Ratings Agencies

Italy's Finance Minister Threatens To Quit If He Is Forced To Leave

It was only last week when rumors that Italy's Finance Minister Giulio Tremonti was about to step down due to irreconcilable difference with the man who puts DSK's (alleged) sexual exploits to shame, pushed down Italian bank stocks. Today, The Guardian picks up where last week left off, and brings us the following scene from a real life version of The Office, wherein we learn that Tremonti, who now is hated in Italy and will soon join the Greek Finance Minister in being the target of a massive scapegoating campaign that will likely end in his termination, has just threatened to quit if calls for his resignation don't subside. Yes, it didn't make much sense to us either but whatever.

As ECB Finds Rating Agencies Have Suddenly Found Religion, It Prepares To Flip Flop On Accepting Greek Bond Collateral

Well this was unexpected: the rating agencies, for years and years patsies of their highest paying clients, have suddenly found their conscience, if not religion, and adamantly refuse to bend long-standing rules which qualify the proposed Greek MLEC/CDO type rescue as an event of default. Per Bloomberg: "The rating companies have signaled the plan would trigger because it is being done to avoid default, so couldn’t be considered voluntary, and because investors would be worse off than by holding the new securities." The ECB is so confused by this intransigence and unwillingness to bend to the will of the criminal cartel that earlier today the ECB's Novotny was complaining to Austrian TV about this unexpected demonstration of independence: "Debt rating agencies are being much tougher on potential private-sector contributions to Greece's debt woes than in past bailouts, European Central Bank Governing Council member Ewald Nowotny said on Monday. "We are conducting a very difficult conversation with the ratings agencies," he said."This is what we have to try to find: a way that on the one hand certainly involves banks without having this lead to a default as a consequence," he added. "I also must say it strikes me that the ratings agencies are being much stricter and more aggressive in this European matter than they were, for example, in similar cases in South America. I think this is something we will have to think over." As a result of all this sudden uncertainty, Bloomberg now speculates that the ECB will have no choice than to flip flop on its own adamant position of isolating defaulted collateral, and accept Greek bonds even in an event of default: “The ECB cannot remove liquidity from the big Greek banks,” said Dimitris Drakopoulos, an economist at Nomura. “This discussion is a waste of time. The ECB is going to back down in the end -- what can they do?” he added."

Eurogroup Approves Fifth Greek Bailout Tranche - Complete Statement And Math Fail

The very critical, and very insufficient 5th bailout tranche to Greece, has now been approved. From Reuters: "Euro zone finance ministers agreed on Saturday to disburse a further 12 billion euros to Greece and said the details of a second aid package for Athens would be finalised by mid-September. After a conference call, the 17 euro zone ministers agreed that the fifth tranche of the 110-billion-euro bailout agreed with Greece in May 2010 would be paid by July 15, as long as the IMF's board signs off on the disbursement. The IMF is expected to meet on July 8 to approve it. The payment will allow Greece to avoid the immediate threat of default, but the country still needs a second rescue package, which is also expected to total around 110 billion euros and which will now likely only be finalised in September. Between now and then, finance ministers will work on the "precise modalities and scale" of the private sector's involvement in the second aid package, which Germany hopes will eventually total around 30 billion euros. Greece said it expected a final decision on a second bailout programme by mid-September to keep the country financed. Eurogroup decided through a teleconference today to work out a new programme on time, before mid-September," Greek Finance Minister Evangelos Venizelos said shortly after the finance ministers approved the 12 billion euro disbursement." More importantly, "The 12 billion euro payment will help Athens cover a 5.9 billion euro bond redemption in August, but the government still has a monumental hill to climb if it is to return to debt sustainability, with its debt-to-GDP ratio above 150 percent."

Leo Kolivakis's picture

Save The World?

Hooked up with a buddy of mine who flew into town. Our interesting conversation covered blogging, bankers and regulation, BRICs, oil, interest rates, deflation, the next crisis, Greece and the Greek bailout, ratings agencies, Canada, and lots more. Enjoy!

