...The Suit, in a major address in Atlanta yesterday. It seems our Sec. of the Treasury has gotten it into his head that it might not be a bad idea to have global regulatory agreement, especially on derivatives, lest the business depart for those jurisdictions who take the most relaxed view about these things. Now readers of this space might be excused if their reaction to this front page sruff is, "Well, DUH," but in grave stenorus tones, The Suit has now warned us all and, as this is being written, he is winging his way to Europe to make certain that the Euros and the Brits see things his way.
It doesn't seem to bother The Suit that nobody has the slightest idea how the regulations required by the Dodd/Frank bill are to work because they have yet to be written despite the fact that the bill comes into effect in about a month--a fact which insures that in the rush to get it done the results will be garbage. Nor does he seem to mind that the biggest pot of money aside from the U.S is not Europe but Asia and those guys have financial institutions as well. Nor does he realize that the conflicts inherent in Dodd/Frank will probably make it impossible for him to fulfill his end of any grand bargain which will certainly result in our global financial relationships, presently in the crapper, get flushed right down the gurgle tube. I guess I have to keep repeating the litany:
1. It is not more regulation that is needed but better governance.
2. Banks get sick on the asset side of the balance sheet; they die on the liability side.
3. Institutions must be allowed to fail. If intervention is required then the management (as defined) of the intervened institution loses everything by contract.
It is rare that one ever witnesses an administration so devoid of rational thought in the economic and fiscal realm as is this one. But there I go, getting political again, over to Greece...
Well, it seems that France is now making noises about a restructuring and--bless them--making it very clear that it must be done in a way so that French banks take no loses. By loses they mean the loss of capital through immediate write-offs which the government will have to replace and that is neither politically possible as the voters would revolt or fiscally impossible because France doesn't have the money. Ah non, mes amis, what we have here is an accounting issue, whereby maturities are extended at favorable terms but no write-down is recorded. Wait for someone to say, "What we wish to do is to give Greece the time to right itself so it can return to the voluntary markets." That is translated from the French, German or whatever language one wishes into, "What we need is time for our stupid banks to write this crap off year-by-year so down the road we can write off a big slug and send the Greeks--damn them--on their way!" Trust me, the accountants will find a way to bless whatever is decided to reach this result and the rating agencies--Moody's is the latest to make a fool out of themselves--will not say boo. Plus ca change...can anyone say Mexico, 1983?
Finally, I want everyone out there to appreciate the dedication I show to sticking to the subject of banking and finance with the doggedness of the truly committed. With the entire world writing about the weiner waver in the Congress of the United States do all of you realize how hard that is? Saint-like. See you tomorrow.
Showing posts with label Deutschebank Greece. Show all posts
Showing posts with label Deutschebank Greece. Show all posts
Tuesday, June 7, 2011
Wednesday, May 25, 2011
DON'T BLAME ME
I tried for hours but Google wouldn't let me do my thing. Then as I sat down to a perfectly cooked steak, local asperges and an excellent bottle of Zin, I became personna garat again. I said the hell with it, greece will still be around tomorrow and preceeded to have a most enjoyable meal
And sorry to say, Greece is still around and the battle withing Euroland still rages between the ECB and the Big Guys who, as we mentioned on Monday are showing signs of perhaps being prepared to practice a bit of legerdemain in order to push the can a bit further down the road by allowing the Greeks to "reschedule" some or all of the debt owed to Euro banks. So you might as, "what's the big deal?' Well, to get the answer to that one just has to look at the statement that came out yesterday from one of Greece's largest financial institutions, Alpha Bank.
Turns out, Alpha "only" (their language, not mine) owes the EUB 3.9 billion Euros backed by Greek paper which, for those of you who are regular reader will remember carries zero risk weighting as does all the paper of any member of the EU. Or to put it another way, from the standpoint of risk, there aint no difference between Greece and Germany. However, in addition to the "only" catagory Alpha hold 9.3 billion on the asset side in Greek paper which they, of course, carry at par. Now what happens if Greece does a rescheduling? Well, the paper held by the ECB no longer become eligible according to their rules, the bonds held by Alpha have to be marked to market, Alpha is kaput and the ECB's 3.9 billion is looking very dodgy not to mention the 10 billion (estimated) owed by other Greek financial institutions backed by the same paper. Remember, this is real money; Euros not dollars. In other words, in a technical sense, bye, bye ECB.
