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Shadow Banking Contagion Approaches As European Banks Sign Private Repo Agreements With US Counterparts

Tyler Durden's picture





 

In what is probably the riskiest escalation of the second credit crisis to date, IFR has released information that was until now speculated, but not confirmed, namely that European banks not only continue to make a mockery out of LiEbor by posting whatever rates they deem appropriate (for the simple reason they don't use interbank funding), while in the meantime going directly to US banks, using shadow, and hence completely unregulated conduits, in the form of private repo arrangements with "at least three of the five biggest US banks." Now where this is interesting is that as Zero Hedge disclosed three months ago, the bulk of the cash generated for the pendancy of QE2 went not to US banks, but to US-based branches of foreign banks. Which probably means that there is a roadblock to repatriating the US held cash (even in exchange for perfectly legitimate receivable debits). Because one would think that this is where the first source of cash for troubled banks would come from. Assuming it hasn't been repatriated already, or is not stuck in some IOER-GC carry trade that generates virtually no return (and when the Fed lowers IOER even more, absolutely no return). Alas this means that the 3M USD Libor which we update every day is substantially under-representing the true funding squeeze in Europe. Even worse, it means that US banks have lent us tens, if not hundreds of billions of cash, in exchange for collateral that could be virtually anything, and which collateral bypasses traditional Fed supervision. As a result, US banks can and will go hog wild in lending repo dollars (at big collateral haircuts but still) to European banks until everyone suddenly runs out of money, and the Fed realizes it has to not only fill traditional liquidity holes, but a massive shadow banking shortfall, precisely the stuff that none other than the Fed has been warning about over and over. Just like in 2008 when the big hit to the system came not from traditional sources of risk but perfectly innocuous and thus ignored money markets, so the same will happen this time, as the biggest crunch will come completely out of left field. It always does.

From IFRE:

US banks have become the unlikely saviours of their ailing European counterparts, signing private agreements to lend them billions of dollars in recent weeks after an exodus of nervous money market funds left many without ready access to short-term funding.

 

Agreements worth tens of billions of dollars have been signed in the last month alone, according to bankers directly involved, who added that senior management of firms on both sides of the transactions have been closely involved with hammering out deals.

 

French lenders are among those using such facilities, say bankers, although deals have also been struck with UK and other European firms. Loans have been made as repo agreements, with banks posting assets such as corporate loans and mortgage portfolios as collateral.

 

“We were able to use some of our assets to get long-term repos,” said one board member at a French bank. “It was a move we made to monetise some of the assets we had on the balance sheet which were good, quality assets, and also to mitigate the withdrawal of money market funds.”

 

...

 

Paris-based Societe Generale said that it had struck US dollar repo deals equivalent to €6bn against a portfolio of commercial mortgage-backed securities and collateralised loans with maturities longer than six months. US bankers say other banks have struck similar deals in recent weeks to generate cash.

 

One source at BNP Paribas with knowledge of the situation said the bank was using US dollar repo markets for fixed income activity, but “not more than usual”, though the bank acknowledged that its use of short-term US money market funds dropped by €10bn to €36bn since the end of July.

 

“Doing repo means you don’t have to sell and don’t have to take the loss on many of these assets upfront,” said another banker at a US bank, who has signed off on such deals in recent weeks. “You can do it privately, so nobody needs to know, and spread losses over the lifetime of the assets.”

 

...

 

The fact that US banks are willing to increase their exposure to European firms – even if they insist on significant haircuts and conservative interest rates – demonstrates that they are happy dealing with such counterparties, at least for the moment.

Yes: for the moment. Alas, when the moment ends, and said banks can no longer afford to lend out cash, and in fact need it, may we ask: who will provide this source of global bailout capital? Oh yes: Ben Bernanke of course, and who will be facing trillions of dollars in full loss exposure should central planning not be successful in patching up the second Great Financial Crisis?

Why you, dear reader.

 


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Wed, 09/14/2011 - 23:23 | Link to Comment Rahm
Rahm's picture

11:59:55

Wed, 09/14/2011 - 23:32 | Link to Comment phyuckyiu
phyuckyiu's picture

Back in late '08 I started screaming at my ex-wife that Libor was getting huge and banks were not lending to each other anymore, aka money is stuck, and we needed to sell our house in bum fuck and move before the velocity of money came to a standstill. She told me to wait 5 years, Obama will fix everything, and that she had no idea what Libor was and didn't care. I got a divorce.

Wed, 09/14/2011 - 23:36 | Link to Comment bob_dabolina
bob_dabolina's picture

That's commitment

Wed, 09/14/2011 - 23:39 | Link to Comment phyuckyiu
phyuckyiu's picture

You can commit to poverty if you wish :)

Wed, 09/14/2011 - 23:41 | Link to Comment Dingleberry
Dingleberry's picture

Did you lose your a$$ on the house, or on the divorce? Or perhaps both?

Thu, 09/15/2011 - 00:08 | Link to Comment pan
pan's picture

In these times you definitely stick her with the house.

