EU BANKING CRISIS - Cyprus Pushes it Back Near the Edge

Euro Bank Jog Turns into a Bank Run 03-18-13 AlphaNOW Reuters

Target 2 balances HAD begun to unwind, while the deposit flight that had taken hold across much of the periphery was reversing course. Markets HAD become convinced that European policy makers had stared into the abyss, realised both the nature and the magnitude of the crisis, and decided to do something about it. Nothing fundamental had changed: the hard work was all still to come. But things WERE moving in the right direction, and policy makers APPEARED to be back in charge. All of a sudden, things now look shaky.

BANKRUPTCY - Does Anyone Care How a Capitalist System (versus a Crony Capitalist System) is Supposed to Work?

Note: Don’t get confused by the word “capitalism” in the phrase “crony capitalism”. Crony capitalism is not at all free market capitalism. Instead, it is actually the same thing as fascism, communist style socialism, kleptocracy, oligarchy or banana republic style corruption

Cyprus Bailout Math; Can Depositors Be Left Whole? 03-17-13 Mish

First the bondholders should have been wiped out. If that was not enough then the deposits above the €100,000 deposit guarantee should have been hit. Then and only then should the average citizen been hit.

And guess what. The average Cyprus citizen would likely not have been hit. Instead, the EU mandated a "screw every citizen" policy to protect the senior bondholders.

After a quick review of the most recent financial statements of the four publicly listed Cypriot banks as shown on their websites, it is notable that a simple alternative proposal could protect the country from bankruptcy and make its depositors whole.

By wiping out 100% of the equity, 100% of the bondholders, and 17% of the banks’ liability to central banks, the Cypriots could stabilize their banking system (based on the 5.8Bn EUR figure being discussed) without penalizing local savers. 

Instead of raising 5.8Bn EUR from depositors, it could raise 1.4Bn from combined market cap, 2.0Bn from bondholders and preferred shareholders, and 2.4Bn of the 14.3Bn in combined Central Bank loans (Cypriot and ECB) it has on its books. This assumes zero contribution from the Cypriot subsidiaries of foreign banks so it may be conservative. 

If the banking system is bankrupt, anything other than an Alice-in-Wonderland recovery system suggests that the order of liquidation is

1. Shareholders,
2. Preferred shareholders,
3. Debt holders,
4. Central Bank creditors, and
5. THEN depositors.

If 10Bn or even 17Bn EUR is truly required, then coincidentally up to 17.7Bn EUR is available from equity holders, debt holders, and Central Bank creditors without impairing a euro cent from depositors.

STATISM - The Silent Culture of Concealment & the Incentive System of Collusion Runs the governing bureaucracies.

The presstitutes in the establishment media enable the warmongering Protection Racket as a condition of employment. Their lack of investigative reporting is only superseded by their ominous distortion of real patriotic loyalty

Ignoring Whistleblowers 03-17-13 BATR.org

A government whistleblower, disclosing classified secrets, risks criminal charges. Defining restricted material usually includes a broad scope of information that casts officials or agencies in a compromising embarrassment. The idea that public servants may be engaged in violating laws is no excuse for blowing the whistle on such abuses if it involves "National Security". This protect the state attitude at all cost argument, is the very definition of institutional cover-up. In war, truth is the first casualty, so said Aeschylus.

So throwing the book at Bradley Manning comes as no surprise. Why should anyone be concerned about the intentional dissemination of raw evidence about war crimes, committed in the name of the War of Terror? Most would fail to be moved by the motivations of a stoic prisoner, who uploaded secured computer files to WikiLeaks. Many would cheer his interminable incarceration for disclosing military records.

Yet, before you slam the jail shut, reflect upon the Secretly Recorded Audio Leaked of Bradley Manning's Court Statement. Listen to the Full Statement.

Also, view the YouTube video, Bradley Manning Tells Court Public Have the Right to Know About US War Crimes.

A cogent reaction from another renowned whistleblower, Daniel Ellsberg of the Pentagon Papers fame, carries the weight of a brave man from another era.

"It's important to remember through all this that Manning has already pled guilty to ten charges of violating military regulations (few of which, if any would be civilian crimes) and faces twenty years in jail. Yet the prosecutors are still going ahead with the absurd charge of "aiding the enemy," a capital offense, of which the prosecutors are asking for life in prison.

Nixon could have brought that charge against me too. I was revealing wrongdoing by our government in a public way, and that information could have been read by our enemies in Vietnam. Of course, I never had that intent and Manning didn't either. We both leaked information to provoke a domestic debate about military force and government secrecy. And to say we did so to aid the enemy is absurd."

