Infinite Unknown

Goldman Sachs received a $12.9 billion payout from the government’s bailout of AIG, which was at one time the world’s largest insurance company.

Goldman Sachs sent $4.3 billion in federal tax money to 32 entities, including many overseas banks, hedge funds and pensions, according to information made public Friday night.

Goldman Sachs disclosed the list of companies to the Senate Finance Committee after a threat of subpoena from Sen. Chuck Grassley, R-Ia.

Asked the significance of the list, Grassley said, “I hope it’s as simple as taxpayers deserve to know what happened to their money.”

He added, “We thought originally we were bailing out AIG. Then later on … we learned that the money flowed through AIG to a few big banks, and now we know that the money went from these few big banks to dozens of financial institutions all around the world.”

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Tags: AIG, Bailout, Banks, Economy, Fed, Federal Reserve, Global News, Government, Politics, Taxpayers, Timothy Geithner, U.S.

Last week, President Obama signed into law the Dodd-Frank Wall Street Reform bill – hailed as the most sweeping overhaul of US financial regulation since the 1930s.

“Because of this law, the American people will never again be asked to foot the bill for Wall Street’s mistakes,” Obama boomed at the schmaltzy signing ceremony, amid bursts of applause.

“These reforms will put a stop to a lot of the bad loans that fuelled this debt-based bubble,” the President gushed to America and the rest of the world. “This bill also empowers consumerse_SLpsdelivering the strongest consumer financial protections in history.”

It would be reassuring if we could agree with Obama, concluding that Dodd-Frank will help to prevent the next systemic crisis and associated bail-out of “too-big-to-fail” banks. Reassuring, but wrong.

For despite some marginal regulatory improvements, this is no Rooseveltian legislative milestone. Amid the hype and back-slapping of last week’s launch, the sad reality is that Dodd-Frank fails to address the fundamental problems that resulted in the sub-prime fiasco and the related damage to not just America, but the entire global economy.

The inherent feebleness of this door-stopping bundle of statute and its lack of desperately needed substance, was brilliantly captured by Laurence Kotlikoff, a highly-respected professor of economics at Boston University. “This law is like being invited to dinner and served pictures of food,” Kotlikoff remarked.

It would be tempting to smile at such a wry observation if the situation it described wasn’t so depressing. For what the US political establishment’s non-response to the credit crunch illustrates is this: such is the lobbying power of the big Wall Street institutions that they not only caused a global economic crisis and then forced the US government to pay for a massive bail-out, but then used a slice of that bail-out cash to bribe politicians with campaign donations in order to block rule changes that might prevent a repeat performance.

That leaves the politicians and high-flying bankers happy, of course, while regular citizens – and their children and grandchildren – foot the multi-billion dollar bill. Continue reading »

Tags: Bailout, Barack Obama, Economy, Global News, Government, Law, Lobbyists, Obama administration, Politics, U.S., Wall Street

Those were the good old days!

LOSSES posted by Anglo Irish Bank are the worst by any bank in the entire world, according to new data from a prestigious financial journal.

The taxpayer-owned bank’s loss in 2009 of €15bn was far bigger than those of giant US, Japanese and German banks, according to ‘The Banker’, an industry magazine listing the 25 biggest losses.

Anglo, which is hoping to split itself into a so-called ‘good’ and ‘bad’ bank, managed to lose almost more money than the two next biggest loss-makers put together, the magazine reveals.

Anglo, nationalised since January 2009, has already set a record with its 2009 loss — the largest ever posted by an Irish company.

Many experts believe such losses may never be recorded again in Irish business. And to cope with future losses, the Government is committed to pumping over €22bn into the bank.

Destruction

The scale of destruction wrought by the bank is clear when compared with other banks that reported smaller losses. For example, Royal Bank of Scotland, one of the largest banks in the world, lost only a quarter of what Anglo lost last year, the survey reveals.

US lender Citigroup, once the world’s largest bank, only lost half of what Anglo lost in 2009, despite taking a massive hit during the subprime crisis. Most of the 25 banks surveyed lost money because of the subprime crisis, whereas Anglo’s losses came from property lending. Continue reading »

Tags: Anglo Irish Bank, Bailout, Banks, Economy, Global News, Government, Ireland, Politics, Taxpayers

European leaders meet in Brussels today amid growing fears that Spain, Europe’s fifth-largest economy, is preparing to ask for a bailout which would dwarf the €110bn (£90bn) rescue plan for Greece.

The Spanish government yesterday dismissed reports that it was already in discussions with the European Commission, International Monetary Fund and the US Treasury for a rescue package worth up to €250bn.

