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Moody's Issues Stern Warning On China's Pyramid Bank Recapitalization Scheme; Has CIC Entered A Funding Crisis?

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Mon, 08/30/2010 - 11:05 | 552838 Sudden Debt
Sudden Debt's picture

who cares... you can't buy put options on that one.

Mon, 08/30/2010 - 11:05 | 552841 Caviar Emptor
Caviar Emptor's picture

Mr Kettle, meet Mr Pot. 

Mon, 08/30/2010 - 11:28 | 552894 aurum
aurum's picture

exactly...how the hell do they think US banks "arent" insolvent?

Mon, 08/30/2010 - 11:09 | 552851 Azannoth
Azannoth's picture

"However, the increases in assets and equity are artificial and without real economic substance: ..." Nooooo Shit!

Mon, 08/30/2010 - 11:10 | 552853 Rick64
Rick64's picture

Recapitalization thru overleveraging. Wonder where they got that idea?

Mon, 08/30/2010 - 11:20 | 552881 mikla
mikla's picture

Yeah, it's a good thing the Fed doesn't increase system leverage with silly stuff like paying banks on their capital reserves, purchasing over-the-counter securities, engaging in CDS hedge fund activities with the banks they theoretically "regulate", etc.  When we feed back Fannie&Freddie "profits" into new mortgage purchases and further leverage, it's because those profits are real.

Mon, 08/30/2010 - 11:13 | 552861 tony bonn
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bwwwhahahahahahahaha....moody's is issuing stern warnings to flaky chinese banks when the ones in its own back yard are poster children for fraud, insolvency, and corruption....where is edward munch when you need him?

and all of this is coming from an institution which performed bold acts of deception in affirming the soundness of cds, cdos and other crapulent financial engineering marvels?

fuck moody's

Mon, 08/30/2010 - 11:17 | 552875 Caviar Emptor
Caviar Emptor's picture

It's a macabre dance of thieves!

It's a banking Three Penny Opera! Ben sure won't get to play Mack The Knife :)

Mon, 08/30/2010 - 22:03 | 554234 Heavy
Heavy's picture
How about Macbeth?
Mon, 08/30/2010 - 11:14 | 552863 Caviar Emptor
Caviar Emptor's picture

Beginnings of a globally un_coordinated downward spiral? 

If CIC needs recap due to losses on US exposure, and US relies on continued mass credit from China, we have ourselves a perfect storm. Yipes. 

As a temporary solution to short circuit the spiral and provide some cover, Ben might propose that US just start printing Renminbi for external trade :-) Throw in a skyscraper or two in NYC.

Mon, 08/30/2010 - 11:15 | 552867 Spitzer
Spitzer's picture

Did that new Chinese rating agency not just downgrade US debt et al ?

I guess the TBTF didn't take that lightly and struck back with this.

Mon, 08/30/2010 - 11:34 | 552905 NotApplicable
NotApplicable's picture

Political economics is war by another means.

Of course, war is political economics by another means.

Really though, it's a win-win for both parties as they blame each other for currency manipulation, all while robbing the world blind.

Mon, 08/30/2010 - 11:26 | 552891 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

One of the causes of the "green shoots" effect has been the continued blowing of bubbles in other parts of the world outside of US and Europe. Canada, China, Australia and etc. Those bubbles can't last forever. It will pop. The global ponzi can not run forever!

Mon, 08/30/2010 - 11:26 | 552892 bada boom
bada boom's picture

What about this kind of "Sternn" warning,


Mon, 08/30/2010 - 11:32 | 552899 Dollar Bill Hiccup
Dollar Bill Hiccup's picture

Don't worry, the Chinese are really smart. 

Great piece from the FT last year, "China's murky world of local finance" in the Dragonbeat section.

Local off balance sheet funding in concert with bank lending all mandated by the Central powers in Beijing and implicitly backed by Beijing. 

That sounds really smart.

How do you say "shell game" in Mandarin?



Mon, 08/30/2010 - 11:34 | 552903 Catullus
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But this in no way applies to the federal reserve "reinvesting" mbs proceeds into treasuries.

Mon, 08/30/2010 - 11:38 | 552912 NotApplicable
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Why that displays the "strength" of the underlying mbs paper, and thus the American Homeowner!

Mon, 08/30/2010 - 11:49 | 552933 Cistercian
Cistercian's picture

That's absolutely right!What could possibly go wrong?

