If you've been following events in Europe (checkout Kossack gjohnsit's post on the Rec List for the latest on this, by clicking HERE), the reality is that what's happening throughout the continent--from Athens to Bucharest and from Lisbon to Madrid--has very little to do with the well-being of the respective citizens of the countries involved with regard to recent austerity demands by Europe's status quo. Numbers I've read, of late, note that less than 20% of these funds actually make it past payments for currently outstanding bank debt. It's all about making the banks "whole." (I know, you're shocked, right?)
In fact, much of the Wall Street bailout money and related U.S. government guarantees -- which included, and continues to include, trillions of dollars in U.S. taxpayer backstops and related guarantees for Wall Street's European cohorts -- had gone, and continues to go, to European banks, even though it had been largely unreported in the MSM, until just the past few months. (How quickly we forget! See Nomi Prins' and Satyajit Das' commentary, below.)
Here's Joseph Stiglitz on the International Monetary Fund (IMF), a member of "the troika" imposing austerity in Greece, now:
The IMF is a body with a very specific agenda. It was best described by former head of the World Bank, Joseph Stiglitz, to Johann Hari: “When the IMF arrives in a country, they are interested in only one thing. How do we make sure the banks and financial institutions are paid?… It is the IMF that keeps the [financial] speculators in business. They’re not interested in development, or what helps a country to get out of poverty.”
The best piece I've read about this is from one of the world's leading experts on derivatives trading, author Satyajit Das, entitled: "What happens in Europe won’t stay in Europe."
As you'll realize, once you read Das' commentary linked above, in the U.S. it's not even primarily about the U.S. taxpayer's 17%+/- share of the overall funding of the IMF (although U.S. taxpayers are, via the IMF, directly funding tens of billions of dollars of these European bank bailouts, as you read this) for the too-big-to-fail banks' direct investments in sovereign and corporate bonds in Portugal, Ireland, Italy, Greece and Spain (the "PIIGS"). That's a "mere" $80 billion in exposure. (Check this piece of propaganda from the NY Times via Americablog, earlier this month, which completely ignores the real story.) As Das points it out this story is primarily about U.S. banks' direct investments of over $500,000,000,000 (Das tells us it may be more than a trillion dollars) in French and German banks and those banks' direct investments and derivatives plays in the at-risk Eurozone countries.
You see, when a country (or any entity, for that matter) actually defaults on debt, it's pretty much coming right out of the counterparties' pockets, since the very nature of these sovereign and (PIIGS') bank-based derivatives is, literally, all about insurance against defaults.
And, here's Nomi Prins, from just a few weeks ago...
Bailouts+Downgrades=Austerity and Pain
Nomi Prins
Tuesday, January 17, 2012 at 5:07PM
…Bailout Economics Doesn’t Work
ECB bailout money didn’t (and won’t) go towards helping any European country’s local economy, any more than it went to aiding the mainstream US economy. The ECB and IMF, at the Fed, US Treasury and US administration’s urging, camouflaged the insolvency of European banks, perpetuating losses with bailouts, and forcing cowardly governments to support them, while turning a blind eye to boosting core economies.
Meanwhile, banks with access to the ECB’s ‘window’ are taking the money and immediately putting it back into the ECB as reserves. Overnight deposits at the ECB continue to break records, currently hovering around 500 billion Euro ($640 billion). As in the US, European banks aren’t using that liquidity to help fix local economies, but hoarding it to preserve themselves. The amount on reserve is 98% of the total made available in emergency 3-year loans in late December at 1% interest; banks get 0.25%, which means they are paying 0.75% interest for the loans, far less than the market would charge them.
The die has been cast. Central entities like the Fed, ECB, and IMF perpetuate strategies that further undermine economies, through emergency loan facilities and bailouts, with rating agency downgrades spurring them on. Governments attempt to raise money at harsher terms PLUS repay the bailouts that caused those terms to be higher. Banks hoard cheap money which doesn’t help populations, exacerbating the damaging economic effects. Unfortunately, this won't end any time soon...
Yes, it IS an AIG backdoor bank bailout redux. Once again, it's all about "
Our Friends from Goldman Sachs..."
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And, yes, I realize that derivatives trading is viewed as being outside of the control of our government, since it's being done, internationally; but, then again, if our government can control offshored Internet gambling here in the U.S., then why are the powers that be excluding what IS, effectively, nothing more than Wall Street casino betting, at least as it relates to the trillions of dollars in uncovered/naked shorting of derivatives that are occurring in Europe, right now, as you read this? The sad thing is that when it comes to derivatives trading, in general, the banks are still--for all intents and purposes--supervising themselves. The derivatives "clearing houses" are owned by the banks, and they will continue to do so (because Dodd-Frank was woefully ineffective in this regard) if we allow them to continue to run rampant in the corridors of our government in D.C. handing out campaign cash.
At what point does "allowing the TBTF banks to remain competitive on the world stage" outweigh the safety and financial security of the 99% of us on Main Street?
Want to do at least a little something about this, today? As in right now? Join OWS as they Occupy the SEC later this afternoon...
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4:00 TODAY: Occupy the SEC March to the Fed and the SEC: Enforce the Volcker Rule!
Lambert Strether
Naked Capitalism
Monday, February 13, 2012 8:28AM
Details here.
Schedule:
4-430pm: Assemble at Liberty Plaza
5pm: March to the Fed (33 Liberty Street )
5:30pm: March to the SEC’s NY Office (3 World Financial Center, Suite 400)
February 13th marks the deadline for Public Comment on the draft version of the Volcker Rule . The Volcker Rule is a new regulation that aims to curb risky behavior at banks that have enjoyed bailouts and cheap funding from the Fed. It does so by prohibiting big banks from doing two things:
1. Proprietary Trading
2. Owning Hedge Funds or Private Equity Funds
Between now and the summer, the SEC, The Fed, the FDIC and the OCC will be deciding on what the final rule will look like. The banking lobby would love for the rule to be watered down. We want to march on the Fed and the SEC to let them know that we are watching, and we are asking them not to bow to the banks, but to draft a strict, loophole-free version of the Volcker Rule.
Monday, February 13th is the deadline for the public to submit comment on the draft of the Volcker Rule. To learn more about how to comment, visit Occupy the SEC.
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One final note: While it's not directly mentioned in Lambert Strether's Naked Capitalism post, immediately above, the reality is that (between) the Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC) control ALL US bank derivatives trading regulatory oversight in this country, too.