Bob Diamond, Chairman, Barclays Bank: “There have been apologies and remorse from bankers. What we need is a dose of confidence; we need to think about what’s best for the economy of the UK.”
Gorilla translates: “I’ll need a dose of 8 million pounds above my salary this year to regain my confidence!”
In the Old Dominion, as in many other states, and certainly in the US Congress, the bankers rule!
There’s little or no protection for consumers facing foreclosure, any more than there was little or no protection for consumers who were targeted by the banks for totally inappropriate home loans.
And despite all the ballyhoo, Dodd-Frank does next to nothing to prevent the next cycle of disaster, because it does not punish the banks today for their rapacious behavior.
Gorilla says: “The Citi’s not losing much sleep!”
International bank regulators will give everyone plenty of time to achieve what are ridiculously low Tier I capital standards.
Using the new magic 7%, it’s been determined that the world’s banks would need another $750 billion.
Oh, and forgotten in all this is that the bankrupt Lehman Brothers was indeed well capitalized by the new, “tougher” Basel standard.
Most reputable economists have argued that 15-20% should be the minimum, and some say it should be closer to 30%, so as to prevent the shadow banking system from collapsing the world economy a second time.
But of course that would mean many banks are in fact insolvent and unable to raise the necessary capital.
And so extend and pretend goes on. Some day, some decade all will come right.
Gorilla says: “Here we go again!”
The world’s bankers care not one iota about whether they appear to be criminals.
Gorilla says: “That’s because they are! When everything’s destroyed by nature, we still shoot looters, don’t we?”
That’s how much the Fed is on the hook for “saving” the banking system…
And the likelihood this vast assumption of worthless assets will be paid back? Very, very small.
And the likelihood the Fed will be doing this for the banks again once Euroland contagion reaches critical mass and/or economic recovery stalls out? Very, very large.
It’s not to say that the banks didn’t need help at the time.
But there was no effort made by the Fed, or any other regulators/legislators/President since, to exact any price for the banks behavior: enforce haircuts on shareholders, fire bank management, or eliminate the shadow banking system once and for all.
Gorilla says: “Second verse: same as the worst!”
The news from Euroland keeps getting grimmer…
Today, it’s Italy and Spain, but the larger issue remains: extend and pretend isn’t working on either side of the Atlantic and the day of reckoning is fast approaching.
For Euroland, the problem is straightforward: the PIIGS are going to default, the only questions are how big the haircuts will be and whether the euro currency regime survives.
For the US, bank loan losses have still not been fully marked to market, and they are substantial: several trillion dollars.
There will be at least another 5-10 years of high unemployment and deflation until and unless politicians get serious about creating jobs (vastly more stimulus is needed, on the order of $2 trillion/year for the next 3-5 years) and enforcing moral hazard (politicians cannot continue being wholly owned subsidiaries of a bankrupt Wall Street, and house prices need to fall another 20-30%).
With the Know Nothings guaranteeing another 2 years of stagnation and gridlock in Washington, it’s difficult to be anything other than pessimistic about the rest of this decade.
Gorilla says: “When we have no leaders, we’re all bottom feeders!”
Unlike our so-called leaders, I haven’t forgotten you, the Irish, the banksters, and the Eurozone, but but thanks again for the reminder!
And of course this isn’t being discussed anywhere at all, nor are the trillions in bad debts of our very own banksters, now offloaded to the Fed!!!
It’s a giant game of extend and pretend, and it may very well end in tears…
Gorilla says: “The hurricane that will actually hit the financial system is well beyond Category 5 (and its progenitors will all be taking the fifth)!!!”
In Denver, where yet another exotic banking deal ends up screwing kids, teachers, and taxpayers…
This one was executed in 2008, while banks were beginning to collapse. It left the school system facing fees amounting to 20% of the total budget by 2010. Unless it’s renegotiated, this deal will be killing off the Denver school system pretty quickly.
Oh, and the man responsible is now a Senator from Colorado! But he doesn’t want to talk about it!
Gorilla says: “Responsibility? In the Senate? You must be joking!”
Quelle surprise!!!
And the big winners are the French and Nordic banks, who get another 8 years to let the rest of the world know they’re solvent!
It’s another example of why “financial reform” has become a meaningless phrase.
Like criminals, banks will always go to countries and regulators that give them the best free ride.
In the US, the free ride depends more or less on capturing and/or shopping around for regulators.
In Euroland, it’s all about hiding away your problems and/or creating stress free stress tests you know your banks will ace.
Gorilla says: “Warm up the printing press and get ready for the next banking crisis!”
Only 7 of 91 European banks failed the stress test!
Sounds great, until you realize that the tests did not take into account the possibility of debt defaults by Spain, Portugal, Greece, Ireland, and Italy.
Oh, and the 6% Tier One capital requirement minimum? Lehman Brothers had more than 10%, how’d that turn out?
Mostly, these tests, like the ones in the US, are about extend and pretend.
The hope is that world economic growth will eliminate any threat to solvency.
And of course, the best way to achieve this is the German and Chinese way: beggar thy neighbor!
Gorilla says: “The underpants gnomes withdrew their funds long ago!”
Gorilla’s Blog