EU-DIGEST

Labels: Banking Industry, Davos, Economic World Order, EU Economy, The Financial Meltdown

Labels: Banking Industry, EU, ING

Labels: Banking Industry, Barack Obama, EU

Labels: Banking Industry, US Economy

Labels: Banking Industry, EU, Obama

Labels: Banking Industry, Financial Industry

America's Main Street community banks -- the vast majority of which avoided the banquet of greed and corruption that created the toxic economic swamp we are still fighting to get ourselves out of -- are struggling. Many of them have closed down (or been taken over by the FDIC) over the last 12 months. The government policy of protecting the Too Big and Politically Connected to Fail is badly hurting the small banks, which are having a much harder time competing in the financial marketplace. As a result, a system which was already dangerously concentrated at the top has only become more so.

For the complete report: Take Your Money Out of the Hands of the Banking Oligarchs | | AlterNet

Labels: Banking Industry, EU, US

Greece dismissed talk of a bailout from Europe after an ambitious plan to solve the worst debt crisis in the country's modern history failed to convince EU officials and investors. "It hasn't been a question of a bailout," Greek Finance Minister George Papaconstantinou said in Paris after talks with his French and German counterparts. "We haven't discussed this with my colleagues." EU partners thought Greece was heading "in the right direction", he added.

Papandreou warned that Greece "faces the risk of sinking" under its 300 billion euros' (442 dollars') worth of debt and had "lost every trace of credibility" after fresh doubts about its official statistics. Greece's public deficit is likely to rise to 12.7 percent of output this year -- far exceeding the eurozone limit of 3.0 percent.

Analysts at Bank of America Merrill Lynch said in a note that "despite its travails, Greece is not likely to default on its debt. "But pressure probably will remain intense until the new administration can prove to the market that it is committed to cutting public spending."

Labels: Banking Industry, EU, Greece

The wheels are coming off the Austrian banking cart. On Monday morning Austria's red-eyed conservative Finance Minister Josef Pröll was happy to present a solution for ailing Carinthian Hypo Alpe Adria Bank AG whose main shareholder has been German Bayerische Landesbank. According to his statements - Austria will take over 100% ownership of the bank that had helped the late right-wing governor of Carinthia, Jörg Haider, to finance his populist measures in Austria's most indebted province.

The complete deal has a volume of €4.5 billion, counting all equity and liquidity injections. While the finance minister was keen to point out that the damage for Austrian taxpayers may be less than the €1,800 per capita figure splashed on tabloid papers this morning, it cannot be yet said how big the damage will actually be. According to Pröll the former owners Bayerische Landesbank, Carinthia and Austrian Insurer Grazer Wechselseitige will inject altogether €1.5 billion in equity together with the Austrian government. Bayern LB took the biggest hit in negotiations that also involved telephone conversations with ECB President Jean-Claude Trichet and promised to prop up the bank with €825 million equity and more than €3 billion in liquidity.

Labels: Banking Industry, EU

Residents of this banking center of the U.S. South were living the high life. Then came the market meltdown and the resultant evaporation of high-paying jobs and confidence. On the surface, there's little to suggest Charlotte, the great banking center of the American South, is hurting. And yet, the financial crisis has probably hit harder here than just about anywhere outside of Lower Manhattan, jeopardizing the city's status as the No. 2 banking centre in the United States. In the past year, Charlotte has lost the headquarters of homegrown Wachovia Corp., once the fourth-largest bank in the country. That brought the additional pain of losing some 2,000 high-paying jobs that were cut following its shotgun marriage with San Francisco-based Wells Fargo. No. 2 Bank of America is still here, but it's in the ranks of the country's many “zombie” banks – still hoarding cash and reluctant to take on much risk as it operates under the watchful eye of regulators.

There's speculation that whoever succeeds Bank of America's chief executive officer Ken Lewis when he leaves at the end of the month will order a breakup of the financial behemoth, delivering another indignity to Charlotte.

Labels: Banking Industry, US

If Robert Benmosche thinks he has it tough, try being a deal maker in Europe. Bankers, traders and financiers not only face proposals to severely restrict their compensation, they also are getting a good old-fashioned scolding from one of Europe’s top financial regulators. “Now is not the time for tantrums,’’ European Union’s competition chief Neelie Kroes said on Thursday. “Now is the time for the banking industry to show some respect to its customers, investors and the people who are often funding it all – taxpayers.”

Wait, she wasn’t finished. “Too often bankers think they are better, smarter people who deserve different rules and different pay to everyone else,’’ added Kroes, who is nearing the end of her five-year term. “They can only think that if others let them.” Benmosche, the chief of American International Group who is being paid $10.5 million a year, may think the federal government is acting with too heavy of a hand in regulating AIG’s compensation, but Kroes makes U.S. regulators look easy. While Congress, the White House and Wall Street remain mired in a debate about the future of financial regulation – namely how to deal with banks that are too big to fail–Kroes has already broken up two of Europe’s biggest banks, Royal Bank of Scotland Group and Lloyds Holding, in return for allowing a U.K. bail out of those institutions.

