the bank agrees to sin no more for a monitored period of time.  Problem is you have those pesky French politicians whose reaction to such a cram-down might well be considerably less than a sigh of relief.

In the end, we should try to keep in mind that it is just not CMOs that can result in a crisis in the world's financial system.  We are all inextricably interlinked with one another at this point in time and let us not assume that the guy with the different opinion of our actions is going to act rationally when he is convinced that our actions are irrational.  I go back to my little get-together in New York where there was the recognition that as things unravelled, the must common question asked was, "How did this happen?"  Things happen because no one was paying enough attention.  With emotions where they stand today, someone had better be paying attention.

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