Bank Of Italy Caught Lying About Imploding Monte Paschi, Counters With Even More Ridiculous Lies

Tyler Durden's picture

One half of the reason why the "market" has finally been reacquainted with gravity is its realization that the previously reported Spanish kickback scandal, which incidentally has been known for over two weeks to most if not the algos that push stocks higher, is refusing to go away. As El Pais summarized below, the graft revealed in this ongoing political fiasco threatens to take down everyone in the Spanish ruling PP, from PM Rajoy, who received more than €300,000 over the years, and on to the lowest rungs of political corruption.

The other half of the reason for today's Italian stock market collapse is the well-known to our readers scandal involving Italian bank Monte Paschi, which also refuses to go away due to its massive political implications three weeks ahead of the Italian elections. Yet the reason why little if anything has been mentioned about what may soon be a nationalization of the third largest (and just as insolvent) Italian bank in the mainstream US press is the resulting humiliation for the current ECB head, ex-Goldmanite Mario Draghi, who has been aggressively pushing to become a bank supervisor of all European banks as ECB head, yet with every day new revelations emerge about how epically he failed to supervise a major Italian bank right under his nose as head of the Bank of Italy.

The latest in this developing scnadal which not even the market can ignore any more comes once more from the Bank of Italy, which has once more changed its story. Recall that as recently as January 23 Mario Monti vowed in Davos that "nobody knew nuthin":


This was a sentiment that was vouched by the Bank of Italy itself, which pled complete ignorance and accused then-BMPS management of everything.

Turns out Monti and the Bank of Italy both lied.

And now that it has to change its story once more, it is instead blaming the fact that it had no authority to act over what has emerged its own inspectors discovered were derivative irregularities as early as mid-2010. As Reuters summarizes, what we first said two weeks ago: "The roots of the corruption and derivatives scandal at Monte dei Paschi all stem back to when Draghi, now president of the European Central Bank, was chief of Italy's central bank from 2006 to 2011."

So now that the Bank of Italy can no longer plead ignorance, what is the defense? Why inability to actually do anything.

From Reuters:

The Bank of Italy (BoI) says it did everything in its powers to oversee Monte Paschi, including forcing it to raise new capital and applying behind the scenes pressure to force out its executives, who left last year.


Last month, the BoI approved 3.9 billion euros ($5.3 billion) of state loans needed by the ailing Siena bank to shore up its capital.


But the BoI, under Draghi's leadership, is under fire for not acting faster to sanction those managers and make its doubts public even though its inspectors had spotted the derivatives contracts at the center of the scandal back in mid-2010.


However, the senior BoI source stressed that the decision on launching a sanctions procedure, involving publicly blaming and fining bank officials, does not depend on the BoI governor and its five member executive board, but on the bank's inspectors and then a series of lower committees.


"The inspectors are the only people responsible for initiating a sanctions procedure so if they don't find anything in the course of their inspection then it's not possible for the top management to start the process," said the source, who asked not to be named.


"We instruct the staff to be absolutely free from any influence from us, to present exactly the case, so if a sanction is decided then they present a proposal to the board and the board decides on the actual implementation of the sanctions."


In the summer of 2010 BoI inspectors uncovered two opaque derivatives contracts that could cost Monte Paschi 720 million euros and are now at the center of fraud investigations, yet did not propose that sanctions be launched.


That decision "had nothing to do with the board," the official said, though he added that Draghi was shown the inspectors report.


He declined to say whether he thought it was a good decision not to propose sanctions at that time.

Why was the BoI caught lying? Same as every other time: a media leak.

That 2010 inspectors' report was leaked to the press and sparked much of the current criticism of the BoI because the sharp criticisms of Monte Paschi's accounts and operations made by the inspectors were not followed by pressing action.


The BoI did not summon Monte Paschi's executives, now under criminal investigation, until November 2011, after Draghi had left to head the ECB. It did not launch a sanctions procedure - which is still not completed - until the following year, after the officials had left the bank.

And the piece de resistance:

"We may perhaps appear to be slow, but I think we are deliberate," the official said. He also stressed that although Monte Paschi failed to comply with the BoI's requests, the wrongdoing was already done at the time of the 2010 inspection. "What took place afterwards was to try to disguise the losses but it wasn't a recurrent or growing pattern of misbehaving," he said.

Deliberate indeed: very deliberate in covering up fraud, and pretending the situation is fixed when in reality anyone with half a brain now realizes that despite the endless pumping of liquidity by the same ECB that Mario Draghi is now in charge of, things on Italian bank balance sheets are uglier than ever, and just getting worse by the day.

