The Putrid Smell Suddenly Emanating From European Banks

Wolf Richter's picture

Wolf Richter

By now we should have gotten used to the odor emanating from banks—bailouts, money laundering, Libor rate-rigging, the other misdeeds. But in Europe over the last few days, it was particularly dense.

A nauseating whiff came from Barclays today, when it leaked out that it has been under investigation by the Financial Services Authority and the Serious Fraud Office in Britain for illegal fundraising in 2008. Allegedly, the bank secretly loaned £5.3 billion ($8.4 billion) to one of Qatar’s sovereign wealth funds, which then turned around and with great public fanfare pumped that money back into Barclays—a scheme to raise capital on paper to escape a government takeover during the financial crisis.

Then Crédit Agricole, France’s third largest bank, announced €3.8 billion ($5 billion) in write-downs, mostly of “Goodwill” due to the “present macro-economic and financial environment.” Goodwill reflects money paid out for certain items in excess of their value—an expense that, by a quirk of accounting, is temporarily parked as an asset on the balance sheet to be expensed eventually. After the write-off, the bank will still have about €14 billion of Goodwill clogging up its balance sheet, and more write-offs are to come. It already wrote off €2.5 billion last year, when it agreed to sell its stake in the Greek bank Emporiki for €1, which it had acquired with impeccable timing in 2006 for €2.2 billion.

Greek banks... oh my! They’re being investigated by Greek financial crime prosecutors for €232 million in loans that they handed out to the ruling parties, Prime Minister Antonis Samaras’ New Democracy and the Socialist PASOK. “Suspected crimes against the state,” a court official called it.

The state funds political parties based on their share of the vote, and both parties pledged hoped-for state funding as collateral for these loans. But during the election last June, New Democracy’s share of the vote dropped from 33% to 29% and PASOK’s from 43% to 12%. With it, state funding suddenly collapsed, and some of the loans are turning sour.

Bitter irony: teetering Greek banks, hoping at the time to get bailed out by taxpayers in other countries, funded Greek political parties that then negotiated the bank bailouts with the EU for the benefit of bank investors [likewise, Proton Bank got bailed out in 2011 though it engaged in fraud, embezzlement, and money laundering, when a bomb exploded.... European Bailout Fund For Greek Money Laundering And Fraud]

Still on Friday, SNS Reaal, fourth largest bank in the Netherlands, was bailed out again—after already having been bailed out in 2008. This time, it was nationalized. The €10 billion package would cost taxpayers initially €3.7 billion. Stockholders and junior debt holders lost out too, but holders of senior debt and covered bonds were made whole.

There is never an alternative to bailouts. A collapse “would have unacceptably large and undesirable consequences,” according to Finance Minister Jeroen Dijsselbloemsaid. As brand-spanking new President of the Eurogroup, he thus confirmed: bank bailouts will be the norm in the Eurozone.

They’re worried that letting even a smallish bank fail could take down the electron-thin confidence in the entire financial system—just when the debt crisis has been officially declared “over.” And so, based on the operative set of rules, the Dutch government shanghaied its strung-out taxpayers, whose belts are already being tightened by austerity, into paying, once again, for the misdeeds of the bankers.

In Italy, a billowing scandal got new fuel. It kicked off with a criminal investigation into Monte dei Paschi di Siena, Italy’s third largest bank, for alleged market manipulation, false accounting, obstructing regulators, and fraud. The bank used derivatives to hide losses during the financial crisis, but these losses are now seeping from the woodwork. So Standard & Poor’s just cut the bank’s credit rating, fearing that the announced losses may just be the tip of the iceberg.

That form of financial engineering came to light when new management took a gander at the books. Now a government bailout is in the works. Because there is never an alternative. Taxpayers tighten your belts!

And on Thursday, Deutsche Bank waded deeper into its quagmire of “matters,” among them the Libor rate-rigging scandal, which might cost it €2.5 billion, and the carbon-trading tax-fraud scandal that broke with a televised raid by police on its headquarters. So, more write-downs are due, and the bank announced a €2.2 billion loss for the fourth quarter. “In 2013,” said co-CEO Jürgen Fitschen reassuringly, “we will be confronted with more developments in these and other matters.”