T-Minus Two Months Until The $500 Billion Rolling Debt Ticking Timebomb Goes Off

Ever since the famous Stanley Druckenmiller Op Ed published in early May, which called for an outright default of the US, saying it would not be
the end of the world, and in fact the US would emerge stronger as a
result of finally taking the first steps to getting its fiscal house in
order, there has been a visible shift regarding the US debt ceiling discussion, with republicans (so far) digging in and refusing to budge on the issue. After all, on the surface Druckenmiller is absolutely correct: with interest rates near record lows for the past 3 years, interest payments would be manageable for a long time even if general rates were to surge due to the Treasury's fixing of low cash coupons over the past 3-4 years, amounting to about 20-30% of all annual tax receipts. There is however one very big problem with this argument, one which we pointed out back in April 2010 when we said that "What people don't realize is that...unless the UST can roll its debt not on a monthly
but now weekly basis in greater and greater amounts, the interest rate
doesn't matter.
All it takes is one semi-failed auction and it's game over as hundreds of billions in bills become payable." Enter the always forgotten maturing debt argument. And as a just released presentation by the Bipartisan Policy Center titled "Debt Limit Analysis" reminds us, aside from the actual deficit funding math, which is that in August there is a $134.3 billion cash shortfall that has to be funded with debt, there is a far greater risk. Or, put numerically, 467.4 billion risks. This is the amount of debt that matures through August 31, and has to be rolled over or the US is bankrupt... in every sense of the word. Once again, America's politicians and media get broadsided by the definition of gross versus net. Because, in reality, the inability to issue more debt post August 3 means a halt to all new debt issuance. Which, unfortunately because it means Geithner's scaremongering is actually correct, would imply the end for the debt ponzi.

Guest Post: The Three Ds: Delegitimization, Definancialization, Deglobalization

I tend to be years early on identifying trends, but three that will make a difference going forward are what I call "The Three Ds": Delegitimization, Definancialization and Deglobalization. Broadly speaking, the global economy and thus globalization and its sibling, financialization, depend on the legitimacy of centralized institutions. These include nation-state governments, international organizations such as the IMF, central banks, the mainstream global media, and various Central State agencies tasked with reporting data accurately, for example the Securities and Exchange Commission (SEC) in the U.S. and equivalent agencies in other trading blocs. By far the grandest experiments in legitimization of the past 20 years are the European Union (EU) and its common currency, the euro, and China's one-party rule combining a command economy with a quasi-free enterprise model, i.e. "Capitalism with Chinese characteristics." The vortex of insolvency gripping Europe is rapidly chewing through what remains of the legitimacy of the euro and the EU institutions tasked with overseeing the financial sector...As for the euro and the EU's grand integration experiment, we can turn to George W. Bush's inimitable phrase for a summary: this sucker's going down. The subprime mortgage meltdown offers a cogent preview of Europe's future.

Obama Redirects From A Broke US Government By Playing The Class Warfare Card, Focuses On "Millionaires And Billionaires"

In what appears to be an increasingly tenuous attempt to redirect focus from terminal federal government failure through the imposition of yet another round of class antagonism, Barack Obama, as part of his earlier address to the nation, stressed that more revenue "must be part of any deficit-reduction deal" and criticized Republicans for protecting tax breaks for "millionaires and billionaires" in the process even invoking users of corporate jets (despite that fact that he himself boasted using the $56,000/hour taxpayer funded Air Force one to travel the 110 mile distance between Washington DC and Williamsburg, VA). As the WSJ puts it: Obama "staked out his position in budget negotiations, which have reached a critical phase and increasingly appear to hinge on which side wins the public-relations battle." Well-aware of the dead end trap that Bernanke finds himself in namely that monetary policy alone is now (or ever) powerless to fix the economy (although it sure would do miracle for the Russell 2000... and hyperinflation), and that a fiscal stimulus is currently unpassable, Obama dragged out the strawman, suggesting "that some initiatives designed to stimulate the economy in the short term should be included in a final deal, singling out a yearlong extension of the payroll-tax break for employees, which expires in January." The bottom line is that as the $4 trillion budget cutting goal is completely unattainable (something the Republicans have claimed is a priority in allowing a debt ceiling hike, yet which is nothing but a PR bluff), Obama has instead once again resorted to what he does best: foment class antagonisms within America, by singling out the rich versus the poor. Ironically, as a WSJ commentator puts it so eloquently, "Obama clearly wants all Americans brought down to a shared level of misery --- except, of course, our federal overlords who will continue to demand their own personal jets, international family travel at taxpayer expense, lifetime health benefits while being excused from the ravages of ObamaCare, and of course their recurring exemptions from all other laws that they impose on us lowly serf taxpayers. Obama wants class warfare? Well he got it: Americans vs their elitist, corrupt, irresponsible, thieving government." One can hope that the final outcome of said warfare here will be more effective than any and everywhere else, where said "governments" continue to dangle the carrot of (insolvent) entitlement program elimination should the population dare to change the status quo.

