Madoff house arrest ordered as European banks reel

December 17 2008

By Grant McCool and John Poirier

NEW YORK/WASHINGTON (Reuters) – Disgraced financier Bernard Madoff, accused of orchestrating a $50 billion (33 billion pound) fraud, was placed under house arrest on Wednesday as BNP Paribas  became the latest European bank to be sideswiped by the scandal.

A federal judge ordered the 70-year-old former pillar of Wall Street confined to his $7 million Manhattan apartment and told Madoff’s wife to surrender her U.S. passport by noon on Thursday.

Madoff will be fitted with an electronic ankle bracelet and will only be allowed to leave his home for appointments prearranged with authorities.

The changes in bail conditions for the one-time Nasdaq Stock Exchange chairman were ordered a day after U.S. Securities and Exchange Commission Chairman Christopher Cox offered an embarrassing mea culpa for the agency’s lack of oversight of Madoff’s investment advisory firm.

A rewrite of U.S. regulations to prevent a relapse of the Madoff fiasco will be high on the agenda of the new U.S. Congress, U.S. Rep. Paul Kanjorski said. He said he will convene a congressional inquiry in early January to focus on the case.

Kanjorski, who chairs the House Capital Markets Subcommittee, called the matter “deeply disturbing,” and said the scandal only weakens “already-battered investor confidence in our securities markets.”

BNP’s stock was the main loser among Europe’s top banks after it announced an unexpected 11-month loss at its CIB investment bank unit, blamed partly on exposure to Madoff.

“Generally there is a sense of nervousness going on with Madoff’s alleged fraud and BNP’s losses,” said Fox-Pitt Kelton analyst David Williams.

In Asia, Great Eastern Holdings Ltd , the insurance arm of Singapore’s Oversea-Chinese Banking Corp , said it had an indirect exposure of about S$64 million (US$43.93 million) to Madoff.

In Europe, the Dutch pension fund of Royal Dutch Shell Plc  said it had a $45 million exposure.

YEARS TO SORT OUT LOSSES

An investor protection group in the United States said it could take several years to sort through investor losses.

The Securities Investor Protection Corp is overseeing the liquidation of Bernard L. Madoff Investment Securities LLC.

Madoff, who counted celebrities and many friends among his investors, was unable to obtain four co-signers to guarantee his $10 million bond.

Only two people, his wife, Ruth, and brother, Peter, had signed it as of Wednesday morning. Peter Madoff also worked at Madoff’s firm.

In lieu of two additional signatures, Madoff and the government agreed that his wife surrender her passport and put up properties in her name in Montauk, New York, and Palm Beach, Florida.

Madoff will not be required to appear in court for a bail hearing unless he fails to file the documents on the additional conditions by Monday, the deadline set by the judge.

A preliminary hearing and appearance by Madoff was scheduled for January 12.

Cox’s admission that the SEC had missed obvious red flags in the Madoff case was seen as the latest in a series of black eyes to the U.S. securities watchdog, already under fire for weak oversight as U.S. banks loaded up on risky assets that have ripped huge holes in their balance sheets.

Cox said the agency’s failure to catch Madoff’s alleged massive Ponzi scheme was “deeply troubling.” Under a Ponzi scheme, later investors’ funds were used to pay returns to initial investors.

Cox asked the agency’s inspector general to probe the SEC’s conduct in the Madoff case. Madoff’s niece, Shana Madoff, a compliance lawyer at his firm, is married to a former SEC lawyer, Eric Swanson, who was the agency’s assistant director in the office of compliance inspections and examinations.

A spokesman for Swanson said his romantic relationship with his wife began years after the compliance team he helped supervise inquired into Bernard Madoff’s securities operations.

In another sign of Madoff’s close ties to the powerful, U.S. Attorney General Michael Mukasey has removed himself from involvement in the investigation, a department spokesman said.

He declined to discuss the reason. Mukasey is leaving office in January.

Marc Mukasey, a son of the attorney general, told Reuters on Wednesday that he represents Frank DiPascali, a senior official at Madoff’s firm. The younger Mukasey leads white-collar defense and special investigations at New York law firm Bracewell & Giuliani.

Madoff, accused of defrauding hundreds of wealthy investors including Ezra Merkin, the former chairman of auto finance company GMAC, and real estate and newspaper mogul Mortimer Zuckerman, faces up to 20 years in prison and a maximum fine of $5 million if convicted.

At least two putative class-action lawsuits have been filed in U.S. district court in Manhattan over investments handled by Madoff.

On Wednesday, an investor sued Gabriel Capital LP, its manager Merkin and auditor BDO Seidman for “gross negligence” in handing over at least 27 percent of Gabriel investment capital to Madoff. A similar lawsuit was filed by New York Law School on Tuesday against Ascot Partners LP, Merkin and BDO Seidman.

(Additional reporting by Rachelle Younglai in Washington and Martha Graybow in New York; writing by Christian Plumb; editing by Jeffrey Benkoe)

Source

Madoff victims threaten legal action and there certainly are many

Pakistan gets $7.6 billion loan package from IMF

Supporters of Pakistan's opposition party Tehreek-e-Insaf, or Moment for Justice, take part in a rally against the U.S. missile strikes in the Pakistani tribal areas, Monday, Nov. 24, 2008 in Islamabad, Pakistan. Protesters urged Islamabad to sever ties with the United States over the strike _ highlighting the risks for Washington as it seeks to eliminate extremists along the Afghan border yet also support Pakistan's democratically elected government.
Supporters of Pakistan’s opposition party Tehreek-e-Insaf, or Moment for Justice, take part in a rally against the U.S. missile strikes in the Pakistani tribal areas, Monday, Nov. 24, 2008 in Islamabad, Pakistan. Protesters urged Islamabad to sever ties with the United States over the strike _ highlighting the risks for Washington as it seeks to eliminate extremists along the Afghan border yet also support Pakistan’s democratically elected government. (AP Photo/Anjum Naveed)
By Chris Brummitt
November 25, 2008

ISLAMABAD, Pakistan—Pakistan, the front-line state in the battle against Islamist terrorism, has won final approval for a $7.6 billion loan from the International Monetary Fund to help stave off a possible economic meltdown.

The IMF said a first installment of $3.1 billion will be transferred immediately to the nuclear-armed country, which is battling surging violence by Taliban and al-Qaida-linked militants and is increasingly seen in the West as key to stabilizing neighboring Afghanistan.

The IMF said the Pakistani economy had been badly hit by the worsening security situation, higher oil and food import prices and the global financial and credit crisis.

“By providing large financial support to Pakistan, the IMF is sending a strong signal to the donor community about the country’s improved macroeconomic prospects,” said IMF acting Chairman Takatoshi Kato in a statement released after the decision Monday in Washington, where the fund is based.

Pakistan’s young government had been reluctant to go to the IMF but had little choice after close allies — the “United States, China and Saudi Arabia” — turned down pleas for significant bilateral aid.

In mid-November, the IMF announced it had reached a preliminary agreement on the deal.

Opposition and nationalist lawmakers have criticized the government for turning to the fund, saying the IMF will impose “austerity measures” that will hurt ordinary Pakistanis, two-thirds of whom live on $2 dollar a day or less.

“This IMF loan the government is getting is in fact poison, and the nation has been forced to drink it,” said Javed Hashmi, a senior figure in the main opposition party, told reporters.

The loan removes the most pressing risk facing the country — that it would not be able to repay dollar-denominated government bonds due to mature early next year, said Muzammil Aslam, an economist at the Pakistani securities firm KASB.

Aslam and other economists said Pakistan’s government had already made some tough decisions, such as hiking the prices of fuel and electricity.

Many Pakistani economists and commentators argued that the country had no choice but to turn to the IMF. They say it is now critical that the money is well spent — always a worry in corruption-prone and chaotic Pakistan.

The IMF said in return for the money Pakistan had agreed to phase out energy subsidies, boost taxes and implement other money saving reforms. It said the World Bank would put in place a “comprehensive” social security net to shield the poor from any cuts.

In an interview with The Associated Press earlier this month, President Asif Ali Zardari said the loan was “a difficult pill, but one has to take medicine to get better,”

The loan will immediately boost Pakistan’s foreign currency reserves, which have seen a rapid decline that has seen the value of the rupee fall some 20 percent since March, and enable it to pay off foreign-denominated debt due to mature soon.

The currency has clawed back some ground in recent weeks as it became clear that the IMF would step in.

The country is also wracked by power cuts, the costs of essential goods are soaring and the stock market has plummeted amid waning investor confidence.

Pakistan is one of a number of countries including Hungary and Ukraine that has sought IMF assistance in the wake of the global credit crunch. However, its strategic importance in the U.S.-led war against terrorism makes its financial and political stability particularly critical for the international community.

U.S. officials say that militants sheltering in its lawless northwest are behind much of the violence in Afghanistan, where a resurgent Taliban threaten the success of the U.S.-led mission there seven years after the invasion.

They also say that al-Qaida’s leadership — including Osama bin Laden — has managed to regroup in the region, and is possibly plotting attacks on the West.

Pakistan’s army is batting militants in several parts of the northwest but some Western analysts and officials suspect elements within the security forces of sympathizing with the extremists.

Officials in Peshawar said Tuesday that gunmen kidnapped a Pakistani working on a U.S.-funded aid project in the region.

Police said the attackers seized the man from a convoy of relief vehicles in the Dir region on Monday. Other aid workers escaped after villagers fired on the attackers.

The U.N.’s World Food Program said the victim was distributing wheat and cooking oil on its behalf. WFP spokesman Amjad Jamal said the food was paid for by the U.S. government.

Jamal said it was unclear if Taliban militants were behind the kidnapping and that WFP had received no demands.

Source

If it were not for the war next door to them and the fact the US continues to attack them, they probably wouldn’t need  help. War after all does cost a lot.

Stopping the Attacks on Pakistani soil by the US, would be in everyone’s best interest.

“If America doesn’t stop attacks in tribal areas, we will prepare a lashkar [army] to attack US forces in Afghanistan,” tribal chief Malik Nasrullah announced in Miran Shah, north Waziristan’s largest city. “We will also seek support from the tribal elders in Afghanistan to fight jointly against America.”

Published in: on November 25, 2008 at 9:33 pm  Comments Off on Pakistan gets $7.6 billion loan package from IMF  
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Lessons learned in Icelandic crisis

November 24, 2008,

A city council finance chief has admitted people have questioned their own roles in the Icelandic bank saga which has seen £42m of council cash frozen overseas.

John Beevers, head of financial projects at Nottingham City Council, said lessons are being learned about credit ratings after the authority ploughed vast sums of money into Landsbanki, Glitnir and Heritable just months before they ran into trouble.

Mr Beevers told the council’s Overview and Scrutiny Committee: “It [the Icelandic banks crisis] has provided more focus around the impact of credit ratings and what they show and whether they have been sufficient.

“There is a number of people that, as things come out, are looking at whether their role in it has been appropriate.

“I think we are taking on board the lessons we are learning.”

He also said there had been changes in some of the banks’ credit ratings around the time the investments were made.

“There had been some negative rating outlook changes on some of the banks,” he told the meeting. “That has not developed through to a complete meltdown of the bank itself.”

He later added: “Our actions are reinforced by over 100 other institutions. If the message were so loud and clear we would have been a number of two or three.”

The meeting heard the council was continuing to use the same credit rating agency, Butlers.

Deputy chief executive Carole Mills-Evans said an update on recovering the money was expected in the next “couple of weeks”.

She claimed that it would have been “almost impossible” for the council to get its money back before the end of its agreement with the banks.

“There is some talk that some councils have exit clauses. We have yet to find one council that that applies to.”

Source


UK anti terror laws right move against Icelandic banks?

“Not all conversations concerning this matter have been made public . . . When the matter is investigated, other conversations will have to be made public. I am aware of what they are about and I am aware of what in fact determined the position of the UK authorities,” the Financial Times quotes Icelandic central bank chairman David Oddsson as saying.

The implication, the article continues, is that the UK was right to use anti terror laws to freeze Icelandic assets at the beginning of the banking crisis in October. Furthermore, the FT states that any such revelations could damage any potential lawsuit filed against the British government by Reykjavik. The Icelandic government has hired Lovells, a UK law firm to investigate whether London acted illegally and significantly and unnecessarily worsened the economic crisis already unfolding.

Oddsson’s comments were made during a speech to the Iceland Chamber of Commerce late last week. As a former long-standing Prime Minister, current head of the central bank and prominent Independence Party figure, Oddsson is seen as a close ally of PM Geir Haarde, who once served as his minister of finance.

Oddsson and Haarde, among others, are credited with liberalising the Icelandic financial sector and also blamed by many for allowing the current crisis to unfold. As many as 90 percent of people now want Oddsson replaced, and a Frettabladid poll this weekend revealed that 70 percent of respondents no longer support the current government.

David Oddsson protests his innocence however; stating in his speech that he had been warning the government on the state of the banks for 18 months and was repeatedly ignored.

He also described the inquiry recently announced by the government as “a whitewash”.

“The investigation . . . is in all respects unsuitable and insufficient. It is almost laughable to see the posturing in the entire organised propaganda campaign which has been carried out by those who bear the prime responsibility,” he said.

Source

Related

Who Could Have Predicted Revolution in Iceland?

Iceland’s Economic Meltdown is a big Flashing Warning Sign


Iceland isn’t the only one needing help: Point of Interest.

The United States has asked four oil-rich Gulf states for close to 300 billion dollars to help it curb the global financial meltdown, Kuwait’s daily Al-Seyassah reported Thursday.

Quoting “highly informed” sources, the daily said Washington has asked Saudi Arabia for 120 billion dollars, the United Arab Emirates for 70 billion dollars, Qatar for 60 billion dollars and was seeking 40 billion dollars from Kuwait…….

Seems Because of Capitalism we have a planet full of beggars.

The lesson to be learned from all of this is “Capitalism” SUCKS.

Simple and to the point.

A Lesson the Entire would should have learned by now.

Published in: on November 25, 2008 at 3:13 am  Comments Off on Lessons learned in Icelandic crisis  
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Citibank Bailout May Leave You Holding the Bag in More Ways Than One

Citigroup Bailout Leaves Shareholders in the Cold

November 24 2008

Citibank news is good for the upper management group at Citigroup! A Citibank bailout marks the third time in recent months that Uncle Sam – and by extension you and I – offers a helping hand and million of dollars in an attempt to keep a financial institution from going under.

Citibank Bailout Prevents Citibank Bankruptcy … For Now

WMDT, ABC reports that $20 billion from the $700 billion bailout package will indeed be invested in Citibank. In return, Uncle Sam – and you and I – receive $7 billion of “preferred shares.” But wait, there is more!

The Washington Post reports that in addition to the bailout funds, Uncle Sam will also take on the role of protector against future losses. While Citigroup would have to eat the next $29 billion in losses it shows, the United States government will cover “most of the losses beyond that amount.”

Wagging tongues assert that what is needed, really, is Citibank bankrupt, but the Citibank bailout in addition to the prior investment of $25 billion that Uncle Sam already dropped into Citigroup, may halt this process.

Citigroup Bailout and Its Effect on Shareholders

The Citigroup bailout is not as favorable for shareholders as early estimates had hoped. This Citi bailout package is supposedly going to require a curtailing of executive level pay, but it most certainly decreases share dividends to $0.01/share/quarter for a period of three years.

Citibank Bailout Rewards Bad Behavior

Citibank business practices have been making headlines over the last decade, most notably its 2004 short sale on the European bond market and its theft of funds from 53,000 credit card customer accounts.

Lest you forget, it was Citigroup’s 1998 lobbying efforts, as reported by Open Secrets, that paved the way for banks to get involved in other forms of business such as insurance. Citibank lobbyists were also front and center when bankruptcy reform was discussed, and consumers currently hoping for Chapter 7 relief know how much more difficult this process has become.

Beholden to politicians, Citibank has heavily investment in the American political process, favoring the Democratic Party with $2,248,481 versus the Republican Party which only received $1,483,884. This totals $3,736,915 in overall political donations that perhaps could have been better spent protecting the company from its impending losses.

Citibank Bailout May Not Halt Layoffs

There is no word if the Citigroup bailout will prevent the loss of more than 50,000 Bay Area jobs the San Francisco Chronicle reported on last week.

Source

U.S. agrees to invest $20 billion to bailout Citigroup

November 24 2008

Citigroup Inc. reached an agreement with the U.S. Treasury, the Federal Reserve Board and the Federal Deposit Insurance Corp. over the weekend that will inject $20 billion worth of new capital into the company.

This is in addition to the $25 billion infusion already approved by the government through the Troubled Assets Relief Program (TARP).

Citi (NYSE: C) officials in New York say the move will strengthen the company’s capital ratios, reduce risk and increase financial liquidity. The plan was unanimously approved by the lender’s board of directors.

Under the terms of the agreement, the U.S. Treasury Department will invest $20 billion in Citi preferred stock under the TARP.