For those paying attention, "technical" is the operative word. The fact is these guys can do any damn thing they want provided they can get their political acts together...and yes, whatever they do Ireland and Portugal will be right behind. Fact of the matter is as soon as the German volk realize that not even they have enough money to bail out Spain--not that I'm saying Spain needs bailing--some accomodation may have to be found there as well. The bizarre beauty of this is that it has become such a mess that nobody...and I mean nobody...will raise a murmur of protest. Now are some people going to get hurt? Sure, but I suspect it will mostly be in the Euro banking sector and by this time if you haven't realized that banks survive on liquidity and not on some silly concepts involving capital and that central banks are uniquely designed to provide liquidy, stop reading now as your condition is hopeless. All will not be cured overnight--indeed, it will take years--but the cure will come.
Now you may have heard all the talk bubbling up about if Greece defaults their credit will be forever wrecked. That folks, is a load of crap. Financial markets have a memory and an attention span slightly longer than that of my 14 1/2 year old Wheaton Terrier but only slightly. Argentina, one of the greatest collection of thieves in mordern times stiffed their bond holders by 80% 6 years ago and look where they are today. The Leader and his mob wiped out bond holders in GM and Chrystler in 2008. Can the United States borrow today...ah, don't bring up the Fed and QE II. Bad example. The fact of the matter is there's one born every minute. The guy who will respond positively to, "Pssst, wanna buy a temple on a hill?" is already walking around.
And sorry to say, Greece is still around and the battle withing Euroland still rages between the ECB and the Big Guys who, as we mentioned on Monday are showing signs of perhaps being prepared to practice a bit of legerdemain in order to push the can a bit further down the road by allowing the Greeks to "reschedule" some or all of the debt owed to Euro banks. So you might as, "what's the big deal?' Well, to get the answer to that one just has to look at the statement that came out yesterday from one of Greece's largest financial institutions, Alpha Bank.
Turns out, Alpha "only" (their language, not mine) owes the EUB 3.9 billion Euros backed by Greek paper which, for those of you who are regular reader will remember carries zero risk weighting as does all the paper of any member of the EU. Or to put it another way, from the standpoint of risk, there aint no difference between Greece and Germany. However, in addition to the "only" catagory Alpha hold 9.3 billion on the asset side in Greek paper which they, of course, carry at par. Now what happens if Greece does a rescheduling? Well, the paper held by the ECB no longer become eligible according to their rules, the bonds held by Alpha have to be marked to market, Alpha is kaput and the ECB's 3.9 billion is looking very dodgy not to mention the 10 billion (estimated) owed by other Greek financial institutions backed by the same paper. Remember, this is real money; Euros not dollars. In other words, in a technical sense, bye, bye ECB.
For those paying attention, "technical" is the operative word. The fact is these guys can do any damn thing they want provided they can get their political acts together...and yes, whatever they do Ireland and Portugal will be right behind. Fact of the matter is as soon as the German volk realize that not even they have enough money to bail out Spain--not that I'm saying Spain needs bailing--some accomodation may have to be found there as well. The bizarre beauty of this is that it has become such a mess that nobody...and I mean nobody...will raise a murmur of protest. Now are some people going to get hurt? Sure, but I suspect it will mostly be in the Euro banking sector and by this time if you haven't realized that banks survive on liquidity and not on some silly concepts involving capital and that central banks are uniquely designed to provide liquidy, stop reading now as your condition is hopeless. All will not be cured overnight--indeed, it will take years--but the cure will come.
Now you may have heard all the talk bubbling up about if Greece defaults their credit will be forever wrecked. That folks, is a load of crap. Financial markets have a memory and an attention span slightly longer than that of my 14 1/2 year old Wheaton Terrier but only slightly. Argentina, one of the greatest collection of thieves in mordern times stiffed their bond holders by 80% 6 years ago and look where they are today. The Leader and his mob wiped out bond holders in GM and Chrystler in 2008. Can the United States borrow today...ah, don't bring up the Fed and QE II. Bad example. The fact of the matter is there's one born every minute. The guy who will respond positively to, "Pssst, wanna buy a temple on a hill?" is already walking around.
