Tweeter button Facebook button

November 30, 2011

Where Are The Handcuffs?! (Treasury Secretary Hank Paulson)

By Karl Denninger on November 29, 2011

Oh, so there was inside information passed around?

On the morning of July 21, before the Eton Park meeting, Paulson had spoken to New York Times reporters and editors, according to his Treasury Department schedule. A Times article the next day said the Federal Reserve and the Office of the Comptroller of the Currency were inspecting Fannie and Freddie’s books and cited Paulson as saying he expected their examination would give a signal of confidence to the markets.

This is the narrative we heard on CNBC and elsewhere.

There’s one problem: It was a lie.

At the Eton Park meeting, he sent a different message, according to a fund manager who attended. Over sandwiches and pasta salad, he delivered that information to a group of men capable of profiting from any disclosure.

Around the conference room table were a dozen or so hedge- fund managers and other Wall Street executives — at least five of them alumni of Goldman Sachs Group Inc. (GS), of which Paulson was chief executive officer and chairman from 1999 to 2006. In addition to Eton Park founder Eric Mindich, they included such boldface names as Lone Pine Capital LLC founder Stephen Mandel, Dinakar Singh of TPG-Axon Capital Management LP and Daniel Och of Och-Ziff Capital Management Group LLC.

After a perfunctory discussion of the market turmoil, the fund manager says, the discussion turned to Fannie Mae and Freddie Mac. Paulson said he had erred by not punishing Bear Stearns shareholders more severely. The secretary, then 62, went on to describe a possible scenario for placing Fannie and Freddie into “conservatorship” — a government seizure designed to allow the firms to continue operations despite heavy losses in the mortgage markets.

In other words all equity would be wiped out, as would preferred stock.

Did Paulson break any laws by disclosing his intentions on a preferential basis? That’s a bit more murky. At first blush the answer would appear to be “no”; he had no duty to file an 8K since he wasn’t an officer of Fannie or Freddie, and it would appear that Reg-FD wouldn’t apply to him either.

The better question is whether he was a public fiduciary at the time, in which case disclosing inside information in such a preferential fashion would be a breach.

There’s no way to know if the hedgies involved in the lunch traded on what they learned. The Bloomberg story says that at least one of them called his lawyer who told him to stop trading in any such securities as that was material non-public inside information (duh!) but whether they and the rest did so is an open question.

Both Bill Black and Janet Tavakoli went on the record for Bloomberg:

“You just never ever do that as a government regulator — transmit nonpublic market information to market participants,” says Black, who’s a former general counsel at the Federal Home Loan Bank of San Francisco. “There were no legitimate reasons for those disclosures.

Janet Tavakoli, founder of Chicago-based financial consulting firm Tavakoli Structured Finance Inc., says the meeting fits a pattern.

“What is this but crony capitalism?” she asks. “Most people have had their fill of it.”

Let’s just call this what it really is: Theft.

Remember, all after-IPO trades of a stock or after-issue trades of some other security are at someone else’s profit or expense. That is, if you win someone else either loses directly or they lose opportunity — that is, they sell you their shares, you buy them, they don’t make the money and you do. Likewise, if you buy something and it goes down in price, you take the loss they otherwise would have. And if you short something you’ve borrowed the shares from somebody and the person who you short them to swallows the loss while you gain.

Therefore what we really have to ask here is whether any shareholder of the common or preferred stock has a valid fraud claim against the Government and Paulson, personally. After all, his public statements, which if this story is accurate were intentional lies, resulted in a near-doubling of Fannie’s stock over the space of four days.

Isn’t it nice when the government steals your money?

Oh, and why do we sit for this crap again?

Sources:

https://market-ticker.org/akcs-www?post=198261

https://www.fedupusa.org/2011/11/where-are-the-handcuffs-treasury-secretary-hank-paulson

US Wants Debt Action As Obama Hosts Eurozone Summit

WASHINGTON (AFP) - The United States said Monday that Europe needed to act “now” with force and decisiveness to attack the eurozone debt crisis, as President Barack Obama hosted a summit with top European officials.

