Market Leader : News :: Nouriel Roubini names variants of possible eurozone collapse

Nouriel Roubini, an American economist and a Nobel Prize winner in economics, became world-famous after forecasting the latest global economic crisis. His opinion is respected around the world. In his recent article published in The Financial Times Mr. Roubini says the eurozone may collapse.

Actually, this is not the first time Roubini warned the world of the forthcoming fate of the eurozone and its common currency. The American economist assumes that the current political and economic situation in Italy confirms his expectations. According to him, Italy will most likely have to return to the Italian Lira – its previous national currency – in order to curb the escalating debt crisis. Once Italy leaves the currency union, it will most likely result in a collapse of the entire eurozone.

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Possible scenarios:

According to Masterforex-V Academy, Nouriel Roubini offers the following 4 scenarios for the eurozone:

Symmetrical reflation. This is the best option for restoring growth and competitiveness of the eurozone’s periphery while undertaking necessary austerity measures and structural reforms. This implies significant easing of monetary policy by the European Central Bank, which can eventually depreciate the common European currency against other major currencies. That is why both Germany and the ECB oppose the idea.

Recessionary reflation. It implies tough austerity policies. However, austerity and spending cuts lead to production cuts, at least in near-term perspective. In order to avoid the negative consequences of such  structural reforms and to improve the balance of trade it is necessary to depreciate the common currency.

A default followed by a withdrawal from the eurozone. The common currency may survive if the sick peripheral eurozone economies go back to their national currencies – lira, drachma, peso etc. However, Euro will also suffer losses because the currencies of the former eurozone members will depreciate.  That will be the European variant of Lehman Brothers’ collapse, which caused the 2008-2009 global crisis.

Peripheral eurozone economies. The EU leaders can try to ignore the economic problems seen in those debt-ridden peripheral eurozone economies. Theoretically, it is possible. However, this would be an extremely costly solution for other eurozone members like Germany and France.

via Market Leader : News :: Nouriel Roubini names variants of possible eurozone collapse.

European bank chief urges action on rescue fund | Reuters

European Central Bank chief Mario Draghi told euro zone governments on Friday to act fast to get their rescue fund up and running, expressing exasperation at their lack of progress in responding to the escalating debt crisis.

The ECB is under intense pressure to play a greater role in tackling the euro zone crisis. A Reuters poll of 50 bond strategists in Europe and the United States gave an even probability that it would eventually agree to print money.

Chancellor Angela Merkel of Germany rebuffed demands from Prime Minister David Cameron for decisive action, making clear she favoured a step-by-step approach that has seen Germany resist calls for the ECB to backstop other governments.

“The British demand that we use a large amount of firepower to win back credibility for the euro zone is right,” Merkel said. “But we have to take care that we don’t pretend to have powers we don’t have. Because the markets will figure out very quickly that this won’t work.”

A Reuters poll of 50 bond strategists in Europe and the United States however gave an even probability that the ECB would eventually agree to print money.

Draghi put the onus firmly on governments, saying they had failed to put into practice decisions underpinning the European Financial Stability Facility — the rescue fund which they have promised to give more firepower without yet explaining how.

“Where is the implementation of these long-standing decisions?” Draghi said at a banking conference in Frankfurt. “We should not be waiting any longer.”

via European bank chief urges action on rescue fund | Reuters.

Italy Senate passes budget, Berlusconi end nigh | World | Reuters

By Barry Moody and James Mackenzie

ROME (Reuters) – Italy’s Senate approved economic reforms intended to reverse a collapse of market confidence on Friday, kicking off a rapid transition that will end the Berlusconi era and clear the way for an emergency government within days.

The package of austerity measures demanded by the European Union goes to the lower house which is expected to approve it on Saturday, triggering the resignation of Prime Minister Silvio Berlusconi and ending a 17-year era in which he has loomed large over Italy.

The news had an immediate salutary effect on markets.

Italian bond yields, which raced way above sustainable levels earlier this week, fell sharply in response to acceleration of Berlusconi’s resignation and the approval of the reforms.

Former European Commissioner Mario Monti, who is expected to replace the billionaire media magnate by Monday, was applauded when he took his place for the vote after being appointed a Senator for life by President Giorgio Napolitano.

The appointment, transforming Monti from academic to legislator, was seen as clear confirmation that he will be asked to head a largely technocratic government to push through reforms in an effort to head off a perilous crisis.

via Italy Senate passes budget, Berlusconi end nigh | World | Reuters.

Dream of United Europe frays at the edges – National News – National – General – Merredin Wheatbelt Mercury

At a joint news conference last week, Germany’s Angela Merkel and France’s Nicolas Sarkozy let their guard drop. Asked whether they could rely on Silvio Berlusconi to get Italy’s economy in order, they exchanged a mocking glance, rolled their eyes heavenward and smirked.

No one’s laughing now.

Berlusconi, the playboy Prime Minister described by one commentator as a man no one would trust with their daughters, much less their economy, has been forced to exit the political stage, to the relief of the German Chancellor, the French President and most of Berlusconi’s MPs.

But he has left behind a shambles that has become the latest threat to the future of Europe. Italy might soon follow Greece into economic meltdown, a prospect that has sparked talk of a deep recession, an end to the euro and the collapse or shrinking of the European Union.

The crisis in Europe is also undermining the fragile global economic recovery, leaving the world “looking straight into the face of a great depression”, Simon Johnson, a former chief economist at the International Monetary Fund, warned this week.

Other commentators also threw the term about. “I think it is pretty clear that we are in a very precarious economic situation that is highly similar to the Great Depression,” David Edwards wrote in Forbes magazine.

The chief of the IMF, Christine Lagarde, joined the chorus of doom, warning on a visit to Asia that “there are dark clouds gathering in the global economy. Countries need to prepare for any storm that might reach their shores.”

via Dream of United Europe frays at the edges – National News – National – General – Merredin Wheatbelt Mercury.

EU’s Barroso warns about cost of splitting euro zone – chicagotribune.com

BERLIN (Reuters) – Any reduction in the euro zone would exact a significant toll on the region’s economy, the president of the European Commission warned on Wednesday, as he urged Germany to show leadership in solving Europe’s escalating debt crisis

Jose Manuel Barroso, president of the European Commission, the EU’s executive arm, in a speech in Berlin urged EU governments to ensure that reforming the 17-member euro zone does not come at the price of creating new divisions among member states.

“The idea that we have two unions in Europe means disunion,” Barroso said.

“There cannot be peace and prosperity in the North or in the West of Europe if there is no peace and prosperity in the South or in the East,” he said.

Barroso argued that all EU member states should strive to adopt the euro and any reforms of the single currency area should not result in new conditions for joining.

“All EU states should have the euro as its currency,” he said. “The challenge is how to further deepen euro area integration without creating divisions with those who are not yet in it.”

French President Nicolas Sarkozy has advocated a two-speed Europe in which euro zone countries accelerate and deepen integration while an expanding group outside the currency bloc stays more loosely connected — a signal that some members may have to quit the euro if the entire structure is not to crumble.

via EU’s Barroso warns about cost of splitting euro zone – chicagotribune.com.

SocGen Q3 Profit Declines 31% on Greece – Bloomberg

Societe Generale (GLE) SA, France’s second- largest bank, said third-quarter profit fell 31 percent, hurt by a writedown on Greek sovereign debt and lower trading revenue. The company won’t pay a dividend for 2011.

Net income dropped to 622 million euros ($855 million) from 896 million euros a year earlier, the Paris-based lender said in a statement today. That missed the 764 million-euro average estimate of 13 analysts surveyed by Bloomberg. The lender took a 333 million-euro pretax writedown on its Greek sovereign debt holdings.

Societe Generale, which said in August it may miss a 6 billion-euro profit target for 2012, follows larger rival BNP Paribas SA in increasing its writedown of Greek debt to 60 percent. The two banks are trimming assets to comply with new capital rules after their stock plunged and U.S. money-market funds became reluctant to lend to them in dollars.

The firm has started to reduce the balance sheet by “disposing of a significant amount of our legacy assets at a low cost” and “halving our sovereign debt exposure” to Greece, Ireland, Italy, Spain and Portugal since the beginning of the year, Chief Executive Officer Frederic Oudea, 48, said in the statement.

via SocGen Q3 Profit Declines 31% on Greece – Bloomberg.