Labels: Banking Industry, EU

The European Investment Bank, Royal Bank of Scotland PLC (RBS), BNP Paribas SA (BNP.FR) and Lloyds Banking Group PLC (LYG) have agreed to lend euro 1.54 billion over the next three years to developers of onshore wind farms who already have planning permission in the U.K., the U.K. government said Tuesday.

Labels: Banking Industry, Britain. EU, EU

CIT Group Inc.'s board of directors, in what would be among the biggest corporate bankruptcies ever, said Sunday it has approved the filing of a prepackaged reorganization plan. The formal filing in U.S. Bankruptcy Court was expected to follow within hours. CIT, a major lender to small and midsize businesses, has struggled to avoid collapse since the recession triggered billions of dollars in loan losses and the financial crisis cut the company off from its main source of financing. "The decision to proceed with our plan of reorganization will allow CIT to continue to provide funding to our small business and middle market customers, two sectors that remain vitally important to the U.S. economy," Chairman and CEO Jeffrey M. Peek said in a statement.

With roughly $60 billion in assets, CIT's filing is probably the fourth-largest bankruptcy in U.S. history, ranking between General Motors and Enron. The bankruptcy of Lehman Brothers, which collapsed last year, was the biggest.

Labels: Banking Industry, Bankruptcy, CIT

Labels: Banking Industry, Economy

The slightly weaker US economic data, as well as worries about the stability of the US financial industry, prompted selling in risk correlated trades last week. In the FX market, high beta currencies were the biggest losers as falling equity and commodity prices renewed risk-aversion & spawned correction fears. Friday U.S. stocks tumbled the most since July after declines in personal spending and consumer confidence and the threat of a CIT bankruptcy raised concern over the durability of the economic recovery.

Labels: Banking Industry, CIT, Economy, EU

Financial Sector - Break Up Goldman Sachs - by Michael Maiello

If we agree on a few basic things that we all want, breaking up Goldman Sachs and most of the other big Wall Street banks makes a lot of sense. Let's start with the wants: The taxpayer should never again be asked to save the banks from the costs of their own investment decisions; American consumers and businesses should have access to financial products, credit and financing; bank shareholders deserve a chance to make some money. In his new book The Road To Financial Reformation, Henry Kaufman, former member of the Federal Reserve and as prescient a forecaster as you're likely to find, doubts the ability of executive suite denizens to effectively run massive financial institutions.Users of financial products would be better off with more choices and more competitive providers.

Labels: Banking Industry, Economy, Goldman Sachs, US

Netherlands: ING Bites the Bullet

One of the great debates among U.S. bank regulators is whether large, ailing firms should be broken up to pose less risk to the financial system. But in Europe, the debate already seems settled: just do it. At least that’s the message traders heard from ING.

The European Commission has cracked down harder on antitrust issues than regulators in the U.S., says Jaap Meijer, a bank analyst with Evolution Securities in London. “It’s all very drastic,” he says. But ING is “solving its weak capital base” by taking these steps. And other banks should ultimately emerge in a healthier state after they also raise capital and divest assets. Still, some bank analysts said ING’s settlement with regulators looks less favorable than they’d expected. And the news hit European bank stocks hard today, with ING falling over 7% in Amsterdam trading.

Note EU-Digest: Isn't it time for US Banks to do the same??

Labels: Banking Industry, Economy, EU, ING, Netherlands

Deutsche Bank Agrees to Buy ABN Assets From Dutch - by Martijn van der Starre and Aaron Kirchfeld

Deutsche Bank AG, Germany’s biggest lender, agreed to buy some ABN Amro Holding NV assets that the Netherlands must sell to satisfy European Union regulators. The assets are the same as those it agreed to buy from Fortis in July 2008, Frankfurt-based Deutsche Bank said in a statement on its Web site today. Negotiations on final terms and conditions continue, the lender said. Deutsch Bank agreed in 2008 to purchase ABN Amro’s commercial-banking operations from Fortis, the insurer that sold its banking divisions later that year to avert a collapse. The 709 million-euro ($1.06 billion) deal was scrapped after the Dutch government bailed out part of Fortis, including the stake in ABN Amro it bought in 2007.

Labels: Banking Industry, EU, Germany, Netherlands

Britain: Mervyn King launches accurate and devastating attack on £1tn banks bailout - a message also hitting home for other worldwide bank bailouts

Mervyn King, the governor of the Bank of England, has launched a devastating but accurate attack on Britain's banks, describing the £1tn government support given to them as "breathtaking". In an articulate and brilliant speech last night, he made his clearest call yet for large banks to be broken up, King warned that the British people will be paying for the cost of the financial crisis for a generation. He said: "To paraphrase a great wartime leader, never in the field of financial endeavour has so much money been owed by so few to so many. And, one might add, so far with little or no real reform".

He told bankers not to return to the practices of two years ago before the credit crunch began. "It is important that banks in receipt of public support are not encouraged to try to earn their way out of that support by resuming the very activities that got them into trouble in the first place. "The sheer creative imagination of the financial sector to think up new ways of taking risk will in the end, I believe, force us to confront the 'too important to fail' question. Although there are no simple answers, it is in our collective interest to reduce the dependence of so many households and businesses on so few institutions that engage in so many risky activities," the governor said.

