Bruce's International Banking Thread

[Virgil Showlion]

BiMetalAUPT
Message #175 - 09/05/10 07:44 PM

Now this is interesting BIS III told the EU's Banks to buy Greek bonds!!!What is next!!


FRANKFURT — Even as Europe’s sovereign debt crisis intensified early this year, banks continued to load up on debt from Greece and other countries with the most acute fiscal problems, according to a report released Sunday that also suggested that the [topics.nytimes.com/top/reference/timestopics/organizations/e/european_central_bank/index.html?inline=nyt-org] European Central Bank inadvertently encouraged institutions to increase their risk.

Banks increased the amount of credit they extended to government and the private sector in Greece, Ireland, Portugal and Spain by 4.3 percent, or $109 billion, in the first quarter of 2010 compared with the previous quarter, the Bank for International Settlements said. The additional credit brought banks’ total exposure to the four countries to $2.6 trillion. The B.I.S., located in Basel, Switzerland, serves as a clearinghouse for the world’s central banks.

European banks increased their holdings to the four countries more than banks from the United States or other places outside of Europe, possibly because banks in the euro zone could use debt from Greece and the other countries as collateral for low-interest loans from the European Central Bank, the B.I.S. said in its quarterly report.

The E.C.B. has been lending euro-zone banks as much as they want at 1 percent interest, provided the banks can put up collateral like government bonds. The massive liquidity has helped weaker banks survive periods when they were unable to borrow from other banks or outside investors.

The fact that higher-risk European debt was less liquid, or harder to sell quickly, “was less of a concern for euro-area banks than for other banks since the former could ‘liquefy’ this debt in their operations with the E.C.B.,” the B.I.S. said.

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BiMetalAUPT
Message #176 - 09/06/10 10:29 PM

Now the fact are clear... German Banks are way undercapitilized and need masive capital infussions.. esp top 10 banks but the ECB passed them all under the stress test>>>As I have said .. they lack Teir1 capital now will need to raise 141 Billion USD to make 10% Tier1 capital as the new lower standard from 12.125% from the original plan( as per friend in Swiss banking firm that has the capital )



FRANKFURT (Reuters) - Germany's 10 biggest banks may need 105 billion euros ($141 billion) of additional capital under a revamp of banking rules designed to prevent future financial crises, the country's banking association said.

International banking regulators known as the Basel Committee will likely require banks to have a Tier 1 capital ratio of 6 percent, up from 4 percent, said the BdB banking association, whose members include lenders such as Commerzbank and Deutsche Bank.

Regulators are bumping up the amount of capital banks need to hold in an effort to ensure lenders have an array of loss-absorbing backstops that can be used in case of a downturn.

Buffers for capital conservation of an additional 2 percent and a countercyclical capital buffer of 2 percent more are also likely to be applied, the BdB said on Monday.

The Tier 1 ratio and each of the buffers probably would be composed of 80 percent of top quality or "core Tier 1" capital, which consists of equity capital and retained earnings, BdB said.

Many leading banks already hold Tier 1 capital of 10 percent or more.

But many lenders also face big hurdles getting ready for the new rules and needed time to adjust, particularly as politicians were also weighing separate measures such as a bank levy, a financial transaction tax and changes to the law on corporate restructuring, BdB Deputy General Manager Hans-Joachim Massenberg told journalists.

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frank the impaler
Message #177 - 09/07/10 12:22 AM

Germany's not dealing from the the top of the deck

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BiMetalAUPT
Message #178 - 09/07/10 11:08 PM

Frank from New York Federal Reserve ...Any idea about starting a Morgage investment Trust for the 50% down Condo market in New York City???Name? International Luxury Investment Trust and Guaranty Fund.  100% Capital and only lend on Co-OP I want to live in!!! Finance Art also ?  Bruce

Financial Amplification of Foreign Exchange Risk Premia July 2010  Number 461
Revised August 2010 JEL classification: G15, G01, G17, F31  

Authors: [www.newyorkfed.org/research/economists/adrian/index.html] Tobias Adrian, [www.newyorkfed.org/research/economists/etula/index.html] Erkko Etula, and [www.newyorkfed.org/research/economists/groen/index.html] Jan J. J. Groen

Theories of systemic risk suggest that financial intermediaries’ balance-sheet constraints amplify fundamental shocks. We provide supportive evidence for such theories by decomposing the U.S. dollar risk premium into components associated with macroeconomic fundamentals and a component associated with financial intermediary balance sheets. Relative to the benchmark model with only macroeconomic state variables, balance sheets amplify the U.S. dollar risk premium. We discuss applications to systemic risk monitoring.

 

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frank the impaler
Message #179 - 09/07/10 11:14 PM

Bruce- I believe they are already doing this in NY

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Scared_Shirtless
Message #180 - 09/07/10 11:24 PM



Hi Bruce!

 

Great bank posts.  So the German banks used 4% Tier 1...

 

They calculated it HOW???  They included WHAT???

 

And now 6%...  Let alone 8 - or 10 - or 12 1/8...

 

All those different regulators overseeing.  Hmmm...

 

And now an inflamed sovereign debt issue.

 

Interesting times...

[Virgil Showlion]

BiMetalAUPT
Message #181 - 09/19/10 04:42 PM

NOW IT IS A WAR OF WORDS.. THE ECB IS FIGHTING BACK IN THE LAND OF THE PRESS CORE..INTERESTING THEY HAVE NO DATA TO BACK UP THIS BATTLE VS B.I.C. III THAT THEY FUND..I THINK THEY ARE BETTING WITH A PAIR OF TWO'S HOPING TO DRAW TWO MORE TWO'S BUT SOME ONE ELSE HOLDS THE FOUR ACES..LIKE CITIBANK OR INDUSTRIAL BANK OF JAPAN??IS THE CAPITAL OF 4.5% TIER1 GOING TOO LOW AS B.I.S III CLAIMS FOR THE LAST 10 YEARS?? JUST A THOUGHT  GREEK BONDS AT PAR AS FAR TO BORROW AT THE ECB...

Markets are over-pricing the risk of a euro zone sovereign default at the moment, European Central Bank Governing

Council member Ewald Nowotny said on Friday.

"It's true we had a situation of kind of uniform interest rates, we don't have that anymore," Nowotny said in a conference.

"We have quite substantial risk premia; you could say even that to a certain extent they may be overblown. We have kind of been moving between the extremes."

Heavily indebted euro zone perimeter countries are being hit particular hard at the moment. Greece, whose troubles triggered the debt crisis, is facing market prices around 9 percentage points higher on its 10-year bonds than [www.reuters.com/places/germany] Germany. GR10YT=2.1%DE10YT=1.97%

Nowotny also said that asset bubbles were better tackled with regulatory tools than interest rate increases.

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BiMetalAUPT
Message #182 - 09/26/10 06:46 AM

The increase in Tier1 has German Banks and their trade group all in fits.. Esp GCB!!!  7% Capital..Citibank has 12% Tier1` after the student loans were sold!!!  BBC on the subject..


The Bank for International Settlements (BIS) says the new rules on banks' capital requirements, which it helped to draw up, will make the world "a safer place".

Known as Basel III, the regulations require banks to hold more capital in order to absorb major losses.

Stephen Cecchetti of the BIS told the BBC that the new rules reduced the likelihood of another financial crisis.

However, the new rules have been accused of being soft on banks.


The BIS was part of the team that drew up Basel III alongside the Basel Committee, a group of bank regulators from 27 countries. 'Strong agreement' [www.bbc.co.uk/news/business-11302062#story_continues_2] Continue reading the main story “Start Quote

I don't think we know that the banks meet the (new) criteria and I don't think investors know either.” End Quote Professor Stephen Cecchetti Economic adviser, Bank for International Settlements

Speaking on the BBC World Service's Business Daily, Professor Cecchetti said: "It's important to keep in mind that if banks are left on their own, they tend to hold too little capital.

"I think the deal we have been able to get is a very good, very strong agreement."

Asked whether the rise in banking shares after the Basel III was agreed meant that investors believed most banks met the new criteria, Professor Cecchetti said: "I don't know that 24 hours in the stock market is something that we would want to put much interpretation on one way or another."

As well as increasing the capital banks hold to act as a buffer against future losses from 2% to 7%, Professor Cecchetti said Basel III had made the definition of what constitutes as capital stricter and widened the remit of what counts as banking activity.

As a result of the new amendments he added that it was not clear if all banks met the rules.

"Its our view that the definitional changes and the changes in the size of (banks) are underestimated," he said.

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BiMetalAUPT
Message #183 - 09/26/10 07:06 AM

From B.I.S. Basel,Switzerland...  ECB has some good words but the German "Bund" does not.. Lobied for less number .. End result 7%.. Not the 12.25% the Federal Reserved wants....
 
Group of Governors and Heads of Supervision announces higher global minimum capital standards 12 September 2010

At its 12 September 2010 meeting, the Group of Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking Supervision, announced a substantial strengthening of existing capital requirements and fully endorsed the [www.bis.org/press/p100726.htm] agreements it reached on 26 July 2010. These capital reforms, together with the introduction of a global liquidity standard, deliver on the core of the global financial reform agenda and will be presented to the Seoul G20 Leaders summit in November.

The Committee's package of reforms will increase the minimum common equity requirement from 2% to 4.5%. In addition, banks will be required to hold a capital conservation buffer of 2.5% to withstand future periods of stress bringing the total common equity requirements to 7%. This reinforces the stronger definition of capital agreed by Governors and Heads of Supervision in July and the higher capital requirements for trading, derivative and securitisation activities to be introduced at the end of 2011.

Mr Jean-Claude Trichet, President of the European Central Bank and Chairman of the Group of Governors and Heads of Supervision, said that "the agreements reached today are a fundamental strengthening of global capital standards." He added that "their contribution to long term financial stability and growth will be substantial. The transition arrangements will enable banks to meet the new standards while supporting the economic recovery." Mr Nout Wellink, Chairman of the Basel Committee on Banking Supervision and President of the Netherlands Bank, added that "the combination of a much stronger definition of capital, higher minimum requirements and the introduction of new capital buffers will ensure that banks are better able to withstand periods of economic and financial stress, therefore supporting economic growth."

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BiMetalAUPT
Message #184 - 09/26/10 07:10 AM

More Capital but not enough .. hold to the 12.25% .. My dad told me use 10% capital ratio.. If the bank has less..sell the stock!!!  OPK that makes great ROE but at the cost of risk...

Increased capital requirements

Under the agreements reached today, the minimum requirement for common equity, the highest form of loss absorbing capital, will be raised from the current 2% level, before the application of regulatory adjustments, to 4.5% after the application of stricter adjustments. This will be phased in by 1 January 2015. The Tier 1 capital requirement, which includes common equity and other qualifying financial instruments based on stricter criteria, will increase from 4% to 6% over the same period. ([www.bis.org/press/p100912a.pdf] Annex 1 summarises the new capital requirements.)   That is a long time off.. but we have needs for loans to build capital and profits now to get to 7%!!!!!

The Group of Governors and Heads of Supervision also agreed that the capital conservation buffer above the regulatory minimum requirement be calibrated at 2.5% and be met with common equity, after the application of deductions. The purpose of the conservation buffer is to ensure that banks maintain a buffer of capital that can be used to absorb losses during periods of financial and economic stress. While banks are allowed to draw on the buffer during such periods of stress, the closer their regulatory capital ratios approach the minimum requirement, the greater the constraints on earnings distributions. This framework will reinforce the objective of sound supervision and bank governance and address the collective action problem that has prevented some banks from curtailing distributions such as discretionary bonuses and high dividends, even in the face of deteriorating capital positions.

A countercyclical buffer within a range of 0% - 2.5% of common equity or other fully loss absorbing capital will be implemented according to national circumstances. The purpose of the countercyclical buffer is to achieve the broader macroprudential goal of protecting the banking sector from periods of excess aggregate credit growth. For any given country, this buffer will only be in effect when there is excess credit growth that is resulting in a system wide build up of risk. The countercyclical buffer, when in effect, would be introduced as an extension of the conservation buffer range.

These capital requirements are supplemented by a non-risk-based leverage ratio that will serve as a backstop to the risk-based measures described above. [www.bis.org/press/p100716.htm] In July, Governors and Heads of Supervision agreed to test a minimum Tier 1 leverage ratio of 3% during the parallel run period. Based on the results of the parallel run period, any final adjustments would be carried out in the first half of 2017 with a view to migrating to a Pillar 1 treatment on 1 January 2018 based on appropriate review and calibration.

Systemically important banks should have loss absorbing capacity beyond the standards announced today and work continues on this issue in the Financial Stability Board and relevant Basel Committee work streams. The Basel Committee and the FSB are developing a well integrated approach to systemically important financial institutions which could include combinations of capital surcharges, contingent capital and bail-in debt. In addition, work is continuing to strengthen resolution regimes. The Basel Committee also recently issued a consultative document [www.bis.org/press/p100819.htm] Proposal to ensure the loss absorbency of regulatory capital at the point of non-viability. Governors and Heads of Supervision endorse the aim to strengthen the loss absorbency of non-common Tier 1 and Tier 2 capital instruments.

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BiMetalAUPT
Message #185 - 09/27/10 04:16 AM

Transition arrangements: yes if you think this is the last word on the work in progress..THINK AGAIN


Since the onset of the crisis, banks have already undertaken substantial efforts to raise their capital levels. However, preliminary results of the Committee's comprehensive quantitative impact study show that as of the end of 2009, large banks will need, in the aggregate, a significant amount of additional capital to meet these new requirements. Smaller banks, which are particularly important for lending to the SME sector, for the most part already meet these higher standards.

The Governors and Heads of Supervision also agreed on transitional arrangements for implementing the new standards. These will help ensure that the banking sector can meet the higher capital standards through reasonable earnings retention and capital raising, while still supporting lending to the economy. The transitional arrangements, which are summarised in [www.bis.org/press/p100912b.pdf] Annex 2, include:

• National implementation by member countries will begin on 1 January 2013. Member countries must translate the rules into national laws and regulations before this date. As of 1 January 2013, banks will be required to meet the following new minimum requirements in relation to risk-weighted assets (RWAs):
  • 3.5% common equity/RWAs;
    
  • 4.5% Tier 1 capital/RWAs, and
    
  • 8.0% total capital/RWAs.

  The minimum common equity and Tier 1 requirements will be phased in between 1 January 2013 and 1 January 2015. On 1 January 2013, the minimum common equity requirement will rise from the current 2% level to 3.5%. The Tier 1 capital requirement will rise from 4% to 4.5%. On 1 January 2014, banks will have to meet a 4% minimum common equity requirement and a Tier 1 requirement of 5.5%. On 1 January 2015, banks will have to meet the 4.5% common equity and the 6% Tier 1 requirements. The total capital requirement remains at the existing level of 8.0% and so does not need to be phased in. The difference between the total capital requirement of 8.0% and the Tier 1 requirement can be met with Tier 2 and higher forms of capital. The regulatory adjustments (ie deductions and prudential filters), including amounts above the aggregate 15% limit for investments in financial institutions, mortgage servicing rights, and deferred tax assets from timing differences, would be fully deducted from common equity by 1 January 2018.

  
  
• 
  
  
• In particular, the regulatory adjustments will begin at 20% of the required deductions from common equity on 1 January 2014, 40% on 1 January 2015, 60% on 1 January 2016, 80% on 1 January 2017, and reach 100% on 1 January 2018. During this transition period, the remainder not deducted from common equity will continue to be subject to existing national treatments.
  
• The capital conservation buffer will be phased in between 1 January 2016 and year end 2018 becoming fully effective on 1 January 2019. It will begin at 0.625% of RWAs on 1 January 2016 and increase each subsequent year by an additional 0.625 percentage points, to reach its final level of 2.5% of RWAs on 1 January 2019. Countries that experience excessive credit growth should consider accelerating the build up of the capital conservation buffer and the countercyclical buffer. National authorities have the discretion to impose shorter transition periods and should do so where appropriate.
  
• Banks that already meet the minimum ratio requirement during the transition period but remain below the 7% common equity target (minimum plus conservation buffer) should maintain prudent earnings retention policies with a view to meeting the conservation buffer as soon as reasonably possible.
  
• Existing public sector capital injections will be grandfathered until 1 January 2018. Capital instruments that no longer qualify as non-common equity Tier 1 capital or Tier 2 capital will be phased out over a 10 year horizon beginning 1 January 2013. Fixing the base at the n

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BiMetalAUPT
Message #186 - 10/03/10 05:21 PM



Some prefatory stories are highly revealing. Bank of America is badly on the ropes. On the same weekend at the end of July, when the Bank For Intl Settlements executed a 340 ton gold swap contract, two other events happened. The London metals exchange apparently suffered coordinated delivery raids, all legal, but painful nonetheless, stripping the embattled exchange of much gold bullion. My source from the German banking fortress shared that the BIS might have rescued the London Bullion Market Assn, and thereby prevented a near default at the exchange. Spurious stories about aiding commercial banks, even the Portuguese central bank, were floated to distract the masses. The second event was that on the same weekend, Bank of America suffered a failure. But the USFed pulled it out of the fire by Monday morning with fresh huge infusions of funny money. This week, another $13 billion infusion came to BOA by way of much darker corners of USGovt agencies, from nether recesses. It is getting that bad! So BOA had been propped by the USFed and the USCongress in the past, but by the syndicate now. In time, they will remove the valued assets and exit the burning building. Unexpected consequences are sure to come, a fact of nature. The BOA story came after a prompted inquiry as to which banks might next succumb to the rising gold & silver prices. BOA was at the top of the list of banks mentioned, but others were mentioned too. They appear in the September Hat Trick Letter, the usual suspects.

 

QE2:  A JUSTIFIED CANCER

My best description of QE2, the Quantitative Round #2 Launch, is simply stated a monetary cancer, an admission of failure, and the trigger for the next breakdown in the global monetary system. The QE2 Launch is a US flag flying upside down at the central bank command center. Imagine trying to justify printing money to cover debts, and retaining credibility. The belief stated by USFed Chairman Bernanke, that zero cost comes from printing money, is pure heresy with dire consequences. The cost is lost confidence in the monetary system, in the currencies, and in the central bank franchise system. The QE initiatives kill the requisite confidence. Thus the rise in the Gold price in response. The financial news anchors struggle to hide their growing awareness that gold is the safe harbor from a destroyed monetary system, wrecked currencies, discredited central banks, and insolvent banks. They are awakening, as are those in the investment community.

 

Three additional sides are revealed on the Quantitative Easing desperation. The Bank of England has a US plant residing within. Adam Posen is an American who sits on the Monetary Policy Committee at the bank. He inflamed concerns about monetary instability with a speech to the Chamber of Commerce in Hull on Tuesday. He urged the major central banks to pursue more aggressive bond buying in order to rescue the world economy from stagnation that persists. He spoke of the fear of looking ineffective from inaction, mitigated by usage of extreme tools. He actually said, "Thus, policymakers should not settle for weak growth out of misplaced fear of inflation." So there you have it, inflation full speed ahead. A clarion call to inflate. The risk is hyper-inflation. Their policies in the last cycle produced unforeseen problems. In fact, the central banks, in particular the USFed, fight the last war only to create the most monster, on a consistent basis, in a pattern of serial events. Their colossal monetary inflation is breaking all historical records. It is given political cover by virtue of doctored price inflation statistics to hide its chronic 5% to 7% range. Posen pushed for further monetary easing undertaken in the United Kingdom, even to the extent of corporate debt purchases. Of course, to keep the order, they should begin with simple UKGilt (bond) purchases. He acknowledged that a QE program will not be able to create sustained recovery on its own. He fears a 1990s Japan style scenario, when a collapse of the Western monetary syste

[Virgil Showlion]

BiMetalAUPT
Message #187 - 10/03/10 08:17 PM

Point her about international banking is we are seeing a "Phase Delay" with banks not lending money due to the increased demand for Tier 1 capital and tighter standards both by the BIS.III doctrine.  The decline in growth is countered by QE2 by German and American Central Banks.. When the effect are felt we will have major inflation and then tight money.. Yo Yo economy growth...As my German Grandmother would say food in the pantry is as good as money in the bank.. Now for the Wine .. it gets better.. Check out the gold!!! and silver



THE CURRENCY WAR HEATS UP

The competing currency war is ramping up, with gross interventions, open disputes, notable desperation, friction among trade partners, and urgent need to take action. Nations are taking positions against each other increasingly. In defending their economies, they are pitting themselves against allies and foes alike. The number of bilateral squabbles has never been greater. The winner will be Gold, as all paper currencys will circle the toilet and lose. The Gold price acts as a meter; it will rise in spectacular fashion. It rises due to the profound debasement in a death process of the currency system. The undermine is being sanctioned by the major nations. This process follows inevitably after the grotesque insolvency of the US banking system, the UK banking system, and much of the European banking system. Their economies are dying on the vine as a result of the dysfunctional credit systems.

