ECB lends almost a half a trillion Euros to ease EU bank lending

December 21, 2011 by · Leave a Comment
Filed under: Credit News 

First off, Happy Holidays.  It has been quite busy for me this time of year.   I heard about this story in the morning and thought it was a bridge to no-where because these “loans” are repurchase agreements or REPOs.  Again they are trying to solve a debt crisis by issuing more debt.  On top of that, they are basically giving away free money to creditors that made bad decisions in the hope they will be able to ride the “float” (interest) all the way to a solid balance-sheet.

Its the worst form of social welfare you can have.  When sophisticated people invest capital, there has to be real risk of loss or they will not be prudent with their money.  Now this is not just a rant against another bad program.

I was watching Bloomberg TV on the Pimm Fox show today and maybe it was my more conspiratorial side but they had an expert on the show, explaining this deal and talking about its merits.    Near the end of the segment, they were talking about senior creditors and the guest mentioned the fact that they had to pledge assets to secure these loans and how these loans were structured, the ECB was now in fact the most senior creditor and this was a little talked about fact.  At that time, the sound cut out while he was finishing his point.  Maybe it was just a technical glitch but it was very timely and I really wanted to hear what he finished with.   Maybe it is just me, but I wonder if the other creditors to these 500+ banks understand that has just happened if this is the fact in the matter?

New York Times – After more than a year of frustrating and mostly fruitless summit meetings of European political leaders, the European Central Bank appears to have found a more promising way to ease the euro zone crisis: give money to banks at bargain-basement rates.

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Federal Reserve now largest owner of U.S. Gov’t Debt – surpassing China

November 17, 2011 by · Leave a Comment
Filed under: Credit News 

No surprise here, this is part of the result you receive when you do quantitative easing and try and keep it a sterile operation.  The central banks racks up your public debt and their balance-sheet explodes!  I just do not see any way this will not end in some sort of general price inflation.   We need to get serious about getting our fiscal house in order or order will be brought to our financial house.  If Europe and the Euro continue to decline, we will most likely see more stimulus and that will bring increased buying of government debt by the U.S. central bank.

CNS News (Terence P. Jeffrey) –  At the close of business on Tuesday, the debt of the federal government exceeded $15 trillion for the first time–with the largest single owner of the publicly held portion of that debt being the Federal Reserve.

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Former Irish billionaire declares personal bankruptcy

November 15, 2011 by · Leave a Comment
Filed under: Credit News 

What a misstep on the part of Sean Quinn.  He should of never pledged his entire equity of the Quinn Group to the bank to acquire its shares.  When you took the money from the bank and started buying, you basically locked yourself in at the prices you purchase shares at.  If you don’t acquire the majority stake in the bank, you loaned capital is now at the mercy of the managers of the bank and their board.  In this case, the fix was already baked in so it would not of mattered if he got control of the now failed firm.  It is plain to see what happened next, the bank was leveraged up with toxic real estate assets and as those declines, the shares fell and the bank went under.  Now Mr. Quinn owes a huge note to a failed bank for billions and he owns shares in a bank that is now insolvent.

This is what happens when we use so much leverage in the system.  Companies and people can just explode and leave huge liabilities that hurt the employees and shareholders alike.

Forbes (Edwin Durgy) – Once Ireland’s richest man with a personal fortune of $6 billion, Sean Quinn applied for voluntary bankruptcy in Belfast this morning. Quinn owed an alleged $3.85 billion to Anglo Irish Bank’s successor institution, the Irish Bank Resolution Corporation, which he simply couldn’t repay.

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Spain’s credit rating downgraded two notches by Fitch

October 7, 2011 by · Leave a Comment
Filed under: Credit News 

Contagion looks to be spreading.  I don’t like that financial terminology, sounds creepy.  Like who would want to get contagion?  As each of these countries credit ratings get cut, we will see their borrowing cost increase and that will put more pressure on the banks.  Fitch mentioned in the article that the outlook was negative, so I am assuming they do see a Greek default and maybe even more.

Maybe Greece just can’t pay their bills and entitlements vastly outstrip the Greeks ability to tax.   That means the EU should just bail them out if they can or just get the default over with if it is eminent.  When it smells bad, sometimes you just have to hold your noise and go in.  It is just another case of a borrower having more debt than they can service but they don’t want to tell you because it will be a hassle and someone might get hurt.  You just have to know that sometimes it has to hurt to get better and putting it off in procrastination usually makes things worst and more uncontrollable.

Bloomberg (Emma Ross-Thomas) – Spain had its credit rating cut two levels by Fitch Ratings, which cited the “intensification” of the euro crisis, slower Spanish growth and regional finances as risks to the nation’s debt outlook.

Fitch cut its rating to AA- from AA+, the company said in a statement today from London. The outlook is negative. Fitch cited similar reasons for also downgrading Italy one level to A+, while maintaining Portugal at BBB-, saying it would complete a review of that ranking in the fourth quarter.

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Over-leveraged U.S. banks? Top 4 have $235.05 Trillion in OTC Derivatives

October 4, 2011 by · 3 Comments
Filed under: Credit News 

DAMN!?!?!??!   The United States only has a $14 trillion dollar annual GDP.  The world is around $100 trillion.    Sure looks like all that financial reform and new rules did a bunch.   All I seem to see from that is we have codified “Too Big Too Fail” so that we have to bail out these banks and they still are allowed these outrageous derivative positions.   Welcome to America, the place where as long as you make a big enough mess, we will not only bail your out but we won’t even bother throwing you in jail.

For all the crap I have given Ben Bernanke on this site (I do hope this makes it to you),  he did make one really good call today on C-Span and it gave me a little perspective into him as a person/chairmen/professor.   The question came from a Senator in the hearing about what Mr. Bernanke did to investigate and pursue these alleged criminal issues that have arisen since the crisis made all this wrong-doing apparent.  Mr. Bernanke responded in such an honest manner but it was a well needed slap in the face to our representatives.   He turned around an said that this was not the purview of the Federal Reserve.   AND HE IS CORRECT.

It is our responsibility as a society to punish these people but either because we are incompetent or our representatives are too lobbied, we did nothing.  How can we have the largest financial crisis in the history of the world and really no one goes to jail??? Even after the S&L crisis, we had over 700 prosecutions.  I am so sick of having to say this but we have to do something after every crisis and make sure to set the right precedence.  Quit letting politicians tell you “we need to look forward and not into the past”.   You know what I say to that?   F*$k Y*@! (really)

USA Watch Dog (Greg Hunter) – I keep hammering away at the fact the Fed doled out $16 trillion in the wake of the credit crisis of 2008.  This is an enormous sum that is greater than the all goods and services produced in the U.S. in a single year.  Domestic banks and companies got the money, right along with foreign banks and companies.  In effect, the Federal Reserve bailed out the world financial system.  Now, we are right back to square one facing another financial meltdown with European banks and sovereign debt.  If the Fed spent $16 trillion, why in the heck is this problem not fixed and why isn’t the world economy taking off like a rocket?”  The simple answer is it wasn’t enough money.

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