Will The Super Goldman Mario Brothers Succeed In Covering Up The Latest Italian Bailout Scandal?

Tyler Durden's picture

"And the hits just keep on coming."

It was about a week ago when Bloomberg reported that the world's oldest bank, Sienna's Banca Monte dei Paschi (BMPS) had masked a massive (for its size) loss courtesy of a Deutsche Bank-facilitated derivative transaction dubbed "Project Santoini." The trade, which led to a $2 billion loan from Deutsche Bank in December 2008, helped Monte Paschi mitigate a €367 loss from an older derivative contract with Deutsche Bank. As part of the arrangement, the Italian lender made a losing bet on the value of the country’s government bonds: one wonders if DB made BMPS buy some of its Italian holdings because, as is well-known, it was about this time that the German bank was getting uber bearish on all the periphery (for more on the details of the derivative read here).

This was the first time anyone in the general public had head about "Project Santorini."

Not surprisingly "Santorini" did not help the firm and in a few months later, the firm sought a €1.9 billion bailout from the Italian government - the first of many. Then in 2012, the bank requested more bailout funds after it became the only bank to fail the minimum capital requirement set by European regulators. CEO Fabrizio Viola, 55, requested an additional 500 million euros, bringing the total cost of the bailout to 3.9 billion euros, after the lender said in November that structured financings linked to government securities had soured. It is likely that yet another bailout of BMPS is imminent.

Then yesterday, as we reported, that BMPS had engaged in yet another previously undisclosed derivative trade named "Alexandria", this time with Nomura whose impact we immediately unclear but one which would result in an earnings hit of €220 million. However, while previously BMPS tried to get off the hook and put the blame on Deutsche, in this case Nomura said the bank's Chairman, Giuseppe Mussari, had "fully reviews and approved" the trade.

This was the first time anyone in the general public had head about "Project Alexandria."

And the market finally took notice, maybe because of the news of two previously unknown and losing derivative deals with two separate banks, both of which had supposedly gotten the blessing of the regulator - the Bank of Italy - coming to light in under one week, or maybe because the abovementioned Mussari promptly quit his post as Italy's top banking lobbyist in the aftermath of the disclosures: in all ways analogous to the departure of the US assistant attorney general yesterday in the aftermath of the "Untouchables" Frontline episode. Because if there is a departure, there is fire.

The result: the stock plunged.

Today it's deja vu again, as the news keeps on coming, this time from Reuters, which reported that BMPS could face total losses as much as $1 billion on prior derivatives trades which have only recently been discovered. The shares promptly plunged, and BMPS was halted for trading minutes before the Italian market closed:


From Reuters:

the world's oldest bank has now said it is reviewing three loss-making structured trades related to its Italian sovereign bond holdings which only recently came to light and were negotiated by its previous management.


"Yes. The actualized shortfall is around that amount," the bank's chief executive Fabrizio Viola was quoted by daily newspaper Il Messaggero as saying when asked if 720 million euros was a certain loss rather than simply a maximum risk.


UBS said in a research note on Thursday it was including in its estimates a loss of 720 million euros on the derivative trades, pending more clarity, pushing the full-year expected loss to over 2 billion euros.


"Since the bank's statement spoke of an analysis exclusively of three products, the worry is there could be more and that's spooking the market," one analyst said, asking not to be named.


Viola, who has said the three products were never submitted to the bank's board, told Il Messaggero the management would now open every drawer in the bank for caution's sake. "But I think we're very close to completing the (clean-up) job," he said.


A spokesman for main shareholder Fondazione Monte dei Paschi di Siena told Reuters it did not exclude taking legal action depending on the outcome of analyses under way.


The bank said on Wednesday that 500 million euros requested in extra state aid in November would be enough to absorb a hit on its capital from the structured trades, which were linked to its massive 24 billion-euro Italian government bond portfolio.

Naturally, the implication is that after 4 years of endless bailouts and "recovery", nobody has any clue still just what is on Europe's bank balance sheets. And the further implication is that if BMPS was doing it, everyone else was, of course, doing it, and much more dirty laundry is soon set to be uncovered, especially since the Italian banking business puts simple incest to shame:

The central bank also said the new management, headed by Chairman Alessandro Profumo, had produced documents that had previously been hidden.