 

The Competing Currency War has numerous sides in flourishing development, many stories, involving many nations, much conflict, collectively of huge importance. The longstanding battle between China and the United States is at a flashpoint every couple months. Japan is angry that the Chinese central bank has pushed up the value of the Yen. A return to investor flight away from the Euro might resume on renewed concerns over the sovereign risk. The Australian Dollar has been pushed higher by the strength of Australian resource wealth and further official interest rate hikes. Numerous international meetings over the next six weeks will elevate concerns from the broken financial arenas into the fractious political domain. The US and China are headed for a serious clash, with little sign of compromise. Each Quantitative Easing initiative acts like a stick poked in the Chinese eye, since claims of currency manipulation ring hollow when the USGovt is doing precisely that, undercutting the USDollar loudly.

 

The upcoming midterm elections in the United States could easily flip control to the other inept party, as perceptions grow of systemic failure while political inaction persists. Anticipated gridlock would ensure inaction and accelerate the slide. President Obama hastily sent the lead economic adviser Larry Summers to Beijing to haggle with Chinese leaders over their currency policy. Summers promptly resigned afterwards. Team Obama is losing its members, never perceived as any all-star cast, but rather retreads. The political insects in the USCongress harp on China, an easy target. They buzz but make no honey. Further details on events related to other nations in th

THE CURRENCY WAR HEATS UP

The competing currency war is ramping up, with gross interventions, open disputes, notable desperation, friction among trade partners, and urgent need to take action. Nations are taking positions against each other increasingly. In defending their economies, they are pitting themselves against allies and foes alike. The number of bilateral squabbles has never been greater. The winner will be Gold, as all paper currencys will circle the toilet and lose. The Gold price acts as a meter; it will rise in spectacular fashion. It rises due to the profound debasement in a death process of the currency system. The undermine is being sanctioned by the major nations. This process follows inevitably after the grotesque insolvency of the US banking system, the UK banking system, and much of the European banking system. Their economies are dying on the vine as a result o

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Ahamburger
Message #188 - 10/04/10 01:20 AM



 Thanks for the info on BOA Bruce!!!!

 

  Not sure if you read this today or not, how does this effect the Euro zone??

 

China's premier, Wen Jiabao, pledges support for euro

The country vows it will not reduce its holdings of European government bonds, and will double trade with Greece

www.guardian.co.uk/world/2010/oct/04/china-wen-jiabo-euro

 

 Since the Euro zone is Chinas biggest trading partner I thought it was pretty interesting to say the least...

 

 

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BiMetalAUPT
Message #189 - 10/08/10 03:58 AM

Good news on Tier 1 for the two largest German banks!!!

Germany’s 14 biggest banks, including [www.bloomberg.com/apps/quote?ticker=DBK:GR] Deutsche Bank AG and [www.bloomberg.com/apps/quote?ticker=CBK:GY] Commerzbank AG, boosted their capital buffers in the first half before the introduction of tighter regulatory requirements, according to Ernst & Young.

The banks’ Tier 1 capital ratio, a measure of financial strength, rose to 10.1 percent on average in the first six months of 2010, from 9.3 percent in the year-earlier period, the consulting firm said in an e-mailed statement today. Nine of the lenders raised their capital, three were unchanged and state- owned banks Norddeutsche Landesbank Girozentrale and Landesbank Hessen-Thueringen Girozentrale saw declines.

The [www.bis.org/bcbs/index.htm] Basel Committee on Banking Supervision this month agreed to more than double capital requirements for banks after the financial crisis forced state bailouts of firms including Commerzbank, [www.bloomberg.com/apps/quote?ticker=LBNRW:GR] WestLB AG and Bayerische Landesbank. [www.bloomberg.com/apps/quote?ticker=HRX:GY] Hypo Real Estate Holding AG, the commercial-property lender rescued by the government, was the only one among the 14 German banks to fail a European Union-wide stress test in July.

Lenders are facing “lasting challenges” to improve their business models amid rising requirements for capital, said Dirk Mueller-Tronnier, head of banking at Ernst & Young. “The banks still have a lot of work to do.”

The 14 lenders surveyed by the consulting firm boosted net income to a total of 4.35 billion euros ($5.85 billion) in the first half from 1.1 billion euros in the year-earlier period, helped by a 51 percent decline in loan-loss provisions, the study showed. Eight of the banks increased profit, led by a rebound at Commerzbank, while the remaining ones saw a decline in earnings. Munich-based Hypo Real Estate had the biggest loss.

Eleven of the banks employed 234,333 people in the first half, down 4 percent, according to the report.

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BiMetalAUPT
Message #190 - 10/13/10 08:42 PM

Last week Swedish and German parliamentarians lodged objections to an EU Commission proposal for uniform national bank-deposit guarantees, which would lock these national guarantee funds into bailing each other out should any country's kitty prove insufficient.

EU Economic and Monetary Affairs Commissioner Michel Barnier pitched the move back in July as a way to bring "responsibility to Europe's financial system," adding that European consumers "need reassurance that their savings, investments or insurance policies are protected no matter where in Europe they are based." The proposed rules would require its 27 nations to guarantee depositors for up to €100,000 ($139,219). Banks would pre-fund these pots with 75% of their national target amount, but nothing in the proposal would preclude taxpayers from having to kick in as a "last resort," as they already have. If any European bank failed under the new rules, and if its national fund failed to make depositors whole, the rest of the bloc would have to loan them up to 25% of the difference.

Mr. Barnier's idea is that a uniform, EU-wide deposit-insurance scheme would prevent a run on any one nation's banks, and hence a liquidity crisis, in a panic. That may prove true. Yet insulating one banking system by tying it to others also internationalizes existing national risks. When Greece declared itself unable to pay its bills earlier this year, uncertainty spread to the whole euro zone as the Bank for International Settlements estimated that French and German banks were the largest holders of Greek sovereign debt. The EU's and IMF's subsequent Greek bailout was intended to quell market fears of so-called contagion, but in reality it validated them by setting the precedent that a crisis in one European country would be paid for by all.

A mutual pact for deposit insurance would widen that precedent and thus increase the effects that every country's financial system can have on every other. These days, all eyes are on Ireland, which already guarantees bank deposits up to €100,000. Dublin's ongoing bank bailouts have brought the public deficit to an estimated 32% of GDP, so it's an open question how Ireland will continue to pay its bills while sustaining its systemically crucial banks. Of course, Ireland is small compared to other countries with troubled banking sectors, such as Spain. Asking every EU member state to pitch in to bail out Spain's banks if Madrid got in over its head could get expensive quickly.

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BiMetalAUPT
Message #191 - 10/13/10 10:02 PM

The first time I read this I thought how lucky we are to be in NAFTA.. Mexico has just had it credit rating improved and sold a 100 year bond!!! at a discount to the 30 year bonds it sold!!!  Canada is a real star in the world of Finance and the USA is making all the right moves.  The fact is our SS system is one of the most solvent!!


To force the Commission to review its plan, several more national parliaments would have to join Berlin and Stockholm's objections by today. As of press time, Czech, Danish, Italian, Dutch, Austrian, Polish, Slovenian, and Finnish parliamentarians were scrutinizing the proposal.

Germany's domestic bank bailouts have helped hike the national debt to more than 80% of GDP so far, and some German banks remain significantly exposed to other countries' sovereign debts. But the German national fisc is still among the more stable in the EU. And since European bailouts so far have, for Germans, been all give and no take, it's unsurprising that German lawmakers want to shut the door to still more foreign liabilities. Sweden, meanwhile, has a largely stable banking system, a public deficit of 1.1% of GDP and economic growth forecast at 4.5% this year. A mutual insurance pact that would import Irish, never mind Spanish, peril would be a no-win for Stockholm.

The old maxim that fear is the foundation of safety reminds us how unpleasant a completely safe world would be. But by attempting to reduce fear by spreading risk, Brussels would only make finance more hazardous for everyone.

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frank the impaler
Message #192 - 10/13/10 10:24 PM

Bruce you know we will eat the EUC's lunch and then sell them food when they are hungary

[Virgil Showlion]

BiMetalAUPT
Message #193 - 10/13/10 11:56 PM

Frank,
 It is all about Capital.. as in CAPM!!!!  We have a lot more capital Ideas then the EU.  As far as...

The old maxim that fear is the foundation of safety reminds us how unpleasant a completely safe world would be. But by attempting to reduce fear by spreading risk, Brussels would only make finance more hazardous for everyone.

Too many of my friend was with "Money never sleeps".. IT is the Game !!!We have to play.. It is the only game in town!!!!  AND those who love it play to win.. Kash is KING...  BUT the REturn on KASH is NILL!!!!  Or should I say ROE!!!!!!!

in every problem .. their is a GOLDEN opportunity.. Look at Energy!!! We had wood to run the Rail Roads on now we  have silver wire and 5th Generation Nuke Power to make the trains go 200+ MPH...  ++
We had oil in the ground to make fire for the boilers for the trains so they could go 100 mph... now we have nuke power and wire to make them to 200+ MPH...

Then we made the oil into Diesel.. so we could go 120 mph.. now we have 900 volt DC to go 200++ mph.. Japan, France and Germany are all ahead of us but they go 250++mph

And my point is...Kash is KING..
                        It give you all the options..
                                If you do now have the Technology you can use the Kash and buy it..

                                        But if you lose the Kash..

Just a thought,
Bruce

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Life was good
Message #194 - 10/14/10 12:16 AM

And my point is...Kash is KING..

Really?  I think it depends on how much cash you have.  Not much good if you have a quarter and the need cost a dollar.  Kash only is King to those that control it, which is neither you nor I. 

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BiMetalAUPT
Message #195 - 10/14/10 04:26 AM

Life is Good,
 I had an old friend that earned a living using what little capital he had during the Great Depression.. He would scalp the Cotton market during the day.    It was all about Money control... They called them two dollar brokers as he worked the New York Exchange on his own account when he had the capital from the Cotton Exchange.  " Money never sleeps".. He would square the books at the end of the day and week with the exchange. 

I am not sure how it was down in the Pits during the summer but he also worked during the week-end... This was the depression so a $2.00 profit was a lot of money for an exchange of risk and assets. 

KASH WAS KING!!!!

Bruce

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Tyfighter3
Message #196 - 10/14/10 05:18 AM

Bruce, isn't there a reason why Europe and Japan have high speed trains? Isn't it because they have to import most of their energy and the closeness of their population makes it halfway breaking even?

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BiMetalAUPT
Message #197 - 10/14/10 08:07 AM









Ty Figher 3,
 Sorry, I do not know.  Discounted Air lines are doing better in the EU all the time also.  What I do know is they run the Double Cars from Paris  to the Bedroom area on tyres.. Nice ride...  They also have their own express track  in England and the EU so they do not have to slow.  The all are very good and well paid for with Union working members proud to be part of the line. 

Have you ever seen the pictures of the old Broadgage Lines.. Like to Osweago New York.  The high speed lines in Japan are about as wide...We do not have lines that are wide enough so we will have to build from zero to make it fast.  Their is a big argument in England about adding a new line though London to the North... Might harm the Rothschild's estate???


Just a thought,
Bruce





t

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BiMetalAUPT
Message #198 - 10/17/10 09:15 PM

More one the subject of wealth and Socal services.. Esp Sweden and France.. Both on the wealthest population..

Abstract:

Globalization is increasingly changing the demography of populations through modernization and through migration. Modernization and modernity impact populations by decreasing the death rates and birth rates to generate populations with age structures that look like inverted pyramids with few young people and many old people, as is currently the case in Japan. Women in modern societies have significantly fewer children. Without immigration, populations in modern societies (Europe, the United States, Japan) are not replacing themselves. Migration, especially international labor migration and to some extent, refugee migration, brings populations with high birth rates from pre-modern or modernizing countries having large populations and poor employment prospects to countries with (usually low waged) employment opportunities and low birth rates among their indigenous populations. This situation raises a host of political and economic questions and problems. The purpose of this paper is to survey migration and citizenship policies in a sample of modern low birth rate countries (US, Australia, Canada, Europe, Japan) to begin to develop a typology of responses to this dilemma with particular attention to the gendered nature of these policies. Modern developed societies need immigrant labor but are quite conflicted about whether to encourage immigration or limit it. The result is often a set of contradictory policies that (sometimes inadvertently) encourage migration (globalization and free trade policies, bracero type programs, sexual trafficking) and at the same time attempt to limit it (tighter border controls, strict citizenship limitations). These policies are highly gendered both for sending and for receiving states. Countries of origin influence migration through assumptions about the differential status and role of men and women and through rules that impact men and women differently. Receiving countries often classify women as dependent according to their family roles rather than as independent entities. In receiving countries that accept women as temporary workers, women are often admitted to perform female occupations of childcare, domestic service, or nursing. The topic raises questions of increased nativism, changing national identities, anti-immigrant violence, and right wing political parties. It also raises many questions about women and their reproductive role in society. In the past, low birth rates and labor shortages in Sweden and in France were responsible for state policies that encouraged state subsidies for childbearing, for maternity leave, for childcare, and in general, promoted the equality of women and the welfare state in Swedish and French societies. Will this current demographic pressure cause states to act in the same vein? To what extent will the influx of immigrant women (in countries where immigration is allowed) alter the face of the current women's movements in receiving countries?

[Virgil Showlion]

BiMetalAUPT
Message #199 - 11/01/10 06:01 PM

power of Forecasting : returns are now more normal.. great read equity premium!!!.. here is the E.S.

  [www.newyorkfed.org/index.html] Home > [www.newyorkfed.org/research/index.html] Research > [www.newyorkfed.org/research/publication_annuals/index.html] Research Publications Staff Reports Equity Premium Predictions with Adaptive Macro Indexes October 2010  Number 475 JEL classification: G17, C58  

Author: [www.newyorkfed.org/research/economists/bai/index.html] Jennie Bai

Fundamental economic conditions are crucial determinants of equity premia. However, commonly used predictors do not adequately capture the changing nature of economic conditions and hence have limited power in forecasting equity returns. To address the inadequacy, this paper constructs macro indexes from large data sets and adaptively chooses optimal indexes to predict stock returns. I find that adaptive macro indexes explain a substantial fraction of the short-term variation in future stock returns and have more forecasting power than both the historical average of stock returns and commonly used predictors. The forecasting power exhibits a strong cyclical pattern, implying the ability of adaptive macro indexes to capture time-varying economic conditions. This finding highlights the importance of using dynamically measured economic conditions to investigate empirical linkages between the equity premium and macroeconomic fundamentals.   [www.newyorkfed.org/research/staff_reports/sr475.pdf] Available only in PDF47 pages / 696 kb

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BiMetalAUPT
Message #200 - 11/01/10 09:50 PM

Also this is about the MMXI-Gold use of a limited number of indicators.. M1,M2,M3 AND NONE-M2-M3 OR NONE-M1-M2...

Introduction
Empirical studies increasingly cast doubt on the forecasting power of price-based predic-
tors of equity returns. The literature in this area has documented numerous problems,1 includ-
ing small-sample bias with highly persistent predictors,2 poor out-of-sample performance,3 and
unstable forecasting relationships.4 One potential reason for their weak performance is that
fixed financial predictors fail to capture time-varying economic conditions sufficiently. Never-
theless, fundamental economic forces are crucial determinants of equity premia in the financial
markets.5 The challenge thus far has been to find a way to capture changing fundamental
conditions that affect equity returns.
This paper answers the challenge in two ways. First, I construct macro indices from a
large number of economic series as quantitative descriptions of economic conditions. Second,
I design an adaptive procedure to choose optimal indices for equity premium predictions.
Using this procedure, I find that adaptively selected macro indices are able to predict equity
premia. Trading strategies based on these indices significantly and consistently outperform
a buy-and-hold strategy benchmark under varying assumptions of transaction costs and risk
tolerance. Furthermore, I connect these indices to economic sectors, comparing ex ante and
ex post forecasting. The results provide new evidence that four sectors – interest rates, price

indices, housing, and employment – are particular relevant in predicting the equity premium.

Given the deficiency of financial predictors, previous papers (for example, Lettau and

Ludvigson [2001], Piazzesi, Schneider and Tuzel [2007] and Gomes, Kogan and Yogo [2007])
have attempted to explore alternative predictors involving macroeconomic series.6 Common
to all these papers is a focus on a small set of predictors based on theoretical models. From an
academic viewpoint, the use of model-based predictors facilitates an understanding of specific

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BiMetalAUPT
Message #201 - 11/04/10 06:08 PM

OTC.. CDS.. about time.. Your thoughts???AIG and FGIT Got the banks in trouble by saying the junk they were sold was A++.. And did not need capital Tier1 confensation for risk!!!  risk adjustment or loss risk they said was zero.. Right!! IE were told Zero Counter-party Risk!!
Statement Regarding November 2-3 Meeting of OTC Derivatives Regulators’ Forum November 4, 2010

 

The Federal Reserve Bank of New York hosted a meeting of the OTC Derivatives Regulators’ Forum (ODRF)—a group comprised of over 50 financial regulators from around the world—over the last two days. The group reaffirmed continued coordination on matters relating to centralized market infrastructure serving the global OTC derivatives markets—central counterparties (CCPs) and trade repositories (TRs)—and discussed its work in light of recent global regulatory developments, including the publication of the report of the Financial Stability Board’s (FSB) OTC Derivatives Working Group as well as the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act in the U.S., and the release in the European Union of the Market Infrastructure Regulation (EMIR) proposal.

"Recent legislative developments underscore the importance of the work of the ODRF in facilitating global coordination and cooperation in the OTC derivatives market. The Forum has made important contributions by bringing together common interests, concerns, and perspectives from different authorities across jurisdictions on OTC derivatives matters,” said Stacy Coleman, vice president and lead of the OTC derivatives efforts for the New York Fed. “We commend the collaboration among the group's participants in promoting consistent global public policy objectives and oversight approaches which are also supportive of the OTC derivatives-related commitments set forth by the G-20."

The group also met with representatives from OTC derivatives CCPs and TRs to discuss current market developments and ongoing engagement, which follows a meeting with CCP and TR representatives held in April 2009.

The ODRF includes central banks, banking supervisors, market regulators, standard setters, and other governmental authorities that have direct authority over OTC derivatives market infrastructure providers or major OTC derivatives market participants, or consider OTC derivative market matters more broadly. The group meets periodically to exchange views and share information on developments related to OTC derivatives central counterparties and trade repositories. The last meeting of the ODRF was in Rome, Italy, in June 2010.

Contact:
Jeffrey Smith
[phone]
[phone]
[mailto:[e-mail]] [e-mail]

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BiMetalAUPT
Message #202 - 11/05/10 08:05 PM

From money to banking.. World wide banks are in trouble.. Esp China where they have lent on anything that exported to the USA on the grounds we would always increase our imports from China.. But we ran out of money!!  M3 is now down some 1.5 Trillion USD.Just a thought,Bi metal Au Pt
Catch the run on gold and silver!!



"It’s frightening," said Professor Tim Congdon from International Monetary Research. "The plunge in M3 has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise [www.businessinsider.com/money-supply-double-dip-2010-5#] capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly," he said.

...

Mr Congdon said the Obama policy risks repeating the strategic errors of Japan, which pushed debt to dangerously high levels with one fiscal boost after another during its Lost Decade, instead of resorting to full-blown "Friedmanite" monetary stimulus.

"Fiscal policy does not work. The US has just tried the biggest fiscal experiment in history and it has failed. What matters is the quantity of money and in extremis that can be increased easily by quantitative easing. If the Fed doesn’t act, a double-dip recession is a virtual certainty," he said.