Mr. Kings message is not only seen of importance to Britain, but also to the US and every other nation which has been involved in these bailout practices, without strong regulations and oversight controls. As one financial analyst listening to Kings speech said, "the crises might look to be under control but in fact it is only beginning for real now".

Labels: Bailout, Banking Industry, EU, World Economic Order

Dutch DSB bank declared bankrupt

A Dutch court declared DSB Bank NV bankrupt on Monday, ending hopes the regional lender, which suffered a run on deposits, might be sold or bailed out. The privately-owned bank is the first to go bust in the Netherlands since last year, though the government and regulators insist its failure was not directly related to the credit crisis. "The court concludes that the utmost was done for DSB to continue as a whole entity, and there is no prospect of that anymore," the Amsterdam District Court said in a summary of its ruling. After a run on deposits, DSB was put into receivership of the Netherlands' central bank a week ago. Customers had withdrawn about a sixth of the euro4.3 billion ($6.4 billion) the bank had in deposits at the start of the month.

The government insures the first euro100,000 of retail bank accounts. Central Bank President Nout Wellink has predicted a liquidation that will result in big losses for creditors and cost many of the 2,000 employees their jobs.

Labels: Banking Industry, EU, Netherlands

E.U. Grants 24-Hour Extension On ABN Amro - Deutsche Bank could buy assets

The European Commission late Monday said it granted the Dutch government a 24-hour extension on talks to divest of nationalized bank assets "in light of encouraging developments" in a potential sales process. The Dutch government now expects to have news on the sale of the state-owned bank assets by Tuesday, Dutch Finance Minister Wouter Bos said separately at a conference in Luxembourg Monday night. The Dutch state is required to sell some bank assets from ABN Amro and Fortis Bank Netherlands to meet competition standards mandated by the European Commission. The country took over ABN Amro and Fortis Bank Netherlands in October 2008 to prevent their collapse. The European Commission has already granted the Dutch government several extensions to shed the bank assets amid repeatedly stalled deal talks. The European Commission warned Monday it would only grant another extension in order to finalize a binding sale and acquisition. Deutsche Bank AG (DB) is widely considered interested in buying the Dutch bank assets, given a previous deal with the Dutch government to buy some of its bank assets fell through at the beginning of October.

Labels: Banking Industry, EU, Netherlands

EU banks pass stress test

Major European banks won an all-clear Thursday from a stress test by financial supervisors that showed none of them would collapse if the economy worsens. European Union finance ministers and central bankers said in a statement that the bloc's 22 biggest banks were likely to face an extra €400 billion ($581.5 billion) in losses this year and next year if economic output fell below recent forecasts — but none would go under. "Large banks appear sufficiently capitalized to head off a severe macroeconomic deterioration," they said after talks in Goteborg, Sweden.

The head of the European Central Bank, Jean-Claude Trichet told reporters that "our system is resisting in a way that is reassuring." Germany's top central banker, Axel Weber, described the test as giving banks "an assured all-clear."

Labels: Banking Industry, Economy, EU

Consumer Revolt-Irate Bank Customers Staging Online Revolt

When Bank of America raised her credit card interest rate from 13 percent to a whopping 30 percent, Ann went viral, reports CBS News correspondent Ben Tracy. "I could get a better rate from a loan shark," she said online. So she gave them her terms - lower the rate or she won't pay. "Stick that in your bailout pipe and smoke it," Minch said.

The video was viewed a quarter million times. Thousands responded complaining about their own banks. "Capital One, you can just kiss my a**," said one angry customer on an Internet video. American banks are easy targets. They got billions in bailout funds and are now raising rates and fees on those very same taxpayers.

Labels: Banking Industry, Consumer Revolt

European banks consider repaying government loans

Confidence in economic recovery is taking root in Europe as big private-sector players continue to repay emergency government loans advanced at the height of last year's financial crisis. BNP Paribas, France's biggest bank, said Tuesday it plans to raise the equivalent of $6.3 billion U.S. by selling new shares to existing stockholders. The bank is offering the shares at a price 30 per cent below Monday's market close - but then its stock has almost doubled since January 1 and the market welcomed the rights offer. "Capital markets are completely reopened and we can reimburse the preferred shares that the bank issued to the Government," said the bank.<

Note EU-Digest: Regardless of what the banking community is saying they need to be regulated.

Labels: Banking Industry, EU

EU summit to clamp down on bankers' bonuses

EU leaders will urge the G20 to set binding rules on bankers' bonuses, linking the amount of cash paid to long-term performance, reveals a draft common paper to be adopted today (17 September) during an extraordinary summit in Brussels ahead of next week’s international meeting in Pittsburgh.To dissuade reckless risk-taking in the banking sector, EU leaders are poised to adopt a strong stance on bankers' bonuses, actually threatening sanctions in each of the G20 countries, said the draft document.But US opposition to Europe's push for caps on bonuses would make it the toughest subject to reach agreement on, said Jouyet, who this week attended a meeting of the Financial Stability Board (FSB), comprising G20 central bankers and regulators.