Monday, March 14, 2011
EUROTHROAT CALLS
My main man called over the weekend. He resides in Brussels for his sins but gets paid a bundle from the Commission. It's a nice life and he's on the inside. I've Americanized the content to protect the guilty.
"Well, I've been calling you for two days. Where the hell have you been?"
"Charlie, Charlie, relax. This has been a tough week."
"I'm in tears. What happened?"
"Well, as you Americans like to say, it was a food-fight at dinner. The Germans were being German, the French were being superior, the English above the fray, the Spanish somewhat irate, the Greeks contrite and the Irish very Irish, spoiling for a fight."
"Yet reports have an agreement being reached."
"Oh Charlie, you know better than that. It was midnight, everyone was most tired and what was put out was a series of unconnected dots, left to be connected in two weeks time. The Greeks got a bit but not enough. Frau Merkel made encouraging noises as to what she was prepared to do IF...and it is a bigger if than one would think...all affected parties do would she wants."
"...And will they?"
"Well, that remains to be seen, but I must say the new Irish on the block simply dug in their heels."
"On the tax question?"
"Indeed, as you predicted, and of course we are now in the game...what do you call it...chicken? We want them to raise the corporate tax rate and they keep reminding us about their banks all of whom owe the continent a lot of money so why should they continue to bail the continental banks out? Is an interesting question, no?" We like our banks just as they are.
"Yes, and shall remain such. And the rest..."
"Ha! The Greeks get a little break but the Portugese yield is now 12% which of course cannot last but about that, no one is talking. But Trichet seems to be saying if you issue, we will buy. Sounds like your man although Trichet even said he may buy direct..."
"I can get it for you wholesale."
"What?"
"Never mind, an old American joke. So what happens in 10 days?"
"I don't know, but funny is it not. They are speaking, not with one voice but they actually said some things I did not expect so maybe they can find one voice in the time up to the next meeting."
"Prediction?"
"I think not. More talk, that's all. We speak as the European Union but we are seperate countries still. How you say, old habits die hard? We still don't really trust each other. It is not like a political disagreement, it is the national psyche syndrome. But the one thing they agree about is that you are no help. I tell you, you say Bernanke and people just shake their heads. No one can understand his positions and why he seems not to listen. This is bad, Charlie, it really is. It should not be so."
"I'm told a lot of people involved here feel the same way. Just don't blame us for your home grown problems. Listen, thanks for the update, I appreciate it."
"I know, Charlie, on this you are right. Spring is coming, Charlie, come visit. Brussels is good in the spring."
"Almost everywhere is good in the spring my friend, but Brussels is too expensive."
"Which is why they pay us so much, Charlie. Life is good."
"Well, I've been calling you for two days. Where the hell have you been?"
"Charlie, Charlie, relax. This has been a tough week."
"I'm in tears. What happened?"
"Well, as you Americans like to say, it was a food-fight at dinner. The Germans were being German, the French were being superior, the English above the fray, the Spanish somewhat irate, the Greeks contrite and the Irish very Irish, spoiling for a fight."
"Yet reports have an agreement being reached."
"Oh Charlie, you know better than that. It was midnight, everyone was most tired and what was put out was a series of unconnected dots, left to be connected in two weeks time. The Greeks got a bit but not enough. Frau Merkel made encouraging noises as to what she was prepared to do IF...and it is a bigger if than one would think...all affected parties do would she wants."
"...And will they?"
"Well, that remains to be seen, but I must say the new Irish on the block simply dug in their heels."
"On the tax question?"
"Indeed, as you predicted, and of course we are now in the game...what do you call it...chicken? We want them to raise the corporate tax rate and they keep reminding us about their banks all of whom owe the continent a lot of money so why should they continue to bail the continental banks out? Is an interesting question, no?" We like our banks just as they are.
"Yes, and shall remain such. And the rest..."
"Ha! The Greeks get a little break but the Portugese yield is now 12% which of course cannot last but about that, no one is talking. But Trichet seems to be saying if you issue, we will buy. Sounds like your man although Trichet even said he may buy direct..."
"I can get it for you wholesale."
"What?"
"Never mind, an old American joke. So what happens in 10 days?"