And other matters! More revelations to come. Already, there are estimates that these misdeeds would eventually amount to €10 billion. Now suddenly: “Building capital is our top priority,” said the other co-CEO Anshu Jain. He wants to do it without diluting current stockholders. “But in this uncertain world, I cannot exclude anything,” he mollified his audience.

Turns out, the bank intends to get rid of €16 billion in high-risk credit default swaps by end of March. It might boost its core Tier 1 capital ratio from 8% to 8.5%. More such sales are planned—a wholesale dumping of its credit correlation book, an outgrowth of the financial engineering it used to hide whatever needed to be hidden.

The bitter irony of the financial crisis is just how common the putrid smell has become since. And how routine it has become for these inscrutable institutions with their opaque financial statements to transfer risks and losses to the people. In the US, too, the smell refuses to evaporate. And nothing indicates that this will change anytime soon.

Weary of all this, the French—whose economy is spiraling deeper into crisis—expressed disdain for their political class; they’re dreaming of authoritarian leadership, a “real leader” who would clean up the mess and “reestablish order.” Read.... Could 87% of the French Really Want A Strongman To Reestablish Order?

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Dewey Cheatum Howe's picture

And more stinkiness. Throw the auditors under the bus first. No surprises here.

Federal authorities are scrutinizing private consultants hired to clean up financial misdeeds like money laundering and foreclosure abuses, taking aim at an industry that is paid billions of dollars by the same banks it is expected to police.

The consultants operate with scant supervision and produce mixed results, according to government documents and interviews with prosecutors and regulators. In one case, the consulting firms enabled the wrongdoing. The deficiencies, officials say, can leave consumers vulnerable and allow tainted money to flow through the financial system.

Critics concede that regulators have little choice but to hire outsiders for certain responsibilities after they find problems at the banks. The government does not have the resources to ensure that banks follow the rules.

Still, consultants like Deloitte & Touche and the Promontory Financial Group can add to regulators’ headaches, the government documents and interviews indicate. Some banks that work with consultants continue to run afoul of the law.

Toilet & Douche the same auditor behind the supposedly sound evaluation of Autonomy before being sold to HP.

A trip down zerohedge memory lane

Dewey Cheatum Howe's picture

And more on dead bodies and putrid smells that refuse to subside in the US banking system.

One of the things we’ve lamented since 2010, before the robosiging scandal broke, is the use of forgeries and document fabrications to remedy otherwise fatal problems with foreclosure actions, such as a lack of proper signatures on a borrower promissory note. We even once saw a case when an allonge (a separate sheet, which is required to be “firmly affixed” to the note, meant to add signatures only when there is no room left on the note) appeared at the 11th hour, with obviously questionable signatures (evidence of pixtillation and shrinking to fit). But that occurred after business hours on a Thursday before a three day weekend, and effectively stymied the defense, since they could not round up a document expert quickly enough to challenge the crude forgery.

It looks like document experts are finally getting their day in court. April Charney sent on this declaration by James Kelley filed in US District Court in Knoxville, Eastern District, Malin vs JP MORGAN CHASE et al. Kelly has a PhD and over 30 years of experience, including in the military. I hope readers will circulate it to people who might find it fo use. And yes, Kelley’s contact information is at the end of the declaration.

q99x2's picture

It's a return to the strongman. And make that strongman open source computing.

disabledvet's picture

More like "return of the straw man." find an enemy somewhere! We must stop looking like clueless dopes!

rsnoble's picture

Crazy ass planet.

rsnoble's picture

Just imagine if humans were multi-planetary how fucked up things could be.

Widowmaker's picture

Fiat = Fraud.

(the end)

shovelhead's picture

The picnic was going swimmingly and much merriment was underway when the salmonella tinged potato salad began it's evil work.

As the first signs of discomfort appeared, the occasional whiff of a silent-but-deadly emanation was not a cause of alarm, but soon this was not the case as loud and noxious eructions began to overwhelm the festivities as the crowds began to realize this was no ordinary case of flatulence.