The TARP is the $700 billion financial rescue package approved by Congress in September. The Treasury Department is offering to purchase up to $250 billion worth of senior preferred shares of U.S.-controlled banks and savings associations. The program is designed to provide financial institutions with fresh capital in exchange for the government taking an equity stake in the lenders.

Citi will also issue $7 billion in preferred stock to the U.S. Treasury and the FDIC as payment for a government guarantee on $306 billion worth of securities, loans and commitments backed by residential and commercial real estate and other assets.

The guarantee, Citi officials say, will free up an additional $16 billion worth of capital for the company.

Citi has also agreed to issue warrants to the U.S. Treasury and FDIC for some 254 million shares of the company’s stock at a strike price of $10.61. Citi has also agreed to limit its quarterly common stock dividend to one-cent per share for the next three years.

Under this agreement, Citi will assume any losses on the portfolio for up to $29 billion on a pretax basis. The government agencies, in turn, will assume 90 percent of any losses above that level.

Citi has also been provided with expanded access to the Federal Reserve’s Primary Dealer Credit Facility and the discount window. This will provide additional liquidity for the lender, if needed. Citi also has access to the Federal Reserve’s Commercial Paper Funding Facility.

The agreement specifies that the company’s executive compensation plan, including bonuses, must be submitted to and approved by the U.S. government.

“This weekend, the U.S. government and Citi worked together in an unprecedented way to address market confidence and the recent decline in Citi’s stock price,” Citi CEO Vikram S. Pandit said in a statement. “We reached an agreement based on an innovative market solution to further strengthen our capital ratios, reduce risk, and increase liquidity. We appreciate the tremendous effort by the government to assure market stability.”

A week ago, Citi announced that it plans to eliminate 53,000 jobs as the company works to stem financial losses. The company posted a third-quarter loss of $2.8 billion.

The lender employs 17,000 people in Texas. Citi operates a call center in Northwest San Antonio and has 10 Citibank branches in the city.

In October, the company lost a bidding war with Wells Fargo (NYSE: WFC) over the purchase of Wachovia Corp. Wells Fargo is in the process of buying Wachovia for $15.1 billion.

Source

Belarus threatens to quit IMF

November 16 2008
Cash-strapped Belarus has said it may turn its back on the International Monetary Fund if the organization refuses to give it a US$ 2 billion loan.

The hard-line President of the former Soviet state, Aleksandr Lukashenko, issued the warning in an interview to the Wall Street Journal, which was broadcast on Belarusian TV on Friday.

“We survived without IMF loans before, during the severest of times” he said. “If they deny it now, we will build our co-operation with the IMF accordingly”.

This means the country would likely to sever ties with the IMF, often described as the international lender of last resort.
“I have told the government and the chairman of the National Bank that if they don’t help us in our situation – which is not as bad as in other countries to which they [the IMF] give loans – why should we co-operate?” Lukashenko said.

The hard-line leader added that as a member of the IMF, Belarus had regularly contributed money to the fund and taken part in its meetings.

“So what for do we need it all, if we are treated like this?” the Belarusian president concluded.

Published in: on November 17, 2008 at 7:09 am  Comments Off on Belarus threatens to quit IMF  
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Bonuses for Wall Street Should Go to Zero, U.S. Taxpayers Say

By Christine Harper

November 11 2008

U.S. taxpayers, who feel they own a stake in Wall Street after funding a $700 billion bailout for the industry, don’t want executives’ bonuses reduced. They want them eliminated.

“I may not understand everything, but I do understand common sense, and when you lend money to someone, you don’t want to see them at a new-car dealer the next day,” said Ken Karlson, a 61-year-old Vietnam veteran and freelance marketer in Wheaton, Illinois. “The bailout money shouldn’t have been given to them in the first place.”

Compensation at Goldman Sachs Group Inc., Morgan Stanley, Citigroup Inc. and the six other banks that received the first $125 billion of the federal funds is under scrutiny by lawmakers, including Rep. Henry Waxman, a California Democrat, and New York Attorney General Andrew Cuomo, also a Democrat. President-elect Barack Obama cited the program at his first news conference on Nov. 7, saying it will be reviewed to make sure it’s “not unduly rewarding the management of financial firms receiving government assistance.”

While year-end rewards are likely to decline with a drop in revenue this year, industry veterans say that eliminating them risks driving away the firms’ most productive workers.

“There are instances where bonuses are justified, deserved, and in the best interests of the investment bank involved,” said Dan Lufkin, a co-founder of Donaldson Lufkin & Jenrette Inc., the investment bank acquired by Credit Suisse Group AG in 2000. “Your very best people are people you want to hold, and your very best people will have opportunities even in this environment to transfer allegiance.”

`Your Jaw Drops’

The companies, which set aside revenue throughout the year to pay bonuses, haven’t commented on plans for year-end awards, typically decided this month or next. A study released last week said the firms are likely to cut bonuses for top executives by as much as 70 percent.

“Even really sober people are saying this is the worst financial crisis since the Depression, and they’re saying bonuses are just going to be reduced?” said Patrick Amo, a 53-year-old retired merchant marine in Seattle. “Oh my God, you read that and your jaw drops.”

Wall Street firms’ pay has traditionally been tied closely to performance of the companies, which is why employees receive most of their compensation at the end of the year after final results are known. Depending on seniority and performance, bonuses for traders, bankers and executives can be a multiple of their salaries, which range from about $80,000 to $600,000.

Blankfein’s $67.9 Million

The nine banks that Waxman pressed to detail their bonus plans asked for more time to respond, according to his spokeswoman, Karen Lightfoot. She said they’ve been granted an additional two weeks. The original deadline was yesterday.

Goldman, the largest and most profitable U.S. securities firm in the world last year, paid Chief Executive Officer Lloyd Blankfein a record $67.9 million bonus for 2007 on top of his $600,000 salary. That was justified, he told shareholders at the company’s annual meeting in April, because of Goldman’s superior financial results.

“We’re very much a performance-related firm,” he said. “If those results don’t come in, I assure you at Goldman Sachs you won’t see that compensation.”

Goldman’s profit is down 47 percent so far this year and five analysts expect the company to report its first loss as a public company in the fourth quarter that ends this month. The stock price has dropped 67 percent this year and Goldman received $10 billion from the U.S. government in the bailout last month. Michael DuVally, a spokesman for Goldman Sachs in New York, declined to comment on the company’s plans for bonuses this year.

`Appalling’

“The executives in companies that get bailout money should have their base salaries reduced by 10 percent for 2009 and they should pay back a substantial portion of their 2007 bonuses to the government for the financial devastation they oversaw, fostered and, in some cases, directly caused,” said S. Woods Bennett, a 57-year-old lawyer in Baltimore. “Their sense of entitlement is appalling.”

In addition to Goldman, Morgan Stanley and Citigroup, the companies that received the first round of money from the U.S. government’s Troubled Asset Relief Program were Merrill Lynch & Co., JPMorgan Chase & Co., Bank of America Corp., Wells Fargo & Co., State Street Corp. and Bank of New York Mellon Corp.

Some needed the money more than others. Citigroup and Merrill haven’t been profitable since early last year. Earnings at each of the other firms, except Boston-based State Street, have been dropping.

`Money’s Money’

“Bonuses and severance packages will obsess the American public” and become “a humiliation and embarrassment,” said Arthur Levitt, a senior adviser to the Carlyle Group, former chairman of the Securities and Exchange Commission, and a board member of Bloomberg LP, the parent company of Bloomberg News. “Compensation committees, believe me, are paying close attention to this.”

Several of the companies — including Citigroup and Wells Fargo — have said they won’t use federal funds to pay bonuses. That’s disputed by some, including former compensation consultant Graef Crystal.

“The argument of saying we’re not using the bailout money is just crap because money’s fungible, money’s money,” said Crystal, who writes the newsletter graefcrystal.com. “It exposes them to ridicule.”

A renegotiated government rescue for American International Group Inc., which was once the world’s largest insurance company, includes a freeze on the bonus pool for 70 top executives and imposes limits on severance benefits, the Treasury said in a statement yesterday. AIG’s bailout is separate for the $125 billion being invested in nine banks.

Economy Contracts

The bailout is only part of the reason that people object to Wall Street bonuses this year. The financial industry worldwide has taken more than $690 billion in writedowns and credit losses this year and cut more than 150,000 jobs, according to data compiled by Bloomberg.

A decline in lending has caused the wider economy to contract: the U.S. gross domestic product shrank at a 0.3 percent annual pace in the third quarter, consumer spending fell at its fastest pace since 1980 and unemployment jumped to 6.5 percent, the highest since 1994.

“This is the real economy these vultures have wrecked once again,” said Leo Gerard, president of the Pittsburgh-based United Steelworkers, which represents 1.2 million active and retired members. “Workers are taking it on the chin through no fault of their own.”

Top Executives

“Please explain how miserable performance of biblical proportions warrants any bonuses, particularly using money from me the customer and taxpayer,” said Glenn Brown, 67, who recently retired after 21 years as a researcher in the department of surgery at Beth Israel Deaconess in Boston and as an adjunct assistant professor at Harvard Medical School. “I don’t understand how they can even conceive of doing that.”

“If these guys were so talented how did this problem happen anyway?” said Mark Whitling, 63, who works as the chief financial officer of a steel service company that employs 125 people in Eastern Ohio. “We don’t feel sorry for them.”

Attention is most focused on the top executives at the banks that are receiving federal money. They’ll have to take the steepest pay cuts because their pay is disclosed in proxy filings, according to Alan Johnson, managing director of Johnson Associates, the compensation consulting firm that estimates bonuses will decline between 10 percent and 70 percent.

“I’d advise the CEO to say he can’t take anything if it’s one of these firms getting bailed out by the government,” said Crystal. “I think he’s just going to have to go down to just his salary.”

Pay or Lose

That’s probably not the case for employees whose pay isn’t disclosed, even those who get bonuses that exceed $1 million.

Both Johnson and Crystal say that top performers should receive bonuses this year or companies risk losing their best workers. Of about 600 people who responded to an online survey on the eFinancialCareers.com Web site, 46 percent said they would be unwilling to take any pay cut this year.

“You could build up, I would think, a lot of resentment on the part of people who say, `Look I did give my all this last year, and I know it’s been a bad year, but everything that was asked of me I accomplished and then some,”’ said Crystal. Eliminating bonuses across the board “could be very demoralizing in the long run and it could lose you some people.”

Larry Frank, a 60-year-old retired software company owner who lives in Ormond Beach, Florida, said he told his broker at Merrill Lynch that he would pull his money from the company if it paid the $6.7 billion it has set aside this year to pay bonuses. While he thinks top managers should suffer, he doesn’t think everybody should lose out on getting a bonus.

`Bunch of BS’

“Individual brokers, if they’re performing and their areas are profitable and they’re doing their job, I can’t see punishing them,” he said. “The CEO shouldn’t get anything.”

Still, other people say that all employees working at companies receiving bailout funds should pay the price.

“It’s crazy, it’s all one company, it’s the same thing,” said Scott Floyd, a 37-year-old marketing executive in Manhattan Beach, California. “For people to say the guys in the brokerage should get bonuses because they did well, but it was just the mortgage lending division that did terribly, that’s a bunch of BS.”

Amo, the retired ship captain in Seattle, said that since most financial companies are cutting jobs, they shouldn’t worry about paying bonuses to keep people from leaving.

“Where are they going to go? Don’t let the door hit you on your way out,” he said. “It’s not like it’s just one company — the entire Street is frozen.”

`Thumbing Their Noses’

Karlson, the Vietnam vet, said he thinks Wall Street executives are “thumbing their noses at the common people” if they pay themselves bonuses while people in the country are losing their homes.

“The rationale that they depend on their bonuses, come on, how are we supposed to relate to that?” he said. “You don’t get a bonus from your company if it doesn’t do a good job.”

Jim Beachboard, a 57-year-old lawyer in Little Rock, Arkansas, compared taking a bonus to “kind of like being on the Titanic.”

“It was supposed to be women and children first, so the guys that tried to jump in the lifeboats weren’t really looked upon with much kindness,” he said. “When you start thinking of this many tax dollars being injected into the system, I know there are all sorts of rationalizations and justifications that you can use to try to justify almost anything, but it’s just really in very poor taste.”

Taking a bonus isn’t something executives should be proud of, Beachboard added.

“My mother always told me, don’t ever do anything that you would be too ashamed to tell me about, and I thought, would they really want to tell their mother that?”

Source

Russia says IMF inadequate

November 10 2008

Russia’s finance minister reiterated Moscow’s call for reforming global financial institutions, saying in comments televised Monday that the International Monetary Fund was inadequate as a crisis manager.

Alexei Kudrin spoke ahead of a meeting of top international financial ministers Saturday in Washington to discuss the deepening global crisis.

Russia has proposed creating new international agencies to replace or take on some of the functions of existing ones, like the IMF or the World Bank. Moscow has said those organizations do not adequately represent some of the larger economies such as China and Russia.

“We are absolutely sure that today the current system of institutions used for crisis settlement, including the IMF, are inadequate,” said Kudrin in comments on the state-funded English language network Russia Today.

Kudrin called for a new agreement along the lines of the Maastricht Treaty, the 1992 treaty that paved the way for the euro, that would obligate nations to meet a certain set of budget and economic criteria in order to prevent new crises.

Russia has been hard hit by the global crisis, with economic growth forecasts slashed and its stock markets losing some two-thirds of their value since the start of the year.

The Kremlin has laid the bulk of the blame with the United States.

On Friday, a top Kremlin aide suggested the IMF’s role be reduced to that of an ordinary financial institution.

“The IMF should work as a bank, not as a project finance institution. It should not act as a manager in countries it lends to,” Arkady Dvorkovich told a news conference. “It should put forward financial conditions on loans, not political ones.”

Source

Well it seems this treaty didn’t exactly prevent the Financial Crisis.
But for what it’s worth. Take a look.

Maastricht Treaty

Published in: on November 11, 2008 at 7:52 am  Comments Off on Russia says IMF inadequate  
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Citigroup in Talks to Buy a Bank

[Vikram Pandit]

November 10 2008

Less than a month after walking away from Wachovia Corp., Citigroup Inc. is in discussions to acquire another U.S. bank, according to people familiar with the situation.

The target’s name couldn’t be determined, but it is a regional bank that overlaps geographically with Citigroup’s retail-banking unit, which has its highest concentration of branches in the Northeast, California and Texas. A deal could be reached later this month, the people said.

With Wachovia racing to complete its purchase by Wells Fargo & Co., any acquisition by Citigroup could feel like a consolation prize, because none of the remaining sellers among U.S. banks comes close to Wachovia in size.

The fallout from that deal has added to tensions between Citigroup executives and directors, according to people familiar with the matter. Some board members have felt they weren’t sufficiently kept in the loop, while some executives groused that directors are trying to wield too much clout, people familiar with the matter say. A Citigroup spokeswoman declined to comment.

Some insiders say an acquisition would pump up morale at Citigroup and ease the embarrassment of the Wachovia mess.

Beyond that, the renewed takeover efforts show that Citigroup Chief Executive Vikram Pandit is determined to secure a deeper base of deposits tied to the world’s largest economy. Such deposits are relatively cheap and a reliable funding source that makes them even more attractive as turmoil continues to swirl through the capital markets.

After Citigroup’s U.S. deposit levels declined slightly in the third quarter, the company has been trying to lure new accounts by offering unusually high interest rates on certificates of deposit.

Another reason why Mr. Pandit wants Citigroup to bulk up in the U.S.: As the financial crisis ricochets around the world, Citigroup’s vast global network is becoming yet another source of pain for a company that has piled up net losses of $20.25 billion in the past four quarters.

Last month, Citigroup reported a surprising leap in third-quarter losses on loans in Brazil, India and Mexico, while warning that deteriorating conditions in Colombia, Greece, Italy, Japan, Spain and elsewhere were possible harbingers of rising consumer defaults. The New York company’s sizable operations in economies that have been relatively unscathed by the financial crisis, such as Argentina and Turkey, also could be vulnerable.

“It’s going to get a lot worse everywhere,” says David Trone, an analyst at Fox-Pitt Kelton. Citigroup is the U.S. bank most heavily exposed to havoc in emerging markets, he adds.

Executives at Citigroup say any losses outside the U.S. will be manageable. They say the bank is in much better shape than it would have been had it plowed deeper into U.S. real-estate loans.

“I’d take the emerging-markets position any day of the week,” Gary Crittenden, Citigroup’s chief financial officer, said in an interview.

Citigroup does business in 106 countries on six continents. Its closest rival, HSBC Holdings PLC, operates in 85 countries. U.S.-based J.P. Morgan Chase & Co., Bank of America Corp. and Wells Fargo exceed Citigroup in stock-market value but have little or no international retail presence.

Overall, Citigroup gets about half its revenue from outside the U.S. Around the world, Citigroup offers retail banking, credit cards and wealth-management services to consumers, while providing corporate clients with investment banking, cash management and transaction processing.

