What the MSM is missing is that Spain's failings make this real. Spain is big enough to bring down the whole shebang, right now, and its banks cannot be salvaged with just a hundred billion or so.
Just What Is Mario Draghi Hiding? ECB Declines To Respond To Bloomberg FOIA Request On Greek-Goldman SwapsSubmitted by Tyler Durden on 06/14/2012 12:38 -0500
Back in February 2010, in the aftermath of the discovery that none other than Goldman Sachs had facilitated for nearly a decade the masking of the true magnitude of non-Maastricht conforming Greek debt, Zero Hedge first identified the prospectus for a Goldman underwritten swap agreement securitization titled Titlos PLC. We titled the analysis "Is Titlos PLC The Downgrade Catalyst Trigger Which Will Destroy Greece?" because for all intents and purposes it was: at that time a rating agency downgrade of the country would lead to a chain of events which would make billions in assets ineligible for ECB collateral, forcing a massive margin call on the National Bank of Greece, which likely would have precipitated a Greek default there and then. But that is irrelevant for the time being: what is relevant is Titlos itself, and what Bloomberg did after we posted the analysis. It appears that in following in the footsteps of Mark Pittman, Bloomberg sued the ECB under Freedom of Information rules requesting "access to two internal papers drafted for the central bank’s six-member Executive Board. They show how Greece used swaps to hide its borrowings, according to a March 3, 2010, note attached to the papers and obtained by Bloomberg News. The first document is entitled “The impact on government deficit and debt from off-market swaps: the Greek case.” The second reviews Titlos Plc, a securitization that allowed National Bank of Greece SA, the country’s biggest lender, to exchange swaps on Greek government debt for funding from the ECB, the Executive Board said in the cover note. The ECB's response: "The European Central Bank said it can’t release files showing how Greece may have used derivatives to hide its borrowings because disclosure could still inflame the crisis threatening the future of the single currency." Maybe. But what is far more likely is that the reason why the ECB, headed by none other than former Goldmanite Mario Draghi, is desperate to keep these documents secret is for another reason. A very simple reason:
Mario Draghi - 2002-2005: Vice Chairman and Managing Director at Goldman Sachs International
And so, the little rating agency that could, just gave Spain the triple hooks, downgrading the country from B to CCC+, negative outlook. As a reminder, the Uganda credit rating is B: it sure is no Spain.
We were wondering how long Europe's insolvent, and very much scorned, banks would take the constant downgrade abuse (or reacquaintance with reality as we like to call it, but that is irrelevant) by the rating agencies without retorting. After all the same organizations that allowed bank "credit analysts" to pretend they did work for years, when they all merely fell in place in some lemming-like procession, patting each other on the back, pocketing record bonus after record bonus and praising groupthink encapsulated by the made up letters AAA, are now largely non-grata first in Europe, and soon, following the imminent downgrade of American banks, in the US as well. It appears that the response is finally coming. Sky News reports that "some of Europe's largest banks are intensifying discussions about a move to reduce their co-operation with the big three credit ratings agencies amid widespread dissatisfaction with their decision-making." After all, when all they do is downgrade, as opposed to the old standby, upgrade, who needs them. In fact, why not just shut their mouths entirely. Sadly, this is precisely what is on the horizon.
Halfway into the year, my warnings on the FIRE sector are starting to come into there own. The first look, banks and bank stock analysts!
The First BRIC to be Downgraded to Junk?
A month and a half after the SEC took a much-deserved break from watching taxpayer-funded pornography, and stumbled on the scene with its latest pathetic attempt to scapegoat someone, anyone, for its years of gross incompetence, corruption, and inability to prosecute any of the true perpetrators for an event that wiped out tens of trillions in US wealth, by suing Egan-Jones for "improperly" filing their NRSRO application in what was a glaring attempt to shut them up, the only rating agency with any credibility has done what nobody else in the history of modern crony capitalist-cum-socialist America has dared to do: fight back. We have only three words for Sean Egan: For. The. Win.
First Moody's cut the most prominent Austrian banks, and now it is Germany's turn, if not that of the most undercapitalized German bank yet: "The ongoing rating review for Deutsche Bank AG and its subsidiaries will be concluded together with the reviews for other global firms with large capital markets operations." Punchline: "Frankfurt am Main, June 06, 2012 -- Moody's Investors Service has today taken various rating actions on seven German banks and their subsidiaries, as well as one German subsidiary of a foreign group. As a result, the long-term debt and deposit ratings for six groups and one German subsidiary of a foreign group have declined by one notch, while the ratings for one group were confirmed. Moody's also downgraded the long-term debt and deposit ratings for several subsidiaries of these groups, by up to three notches. At the same time, the short-term ratings for three groups as well as one German subsidiary of a foreign group have been downgraded by one notch, triggered by the long-term rating downgrades."
All you need to read and some more.
When one is expected to go down for missing a comma in their NRSRO application, one at least should go down swinging. Sure enough, Egan-Jones, the only rating agency with any credibility left, is at it again, this time cutting the big momma itself - the UK - from AA to AA-.
Time To Load Up On Denmark CDS - Moody's Cuts Nine Danish Financial Institutions: Luxor Thesis In PlaySubmitted by Tyler Durden on 05/30/2012 15:35 -0500
Last time we looked at Denmark it it was in the context of Luxor Capital which had some very ugly things to say about the Scandinavian country in "Rotten Contagion To Make Landfall In Denmark: CDS Set To Soar As Hedge Funds Target Country." Now, 6 months later, Moody's has finally gotten the memo: "Moody's Investors Service has today downgraded the ratings for nine Danish financial institutions and for one foreign subsidiary of a Danish group by one to three notches. The short-term ratings declined by one notch for six of these institutions. The rating outlooks for five banks affected by today's rating actions are stable, whereas the rating outlooks for two banks and for all three specialised lenders affected by today's rating actions are negative The magnitude of some of today's downgrades reflects a range of concerns, including the risk that some institutions' concentrated loan books deteriorate amidst difficult domestic and European conditions, with adverse consequences on their ability to refinance maturing debt. The latter concern is exacerbated by structural changes in the terms of Danish covered bonds and the mix of underlying assets that lead to increased refinancing risk. While Moody's central scenario remains that financial institutions show some resilience to what will likely be a prolonged difficult environment - and the revised rating levels for most Danish financial institutions continue to reflect low risks to creditors - today's rating actions reflect the view that these risks have increased."
The little rating agency (or is that former, now that it is public knowledge that Egan-Jones missed a comma in their NRSRO application?) that just refuses to go away, has done it again, and downgraded Spain from BB- to B (negative outlook of course), and on the edge of the dreaded triple hooks, mere days after it cut it from BB+ to BB-.
All you need to read and some more.
We present the following postcard we just got from Sweden. We can only hope this is a very isolated incident of people enjoying to wait in line for a few pieces of paper, completely devoid of any contextual reference. That, or they are all suddenly applying for a mortgage, or in the best case, merely enjoying the wonderful weather, just incidentally next to a branch of one of Sweden's largest banks.