Thu, 09/15/2011 - 00:23 | Link to Comment phyuckyiu
phyuckyiu's picture

The house lost half the value, it was in bum fuck Oregon. Happy to be back in the Bay Area near my parents, where I don't have to consciously use double negatives to fit in (it sounds prude but I hate poor english). Actually maybe I am a prude I saw Philip Glass with my parents last weekend, that's like Woody Allen prude. Not happy to have lost a best friend, but i've already lost half my life's work as it is. I had to downgrade to Felton from Los Gatos when I came back, not that i'm a huge fan of Los Gatos but their school district made me money. Consider me one of those that slipped down from the middle class, cuz I aintz got no dough, cuz.

Thu, 09/15/2011 - 00:41 | Link to Comment eisley79
eisley79's picture

this tyler said "us" refering to himself as part of Europe, stay in character tylers!

Thu, 09/15/2011 - 05:13 | Link to Comment George the baby...
George the baby crusher's picture

Actually he was refering to Ben Bernanke bailing out the European banks.  So he maintained his character quiet well.

Thu, 09/15/2011 - 18:47 | Link to Comment eisley79
eisley79's picture

no he(of they) didnt, the US/NA is always "us", never europe, europe is always "them"

 

SON

Thu, 09/15/2011 - 02:43 | Link to Comment Absalon
Absalon's picture

So you left your wife and moved back to Mommy.   Your ex-wife's better off without you.

Thu, 09/15/2011 - 05:05 | Link to Comment phyuckyiu
phyuckyiu's picture

Laugh I am guilty of having an intact family that I see once every few weeks. They live 100 miles away from me, but i'm sure that's too close for a bitter caucasian housewife such as yourself. You'd probably disapprove of our trips to the Museum of Modern Art or the De Young, or the Symphony, far too nebbish for someone as cool as yourself. They are also in their late 70's and I want to appreciate them before they are dead, which could be anytime. Apologies to those who don't enjoy their family, I realize they are legion. Perhaps if you had come from a supportive, loving family you wouldn't be so angry. Cheers.

Thu, 09/15/2011 - 05:11 | Link to Comment jeff montanye
jeff montanye's picture

your ex wife is lucky to be ex.

Thu, 09/15/2011 - 07:57 | Link to Comment phyuckyiu
phyuckyiu's picture

Yes I know, best to leave the people that still talk to their family alone. Totally agree. I must be such a dweeb, going to museums with my -gasp- parents. I promise we'll pick more macho things to do down the road so you'll approve, except that they're old and the era of season Raiders tickets was 35 years ago. Or I suppose you object to someone seeing his parents twice a month before they are dead, it must be a sign of weakness. Sad. Or somehow I have to move away from my beloved Bay Area to prove to you some freudian theory on separation? I've tried, there is no place better than the Bay Area. If you don't get it, I can't help. And my parents lived here first. Bummer. The Bay Area is a huge place, I live in the woods near Santa Cruz, far from pretty much everything. I hope when you turn 78 that someone still wants to talk to you, but wouldn't it be justice after your post if you sat by yourself all day every day at that age? And to think all this started over a Philip Glass concert. LOL.

Thu, 09/15/2011 - 08:40 | Link to Comment Comay Mierda
Comay Mierda's picture

arguing on the internet is like competing in the special olympics - even if you win, you are still retarded

 

:P

Thu, 09/15/2011 - 13:23 | Link to Comment phyuckyiu
phyuckyiu's picture

So true, gotta love the one line innuendos from assholes.

Thu, 09/15/2011 - 10:05 | Link to Comment Pegasus Muse
Pegasus Muse's picture

And to think all this started over a Philip Glass concert.

Might have been worth it had it been a decent composer -- a Tchaikovsky, Brahms, Mahler, etc.

Glass' minimalist 20th century stuff does little for me.

Thu, 09/15/2011 - 13:27 | Link to Comment phyuckyiu
phyuckyiu's picture

Glass is a little like chinese water torture.

Wed, 09/14/2011 - 23:40 | Link to Comment Crisismode
Crisismode's picture

Was she any good in bed?

Thu, 09/15/2011 - 07:25 | Link to Comment phyuckyiu
phyuckyiu's picture

My first post made it sound like I hated her, but I only hated her ignorance of things that really matter, during times that really matter. Some of course will say the only thing that matters is love. Anyone in a marriage knows that money troubles is a make or break scenario, very dicey. Everyone gets along great till there is money issues. Buying a business up in Oregon to make your wife happy and bleeding all your equity, and then watching all the doors to possibly selling the place quickly closing, is not the easiest scenario. To judge me that shallow with just a few posts is premature. She took the Sybian with her, does that help? :)

Thu, 09/15/2011 - 00:25 | Link to Comment Two Towers AU AG
Two Towers AU AG's picture

bob_dabolina  Its not commitment. Its called discipline.

A guy told me one time ..Dont let yourself get attached to anything you are not willing to walk out on in 30 seconds flat. when you feel the heat around the corner.

http://www.youtube.com/watch?v=iITu3Z4i1No  (see @ 2:13-3:03)

 

 

Wed, 09/14/2011 - 23:50 | Link to Comment Long-John-Silver
Long-John-Silver's picture

My wife thought I had gone insane when I cleaned out the 401(k)'s and the savings accounts except for enough to float along. I then went physical Gold and Silver at a 25/75% ratio. I've gone from being a raving lunatic to an evil financial genius these past few years.

