Busted: Bankers and The Global Economy

January 13, 2009

October 3, 2008

E.U. Panic: the Edge of the Abyss

Interbank lending, credit to businesses and individuals have seized up. Central banks have injected billions of dollars to maintain some flow of funds, endangering the stability of the dollar.

French Prime Minister Francois Fillon is hosting an emergency summit with Italian, British and German leaders on October 4. Fillon claims that only collective action are capable of solving the financial crisis facing the European Union. He said he would not rule out any solution to stop the failure of the banking system.

Lax regulation and excessive lending have to a global debacle placing the world “on the edge of the abyss because of an irresponsible system,” according to the French Minister.

Finance Ministers in Europe will be working on proposals at the emergency meeting to unfreeze credit while coordinating economic and monetary strategies. While the U.S. has been focused on a massive bailout plan, the British government has been panicking in an effort to bolster their financial system. Bad news isn’t limited to the U.S. economy, now residing in the E.U. financial sector.

Ireland has offered guarantees on bank deposits, prompting a flight of capital from British lenders to Irish banks. Insurance giant Fortis has been broken up and nationalized to sustain it since no corporate rescuers were available. Swiss UBS has been plastered by its exposure to subprime debt. The banking and investment industry in Europe is shedding jobs. Meanwhile, turmoil over Ireland’s guarantees threatens the stability of the rest of Union according to many banking officials.

The U.S. economy has become thoroughly dependant on foreign investment. With much of the world is financial disarray, who will invest in America? According to authors of the American bailout plan, the plan is largely dependent on foreign investors to insure the success for the future. Otherwise, U.S. success in preventing a protracted deep recession is truly a wild card. ~ E. Manning

August 10, 2008

Banks Eat Billions; Credit Crunch Expands

paranoid banking firms gamble on their importance

paranoid banking firms gamble on their importance

The Securities and Exchange Commission stepped in and decided that auction-rate securities have been improperly sold to the public. They haven’t said much else as they carefully watch over the fold of now paranoid bankers. Investment bankers have plenty of egg on their face with punitive action in the immediate future by the Feds.

Citigroup and Merrill Lynch have decided to buy back billions of dollars of securities without admitting liability officially because of state regulator pressure. Bank of America and Countrywide are firmly ensconced in trouble. Swiss giant UBS is in the throes of negotiating a payout that could be in the 25 billion dollar region. As private citizens and investors, we know the reality of the situation. Bankers have tried to play us for fools for the almighty dollar and perhaps investors bit off too much, too soon in the haste for profit.

In theory, when times get better larger investors and even banks should be able to sell off the securities once the markets ease and there’s more credit in the system. That is the public line, but the truth is probably altogether different. Selling off investments with major liquidity issues is a big maybe considering the quantity of these beleaguered banking instruments. Following the aftermath of the subprime mortgage debacle, this is yet another blow to the reputation of investment banks, who may struggle to sell such “sweet deals” in future times even at fire sale prices.

British banks are taking huge hits as a result of the credit crunch with increased pressure to perform for stockholders. Lloyds, Halifax and Alliance & Leicester have been fairly decimated profit-wise. Now RBS and Barclays are taking turns with profit thrashing. British banks haven’t found the credit crunch much easier than U.S. banks. Housing prices continue to drop in the U.S. and the United Kingdom. Foreclosures are a uniform blight in both economies while bankers and economies struggle to adjust. The U.S. market has lost nearly a million homes to foreclosure with more on the way: the worst since the Great Depression.

August 8, 2008

Bankers Seek to Buy Out Uncle Sam on Fraud

Regulators have been investigating Wall Street firms for their role in the sales and marketing of auction-rate investments.

Wall Street agreed to buy back more than $17 billion in securities that they fraudulently sold to retail customers paving the way for other banks and brokerage firms to do the same.

Merrill Lynch jumped ahead of regulator investigatory scrutiny, announcing that they will buy back about $10 billion in auction-rate investments that it sold to retail investors.

Citigroup reached a settled with state and federal regulators, agreeing to buy back about $7.3 billion of auction-rate securities that it sold to retail customers. As recompense for misconduct, Citigroup will pay a $100 million fine for its misconduct. The securities are essentially worthless, even though the buyers were told that the securities were safe and easy to cash in.

Even Bank of America is under attack with subpoenas related to securities sales. Taking on responsibility of bank instruments in bank bailouts has likely posed an additional headache.

At this time, institutional investors are still out in the cold, but both firms claim to be working on a resolution on problems with institutional investors in the hopes of avoiding more heat and gaining brownie points from the federal government. A rush of settlements are expected in the next few months as Wall Street aims to absolve itself.

Regulators are starting to pile on in a sort of informational and investigational bankers bloodletting. The Securities and Exchange Commission has elected to stay out the recent penalties as they expect to weigh in on their own investigation. From all appearance, Wall Street’s troubles have only just begun. Bankers know their guilt. Can they distract the investigations to avoid the embarassment as the propensity of their fraud is exposed to the nation? Seeking to buy out authorities may be seen as an easy way out as the financial onslaught on Wall Street and for banking in general continues.

July 19, 2008

Swiss Secret Banking Dropped by UBS

Due to secrecy pressures from the U.S. federal government, Swiss-owned UBS has decided to drop offshore banking services in America because of criticism that the foreign bank assists Americans in rampant tax evasion. It is now much harder for Americans to participate in secret banking.

Meanwhile, the bank is cooperating with the U.S. government to identify U.S. clients who might have committed tax fraud by using UBS services. Because of the refusal of the Swiss to succumb to privacy pressures, UBS has elected to cease their offshore banking service altogether for America.

Client identity is usually protected under Swiss law, but not when (more…)

February 2, 2008

Dishonest Swiss Bankers?

Filed under: banking, investment, money — Tags: , , , , , , , , — digitaleconomy @ 7:31 pm

Reuters Article 2/2/08
U.S. government prosecutors are investigating whether Swiss banking giant UBS misled investors by reporting inflated prices of mortgage-backed securities it held despite knowing those valuations had eroded.

I have no doubt that whatever investigations that may be or come to pass reveal plenty of banking tomfoolery in the hopes of keeping profits up and losses to a minimum. I don’t know why, but somehow I expected more professionalism from Swiss bankers. Never underestimate the greed of a banker or his cronies. It’s best to remember that greed crosses all national borders. ~E.M.

January 30, 2008

Swiss Banking and Credit Woes

Filed under: banking, federal reserve, investment, money — Tags: , , , , , , , , , — digitaleconomy @ 5:32 am

UBS is among the hardest-hit of the banks around the world that have collectively suffered more than $100 billion in losses from the crisis originating from defaults in U.S. subprime mortgages.

Globe Investor 1/30/2008

International Herald Tribune 1/30/2008

If you have read any of my commentary, history or articles, you are aware of the importance of Swiss banking as well as its role in the world banking system. UBS is a major hinge of the international banking community and is tied into the private banking sector as well with secret investors and ties to the Roman Bank. Because of this role and the power of Swiss banking, the news of this article should cause bankers and investors great concern. UBS has an extensive holding of pensions and other commercial financial holdings that impact the retirement community. The fact that UBS has made the error of investing so heavily in U.S. subprime mortgages is oversight on their part. The real concern is the impact that continued hits will have on existing strongholds in the corporate finance, insurance, pensions and reserve funds of all kinds. All these funds are at additional risk because of this recent bad investment write-off. ~ E.M.

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