A Year After Declaring War On The Banks

testosteronepit's picture




 

Wolf Richter   www.testosteronepit.com   www.amazon.com/author/wolfrichter

On January 22, 2012, French presidential candidate François Hollande shook up the banks: “It has no name, no face, no party, it will never be candidate, it will therefore never be elected, yet it governs: that enemy is the world of finance,” he said. It “freed itself from all rules” and “took control of the economy, of society, and even our lives.” He’d fight it, he said, and promised some tough reforms.

But as the private sector in France sank deeper into an economic and fiscal quagmire, his words, designed to endear him to the left wing of his Socialist Party, were swept under the rug. And you’d think that since becoming President of France, he has been tutored by JPMorgan Chase CEO Jamie Dimon.

A year later, Dimon had some choice words himself, while at the World Economic Forum in Davos, Switzerland, where bankers, business leaders, politicians, and whoever was able to get in were hobnobbing for the better of the world.

Dimon lashed out at regulators and their feeble, slow, and confused efforts to rein in the banking industry so that it wouldn’t shove the world into another crisis. They were “trying to do too much, too fast,” he said. He defended inscrutable megabanks with their meaningless financial statements. “Businesses can be opaque,” he said. “They’re complex.” A word that in a financial crisis excuses everything, even massive bailouts that will haunt generations to come. “You don’t know how aircraft engines work, either,” he mollified us, based on the logic that we still get on a plane and fly across the Pacific.

And so the CEO of America’s largest TBTF bank, recipient of the Fed’s bailout trillions, praised the Fed because “they saved the system.” Indeed, they not only saved the system that had shoved the world into the financial crisis, but they also bailed out and enriched those who were, and still are, integral part of it—who now, according to Dallas Fed President Richard Fisher, “believe themselves to be exempt from the processes of bankruptcy and creative destruction” [for more on Fisher’s feisty fight against TBTF, read.... How Big Is ”BIG?”].

This is the world Hollande declared war on, back in the day. But now, France is sinking into a new crisis, and this time it’s the already diminutive private sector that is gasping for air and shedding jobs—and moving overseas, along with the rich and not-so-rich for whom the fiscal and rhetorical climate has become too hostile. 

Not a day passes without another confirmation or a new indication. Today, the statistical agency Insee released its monthly Business Climate Index, which, after a soupçon of an uptick, has deteriorated again in the categories of Industry, Wholesale, Construction, and Retail. Only Service saw an improvement. The index, at 86.75, is down from 87.02 in December, and below where it was in October 2009, during the financial crisis.

Given this scenario, what happened to Hollande’s “enemy” and the reforms to rein it in? It’s not that he didn’t try—though there simply isn’t much appetite around the world for confronting the banks. For example, even the highly anticipated Basle III liquidity rules that were supposed to make global banks more stable and another financial meltdown less likely, well... A couple of weeks ago, after years of negotiations and intensive lobbying by the banks, the rules were finalized. In watered-down form. And implementation was delayed until 2019. A huge win for the banks.

Nevertheless, Hollande’s vow to separate the banks’ retail operations from their speculative activities coagulated into a proposal for a law that was presented to parliament last December. The government prided itself that it was the first in the EU to put banking reform on the table. Four years after the financial crisis. As Dimon said: “trying to do too much, too fast.” The proposal, of course, came with such huge concession to the banks that effectively not much will change.

And his vow to impose a tax on financial transactions? It has also turned into a proposal, and the EU just issued its blessing for the tax. The 11 countries, including France and Germany, that are considering such a tax are now free to impose it. Against a wall of opposition from the banks. Nothing will happen in Germany before the election later this year. But in France, which is dying for additional revenues, the tax might pick up momentum.

These days, tangled up in a real war in Mali, Hollande no longer declares war on the financial world. In fact, he already has the first taxpayer-funded bank bailouts under his belt, including the €7 billion bailout of Banque PSA Finance. He’d “saved the system,” Dimon would say, because when push comes to shove, citizens and taxpayers, and their kids, are the ones who pay, not bank investors. And it doesn’t matter who is president.

France’s economic foundations are cracking. Unemployment is rising incessantly. The private sector is comatose. Car sales sank 13.9% in 2012, from a lousy 2011; sales by its native automakers plunged even more. Now home sales are grinding to a halt. And the finger-pointing has already started. Read....  The Next Shoe To Drop In France.

