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Global Banking Crisis - How & Why YOU Will Get "Cyprus'd" As This Bank Scrambled For Capital!!!
It is my opinion that banks worldwide are simply not safe anymore, and we are on the precipice of a banking crisis that will make the Lehman fiasco look like a test run. For one, interest rates will definitely have to rise. Yes, I know Bernanke is running ZIRP, the ECB is QE to infinity and beyond, yada, yada... But these entities are not the end all and be all for market rates. They can manipulate rates, but they can't ultimately control them for the long term. After 6 years, it's been long term... With banks failing and taking depositor's and bondholder's funds with them, there's simply not enough people stupid enough to accept .7% returns in exchange for the very likely possibility of losing a large chunk of (the majority of, or possibly all of) their principal to go around!!! This central bank Ponzi scheme of printing more money to pay for the debt that you couldn't afford to pay back because you didn't have the money relies on the "Greater Fool Theory". Common sense dictates that this theory is predicated on an ample supply of "Greater Fools". What you will read below should shake the foundations of your belief in the EU banking system, and hopefully will start a dearth in "Greater Fools"! Even more alarming, it actually gets worse from here. Oh yeah, if you have believe that the information below actually identifies a gross misrepresentation of fact, omission or outright fraud, simply contact the SEC and let them know that Reggie Middleton suggested they look into it. You can actually use this form to convery my message.
I have compiled a list of at least 6 banks which I feel are at risk of being Cyprus'd, with more being added weekly. The first bank report, whose subject is still steadily accepting deposits at measly interest rates, is available for download right now for all paying BoomBustBlog subscribers (click here to subscribe), reference
EU Bank Capital Confusion, Potential Failure. Those of you who actually follow this banking stuff may very well be shocked at how bold the actions described therein actually are!
First Off Let's Make Bank Collapse Real...
To begin with, let's make this Cyprus thing real, by showing a live example of what happens when to a real small business that had the gall to bank with Laikie Bank, from the Bitcoin forum I excerpt a post that puts things into perspective, re: bank account confiscation:
Most of the circulating assets on our business Current Account are blocked.
Over 700k of expropriated money will be used to repay country's debt. Probably we will get back about 20% of this amount in 6-7 years.
I'm not Russian oligarch, but just European medium size IT business. Thousands of other companies around Cyprus have the same situation.
The business is definitely ruined, all Cypriot workers to be fired.
We are moving to small Caribbean country where authorities have more respect to people's assets. Also we are thinking about using Bitcoin to pay wages and for payments between our partners.
Special thanks to:
- Jeroen Dijsselbloem
- Angela Merkel
- Manuel Barroso
- the rest of officials of "European Comission"
Laiki Bank has offered details...
Next, Let's Realize That Cyprus Is Not A "Special Case", It Is Like The Template For Future Actions
Just the fear of another wave of bank collapse has government officials and regulators in fear. Why are they afraid? I made the cause of such fear clear to all as the keynote speaker at the ING Valuation Conference in Amsterdam.
With the knowledge contained in the video above, it's not hard to see the Infection spreads to North America as The Canadian Government Offers "Bail-In" Regime, Prepares For The Confiscation Of Bank Deposits To Bail Out Banks! Hold on, before you start worrying about your Canadian bank, you should be aware that the EU banks are still much, much, much worse off. Let's forget Cyprus for a minute and look deeper into the EU, into a larger country with more globally interconnected banks.
On Thursday, 29 April 2010 I warned my subscribers to Beware of the Potential Irish Ponzi Scheme! Shortly thereafter, the BoomBustBlog Irish Research Became Reality. That same month, I warned again with the post, "Many Institutions Believe Ireland To Be A Model of Austerity Implementation But the Facts Beg to Differ!" Five months later, I went back at Ireland again with "If the World Knew What BoomBustBlogger's Know, Would Ireland Default Today?" This post was the clincher, to wit:
The Farce!