Officials in Madrid, Brussels and Paris were forced to deny that a Spanish bailout – which would take the European debt and euro crisis into a potentially dangerous new phase – was on the Brussels summit agenda.

“Spain is a country that is solvent, solid and strong, with international credibility,” said its Prime Minister, Jose Luis Rodriguez Zapatero. The European Commission spokesman said: “I can firmly deny [that a Spanish rescue is under discussion]. I can say that that story is rubbish.” (Sure!)

Brussels diplomats have been at pains to send out feel-good signals ahead of a summit in which Europe’s leaders are supposed to take the first steps towards more disciplined and co-ordinated, control of national finances. Those reforms are meant to restore confidence in the euro and underpin the €750m EU and IMF safety-net, created last month for euroland countries that lose the confidence of the financial markets.

However, it is proving hard to shake off persistent market fears about Spain, which, if it needed a lifeline, would swallow up a large part of the emergency fund. Worryingly for the EU, the doubts about Spain – whether real or driven by speculation – are eerily similar to the gradual seeping away of confidence that sent Greece into a financial death spiral in March and April. The Spanish government’s cost of borrowing hit a new record yesterday. The interest rate gap, or spread, between 10-year Spanish bonds and their German equivalents, rose by more than 0.10 of a point to 2.23 percentage points.

A senior Spanish banker, Francisco Gonzalez, chairman of the BBVA financial services group, confirmed that foreign private banks were now refusing to provide liquidity to their Spanish counterparts. “Financial markets have withdrawn their confidence in our country,” he said. “For most Spanish companies and entities, international capital markets are closed.”

As a result, the European Central Bank is said to have provided record amounts of liquidity to Spanish banks in recent days. The closure of bank-to-bank credit to Spanish institutions recalls to some market commentators the ripple of crisis through the global financial system after the fall of Lehman Brothers in the Autumn of 2008. Continue reading »

Tags: Bailout, Banks, Debt, Dominique Strauss-Kahn, ECB, Economy, EU, Europe, Global News, Government, Greece, IMF, José Luis Rodríguez Zapatero, Politics, Spain

Fannie Mae headquarters stands in Washington.((Bloomberg)

June 14 (Bloomberg) — The cost of fixing Fannie Mae and Freddie Mac, the mortgage companies that last year bought or guaranteed three-quarters of all U.S. home loans, will be at least $160 billion and could grow to as much as $1 trillion after the biggest bailout in American history.

Fannie and Freddie, now 80 percent owned by U.S. taxpayers, already have drawn $145 billion from an unlimited line of government credit granted to ensure that home buyers can get loans while the private housing-finance industry is moribund. That surpasses the amount spent on rescues of American International Group Inc., General Motors Co. or Citigroup Inc., which have begun repaying their debts.

“It is the mother of all bailouts,” said Edward Pinto, a former chief credit officer at Fannie Mae, who is now a consultant to the mortgage-finance industry. Continue reading »

Tags: Bailout, Economy, Fannie Mae, Freddie Mac, Global News, Obama administration, Politics, Taxpayers, U.S.

Commentary:

This unconstitutional bailout is not about rescuing the euro or helping the people of Greece.

It is a bailout for the banksters, looting the people (especially the Germans):

- Former Bundesbank Head Karl Otto Pöhl: Bailout Plan Is All About ‘Rescuing Banks and Rich Greeks’:

Added to this is the fact that, against all its vows, and against an explicit ban within its own constitution, the European Central Bank (ECB) has become involved in financing states.

- France’s Europe Minister Pierre Lellouche: Eurozone Bailout Violates EU Laws:

In an interview with the Financial Times, Pierre Lellouche laid bare the French government’s conviction that the emergency stabilisation scheme agreed earlier this month amounted to a fundamental revision of the European Union’s rules and a leap towards an economic government for the bloc.

“It is an enormous change,” Mr Lellouche said. “It explains some of the reticence.

It is expressly forbidden in the treaties by the famous no bail-out clause. De facto, we have changed the treaty,” he added.

- Germany’s Bundesbank: Greek Rescue as a Threat to Economic Stability and Probably Illegal; Calls IMF ‘Inflation Maximising Fund’:

The Bundesbank document offers a withering critique of the deal agreed by EU leaders two weeks ago, saying the plan had been cobbled together without consulting central banks and will lead to monetisation of debt. “It brings problems in respect to stability policy that should not be underestimated.”

The joint rescue between the IMF and the EU would turn the Bundesbank into a “money-printing machine” for the purchase of Greek bonds, according to Rundschau. This would breach the EU’s ‘no-bail clause’.