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Thu, 01/24/2013 - 13:12 | 3182857 Papasmurf
Papasmurf's picture

Like any corporation, banking should be subject to monopoly laws.  Make banks compete so bank profits are driven towards zero, per capitalistic economic principles.  Just like gas stations or nail salons, you need to let failing banks fail, for the good of free markets.

Thu, 01/24/2013 - 12:35 | 3182740 GNWT
GNWT's picture

obama did the same thing

money talks,

bullshit walks...

G

Thu, 01/24/2013 - 17:44 | 3183822 monad
monad's picture

You got that backwards.

Thu, 01/24/2013 - 12:20 | 3182696 Bob
Bob's picture

“You don’t know how aircraft engines work, either,” he mollified us, based on the logic that we still get on a plane and fly across the Pacific.

Is it just me, or is Dimon using an example of something that actually fucking works?

Thu, 01/24/2013 - 12:18 | 3182689 IamtheREALmario
IamtheREALmario's picture

The fight is wrong. The banks are not what need to be attacked. It is the individuals in the banks that personally do illegal things. Strip away the corporate veil, sort out the corruption and the banks will fall in line with the needs of the country and its people. Until the individuals are addressed, the banks will never work in the best interest of the world or a country.

If someone such as Obama or Hollande want power (and they do) then they need to eliminate the powerful people who stand in their way ... or continue to be slaves to them.

Thu, 01/24/2013 - 11:05 | 3182479 Hohum
Hohum's picture

Banks aren't the enemy?

Thu, 01/24/2013 - 12:18 | 3182695 shovelhead
shovelhead's picture

Not really...

Seeing how every time they create credit via loans & credit cards, they debase the value of your existing currency, you should not look on them as an enemy but as a dependent.

Much like a loser child who at 30 lives at home with an allowance who plays HALO all day and borrows your car to go out drinking all night.

Just a matter of perspective.

 

Thu, 01/24/2013 - 13:07 | 3182841 Papasmurf
Papasmurf's picture

you should not look on them as an enemy but as a dependent.

 

you should not look on them as an enemy but as a parasite.

 

 

Thu, 01/24/2013 - 09:45 | 3182219 fabmax
fabmax's picture

Central Banks are private Cartels, and the FED is no exception. I could list many Countries where Central Banks are owned by a very small number of families. It's no secret that the FED was founded by people like JPM (and their Banks), Rockefellers, etc, and Rothschilds in Europe.

This is history not rumours. After 100 years the FED is "controlled" by the same families, nothing changed. And this is not what I mean by Democracy. So I guess I agree to disagree with lots of people.

 

This has nothing to do with Socialism; the so-called independence of Central Banks led to these Cartels owning entire Nations; this is the failure of politics.

Thu, 01/24/2013 - 08:02 | 3182103 WaEver
WaEver's picture

Read the speech from this dude from the Dallas FED at http://www.dallasfed.org/news/speeches/fisher/2013/fs130116.cfm

Thu, 01/24/2013 - 07:58 | 3182100 Mr. Hudson
Mr. Hudson's picture

Everybody has a price for which they can be bought. Everybody. Except Ron Paul.

Thu, 01/24/2013 - 07:25 | 3182079 el-greco
el-greco's picture

...and if humans had to regulate fuel air mixture and pump the turbines of a jet engine while also manually regulating the cabin air pressure....all from a land based station, or god forbid, from a bank, there would be far fewer passengers willing to fly. So Mr Dimon, I dont know how a plane works but I sure know its the computers that keep it in the air reliably and not corruption-prone individuals.

Thu, 01/24/2013 - 06:32 | 3182066 smacker
smacker's picture

"...his words, designed to endear him to the left wing of his Socialist Party, were swept under the rug."

Hollande's words may well have endeared him to the Left in France because France is a socialist country and you can't avoid them. But since they were made during his election campaign, they were also intended to endear him to those on the Right who support open free market capitalism that is honest and operates with integrity. Honest business is NOT a preserve of the Left, far from it. The finance/banking industry conspicuously failed to do this and if Hollande really wants to earn some browny points, he should round up the fraudulent French bankers and deal with them, as the US/UK/et al should also do. Until he does that, his words will remain empty of meaning.

Thu, 01/24/2013 - 06:52 | 3182063 falak pema
falak pema's picture

I love this selective butt kicking. France is the image of first world : on the defense before attrition turns to a rout. But its  true for all of first world...so choose your hobby horse to kick around. 

But yes Hollande cannot deliver, nor can Merkel so the Euro sinks in the print to infinity tempest that will hit the asymptote. 