"I don't know, but funny is it not. They are speaking, not with one voice but they actually said some things I did not expect so maybe they can find one voice in the time up to the next meeting."
"Prediction?"
"I think not. More talk, that's all. We speak as the European Union but we are seperate countries still. How you say, old habits die hard? We still don't really trust each other. It is not like a political disagreement, it is the national psyche syndrome. But the one thing they agree about is that you are no help. I tell you, you say Bernanke and people just shake their heads. No one can understand his positions and why he seems not to listen. This is bad, Charlie, it really is. It should not be so."
"I'm told a lot of people involved here feel the same way. Just don't blame us for your home grown problems. Listen, thanks for the update, I appreciate it."
"I know, Charlie, on this you are right. Spring is coming, Charlie, come visit. Brussels is good in the spring."
"Almost everywhere is good in the spring my friend, but Brussels is too expensive."
"Which is why they pay us so much, Charlie. Life is good."
Monday, March 7, 2011
TOUGH TIMES
I mean when you have to highlight the bold and brave move of Moody's in lowering Greece's rating from B1a to B1 you got a serious blogging problem on your hands. These are tough blogging times my friend, really tough times. Maybe, I should become a political pundit; there always seems to be room for just one more of those. Then again, constant raving is probably not particularly good for my my overall physical and mental state given the quality of our politics and politicians these days. So Greece becoming junkier and junkier is all I have I guess for the foreseeable future.
Oh yeah, Poo Bear did put out another warning last week that she and the FDIC would deal harshly and quickly with any bank that was in danger of failure. Who cares. And along the same lines, the pols and the news guys have finally figured out (well, almost) the Dodd/Frank has probably made the situation a good deal worse by the clear creation of two (at least) tiers of financial institutions as witnessed by the fact that the risk premium assigned to institutions deemed by the market as not big enough not to fail has increased to 78 basis points according to one report. I don't know whether this is correct but clerly what will happen is that the big will get bigger, risk in the system will be more and more centered in the big institutions making them more risky, the small will want to get big and take bigger risks in an attempt to accomplish that goal and the realization will eventually come that we have made things worse not better. Way to go guys.
Oh yeah, another worthy news item. Bill Gross, he of PIMCO, proclaimed today that what we need are more taxes on the "rich" (to be defined) and higher taxes on corporations. I am sure The Leader and his mob will be screaming, "See, see, see, a leader of American finance says we need higher taxes!" The New York Times will be right along with them. Of course, overlooked in all of this is the fact that poor Mr. Gross is right where you don't want to be in an enviornment in which the Fed is going to do it's damndest to inflate the hell out of our problems: Mr. Gross owns the biggest fixed income (bond) portfolio in the world and is about to get murdered. What Mr. Gross is trying to say is we need more revenue at the governmental level but being no brighter than the average politician he thinks the way to get it is to raise taxes rather than by redoing the tax code in the manner that Billy's guy and the Wyoming Wing Nut suggested and which everyone has ignored, especially The Leader who appointed them...Oh damn, I'm becoming a political pundit. See what happens when there's nothing going on. Scary.
Oh yeah, Poo Bear did put out another warning last week that she and the FDIC would deal harshly and quickly with any bank that was in danger of failure. Who cares. And along the same lines, the pols and the news guys have finally figured out (well, almost) the Dodd/Frank has probably made the situation a good deal worse by the clear creation of two (at least) tiers of financial institutions as witnessed by the fact that the risk premium assigned to institutions deemed by the market as not big enough not to fail has increased to 78 basis points according to one report. I don't know whether this is correct but clerly what will happen is that the big will get bigger, risk in the system will be more and more centered in the big institutions making them more risky, the small will want to get big and take bigger risks in an attempt to accomplish that goal and the realization will eventually come that we have made things worse not better. Way to go guys.
Oh yeah, another worthy news item. Bill Gross, he of PIMCO, proclaimed today that what we need are more taxes on the "rich" (to be defined) and higher taxes on corporations. I am sure The Leader and his mob will be screaming, "See, see, see, a leader of American finance says we need higher taxes!" The New York Times will be right along with them. Of course, overlooked in all of this is the fact that poor Mr. Gross is right where you don't want to be in an enviornment in which the Fed is going to do it's damndest to inflate the hell out of our problems: Mr. Gross owns the biggest fixed income (bond) portfolio in the world and is about to get murdered. What Mr. Gross is trying to say is we need more revenue at the governmental level but being no brighter than the average politician he thinks the way to get it is to raise taxes rather than by redoing the tax code in the manner that Billy's guy and the Wyoming Wing Nut suggested and which everyone has ignored, especially The Leader who appointed them...Oh damn, I'm becoming a political pundit. See what happens when there's nothing going on. Scary.
