With $30 Billion In Structuring Fees On The Table, Moody's Calls For Larger EFSF Even As WSJ Reports It May Be DOA
Even as the realization that the "EFSF as an insurance policy" is dead on arrival, just as Zero Hedge predicted following some simplistic math exercises yesterday, is spreading following a report just out by the WSJ that "EU lawyers have rejected direct EFSF guarantees", the multi-trillion CDO-insurance hybrid has received an endorsement from a most surprising source: Moody's which "called for increasing by as much as fivefold the firepower of the euro area’s temporary rescue fund, the European Financial stability Facility. A 2 trillion-euro ($2.8 trillion) EFSF “is not an unfair figure. What is needed is that there are resources to cover the entire area including Spain and Italy." Well, when one considers that there are about $30 billion in structuring fees on the table, a lot of it payable to the rating agencies, and quite a bit due to the EU's financial advisor (which has remained very stealthy through this point: we wonder just who is advising the EU and Eurozone on the daily changes to the bailout proposals - is it Goldman Sachs? BNP? SocGen? Inquiring minds deserve to know), it is probably not that strange that Moody's will pull a 180 and now demand a far larger "rescue facility." After all, without one, not only will the rating agency make billions less in the current fiscal year, but it will have no excuses to not downgrade the countries in Europe's core whose fiscal situation is deteriorating with each passing day.
From Bloomberg:
European policy makers can help end the debt crisis through an orderly Greek default, interest-rate cuts, further bond purchases and a bigger rescue fund, said Steven Cochrane, head of economic research at Moody’s Analytics.
“Our expectation is that there’s no way for Greece not to default,” Cochrane said at an event today in Limassol, Cyprus.
“Our assumption that we have fed in our forecast for the European economy is that bondholders of Greek debt will be taking a haircut of about 60 percent.”
Policy makers should ensure that the default remains orderly, Cochrane said, adding that it may happen “sometime next year when the economy might be in stronger shape to survive the event.”
And here is where it gets simply surreal:
Cochrane also called for the European Central Bank to continue buying Spanish and Italian government bonds to help boost consumer and investor confidence and keep yields below the “survival rate” of 6 percent. The ECB should also reverse this year’s interest-rate increases, he said.
“The risk of inflation is much less than that of a downturn in the economy,” Cochrane said.
He also called for increasing by as much as fivefold the firepower of the euro area’s temporary rescue fund, the European Financial Stability Facility. A 2 trillion-euro ($2.8 trillion) EFSF “is not an unfair figure,” he said. “What is needed is that there are resources to cover the entire area,” including Spain and Italy.
As a reminder, it was Moody's which refused to downgrade the US on the expectation that the country would incur more debt in the future (in a nutshell) and thus would be more stable.
Structuring fees aside, someone really needs to explain to "credit" rating agency Moody's just what leverage means, and why doubling your debt is not a cause for a rating increase. But we won't be holding our breath.
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If they could "do the math" they wouldnt be broke!
Same as the US but... chiu... lets not talk about that. Have you seen the chart in ZH page. It was not about any eueopean PIG....
Get to know em..
Richard Cantor
Chief Risk Officer, Chief Credit Officer and Chair of Credit Policy CommitteeRichard Cantor is Chief Risk Officer of Moody's Corporation, Chief Credit Officer of Moody's Investors Service and Chairman of the Credit Policy Committee. Prior to his current position, he was Managing Director of the Credit Policy Research Group, responsible for default research and measures ratings performance for Moody's Investors Service. He is a member of the Moody's Credit Policy Committee and co-chairs Moody's Academic Advisory Panel. Prior to that, he was a Senior Vice President in the Financial Guarantor Ratings Group, which rates financial guaranty insurers and reinsurers.
Mr. Cantor joined Moody's from the Federal Reserve Bank of New York, where he held a variety of positions in the Research Group and was Staff Director at the Discount Window. Prior to the Fed, Mr. Cantor taught Economics at UCLA and Ohio State and has taught on an adjunct basis at the Business Schools of Columbia University and NYU.
Mr. Cantor received a B.A. from Tufts University and a Ph.D. in Economics from Johns Hopkins University.
Who rates the ratings agencies?
nobody.
And it's clear what we require is to incorporate more entities that can lever up the debt base even bigger. There's no natural party or real business that will do that at this point.
So...if the economies turn down and the nations default, hmm...what will that do to the currency?
wrong question.
You should ask who OWNS the rating agencies!
So Europe is asking its taxpayers to bail out PIIGS and banks, and the banks want the taxpayers
to pay them 10s of billions to structure the bailout. What is wrong with this picture?
That is one hell of a shit sandwich the tax papers are being asked to swallow.
Don't you know? Only red numbers count now, not black numbers. And oh, derivatives have real value not the underlying assets!
/sarc
Has to be Goldman- for that many bucatos, they'll do whatever they have to in order to be the principal on this deal.....
Mr. Vix Mr. Vix, what are you up to buddy?
but, but collateral will be enough to quarantee everything!
I'll take the greek islands
Woohoo! $200 oil, here we come!
as the belly of the beast grows larger..
oil down, gold down, silver down.