Without 3% growth per annum of first world interconnectd economy, USA/EURO/JAP/UK, this ship sinks. 

Can you see the premise of a 3% growth rate in next decade? Cheap, abundant Frack gas world wide and energy priced at 80USD/bbl for ten years...thats what it'll take and we'll have to pray the ecological barrier will not have burst; permanently and irreversibly. 

Hopium is the trajectory of the Obammy/Merkel/Ben/Draghi brigade of which Dimon/GS are Mr Moneybags.

More on Hollande's power play in Mali and its potential consequences for making Africa into a turbulent continent with energy supply lines becoming Crusader castles put up to ransom by the "new terrorists",  here is a interesting article about why this makes Russia look safe haven as energy source; major plank of Merkel's Ost politik in the wake of Schroeder's past groundwork :

Suddenly Russian Oil Looks Like A Great Option - Business Insider

Thu, 01/24/2013 - 05:36 | 3182041 Shevva
Shevva's picture

The only way the west will survive, given that countries like the UK with their joke AAA are still borrowing 15 billion a month is if the Goverments start to say your an adult deal with it yourself and let the whole thing implode. Oh wait as the article firmly points out right, left, up, down your going to suck banker c@ck to stay in power.

Thu, 01/24/2013 - 03:06 | 3181961 luckylongshot
luckylongshot's picture

 

We hang the petty thieves and appoint the great ones to public office. ~ Aesop , Greek slave & fable author  

Thu, 01/24/2013 - 04:15 | 3182001 Radical Marijuana
Radical Marijuana's picture

"Kill a few people, and you are called a murdeder.

Get away with kiilling millions, and you are a hero."

OR,

Like the Hollywood dramatization of the life of Sargent York ends with him getting his dream house:

http://en.wikipedia.org/wiki/Sergeant_York

Thu, 01/24/2013 - 02:52 | 3181947 WTFUD
WTFUD's picture

The boys are back in town, the boys are back. people that despise you will analyse and criticise you, they'll tell lies until they realise you, are some one they should apologise too. don't let them people compromise you, be awise too, you can do anything you wanna do, it's not wrong what i say it"s true, Do what you want. t. lizzy

Thu, 01/24/2013 - 01:07 | 3181853 Chris88
Chris88's picture

Sad part is most ZeroHedgers, under the mask of claiming to want "freedom", would agree with the EU's biggest clown, Francois Hollande.  For the record, I don't support the idea of central banking and bailouts, it makes no economic sense whatsoever to reward failure.  But come on, let's face it, people just run around here "Banker this and banker that" and probably haven't even analyzed a bank in their life and don't know the drivers of them.  Nor do they probably understand that a community bank is an entirely different animal than one of the bulge brackets like JPM or BAC, but yeah, just keep spewing useless crap and play into the class warfare.  You're definitely not a useful idiot, just pat yourself on the back.  

Thu, 01/24/2013 - 12:19 | 3182697 monad
monad's picture

IMHO When being charged by a rhino its best to focus on stopping the beast. You can dissect its entrails later; if you're still around to do so. I could be wrong so you do what you want, but don't come to me later, asking me to buy your freedom. Again. You're just not worth it.

Thu, 01/24/2013 - 04:27 | 3182015 Radical Marijuana
Radical Marijuana's picture

Again, Cris88, you amuse me by being such a classic mainstream moron, who is still able to operate within the system, without understanding that system as a whole. I kind of find that flabbergasting. Political idiots that know nothing are very common. Individuals such as yourself, Chris88, that know so much, but otherwise know nothing, are much rarer!

Like I said, your relatively unique status delights my macabre sense of humour! I am astonished to try to imagine how you can sustain the cognitive dissonance of both knowing so much, and so little, at the same time. For your sanity's sake, I hope you never wake up. IF you ever do ... watch out world!!!

Thu, 01/24/2013 - 01:38 | 3181886 DeadFred
DeadFred's picture

They still have community banks?  In my burg we have two Wells Fargo branches a couple blocks from each other but I don't know of a single community bank. Citi, BofA Chase, USB sure, but don't know of any others.  I'll look a bit harder.

Thu, 01/24/2013 - 10:27 | 3182337 rufusbird
rufusbird's picture

Support your local Credit Union!

Thu, 01/24/2013 - 01:40 | 3181887 Chris88
Chris88's picture

Considering I am long and short a good deal of them in my portfolio, and there are thousands of them around, it shouldn't be too hard.