The government has set up an asset management agency – NAMA, which will buy toxic assets from banks at a discount and will in turn issue government-guaranteed securities. NAMA was expected to buy about $81 billion of toxic assets at a price of $43 billion and issue government-guaranteed securities in return. Since these securities have collateral backing and are likely to be repaid through the pay back of underlying loans, these securities are considered off-balance-sheet and are not part of general government debt by Eurostat. According to Davy research, while the projected gross government debt excluding the impact of promissory notes and NAMA bonds is 84.8% in 2012, including the impact of promissory notes and NAMA bonds (in other words, including the truth), the gross government debt can rise to 117.4% of GDP. This either competes with or bests Greece, 2010's poster child of flagrant spending.
This means that the teacher has created a very harsh austerity plan for its "learner"/student/tax paying populace that has materially lowered the standard of living - all based upon numbers that were bogus to begin with. In other words, it ain't gonna work!
Well, today we have proof and that proof will likely leave some EU bank despositors "Cyprus'd", and I don't mean just those in Cyprus either.
Introduction and Background
In 2007 Ireland had significant cross border exposure to UK and US banks through derivatives and property products. As I warned in 2007, the real estate bubble in the the US/UK popped in 2008, sending pathogenic contagion straight through the Irish banking system. The entire banking system started collapsing. On February 15, 2008, Ireland took extraordinary measures (which we will explore in depth a little later on) to mitigate said collapse, measures that many a layperson would deem misleading, if not fraudulent. RBS (Royal Bank of Scotland, one of the largest financial institutions in the countries of Ireland and the UK) was effectively nationalized by the UK and a bad bank was formed to purchase bad debt/products from the Zombie Irish banks in exchange for government bonds, backed by a country that just simply couldn't afford it.
Following my warning in February of 2008, Lehman filed bankruptcy in September sending an additional set of contagion shock through Ireland and its banking system, causing Ireland to issues bonds and further indebt itself to save its Zombie banks – again! This time through blanket bank guarantees backed by the full faith of the government.
In September of 2010, a large swath of said government guarantees for the banks were about to expire. Reference this excerpt from the book “Zombie Banks: How Broken Banks and Debtor Nations Are Crippling the Global Economy”:
In September 2010, some of Ireland's government guarantees for bank debts were about to expire, which put U.S. Treasury officials on edge. If the guarantee wasn't renewed, the banks would likely default on their bonds, triggering the next event in line: a slew of credit default swap (CDS) contracts on Irish banks' debt. U.S. Treasury officials had reason to worry - the names backing those contracts were the largest U .S. banks, and they could end up paying billions in case of default. Any more weight on U.S. banks could be a tipping point to collapse. Treasury officials made inquiries to their counterparts at the Irish finance ministry asking about the course of action the country was planning to take and indicated their concern about possible default and its CDS repercussions. A year after having issued blanket guarantees on the banks' liabilities the Irish government once again didn't dare let the bank fail. Instead it ended up asking for financial assistance from the European Union (EU) and the International Monetary Fund (IIMF): the country had been pushed to the brink of collapse.
The next few posts will document details the financial shenanigans played by several EU banks (Ireland included), among others, to the tune of over €40 billion. This money was essentially double counted, or to put more simply, at least one version of it simply doesn't exist on someone’s balance sheet.
For now, let’s focus on Ireland and the Irish banks.
Anglo Irish Bank
Anglo Irish Bank which subsequently became Irish Bank Resolution Corporation (IBRC), was recently liquidated by the Irish Government. Included below are three documents executed by this bank. The first two are charge documents that the bank entered into on the 15th of February, 2008. These charges are in favor of the Central Bank and Financial Services Authority of Ireland (the ECB). They are floating charges over Secured Obligations (repo agreements) and the banks payment module account.
Anglo Irish Bank Charge Doc no2 Page 1
Anglo Irish Bank Charge Doc no2 Page 2
Anglo Irish Bank charge doc Page 1
Anglo Irish Bank charge doc Page 2
So, What's So Special About These Documents???