Read more: www.businessinsider.com/money-supply-double-dip-2010-5#ixzz14RLYlB7o

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BiMetalAUPT
Message #203 - 11/06/10 08:45 PM

How much Tier 1 Capital should international banks hold vs local small banks!!!   From NYFRB   looks like a debate with BIS III!!!

aught between Scylla and Charybdis? Regulating Bank Leverage When There Is Rent Seeking and Risk Shifting September 2010  Number 469
Revised September 2010 JEL classification: G21, G28, G32, G35, G38  

Authors: Viral V. Acharya, [www.newyorkfed.org/research/economists/mehran/index.html] Hamid Mehran and Anjan Thakor

Banks face two different kinds of moral hazard problems: asset substitution by shareholders (e.g., making risky, negative net present value loans) and managerial rent seeking (e.g., investing in inefficient “pet” projects and consuming perquisites that yield private benefits). The privately optimal level of bank leverage is neither too low nor too high: It balances efficiently the market discipline imposed by owners of risky debt on managerial rent seeking against the asset substitution induced at high levels of leverage. However, when correlated bank failures can impose significant social costs, governments may have no option but to bail out bank creditors. Anticipation of this generates an equilibrium featuring systemic risk in which all banks choose inefficiently high leverage to fund correlated assets and market discipline is compromised. A minimum equity capital requirement can rule out asset substitution but also compromise market discipline by making bank debt too safe. The optimal capital regulation requires that a part of bank capital be unavailable to creditors upon failure, and be available to shareholders only contingent on good performance.

  [www.newyorkfed.org/research/staff_reports/sr469.pdf] Available only in PDF52 pages / 780 kb
 

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BiMetalAUPT
Message #204 - 11/11/10 08:27 PM

Frank!Angela  Merkel /Germany does not want to be on the hook for insolvent Irish Banks!!!I have to agree with her.. Why pay the bills for over spending you did not do...  Time for the USA to also save 10.4% of our GDP.. Including debt reduction 


German Chancellor [search.bloomberg.com/search?q=Angela%20Merkel&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1&partialfields=-wnnis:NOAVSYND&lr=-lang_ja] Angela Merkel said the Group of 20 is falling short so far in efforts to avert future bank bailouts, even as leaders of the world’s biggest economies are poised to agree on tougher capital, liquidity and leverage requirements.

Merkel, addressing a business forum in Seoul today, said she’s “not quite satisfied yet” with G-20 plans for reducing risks linked to the world’s biggest and most systemically important banks. She called for an international framework that pushes creditors to help bear the cost of any future rescues.

“There may be a conflict here between the interests of the financial world and the interests of politicians,” Merkel said. “We can’t constantly explain to our voters that taxpayers have to be on the hook for certain risks, rather than those who make a lot of money taking those risks.”

The discussions reflect a voter backlash against rescues of companies from American International Group Inc. to Royal Bank of Scotland Plc during the deepest financial crisis since the 1930s. While the U.S. and European Union have agreed such firms should undergo regular stress tests and be subject to extra supervision and loss-absorption requirements, regulators have yet to specify how they will define systemically important banks.

The G-20 leaders conclude their two-day summit in Seoul tomorrow.

G-20 Focus

G-20 efforts this year have focused on how to reduce the likelihood of banks needing a rescue, rather than addressing the issue of how to proceed once crisis conditions emerge. Leaders are on course to endorse so-called Basel III capital standards, while deferring decisions on oversight of derivatives and the process for dismantling a failing global financial company.

The rules will need to be implemented carefully so that banks aren’t hurt by regional differences, [search.bloomberg.com/search?q=Gerard%20Mestrallet&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1&partialfields=-wnnis:NOAVSYND&lr=-lang_ja] Gerard Mestrallet, chairman of Suez Environnement SA, said in an interview today. Otherwise, he said, the Basel rules could reduce the flow of investment.

“There’s a big difference between the U.S., where 80 percent of financing is done on the securities market, and Europe, where 70 percent of financing is done by banks,” he said. “You can’t apply the same rules rigidly across borders.”

U.K. officials have signaled the G-20 should listen to industry concerns, while U.S. Treasury Secretary [search.bloomberg.com/search?q=Timothy%20F.%20Geithner&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1&partialfields=-wnnis:NOAVSYND&lr=-lang_ja] Timothy F. Geithner said the G-20 can’t shirk its duty to require banks to guard against potential losses.

‘More Cushion’

“The most important way to reduce future crises is to make sure those financial institutions hold more capital, hold more cushion against the risks they take,” Geithner said in an interview today with CNBC television.

Geithner said the proposed new standards would be applied without creating a two-tiered system that affects similar banks unevenly. Small and medium-sized banks don’t operate at the same level as the globally active banks that are in need of a “level playing field,” he said.

“What I expect you’re going to see is the heads of state endorse, support, the new standards for reducing risk and leverage across the largest global financial institutions,” Geithner said.

The Obama administration has been working with Europe to narrow differences over financial regulation, including sending staff to Brussels to help with proposed derivatives regulations. Geithner issued a joint statement on Oct. 29 with EU Financial Services Commissioner [search.bloomberg.com/search?q=Michel%20Barnier&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1&partialfields=-wnnis:NOAVSYND&lr=-lang_ja] Michel Barnier pledging cooperation.

[Virgil Showlion]

Old and gray
Message #205 - 11/12/10 12:51 AM



In a reference back to your suggestion the M3 needs to be bolstered. . .

 

By no means is money targeting, specifically M3, a new strategy. Nor has it been successful with any great consistency. The UK twice tried to work with a £M3 target and failed both times within a ten year span.

 

In a 2001 paper by two Brits, K. Alec Chrystal and Paul D. Mizen, the attempt was summarized in these two paragraphs.

 

The 1974-79 Labour Government introduced monetary targets, but they continued to attempt to hit them by means of direct controls in the form of the Corset. When the Conservative administration of Margaret Thatcher took over as the UK government in 1979, monetary policy took a new turn. Chancellor of the Exchequer, Geoffrey Howe, labelled by his predecessor Denis Healey as a ‘believing monetarist’, attempted to target the growth rate of the money supply (£M3) by use of the official interest rate, after exchange controls were abolished in October 1979 and the Corset then became impossible to maintain. Targets were set for £M3 (broad money excluding balances in foreign currency) to lie in the range 7-11 per cent for the period 1980-81 falling by one percent per annum to 4-8 percent by 1983-4. In the event, however, money growth overshot its target by 100 per cent in the first two-and-a-half years. The abolition of exchange controls and the Corset (and the financial innovations that followed) meant that the relationship between broad money and nominal incomes fundamentally altered (see Goodhart, 1989).

Although it was becoming apparent by 1982 that the velocity trend had changed, partly because the relaxation of credit controls and exchange controls had redirected much foreign business back through the British banking system, Nigel Lawson, the new Chancellor appointed in 1983, reasserted his confidence in monetary targeting by publishing further growth targets often for several years ahead. The Medium Term Financial Strategy was largely unsuccessful, however, (at least in controlling money growth) and this led to the conclusion that monetary targeting of all types was flawed. It was dropped in the summer of 1985 in favour of exchange rate shadowing.

This is one of the illustrations of a stressed situation in which monetary policy, particularly where targeting is involved, will not respond in a normal fashion. It's also a classic example of one of the large flaws in monetarism: it fails when you need it most.

 

Here in the US, monetarism was strong through the period leading up to the blow-up that resulted from the long stagflation build up (more realistically almost from the time we went off the gold standard). As a result of that occurrence, relying on monetarism largely became a strategy of the past. Despite this fact, The Fed is following a path that seems ominously reminiscent of monetarism.

 

BTW, the "more Cushion" effect is not the answer to the built-in hazards posed by derivatives. Until those are specifically restricted, look for a constant strain on reserves at any reasonable level.

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BiMetalAUPT
Message #206 - 11/12/10 03:58 PM

O&G,

Thank-you for this great post....
  Everything is great until it fails... i recall being told about my father running over to American Home to get my mother to sign stock buy orders he had executed in the morning under her name( before Morgan was divided.  )
They talked a lot about M3... Not sure how much net difference but England also has an M4....The group in SFFRB was the most like this group and did a lot of work on controlling M1.   Target M1 = Target GDP Growth+ Target Inflation being the best known model.

Thank-you again for your great post,
Bruce

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BiMetalAUPT
Message #207 - 11/12/10 06:59 PM

Reason for current hedging.. Risk Amplification... from NYFRB  to read the total artical use radio button at bottom!!!
  [www.newyorkfed.org/index.html] Home > [www.newyorkfed.org/research/index.html] Research > [www.newyorkfed.org/research/publication_annuals/index.html] Research Publications Staff Reports Financial Amplification of Foreign Exchange Risk Premia July 2010  Number 461
Revised November 2010 JEL classification: G15, G01, G17, F31  

Authors: [www.newyorkfed.org/research/economists/adrian/index.html] Tobias Adrian, Erkko Etula, and [www.newyorkfed.org/research/economists/groen/index.html] Jan J. J. Groen

Theories of financial frictions in international capital markets suggest that financial intermediaries’ balance-sheet constraints amplify fundamental shocks. We present empirical evidence for such theories by decomposing the U.S. dollar risk premium into components associated with macroeconomic fundamentals and a component associated with financial intermediary balance sheets. Relative to the benchmark model with only macroeconomic state variables, balance sheets amplify the U.S. dollar risk premium. We discuss applications to financial stability monitoring.

  [www.newyorkfed.org/research/staff_reports/sr461.pdf] Available only in PDF31 pages / 303 kb
 

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BiMetalAUPT
Message #208 - 11/15/10 09:43 PM

LONDON (Nov. 15) -- The European Union is drawing up a possible $110 billion bailout plan to help [www.aolnews.com/tag/ireland] Ireland rescue its ailing banking sector, despite repeated claims by the Irish government that the debt-ridden nation doesn't need any outside help.

Reports of a bailout first emerged this weekend, when it was revealed that Irish finance ministry officials were holding informal talks with senior EU representatives over a rescue package of $80 billion to $110 billion. A government spokesman acknowledged today that a meeting had taken place with "international colleagues" over the country's debt crisis but insisted, "Ireland has made no application for external support." They added that the country is "[www.eubusiness.com/news-eu/eurozone-economy.6y5/] fully funded till well into 2011."

However, it's expected that Ireland's debt woes will be at the top of the agenda when finance ministers from across the EU meet for talks Tuesday and Wednesday in Belgium. That's because that market has started to worry that Ireland (pop. 6.2 million), with a national debt of $120 billion, might not be able to repay the billions it has borrowed in the form of government bonds.

Investors have started to those bonds over the past two weeks, leading to fears that confidence could be about to drop in other eurozone states, such as debt-addled [www.aolnews.com/tag/spain/] Spain and Portugal. That would likely threaten the stability of the euro currency, as well as the global economic recovery. Portugal today called on Ireland to recognize what was at stake for the whole continent, and to act in [www.aolnews.com/tag/europe] Europe's best interests.

"I want to believe [Ireland] will decide to do what is most appropriate together for Ireland and the euro," Portuguese Finance Minister Teixeira dos Santos [www.google.com/hostednews/afp/article/ALeqM5hoIHkjDCo05EmHuxg62KA6H_-T6A?docId=CNG.f6195da88e96c07a59558ee7d57595b6.b51] told Agence France-Presse. "I want to believe they have the vision to take the right decision."

Other observers have suggested that instead of asking for a general government bailout, Ireland could negotiate a more tightly focused aid package aimed at its banking sector, which was devastated when the real-estate bubble collapsed in 2008. (The average house price has fallen 50 to 60 percent over the past two years.) That kind of targeted intervention would limit the amount of influence officials from the EU, and potentially the International Monetary Fund, could wield over Irish economic policy.

The government is especially keen to keep its rate of corporate tax at 12.5 percent, which has lured several multinationals to the Emerald Isle. But they worry that European giants like France and [www.aolnews.com/tag/germany/] Germany, who have long criticized that policy, might try to force Dublin to increase the corporate rate as part of a bailout.

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BiMetalAUPT
Message #209 - 11/15/10 11:46 PM

If this is now what Angela Merkel has been saying .. they will not keep their word..Banks as weak as Ireland's banking system.. No deal will be keep..

ATHENS (AFP) - – Greece acknowledged Monday it would breach conditions for a new instalment of a 110-billion-euro bailout as the IMF and European Union began an audit of the country's austerity measures.  Want to bet.. i will bet they will keep zero percent of the deal.. Like France with the socialist and the Truck drivers... One look at the Truck drivers in the office with a Tire rod and the rules will change

and although bolstered by sweeping successes in local elections on Sunday, the outlook is still overshadowed by gloom on the economic front.

The Eurostat statistics agency issued its final revision of Greece's accounts for the past four years, triggering a new forecast by Athens that its public deficit in 2010 would reach 9.4 percent of output, well above the 8.1-percent target.

Greek bond yields, a measure of investor confidence in the country's finances, rose on Monday, with the rate on 10-year paper up to 11.280 percent from 11.184 percent on Friday.  Nolw yoi know whey West LB bought so many of these junk bonds.. look like they would make a lot of money if Greece was balled out with all those German marks.. Euro's.. got to get under their skin.. bet they miss the Mark!!!!

Having flirted with insolvency until it was rescued by the International Monetary Fund and EU in May, Greece on Monday sought to reassure its partners that despite the latest figures, it remained on course.

It said it had in effect reduced its public deficit by a greater percentage than pledged as part of the 110-billion-euro (150-billion-dollar) EU-IMF rescue.

"Despite the revision of the figures, the 2010 deficit reduction is greater than was initially planned, equivalent to six percentage points of GDP when the objective was to get 5.5 percent," the finance ministry said in a statement.

The 8.1-percent target was set when Greece's 2009 public deficit was estimated at 13.6 percent of GDP.

But as part of the bailout, Greece was obliged to allow Eurostat to review its unreliable accounts and on Monday the EU agency revised the 2009 deficit up to 15.4 percent...What has Merkel been warning!!! need a double barrel merkel 375 H&H Mag to get there Greek's?

The 2009 figure is important because it is the baseline for the amount by which Greece must cut its public deficit this year. The bigger the deficit last year, the more it has to do to meet rescue conditions this year.

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BiMetalAUPT
Message #210 - 11/17/10 03:35 AM

Ireland is on the brink of nationalizing the largest bank!! The 2nt largest was nationalized due to CR loses and lack of international buyers for the ailing Anglo Irish Bank-shares...



LONDON/DUBLIN (Reuters) - Ireland may have hoisted a "For Sale" sign over its troubled banks but will struggle to attract buyers when the country is still in the throes of its economic crisis, bankers and analysts said.

Patrick Honohan, Ireland's central bank governor, on Wednesday said foreign ownership of its ailing banks was not a "far-fetched" scenario.

But the country's two main banks have had to sell some of their best assets to raise funds or as a condition of taking state aid and are pure plays on an economy mired in austerity and struggling to emerge from years of reckless lending.

Bank of Ireland's shares fell a further 8 percent on Thursday while Allied Irish Banks was down 7 percent.

Having avoided majority state ownership, Bank of Ireland is seen as best placed to attract any buyer interest. Analysts say it should emerge from the crisis as a dominant, profitable force in a market where foreign rivals like Lloyds and Danske Bank

have retreated or retrenched, and domestic rivals are on the ropes.

But the febrile Irish backdrop and concern that more capital could be needed makes it unlikely any predator will move soon.

The cost of insuring the bonds of Irish banks has soared to distressed levels amid concerns there will be more nasty surprises that could tip the sovereign over the edge.

"The attractiveness of Ireland is still very risky," one banker said. "Capital markets are losing patience ... the news has repeatedly been worse than expected."

Stephen Lyons, Davy banking analyst in Dublin, said overseas interest would be welcome, but appetites would be limited until the economy is on steadier ground.

"When he (Honohan) talked about that he wasn't really being timeframe specific ... You need the positive support of the economy. We're not there yet," Lyons said.

Bargain hunters circled earlier in the crisis, with Allied Irish Banks last year holding talks to sell a minority stake to an unnamed suitor -- which sources said was from Canada -- but that talk faded as problems deepened.

Spain's Santander has also shown interest in the past, an industry source said. But the euro-zone's biggest bank last month called a halt to acquisitions after a string of deals.

Asset managers or sovereign funds are seen as more likely buyers, and hedge funds or turnaround experts are showing an interest in books of loans that emerge at knock-down prices from Ireland's "bad bank," or NAMA.

Also a private equity consortium led by Cardinal Asset Management will seek more deals if it is successful bidding for nationalized EBS Building Society, a person familiar with the matter said Thursday. Of potential interest to them would be Permanent TSB and Irish Nationwide, the source said.

Ireland has already struggled to get to grips with its banking crisis, and the latest fear is that losses on residential mortgages will spike as the government's austerity measures squeeze income.

The government admitted in September the bill for purging its banks of years of reckless lending could top 50 billion euros and now there is a fear the bill could be even higher if mortgage losses climb.

And most of the banking sector is now in government hands. Losses on commercial property left Anglo Irish Bank nationalized, BoI is 36 percent owned by the state and Dublin will own over 90 percent of arch-rival Allied Irish Banks after a 5.4 billion-euro rights issue.

The crisis has also hurt foreign banks. Royal Bank of Scotland's Ulster Bank unit has lost 490 million pounds this year, hit by 785 million pounds of bad debts, and last week said the commercial property market will take years to recover. It also has a sizeable exposure to Irish sovereign debt.

(Additional reporting by Matthew Scuffham and Victoria Howley; Editing by Greg Mahlich) [www.reuters.com/article/innovationNews/idUSTRE6AA42620101111] Buyer beware: Irish banks on the block

[Virgil Showlion]

frank the impaler
Message #211 - 11/17/10 03:43 AM



Bruce you understand the moral hazard when you create debt instruments that are inherently defective; then insuredthen used by governments to finance operationswhich are then detonatedand orchestrated a insurance payoffand then hedged to maximize the risk and payout that no government can finance

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BiMetalAUPT
Message #212 - 11/17/10 04:58 AM

Frank,
 The more I get into the European Bank Crisis the more of a joke it was when the blamed the problems on the USA and Alt-A or sub-prime CDO's.

I am not sure what they were thinking.. Some of the Real Estate deals were financed for 110% of the value of the underlaying assets!!!!! Moral Hazards is a kind way of saying what was going on.. Plain out and out robbery..
With income decline as the government cut benefits we could see a lot more bad loans from the over financed houses.. They blamed the USA for the problems.. Great savers but poor investments. 
Thank-you,
Bruce

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frank the impaler
Message #213 - 11/17/10 01:23 PM

I agree

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BiMetalAUPT
Message #214 - 11/17/10 05:01 PM



Nov. 17 (Bloomberg) -- Chancellor of the Exchequer George Osborne said Britain is willing to contribute to an aid package for Ireland in what would be its first financial foray into the euro area’s debt crisis.

U.K. banks have the biggest exposure to the Irish financial industry, making it important for Britain to support its struggling neighbor, Osborne told reporters today in Brussels, where he’s attending a meeting of European Union finance chiefs.

“It’s in Britain’s national interest that the Irish economy is successful and we have a stable banking system,” Osborne said. “Britain stands ready to support Ireland in the steps it needs to take.”

The comments may stir opposition at home for Prime Minister David Cameron, who is slashing government spending to reduce Britain’s own record budget deficit. In Parliament today, Peter Bone, a lawmaker from Cameron’s Conservative Party, called on the government to rule out participating in any bailout for Ireland.

Britain’s banks had $222 billion exposure to their Irish counterparts by end of the first quarter, according to the Bank for International Settlements. Germany’s exposure was $206 billion and the U.S.’s was $114 billion, BIS data showed.

Osborne said he has had no approach from British banks, the Bank of England or the Financial Services Authority to pledge support for Ireland. Yesterday, the central bank’s governor, Mervyn King, said the exposure of Britain’s banking system to Ireland’s economy is “by no means trivial.”

‘Stress Tests’

“U.K. banks have passed stress tests, the banking system is well capitalized and our engagement in this is because we are good neighbors of Ireland, not because we have particular concern about any U.K. bank,” Osborne said. “The Bank of England and the FSA have not expressed to me any particular concern with U.K. banks.”

Irish Finance Minister Brian Lenihan told reporters in Brussels that Britain is “anxious to help,” saying the decision is “a matter for the British authorities themselves to decide.”

The U.K. already is committed to the EU’s 60 billion-euro ($81 billion) Financial Stability Mechanism. It would be liable for 13 percent, or about 7 billion euros, should Ireland use and fail to repay the whole facility.

Osborne refused to give details on what type of assistance he is considering giving Ireland and declined to say whether any aid would be made through bilateral loans.

Policy Shift

“I am not going to speculate on what that support might be or indeed if it will be required,” Osborne told reporters after his meetings in Brussels.

The decision to support Ireland marks a shift in British policy toward assisting EU countries facing potential financial hardship. Osborne’s remarks today contrast with the U.K.’s decision to avoid paying into the euro-area rescue of Greece in May.