Wed, 09/14/2011 - 23:56 | Link to Comment Fiat2Zero
Fiat2Zero's picture

I did the same but less than a year ago.  I am transitioning out of raving lunatic to evil financial genius as the PMs are moving higher.  Alas the manipulation lately is definitely trying to take some of shine off my reputation.  I guess I'll have to wait for the Fall/Winter surge for confirmation.

Maybe I'm like the "mini-me" size evil financial genius now...

Thu, 09/15/2011 - 00:04 | Link to Comment Waffen
Waffen's picture

Indeed i had gone from crazy lunatic to "you can assfuck me" in April until May 1st when it was "you can sleep on the couch."

I am now back to speaking terms and am also waiting for the Fall/Winter surge to return to daily blowjobs.

 

 

full disclosure

~sadly, reality was April (your awesome) to May (you suck) and now its (meh). any sexual relations with the wife have always been hit or miss~

Thu, 09/15/2011 - 00:12 | Link to Comment pan
pan's picture

Re. your sexual relations, the problem is that you married her.  If you were still just dating her, you'd be getting it regularly.  I am speaking from experience.

Thu, 09/15/2011 - 00:19 | Link to Comment Dugald
Dugald's picture

Make this man  Fed Tres....quick

Thu, 09/15/2011 - 01:28 | Link to Comment dasein211
dasein211's picture

Fuck that is so true. I nominate you for president and warn anyone dating that if you hate sex and working out all the time than by all means get married.

Thu, 09/15/2011 - 00:13 | Link to Comment Crisismode
Crisismode's picture

Women are just funny that way.

 

You can't live with them,

 

But  you certainly can live without them.

Thu, 09/15/2011 - 00:32 | Link to Comment phyuckyiu
phyuckyiu's picture

Best post on the thread by far.

Thu, 09/15/2011 - 00:40 | Link to Comment TheBadgersSett
TheBadgersSett's picture

excellent mini thresd within an already exclellent thread. Excellent.

Thu, 09/15/2011 - 08:07 | Link to Comment ZeroPower
ZeroPower's picture

Inception o.0

Thu, 09/15/2011 - 06:49 | Link to Comment papaswamp
papaswamp's picture

Get a sailboat...head for a tropical island with plenty rum, bow ornaments some gold. When this whole shitsotrm finally hits, that's my plan.

FOr you non-nautical types...bow ornaments:

http://livesaildie.com/files/2006/05/big3_740_full.jpg

Thu, 09/15/2011 - 06:49 | Link to Comment A.W.E.S.O.M.-O 4000
A.W.E.S.O.M.-O 4000's picture

That's why I only talk to my wife about the weather.

 

This December we'll have been together for 15 years.

Wed, 09/14/2011 - 23:29 | Link to Comment CapitalistRock
CapitalistRock's picture

It boggles the mind that people are sitting in stocks "for the long haul". Fewer than 1 in 500 Americans own even a single ounce of gold bullion.

Wed, 09/14/2011 - 23:31 | Link to Comment Thomas Jefferson
Thomas Jefferson's picture

Im scared shitless about the money I have in my business checking account. 

Wed, 09/14/2011 - 23:38 | Link to Comment bob_dabolina
bob_dabolina's picture

Jonesin' for that fiat.

Wed, 09/14/2011 - 23:43 | Link to Comment rocker
rocker's picture

Have you ever heard of withdrawal and safe deposit boxes.  Or even a safe or two.  

Just buy one that two monkeys can not carry and your safe. Eh.

Thu, 09/15/2011 - 00:04 | Link to Comment Belarus
Belarus's picture

Other than working capital needs, you shouldn't have ANY money in a business checking account. Pay it out as a dividend or make up some property and plant expenditures and move the money out. Jesus, who sits on your board?

Thu, 09/15/2011 - 00:06 | Link to Comment readytoleave
readytoleave's picture

When liquidity dried up overnight in 2008 our banker went absoulutely nuts...  We had been giving him our financials every 30 days for over five years.  All of a sudden there were "issues" with our ratios...  Check any loan docs that you have a balance on. 

Check them very carefully for "Demand Clauses."  When this turns South --- again.... The bankers will be coming first after every quick dollar they can get their hands on(your checking account) and second they'll come after anything that they can sell for even 20 cents on the dollar -- quick.

I have found bankers to be the worst business people in the world.  I always thought "these guys lend out other people's money" they must be really sharp to be able to quantify and classify that kind of risk.  I was so far off it's not even funny.

The best thing that all of us "business people" can do is stay off the radar screens of the bankers and the IRS.  I can assure you --- it's no easy feat.  They will both make sh**t up to take your money -- and if "your" money is in a bank --- it isn't your money -- it's theirs.  You have a contract that they will breach at will.  They can take it out of your account at will !!  It isn't theft -- it's "bank process."  It's a civil matter and you have to use the courts to try and get it back. 

The banks throughout this country are screwed.  Their balance sheets are screwed --- and hence any money you have in a bank (which is actually nothing more than a bunch of 1's and 0's on a hard disk) is at risk.  I'm not being dramatic...  I'm speaking from experience.

That's why my user name is "readytoleave." 