Profumo, former CEO at Italy's biggest bank UniCredit, took up his new role at Monte Paschi last April in place of Giuseppe Mussari while Viola took over as CEO in February from Antonio Vigni.


Mussari stepped down as head of Italy's banking association late on Tuesday, although he has denied any wrongdoing.


"You'll have to ask them (the old management). I can only make suppositions. And I prefer to keep them to myself," Viola told Il Messaggero when asked why the Bank of Italy had not been informed.


On Thursday, Italy's Treasury minister Vittorio Grilli said there was no sign that other Italian lenders could face problems similar to those at Monte Paschi.


"It's an isolated case and I don't see any reputational risk for other Italian banks which are much more solid than foreign banks as regards their exposure to derivative," said Giovanni Fiori, professor of accounting and business at Rome's LUISS Guido Carli university.

Of course there will be more "cases" - to assume this is isolated is the height of stupidity and naivete, but what else is an Italian minister to do to preserve the precarious stability attained after months of endless bluster from the ECB that Europe is "fine" -why pull a Juncker and lie of course.

But not even that is the biggest issue. Because should the BMPS dirty laundry be truly exposed for all to see, then the stench will go far. Very far. As far as Frankfurt and the ECB headquarters, because as we first explained yesterday, the person who may well be held accountable for BMPS' endless transgressions is none other than ECB head, and former Goldmanite, and prior head of the Bank of Italy: Mario Draghi.

Recall from Yesterday:

Bank Of Italy Throws The Book At Monte Paschi For "Hiding Derivative Documents"


As we reported previously, the stock of the oldest bank in the world, Italy's venerable Banca Monte Dei Paschi of Siena, was halted in early trade after plunging on news that the bank had engaged in not only the previously reported secret derivative transaction with Deustche Bank to hide losses before a prior government bailout, but yet another derivative transaction, this time with Nomura, signed three years ago and whose intention, ironically, was to reduce 2012 earnings by some €220 million.


What the ultimate purpose of these deals was is still unclear and will likely become apparent eventually, however it will likely require the former Chairman of the bank, Giuseppe Mussari, who served as Chair from 2006 until April 2012, and who officially quit his post as Italy's top banking lobbyist after today's revelations, to testify. One person whom he may testify against is none other than current ECB head Mario Draghi, who just happened to be the head of the Bank of Italy from 2006 to 2011, or the entire period when Monte Paschi was engaging in what increasingly appears to have been fraudulent activity.


But don't worry: just like in the US, nobody of signfiicance is about to go down for this "glitch" which is about to be blamed on some poor mid-level shmuck, and which nobody in the senior level management had any idea about, and certainly not the person who ultimately would have had to give the green light: the current head of the ECB. Sure enough from Bloomberg:


It was all Fabrice Tourre's fault. Or better, yet: an algo did it!




Would it be the same magistrates who are also reviewing Berlusconi for "alleged" sex with minors?

* * *

Sure enough not even 24 hours later, Mario Monti, speaking in Davos, said something that immedately confirmed just what is at issue here:


Translation, it was not the Bank of Italy's fault, and that of its then-head, Mario Drahi, that it failed in supervising the iconic Sienna bank. Because, you see, it is all the evil management's fault. The same "management" whose Chairman just happened to be head of the entire Italian banking lobby. Until yesterday.

And another, less politically correct translation: a (super) Goldman brother is helping another (super) Goldman brother out before the reporters figure out just what happened.

Naturally, since justice no longer exists in a Ponzi empire doomed to less than beautiful deleveraging, there will be no heads rolling over this matter besides those that already have, however one wonders: if Mario Draghi allowed such glaring unreported transactions, whose significance nobody grasped or know about at the time, and whose impact is only now being appreciated, to happen under his nose while in Italy, just what has been happening now that he is head of the biggest central bank in the world?

The other question: if and when BMPS fails, and its shareholders sue the Bank of Italy, will they also sue the man who presided over the Bank of Italy from 2006 until 2011?

And if Monte Paschi is the canary in the 2013 Italian bailout coalmine, who will be next: first in Italy, and then all over Europe?