Labels: Banking Industry, EU

FSB Warns of Renewed Banking Strains

The Financial Stability Board (FSB) assessed that it has made substantial progress in achieving the mandates given by G20 leaders last November and this April at a plenary meeting Tuesday. The panel said that it would submit two reports to the G20 summit slated for Sept. 24 and 25 in Pittsburgh on progress made in the aftermath of the unprecedented financial crisis. ``Good progress has been made on the policy development needed to implement the package of reforms set out previous Financial Stability Forum (FSF) reports, the G20's Washington Action Plan of November 2008 and the London summit statement of April 2009,'' the FSB said in a statement. The Financial Stability Board (FSB) assessed that it has made substantial progress in achieving the mandates given by G20 leaders last November and this April at a plenary meeting Tuesday. The panel said that it would submit two reports to the G20 summit slated for Sept. 24 and 25 in Pittsburgh on progress made in the aftermath of the unprecedented financial crisis.

Labels: Banking Industry, World Economy

Norway PM defends strong state as election starts<

Norway's prime minister defended on Sunday his government's cautious tactics in steering the economy through crisis, as early voting began in a closely fought parliamentary election. Polls show Prime Minister Jens Stoltenberg's centre-left coalition neck-and-neck with the right-of-centre opposition in a race set to determine whether the affluent Nordic country opens new Arctic regions for oil and gas exploration and how it spends its vast oil windfall. One new opinion poll on Sunday showed the government taking 85 seats in the 169-member parliament, just enough to be returned to power. That would be only the first time in 16 years that Norwegians have voted back the incumbents.

Labels: Banking Industry, EU Economy, Norway, World Economy

Cutting bankers down to size - by Philip Augar

Attacking bonuses addresses the symptom of the crisis, not the cause. It's time to break up the investment banks. The huge profits that the investment banks made before the credit crunch and are beginning to make again enabled them to pay the bonuses that are causing such outrage. Yet it took the catastrophic failure of risk management to bring this to public attention and even now politicians, regulators and the general public are struggling to understand the dark arts of investment banking.

The global economy needs to have effective investment banks for reasons but they must be cut down to size. Focusing on bonuses addresses the symptom rather than the cause. Big bonuses are paid because most years the banks make too much money. They make too much money because they are allowed to combine too many conflicting activities. Breaking up the banks into trading houses that provide customers with liquidity, research firms and boutiques that advise corporate clients would remove that advantage and ensure that the investment banks remained proportionate in scale and influence. That way we would be able to keep the bubble gum in the sweet shop, avoid the risk of over-mighty finance threatening the global economy and retain the socially and economically useful functions of the industry.

Labels: Banking Industry, EU, US

Analyst: Up to 200 more US banks may fail in crisis

Analyst: Up to 200 more US banks may fail in crisis

Banking equities analyst Richard Bove said Sunday that it's possible 150 to 200 more U.S. banks could fail in the current banking crisis, putting greater stress on the Federal Deposit Insurance Corp.'s deposit insurance fund. The FDIC, which insures deposits, may be forced to turn to non-U.S. banks and private equity funds to help shore up the banking system, the Rochdale Securities analyst wrote in a note to investors. Among the 81 banks closed so far this year - compared with 25 last year and three in all of 2007 - were a stream of smaller institutions, many ruined by losses on ordinary loans amid the souring economy, tumbling home prices and spiking unemployment.

Labels: Banking Industry, G20, US Economy

France and Germany declare war on bankers' bonuses - by Phillip Inman

France and Germany are squaring up for a fight with Britain and the US over bankers' bonuses after President Nicolas Sarkozy and the German chancellor, Angela Merkel, agreed a hardline stance before the G20 finance ministers' meeting this weekend. France and Germany will seek widespread agreement for proposals that will limit bonus payments and the risks taken by banks. The proposals are aimed at preventing a repeat of the financial crisis. The French administration plans to ban banks from winning government contracts if they fail to agree to limits on bonuses, while bonuses must be deferred for at least four years under rules being considered by Merkel's cabinet.

However, the Obama administration is expected to say tomorrow that it wants the summit to focus on getting the world economy back on its feet and promoting financial stability. Note EU-Digest: Unfortunately the Obama administration, which faces an uphill struggle to pass healthcare reforms through congress does not seem to have the courage to oppose the risky bonus culture on Wall Street or the powerful financial industry.

Labels: Banking Industry, EU, France, G20, Germany

Germany, France target bank "excesses" for G20 meet

The leaders of Germany and France took aim at the banking sector on Monday, pledging to check banks' power and push for limits on bonus payments at a Group of 20 summit next month. Chancellor Angela Merkel said bonus payments to bankers were "rightly driving a lot of people crazy" and that she and French President Nicolas Sarkozy wanted the G20 summit in Pittsburgh on September 24-25 to make progress on financial regulation. "No bank may become so big that it could get into a position where it could blackmail governments," Merkel told a joint news conference with Sarkozy in Berlin.