The US-European summit at the White House came amid stark new warnings on the depths of the eurozone turmoil and renewed fears that the exposure to Europe of US banks could rebound and harm the slow US economic recovery.

“This is something they need to solve and they have the capacity to solve,” said White House spokesman Jay Carney.

“Our position is and has been that it’s critical for Europe to move with force and decisiveness now, particularly with new governments coming into place in Italy, Greece and Spain.”

Obama hosted European Council President Herman Van Rompuy, European Commission President Jose Manuel Barroso, High Representative Catherine Ashton and other officials for talks and lunch at the White House.

The talks, also including US Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner, opened with a brief photo-op, and were to conclude later with statements from both sides.

The US president has repeatedly stressed his anxiety over the eurozone crisis and halting efforts to fix it, and could pay a heavy price if economic panic vaults the Atlantic and slows the US recovery as he seeks reelection.

A study by Fitch ratings agency published last week warned that exposure of the US financial sector to European countries and banks was “sizable.”

The White House talks take place as France and Germany seek to frame yet another plan to seek to end the stubborn two-year debt crisis, and outside observers delivered pessimistic warnings on the extent of eurozone woes.

The Organization for Economic Cooperation and Development (OECD) warned that policymakers were failing to see the urgency of acting to tackle risks to the global economy, and rapped the United States as well as Europe.

Moody’s Investors Service warned that all European Union sovereign debt ratings, not just those of teetering nations like Italy, Greece and Portugal were at risk, pointing to a widening of the crisis.

“In the absence of policy measures that stabilize market conditions over the short term, or those conditions stabilizing for any other reason, credit risk will continue to rise,” Moody’s said.

Obama has consistently called on European leaders to construct a eurozone firewall and insists Europe has the capacity to fix the crisis — though questioned whether there is sufficient political will.

“I am deeply concerned and I have been deeply concerned. I suspect I will be deeply concerned tomorrow and next week,” Obama said when asked about his reaction to the crisis in the eurozone in Australia this month.

Despite its exposure to Europe and its status as the world’s top economic power, the United States has limited capacity to influence the eurozone crisis, and has been cajoling top European leaders to act decisively.

Washington’s moral standing on the issue has also been called into question by its failure to make its own tough political decisions needed to fix its bulging deficit, with little movement likely ahead of a 2012 election year.

And despite offering a platform for Obama to express renewed concern, it was unlikely the summit would make much progress as it lacks key players like German Chancellor Angela Merkel and French President Nicolas Sarkozy.

Reports said Monday that key eurozone leaders were considering a push for strict new budget rules for member states to fix the crisis, rather than recommending changes to EU treaties, which could take years.

The White House said the summit would address “efforts to strengthen economic ties and growth” but also take on developments in the Middle East following the Arab Spring and law enforcement and counterterrorism cooperation.

It was likely that Iran’s nuclear drive would also come up, following new steps by Washington and its allies to deepen Tehran’s isolation in the wake of a UN report citing new evidence of a nuclear weapons program.

 

Source: https://www.activistpost.com/2011/11/obama-has-repeatedly-stressed-his.html

Fitch Lowers US Credit Outlook To ‘Negative’

WASHINGTON (AFP) - Ratings agency Fitch reaffirmed the United States’ top credit rating, but downgraded the outlook to negative as it projected slow growth, political stalemate and rising levels of debt this decade.

Citing “still strong economic and credit fundamentals,” Fitch nonetheless said that the recent failure of Congress to reach a short-term deficit cutting deal could delay more fundamental reforms.

Fitch added that there was “considerable uncertainty surrounding the economy’s potential output.”

Taken together, political failures and slower growth could result in a full-fledged downgrade.

“The negative outlook indicates a slightly greater than 50 percent chance of a downgrade over a two-year horizon,” it said.

A spokeswoman for the US Treasury, Colleen Murray, said the move was a “reminder of the need for Congress to reduce the country’s long-term deficit in a balanced manner and to avoid efforts that would undo the $1.2 trillion in automatic cuts negotiated last summer.”

Fitch said a key trigger would be the government’s failure to reach agreement in 2013 on a “credible deficit reduction plan” as the economy slows. That, Fitch said “would likely result in a downgrade of the US sovereign rating.”