In any political trial, the spirit of the law is sacrificed for the expediency of protecting a debased regime. Balance in prosecution is a concept unknown to a government consumed with punishing any perceived enemy of the state.

Attorney Floyd Abrams and Professor Yochai Benkler provide a thoughtful perspective and legal opinion in The New York Times editorial - Death to Whistle-Blowers?

"Under the prosecution's theory, because Private Manning knew the materials would be published and that Al Qaeda could read them once published, he indirectly communicated with the enemy. But in this theory, whether publication is by WikiLeaks or The Times is entirely beside the point. Defendants are guilty of "aiding the enemy" for leaking to a publishing medium simply because that publication can be read by anyone with an Internet connection. 

Private Manning's guilty plea gives the prosecution an opportunity to rethink its strategy. The extreme charges remaining in this case create a severe threat to future whistle-blowers, even when their revelations are crystal-clear instances of whistle-blowing. We cannot allow our concerns about terrorism to turn us into a country where communicating with the press can be prosecuted as a capital offense." 

No such mercy from the imperial empire, Manning must suffer the supreme wrath for his transgressions. His admissions acknowledge expected official sanctions, but the sentiment of Daniel Ellsberg reflects the standpoint of many Manning supporters.

"...For the third straight year, Manning has been nominated for the Noble Peace Prize by, among others, Tunisian parliamentarians. Given the role the WikiLeaks cables played in the Arab Spring, and their role in speeding up the end of the Iraq War, I can think of no one more deserving who is deserving of the peace prize.

He's also deserving of the Congressional Medal of Honor. This medal, awarded by Congress-and not the executive branch-is given to military personnel, who during wartime, do what they should do for their country and their comrades, at the greatest risk to themselves."

Another target of recrimination, seen in the Sibel Edmonds dismissal is a classic example of punishing the whistleblower. Edmonds took a job as a translator at the FBI shortly after 9-11. Her story, stated in the YouTube interview, The Government Is Raping You: Sibel Edmonds, is compelling.

Sibel Edmonds Finally Wins, documents her observation in the book, "Classified Woman" and offers a disturbing assessment of her fellow workers.

"Edmonds found at the FBI translation unit almost entirely two types of people. The first group was corrupt sociopaths, foreign spies, cheats and schemers indifferent to or working against U.S. national security. The second group was fearful bureaucrats unwilling to make waves. The ordinary competent person with good intentions who risks their job to "say something if you see something" is the rarest commodity. Hence the elite category that Edmonds found herself almost alone in: whistleblowers."

This characterization of morally challenged federal employees is a direct consequence of a system that protects the cover-ups, while punishing disclosure of conflicting evidence of outright corruption. The silent culture of concealment or the worse incentive system of collusion runs the governing bureaucracies.

The presstitutes in the establishment media enable the warmongering protection racket as a condition of employment. Their lack of investigative reporting is only superseded by their ominous distortion of real patriotic loyalty. Whistleblowers function as detectives doing the job that reporters abdicate. Woefully, so few citizens of conscience are willing to jeopardize their individual circumstance for the courage of genuine national security.

The always insightful, William F. Jasper of the New American writes in Sibel Edmonds' "Classified Woman".

"Unfortunately, most of Edmonds' contributing editors at BoilingFrogs are decidedly left of center, and their anti-globalist, anti-war, anti-police-state arguments and analyses tend to range from the "progressive" to the Marxoid. However, when she went public and came under attack, it wasn't Sean Hannity and Rush Limbaugh who came to her defense; it was the anti-Bush Left that rallied to her aid. In fact, the faux conservatives at FOX, National Review, and the radio talk show universe alternately ignored and attacked her; they were busy cheerleading George W. Bush's unconstitutional wars abroad and his unconstitutional police-state measures at home. Sympathetic coverage for Edmonds from alternative media on the Right has been woefully lacking, with a few exceptions.

In April 2011, Sibel Edmonds submitted her manuscript for Classified Woman to the FBI for review, as required by terms of her employment agreement. Under that agreement, the FBI has 30 days to approve and/or require deletions and revisions. After waiting over 340 days with no response from the bureau, Edmonds took the path that few others have taken; she published anyway. However, with every publisher afraid to touch it, she was forced to publish it on her own. She knows that any day now the Obama administration, which has prosecuted more whistleblowers than all previous administrations combined, may come after her."