Is there a solution for Greece? Sure:

- German Professors Challenge Greek Bailout Legislation, Declare it Unconstitutional

- Max Keiser on Greece: ‘The IMF is a Financial Mafia’

- The Solution For Greece (Max Keiser, Matt Taibbi and Catherine Austin Fitts)

And the banksters, not the people, would have to eat the losses.

German High Court Considers Euro Bailout: Is the Rescue Package Constitutional?

Protesters in Athens: If Germany’s highest court issues a temporary injunction on loan guarantees, it could push Greece to the brink.

A handful of challenges have been filed in Germany’s high court against the 750 billion euro bailout package agreed to in Brussels. The government in Berlin argues the deal was a “political statement” and not a binding international agreement.

There are many who raised their eyebrows when the European Union agreed last month to create a €750 billion war chest to help prop up the euro. Many were concerned that it might violate EU rules on direct aid among member states.

In Germany, however, the package has attracted the attention of the country’s highest court, the Federal Constitutional Court. It is currently considering whether to issue a temporary injunction against the country’s contribution to the planned rescue package. If the court rules to issue the injunction, it could temporarily ban the government in Berlin from activating German credit guarantees — at least until the court can rule on their legality.

SPIEGEL reported this weekend that Andreas Vosskuhle, president of the Karlsruhe-based Constitutional Court, sent a letter to the chancellor, her ministers, parliament, the German president, all state governments, as well as the European Central Bank and Germany’s central bank, the Bundesbank, requesting statements addressing a request for a temporary injunction. The request was made by Peter Gauweiler, a member of the German parliament with the conservative Christian Social Union, the sister party to Angela Merkel’s Christian Democrats.

His request hardly comes as a surprise. In 2009, Gauweiler filed a suit against the ratification of the Lisbon Treaty, which set the stage for wide-ranging European Union reforms, in what became a partially successful challenge. The court ruled that the German parliament must play a greater role in Germany’s decision-making at the EU level — a ruling that could have wide-reaching implications for future European integration.

Multiple Constitutional Challenges

Addressing Gauweiler’s latest constitutional complaint, Berlin said that if the injunction is issued, it could directly result in a Greek bankruptcy. The government also stated that the euro rescue package agreed to by the EU member states in Brussels was “not a legally binding international agreement, but merely a political statement.”

In addition to the complaint by Gauweiler, Constitutional Court officials have confirmed that three further cases have been submitted against the euro rescue package. At some point this week, German constitutional lawyer and financial expert Markus Kerber and his supporters also plan to submit a constitutional complaint. Kerber and his co-plaintiffs want the court to determine whether the German law passed by the Bundestag approving the euro bailout complies with the country’s own constitution. The legislation covers Germany’s share of the bailout, roughly €148 billion in credit guarantees.

Continue reading »

Tags: Bailout, ECB, Economy, EU, Euro, Europe, Germany, Global News, Government, Greece, Law, Lisbon Treaty, Peter Gauweiler, Politics

Unconstitutional:

- France’s Europe Minister Pierre Lellouche: Eurozone Bailout Violates EU Laws

“Against all its vows, and against an explicit ban within its own constitution, the European Central Bank (ECB) has become involved in financing states.”

Karl Otto Pöhl was head of the German central bank, the Bundesbank, from 1980 to 1991.

Bailout Plan Is All About ‘Rescuing Banks and Rich Greeks’

The 750 billion euro package the European Union passed last week to prop up the common currency has been heavily criticized in Germany. Former Bundesbank head Karl Otto Pöhl told SPIEGEL that Greece may ultimately have to opt out, and that the foundation of the euro has been fundamentally weakened.

SPIEGEL: Mr Pöhl, are you still investing in the euro — or has the European common currency become too unstable of late?

Pöhl: I still have money in euros, but the question is justified. There is still danger that the euro will become a weak currency.

SPIEGEL: The exchange rate with the dollar is still close to $1.25. What’s the problem?

Pöhl: The foundation of the euro has fundamentally changed as a result of the decision by euro-zone governments to transform themselves into a transfer union. That is a violation of every rule. In the treaties governing the functioning of the European Union, it explicitly states that no country is liable for the debts of any other. But what we are doing right now, is exactly that. Added to this is the fact that, against all its vows, and against an explicit ban within its own constitution, the European Central Bank (ECB) has become involved in financing states. Obviously, all of that will have an impact.

SPIEGEL: What do you think will happen?

Pöhl: The euro has already sunk in value against a whole list of other currencies. This trend could continue, because what we have basically done is guarantee a long line of weaker currencies that never should have been allowed to become part of the euro.

SPIEGEL: The German government has said that there was no alternative to the rescue package for Greece, nor to that for other debt-laden countries.

Pöhl: I don’t believe that. Of course there were alternatives. For instance, never having allowed Greece to become part of the euro zone in the first place.