Since taking over last December, Mr. Pandit has been eager to push even deeper into emerging markets. To overcome the lack of credit bureaus and other infrastructure that banks rely on in the U.S. and Western Europe to guide lending decisions, Citigroup uses a credit-scoring system that it built.

As the rest of the world is afflicted by economic woes, Citigroup’s method will be tested. “You’re underwriting more on judgment than on facts and science,” says Mr. Trone of Fox-Pitt Kelton.

Citigroup responds that its credit models have been honed for decades and are among the most sophisticated in the world. Still, rising defaults on international consumer loans are inevitable, the bank acknowledges. In the third quarter, Citigroup suffered losses on 4.5% of its international consumer loans, compared with a 3.9% rate in the U.S.

“There will be increasing credit costs across the globe,” Mr. Crittenden says. “But the magnitude hopefully will be muted by the fact that our customer base is upscale.”

Citigroup says it has socked away enough reserves to absorb 10 months of non-U.S. loan defaults. Still, William Rhodes, a senior vice chairman at Citigroup, has said that a bailout of emerging economies by the International Monetary Fund is needed to avoid a “firestorm.”

Since losing out on Wachovia and taking a hard look at Washington Mutual Inc. before the Seattle company’s failed banking operations were sold to J.P. Morgan in September, Citigroup has been fortified with $25 billion in taxpayer-funded capital from the Treasury Department.

That makes it easier for Citigroup to pursue another U.S. bank, though some lawmakers have complained that federal infusions should be funneled into loans, not acquisitions.

Source

They socked away $25 billion in US taxpayers money alright.

Citigroup was one of those banks. Considering their Financial woes one has to wonder who’s money they will use if they buy another bank?

What bailed-out banks spend on lobbying

Using bailout funds for bonuses, dividends and acquisitions illegal

Published in: on November 10, 2008 at 8:21 am  Comments Off on Citigroup in Talks to Buy a Bank  
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World Bank offers Nigeria fresh $3bn loan

By Everest Amaefule, Abuja

Nov 10 2008

The World Bank has offered Nigeria the opportunity of a fresh loan of $3bn to improve on its infrastructure.

The window of opportunity is open between 2009 and 2011, according to a senior official of the bank, Mr. Simeon Ehui, who spoke when a group of foreign journalists and alumni of the International Institute of Journalism, led by Head of the institute, Mr. Astrid Kohl, visited the bank on Saturday.

Ehui, who represented the Country Director of the bank, Mr. Onno Ruhl, said the country was eligible to get $3bn to support development projects and eradicate poverty as a result of improvement in the economy.

The meeting was also attended by the Chief Economist of the World Bank Office in Nigeria, Mr. Volker Treichel, and Senior Communications Officer, Mr. Obadiah Tomohdet.

According to Ehui, “The $3bn for three years is a concessionary loan with zero interest rate. It will not add any burden to Nigeria. The loan has been offered to Nigeria because of the massive improvement in the economy.

“As at 1994, there was no commitment by the bank in Nigeria. But the World Bank’s commitment in Nigeria has grown since 1999 to $2.2bn in 2006 and over $2.5bn currently. The improvement in the bank’s commitment in Nigeria over the years is not by chance. It is as a result of improved governance and economic performance.”

The senior bank official explained that the loan was tied to several developmental projects, including education, health, roads, and agriculture, adding that it was an International Development Association concessionary loan with no interest rate apart from administrative charges.

He also noted that Africa now had an additional seat on the World Bank board but added that the country or region that would take the slot was being finalised.

Speaking at the event, the World Bank chief economist said Nigeria’s double-digit growth target was realisable, but urged the Federal Government to address the power problem in the country.

Meanwhile, the bank in its “World Development Report 2009: Reshaping Economic Geography”, released on Friday, said policies that facilitated geographic concentration and economic integration, both within and across countries, as well as within the global economy, would promote long-term growth in Africa.

According to the Director of the report, Mr. Indemit Gill, growth does not come to every place at once, with markets favouring some places over others.

To encourage prosperity, he said, governments should facilitate the geographic concentration of production, rather than fight it. But they must also institute policies that would make the provision of basic needs – schools, security, streets, and sanitation – more universal, he added.

The report noted that sub-Saharan Africa today faced the triple challenges of low density or scarce and scattered populations; long distances between remote areas and centres of economic activity; and deep divisions in national, religious, and ethnic terms.

Source

Published in: on November 10, 2008 at 7:55 am  Comments Off on World Bank offers Nigeria fresh $3bn loan  
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Real Change Depends on Stopping the Bailout Profiteers

To understand the meaning of the U.S. election results, it is worth looking back to the moment when everything changed for the Obama campaign. It was, without question, the moment when the economic crisis hit Wall Street.

Up to that point, things weren’t looking all that good for Barack Obama. The Democratic National Convention barely delivered a bump, while the appointment of Sarah Palin seemed to have shifted the momentum decisively over to John McCain.

Then, Fannie Mae and Freddie Mac failed, followed by insurance giant AIG, then Lehman Brothers. It was in this moment of economic vertigo that Obama found a new language. With tremendous clarity, he turned his campaign into a referendum into the deregulation and trickle down policies that have dominated mainstream economic discourse since Ronald Reagan. He said his opponent represented more of the same while he stood for a new direction, one that would rebuild the economy from the ground up, rather than the top down. Obama stayed on this message for the rest of the campaign and, as we just saw, it worked.

The question now is whether Obama will have the courage to take the ideas that won him this election and turn them into policy. Or, alternately, whether he will use the financial crisis to rationalize a move to what pundits call “the middle” (if there is one thing this election has proved, it is that the real middle is far to the left of its previously advertised address). Predictably, Obama is already coming under enormous pressure to break his election promises, particularly those relating to raising taxes on the wealthy and imposing real environmental regulations on polluters. All day on the business networks, we hear that, in light of the economic crisis, corporations need lower taxes, and fewer regulations — in other words, more of the same.

The new president’s only hope of resisting this campaign being waged by the elites is if the remarkable grassroots movement that carried him to victory can somehow stay energized, networked, mobilized — and most of all, critical. Now that the election has been won, this movement’s new missions should be clear: loudly holding Obama to his campaign promises, and letting the Democrats know that there will be consequences for betrayal.

The first order of business — and one that cannot wait until inauguration — must be halting the robbery-in-progress known as the “economic bailout.” I have spent the past month examining the loopholes and conflicts of interest embedded in the U.S. Treasury Department’s plans. The results of that research can be found in a just published feature article in Rolling Stone, The Bailout Profiteers, as well as my most recent Nation column, Bush’s Final Pillage.

Both these pieces argue that the $700-billion “rescue plan” should be regarded as the Bush Administration’s final heist. Not only does it transfer billions of dollars of public wealth into the hands of politically connected corporations (a Bush specialty), but it passes on such an enormous debt burden to the next administration that it will make real investments in green infrastructure and universal health care close to impossible. If this final looting is not stopped (and yes, there is still time), we can forget about Obama making good on the more progressive aspects of his campaign platform, let alone the hope that he will offer the country some kind of grand Green New Deal.

Readers of The Shock Doctrine know that terrible thefts have a habit of taking place during periods of dramatic political transition. When societies are changing quickly, the media and the people are naturally focused on big “P” politics — who gets the top appointments, what was said in the most recent speech. Meanwhile, safe from public scrutiny, far reaching pro-corporate policies are locked into place, dramatically restricting future possibilities for real change.

It’s not too late to halt the robbery in progress, but it cannot wait until inauguration. Several great initiatives to shift the nature of the bailout are already underway, including http://bailoutmainstreet.com. I added my name to the “Call to Action: Time for a 21st Century Green America” and invite you to do the same.

Stopping the bailout profiteers is about more than money. It is about democracy. Specifically, it is about whether Americans will be able to afford the change they have just voted for so conclusively.

Source

Published in: on November 8, 2008 at 4:42 am  Comments Off on Real Change Depends on Stopping the Bailout Profiteers  
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Iceland awaits IMF decision on Monday


A decision on whether or not Iceland will receive its requested loan from the IMF has been delayed again for two days. The decision is now expected on Monday.

The Icelandic PM says he is entirely confident that the USD 2.1 billion loan will be granted, and that a wider 6 billion dollar rescue package will be agreed upon as a result.

The delay is blamed on IMF coordination with the Nordic countries. Some sources claim the IMF is waiting for the Nordic countries to commit money beforehand; while others claim the Nordic countries are waiting for the IMF’s confirmation before they pledge support.

PM Geir H. Haarde believes the weekend’s hurdles will be easy to conquer – although, if true, it could potentially become a frustrating situation.

Norway and the Faroe Islands have already pledged to lend Iceland money. The final rescue deal is expected to include cash from the IMF, the Nordic bloc, the UK, Netherlands and Poland. The participation of the USA, Russia and the European Central Bank has not yet been confirmed or denied.

The Prime Minister denies credible rumours that the delay is caused by IMF unease over Iceland’s ongoing negotiations with the Netherlands and the UK over frozen savings accounts.

Source

Published in: on November 8, 2008 at 3:23 am  Comments Off on Iceland awaits IMF decision on Monday  
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AIB profit warning pushes M&T stake sale into focus

By Joe Brennan

November 06 2008

Allied Irish Banks left analysts in little doubt yesterday that its 24pc stake in US lender M&T will be put on the block as the group seeks to build up its capital reserves in the face of soaring bad loan losses.

The group slashed its full year earnings guidance by more than a third to €1.20 a share before the stock market opened, after more than doubling its forecast for bad loan loss provisions to €950m — or 0.75pc of average loans.

An increasing number of souring loans to property developers has forced AIB to also hike its loan loss forecast for 2009 from 0.6pc-0.8pc loans to 0.9pc-1.10pc. This points to a combined charge of over €2.35bn for the two years, assuming the overall loan book remains stable.

However, the country’s largest lender said it had an “action plan” that would save it from going to shareholders to raise fresh equity.

“It’s no surprise that AIB’s credit quality has deteriorated, given the challenging economic environment,” said Sebastian Orsi, an analyst with Merrion Capital. “The bad debt figures are beginning to get up there towards what the market is expecting.”

Analysts estimated the group would save €500m by a decision not to pay a final cash dividend this year. A scrip issue has not been ruled out and a question mark hangs over whether AIB will make a 2009 payout.

AIB also highlighted that asset disposals are on the cards as it seeks to increase its core tier one capital ratio — a key measure of a lender’s balance sheet strength — from 6pc at the end of this year to “at least 7pc over time”. Irish banks will come under pressure to sufficiently address their capital bases before the Government guarantee scheme runs out in two years’ time.

“We cannot announce specific actions in advance. Suffice to say, we have assets and the disposal of assets can bring us up [to a 7pc core ratio],” said John O’Donnell, group finance director. He indicated, on questioning in an analysts’ conference call, that a sale of its M&T stake could release €1.2bn of additional capital.

“The new target of 7pc is obviously low relative to where [UK and European] peers are headed and will disappoint the market. One presumes a disposal of M&T is imminent in order to help AIB to get there,” said Davy analysts.

Chief executive Eugene Sheehy appeared to pour cold water on suggestions the group’s 70pc stake in fast-growing Polish lender Bank Zachodni WBK could be sold.

“In our model, as you’re aware, we’ve four divisions,” he said, referring to the Republic of Ireland, UK, Capital Markets and Poland units, “and we believe the strategy we have in each division is robust. We spent a long time building up our positions in these markets. We’ve invested a lot of money and a lot of time building up these franchises and we don’t see the merit in running them down.”

When asked how a theoretical sale of Bank Zachodni could boost capital, Mr Sheehy told an analyst: “You’re stretching theory a bit too far.”

AIB sees its dependency on wholesale funding dipping this year as deposits grow by a “low teens percentage” — driven by the UK, Capital Markets and Poland — while loans increase about 9pc.

The loan-to-deposit ratio should fall from 157pc last year to 150pc at the end of 2008, and further gain in the medium term.

While AIB’s net interest margin has been squeezed in recent years as loan growth outpaced that of deposits, the group sees the trend is now being reversed.

Source

Published in: on November 6, 2008 at 1:37 pm  Comments Off on AIB profit warning pushes M&T stake sale into focus  
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Foreign currency loan crux for fomer communist bloc

November 5 2008

Eastern European markets are feeling the pinch as investors pull money out of the region and local currencies plunge. Plunging domestic currencies mean higher monthly payments for businesses and households repaying foreign-denominated loans, forcing them to scale back spending.

In Budapest, project manager Imre Apostagi says the hospital upgrade he’s overseeing has stalled because his employer can’t get a foreign-currency loan.

The company borrows in foreign currencies to avoid domestic interest rates as much as double those linked to dollars, the euro and Swiss francs. Now banks are curtailing the loans as investors pull money out of eastern Europe‘s developing markets and local currencies plunge.

“There’s no money out there,” said Mr Apostagi, a project manager who asked that the medical-equipment seller he works for not be identified to avoid alarming international backers.

“We won’t collapse, but everything’s slowing to a crawl. The whole world is scared and everyone’s going a bit mad.”

Loans

Foreign-denominated loans helped fuel eastern European economies including Poland, Romania and Ukraine, funding home purchases and entrepreneurship after the region emerged from communism.

The elimination of such lending is magnifying the global credit crunch and threatening to stall the expansion of some of Europe’s fastest-growing economies.

“What has been a factor of strength in recent years has now become a social weakness,” said Tom Fallon, head of emerging markets in Paris at La Francaise des Placements, which manages $11bn.

Since the end of August, the Hungarian forint has fallen 16pc against the Swiss franc, the currency of choice for Hungarian homebuyers, and more than 8pc against the euro.

Foreign currency loans make up 62pc of all household debt in the country, up from 33pc three years ago.

Romania’s leu dropped more than 14pc against the dollar and 3.2pc against the euro.

Poland’s zloty declined more than 17pc against the dollar and 6.8pc against the euro, and Ukraine’s hryvnia plunged 22pc to the dollar and 11.5pc to the euro.

That’s even after a boost this week from an International Monetary Fund (IMF) emergency loan programme for emerging markets and the US Federal Reserve‘s decision to pump as much as $120bn into other developing countries.

The Fed said yesterday that it aims to “mitigate the spread of difficulties in obtaining US dollar funding”.

In Kiev, Ukraine, Yuriy Voloshyn, who works at a real-estate company, says he’s decided to abandon plans to buy a new television because of his dollar-based mortgage. His monthly payments have risen by 18pc, or 1,000 hryvnias (€130), since he took out the loan seven months ago.

“I only have money to pay for food and my monthly fee to the bank,” Mr Voloshyn(25) said. “I can’t even dream about anything else.”

Rafal Mrowka, a driver from Ostrow Wielkopolski in western Poland, says he became addicted to checking foreign currency rates as monthly installments on his Swiss-franc mortgage jumped 25pc.

Nervous

“I’ve even stopped getting nervous, now I can only laugh,” the 32-year-old, first-time property owner said.

The bulk of eastern Europe’s credit boom was denominated in foreign currencies because they provided for cheaper financing. For example, Hungarian consumers borrowed five times as much in foreign currencies as in forint in the three months to June.

Now banks including Munich-based Bayerische Landesbank and Austria‘s Raiffeisen International Bank Holding AG are curbing foreign-currency loans in Hungary.

In Poland, where 80pc of mortgages are denominated in Swiss francs, Bank Millennium SA, Getin Bank SA and PKO Bank Polski SA have either boosted fees or stopped lending in the currency.

The extra burden on borrowers is making a bad economic outlook worse, said Matthias Siller, who focuses on emerging markets at Baring Asset Management in London, where he manages about $4bn.

If borrowers believe local interest rates are prohibitive and foreign currency lending dries up, it means “a sharp deceleration in consumer spending,” Mr Siller said. “That will bring serious problems for the economy.”

The east has been the fastest-growing part of Europe, with Romania’s economy expanding 9.3pc in the year through June, Ukraine 6.5pc and Poland 5.8pc. The combined economy of the countries sharing the euro grew 1.4pc in the period.

Ukraine, facing financial meltdown as the hryvnia drops and prices for exports such as steel tumble, has agreed to a $16.5bn loan from the IMF while Hungary secured $26bn in loans from the IMF, the EU and the World Bank. The government forecast a 1pc economic contraction next year, the first since 1993.

The Hungarian central bank raised its benchmark interest rate by three percentage points to 11.5pc last month to defend the forint.

“Panicked customers are calling to say they’re afraid the interest on their mortgages will go up or that they won’t be able to secure mortgages,” said Nikolett Gurubi, director of lending at Otthon Centrum Belvaros, the downtown Budapest branch of a real estate agency.

“We’ve been observing a return to a good old banking rule, to lend in a currency in which people earn,” said Jan Krzysztof Bielecki, chief executive officer of Poland’s biggest lender, Bank Pekao SA.

It stopped non-zloty lending in 2003.

“Earlier, banks competed on the Swiss franc market watching only sales levels and not looking at keeping an acceptable risk level.”

