Bloomberg tweeted about 40 minutes ago that Cyprus had approved the legislation necessary for the EU bailout, but still does not have a news story up. The Wall Street Journal as of now has a “Breaking News” item on its website, again no story yet, “Cyprus lawmakers approve key bills aiming to secure broader bailout package.” So this looks to be a done deal.
Read more...The official sick man list of Europe has long been the PIIGS, or if you prefer, the GIPSI: Greece, Ireland, Spain, Italy, Portugal. As the Cyprus restructuring drama has moved into high gear, it’s obscured news of a serious deterioration in the French economy and the weakened condition of Slovenia, which has a population and GDP roughly 1.5 times as large as that of Cyprus.
Read more...Mr. Market decided yesterday that the fact that the Cypriot finance minister, Michalis Sarris, was meeting as previously scheduled with Russian officials meant all would be well. And even better…Bernanke said the Cyprus banking mess would be contained. So why worry?
The ECB just announced that it will extend the ELA to Cyprus only through Monday. After that, it will cut off Cyprus if it has not knuckled under to an EU/IMF deal.
Read more...Yves here. You will notice that this list of options for Cyprus is very depressing and does not envision Russia riding in to the rescue in a big way. It also treats a 20% fall in GDP as a possibly optimistic base case.
Read more...Cyprus, as its President Nicos Anastasiades predicted but no one outside Cyprus quite believed would happen, has resoundingly defied the will of the Eurozone in failing to surrender a single Parliamentary vote to a diktat to haircut depositors to save its number two bank, whose failure would in all likelihood bring down Cyprus’s entire banking system. The members of the President’s own party abstained despite his resigned support for the deal. And mind you, this was after the terms revised to allow for deposits under €20,000 to be spared.
The EU was utterly unprepared for this rebellion.
Read more...A quick run-down on the impressively stupid handling of the “Cyprus bailout” by the EU.
Read more...The state of play in Cyprus is that negotiations in Parliament are underway, with the hope of a yes vote on a “Plan B” today. The Cypriot officialdom has allowed for slippage in this timetable, with the bank holiday in effect till Thursday. The latest events were largely a nothingburger, aside from the big news of the failure to approve the president’s plan yesterday: European ministers confirmed that they’ll approve an agreement so long as Cyrpus obtains €5.8 billion from depositors. Monday night, President Nicos Anastasiades gave his version of the Hank Paulson armageddon speech on national TV, laying out the fact that no deal means an immediate collapse of “one bank” (presumably Liaki), and a possible exit from the Eurozone.
The widespread assumption is that the Cypriots will fall into line, since the alternative really does look even uglier. But the runway is pretty short.
Read more...It would be ironic if Cyprus, one the smallest countries in Europe with little over 1 million people and about 0.5% of the European Union (“EU”) economically, were to prove a key inflexion point in the crisis.
Read more...The cheery view that Europe had moves past its crisis now looks to have been a tad premature.
Read more...Yves here. I wasn’t planning on liveblogging this hearing, but listing to the introductory remarks, the knives are really out for JPM. In all the post-crisis hearings I’ve watched, I’ve never seen such unanimity between the Democrats and the Republicans on the severity of the problem and the need for more regulation.
Read more...There is so much grist in the just-released Senate Permanent Subcommittee report on the JP Morgan London Whale trades that the initial reports are merely high level summaries, which is understandable. Even with the admirable job done by the committee in documenting its findings and recommendations, it will take some doing to pull out the critical observations and convey them to the public. Plus the hearings tomorrow should provide good theater and further hooks for commentary.
But some critical findings emerge, quickly. We here at NC were particularly harsh critics of JP Morgan’s conduct, and disappointed in the media’s failure to understand that the information JP Morgan presented as it bobbed and weaved showed glaring deficiencies in risk controls. Yet the failings described in the report are even worse than we imagined.
Read more...By C.P. Chandrasekhar, Professor of Economics, School of Social Sciences, Jawaharlal Nehru University, New Delhi, India. Cross posted from Triple Crisis
If the international media are to be believed the world, still struggling with recession, is faced with a potential new threat emanating from China. Underlying that threat is a rapid rise in credit provided by a “shadow banking” sector to developers in an increasingly fragile property market.
Read more...There is a very useful and accessible article at BBC (hat tip Richard Smith) on the information technology hairballs and baked-in level of future problems at major banks. The article was prompted by widespread problems at NatWest this week in accessing accounts.
Read more...Over the last two and a half years, Wells Fargo, like most of the major mortgage servicers, claimed that it had a “rigorous system” to insure that mortgage documents were accurate and complete. The reason this mattered was that there was significant evidence to the contrary. Foreclosure defense attorneys found repeatedly that, for securitized mortgages, the servicer or foreclosure mill attorney would present documents to the court that failed to show the borrower’s note (a promissory note) had been transferred properly to the trust. This mattered not only on a borrower level, but indicated that originators of the mortgage securitizations hadn’t bothered transferring the notes properly to the trusts that were to hold them. This raised the ugly specter of what was called “securitization fail,” that investors had been sold securities that they had been told were mortgage backed when they might in practice not be.
The robosiging scandal was merely the tip of the iceberg of mortgage and foreclosure problems that resulted from the failure to adhere to the requirements of well-settled state real estate law. The banks maintained that there was nothing wrong with mortgage ownership or with the records. All they had were occasional errors and some unfortunate corners-cutting with affidavits. If they merely re-executed all those robosigned documents, all would be well.
Wells Fargo’s own actions say the reverse.
Read more...Yves here. This post is useful in that it suggests short, simple ways to debunk the idea that deficit cutting is a good thing and to make the argument politically palatable. The trouble some readers will have is in positing that Obama is interested in policies that are good for middle class Americans, as opposed to his wealthy backers.
Read more...