“The longer productive capacity remains idle and unemployment high, the greater the likelihood that the loss of output (and tax receipts) is greater than currently estimated.”

Fitch said that had “negative implications for the medium to long-term fiscal outlook.”

Fitch projected federal debt would rise to 90 percent of GDP by the end of the decade.

“In Fitch’s opinion, such a level of government indebtedness would no longer be consistent with the US retaining its ‘AAA’ status despite its underlying strengths.”

 

Source: https://www.activistpost.com/2011/11/fitch-lowers-us-credit-outlook-to.html

Class Segregation: Rich Hunker Down in Wealthy Enclaves — Leaving the Rest of America’s Neighborhoods to Deteriorate

America’s rich haven’t just become richer, according to a new study. They’ve become far more likely to live among their own kind.

Just 40 years ago, most Americans rubbed elbows with neighbors from a fairly wide cross-section of income levels. But today’s rich, Census data show, are keeping everyone else at arm’s length — and more.

How many neighborhoods have you ever seen with oodles of rich residents — and poor schools? Or, vice versa, how many neighborhoods do you know with lots of poor people and richly appointed schools?Silly questions. We all know the answers. Kids in affluent neighborhoods don’t go to schools with leaky roofs, tattered textbooks, and uncertified teachers. Kids in poor neighborhoods do. And what goes for schools, of course, goes for every other public service as well — from parks and libraries to road repair and garbage pick-up. You’re going to be much better off, as a person of modest means, if some of your neighbors have more substantial means.

Back in 1970, the vast majority of Americans lived in neighborhoods that did mix people of substantial and modest means. No more. In fact, says a new study just released by the Russell Sage Foundation and Brown University, the share of Americans living amid intense income segregation has more than doubled.America’s rich haven’t just become richer, show the study data from Stanford University sociologists Sean Reardon and Kendra Bischoff. They’ve become far more likely to live among their own kind. The same for the poor.Reardon and Bischoff have gone through Census data from all the U.S. metro areas with populations over 500,000. They define as “affluent” those neighborhoods where most families have incomes that run at least 50 percent over the typical family income of the entire metro area.

Poor neighborhoods have most families making less than two-thirds the metro median income.

In 2007, in the nation’s most typical metro areas, neighborhoods that rated as affluent in the Stanford research schema had over half their families making over $112,500. Poor neighborhoods had over half their families making under $50,000.Nearly one out of three families in America’s large metropolitan areas, the Stanford analysts found, spent 2007 in either a severely segregated rich or a severely segregated poor neighborhood.In 1970, by contrast, only one in seven American families lived in neighborhoods that rated as segregated rich or poor.In that same year, 65 percent of Americans lived in neighborhoods where over half the resident families rated as middle income. By 2007, that share of Americans living in middle-class neighborhoods had dropped to 44 percent.

The isolation of America’s rich, the authors of this new income segregation study note, is actually getting more intense than the isolation of the poor. And that isolation, they point out, deeply matters.“The increasing concentration of income and wealth in a small number of neighborhoods,” the two authors note, “results in greater disadvantages for the remaining neighborhoods where low- and middle-income families live.”New Jersey hosts some of the nation’s most income-segregated areas, and this segregation, Newark Star-Ledger commentator Tom Moran observed last week, is taking an ever heavier toll on our political psyche.Growing income segregation, explains Moran, “means people of different means don’t rub elbows as much, their kids don’t play together as much, the parents don’t chat over the back yard fence.

In this segregated environment, people know less and less about people not like themselves. They more easily embrace stereotypes. Politicians from neighborhoods where rich people only interact with other rich people will gravitate more glibly to mean-spirited austerity budget cutbacks.These pols don’t see the threats austerity poses to the well-being of real people with real needs. They see instead the “lazy” poor.This phenomenon has been swirling around the U.S. political scene ever since modern American inequality first began skyrocketing in the 1980s. In 1991, Robert Reich, soon to become the U.S. secretary of labor, gave the phenomenon a label: the “secession of the successful.”America’s top earners, Reich would note, “feel increasingly justified in paying only what is necessary to insure that everyone in their community is sufficiently well educated and has access to the public services they need to succeed.”The nation’s “stark political challenge in the decades ahead,” Reich added back in 1991, will be trying to reaffirm that we remain “a society whose members have abiding obligations to one another.”