Germany and France regard financial market excesses as being the root cause of the global economic downturn and want tighter regulations to prevent a repeat of the biggest financial crisis since World War Two.

Note EU-Digest: They are absolutely right.

Labels: Banking Industry, EU, Financial Regulation, France, Germany

"Business as usual"

For the complete report from Monsters and Critics click on this link

US banks still paid huge bonuses while getting government money

Several banks that received US government assistance paid out billions of dollars in bonuses of 1 million dollar or more per employee, according to a report released Thursday by the New York Attorney General Andrew Cuomo.

Cuomo's office said that even after the sub-prime mortgage crisis started emerging in 2007 and declined into the worst recession since the 1930s, 'compensation and benefits stayed at bull-market levels even though bank performance plummeted.' Two of the first recipients of US government assistance, Citigroup and Merrill Lynch, which suffered losses of more than 27 billion dollars each in 2008, paid out more than 5.3 billion dollars and 3.6 billion dollars respectively, the Cuomo report said.

Even though the payment of these huge bonuses has provoked public outrage among taxpayers angry over the frivolous expenditure of taxpayers' money, not much has been done by the US Government to correct these practices. In Europe some EU member states did put legislation on the books to stop these activities, but overall the result there to curb these activities have also been unsatisfactory.

Labels: Banking Industry, Bonuses, Economy

The German government is worried that the current shortage of bank credit plaguing industry will worsen later this year and is considering tackling the problem by forcibly taking stakes in banks, similar to the policy adopted by authorities in the United States and Britain, a German newspaper reported on Monday.The plan envisages the government forcing banks to take state aid and to part-nationalize them in return.

At present small businesses as well as large corporations say they are having problems securing bank loans. The banks have tightened their lending because they have had to make risk provisions to cover remaining toxic assets in their balance sheets, because an increasing number of companies cannot repay their loans in the current economic downturn, and because new international balance sheet rules are forcing banks to put back more equity capital to cover their loans. The government has argued that it's time banks boosted their lending because several of them have taken billions of euros in government aid.

Labels: Banking Industry, Credit Crunch, EU, Germany

EU Has ‘Doubts’ About ING’s Risk Transfer Plan - by Matthew Newman and Martijn van der Starre

ING Groep NV, the biggest financial services company in the Netherlands, must overcome “doubts” from European Union regulators that its risk-transfer plan with the Dutch government on mortgage assets complies with EU rules. The European Commission said the Dutch government, which accepted a transfer of risks and cash flows on 21.6 billion euros ($30.1 billion) of mortgage assets from ING, may have overvalued the portfolio. “The commission considers at this stage that it can not dispel its doubts that the approach taken by the independent expert appears to lead to an overvaluation of the portfolio and to an overestimation of the benefit to the Dutch State,” the EU said July 11 on its Web site. The commission gave temporary approval for the Dutch measure on March 31.

The commission said it has doubts about the discount rates used to calculate the cash flows to ING, the house price assumptions that underlie the portfolio’s U.S. mortgages and other valuation methodologies used to assess the real economic value of the illiquid assets that are part of the transaction. ING, which traces its roots to 1743, plans to raise as much as 8 billion euros selling assets, it said in April. The company, which also received a 10 billion-euro lifeline from the Netherlands in October, will sell as many as 15 businesses and exit about 10 of the 48 countries in which it operates.

Labels: Banking Industry, EU, ING, Netherlands

Labels: Banking Industry, EU

Banking Industry - Meltdown - and out -- by David Ransom

The people who brought you the financial meltdown have been pouring the molten remains into the same broken mould. The latest G8 finished with a promise of $20 billion over three years for agriculture in the ‘developing’ world. That’s less than $7 a year for each of the estimated billion people (and counting) who are now malnourished - even supposing that the cash materializes, and that G8 promises don’t come as cheap as they are.

No G8 leaders - even ministers - bothered to turn up at a UN conference on the financial crisis in June. Rather, they went out of their way to rubbish it. That was partly because a UN Commission, chaired by the Nobel Laureate economist Joseph Stiglitz, dared to propose modest reforms, including some sort of UN Economic Council to oversee the IMF, World Bank and WTO - and a new international currency to replace the US dollar. Despite talk of ‘recovery’, so far it relates to little more than the continuing flow of public funds into private banks (now via ‘quantitative easing’ - or printing money). They’re still not lending, least of all to each other. An unknown quantity of toxic debt remains. In politics the recent elections to the European Parliament the usual political suspects, plus assorted neo-fascists, emerged almost triumphant. Fresh political - as well as financial - thinking is urgently required.

Labels: Banking Industry

The Party Has Started Again: Are Big Payouts Set for Revival on Wall Street?

