Tyler Durden's picture

From Mark Grant, author of Out Of The Box

Who is Minding the Store?

Recently I sat and mused with the Chairman of the Board of one of the major international banks. One of the subjects under discussion was the oversight of risk by the Board. This included investment risk, counterparty risk and the general exposure of the bank to what various parts of management were engaged in with their businesses. He assured me that they had multiple reports that were filtered up to the Board and I asked the question about who was designing the reports and were they accurate not in terms of information but in terms of their structure.  Banks, insurance companies and other managers of money typically have respected members of the business community on their Board but often lack investment professionals to help provide some guidance and oversight for their dealer operations and for their trust operations so that the oversight by the Board is, frankly, insufficient. The complexities of any large dealer operation, in particular, are far past what the CEO of some main street corporation on the Board has any real knowledge of and the consequences of not having the appropriate people providing guidance can be catastrophic.

This schematic was clearly demonstrated recently at J.P. Morgan. The Directors of the Risk Committee had virtually no Wall Street experience and, consequently, had no real knowledge of the exposure of the bank except the data that they were given but then I doubt if they knew how to make any real sense of the numbers in front of them and certainly they did not have enough experience to judge if those figures were all that they needed to make informed decisions. Now JPM is facing investigations by half a dozen Federal Agencies including the Department of Justice and this was caused, in my opinion, by not having the appropriate people in oversight positions on the Board. Smart people always learn from their mistakes but really smart people learn from the mistakes of others. Therefore I suggest to those of you in senior positions to stop and evaluate who is on your Board, who is on the Risk Committee and who is minding the store because it is the Board, in the final analysis, that is ultimately responsible for the business of your institution and while you may have great faith in your management it is the Board, not those in executive positions, that are held accountable for the risks your firm has undertaken.

When the Defendants are also the Judge and Jury

“All within the state, nothing outside the state, nothing against the state. “

                               -Benito Mussolini

Here is a prescription for disaster. Here is an opiate that, once seen, should be avoided at any and all costs because the hand is a losing one far past any combination of cards on the Blackjack table. Yet, this is exactly what Europe is proscribing for owners of unsecured bank debt on the Continent.  The importance of Friday’s announcement was not that unsecured bank debt owners were to take losses if some bank foundered but just who would be deciding what losses were to be taken. Yes, it is true, investors for the last three years had been assured and re-assured that the sovereign nation where the bank was domiciled would be back-stopping any bank bonds or that the European Union itself would ring fence all bond holders so that the announcement was in direct contention to what we had all been told to get us to support European bank debt. Europe had claimed responsibility and now they have withdrawn it and this reason alone is enough to push yields for European bank bonds far wider than where they are currently as the charade of one more contingent liability has been officially ended. I assert, just for this reversal in position, that the yields of all unsecured bank bonds on the Continent will gap out from their current levels as what we were told is not what we are to get any longer. The new EU bank plan normalizes the losses to put them on the same plain with the American banks but the second part of the story is where disaster lies and I mean unmitigated disaster.

In America we have a formalized process for insolvency, bankruptcy that is overseen by the Rule of Law and the decisions are made by our courts. We have a functioning judicial system and all manner of statutes and regulations so that claims on assets are a matter of well-established Laws that govern this process. This also used to be the way of it in Europe but now we are being told that the legal system on the Continent is going to be irrelevant which will include, by the way, all of the nations in Europe including Great Britain. What the European Union has tossed on our plate is some sort of gruel that no one should eat for it is full of deadly poison; of that I have absolutely no doubt.  The new EU bank plan states clearly and without remorse that the decisions for any bank insolvency will be made by Regulators. This would be people appointed by European politicians, this would be bureaucrats, this would be employees of the State as Europe returns to the governance of the old Soviet Union where the Rule of Law was subordinated to the designs of the nation.  Let me make this clearer; unsecured bank debt owners will have no rights, no due process and no appeal. The State will decide who is to get what, how much they will get and your rights as a bond holder will be about equivalent to Russia under Stalin where the legal system operated under the thumb of the man in charge. Further the regulators can, once again, exempt the EU, the ECB, the EIB, the IMF or whomever they like from any call on assets so that the bond owner can be subordinated to whomever the Regulators so desire. Then if they will impose this system of State dominance on unsecured bond holders today who is to say that they will not impose it on other classes of assets tomorrow. When the Rule of Law is replaced by the Rule of the State then I will proclaim, unconditionally and without qualification, that the system has been rigged for the benefit of the nations and to the detriment of any private citizens. Therefore there is only one rational conclusion that can be reached which is that no one should own any European unsecured bank debt, NONE, of any bank on the Continent as the Regulators in Europe can now decide the fate of the bondholders for any political reason that they deem relevant and expedient.