Greek leaders struggle to agree on new premier | Reuters

By Lefteris Papadimas and Harry Papachristou

ATHENS, Nov 8 (Reuters) – Greek party leaders were struggling on Tuesday to agree on a new prime minister, under pressure from the European Union to push through a bailout to save the country’s finances and end the chaos threatening the euro.

After early signs that agreement on a new national unity coalition could be reached quickly, the drive by the socialist and conservative parties to create a government that will rule only until February appeared to be losing momentum.

Monday came and went without any accord on who will lead the coalition, despite former vice president of the European Central Bank, Lucas Papademos, emerging as a frontrunner.

“Today is the last chance for the two main parties,” centre-left daily Ta Nea wrote in an editorial. “They have to come up with a government strong enough to take the country out of the moving sand of political impasse that leaves us defenceless, at the mercy of the crisis. Time is up.”

The cabinet will hold an emergency session on Tuesday and officials said negotiations were under way on the “100-day coalition” which must win parliamentary approval for a euro zone bailout and save the country from bankruptcy.

“A national unity government, right now,” Ethnos daily wrote on its front page. “The country and the society cannot endure anymore.”

Frustration was also apparent in Brussels where officials said the new government had to show it was serious about implementing promises Athens has made to its EU and IMF lenders in return for the 130 billion-euro bailout.

via UPDATE 1-Greek leaders struggle to agree on new premier | Reuters.

Europe debt crisis shifting from Greece to Italy

The center of Europe’s debt crisis was rapidly shifting Monday from tiny Greece to far-bigger Italy, threatening to open a dangerous new chapter in the region’s financial turmoil and plunging embattled Prime Minister Silvio Berlusconi into the deepest political crisis of his two-decade career.

Investors staged a fresh run on Italian bonds that drove borrowing costs for the world’s eighth-largest economy above 6.5 percent, brushing up against levels that, once crossed by Greece, Portugal and Ireland, led to a quick erosion of confidence that triggered international bailouts.

The escalating turmoil in Italy highlights the repeated failures of European leaders to come to grips with the debt crisis, which has been building over the past two years.

Officials had hoped that the markets would calm after politicians in near-bankrupt Greece rallied around a plan last week that would bring sharp austerity in exchange for a bailout. But investors, now fretting over Italy and doubting whether European leaders can muster the will to truly resolve the crisis, instead appear as skeptical as ever that highly indebted European countries will be able to pay their bills.

via Europe debt crisis shifting from Greece to Italy.

Bill Black: On Unemployment, Foreclosures, Underwater Mortgages, Inflated Appraisals, and Banksters

FDIC closes two banks in Utah and Nebraska bringing total number in 2011 to 87 – National Finance Examiner | Examiner.com

There were two banks in the US that closed their doors on Friday, November 4th in the states of Utah and Nebraska after the market closed.  Sun First Bank, located in St. George, Utah, and Mid City Bank Inc…, located in Omaha, Nebraska, are the first two bank casualties for the month of November, and bring the total number of failed banks in 2011 to 87.

11/4/2011 *** UT *** St. Geoege *** Sun First Bank *** $49.7 million dollar estimated FDIC DIF cost.

11/4/2011 *** NE *** Omaha *** Mid City Bank Inc…*** $12.7 million dollar estimated FDIC DIF cost.

The total DIF for failed banks this week is $62.4 million dollars.

If you were banking at Sun First Bank in St. George, Utah, you are now banking at Cache Valley Bank.  If you were banking at Mid City Bank Inc… in Omaha, Nebraska, you are now banking at Premiere Bank.

For more on the FDIC bank closure lists you can go to the FDIC website and search through their report of failed banks, credit unions, and Trusts.

via FDIC closes two banks in Utah and Nebraska bringing total number in 2011 to 87 – National Finance Examiner | Examiner.com.

Crisis-hit Greece faces deadlock over unity government

ATHENS, Nov 5, 2011 (AFP) – Greece was in political deadlock Saturday as the main opposition party resisted Prime Minister George Papandreou’s efforts to form a unity government he said was vital to keep the country in the eurozone.

Fresh from winning a knife-edge confidence vote in parliament early Saturday, Papandreou said he would start talks “very soon” to form a government to pass a bailout package crucial for keeping the debt-wracked nation afloat.

“The application of this deal is the precondition for us staying in the euro. It’s as important as that,” Papandreou told a crowd of reporters after talks with Greece’s president, Carolos Papoulias, that lasted just over an hour.

But only a few hours later, the leader of the main opposition party poured cold water on the plan, hardening his position that early elections must be held, a proposal Papandreou has dismissed as a “catastrophe.”

“We insist on our call for immediate elections,” said Antonis Samaras, the head of the conservative New Democracy party, in a highly anticipated television address.

The price of New Democracy’s support is Papandreou’s resignation and early elections, reiterated Samaras. “No one can offer a blank cheque.”

Papoulias said he would hold talks with Samaras on Sunday at 1:00 pm local time (1100 GMT). Under the Greek constitution, the president can summon the political parties for talks if the deadlock continues.

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“What the Greeks want — a team led by a third person, neither Papandreou nor Samaras — is in the process of being lost. It’s dangerous,” he said.

And there was no sign of a let-up in the fierce pressure being exerted by Greece’s European partners.

German Chancellor Angela Merkel warned in her weekly webcast that Europe would need a decade to clean up its finances and emerge from the current debt crisis.

“Everyone in Europe must make an effort to achieve all that is required,” Merkel said.

As the politicians squabbled, Greece is fast running out of cash.

 

Read more: http://www.vancouversun.com/business/Talks+Greek+coalition+start+soon+Papandreou/5663386/story.html#ixzz1cr2CzeYz

via Crisis-hit Greece faces deadlock over unity government.

Greece begins talks on emergency gov’t, news, StarAfrica.com

Greece on Saturday was to begin talks on forming an emergency government to drag itself out of political stalemate caused by two years of austerity after Prime Minister George Papandreou won a nail-biting confidence vote.

As the shadow of bankruptcy loomed over the crisis-hit nation, Papandreou won the parliamentary vote after pledging to initiate the talks to overcome a budding revolt from the party founded by his father nearly four decades ago.

He carried the vote, watched nervously by financial markets and fellow European leaders, by 153 deputies to 145 from the combined opposition.

Shortly before lawmakers began voting, Papandreou had announced he would see Greek President Carolos Papoulias later on Saturday to hand in his mandate and start talks on the formation of such a government.

The meeting would be held at 1000 GMT, the PM’s office said.

“Papandreou gets vote of confidence and hands over the baton,” leftist Eleftherotypia daily said in its online edition.

The ruling socialists went into the showdown with 152 deputies but added another before the night was over.

Former labour minister Louka Katseli, who had been ejected earlier this month for opposing a collective wage amendment included in a reform bill, was readmitted into the ruling parliamentary group after supporting the government.

Papandreou’s lawmakers gave him a standing ovation as he entered the chamber and again at the end of his speech.

“Honest and broad backing is called for,” he told deputies ahead of the vote. “It is time to cooperate with a sense of national responsibility,” he said.

“I am not interested in a chair, the last thing I am interested in is whether I am re-elected,” said the 59-year-old politician, who took over the party in 2004 and endured two national election defeats and a leadership challenge from current Finance Minister Evangelos Venizelos before coming to power in 2009.

“If by my deeds I can give a message that we are not enemies (with the opposition) … then I will have made the greatest contribution to the country in my 30-year career,” the PM said.

“The tradition of my family would not permit me to do anything different,” said Papandreou, whose father and grandfather were also leaders of Greece.

The debate, held with several thousand communists staging a noisy protest in front of the flood-lit parliament, capped a tumultuous week for Greece.

via Greece begins talks on emergency gov’t, news, StarAfrica.com.

David Cameron: ‘British economy is getting worse as euro crisis goes unresolved’ – Telegraph

The British economy is getting worse “every day” that the euro crisis goes unresolved, David Cameron has warned, as he told European leaders that the “world cannot wait” any longer for a rescue package to be agreed.

By Robert Winnett, Political Editor, in Cannes

The Prime Minister condemned the “endless questions and changes” in the eurozone that led to the G20 summit of world leaders ending acrimoniously without a detailed plan. His warning that the crisis is having a “chilling effect” on the economy heightened fears that growth in Britain has stalled.