Sunday, May 30, 2010
IT'S GOTTA BE ME
Pulled up the blog today in preparation of my last post before I'm off fishing tomorrow. To my horror I discovered that the last two paragraphs never made it into print. I've spent hours trying to retrieve then all to no avail and have come to the conclusion that I had better start doing better with my publishing as the problems over the past few months must be mostly of my own doings. Once again, apologies. I'll try to do better.
Anyway, what I was trying to get at is what we can expect over the coming months and what intelligent steps might be taken to straighten out the mess that the Euros are creating for themselves.
Iy seems to me that the first thing one must do is to decide what it is that one wishes to accomplish which so far has yet to be done. At the present time we have an impending crisis in the debt profiles of a number of sovereign countries, which could--it really hasn't happened yet--expand into a full blown crisis of confidence in credit markets much like that which occurred in 2008. The one HUGE difference this time around is that we have seen this coming from a long way off and we have had time to consider solutions...not make things up as we go along. Unfortunately, a good deal of the latter has been done and very little of the former.
So far, this has been considered by the market as a whole as a European crisis but that could change rapidly. Lets stake stock of what has occur ed and where we are today
1. Four countries are basically involved: Greece, Spain, Portugal and Italy with Ireland and sitting on the fringe but Ireland moved early.
2. Greece and Portugal do not really count on their own; they are too small. It is the relationship or "contagion" of the remaining states that is important if the problem of a single state is not solved.
3. The well-know dichotomy of a political union having a single monetary policy but multiple fiscal policies has been discussed ad nauseum...ignore it, it isn't going to change or be fixed.
4. The big players, Germany, France and to a lesser extent the Dutch (the Brits are not players by their own choice) could care less about Greece as a viable nation. Their only concern is how it effect their own body politics.
5. The French and the Germans have one mutual common interest, i.e. the health of their national banking systems and diverse mutual interests, i.e. the stability of the Euro and of the EU which could flip-flop in a heartbeat...or certainly as a result of German Parliamentary elections. Every decision made so far have these interest in the forefront and NOT the viability of a Greece as a nation state and certainly not as a member of the EU
The problem is, the course of action taken by the French and the Germans has, to a great extent, ignored the views of that shadowy thing we call, "the Market," who could care less about all of the above and remains solely interested in situations that allow it to make money by exploiting either systemic opportunity or man-created opportunities. In linking the rescue of Greece with the salvation of the French and German banking systems and the stability of the Euro through this multinational grab-bag of lines of credit, the main players have given the Market an opportunity to make a value judgement and that judgement is too little, too late, too poorly focused and too lacking in permanency to accomplish the undeclared, but well-understood, goals of its authors. The result? In attempting to save what probably cannot be saved...the credit outlook of the respective banking systems and the stability of the Euro, the gruesome twosome have probably exacerbated the problem and made the rescheduling of Greece (and if Greece has sprung who can be but far behind?) and the further collapse of the Euro inevitable. I fear we are looking at the toothpaste splattered all over the bathroom sink: getting it back in the tube is a mug's game.
The good news is that is the boys recognize and have the guts to admit their mistake, we can deal with Greece fairly easily and with minimum loss to all concern...although there will have to be some loss in order to make the effort credible. The other good news is there are a hell of a lot of people still around who not only understand what has been going on but have the experience and know-how to fix it...including the distinguished author of a mid west blog site. Just not next week as NOTHING interferes with the quest for the Blue Marlin. But keep this Market guy in mind: Keep providing him with opportunities and he is going to take advantage of the same. At this point it is really simple to make what has become silly and unworkable ugly and dangerous. The Market knows how to do that just as some of us know how to fix it. Fait vos jeu...and don't waste time doing so.
Anyway, what I was trying to get at is what we can expect over the coming months and what intelligent steps might be taken to straighten out the mess that the Euros are creating for themselves.