If you cannot read the writing on the wall then allow me to read it for you. The European Union has abrogated the Rule of Law for the good of the State. This is the second such abrogation with the first being the exemption of certain European institutions and the IMF from the Private Sector Involvement of Greece. Greece may be a one-off exemption as they claim but we now have a second instance where jurisprudence has been overturned for the good of the nations of Europe. This is not Socialism or Capitalism but rather some sort of Fascist governance which I publically decry as the echo of the jackboots sounds across the Continent once again. The precedents have now been set and the future is clearly marked by a return to the totalitarianism of a politically controlled State. My advice is therefore succinct:


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fightthepower's picture

Fuck You Bernanke!

SMG's picture

You can run, but you cannot hide from the Eye Of Sauron.   Better to stay and fight and get others to fight with you.

Colombian Gringo's picture

This is what elitists do, uphold laws for their benefit, and get a free pass on laws that would restrain them. This is what fascism looks like.

rehypothecator's picture

Laws are made to protect the elites from those they plunder.

LeonardoFibonacci's picture

Help Help, i cannot run because i ate 6 hamburgers

Harlequin001's picture

You can run, but you just die sweatin'...

GMadScientist's picture

Then we'll tie you down, sew your asshole shut, and just keep feedin' ya...like a pate Goose ya plump little dumpling.


Kayman's picture

"In America we have a formalized process for insolvency, bankruptcy that is overseen by the Rule of Law and the decisions are made by our courts. We have a functioning judicial system and all manner of statutes and regulations so that claims on assets are a matter of well-established Laws that govern this process."

Laws exist only to crush the little people.  Corrected that error for ya.

Manthong's picture

Yes, my GM remark above.

GM is probably not an exception, but an outlier.

mkhs's picture

Sure, ask the MF customers how that bankruptcy thing worked out.  Hint, futures and securities are different.

Nothing To See Here's picture

"Laws are made to protect the elites from those they plunder."

There is an important distinction between Law and legislation. Statists have managed to convince the masses that both are the same, but they are not. Law is a bottom-to-top process. Legislation is a top-to-bottom process. What you talk about is legislation.

Al Gorerhythm's picture

That'd be legislation backed by the law, right?

oldman's picture

Of course.

That is why law was invented----force is still the last law-----and force is the military state.

I have this empty feeling that when it comes down to the real deal----that the US is going to say:

"Either do it our way or we are going to nuke the planet!"

I truly hope that I am completely incorrect                           om

Xkwisetly Paneful's picture

There is no place in fascism for one world order which is obviously what they are working towards.

Why is this so incredibly complicated?  No nationalism=no fascism.

BigJim's picture

The 'nationalism' here is the elitists trying to push for a federal europe... and the locals trying to push for more national sovereignty.

Both are pushing nationalism; the former have just expanded the authoritarian polity from one State to many.

Xkwisetly Paneful's picture

It is obvious all of the central banks are in bed with another and working on a one world order financial system-as are many of the politicians.

makes the idea of nationalism preposterously farcical.

They are textbook leftwing authoritarians and should be labelled as such.


Think for yourself's picture

I have reason to think you are mistaken, but only because you conceive of fascism as being specifically nationalistic rather than statist. Please see my comment to your other post below as to why.

CompassionateFascist's picture

No, he is exquisitely, empirically right: the only Greek political element NOT bankster-controlled...is the so-called "fascists", the HardRight. This is also the case in America. It's globalist-socialist/plutocrats vs. nationalist/populist fascists. And we (that is to say, I) am going to win.

Libertarian777's picture

hence the need for INDIVIDUAL LIBERTY. Each person is soverign unto themselves, and only grants to government that limited power as agreed upon in the constitution.

Nationalism is what comes after the plundering of facism resulting in social unrest. Even now, with the co-opting of the OWS and Tea Party, we have an 'EX-PATRIOT' (Nationalist) law in the works to further create class warfare. Instead of worrying about Eduardo Saverin, US citizens should be worried about the NDAA and the EX-PATRIOT acts.

Who is the SOLE candidate who consistently speaks about INDIVIDUAL liberty and INDIVIDUAL rights (not 'national', 'group' or 'collective' rights)?...

blindfaith's picture



Yes, Yes, and we have 36 states who have agreed to deny rights by consitutional amendment with little knowledge of the effects and affects of such action to destroy individual liberty.  And the show begins, when you chip away at human rights with laws born from hate, you usher in Facism.  But we hide behind a bible that few have really read and fewer even understand, and then claim that God wants this?  Man wants this, not God.  And these same corrupted men will take from you all your rights...one by one, and you won't do a thing because it has not entered your home...yet.  And then, there won't be anyone left to help you protect your God given rights.