Following the two-day meeting in Cannes, Germany and France failed to explain how they intended to implement a €1trillion rescue package for the single currency after admitting that they were struggling to raise sufficient funds.

The US objected to proposals to increase substantially the size of the International Monetary Fund, which could directly help countries such as Italy. President Barack Obama made clear that he wanted eurozone countries to do more to solve the single currency’s problems.

Cash-rich emerging economies such as China were also not willing to help finance the eurozone bail-out until the Europeans themselves did more.

President Nicolas Sarkozy warned that a deal involving the eurozone and the IMF could take until February to finalise.

via David Cameron: ‘British economy is getting worse as euro crisis goes unresolved’ – Telegraph.

Draghi Chooses ECB Rates Over Printing Press as Recession Looms – Businessweek

Nov. 4 (Bloomberg) — European Central Bank President Mario Draghi signaled he’d rather use interest rates than the printing press to bolster growth as the debt crisis drags the euro-area economy toward recession.

Chairing his first policy meeting after succeeding Jean- Claude Trichet on Nov. 1, Draghi unexpectedly cut the benchmark rate yesterday by a quarter point to 1.25 percent and left the door open to a further move. At the same time, he ruled out ramping up ECB bond buying to reduce governments’ borrowing costs, saying the program is “temporary” and “limited.”

“It’s back to basics on the crisis fighting; rates rather than bond purchases,” said Julian Callow, chief European economist at Barclays Capital in London. “He must be the first ECB President to utter the word ‘recession’ before it has actually happened.”

As bond yields soared in Italy and Spain after euro-area leaders raised the prospect of Greece leaving the 17-nation currency bloc, Draghi said the debt crisis is damping growth and a “mild recession” is on the cards. The central bank will lower rates again as soon as next month to fully reverse the two increases carried out under Trichet earlier this year, economists said.

via Draghi Chooses ECB Rates Over Printing Press as Recession Looms – Businessweek.

EU Leaders to Tell Greece’s Papandreou No Alternative to Cuts

European leaders are to set to tell Greek Prime Minister George Papandreou he has no alternative to the budget cuts imposed in a week-old debt-crisis strategy that they are racing to prevent from unraveling.

Papandreou, his hold on power weakening, was summoned to Cannes, France, for emergency talks on the eve of a Group of 20 summit where he will hear from French President Nicolas Sarkozy that the “only way to resolve Greek debt problems” is through a deal hammered out in a six-day crisis-management marathon. German Chancellor Angela Merkel said today that policy makers “must bring calm to the euro.”

Papandreou triggered the latest upheaval in the two-year- long crisis by abruptly announcing on Oct. 31 a parliamentary confidence vote and his desire to hold a referendum on the rescue pact. Global stocks, the euro and bonds of debt-strapped countries tumbled yesterday as concern of a disorderly Greek default mounted.

“Given the state of markets and world affairs in general, it is clear that the leaders will work hard at sending a positive message of cooperation and solidarity” from the G-20, said Erik Nielsen, global chief economist at UniCredit Bank AG in London. “But, frankly, it is difficult to be too optimistic.”

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People ‘Perplexed’

Papandreou will join a group at about 8:30 p.m. comprising Sarkozy, Merkel, International Monetary Fund Managing Director Christine Lagarde, as well as European Union authorities, according to a statement from Sarkozy’s office. They will have met at about 5:30 p.m. without Papandreou.

via EU Leaders to Tell Greece’s Papandreou No Alternative to Cuts.

Greek government faces collapse as lawmakers oppose referendum – video | World news | guardian.co.uk

The Greek government is on the brink of collapse over plans for a referendum on a eurozone bailout, with ruling party defections casting grave doubt on whether the prime minister, George Papandreou, can survive a confidence vote. The finance minister, Evangelos Venizelos, has also broken ranks with Papandreou, opposing the referendum after a bruising meeting with the German and French leaders who make clear Greece faces ejection from the eurozone if it rejects the €130bn rescue package.

via Greek government faces collapse as lawmakers oppose referendum – video | World news | guardian.co.uk.

Greek PM explains referendum vote to furious European leaders | The Salt Lake Tribune

By Greg Keller, Associated Press

Cannes, France • Greek Prime Minister George Papandreou flew to the chic French resort of Cannes on Wednesday to explain to his furious European colleagues why he was holding a surprise referendum on a bailout deal that took them all months to work out.

Papandreou’s pledge to let the Greek people themselves vote has riled financial markets and threatens to derail an entire European debt crisis plan that’s not even a week old. Observers called it a “back me or sack me” move to make sure the Greek public will support the severe austerity measures looming ahead.

But a “no” vote in the referendum would have enormous consequences not just for Greece but for the rest of Europe. It could lead to a disorderly Greek default, force Greece out of the 17-nation eurozone, topple many fragile European banks and send the global economy spinning back into recession.

With this in mind, French President Nicolas Sarkozy, German Chancellor Angela Merkel and top European Union officials gathered at the Palais des Festivals, site of Cannes’ famous film festival, for private emergency talks ahead of a meeting with Papandreou.

The pressure on Papandreou was mounting. European leaders “will not accept” it if Greece jeopardizes the rescue plan, Luxembourg Prime Minister Jean-Claude Juncker said after the first round of talks.

“All 17 of us made decisions a week ago,” he said, urging Greece not to “dissociate itself” from those decisions. “The situation is serious.”

Playing hardball, eurozone officials said an (euro) 8 billion ($11 billion) loan that Greece needs within weeks to avoid bankruptcy was conditional on Greece backing the latest rescue deal.

“If these [reforms] are now being put in question in December by the referendum, then we have a completely different situation,” said one eurozone official, speaking on condition of anonymity because of the sensitivity of the issue.

via Greek PM explains referendum vote to furious European leaders | The Salt Lake Tribune.

France, Germany demand quick Greek decision on euro | Reuters

By Emmanuel Jarry and Daniel Flynn

CANNES, France (Reuters) – Germany and France pressed Greece on Wednesday to make up its mind fast whether it wants to stay in the euro zone after a shock decision to call a referendum on an EU/IMF bailout caused panic on global markets.

French President Nicolas Sarkozy and Germany’s Angela Merkel summoned George Papandreou for emergency talks with top European Union officials in Cannes on the eve of a summit of the G20 major world economies that has been upstaged by the surprise Greek move.

Paris and Berlin said they would push the Greek Prime Minister for rapid implementation of measures to tackle the currency area’s debt crisis that Athens has thrown into doubt.

Papandreou made no comment on arrival for a dinner at which he was expected to hear Europe’s anger at his unilateral decision to call a public vote without informing the EU partners who are aiding his debt-stricken country.

The French and German leaders met first with the heads of EU institutions and the International Monetary Fund to discuss how to limit the damage from the Greek decision and apply pressure for a swift outcome.

EU and IMF board sources said Greece would not receive an urgently needed 8 billion euro aid installment, due this month, until after the vote because official creditors wanted to be sure Athens would stick to its austerity program.

European Commission President Jose Manuel Barroso delivered this message to Papandreou before his arrival in Cannes, EU sources said.

via France, Germany demand quick Greek decision on euro | Top News | Reuters.

Greek Prime Minister Calls For Referendum On New EU Aid Deal – WSJ.com

ATHENS (Dow Jones)–Greek Prime Minister George Papandreou Monday called for a popular referendum on a newly minted aid-and-debt deal for Greece, while also demanding a fresh vote of confidence in his embattled Socialist government.

“For the new [aid] deal we have to go to a referendum,” Papandreou told Socialist party deputies.

His remarks come just days after European leaders in Brussels announced a series of decisions aimed at stemming the spread of the euro zone’s widening debt crisis. The plans include boosting the firepower of Europe’s temporary bailout fund, and recapitalizing Europe’s banks.

A deal under which Greece’s private-sector creditors accept a nominal 50% “haircut” on the country’s public debt is central to the plan. In exchange, Greece will receive some EUR100 billion ($139.3 billion) in fresh aid to help cover its financing needs over the next few years.

Elected to a four-year term in October 2009, the ruling Socialists or Pasok party has seen its parliamentary majority whittled down as lawmakers have bolted from the party in protest over two years of austerity measures.

via Greek Prime Minister Calls For Referendum On New EU Aid Deal – WSJ.com.