“When it comes to supporting the euro, that is for the euro-group countries,” the then chancellor, Alistair Darling, said at the time.

European finance ministers agreed late yesterday to start work on possible aid for Ireland’s debt-laden banks. “If banking problems are too big for this small country to manage, Europe has made it clear they’ll help,” Lenihan said in an interview w

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BiMetalAUPT
Message #215 - 11/17/10 05:05 PM

My point being as it was in may.. The "STRESS TEST" WAS AND WILL ALWAYS BE A PROPAGANDA MACHINE... It has not real teeth and lack any real understanding of the risk with weak paper the banks owned.  These banks are only Paper Tigers..... so much for the UK being "Good Neighbors"

Just a thought,
Bruce

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Scared_Shirtless
Message #216 - 11/17/10 05:38 PM



Good neighbors - trying to save (or more accurately - bail out) their own banks.

 

Sick...

[Virgil Showlion]

BiMetalAUPT
Message #217 - 11/21/10 02:06 AM

More one the Irish Banking/ debt problem from ECB President.. Germans are mad.. Raise in the EURO will kill exports..

BASEL, Switzerland (Dow Jones)--European Central Bank President Jean-Claude Trichet tried Monday to calm an increasingly heated argument over foreign exchange policies, dismissing suggestions that the world's major powers are deliberately weakening their currencies.

Speaking after a regular meeting with other central bank heads, Trichet said: "Absolutely no participants mentioned that they were pursuing any kind of weak currency policies." DO YOU WANT TO BET.. THIS IS THE GAME NO ONE IS TALKING ABOUT.. ASK THE FRENCH.. FRENCH WINE IS OVERPRICED VS TEXAS WINE!!!

By contrast, he argued that central banks across the world "share a common purpose" in keeping inflation expectations anchored, despite the differing challenges they face in their respective countries.

Trichet was speaking in his capacity as chairman of the Global Economy Committee, which meets every two months at the Bank for International Settlements.

His comments come after the Federal Reserve's latest attempt to stimulate the U.S. economy drew a hostile reaction from many of its trading partners, including Germany and China.

Many Asian countries have either formal or informal links to the dollar, and officials there worry that the Fed's new policy stimulus will create inflation for them at home. Germany, meanwhile, frets that its exports will suffer from reduced price competitiveness.

Trichet explained that each central bank can only act within the limits of its own legal mandate.

"Central banks are taking action in their own country, by definition," Trichet said. "They have a responsibility in their own country, and each of them takes into account all the elements that are permitting them to honor their commitment."

He said the committe had received a "very, very precise exposition" by the Fed of its new policy, but said there was no judgment of, or vote on, its action.

The Fed has a dual mandate of ensuring both price stability and full employment, and its action last week came against the backdrop of a stubbornly high jobless rate in the U.S., as well as some lingering fears of a deflationary price spiral forming in the U.S. housing market.  SEE FLOW5 POSTING ON THIS SUBJECT.. GREAT JOB BY FLOW5

Trichet said his peers agreed on the need to avoid misalignments and excessive volatility, which central bankers regarded as being counterproductive for global growth and stability.

He added that his central bank peers "were very much in line with the present consensus as regards the necessity to have progressively more exchange rate flexibility," in line with the commitment adopted by the Group of 20 leading industrial and developing economies.

G-20 leaders convene later this week in Seoul and are due to sign off on reforms of the International Monetary Fund and on tighter capital standards for the global banking sector.

However, they have so far made only limited progress in their proclaimed agenda of restoring "strong, sustainable and balanced growth" to the world economy, with no consensus on how to achieve that aim. A U.S. initiative to commit to quantitative and measurable limits on current account imbalances met with stiff opposition at a meeting of finance ministers last month. POINT THS IS MISSED ALL THE TIME IS : M3 IS CONTRACTING AS IT DID IN THE 1930'S.. BEN B. MAY NOT BE TALKING ABOUT IT BUT HAS TALKED AROUND IT WITH EVERYTHING EXCEPT M3 BEING CALLED...

Trichet also noted that the Committee hadn't discussed an idea floated by World Bank President Robert Zoellick at the weekend, who suggested the G-20 consider using gold as an international reference point of market expectations about inflation, deflation and future currency values as part of a "cooperative monetary system that reflects emerging economic conditions."

"Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today," Zoe

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Tyfighter3
Message #218 - 11/21/10 02:56 AM

So, we are going back to the Barter system we did in the past for trading?

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BiMetalAUPT
Message #219 - 11/22/10 03:31 AM

The Irish government has agreed to request a bailout from the [www.ibtimes.com/topics/detail/373/european-union/] European Union and the [www.ibtimes.com/topics/detail/561/international-monetary-fund/] International Monetary Fund ([www.ibtimes.com/topics/detail/264/imf/] IMF), according to official statements from Ireland and the Eurogroup. The size is likely to be 80 to 90 billion euros, a senior EU official told Reuters.

+That is a shocker!!! Frank called this one in may!!!!  Now do you want to bet on size???



Separately, the U.K. and Sweden have indicated that they are willing to make individual loans to Ireland.  U.K. taxpayers are likely to contribute 7 billion sterling pounds in total, which includes aid as a part of the [www.ibtimes.com/topics/detail/373/european-union/] European Union and the separate loans it plans to make, according to The Guardian. 

U.K. banks are heavily exposed to Irish debt and Ireland is a big exports market for the U.K., so Britain has a strong incentives to financially shore up its neighbor.

European banks in general are exposed to Irish debt.  Furthermore, European officials fear Ireland's deteriorating sovereign debt conditions will spread to other countries like [www.ibtimes.com/topics/detail/349/portugal/] Portugal and Spain and therefore threaten the whole European financial system and the euro currency. 

When PIIGS Fly...  Again they are flanting the "Good Neighbor" line.. Yes.. Never steal from your Neighbors as they may have a larger gun then you have.. These are the same EU Banks that were telling us how poor we ran our banking system...  We have been helping them from day one with Currency swaps and masive QE1 and now QE2!!!! So why do we import their Recession/Depression as we did in the 1930's.?

Just a thought,
Bruce  aka Bi Metal Au Pt

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Stay Put
Message #220 - 11/22/10 04:09 AM



The debt is due this spring, and America has to tell the landlord that we just don't have the rent.  Duff, you (Obama, DNC, and the FED) must have skipped the history class on post WWI Germany who did exactly what we are doing right now.  As a response to being made solely responsible for total costs of WWI, Germany realized that they could never pay this debt off, and defiantly decided to just print the debt in the form of German Marks (QE1, 2, 3........ring a bell?).  The German Mark became devalued to the point of near total worthlessness.  People literally used the German Marks to help heat their homes in the winters, and needed to be paid by employers, on a daily basis, as each day saw the Mark literally disintegrate in value until it finally became nearly worthless.  This is what the FED and DNC have and are doing to our own dollar.

Instead of a year or two of pain, and criminal charges against the banking and political criminals, we are now looking at 10-15 years of agony thanks to the printing presses and those criminals still at large.

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flow5
Message #221 - 11/22/10 01:30 PM



LONDON (Reuters) - The new Basel III banking rules will leave the biggest U.S. banks short of between $100 billion and $150 billion in equity capital, with 90 per cent of the shortfall concentrated in the top six banks, the Financial Times said, citing research from Barclays Capital.

The newspaper said the study by the investment banking arm of Barclays Plc assumes the banks will need to hold top quality capital equal to 8 percent of their total assets -- a one point cushion against falling below the effective global minimum of 7 percent set in September by the Basel Committee on Banking Supervision.

The regulations mean banks may need to increase their capital through retained earnings or issuing equity or they can cut their risk-weighted assets by selling off assets and cutting back riskier business.

"These shortfalls are entirely manageable ... The more difficult question is what affect the new rules will have on the cost and availability of credit and bank profitability," the FT quoted Tom McGuire, head of the Capital Advisory Group at BarCap, as saying.

McGuire estimates that U.S. banks can cut their equity needs by $10 billion with each $125 billion reduction in risk-weighted assets, the FT said.

===============================================================

 

On the other hand: The FED continues to enhance its subsidies to its member commercial banks (in an attempt to make them the world's, most competitive (lowest cost,  & inevitably, least regulated), provider of new money & credit) --- at the taxpayer’s expense.

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BiMetalAUPT
Message #222 - 11/22/10 06:07 PM

But the USA major banks will need about $150 billion added capital in all ( all 19 banks that will be stress tested).. Bet it will be done better then Germany or Ireland.. Ben B. might get this one right.. We need a lot of capital in tlop banks to improve beta and lower CAPM cost...With Citigroup Given Beta of 2.8 capital will cost about 23%to raise!!!!!

LONDON (Reuters) - The new Basel III banking rules will leave the biggest U.S. banks short of between $100 billion and $150 billion in equity capital, with 90 per cent of the shortfall concentrated in the top six banks, the Financial Times said, citing research from Barclays Capital.

The newspaper said the study by the investment banking arm of Barclays Plc (LSE:[finance.yahoo.com/q?s=barc.l] BARC.L - [finance.yahoo.com/q/h?s=barc.l] News) assumes the banks will need to hold top quality capital equal to 8 percent of their total assets -- a one point cushion against falling below the effective global minimum of 7 percent set in September by the Basel Committee on Banking Supervision.

The regulations mean banks may need to increase their capital through retained earnings or issuing equity or they can cut their risk-weighted assets by selling off assets and cutting back riskier business.

"These shortfalls are entirely manageable ... The more difficult question is what affect the new rules will have on the cost and availability of credit and bank profitability," the FT quoted Tom McGuire, head of the Capital Advisory Group at BarCap, as saying.

McGuire estimates that U.S. banks can cut their equity needs by $10 billion with each $125 billion reduction in risk-weighted assets, the FT said.

They told the world that is what CDS was going to do.. Remeber Greenspan telling that to Congress how CDS was lovering the cost to borrow money.. Or did I dream this up???

[Virgil Showlion]

flow5
Message #223 - 11/22/10 06:43 PM

deregulation (i.e., CDS), until there is nothing (literally), left to deregulate

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BiMetalAUPT
Message #224 - 11/22/10 10:21 PM

“If that is not enough to worry about financial contagion, what is? The ECB's lack of action begs the question as to whether it is fulfilling its financial stability mandate,” he said. That is a polite way of putting it.

The eurozone’s fiscal fund (European Financial Stability Facility) is fatally flawed. Like Alpinistas roped together, an ever-reduced core of solvent states are supposed to carry the weight on an ever-widening group of insolvent states dangling beneath them. This lacks political credibility and may be tested to destruction if – as seems likely – Ireland is forced to ask for help. At which moment the chain-reaction begins in earnest, starting with Iberia.

It was a grave error for Germany’s Angela Merkel and France’s Nicolas Sarkozy to invoke the spectre of sovereign defaults and bondholder “haircuts” at this delicate juncture, ignoring warnings from ECB chief Jean-Claude Trichet that such talk would set off investor flight from high-debt states.

EU leaders have since made a clumsy attempt to undo the damage, insisting that the policy shift would have “no impact whatsoever” on existing bonds. It would come into force only after mid-2013 under the new bail-out mechanism. Nobody is fooled by such a distinction.

“This is a breath-taking mixture of suicidal irresponsibility and farcical incoherence,” said Marco Annunziata from Unicredit.

“If by 2013 countries like Greece, Ireland and Portugal are still in a shaky position, any new debt issued will carry exorbitant yields. The EU would then have to choose between a full-fledged, open-ended bail-out, and reneging on the promise that existing debt would not be restructured. Will German voters then accept higher taxes to save their profligate neighbours?” he said.

In May it was enough for the EU to announce a €750bn safety-net with the IMF for eurozone debtors. Bond spreads narrowed. A spike in economic output - led by Germany’s rogue growth of 9pc (annualised) in the second quarter – beguiled EU elites into believing that monetary union had survived its ordeal by fire. It had not, and this time they will have to put up real money.

Sadly for Ireland, events have snowballed out of control. Confidence has collapsed before Irish export industries – pharma, medical devices, IT, and backroom services – have had time to pull the country out of its tailspin.

Premier Brian Cowen – who presides over a budget deficit of 32pc of GDP this year - still insists that no rescue is needed. “We have adequate funding right up until July,” he said. Mr Cowan must know this is not enough. Funding for Irish banks has evaporated, and with it funding for Irish firms.

As we learn from leaks that “technical” talks are under way on the terms of any EU bail-out, it can only be a matter of weeks, or days, before Ireland has to tap EFSF – for €80bn to €85bn, says Barclays Capital.

Portugal is in worse shape than Ireland. Total debt is 330pc of GDP. The current account deficit is near 12pc of GDP (while Ireland is moving into surplus). Portuguese banks rely on foreign wholesale funding to cover 40pc of assets.

The country has been trapped in perma-slump with an over-valued currency for almost a decade. Successive waves of austerity have failed to make a lasting dent on the fiscal deficit, yet have been enough to sap the authority of the ruling socialists and revive the far-Left.

Former ministers are already talking openly of the need for an EU-IMF rescue. It is hard to see how Portugal could avoid being sucked into the vortex alongside Ireland. Europe and the IMF would then face a cumulative bail-out bill of €200bn or so. That stretches the EFSF to its credible limits.

The focus would shift instantly to Spain, where economic growth stalled to zero in the third quarter, car sales fell 38pc in October, a 5pc cut in public wages has yet to bite, and roughly 1m unsold homes are still hanging over the property market. The problem i

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BiMetalAUPT
Message #225 - 11/22/10 10:37 PM

I thought the last point Evan-P made was the best so I started out with it.. There is no way you can have currency stabl;itlity without economic strength..
Europe stumbles blindly towards its 1931 moment It is the European Central Bank that should be printing money on a mass scale to purchase government debt, not the US Federal Reserve.

THE DEPRESSION ROUND TWO STARTED IN CENTRAL EUROPE!!!!

Unless the ECB takes fast and dramatic action, it risks destroying the currency it is paid to manage, and allowing a political catastrophe to unfold in Europe.   EDIT: IT IS THE ECONOMY MERKEL!!! IT IS GROWTH IN THE GDP ALEX!!

IT WAS CREDIT ANSTALT THAT PUSHED THE RECESSION INTO THE DEPRESSION.. UNCLE HOOVER..SAUL WARBERG!!!!WE NEED MORE M3!! AT ANY COST TO REPLACE MONEY LOSTED IN THE BANK CRASH!!!!

If mishandled, Ireland could all too easily become a sovereign version of Credit Anstalt - the Austrian bank that brought down the central European financial system in 1931, sent tremors through London and New York, and set off the second deeper phase of the Great Depression, the phase when politics turned ugly.

“Does the ECB understand the concept of contagion?” asked Jacques Cailloux, chief Europe economist at RBS. Three EMU countries have already been shut out of the capital markets, and footloose foreign creditors hold €2 trillion of debt securities issued by Spain, Portugal, Ireland and Greece.

EVANS-P THE WORD YOU ARE LOOKING FOR IS "IMPLOSION AMPLIFICATION"...PER WM DOUDLEY..PRESIDENT OF NYFRB!!!

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ex_broker
Message #226 - 11/22/10 11:28 PM

BiMet, I don't like all of the French wine but, have you ever tasted the stuff we Texans call "Wine"?

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Scared_Shirtless
Message #227 - 11/23/10 12:35 AM



Great thread Bruce!

 

Europe just sucks in deeper and deeper.

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BiMetalAUPT
Message #228 - 11/23/10 03:36 AM

Ex-Broker,
 Yes.. have High Plains Merlot, Cab Franc and Regent...I have been blending a high mature Merlot 181 95% with Regent BL3  5% for what we call Hermitage Petrus Duplex.. Châteaux Lendrum  now for years.. We used to blend Cab Franc.. 14.7% alcohol .. after the Right Bank Bordeaux  Petrus .  We just tested the 2008 .. early but it is working great.. I may blend up some more if I can find the bottles.   Very Full body and great taste of black Currents. 

I also have friend Dr. and Bunny Becker that make a great Merlot and Left Bank Bordeaux .. i have ran out of his 2005 that had a Parker Rating of about 98 .  I have in the passed talked about these.  The wine I have been talked about more then any other is a LaNoir.. I made a Cuvee  from 1967 to about 2000 when I lost the vines...Alcohol was about 19% and the Port was Ruby red ...  Last two bottle went to New York for a wine taste.. Told everyone this was the last bottle.. Question.. Do you have any more.. Should have keep the Cuvee alive...

We should be in Houston in December..

Just a thought,
Bi Metal Au Pt

[Virgil Showlion]

BiMetalAUPT
Message #229 - 11/23/10 03:57 AM

S.S;
 You get my point.. Like 1931 with the insolvency of Credit Anstalt  in Austria caused the second wave in the Depression : the insolvency keep amplification on itself until the trade war started.. Europe blamed it on the USA but they raised tariffs higher  then the USA did.  The ECB is reducing excessive liquidity as the ship sinks...

Just a though,
Bruce 

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frank the impaler
Message #230 - 11/23/10 03:58 AM

Bruce-thanx for the attribution...look for sometime after the beginning of the new year a sort of "global securitization conference"...they have to unwind some or more of this crapand they're all going to have a lot of crap

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Scared_Shirtless
Message #231 - 11/23/10 12:56 PM



Thanks Bruce;

 

I do get your point.  It could easily be Europe all over again.

 

In fact - its hards to see it otherwise.

 

In the meantime - I'm feeling like I stayed too long at the party with regards to bonds.  You know - between the MBS uncertainties and now the treasuries spiking somewhat.

 

You are doing great work on Europe for us.  Thank you Bruce.

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BiMetalAUPT
Message #232 - 11/29/10 05:38 AM



If people want to understand the real reason for worsening conditions in euroland they could do worse than check the latest survey from the purchasing managers.

This clearly shows the great divide between the anchor nations of the eurozone - France and Germany - and the rest.

The unified German economy has bounced back from the 'great recession' with gusto.

The quarterly survey from the purchasing managers points to a further surge in GDP growth.

In France, which emerged from the downturn with a much less impaired fiscal position than most of its partners, output is also expanding at a good clip.

Read more: www.dailymail.co.uk/money/article-1332500/ALEX-BRUMMER-The-euros-German-problem.html#ixzz16eAe0lbU

The worry for policymakers in Berlin will be that the European Central Bank might, through its guarantees of commercial banking debt, contribute to future inflation


Even though economists expect the German growth rate to slip next year, as its fiscal austerity measures bite, it remains in a different league to what experts are now calling the periphery - Ireland, Portugal and Spain.

The current situation will remind some people of the final days of the Exchange Rate Mechanism in 1992, when Britain was ejected, and the Bundesbank refused to offer Tory Chancellor Norman Lamont any comfort by cutting German interest rates.

Similarly, at present Germany has resisted all efforts by the Group of 20 in Seoul to persuade Berlin to do something about its soaring trade deficit.

The fact that Ireland and the peripherals are being allowed to swing in the wind, with the bond yields and cost of insuring debt rising again in latest trading, will be of little concern to Germany.

Read more: www.dailymail.co.uk/money/article-1332500/ALEX-BRUMMER-The-euros-German-problem.html#ixzz16eAKHpsp

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BiMetalAUPT
Message #233 - 11/29/10 05:48 AM



The worry for policymakers in Berlin will be that the European Central Bank might, through its guarantees of commercial banking debt, contribute to future inflation.

That is why it has been so keen to promote Axel Weber, the current Bundesbank president, as the next ECB boss. The Germans have a point. Bailouts of banking systems in Ireland and beyond, without proper restructuring of debt, can only store up problems.

In Ireland, only the shareholders funds have been wiped out and some of the subordinated debt. Senior debt holders need to take a share of the pain.

It is not just Ireland that needs to think about this. Spain says that it has reformed its banking system by reducing the number of savings banks from 45 to 20 as part of a restructuring.

Whether that is enough to deal with the over exposure of the Spanish banks to residential property is unclear.

We are in the middle of a seismic event and the denials of problems by the countries concerned are - like the protests of broken bank chiefs after Lehman - not worth a light.
Scouting for gains

IS there ever a good time for a founding shareholder to sell down their stake? Probably not.

And if you are going to do so you might as well do it when the going looks good, as it does at Home-Serve, with revenues, profits and customer numbers all on the right track.

Nevertheless, the surprise decision of HomeServe chief executive Richard Harpin to a third of his stock to collect £68m, does raise some issues.