Mon, 08/30/2010 - 11:35 | 552908 MarketTruth
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Ok, this is getting so assinine and pot/kettle that the humor is almost unbearable as every country has their FIAT currency run to the bottom. Central banksters are using everything they can to keep the fraud going. Fraudulent accounting tricks, 'hidden' free money that is then sent to buy debt/etc with instant ~2% 'profit', etc. This will all end very, very badly.

Got gold/silver?


Mon, 08/30/2010 - 11:57 | 552946 overmedicatedun...
overmedicatedundersexed's picture

Had dinner this weekend with a Chinese PHD (math) who moved here to teach..

She ,yes ,she, said that the common folks are getting scared of the rem-bi loosing value and many are now buying.. wait for it.. PM's

anecdotal of course but her input seems more on the ground, then what we get out of the media. 

Hmm, Chinese people are not liking the paper money game either.

Seems we humans have been hard wired to

want PM's when economic conditions become


Mon, 08/30/2010 - 12:07 | 552968 MarketTruth
MarketTruth's picture

Am not surprised at either the SHE part or the buying of gold/silver. Last time i as in China about 6 months ago it was extremely obvious and easy to buy gold/silver bars directly from banks and/or within various malls at the jewelry store. Unlike, say, in the EU, UK or USA where you truly have to look to buy. In China gold and silver bars are virtually everywhere for the purchasing and prominently displayed right in the main/front window.

Mon, 08/30/2010 - 11:40 | 552915 carbonmutant
carbonmutant's picture

Moody's is allowed to stay in business as long as they don't release the same analysis on US banks. They like the SEC are now a tool of the administration...

Mon, 08/30/2010 - 11:40 | 552916 trav7777
trav7777's picture

but...but...I was assured that the chinamen were going to take over the world just like the japs were in the 1980s.  I mean, I saw a few movies with this theme, for cryin out loud.

Don't worry, that magical asian centrally planned economy is IMMUNE to any laws of economics or even physics for that matter.

Mon, 08/30/2010 - 11:48 | 552930 Mako
Mako's picture

Yep, the crazies have no idea that all these systems are based on the same flawed assumptions.  They are all part of the global system and when it's over for the global size they will all go down the drain. 

Yep, the Japs are going to own everything then the Europeans, then the Chinamen, then I guess the North Koreans... running out false hope it looks like.

Mon, 08/30/2010 - 11:54 | 552938 carbonmutant
carbonmutant's picture

Chinese movies always involve a little wire work... LOL.

Mon, 08/30/2010 - 11:44 | 552925 Mako
Mako's picture

The system is insolvent on day number 1.   The books never balance, really what everyone is running from is a balancing of the unbalancable books.


Mon, 08/30/2010 - 11:49 | 552932 bugs_
bugs_'s picture

Deep Shah.

PS: OK for indian mafia to downgrade chinese mafia.

Mon, 08/30/2010 - 11:50 | 552934 oddjob
oddjob's picture

from Moody's?....thanks for the laugh shills.


Mon, 08/30/2010 - 11:56 | 552943 carbonmutant
carbonmutant's picture

American consumer solve all problems... Modern Chinese Mantra

Mon, 08/30/2010 - 12:00 | 552951 william the bastard
william the bastard's picture

is that the Chinese sovereign wealth fund is likely in a major need of recapitalization, courtesy of its extensive US financial sector equity holdings.

AKA source of funds

Mon, 08/30/2010 - 12:11 | 552991 trx
trx's picture

Well, it certainly looks like the CIC is looking to hedge themselfs:


China’s SWF To Invest In Nassim Taleb’s Bear Fund
Mon, 08/30/2010 - 12:32 | 553042 strannick
strannick's picture


Thank goodness 'Moody's isnt out with a surprisingly frank appraisal of the American banking system's precarious capitalization trend' Then we would be in trouble

Mon, 08/30/2010 - 13:08 | 553132 iPood
iPood's picture
Yuán tingju = circle jerk  
Mon, 08/30/2010 - 16:06 | 553573 tom
tom's picture

The fun things you can do when there's no checks and balances.

Works like this: state-owned banks use $28 billion of their fractionally-reserved money to buy long-term bonds issued by their state holding company (Huijin). Huijin then injects that $28 billion into a share issue by the same group of banks, and the central bank agrees to classify it as a $28 billion injection of "equity", even though banks actually just lent it to themselves via their holding company. Now banks are allowed to increase lending by another $240 billion.

Mon, 08/30/2010 - 16:44 | 553670 MichaelG
MichaelG's picture

Is 'Huijin' Mandarin for 'Enron'?

Wed, 09/29/2010 - 07:29 | 612184 Herry12
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