My guess is that there is already a very quiet bank run happening throughout Europe.  It's been going on for weeks if not months.  The smart/big corporate money is moving it as fast as humanly possible without setting off any alarms...  

We use a small, little know institution on that side of the pond and two weeks ago I awoke to not being able to access our accounts -- "the web site just wouldn't resolve."

I thought holy sh**t.  For two days we couldn't make any transactions. 

And that's the way it's going to happen...   Everyone will wake up on a seemingly quiet Tuesday morning and you just won't be able to get to your accounts....

What is coming has already happened to a number of businessmen like myself.  But the next time --- and it will be soon --- will be so much worse.

Thu, 09/15/2011 - 00:25 | Link to Comment Thomas Jefferson
Thomas Jefferson's picture

Well said.  Argentina style.  Looks like Ill have to sleep in my adult diapers tonight.

Thu, 09/15/2011 - 02:44 | Link to Comment Founders Keeper
Founders Keeper's picture

LOL

Thu, 09/15/2011 - 00:36 | Link to Comment FreeNewEnergy
FreeNewEnergy's picture

You are 100% correct. Keep all loan balances high, so that the banks cannot cut your credit limit. If and when they do, stop paying, period.

I am more than happy to borrow at 23, 28, 34% interest on money that is depreciating at 6-8-10% a year. Why should I care? I'll borrow as much as possible of they'll lend it because I'm buying assets for a buck that are worth three, six, ten on the open market, so the interest expense is rather negligible, or, using the Chairman's term, "transitory."

To me, that translates into "if there's an absolute asset crash, I'll keep paying," because I'm that liquid and if my bank has any brains at all, they'll follow me to Nirvana.

Sadly, I have never met a banker with brains, nor a buyer with adequate restraint. I've either been cursed or very lucky, but I am still standing and doing business... and it seems to be getting better.

Thu, 09/15/2011 - 02:02 | Link to Comment IQ 145
IQ 145's picture

That's right. the French and Austrian Bankers can hear the giant sucking sound; the wealthy European clients aren't renewing their CD's or their bonds. A quiet bank run. I think a lot of this is showing up as the frankly lunatic buying of long term treasuries in the US; some of it bleeds off into Gold and Silver.

Wed, 09/14/2011 - 23:32 | Link to Comment rocker
rocker's picture

But, but, but they have those earnings from last year. Eh.

Thu, 09/15/2011 - 01:42 | Link to Comment Whalley World
Whalley World's picture

Seeing as the North American average is 1% I'd say us Canucks and our Mexican Compadres are sitting a little prettier.

Wed, 09/14/2011 - 23:30 | Link to Comment bluebare
bluebare's picture

11:59:55:01

Wed, 09/14/2011 - 23:30 | Link to Comment bankonzhongguo
bankonzhongguo's picture

It's all part of the Plan.

Wed, 09/14/2011 - 23:31 | Link to Comment Thomas Jefferson
Thomas Jefferson's picture

Tick.... Tick.... Tick....

Wed, 09/14/2011 - 23:31 | Link to Comment macfly
macfly's picture

It really does just go from bad to worse, and my shorts were squeezed bad today, but I'm chilling and waiting for a roll over.

Wed, 09/14/2011 - 23:34 | Link to Comment rocker
rocker's picture

This is what's fueling the market, weak short hands. The rest is just air on No Volume.

Wed, 09/14/2011 - 23:31 | Link to Comment caerus
caerus's picture

banks are posting mortgage portfolios as collateral? yeah that'll work...

Thu, 09/15/2011 - 00:46 | Link to Comment FreeNewEnergy
FreeNewEnergy's picture

Yeah, this:


Paris-based Societe Generale said that it had struck US dollar repo deals equivalent to €6bn against a portfolio of commercial mortgage-backed securities and collateralised loans with maturities longer than six months.

 


absolutely cracked me up, considering I'm living in a house that has no counterparty risk thanks to MERS and BAC, and my next target is the county tax office. Sure, I'm in residential MBS, which is already kaput, so those CMBS ought to be really viable as collateral since all us broke homeowners will surely be flocking to the Gap and Best Buy for worthless techno-trinkets any minute now.

 

Can this get any weirder? You bet, and I hope it does. Anybody with half a brain (only 24% of the US population by my calculations) should be able to profit handsomely from the missteps and miscalculations of the herd.

 

There's an algo in there somewhere. I can feel it.

 

 

Thu, 09/15/2011 - 02:08 | Link to Comment e_goldstein
e_goldstein's picture

< 3%

Wed, 09/14/2011 - 23:31 | Link to Comment rocker
rocker's picture

Oh please, didn't Geithner just tell Crimer that all is well and their is No Risk. No Contagion.

Sleep well, this should be good for another 200 point Rally on Air Farts.  LOL

Thu, 09/15/2011 - 00:03 | Link to Comment Denver768
Denver768's picture

No doubt. The machine induced float upward. A multiple-day short squeeze on no volume before a triple digit drop in a flash... The controllers are at the wheel. No need to worry disenfranchised traders, 401k holders and retirees.... You can trust the machines, your elected officials, your bankers.... NOT.

Money is shit, bankers are flies.

Wed, 09/14/2011 - 23:31 | Link to Comment lolmao500
lolmao500's picture

This is really really really really really bad.