SPIEGEL: That may be true. But that was a mistake made years ago.

Pöhl: All the same, it was a mistake. That much is completely clear. I would also have expected the (European) Commission and the ECB to intervene far earlier. They must have realized that a small, indeed a tiny, country like Greece, one with no industrial base, would never be in a position to pay back €300 billion worth of debt.

SPIEGEL: According to the rescue plan, it’s actually €350 billion …

Pöhl: … which that country has even less chance of paying back. Without a “haircut,” a partial debt waiver, it cannot and will not ever happen. So why not immediately? That would have been one alternative. The European Union should have declared half a year ago — or even earlier — that Greek debt needed restructuring.

SPIEGEL: But according to Chancellor Angela Merkel, that would have led to a domino effect, with repercussions for other European states facing debt crises of their own.

Pöhl: I do not believe that. I think it was about something altogether different.

SPIEGEL: Such as?

Pöhl: It was about protecting German banks, but especially the French banks, from debt write offs. On the day that the rescue package was agreed on, shares of French banks rose by up to 24 percent. Looking at that, you can see what this was really about — namely, rescuing the banks and the rich Greeks. Continue reading »

Tags: Bailout, Banks, Bundesbank, Central Bank, Constitution, ECB, Economy, EU, Euro, Europe, Germany, Global News, Government, Greece, Karl Otto Pöhl, Politics

Janet Tavakoli & Dave Fry on Financial Reform & Goldman Sachs Lawsuit from David Fry on Vimeo.

Tags: Bailout, Banks, Derivatives, Derivatives market, Economy, Fraud, Global News, Goldman Sachs, Government, Janet Tavakoli, Mortgage crisis, Mortgages, Politics, Ponzi schemes, SEC, U.S., Wall Street, Warren Buffett

The bailout for Greece was never about helping the people. Instead it was a bailout for the banksters with taxpayer money, looting the people.

And the ECB buying up Greek bonds is pure quantitative easing (=printing money=inflation=tax on monetary assets), which will not stabilize, but devalue the euro.

In this case things are a little more complicated because the credit line for the ECB quantitative easing policy comes directly from the US Federal Reserve.

European Central Bank President Jean-Claude Trichet: German central bankers are skeptical about the ECB’s buying-up of Greek bonds.

The European Central Bank has been buying up Greek bonds by the bucketload, even though Athens is already getting money from an EU rescue fund. German central bankers suspect a French plot behind the massive buy-up — after all, it gives French banks the perfect opportunity to get rid of their Greek assets.

The senior members of the German central bank, the Bundesbank, regarded Axel Weber with a look of anticipation. What would Weber, the Bundesbank president, say about the serious crisis that had them all so worried, they wondered? And what did he intend to do about it?

Weber said nothing and, as some who attended the meeting report, even his facial expression was inscrutable. The Bundesbank president remained stone-faced as he acknowledged the latest figures, which indicated that by the end of last week the European Central Bank (ECB) had already spent close to €40 billion ($50 billion) on buying up government bonds from Spain, Portugal, Ireland and, in particular, Greece.

The ECB already has about €25 billion of Greece’s mountain of debt on its books, and it is adding another €2 billion a day, on average. The Bundesbank, which has a 27 percent stake in the ECB, is responsible for €7 billion of the ECB’s Greek government bonds.

Many Bundesbank members are wondering why the ECB is buying Greek bonds in the first place, particularly on this scale, now that the euro-zone countries’ €110 billion bailout package for Greece has been approved, and the first tranche of the funds has already been disbursed.

The general €750 billion rescue fund for the remaining highly indebted countries has been approved but not yet set up. For this reason, it certainly makes sense to stabilize the prices of Spanish, Portuguese and Irish bonds. Nevertheless, some of the central bankers have a sneaking suspicion that there is a French conspiracy at work.

Helping French Banks Continue reading »

Tags: Bailout, ECB, Economy, EU, Europe, France, Germany, Global News, Greece, Ireland, Jean-Claude Trichet, Politics, Portugal, Spain

- Indebted Greece still faces arms purchases (BusinessWeek):

French European parliament member Daniel Cohn-Bendit was even blunter, accusing the leaders of France and Germany of obliging Greece to maintain arms sales negotiations with their countries before agreeing to financial aid.

“For the past three months, there were several billions in arms contracts that we forced Greece to confirm: French frigates … helicopters, airplanes, German submarines. It’s hypocrisy,” Cohn-Bendit said at a news conference in Paris earlier this month.

“We want to make money … on the backs of the Greeks,” he said.

Both the French and German governments flatly denied the allegations.

Tags: Bailout, Economy, EU, Europe, France, Germany, Global News, Greece, Military, Politics