Iy seems to me that the first thing one must do is to decide what it is that one wishes to accomplish which so far has yet to be done. At the present time we have an impending crisis in the debt profiles of a number of sovereign countries, which could--it really hasn't happened yet--expand into a full blown crisis of confidence in credit markets much like that which occurred in 2008. The one HUGE difference this time around is that we have seen this coming from a long way off and we have had time to consider solutions...not make things up as we go along. Unfortunately, a good deal of the latter has been done and very little of the former.
So far, this has been considered by the market as a whole as a European crisis but that could change rapidly. Lets stake stock of what has occur ed and where we are today
1. Four countries are basically involved: Greece, Spain, Portugal and Italy with Ireland and sitting on the fringe but Ireland moved early.
2. Greece and Portugal do not really count on their own; they are too small. It is the relationship or "contagion" of the remaining states that is important if the problem of a single state is not solved.
3. The well-know dichotomy of a political union having a single monetary policy but multiple fiscal policies has been discussed ad nauseum...ignore it, it isn't going to change or be fixed.
4. The big players, Germany, France and to a lesser extent the Dutch (the Brits are not players by their own choice) could care less about Greece as a viable nation. Their only concern is how it effect their own body politics.
5. The French and the Germans have one mutual common interest, i.e. the health of their national banking systems and diverse mutual interests, i.e. the stability of the Euro and of the EU which could flip-flop in a heartbeat...or certainly as a result of German Parliamentary elections. Every decision made so far have these interest in the forefront and NOT the viability of a Greece as a nation state and certainly not as a member of the EU
The problem is, the course of action taken by the French and the Germans has, to a great extent, ignored the views of that shadowy thing we call, "the Market," who could care less about all of the above and remains solely interested in situations that allow it to make money by exploiting either systemic opportunity or man-created opportunities. In linking the rescue of Greece with the salvation of the French and German banking systems and the stability of the Euro through this multinational grab-bag of lines of credit, the main players have given the Market an opportunity to make a value judgement and that judgement is too little, too late, too poorly focused and too lacking in permanency to accomplish the undeclared, but well-understood, goals of its authors. The result? In attempting to save what probably cannot be saved...the credit outlook of the respective banking systems and the stability of the Euro, the gruesome twosome have probably exacerbated the problem and made the rescheduling of Greece (and if Greece has sprung who can be but far behind?) and the further collapse of the Euro inevitable. I fear we are looking at the toothpaste splattered all over the bathroom sink: getting it back in the tube is a mug's game.
The good news is that is the boys recognize and have the guts to admit their mistake, we can deal with Greece fairly easily and with minimum loss to all concern...although there will have to be some loss in order to make the effort credible. The other good news is there are a hell of a lot of people still around who not only understand what has been going on but have the experience and know-how to fix it...including the distinguished author of a mid west blog site. Just not next week as NOTHING interferes with the quest for the Blue Marlin. But keep this Market guy in mind: Keep providing him with opportunities and he is going to take advantage of the same. At this point it is really simple to make what has become silly and unworkable ugly and dangerous. The Market knows how to do that just as some of us know how to fix it. Fait vos jeu...and don't waste time doing so.
Sunday, May 16, 2010
BUT FIRST...
...before we head off to yet another wedding and the graduation of our granddaughter from the eighth grade which will keep me out of action for a week, I thought I would briefly comment on the financial regulation bill winding its way through Chris the Crook's committee.
But first (clever, eh) I though I would let you know I'm in trouble. Hans rang up yesterday.
"Charlie! What for the hell you do that, Ja?!!!"
"...And a very Gutten Tag to you mein leiber freund. Do what?"
"You know what. Ackermann!"
"What about him?"
"You call him ein Deu,,,ah,,,German. For Damn, Charlie, you knows he is Swiss!"
"Oh come on Hans, alles ist mir wurst, nein?"
"Nein, nein, nein! Alles ist nicht ! They are not us! Nein!"
"Hans, be honest. In '46 you were all Swiss."
"Ach, Charlie zu...zu...zu..."
"Hans, I know German can be wonderfully expressive but it's so difficult to formulate. Use Ein-lish!"
"You are a sh*%!
"But a lovable one! How's the Frau?"
