No sooner had some astute Euro commentators noted that Draghi might have found a path through the Euro mess to keep it patched up long enough for to impose austerity on the periphery and drive all of Europe into a lovely depression, various elements of his plan look as if they were coming unglued.
Read more...While many citizens favor criminal prosecutions of bankers (I recently had a BSchool classmate of Jamie Dimon ask me when he was going to jail), it’s been remarkable how little mention of it there has been in the mainstream media in connection with the Libor scandal (yes, sports fans, price fixing is criminal per the Sherman Anti-Trust Act). This interview of Dennis Kelleher and Felix Salmon by Eliot Spitzer provides a badly-needed counterpoint.
Read more...Ambrose Evans-Pritchard of the Telegraph, who correctly called that ECB would not take action last week, argues in his latest article that Mario Draghi and Italy’s Mario Monti have isolated the Bundesbank and are closing in on being able to buy bonds along side the Eurozone rescue facilities once the ESM presumably goes live (the assumption is that the German constitutional court will lift its injunction on September 11). Draghi hopes to keep Mr. Market at bay till then by a combination of happy talk and threats.
Read more...Heretofore, the Northern bloc countries, most importantly Germany, have firmly opposed ECB bond buying out of concern that it would lead to their bugaboo, hyperinflation. But now that the Eurozone is teetering on the verge of a full blow crisis, German politicians appear to be relenting.
Read more...Raúl Ilargi Meijer, editor-in-chief of The Automatic Earth, wrote three weeks ago that Libor rigging was a criminal conspiracy from the start. Here he provides an update which summarizes how collusion between large banks and central banks/regulators allowed the rate-rigging scandal to continue unchecked, at the expense of society and the real economy, for decades. This is an edited version of Raúl’s piece.
Read more...Despite the high expectations, nay, demands of the Bond Gods, ECB chief Mario Draghi, who had promised to part the seas and deliver investors to a promised land of Eurotranquility, which these days means at least a few weeks of relief, instead resorted to more brave-sounding talk. Today his message was he and his fellow Eurocrats were still working on a plan to do something really big, not to worry. Markets “recoiled,” in the words of the Financial Times.
Read more...If there’s any way for banks to cut the cake to work to their advantage, they do.
One example that has not gotten attention is that servicers will complete all the steps of a foreclosure, sometimes even scheduling the sheriff’s sale, and then not put in a bid.
Read more...Michael Hudson spoke with Max Keiser about what he calls “fictitious capital” which is essentially lending backed by inadequate capital, such as collateral that has fallen in value.
Read more...The verdict is in: nearly 20 years of keeping the SEC budget starved and cowed have rendered a once competent and feared agency incapable of doing more than winning cases on illegal parking, um, insider trading.
The SEC’s performance in the case at issue, SEC v. Stoker, was such a total fail that the odds are high that any motivated member of the top half of the NC readership would have done a better job of arguing this case pro se than the SEC did.
Read more...Today, Acting FHFA Director Ed DeMarco wrote to Congress, after due consideration, reaffirming his position that he will not permit Fannie and Freddie to lower principal balances of mortgages of borrowers that are delinquent. This is despite the fact that the top analyst in this space, Laurie Goodman, has determined that principal modifications are the most effective form of mortgage modification, resulting in much lower refault rates than interest rate mods or capitalization mods. And that makes sense. Why should a borrower struggle to hang on to a home when even if they make all the payments, when they sell they they are stuck with a big tax bill? And as we’ve stressed, private label investors are overwhelmingly in favor of deep principal mods for viable borrowers, and that’s because foreclosure is costly and leaves them worse off.
As much as this blogger is firmly of the view that this is a poor economic decision (deep principal mods are a sound idea, as long as you have a decent approach for vetting borrower income and other debt payments to see if they are viable with a mod), I have to hand it to DeMarco as a bureaucratic infighter.
Read more...The more news comes out, the more it looks like Mario Draghi’s pledge that the ECB would do all it would take to save the Euro was a bluff.
Read more...The Administration, meaning the Treasury Department, is never wanting for a defense of the big financial services incumbents.
Read more...The big news of the day on Thursday was Mario Draghi’s pronouncement that the ECB would do “whatever it takes” to shore up the Euro. He also used the same phrases about the need to keep the monetary channel open prior to preceded previous interventions. Two-year Spanish bond yields, which had risen to unprecedented levels, came in by over 150 basis points and global stock markets rallied.
But how seriously should we take this talk?
Read more...Josh Rosner of Graham Fisher published a report last week urging subscribers to short bunds, beating the Moody’s negative watch for Germany and the Netherlands by a full week.
The article provides a data-rich analysis of how a banking crisis has morphed into a sovereign debt crisis as the authorities have refused to impose losses on investors in banks in the so-called core Eurozone countries. And as Rosner argues, the current path of denial and delay has increased the eventual costs to Germany and the global economy, with the tab to Germany already €500 billion higher than it would otherwise have been.
Read more...By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk and Traders Guns and Money. Jointly posted with roubini.com
The scandal surrounding the manipulation of LIBOR sets raises a number of issues. The first part of this two part piece set out the known facts. In the second part, we discuss the broader implications of the episode.
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