Thu, 01/24/2013 - 04:19 | 3182012 Radical Marijuana
Radical Marijuana's picture

Community banks still make "money" out of nothing, as debts. They just do not make astronomically large amounts of it, leveraged over the moon by derivatives, like the five biggest American banks do!

Community banks have to be careful not to fail. The Too Big To Fail control the government, so that they have nothing to worry about, other than the destruction of America, but then, they work within a global syndicate that is planning to make that happen.

Thu, 01/24/2013 - 04:56 | 3182026 Chris88
Chris88's picture

Honestly, how many banks have you modeled and analyzed?  Zero, it's pretty obvious.  "Make money from nothing": don't you understand what time preference is, and that's where originary interest comes from?  You don't seem to realize that projects are financed in the present to produce what is hopefully a higher valued good in the future.  The cost for one foregoing readily available capital (consumption) in the present to finance future consumption is why we have interest.  Allocating that capital along different types of loans and securities on a balance sheet while selecting the best sources of funding (developing a deposit base, keeping balance sheet risk low, etc.) is not magically making money from nothing like it's guaranteed.  It's called running a business.  

Most community banks do not have off balance sheet items; again, since you've never read a filing by any, you wouldn't understand that anyway.  Secondly, things being off balance sheet is because a derivative asset, when it is created initially, is neither an asset or liability until a change occurs (for example, rising rates would cause the fixed leg of a IR swap to lose out, etc.).  If you look at the gross amount of derivatives outstanding, the number is astronomical.  But because of counterparties to these contracts taking the opposite bet, the net amount is zero globally. Now of course there is risk that certain ones won't pay others in the event of a cata;yst that substantially impacts these derivative prices, but you should at least have an objective and working knowledge of what it is you're talking about before spouting off nonsense.  I'm not a fan of big US banks, although, for example, C is less of a dog than JPM or BAC, and I wouldn't really buy into the big guys.  However, you should also note that leverage (TE/TA) at US banks is dwarfed by leverage at their European counterparts.  

Sorry I didn't just do the usual "ZOMG zionist Jews, banksters are evil, damn the rich, everyone in finance eats fetuses" bullshit, I live in reality.  When you know your elbow from your ass in the subject, feel free to talk to me.

Thu, 01/24/2013 - 09:30 | 3182185 andy_pandy
andy_pandy's picture

is war/drug trafficking such definitions of a good NPV "project" ?

Thu, 01/24/2013 - 00:56 | 3181834 steve from virginia
steve from virginia's picture

 

Hollande wipes his eyes while France's petroleum addiciton slowly bankrupts the country ... while Europe's petroleum addiction bankrupts the entire continent.

 

Yea, kick the banks and the bankers it is a fine thing to do but better get rid of those cars while you are at it. Europe has little in the way of its own petroleum when it's gone it's gone forever ... whipping the banks won't help it come back, either.

 

No petroleum = no wars for Hollande no fun for the bankers ... just hard times. How hard? I'm sure you don't want to know ...

Thu, 01/24/2013 - 00:42 | 3181810 Anusocracy
Anusocracy's picture

Some minds can create wealth and can function in a productive society, others cannot.

The others are those who choose to attempt to run such a society.

Thu, 01/24/2013 - 00:36 | 3181799 FullFaithAndCretin
FullFaithAndCretin's picture

Even if we don't know how an airplane engine works, we still climb aboard a Dreamliner... oh wait.

Thu, 01/24/2013 - 00:03 | 3181751 Dr. Sandi
Dr. Sandi's picture

Even if we don't know how an airplane engine works, we get on a plane and fly to Davos.

But if we knew that the engine doesn't actually work very well anymore, would we still trust the mechanics who were in charge of those engines for so many years? Or would we call them on the carpet and ask why the hell so many planes are dropping out of the sky?

Even when I don't know precisely HOW something works, I start asking embarrassing questions when it doesn't work so well ANYMORE.

Sorry Jammy Dumbass, but shut the fuck up, please. We just not quite as stupid as you want us to be. Oh, and maybe have a gun for a midnight snack while you're enjoying Europe. Thanks.

Thu, 01/24/2013 - 00:17 | 3181767 monad
monad's picture

If Morgan Chase made jet engines they would have been shut down while the FAA determined exactly what happened, and brought charges against whoever was criminally negligent. Unfortunately these pathological mass murderers aren't engineer material, and neither is congress. Or the judicial branch.