Forget about the false left-right paradigm. The "War of Terror" being waged by the imperium empire is designed to crush whistleblowers, and keep the brain dead in a zombie trance. Just consider the impact on the Afghanistan campaign if the FBI acted upon the evidence unclosed by Sibel Edmonds that cuts to the heart of the 911 myth assumptions.

The military-industrial-security-intelligence complex closes ranks to protect their "Splendid Little Wars". The whistleblowers that expose the lies out of the War Party establishment are only a minor distraction, as long as the public sleeps in their self-induced coma. The Army Times item, Hagel to order review of drone medal precedence, is one such interlude, while the control and command structure continues to aim their weapons at imaginary threats.

Who would doubt that the Bradley Mannings and Sibel Edmonds, squealers of state secrets, would be prime quarries for the hunt to eliminate enemies of the state? The only good government snitch is a Gitmo captive. So goes the claims of the governance prosecutors. 

How many people have actually examined the information in the Manning WikiLeak disclosures or read the Edmonds account of 911-treason complicity? Oh no, the discomfort of confronting the fake reality of the official story of make believe is too disturbing for most people.

Loyalty of country is a very dangerous attitude, when your government sponsors state terrorism as a normal activity. The fear to face up to the horrors of administration deceit is the prime activity of the flag waving drones that cheer for more carnage.

When Edmonds describes the traitors within the national security structure, the fearful bureaucrats facilitate the ongoing treachery that passes for nationalism. When Manning exposes the documents that prove a genocide policy is in effect, the penalty demanded by the bellicose command is his execution.

An honorable whistleblower is a citizen hero. Disobeying dishonest laws is true patriotism. In the end, A Different Philosophy of Civil Disobedience, is needed. Complacency is the countrywide disease of choice. Real patriots oppose jingoistic orders. Stand down . . .

CRONY CAPITALISM - From the Mouth of Fed President Richard Fisher

CRONY CAPITALISM - Bank Corruption Summary

Jaw-Dropping Crimes of the Big Banks 03-14-13 Washington's Blog

Preface: Not all banks are criminal enterprises. The wrongdoing of a particular bank cannot be attributed to other banks without proof. But – as documented below – many of the biggest banks have engaged in unimaginably bad behavior.

You Won’t Believe What They’ve Done …

Here are just some of the improprieties by big banks:

• Funding the Nazis

• Laundering money for terrorists

• Financing illegal arms deals, and funding the manufacture of cluster bombs (and see this and this) and other arms which are banned in most of the world

• Launching a coup against the President of the United States

• Handling money for rogue military operations

• Laundering money for drug cartels. See this, this, this, this and this (indeed, drug dealers kept the banking system afloat during the depths of the 2008 financial crisis)

• Engaging in mafia-style big-rigging fraud against local governments. See this, this and this

• Shaving money off of virtually every pension transaction they handled over the course of decades, stealing collectively billions of dollars from pensions worldwide. Details here, here, here, here, here, here, here, here, here, here, here and here

• Manipulating gold prices … on a daily basis

• Charging “storage fees” to store gold bullion … without even buying or storing any gold . And raiding allocated gold accounts

• Committing massive and pervasive fraud both when they initiated mortgage loans and when they foreclosed on them (and see this)

• Pledging the same mortgage multiple times to different buyers. See this, this, this, this and this. This would be like selling your car, and collecting money from 10 different buyers for the same car

• Cheating homeowners by gaming laws meant to protect people from unfair foreclosure

• Committing massive fraud in an $800 trillion dollar market which effects everything from mortgages, student loans, small business loans and city financing

• Manipulating the hundred trillion dollar derivatives market

• Engaging in insider trading of the most important financial information

• Pushing investments which they knew were terrible, and then betting against the same investments to make money for themselves. See this, this, this, this and this

• Engaging in unlawful “frontrunning” to manipulate markets. See this, this, this, this, this and this

• Engaging in unlawful “Wash Trades” to manipulate asset prices. See this, this and this

• Otherwise manipulating markets. And see this

• Participating in various Ponzi schemes. See this, this and this

• Charging veterans unlawful mortgage fees

• Helping the richest to illegally hide assets

• Cooking their books (and see this)

• Bribing and bullying ratings agencies to inflate ratings on their risky investments

• Violently cracking down on peaceful protesters

The executives of the big banks invariably pretend that the hanky-panky was only committed by a couple of low-level rogue employees. But studies show that most of the fraud is committed by management.