The problem is a “good lesson to all of us”, Polish President Lech Kaczynski said last month at a press conference in Warsaw, where he urged Poles to stick to zloty lending.

Source

Iceland lifts interest rates to record 18% to secure IMF $2bn loan

By David Ibison in Stockholm

Published: October 29 2008

Iceland raised interest rates to a record 18 per cent from 12 per cent yesterday as a “condition of a proposed $2bn loan from the International Monetary Fund” to help rescue the stricken island.

Iceland applied to the Washington-based organisation for the emergency loan after its banking system collapsed and is seeking another $4bn (€3.2bn, £2.6bn) from some Nordic and other central banks.

The application will be presented to the IMF’s board tomorrow and the central bank said a condition attached to the loan was for a rate rise to 18 per cent.

The move reversed a 3.5 per cent rate cut announced just two weeks ago by David Oddsson, central bank governor, underlining the influence the IMF now has over policymaking in Iceland.

Brian Coulton, managing director at Fitch Ratings, the credit rating agency, said Iceland’s central bank had “no choice but to work very closely with the fund”.

Following the collapse of the banking system, the Icelandic economy is expected to contract by up to 10 per cent, unemployment to rise at about 8 per cent and inflation to hit 20 per cent or more, economists say.

“Putting up interest rates means they are going to go through the mother of all recessions, but the key is stability,” Mr Coulton said.

The IMF-led rescue represents an important breakthrough for Iceland as it strives to stabilise its economy by clearing the way for other countries to come to its aid. But it has come at the price of agreeing to the organisation’s demands.

The IMF conditions at-tached to the loan are to restore confidence in the economy and stabilise the Icelandic krona, restore fiscal sustainability, and reestablish a viable banking system. Yesterday’s rate rise was an important first step towards boosting the credibility of the Icelandic krona, which lost 70 per cent of its value during the crisis before trading dried up amid the uncertainty.

The IMF and Icelandic government have agreed that the currency should refloat within a matter of weeks, regarded as a vital step in restoring Iceland’s international credibility and helping the international payment system to restart.

“It is of overarching importance to restore stability in the foreign exchange market and support the exchange rate of the crown,” Sedlabanki, the central bank, said in a statement.

The huge interest rate rise came as Iceland continued to try to rally international sup-port for multi-billiondollar loans to bolster its foreign exchange re-serves, a move that should also help support its currency once it resumes trading.

The office of Geir Haarde, prime minister, told the Financial Times yesterday Iceland had sent an application for funds to the US Federal Reserve and the European Central Bank and had also been in contact with the Bank of Japan via its embassy in Tokyo.

The Icelandic krona is expected to be floated again as soon as is practical, possibly within the next two weeks, once the IMF’s board has approved the $2bn loan.

Source

The interest rate increase is way out of line with any logic. That is one of the reasons I don’t trust the IMF. Their Conditions. They dictate to those in need. 18% is ridiculous. This is helping Iceland how?

That kind of interest rate is insanity.

Nordic nations work on Iceland bail-out
By David Ibison in Stockholm

November 5 2008

Officials from four Nordic central banks and finance ministries held a private meeting in Stockholm on Wednesday to discuss their contributions to a $6bn rescue package for Iceland.

The gathering at the Ministry of Finance was a strong sign that Denmark, Sweden and Finland are drawing closer to announcing a multibillion euro package of loans after Norway agreed a €500m ($648m, £405m) advance last week.

Iceland hopes to be told on Thursday or Friday that its application to the International Monetary Fund for a $2bn (€1.54bn, £1.25bn) loan to support its economic revival has been approved.

Once official approval of the IMF loan has been secured, the way is clear for the Nordic countries to start considering how much they are prepared to offer, central banking officials said.

Iceland is seeking a total of about $6bn, which it will use to bolster its foreign exchange reserves to try to restore the credibility of its currency after its banking system collapsed last month.

The island’s government has also sent an application for funds to the US Federal Reserve and the European Central Bank and has been in contact with the Bank of Japan through its embassy in Tokyo, it said.

The four Nordic nations have said they are willing to support Iceland but only after it agreed to design and implement an economic stabilisation plan in association with the IMF. That plan was agreed in late October and comprises stabilising the Icelandic krona, restoring fiscal sustainability and re-establishing a viable banking system. It should also be approved by the IMF on Thursday or Friday.

The meeting at the finance ministry was attended by Ingimundur Fridriksson, one of three governors of Iceland’s central bank; Audun Gronn, the head of the international department at Norway’s central bank; Barbro Wickman-Parak, deputy governor of Sweden’s Riksbank; and similar level representatives from the central bank and finance ministries of Finland and Denmark.

Any commitment by the Nordic nations to support Iceland alongside the IMF would be an important development as the island strives to stabilise its economy. But securing approval for the loans does not mean that Iceland will have immediate access to the funds. Norway’s loan requires approval from parliament, as would others.

Following the collapse of Iceland’s banking system, its economy is expected to contract up to 10 per cent, unemployment is forecast to spike to about 8 per cent and inflation is set to reach 20 per cent or more, according to economists.

Iceland raised interest rates last week from 12 per cent to a record 18 per cent.

Source

Some European Union member states are said to be of the opinion that Iceland should not be granted a loan from the International Monetary Fund (IMF) until an agreement with Britain in regards to the deposits of Icelandic banks has been reached.

These same EU member states allegedly also believe that Iceland should not be granted a loan from the union’s emergency fund until the dispute surrounding the deposit accounts has been solved, Fréttabladid reports.

Icelandic Committee Members of Parliament of the European Free Trade Association (EFTA) Countries (CMP) said they had been given a clear message in that regard from EU officials during a meeting in Brussels earlier this week.

“I believe that extortion is involved,” said MP for the Left-Greens Árni Thór Sigurdsson, who is on the CMP. “[EU officials] said that a loan from the IMF would not happen unless we reached an agreement with Britain. They have influence in the fund and can set terms like that, which is known as extortion.”

Katrín Júlíusdóttir, an MP for the Social Democrats and chairman for the Icelandic division of the CMP, said Iceland’s representatives on the CMP had pointed out that Iceland intended to respect laws and regulations but that they disagreed with Britain on the interpretation of some legal issues.

Júlíusdóttir said Iceland’s representatives in the committee had also pointed out that there should not be a connection between international financial aid and a dispute on insurance for deposits.

British authorities have offered a loan to the Icelandic state so that Icelandic authorities can honor their obligations to Landsbanki account holders in the UK. However, a prerequisite for such a loan is an agreement with the IMF.

According to Fréttabladid, British Chancellor of the Exchequer Alistair Darling emphasized that a loan to Iceland would not be granted otherwise in an interview with the Dow Jones news agency on Monday.

Icelandic banks Landsbanki and Kaupthing, both of which have now been nationalized, accepted deposits through their subsidiaries in some European countries, primarily in the UK and the Netherlands. Landsbanki’s Icesave is an example of such a subsidiary.

Click here to read more about the potential IMF loan and here to read more about the development of the Iceland-Britain dispute.

Source


Published in: on November 6, 2008 at 10:07 am  Comments Off on Iceland lifts interest rates to record 18% to secure IMF $2bn loan  
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Goldman begins to cut 10% of staff

AP

November 06, 2008

Goldman Sachs Group Inc has begun notifying about 3,200 employees globally that they have lost their jobs, as the world’s biggest investment bank slashes expenses to ride out the financial crisis, a person familiar with the situation said.

The job cuts, which were first reported last month, are a reflection of the ongoing downturn in the credit and lending markets that triggered massive losses for banks around the world. Goldman Sachs had been considered the strongest investment bank on Wall Street, and earlier this year had expected its payrolls to expand.

Positions will be cut across Goldman’s offices globally and among various business lines, and will bring the company’s staffing to 2006 and 2007 levels, the person said yesterday. He spoke on condition of anonymity because the company hasn’t publicly disclosed details of the plan.

According to CapitalIQ, Goldman has more than 37,000 employees across its operations.

There also have been reports that Goldman’s army of bankers might see their bonuses cut in half this year.

Difficulties at the firm demonstrate that even the industry’s most powerful player is not immune to fallout from the unprecedented financial turmoil.

On Monday, Merrill Lynch analyst Guy Moszkowski predicted that Goldman would report a loss for the fourth quarter, its first since going public in 1999. The stock market’s

plunge has created a brutal atmosphere for some of Goldman’s once high-flying businesses, such as private equity and proprietary trading.


Source

Published in: on November 6, 2008 at 6:29 am  Comments Off on Goldman begins to cut 10% of staff  
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It’s No Joke: Federal Reserve Hires Failed Bank Executive

The Federal Reserve Bank is drawing jeers for hiring a former top executive from the now-defunct investment bank Bear Stearns to help it gauge the health of other banks.

The Federal Reserve Bank has hired the former head of risk management for Bear Stearns, which imploded this spring.

“How’s this for sweet irony?” business publication Portfolio.com needled the pick.

November 4 2008

By Justin Rood

Michael Alix was head of risk management for Bear Stearns for two years until the institution imploded this spring, a victim of its (risky) subprime-mortgage related investments.

Last Friday, the Federal Reserve Bank of New York quietly announced it had hired Alix to advise it on bank supervision.

“You’re kidding me,” said economic policy expert Dean Baker, of the Washington, D.C.-based Center for Economic Policy and Research. While he didn’t know Alix personally, he said, “You would think [his record] would be a big strike against him.”

The collapse of Bear Stearns led to its pennies-on-the-dollar buyout by J.P. Morgan Chase; the bank’s shareholders saw their wealth plummet. To facilitate the buyout, the Fed agreed to assume potential billions in losses on bad Bear Stearns investments.

“[Alix] was the guy on the mast charged with yelling ‘iceberg’ just before the Titanic introducted its bow to a floating chunk of ice,” wrote financial expert and blogger John Carney on the web site Clusterstock.com, where he flagged the hire.

The Fed’s move “is sure to put to rest the notion that there are no second acts in American life,” Carney observed drily.

A spokesman for the Federal Reserve declined to comment.

Source

Published in: on November 5, 2008 at 5:35 am  Comments Off on It’s No Joke: Federal Reserve Hires Failed Bank Executive  
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Iceland’s Kaupthing Prepares Lawsuit against Britain


October 16 2008

Representatives of Iceland’s largest bank, Kaupthing, are preparing a lawsuit against British authorities because of the harsh measures the UK took last week—seizing Kaupthing’s assets in the UK—which, Kaupthing claims, drove the bank into bankruptcy.

Kaupthing Bank will demand ISK 100 billion (USD 1.0 billion, EUR 0.7 billion, GBP 0.5 billion) in compensation, RÚV reports.

A group of lawyers from an international law firm are currently in Iceland working with Kaupthing Bank’s representatives to prepare the bank’s case against the British authorities. One of these lawyers is John Jarvis, a highly-respected lawyer in the UK.

“I think it’s safe to say we have formed some initial views. We are surprised that the order that was made, was made pursuant to an act which is commonly known now as the Northern Rock Act 2008,” Jarvis said in an interview with RÚV.

“It seems to be, to us at the moment, outside the purpose of that act that the order was made and there is a possible remedy there for a gain to the English court to have that order declared unlawful,” Jarvis continued.

“We are also looking to see whether there are the civil remedies for damages for such torts under English law as misfeasance in public office and negligence,” Jarvis concluded.

The team of lawyers is hopeful that Kaupthing Bank can win the case. “One can see from the use of the anti-terrorist legislation by the British government against Landsbanki that there was a degree of desperation in their actions last week,” said lawyer Richard Beresford.

“And certainly the language of the British government in relation to Icelandic banks was unfortunate and perhaps betrayed something underneath which was more than one would have thought should be proper behavior by the British government towards one of the major financial institutes in the UK,” Beresford added.

Click here to watch the news item on RÚV and listen to the interviews with Jarvis and Beresford (only available for two weeks from this date) and here to read about a potential lawsuit by Icelandic authorities against the British government.

Source

Published in: on October 16, 2008 at 7:39 pm  Comments Off on Iceland’s Kaupthing Prepares Lawsuit against Britain  
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Iceland Registers Complaint about Britain to NATO


October 16 2008

Icelandic authorities have filed a complaint with NATO because of Britain’s action to invoke anti-terrorism legislation in an effort to freeze the assets of Icelandic banks in the UK. The formal complaint was submitted at the meeting of the NATO Council yesterday.

Iceland’s Prime Minister Geir H. Haarde said at the Althingi parliament yesterday that it would have been “unthinkable” that Britain had treated a larger nation in such a way.

According to Morgunbladid’s sources, Iceland’s permanent representative at NATO, Thorsteinn Ingólfsson, cited public safety in Iceland in a broad context at the meeting, including an economical context, and said that Iceland was being threatened under the current circumstances, among other things because of one-sided actions taken by one NATO member state, Britain.

Icelandic authorities claim British authorities abused their anti-terrorism legislation, which is at odds with the joint fight of NATO member states against terrorism and does in fact jeopardize the credibility of that fight.

The NATO Council’s meeting was closed and only attended by the permanent representatives of the member states and the NATO Secretary General, but not by other officials. That kind of arrangement is unusual and only takes place when very serious matters are discussed.

After the meeting, NATO Secretary General Jaap de Hoop Scheffer called Iceland’s Prime Minister Geir H. Haarde and they discussed the matter. Haarde also discussed the matter with President of the European Commission José Manual Barroso.

Barroso said at a press conference yesterday that the European Union could not be involved in a debate between Iceland and Britain.

According to historian Gudni Th. Jóhannesson, Iceland has not complained to NATO about the actions of another NATO member state since the Cod Wars against Britain, 1975-1976, when Iceland fought for extending its fishing limits to 200 nautical miles.

Click here to read about Icelandic authorities preparing a lawsuit against Britain.

Source

Published in: on October 16, 2008 at 7:31 pm  Comments Off on Iceland Registers Complaint about Britain to NATO  
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Unbowed Icelandic PM sends a strong message to UK

October 16 2008

Geir H. HaardeIn an emotional address to parliament today, Icelandic Prime Minister Geir H. Haarde summed up the tempestuous waves of misfortune that over the last weeks have shaken the nation’s financial foundations and threathened its sovereignty.

“It is at such times that the Icelandic nation will show what stuff it is made of – its fortitude and prudence in the face of these disasters inspires admiration everywhere. We may for a time be bloodied, but we are unbowed.”

Haarde went on to say that now that the worst of the storm was over, that the time to regain control over the raging economic situation and normalise the economy had arrived. Landsbanki and Glitnir have already begun operating in a changed form.

“…loan lines of up to 400 million euros were activated yesterday from the central banks of Denmark and Norway. We will strengthen the currency reserves considerably in addition to this and discussions are now in progress in Moscow on a possible currency loan,” said Geir. “Furthermore mentioning discussions with the IMF on the possible involvement of the Fund in the financial reconstruction work that lies ahead. All possibilities are being assessed without prejudice.”

The Prime Minister then reminded how the seriousness of Iceland’s situation has its roots in the financial upheavals across the world that have left no country unaffected and have brought larger economic entities to their knees.

“…dozens of banks around the world have had to throw in the towel and look to the state for assistance in their home countries. The problem which faced the Icelandic Government when this chain of events was unleashed was more serious than the problem facing other governments, because of how large the Icelandic banking system was in proportion to the economy. It was, therefore, clear that it was neither sensible nor feasible for the Icelandic state to shoulder the burdens of the entire banking system.”

In face of these facts Haarde stated that, “The Government decided to take another course with the long term interests of the Icelandic nation uppermost. The actions of the Icelandic authorities are among the most radical actions taken by a government in a banking crisis.”

Haarde then took this opportunity to thank the members of Althingi from all parties for working to ensure that the so-called emergency legislation was passed as quickly as it was.

He continued that the most important task was to retrieve as much value as possible from the operations of the banks in order to limit the damage caused by their collapse. “All of us, the administration, members of parliament, and others in leading positions must stand together in this task. In this work we will need to make use of the efforts of all those with experience and expertise in banking. We should not allow speculation about the causes of the fire to hinder the work of extinguishing it,” Haarde said.

Haarde then hit the topic of relations with UK. “…the way we were treated by the British Government last week had nothing to do with salvaging British interests and was absolutely unacceptable.”

“The British Government’s unprecedented actions against Kaupthing in the United Kingdom have led us to review our legal position vis-à-vis the British authorities. To that end, the Government of Iceland has appointed a British law firm, which is now working to prepare a case, and the Icelandic Government has also taken various measures to ensure that the British public is made aware of our point of view.”

“Despite the dispute that has arisen in relations between Iceland and the United Kingdom, both countries have emphasized resolving the issues connected to Landsbanki’s IceSave accounts. The same applies to IceSave accounts in the Netherlands.”

“No agreement has yet been concluded with the United Kingdom, but I am hopeful that an outcome will be achieved soon.”