Italian Bonds Slide on Contagion Concern; German Bunds Advance – Bloomberg

Bloomberg:

Bailout Fund

After two crisis summits in four days, European Union leaders agreed on Oct. 27 to increase the bailout fund to 1 trillion euros, recapitalize banks and convince lenders to write down their holdings of Greek debt by 50 percent.

That didn’t halt a slide in Italian debt, with 10-year yields rising 15 basis points on Oct. 28 and another eight basis points today, to 6.10 percent. Spain’s 10-year rate increased three basis points to 5.54 percent, and similar-maturity Belgian yields jumped eight points to 4.38 percent.

The December Italian bond futures contract fell 0.6 percent to 97.04, widening the difference over its German equivalent to 38.22, the most in a month.

MF Global, which said on Oct. 25 it owned $6.3 billion of Italian, Spanish, Belgian, Portuguese and Irish bonds, listed total debt of $39.7 billion and assets of $41 billion in Chapter 11 papers filed today in U.S. Bankruptcy Court in Manhattan. MF Global declined 67 percent last week and its bonds started trading at distressed levels amid its disclosures of bets on European sovereign-debt.

‘Market Trauma’

“It’s an example of the market trauma,” said Charles Diebel, head of market strategy at Lloyds Bank Corporate Markets in London. “It’s broadly speaking bullish” for bunds, he said.

via Italian Bonds Slide on Contagion Concern; German Bunds Advance – Bloomberg.

BUSTED: Employees At Law Firm Mocked Foreclosed On Homeowners At Halloween Party

This is going to be very awkward for the lawfirm Steven J. Baum.

NYT columnist Joe Nocera has just posted pictures from last year’s Halloween party, where employees mocked foreclosed-on homeowners by dressing up as homeless foreclosees among other things.

What’s doubly bad about mocking the unfortunate is that Steven J. Baum is a lawfirm that handles mortgage issues for all the major banks.

As Nocera notes, these images are from the 2010 party, but somehow that probably won’t get the firm off the hook.

images

via BUSTED: Employees At Law Firm Mocked Foreclosed On Homeowners At Halloween Party.

US Senators to Federal Bank Regulators: Must Ensure Risky Behavior by Banks Does Not Threaten Taxpayers

WASHINGTON, Oct. 27 — The office of Sen. Bob Casey, D-Pa., has issued the following news release:

Senator Bob Casey (D-PA), Chairman of the Joint Economic Committee, sent letters today to federal banking regulators expressing concern that Bank of America has moved trillions of dollars in derivatives from its subsidiary Merrill Lynch into a subsidiary insured by the Federal Deposit Insurance Corp (FDIC).

“We have seen what happens when we allow banks to play roulette with taxpayer money,” said Senator Casey. “The Administration has an obligation to ensure that taxpayers are not on the hook for risky bets by big banks.”

Three years after taxpayers rescued some of the biggest U.S. banks, lawmakers continue to question how to protect taxpayers from risks generated by investment-banking operations. The letter outlined concerns over a reported increase in so-called 23A exemptions, referring to the section of the Federal Reserve Act that separates insured banking from investment activities.

Casey was joined by U.S. Sens. Sherrod Brown (D-OH), Carl Levin (D-MI), Jeff Merkley (D-OR), Mark Begich (D-AK), Richard Blumenthal (D-CT), Tom Harkin (D-IA), Bill Nelson (D-FL), Sheldon Whitehouse (D-RI), and Maria Cantwell (D-WA) in sending the letter to banking regulators.

via Insurance News – Casey to Federal Bank Regulators: Must Ensure Risky Behavior by Banks Does Not Threaten Taxpayers.

Illinois bank closed; 85th to fail in U.S. in 2011 – MarketWatch

Regulators on Friday closed a bank in Illinois, bringing the nationwide tally of bank failures up to 85 for the year.

Des Plaines, Ill.-based All American Bank, was closed by the state’s Department of Financial and Professional Regulation. International Bank of Chicago agreed to take over the failed bank as part of a purchase-and-assumption deal with the Federal Deposit Insurance Corp. It was Illinois’ ninth bank failure this year.

All American had about $37.8 million in total assets and $33.4 million in total deposits at the end of June. International Bank of Chicago agreed to acquire all of the failed bank’s deposits and buy essentially all of its assets.

The FDIC estimates that the cost of the bank’s failure to the Deposit Insurance Fund will reach $6.5 million.

Depositors of the failed bank will automatically become depositors of the new bank and deposits will continue to be insured by the FDIC. The FDIC insures deposits for up to $250,000 per depositor.

via Illinois bank closed; 85th to fail in U.S. in 2011 – MarketWatch.

First Security Bank of Nevada Announces Change of Control | Benzinga.com

First Security Bank of Nevada (“FSB”) announces successfully obtaining a considerable capital investment assuring the financial stability and liquidity of this important Las Vegas-based community bank.

An investor group, led by Jason A. Awad, and including Toomas Rebane, M.D., Ph.D., and Eva Garcia-Mendoza, secured written approval from the Federal Deposit Insurance Corp. and the Nevada Financial Institutions Divisions to acquire a significant ownership interest in FSB upon payment of $14,000,000 in cash funds.

The FSB recapitalization and stock acquisition by the investor group was completed August 3, 2011. The financial strength and liquidity of First Security Bank shall be immediately and dramatically improved with the funds from this prominent local investor group.

The arduous regulatory approvals attest to the FDIC conclusion regarding the financial credibility of the investor group, and their prior proven experience and leadership in banking. Mr. Awad was the former chairman of the board with Business Bank of Nevada, which successfully merged with City National Bank in 2007. All the members of the investor group were previously FDIC approved as directors, and shall be actively involved as directors for FSB. Mr. Awad acknowledged the important efforts of the FDIC and NFID, which resulted in an expedited approval process and a positive outcome in Las Vegas banking.

via First Security Bank of Nevada Announces Change of Control | Benzinga.com.

Greek deal may imperil sovereign CDS market | Reuters

Oct 28 (Reuters) – The future of the Credit Default Swap (CDS) market — used to hedge against the risk of a country defaulting — may be at risk if these derivative instruments do not pay out after this week’s rescue deal for Greece.

An implosion of the sovereign CDS market could lead investors to buy fewer government bonds because they feel they cannot protect themselves, and risks pushing up borrowing costs for governments, especially in the euro zone.

Private sector creditors such as insurers, banks and funds will take losses of 100 billion euros on their Greek debt holdings under a new bailout pact struck this week, sharing the burden of the costly rescue with taxpayers.

But the International Swaps and Derivatives Association (ISDA) — a bank lobby that also decides whether an event triggers the CDS — has said it’s not likely that the restructuring would lead to a pay-out.

“The CDS market is being keelhauled. This certainly isn’t going to help, because why would you buy a CDS if there will never be a payout?” said one well-placed industry source, referring to the Greek situation.

He projected the sovereign CDS market — a small corner of the $25 trillion overall market — could die out in the next year, echoing some bankers’ fears.

CDS contracts are a form of protection that entitle bondholders to a pay-out in case of a default. They are also often used by investors who do not own the underlying bonds to bet on the market — so-called “naked” CDS.

This has made them unpopular among politicians, who have blamed speculators for exacerbating Europe’s debt crisis.

via CORRECTED-Greek deal may imperil sovereign CDS market | Reuters.

German finmin: Europe has long way to go to solve crisis | Reuters

Oct 29 (Reuters) – Europe still has a long way to go to solve its crisis, German Finance Minister Wolfgang Schaeuble was cited as saying by a magazine, noting it was key Italy did its homework and implemented promised reforms.

Schaeuble said European leaders had made an important step forward at last week’s summit but it was far from the last meeting on this matter.

“We still have to go a long way until we have solved all the problems,” he told Spiegel magazine, in an interview to be published on Sunday. “But the chance we will be successful has grown since last week.”

When asked if the euro zone’s bailout fund would be sufficient to potentially rescue Italy, Schaeuble said the question was irrelevant and the country must simply do its homework and implement reforms to reduce its deficit and bolster economic growth.

Italy, the euro zone’s third largest economy, is again at the centre of the debt crisis, as fears grow that its borrowing costs could hit levels that overwhelm the capacity of the bloc to provide support amid chronic political instability in Rome.

“Italy has declared its openness to reforms, now it must implement them,” Schaeuble said, noting the country needed structural reforms in the labour market and social security.

via German finmin: Europe has long way to go to solve crisis | Reuters.