Indeed, one of the world’s top fraud experts – professor of law and economics, and former senior S&L regulator Bill Black – says that most financial fraud is “control fraud”, where the people who own the banks are the ones who implement systemic fraud. See this, this and this.

Even the bank with the reputation as being the “best managed bank” in the U.S., JP Morgan, has engaged in massive fraud. For example, the Senate’s Permanent Subcommittee on Investigations released a report today quoting an examiner at the Office of Comptroller of the Currency – JPMorgan’s regulator – saying he felt the bank had “lied to” and “deceived” the agency over the question of whether the bank had mismarked its books to hide the extent of losses. And Joshua Rosner – noted bond analyst, and Managing Director at independent research consultancy Graham Fisher & Co – notes that JP Morgan had many similar anti money laundering laws violations as HSBC, failed to segregate accounts a la MF Global, and paid almost 12% of its 2009-12 net income on regulatory and legal settlements.

But at least the big banks do good things for society, like loaning money to Main Street, right?

Actually:

• The big banks no longer do very much traditional banking. Most of their business is from financial speculation. For example, less than 10% of Bank of America’s assets come from traditional banking deposits. Instead, they are mainly engaged in financial speculation and derivatives. (and see this)

• The big banks have slashed lending since they were bailed out by taxpayers … while smaller banks have increased lending. See this, this and this

• A huge portion of the banks’ profits comes from taxpayer bailouts. For example, 77% of JP Morgan’s net income comes from taxpayer subsidies

• The big banks are looting, killing the economy … and waging war on the people of the world

• And our democracy and republican form of government as well

We can almost understand why Thomas Jefferson warned:

And I sincerely believe, with you, that banking establishments are more dangerous than standing armies ….

John Adams said:

Banks have done more injury to religion, morality, tranquillity, prosperity, and even wealth of the nation than they have done or ever will do good.

And Lord Acton argued:

The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.

No wonder a stunning list of prominent economists, financial experts and bankers say we need to break up the big banks.

CYRPUS

CYPRUS - Breaks Public Trust, Signals Enormnity of EU Banking Problems and Incites the Politics of Germany Distating Terms

"I object to the entire scheme. First the bondholders should have been wiped out. If that was not enough then the deposits above the €100,000 deposit guarantee should have been hit. Then and only then should the average citizen been hit.

... And guess what. The average Cyprus citizen would likely not have been hit. Instead, the EU mandated a "screw every citizen" policy to protect the senior bondholders. This is not going to sit well in Cyprus or anywhere else, and all for a mere EU 5.8 billion Euros.

The stupidity and arrogance of these nannycrats is staggering.The nannycrats think this will stop "contagion". They are nuts." Mish 03-17-13

PUBLIC TRUST

SIGNALS & POLITICS

Frederik Ducrozet, an economist with Credit Agricole, tells Business Insider:

I think the Cyprus deal as it stands a big deal indeed, mostly in terms of bad signaling (as the ongoing normalisation in Eurozone capital flows remains fragile and vulnerable to sudden stops) and politics (Germany still imposing its rules despite growing discontent in the South).

There were multiple reports which indicated that Germany told Cyprus: Confiscate your depositors' money or leave the Eurozone. That's a terrible political dynamic, and on top of Italy it exacerbates a bad overall political situation.

#Cyprus Depositors Vent Fury Through Social Media 03-17-13 Zero Hedge

• Small Depositors Are Getting Hit Because Cyprus Didn't Want To 'Price Themselves Out Of The Laundry Business'
• ANALYST: Cyprus Could Cause The Already Overvalued S&P 500 To Fall By 10%
• This is a nuclear war on savings and wealth - something that will likely crush animal spirits. This is a policy move you expect from a dictatorial regime in sub-Saharan Africa, not in an EMU member state. If the European governments can clandestinely expropriate 7 to 10 percent of their hard working citizen's precautionary savings after the close of business on a Friday night, what else are they capable of doing? Why even hold money in a bank account? Are they trying to start a bank run?
• The Rape Of Cyprus By The European Union & The IMF The nations of Europe, Germany, France, the Netherlands and the rest, demanded that this take place, a "fait accompli," the President of Cyprus said and Europe annexes Cyprus. Let's be quite clear; the European Union has confiscated the private property of the citizens in Cyprus without debate, legislation or Parliamentary agreement. Pay attention please. The European Union and the European Central Bank and the IMF have just advocated the confiscation of private property for their own indulgence.
• Cyprus: The World’s Biggest "Poker Game" The nations of Europe, Germany, France, the Netherlands and the rest, demanded that this take place, a "fait accompli," the President of Cyprus said and Europe annexes Cyprus. Let's be quite clear; the European Union has confiscated the private property of the citizens in Cyprus without debate, legislation or Parliamentary agreement. Pay attention please. The European Union and the European Central Bank and the IMF have just advocated the confiscation of private property for their own indulgence.