We are, the new Stanford data tell us, most definitely losing that challenge.

 

Wall Street Banks Earned Billions In Profits Off $7.7 Trillion In Secret Fed Loans Made During The Financial Crisis

In the lead-up to the financial crisis that crippled the American economy and plunged the country into a recession, the Federal Reserve made trillions in undisclosed loans to struggling banks and financial institutions, according to official documents obtained by Bloomberg News. Six of the country’s largest banks then turned those loans into more than $13 billion in previously undisclosed profits.

The total cost of the Fed loans amounted to $7.77 trillion, and unlike the funds made available by the Troubled Asset Relief Program (TARP), the loans came with virtually no strings attached for the banks:

The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he “wasn’t aware of the magnitude.” It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.“TARP at least had some strings attached,” says Brad Miller, a North Carolina Democrat on the House Financial Services Committee, referring to the program’s executive-pay ceiling. “With the Fed programs, there was nothing.”

In one month, Morgan Stanley — one of the most vulnerable financial companies at the time — took $107 billion in secret loans, enough to pay off a tenth of the nation’s delinquent mortgages. The loans, like those made to other institutions, were never reported to Morgan Stanley’s shareholders or the taxpayers who subsidized them.

Other banks drew similar loans without disclosing them. Bank of America, for instance, held $86 billion in public debt on the day then-CEO Ken Lewis declared his company “one of thestrongest and most stable major banks in the world.” Bank of America’s Fed borrowing peaked at $91.4 billion in February 2009; at the same time, it benefited from $45 billion in TARP loans.

And even while members of Congress were working to overhaul the nation’s financial regulatory system, the banks and the Fed kept them in the dark about the loans. Rep. Barney Frank (D-MA), one of the architects of the Wall Street reform act that eventually became law, and former Sen. Judd Gregg (R-NH), the GOP’s lead negotiator on TARP, told Bloomberg they were unaware of the specifics of such loans.

Had Congress had such information, members of both parties would have changed their votes to favor Wall Street reform, Sen. Sherrod Brown (D-OH) said. Former Sen. Byron Dorgan (D-ND), meanwhile, said knowledge of the loans could have led to a push to reinstate the Glass-Steagall Act, which prohibited banks from owning investment companies and vice versa, thereby limiting their size and vulnerability to such crises.

The secret nature of the loans, however, instead helped Wall Street work to “preserve a broken status quo” that allowed its biggest banks to grow even larger than they were before the crisis. The nation’s largest banks have turned more in profit in the last 30 months than they did in nearly eight years preceding the crisis, all while spending millions to derail significant reform legislation. And since the Dodd-Frank Act became law, they have spent millions more to weaken its rules and prevent certain regulations from taking effect. Bank lobbying, in fact, is now on pace to reach a record high this year.

 

Source: https://thinkprogress.org/economy/2011/11/28/376430/wall-street-banks-fed-loans-secret/

China Bubble A Global Concern

China’s economy has been growing at a phenomenal pace in recent decades, averaging around 10% a year. Few people seemed to worry, therefore, when the Chinese government announced recently that gross domestic product (GDP) growth in the third quarter of 2011 slowed to “only” 9.1% . Almost any country would envy such growth. Yet beneath the continued robust appearances, there are signs that China is heading toward a crash reminiscent of the one that brought down the United States economy during 2007-2008.

China too is facing a real estate bubble financed by an unregulated shadow banking system that is just lately starting to get squeezed between tightening government regulation of credit and sharply falling export sales. If real estate prices finally start to tumble, the shock to bullish Chinese investors could collapse the shadow banking system, drive many smaller businesses under, and create severe unemployment problems.

Although the US Congress is still fixated on the supposed problem of an undervalued currency, a serious slowdown of the Chinese economy could have worse implications for the world economy than the much touted exchange rate issue.