Because once the other cockroaches, to take literary freedom with mixing and matching metaphors, are exposed - what will happen to all those sworn vows that Europe is now, finally, fixed, uttered most recently by none other than the Super Goldman Mario brothers?

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Say What Again's picture

Let's go to Mandy for some deep insight into this issue

knukles's picture

Excuse me Mandy, but lemme get that pen I dropped down there.
Yes, between your tits.
You didn't see it?
I dropped it a while ago.
Look trust me, I'll get it and it'll all be OK

Hey, come back here!



cifo's picture

Deutsche and Nomura made an easy $2 billion then?

nope-1004's picture

Kinda obvious that all the big banks are insolvent, lying, criminal, and fraudulent.  Problem is that because it is so obvious, these idiots keeps spewing lies that land on numb ears.

I love the smell of insolvency in a rigged market.  Kinda makes me giddy, because when she blows, holy SHEITE!!


macholatte's picture


Updated phraseology for clarity


Market = casino

Derivative trade = bet

Bailout = pimping your whore

the market finally took notice = pit boss is hawking the table

regulator = shill

banking lobbyist = hooker





Zer0head's picture

the history parrot says


arrrrrarrrrk  Cioffi  arrrahhhhchiiiiouiiiiou  Tannin Tannin Cioffi Cioffi  arrahc High-Grade Structured Credit Fund pretty bird iiiiou High-Grade Structured Credit Enhanced Leveraged Fund cracker wheres Cioffi wheres Cioffi hello hello Tannin fukuu fuuku Cioffi arrrrakiiiiou Structured Credit Structured Credit hello goodbye aararrk hellooo Tannin hello Cioffi not guilty good boys not guilty    http://www.nytimes.com/2009/11/11/business/11bear.html?_r=0

Manthong's picture

“the other cockroaches”

Come on now.. This time is different.

Through the miracle of modern enlightened economic policy and financial expertise it is a certitude that a single cockroach can be self-emergent and remain an exception in perpetuity.

Pure Evil's picture



"it is all the evil management's fault"

Heh, heh, ............me likey, ............I'll take credit where credit is due.

fockewulf190's picture

A bit OT, but (in pure Dirty Harry style) "I gots ta know!"  Not that I am really expecting an answer, but just how in the hell do you Tylers at ZH manage to pull all of these shit smelling rabbits out of the world´s financial hat  time after time?  Sure, some of the reports are hard news based, others are opines on freely available data, but often enough, you people are producing some blockbuster reports and blowing the doors off the MSM consistently.

It´s amazing just how fucked up the world really is, and I just want to say thanks for the good work your doing, exposing the financial and political shenanigans, and giving us poor slobs at least some semblance of a chance to learn and prepare. 

walküre's picture

Sure on paper they did. It was probably used to create another derivative of some sort.

Does anyone here really still accept anything at face value these financial "institutions" are offering to us in terms of "balance" sheets?

It's all bogus. Anyone can play with a computer and dream up ficticious accounting bullshit. It didn't begin or end with Enron, Arthur Anderson or Sino Forest.

So much bullshit going on, so little time to cover it all! Time to prepare for the big bang is running out. If I can figure this out here, there really isn't much time left.

If you don't hold it, you don't own it.

resurger's picture

Walkure slow down!

If some CEO's do not know what is a "Discount Window" is, Am sure they know what OBS derivative is and how to profit from it..

Have faith, your money is in safe hands

Fiat Currency's picture

It's a Super Mario Smash Bros match to the death !!

LongSoupLine's picture

It's time for a new methodology to extract the truth.


Line all these fuckers up (GS, DB, ECB, etc) and publicly ask them for full honest details.  If they lie, shoot them in the fucking head.  After the first shot, those pussy-ass ball fuckers will puke information out their ass.


Fuck you bankers.

Buck Johnson's picture

No kidding, I would love to go back to  her.  This is the canary in the coal mine for the EU.  These derivative contracts are starting to surface and trust me I don't even buy the 1 billion loss (more likely to be more).

davidsmith's picture



Naturally, the implication is that after 4 years of endless bailouts and "recovery", nobody has any clue still just what is on Europe's bank balance sheets.