Wed, 09/14/2011 - 23:31 | Link to Comment Hansel
Hansel's picture

That's pretty sweet.  People flee French banks for U.S. banks, and then the U.S. banks lend the money right back to the French banks.

Thu, 09/15/2011 - 09:55 | Link to Comment falak pema
falak pema's picture

its called a cartel, the most blatant time honoured oligarchical structure since roman days...THEIR club membership rule : "When times are bad, we regroup like shieded tortoises, when times are good we are every man for himself and may the milk maid go to he who milks his clients best!"

Wed, 09/14/2011 - 23:31 | Link to Comment Jim in MN
Jim in MN's picture

Hey so does this mean that Citibank has like TWO trillion in European exposure instead of just a trillion? Naughty Citibank. Wouldn't want to get caught holding any of THAT stanky stuff.

Wed, 09/14/2011 - 23:42 | Link to Comment Mercury
Mercury's picture

Why anyone would choose to put their cash into money markets at this point is beyond me.

Near zero (negative real) interest rates, no FDIC coverage, new rules that can suddenly close the window on you when you want to withdraw funds and buck-breaking principal risks galore.

Wed, 09/14/2011 - 23:33 | Link to Comment williambanzai7
williambanzai7's picture

That's history you hear rhyming...

j

Wed, 09/14/2011 - 23:37 | Link to Comment rocker
rocker's picture

Again. didn't we do that before.  Oh yeah, it's Europe's turn.  

No Defaults allowed, I'll give you 40 cents on that dollar you gave me yesterday. We be still good, Eh.   LOL 

Wed, 09/14/2011 - 23:41 | Link to Comment Jim in MN
Jim in MN's picture

Warning--Financial Engineering Zone--No Productive or Honest Activity Allowed

Thu, 09/15/2011 - 00:07 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Seriously jim, Financial engineering and financial innovation, talk about two really dangerous oxymorons.

ORI

Wed, 09/14/2011 - 23:50 | Link to Comment sitenine
sitenine's picture

thank you

Wed, 09/14/2011 - 23:34 | Link to Comment bob_dabolina
bob_dabolina's picture

And I wonder who have been those big sellers of gold 2-430am est....

Wed, 09/14/2011 - 23:52 | Link to Comment Long-John-Silver
Long-John-Silver's picture

Paper or Plastic Gold?

Wed, 09/14/2011 - 23:35 | Link to Comment adr
adr's picture

Tens of billions, probably well into the tens of trillions. Bernanke has proboably been bankrolling every single market jump since March 2009. In fact we probably know 100% for sure he has. China is probably buying Greek debt with US dollars.

The goal is to have the USA hold the bag for the rest of the world. We'll have our hyperinflation moment, the billionares will retire to Dubai to live out the last years of their lives in luxury. Without the welfare payments America will degenerate into the worst parts of Africa and we'll have the race wars.

Wed, 09/14/2011 - 23:38 | Link to Comment Denver768
Denver768's picture

Jiminee cricket. Between the machines, the corrupt officials, the rigged casino, the banking idiots, the dull mass media

All I can say is WTF... Time to start shutting it all down and unwind this mess, however painful.

Money is shit, the bankers are flies.

Time to flush this toilet.

Wed, 09/14/2011 - 23:41 | Link to Comment Thomas Jefferson
Thomas Jefferson's picture

Europe is burning to the ground and Fox News is trying to pump out some murder mystery BS.  Why does anyone watch that garbage?

Thu, 09/15/2011 - 00:11 | Link to Comment Denver768
Denver768's picture

Opium for the masses... Keep them slumbering. And our next-to-worthless journalist aren't doing the people any favors either.

Sad really. Scary and sad.

Thu, 09/15/2011 - 00:14 | Link to Comment Oh regional Indian
Oh regional Indian's picture

When you let the Faux guard the hen house of your mind, what do you expect TJ?

ORI

Want to save the world?

Thu, 09/15/2011 - 00:15 | Link to Comment chump666
chump666's picture

hahaha oh man that sounded funny...

yeah but you are right.  The EZ meltdown/riot/chaos back on in less than 48hrs.  The markets, as described, are panic meltups.   F*ck the Fed, they sent more trillions into bank blackholes, everyone will short US banks.  No problems, cause they can't make money anymore.  On 0% rates + insane speculation = Wall Street will implode again

Thu, 09/15/2011 - 00:16 | Link to Comment chump666
chump666's picture

...EUR sells coming through.

Wed, 09/14/2011 - 23:36 | Link to Comment zorba THE GREEK
zorba THE GREEK's picture

What else is going on behind the scenes that we don't know about?

It's always the punch you don't see coming that knocks you out.

Wed, 09/14/2011 - 23:38 | Link to Comment rocker
rocker's picture

Think, it is Rinse and Repeat Time.  Done it all before.  Geithner has the play book in hand.

Wed, 09/14/2011 - 23:36 | Link to Comment catladdy
catladdy's picture

-At what interest rate will the USA be unable to meet it's daily interest expense? Is it 7% now?

 

Wed, 09/14/2011 - 23:37 | Link to Comment sitenine
sitenine's picture

Sucks to be a tax payer, doesn't it?