This comes from the people who continue lying every single day, telling any idiot who still believes them that "Europe is fixed."

And the worst is that nobody knows just which other Italian (at first, at least) will blow up next, certainly not Italian shareholders which just dumped local stocks with a vigor not seen since the July near-bankruptcy of Spain, resulting in the Italian stock market plunging 4% or the most in six months.

More on this scandal here, here and here.

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IridiumRebel's picture

I no know nothing. I just a make a da pizza pies!

foodstampbarry's picture

Whatsa matter you huh? I lie, no big deal. I make a myself rich. Pizza pies for everyone of my friends!

francis_sawyer's picture

It's all funny when you crack jokes about Italians...


Try doing some yiddish stand up comedy & see how funny the deep thinkers on ZH think it is...


Muppet Pimp's picture

It is almost as if a bankster oligarchy accountable to no one runs the world's central banks.  Time to walk the plank Draghi, there is another Goldman partner jumping on the coporate GulfStream, on his way to claim your position, and of course your old job is available at Goldman.  Revolving Door bitchez...

redpill's picture

If at first they don't believe you, lie bigger.

Looney's picture

Investigating Monte Paschi for fraud?

How about investigating the Bank of Italy AND its Draghi-Queen for the Bank Stress Test fraud. Remember how all Italian banks passed those with flying colors? ;-)


Al Gorerhythm's picture

When it becomes serious, you have to lie.

Colonel Klink's picture

Yep!  And in Italian tradition, it's bunga bunga in-you-endo!


Mr Lennon Hendrix's picture

I know when a gold starts moving higher it won't a stop.

youngman's picture






( That is my Best Harpo imitation)

FL_Conservative's picture

Mario Draghi channels his inner Sgt. Schultz.

Colonel Klink's picture

He's supposed to be guarding the prisoners!



Buck Johnson's picture

More banks will be outed real soon in Italy.

alien-IQ's picture

It would be news if a bank was caught telling the truth. A bank lying can hardly be considered news. That happens 24/7.

Cognitive Dissonance's picture

Most lies are actually supporting lies, there to buttress prior lies which were also there to.........well, you get the picture.

You just can't trust your lying lies. :)

falak pema's picture

 "lies" ike butterflies, fly in droves, but without an "f". 

"f" word ruins the lies as it does the "lays"...lay lady lay  can be sung as lie lady lie!

While  if you add an "f" for good effect it reads  : flay lady flay! Now that sounds really kinky! 

"F" to buttress lies, gives butt fress if it slips its place. 

Would you have your butt fressed or your lies to lie still? 

Looney's picture

Go "uck" yourself! (just kidding, could not resist)   ;-)


NoDebt's picture

This is stage 2 of basic crisis management.  For those unaware of the rules of crisis management or having never heard me recite them here on ZH before, here they are:

1.  Deny there is a problem.  (Done as of 1/23 on the initial story)

2.  Admit there is a problem but claim there is nothing you can do about it.  (Done as of today)

3.  Admit you could have done something about it, but it's too late now.  (To come later)

Crisis successfully managed.

EscapeKey's picture


A new CEO was hired to replace an outgoing CEO.  The outgoing CEO met with the incoming CEO for an exit interview.  During the discussion, the departing CEO stated he had placed 3 very important letters in his drawer just as his predecessor had done for him.  He explained that the new CEO would find opening the letters in order most useful when a serious event took place.  He also stated the letters left for him had really helped him over his tenure.
Several months passed before a major event came up.  The new CEO now remembered the letters and noticed they were numbered 1, 2, and 3. The former CEO had instructed they be opened in order for maximal benefit.  The new CEO opened letter #1 and the paper inside had the words “blame it on your predecessor.”  The new CEO did as the letter stated and amazingly he was able to avert serious problems and keep his job.
Several months passed before the next serious event took place.  This one was growing in magnitude and things were starting to get ugly at the company.  There were even calls for the CEO to step down.  In desperation, the CEO opened the drawer and pulled out letter #2.  With great fear he, opened it carefully to read the word “reorganize.”  He followed the instructions and just as before he was saved. The whole company quieted down and went back to business as usual.
After about a year, a third serious event took place and it was much worse than the rest.  The CEO knew how to get out of the mess because he had a third letter left to open.  With a smile he reached for the letter #3 and opened it to read “write 3 letters.”


Cognitive Dissonance's picture

Always enjoy that story when someone posts it up again.