The reasons given for the floating charges are the banks participation in Target 2, which is a interbank, cross-border EU real-time payment system. A former Group Chief Auditor of one of Ireland’s largest banks who was part of the team who conducted the stress testing for the European Banking Authority was allegedly quite shocked to see the various charge documents herein. He informed BoomBustBlog consultants that these charge documents were not included in the stress testing. For those who don’t get the gravity of this statement – the previous encumbering of the Irish bank’s assets were ignored or not known by those who conducted the stress testing for the banks. What makes things even worse was despite the fact the bank’s assets were double counted, allowing them to pass the stress tests, they promptly started failing post stress test… And I do mean promptly, as in within months.
The chief auditor was also allegedly able to inform that the reasons given for the purpose of the charges was a red herring. He allegedly advised that Target 2 is only a payment system and the description stated was a complete misrepresentation of the true reasons.
The real reasons for the charges were because the bank was completely bust. The bank had already previously entered into repo transactions (secured obligations) with the Irish Central Bank (ECB) and had run out of money. The Irish Central Bank gave further funding using these charge documents. The share price of Anglo in February 2008 was still quite high but started to collapse over the coming months. These charge documents are not disclosed in the Annual Accounts (the EU version of an annual report) for the 31st of March, 2008.
Questions also arise as to the validity of the asset transfer, the legality of Anglo Irish Bank and/or the ECB entering into repo agreements, and the activity of Anglo Irish Bank in regards to its trading activity… If a charge was given over ALL of Anglo Irish's assets, then exactly how did it legally engage in the MBS, derivative and trading activity? Underlying assets must be pledged to a trust in order to create many derivative structures, including MBS, but if there's a negative pledge clause in the charge and the charge covers nearly everything, then those assets don't truly belong to said trust, do they? You can imagine how far one can go with this line of thinking, no?
If you were an investor, shareholder, bondholder or regulator the information above was critical information - EXTREMELY CRITICAL INFORMATION! Anglo ADR's were also traded through brokers in the USA. I am sure that ADR holders would have liked to have been aware of this information, as well as the SEC.
I see a number of avenues which could be worth pursuing, including terms of recompense for junior bondholders who got hosed, equity shareholders who lost capital, counterparties, etc. This is, to my lay ears, tantamount to blatant fraud. Of course, I’m not an international banking lawyer, so what do I know??? Yet, I have only touched on some of the issues. There’s a lot more to come.
In relation to Anglo Irish Bank (IBRC), the 2008 charge document states that the charge covers ‘all present and future liabilities whatsoever of the company, to the Central Bank of Ireland (ECB).’ But there is no disclosure of this in the Anglo 2008 accounts (annual report). This appears to illustrate concealment of the true facts. If these charge documents have not been overridden, then a massive amount of assets in the bank have been over-encumbered. Even if the charges have been overridden in some form or fashion, the mere omission of their existence is a misrepresentation of the banks financial condition, particularly in the stress testing of the banks and regulatory financial reporting (ex. SEC).
If you believe that the information above actually identifies a gross misrepresentation of fact, omission or outright fraud, simply contact the SEC and let them know that Reggie Middleton suggested they look into it. You can actually use this form to convey my message.
As a reminder for those who wish to ignore my banking calls as a frivolous episode of Chicken Little, BoomBustBlog is the place that was the first to reveal:
- The collapse of Bear Stearns in January 2008 (2 months before Bear Stearns fell, while trading in the $100s and still had buy ratings and investment grade AA or better from the ratings agencies): Is this the Breaking of the Bear?
- The warning of Lehman Brothers before anyone had a clue!!! (February through May 2008): Is Lehman really a lemming in disguise? Thursday, February 21st, 2008 | Web chatter on Lehman Brothers Sunday, March 16th, 2008 (It would appear that Lehman’s hedges are paying off for them. The have the most CMBS and RMBS as a percent of tangible equity on the street following BSC.