"Gut. She loves you, Charlie, but you are still a sh*%!"
I must be more careful next time.
Anyway, last week in Congress there was a slight glimmer of intelligence and another monstrous example of stupidity and cynical arrogance within the Democratic majority in the Senate. Maria Cantwell of Washington, one not usually given to intelligent pronouncements joined with Rep. George LeMieux in proposing an amendment to Chris the Crook's legislation that would remove the congressional impremator on the rating agencies. That, sportsfans, would be a hell of a good thing as it would force those good folks who will invest in any old crap as long as it has the appropriate rating into doing the jobs for which they are paid, namely, managing risk. Remember my comments about institutions that would be designated as being so big as to propose systemic risk? The market would take that to mean TBTF and rush in. This is precisely what happened with risk ratings provided by institutions designated by the government as THE ONLY ONES authorized to provide such ratings. Who would have thunk that the U.S. Government would allow a bunch of dummies to get it so wrong.
The operative word is government...a synonym for dumb. Let's see where this goes. It's a big deal
Unfortunately, the junior Senator from the state of Minnesota has other thoughts. Al Franken, a dreadful creature at best, proposed an amendment that would memorialize the activities of the agencies in yet ANOTHER governmental body to be overseen by the SEC and each would, if I understand it correctly, be assigned certain categories of risk to rate. In other words, rather than having a government sanction for their actions, the rating agencies would now be under DIRECT government control. Might I remind you, dear reader, that government control in matters such as the extension of credit often doesn't work out too well to which Fanny, Freddie and the FHSA can bear witness. As you mull this over, keep thinking what that "sh%* Charlie keeps saying, "$1Trillion in losses." Imagine if he's right.
There was a real hit piece on the New York Fed in the Wall Street Journal the other day. I'll try to get to the bottom of it but I have the suspicion that The Bair of Very Little Brain was behind it somehow. Things are getting ugly.
See you when I can.
But first (clever, eh) I though I would let you know I'm in trouble. Hans rang up yesterday.
"Charlie! What for the hell you do that, Ja?!!!"
"...And a very Gutten Tag to you mein leiber freund. Do what?"
"You know what. Ackermann!"
"What about him?"
"You call him ein Deu,,,ah,,,German. For Damn, Charlie, you knows he is Swiss!"
"Oh come on Hans, alles ist mir wurst, nein?"
"Nein, nein, nein! Alles ist nicht ! They are not us! Nein!"
"Hans, be honest. In '46 you were all Swiss."
"Ach, Charlie zu...zu...zu..."
"Hans, I know German can be wonderfully expressive but it's so difficult to formulate. Use Ein-lish!"
"You are a sh*%!
"But a lovable one! How's the Frau?"
"Gut. She loves you, Charlie, but you are still a sh*%!"
I must be more careful next time.
Anyway, last week in Congress there was a slight glimmer of intelligence and another monstrous example of stupidity and cynical arrogance within the Democratic majority in the Senate. Maria Cantwell of Washington, one not usually given to intelligent pronouncements joined with Rep. George LeMieux in proposing an amendment to Chris the Crook's legislation that would remove the congressional impremator on the rating agencies. That, sportsfans, would be a hell of a good thing as it would force those good folks who will invest in any old crap as long as it has the appropriate rating into doing the jobs for which they are paid, namely, managing risk. Remember my comments about institutions that would be designated as being so big as to propose systemic risk? The market would take that to mean TBTF and rush in. This is precisely what happened with risk ratings provided by institutions designated by the government as THE ONLY ONES authorized to provide such ratings. Who would have thunk that the U.S. Government would allow a bunch of dummies to get it so wrong.
The operative word is government...a synonym for dumb. Let's see where this goes. It's a big deal
Unfortunately, the junior Senator from the state of Minnesota has other thoughts. Al Franken, a dreadful creature at best, proposed an amendment that would memorialize the activities of the agencies in yet ANOTHER governmental body to be overseen by the SEC and each would, if I understand it correctly, be assigned certain categories of risk to rate. In other words, rather than having a government sanction for their actions, the rating agencies would now be under DIRECT government control. Might I remind you, dear reader, that government control in matters such as the extension of credit often doesn't work out too well to which Fanny, Freddie and the FHSA can bear witness. As you mull this over, keep thinking what that "sh%* Charlie keeps saying, "$1Trillion in losses." Imagine if he's right.