Wed, 09/14/2011 - 23:41 | Link to Comment bob_dabolina
bob_dabolina's picture

It's an honor and privilege to be fucked in such a regal manner

Wed, 09/14/2011 - 23:41 | Link to Comment nah
nah's picture

printing money is a luxury

.

isnt it

Wed, 09/14/2011 - 23:41 | Link to Comment MFL8240
MFL8240's picture

These same banks in the US are reposessing homes from US taxpayers as they are using money to help European banks.  This is as sick as it gets folks.  

Thu, 09/15/2011 - 00:02 | Link to Comment Mactheknife
Mactheknife's picture

That's just geography. The same banking cartel owns most of them. Just as they own the Federal Reserve. They've only been working on this for 250 years.

http://www.erichufschmid.net/TFC/Rothschild-timeline.htm

Wed, 09/14/2011 - 23:44 | Link to Comment Dingleberry
Dingleberry's picture

So "our" banks bought euro-style CMBS???? I sure hope they have the coveted "AAA" ratings!!!!!  (wink, wink).

Wed, 09/14/2011 - 23:46 | Link to Comment rocker
rocker's picture

Not to worry, the Fed has their back.  Who will have Grandpa's and Grandma's back.  Hmmmm

Wed, 09/14/2011 - 23:45 | Link to Comment Syrin
Syrin's picture

This is the sort of stuff you see in movies like "Conspiracy Theory" playing out before our eyes.

Wed, 09/14/2011 - 23:45 | Link to Comment monopoly
monopoly's picture

I cannot absorb any more tonight. Just beyond imagination.

Good Night.

Wed, 09/14/2011 - 23:46 | Link to Comment boom goes the d...
boom goes the dynamite's picture

Have we reached the Alamo yet?  We'll be safe there.

Wed, 09/14/2011 - 23:46 | Link to Comment LeonardoFibonacci
LeonardoFibonacci's picture

What would Dexter Morgan do?

Thu, 09/15/2011 - 00:59 | Link to Comment FreeNewEnergy
FreeNewEnergy's picture

I don't know how Dexter Morgan is, but I'd do Chesty Morgan any time.

chestymorgan011.jpg

Wed, 09/14/2011 - 23:48 | Link to Comment Jim in MN
Jim in MN's picture

Remember kiddies, get anything you value OUT of NYC/DC. Redirect financial affairs to credit unions or conservative local banks. Ask your family, church, local government and barber shop to do the same.

You can protect yourself and take some power from these corrupt bastards at the same time. Smiles!

Wed, 09/14/2011 - 23:50 | Link to Comment LeonardoFibonacci
LeonardoFibonacci's picture

Run for your lives..........

Wed, 09/14/2011 - 23:49 | Link to Comment zorba THE GREEK
zorba THE GREEK's picture

Just bring out the giant eraser and hit the reset button so we can get on life as usual.

Wed, 09/14/2011 - 23:51 | Link to Comment Belarus
Belarus's picture

Jesus, no one has said it yet: good goddamn sleuth work ZH. It's like AIG all over again....off balance sheet risk, with no collateral or reserves. Scary shit. 

Thu, 09/15/2011 - 03:56 | Link to Comment FlyPaper
FlyPaper's picture

But remember: all that fancy financial reform legislation that passed last year will protect us~!

I think its time to put a clamp down on this shit.  Would these banks be doing this lending if they were not assuming we'd bail their sorry asses out again?

All said, I'd have to think that uncle Ben knows this is going on.  Its one way the FED gets to be the global Central Bank; and the wealth of the US citizens gets drained on every loss via QE.  All they have to do is take the SocGen "toxic assets" now REPOd to the to-big-to-fail banks and make Maiden Lane VI.  This perpetuates the game and further interlocks the US and European banking sectors together; and the FED (at our expense) gets to fill the gap in the ECB charter.

And the status quo continues ...

Disgusting.

 

Wed, 09/14/2011 - 23:53 | Link to Comment 1971
1971's picture

If they have not already but will the banks soon be signing exclusive agreements with the drug cartels to generate more liquidity?

1971

Thu, 09/15/2011 - 00:00 | Link to Comment Belarus
Belarus's picture

BTW, it could be why the algo's have been instructed to keep BAC above $7 per share at all costs. It seems to be a breakpoint for the bank, seriously like they haven't had enough, and anything below becomes a deat spiral.....where of course cash is looked up in European shit soup....

This fucker, and everything, is on the precipice of disaster. I expect to hear LSAP on the 21st. Operaton Twist just isn't going to do it. If not, all bets need to come off the table on everything not nailed down.

Thu, 09/15/2011 - 00:29 | Link to Comment lizzy36
lizzy36's picture

$7 is buffets break even. Probably why they are trying to keep it above $7. If they are forced to do another secondary, Buffet ain't going to be happy if it comes at a d/c to where he purchased his piece.

Thu, 09/15/2011 - 09:34 | Link to Comment baseball13
baseball13's picture

Buffet has no risk in the BAC deal - remember he had met with Obama the week before his private bailout...

Thu, 09/15/2011 - 01:11 | Link to Comment FreeNewEnergy
FreeNewEnergy's picture

+7

$7 is the magic, like a banker's G-spot, where value disappears below and one can catch one's breath above. I distinctly remember telling my father not to sell our $12 puts on Cuntrywde at $7, because I was sure it was going to $3 and I was right. We got out at 5.20-5.50.