Harpin's reason for selling is to diversify his wealth.

That is perfectly acceptable, although critics might argue that if there was no compelling family or other reason to switch into other investments at present, it doesn't say an enormous amount about his faith in the future.

The hope must be, in Harpin's case, that he will use some of the money to advance his backing of enterprise - his favourite causes, such as the Scout movement, would testify.

As for the taxman, he ought to be pleased. Harpin is domiciled in the UK and will pay capital gains on his sale. That is a great deal more than can be said about some other patriotic business leaders.

  Explore more:Places: [explore.dailymail.co.uk/locations/cities/seoul] Seoul, [explore.dailymail.co.uk/locations/cities/berlin] Berlin, [explore.dailymail.co.uk/locations/countries/spain] Spain, [explore.dailymail.co.uk/locations/countries/france] France, [explore.dailymail.co.uk/locations/countries/portugal] Portugal, [explore.dailymail.co.uk/locations/countries/germany] Germany, [explore.dailymail.co.uk/locations/countries/united_kingdom] United Kingdom, [explore.dailymail.co.uk/locations/countries/ireland] Ireland Organisations: [explore.dailymail.co.uk/organisations/european_central_bank] European Central Bank

Read more: www.dailymail.co.uk/money/article-1332500/ALEX-BRUMMER-The-euros-German-problem.html#ixzz16eCbQxWl

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Scared_Shirtless
Message #234 - 11/29/10 12:56 PM



Did I read this right Bruce?  Some European countries are raiding their sovereign pension funds to pay bills?

 

That doesn't sound too sustainable.

 

Europe looks bad and I have to tell you - I'm pulling FOR the Irish people - which means I'm not pulling for the banks.

 

Haircuts anyone?  Get 'em while they're hot!

[Virgil Showlion]

BiMetalAUPT
Message #235 - 11/29/10 02:05 PM

S.S.,
 The ,learned it from the USA... We did it with Social "Suzerainty" in 1967 to pay for the War in Vietnam...I am not sure about what they have done but I sure bet they are doing this.. Esp in the PIIGS...

They raided the SS account then raised the SS bill to pay for the monies used from the trust fund..  Suzerainty means more about weak country falling to world powers and have their assets used for the strong nations benefit.. Like Rome or London did. 


Suzerainty (pronounced [simple.wikipedia.org/wiki/Help:Pronunciation] /'sju?z?r?nti/[simple.wikipedia.org/wiki/Received_Pronunciation] RP or /?sju?z?re?nti/[simple.wikipedia.org/wiki/Received_Pronunciation] RP) (/?su?z?r?nti/ [simple.wikipedia.org/wiki/General_American] GA) is a situation in which a [simple.wikipedia.org/wiki/Region] region or [simple.wikipedia.org/wiki/Nation] people is a [simple.wikipedia.org/wiki/Tributary_state] tributary to a more powerful entity which allows the tributary some limited domestic [simple.wiktionary.org/wiki/autonomy] autonomy to control its [simple.wikipedia.org/w/index.php?title=Foreign_affairs&action=edit&redlink=1] foreign affairs. The more powerful entity in the suzerainty relationship, or the [simple.wikipedia.org/wiki/Head_of_state] head of state of that more powerful entity, is called a suzerain. The term suzerainty was originally used to describe the relationship between the [simple.wikipedia.org/wiki/Ottoman_Empire] Ottoman Empire and its surrounding regions. It differs from [simple.wikipedia.org/wiki/Sovereignty] sovereignty in that the tributary has some (limited) self-rule. A suzerain can also mean a [simple.wikipedia.org/wiki/Feudal] feudal [simple.wikipedia.org/wiki/Lord] lord, to whom [simple.wikipedia.org/wiki/Vassal] vassals must pay tribute.

The word is often spelled "suzerainity", though this has come to be considered incorrect.




This is an interesting question..




Bruce

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Scared_Shirtless
Message #236 - 11/29/10 05:08 PM



Pretty sure I read Ireland.  I also believe France was one!

 

Hungary?  Yeah-that was the other.

 

ps - I learned a new word!!!  Never heard that one!

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BiMetalAUPT
Message #237 - 12/01/10 02:06 AM

This is an interesting item about how China's State owned banks supported industrial growth... Term here is "ENVELOPMENT"

THE PAPER WAS FROM THE UNIVERSITY OF TEXAS AT AUSTIN.. WHERE I STARTED MY MBA STUDIES.. MY STUDIES TOOK ME THOUGH  ADVANCED MACRO- ECONOMICS, STRATEGIC PLANNING AND INTERNATIONAL LAW. 


[www.inderscience.com/browse/index.php?journalID=170&year=2008&vol=3&issue=5] International Journal of Operational Research 2008 - Vol. 3, No.5 pp. 533 - 556   Abstract: This paper applies Data Envelopment Analysis (DEA) to determine relative efficiencies of state-owned and joint stock banks in Chongqing, China, during the period 1996–2000. A distinction is made between long- and short-run efficiencies and inefficiencies to allow for the fact that joint stock banks are relatively new to China have more modern management and access to international finance markets while state-owned banks generally use government funding. Using Mann–Whitney rank order statistics produces results in favour of joint stock banks in the short-run but not in the long-run. A relatively new way of distinguishing between long- and short-run performances is utilised that avoids the need for identifying lengthy time periods and data associated with long-run performances.   Keywords: [www.inderscience.com/search/index.php?action=basic&wf=full&year1=1995&year2=2007&o=2&q=data%20envelopment%20analysis] data envelopment analysis; [www.inderscience.com/search/index.php?action=basic&wf=full&year1=1995&year2=2007&o=2&q=%20DEA] DEA; [www.inderscience.com/search/index.php?action=basic&wf=full&year1=1995&year2=2007&o=2&q=%20joint%20stock%20banks] joint stock banks; [www.inderscience.com/search/index.php?action=basic&wf=full&year1=1995&year2=2007&o=2&q=%20long-run%20efficiency] long-run efficiency; [www.inderscience.com/search/index.php?action=basic&wf=full&year1=1995&year2=2007&o=2&q=%20short-run%20efficiency] short-run efficiency; [www.inderscience.com/search/index.php?action=basic&wf=full&year1=1995&year2=2007&o=2&q=%20state-owned%20banks] state-owned banks; [www.inderscience.com/search/index.php?action=basic&wf=full&year1=1995&year2=2007&o=2&q=%20China] China; [www.inderscience.com/search/index.php?action=basic&wf=full&year1=1995&year2=2007&o=2&q=%20banking%20efficiencies.] banking efficiencies.   DOI: 10.1504/IJOR.2008.019167

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BiMetalAUPT
Message #238 - 12/01/10 02:11 AM

NOW YOU KNOW WHY I AM A  THOMAS THINKER..HE BEAT EDISON WITH THIS SYSTEM....HE ALSO JOINED EDISON TO TAKE ON BELL!!!!!



Envelopment is the military tactic of surrounding an enemy in the field so that they are isolated in a [en.wikipedia.org/wiki/Pocket_%28military%29] pocket. The friendly forces can choose to attack the pocket or [en.wikipedia.org/wiki/Investment_%28military%29] invest it (to stop supplies getting and to prevent breakouts) and wait for a beleaguered enemy to surrender.

To achieve an envelopment several different tactics can be employed:

• A [en.wikipedia.org/wiki/Flanking_manoeuvre] flanking manoeuvre can envelop an enemy force if some form of obstacle (such as a river, sea, or a mountain range) prevents the enemy from retreating or obtaining supplies.
  
• A [en.wikipedia.org/wiki/Pincer_movement] pincer movement consists of two simultaneous flanking manoeuvres which encircle an enemy. Early in [en.wikipedia.org/wiki/World_War_II] World War II the Germans frequently employed this tactic and encircled huge numbers of the enemy during the [en.wikipedia.org/wiki/Blitzkrieg] Blitzkrieg attacks on both the Western Front during the [en.wikipedia.org/wiki/Battle_of_France] Battle of France and during [en.wikipedia.org/wiki/Operation_Barbarossa] Operation Barbarossa on the [en.wikipedia.org/wiki/Eastern_Front_%28World_War_II%29] Eastern Front.
  
• A retreat where the enemy advances and then is attacked by friendly forces in the [en.wikipedia.org/wiki/Rear_%28military%29] rear as happened at the [en.wikipedia.org/wiki/Battle_of_Cannae] Battle of Cannae.
  
• A [en.wikipedia.org/wiki/Vertical_Envelopment] vertical envelopment is "a tactical maneuver in which troops, either air-dropped or air-landed, attack the rear and flanks of a force, in effect cutting off or encircling the force".[en.wikipedia.org/wiki/Envelopment#cite_note-0] [1]

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Ahamburger
Message #239 - 12/01/10 03:43 AM

Envelopment is the military tactic of surrounding an enemy in the field so that they are isolated in a [en.wikipedia.org/wiki/Pocket_%28military%29] pocket. The friendly forces can choose to attack the pocket or [en.wikipedia.org/wiki/Investment_%28military%29] invest it (to stop supplies getting and to prevent breakouts) and wait for a beleaguered enemy to surrender.

 Luv it Bruce the Impaler!.. Kind of like this, right! China announces new crackdown on product piracy:

[news.yahoo.com/s/ap/20101130/ap_on_hi_te/as_china_product_piracy] news.yahoo.com/s/ap/20101130/ap_on_hi_te/as_china_product_pir

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BiMetalAUPT
Message #240 - 12/01/10 05:34 PM

lack of demand for low interest rate German bonds.. Did not sell all the bonds!@!!!on 5 year offer!!!



FRANKFURT — A German five-year bond issue on Wednesday was undersubscribed, figures released by the central bank showed, the second time in two weeks that a German debt issue has gone uncovered.

Last week, an issue of 10-year German bonds, the eurozone benchmark, also met with offers for less than was available, amid heightened market tensions stemming from the Irish debt crisis.

This time, the agency which manages Germany's sovereign debt received offers for just 4.55 billion euros (5.96 billion dollars) after tendering bonds worth a total five billion euros, the central bank data showed.

In the end, the agency sold "Bobl" bonds worth 4.13 billion euros at an average rate of 1.73 percent.

UniCredit fixed income strategist Luca Cazzulani told AFP the main factor behind the result was that the market environment was not so nervous that investors would pile money into low-yield government bonds.

He pointed out that once the European Central Bank (ECB) tightened monetary conditions, something expected later this year, "when you have a German bond yielding barely 1.8 percent it's hardly a good deal."

Cazzulani said he was interested in seeing the results of a French bond offer on Thursday that includes an issue with a two-year difference in maturity from the German one to see if some kind of trend was emerging.

Of 70 German bond issues this year, this was only the fifth to be undersubscribed, and the result drove up the rate on 10-year Bunds to 2.759 percent from 2.670 percent at the close of trading on Tuesday.

Pressure has grown on Belgian, Irish, Italian and Spanish government debt, while German bonds, the eurozone's gold standard, normally benefit from full investor confidence.

But growing perceptions that strong eurozone countries might in future have to guarantee bailouts for the weak may begin to weigh on the stronger countries' credit standings.

"Investors are making the connection that at some point if anything goes wrong, it will be up to the countries that have given guarantees to pay the money," Cazzulani noted.

He stressed that did not seem to be "a very relevant source of concern right now" but added: "It is undeniable that some investors keep saying that."

Meanwhile, lighter pressure on Spanish debt Wednesday was part of a general rally in bonds issued by peripheral eurozone countries owing to rumours of a major ECB announcement on Thursday, the strategist said.

Markets expect "that tomorrow the ECB will announce some big and bold moves on its government bond purchase programme."

Rumours have floated ECB purchases of between one to two trillion euros in government debt, far above the current level of just under 70 million.  THIS IS FAR GREATER THEN QE2.. THEY JUST HAVE NOT GIVEN IT A NAME!!!

But the ECB would find it very hard to sterilize such purchases by taking in an equivalent amount of bank deposits, Cazzulani said, which could then fuel inflation expectations.NOW THEIR IS A PAGE FROM BEN B. PLAY BOOK..LARGE CD'S FOR BANKS.. WE DID 5 BILLION YESTERDAY!!

For ECB purchases to be credible, "they have to buy a big amount but if they buy a big amount it will be very difficult to sterilize it, and if they don?t sterilize it, it will be politically inacceptable for some EU countries," he said.

[Virgil Showlion]

BiMetalAUPT
Message #241 - 12/01/10 05:41 PM

CONCEPT OF LEGAL RESERVES IN THE INTERNATIONAL CENTRAL BANKS RESERVES,,,, NEW YORK FRB SITE...
  [www.newyorkfed.org/index.html] Home > [www.newyorkfed.org/newsevents/index.html] News and Events > [www.newyorkfed.org/newsevents/speeches/index.html] Speeches Speech Recent Developments in Key Legal Issues of International Reserves Investments November 16, 2010
Posted November 19, 2010 Printer version  


[www.newyorkfed.org/aboutthefed/orgchart/baxter.html] Thomas C. Baxter Jr., General Counsel and Executive Vice President

Remarks at the Central Reserve Bank of Peru on the Foreign Sovereign Immunities Act and Central Bank Immunity in the United States

Let me begin by thanking Manuel Monteagudo, a dear friend and colleague, and the Central Reserve Bank of Peru for inviting me to speak and for hosting this important conference.

My task is to discuss the Foreign Sovereign Immunities Act (FSIA or Act), which provides specific immunity protections for central banks. I believe that central bank immunity generally, and the topic of this conference more specifically—legal aspects of central banks' reserve investments—is both timely and deserving of attention.

Our present situation has brought new challenges. In the emerging markets, some countries have experienced sovereign default and the attention of litigious and sophisticated investors looking to realize on the debt of the defaulted sovereign. In more mature markets like the United States, which is recovering from the worst financial crisis since the 1930s, the importance of foreign investment has been reaffirmed and our fiscal deficit relies on foreign investment. Emerging and mature markets share a common interest in trying to ensure that central banks invest their international reserves in a manner that is appropriate and safe. Concern about reserve management arises from the public nature of the reserves, and from the unique position of the central bank as an instrumentality of a sovereign state.

In some ways, central bank reserves are like a nation's savings account. On a personal level, most of us want to protect the security of our savings, because that savings enables us to achieve future goals, such as the purchase of a home or the education of our children and provides a safety net for the unforeseen, such as unemployment, illness and even death. For the same reasons, central bankers worry about the safety and liquidity of their national reserves.

In my view, central bank attorneys play a key role in ensuring that central bank reserves are kept safe and secure. A legal advisor who is counseling a client contemplating a transaction, including an investment, should provide advice about how to structure the transaction to minimize, to the extent appropriate, the risk of loss. An accurate understanding of legal risk is one factor in evaluating the overall risk of any given investment. For a central bank, especially a central bank from a jurisdiction that might be the object of unwelcome attention from creditors or other litigants, this legal risk might

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BiMetalAUPT
Message #242 - 12/01/10 05:59 PM

Central Bank Liquidity Swap Lines

Background

Because of the role that the U.S. dollar plays in global financial markets, strains in dollar funding markets overseas can disrupt financial conditions in the United States. To address severe strains in global short-term dollar funding markets, in December 2007, the Federal Reserve established temporary central bank liquidity swap lines (also referred to as reciprocal currency arrangements) with a number of foreign central banks. Foreign central banks then could draw on those lines to provide dollar liquidity to institutions in their jurisdictions. In the swap transactions, the Federal Reserve deals only with the foreign central bank. Moreover, as explained below, the transaction is structured so that the Federal Reserve does not bear any foreign exchange risk. In May 2010, dollar swap lines were re-established with certain foreign central banks because of the re-emergence of strains in dollar funding markets.

As a precautionary measure, foreign-currency liquidity swap lines, through which the Federal Reserve could have received foreign currency liquidity from foreign central banks in order to lend to U.S. institutions, were also established. These swap lines are discussed in further detail below.

Liquidity swap lines were established under the authority of Section 14 of the Federal Reserve Act and in compliance with authorizations, policies, and procedures established by the Federal Open Market Committee (FOMC). The lines are administered by the Federal Reserve Bank of New York.

Dollar Liquidity Swap Lines

When a foreign central bank draws on its dollar liquidity swap line with the Federal Reserve, the foreign central bank sells a specified amount of its currency to the Federal Reserve in exchange for dollars at the prevailing market exchange rate. At the same time, the Federal Reserve and the foreign central bank enter into an agreement for a second transaction that obligates the foreign central bank to buy back its currency on a specified future date, which could be the next day or as much as three months later, at the same exchange rate used in the initial leg of the transaction. Because both legs of the transaction are conducted at the same exchange rate, the recorded value of the foreign currency amount is not affected by changes in the market exchange rate, and the Federal Reserve bears no exchange rate risk. At the conclusion of the second leg of the transaction, the foreign central bank pays interest to the Federal Reserve on the dollars drawn.

The foreign central bank lends the dollars it obtained via the swap line to institutions in its jurisdiction. The foreign central bank is obligated to return the dollars to the Federal Reserve under the terms of the agreement; the Federal Reserve is not a counterparty to the loan extended by the foreign central bank to depository institutions. The foreign central bank therefore bears the credit risk associated with the loans that it makes to institutions in its jurisdiction.

The FOMC authorized temporary dollar liquidity swap arrangements with 14 foreign central banks between December 12, 2007, and October 29, 2008. The arrangements expired on February 1, 2010. All transactions were executed in full, in accordance with the terms of the swap arrangements.

In May 2010, in response to the re-emergence of strains in short-term dollar funding markets abroad, the FOMC re-authorized dollar liquidity swap lines with five foreign central banks through January 2011.

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Tyfighter3
Message #243 - 12/02/10 05:37 AM

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BiMetalAUPT
Message #244 - 12/07/10 09:25 PM

he head of the German central bank, Axel Weber, is openly critical of the way the European Central Bank has handled the euro's debt woes. He is fighting to uphold purist monetary principles that are untenable in the current crisis. His chances of succeeding Jean-Claude Trichet as ECB chief are waning as a result.

Jean-Claude Trichet had chosen a complicated topic for his presentation. The president of the European Central Bank (ECB) stood on a podium in Frankfurt's Alte Oper opera house and talked about "macro-prudential regulation," "correlated risk positions" and "anti-cyclical capital buffers." These are dense subjects even for the bankers and financial experts in the audience, and a leaden sense of fatigue soon spread throughout the hall. Many listeners sank deep down into their seats, some stretched out their legs, and a few had drifted off to sleep.

One person, however, was wide awake in the front row. Axel Weber, the president of Germany's central bank, the Bundesbank, had brought along some work from the office. He fished documents out of a brown envelope, leafed through notes, studied diagrams and tables, and corrected manuscripts. Then he turned to the two smartphones that were lying on the table in front of him. Weber checked e-mails and the news, and typed out orders. Finally, he pushed back his chair, rushed over to his press officer on the other side of the room, and discussed how he should react to an agency report that he had just received.

Weber had accomplished quite a bit by the time Trichet finally stepped down from the podium amid a round of subdued applause. On the way to his seat, the ECB president had to pass by Weber. The German and the Frenchman shook hands, but the gesture seemed wooden and awkward. They didn't smile, they didn't look at each other, and they didn't talk. Then they walked off in opposite directions.

Last week, the European Central Bank reaffirmed its decision from last May to [www.spiegel.de/international/europe/0,1518,695111,00.html] buy up government bonds from ailing EU member states to support the euro. At the time, Weber had voted against the move and, riding roughshod over all the usual customs, had made his vote public.

The Pope vs Martin Luther

Since then, the euro zone has had one more problem: A religious war of sorts has erupted among the top officials of Europe's monetary authority, with Trichet cast in the role of the pope ("there is only one explanation and I give it") and Weber as Martin Luther ("I always go my own way, and it has served me well").

The two rivals are fighting with interviews and speeches -- with calculated indiscretions and public admonishments. The battle is about the currency's stability, the European Central Bank's image of itself and, last but not least, the presidency of the ECB.

Weber wants to succeed Trichet next fall as the head of the ECB -- and [www.spiegel.de/international/business/0,1518,726730,00.html] many people are wondering if that is still possible now that the German has become one of the most controversial figures in the euro crisis. His supporters cheer him as a defender of German virtues in monetary policy, while his critics accuse him of promoting himself at the expense of the common currency.

Weber is fighting an election campaign the likes of which Europe has never experienced before, and it's clear that his campaign will force German Chancellor Angela Merkel to make a difficult decision: Should she support a man who is engaged in a bitter feud with the current incumbent? Does the European Central Bank need an agile diplomat or an intractable guardian of stability at the helm? And most important of all: Does it help the euro if Merkel endorses Weber's candidacy?