“In the emergency legislation passed by the Althing last week, depositors’ claims were given priority during the receivership process. There are good prospects that Landsbanki’s assets in the Netherlands and Britain will go a long way toward covering the claims that savers in these countries have on the respective banks – which will in turn reduce the claim that falls on the Icelandic state. The Government has taken measures to ensure the value of the banks’ assets and in that way limit losses as far as possible.”

Haarde ended his speech by asking the nation to come together, learn from its mistakes and not to turn to anxiety.

“There are always opportunities in a difficult position. We have been forced onto the defensive in recent days, but with determined effort, we will slowly but surely regain the offensive.”

“The Icelandic nation has been confronted with great and difficult challenges in the past, and adversity has always fortified us and brought out the best in this nation. There are difficult times ahead, and they will put our solidarity to greater tests than ever before. But no one need be in any doubt that the people of Iceland will draw on their inherent strength and make their voice heard in the world once again.”

“In these difficult times it is essential to prevent fear and anxiety, which understandably effect people, from developing into confusion and panic.”

Source

Published in: on October 16, 2008 at 6:21 pm  Comments Off on Unbowed Icelandic PM sends a strong message to UK  
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Petition to Eliminate the Federal Reserve

October 14, 2008

In view of what has happened over the past few weeks, the Federal Reserve owned and operated as a Private Bank and was greatly responsible for the Global melt down.

I do highly recommend that the US eliminate it, open and operate a Central Bank of its own. This is done in most countries and works far better and more efficiently then a private banks do.

Kennedy tried to do that very thing during his presidency and was right in doing so. The Federal Reserve is for profit not for the people of the US. They have been absolutely irresponsible and cannot be trusted any longer.

This was an intelligent and necessary move Kennedy made.  Just a pity it was stopped due to his death.

President John F.Kennedy, The Federal Reserve And Executive Order 11110

Every country should have its own Central Bank.

Do the sign the petition Take back what was stolen from Americans in December of 1913 By corruption, coercion and lies. Americans should be able to control their own money. Private banking systems like the Federal Reserve are there to serve their own self interests, not to serve the people.

Now is the time to have them removed as Kennedy tried to do.

Petition to Eliminate the Federal Reserve.

To:  U.S. Congress It Is Time To Abolish the Federal Reserve

Today in August 2007, the world financial systems and investment markets, real estate and the availability of credit are all under direct assault due to past actions of the Federal Reserve in the United States.

We the undersigned now call on Congress to Abolish the Federal Reserve System. The latest boom, mania and subsequent bust in the stock market, real estate, asset prices and now credit around the world are the direct result of easy money policies of the FED designed to enhance the profits of certain financial special interests. Now in 2007, ultimately as usual, the unsophisticated American middle and working class investors and borrowers who believed all the hype will pay the price in financial losses.

Wall Street’s” business as usual” call for the FED to intervene and bail out the corporate perpetrators of the scam is like asking a child molester to run a day care center or a drug dealer to teach our children all about drugs. The private banker owned FED is the cause of our problems not the solution.

Since the creation of the Federal Reserve in secret at Jekyll Island, Georgia in 1913, “middle and working-class Americans have been victimized by a boom-and-bust monetary policy. In addition, most Americans have suffered a steadily eroding purchasing power because of the Federal Reserve’s inflationary policies. This represents a real, if hidden, tax imposed on the American people….

From the Great Depression, to the stagflation of the seventies, to the burst of the dotcom bubble last year, every economic downturn suffered by the country over the last 80 years can be traced to Federal Reserve policy. The Fed has followed a consistent policy of flooding the economy with easy money, leading to a misallocation of resources and an artificial “boom” followed by a recession or depression when the Fed-created bubble bursts.” – Congressman Ron Paul, U.S. House of Representatives September 10, 2002

GOP Presidential Candidate Ron Paul was right back in 2002 and he is right today about abolishing the Federal Reserve and the necessity for the United State to return to a Gold Standard in order to protect the dollar from political and Wall Street banker manipulations which ultimately will destroy the dollar as a store of value and the financial security of millions of American investors and other innocent hard working citizens around the world.

Please Take the Time to Sign the Petition

There are currently 3811 Total Signatures

I would love to see a few million before the end of the week the race is on.

One person can make a difference.

One voice can become a million,

A million voices can become a billion voices.

A few billion voices are pretty hard to ignore.

Do pass this around to as many people as you can. Do this before the Federal Reserve and its private owners totally destroy Americas Way of life any further.

Also give them the link to my site so they can become educated on everything that has happened over the past few weeks and they can also learn about who operates the Federal Reserve.  Did You Know

In the interest of the Entire world the US needs it’s own Central Bank.

It is in fact everyones concern, so in my opinion everyone can sign.

Lets go for a few Billion Voices.

Call your Congressmen as well. Call anyone who will listen. Don’t take No for an answer.

Write your local newspapers, get people thinking about it.  Be vocal for the rights of Americans.

Salaries hit by Icelandic bank Collapse

Council salaries hit by bank collapses

Treasury urged to defer £1bn business-tax demand as this month’s payroll for hundreds of thousands of workers is frozen in Icelandic accounts

By Jane Merrick, Brian Brady and Jonathan Owen
October 12 2008

Hundreds of thousands of council workers may not be paid this month because their earnings are frozen by the Icelandic bank collapse, it emerged last night.

The Local Government Association has just eight days to avert a catastrophe, senior sources warned. The LGA has urged the Treasury not to insist on prompt payment of nearly £1bn in business taxes owed by councils, and due on 20 October, to free up cash and allow staff to be paid.

It is understood that dozens of the 100-plus local councils that are victims of the Iceland banking crisis use their accounts for the payroll of everyone from the chief executive to front line staff. Until now it was thought only capital savings, worth £840m, were locked in the failed banks. But the accounts were also used as a quick way to earn interest to pay wages.

And in a fresh blow to the banking industry, The Independent on Sunday has learned that seven councils are to withdraw a total of £2bn from British and foreign banks because they fear the crisis could claim more victims. The money will be transferred to government bonds, leaving a gaping hole in UK banking assets at a time when the Treasury is struggling to prop them up with its £500bn bailout.

Treasury officials and the Icelandic authorities said last night that they had made “significant progress” in agreeing in principal a quick payout for British investors – including local councils – who had about £4bn in the Icelandic Landsbanki’s internet bank Icesave.

The News of the World also reported that the value of Icelandic-owned assets seized by the Britain under anti-terror laws was believed to be roughly equivalent to the amount invested in Icelandic banks by British individuals and organisations.

As the economic crisis deepens, Gordon Brown will today make an unprecedented appearance in Paris before an emergency summit of eurozone leaders held by French President Nicolas Sarkozy. The Prime Minister will give a presentation on last week’s bailout, which gave the taxpayer a £50bn stake in British banks.

A No 10 spokesman said last night: “We don’t expect everyone to do exactly what we have done, but the approach we set out is probably the best kind of model.”

Following G7 finance meetings in Washington, President George Bush called for a “serious global response” to cope with the continuing plunge in markets, backing moves to buy stock in troubled financial institutions.

A local government source warned that most of the councils caught in the collapse had invested funds from revenue accounts, used to cover recurring costs such as wages and local services, in Icelandic banks – with terrifying implications for staff and clients. It is not known which councils are affected, but conservative estimates of 50 authorities would cover more than 150,000 staff.

Public-sector unions last night revealed they had written to employers laying out their “grave concerns” about the immediate impact on wages, jobs and front-line services. Unison spokeswoman Mary McGuire said: “We have asked the LGA … how much councils have deposited, and exactly what the impact is going to be in the short term.”

Haringey in north London is believed to be among those councils whose payroll is frozen, though the chief executive refused to confirm or deny this. Haringey made a £5m investment in Iceland just last week – after the nation’s first bank, Glitnir, went bankrupt. Braintree council, in Essex, has confirmed that the £230,000 annual interest from £5m of taxpayers’ money held in three failed Icelandic banks was to be spent on payroll and services.

Despite warnings as far back as July that investing in Icelandic banks was risky, Tory-controlled Winchester council deposited £1m in Heritable, a Landsbanki subsidiary, in September. Lord Oakeshott, Liberal Democrat Treasury spokesman, said: “Winchester council was grossly imprudent. I wouldn’t put them in charge of a child’s money box.”

Council leaders will meet local government minister John Healey and the economic secretary to the Treasury, Ian Pearson, later this week to appeal for more help, including a delay in the payment of business rates. More money is due to the Treasury on 6 November, the date of the Glenrothes by-election.

The shadow Local Government Secretary, Eric Pickles, said: “If the Government shows some flexibility, I am sure that most problems in regard to cash-flow will be taken care of.”

Local government difficulties

Interest rate swaps

In the 1980s, council officers, who were largely unskilled for the task, became involved in a sophisticated form of derivative known as an interest rate swap. Until 1988, when interest rates rose, councils made a tidy profit, but then huge losses were incurred. Hammersmith & Fulham council lost about £200m on investments worth £6bn, but eventually settled with many of its creditors.

Off balance sheet

Not yet a disaster, but there are plenty of critics of councils’ – and central government’s – habit of taking health care facilities and schools built through the private finance initiative off their balance sheets. The argument is that the risk of the project failing is borne by the private sector and so the project should go on its balance sheet. However, even some officials privately admit that it’s a smoke and mirrors exercise to ensure big investments do not come out of a local or central government budget.

BCCI

The Bank of Credit and Commerce International collapsed in 1991 owing more than $16bn (£9.4bn) and took the deposits of local councils down with it.

Source

Time Line To Date

7 September
US government seizes control of mortgage lenders Fannie Mae and Freddie Mac.

14 September 2007
Bank of England steps in with emergency funding to support Northern Rock.

17 March 2008
Federal Reserve organises the rescue of Bear Stearns.

17 September
US rescues insurer AIG.

26 September
US government takes control of Washington Mutual in the largest-ever American bank failure.

29 September
UK government nationalises Bradford & Bingley’s loan book.

30 September
Ireland guarantees the deposits of all savers.

3 October
Biggest ever US government bail-out plan – worth $700bn – clears House of Representatives after being rejected a week earlier.

7 October
Iceland asks Russia for €4bn loan to avoid financial meltdown.

8 October
Chancellor Alistair Darling announces £450bn rescue plan for Britain’s ailing banks. Bank of England cuts interest rates by half a percentage point.

10 October
G7 meeting in Washington agrees global rescue plan.

Source

Traders’ worst fears realised at Lehmans auction


Hundreds of billions set to change hands as credit default swaps are reconciled

By Stephen Foley
October 11 2008


Derivatives traders were yesterday nervously picking their way through the wreckage of the Lehman Brothers bankruptcy in what was the biggest test to date of the unregulated $60 trillion (£35.4 trillion) credit default swaps market.

Investors who had placed bets on Lehman’s creditworthiness held an auction aimed at clarifying who owes what to whom after the investment bank went bust four weeks ago, and analysts believe that several hundreds of billions of dollars will change hands.

Credit default swaps are a kind of insurance, which investors used to protect themselves in the event that Lehman defaulted on its bonds. Unlike traditional insurance, however, any financial firm could write a credit default swap contract so banks, insurance companies, hedge funds and traditional fund managers are among those now being required to make investors whole.

The auction set a price for Lehman bonds of 8.625 cents on the dollar. Financial firms that sold credit default swaps, therefore, owe 91.375 cents on the dollar – more than Wall Street had been factoring in. That figure increased nerves about whether everyone in the chain will actually be able to pay the amount that they owe, something that will become clear over the coming days. Participants said the auction went smoothly and efficiently.

The insurance giant AIG was one of the biggest sellers of Lehman Brothers credit default swaps, and it faces big losses as a result. It had to be bailed out by the US government three days after the Lehman bankruptcy filing, and has so far been extended $123bn in loans from the US taxpayer. What investors and regulators fear most is a failure to pay by one link in the chain could cause a cascade of losses through the system.

Analysts say the amount of money that has to change hands could be more than $200bn. Some estimates put the value of outstanding credit default swaps on Lehman Brothers debt at $400bn, although some of these trades have already been netted out because some investors both sold and bought CDS contracts. Exact figures are not available because a CDS is a private contract and is not traded on an exchange, but the payout will certainly be the biggest in the 10-year history of the market.

CDS issuance has exploded in recent years as investors have used the instruments not just to insure bonds that they hold, but also to bet on the creditworthiness of companies. The growth of the market has been so fast that Wall Street has not had time to invent a central trading mechanism.

The New York branch of the Federal Reserve, the US central bank, summoned market participants to a meeting yesterday to discuss creating just such a mechanism. IntercontinentalExchange, the electronic trading platform that is now one of the most popular places to buy and sell oil, said yesterday it had set up a joint venture to create a CDS settlement system. Its announcement came three days after CME Group, which runs the Chicago Mercantile Exchange for derivatives trading, said it was joining forces with hedge fund Citadel to set up a similar system.

Deutsche Borse and NYSE Euronext have also expressed interest, suggesting there could be ferocious competition between exchanges if CDS trading is forced into the regulated arena.

Source

Published in: on October 11, 2008 at 6:05 am  Comments Off on Traders’ worst fears realised at Lehmans auction  
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A Crisis Made in the Oval Office

This is the first time in the history of the United States that the president has sought to provoke a financial panic to get legislation passed through Congress. While this has proven to be a successful political strategy – after the House of Representatives finally passed the bank bail-out plan today – it marks yet another low point in American politics.

It was incredibly irresponsible for George Bush to tell the American people on national television that the country could be facing another Great Depression. By contrast, when we actually were in the Great Depression, President Roosevelt said: “We have nothing to fear, but fear itself.”

It was even more irresponsible for President Bush to seize on the decline in the stock market five days later as evidence that his bailout was needed for the economy. President Bush must surely understand, as all economists know, that the daily swings in the stock market are driven by mass psychology and have almost nothing to do with the underlying strength in the economy.

The scare tactics of President Bush, Henry Paulson, the Treasury secretary, and Ben Bernanke, chairman of the Federal Reserve, created sufficient panic, so that by the time of the first vote on the emergency package in Congress, much of the public believed that the defeat of the bail-out may actually have had serious consequences for the economy. Millions of people have changed their behaviour because of this fear, with many pulling money out of bank and money market accounts, and adjusting their financial plans in other ways.

This effort to promote panic is especially striking since the country’s dire economic situation is almost entirely the result of the Bush administration’s policy failures. First and foremost, the decision of Paulson and Bernanke (and previously Alan Greenspan) to ignore the housing bubble, allowed for the growth of an $8tn bubble, which is now collapsing.

It is the collapse of this bubble – which has already destroyed more than $4tn in housing wealth, and is likely to destroy another $4tn over the next year – that is at the root of the economy’s problems. While competent economists were warning of the bubble and the dire consequences of its collapse, the top officials in the Bush administration were celebrating the rise in homeownership rates.

The Bush administration made the crisis even worse by deregulating Wall Street. This led to the huge over-leveraging of financial institutions, which has vastly complicated the country’s economic policies. It is especially disturbing that Secretary Paulson personally profited from these policies, earning millions of dollars in compensation from Goldman Sachs during his years there as its chief executive.

The collapse of the housing bubble, while falling short of the magnitude of the Great Depression, is likely to lead to the worst recession since the second world war. Repairing the damage caused by this bubble will be a long and difficult process. Cleaning up the damage to the political system from President Bush’s unprecedented fear campaign may prove to be even more difficult.

Source

Published in: on October 8, 2008 at 8:55 am  Comments Off on A Crisis Made in the Oval Office  
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Iceland government seizes control of Landsbanki

David Teather

October 07 2008

The Icelandic government this morning seized control of Landsbanki, the second-largest bank in the country, and sought to secure a €4bn loan from Russia as it worked to avert a financial meltdown.

The government moved quickly to use sweeping powers over the country’s banks granted in the Reykjavik parliament last night. The board of directors at Landsbanki has been dismissed and the bank put into receivership. The government has also loaned €500m to Kaupthing, the biggest bank in Iceland.

UK savers trying to access their Landsbanki-run Icesave accounts this morning were faced with a message telling them the bank was unable to process requests for deposits or withdrawals. Icesave offered competitive rates and has more than 200,000 accounts in the UK. The first €22,000 (roughly £17,000) held in the accounts is secured under an Icelandic compensation scheme, and the remainder up to £50,000 is guaranteed by the British government.

On state radio, commerce and banking minister Bjorgvin Sigurdsson sought to reassure people in Iceland that the bank would remain open and continue to run as normal.

The Landsbanki chairman and a large shareholder in the bank is Bjorgolfur Gudmundsson, the owner of West Ham United football club.

In an address broadcast on Icelandic television last night, prime minister Geir Haarde announced plans to rush through the emergency bill, supported by opposition parties, allowing the government to push through mergers between the battered banks or force them into bankruptcy.
“We were faced with the real possibility that the national economy would be sucked into the global banking swell and end in national bankruptcy,” he said.

There was some confusion about whether the loan from Russia had been agreed. Iceland’s central bank said in a statement that it had been informed by the Russian ambassador that Iceland would be given a €4bn loan and that it had been agreed by the Russian prime minister, Vladimir Putin. The bank said Haarde had approached the Russians about a loan some months ago.

