This page has been archived and commenting is disabled.
David Faber, Chris Whalen and Euro Banks
I think a lot of Chris Whalen over at Institutional Risk Analytics, so I tuned in CNBC to listen to him this morning. At one point the discussion turned to Europe and Chris made it clear:
David Faber jumped out of his chair and challenged Whalen. He implied that Chris was making things up and spreading rumors. I was a bit surprised. It was if Faber was defending the Euro banks.
Faber is an ass. He doesn’t read newspapers either. Two recent headlines:
My understanding from talking to Europe again the morning is that there is a constant drain of dollar funding from highly rated core European banks. I’m absolutely confirming what Whalen has separately heard.
Behind the problems are US money market funds. They have been reducing their exposure to the big “safe” Euro banks. This process has been ongoing for some time. It's not news at all.
This chart from Fitch shows where the exposures were at the end of June. Note that there is not much outstanding for Spain and Italy, but you can be sure that even those numbers are much lower today. Germany is relatively small; the reason is they don’t pay much for deposit money. But look who is a total of 15% of all US money funds. France.
A US money fund that is either facing redemptions (they are) or who just wanted to reduce Euro bank exposure there is only one place to go; France. And that is what is happening. I have no idea of the volume of this unwind; my instincts tell me it is pretty large. It accelerated today.
It’s only Wednesday. There is a lot of time to worry about this before Friday. Normally big developments in Europe have happened over a weekend. That may not be case this time around. The markets may force the global finance leaders to move more quickly to (try to) stabilize things.
The mechanism is already in place. The US dollar swap agreements can be used at any time. A trillion of liquidity could be provided very quickly. It would require that the central banks of Europe on-lend the liquidity to the commercial banks. That would solve the solvency issue. It would be the equivalent of a Euro TARP. A semi-nationalization of the banks.
I wrote yesterday that I was dumfounded by Bernanke’s decision to extend ZIRP for two years. This unprecedented step has huge risks attached to it. Bernanke is well aware of that. Why did he risk it all? He must have known that there was soon to be a very big sucking noise from Europe. One that would require the USA to lend Europe some very big bucks.
I have some sense of what is going on in the background. Chris Whalen has a much better idea than I. But the big shots at the major banks know exactly what is going on the funding markets. After all, they ARE the funding markets. I can assure you that central bankers and treasury officials are all talking as well.
So if your wondering why stocks are tanking and bonds are soaring it’s because the news on this is already out. It’s just not in print. A thanks to Chris Whalen for putting this so squarely on the table.
.
- advertisements -





It still feels to me like there has to be another shock for BAC, say, to actually plunge over the edge of the cliff.
If they do, then yes--it will be Lehman, or quite possibly worse.
Disturbing to say the least. I'm gettin that Lehman feelin again, and so are the markets.
So jump to bonds, where you are exposed to the currency risk ? Fuck is that a stupid idea.
Just borrow the money for the bonds from Greece, if you can
No currency risk there.
Borrow in Euros and pay back half as much in whatever it is they give out afterwards.
Is there a video link available to this yet?
edit: thanks!
The CNBC segment with Whalen is here http://video.cnbc.com/gallery/?video=3000038440 and here http://video.cnbc.com/gallery/?video=3000038442
This is not surprising. It's the same network that feels the need to put Steve Liesman on air every 15 minutes to defend the Fed.
Tks Mercury. I have tech problems today. You solved one of them.
b
Liquidity is always an illusion.
Michael Milken
when you need it...i agree. having said that if you've been a junk bond king during this cataclysm you've been INCINERATED. Time for the meat eaters to make an appearance.
Read my bio. I worked for him 5 years. Twas liquidity that brought DBL down.
##
David Faber jumped out of his chair and challenged Whalen. He implied that Chris was making things up and spreading rumors. I was a bit surprised. It was if Faber was defending the Euro banks.