- The collapse of the regional banks (32 of them, actually) in May 2008: As I see it, these 32 banks and thrifts are in deep doo-doo! as well as the fall of Countrywide and Washington Mutual
- The collapse of the monoline insurers, Ambac and MBIA in late 2007 & 2008: A Super Scary Halloween Tale of 104 Basis Points Pt I & II, by Reggie Middleton, Welcome to the World of Dr. FrankenFinance! and Ambac is Effectively Insolvent & Will See More than $8 Billion of Losses with Just a $2.26 Billion
- The ENTIRE Pan-European Sovereign Debt Crisis (potentially soon to be the Global Sovereign Debt Crisis) starting in January of 2009 and explicit detail as of January 2010: The Pan-European Sovereign Debt Crisis
- Ireland austerity and the disguised sink hole of debt and non-performing assets that is the Irish banking system: I Suggest Those That Dislike Hearing “I Told You So” Divest from Western and Southern European Debt, It’ll Get Worse Before It Get’s Better!
The Banks Are Bigger Than Many of the Sovereigns
Definitions:
Charge
The document evidencing mortgage security required by Crown Law (law derived from English law). A Fixed Charge refers to a defined set of assets and is usually registered. A Floating Charge refers to other assets which change from time to time (ie. cash, inventory, etc.), which become a Fixed Charge after a default.
Repurchase Agreement
A repurchase agreement, also known as a repo, RP, or sale and repurchase agreement, is the sale of securities together with an agreement for the seller to buy back the securities at a later date. The repurchase price should be greater than the original sale price, the difference effectively representing interest, sometimes called the repo rate. The party that originally buys the securities effectively acts as a lender. The original seller is effectively acting as aborrower, using their security as collateral for a secured cash loan at a fixed rate of interest.
A repo is equivalent to a spot sale combined with a forward contract. The spot sale results in transfer of money to the borrower in exchange for legal transfer of the security to the lender, while the forward contract ensures repayment of the loan to the lender and return of the collateral of the borrower. The difference between the forward price and the spot price is effectively the interest on the loan, while the settlement date of the forward contract is the maturity date of the loan.
Target 2
TARGET 2 is an interbank payment system for the real-time processing of cross-border transfers throughout the European Union. TARGET2 replaced TARGET (Trans-European Automated Real-time Gross Settlement Express Transfer System) in November 2007.
Next up is a bank that is still steadily accepting deposits at a steady clip, paying ungodly low interest rates, and setting itself up to potentially get "Cyprus'd". Paying subscribers can download the report now, before capital controls are set in - see
EU Bank Capital Confusion, Potential Failure. Everybody else can subscribe or wait until either I make it public or the respective government does the Cyprus Thang! Yes it pays to be a BoomBustBlog member (click here to subscribe).
I will start posting a list of definitive bank names that I have apparently caught in some amazingly duplicitous and misleading capital schemes, at least as it appears to me and my staff. I know I wouldn't have MY money in them, particularly after reading the info above.
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Reggie you know your stuff. The probkem is that the suckers out there still think it can't happen to them.
repo's are big because that's the ECB and the various "Central Banks of Europe" that purchase this crap. this is NOT news...the USA has been doing it since it's founding...and of course the problem is cured simply by a MASSIVE devaluation and the inflation (hopefully temporary) that results from it. the solution is always the same: "brand new Franklins roaring out of the energy patch" only this time that "patch" is the entirety of the Upper Mid-west...one of the most productive places on the entire earth. i can't speak to the safety and soundness of the various financial institutions in the world as it's ridiculous to call anyone an expert on these things. having said that the epic play by John Paulson having gone all in on the biggest housing bust in the history of the Western World "and beyond" was to then go LONG the banks which everyone was shorting "to oblivion." this was truly one of the great trades in all of history...something he aimed for all his life...and "he got it." Europe outside of Sweden really looks like it's going to blow to me...but hey, we ain't living in heaven over here either so who am i to know. the "Greek vortex" has now been responded to. We'll have to wait to see what the result is. it is possible this whole thing "blows over" of course...that is the ideal solution. but i do agree this is a HUGE problem that can only be dealt with by the markets themselves as the Governments themselves...here, there, everywhere...have their hands full.