But the Russian state news agency separately quoted the deputy finance minister, Dmitry Pankin, as saying there had been no formal approach from Iceland and that no decision had been made. The Icelandic bank then updated its statement to say that negotiations would begin “in the next few days”.

The Icelandic Financial Services Authority said it had taken control of Landsbanki to “guarantee a functioning domestic banking system”.

The fate of Iceland, which has extensive interests in the UK, is seen as a warning for the rest of the world, after a long boom fuelled by debt, a dependence on its banking industry and a buoyant housing market.

Time appeared to be running out for Iceland to deliver a solution to the financial crisis yesterday as its currency, the krona, slumped 30% against the euro, accelerating a decline that has been taking place over the past year.

The emergency bill would also allow the government to take over housing loans held by the banks.

The Icelandic government now has control of two of the biggest three banks in the country — the only one remaining in private hands is Kaupthing.

Last week, Landsbanki sold the bulk of its international operations, including the London-based Landsbanki Securities, the former Teather & Greenwood, to smaller rival Straumur-Burdaras, to try to bolster its capital base. But with the wholesale markets closing down, banks are finding it difficult to raise the short-term funding necessary for their day-to-day operations, especially when there is nervousness about an institution’s stability.

Kaupthing and Straumur-Burdaras said in a statement this morning that they continued to operate as normal and had no indication that the government intended to intervene.

The financial regulator yesterday suspended shares in Iceland’s main banks to prevent panic selling. The government also followed Ireland and Germany by guaranteeing all domestic deposits in Icelandic savings accounts.

Concerns about the Icelandic economy grew stronger last week after the government seized control of the third-largest bank, Glitnir, taking a 75% stake in return for €600m (£466m). Haarde warned Icelanders at the time of “the inevitable cut in living standards” to come.

The falling currency, which closed at a record low of 230 Icelandic krona to the euro, is worsening the crisis for the banks, which are shouldering large overseas debts, and for many thousands of individuals in Iceland who were encouraged to take out loans in foreign currencies.

In Iceland, there is widespread fear. Sigridur Dogg Audunsdottir, a local government worker in Reykjavik said everyone in the country was “holding their breath”. Yesterday, she withdrew cash from the bank all the way to her overdraft limit to make sure her family had enough to live on. “It is just unimaginable. It is so dark and gloomy, we have never experienced anything like this. I took out my money just to be safe, because I felt I had to do something. We’ve all been living ahead of ourselves, so in many ways this was inevitable. People here have been so obsessed with money. Iceland is like a nouveau riche country.

“I am not blaming the people. The problem seems to be oversized banks in a small economy. We trusted the banks and they encouraged us to borrow money.”

A collapse in Iceland would severely dent confidence in the broader financial markets. But it could also affect Britain, with the main banks funding a string of companies and entrepreneurs, including Robert Tchenguiz, a large investor in Sainsbury’s, chef Gordon Ramsay and property tycoons the Candy brothers.

One of Iceland’s biggest companies, Baugur, has stakes in a swath of the British high street, including House of Fraser, Karen Millen, Oasis and Whittard of Chelsea. One of the biggest credit insurance firms has stopped covering suppliers to Baugur-controlled stores. In a statement over the weekend, it reiterated that most of the funding of its businesses comes from international banks and that it has little exposure to the disaster-struck Icelandic economy.

Haarde is said to have approached other Nordic governments to see if their central banks might be prepared to inject liquidity into the Icelandic system. Haarde said the banks had agreed at the weekend to sell some overseas assets and bring the cash back to Iceland.

The country’s pension funds, which have assets of €12bn, are also being encouraged to repatriate cash.
Kaupthing holds deposits for thousands of UK savers through its Kaupthing Edge account. Kaupthing Edge is covered by the UK government guarantee on deposits up to £50,000. A spokeswoman for Kaupthing said there had been no rush to close accounts.

Richard Portes, an expert on Iceland at the London Business School, said the government had made a mistake by nationalising Glitnir, creating fear in the markets instead of just providing it with liquidity.
“You have the same law of unintended consequences that you had in the case of Lehman Brothers,” he said. “The Iceland problem was immediately vastly exaggerated.”

He said the Icelandic banks had been unfairly targeted. “The world is a little unjust. They don’t hold any toxic papers. The assets they will have to sell are perfectly good assets. They have been prudently managed and haven’t been excessively dependent on the wholesale money markets compared to anyone else,” he said.

Iceland has undergone a remarkable transformation in the past couple of decades, from an economy largely based on fishing to one of the richest in Europe, driven by its biggest banks after deregulation of the banking system. The banks grew rapidly on borrowing and have assets eight times Iceland’s GDP. But the party has come to an end, with the krona losing more than half its value against the euro in the past 12 months, inflation at 12% and interest rates at 15.5%.

Source

Published in: on October 7, 2008 at 9:11 pm  Comments Off on Iceland government seizes control of Landsbanki  
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Questions the Government faces over banking guarantees

October 6, 2008

The Government is facing increased pressure to follow its European counterparts in pledging 100 per cent protection for UK savers.

What has the German government pledged?

Chancellor Angela Merkel vowed that the federal government would guarantee all private savings accounts in German banks. Finance minister Peer Steinbrueck said that from today German citizens need not worry about “a single euro of their deposits” during the global financial crisis.

Is Germany the only country to offer such a promise?

No. Last week Ireland said all money held in savings accounts at six institutions – Allied Irish Banks, Bank of Ireland, Anglo-Irish Bank, Irish Life and Permanent, Irish Nationwide Building Society and the Educational Building Society – will be guaranteed in their entirety.

Greece has likewise guaranteed its depositors’ savings.

What is the situation in the UK?

In the UK, savings of £50,000 are covered under the Financial Services Compensation Scheme (FSCS). The limit relates to deposits with an organisation, regardless of how many accounts the customer holds. The limit had, until recently, been set at £35,000 but as a result of the current crisis, ministers agreed to up the ceiling.

Can UK citizens benefit from the announcements in other countries?

Yes. Three Irish banks – Allied Irish Bank, Anglo Irish Bank and Bank of Ireland – have branches in the UK. These will be covered by the Irish Government’s guarantee and British citizens can open accounts with relative ease at branches in the UK. In addition, the Post Office’s savings products are run by Bank of Ireland, giving customers 100% protection.

There is also nothing stopping UK customers opening up an account with a bank branch in Ireland. Although it may be harder, as many will want you to appear in person to open the account.

How have British banks responded? Aren’t they at a disadvantage?

On Wednesday the British Bankers’ Association (BBA) challenged the Irish government, claiming that the guarantee was anti-competitive, especially for banks in Northern Ireland. It fears that UK savers will move their money to Irish banks in a bid to benefit from the guarantee offered.

But don’t some institutions in the UK already offer 100 per cent protection?

Yes. When Northern Rock collapsed, the UK Government made an exception to end the run on the bank, ensuring that all of the Rock’s savers will have deposits covered in their entirety.

National Savings & Investment, which is backed by the Treasury, also offers complete protection on people saving through its products.

And Bradford & Bingley savings are safe while part of the collapsed bank goes through the process of being transferred to Santander, owners of Abbey.

So, if ministers pledged complete protection for Northern Rock and Bradford & Bingley, what’s to say they won’t do the same if another bank fails?

Nothing. The whole question in many experts’ view is purely theoretical. It would, it is argued, be almost inconceivable for the Government to let savers lose their money as a result of a bank failing.

Unlike more risky investments, people are not given explicit warnings that they could lose their savings – the whole stability of the banking system depends on the belief that money is safe in the bank.

If people started to lose money, it would lead to instability on a grand scale and a return to a run on the banks as panicked savers attempt to move cash out.

So why don’t the Government just follow the German and Irish lead and guarantee all savings?

Because it shifts liability from the banks to the taxpayers. And we are talking about a lot of money. Estimates suggest it would mean a risk running into the trillions of pounds – that is £1,000,000,000,000s. This would place a huge burden on public finances.

And it could be the “thin end of the wedge”, some fear. Bank’s business customers may be next in asking for their money to be covered.

An 100 per cent guarantee could also impact on the Government’s ability to raise funds which in turn could hit public spending. The theory has it that with a promise to protect all savings, people would be less willing to buy into secure state-backed bonds.

The main attraction of Government “gilt-edged” bonds is that they are seen as one of the safest places you can put money.

If bank saving accounts are covered by a Government guarantee this will no longer be the case. As such they would be deemed to be less attractive, especially as they currently offer a return which is less than that of a top savings account.

Source

Published in: on October 7, 2008 at 8:54 pm  Comments Off on Questions the Government faces over banking guarantees  
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Bank Bailouts in Europe

Bank Bailouts Come to Europe

September 29, 2008

The rush to save four banks signals a more aggressive policy stance. But Europe’s many regulators will make it tough to form a coherent strategy

by Mark Scott

In a stunning series of moves engineered over the weekend and announced Sept. 29, six European governments are collectively committing nearly $150 billion to rescue four troubled financial institutions. Coming on the back of the U.S.’s $700 billion toxic mortgage bailout plan (BusinessWeek.com, 9/28/08), which was thrashed out over the weekend but defeated in a surprise vote Sept. 29, the move likely foretells a more proactive approach among European politicians and regulators to combating threats to the EU economy.

With their high-profile moves to save Britain’s Bradford & Bingley (BB.L), Belgium’s Fortis (FOR.BR), Germany’s Hypo Real Estate Group (HRXG.DE), and Iceland’s Glitnir Bank government officials are changing the rules of the game in Europe. Until now their primary policy response has been to inject billions into the Continent’s credit markets via central banks—but rarely to intervene on behalf of specific troubled institutions. Now policymakers in the EU and its member states are signaling a more aggressive stance that mirrors the speed of U.S. actions.

“The entire financial system was coming under pressure, so of course European governments had to get involved,” says Richard Portes, president of the Centre for Economic Policy Research in London. “The situation was becoming untenable; they had to respond immediately.”

Saving Bradford & Bingley

The largest deal involves British mortgage lender Bradford & Bingley, whose shares have plunged 93% in the past year on concerns about its loan portfolio. Unlike in late 2007, when the British government dithered over plans to rescue ailing mortgage lender Northern Rock, regulators moved swiftly this time to nationalize Bradford & Bingley’s £50 billion ($90 billion) in loans. At the same time, Spain’s Banco Santander (STD) will pay $1.1 billion to assume Bradford & Bingley’s 197 branch offices and £20 billion ($38 billion) in customer deposits.

Just across the English Channel, policymakers in Benelux spent the weekend hammering out a very different rescue package for banking giant Fortis, whose operations are concentrated in the Low Contries. The bank, one of the three institutions that took over and carved up Dutch investment bank ABN Amro earlier this year, saw its shares plunge 35% last week alone on concerns it was overleveraged from the $34.5 billion it spent on the deal.

With Fortis nearing paralysis, regulators devised a plan to partly nationalize it. The governments of Belgium, the Netherlands, and Luxembourg each will buy 49% stakes in local Fortis subsidiaries, for a combined price of €11.2 billion ($16.2 billion). Fortis also will sell its share of ABN Amro, which it bought alongside consortium partners RBS (RBS) and Santander, and write down a further $7.2 billion of assets. Wire services reported on Sept. 29 that the most likely buyer for the ABN Amro assets is the Netherlands’ ING Group (ING.AS)—no doubt for a price well below what Fortis paid.

While both Bradford & Bingley and Fortis were publicly suffering in recent weeks and days, a bigger surprise emanated from Germany the morning of Sept. 29: the sudden rescue of Munich-based commercial real estate lender Hypo Real Estate Group, whose business model had relied heavily on borrowing money in the now-frozen wholesale capital markets.

Germany‘s central bank organized a $50 billion state-backed credit line, $12 billion of which will come from local banks and the rest from the government—and taxpayers.

Iceland Takes Over Glitnir

Even as investors were busy digesting all that news, word came of yet another national bailout: Moving to prevent a collapse of the country’s third-largest bank, Glitnir, the government of Iceland said it would spend $865 million for a 75% stake. The takeover is intended to be only temporary.

In a statement, Glitnir said its funding position had deteriorated in just a matter of days. “The events unfolding in international financial markets in the past two weeks have had unforeseen consequences, drastically changing the conditions of Glitnir’s short-term funding,” the bank said. News of the takeover sent the Icelandic crown plunging to a fresh low against the euro.

These aggressive government actions may not be the end of the line if the credit crisis claims other European institutions. According to analysis by Standard & Poor’s, Deutsche Bank (DB) and Dresdner Bank—a unit of Allianz (AZ) that is being acquired by Commerzbank (CBKG.DE)—are the most vulnerable among German banks due to their continued heavy exposure to volatile capital markets.

Britain‘s RBS, whose shares fell 13% on Sept. 29, might have to write down a further $14 billion related to its portion of the ABN Amro carve-up. Shares in Belgium’s Dexia (DEXB.BR) plunged nearly 30% on Sept. 29 on concerns over its health. And Switzerland’s UBS (UBS), the European bank most affected by the subprime crisis (BusinessWeek.com, 8/12/08), continues to suffer from a decline in its investment banking operations and weakened customer confidence that has hurt its wealth-management business.

While it’s still unlikely that Europe would see a coordinated, Continent-wide bailout on the scale of the proposed U.S. plan, market watchers reckon tighter financial regulations and stricter bank lending practices soon will be introduced at the European Commission. Only last week, French President Nicolas Sarkozy—currently the head of the EU—called for more global regulation (BusinessWeek.com, 9/25/08), adding the financial industry had “perverted the fundamentals of capitalism.”

“Too Many Chefs”

With domestic populations fearful of pending recession and already suffering from soaring food and energy prices, European politicians are scrambling to respond more publicly when banks get in trouble. But the fragmented nature of the European Union and its financial institutions make it more difficult than in the U.S. to put forward a coherent strategy.

For one thing, Europe has relatively weak central regulators—including a central bank whose mandate is more tightly proscribed than the Fed’s—and dozens of national regulators who continue to exert control over their domestic financial-services sectors. “In Europe, there are too many chefs in the kitchen, all with different economic proposals and no concerted voice speaking for them,” says Kully Samra, British director for stockbroker Charles Schwab (SCHW) in London.

Any pan-European strategy to deal with the Continent’s growing financial woes (BusinessWeek.com, 8/6/08) also must tackle the diverging economic problems facing different countries in the EU. According to Morgan Stanley (MS) estimates, the euro zone’s GDP growth will be halved next year, to 1.3%. This reflects deteriorating housing markets in Spain and Ireland, a manufacturing and export downturn in Germany, and an overextension of credit in Italy and Greece.

According to Pete Hahn, a fellow at City University’s Cass Business School and a former managing director at Citigroup (C), each problem requires individual solutions that could be difficult to include in an EU-wide package. “It’s not going to be a one-size-fits-all deal,” he says. “The incredible multitude of regulators involved will make any European strategy a tough proposition.”

Despite the difficulties inherent in any government-backed bailout of Europe’s financial-services industry, politicians may have little choice but to inject taxpayer dollars into struggling banks. British, Benelux, German, and Icelandic authorities have blazed a path with their rapid interventions. It may represent just the start of European attempts to stave off a Continent-wide recession.

With reporting from Kerry Capell in London and Jack Ewing in Frankfurt

Consumers to foot bill for Bradford & Bingley bailout in higher bank charges

September 30, 2008

Bank charges and insurance premiums are set to rise after high street banks and insurers were ordered to pay up to £14 billion under the terms of Bradford & Bingley’s nationalisation.

Some analysts suggested that the bailout could hasten the end of free banking for current account customers as banks attempt to pass on the cost to their customers.

All banks face huge increases in the levy they pay to the deposit lifeboat, the Financial Services Compensation Scheme, after it borrowed £14 billion from the Government to underwrite Bradford & Bingley deposits transferred to Banco Santander.

Banks and building societies will be asked to chip in £900 million a year just to pay the interest on the bill. That works out at more than £100 million each for large banks such as Royal Bank of Scotland and Barclays.

“The banks will be in a militant mood after this,” Alex Potter, a banking analyst with Collins Stewart, said. They had already had their arms twisted by regulators to support an earlier £400 million capital raising by Bradford & Bingley last month.

Stephen Hadrill, head of the Association of British Insurers, said that premiums would have to go up. “Insurers are livid at the way that this has been handled. If it’s going to fall on the companies in due course, insurers are going to have to try to find that money from somewhere,” he said.

The anger erupted after the Government confirmed yesterday that it was nationalising the bulk of Bradford & Bingley, seizing £50 billion of assets and bankrolling the Financial Services Compensation Scheme. Banco Santander, the Spanish bank that owns Abbey, has bought the £20 billion deposit business and the network of 200 branches.

The remaining assets and liabilities of the former building society, including its £41 billion mortgage book, personal loan book, Yorkshire headquarters, treasury assets and wholesale liabilities, will be taken into public ownership by the transfer of all shares to the Treasury, Alistair Darling said.