The amazing this is Citi, which was levitated at $3-5 for two years, then reverse-split to like, what? 45? And now, it's --- ok, i'll check --- 27.39. Citi is as dead a bank as there ever has been.

Maybe they'll make a mercy rule for banks. If your share price falls below 7, or maybe 6, your execs get out of jail free. Seems to be working, no?

F the banks and the .gov. They're just on the wron gsid of th elaw.

Thu, 09/15/2011 - 00:09 | Link to Comment chindit13
chindit13's picture

Your Last 24 Hours Explained

The Greek ship of state once again threatened to slip beneath the waves. Just when it looked as if Poseidon would finally call his children home, China took a back door (Greek Style) approach to the EU Pap smear and hinted that they would be buying Italian sovereign debt. Russia soon followed and supposedly Putin its own bid. Brazil fired a shot from the wings. Only India, which needed to raise rates for the twelfth time in the current cycle, and who needed to intervene in the FX market to prevent the rupee from falling to a two year low above 48 to the dollar, failed to join. Rather than announcing the Apocalypse, these three horsemen rode to stop the Apocalypse from happening. They were, however, one BRIC short of a full load.

Later in the European day, the Greek PM did a three way phone job with Angela “Medusa” Merkel and Nicolas “Siren Song” Sarkozy, with Sarkozy no doubt playing Lucky Pierre. If the legendary sovereign savior named Jeffrey had joined the call, there would have been no doubt whatsoever it was phone Sachs. Instead, we can only think the unthinkable. Tim Geithner dared to offer his advice, telling Cramer on CNBC that Europe and the world could not afford another Lehman moment, failing to note that the world could not afford the first Lehman moment.

In the end, if Europe is to be a Europe greater than what Charlemagne envisioned, which ironically was Europe minus the PIIGS and the former Eastern Bloc, Greek life will have to imitate Greek Art, or at least rhyme with it, and in a rough imitation of Sophocles’ Oedipus Rex, Greece will have to be married with the Vaterland.

Thu, 09/15/2011 - 02:23 | Link to Comment IQ 145
IQ 145's picture

Masterful.

Thu, 09/15/2011 - 10:04 | Link to Comment falak pema
falak pema's picture

Agreed, very entertaining and a propos. Its PIGS not PIIGS. Small correction for Charles Magnus days.

Thu, 09/15/2011 - 00:06 | Link to Comment TheArmageddonTrader
TheArmageddonTrader's picture

This is obviously what SocGen CEO is doing in NYC. The danger of it is that the US counterparties cherry pick the best collateral, making the next level of squeeze that much more difficult.

Thu, 09/15/2011 - 00:08 | Link to Comment Freebird
Freebird's picture

Also the currency swaps are a great opaque way to muddy the waters.

Thu, 09/15/2011 - 00:15 | Link to Comment anto
anto's picture

A quick question for the community:

As I understand it, a huge part of the 2007-2008 US banking crisis was the CDS derivatives.  Since these instruments were unregulated and traded OTC, there was no way to tell before the crisis what CDSs were on the books of the big banks. 

Is there a similar issue re: the European banks now?  Is is possible that they have sold/bought tons of CDSs that may or may not have anything backing them?  Were these things accounted for furing the stress tests?

Furthermore, what would it take to trigger these sovereign CDSs and bank CDSs?  Is there a way for Greece to structure a default so that it doesn't trigger the CDSs?  What about if a bank defaults?

Thu, 09/15/2011 - 00:42 | Link to Comment bob_dabolina
bob_dabolina's picture

Institutional investors (banks/hedgefunds, etc) have speculative bets on countries in Europe defaulting (CDS)

The problem is that countries in Europe were writing checks their productivity couldn't cash. Now NO ONE wants to lend those countries money and they don't have access to the bond market (except to a certain extent the ECB to the tune of about 200 or so billion dollars thus far) as well as the shady transactions highlighted in this article. The banks now have assets that are not worth shit (much like the mortgages and CDOs of the 08 crisis) except they are soverign bonds. 

The interconnectedness of the banking system is structured in such a way where if a couple of the bigger banks are in trouble EVERYONE is in trouble as they are all counterparties to eachother. Let's break it down into a smaller example. Let's say I lend you 100k to buy something (a widget) and I borrowed the money to begin with. Now because it's a loan you have an obligation to pay me back, and I have an obligation to pay my creditor back. Now let's say you go out and buy said widget but all of a sudden that widget is now worth $10,000 and you can't come up with the 90k to pay me back. Now I am in trouble, and my creditor is in trouble as he was expecting that money back to cover other loans he has out. That's basically what we're facing but with 100s of billions if not trillions of dollars.

I don't think the crisis will have as large a shock as in 08 because it was completely unexpected and there were no mechanisms in place to handle it. All kinds of shady gidgetry like reverse repos, fx swap lines, and all other kinds of mechanisms are in place from the last crisis, so to some extent they will be able to cushion it. However, there are always unintended consequences sooo....it's anybodys guess what happns

All that shit I just said is one reason the dollar is on fire right now. There is that carnal and visceral need to fill the black hole and there aren't enough dollars. I have actually suspected that the SNP downgraded the US to make Europe look more attractive because this situation the system is in is dire, but that's just a hunch.