After the government handed out billions of dollars in bailouts, Congress passed legislation banning all companies that received support from the Troubled Asset Relief Program, or TARP, from paying their top 25 executives bonuses greater than a third of their salary, though they were not subject to specific salary cap. Some firms, like Goldman Sachs and Morgan Stanley, have thrown off the yoke of bonus restrictions by repaying the government bailout funds. While others, like Citigroup and Bank of America, have been focused on raising employees’ base salaries to try to shift attention away from bonuses. Whether through bonuses, base salary or a combination of both, the goal for all of them is the same: To retain their top talent.Goldman is set to pay as much as $20 billion this year, or about $700,000 per employee, The Journal said, citing analysts’ estimates. That would be almost twice the $363,000 it paid on average last year, and slightly higher than the $661,000 average in 2007, according to analyst estimates reviewed by The Wall Street Journal. Morgan Stanley, meanwhile, is expected to pay $11 billion to $14 billion in compensation and benefits this year, also according to The Wall Street Journal.

Note EU-Digest: Unfortunately the taxpayer who has helped bail out the banks could once again be in for a big surprise when the disaster we are in today repeats itself. Where are the promised controls, where are promised checks and balances?

Labels: Banking Industry, Economy, US, Wall Street

As Europe enjoys a long-awaited summer heat wave, a sense of sunny optimism has taken hold of its financial capitals. Many in the region's beleaguered banking community reckon the worst of economic downturn is over. Equities markets have rallied since early 2009, property prices are leveling off, and signs of a recovery in consumer and industrial confidence are starting to surface. But before Europe's financial-services industry pats itself too hard on the on the back, bankers and investors may want to heed the sobering analysis released recently by the European Central Bank (ECB). Analysts at the ECB, which oversees the 16-country bloc that uses the euro, forecast that euro-zone banks could still record a further €283 billion ($398 billion) in writedowns by the end of next year, predominantly from defaulting corporate and consumer loans. cts that euro-zone banks could record as much as $398 billion in new write downs by 2010.

Labels: Banking Industry, Economy, EU

Germany's Merkel criticizes central banks' approach in financial crisis

German Chancellor Angela Merkel has voiced skepticism about leading central banks' approach to tackling the economic crisis, suggesting that they may be storing up more trouble for the years ahead. Merkel's comments come as the European Central Bank has faced criticism from some analysts for not being as aggressive as either the U.S. Federal Reserve or the Bank of England, both in cutting interest rates and in promoting measures such as bond purchases to boost the money supply.

Merkel appeared to defend the ECB's more conservative instincts and raise questions about the Fed and Bank of England actions. "The independence of the European Central Bank must be preserved and the things that the other central banks are doing now must be reversed," Merkel said in a speech Tuesday, the text of which was posted on the government Web site. "I view with great skepticism the powers that the Fed has, for example, and how, in the European area, the Bank of England has developed its own little lines," she said, adding that the ECB "also bowed somewhat to international pressure" with its decision to buy bonds. "We must together return to an independent central bank policy and to a policy of good sense," Merkel said. "Otherwise, in 10 years we will again be standing at exactly this point."

Note EU-Digest: Mrs. Merkel is absolutely right. Even Thomas Jefferson one of the founders of the United States said: "If the American people allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children wake up homeless on the continent their fathers conquered"

Labels: Angela Merkel, Banking Industry, EU, Germany, World Economy

Credit Card Companies and Banks : Toxic Plastic - reign of terror by Credit card companies will continue - by Nancy Trejos

In the US Congress is on the verge of passing legislation that would transform the way credit card companies and consumers interact. But relief won't come anytime soon, even if the legislation makes it to President Obama's desk by Memorial Day, as he has requested. As proposed, the earliest that either the House or Senate version would go into effect is nine months after being signed into law. The Federal Reserve, meanwhile, has approved new regulations that do not go into effect until July 2010."With implementation nine to 12 months away, I think the reign of terror we've seen going on relative to consumers will continue," said Adam Levin, former New Jersey consumer affairs director and founder of Credit.com.

Labels: Banking Industry, Credit Card Companies

US Politics: President Obama and the Big Dogs- by William Greider

"What we are witnessing is a high-stakes melodrama of glandular politics. This rival power center, though gravely weakened, is contesting for control with the president. For three decades, the Wall Street guys in good suits have ruled the economy, demanding deference from the political system and from corporate managements, too. Those who failed to follow them were punished, either through stock prices or election financing. Despite their catastrophic failure, the surviving bankers and financiers are trying to hold on to their thrones. Obama wants to govern through public-spirited cooperation. The financial titans play hardball in return. I say "seems" because we do not yet know about Obama and how he will resolve this mess. The administration has been stalling action on the troubled banks, as if it believes in its own wishful forecasts about an early recovery for the economy.

The financial crisis poses the first great moral dilemma of the Obama presidency. Sometime in the next few months, he will be compelled to choose between his technocratic inclinations--rescuing certain financial institutions deemed "too big to fail"--and the obvious moral wrongness of his policy of rewarding the very players who caused our national disaster. The broad public does not doubt that this is morally wrong. I saw a Zogby opinion poll the other day that said only 6 percent of the public supports the financial bailouts. Obama is on the wrong side of that bipartisan consensus."