Americans must start to think more broadly about the role of the Chinese economy in an increasingly troubled world economy and not consider only the bilateral US-China economic relationship in isolation from the rest of the world. Since 2007 the world economy has been rattled by a series of structural failures worse than any since the 1930s. This is a dangerous time.

The Great Depression was not a single crisis but a snowballing series of interlinked crises that each pulled the world deeper into depression. The links among various crises in the world today are even tighter than then because of the much greater integration and interdependence of the global financial system and its greater role in real economies everywhere.

Currency conflict
The view from Washington is that the main problem is China’s overvalued currency, the yuan. Congress is urging the Chinese government to let the yuan rise in value against the dollar, which would make everything made in China more expensive to Americans and everything made in United States cheaper in China. This could conceivably stimulate jobs in the US as we sell more to China. China, though, would lose jobs by selling less to the United States.

However, if the yuan rises sharply against the dollar, China’s loss of jobs is more certain than America’s gain. Most Chinese exports to the United States are labor-intensive products such as shoes and clothing that are not likely to be made in America even if Chinese prices for these things rise. Faced with more expensive Chinese products, American consumers will simply shift our purchases to other low-wage countries such as India, Pakistan, Indonesia, and Vietnam.

China would lose jobs, but America is unlikely to gain many. We would gain some jobs as our products become cheaper for Chinese consumers, allowing us to sell more, but as I argue below, the structure of Chinese demand favors products from Europe and Japan more than those made in America anyway, so our gain would not be large.

On the other hand, a decline in the value of the dollar (the flip side of the rise in the yuan), such as congress demands, would make all Americans somewhat poorer and less able to afford foreign-made goods, including oil. American interest rates would also rise, increasing the cost of our public and private debt and slowing our economy, perhaps counteracting any job gains from increased exports.

Our current low interest rates depend in part on strong Chinese (and Japanese and Arab) demand for our government debt, demand that is largely driven by the Chinese central bank’s purchase of US government bonds as its main method of preventing the yuan from rising. Selling yuan to buy dollars restrains the dollar value of the yuan.

Those dollars are then mostly used to purchase US government bonds, financing our debt. If China stops funding our debt, who will pick up the tab? Interest rates would rise to coax other investors to replace the Chinese. If congress does manage to provoke the sharp rise in the yuan, we may all regret it.

In any case, the “problem” of an overvalued yuan is gradually being solved even without congressional action. Since 2005 the nominal value of the yuan has risen 30% against the dollar. Meanwhile, the real cost of Chinese goods has risen even faster because Chinese inflation has exceeded US inflation by anywhere between 7% and 20% during the same period (depending on the measure of inflation), further reducing the competitiveness of Chinese goods in the American market.

Rising relative Chinese costs are likely to continue, since the cost of labor in China’s export sector has increased more than 30% since the beginning of last year. In fact, precisely because China’s exports compete with those of so many other countries, China is not fully able to pass on its rising costs to foreign consumers through higher prices. Chinese exporters are suffering a profit squeeze instead, which will drive many of them out of business - even more if the yuan value rises sharply.

China and Europe
China’s economic relationship with tottering Europe is even more crucial to the health of the world economy than its relationship with America. China exports to the United States quite a lot more than it imports, not because the Chinese are stubbornly resisting buying American goods, but because the United States does not manufacture so much of what China imports most: factory machinery and railroad equipment. Europe, however, does.

Tour any Chinese factory (I have toured scores of them) and you will see plenty of machines made in Germany, Italy, Britain, and Japan. Decades ago, before the rise of China, the United States had already declined as a major world supplier of productive machinery.

Yet China, because of its very fast growth rate, high savings rate, and high investment spending, needs factory and transportation equipment more than the farm, consumer and entertainment goods and services that the United States typically exports. Although Boeing does sell lots of airliners to China, it is Europe, not America, that benefits most directly from a healthy Chinese economy.

Yet now, because of the ongoing debt crisis and economic slowdown in Europe, European imports from China have recently fallen rather drastically. This, added to the export-profit squeeze mentioned above, could help trigger an economic crisis in China.