CYPRIOT PRESIDENT ADDRESSES NATION: We Were Given Two Options Like Blackmail 03-17-13 BI

Depositors Pay Price in Cyprus Bailout Deal 03-16-13 WSJ

• NEW CHANGES PROPOSED (SUNDAY NIGHT)
  • The new proposal will see smaller depositors, those with up to €100,000, taxed at 3%;
  • savers with €100,000 to €500,000 taxed at 10%; and those with
  • over €500,000 taxed at 15%, one official said.
• ORIGINAL (SATURDAY NIGHT): Depositors in Cypriot banks will be hit with a one-off tax on their savings. Accounts
• With more than €100,000 will be taxed at 9.9%,
• With less at 6.75%,
• Raising an expected €5.8 billion for the near-bankrupt nation.
• Cypriot Parliament would adopt the taxes over the weekend and the money would be extracted from accounts before banks take up business Tuesday.
• Part of a €10 billion ($12.96 billion) bailout from the euro zone and the International Monetary Fund.

The deal, announced early Saturday, marks the first time in the euro zone's five-year-old financial crisis that depositors in bloc's banks will lose money. "We have taken immediate measures so that electronic transfers cannot take effect before banks reopen on Tuesday," said the minister, who took office just two weeks ago.

Jörg Asmussen, a member of the executive board of the European Central Bank, stressed that amounts in excess of the levy will remain fully available. Accounts held in Greek offshoots of Cypriot banks will also be spared.

Cyprus, which first applied for help last summer, has proved a major headache for the euro zone, mostly because

• of an outsized banking sector, which has swelled to eight times the size of the island's economy and was hit hard by a restructuring of Greek government debt last year.
• Allegations of money laundering and
• a general election in February also hampered bailout talks.
• An initial assessment of Cyprus's finances in January concluded it needed more than €17 billion, including €10 billion just to stabilize its banks.
• That would have been an unmanageable burden for the island, whose annual economic output is less than €18 billion and shrinking.

As they struggled to bring down the rescue costs, euro-zone finance ministers and the troika of the European Commission, the ECB and the IMF chose to go ahead with the deposit tax despite warnings it could unsettle savers and investors in other weak European countries.

"This is a special situation, with a very specific banking sector, with a very specific structure and size, which calls for this specific package," said Jeroen Dijsselbloem, the Dutch finance minister who chaired the discussions. He said similar measures weren't being considered for other countries that have received bailouts.

Officials hoped that the contribution of depositors will make it easier to pass the rescue package through parliaments in rich countries like Germany, the Netherlands and Finland. Lawmakers there have balked at bailing out foreign depositors, many of them Russians, whom they suspected of taking advantage of Cyprus's lax banking laws.

• Nicosia will also raise its corporate-tax rate to 12.5% from 10%, among the euro zone's lowest,
• impose a levy on interest income and
• undergo a review of its anti-money-laundering legislation.

The IMF, which had been the strongest advocate for having the bailout burden fall partly on depositors, will contribute to the rescue, said the fund's Managing Director Christine Lagarde. Two officials said the IMF is expected to chip in €1 billion of the overall €10 billion needed.

Olli Rehn, the European Union's economic affairs commissioner, said Russia had indicated it was willing to give Cyprus more time to repay a €2.5 billion rescue loan from 2011, and may also lower the interest it charges. Mr. Sarris is expected to travel to Moscow on Wednesday to nail down the final terms.

The struggle to agree on a bailout for tiny Cyprus, which accounts for just 0.2% of the euro zone's economy, once again underlines how vulnerable the currency union remains to economic shocks in any member nation.

"Cyprus is of systemic relevance to the euro area," said Mr. Rehn. "Not to provide assistance to Cyprus would have posed a risk of undoing the progress that has been painstakingly made over the past year."

Ministers also agreed to give Portugal and Ireland more time to repay their bailout loans, but didn't provide any details.

The Cyprus Bailout Is Unfair, Short-Sighted, And Self-Defeating 03-17-13 The Economist

CRONY CAPITALISM - Understanding Cyprus

Top Banking Analyst: Subsidies to Giant Banks Exceed $780 Billion Dollars Per YEAR 03-13-13 Washingtons Blog