This page has been archived and commenting is disabled.
IMF Calls for Huge New Round of Bank Bailouts
- AIG
- American International Group
- Ben Bernanke
- Central Banks
- Credit Default Swaps
- default
- Federal Reserve
- Federal Reserve Bank
- Financial Regulation
- Gambling
- Germany
- Housing Market
- International Monetary Fund
- James Galbraith
- Janet Yellen
- Krugman
- New York Fed
- New York Times
- Nouriel
- Nouriel Roubini
- Open Market Operations
- Paul Krugman
- Reality
- recovery
- Reggie Middleton
- Richard Alford
- Shadow Banking
- Sovereign Debt
- TARP
- Treasury Department
- Tyler Durden
- Unemployment
- Wall Street Journal
- William Dudley
The IMF is calling for a huge new round of bank bailouts.
As the Telegraph noted yesterday:
Lenders
across Europe and the US are facing a $4 trillion refinancing hurdle
in the coming 24 months and many still need to recapitalise, the
Washington-based organisation said in its Global Financial Stability Report. Governments will have to inject fresh equity into banks – particularly in Spain, Germany and the US – as well as prop up their funding structures by extending emergency support.
Prop up their funding structures?
Virtually all leading independent economists have said that the too big to fails must be broken up, or the economy won't be able to recover, and that smaller banks actually lend more into the economy than the mega-banks (and see this).
And the leading monetary economist told the Wall Street Journal that this was not a liquidity crisis, but an insolvency crisis. She said that Bernanke is fighting the last war, and is taking the wrong approach. Nobel economist Paul Krugman and leading economist James Galbraith largely agree.
The Telegraph continues:
“Progress toward global financial stability has experienced a setback since April ... [due to] the recent turmoil in sovereign debt markets,”
the IMF said. “The global financial system is still in a period of
significant uncertainty and remains the Achilles’ heel of the
economic recovery.”
Turmoil in sovereign debt markets necessitating another round of bailouts?
This is amusing, given that it was the last round of bailouts which caused the sovereign debt crisis in the first place.
Specifically, the Bank for International Settlements – often described as a central bank for central banks (BIS) – slammed the failure of the Fed and other central banks to force companies to write off bad debts years ago.
BIS also warned
that the Fed and other central banks were simply transferring risk
from private banks to governments, which could lead to a sovereign debt
crisis. That is what caused the sovereign debt crisis in the first place!
And BIS cautioned that bailouts could harm the economy (as did the former head of the Fed's open market operations).
The Telegraph continues:
Although banks have recognised all but $550bn of the $2.2 trillion
of bad debts the IMF estimates needed to be written off between 2007
and 2010, they are still facing a looming funding shock that will
need state support. “Nearly $4 trillion of bank debt will need to be rolled over in the next 24 months,” the report says.
$2.2
trillion? In reality, Tyler Durden, Mike Shedlock, Edward Harrison, Reggie
Middleton, Max Keiser and many other savvy financial commentators would
put the number closer to $20-40 trillion in bad debts. And they say
that one of the main problems with the world economy is that the banks
are hiding the real amounts of their debts (and the fact that they are
totally insolvent), so that they can have the taxpayers bail give them a
number of bailouts.
In other words, the big banks are saying, "The economy is unexpectedly not doing well, so we need another bailout."
And the banks and their water-carriers in the central banks, IMF and
other agencies will repeatedly say the same thing over a number of years
to slowly get the banks' $20-40 trillion dollars worth of debt mopped
up by the taxpayer.
See how that works? If people knew that
the giant banks have created a black hole of debt large enough to suck
most of the world economy into it, and that the debt was created through
fraud and wild gambling and speculation, demands to break up the giant
banks and imprison their management would be overwhelming.
So they hide
it.
Instead, they leak out a little information about their debt in dribs
and drabs over the course of many months and years, acting surprised
that there's still debt on their books due to "unexpected" conditions in
the economy. The party line is and will continue to be that these
conditions aren't their fault, but are due to the bad housing market, or
unemployment, or other conditions "out there in the economy" and not of
their making. And, of course, bailouts are needed to deal with these
"unforeseen" events.
Sound far-fetched?
Remember, the largest U.S. banks have repeatedly gone bankrupt due to wild speculation, and the government helped to cover it up. Many top analysts have said the U.S. banks are insolvent (see this, for example). And the big banks have hidden huge liabilities in "off balance sheet" accounts.
Continuing on:
The IMF adds: “Without further bolstering of balance sheets, banking
systems remain susceptible to funding shocks that could intensify deleveraging pressures and place a further drag on public finances and the recovery.”
Intensify deleveraging pressures?
Deleveraging is what we need to stabilize the economy.
As I've previously noted:
The New York Federal published a report in July entitled "The Shadow Banking System: Implications for Financial Regulation".