Any slowdown in China will, in turn, dramatically reduce Chinese demand for imports from Europe of investment goods such as machinery and transportation equipment (since any slowdown in growth disproportionately decreases demand for investment goods), throwing European economies deeper into crisis in what could become a vicious cycle of declining trade demand on both sides.

Europe is a much bigger market for US goods than China could possibly be, regardless of the dollar-yuan exchange rate. A sinking Europe would plunge the US economy back into recession and wreck havoc (again) on the US financial system. The direct effect of a crisis in the Chinese economy looks less severe to the United States than the indirect effect it could have in pushing Europe over the brink.

Bubble burst?

China’s potential decline is, in the end, more worrisome than the competitive pressures of China’s dizzying rise. As mentioned above, China’s impending crisis looks superficially like that of the United States a few years ago. It has many of the same ingredients: a housing bubble, a ballooning unregulated and unstable shadow banking system, and a turn toward credit tightening that may be just enough to burst the bubble, collapse the shadow banking system, and throw the economy in reverse.

Similar to the US case, the Chinese government would certainly step in to rescue the large, official, too-big-to-fail government-owned banks, but the consequences of collapsing the shadow banking system could be severe.

The most obvious part of this prognosis is the housing bubble. I have lived in China for more than four years now and travelled to many cities here. All of China’s cities are festooned with forests of building cranes, adding huge new blocks of high-rise apartment buildings in every corner of every city. It is the most impressive construction boom the world has ever seen. Tens of millions of workers, most of them migrants from rural China, labor on these projects.

This gargantuan effort is less impressive in the evening, when you can see that the vast majority of the newly constructed apartment blocks are nearly empty. Few lights illuminate these largely uninhabited dwellings. Despite the massive increase in supply, housing prices have continued to soar, so that few working families can afford to buy an apartment. Most of those that are purchased are bought by speculators investing in rising prices rather than families wishing to reside in them.

As soon as prices peak and turn down, speculator demand will plummet. Rents are so low in relation to purchase prices that rental income alone is not enough to make these tens of millions of new apartments attractive as investments. Only ever-rising prices have made them attractive. Any reversal of prices could cause speculator-fueled demand to fall precipitously.

The direct consequences of a fall of housing prices may not be as drastic as in the United States, because many of the speculators are small owners who have been allocated at least some of their apartments by the government as part of its redevelopment policies. Not all of the housing speculators are heavily leveraged. But those who have did so by borrowing heavily from the shadow banking sector.

Falling real estate prices could cause speculators to sell into a falling market, accelerating its fall. Some will not recover enough from the falling sales prices to repay their loans. As in the United States, those who go bankrupt will surrender their properties to financiers who must also cast them onto the market to remain sufficiently liquid in a declining market. Conceivably, the Chinese government could halt the fall by buying apartments itself and through government-owned banks, but this would sustain prices at too high a level. Prices need to fall a lot if sufficient number of non-speculative buyers are to be found.

A fall of housing prices sufficient to make these vast blocks of new housing affordable to Chinese consumers (obviously desirable public policy) is likely to collapse the shadow banking sector, which not only provides credit for much real estate speculation but also funds hundreds of thousands of small and medium-sized businesses unable to obtain credit from the larger government-owned banks.

As in the United States in the run-up to the 2007-2008 crisis, the shadow banking system has exploded in size recently. This shadowy system has several components, including off-balance sheet loans from official banks, unofficial loans by large non-financial corporations that can borrow from official banks and then re-lend in the shadow market at higher interest rates, and various unofficial lenders, including rich individuals, pawn brokers, and even gangsters.

Because it is so shadowy, the exact size of this sector is difficult to know, but foreign banks estimate it issues at least one-fifth of all Chinese loans and has grown very rapidly recently, especially as the government has tried to rein in lending by its official banks. Despite continuing rapid GDP growth, deposits in official banking accounts are this year more than 20% lower than last year as funds from rich and middle class investors are siphoned off into higher-interest “wealth management products” that help fund the unregulated shadow sector.