Think for yourself's picture

I used to be well-versed in status-quo politics, and what you say seems to resonate with the mists of my memory. It's as if I could understand what you're saying.

As I said, I could nearly understand, but now it all sounds the same to me. All I heard is that it's statist authoritarian vs statist authoritarian, cuz that's how Hegel rolls.

SilverRhino's picture

You have made the mistake of thinking that fascism is a political and not economic system.   Fascism is nominal ownership of the means of production by the citizens (aka corporations) but control [effective ownership] of the means of production is exercised by the state through regulations and the legal code.    I think you were thinking of national socialism (aka nationalistic fascism) that the german practiced when you first stated your post.

For my own observations nbased on the actions of the states actions so far I would amend your statement

There is no place for anything but fascism in the one world order which is obviously what they are working towards.

Xkwisetly Paneful's picture

I am just going to keep posting this everytime instead.

Fascism ( /?fæ??z?m/) is a radical authoritarian nationalist political ideology.[1][2]

There is nothing fascist in the slighest about what is going on.

They don't give a shit about their own states, they care about erecting the new massive one world order governance.

Think for yourself's picture

Au contraire. Your definition is very good, except that part about nationalist.

Indeed, fascism is not nationalist per say. This might be only a mistaken inferrence that comes from the context in which fascism mostly manifested itself so far.

However, fascism is rather absolutely statist, whatever the level of governance that it applies at. You could have a fascist municipal government if that government did not recognize any external (regional, national, etc) or internal (individual) authority - that is, if it defined itself as the ultimate authority within the confines of its zone of influence.

In the same way, you can find fascism just as well at the national, supranational, continental or global level. Actually, from the last time I read Mussolini's The Doctrine of Fascism, I don't remember reading the word "nation" once. He specifically focuses on the state, which is not pre-supposed, as you do, to be at the national level. The quote in the article pretty much summarizes his view in a single sentence: “All within the state, nothing outside the state, nothing against the state. “

Indeed, in his view, the individual only justifies his existence as it pertains to the state, as do religion, finance, corporations and culture. Indeed, fascism is understood to be the state as culture and religion.

[Edit: this last affirmation might be a bit blurry. What I tried to say is that Mussolini viewed fascism as the ideology incarnated in a fascist state, defining itself as the sole and ultimate end, value and authority.]

In a fascist one-world order, you will understand that one-world governement, one-world 'bank', one-world corporation, one-world religion and one-world military are not even integrated, but rather synonymous. This is very exactly what is going on - a consolidation race towards absolute statism.

DanDaley's picture

Jonah,is that you?

All anyone has to do is look at what fasces are (http://en.wikipedia.org/wiki/Fasces): a representation of unity and regimentation enforced through the power of the state.  In the view of the fascists, you are not allowed to be left alone, to be a free individual, to be free of state encumberances.  The state is your mommy, your daddy, and your parole officer.

Xkwisetly Paneful's picture

and not that it matters an iota, but with the governments being the largest consumers, employers, lenders, borrowers, landlords, tenants and the single largest profiteer of every economic transaction on the planet,

along with endless armies of regulators and endless regulations-

it is fairly obvious who controls the means of production and what is the largest benefactor.

They are left wing authoritarians, I don't care what bullshit moving target label want to attach,

that is what they happen to be.

and fwiw Machiavelli was a fascist hundreds of years before Bennie and Dolph,

the nationalistic component was not added recently.


hornster's picture

Let's ID some nationalist and facist nations.  There are 4 possibilities.


facist and nationalist; Nazi Germany e.g.

facist not nationalist; USSR

nationalist not facist; modern Japan, many others where immigration has not blurred natural boundries.

not nationalist not facist; Antarctica?  Or, what's the point of a government (for facisim) or a nation (for nationalism).  Perhaps that is the point of the NWO, but it is a contradiction,  It is natural that people need to be led and they are a tribal animal.

BigJim's picture

 You can run, but you cannot hide from the Eye Of Sauron.   Better to stay and fight and get others to fight with you.

You might want to run if you find yourself in Mordor, surrounded by orcs.

The problem is - I'm not sure there's a Minas Tirith to run to anymore. The orcs (Statists) appear to have sprung up everywhere.

Piranhanoia's picture

The rangers are everywhere. They remain quiet and hidden for now.

Think for yourself's picture

It's time to stand your ground. Not blindly or recklessly, not stiff as an oak, as you will break in the tempest. Rather, like the easterners so often say, be as a bamboo, flexible and swaying in the wind, yet rooted in place.