For Helmut Schlesinger the answer is clear: "Weber is right," he says, "with its decision, the European Central Bank has crossed the Rubicon."

Schlesinger is one of Weber's predecessors at the Bundesbank. He spent two decades on the bank's board and was its president from 1991 to 1993. He was one of the bank's legendary currency watchdogs and had a reputation for sniffing out inflation from under every pebble. In

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BiMetalAUPT
Message #245 - 12/07/10 09:35 PM

It was right to introduce a bailout package for Greece and the euro zone," he says, "but wrong for the European Central Bank to commit itself by showing a willingness to purchase government bonds."

In Schlesinger's opinion, this breaks a taboo commonly referred to in Germany as the Mefo bond. Mefo is an acronym for a shell corporation called the Metallurgische Forschungsgesellscha>

The staff at the Bundesbank would have us believe that Schlesinger's cause is also Weber's cause. Their interpretation is that here is a man who is fighting as a matter of principle, out of a deep sense of concern for the stability of the currency and the independence of the ECB.

The image painted here by Weber's close advisers is a nice picture. But is it accurate?

It's a sin to print money to prop up a state budget -- that much is certain. The problem is that, in the wake of the financial crisis, this sin has been committed by the central banks of many countries, including the US and the UK. Shouldn't we also be allowed to temporarily violate principles in the euro zone if it means that this will save the common currency?

What's more, in his struggle to uphold principles, Weber considers it justified to break the rules himself, namely those of his office. As the German representative on the Central Bank Council, he should actually lobby for his cause internally, seek allies behind closed doors and otherwise behave in line with the fine traditions of the European Central Bank: Anyone who loses a vote still has to outwardly support the majority decision.

But Weber doesn't see himself as a diplomat, as he has made clear on a number of occasions. Weber has colored his term in office with the know-it-all air of the professor. He is not fighting for majorities -- he is playing to the experts in the crowd. He's not seeking to broker compromises -- he wants to prove that he is right. "It's not true that Weber believes that he is in possession of the truth," says someone who has known him for a long time, "he believes that he is in possession of the absolute truth." In late November, Weber gave a presentation at Berlin's swanky Hotel Adlon -- an excellent opportunity to show his mettle as a monetary statesman. Weber professed his commitment to "the euro -- the project of the century," juggled with jargon like "bondholders' squeeze" and "corporate governance," and called for realistic exchange rates between China and the US.

It was a successful presentation until a final question came from the audience. Max Otte, a professor of business administration at the University of Worms and a book author ("The Crash Is Coming"), tauntingly reminded the Bundesbank president that he had just noted the benefits of realistic exchange rates. Wouldn't it make sense, Otte asked, in this situation for Greece to leave the euro and devalue its currency?

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BiMetalAUPT
Message #246 - 12/07/10 10:19 PM

Weber loves to humiliate his adversaries -- and he takes it in stride that this causes the ranks of his opponents to continue to grow. When Weber rushed out of the hall after his presentation, Otte, shaking with rage, tried to intercept him -- and yelled in a choked voice after the Bundesbank president that he knew very well what the business sector thinks. After all, he said, he was an entrepreneur himself.

Anyone looking for examples of Weber's talent for making enemies only has to ask around at the European Central Bank. His opponents there cite a long list of transgressions. They reproach him for always voicing divergent opinions when Trichet makes public appearances. They complain that he makes far less critical comments at internal meetings than in public. They carp that in the past he didn't always so scrupulously adhere to his own noble monetary principles. They call him a "wannabe hawk."

But the more resistance the head of the Bundesbank faces, the more unrelentingly he plays the role of the rebel. When Trichet recently [www.spiegel.de/international/europe/0,1518,731689,00.html] criticized Germany's plans to make private investors share in the cost of government bailouts, Weber objected once again. He said that it made sense "not to make taxpayers foot the bill alone" for future cases of default.

Weber sees himself as the champion of Germany's interests and, indeed, the conflict in the upper echelons of the European Central Bank says a lot about the overall dilemma of Berlin's euro policy. The Germans often take the right approach on the issues, but they can't manage to turn this into a position that wins majority support. They are isolated, making themselves unpopular, and caught on the defensive -- just like Weber.

ECB Risks Becoming 'Bad Bank'

Since last week, it has been clear that the European Central Bank will, at least for the time being, continue to pursue its controversial bond purchasing program. However, in contrast to rumors that had been circulating earlier on the financial markets, the currency watchdogs have not committed themselves to expanding the program.

There are good reasons for this -- buying bonds entails significant risks. If the central bank purchases government bonds of troubled states on a large scale, it brings additional money into circulation. To avoid fueling inflation, the monetary authority in turn has to issue other bonds on the market to soak up the added liquidity. Economists call this procedure "sterilization."

Although this allows the central bank to limit the amount of money in circulation, it also creates an additional problem for the institution: the proportion of so-called junk books in its balance sheet increases. Those bonds are worth far less than their face value. Deutsche Bank chief economist Thomas Mayer warns that the ECB could turn into a "bad bank," with all the risks that entails. If the junk bonds end up having to be written down, he argues, this would also reduce the central bank's equity -- and the member states of the euro zone would have to inject fresh capital. This would spark a much larger spiral of debt and inflation.

Indeed, it was wise that the European currency watchdogs did not hastily expand the program last week. But it was just as intelligent not to deprive themselves of their ultimate weapon, because they may still need it if the turbulence surrounding the euro continues.

This is what Weber and the Bundesbank fail to appreciate in their campaign: The crisis of the common currency creates new priorities. Europe has to defend the euro, even at the cost of temporarily suspending proven principles.

[Virgil Showlion]

BiMetalAUPT
Message #247 - 12/07/10 11:46 PM

Now the French do not want tight money and are fighting to keep Weber our of President of the ECB!!!.. Weber would be bad for gold prices and bank stock.. BTW the Treasury Department has sold the last Citibank shares...At a profit + add interest on all those loans....QE2 for the Federal Reserve or ECB will make the bank a lot of money..Bruce



Weber's Chances of Getting ECB Top Job are Waning

Until recently, it looked as if they were still in the running. Early this year, the EU governments made Portugal's Vítor Constâncio vice president of the ECB. In accordance with European rules on proportional representation, it was clear that the next president would have to come from a large northern member state, in other words, either Germany or France. Since the French can't occupy the top position after Trichet, however, the German candidate looked like he was in a strong position. Shortly thereafter, Paris said that it was also amenable to the idea of Weber as president.

That has changed. Ever since the conflict between Trichet and Weber escalated, the German's chances have dropped sharply. Every week, the French government brings up the names of new alternative candidates, and Chancellor Merkel has also not yet decided if she wants to fight for Weber.

According to government sources, if Berlin aims for the position, there will be no way around Weber as its candidate. But the question is whether Berlin really wants the office, especially considering the current difficult situation. It would also involve the usual game of string-pulling between European governments: If Merkel wants to ensure that Weber gets the job, she has to make concessions elsewhere.

As for Weber himself, he appears to be playing the tragic hero who is sticking to his principles: "I'm thinking of my current job," he says, "not the next one."

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BiMetalAUPT
Message #248 - 12/08/10 09:02 PM

If you think I was in left Field...The ECB is still in the increased GDP run in the back.. Forget single operating demand.. It is save the GDP and Banks!!!

Lenders must draw up restructuring plans starting next year in return for government capital injections or asset transfers to so-called bad banks under European Union measures announced today.

Every bank in the EU “having recourse to state support in the form of capital or impaired asset measures will have to submit a restructuring plan,” the [ec.europa.eu/index_en.htm] European Commission said in an e-mailed statement. Until now “this was limited to distressed banks.”

[search.bloomberg.com/search?q=Joaquin%20Almunia&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1&partialfields=-wnnis:NOAVSYND&lr=-lang_ja] Joaquin Almunia, the EU’s competition commissioner, said the measure is part of a plan to phase out crisis aid rules for banks, “to prepare a gradual return” to normal market functioning. “The remaining risk of renewed stress is a valid reason to proceed with care and caution,” he said.

Banks in the 27-nation EU used around 1.1 trillion euros ($1.44 trillion) of state loans or guarantees last year, the commission said today. The EU’s antitrust agency, which checks whether subsidies distort competition in the region, granted approval for the measures as part of its response to the biggest financial crisis since the Great Depression.

EU policymakers are trying to wean banks off government help to avoid harming competition. Almunia extended the crisis rules into 2011, telling reporters he hoped to end them in a year’s time or “when normal conditions come back.” That could see new state aid guidelines for the financial industry starting on Jan. 1, 2012, he said.

THE ECB COULD BUY UP TO 2 TRILLION EURO = FIVE TIME THE QE2 OF THE FEDERAL RESERVE BANK IN NEW YORK.. FOR THE TOTAL SYSTEM THIS IS THE BOND WINDOW!!!IE TRADING DESK!!

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BiMetalAUPT
Message #249 - 12/15/10 02:08 AM

JUST AS YOU THINK GERMAN AND FRENCH BANKS SHOULD BE LIGHTING THE LOANS TO PIIGS THEN ARE ADDING TO THE PILE!!

FRANKFURT—Banks' exposure to Ireland and the southern rim of the euro zone in the second quarter was greater than previously thought, according to data from the Bank for International Settlements published Sunday.

The data confirm that German and French banks are among the world's largest creditors to the region.

France's total exposure to Greece stood at $83.1 billion at the end of the second quarter, comprising $57.3 billion in foreign claims and $25.7 billion in "other exposure," or the positive market value of derivative contracts, guarantees extended and credit commitments.

The BIS data on banks' "other exposure" hadn't been previously published, resulting in a greater exposure than estimated.

German banks' total exposure to Greece stood at $65.4 billion, $36.8 billion in foreign claims and $28.6 billion in other exposure. With an exposure of $186.4 billion, German banks had the second-largest exposure to Ireland, after the U.K., where banks' exposure amounted to $187.5 billion at the end of the second quarter.

The BIS's data illustrate how costly it would be if struggling Greece or Ireland were forced to restructure their debts as part of a bailout, as some commentators had argued. Both countries required a bailout because of a crippling debt crisis.

With a total exposure of $98.3 billion, Spanish banks had the largest exposure to Portugal.

German banks topped the list of Spanish creditors, with a total exposure of $216.6 billion; French banks' total exposure to Spain stood at $201.3 billion.

BIS said the total consolidated foreign exposures of BIS-reporting banks to Greece, Ireland, Portugal and Spain stood at $2.281 trillion. At $1.613 trillion, foreign claims represented just over 70% of that amount.

Dear Axel ,
 I DO NOT THINK YOUR GERMAN BANKS GET THE TREND!! PIIGS ARE GOING DOWN AND IT WILL NOT TAKE MY 45/70-500 TO DROP THEM.. THEY ARE DOING IT ON THERE OWN!!! AND THEY WILL TAKE THE GERMAN BANKS DOWN WITH THEM.. LOOK AT WEST L.B. ETC... YES YOU NEED TO FIND BANKERS THAT KNOW SOMETHING ABOUT BANKING.. BUT THAT IS GOING TO GO TO P&M..

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BiMetalAUPT
Message #250 - 12/15/10 09:36 PM

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BiMetalAUPT
Message #251 - 12/16/10 07:08 AM

The German banks are insolvent not due to lending money on overpriced houses as much as underfunded retirement of the Sovereign bonds that finance unreal promises by the very left parties in the 1970's!!

 

 Germany: Axel Weber has a  two-day European summit in Brussels to correct his problem with a very  visible lose-lose situation, and with no easy way out of a complex dilemma that pits good politics against bad economics long term promises of life long cradle to grave health care and massive retirement promos that have a 70% income emplacement  benefit. 


Its hard-fought economic gains, earned over many years through restructuring and fiscal discipline, are threatened by that adopted a liberal  policy  in the 1970's approach like the left wing of the French Parliament . To add to the irony, these challenged countries (and indeed the zone as a whole) now look to Germany to fund one rescue package after another.Germany has or had a single point of correction system for money supply: Inflation Control.




The thinking from the Genius of the German Bundesbank is control money supply to keep inflation down to less then 2%.  My thinking is this is what Thomas Hoenig is talking about.  The Central Part of American my have lower cost and lower income but less losses from overpriced housing. He could be right as the banks in the area that have doing under were from loans bought in other areas of the nation. 





It will be interesting as to what will be the answer as  Axel Weber has a strong Alli in Angelina Merkel...The do not want to increase money supply. Axel will fight the French over it any day!!





Just a few thoughts on one mandate in action.. Bundesbank has zero inflation in its dreams!!! but the ECB must not.. They plan to buy 2 trillion Euro 's in sovereign BONDS.   TO PAY FOR THEM THE BANK WILL PRINT MORE EUROS AND M1 WILL FLY LIKE IN CHINA (M1 GROWTH = 21% FOR 2009).  WE WILL SEE MASSIVE INFLATION IN FRANCE , PIIGS AND THE LIBERAL LOW COUNTRIES AS THE IS WORST THEN THE USA DUE TO HIGH COST OF RETIREMENT AND FREE HEALTH CARE.





Bruce

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Scared_Shirtless
Message #252 - 12/16/10 12:55 PM



I am absolutely blown away by the amounts of soverign debt some banks are holding - both in Europe and the US.  More so Europe.

 

Germany?  Insane amounts.  UK?  Insane amounts.  France?  Insane amounts.  And to top it all off - most are holding insane amounts on each other.  Spain with Portugal debt?  Insane amounts.  Ireland?  Belgium?  Hungary?  Of course Greece.

 

This is gonna be very ugly.  And just like sub-prime - it will NOT be contained.

 

I am blown away...

 

Go Iceland!!!

 

 

[Virgil Showlion]

neohguy
Message #253 - 12/16/10 01:03 PM

Go Iceland!!!

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BiMetalAUPT
Message #254 - 12/16/10 06:39 PM

S.S.,
Your Idea about the European banks holding too much junk and calling it Sovereign bonds is right on!!!  In tyhe USA we just buy Saving Bonds Direct and skip the middle man. Some of the banks were leveraged 50 to 1 because the BIS II Rules allow for no capital counter holdings for Sovereign debt  also AAA.. That got them into trouble when AIG was down rated to JUNK!!!  At that point (9/15/2008) when Lehman went Chapter gone the assets were TOXIC and no one was buying..
with the personal PPP of about 39,600/ person for Iceland.. they are about #20 in personal income.. Ahead of Germany, Sweden, Finland,Netherlands and France  + others.. So .. Keep going for it Iceland... 7% of the population produces 12% of the GDP and 40% of the Exports.. Fishing!!!

British and Dutch authorities have pressed claims against Icelandic Landsbanki to compensate their citizens for losses suffered on deposits held in that bank

They now have three new banks and the Landsbank owned by the state is not paying for loses from the banks' pasted when it owned by stockholders not the state .  They have given the UK its first Haircut in Banking based on "UN-sovereign" Debt....  Increased Yield = increased risk!!!!
Neoh Guy!!!

Go Iceland!!!

Iceland has a new lake power system that has increased electric power to make Al!!!  Agree.. They are working hard...
Bi Metal Au Pt

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BiMetalAUPT
Message #255 - 12/18/10 01:06 AM

From New York Federal Reserve on BIS III fine points on the devil in the detains on Capital ...More Capital Please..Hedge Your BETS!!! with COCO.. Check out RoBaBank for COCO rates.. The last of the AAA in Europe.. The one other I know of is Texas Farm Credit Banking system.. AAA rated ..

Basel III rules text and results of the quantitative impact study issued by the Basel Committee 16 December 2010

The Basel Committee issued today the Basel III rules text, which presents the details of global regulatory standards on bank [www.bis.org/publ/bcbs189.htm] capital adequacy and [www.bis.org/publ/bcbs188.htm] liquidity agreed by the Governors and Heads of Supervision, and endorsed by the G20 Leaders at their November Seoul summit. The Committee also published the results of its comprehensive [www.bis.org/publ/bcbs186.htm] quantitative impact study (QIS).

Mr Nout Wellink, Chairman of the Basel Committee on Banking Supervision and President of the Netherlands Bank, described the Basel III Framework as "a landmark achievement that will help protect financial stability and promote sustainable economic growth. The higher levels of capital, combined with a global liquidity framework, will significantly reduce the probability and severity of banking crises in the future." He added that "with these reforms, the Basel Committee has delivered on the banking reform agenda for internationally active banks set out by the G20 Leaders at their Pittsburgh summit in September 2009".

The rules text presents the details of the Basel III Framework, which covers both microprudential and macroprudential elements. The Framework sets out higher and better-quality capital, better risk coverage, the introduction of a leverage ratio as a backstop to the risk-based requirement, measures to promote the build up of capital that can be drawn down in periods of stress, and the introduction of two global liquidity standards.  Transition and implementation

The Committee has put in place processes to ensure the rigorous and consistent global implementation of the Basel III Framework. The standards will be phased in gradually so that the banking sector can move to the higher capital and liquidity standards while supporting lending to the economy.

Axel Weber  "D*a*m the recession" ... M1 is Fine!!!"   for the Mod's  "I made it up....."

Bruce
D*A*M= Don't Adjust M1

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BiMetalAUPT
Message #256 - 12/18/10 01:10 AM

Cont'
QIS results

The Committee today released the [www.bis.org/publ/bcbs186.htm] Results of the comprehensive quantitative impact study. The Committee conducted a comprehensive QIS exercise to assess the impact of capital adequacy standards announced in July 2009 and the Basel III capital and liquidity proposals published in December 2009. A total of 263 banks from 23 Committee member jurisdictions participated in the QIS exercise. This included 94 Group 1 banks (ie those that have Tier 1 capital in excess of €3 billion, are well diversified and are internationally active) and 169 Group 2 banks (ie all other banks).

The QIS did not take into account any transitional arrangements such as the phase-in of deductions and grandfathering arrangements. Instead, the estimates presented assume full implementation of the final Basel III package, based on data as of year-end 2009. No assumptions were made about banks' profitability or behavioural responses, such as changes in bank capital or balance sheet composition, since then or in the future. For that reason the QIS results are not comparable to industry estimates, which tend to be based on forecasts and consider management actions to mitigate the impact and which incorporate analysts' estimates where information is not publicly available.

Including the effect of all changes to the definition of capital and risk-weighted assets, as well as assuming full implementation as of 31 December 2009, the average common equity Tier 1 capital ratio (CET1) of Group 1 banks was 5.7%, as compared with the new minimum requirement of 4.5%. For Group 2 banks, the average CET1 ratio stood at 7.8%. In order for all Group 1 banks in the sample to meet the new 4.5% CET1 ratio, the additional capital needed is estimated to be €165 billion. For Group 2 banks, the amount is €8 billion. 

Relative to a 7% CET1 level, which includes both the 4.5% minimum requirement and the 2.5% capital conservation buffer, the Committee estimated that Group 1 banks in aggregate would have had a shortfall of €577 billion at the end of 2009. As a point of reference, for this sample of banks the sum of profits after tax and prior to distributions in 2009 was €209 billion. Group 2 banks with CET1 ratios less than 7% would have required an additional €25 billion; the sum of these banks' profits after tax and prior to distributions in 2009 was €20 billion. Since the end of 2009, banks have continued to raise their common equity capital levels through combinations of equity issuance and profit retention.

The Committee also assessed the estimated impact of the liquidity standards. Assuming banks were to make no changes to their liquidity risk profile or funding structure, as of end-2009:

• The average LCR for Group 1 banks was 83%; the average for Group 2 banks was 98%.

  
  

• The average NSFR for Group 1 banks was 93%; the average for Group 2 banks was 103%.

Banks have until 2015 to meet the LCR standard and until 2018 to meet the NSFR standard, which will reflect any revisions following each standard's observation period. Banks that are below the 100% required minimum thresholds can meet these standards by, for example, lengthening the term of their funding or restructuring business models which are most vulnerable to liquidity risk in periods of stress. It should be noted that the shortfalls in the LCR and the NSFR are not additive, as decreasing the shortfall in one standard may also result in a decrease in the shortfall in the other standard.