China’s unemployment is politically sensitive, as about 150 million Chinese urban workers are rural migrants with limited rights in the cities they inhabit. Railroad construction workers alone number about six million, two-thirds of whom have recently been idled because of a slowdown in the previously frenetic pace of construction of new high-speed rail lines.

The broader construction industry includes tens of millions who could be thrown out of work if the real estate boom subsides. Tens of millions more could lose their jobs if large numbers of small and medium-sized businesses are bankrupted by falling exports, the export profit squeeze, and high-cost or unavailable credit as the shadow banking system implodes.

The Chinese government responded to the slowdown of 2008 with a $600 million infrastructure spending program. Something on this scale might be done again to absorb some of the unemployment likely to occur when the housing bubble bursts. But it may be too little too late to avoid a significant downturn with serious implications for the fragile world economy, starting in Europe and spreading to the United States.

Recent hopeful headlines nominate China as part of the bailout of Europe, but severe problems in the world’s most robust economy may overwhelm whatever puny efforts it may be able to make toward a European debt bailout. These are indeed dangerous times.

Americans should be wary of pushing too hard for a free-floating yuan. In this turbulent global economy, anchors of relative stability should not be thrown away lightly. Any rapid appreciation of the yuan will especially devastate the very social forces most congenial to more liberal political reform in China: small and medium-sized export-oriented private businesses.

China’s state sector is easily buffered from severe adverse effects by the government’s ample financial resources, but the shadow banking system and large segments of private business stand at the brink. In the longer term, during the next major American business upturn, it might be desirable to allow further depreciation of the dollar against the yuan and let dollar inflation rise, in part to reduce the real cost of servicing our ballooning debt to China.

In effect the United States might eventually pay back its large foreign debt with dollars worth much less than those it borrowed. There is little China could do to counter a US policy of inflating away much of the value of its accumulated debt. Now is not yet the time. The tottering global financial system is not in shape to suffer another major unexpected shock.

 

Source: https://www.atimes.com/atimes/China_Business/MK23Cb01.html

British Foreign Office: Prepare For Riots If The Euro Collapses

You would expect the Foreign Office mandarins to be prepared for every eventuality – but here’s a doomsday scenario which might just happen. British embassies are now taking active steps to prepare for the possibility of the euro collapsing – something that’s no longer as inconceivable as it once was. The Foreign Office is preparing contingency plans to help expats from the Costa del Sol and the Algarve who could be stranded without cash – or caught up in riots and civil unrest.

ZeroHedge:

As every major developed economy hits Bass’s Keynesian Endgame, the status quo is set to change dramatically. Nowhere is this climax playing out louder than in Europe and the implicit solution of Germany-uber-alles (while seemingly inevitable though nevertheless lengthy in execution) is likely to not sit well with many of the EMU nations. To wit, The Telegraph today reports that Britain’s Foreign Office is advising its overseas embassies to draw up plans to help expats should the collapse of the Euro turn explosive. Almost incredibly, a senior minister has revealed that Britain is now planning on the basis that a euro collapse is matter of time.

Students march with home-made placards during a demonstration in Madrid Thursday Nov. 17, 2011. The students are protesting education cuts after enduring nearly two years of recession prompted in part by the collapse of a real estate bubble. Spain’s economy has 21.5 unemployment, posted zero growth in the third quarter and is not expected to improve much next year.It is the periodic focus of fears it will be the next euro zone country to require a bailout, after Greece, Ireland and Portugal.

The Telegraph:

  • British embassies in the eurozone have been told to draw up plans to help British expats through the collapse of the single currency, amid new fears for Italy and Spain.
  • As the Italian government struggled to borrow and Spain considered seeking an international bail-out, British ministers privately warned that the break-up of the euro, once almost unthinkable, is now increasingly plausible.
  • Diplomats are preparing to help Britons abroad through a banking collapse and even riots arising from the debt crisis.
  • The Treasury confirmed earlier this month that contingency planning for a collapse is now under way
  • A senior minister has now revealed the extent of the Government’s concern, saying that Britain is now planning on the basis that a euro collapse is now just a matter of time.
  • “It’s in our interests that they keep playing for time because that gives us more time to prepare,” the minister told the Daily Telegraph.Recent Foreign and Commonwealth Office instructions to embassies and consulates request contingency planning for extreme scenarios including rioting and social unrest.Greece has seen several outbreaks of civil disorder as its government struggles with its huge debts.
  • British officials think similar scenes cannot be ruled out in other nations if the euro collapses.Diplomats have also been told to prepare to help tens of thousands of British citizens in eurozone countries with the consequences of a financial collapse that would leave them unable to access bank accounts or even withdraw cash.