One of the main conclusions of the report is that leverage undermines financial stability:
Securitization
was intended as a way to transfer credit risk to those better able to
absorb losses, but instead it increased the fragility of the entire
financial system by allowing banks and other intermediaries to
“leverage up” by buying one another’s securities. In the new,
post-crisis financial system, the role of securitization will likely
be held in check by more stringent financial regulation and by the
recognition that it is important to prevent excessive leverage and
maturity mismatch, both of which can undermine financial stability.And as a former economist at the New York Fed, Richard Alford, wrote recently:
On Friday, William Dudley, President of FRBNY, gave an excellent presentation
on the financial crisis. The speech was a logically-structured,
tightly-reasoned, and succinct retrospective of the crisis. It took one
step back from the details and proved a very useful financial
sector-wide perspective. The speech should be read by everyone with an
interest in the crisis. It highlights the often overlooked role of
leverage and maturity mismatches even as its stated purpose was
examining the role of liquidity.While most analysts attributed
the crisis to either specific instruments, or elements of the
de-regulation, or policy action, Dudley correctly identified the causes of the crisis as the excessive use of leverage
and maturity mismatches embedded in financial activities carried out
off the balance sheets of the traditional banking system. The body of
the speech opens with: “..this crisis was caused by the rapid growth of the so-called shadow banking system over the past few decades and its remarkable collapse over the past two years.”In
fact, every independent economist has said that too much leverage was
one of the main causes of the current economic crisis.Federal Reserve Bank of San Francisco President Janet Yellen said
recently that it’s “far from clear” whether the Fed should use
interest rates to stem a surge in financial leverage, and urged further
research into the issue.“Higher rates than called for based on purely
macroeconomic conditions may help forestall a potentially damaging
buildup of leverage and an asset-price boom”.
And as Nouriel Roubini said
last year,"This is a crisis of solvency ... But true deleveraging has
not begun yet because the losses of financial institutions have been
socialized". I.e. that last round of bailouts prevented deleveraging.
And
remember, money from the last round of bailouts wasn't exactly used for
the best purposes as far as the economy is concerned. As I pointed out in May:
The $700 billion dollar TARP bailout was a massive bait-and-switch. The government said it was doing it to soak up toxic assets, and then switched to saying it was needed to free up lending. It didn't do that either. Indeed, the Fed doesn't want the banks to lend.
As I wrote in March 2009:
The
bailout money is just going to line the pockets of the wealthy,
instead of helping to stabilize the economy or even the companies
receiving the bailouts:
- Bailout money is being used to subsidize companies run by horrible business men, allowing the bankers to receive fat bonuses, to redecorate their offices, and to buy gold toilets and prostitutes
- A lot of the bailout money is going to the failing companies' shareholders
- Indeed, a leading progressive economist says
that the true purpose of the bank rescue plans is "a massive
redistribution of wealth to the bank shareholders and their top
executives"
- The Treasury Department encouraged banks to use the bailout money to buy their competitors, and pushed through an amendment to the tax laws
which rewards mergers in the banking industry (this has caused a lot
of companies to bite off more than they can chew, destabilizing the
acquiring companies)And as the New York Times notes, "Tens of billions of [bailout] dollars have merely passed through A.I.G. to its derivatives trading partners".
***
In other words, through a little game-playing by the Fed, taxpayer money is going straight into the pockets of investors in AIG's credit default swaps and is not even really stabilizing AIG.
- advertisements -
George Washington. nicely written.
a trader's perspective.
a trader can control what a trader can control.
whose financial crisis is this?
bailouts, foreclosures, defaults, the fed, foreign debt, ....
a trader sees these as financial icebergs.
a trader can see some of it but not all of it.
how does a trader navigate thorough these dangerous waters?
a trader knows these things are there.
what can a trader do?
what does a trader care about?
how to survive? looking out for number one.
when the financial collapse comes is a trader ready?
a trader.
owes no money. everything is covered. no debt. everything is paid for.
cash is king.
a trader trusts no one.
a trader is an independent thinker.
if the market collapses, so what. a trader is prepared.
a trader trades a complete trading plan making more money than one loses.
a trader can control what a trader can control and trades accordingly.
twittering as stocktradr.
Dude, I wouldn't worry about the price of gold. I'd be worried about protecting your property. This is the beginning of the freaking end and it ain't likely to be pretty. I do suggest that your gold be of the physical variety, however.
Fuck the banks...let them all burn and rot in the lowest sewers of hell.
NO. MORE. BAILOUTS. PERIOD.
WTF???? Riots WILL really breakout if this even comes close to happening. Let them fail. All of the big banks. Let them fucking fail. They do NOT deserve to be bailed out.
Why can't the government, the IMF, EU, Stiglitz, Roubini, etc. just come right out and say we are in a depression?
Every trillion added will cause a rise in goldprice about 400$?!