Just don't call them banks.  Problem solved.  Next?

Cdad's picture

Indeed.  They are not banks.  They are a criminal syndicate...and everyone on Earth knows it at this point.

Until such time as this changes, there are no markets, and there will be no capital formation...which oddly enough is what The Street is trying to encourage through market manipulation.

The status quo is fighting for its life now, to be sure.

redpill's picture

What's sad is the dumb sheeple that still believe the lie that preserving these unprosecutable criminal enterprises is actually helping them or our economy.  

Going Loco's picture

I find it truly terrifying that nobody in power cares that the end of capital formation will mean the end of any hope of prosperity. I can only think of two reasons why they do not care: ignorance or duplicity. If it is duplicity then the tinfoil hatters have it correct and they have a plan to emerge from the other side with control over all wealth. But I think that's wrong, and in fact they are truly ignorant of what they are doing. We really could be on the verge of a new dark age, because if real capital formation dies all we are left with is the shell of fiat, and when that fails it will be replaced with dictat, and then down we all go.

Going Loco's picture

On the other hand....

Super Mario Draghi: What's wrong with it?

ZH: I'll tell you what's wrong with it, my lad. 'E's dead, that's what's wrong with it!

SMD: No, no, 'e's uh,...he's resting.

ZH: Look, matey, I know a dead canary when I see one, and I'm looking at one right now.

SMD: No no he's not dead, he's, he's restin'! Remarkable bird, the Monte dei Paschi, idn'it, ay? Beautiful plumage!

ZH: The plumage don't enter into it. It's stone dead.

SMD: Nononono, no, no! 'E's resting!

ZH: All right then, if he's restin', I'll wake him up!

(shouting at the cage)

'Ello, Mister Canary! I've got a lovely fresh cuttle fish for you if you show...(owner hits the cage)

SMD: There, he moved!

ZH: No, he didn't, that was you hitting the cage!

SMD: I never!!

ZH: Yes, you did!

SMD: I never, never did anything...

ZH: (yelling and hitting the cage repeatedly) 'ELLO!!!!! Testing! Testing! Testing! Testing! This is your nine o'clock alarm call! (Takes canary out of the cage and thumps its head on the counter. Throws it up in the air and watches it plummet to the floor.)

ZH: Now that's what I call a dead canary.

SMD: No, no.....No, 'e's stunned!


SMD: Yeah! You stunned him, just as he was wakin' up! Monte dei Paschis stun easily, major.

ZH: Um...now look...now look, mate, I've definitely 'ad enough of this. That canary is definitely deceased, and when I purchased it not 'alf an hour ago, you assured me that its total lack of movement was due to it bein' tired and shagged out following a prolonged squawk.

SMD: Well, he's...he's, ah...probably pining for the money.

ZH: PININ' for the money?!?!?!? What kind of talk is that?, look, why did he fall flat on his back the moment I got 'im home?

SMD: The Monte dei Paschi prefers kippin' on it's back! Remarkable bird, id'nit, squire? Lovely plumage!

ZH: Look, I took the liberty of examining that canary when I got it home, and I discovered the only reason that it had been sitting on its perch in the first place was that it had been NAILED there.


SMD: Well, o'course it was nailed there! If I hadn't nailed that bird down, it would have nuzzled up to those bars, bent 'em apart with its beak, and VOOM! Feeweeweewee!

ZH: "VOOM"?!? Mate, this bird wouldn't "voom" if you put four million volts through it! 'E's bleedin' demised!

SMD: No no! 'E's pining!

ZH: 'E's not pinin'! 'E's passed on! This canary is no more! He has ceased to be! 'E's expired and gone to meet 'is maker! 'E's a stiff! Bereft of life, 'e rests in peace! If you hadn't nailed 'im to the perch 'e'd be pushing up the daisies! 'Is metabolic processes are now 'istory! 'E's off the twig! 'E's kicked the bucket, 'e's shuffled off 'is mortal coil, run down the curtain and joined the bleedin' choir invisibile!! THIS IS AN EX-CANARY!!

lincolnsteffens's picture

Thank you X 5. That was my first good laugh of the day! You should learn to draw so you could publish a new weekly cartoon about the Ponzi Kleptos. It would be slow to catch on but eventually the great unwashed sheeple masses would begin to understand your humor.