It's time to be steadfast. We're getting close to the first peak of the rollercoaster. Things are likely to get scary if one is not expecting them.

knukles's picture

Bernanke is but a tool of the State which is itself become a tool of its Financial Enablers.
The Abrogation of the Rule of Law has not been motivated, supported, implemented and left unchallenged through the application of unlimited resources and economic/social/political force by the Central Banks, but by it's Political Rulers.
It is the Political Rulers who at the margin profit from the current condition of the Central Banks, not the Central Banks themselves.

To wit:  In the US, the Abrogation of the Rule of Law, with respect to the Senor Secured Debt Holders of GM and Chrysler when such companies were "Bailed Out" by the government, arbitrarily (for purposes of political expediency) reallocating common share ownership to an unsecured party, the unions, at the expense of those with legal claim to such collateral/property.
Europe:  As pointed out above, promises broken, contractual rights left unremedied, debt holders penalized for the purposes of political expediency.  The votes and political support of a voting block, the unions

I suggest that these actions directly flowing from political motivations are those that are creating a World Wide Crisis of Confidence.
A Credibility Trap
A Crisis of Confidence where at the margin, funds are flowing to the safest medium available regardless of return, real or nominal.
The Overwhelming Investment Motivation has and remains the Return Of one's money as opposed to the Return On one's money.
That dear reader, is the reason that the economic phenomenon of the Liquidity Trap exists.  The Liquidity Trap is a mere manifestation of the problem, that being the Credibility Trap, not the cause.

Hence, the performance over the last several years of precious metals which many regard as the ultimate safe currency.
Which also within financial asset space explains the low relative nominal and real level of government debt in countries such as the US and Germany (Yes grasshoppers, those very countries abrogating the rule of law which is not the least of a paradox as many might suggest, for they are the most powerful countries which, at the margin can do so with the least penalty.)
And of course, cash...again within financial asset space.

There will be no return of any reasonable level of economic activity until the Crisis of Confidence, the very system has been Reformed.


reddog's picture


The same as in the United States of America, or the United States of Mexico (Estados Unidos Mexicanos).

Joe The Plumber's picture

Lack of confidence leads to lower growth and higher risk premiums. It is why some poverty stricken nations remain in poverty. They are governed by thieves and the people would laugh if they tried to float a bond in private markets

Kayman's picture

And as the fools run to Treasuries, the last joker in the deck, and our all-knowing political/banking parasites squander scarce investment capital, we become Europe.

Our fearless leaders need to take their shoes and socks off to count past 10.

Run ? Hell no.  Walk away from the Mugs Game.

OldPhart's picture

"In America we have a formalized process for insolvency, bankruptcy that is overseen by the Rule of Law and the decisions are made by our courts. We have a functioning judicial system and all manner of statutes and regulations so that claims on assets are a matter of well-established Laws that govern this process."


Tell that to the General Motors Bond Holders.

Trimmed Hedge's picture

Run, Forrest... RUN!

Abitdodgie's picture

This is Europe so it would be "Run Lola Run"


Run where?  The choices get smaller and smaller by the day.

Oh regional Indian's picture

I do believe there is still time to simply walk away.

The time to run is a'comin too though. 

Lex Romana, Pax Romana. Jokes, both and still in action.

There are two (maybe three) sets of laws, everywhere. That is why the system is not fair. 

It's all about the treaties, specific language, specific gestures, specific times.

The rest, most of what we see, is just theater or material to waste ink and paper.


old naughty's picture

I wonder if there have been any updates?


Did these States know back then and prepared?

Oh regional Indian's picture

ON, I'm a total fence sitter when it comes to inf-W news. Are they really? Can they? Given the control grid, the 10 FEMA districts, the perpetual war emergency since 1933, absolute power to POTUS...

I don't think so...


slewie the pi-rat's picture

hard to tell from out levels of organization

theoretically, no problemo, imo, ori

step-function organization (normal hierachy) 6:1; 5 levels, say;  highly trained core cadre;  control loops;  polygraphs

new tools for the oldSchools is all

no, not everything;  intel will be used at the lowest level, also, as screen;  + ample sampling + new (inter-agency) intel + ? + ?

we seem to be at the point where human nature becomes inhuman (our inhumanity to ourselves dept) at new levels;  same shit, different day, really

it's kinda fun to be hot tho, doncha think?

nature is very prolific and seemingly wasteful, but don't get eaten, old sport!

Kayman's picture


It is all about intent and the relative power of the parties to the agreement.  The specifics are only something to chatter about when the rug is pulled.

Oh regional Indian's picture

Precisely Kayman. And the trouble with that legalease (talk about a misnomer) is that it is anything but ease. The true meaning of words is shrouded in  the mists of etymology. 

Plus who has the time anyways?


GMadScientist's picture

Fuck running; time to stand and fight!