The initial stages of projectile diarrhea were quite startling in their intensity...

caShOnlY's picture

putting 2 + 2 together: we see the idea of 401(k) "redirection" in the U.S.   I imagine this will be the "extinguisher" if a full on European banking collape took place.  They will "ring fence" U.S. banks with retirement funds until, they too, collapse.   When it is finally over and done the leadership will look back and either realize and state they "threw good money after bad" or they will state that if they didn't do what they did "main st. would have suffered more".    ...... MOAR.  

               More than what ? a great depression that will have arrived at that time?

falak pema's picture

the private banking crisis of first world has its epicenter in WS. Period. The rest is just fluff.

The trillions in derivatives, the trillions in Caymanista off shore shangrila, is where the real threat and real firepower lie.

Its all DC/FED controlled. Everybody wants to avoid the mother of all ponzis from collapsing; the Euro surrogates are just part of the same scene. 

City has been a banksta relay since the Euro dollar market emerged in 1971, the original monetary sin of western world. This is a deep Saint Andreas fault line in the world monetary system all around king dollar, all hocked to Saud oil since 1973, and obliged to pump and dump ever since. 

Without cheap oil that bubble collapses. THe arabs/ruskis cannot accept cheap oil. The Oligarchy west cannot accept monetary collapse. The Chinese/Bric nations cannot accept no growth scenario.

Thus the 40 year Kissinger/Bush/Saud/Chindia global construct is now unsustainable. 

Too many divergent pressures building up around the PAx Americana three prong construct. The banking shenanigans are just the ever growing fluff and froth rising to the air; down below is where the groundswell of oceanic turbulence dwells.

Leviathan tsunami! No way out if we don't accept big asset and monetary WRITEDOWNS.

The more we wait, hoping to break the energy/ecology/Asymmetry conundrums, in the cloud of CB fiat hopium, the more fragile the global ship gets. 

disabledvet's picture

If what you're saying is "the end is nigh" I hope you're right falak. I would also throw in gold in there...while obviously unpopular to say here nothing says "prices only move in one erecti...I mean direction" than the barbarous relic. Still...the last of the Big Three (Treasuries) is warning of VERY stormy weather dead ahead. Time to separate the Cookie Cutter Capitalists from the one's who've done their homework? We shall see..."everything seems so well managed from above" until it's not.

WTFx10's picture

BONAPARTE, NAPOLEON. French statesman, general. 

"The Predators provided troops for my campaign in Poland, but they ought to reimburse me: I soon found that they are no good for anything but selling old clothes..."
"Legislating must be put in effect everywhere that the general well-being is in danger. The government cannot look with indifference on the way a despicable nation takes possession of all the provinces of France. The Predators are the master robbers of the modern age; they are the carrion birds of humanity... "They must be treated with political justice, not with civil justice. They are surely not real citizens."
"The Predators have practiced usury since the time of Moses, and oppressed the other peoples. Meanwhile, the Christians were only rarely usurers, falling into disgrace when they did so. We ought to ban the Predators from commerce because they abuse it... The evils of the Predators do not stem from individuals but from the fundamental nature of this people." (From Napoleon's Reflections, and from speeches before the Council of State on April 30 and May 7, 1806.)
"Nothing more contemptible could be done than the reception of the Predators by you. I decided to improve the Predators. But I do not want more of them in my kingdom. Indeed, I have done all to prove my scorn of the most vile nation in the world." (Letter to his brother Jerome, King of Westphalia, March 6, 1808)
(1) Every big and small Predator is the peddling trade must renew his license every year.
(2) Checks and other obligations are only redeemable if the Predator can prove that he has obtained the money without cheating. (Ordinance of March 17, 1808. Napoleonic Code.)


DE GAULLE, CHARLES. 20th century French politician. Addressing the Zionist imbroglio in the Mideast in a news conference of November 27, 1967, he observed:

"The Predators remain what they have been at all times: an elite people, self-confident and domineering."


SAND, GEORGE (Amantine Dupin Dudevant). 19th century French novelist.

