"We risk becoming the best informed society that has ever died of ignorance"
- Rubén Blades

"You can't make up anything anymore. The world itself is a satire. All you're doing is recording it"
- Art Buchwald

"It's getting exciting now, two and one-half. Think of everything we've accomplished, man. Out these windows, we will view the collapse of financial history. One step closer to economic equilibrium"
- Tyler Durden

"It is your corrupt we claim. It is your evil that will be sought by us. With every breath, we shall hunt them down."
- Boondock Saints

Monday, September 26, 2011

Party Like It's 2008

The time is here.  For what feels like eons, anyone with a brain in finance was complaining about the lack of  "change" and the increased "risk" to the system post 2008.  Finance has always been a game of hide the debt.  I called it out in a college economics class only to face very minimal friction to my pointed truth about this field.  If your missing a penny there is no way to make up for it, it snow balls in this field.  The bankers of today are half-ass twits compared with the ones of the old.  The fact that none of these f__ks has been locked up or punished for their reckless actions shows many of us just how much the system is rigged.  I bet I would be questioned and possibly arrested if I went and passed someone in the suicide lane on the road and did so about 20 mph above the speed limit.  This division in the gauge of the legal punishment required for dubious acts is just the beginning to a long road to tyranny, news speak, and pre-crime trials.  Until this country wakes up and gets it shit together, expect to be completely run over while you see and hear daily about how lavish the elitists are living while they "fight for your freedom".  I hope you 9 million Jersey Shore views are ready to serve your true king

From Thomson Reuters:

* Bankers fear Lehman-style contagion from Greek default
* Bankers favor EU building strong defenses to prevent damage
* In private, bankers ready for Greek write-down above 21 pct
* Raising bank capital on markets proving tough

WASHINGTON, Sept 25 (Reuters) - Bankers are bracing for a Greek default, and their best hope is that Europe can erect firewalls around the banking system strong enough and soon enough to prevent it from spreading to other euro-zone countries.
So gloomy were bankers from major financial institutions, attending a conference on the sidelines of the International Monetary Fund/World Bank sessions, that they compared the risks of financial market contagion to the collapse of Lehman Brothers.
"The direct financial exposure in the European banking system is extremely manageable. What's the indirect impact? You're going to have one massive demand shock," said Vikram Pandit, Citigroup's <C.N> chief executive officer.

"The fact is we should all expect some sort of a GDP impact if you have a demand shock that's going to be that significant and that's going to have an impact on business."

The biggest fear is that Greece defaulting on its 340 billion euros in government debt would trigger widespread selling of euro-zone debt causing a much broader financial crisis.

"It is very pessimistic," said another senior commercial banker at an international financial institution. "It (Greek default) is what we have to prepare for. I don't think it is the most likely scenario, but we have to be prepared."

Andreas Schmitz, president of the Germany's BdB banking Association, said an isolated Greek insolvency would be manageable, even though they would have to take writedowns larger than the current 21 percent they have made provisions for.
"But if a wave of bankruptcies sweeps through Europe, the situation looks different; many banks would get into trouble -- and not just in Europe," he told Reuters.

Privately, bankers say they could face 60-80 percent bond losses on a Greek default. Faced with that, they said they would be willing to renegotiate a "better deal" than the 21 percent loss they have agreed to absorb as part of a July Greek bond swap deal, if it lowers the risk of Greek insolvency.


It is the broader contagion that vexes the IMF.

Strains in financial markets are growing and European banks are facing increasing difficulty in tapping short-term funding markets, euro-area bank credit default swap spreads have doubled to about 300 basis points, and European bank stocks plunged nearly 30 percent since early August.

The IMF estimates that these broader problems have increased European bank exposure by 300 billion euros, and urged banks to strengthen their capital buffers and European Union leaders to stand ready with extra help to prevent financial contagion.
Raising bank capital, however, is proving difficult.

U.S. and European banks have raised roughly $100 billion in extra equity capital this year, according to Institute of International Finance calculations.

But Peter Fisher, senior managing director at BlackRock, told the IIF meeting that the decline in bank stocks makes it "pretty challenging" to access private markets, a view bankers shared.

One banker said financial institutions will need state help or EU-wide help to ring fence them and strengthen their reserves.
The IIF, which represents major global banks, said that bank liquidity problems already are spreading worldwide. Poland is seeing sharp withdrawals of funding and Korea, putting downward pressure on their currencies, its economist Philip Suttle said.

To stabilize the situation and prevent a Lehman-style seize-up of financial markets, one senior international finance diplomat said European leaders need to unveil a bailout package of "shock and awe" proportions to cover both sovereign and bank debt.

Only a huge announcement would convince financial markets that European leaders will backstop markets, prevent solvent banks from collapsing and prevent contagion, he said.

European officials were discussing ways to strengthen their 440 billion euro European Financial Stability Fund, possibly leveraging it to the tune of 1-2 trillion euros.

Bankers at the meetings welcomed these discussions to ring-fence the financial system from a disorderly Greek default. Domenico Lombardi, a former IMF official now at the Brookings Institution, said it certainly is needed.

"I believe the strategy that European policymakers are trying to implement is to buy a little of extra time, a few more weeks or maybe a couple of months, in order to get the enhanced EFSF in place so that the European rescue fund with added operational capability ... could recapitalize the European financial institutions," he said.