I don't see how this is not going to develope into some asshole, namely the US, deciding to drop big bombs and just really fk things up even worse than they will get.
As far as the US goes........they need the guns before they Cyprus you. Either that or the theory that they want to start a civil war and use that as an excuse of the banking failures isn't sounding too far fetched.
Oh well fk it. Stock up on ammo, spam and banana chips and hope for the best. Fuck praying if Jesus did show up they'd just throw his ass in jail.
One major prepper out here in the country who is a retired army major has been warning me for years suddenly has a for sale sign in his front yard and his whole family is gone. I'm not going anywhere. If I were it would be out of the US and the rest of the family won't go and still think im nuts.
Not the same in the US of A. If Cyprus had a central bank that could issue new currency (cough, Fed, cough) this wouldn't have happened. They would print some money, and move on to inflation. When this happens in the US, it will be more printing, not haircuts. You haircut will be through inflation, and most people (in america) are too stupid to understand that.
Its going down. Maybe on purpose and maybe not, but they understand that to have it pop all at once will cost them their heads, so...they just let it slow burn. A melt down, where incrementally we adjust our perspectives. Growing acceptance of the downward spiral, the inevitability of it all soaking in. We will ultimately be going after our neighbors before we go after those truely responsible, because we will ultimately be fighting over resources. This is why Greece and then Cyprus. Start small and continue to lower expectations. The southern Euro countries will ultimately be willing to settle for whatever they are "given". Sure, there will be some protests, but ultimately they will go for the handout. They have to. What else do they have. They are DEPENDENTS. America is on the same path, but as the largest we will have to go last. Maybe a little time left to get our affairs in order.
Those are pretty much my thoughts. My concern is that things will get out of hand during the so-called slow burn you mention. A bunch of crazy assholes with 1000's of nukes wanting to come out on top. Who knows. I think prepping is a good idea but the idea of thinking you are safe because of it is insane.
A good short and entertaining clip:
http://www.youtube.com/watch?v=DlMZgIyX0Rs
Agreed. I'm afraid that their arrogance will lead them to believe they can control it, but a crash landing is the admission that it is out of control. A little turbulence here, a little wing dip there and things can go boom in a hurry!
If this is is the case, Why did my overdraft protection kick in?
<< For one, interest rates will definitely have to rise.>>
This should do wonders for house prices.
A list of the 12 weakest big banks in the world
http://www.moneyandmarkets.com/media/images/mam/2684/chart1s.JPG
Notice that 3 of them are in the UK and 11 are in Europe.
"A list of the 12 weakest big banks in the world. Notice that 3 of them are in the UK and 11 are in Europe."
Some are so weak that 11+3 of them only adds up to 12!
ratings without the derivative sauce included; as that toxic and unknown sauce of Coca Cola type formula would make the big five of USA top contenders as well!
If you cant keep your money in any bank, having everything in bullion is too risky (if govt initiate some sort of controls, taxes etc) and cash under the bed..... shares will crash and give you a big hair cut... commercial and residential properties will devalue. Buy oil, wheat, rice....store it in your back yard doesn't sound too practicle. Australian bonds?
Ultimately a 'safe' bank is needed somewhere?
I have one third cash, one third gold/silver and one third property (with some silver / gold mining shares).
Have my cash in an Australian bank..but you have to wonder of their linkages to the rest of the world.
No escape..
We are all in it up to our necks. That's why the power of delusion is so strong. Reality is too painful to face. We are trapped..there is no way out!
Gees, and I thought they should be scared of me.
Thanks Reggie.
digitlman,
Agree 100%. This in real in-depth stuff and Reggie has posted all this on ZH free.
Thanks Reggie.
DavidC