"I saw in 'the wandering Predator' the personification of the Predatorish people, exiled in the Middle Ages. Nevertheless, they are once again extremely rich, owing to their unfailing rude greediness and their indefatigable activity. With their hard-heartedness that they extend toward people of other faiths and races they are at the point of making themselves kings of the world. This people can thank its obstinacy that France will be Predatorized within fifty years. Already some wise Predators prophesy this frankly." (Letter to Victor Lorie, 1857)

COMMUNITY OF STRASBOURG, FRANCE. In an address to the ASSEMBLEE in 1790, the city's revolutionary leaders opposed citizenship for Predators, because:

"Everyone knew the inherent bad character of the Predators and no one doubted they were foreigners... Let the 'enlighteners' stop defaming the Gentiles by blaming them for what is wrong with the Predators. Their conduct is their own fault. Perhaps the Predators might eventually give up every aspect of their separation and all the characteristics of their nature. Let us sit and wait until that happens; we might them judge them to be worthy of equality. (Tres Humble Adresse qui Presente la Commune de la Ville Strasbourg)

Andrew Jackson and the Bank of the United States (1928) by Stan V. Henkels
From the original minutes of the Philadelphia bankers sent to meet with President Jackson February 1834

 "Gentlemen! I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country.

When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin!

Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I have determined to rout you out, and by the Eternal, (bringing his fist down on the table) I will rout you out."

"(I’m) doing God’s work." – Goldman Sachs CEO, Lloyd Blankfein.

What is fraud except creating “value” from nothing and passing it off as something?

"TRUTH is the enemy of the STATE"
Paul Joseph Goebbels was a German politician and Reich Minister of Propaganda in Nazi Germany

    “Truth hurts. Maybe not as much as jumping on a bicycle with a seat missing, but it hurts.”

                                      -Naked Gun



enoch_root's picture

How long until the politicians want to "claw-back" all those bonuses paid out since 2007?

And use the full machinery of the out-of-control state revenue gathering and surveillance appartus to rape the banksters?

... then is when the fun begins.

HoaX's picture

DB got raided and prosecuted, Monti Paschei criminally prosecuted, in the Netherlands the top of SNS Reaal might very well be prosecuted in order to get as much money back from them as possible.

The fact more stench seems to be coming out of Europe might well have to do with the fact that a) rules are being put in place and c) they are starting to be upheld.

That being said, people had more than enough with this crap.

Free Corzine! Free Diamond!

WTFUD's picture

Your all meanies! none of you know the responsibilities and levels of decisions we make on your behalves. i am sure if you knew the pressures we are under trying to grow dividends for our shareholders you would forgive certain indiscretions. rules, regulations, regulating bodies all poking their noses in, and bonuses, lets not even go there! before you clueless muppets start screaming for hangings and jail think carefully what you wish for or we will pack up and go elsewhere. sorry if i come across a little too emotional.

Handful of Dust's picture
EU to impose duties on some Chinese steel By Thomson Reuters - Thu 31 Jan 2013 08:23:04 CT The European Union will impose punitive duties on Chinese makers of some types of steel, diplomats said on Wednesday, countering for the second time what it says are illegal subsidies by Beijing. Let the Trade Wars begin....
Joebloinvestor's picture

The Lanny Breuer school of banking.

Whiner's picture

Emporer Napoleon, come execute the bankstas and break up the banking monsters. They are a theft machine eating the hearts of working people. Viva La France!

tony bonn's picture

the bildeberger hollande is a prelude to the next hitler....france is being quickly sucked into the toilet...what a pompous bunch of people who look disdainfully down their gallic noses at americans.....although sometimes with good reason....

thank you for summarizing the filth - it is pandemic that tracking it is a full time job.....but the crap doesn't stop at the east atlantic tosses mountains up in the states from where it originated....usa banks are more corrupt and decrepit than the europeans - it is just better hid....jpm ir swaps are going to blow up magnificently - it's still baking...

andrewp111's picture

Not a Hitler or a Napoleon, but perhaps a Caesar? France no longer is sovereign since they don't control their own currency. Germany isn't any more sovereign than a US State either.  The next European strongman will be an EU President, and it won't be a clown like Von Rumpoy.

ebworthen's picture

Fuck the banks and the bankers.

They are the corrupt nobility of the 21st century.

The greatest scourge upon the common citizen since the black plague, the despots of the old world, and the dictators of the 20th century.

They need to be utterly destroyed, their mouth upon the teat of government and their bloodsucking leech suckers upon society ripped away; their corporeal corporate bodies drawn and quartered while their human yet inhumane leaders are hung by the neck from the nearest tree or lamppost until dead.