There was a real hit piece on the New York Fed in the Wall Street Journal the other day. I'll try to get to the bottom of it but I have the suspicion that The Bair of Very Little Brain was behind it somehow. Things are getting ugly.
See you when I can.
Friday, May 14, 2010
CHANGE OF PLANS
I know I promised to return to Regulation but today's international stuff was just too good.
Joey Ackermann, the CEO of Deutschebank really dropped one on the markets today. Speaking from a secret hideaway somewhere in Frankfurt he revealed some of his deepest, darkest thoughts regarding Greece. You might remember that it is estimated that the German banking system has some 25-30 billion Euros in exposure although one must take notice that there are substantial assets of Greek banks' German branches in that figure. Nevertheless, the number is bigger than a breadbox and a Greek bail-out wouldn't be a bad thing for Mrs Ackermann's little boy Joey. And he seems to have received it.
Did Joey go away and stay silent? Nah. For some reason he felt it his duty (Germans are big on duty) to express the view that to pile more debt on top of what was already there in Greece's case may not really solve the problem because Greece's economy was simply not big enough to grow its way out of the burden that has been placed upon the poor country. Joey, Joey, Joey: the elucidation of the obvious has never done anybody any good. When you get a freeby, just take it and shut up. The markets, acting as though this was a revelation from the Gods, once again destroyed the Euro inasmuch as there was nothing else left to destroy as the entire European sovereign debt bond market has been sterilized by this piece of political stupidity. The Yen went through the roof as did the buck and things at this stage are so far out of joint that no one really knows what the future might bring. Amazingly, the U.S. stock market geniuses seem to have gotten the vibe that something bad might be afoot and have reacted accordingly. Somehow I just don't think anybody is into this weekend with a substantial position on either side, but I've been wrong before. That's why I'm poor.
The Leader, of course, remains above the fray sending out Krugman in the Times to assure America that we are not Greece. Most of us have figured that out but for sheer wanton political stupidity, all should read Krugman today. You can now get a slug of Gold in a cash machine in the Gulf, there is more invested in Gold ETFs than exists in the commodity at 2x the current price and Congress still believes that trading basis swaps on an exchange will ensure safety in the future. As I have said before, I should have retired to Bedlam.
More tomorrow.
Joey Ackermann, the CEO of Deutschebank really dropped one on the markets today. Speaking from a secret hideaway somewhere in Frankfurt he revealed some of his deepest, darkest thoughts regarding Greece. You might remember that it is estimated that the German banking system has some 25-30 billion Euros in exposure although one must take notice that there are substantial assets of Greek banks' German branches in that figure. Nevertheless, the number is bigger than a breadbox and a Greek bail-out wouldn't be a bad thing for Mrs Ackermann's little boy Joey. And he seems to have received it.
Did Joey go away and stay silent? Nah. For some reason he felt it his duty (Germans are big on duty) to express the view that to pile more debt on top of what was already there in Greece's case may not really solve the problem because Greece's economy was simply not big enough to grow its way out of the burden that has been placed upon the poor country. Joey, Joey, Joey: the elucidation of the obvious has never done anybody any good. When you get a freeby, just take it and shut up. The markets, acting as though this was a revelation from the Gods, once again destroyed the Euro inasmuch as there was nothing else left to destroy as the entire European sovereign debt bond market has been sterilized by this piece of political stupidity. The Yen went through the roof as did the buck and things at this stage are so far out of joint that no one really knows what the future might bring. Amazingly, the U.S. stock market geniuses seem to have gotten the vibe that something bad might be afoot and have reacted accordingly. Somehow I just don't think anybody is into this weekend with a substantial position on either side, but I've been wrong before. That's why I'm poor.
The Leader, of course, remains above the fray sending out Krugman in the Times to assure America that we are not Greece. Most of us have figured that out but for sheer wanton political stupidity, all should read Krugman today. You can now get a slug of Gold in a cash machine in the Gulf, there is more invested in Gold ETFs than exists in the commodity at 2x the current price and Congress still believes that trading basis swaps on an exchange will ensure safety in the future. As I have said before, I should have retired to Bedlam.
More tomorrow.
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