Wash, rinse, and then repeat for maximum effect.

AbbeBrel's picture

And then in the settlement, you hear the "admission":

 We didn't do it, and we will never do it again.

eatthebanksters's picture

Draghi shit...

Neethgie's picture

i loved it when draghi said "i will do whatever it takes" its looking more and more like he meant "i will say whatever it takes"

ahh well worked for a while

Mr Lennon Hendrix's picture

5% - 10% correction in US/European stocks and the euro into March and then Bernanke announces he is buying $100B bonds/month and Draghi anounces hefound a majical unicorn lair that will invest in Euro sovereigns.

Then we get another crack up boom, currencies devalue even further, and we are all told everything is fine for a few months.

Wash, rinse, repeat until the next collapse.

dick cheneys ghost's picture

How many lies does it take to maintain a global 'debt money' ponzi scheme?

Tsar Pointless's picture

I don't know, but I think we're finding out that there will be more than one.

Colonel Klink's picture

Ahhhh, they're printing them one at a time in different denominations!

Bam_Man's picture

Non è un problema. Non fa differenza. Non preoccupi. Tutto sta bene!

SteelRust's picture

Ok, at least say it in a correct way: "Non si preoccupi. Tutto va bene." ;-D

Richard Head's picture

"When it gets serious, you have to lie."


Dr. Engali's picture

In a world of no accountability Mario Draghi will be rewarded handsomely for his failures.

NoDebt's picture

Doc, I think he's actually going to take a hit on this one.  Not a "go to jail/suffer a lawsuit" kind of hit- that's just crazy talk, of course.  But in a political/power sense.  I think he might be on his way to being "damaged goods". 

If he already HAD the reigns at the new bank oversight cabal inside the EU, it's unlikely this would get him thrown out.  But unlike Turbo Timmy G, this is bad stuff hitting BEFORE he's in that position.  All they had on Timmy prior to taking up at Treasury was that he cheated on his own taxes..... and who doesn't do that?  It's expected.  Covering up for banking fraud on a large scale is still just about serious enough to prevent you from being appointed to head up a continent-wide banking commission, I think.  Just about.  I could be, and usually am, wrong, though.


Vince Clortho's picture

Right you are.  The Ponzi is oozing with cracks and fissures, kinda like a dam about to burst.  The boys on top need someone who can walk into a news conference and with a straight face, announce he will be taking steps to make things better.  They need to do this repeatedly.  Draghi and Bernanke fit the bill.  And yes, they are handsomely rewarded.

Jayda1850's picture

The Bank of Italy (BoI) says it did everything in its powers to oversee Monte Paschi, including forcing it to raise new capital and applying behind the scenes pressure to force out its executives, who left last year.

 applying behind the scenes pressure? I'd hate to see if they really wanted to get serious about overseeing these banks, free hookers and blow for all.

akarc's picture

If you keep doing what you have always done......

wait a second

If you keep believing what you have always believed....

wait a second

If you keep listening to you have always listened to.....

wait a second

ah fuck it 


Liitehaus's picture

Could we substitute the name Timmy G. for Draghi, and repeat the story as taking place in NYC???

Vince Clortho's picture

Is there anyone on the planet that takes Timmy seriously?

For some unfathomable reason, Draghi has enough credibility to lie his ass off  and not be grabbed by an angry mob.

The Axe's picture

Is Monti also chinesse?   cause there is a huge unwind in FTSE China   today to!!!!

Goldenballs's picture

The Truth is something so Dangerous that it cannot be uttered - ever,ever,ever,ever,ever (until infinity in banking circles).If infinity occurs make sure you are a}Retired b)Deaf c)Blind d)Dislexic e)on long term sick,so sick you cannot attend any investigation,court of law,etc. If none of these apply lie,lie,lie,lie,lie unless your name is Corzine and you are a personal groveller to Bankrupt Obuma. 

sodbuster's picture

Kinda like the Clintons- It's hard to believe they can make so many millions writing memoirs, when back in the 90's when called to testify- they could not recall a thing!! Didn't know shit, when under oath.

Groundhog Day's picture

At this rate Draghi will be the President, Ruler and King of the World......with Goldman's support of course

Dr. Engali's picture

We will never truly know who the rulers of the world are. Weget to see the puupets..never their masters.

MiltonFriedmansNightmare's picture

Doc, but we can suspect his name starts with an *R* and ends with a *D*,  no?

jubber's picture

Draghi has to resign here

ParkAveFlasher's picture

Berlusconi bunga bunga revolution FTW!