Geithner Rushes To Sabotage German Derivatives Ban
Schäuble Prepares New Moves Against Speculators
By Webster G. Tarpley Tarpley.net 5-30-10
The German government is now fully committed to escalating its ongoing counterattack against international financial speculation. These moves represent an historical watershed as Germany becomes the first major economic power to roll back the tide of financial globalization, under which crackdowns on hedge funds, derivatives, and the world gambling casino were branded as taboo for national governments. German Finance Minister Wolfgang Schäuble has announced that the Merkel government is sending a draft bill to the German parliament (the Bundestag) targeting "turbulence" and "volatility" through further regulation of "certain transactions [which] amplify the crisis." The bill reaffirms the most fundamental German measure enacted so far, the May 18 blanket ban on all naked credit default swaps issued against the treasury bonds of the eurozone nations. This ban represents the most aggressive move anywhere in the OECD against these most toxic derivatives, which have figured prominently in the AIG bankruptcy and the recent Goldman Sachs Abacus scandal. They are also the derivatives being widely used by hedge fund hyenas and zombie banks to attack such nations as Greece , Spain , and the rest of the Southern tier of the euro.
The naked CDS ban protects euroland government bonds, To that would now be added a ban on the naked shorting of those Euro zone government bonds themselves. This means that a speculator wishing to sell a Euro zone government bond short must own that bond in advance. This makes speculation more complex and expensive, and is all to the good.
Schäuble's new measures also expand protection for certain stocks and for the euro itself. The draft bill would outlaw naked shorts of all German stocks, meaning stocks whose primary listing is at a German exchange. The original May 18 package had banned naked shorts against a list of 10 large German banks, insurance companies, and reinsurance firms. The obvious next step is to ban naked shorting of stocks altogether. From now on, speculators who wish to short German stocks must own those stocks before they sell, making it more difficult and costly for said speculators to operate. The new draft bill would also outlaw the naked shorting of the euro itself in the foreign exchange markets. The Bundestag needs to approve this bill on the fast track, and then do more. more