Shareholders look likely to be almost entirely wiped out, although the Treasury is expected to appoint an independent valuer to set compensation, if any. Trading in the shares, which last changed hands at 20p on Friday, was suspended.

The victims include more than 800,000 Bradford & Bingley customers who received free shares when Bradford & Bingley became a listed company in 2000.

Branches opened normally yesterday under Santander. Borrowers were urged to continue making their repayments in the normal way.

The Chancellor disclosed that the immediate cost to taxpayers would be a £4 billion payment to Abbey together with the £14 billion loan to the Financial Services Compensation Scheme.

The Government had acted on the advice of the Bank of England and the Financial Services Authority, “to maintain financial stability and protect depositors, while minimising the exposure to taxpayers”, the Treasury said.

The Financial Services Authority, which supervises British banks, concluded on Saturday that Bradford & Bingley no longer met threshold conditions for operating as a deposit taker, the Treasury said. “Savers’ money remains absolutely secure,” it added.

The nationalisation could push government borrowing this year to levels not seen since the mid-Nineties, adding to the possibility of huge tax rises after the next general election.

The Treasury insists that it expects to recoup all, or the vast bulk, of the £18 billion paid directly, and indirectly via the Financial Services Compensation Scheme, to Santander within months rather than years, through disposal of Bradford & Bingley assets. The Government has first call on this money as it becomes available.

While most of the £18 billion may well be recovered, the exposure nevertheless adds to already intense stress on the Government’s finances.

The £4 billion paid directly to Santander will have to be added to total government borrowing for 2008-09 – already set to soar far above the Chancellor’s £43 billion forecast as the downturn hits tax revenues. Officials remain uncertain whether the £14 billion transferred to Santander through the compensation scheme also count against borrowing but admit that it may have to. The decision will rest with the Office for National Statistics.

Even before the latest costs, economists expected public borrowing to climb to as much as £60 billion.

The initial impact of Bradford & Bingley may now drive this to £78 billion, which would put the Government’s deficit at more than 5 per cent of GDP. In future years, the Treasury will have to add to its borrowing the cost of any defaults on Bradford & Bingley mortgages. With £1.3 billion worth of Bradford & Bingley’s £41 billion in mortgages already in arrears, those losses could pile up quickly as the housing market slumps and unemployment rises.

Eventually, with the Government so deep in the red, taxes will have to rise to bring down public borrowing to more manageable levels.

In the meantime, Bradford & Bingley’s debts will add to those of Northern Rock in swelling the national debt, lifting this by a further £30 billion or so, Capital Economics estimates.

The impact is likely to push total debt up to some 45 per cent of GDP – smashing the 40 per cent ceiling imposed by the Treasury, which looks set to be formally abandoned by Mr Darling in his autumn PreBudget Report.

Banco Santander will strengthen its position among the giants of British savings and mortgages, becoming No 3 in savings, outsized by the planned Lloyds TSB/HBOS combination and Royal Bank of Scotland. Thanks to the acquisitions of Abbey and Alliance & Leicester, it is No 2 in mortgages, with 13 per cent of the home loans market. It will have 1,300 branches under the Abbey, Alliance & Leicester and Bradford & Bingley brands and will employ 23,000 people in Britain. Yesterday it declined to rule out job losses or branch closures, though none was planned immediately.

Related Links

‘Bradford & Bingley gambled our cash’

Property’s new owners likely to lose a billion

Bradford & Bingley Is Seized; Santander Buys Branches (Update4)

By Poppy Trowbridge and Ben Livesey

Sept. 29 (Bloomberg)

Bradford & Bingley Plc, the U.K.’s biggest lender to landlords, was seized by the government after the credit crisis shut off funding and competitors refused to buy mortgage loans that customers are struggling to repay.

Banco Santander SA, Spain’s biggest lender, will pay 612 million pounds ($1.1 billion) for Bradford & Bingley’s 197 branches and 20 billion pounds of deposits, the company said in a statement today. The Santander, Spain-based bank said it also got 18 billion pounds to insure those deposits.

“The bank’s deposit base has value in this market, but you’d have to have a different name over the door,” said Alex Potter, a London-based banking analyst at Collins Stewart Plc.

Bradford & Bingley became the second British bank after Northern Rock Plc to be nationalized this year as survivors of the global credit crunch balk at swallowing all the risks facing weaker competitors. Governments around the world are stepping in to prevent bank failures, with regulators in Belgium, the Netherlands and Luxembourg injecting 11.2 billion euros ($16.3 billion) to save Fortis. Regulators in the U.S. seized Washington Mutual Inc. on Sept. 26 and sold assets to JPMorgan Chase & Co.

The U.K. Treasury will take over Bradford & Bingley’s 41 billion pounds in mortgage loans. In return, the government gets rights to any gains as the bank sells off assets, including personal loans and its headquarters in Bingley, England.

`Biggest Challenge’

“The biggest challenge for the U.K. government will be to manage the bank’s bad loans,” said Leigh Goodwin, a London-based analyst a Fox-Pitt Kelton Ltd. “Nobody else wanted the mortgage assets, which is not a good sign for the sector.”

Compensation rules in the U.K. mean other financial firms will have to cover Bradford & Bingley’s 14 billion-pound insurance policy to protect depositors. A short-term loan from the Bank of England will initially cover the amount falling on the banks.

Santander will pay the additional 4 billion pounds to protect deposits over the 35,000 pound maximum amount covered by the U.K. regulator’s compensation plan.

Bradford & Bingley is the second U.K. lender to fall under Santander, which become the country’s second biggest mortgage lender and third-biggest deposit holder. Santander agreed to buy Leicester, England-based Alliance & Leicester Plc for 1.26 billion pounds in July following its 2004 takeover of Abbey National for 9.2 billion pounds. It now has almost 1,300 U.K. branches and control about 10 percent of consumer deposits.

Cancelled Shares

About half of Bradford & Bingley’ employees will be moved to Santander under the deal, Chancellor Alistair Darling to told the BBC in an interview today.

Santander fell 4.2 percent to 10.46 euros in Madrid, giving the bank a market value of 65.4 billion euros, the second biggest in Europe after HSBC Holding Plc.

Bradford & Bingley’s shares were cancelled in London before the market opened today.

The credit crunch made it impossible for Chief Executive Officer Richard Pym, 59, to fund Bradford & Bingley’s lending. Deposits at the bank amounted to slightly more than half of loans outstanding, which forced it to depend on now-frozen capital markets. Pym will run the bank as public ownership begins, the U.K. Treasury statement said.

Britain‘s Financial Services Authority determined Sept. 27 that Bradford & Bingley didn’t meet the minimum requirements as a deposit taking bank. The Treasury, Bank of England and FSA said they took immediate action “to maintain financial stability and protect depositors while minimizing the exposure to taxpayers.” Any payoff for shareholders will be determined in “due course,” the government said.

`Wiped Out’

“In a nationalization, shareholders get wiped out,” Potter said. “That’s just the risk investors take.”

Bradford & Bingley was the smallest of four British building societies that transformed themselves from customer-owned lenders to publicly traded mortgage specialists as Britain’s housing market boomed. It was created in the 1964 merger of the Bradford Equitable Building Society and the Bingley Building Society, both established in 1851.

The combined company sold shares on the London Stock Exchange in December 2000 and had a market value of 3.2 billion pounds as recently as March 2006. This year, the shares plunged 93 percent to 20 pence on Sept. 26, reducing Bradford & Bingley’s market value to 289 million pounds, even after raising 400 million pounds in its third attempt to replenish capital.

Bradford & Bingley tried to survive by slashing new loans and said last week it would fire 370 mortgage advisers to save about 15 million pounds a year.

Not Enough

The measures weren’t enough to entice other banks to take on Bradford & Bingley’s mortgage business. Falling home price and rising unemployment in Britain have pushed up late mortgage payments to more than 2 percent of its loans. That compares with the U.K. average of 0.5 percent, according to the Council of Mortgage Lenders.

Almost half of Bradford & Bingley’s 42 billion pounds of loans went to landlords, bringing its share of the U.K. buy-to-let market to 19 percent. Arrears on loans to buyers who rent out their properties rose from 0.73 percent at the end of 2007 to 1.1 percent by June 30, according to the council.

About 17 percent of the bank’s loans went to customers whose incomes weren’t verified. They typically have a higher level of default than standard borrowers. Bradford & Bingley’s bad debts in the first half jumped to 74.6 million pounds from 5.3 million pounds last year.

Northern Rock

U.K. officials tried for most of the year to prevent Bradford & Bingley from becoming the next Northern Rock, which ran out of funding and triggered the first bank run in more than a century in September 2007. It had about 113 billion pounds of assets before it borrowed about 24 billion pounds in emergency funds from the Bank of England.

Northern Rock, based in Newcastle, England, was nationalized in February and got an additional 3.4 billion pounds from the government last month after late loan payments rose to 1.2 percent amid the U.K.’s steepest decline in house prices since 1992.

The U.K. avoided nationalization of HBOS Plc, the country’s biggest mortgage lender. It waived antitrust restrictions on Sept. 18 to get Lloyds TSB Group, the U.K.’s largest provider of checking accounts, to buy HBOS in a stock swap valued at about 12 billion pounds. HBOS CEO Andy Hornby agreed to sell after concluding the credit crisis “will be with us for some time.”

Buyers increasingly are waiting as long as they can before agreeing to purchase assets from struggling financial firms.

`Hardball’

Barclays Plc, Britain’s third-largest bank, abandoned talks to buy all of Lehman Brothers Holdings Inc. less than 24 hours before the investment bank filed for bankruptcy on Sept. 15. A day later, Barclays agreed to buy parts of its U.S. businesses for $1.75 billion.

Washington Mutual Inc., the 119-year-old Seattle-based bank, became the biggest U.S. lender to fail when it filed for bankruptcy protection Sept. 26. JPMorgan Chase & Co. purchased its branches and assets for $1.9 billion without taking on any of its liabilities.

“Banks have learned to play hardball,” Potter said. “They have learned to circle a potential acquisition and return when the value’s at its lowest.”

To contact the reporter for this story: Poppy Trowbridge in London at ptrowbridge@bloomberg.net; Ben Livesey in London blivesey@bloomberg.net

Published in: on September 29, 2008 at 11:09 pm  Comments Off on Bank Bailouts in Europe  
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FEDERAL RESERVE OWNERS AND HISTORY

March 2012 — Just added the First Audit of the Federal Reserve in 99 years. It is at the bottom of the page.

Seems the Federal Reserve is deep in a Fraud and Money Laundering Scam. This began in the George W Bush Era.

This may just be the tip of the iceberg.

Bush, Fed, Europe Banks in $15 Trillion Fraud, All Documented

FEDERAL RESERVE OWNERS


Here’s a look into who was involved in setting up the Federal Reserve in 1913.

* Rothschild Banks of London and Berlin
* Lazard Brothers Bank of Paris
* Israel Moses Sieff Banks of Italy
* Warburg Bank of Hamburg, Germany and Amsterdam
* Kuhn Loeb Bank of New York
* Lehman Brothers Bank of New York
* Goldman Sachs Bank of New York
* Chase Manhattan Bank of New York (Controlled By the Rockefeller Family Tree)

Charles A. Lindbergh, Sr. 1913 “When the President signs this bill, the invisible government of the monetary power will be legalized….the worst legislative crime of the ages is perpetrated by this banking and currency bill.”

A Bit of History

In August of 1929, the Fed began to tighten the money supply continually by buying more government bonds. At the same time, all the Wall Street giants of the era, including John D. Rockefeller and J.P. Morgan divested from the stockmarket and put all their assets into cash and gold.

Soon thereafter, on October 24, 1929, the large brokerages all simultaneously called in their 24 hour “call-loans.” Brokers and investors were now forced to sell their stocks at any price they could get to cover these loans. The resulting market crash on “Black Thursday” was the beginning of the Great Depression.

The Chairman of the House Banking and Currency Committee, Representative Louis T. Mc Fadden, accused the Fed and international bankers of premeditating the crash. “It was not accidental,” he declared, “it was a carefully contrived occurrence (created by international bankers) to bring about a condition of despair…so that they might emerge as rulers of us all.”

He went on to accuse European “statesmen and financiers” of creating the situation to facilitate the reacquisition of the massive amounts of gold which Europe had lost to the U.S. during WWI. In a 1999 interview, Nobel Prize winning economist and Stanford University Professor Milton Friedman stated: “The Federal Reserve definitely caused the Great Depression.”

US DECLAIRED bankruptcy

Because the government of the U.S. (a corporation) had paid its loans to the Fed with real money exchangeable for gold, it was now insolvent and could no longer retire its debt. It now had no choice but to file chapter 11. Under the Emergency Banking Act (March 9, 1933, 48 Stat.1, Public law 89-719) President Franklin Roosevelt effectively dissolved the United States Federal Government by declaring the entity bankrupt and insolvent.

June 5, 1933 Congress enacted HJR 192 which made all debts, public or private, no longer collectible in gold. Instead, all debts public or private were to be payable in un-backed Fed-created fiat currency. This new currency would now be legal tender in the U.S. for all debts public and private.

Henceforth, our United States Constitution would be continuously eroded due to the fact that our nation is now owned “lock stock and barrel,” by a private consortium of international bankers, contemptuous of any freedoms or sovereignties intended by our forefathers. This was all accomplished by design.

How the Gold was Stolen from America

Under orders of the creditor (the Federal Reserve System and its private owners) on April 5, 1933 President Franklin D. Roosevelt issued Presidential order 6102, which required all Americans to deliver all gold coins, gold bullion, and gold certificates to their local Federal Reserve Bank on or before April 28, 1933.

Any violators would be fined up to $10,000, imprisoned up to ten years, or both for knowingly violating this order. This gold was then offered by the Fed owners to any foreign, non-U.S. citizen, at $35.00 per ounce. Over the entire previous 100 years, gold had remained at a stable value, increasing only from $18.93 per ounce to $20.69 per ounce.

Since then, every U.S. citizen (by virtue of their birth certificate) has become an asset of the government, pledged at a specific dollar amount to pay this debt through future taxation. Thus, every American citizen is in debt from birth (via future taxation), and is, for all practical purposes, property of the creditors, the privately owned Federal Reserve System.

Presently, the United States Government (which again, is completely owned and controlled by the international bankers) continues to forfeit its sovereignty by entering into international monetary and trade agreements which abolish almost all forms of trade tariffs that previously protected not only the value of American commercial productivity and workforce labor, but which were also a substantial source of revenue for the government.

The loss of this revenue, as well as the expanding deficits created by recent massive reduction in taxation for large corporations and the very wealthiest citizens, insures continued borrowing by the government. This self-perpetuating cycle of borrowing is made possible only by the ability of the government to guarantee repayment (of only the interest, never the principal) through future taxation on the earnings of every American citizen.

Due to our banking history of deception, fraud and counterfeiting, which only benefits the purported elite bankers and their underlings, the borrowed principal itself is being used to make the payments on our debt at interest, thus, it is mathematically impossible to pay off.

We are, therefore, obligated to continue this cycle of borrowing indefinitely, causing complete money slavery for life. The amount owed will expand endlessly, until our monthly payments exceed our income, we are bankrupt, and all we have acquired in this lifetime is pillaged from us. Or, until the privately owned Federal Reserve System is ended and all debts are terminated.

This IS WAY Custsy

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These banking ads represent, in one way or another, that the bank will lend you money in exchange for repayment, plus interest. This absurd idea is completely contrary to what, in reality, transpires and what is actually intended. In actual fact, banks do not lend you any of their own, or their depositors money.

False advertising is an act of deliberately misleading a potential client about a product, service or a company by misrepresenting information or data in advertising or other promotional materials. False advertising is a type of fraud and is often, a crime.

To substantiate this premise, we will begin by examining the funding process of credit cards and loans. When you sign and remit a loan or credit card application, (say you are approved for $10,000.00) the commercial bank stamps the back of the application, as if it were a check, with the words: “Pay $10,000.00 to the order of…” which alters your application, transforming it into a promissory note.

Altering a signed document, after the fact with the intention of changing the document’s value, constitutes forgery and fraud. Forgery is the process of making or adapting objects or documents with the intent to deceive. Fraud is any crime or civil wrong perpetuated for personal gain that utilizes the practice of deception as its principal method.

In criminal law, fraud is the crime or offense of deliberately deceiving another, to damage them – usually, to obtain property or services without compensation. This practice may also be referred to as “theft by deception,” “larceny by trick,” “larceny by fraud and deception” or something similar.

Having altered the original document, the (now) promissory note is deposited at the local Federal Reserve Bank as new money. Generally Accepted Accounting Principels (the publication governing corporate accounting practices) states: “Anything accepted by the bank as a deposit is considered as cash.” This new money represents a three to ten percent fraction of what the commercial bank may now create and do with as they please.