Labels: Banking Industry, Barack Obama, Financial Community, US, Wall Street

Financial experts from a variety of disciplines are not finding much to cheer about following the more rosy reports coming out of Wall Street, the Banking Sector and the Government. They are saying that the value of key collateral on loans is still falling. That close to half of bank lending continues to be tied to real estate, which has shifted from boom to bust in many parts of the United States. Presently the typical home price is down more than 20 percent nationwide, and it has continued to fall by about 2 percent a month. The experts are saying that if that continues, it boosts both the likelihood of defaults by borrowers and the losses for banks when they resell those homes after foreclosure. In the meantime the FDIC reported that loans are going delinquent faster than banks are adding to reserves to cover those losses. This certainly will hit bank profits down the road.

Uncontrolled accounting methods may also be hiding key problems even though banks are saying that a shift away from so-called mark-to-market accounting is a more accurate reflection of the assets’ worth. Banks may be right. But the resulting values could also prove to be too rosy. Just take that pool of risky assets at Citigroup, which the bank is valuing at $101 billion. The more accurate mark-to-market accounting would put the actual value of risky assets at only $29 billion. Losses could therefore outweigh capital on hand.

Collectively, US banks have equity capital of $1.2 trillion, or about 10 percent of their loans, the FDIC says, but many economists including those at the International Monetary Fund (IMF) warn that "hidden" bank losses of those not yet recognized in charge-offs – are larger, possibly exceeding $2 trillion. This could wipe out their equity capital, says Peter Nigro, a former economist at the Office of the Comptroller of the Currency, now at Bryant University in Smithfield, R.I. If you put all that together, the negative forces make it very hard for banks to earn their way out of losses by relying on their interest-rate spreads. "So what the yield curve is doing now is mitigating those losses a little bit", says Mr. Lachman, who used to work for the IMF. Moreover, Lachman expects that European banks will see rising loan problems this year, with ripple effects that will hurt US banks as well.

For the US and European economies to stage a strong recovery, banks need enough capital to lend strongly, economists say. That’s especially true today, because other channels of credit that were strong before the recession, like debt securities funded by non-bank investors, have basically disappeared. The risk, they say, is that political pressures will prevent or delay an accurate assessment of bank losses and how big their write-downs should be and how much capital they need. Another issue that still has not been answered, what are these assets on the bank balance sheets actually worth? Overall it seems to indicate that the financial sector has not yet turned the corner, but instead still remains in a precarious situation.

Labels: Banking Industry, EU, US Economy, US housing market, World Economy

US Banker CEOs Lied to Congress - by John Olagues

This article is about how the CEOs of the largest Banks in the world lied to the U.S. Congress about the extent of their equity compensation bonuses. Their deliberate lies were pre-meditated and were intended to deceive the Congress and the viewing public. Specifically at the 1 hour and 24 minutes into the afternoon session of the Congressional hearing on February 11, 2009, Representative Bill Posey from Florida asked the bankers to declare the value of all the equity compensation that they were granted during 2007. They answered with flat out lies or artificially low values.

Labels: Banking Industry, economic meltdown, US Congress

Hyman Minsky was an economics professor at Washington University, St Louis, who died in 1996. He was ignored by the political establishment and treated as crazy. Once you understand his theory, you can see why. He warned: “The normal functioning of our economy leads to financial trauma and crises, inflation, currency depreciations, unemployment and poverty in the middle of what could be virtually universal affluence – in short . . . financially complex capitalism is inherently flawed.”

As the crisis worsens, it is becoming common for pundits to observe that, although capitalism is collapsing, nobody has thought of an alternative. This is not true. The Minsky alternative – a socialized banking system plus wealth redistribution – is, I believe, the ground on which the most radical of the capitalist re-regulators will coalesce with social-justice activists. And it may even go mainstream if the only alternative is low growth, decades of debt-imposed stagnation, or another rerun of this crisis a few years down the line.

Labels: Banking Industry, Capitalism, US

BETWEEN THE LINES: Nationalizing Banks and Industry: A Lesson In Why Capitalists Hate Socialism - by Anthony Asadullah Samad

"Free Market" enterprise is based on the notion that open markets and the competition derived from competing ideas for consumer patronage will create a market balance (equilibrium) that will produce a stable economy and wide prosperity. There is also a flawed theory that social conditions in the markets, like poverty, homelessness, even economic subjugation and socio-political discrimination caused by racism will self-correct in competitive and robust economic environments. Capitalists think money solves everything when it is actually the cause of many social and economic societal ills.

Labels: Banking Industry, Capitalism, EU, Socialism, US

US Banks 'Basically Insolvent' says George Soros

The U.S. economy is in for a "lasting slowdown" and could face a Japan-style period of relatively low growth coupled with high inflation, billionaire investor George Soros said on Monday. Soros, speaking to Reuters Financial Television, also warned that rescuing U.S. banks could turn them into "zombies" that draw the lifeblood of the economy, prolonging the economic slowdown. "I don't expect the U.S. economy to recover in the third or fourth quarter so I think we are in for a pretty lasting slowdown," Soros said, adding that in 2010 there might be "something" in terms of U.S. growth.