Nye Lavalle Responds to Statement by Janis Smith, MERSCORP’s Vice President for Corporate Communications on the Complaint Filed by the State of Delaware | Foreclosure Fraud – Fighting Foreclosure Fraud by Sharing the Knowledge

Nya Lavalle:

Well, maybe you want to refresh your memory a bit when you read this “You may want to study the FLA. RICO law. It may prove useful to you in your upcoming depositions and perhaps when you have to explain yourself and your business to govt. regulators, AGS, and USDOJ! Much luck! Hey, and will you answer my questions on here for all to see?” that I posted on your forum at http://www.mersinc.org/forum/viewreplies.aspx?id=13&tid=99 on December 4, 2003?

Two weeks ago, the OIG for FHFA came out and said that Fannie and everyone else should have heeded my warnings way back when (2003) when they issued two reports.  I have advised them that they must dismantle your operation since it poses severe reputational, operational, and legal risk and liabilities to U.S. Taxpayers since lawyers are going to start and will pierce your corporate veil of opaque non-transparacy that was specifically designed to conceal the banker’s Pandora’s “Black” Box of financial alchemy, not a measly $20 recording fee (that you all are getting sued for anyway now).

BTW, who’s footing all the legal fees?  My understanding is that the members have to foot the bill when it comes to litigation involving cases by borrowers, but when the County recorders, AGs and everyone else comes on down the line, I don’t know what specific member would have to foot such a bill?  Also, any insurance you have would certainly not cover fraud, I would think.  Please pass on my hellos to them as well as make sure you preserve ALL data and information containing my name and email addy since I am sure they will be important in many cases to come to prove mens rea and scienter!

Sorry for my contemptuous voice and gloating, I mean really, do you blame the contempt I have right now for you and your ilk when ALL of this, and I mean ALL of this, could have been avoided if you all had simply done your jobs, listened, and seen the writing on the walls?  You have personally assisted in stealing the homes of countless Americans and clouding the title of virtually all Americans.  You have not bought off every judge in America and that fact must scare you.

..

Read his full post at  Nye Lavalle Responds to Statement by Janis Smith, MERSCORP’s Vice President for Corporate Communications on the Complaint Filed by the State of Delaware | Foreclosure Fraud – Fighting Foreclosure Fraud by Sharing the Knowledge.

China Could Give $100bn To Euro Bailout Fund | Business News | News Centre – 106 JACK fm

Two senior advisers to the Chinese government told the Financial Times it was “very likely” to put money into the European Financial Stability Fund (EFSF).

But they say any contribution would have to be given strong guarantees and would depend on the input from other countries.

Li Daokui, an academic member of China’s central bank monetary policy committee, told the paper: “It is in China’s long term and intrinsic interest to help Europe because they are our biggest trading partner.

“But the chief concern of the Chinese government is how to explain this decision to our own people.

“The last thing China wants is to throw away the country’s wealth and be seen as just a source of dumb money.”

The reports came after French president Nicolas Sarkozy and Chinese leader Hu Jintao spoke on the phone on Thursday and pledged to cooperate to revive global growth.

The fund’s chief executive is due to visit Beijing on Friday to talk to potential investors.

Beijing has so far only expressed sympathy for the EU but has not committed any cash and only pledged to help by continuing business as usual.

Earlier, Chancellor George Osborne said the debt deal struck by eurozone leaders is “much better than expected” – but that Europe should not expect additional bailout cash from Britain.

via China Could Give $100bn To Euro Bailout Fund | Business News | News Centre – 106 JACK fm.

The Eurozone Crisis Is Over! … Or Is It?

Were Angela Merkel and Nicolas Sarkozy taking a page out of The Godfather‘s book? To read some of the press reports about the Greek bond deal reached early this morning, it certainly sounds like it.

Private banks, represented by Charles Dallara of the lobbying group The Institute of International Finance, agreed to take a 50% “voluntary” writedown on their Greek bonds. Why would they agree to such a drastic cut? For one thing, there’s reality — it’s been very obvious for a long time that given the financial state of Greece, the value of its paper isn’t in shouting distance (or maybe even collect-calling distance) of face value. Maybe more important — if you want to believe the Euro-leaders-as-Don-Corleone story — European heads of state threatened that if banks didn’t agree to the 50% cut, they’d let Greece follow a path to complete insolvency.

At that point it became a pretty simple math equation:

50% > something far closer to zero

In the aftermath of the global financial crisis, some may question how good bankers really are at even simple math, but this seemed to strike a chord.

It isn’t just the Greek debt deal that has markets so excited today, though. In addition, Eurozone leaders came to an agreement in principal on leveraging the European Financial Stability Facility by as much as 5 to 1. This was seen as a key step in the region’s fight to head off its debt crisis because it will provide a huge amount of financial firepower to help bond buyers feel safe even as countries like Italy, Spain, and Portugal struggle to manage their balance sheets.

via The Eurozone Crisis Is Over! … Or Is It?.

Greek Debt Swaps’ Failure to Trigger Casts Doubt on Market – BusinessWeek

Oct. 27 (Bloomberg) — The European Union’s ability to write down 50 percent of banks’ Greek bond holdings without triggering $3.7 billion in debt insurance contracts threatens to undermine confidence in credit-default swaps as a hedge and force up borrowing costs.

As part of today’s accord aimed at resolving the euro region’s sovereign debt crisis, politicians and central bankers said they “invite Greece, private investors and all parties concerned to develop a voluntary bond exchange” into new securities. If the International Swaps & Derivatives Association agrees the exchange isn’t compulsory, credit-default swaps tied to the nation’s debt shouldn’t pay out.

“It will raise some very serious question marks over the value of CDS contracts,” said Harpreet Parhar, a strategist at Credit Agricole SA in London. “For euro sovereigns in particular, the CDS market is likely to remain wary.”

Politicians and central bankers came to a last-minute agreement after banks, the biggest private holders of Greece’s government bonds, were threatened with a full default on their debt, according to Luxembourg Prime Minister Jean-Claude Juncker. ISDA General Counsel David Geen said his organization considered the agreement to be voluntary, even if there may have been “a lot of arm twisting.”

via Greek Debt Swaps’ Failure to Trigger Casts Doubt on Market – BusinessWeek.

ECB Bond Buying Need Ends With New EFSF, German Motion Says – Businessweek

Oct. 25 (Bloomberg) — German lawmakers are set to vote on a non-binding call for the European Central Bank to end its secondary market bond-buying program once the enhanced European rescue fund is enacted, according to a motion to be put to the German parliament.

The joint motion, agreed on by the government parties and main opposition in Berlin today, sets out terms for the lower house supporting the European Financial Stability Facility in a vote tomorrow. It “notes that the need” for the ECB to continue its secondary-market program ends with the new fund’s enactment and urges Chancellor Angela Merkel’s government to “respect” the ban on central-bank credits as well as primary- market purchases by the ECB as the EFSF is set in stone.

The motion sets down criteria to which Merkel must adhere when she goes to Brussels after the EFSF vote tomorrow for a second European summit in four days. Parliament’s budget committee or the full chamber must be allowed to vote once more after leverage models have been transformed into fund’s guidelines, according to the text. It also stipulates that systemically important banks re-capitalize by June 30, 2012.

via ECB Bond Buying Need Ends With New EFSF, German Motion Says – Businessweek.

Italian government on the brink as EU plan stalls

The Italian government and a broad European plan to save the euro were at risk on Tuesday, with Premier Silvio Berlusconi locked in a high-stakes battle with coalition partners to muster support for emergency growth measures demanded by the EU.

Markets are looking to the EU’s grand plan _ promised in time for a leaders’ summit on Wednesday _ for a turnaround in the debt crisis that will avert a potential global recession.

But it risked being delayed, yet again, as governments failed to agree on details. Berlusconi’s government, meanwhile, showed little sign of meeting the EU’s demands for reforms, a prerequisite for the grand plan to go ahead.

The summit of EU leaders, meant to be a confidence-building day, risked going down as another failure in Europe’s fight to stem its two-year-long debt crisis.

EU officials say they will not present their comprehensive plan if Italy doesn’t agree to new economic measures they demanded Sunday. But Berlusconi has so far been unable to get his key ally in parliament, the Northern League, to swallow an increase in pension age. The Northern League says it will alienate their constituency of workers in the productive north.

