Tuesday, October 18, 2011

Kicking in the rotten door

It would not be hard to find someone on Wall Street who could be found screaming about how the #OWS is nothing but a bunch of dirty hippy commies out to destroy the bestest, most wonderfulest expression of human ingenuity ever.  Some Master of the Universe who wonders why the cops haven't scraped the human scum from the lower Manhattan streets so that the real heroes of finance capitalism can go about their work of allocating capital efficiently.

This young woman is amazing.
She understands that some arguments really are too complex for a protest sign
but damn, if she isn't going to try anyway.  Best sign EVAH!
But strangely enough for this observer, while the right-wing jackals scream in their fury on the teevee, the cops have not moved in force against #OWS—which is something of a surprise considering how brutal they can be against the anti-globalization demonstrators at G20 meetings and other economic protests.  In fact, it is not difficult at all to find voices of reason within the corridors of power who seek to accommodate the concerns of #OWS.
Bank of Canada Head Calls Occupy Protests 'Entirely Constructive'
By scarce  October 16, 2011 03:14 PM

If it sounds unusual to hear the head of a country's central bank speak so positively about the protests going on around the world now it's probably because it is. Mark Carney though is one of more reform-minded of the central bankers (somewhat equivalent to the role Ben Bernanke plays as the head of the Federal Reserve). Carney was notably the target of a profanity-laced tirade by Jamie Dimon (CEO of JP Morgan Chase) last month at a meeting of world bankers and officials. Dimon said the new rules discriminated against American banks and called the new capitalization rules "anti-American". 
Mark Carney - a former Goldman Sachs Co. investment banker himself – is being pushed by Canada to head the G20's Financial Stability Board, a position that would put him even more at odds with people like the "business-as-usual, now-move-along" Jamie Dimons of this world who'd just as soon keep the casino open forever. more
Or how about something from the German Social Democrats who have been textbook examples of left-wing sellouts to the forces of neoliberalism.

Interview with German Opposition Leader
'Commercial Banking Should Be Split From Investment Banking'
In an interview with SPIEGEL, Sigmar Gabriel, the leader of the opposition center-left Social Democrats, outlines his plans to tame financial capitalism, warns that the supposed supremacy of banks and markets is eroding faith in politics and says the SPD would do a better job containing the crisis.

SPIEGEL: Criticising capitalism seems to be all the rage -- even Frank Schirrmacher, Editor in Chief of the conservative daily Frankfurter Allegmeine Zeitung, has joined capitalism's critics. Why is the SPD remaining true to the existing system?

Gabriel: We have long criticized financial capitalism for trying to evade almost any form of democratic influence. We, the Social Democrats, are convinced that capitalism needs to be tamed a second time. The first time we achieved that in Germany for many decades with the social market economy. That is no longer enough. Now we need to do it in Europe and even globally.

SPIEGEL: Why are you being so restrained? 
Gabriel: This is not about reviving the pseudo-alternative of communism but about re-conquering the social market economy. In the current climate I know that it sounds modern and left-wing to say that we should do away with capitalism. But we simply don't want that. 
SPIEGEL: So you think the current finance system can be reformed? 
Gabriel: Yes. The new social question is: democracy or the rule of the financial markets. We are currently witnessing the end of an era. The neoliberal ideology has failed worldwide. The US movement Occupy Wall Street is a good example of this. In Germany it is good if as many people as possible join initiatives and peaceful demonstrations against the rule of the financial markets. Worshipping the unfettered freedom of global markets has brought the world to the brink of ruin. We now need social and ecological rules for the market economy. more

Bank Bashing
Europe's Politicians Side with the Protesters
Hundreds of thousands took to the streets in Europe and around the world this weekend to protest against the global banking system. Politicians in Europe, engaged in their own dispute with the banks, stood firmly on the side of the demonstrators.

The numbers were far from overwhelming. Some 20,000 people on the streets of Lisbon, around 10,000 in front of the Reichstag in Berlin, a few thousand each in London's banking district and in Rome's city center. Five-thousand rallied in front of the European Central Bank in Frankfurt.

Taken together, though, the hundreds of anti-bank protests held in over 80 countries around the world on Saturday -- an outgrowth of the Occupy Wall Street movement in the United States -- have been difficult to ignore. And an increasing number of politicians have launched efforts to tap into the anti-bank anger.