Their heads put on pikes in public view for three generations as a warning; their bodies fed to packs of hyenas and swarms of maggots who are the only creatures upon the earth who could stomach their vile parts.



percolator's picture

Regarding the French strongman.

Anyone in any country running on a platform to criminally prosecute bankers would probably do well amongst the populist - the problem is none of these candidates could raise the $$$$ to counter the relentless propaganda the banker elites would spew to win the election.

Ghordius's picture

since we are talking about a French strongman: in France, if you want to win an election it's much less important how much money you spend, and more about how many existing "groups of power" you can get on board of your platform - and many of those groups behave quite conservatively

a bit like politics in some countries before certain regulations were relaxed and it all became a battle about propaganda money coffers

jeff montanye's picture

elizabeth warren may be the camel's nose.

eatthebanksters's picture

does that make Bernanke the horses ass?

smart girl's picture

Just wait until Spring when they will need to come up with Trillions, not Billions. Nice article!

Billy Shears's picture

I guess the whole point in these raids, if not criminal prosecutions, is as theater for an upcoming bailout by the taxpayers. I mean what citizen would stand for a taxpayer funded bailout of a bank that hadn't first been raided? Hell, why not just give them the money? Oh, right, they just did. Nice....

Zer0head's picture

Allow me to speak with authroity.

The putrid smell is from the rotting fish along a couple of hundred miles of the Florida Gulf Coast and the dirty little secret of the Sunshine State's tourist authority and their media harlots (doesn't that sound familiar): it is called K.brevis (AKA - a George Washington Gulf Coast multiple orgasm)

kills tens if not hundreds of thousands of fish, emits aerosolized neuro toxins for the humans basking on the beach and in general is an immense cluster fkuc for any who like to spend a day on the water fishing or a day on or near the beach or who are anywhere downwind of this biomass of deoxygenated scum.   But the Mullets are plentiful and you don't need anything other than a pair of rubber gloves to pick them off the sand, a hot grill and unknowing guests.

Withdrawn Sanction's picture

Allow me to speak with authroity.

If you indeed have "authoroity," why do you need me to "allow" you?

philipat's picture

Speaking with authroity doesn't make much sense. And has little authority, frankly.

apberusdisvet's picture

The Euro "recovery" is like what happens in the ICU when the heirs of the dying billionaire see the scene flatline.

LongSoupLine's picture

One big fucking ponzi.


All those fuckers should hang.  You want to see a quick change in fucking banking culture?  Take one of those high level pricks and fucking execute them as their punishment.

knukles's picture

Heads on sticks in every board room and regulatory agency... would concentrate the minds of the observers, reminding them of that quaint concept, "Fiduciary Responsibility"

philipat's picture

Of course, it's only the European banks. We all know that the US Banks are all just doing God's work.

ebworthen's picture


On T.V.

Put the head on a pike for 3 months.

Watch all the regular people who have been screwed over by these worthless lumps of flesh curse it and throw something.

max2205's picture

The worse the news the higher we go... Moar bad news, moar POMO


Upswaller's picture

Strongman?  Hayek would be proud.

eatthebanksters's picture

Here's the part I don't get...why would any of the banks fail if the authorities arrested, prosecuted and jailed the crooks that run these banks and replace them with honest operators.  I can only think of two reasons there have been no arrests: 1. the executives of the banks are paying off the right people (look at Corzine) or, 2. even honest bankers can't save the system because its so underwater (so TPTB leave the crooks in charge in exchange for a vow of silence).


Here's my next question:  When goverments manipulate economies, publish disinformation and lie about the facts, what does it mean?


Kyle Bass knows!

disabledvet's picture

We ALL know. This is like the Sean Connery character in The Untouchables: "everyone knows what's going on it's just a question of why anyone would want to do anything about it." The surprise is that Lanny Bruer admitting the truth ("i'm here for the banks") meant he actually lost his job. the fact of the matter is is that it is the MEDIA (save here of course) "that makes it all go away"....freeing Jon Corzine et al "before the authorities are even allowed to ask for honesty." Hell the media BARELY televised the hearings they were (and still are) so terrified. Phone hacking? REALLY? "that's all that's going on here"? More like "where the Phuck is my bank...