Northern League leader Umberto Bossi conceded the government is at risk.

“Let’s say the situation is difficult, very dangerous,” he told reporters in Rome.

Berlusconi has survived scandals, court cases and dozens of confidence votes, but experts say the economic plan he needs to get approved will be one of the most critical tests yet of his grasp on the country’s leadership.

via Italian government on the brink as EU plan stalls – Taiwan News Online.

The Fed Bails Out Gaddafi’s Libyan Bank, Arab Banking Corp. of Bahrain, Banks of Bavaria, Korea and Mexico … But Shafts America | ZeroHedge

Fox Business notes:

The conflicts of interest and policy controversies in the Federal Reserve’s bailout of the financial system now include helping out millionaires, billionaires, foreign automakers, and companies whose executives sit on the board of directors of the U.S. central bank.

The Federal Reserve also bought more than $2.2 billion in commercial paper from the state-owned central bank of Bavaria, and it gave more than $23 billion in loans to the Arab Banking Corp. based in Bahrain, with an interest rate as low as a quarter of a percentage point. The Federal Reserve also lent more than $9.6 billion to the Central Bank of Mexico.

***

Banks worldwide tapped into the Federal Reserve’s emergency lending programs more than 4,200 times for a total of $3.8 trillion, estimates show.

Senator Sanders’ staff found that “several billionaires and tens of multi-millionaires received cheap loans from the Fed to invest in securities backed by auto, mortgage, credit card, student and mortgage loans,” Sanders’ letter says. That Fed program is called the Term Asset-backed Securities Loan Facility.

via The Fed Bails Out Gaddafi’s Libyan Bank, Arab Banking Corp. of Bahrain, Banks of Bavaria, Korea and Mexico … But Shafts America | ZeroHedge.

U.S. throws lifeline to underwater homeowners | Reuters

(Reuters) – U.S. homeowners who owe more than their properties are worth got new help on Monday with the government’s expansion of a refinancing program in a step that could help up to 1 million borrowers.

The regulator of mortgage finance giants Fannie Mae and Freddie Mac eased the terms of a program that helps so-called underwater borrowers who have made payments on time but have been unable to refinance.

“These are important steps that will help more homeowners refinance at lower rates, save consumers money and help get folks spending again,” President Barack Obama told a crowd in Las Vegas, a city hard hit by the foreclosure crisis.

The overhaul, which would only help a fraction of the nation’s 11 million underwater borrowers, is the latest government effort to breathe life into the crippled housing market.

Officials have been frustrated that numerous attempts to bolster the sector and help borrowers have had little success.

The Federal Housing Finance Agency said it was scrapping a cap that prohibited borrowers whose mortgages exceeded 125 percent of their property’s value from refinancing loans backed by Fannie Mae and Freddie Mac under the government’s Home Affordable Refinance Program (HARP).

It also took steps to coax homeowners into shorter-term loans and encourage more banks to participate in the program.

via U.S. throws lifeline to underwater homeowners | Reuters.

Australia: Mother sues banks over son’s eBay scam – National News – National – General – The Northern Argus

WOMAN is suing Australia’s big four banks for their alleged role in a $200,000 money laundering scam masterminded by her teenage son.

The woman, from the NSW south coast, has launched an action in the Supreme Court seeking damages and wants an apology from the Commonwealth Bank, ANZ, Westpac and NAB for ”unconscionable conduct” after they allegedly handed her son dozens of bank accounts and debit cards ”without reasonable scrutiny”.

In 2007, the then 14-year-old was selling fictitious products on eBay and, at one stage, earning more than $6000 a day.

He began living the life of a celebrity, booking penthouses overlooking Sydney Harbour that cost $4300 a night and hiring limousines to take him to the beach.

When his mother stumbled on the scam, she says she repeatedly warned the banks he was a minor sourcing funds illegally. It is alleged they ignored her or refused to discuss the matter for privacy reasons.

”He was an intelligent boy who worked out how to cheat the system and play it for all it was worth,” said the mother who, along with her son, cannot be named for legal reasons.

”As his parent and legal guardian, I begged the banks to stop giving him accounts and debit cards but each time I got nowhere because of the Privacy Act.”

She said her suspicions were aroused four years ago when her son began spending lavishly. ”I found a log book listing thousands of dollars worth of transactions with eBay customers, all of whom had deposited money into his bank accounts for non-existent laptops, mobile phones and watches,” she said.

via Mother sues banks over son’s eBay scam – National News – National – General – The Northern Argus.

No Deal Yet on Euro Crisis as the Danger Grows | firstcoastnews.com

BRUSSELS — European leaders have put off the tough decisions needed to save the continent from its debt crisis, but they say a comprehensive plan is still coming.

Leaders of the continent’s richest countries met in Brussels this weekend to discuss steps to reduce Greece’s debt and keep the financial crisis from spreading to Italy and other countries.

On Saturday, officials said the leaders were nearing agreement on slashing Greece’s debts and strengthening the continent’s banks, many of which are awash in Greek bonds.

But Sunday, the only solid detail to emerge from three days of intense talks was that banks will have to raise their capital buffers much faster than they had planned – by the end of 2012, instead of 2019.

via No Deal Yet on Euro Crisis as the Danger Grows | firstcoastnews.com.

An End Game in Europe is Arriving

However, it will be born in the US and caused by risk managers in NYC or Chicago or even Charlotte, North Carolina. Who have most likely ran a series of Monte Carlo scenarios and have decided to be first to act players.

In simple terms, the US is cashing out its risk based chips, and in doing so it is draining the last liquidity out of the Core European banking system. Dexia was the first, and before this is over, it is my opinion that most of the major French banks will be nationalized / recapitalize.

While US banks have significantly different reporting methods then European banks, there is no arguing a simple issue. US banks have a surplus of deposits in them, which European Banks have used to fund longer term banking loans.

If you remove the US deposits via commercial paper deposits in Europe, you will drain the European banking structure of all liquidity. They will have long-term assets for sale in near term pricing squeezes. The implications for summer 2012 are becoming interesting.

In the US, Americans have access to a multitude of different accounts, many with similar sounding names. This article is about the difference in MMA vs MMF and the quick and dirt implications of what they mean.

via An End Game in Europe is Arriving.

Mish’s Global Economic Trend Analysis: EU Finance Ministers Decide to Force Banks to Take Bigger Greek Bond Losses, Recapitalize by $140 Billion; Amount Insufficient, Few Other Details

Details are sketchy but Reuters reports Banks under pressure in Europe crisis, pushed to raise capital, take Greek losses

On Saturday, the finance ministers of the 27-country European Union decided to force the bloc’s biggest banks to substantially increase their capital buffers — an important move to ensure that they are strong enough to withstand the panic that a steep cut to Greece’s debt could trigger on financial markets.

A European official said the new capital rules would force banks to raise just over euro100 billion ($140 billion), but finance ministers did not provide details on their decision. The official was speaking on condition of anonymity because it had been agreed to let leaders unveil the deal at their first summit Sunday.

The deal on banks was likely to be the only major breakthrough ready to announce on Sunday, leaving many important decisions and negotiations to be completed by Wednesday night.

On Friday, the first day of the marathon talks, the finance ministers of the 17 countries that use the euro — and which have found themselves at the center of the crisis because of the currency they share — agreed to demand Greece’s private creditors take big losses on their bondholdings.

via Mish’s Global Economic Trend Analysis: EU Finance Ministers Decide to Force Banks to Take Bigger Greek Bond Losses, Recapitalize by $140 Billion; Amount Insufficient, Few Other Details.

Four Banks Closed In Georgia, Florida and Colorado – Losses Now Total $7 Billion | Problem Bank List

The continued decline in real estate values and aggressive lending during the real estate boom continue to haunt the banking industry.  Regulators closed four banks in three states this week bringing the total banking failures for the year to 84.

Two banks were closed in Georgia which now accounts for 26% of all U.S. banking failures this year.  Two additional banks were closed in Florida and Colorado.

The total assets of the four collapsed banks totaled $2 billion and total losses to the FDIC Deposit Insurance Fund came in at $358.8 million.  A total of 406 banks have now failed since 2007 and the number of potential banking failures on the FDIC’s Problem Bank List has soared to 865 from only 76 in 2007.  Banks classified as “problem banks” account for almost 12% of all federally insured institutions.

via Four Banks Closed In Georgia, Florida and Colorado – Losses Now Total $7 Billion | Problem Bank List.