Punct's picture

It's rather funny that we are complaining about China and US that they're cooking the books when in fact everybody does it. And if everybody does it, why not make it legal? Fuck the world, fuck the economy, fuck the taxpayers? Right?

knukles's picture

"Cooking the books"
Used to be an expression of exceptional evil, bad, illegal practces which we now find to be an everyday business as normal part of Our Modern Times.

fonzannoon's picture

London Whale meets Italian Scungilli.


philosophers bone's picture

Audit Committee to CFO:  Excuse me, we asked for the books to be cooked well done, these are only medium.  This is going to effect your tip you know.

AGuy's picture

You've got it all wrong.  It's "Coooking the Books" when you, I, or  small business do it. When Gov't's or big banks do it, its just reconcilation!

Bam_Man's picture

With 55-60% youth unemployment, what could possibly go wrong?

Punct's picture

Anything but a crash

toothpicker's picture

What's wrong with food stamps?

williambanzai7's picture

Perfumo, Monty Python bank, you can't make this shit up!

FinalCollapse's picture

Super Marios will sweep all cockroaches under the fridge. All is good in Europe /sarc

Big Corked Boots's picture

Project Santorini?

Santorini was a volcano that blew up like 3500 years ago. Like these guys don't know that? WTF? Like if I named my barn Project Shitpile I would expect there to be a bar of gold at the bottom of one of the stalls?

youngman's picture

Its a real big Lemon too...kind of fitting

walküre's picture

Google some images of Santorini. The island is mostly known for its houses that have been "white washed".

Santorini is synonymous for white washing, cleaning, laundering etc ...


BandGap's picture

Fabio Viola = Disappearing money Voila!

Super Broccoli's picture

Italians can't handle money ! you must be one hell of an idiot to beleive those lazy fuckers can do anything good in economy, maths, ingeneering, war, banking or anything else beside "dolce vita" !!!!!

chubbyjjfong's picture

Italians..Yeah.. money not so good, but I admire what they can do with women.

Cursive's picture

Said it before, I'll say it again. Draghi looks like a Peter Sellers character.  I wouldn't buy a used moped from this guy.  I wouldn't sit next to this guy if the only other open seat on the car was next to Lady Gaga.  Dude is just deviant and evil looking.

MiltonFriedmansNightmare's picture

Dude is the bankster class personified.

fonzannoon's picture

he is a serial cropduster Cursive. I know one when i see one.

walküre's picture

No, what you do if you had the opportunity to sit next to that guy is you make sure nobody is watching you .. then you punch him in the face and tell him to stop fucking around or there's more where that came from and THEN you find the seat next to Lady Gaga.

fonzannoon's picture

Ha! Good one. I would probably just stuff my mouth with food and roll my eyes. I've seen that work elsewhere.

jubber's picture

Interesting GS have been down why every other Bank has been up, wonder if they have their name on the mysterious 3rd deal?

From Germany With Love's picture

The question is this: could this be a plot to remove Draghi? Not that I am a fan of his leadership of the ECB...
nor of the GS spider-web... but... it's conceivable.

caimen garou's picture

conceivable yes, but the anti-christ Draghi can't be removed by mortals.

falak pema's picture

I didn't get any bonus points for saying this : 3180249

Monti n Monti is the current Italian strategy; better than Berlu but so surrogate to the Oligarchy! 

Contra_Man's picture

The next question is this: Who was the counterparty who once was made 100% good for collateral, but now has found out its 100% gone bad?

NotApplicable's picture

You mean it's not all of them?

You'll have to be more specific.

fonzannoon's picture

i wonder if the bernak will orchestrate his finest ramp to the close yet today. i have faith in him.

rsnoble's picture

Off topic but oh look, the US clowns are pounding the table again today about that evil Iran.  When there's countries like N Korea that are test firing rockets and coming right out and saying it's for the US and then we do nothing about and go after those evil bastards in Iran..........these storylines are just all BS.  Their gona end up getting us in a real war before long you watch.