Just a wild guess ,anybody with different number.
the international monetary fraud is an oil slick in need of co-rexit...yet i would much rather burn it off with a massive bonfire....
fuck the fed, fuck the imf...
Fact packed and readable! Nice article with good links.
There goes the afternoon....
QE2,
TARP2 etc.
Then Fiscal austerity;
No medicaid, no medicare, no Social Security, no food stamps.
Sell of National Forests,
Privatize everything.
Kill the beast that is government, but feed the real beast that is corporatism.
R U starting to get the picture?
Got it. Not only are they going to take away the punchbowl they are going to burn down the meeting hall. Ok! Let's get it on.
The IMF is owned in good part by the SAME OWNERS AS THE US FED RES. Meet the new boss, same as the old boss.
Bankstanomics 101
You really nailed it, George! Razor sharp.
And to think! I thought the recession had ended and we were in recovery!
Just a fews years ago...the IMF was irrelevant..
And it has quickly become another wealth/tax transfer vehicle ...wanting to impose its doctrine on sovereign countries....
Well here it is....
Get rid of the IMF.....and let each country get its own domestic act straight with its own currency....
Enough of the New World Order CRAP already....
You've hit the nail on the head. Fuck the Fed, the IMF and everybody else. I want to see Lloyd Blankfein and Goldman Sachs taken down. That would be sweet!
I can't say when this sewer pipe is going to break... but I'm giving it within 24 months. There is no #uckin way that the global system can withstand this liquidity requirement and not rupture.
The phrase I have been using is "Embrace the Deflation."
Step 1 would be bringing back Mark to Market rules, Step 2 would be to put derivative liabilities BEHIND bondholders and regulate them like insurance.
Of course, we also need to come up with a way to help the average joe make it through the incredibly painful deflationary unwinding... merely stopping foreclosures is not good enough because what happens when it is time for them to start paying rent?
What we need are extremely generous bankruptcy laws that make people WANT to get their foreclosure over with and move into a rental situation.
If our government is going to just hand out $trillions it may as well go toward policies that help the macro-economic picture long term - this means straightening out what is actually slowing down our economy. This situation isn't more dire than what we faced in WW2.
There's really nothing left to do at this point other than laugh. The alternative is too gruesome.
Don't forget drinking, numbs the pain, and keeps you flexible.
Booze working for me right now. Incredible a-holes ruining everything. In the near future, all my friends will understand why I told them to take early retirement and why I don't pay the mortgage.
This will be another major headache for the
Euroland's banking system, broadly insolvent or
already nationalized, that's what is called a 'double
bind'
EURUSD should go to 1.50 on the news.
Leverage, what leverage, Deutsche was only about 50 : 1 ....
Another QE and another TARP? While the obvious question is whether the economy can survive it, we should also ask the question of whether the democracy can survive it?
Excellent question. I don't think democracy will be able to survive it. There will be mass rioting & violence against banks,bankers, etc.
That 7 should just about cover funding requirements for the next week or two...
I don't care if they give the banks 4 Quadrillions of dollars. AS long as the executives do not get one cent of it in any kind of compensation scheme. Not one drachma should be allowed to pass from the reserves to their accounts in any way, shape, or form.
C'mon, not even for charity?
Waddya trying to do, drive thieves into a different line of business? Where will they go, what will the banks do?
So, the banks are too big to fail, but too leveraged to survive. Therefore, we will inject money into the banks, which is basically just printed, to make the banks technically solvent, but as a result, screw all those with low risk savings. Meanwhile, all those who caused this mess have quietly sold their equities and put their wealth in precious metals, because they know it's going to go wrong again, and the next one is the big one.
I told you, if America is doing the bailout/QE/Whatever thing, Europe will follow.
It can only mean one thing! THE US WILL DO A QE OF 3 TRILLION $ TO!!!
GOLD 1600 HERE WE COME!!!
Can I have a trillion to?!
I used to play bank when we played monopoly when we where kids!
And I was very good at it!
If you were good at it no, you must suck to be a banker.
Yeah me too - and I used to cheat like there's no tomorrow. And in the event I was caught, I apologized, returned (some of) the money, and promised never to do it again.
Just like a real banker.
Thats the spirit.
Now, you only need to marry the son or the daugther (at your choice) of a banker, and you are ready to roll.
Hey, Washington - one for you.
http://www.businessinsider.com/white-house-blocked-worst-case-scenario-e...
Speaking of disasters, check this out: http://blogs.denverpost.com/captured/2010/10/06/hungary-town-inundated-by-toxic-sludge/2473/
Whats New,I,ve just created US$100,000,000,000,freshly printed,I,ll send it round should keep you going for a couple of hours,
Goldenballs - do you remember Colemanballs (Private Eye)?
One of these days ....
http://www.youtube.com/watch?v=JnX-D4kkPOQ