Mr Wellink noted that "the Basel III capital and liquidity standards will gradually raise the level of high-quality capital in the banking system, increase liquidity buffers and reduce unstable funding structures. The transition period provides banks with ample time to move to the new standards in a manner consistent with a sound economic recovery, while raising the safeguards in the system against economic or financial shocks". He added that in the case of the liq

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BiMetalAUPT
Message #257 - 12/20/10 11:16 AM

I THINK THE GERMAN BUNDESBANK IS DREAMING BUT HERE IS ALL ABOUT THE E-MAIL ...YES YOU DO REMEMBER THE BUNDESBANK STATED ALL THE GERMAN BANKS EXCEPT HYPO REALESTATE BANK WERE SOLVENT THEN SAID THEY COULD NEED 150 BILLION MORE EURO CAPITAL FOR BIS III



Bundesbank Confident German Banks Can Implement Basel III On Time



FRANKFURT -([www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=201012160842dowjonesdjonline000422&title=bundesbank-confident-german-banks-can-implement-basel-iii-on-time#] Dow Jones)- Germany's banks should be able to implement new global rules on capital and liquidity on time, Franz-Christoph Zeitler, head of banking supervision at the Deutsche Bundesbank, said Thursday.

In an e-mailed statement, Zeitler said that "on the basis of [their] responses, we are confident that German banks can meet the capital ratios inside the transitional phase that is foreseen."

Under a compromise hammered out in September, Germany's public-sector banks will effectively have five years more than private-sector banks across the world to bring their capital bases into line with the new global rules.

Whereas most banks have to comply fully with the new rules by 2018, banks that aren't joint-stock companies have until 2023 to replace their existing capital instruments with common [www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=201012160842dowjonesdjonline000422&title=bundesbank-confident-german-banks-can-implement-basel-iii-on-time#] equity or something directly comparable to it. At present, many rely on specially tailored deposits from their effective owners, known as silent participations. Zeitler said the transitional phases outlined in the so-called Basel III accords "will prevent undesired side-effects on the economy and will make it possible for banks to fulfill th

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Scared_Shirtless
Message #258 - 12/20/10 12:53 PM



If a lot of Europe's coming pain is over promised retirement benefits, we have an all too similar issue at home.  The coming blowup in the states will mimic the EU blowup.  The coming reductions to government employees is real - but it will NOT go down pretty.  This will be extremely ugly.  The union propaganda will be brutal.

 

"They're all entitled - you see."

 

Chris Christie called it about right on 60 minutes last night.  He's my hero!!!

 

To many similarities between us and Europe - it scares me.

 

I have NO idea how to invest in 2011.  I'm thinking - batten down the hatches instead.

[Virgil Showlion]

BiMetalAUPT
Message #259 - 12/21/10 04:44 PM

World Banking is still on path with a major Bank or two insolvent..Federal Reserve still IN THE   MAJOR BANKING CRISES MODE!! THIS WAS A PHONE MEETING...IE EMERGENCY MEETING ...ECB BUTTON ON THE BOTTOM IS WORTH READING!!!  FROM NEW YORK  VIA WASHINGTON CENTRAL OFFICE OF THE FEDERAL RESERVE SYSTEM..
www.federalreserve.gov/newsevents/press/monetary/20101221a.htm

Press Release

Release Date: December 21, 2010 For immediate release

The Federal Open Market Committee has authorized an extension through August 1, 2011, of its temporary U.S. dollar liquidity swap arrangements with the Bank of Canada, the Bank of England, the European Central Bank, the Bank of Japan, and the Swiss National Bank. The swap arrangements, established in May 2010, had been authorized through January 2011.

Information on the actions that will be taken by other central banks is available at the following websites:

[www.bank-banque-canada.ca/en/index.html] Bank of Canada

[www.bankofengland.co.uk/index.htm] Bank of England

[www.ecb.int/home/html/index.en.html] European Central Bank

[www.boj.or.jp/en/] Bank of Japan

[www.snb.ch/] Swiss National Bank

 

[www.federalreserve.gov/newsevents/press/monetary/monetary20100510.pdf] U.S. Dollar Liquidity Swaps--Frequently Asked Questions (51 KB PDF) [www.federalreserve.gov/newsevents/press/monetary/2010monetary.htm] 2010 Monetary Policy Releases

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BiMetalAUPT
Message #260 - 12/21/10 04:53 PM

DAMAGE CONTROL...14 DAY EMERGENCY ACTION ON DEC 22,2010.. SOMETHING IS GOING DOWN IN THE EU.. COULD IT BE SPAIN?

PRESS RELEASE 21 December 2010 - Prolongation of US dollar liquidity-providing operations

The Governing Council of the European Central Bank (ECB) has taken a decision, in coordination with the Bank of Canada, the Bank of England, the Bank of Japan, and the Swiss National Bank, to extend the liquidity swap arrangements with the Federal Reserve up to ?1 August 2011, and to continue to conduct US dollar liquidity-providing operations with a maturity of seven days. These Eurosystem operations will continue to take the form of repurchase operations against eligible collateral and will be carried out as fixed rate tenders with full allotment. The next US dollar liquidity-providing operation will be carried out on ?22 December 2010, with settlement on 23 December; by way of exception, however, it will be conducted as a 14-day operation to cover the year-end.

Information on related actions that are being taken by other central banks is available at the following websites:

Federal Reserve Board:  [www.federalreserve.gov/] www.federalreserve.gov

Bank of England:  [www.bankofengland.co.uk/] www.bankofengland.co.uk

Bank of Japan:  www.boj.or.jp/en

Swiss National Bank:  [www.snb.ch/] www.snb.ch

Bank of Canada:  [www.bankofcanada.ca/] www.bankofcanada.ca European Central Bank
Directorate Communications
Press and Information Division
Kaiserstrasse 29, D-60311 Frankfurt am Main
Tel.: [phone], Fax: [phone]
Internet: www.ecb.europa.eu

Reproduction is permitted provided that the source is acknowledged.

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dendl
Message #261 - 12/21/10 05:00 PM



Hey Scaredshirtless,

Isn't Christie a woman?

And also,for everybody. If Europe doesn't engage in printing presses, won't they slip into radical deflation, while we print our way to hyper-inflation?

Chad

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Scared_Shirtless
Message #262 - 12/21/10 05:20 PM



Chris is MOST DEFINITELY not a woman...

 

And Europe WILL fire up their presses.  Count on it.

 

Somethings up Bruce!   THANKS!!!!!

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BiMetalAUPT
Message #263 - 12/23/10 06:26 PM

From New York...This is interesting... Work hard, save your money , buy only what you need and they you get to pay off the big spenders of the world..

Just a thought.. it is clear this is needed but it is also clear it was needed years ago...German banks are still buying high risk Sovereign bonds in Spain and Greece.., Bi Metal Au Pt
  [www.newyorkfed.org/index.html] Home > [www.newyorkfed.org/newsevents/index.html] News and Events > [www.newyorkfed.org/newsevents/news/index.html] News Press Release Senior Supervisors Group Issues Report on Risk Appetite Frameworks and IT Infrastructure December 23, 2010

 

NEW YORK—Senior financial supervisors from ten countries—collectively, the Senior Supervisors Group (SSG)—today issued a report that evaluates how financial institutions have progressed in developing formal risk appetite frameworks and in building out highly developed IT infrastructures and firm wide data aggregation capabilities.

The report—Observations on Developments in Risk Appetite Frameworks and IT Infrastructures—concludes that while firms have made progress in developing risk appetite frameworks and have begun multiyear projects to improve IT infrastructure, considerably more work must be done to strengthen these practices. In particular, the aggregation of risk data remains a challenge, despite its criticality to strategic planning, decision making and risk management.

The observations and conclusions in the report reflect the findings of initiatives undertaken by two SSG working groups. The risk appetite working group conducted a series of interviews with boards of directors and senior management of global financial institutions to gauge progress in risk appetite frameworks, while the working group that focused on IT infrastructure based its views on observations from a number of existing supervisory efforts.

This report represents a joint effort on the part of twelve supervisory agencies: the Canadian Office of the Superintendent of Financial Institutions, the French Prudential Control Authority, the German Federal Financial Supervisory Authority, the Bank of Italy, the Japanese Financial Services Agency, the Netherlands Bank, the Bank of Spain, the Swiss Financial Market Supervisory Authority, the U.K. Financial Services Authority, and, in the United States, the Office of the Comptroller of the Currency, the Securities and Exchange Commission and the Federal Reserve.

These initiatives were conducted to support the priorities of the Financial Stability Board, whose mission is to address vulnerabilities in the financial system and to promote global financial stability.

The report is attached below, together with the transmittal letter to the chairman of the Financial Stability Board, which summarizes the report’s key observations and conclusions.

[www.newyorkfed.org/newsevents/news/banking/2010/an101223.pdf] SSG Report  

Contact:
Jack Gutt
Federal Reserve Bank of New York
[phone]
[mailto:[e-mail]] [e-mail]

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BiMetalAUPT
Message #264 - 12/23/10 08:01 PM

Things in the EU Sovereign Bond asset area are under attach!!   This will increase the needed capital for banks to hold Bonds from Portugal per their tier1 capital assessment. 

Pan Pylas, AP Business Writer, On Thursday December 23, 2010, 12:57 pm EST

LONDON (AP) -- Portugal had its credit rating downgraded Thursday by the Fitch Ratings agency amid mounting concerns over the country's ability to raise money in the markets to finance its hefty borrowings.

Fitch said it was reducing its rating on the country's debt by one notch to A+ from AA- and warned that further downgrades may be in the offing by maintaining its negative outlook.

"The downgrade reflects an even slower reduction in the current account deficit and a much more difficult financing environment for the Portuguese government and banks than incorporated into Fitch's previous rating (in March), as well as a deteriorating near-term economic outlook," Fitch said in a statement.

Fitch's downgrade follows a warning earlier this week from rival Moody's Investor Services that it may cut its A1 rating on Portugal by a notch or two because of uncertain economic growth, the high cost of borrowing on global markets and worries about the banking sector.

Fitch's reasoning is very similar and is likely to stoke renewed speculation that Portugal could well be the next country using the euro in need of financial help from its partners in the European Union and the International Monetary Fund -- Greece and Ireland have already suffered the ignominy of being bailed out.

The agency said the Portuguese government would likely meet its target of reducing its budget deficit to 7.3 percent of national income this year, but voiced concerns that this is heavily dependent on one-time measures, which don't make a dent on the long-term state of the public finances.

As a result, Fitch said the government will find it "extremely challenging" getting the budget into shape, especially if, as the agency expects, the economy falls into recession next year. The Portuguese government aims to reduce the budget deficit to 3 percent of GDP by 2012 and to just 2 percent of 2013, which would be extremely difficult if the euro zone's smallest economy starts to contract again -- in effect, lower growth means lower tax receipts and higher social spending, hardly conducive to budgetary health.

"Failure to meet its 2011 budget headline and structural deficit targets would erode confidence in the medium-term sustainability of public finances that underpins Portugal's current sovereign ratings," Fitch said.

Confidence is particularly important if Portugal is going to be able to avoid the same fate which befell Greece and Ireland. If investors lose confidence in the budget plan, then the country's cost of borrowing in the markets -- already considered to be a long-term unsustainable rate of nearly 7 percent -- will rise further.

Fitch said that so far, Portuguese officials have managed to withstand the pressure, partly by articulating a coherent bond issue strategy to investors and partly by ongoing reforms to the labor market and the education system.

The reforms are aimed at building up the country's competitiveness, which should help rebalance the economy in favor of exports and ultimately lead to an improvement in the current account deficit.

Portugal's current account deficit, effectively its trade deficit, has averaged around 10 percent of GDP over the last decade and net debt is equivalent to 90 percent of GDP, the third-highest in the euro zone.

"Insufficient progress in rebalancing of the economy, including a reduction in the current account deficit to a more sustainable level, over the next few years would be negative for sovereign creditworthiness," Fitch said.tug

[Virgil Showlion]

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[bimetalaupt]

BAnking is all about TRUST!!.. German banks are know looking at how much the German people will put up with the PIOGS.. This is just the latest thing I have read on lack of trust.. MY POINT IS THE LAST TWO DEPRESSIONS WERE STARTED IN EUROPE WITH BANKS THAT WERE LENDING MONEY TO OTHERS RATHER THEN BUILDING UNITS OF GROWTH IN THEIR OWN BACK YARD.

— The chief economist of Germany's biggest bank says he expects Portugal to seek a bailout from other eurozone countries soon as the sovereign debt crisis continues to erode market trust. tHE PROBLEM IS WEBER HAS NOT THE WILL TO INCREASE M1 OR THE MARKET FOR THE BONDS WILL BE ZERO .. THAT WILL MEAN THE BUNDESBANK WILL HAVE TO BUY THE GERMAN BONDS.. LAST MONTH THE WAS NOT ENOUGH DEMAND FOR THE 10 OR OR 30 YEAR BOND.. SO NOT ALL BONDS WERE SOLD.

Deutsche Bank AG's Thomas Mayer as saying he "wouldn't be surprised if Portugal would in the near future seek help in addition to Greece and Ireland." MAKE THAT MONDAY.. ALSO SPAIN IS LOOKING TO FIND FUNDING AS IT IS COSTING THEM 11% FOR MONEY FROM THE SWAP!!! REMEMBER BEN B. IS MAKING A LOT OF MONEY FROM THE SWAP..

Mayer as saying the government in Lisbon would be "well-advised to move swiftly" under the protection of Europe's euro750 billion ($980 billion) rescue fund... aCT NOW WHILE THE FUNDS ARE STILL ON THE TABLE.. I THINK WEBER WANT TO CUT HIS LOSSES AND AT THE COST OF THE EURO BUILD GERMAN CASH TO PAY FOR THE HIGH CASH FLOW RETIREMENT SYSTEMS.. HE IS ALL ABOUT CONCEALING INFLATION AND NOT INCREASE THE M1 FOR THE EURO...

Mayer SAIDSpain, Italy and Belgium enjoyed much better fundamentals and would not need outside help to refinance their deficits.
WITH THAT DATA AND $4.-- YOU CAN BUY A REAL GOOD COFFEE IN PARIS, FR. BET THEY WILL WITH ALL THE MONEY THEY PUMPED INTO ING!!!!! BELGIUM IS OUT OF CASH FOR THE HUGE RETIREMENT PROMISES MADE TO WORKER AFTER WWII. LIKE THE GERMAN SYSTEM , THEY BET ON 2% POPULATION GROWTH IN 1949.

JUST A THOUGHT,
BRUCE

[bimetalaupt]

This was from one of the true independent thinkers at New York Federal Reserve Bank.. He cares to tell it out as he sees it..

Challenges Facing the U.S. Economy and Financial System

Remarks at the Economic Club of New York, New York City

Good morning. Thank you, Andrew, for your kind introduction. It is a pleasure to be here this morning to offer some reflections on the challenges facing the United States—although I think you will understand if I say that it would have been more of a pleasure a few weeks ago, before the furor surrounding the Federal Open Market Committee's (FOMC) latest action. Let me underscore that my comments this morning are personal, not institutional, and do not reflect the views of the Federal Reserve System or the Federal Reserve Bank of New York.

As you know, the United States is now about a year and half into recovery from the longest and deepest recession of the post war period. Growth has resumed, and our financial system, pushed to the brink two years ago, has stabilized.

We are recovering, but we are far from recovered. The rebound to date has been much less vigorous than has been the norm for U.S. recoveries. The economy has been adding jobs—some 875,000 since the start of the year—but unemployment remains stubbornly high. Growth has slowed, averaging just under 2 percent over the last two quarters, as support from the fiscal stimulus and the turn in the inventory cycle is fading. Bank lending standards are no longer being tightened, but bank credit continues to contract. The backlog of inventory in housing appears likely to weigh on activity in that sector for some time to come. And the large amount of slack created by the recession continues to put downward pressure on prices and wages. All in all, a fragile picture.

This sluggishness is a reflection of the fact that what came before was not a garden variety recession. Put simply, our current circumstances are not just the result of the crisis. Our growth was too reliant on spending and borrowing, as opposed to saving and investing and competing in the increasingly globalized marketplace. Too much of what occurred in the run-up to the crisis was framed against a backdrop of monetary, supervisory and fiscal policy focused too much on the quantity of growth, and not enough on the quality.

Experience with balance sheet recessions and debt overhangs is relatively limited in the advanced economies, at least in the post war period. But these types of problems are far less rare in the emerging world. And the record there suggests that recovery takes time and requires painful adjustments, as households and creditors work through the overhang of excessive borrowing and lending, and the associated decline in asset prices and employment opportunities; and as financial institutions work to strengthen their balance sheets to meet more robust standards for capital and liquidity. I see little to suggest that a similar dynamic isn't likely to hold true for us as well.

Adding to the challenges confronting us at the moment is the large amount of uncertainty in the wind. In addition to the headwinds for the macro outlook, there are questions about the long-term sustainability of U.S. fiscal policy; six weeks from the start of a new year, households and businesses still don't know what the tax regime will be in the coming year, let alone for the medium term; they face questions regarding the new health regime and its costs; on the financial side, there are hundreds of new regulations to be written during the next year or so in the context of Dodd Frank and Basel III, and those carry with them concerns about the availability and cost of credit, as well as the durability of certain business models. And the state of our domestic political discourse hasn't exactly been confidence-inspiring—or investment-friendly.

All of this clearly affects confidence, the prospects for growth and employment, and the hand-off from a fading turn in the inventory cycle to a sustained upturn in business fixed investment and, over time, consumption. As we know, jobs depend on growth; growth depends on investment; and investment capital flows where it is welcome, where the rules of the game are perceived to fair and predictable, and where it can expect a reasonable return.

In this context, there are numerous questions about what role monetary policy can and should play. And as we've seen in the past few weeks, there is no shortage of views on answers. So let me share my bias:

Monetary policy can create favorable conditions for growth, by helping to foster an environment in which job creation can take place. And monetary policy can provide a supportive environment for households and firms as they work through difficult balance sheet adjustments, by lifting asset prices and net worth, lowering debt and equity costs, and ensuring that disinflation or deflation do not derail the adjustment process. Finally, monetary policy can contribute to reduced uncertainty about the outlook for growth, and help guard against the risk that a new negative shock could threaten what is still a fragile recovery.

But monetary policy has limits. It cannot, by itself, create growth or jobs. Nor can monetary policy, by itself, provide the answers to all of the uncertainties that are weighing on consumption, investment and job creation, or eliminate the need for balance sheet adjustments.

It is understandable that the decision to undertake Large Scale Asset Purchases has been greeted with some degree of anxiety and skepticism. On the other hand, I am not persuaded by much of the reaction.

Monetary policy works by influencing the level and shape of the domestic yield curve. In normal times, the Fed does this by buying and selling Treasury securities at the short end of the curve, thereby influencing short-term rates. The Fed's purchase of Treasury bonds (under quantitative easing "QE" or LSAP) simply extends classic open market operations to longer duration securities, to produce similar results: a shift in the yield curve consistent with desired financial conditions.

While I have some sympathy for those who question the degree to which this will ultimately be successful in producing the desired real economy effects, I am not sure what to make of the fact that a change in operating procedure per se could have generated such an uproar about the Fed's fundamental commitment to price stability, to preserving the central role of the dollar as the world's reserve currency—and to executing on the responsibilities that brings with it. Based on our record on that score over the past thirty years or so, I find it particularly curious.

Regarding the external implications of the policy, several points are worth keeping in mind. One is that the goal of policy is to stimulate demand in the United States by encouraging lower real yields. To be sure, the dollar has weakened of late, but as a side effect of policy, not as a goal, and not by more than might be expected in light of our recent slowing and recent changes in interest rates and inflation expectations. And as growth strengthens, the value of the dollar should adjust accordingly.

Policy-induced shifts in financial conditions—lower expected real yields, tighter spreads, higher asset prices—should provide some support for growth in the quarters ahead, notwithstanding that aspects of the credit channel remain impaired.

We recognize that success in easing financial conditions comes with risks: financial excesses may reemerge—this is something we will be especially watchful for. But this is not just a consideration for monetary policy, and is not unique to LSAPs. All of us—public and private sectors alike—need to be attentive to undue acceleration in financial activity, to slippages in risk management practices or underwriting standards, and to developments in an environment where many of the familiar reference points are changing rapidly.

So, to reiterate: monetary policy can potentially ease the headwinds we currently face and help reduce some of the downside risks, but it is not a cure-all for the challenges facing our country. These need to be addressed directly by the appropriate parties. Progress in areas beyond the purview of monetary policy is important if we are to achieve strong and sustainable growth, and durably shore up confidence in our economy, our currency and our credit.