Reggie Middleton's picture

Hey Mr. & Mrs. investment committee members, here's a strong investment idea. Let's take 30% of our money off of the table after losing 48% of it already, and reinvest 70% of it back into the original investment pool, but this time accept 20% in equity risk just as the country we're investing in is about to undergo a nasty, self-imposed austerity driven recession while our new fixed income position is subordinated in real time by the IMF, and soon likely to trade underwater just about as quickly. Now, where's my damn bonus??? I have an appointment with the Azimut dealer!

The Unwind Begins: Eurogroup President Juncker Redirects From A Broke Europe By Throwing US And Japan Under The Insolvency Bus: "The Debt Level Of The USA Is Disastrous"

The first rule of media (especially when dealing with an idiot audience that has a 7 second attention span): when all else fails, redirect. That's precisely what Eurogroup president, and certified, sanctimonious, pompous liar, Jean-Claude Juncker just did today, as it is becoming increasingly clear that nobody in Europe has any clue just what the Greek bailout #2 will look like now that the ECB and Germany are at polar opposites on how to proceed, the ECB thinks it is a rating agency and can dictate what an Event of Default is, and German bankers are willing to cede to private involvement in the bailout, but in a way that is voluntary. The problem is that these three are very much mutually exclusive. So what does Juncker go ahead and do - he redirects to highlighting the problems of the US: "The debt level of the USA is disastrous," Mr. Juncker said. "The real problem is that no one can explain well why the euro zone is in the epicenter of a global financial challenge at a moment, at which the fundamental indicators of the euro zone are substantially better than those of the U.S. or Japanese economy." That may well be the defining moment: by now everyone knows that the global economy is a massive pyramid scheme. Yet to this point, those in control have at least kept their mouths shut. However, when in order to explain one's insolvency, those at the very top of the control pyramid have no other choice than to point out just how broke others are (when in reality it is all one big, interconnected, "globalized" and truly insolvent Ponzi), then the unwind has begin.

IMF Says Is Open To Delaying Greek Bailout Loan Repayments

The soap opera begins early today (at least in the US), after the Irish Times reports that the IMF is open to delaying Greece's repayment of its international loans but believes a major restructuring of its debt would create untold problems in the euro zone, a senior IMF official said today. "Athens has made progress in tackling its debt crisis but cannot afford to relax the pace of reforms, Bob Traa, the International Monetary Fund's senior representative in Greece, told a banking conference. "If you want a debt restructuring that will really make a difference, it will need to be very large. Such a large debt restructuring would create untold problems not just in Greece, but also in the euro zone," Mr Traa said. But he did hint that the IMF was open to other solutions. "Stretching out payment terms, for instance in loans from euro area partners and the IMF, is a reasonable thing to think about because we have amortisation right at the end of the programme. This is a technical issue we can think about," he said." Unfortunately, as the rating agencies have made clear by now, such a move would be considered a technical default, and thus is unworkable as the very simple matter at the heart of the whole eurozone crisis is the forced marking of debt from mythical par levels (where the ECB has it) to market values (around half): a development which would lead to the insolvency of the ECB, something discussed minutes ago. All Europe wants is a phase transition that allows it to keep marking Greek bonds at par, and how this is achieved is irrelevant.

Don Coxe On Everything From The Markets Rolling Over, To Persistent Food Inflation, To The Coming US Sovereign Debt Crunch

There is a plethora of original insight in Don Coxe (BMO Capital Makets) among them observations on sovereign risk moving from east to west, state finances (or lack thereof), the ongoing correction in financial stocks which portends nothing good for the equity investors, the ongoing violence in MENA, why this inflationary spike in food may last far longer than previous ones, and naturally, some very spot on thoughts on gold, which conclude with: "The only gold bubble likely to burst is the bubbling ridicule of gold."