EU crisis straining Franco-German ties | News | Financial Post

PARIS – Relentless crisis management is straining the Franco-German relationship that underpins the euro, pitting Paris against Berlin over how best to leverage the EFSF rescue fund to contain the currency bloc’s debt fiasco.

Sources have used words like “dire” and “explosive” to describe recent exchanges between the French and German camps, whose disagreement over whether to draw the European Central Bank deeper into the rescue effort could derail a promised crisis plan.

French President Nicolas Sarkozy has managed to get his way on a series of eurozone issues in past months, despite pressure to bow to Germany and its greater economic weight.

This time German Chancellor Angela Merkel has dug in her heels against his push to save France’s prized triple-A rating by defining the European Financial Stability Fund as a bank able to tap ECB funds, and so bail out French commercial banks.

Her hands tied by rules that mean the Bundestag’s budget committee must approve all key decisions about the EFSF, Ms. Merkel is blocking Mr. Sarkozy’s efforts to ensure the rescue fund, rather than governments, picks up most of the tab for rescuing banks weighed down by rapidly devaluing Greek debt.

Yet Mr. Sarkozy’s trump card in negotiations that could now run until Wednesday is that Germany would be left carrying even more of the burden of supporting the eurozone if recapitalizing French banks costs Paris its AAA rating.

“In different ways, France and Germany are both standing with their backs to the wall,” said Thomas Klau, head of the Paris office of the European Council on Foreign Relations.

via EU crisis straining Franco-German ties | News | Financial Post.

Lawmakers Propose Ban on Consumer Debit Card Fees – Business Focus – Convenience Store News

NATIONAL REPORT — Legislators in at least two states are taking action to reverse the latest trend of consumer debit card fees. The fees, which can reach as much as $5 a month as in the case of Bank of America, are hitting customers at a time when banks are trying to recoup lost revenue from the recently enacted swipe fee reform.

U.S. Rep. David Cicilline (D-R.I.) is proposing legislation that would ban banks from assessing such fees. H.R. 3190 would prohibit an insured depository institution from charging consumers for receiving or using a debit card.

“After Wall Street greed drove our financial system to the brink of collapse, the big banks received a massive taxpayer-funded bailout to stay afloat,” Cicilline said in a release. “It is unconscionable that now, these same banks are trying to reach into the pockets of hardworking American families in order to inflate revenues, bolster balance sheets and feed corporate excess.”

In Florida, one elected official is proposing similar legislation on the state level. State Rep. Jeff Clemens (D-District 89) is co-sponsoring HB 375, which would prohibit certain financial institutions from charging specified fees for use or holding of a debit card by a consumer. The bill, if approved, would go into effect July 1, 2012.

“It is unlawful for any financial institutions, including any federal financial institution or state financial institution to charge or impose a dormancy fee, an inactivity fee or charge, or a service fee with respect to the use or holding of a debit card by a consumer,” the proposed bill states.

Any violations would be subject to administrative fines and penalties.

via Lawmakers Propose Ban on Consumer Debit Card Fees – Business Focus – Convenience Store News.

Fannie, Freddie End Lawyer Networks Amid Foreclosure Woes – Bloomberg

Fannie Mae and Freddie Mac will phase out their foreclosure attorney networks in the wake of the so-called robo-signing scandal, the companies’ regulator said.

The Federal Housing Finance Agency directed the companies to transition to a system that allows mortgage servicers to select their own law firms for processing defaults and foreclosures, rather than relying on a pool of attorneys designated by Fannie Mae or Freddie Mac.

The move is in line with an ongoing effort to establish uniform foreclosure processes at the two companies, the FHFA announced in a press release.

Fannie Mae currently requires mortgage servicers handling its loans to use its Retained Attorney Network for foreclosures and bankruptcies. Some of those lawyers have been accused by lawmakers, regulators and consumer groups of mishandling paperwork for evictions and foreclosures, including falsifying signatures on court affidavits. The dispute led many mortgage servicers to suspend foreclosure activity last year.

In a September report, the FHFA’s Office of Inspector General found that Fannie Mae did not monitor the conduct of its 191 network law firms.

Earlier this month, Representative Elijah Cummings of Maryland, the top Democrat on the House Oversight and Government Reform Committee, asked FHFA Acting Director Edward J. DeMarco to consider ending the Fannie Mae program.

via Fannie, Freddie End Lawyer Networks Amid Foreclosure Woes – Bloomberg.

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Ending this corrupt program could be a major blow to income generated to Lender Processing Services for automated referrals issued to networked lawyers.

The Next Bailout: BofA Moves Derivatives Into Insured Institution | FDL News Desk

Bank of America announced a way for them to make it look like they made a $6.2 billion profit in the last quarter. The “profit” came mostly from an accounting trick and the sale of their stake in a Chinese bank, part of their downsizing strategy. But they had lower revenue and income in their credit card, real estate and investment banking businesses, which is pretty much their entire business. If you add up the accounting gains totaling $6.2 billion and the net on the sale of the bank, you’d see that the bank lost $1.4 billion last quarter.

The market shrugged off the gimmicks, and at this point BofA is up 10% on the day. But I think that actually has a lot more to do with this:

Bank of America Corp. (BAC), hit by a credit downgrade last month, has moved derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits, according to people with direct knowledge of the situation.

The Federal Reserve and Federal Deposit Insurance Corp. disagree over the transfers, which are being requested by counterparties, said the people, who asked to remain anonymous because they weren’t authorized to speak publicly. The Fed has signaled that it favors moving the derivatives to give relief to the bank holding company, while the FDIC, which would have to pay off depositors in the event of a bank failure, is objecting, said the people. The bank doesn’t believe regulatory approval is needed, said people with knowledge of its position.

Three years after taxpayers rescued some of the biggest U.S. lenders, regulators are grappling with how to protect FDIC- insured bank accounts from risks generated by investment-banking operations. Bank of America, which got a $45 billion bailout during the financial crisis, had $1.04 trillion in deposits as of midyear, ranking it second among U.S. firms.

“The concern is that there is always an enormous temptation to dump the losers on the insured institution,” said William Black, professor of economics and law at the University of Missouri-Kansas City and a former bank regulator. “We should have fairly tight restrictions on that.”

This has been described as another bailout, and it’s not hard to see why. The derivatives go into the insured institution, protecting the counter-parties, and they would be paid off in the event of a failure. Notice that the counter-parties themselves are managing the process, requesting that their bets get implicit government backing. The notional value on these derivatives trades is $75 trillion, with a T. This includes their European derivatives exposure. And according to Bloomberg, JPMorgan Chase has already done this.

When the FDIC is screaming bloody murder and the Federal Reserve reassures that an action is perfectly legitimate and should cause no concern, watch your wallet.

via The Next Bailout: BofA Moves Derivatives Into Insured Institution | FDL News Desk.

..

This is a an issue of critical significance that should be dealt with more gravity than ever given to TARP, but it is not an impossible issue for the FDIC to address.  The FDIC should use every effort to signify the importance of the issue to Congress demanding immediate laws and regulations put in place that release the FDIC from any and all requirements to insure Credit Default Swaps.  This would leave sole responsibility t insurers to pay on swaps to whatever extent they can should they be triggered.  Proper regulations would allow the sale and clearing of swaps to be monitored and restricted.  The EU today announced a ban on the purchases and sales of Naked Credit Default swaps.  Regulating future sales could require institutions that sell swaps to escrow sufficient funds to meet triggering events  based on actuarial analysis.

Bank of America’s latest bailout bigger than ever | Loren Steffy | a Chron.com blog

Is that a withdrawal or is he shoring up the derivatives fund? (AP)

What, you thought the big banks were done leaning on taxpayers? Sure, Bank of America may have repaid the $45 billion it borrowed under the Troubled Asset Relief Program, but it’s a long way from standing on its own.

Last month, the bank’s Merrill Lynch unit was hit by a credit downgrade. Moody’s Investors Service cut its rating to Baa1, three notches above junk status. Apparently, this concerned the counterparties for Merrill’s derivatives, who worried their collateral could be compromised if Merrill’s credit rating fell more. So, Bank of America shifted a portion — or perhaps all — of its  $53 trillion in derivatives holdings to its retail bank.

