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Latest Stress Test Rumor: 23% Haircut On Greek Debt... Held In Trading Books
Another day, another accounting debauchery by Europe. In the latest development, Reuters reports that as per the recent JPM "suggestion" posted previously on Zero Hedge, Greek debt is now expected to be haircut by 23%, or to reflect current market prices. Allegedly this is yet another failed attempt to restore some confidence in the entire farcical process. There is, of course, one caveat: the haircut will only pertain to trading books. In other words this is Europe's equivalent of FASB 157: everything that banks hold "to maturity" will not see a major haircut, and very likely not see any haircut at all. Which simply means that all European banks that hold such debt will merely reclassify their Greek exposure from trading to a "held to bankruptcy at par" category. The surreality of European banking assets (which as we pointed out previously is a $100 trillion circle jerk where one bank's assets are another bank's liabilities) has now passed well into the twilight zone. But never fear, the ECB is here. Which begs the question: will JC Trichet's books also be exposed to some sort of stress test? After all Europe's central bank is on the hook for over $1 trillion in impaired debt now - does this mean the central bank will in no way be subject to any haircuts or other viability tests? Why of course, how else will flagrant lies about financial system's stability be perpetuated for at least one more year.
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Lies, lies and damned statistics.
What's new?
It's Lies, Lies and Chinese Type Statistics ;)
Look at the euro explode... smokin! The dollar is absolutely fu**ed. What a lovely day, for a downgrade.
Waddaya know!! the euro is out to lunch!
Fitting for this thread as well.
In April, the The Wall Street Journal examined data from the Federal Reserve bank of New York and found 18 banks including Goldman Sachs Group Inc. (NYSE: GS - News), Morgan Stanley (NYSE: MS - News) and J.P. Morgan Chase & Co. (NYSE: JPM - News) masked debt levels in the five quarters ending in March.
The Journal found the banks "understated the debt levels used to fund securities trades by lowering them an average of 42% at the end of each of the past five quarterly periods, the data showed. The banks, which publicly release debt data each quarter, then boosted the debt levels in the middle of successive quarters."
Of course, like many Wall Street practices in the era of deregulation, all of the trades were perfectly legal, just as the "repo" accounting used by Lehman Brothers to hide its leverage exposure was legal — at least in the opinion of the U.K. attorneys they could get to approve the deals.
Lehman was hardly alone. Before, during and after the financial crisis, banks used countless accounting tricks, including off-balance sheet entities called special purpose vehicles, short-term repurchase agreements, securities that banks label "available for sale," and all varieties of "intent-based accounting."
The realistic procedure is to start with a number we know can be achieved and then modify it as the assets are sold to market.
So, we start at zero.
One thing I never understood - at least under US accounting rules, when you reclassified from trading to HTM, you had to value the securities based on the last trade or observable input, else the auditors couldn't sign off (and wouldn't, without someone to indemnify them).
Just another case where the rules go under a bus for the TBTFs?
Getting away pretty lightly if only 23%,if Greece was a company you would get nothing as it would be bankrupt.Can,t help thinking this figure will only grow.
I was expecting a 23.5% haircut. This is bullish.
Indeed, the DOW will at least go up 2000 points on this superb news!
In the summer/fall of '08 I used to wake up early in the morning and the first thing I would do was look to see if my alarm clock was lit up - that would be my indicator that the world markets had not collapsed over night and sent every bank on the planet into collapse... because without banks there would be no electricity, no food, no anything. I thought then, as I think now, that there are desperate men doing desperate things to conceal the awful truth about how little there is actually keeping the electricity on.
Let's not forget that this Presidential "power", first widely reported during President Bush's reign, is still in force and most likely used extensively. It's all legal because of the Golden Rule. "He who has the (fiat currency) Gold makes the rules."
Intelligence Czar Can Waive SEC Rules
Now, the White House's top spymaster can cite national security to exempt businesses from reporting requirementshttp://www.businessweek.com/bwdaily/dnflash/may2006/nf20060523_2210.htm?campaign_id=rss_daily
chains we can bereave in
Pocket change we can believe in.
How much longer until it is obvious that the sovereign debt of most western countries will not be repaid (at least with uninflated money).
European and American banks are virtually all insolvent but their share prices continue to climb.
This type of thing has happened many times in past bubbles but with the active involvement of governments and central bankers this may go on for years (or collapse tomorrow).
to be followed by 38, 50 and 62% haircut rumours?