Soros also said the U.S. dollar is under selling pressure and may eventually be replaced as a world reserve currency, possibly by the IMF's Special Drawing Rights, a synthetic currency basket comprised of dollars, euros, yen and sterling. "I think the dollar is now under question and I think the system will need to be reformed, so that the United States will be subject to the same discipline as is imposed on other countries," said Soros, whose famous bet against the British pound earned his Quantum Fund $1 billion in 1992. "Being the main issuer of international currency, the US been exempt and we have abused that because we have effectively consumed 6.5 percent more than we have produced. That is now coming to an end."

Labels: Banking Industry, Economy, George Soros, US

Russian banker warns lenders' troubles to grow - by Catrina Steward

Russia's banking crisis has only just started, a leading financier warned Wednesday, as lenders could face a fresh wave of defaults on loans and weak economic activity. "The crisis is just beginning for the banking industry," German Gref, chief executive of state-backed Sberbank, Russia's largest lender, told a conference. "The crisis will spill over from the real sector of the economy."

Eight months on from Russia's stock market collapse and a liquidity crisis in the financial sector, the rapid rise in bad loans threatens to stall the recovery of the banking sector and the real economy. Some domestic banks are only starting to acknowledge the problem as companies miss payments, face bankruptcy or cede shares to banks put up as collateral.

Labels: Banking Industry, Economy, Russia

Europe starts work on financial overhaul - by Aoife White

(AP) European officials started work Friday on a massive overhaul of their financial system, just a day after leaders from the Group of 20 major world economies tried to fix a crisis that has sent the world into a sharp economic downturn. European Union finance ministers will spend two days talking about their troubled economies and how they should increase oversight of the financial sector — both within Europe and at the global level.

On Friday, ministers will look at sweeping proposals by the European Commission that would arm regulators with the power to fine any person breaking financial market rules and sanction any country that holds back information on tax evasion and money laundering.Bankers' pay is also in the firing line as the EU executive readies tighter rules for banks whose pay structures push executives and traders to take high risks for the promise of greater personal bonuses. But these are the low-hanging fruit and ministers are unlikely to make progress on bigger issues, such as how banks should be supervised and by who.Britain is now ready to accept a European financial stability supervisor, the country's financial watchdog said last month.

Labels: Banking Industry, Economy, EU, Financial Reforms

US Economy - Zombie Banks ( Citigroup and Bank of America) are Devouring Our Public Money with No End in Sight - by Bill Moyers

A zombie bank is a bank that's insolvent that's allowed to continue its activity. It's allowed to go on living as a dead financial entity. The zombie will continue to lose more, and the taxpayer, kind of off the government's budget, will continue to experience larger and larger burden of future losses. President Obama intends to hold these banks fully accountable for the assistance they receive, and this time they will have to clearly demonstrate how taxpayer dollars result in more lending for the American taxpayer. This time CEOs won't be able to use taxpayer money to pad their paychecks or buy fancy drapes or disappear on a private jet. Those days are over. The President also spoke about what you might call free market fundamentalism. Unfettered, unregulated markets as one pole, and what you might call administrative socialism as another pole. We've got to end up somewhere in the middle. Where the market's dynamism and flexibility is honored, but where you have real regulation and real enforcement. It's been a long time since the president has talked like that. So that's a hopeful sign.

Labels: Bank of America, Banking Industry, Citigroup, US

U.S. loath to follow Europe on bank plan - by Landon Thomas

When it comes to formulating an effective strategy for reviving the fortunes of hobbled U.S. banks, the administration of Barack Obama is playing catch-up compared with countries in similar straits in Europe. For all the huge sums of taxpayer money already committed, analysts say, the problem is that it is proving all but impossible to clean up balance sheets, raise lending and bolster capital without being prepared to take some sort of government ownership and control over the most troubled banks.

At a time when the market capitalization of the top U.S. banks is collectively below $500 billion, the International Monetary Fund is estimating that financial write-downs will rise to $2.2 trillion. As a result, a number of analysts contend, the Obama administration will ultimately be compelled to admit that even with recent capital injections, some large banks like Citigroup and Bank of America may well become insolvent.

Labels: Banking Industry, Economy, EU

US Economy: Greedy credit card companies and Congress created a financial disaster - by Yael T. Abouhalkah

It's a fascinating story: Greedy credit-card companies convinced a complicit Congress to approve new 2005 bankruptcy rules that helped torpedo the U.S. economy. The report making these allegations rings true; it was prepared by researchers at the Federal Reserve Bank of New York. It's yet another case where a self-serving industry got its way with Congress, with dire consequences for ordinary Americans. As for Congress, it's another case where members (who now want a $4,700-a-year raise) made irresponsible decisions to placate big-time donors. Basically, the new bankruptcy rules promoted by the credit card industry have led to a surge in home foreclosures. The reason: Before the 2005 bankruptcy act, people could file for Chapter 7 bankruptcy, which erased unsecured debt such as credit card debt. Chapter 7 helped people keep some money to make their mortgage payments. But the new law has forced more people to file for Chapter 13 bankruptcy. They still have to make payments to lenders such as the credit card companies, reducing the amount of funds available to make mortgage payments.

Labels: Banking Industry, Credit Card Industry, US Economy