Clearly, putting our public finances back on track represents one of our most important challenges. Fiscal support played a valuable stabilizing role in heading off economic and financial disaster, both in the United Sates and across the globe. But with the U.S. public debt rising at its fastest pace since the Second World War and set to soon reach its highest level in relation to national income in over 50 years, we would be kidding ourselves if we believed that today's very large and growing structural fiscal deficits are consistent with a continuing strong global leadership role.

We need a strategic approach, one that provides answers—growth friendly answers—about how spending and tax burdens are likely to evolve.

This does not mean we need to solve all of our problems at once. We have some scope for gradualism and even to provide further support for growth—but this needs to be embedded in a credible framework that gives greater predictability to the path back to a sustainable fiscal stance.

Fundamental financial reform also needs to be a priority, and important progress has been made both domestically and internationally in forums such as (Basel and the Financial Stability Board) on higher and better quality capital and liquidity buffers, more robust institutional arrangements, and resolution regimes for large interconnected financial institutions.

But these are complicated undertakings, with many details still to be worked out, (as evidenced by the more than 200 new rules scheduled to be written under Dodd-Frank in the months ahead). Details matter here—bank regulation rivals the tax code in its complexity but also in its impact on incentives—and a great number of moving parts will need to fit together efficiently and effectively. Once in place, regulations can also be difficult to change. So it is important that we get this right.

There is a tension between moving quickly to resolve regulatory uncertainties, however, and introducing greater scope for unintended consequences. Transparency, consultation, and international coordination should help on this score.

We also need to keep in mind that our ultimate success in enhancing financial stability will depend on aspects that cannot be addressed by legislation and static rules. As I noted earlier, all of us have role to play in guarding against potential side effects of the accommodative environment that prevails in much of the globe at present.

Let me conclude with a brief word about the role of the emerging world in all of this.

The emerging markets, so often a source of instability in the past, have been an important source of resilience and stability in recent years. Indeed, after spending much of my career helping countries in the emerging world work through difficult patches, I now find myself on the other side, spending a fair bit of time discussing, with visitors from the emerging world, how we plan to get ourselves back on track.

Growth prospects and policy performance in much of the emerging world remain relatively strong, notwithstanding prospects for subdued growth in the advanced economies. These positive trends, even more than the push of low yields in the advanced economies, have been encouraging capital to flow once again to the emerging world. On balance this is a positive development, as it can facilitate more rapid increases in the standard of living in these countries, as well as a needed rebalancing of global demand. But it also poses its fair share of challenges.

I think it is well understood that the emerging world will need to expand its role further, and become more of an engine of growth and global demand, if the global economy is to successfully navigate the difficult straits it faces. But experience has taught the emerging market economies to be cautious. They know better than anyone that they are not decoupled from the risks that the advanced economies are facing. And they also know the risks of market exuberance and complacency. In this context, it is no surprise that self insurance through reserve accumulation has again been on the rise.

Unfortunately, with jobs scarce in the advanced economies, and authorities in the emerging world understandably concerned about being overwhelmed by excessive capital inflows, the scope for fractious and defensive policies is growing. I cannot recall a time in my career when protectionist sentiment was bubbling so close to the surface.

We need a framework for dealing with these issues, which go well beyond exchange rates and include a host of policies that influence savings, investment and growth trajectories. But there are no easy answers, because while there are important common interests, many others are not clearly aligned.

Achieving the needed global adjustment will require cooperation, consultation and leadership—real leadership that identifies common principles, that frames policy against principles that can be mutually shared, that inspires confidence by delivering on commitments, and that makes possible concessions that facilitate broader interests.

Success will hinge in part on the willingness of the emerging economies, particularly the larger ones, to meet this challenge.

But I have a hard time seeing how we can get to a better place without strong leadership from the Unites States as well. In this respect, we have our work cut out for us. It is not enough for us to have good ideas about what others can do, we need to show that we are holding up our end, and delivering on the reforms that we need.

I think we all recognize that the crisis damaged our global leadership role. The size and vitality of our economy, respect and confidence in our policy framework, and the liquidity and robustness of our financial system—have all been important sources of soft power for the United States, and have allowed us to exert influence in support of an open global trade and financial system, not just to our benefit, but to the benefit of greater global prosperity.

These strengths are still there, but the rest of the world expected better of us in terms of management of our economy and our financial system—just as I think we expected much better of ourselves.
Addressing our challenges is vital if we are to continue to play an effective leadership role going forward. Let me be clear. This is not about the demise of Unites States or Western leadership. It is about the reality of change, the need to adapt to it, and the need to engage with it. The rest of the world is getting better; if we are to help the world get to a better place, and thereby help guarantee our own interests and prosperity, we have to as well. Thank you.

[olderstill]

I like this setup. When you can post a three and a half page address in one swoop. . . Good job picking up on Checki's speech, BiMet!

He is a realist, isn't he? Though I'm not sure I completely agree with his contention that the system or any part of it has stabilized. Too many questions, too many fears remaining. . . not only among the people but in the institutions and corporate world as well. When we see money circulating closer to normal, we can exhale a little more freely.

I believe this is a first. I don't recall seeing this admission anywhere other than on these threads.

"I think we all recognize that the crisis damaged our global leadership role."

Overall, Checki does come across as a genuine realist.

[olderstill]

Frank;

I just came from an MSNBC program which had the soon to be ex-Gov. Rendell of Pennsylvania featured in an interview in which he presented an assessment of the NFL as indicative of the US as a nation of "wusses". Too much snow, the NFL cancelled Sunday's Eagles-Giants game. (Rendell is also an ex-Mayor of Philadelphia.) Then, he named a couple of other instances which he saw as bolstering that position: school closings, and two others my memory didn't fix on. The cycle was completed when he discussed national politics and the interviewer tried to goad the Gov. into committing to a national tour promoting a not-yet-written primer on "wussing".

Everything you suggest above falls in line with the kind of attitude one would assume to be at the base of the syndrome producing the impression of a nation of "wusses". Defective products, valueless securities, government dependence by those who denigrate and eschew government support for others but not for themselves, and the resulting loss of stature in the global community are all part of the same ailment IMO.

More than thirty years ago after having served in negotiations between American and foreign corporations, it was obvious that foreign top echelon management personnel were far better trained to discuss production and product matters than were the Americans. In a published discussion piece, I wrote that the Americans seemed better schooled in excuses than simple production technology; that their attitude was one of avoiding commitment to production of complex parts, preferring to not engage in the effort because of one reason after another. Whereas, the foreigners - in the reference of that moment, the Japanese - committed to produce for a customer and worked their way through the difficulties to deliver rather than shirk the commitment.

It was obvious that Japanaese management knew product and process and took an active part in the negotiations, while their American counterparts (with a few, but not many, exceptions) sat back and pontificated about irrelevant issues and, I believed, suffered a loss of respect as a result. But, when they strutted out of the room and slid into the rich appointments of the corner office and a staff that all but bowed in their presence, that was their refuge, their justification.

I knew sole owners of multi-million dollar conglomerates who never side-stepped the challenge to roll up their sleeves and get their hands dirty, and everyone respected them for it. Their workers would take a running try at jumping across the Grand Canyon if the boss asked, and their customers would never think of looking elsewhere for whatever that man could provide for them.

You can guess how many were like that if you want, but it was not many, it fits into my perception of the bell curve and the tiny tip at the one end reserved for competent personnel. Strangely, the businesses they ran were as solid as the rock of Gibraltar and if their heirs had not sold the businesses off after stripping what they could from the carcass, they'd be running today.

That also was the trait that gained respect and stature for American business, can-do, will-do, won't go home until I have done. In my experience these were few, but that attitude did add to the legend or myth of American business. If someone starts out to conduct business that way today, he/she is labeled a patsy, a mark, ready for plucking, a pigeon.

Do I agree that that first attitude above has diminished us in the eyes of the world? . . . You're damn right, I do! But, facing the truth, Frank, the US is no longer alone in that respect. I'm preparing to address the issue of how the international banking community - led by BIS - has been depending on the banking industry to set the standards through Basel I, II and now III, and their adoption at the global industry's insistence resulted in the current crisis. The guidelines and policies put into practice were a unified global effort not just any one nation's.

I intend to use the speech BiMet posted above as a springboard to discuss Basel in all its glory and shame. But, I'll do it over on the tsnami thread so folks won't have to trip over it if they'd prefer not to.

But, then, again, Frank, you hit the nail on the head with one blow. Me? . . I have to beat it to death. (Is that a privilege of old age. . . or, just a presumption?)

[olderstill]

This is a good thread, BiMet! Thanks to Virgil for preserving it.

[bimetalaupt]

Don't you think that rather from a leadership role in regards to economics to a leadership role in regards to the mal-intent that some of Americas leading institutions played in the manufacturing of defective products...the manufacturing of a "proprietary" quotation system to track and price the phony securities, the total lack of leadership in regards to assuming their private responsibilities and shoving them on the tax payers with the governments help?...you don't think that diminished us in the eyes of the world?

Read more: notmsnmoney.proboards.com/index.cgi?board=moneytalk&action=display&thread=459&page=2#ixzz19YHcKSmP

Frank,
i think Ben B. came very close to leadership with his swap accounts and the ECB.. he saved a lot of Griff in the fact that the CDS were then worthless. Things could be worst if one or two major European banks fell with the Sovereign Bonds of Spain or Ireland.
Germany, Belgium and France had to put a lot of capital into the wrecked banks to keep the system from Depression 2008!!! It will be interesting to see more of what he done. The first report was pure horror Just like The Failure of the Rothschild's bank in Austrea due to failure of Eastern European Sovereign debt and bonds.

Well Ben B. Did make a lot of money for the Federal Reserve Bank in New York...Think about it A Jew making money lending to other Jewish Bankers in Europe. The Rothschild and Baer Family never did get along....

Just a thought,
Bi Metal Au Pt

[bimetalaupt]

Older Still,
VS did a great Job.. The ability to post larger post sure helps keep thing together and thoughts in order.
It was obvious that Japanaese management knew product and process and took an active part in the negotiations, while their American counterparts (with a few, but not many, exceptions) sat back and pontificated about irrelevant issues and, I believed, suffered a loss of respect as a result. But, when they strutted out of the room and slid into the rich appointments of the corner office and a staff that all but bowed in their presence, that was their refuge, their justification.

Read more: notmsnmoney.proboards.com/index.cgi?action=display&board=moneytalk&thread=459&page=2#ixzz19YPJpaQy

I recall talking to my father about the Factoring of Mooney in the MU2 investment. It was almost impossible for money to get small improvement in the airframe from Mitsubishi.. I did like the short frame but it was to tight for corporate use. She was a handful to fl;y and you had to be at 100% to keep it working.. Never get to stall but always 5 over....

I never did live up to my father expiations of me..
Bi Metal Au Pt

[Tesla_DC-meme]

The Rothschild and Baer Family never did get along....

Read more: notmsnmoney.proboards.com/index.cgi?board=moneytalk&action=display&thread=459&page=2#ixzz19YOZKNp2

Or so it would seem... (kidding)
Even the supra super duper wealthy have egos...

[bimetalaupt]

Tesla,
More then ego... It is about true old fashion banking principles.. Baer has them as Well as a lot of Tier1.. Rothschild was more about leverage..now they are more advisors then Bankers...

Just a thought,'
Bi Metal Au Pt

[bimetalaupt]

OMEWHERE amid the gloom left by the financial crisis there is a global economic recovery struggling to break through.

It is evident in the healthier profits of business in both Europe and the US and in the essentially solid retail sales in these, the two biggest, consumer markets.

The ebullience of the emerging economies, led by China, is giving momentum to world trade and providing a base for developed country exporters.

It is the financial superstructure -- the bond markets, the banks and the foreign exchange markets -- that is the source of lingering worries.

Creaking beneath the weight of growing government debts and non-performing loans, the financial system generated a number of investor panics throughout last year and is likely to do so again this year. The panics last year -- notably Greece and Ireland -- were managed before runaway contagion could cause serious damage.
But the risk that the next time may be different has been a key factor suppressing equity returns over the past year, and will remain a hazard in coming months.

The tension between an essentially healthy real economy and the strained financial sector creates a challenge for investors, businesses and policymakers.

There is no knowing if or when financial crises may strike.

The Reserve Bank's stance has been to assume the best but be ready for the worst. US companies achieved record profits in the year to the third quarter, surpassing the previous peak, reached in 2006.

Much of the earnings growth has been achieved by cost cuts, which explains why employment has not responded.

Soaring productivity, however, has set up the economy well for fresh investment.

European profit growth has outpaced that of the US, with a Bloomberg analysts' survey tipping 80 per cent growth this year.

Almost two-thirds of the major listed European companies have reported positive earnings surprises.

Retail sales in the US are expected to be at least 3 per cent higher this year, the best result since 2007.

Although the growth is modest, it is in the right direction.

European retailers are expecting their best December quarter since 2006, led by consumers in France and Germany.

Business, however, is still far from normal. During the December quarter, global manufacturing surveys showed the strong recovery from the 2008-09 downturn was fading.

There was a sense that much of that early recovery was the result of companies deciding they had run down their inventories far enough and resuming a more normal level of orders, rather than a self-sustaining revival in demand. Investment in the US and Europe has been lacklustre, although there signs of improvement late last year. It is not clear whether investment is weak because companies cannot raise funds or are unconvinced about the growth outlook.

The IMF estimates output is still 4-5 per cent below capacity in the US and Europe, so scope remains for sales growth before new investment is required.

Business around the world went into the financial crisis with relatively low gearing, unlike the 1990 and 2000 downturns.

Although demand collapsed during the crisis, there were not many corporate (as distinct from bank) failures.

A striking feature of the post-crisis period is that corporate savings remain very high in Australia and overseas.

However, investment is running at breakneck speed in much of the emerging world.

Singapore finished last year reporting annual growth of 14.7 per cent. India is expected to achieve 8.7 per cent and Brazil 7.5 per cent.

China's growth is estimated at about 10 per cent. It is facing rising inflation and is trying to rein in its growth somewhat.

The emerging country economies suffered in the global financial crisis from the collapse in world trade and the global retreat from capital markets, but their banking systems and government finances were always in good shape.

The recovery in world trade has been rapid, and rising domestic demand in emerging countries has helped to fuel their rapid growth. World trade is now only slightly below the 2008 peak and is still growing strongly.

Crucially, many of the emerging countries have been helped by their currency policies, either pegging to the US dollar or managing capital controls.

The most obvious risk to the global recovery remains European government finances.

Spain, Portugal and Italy all face huge debt rollover schedules in the first half of the year.

Westpac chief currency strategist Robert Rennie estimates total sovereign bond redemption will be $US214 billion ($209.1bn) in January alone, 25 per cent more than in any month over the past few years.

Ratings issues are affecting the European markets, with Spain, Portugal, Ireland and Greece on negative watch for downgrading by agencies.

It only takes one failed bond issue to set markets panicking, and some investors are taking speculative positions that such a failure will occur. Much will depend on the determination of the European Central Bank to ensure those speculators lose. A sign that the speculators have the upper hand is that Germany is pushing for hard-liner Axel Weber to take over the ECB presidency.

He strongly opposes bailing out government bonds.

A more distant, but still real, risk is that markets may baulk at the heavy borrowing requirement of the US in the face of the inability of the administration and congress to agree on meaningful budget cuts.

Other US financial hazards include the parlous finances of many state governments and the commercial property market.

Another source of tension last year was currency markets. The US tagged China a currency manipulator, but the grievance about the lack of appreciation in the renminbi remains.

China's current inflation problem is partly a result of its undervalued currency.

Lack of confidence in currency is also partly responsible for soaring commodity prices, but much of the price movement in the second half of last year can be justified by the fundamentals of strong emerging market demand.

There are echoes of early 2008, when commodity prices soared even as the subprime crisis was gathering momentum.

Investors are left to judge between the promising demand outlook for demand and capricious financial

[scaredshirtless]

Thanks Virgil!!! And Happy New Year to you!!!

[bimetalaupt]

AAA credit rating for the Central Bank of the Farm Credit system...

Farm Credit Bank of Texas, located in Austin, Texas, is a wholesale financing institution that is part of the cooperatively owned nationwide Farm Credit System. The Congressionally mandated mission of the Farm Credit System is to provide a stable and dependable source of financing to rural America, farmers, ranchers and those businesses that provide essential services that support rural America.[citation needed] The bank operates under a charter issued by the Farm Credit Administration, an independent regulatory agency within the executive branch of the federal government. The bank provides funding and related services to 19 local borrower-owned Farm Credit lending cooperatives (Agricultural Credit Associations and Federal Land Credit Associations) in Alabama, Louisiana, Mississippi, New Mexico and Texas.

Farm Credit Bank of Texas is a federated cooperative owned by these local Farm Credit cooperatives, which directly finance rural real estate, agricultural production, country homes and agribusiness firms. Together with the other four banks of the Farm Credit System (AgFirst Farm Credit Bank, Columbia, South Carolina; AgriBank FCB, St. Paul, Minnesota; CoBank, ACB, Denver, Colorado; and U. S. AgBank, FCB, Wichta, Kansas), the bank generates funds from the issuance of debt securities in the national and international financial markets through the Federal Farm Credit Banks Funding Corporation, a joint subsidiary of the banks of the Farm Credit System. These debt securities are the joint and several liabilities of the banks of the Farm Credit System and are neither guaranteed by the federal government nor backed by the full faith and credit of the federal government. The Farm Credit Insurance Fund is available to protect investors in Farm Credit System debt securities. As of September 2008, the long-term debt of the Farm Credit System carries the ratings of AAA from Standard & Poor's Rating Service and Fitch Ratings and AAA from Moody's Investors Service. As of the same date, the Farm Credit System's short-term debt carries the ratings of A-1+, F1+ and P-1, respectively,[1] from the three rating agencies. Complete information on the Farm Credit System's debt securities can be found at the website of the Federal Farm Credit Banks Funding Corporation.

CEO: Larry Doyle

[bimetalaupt]

To All,
With the overall increase in risk taking in the international banking section of finance regulators are now looking at too much risk being taken in what had been very conservative banks. This supports many on the German state bank KfW and IKE Industrial Bank buying CDO's from GS.. From New York Federal Reserve Bank..Bi Metal Au Pt..
Senior Supervisors Group Issues Report on Risk Appetite Frameworks and IT Infrastructure
December 23, 2010



NEW YORK—Senior financial supervisors from ten countries—collectively, the Senior Supervisors Group (SSG)—today issued a report that evaluates how financial institutions have progressed in developing formal risk appetite frameworks and in building out highly developed IT infrastructures and firm wide data aggregation capabilities.

The report—Observations on Developments in Risk Appetite Frameworks and IT Infrastructures—concludes that while firms have made progress in developing risk appetite frameworks and have begun multiyear projects to improve IT infrastructure, considerably more work must be done to strengthen these practices. In particular, the aggregation of risk data remains a challenge, despite its criticality to strategic planning, decision making and risk management.

The observations and conclusions in the report reflect the findings of initiatives undertaken by two SSG working groups. The risk appetite working group conducted a series of interviews with boards of directors and senior management of global financial institutions to gauge progress in risk appetite frameworks, while the working group that focused on IT infrastructure based its views on observations from a number of existing supervisory efforts.

This report represents a joint effort on the part of twelve supervisory agencies: the Canadian Office of the Superintendent of Financial Institutions, the French Prudential Control Authority, the German Federal Financial Supervisory Authority, the Bank of Italy, the Japanese Financial Services Agency, the Netherlands Bank, the Bank of Spain, the Swiss Financial Market Supervisory Authority, the U.K. Financial Services Authority, and, in the United States, the Office of the Comptroller of the Currency, the Securities and Exchange Commission and the Federal Reserve.

These initiatives were conducted to support the priorities of the Financial Stability Board, whose mission is to address vulnerabilities in the financial system and to promote global financial stability.

The report is attached below, together with the transmittal letter to the chairman of the Financial Stability Board, which summarizes the report’s key observations and conclusions.

SSG Report pdf

Contact:
Jack Gutt
Federal Reserve Bank of New York
[phone]
[e-mail]

[Aman A.K.A. Ahamburger]

Some things that I have noted, one directly linked to international banking. One indirectly.

Saudi Arabia's liquidity conditions pick up
www.zawya.com/story.cfm/sidZAWYA20110105035640/Saudi%20Arabia's%20liquidity%20conditions%20pick%20up

With the troubles in Spain these kinds of things help liquidity. They also sell bonds, IMO.

Spain signs business accords with China
www.businessweek.com/ap/financialnews/D9KI6BCG1.htm