Faber is an ass. He doesn’t read newspapers either
##
bruce , pal .
why seeing whalen/faber debate you decided whalen was talking true, and faber is talking false.why ????????
what if mr. whalen is trying to speak down European banks, thus talking his book/ his clients book (aka shorting europe banks) and he actually is ass ?
or might be you're THE ASS TOO..
alx
ps
your reference to WSJ/FinTime is just Laughable .. since when mass media started printing up-today information...
the "free speach indicator." ironic actually when you consider how important freedom was to (some) folks who came to this country. now listen to them: "shut your phucking mouth" is all they have. whatever happened to "put your money where your mouth is"? oh, that's right. this is New York. They're bankrupt. The MEDIA telling people to shut up???!!! YOU SHUT UP! Only here for the money? REALLY? Well..."phuck you very much" then, too. Ridiculous. It makes money for no one of course. Even the entertainment value is wanting. I'm sure WWF would agree as would their advertisers and sponsers.
This has been going on for weeks. Euro inter-bank lending has been getting tighter and tigher. US money funds have been divesting concentrations of Euro bank CP. Granted the papers only see it today but this is why the market has been selling off massively and financials have been getting killed (along with general economic and recovery concerns). Any of them may be talking their books but either Faber has had his head in the sand or is lying. The issues have been plain as day for a couple weeks now.
I put my name on this as well. I said in print that I am hearing from my contacts the same as Whalen. So that is why I know that Whalen is right and Faber is well, just Faber.
The WSJ story is from yesterday. That's not relevant enough for you?
The burden of proof is on Faber not the other way around. Unprofessional--unworthy of being on the air let alone representing the financial media. The fact of the matter is people want answers after the taxpayer gave these worthless fucks trillions. "Go phuck yourself" is the answer? Hmmm. where have i heard that one before. Wait 'till the terror trials start.
Great article, Bruce. These anecdotal tidbits with the accompanying news articles is very helpful.
And you maintain money market funds are not leaving European banks? A few weeks ago I got the latest prospectus on a Fidelity fund (yeah, I know its making zip). The high percentage of notes held by European banks did not still well with me so I moved it all. I'm probably not the only person taking these measures to protect principal.
Well done Cody. I'm not sure this is going to expode so that you would have lost in your MMF. But there may have been some days when it did break the buck (before Uncle Sam steps in) But if what you did lets you sleep better, then it is a smart move.
bk
You can believe who you want to believe. Whalen has been calling the right shots for a long time, to the displeasure cheerleaders for the status quo. It won't be long now before we know for sure who is right and who is talking his book.
Will you come back and tell Bruce if you were wrong?
The gold and silver bullion website has gone bonkers! Prices have gone out of control!
http://www.bulliondirect.com/catalog/home.do
TROLL
Faber reminds me of the rich spoiled kid that doesn't like the light to be shone on anyone else.
Chris Whalen provided top drawer commentary in the interview.
"Faber is an ass" yes, I concur. He is most likely losing his ass and explains his imature action. So, I expect the CNBS crowd to pray to thier Bail Out god the great Bernack to do something to save them from making bad bets as thier stupid guest recogmend each and every hour. You'd think these dumb asses would of been greatful for the 100% gains they saw due to Burnacks dollar cruching vaporized wealt affect and cash in asap before they lose 80% of what they should of not gotten to begin with.
Was on the wires this morning that French banks were selling gold below spot in a desperate attempt to raise cash. Not sure if it's true but sounds plausible.
Central bank swap lines are going to be running hot (as you predicted Bruce) in the very near future.
Here's the follow up on this: http://ftalphaville.ft.com/blog/2011/08/10/649746/theres-a-new-gofo-tabl...
If so, it sure didn't offer any price relief in ol' tradition. Buy the fucking smaller ramp than would have otherwise happened?
Good post.
I'll gladly go back on CNBC to discuss banks. It should be obvious that I don't mind ruffling feathers and I feel I have a pretty firm grasp on what is happening over in Europe.
You always do a great Job Reggie..
I saw faber about 2 to 3 weeks ago challege Jim Rickards on Squawk box on something similar to that exchange this morning he had with Chris..He was wrong then also..
you have been calling em right all along reg.