Thu, 09/15/2011 - 01:19 | Link to Comment FreeNewEnergy
FreeNewEnergy's picture

Dude, too long. CDS going bat-shit is like a bookie that goes bust. At first, everybody wants his ass, but once everyone realizes that the Cowboys covered the line and everybody and their grandparents were on it and killed the bookie, everybody laughs it off, kicks the deadbeat bookie twice in the crotch and moves on. There's no gain on a shit bet.

I think it would be nice if every Tuesday people could go into their local mega-bank branch and withdraw as much money as they need, not what they have in their accounts, just what they figure will get them through the week. Kind of how our federal government works.

Thu, 09/15/2011 - 10:26 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

monetiZe assets;  don't hafta take losses! 

now, are these shadow and completely unreguated?  nah!  the FED is in charge of banking and is calling the shots, here, spreading the contagion/risk

 is this QE III,  BiCheZ?

th europeon banks will not hafta "take any losses"!  welcome to the shark-jumping olympiad! 

credit woes?  we can help ya extend and pretend! 

now, i may be wrong.  again.  but didn't the "regulation" script go something like this?

  • how tf can we can regulate these zombie mofo's?
  • i know!  let's have the FED do it!
  • ok!  that's unan-i-mouse!  next odor of business:  supercongo and campaign contribs for re-election of puppets...

"long-term repos..."...."good quality assets"...."don't hafta take the losses upfront, spread them over the life of the asset"...

it's just a warm fuzzy socialiZing these eoropean losses thru US banks...

my inner ross perot is hearing a giant sucking sound~~~US liquidity going to europe, and with the collateralized commercial debt backing the monetiZation, the irony is too much for a mere pirate, as mr perot meets clark griswold

the poor fuking shark!!!  oh!  the humanity!

Thu, 09/15/2011 - 00:33 | Link to Comment honestann
honestann's picture

End the fed.

End all central banks.

End the eurozone.

End the USSA.

Thu, 09/15/2011 - 00:55 | Link to Comment Peter K
Peter K's picture

Helps explain the Turbo Tax Tim emergency flight to the Euro Min Fin summit this weekend ;)

We want our money back!

Thu, 09/15/2011 - 01:09 | Link to Comment Rinpocheinp
Rinpocheinp's picture

"The first TSLF auction will be a loan of Treasury securities against Schedule 2 collateral rather than against the Schedule 1 collateral previously proposed. To facilitate the operational processes of the facility, the Federal Reserve has also expanded the list of eligible collateral for Schedule 2 to include agency collateralized-mortgage obligations (CMOs) and AAA/Aaa-rated commercial mortgage-backed securities (CMBS), in addition to the previously announced AAA/Aaa-rated private-label residential mortgage backed securities (RMBS) and OMO-eligible collateral."

http://www.newyorkfed.org/newsevents/news/markets/2008/rp080320.html

"To facilitate the operational processes of the facility...",

: an unsufficiently facilitating facility has had its operational processes facilitated, hence it now facilitates the new purchases -- which before could not be turned into cash. A financial product has been turned into cash -- a mere configuration of promises of cash -- the enslaved mortgage victims' wages.

 

Thu, 09/15/2011 - 01:12 | Link to Comment pappyhlace
pappyhlace's picture

think i'll hit the bank this weekend and take out some debt notes...er fiat...er "money"

Thu, 09/15/2011 - 02:20 | Link to Comment TheArmageddonTrader
TheArmageddonTrader's picture

Well I said the US banks would be cherry picking the European banks' best assets for collateral, and here's the FT with confirmation.

Banks use gold to get dollar funds

European banks are rushing to use their gold to access much-needed dollar funding, in the latest sign of the growing liquidity crunch for the continent’s financial institutions.

Gold dealers and analysts said that there had been a strong move to lend gold in the market in exchange for dollars in the past week, accelerating in recent days.

http://www.ft.com/intl/cms/s/0/9c5ec914-deed-11e0-9af3-00144feabdc0.html...

Thu, 09/15/2011 - 02:37 | Link to Comment pcrs
pcrs's picture

they must be pretty sure of a bailout if they are heading there, a tendency for suicide they do not have.

Thu, 09/15/2011 - 02:40 | Link to Comment Absalon
Absalon's picture

So - published financial statements for banks on both sides of the Atlantic are meaningless.

 

But, we already knew that.

 

When are these clowns going to learn that the first step to fixing the financial crisis is to shoot the liars and publish honest financial statements so we know what we are investing in?

 

 

Thu, 09/15/2011 - 08:04 | Link to Comment Youri Carma
Youri Carma's picture

NWO likes this. Very good, very good …. gna, gna, gna.

 

Same as it ever was! http://www.youtube.com/watch?v=I1wg1DNHbNU

Thu, 09/15/2011 - 09:27 | Link to Comment baseball13
baseball13's picture

My 2 cents worth:

   - bread & circuses

   - financial armegeddon

   - big government takeover (martial law)

   - Revolution!

> see you on the other side...

Do NOT follow this link or you will be banned from the site!