Watch Sprott: “Forces Are At Work That Can Move the Prices Down.”
the alternative to the smoke and mirrors can not be acknowledged.
the reality of Fukushima can not be ackowledged.
our present leaders need to be removed.
the entire system needs to be removed.
any country with a nuclear reactor needs to be put under siege.
any country practicing usury and citizenry domination needs to be dissolved.
Yes, that's all of them.
This will not be pretty, but its what's next.
We can no longer kick the can down the road.
turn your fucking computer off, idiot, so we can stop using that gfd electricity from those nuke plants
NEWSFLASH: Steven Cochrane, head of economic research at Moody’s Analytics named new Head Writer at The Onion.
Is this today's rumor that will juice the market? Free 80B in fees for the bankers? I was wondering what it would be today.
The BS won't stop... until it does.
Starting to think Stephan Molyneux is right. The question is who's the real problem here. The banksters or the state. He firmly believes without the state, the bankster/corporation couldn't do the voodoo they do.
http://worldwideponzicollapse.blogspot.com/2011/10/your-enemy-is-state-s...
C N' F'n B, the banksters are the state.
David Graeber author of Debt: The Fisrt 5,000 Years comes to the some conclusion.
Correct me if I am wrong, but he advisor d'jour is BlackRock these days.
And someone also needs to explain to Mr. Cockrane that "resources to cover the entire area" is incestous.
Someone needs to explain to this guy that when you drive the correlation coefficient of the weakest member's survival with that of planet earth to 1, you are not making the world safer.
I'm beginning to think there will be no end to this charade.
We dont just have carrots and sticks, now we have carrot tsunamis!
Damn the end must be getting real near.
Nothing will happen until Mark Zandi's asshole has been completely stuffed to his satisfaction.
ratings agency extortion. love it.
Rumor hurry up we are heading south
The dike is crumbling. No amount of finger plugging can stop it. We are witnessing the final acts of a desperate few. <imho>
The sovereigns, rather than the financier pestilence they serve, will still lead the way in downgrades albeit at a slower roll, further supporting the campaign to label government spending per se the problem, rather than complete capture of said governments by TPTB which the rating agencies themselves serve.
Got Austerity?
Back to some real news:
California judge revokes actress Lindsay Lohan's probation. She's taken from courtroom in handcuffs.
I seriously hope they enlarge this fucker because it will serve to be an end for these piigs fuckers-- the eventual end of the fed & ecb is near along with throwing this genocidal policymakers behind bars and I aint talking gold ones.
Give em enough rope to hang themselves huh?
Dont they already have miles of the stuff? Bullish for fibers.
Other than the G20 saying Europe needs a plan by this weekend, is there any reason why Europe needs to be fixed this weekend? The timing seems arbitrary. I expect no plan -- and 'agreeing in principle to a framework' is not a plan -- and the focus will shift to some new event down the road that everyone can hurry up and wait for.
Oh sure. But it's still some time left until US presents THE savings plan.
Should be called Debt Rating Agency.
Stupid asshole Stephen Cockroach.
$30 Billion in "structuring fees"?
How many banksters does it take to "structure" this pathetic attempt at 'solving' this mess?
If the 'advisers' (aka 'chorines') involved are going to divvy up $30 billion in fees, do they really believe it can work? Would they want it to work? Will they simply rub their hands in glee waiting for EFSF Mach II - which of course will be even bigger and require even larger fees...?
I am lost for words at the madness and the stupidity of these idiots.
Are they being paid to solve the crisis that they helped create?? Genius.
Yes - they pass 'GO' every time they roll the dice. They never ever 'GO TO JAIL' and they collect £10 from each player whenever anyone else rolls the dice.
Oops - double post.
Did some HFT's go offline there? That looks like a bidless fall.
jeeeez, tyler! this is their plan!
of course the fuking thing is styooopid, senseless, and won't work!
it does sound like timmah & the chairsatan, tho, doesn't it?
here is buffett's rating agency at work! they hafta finance the boondoggle long enuf to get outa dodge w/ the the loot b4 the whole deal turns to ca-ka poo-Poo. again
LOL, rating agencies don't charge billions. When I was at a rating agency the most ever charged on a deal that I can recall was 500k-1m, though the average was closer to $150k.
Is this how they teach journalism at school?
Make it 20 trillion and help bail out the US.
As I have said before, since it is a fiat system, why not just hit reset?
Do some "hand wringing" and apologizing and promise to put safeguards in place and you're good to go for at least another 20 years until the bullshit catches up.
The sociopathic parasites want $30 billion in fees to save the world!!??
Bwahahahahaha! Beautiful.
On what basis do the rating agencies get any fees on this restructuring? Are they required to examine and give blessing (ka-ching!) on the restructuring? Agree (ka-ching!) to returning the parties to AAA rating if the restructuring is done? If so, just another set of conflicts of interest. Should be done at cost, as a type of pro bono work for the good of society.
The EFSF vehicle needs a credit rating. The rating agencies need to assess whether it's AAA based on their criteria. I have a lot of criticisms of rating agencies as I know all the shortcomings firsthand, but these are private companies with shareholders and need to get paid for their work. This deal will probably cost well above the average (not billions, but more likely very low millions) because it's going to involve multiple people from the sovereigns team as well as possibly analysts from the CDO/Insurance team, multiple managing directors in New York and London will need to be involved and to boot they will probably be paying external lawyers to review the legal structure of the deal.