That way, the derivatives can be backstopped by the bank’s $1 trillion in deposits — deposits that are insured by the Federal Deposit Insurance Corp. The FDIC, of course, has objected to the move because it would be on the hook if something went wrong. The Federal Reserve, which is concerned with bank soundness rather than depositor exposure, supports the move.

The problem underscores the point that I made in my Sunday column: We need a smaller Wall Street because taxpayers are still ultimately responsible for its risky deals. The FDIC can’t possibly pay out on $53 trillion worth of derivatives, which leaves taxpayers holding the bag.

via Bank of America’s latest bailout bigger than ever | Loren Steffy | a Chron.com blog.

BofA seeks to oust AIG law firm from $10 billion case | Reuters

(Reuters) – Bank of America Corp (BAC.N) urged a judge to disqualify the law firm representing insurer American International Group Inc (AIG.N) in its $10 billion mortgage fraud lawsuit against the bank, alleging a conflict of interest by one of the firm’s partners.

The bank said Quinn Emanuel Urquhart & Sullivan should be removed because the partner had defended Merrill Lynch & Co and its First Franklin Financial Corp unit against similar charges that they made and sold defective mortgage loans. Bank of America bought Merrill on January 1, 2009.

While the partner, Marc Becker, is no longer working on the case following the bank’s objection, his earlier involvement is a “flouting of the ethical rules” and put him in position to use his former clients’ confidential information, Bank of America said.

“Becker’s involvement in this case has already tainted these proceedings,” wrote Marc Dworsky, a partner at Munger, Tolles & Olson, which represents Bank of America and employed Becker until 2008, in a filing on Monday evening with the U.S. District Court in Manhattan.

“Quinn cannot be in a position to use defendants’ confidential information against them in the future — particularly in a case of this magnitude,” Dworsky added.

The challenge raises the stakes in one of the biggest lawsuits stemming from the global financial and credit crises.

via BofA seeks to oust AIG law firm from $10 billion case | Reuters.

EU Gets Deal on Naked Sovereign CDS Curbs – Bloomberg

The European Union reached a deal as part of a short-selling law that will pave the way for an optional ban on naked credit-default swaps on sovereign debt.

Poland, which holds the rotating presidency of the EU, and lawmakers from the European Parliament, reached the accord at a meeting in Brussels, EU spokeswoman Chantal Hughes said.

Under today’s deal, traders may be prevented from buying CDS on government bonds unless they either own the sovereign debt or other assets whose price moves in tandem with it. Nations will have the right to opt out of the measure if they detect signs that it may affect their borrowing costs.

“These balanced measures will ensure that sovereign CDS are used for the purpose for which they were designed, hedging against the risk of sovereign default, without putting at risk the proper functioning of sovereign-debt markets,” EU Financial Services Commissioner Michel Barnier said in a statement.

German Finance Minister Wolfgang Schaeuble and lawmakers in the European Parliament have called for a ban on naked CDS trades on government debt over concerns the practice fueled the euro zone’s debt crisis. Germany already has restrictions on using swaps to bet on sovereign defaults.

via EU Gets Deal on Naked Sovereign CDS Curbs – Bloomberg.

EU to ban ‘naked’ credit default swaps

The European Union has agreed to ban “naked” credit default swaps, a controversial financial instrument that traders use to bet on a country’s failure to pay off debt.

EU states and the European parliament reached a deal after long negotiations to prohibit the highly speculative instrument partly blamed for exacerbating Europe’s debt crisis.

A CDS serves as an insurance against the risk of default by a company or a government. In a “naked” CDS, the investors do not own the debt, betting they can purchase it later at a cheaper price if a default occurs.

Critics say “naked” CDS allow markets to speculate on a government’s chances of defaulting – something Greece has struggled to fend off since May 2010 – driving up pressure on countries.

“The parliament fought to put an end to speculation on sovereign debts in Europe,” said Green member of the European parliament Pascal Canfin.

“The prohibition of naked CDS on sovereign debt is a great victory,” the French lawmaker said.

The European Commission presented new rules to better control CDS instruments in September 2010 at the request of French President Nicolas Sarkozy and German Chancellor Angela Merkel.

The European parliament voted to ban “naked” CDS on sovereign debt in July, but some states including Italy were opposed, fearing that it would increase the price of their bonds and make it more difficult to borrow money.

via EU to ban ‘naked’ credit default swaps.

Germany snuffs out summit hopes – October 19, 2011

A final complete fix to debt crisis won’t come so soon, says Merkel’s spokesman

(BRUSSELS) Europe’s options for overcoming the debt crisis narrowed as Germany doused expectations of a breakthrough at this weekend’s summit and central bankers balked at extended bond purchases.

Ratings threat: French Finance Minister Francois Baroin said Paris will do everything to maintain its top debt ratings after Moody’s said France’s top credit rating is under pressure as the debt crisis has led to a deterioration of its government finances

European stock futures signalled a second day of declines after German Chancellor Angela Merkel’s office knocked down what it called ‘dreams’ that the Oct 23 summit will be the last word in taming the crisis.

Christian Noyer, head of France’s central bank, ruled out a ramping up of the European Central Bank’s bond-buying programme as part of a multi-pronged strategy to shield countries like Italy.

While Group of 20 finance ministers and central bankers pressed European Union leaders to set out a strategy by the end of the week, divisions flared over an emerging plan to avoid a Greek default, bolster banks and curb contagion.

‘We’re really in a bind here,’ Carl Weinberg, chief economist at High Frequency Economics, said in an interview on Bloomberg Television. ‘We have a lot of egos, a lot of national interests, a lot of political considerations, and that’s just hampering us from getting to a solution.’

The ECB said on Monday it bought 2.2 billion euros (S$3.85 billion) of bonds last week, the least since it restarted the market support programme in August over the objections of Germans on its council. While looking to exit the bond-buying business, the ECB also opposes the use of its balance sheet to boost the government-financed 440 billion euro rescue fund with enough firepower to do that job.

via Germany snuffs out summit hopes – October 19, 2011.

Moody’s may slap negative outlook on France – October 19, 2011

It adds that France may face a number of challenges in the coming months

(NEW YORK) Moody’s warned on Monday that it may slap a negative outlook on France’s Aaa credit rating in the next three months if the costs for helping to bail out banks and other eurozone members stretch its budget too much.

The warning comes as European Union leaders are discussing measures to protect the region’s financial system from an expected Greek debt default. Those measures should include injection of capital into banks with exposure to Greek debt.

France and Germany are the two strongest economies among the 17 eurozone members, and they are spearheading a plan to be presented at an EU summit on Sunday to help resolve the region’s debt crisis.

France’s progress on crucial fiscal and economic reforms as well as potential adverse developments in financial markets or the economy will also be taken into account under the review, Moody’s said.

A negative outlook would be a sign that Moody’s could downgrade its rating on France in the next couple of years.

via Moody’s may slap negative outlook on France – October 19, 2011.

Warning Bells Ring / Financial Crisis: BofA Said to Split Regulators Over Shifting Merrill Derivatives – Businessweek – Ring Fencing Deposits Against Counterparty Demands

Oct. 18 (Bloomberg) — Bank of America Corp., hit by a credit downgrade last month, has moved derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits, according to people with direct knowledge of the situation.

The Federal Reserve and Federal Deposit Insurance Corp. disagree over the transfers, which are being requested by counterparties, said the people, who asked to remain anonymous because they weren’t authorized to speak publicly. The Fed has signaled that it favors moving the derivatives to give relief to the bank holding company, while the FDIC, which would have to pay off depositors in the event of a bank failure, is objecting, said the people. The bank doesn’t believe regulatory approval is needed, said people with knowledge of its position.

Three years after taxpayers rescued some of the biggest U.S. lenders, regulators are grappling with how to protect FDIC- insured bank accounts from risks generated by investment-banking operations. Bank of America, which got a $45 billion bailout during the financial crisis, had $1.04 trillion in deposits as of midyear, ranking it second among U.S. firms.

“The concern is that there is always an enormous temptation to dump the losers on the insured institution,” said William Black, professor of economics and law at the University of Missouri-Kansas City and a former bank regulator. “We should have fairly tight restrictions on that.”

via BofA Said to Split Regulators Over Shifting Merrill Derivatives – Businessweek.

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