Thu, 01/24/2013 - 00:06 | 3181744 monad
monad's picture

Roberto Calvi, Neil Bush, Chalabi, Paulson, the gnomes, AIG, Corzine, the Fucking Robbers and their pals, Hollande is right.

Wed, 01/23/2013 - 23:30 | 3181698 Radical Marijuana
Radical Marijuana's picture

This reminds me of how Obama was night vs. day compared to what he said before and during elections, versus what he actually did afterwards.

The only time one gets some "truth" is when politicians are in the opposition, or campaigning to gain power. THEN they do their market research, and tell people what they want to hear, which is slightly more honest. HOWEVER, as soon as they get power, they then DO the opposite.  Of course, that must be the case, because otherwise they would probably be assassinated instead.

Unless the voting public were to advance their understanding of politics enough to appreciate some of these deeper truths, then, over and over, the best professional liars and immaculate hypocrites will keep on being able to win the elections, only to then again DO the opposite to what they promised.

This pattern is totally ubiquitos in history! One good example comes from Canadian history, where the individual who was the longest serving Prime Minister, so far, made this statement, while he was in the opposition:

Until the control of the issue of currency and credit is restored to government and recognized as its most conspicuous and sacred responsibility, all talk of the sovereignty of Parliament and of democracy is idle and futile … Once a nation parts with control of its currency and credit,  it matters not who makes that nation’s laws … Usury once in control will wreck any nation.”

--- Prime Minister William Lyon Mackenzie King

... the same old, same old, over, and over, and over, again ...

OF COURSE, FRENCH DEMOCRACY IS ALREADY DESTROYED!

HENCE, DEBT SLAVERY BACKED BY WARS BASED ON DECEIT.

"These days, tangled up in a real war in Mali, Hollande no longer declares war on the financial world."

Thu, 01/24/2013 - 13:10 | 3182850 NotApplicable
NotApplicable's picture

Sorry, had to give you a downvote for being dumb enough to not only listen to the puppet named Obummer, but to actually note the disconnect between "his" words and the actions of those behind the scenes. By doing so, you only aid them in their quest to appear legitimate.

It's nothing but a con-game.

Thu, 01/24/2013 - 01:10 | 3181861 Chris88
Chris88's picture

Currency controlled by the government?  Have you ever heard of a central bank?  Unless you're one of the clown socialist apologists that claims that a central bank is private, which is the most laughable and idiotic thing I've heard on here.  Given its outstanding success everywhere else, sure, I'd definitely be clamoring for the government to do more!  

Thu, 01/24/2013 - 13:14 | 3182866 NotApplicable
NotApplicable's picture

When private banks take over a public government, the distinction between the two becomes MOOT, and serves merely as arguing points, which serve merely as a distraction to the point that the distinction is moot.

Thu, 01/24/2013 - 04:11 | 3182000 Radical Marijuana
Radical Marijuana's picture

Chris88, thanks for tickling my macabre sense of humour by writing "a central bank is private, which is the most laughable and idiotic thing I've heard on here." Central banks are the privatization of the powers of government. They are chartered by governmental legislation, but nevertheless, the banking laws delivered the power to make "money" out of nothing to private banks.

That the Federal Reserve Board is NOT directly part of the Federal Government, but more like Federal Express, is the most often stated observation. That private banks are allowed to legally counterfeit "money" is the foundation of our current economic system! I wonder what kind of bizarro mirror world of belief in bullshit you are living in, Chris88?

I advise you not to find out, since you will not like it, but nevetheless, there is an entire history, replete with numerous authors, regarding HOW that came to be. 

I had collected some of that here:

Some Monetary System articles.

Although, it is more fun to watch:

http://www.marijuanaparty.ca/article.php3?id_article=445

Anyway, thanks for making me smile with your observation.

Wed, 01/23/2013 - 22:47 | 3181608 dunce
dunce's picture

I never thought of the tipping point in an economy as other than the balance brtween private sector workers and govt. sponges, but this article makes me wonder if a exodus of businesses and big producers of wealth might sink a ship of state with morons at the helm.

Wed, 01/23/2013 - 23:18 | 3181683 Eally Ucked
Eally Ucked's picture

"a exodus of businesses and big producers of wealth might sink a ship of state with morons at the helm. " I'm always hearing about that exodus, from all countries in western world and where they're going to find safe heaven? Viet Nam? Egypt, SA or Antarctica? Maybe Russia?

Thu, 01/24/2013 - 12:43 | 3182766 NidStyles
NidStyles's picture

If you have to ask, you aren't invited.

Do NOT follow this link or you will be banned from the site!