German Finance Minister Wolfgang Schäuble, a member of Chancellor Angela Merkel's conservative Christian Democrats, vowed in a Sunday evening television interview that he was taking the protests "very seriously" and said that banks need to submit to "clear controls and transparency for all parts of the banking business." 
On the eve of the protests, center-left Social Democrat leader Sigmar Gabriel told SPIEGEL that "we have to force the banks back into their role as servants to the real economy. The correct move would be to split investment banking off from commercial banking. Every mid-sized company which needs a loan will soon run into difficulties because banks are threatened with bankruptcy as a result of bad bets on the investment banking side." more
While I suppose it could be argued that #OWS is so MUCH more clever than all the anti-neoliberal, anti-globalization demonstrators that have been beaten to a bloody pulp for the past 30+ years, I doubt that is even remotely true.  I think the big difference this time around is that the banksters know their house of cards is about to blow over and they are going to need some more serious bailout money very soon.

Josef Ackerman Is A Key Figure In Fighting The Rumored 50% Greek Writedown, Says Report
Courtney Comstock | Oct. 17, 2011 
Deutsche Bank CEO Josef Ackermann is playing a key role in negotiations on reducing ~50% haircut investors might have to take on Greek debt holdings, according to several sources who spoke to the German publication BILD.

Word is that Ackermann, as Chairman of the International Banking Federation, is taking a central role in fighting against the proposed ~50% write-downs that owners of Greek debt might be forced to take if Eurozone leaders take Greece through a strategic, orderly default that does not trigger a credit event.

This is a critical development in the ongoing battle between owners of Greek debt, like banks, and owners of Greek CDS, private investors like hedge fund managers.

The feeling is that if CDS owners would be "punished" by not being paid out on their CDS, then so should investors on Greek debt, like Deutsche Bank (Deutsche Bank's estimated total Sovereign exposure to Greece, as estimated by the EBA bank stress tests in July, is around 3,622 million euros (PDF). A more recent, but unsourced and anonymous, estimate we've gotten says that DB has $1,522 million in sovereign bonds and public sector lendings exposure, which might account for YTD asset sales).

However there's a big caveat.

MSNBC provides some background:

Many banks are believed to have too little capital in reserve to covers those losses, prompting calls by regulators to force bankers to raise more capital. Without stronger capital cushions to withstand Greek debt losses, European governments fear they’ll have to step in to clean up the financial mess.

In fact, Ackermann in September warned that many banks would not survive having to revalue their Greek debt holdings at market value.  more 
So we cannot have an orderly Greek default because it would mean that the largest banks in the world are out of business.
Four US banks hold a staggering 95.9% of U.S. derivatives: The $600 Trillion Time Bomb That's Set to Explode

by Keith Fitz-Gerald
Global Research, October 16, 2011

Do you want to know the real reason banks aren't lending and the PIIGS have control of the barnyard in Europe? 
It's because risk in the $600 trillion derivatives market isn't evening out. To the contrary, it's growing increasingly concentrated among a select few banks, especially here in the United States.

In 2009, five banks held 80% of derivatives in America. Now, just four banks hold a staggering 95.9% of U.S. derivatives, according to a recent report from the Office of the Currency Comptroller.

The four banks in question: JPMorgan Chase & Co. (NYSE: JPM), Citigroup Inc. (NYSE: C), Bank of America Corp. (NYSE: BAC) and Goldman Sachs Group Inc. (NYSE: GS). 
Derivatives played a crucial role in bringing down the global economy, so you would think that the world's top policymakers would have reined these things in by now - but they haven't.

Instead of attacking the problem, regulators have let it spiral out of control, and the result is a $600 trillion time bomb called the derivatives market.

Think I'm exaggerating?

The notional value of the world's derivatives actually is estimated at more than $600 trillion. Notional value, of course, is the total value of a leveraged position's assets. This distinction is necessary because when you're talking about leveraged assets like options and derivatives, a little bit of money can control a disproportionately large position that may be as much as 5, 10, 30, or, in extreme cases, 100 times greater than investments that could be funded only in cash instruments.

The world's gross domestic product (GDP) is only about $65 trillion, or roughly 10.83% of the worldwide value of the global derivatives market, according to The Economist. So there is literally not enough money on the planet to backstop the banks trading these things if they run into trouble. more


  1. Wow, it turns out this 'capitalist free market' system the Randian neo-liberals favor can really be a bad system when these neo-liberal capitalists running it are short-sighted idiots.