So there you are at work,pension deduction taken from your wages,fund manager invests your money in Greek Debt ............... because on paper looks ok / you can do bugger all about it ........ comes retirement ..... oh dear,you can,t retire your pension pot isn,t big enough (because of crap investment decisions by banks who charge whether they loose you money or not) ....... might as well have done a Robert Maxwell in your life,lived in luxury and then just walked off your private yacht or rob banks and if caught the state has to look after you. what a pisstake the banks are.
I am hereby removing my underweight rating on the world's economy, moving it to a strong buy and urging everyone to double up (a la GS). [I hope I can generate enough interest to sell my book to everyone.]
The reasons for my rating are: strong debt/GDP ratios, low household debt burdens in most of the industrialized world, increasing tax revenues, exceptional US municipal financial health, riots and strikes around the world a sign of consumer 'passion', great financial health of companies as they game Non-GAAP numbers, gullibility of consumers to listen blindly to the MSM, etc., etc.
AA now up just a few cents from Friday's close. But consider the increase in global stock market wealth on the great expectations.
Without a great financial "shock" (a sovereign debt default, or a big bank from Europe, US or Japan going bankrupt) the stock market will go up and up in the short term.
It won't stop until the first numbers showing the "disaster" in the real economy start to come.
When ISM and NFP start to show what the Baltic Dry Index is anticipating, then this new "lagging indicator" called the stock market will start to collapse.
We need more tax receipts to keep on rigging the markets in the continual rise of stocks therefore all jobs will now carry a 135 hour working week with a subsequent rise in productivity.Many thanks y,all , your friendly neighbourhood grasping mafia infested Government.
Any one who refuses to obey the 135 hours rule will have to get by on unemployment benefit,as no one can survive on these payments you will die and therefore there won,t be a problem,state saves money on medical,retirement costs .... etc.You have a Good Day Y,all you hear me now.
You GOTTA love the divine comedy that world central banks are providing their adoring public these days! And the latest from the ECB...it's simply Moliere!
As Tyler points out regularly, every major bank owes every other. The "elite" banks of the post world war 2 era on both sides of the Atlantic formed a private club so as to be cash cows for their ambitious bankers' own revenue: just keep on making deals with one another to extract the fees and make innocent looking but super profitable side bets (in over the counter, non-regulated markets, of course!) based on insider knowledge.
Just an average every day pyramid scheme that eventually happened to dwarf all world capital markets (!) and run short of available "liquidity" to keep the game going (hence the need for multi-trillion rescues on 3 continents).
These guys were just going about their daily business back in 2007 when suddenly one summer day it was announced that some real estate deals had gone bad. It wouldn't normally have been a problem since now the assets would automatically be classified as "undervalued" as they all had been doing right along since the '80s. Another bank would buy the assets, wait a few months and claim they had made the deal of the century. But this time they couldn't raise the huge amount of cash required. Then things got ominous when it happened on BOTH sides of the Atlantic ! In the absence of globally coordinated money printing and rescues it just became a liar's poker game after that.
Now that the game has been suspended for rain, the bankers are happy to let the politicians and central bankers deal with the headaches of juggling the books! Very entertaining!
The European Central Bank is restructuring in real-time. How can you run a stress test when you change the rules at the same time. Basically, if you don't like the results, you just keep tinkering with the rules until you get passing grades.
Does anyone actually buy the stress tests as credible. Pretty silly.
Definition of the word Bank - A Legal Criminal Organisation,heads they win,tails they win.
In the immortal words of Creedence Clearwater Revival, "things got bad - and things got worse" closely followed by "people come knocking on your door - and all they ever ask for is more and more and more ".How prophetic.
As warned about earlier, DOW/SP500 remains bullish for now ...
http://stockmarket618.wordpress.com
Well put a "candle in the window" then goldenballs. What's next a doleful wail about "our young men and women in harms way"? u sound like another one of our worthless politicos busy "passing legislation." there's no "dishonesty" in Greece because "somebody has to pay for the submarines." that would be plural by the way. i think a little Patsy Cline is in order myself...more along the lines of "we'll meet again, don't know where, don't know when...but someday baby we'll meet again."
Think you missed out the Sunny Day bit George.Plenty of those in Greece but not of the financial kind.Ah time for a holiday in Crete.
23% sounds like a trim , or a shave
40% is a haircut
George Papandreou, the Prime Minister of Greece, is a Bilderberger.
http://www.bilderberg.org/g/Bilderberg.html
911 was an inside job
Been quite a run of weekend/Monday action in Europe...
http://polijam.com/index.php?option=com_wrapper&view=wrapper&url=http:/www.telegraph.co.uk/finance/china-business/7886077/Chinese-rating-agency-strips-Western-nations-of-AAA-status.html
over the AAA hellow AA (made in China
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