Tag Archives: Credit rating agency

“Split-Rated” – New Econo-parody Song

Versusplus.com are kicking off the autumn  season with a clean goal, straight into the upper corner: “Split-Rated” is a song about the newly emerged strange situation of the US credit ratings. Enjoy!

“We’re standard and we’re poor.”

www.versusplus.com

Here’s the song about Standard & Poor’s downgrade of the US credit rating, and the peculiar fact that other rating agencies are keeping the originnal triple-A.

“Split-Rated” are written and sung by Curtis Threadneedle, Marcy Shaffer  at http://www.versusplus.com, and Merle Hazard at http://www.merlehazard.com.

Sing along!

Watch “SPLIT-RATED”: on YouTube @ http://youtu.be/eaNDQD_WFIE, and on versusplus.com, with text of lyrics, @http://versusplus.com/split-rated.html

MORE econoparody songs at iRock.

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Filed under International Econnomic Politics, National Economic Politics

Too Big To Jail

One might certainly wonder what the EU regulators want to achieve with their  probe into the big global bank’s shady CDS activity. They can’t launch a criminal investigation anyway. The banks in question – once “too big to fail” – are also “too big to jail”.

Credit rating agencies would weigh in with ponderous warnings, which would scare sources of capital from participating.”

As pointed out in my last post, I’m not sure what’s really going on with the European Commission and the launching of two separate probes into the shady CDS trading of 16 major global banks. Perhaps they’re trying to fill up the bailout-bin with some juicy cash settlements?

That is acctually all the EU Commission can hope for.
Whatever the findings of the CDS investigation might be, there will never be a criminal case against banks like Goldman Sachs, JP Morgan Chase or Bank of America.
Never.
It’s exactly one year since the US Security and Exchange Commission charged Goldman Sachs with fraud related to the subprime disaster.
Two months later, Goldman and the US authorities agreed on a cash settlement of USD 550 million, or – roughly – equal to 3,4% of the banks bonus pool…
And this was supposed to be the biggest crackdown on financial crime – ever!
All the major banks have been facing similar or other criminal charges, but none – I repeat; none – have so far been given more than a slap on the wrist and a cosy little fine.
Unfair? Absolutely. But the fact is, however, there’s nothing else to do.
As Robert Lenzner at Forbes.com points out; a criminal  case would threaten these banks status as an authorized dealers in government securities and would in effect put such a cloud over its role in  buying and selling US Treasury securities that it would damage that gigantic and  crucial marketplace.
Besides, a criminal case, before it was tried or settled, would severely hinder the banks’ ability to borrow money in global markets, as many financial institutions would place it on a restricted list.
“Credit rating agencies would weigh in with ponderous warnings, and most likely scare sources of capital from participating,” Lenzner writes in his comment on the latest Goldman-bashing by the US Senate.
And this, in turn, would drastically reduce these banks ability to trade corporate debt, common stocks, currencies or commodities.
This process would feed on itself even before any sense that the firm was criminal or not.
Additionally, the central bankswould become quite wary of having any of these firms as a counterparts on any transaction.
So would all other market participants.

About 90% of all the derivative transactions in the world are handled by these firms with each other as the counterparts.

And now we have a handful of US banks that are “too big to jail,” a bunch of European banks that are “too stressed to test” and those who once was classified as “too big to fail” are now labeled as “systemically important.”

Honestly? I’m deeply impressed!



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The Big Bailout Scam (EU Version)

While the recent Basle agreement requires banks to carry a slightly higher cash cushion, nothing has been done to re-establish the division between investment banking and commercial high-street banking. Except for a temporary ban on naked short sales in Germany, the derivatives trade remains mainly unregulated. Honorary Professorial Research Fellow in London, George Irvin, makes the picture crystal clear.

“How long will sensible people go on accepting this nonsense before venting their anger on our ruling classes?”

George Irvin


“It may sound like total madness, but that’s pretty well what’s happening to a growing number of Europeans (including Brits) today,” George Irvin writes in his latest blog post.

I don’t think anyone could tell the story of the European Great Resession better and more understandable than professor George Irvin does in his latest blog post at the EUobserver.com:

*

Suppose that my rich neighbour down the road mortgaged his mansion up to the hilt to bet on the horses, ran up millions in debt and asked me, an ordinary punter, to pay off his debts plus interest.

Suppose that foolishly I accepted, and while I struggled to pay it off while barely able to feed my family and pay off the mortgage, my super-rich neighbour acquired an even bigger mansion.

To make matters worse, he used all sorts of clever dodges in the Caymans to pay negligible taxes, while if I failed to pay mine I knew I’d be sent to prison.

It may sound like total madness, but that’s pretty well what’s happening to a growing number of Europeans (including Brits) today.

How did we get here? In Britain, the 2008 credit crunch produced a massive recession which played havoc with government finances.

In Ireland the government took over the entire debt of its banking system, while in Greece, the rich paid minimal taxes and successive governments, unwilling to challenge them, indulged in creative accounting.

That’s somewhat simplified, but it’s the essence of the story.

Everywhere in Europe, voters are being told that decent pensions and universal welfare provision are no longer affordable and that we must all tighten our belts.

Governments can no longer borrow because the credit rating agencies might downgrade their bonds.

First it was Greece and Ireland, today it is Portugal, and tomorrow perhaps Spain, then Italy, and then … who knows?

But ordinary punters are starting to wake up.

Instead of enduring years of economic depression, the Greeks and the Irish will probably have to default, as will the Portuguese if their economy reacts the same way to belt-tightening.

And what if Spain has to be bailed out, still less defaults?

That would spell a major hit for banks in Germany, France, the UK (and elsewhere), all of which could easily add up to another major financial crisis.

Are we really so vulnerable?

The answer is indeed yes – because so little has been done to address the underlying causes of the 2008 crisis.

While the recent Basle Three agreement requires banks to carry a slightly higher cash cushion, nothing has been done to re-establish the division between investment banking and commercial high-street banking, a division which disappeared with the repeal in the US of Glass–Steagall in 1999.

Except for a temporary ban on naked short sales in Germany, the derivatives trade remains mainly unregulated.

Credit default swaps (a form of insurance on risky financial products) are still sold over-the-counter rather than through an official market, the US President having failed to follow up his 2009 promise to re-regulate these.

Meanwhile, the trillions poured into the big banks since 2008, instead of going to cash-starved small business or being used to build infrastructure and to create jobs, have largely helped fuel a new stock market bubble.

The extraordinary rise in the value of companies such as Facebook and Zynga provides a worrying parallel with the dotcom bubble of 2000.

Tax dodging is now a major growth industry—witness the latest GE scandal.

As for making the bankers pay by introducing some form of Tobin tax, there’s been much talk but little action.

Perhaps most galling of all is the injustice of using Keynesian economics to justify the need for state intervention in banking bailouts while claiming today that the profligate state caused the problem, as politicians now argue in London, Brussels and Frankfurt.

How long will sensible people go on accepting this nonsense before venting their anger on our ruling classes?


By George Irvin


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