So, $100,000.00 to $330,000.00.00, minus the original $10,000.00 is now added to the commercial bank’s coffers. With this scheme they are taking your asset, depositing it, multiplying it and exchanging it for an alleged loan back to you. This may constitute deliberate theft by deception. In reality, of course, no loan exists.

At this point in the process, they have now transferred and deposited your note (asset) to the Federal Reserve Bank. This note will permanently reside and be concealed there. Since they’ve pilfered your promissory note, they owe it back to you. It is you, therefore, who is actually the creditor. This deceptive acquisition and concealment of such a potentially valuable asset amounts to fraudulent conveyance.

In legal jargon, the term “fraudulent conveyance” refers to the illegal transfer of property to another party in order to defer, hinder or defraud creditors. In order to be found guilty of fraudulent conveyance, it must be proven that the intention of transferring the property was to put it out of reach of a known creditor – in this case, you.

Once they have perpetrated this fraudulent conveyance, the creditor then establishes a demand deposit transaction account (checking account) in your name. $10,000.00 of these newly created/acquired funds are then deposited into this account. A debit card, or in this case, a credit card or paper check is then issued against these funds. Remember – it’s all just bookkeeping entries, because this money is backed by nothing.

Money laundering is the practice of engaging in financial transactions in order to conceal the identity, source and/or destination of money. Previously, the term “money laundering” was applied only to financial transactions related to otherwise criminal activity.

Today, its definition is often expanded by government regulators (such as the United States Office of the Comptroller of the Currency) to encompass any financial transactions which generate an asset or a value as the result of an illegal act, which may involve actions such as tax evasion or false accounting.

As a result, the illegal activity of money laundering is now recognized as routinely practiced by individuals, small or large businesses, corrupt officials, and members of organized crime (such as drug dealers, criminal organizations and possibly, the banking cartel).

Since receipt of your first “statement” from each of your creditors, they have perpetuated the notion of your indebtedness to them. These assertions did not disclose a remaining balance owed to you, as would your checking account. Mail fraud refers to any scheme which attempts to unlawfully obtain money or valuables in which the postal system is used at any point in the commission of a criminal offence.

When they claim you owe a delinquent payment, you are typically contacted via telephone, by their representative, requesting a payment. In some cases this constitutes wire fraud, which is the Federal crime of utilizing interstate wire communications to facilitate a fraudulent scheme.

Throughout the process of receiving monthly payment demands, you may have been threatened with late fees, increased interest rates, derogatory information being applied to your credit reports, telephone harassment and the threat of being “wrongfully” sued.

Extortion is a criminal offense which occurs when a person obtains money, behavior, or other goods and/or services from another by wrongfully threatening or inflicting harm to this person, their reputation, or property. Refraining from doing harm to someone in exchange for cooperation or compensation is extortion, sometimes euphemistically referred to as “protection”. This is a common practice of organized crime groups.

Blackmail is one kind of extortion – specifically, extortion by threatening to impugn another’s reputation (in this case) by publishing derogatory information about them, true or false, on credit reports. Even if it is not criminal to disseminate the information, demanding money or other consideration under threat of injury constitutes blackmail.

New money was brought into existence by the deposit of your agreement/promissory note. If you were to pay off the alleged loan, you would never receive your original deposit/asset back (the value of the promissory note). In essence, you have now paid the loan twice. Simultaneously, the banks are able to indefinitely hold and multiply the value of your note (by a factor of 10 to 33) and exponentially generate additional profits.

For an agreement or a contract to be valid, there must be valuable consideration given by all parties. Valuable consideration infers a negotiated exchange and legally reciprocal obligation. If no consideration is present, the contract is generally void and unenforceable.

The bank never explained to you what you have now learned. They did not divulge that they were not loaning anything. You were not informed that you were exchanging a promissory note (which has a real cash value) that was appropriated to fund the implicit loan.

You were led to assume that they were loaning you their own, or other people’s money, which we have established as false. They blatantly concealed this fact. If you were misinformed, according to contract law, the agreement is null and void due to “non-disclosure.”

Contract law states that when an agreement is made between two parties, each must be given full disclosure of what is transpiring. An agreement is not valid if either party conceals pertinent information.

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Any President that Would Dare Oppose The Federal Reserve Gets Assassinated: History Lesson & JP Morgan Buyout of Bear Stearns

Article Source

Somewhere in the trillionaires room of Heaven three old codgers are sitting around a table smoking cigars and chuckling over the J. P Morgan Chase & Company buyout of Bear Stearns for a paltry $2.00 a share. Not so much because the price had been over $130 a share a few weeks earlier but because the Federal Reserve Board put up $30 billion of the government’s money to guarantee the sale.

Yes, Mayer Amschel Rothschild, J. P. Morgan and John D. Rockefeller, patriarchs of three of the most powerful family fortunes in history have waited nearly two centuries to see their dreams fulfilled. Perhaps such patience is why their families have remained successful by steadfastly maintaining the rules of the game as set down by their founders.

It was 248 years ago, in 1760 that Mayer Amschel Rothschild created the House of Rothschild that was to pave the way for international banking and control of the world’s resources on a scale unparalleled and somewhat mysterious to this date. He disbursed his five sons to set up banking operations throughout Europe and the various European empires.

“Give me control of a nation’s money
and I care not who makes the laws.”
Mayer Amschel Rothschild

In time the House of Rothschild was able to take control of the Bank of France and Bank of England and relentlessly pursued an effort over two centuries to control a national bank in the USA. By 1850 it was said the Rothschild family was worth over $6 billion and owned one half of the world’s wealth.

From oil (Shell) to diamonds (DeBeers) to gold (from 1919 until 2004 a Rothschild was permanent Chairman of the London Gold Fixing committee which met twice a day in the Rothschild offices in London) the Rothschild’s quietly accumulated a foothold in critical industries and commodities throughout the world.

A master at building impenetrable walls around his family assets the current value of the Rothschild holdings are estimated to be between $100 and $300 trillion, yes that is trillion dollars! Now for a point of reference the current United States National Debt is $9.4 trillion.

J. P. Morgan began as the New York agent for his father’s business in London in 1860 and by 1877 was floating $260 million in US Bonds to save the government from an economic collapse. In 1890 he inherited the business and in 1895 bought $200 million in US Bonds with gold to again save the US economy.

“If you have to ask how much it costs,
you can’t afford it.”
J. P. Morgan

By 1912 he controlled $22 billion and had started companies such as US Steel and General Electric while he owned several railroads. Morgan was also an American agent for the House of Rothschild in London and used the Rothschild resources to help people like John D. Rockefeller.

Rockefeller, who started Standard Oil in 1863 with the help of Morgan, grew his company into the largest oil company in the world and by 1916 Rockefeller was the first billionaire in American history. In 1909 he had set up the Rockefeller Foundation with $225 million and donated nearly a billion more dollars to various causes. The Rockefeller family fortune is estimated to be around $11 trillion today.

“The way to make money is to buy
when blood is running in the streets.”
John D. Rockefeller

So what did they have in common these extraordinary capitalists? They all were dedicated to owning a national bank in America so they could determine the fiscal policies of the nation and earn interest on the debt of the nation.

Rothschild agents in 1791 formed the First Bank of the United States but intense opposition to foreign ownership by President Jefferson and others helped kill it by 1811. A Second Bank of the United States was formed in 1816 once again by Rothschild agents and this time they secured a 20-year charter. However, President Andrew Jackson was also opposed to foreign ownership and withdrew the federal deposits in 1832 as part of his plan to kill the bank charter in 1836.

An attempt to assassinate Jackson in 1834 left him wounded but more determined than ever to stop the central bank. Thirty years later President Lincoln refused to pay international bankers extremely high interest rates during the Civil War and ordered the printing of government bonds. With the help of Russian Czar Alexander II who also blocked a similar national bank from being set up in Russia by the international bankers they were able to survive the economic squeeze.

Lincoln said, “The money powers prey upon the nation in times of peace and conspire against it in times of adversity. The banking powers are more despotic than a monarchy, more insolent than autocracy, more selfish than bureaucracy. They denounce as public enemies all who question their methods or throw light upon their crimes. I have two great enemies, the Southern Army in front of me and the bankers in the rear. Of the two, the one at my rear is my greatest foe. Corporations have been enthroned, and an era of corruption in high places will follow. The money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until the wealth is aggregated in the hands of a few, and the Republic is destroyed.”

Both Lincoln and Alexander II were assassinated. In 1881 James Garfield became president and he was dedicated to restoring the right of the federal government to issue money like Lincoln did in the Civil War and he was also assassinated.

Finally along came 1913 and the US was again suffering from a weak economy and there was a threat of another costly war, a world war this time, and business tycoons J.P. Morgan, John D. Rockefeller and E.H. Harriman were part of a group that got Woodrow Wilson to sign into law the Federal Reserve Act creating a network of 12 privately owned banks as part of a new Federal Reserve network.

One of the largest stockholders in the new Federal Reserve was the House of Rothschild through their direct and indirect holdings. A few years later it was disclosed that the Rothschilds also owned about 20% of J. P. Morgan. In time Morgan would merge with the Chase Manhattan Bank of the Rockefellers.

Years later John F. Kennedy opposed a private national bank and was assassinated in 1963 and Ronald Reagan opposed a private national bank and in 1981 an attempt was made to assassinate him. Coincidence or not the opposition to a privately owned national bank was a common characteristic.

Which brings us full circle to the present bailout of Bear Stearns by J.P. Morgan Chase & Company and we find the Rothschild, Morgan and Rockefeller families are all conveniently part of the same group benefiting from the bailout and the $30 billion guarantee by the Federal Reserve. This is the third time the J. P. Morgan Company has come to the rescue of the American banking system and economy.

John Perkins “Confessions of an Economic Hitman”Extended Interview 2008

Talks about Banks, Corporations, Free Trade,Wars, Toppling Governments, assassinations and numerous other things the US does to manipulate other countries.

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From September 2009

Federal Reserve rejects request for public Audit

First independent audit of the Federal Reserve in the Fed’s 99 year history.

By Alan Grayson

I think it’s fair to say that Congressman Ron Paul and I are the parents of the GAO’s audit of the Federal Reserve.

Anyway, one of our love children is a massive 251-page GAO report technocratically entitled “Opportunities Exist to Strengthen Policies and Processes for Managing Emergency Assistance.” It is almost as weighty as that 13-lb. baby born in Germany last week, named Jihad. It also is the first independent audit of the Federal Reserve in the Fed’s 99-year history.

It documents Wall Street bailouts by the Fed that dwarf the $700 billion TARP, and everything else you’ve heard about.

I wouldn’t want anyone to think that I’m dramatizing or amplifying what this GAO report says, so I’m just going to list some of my favorite parts, by page number.

Page 131 – The total lending for the Fed’s “broad-based emergency programs” was $16,115,000,000,000. That’s right, more than $16 trillion. The four largest recipients, Citigroup, Morgan Stanley, Merrill Lynch and Bank of America, received more than a trillion dollars each. The 5th largest recipient was Barclays PLC. The 8th was the Royal Bank of Scotland Group, PLC. The 9th was Deutsche Bank AG. The 10th was UBS AG. These four institutions each got between a quarter of a trillion and a trillion dollars. None of them is an American bank.

Pages 133 & 137 – Some of these “broad-based emergency program” loans were long-term, and some were short-term. But the “term-adjusted borrowing” was equivalent to a total of $1,139,000,000,000 more than one year. That’s more than $1 trillion out the door. Lending for these programs in fact peaked at more than $1 trillion.

Pages 135 & 196 – Sixty percent of the $738 billion “Commercial Paper Funding Facility” went to the subsidiaries of foreign banks. 36% of the $71 billion Term Asset-Backed Securities Loan Facility also went to subsidiaries of foreign banks.

Page 205 – Separate and apart from these “broad-based emergency program” loans were another $10,057,000,000,000 in “currency swaps.” In the “currency swaps,” the Fed handed dollars to foreign central banks, no strings attached, to fund bailouts in other countries. The Fed’s only “collateral” was a corresponding amount of foreign currency, which never left the Fed’s books (even to be deposited to earn interest), plus a promise to repay. But the Fed agreed to give back the foreign currency at the original exchange rate, even if the foreign currency appreciated in value during the period of the swap. These currency swaps and the “broad-based emergency program” loans, together, totaled more than $26 trillion. That’s almost $100,000 for every man, woman, and child in America. That’s an amount equal to more than seven years of federal spending — on the military, Social Security, Medicare, Medicaid, interest on the debt, and everything else. And around twice American’s total GNP.

Page 201 – Here again, these “swaps” were of varying length, but on Dec. 4, 2008, there were $588,000,000,000 outstanding. That’s almost $2,000 for every American. All sent to foreign countries. That’s more than twenty times as much as our foreign aid budget.

Page 129 – In October 2008, the Fed gave $60,000,000,000 to the Swiss National Bank with the specific understanding that the money would be used to bail out UBS, a Swiss bank. Not an American bank. A Swiss bank.

Pages 3 & 4 – In addition to the “broad-based programs,” and in addition to the “currency swaps,” there have been hundreds of billions of dollars in Fed loans called “assistance to individual institutions.” This has included Bear Stearns, AIG, Citigroup, Bank of America, and “some primary dealers.” The Fed decided unilaterally who received this “assistance,” and who didn’t.

Pages 101 & 173 – You may have heard somewhere that these were riskless transactions, where the Fed always had enough collateral to avoid losses. Not true. The “Maiden Lane I” bailout fund was in the hole for almost two years.

Page 4 – You also may have heard somewhere that all this money was paid back. Not true. The GAO lists five Fed bailout programs that still have amounts outstanding, including $909,000,000,000 (just under a trillion dollars) for the Fed’s Agency Mortgage-Backed Securities Purchase Program alone. That’s almost $3,000 for every American.

Page 126 – In contemporaneous documents, the Fed apparently did not even take a stab at explaining why it helped some banks (like Goldman Sachs and Morgan Stanley) and not others. After the fact, the Fed referred vaguely to “strains in the financial markets,” “transitional credit,” and the Fed’s all-time favorite rationale for everything it does, “increasing liquidity.”

81 different places in the GAO report – The Fed applied nothing even resembling a consistent policy toward valuing the assets that it acquired. Sometimes it asked its counterparty to take a “haircut” (discount), sometimes it didn’t. Having read the whole report, I see no rhyme or reason to those decisions, with billions upon billions of dollars at stake.

Page 2 – As massive as these enumerated Fed bailouts were, there were yet more. The GAO did not even endeavor to analyze the Fed’s discount window lending, or its single-tranche term repurchase agreements.

Pages 13 & 14 – And the Fed wasn’t the only one bailing out Wall Street, of course. On top of what the Fed did, there was the $700,000,000,000 TARP program authorized by Congress (which I voted against). The Federal Deposit Insurance Corp. (FDIC) also provided a federal guarantee for $600,000,000,000 in bonds issued by Wall Street.

There is one thing that I’d like to add to this, which isn’t in the GAO’s report. All this is something new, very new. For the first 96 years of the Fed’s existence, the Fed’s primary market activities were to buy or sell U.S. Treasury bonds (to change the money supply), and to lend at the “discount window.” Neither of these activities permitted the Fed to play favorites. But the programs that the GAO audited are fundamentally different. They allowed the Fed to choose winners and losers.

So what does all this mean? Here are some short observations:

(1) In the case of TARP, at least The People’s representatives got a vote. In the case of the Fed’s bailouts, which were roughly 20 times as substantial, there was never any vote. Unelected functionaries, with all sorts of ties to Wall Street, handed out trillions of dollars to Wall Street. That’s now how a democracy should function, or even can function.

(2) The notion that this was all without risk, just because the Fed can keep printing money, is both laughable and cryable (if that were a word). Leaving aside the example of Germany’s hyperinflation in 1923, we have the more recent examples of Iceland (75% of GNP gone when the central bank took over three failed banks) and Ireland (100% of GNP gone when the central bank tried to rescue property firms).

(3) In the same way that American troops cannot act as police officers for the world, our central bank cannot act as piggy bank for the world. If the European Central Bank wants to bail out UBS, fine. But there is no reason why our money should be involved in that.

(4) For the Fed to pick and choose among aid recipients, and then pick and choose who takes a “haircut” and who doesn’t, is both corporate welfare and socialism. The Fed is a central bank, not a barber shop.

(5) The main, if not the sole, qualification for getting help from the Fed was to have lost huge amounts of money. The Fed bailouts rewarded failure, and penalized success. (If you don’t believe me, ask Jamie Dimon at JP Morgan.) The Fed helped the losers to squander and destroy even more capital.

(6) During all the time that the Fed was stuffing money into the pockets of failed banks, many Americans couldn’t borrow a dime for a home, a car, or anything else. If the Fed had extended $26 trillion in credit to the American people instead of Wall Street, would there be 24 million Americans today who can’t find a full-time job?

And here’s what bothers me most about all this: it can happen again. I’ve called the GAO report a bailout autopsy. But it’s an autopsy of the undead.

Feel free to take a look at it yourself, it’s right here.

Source

Ron Paul and what he went through to get this Audit done.