A man dressed as a banker lies on a mattress as he is rolled along on top of students during a demonstration march in Madrid Thursday Nov. 17, 2011. The students are protesting education cuts after enduring nearly two years of recession prompted in part by the collapse of a real estate bubble. Spain’s economy has 21.5 unemployment, posted zero growth in the third quarter and is not expected to improve much next year.It is the periodic focus of fears it will be the next euro zone country to require a bailout, after Greece, Ireland and Portugal.

The New York Times:

While European leaders still say there is no need to draw up a Plan B, some of the world’s biggest banks, and their supervisors, are doing just that.“We cannot be, and are not, complacent on this front,” Andrew Bailey, a regulator at Britain’s Financial Services Authority, said this week. “We must not ignore the prospect of a disorderly departure of some countries from the euro zone,” he said.Banks including Merrill Lynch, Barclays Capital and Nomura issued a cascade of reports this week examining the likelihood of a breakup of the euro zone. “The euro zone financial crisis has entered a far more dangerous phase,” analysts at Nomura wrote on Friday. Unless the European Central Bank steps in to help where politicians have failed, “a euro breakup now appears probable rather than possible,” the bank said.Major British financial institutions, like the Royal Bank of Scotland, are drawing up contingency plans in case the unthinkable veers toward reality, bank supervisors said Thursday. United States regulators have been pushing American banks like Citigroup and others to reduce their exposure to the euro zone. In Asia, authorities in Hong Kong have stepped up their monitoring of the international exposure of foreign and local banks in light of the European crisis.

Source: https://www.theblaze.com/stories/british-foreign-office-prepare-for-riots-if-the-euro-collapses/

Not Hiring Until Obama Is Gone Is A Symptom Of Broader GOP Ignorance

There are occasions that the level of ignorance some people exhibit should cause Americans to be ashamed to live in this country. Republicans have perpetuated a lie that America’s economic malaise is solely the fault of the Obama Administration and their solution is to return to the Bush-Republican policies of deregulation, tax cuts for the wealthy, and allegiance to Wall Street’s financial corporate agenda that sent the economy perilously close to total collapse. One businessman’s ignorance epitomizes why economic pain and suffering caused by Republican policies continues and why it should engender ire in all Americans.

Last Monday, a photo of a sign posted on a Georgia man’s company trucks went viral on the Internet, and it exemplified ignorance, vindictiveness, and contempt typical of Republican economic policies that many Americans support. The sign read, New Company Policy: We are not hiring until Obama is gone.” The company owner, Bill Looman, said his message was not political, but representative of his belief that he cannot hire anyone because of the economy; he blames President Obama. In an interview Looman said, “The way the economy’s running, and the way my business has been hampered by the economy, and the policies of the people in power, I felt that it was necessary to voice my opinion, and predict that I wouldn’t be able to do any hiring.” Apparently, Looman subscribes to Republican rhetoric as a matter-of-course and is ignorant of why the economy is stagnate.

Without going into the stupidity inherent in Republican economic policies and to avoid portraying men like Looman as cognitively deficient conservative sycophants, there are a couple of points to make on why Looman is wrong and why the Obama Administration’s jobs plan would benefit moronic dolts like the Georgia business owner.

Looman’s business is U.S. Cranes, LLC., and he said, Can’t afford it. I’ve got people that I want to hire now, but I just can’t afford it. And I don’t foresee that I’ll be able to afford it unless some things change in D.C.” The President’s jobs plan called for a tiny tax increase on millionaires and billionaires to fund infrastructure improvements that Looman would certainly have benefited from, but Republicans blocked job creation because of their policy of not increasing taxes for the richest 1% of Americans. Looman must suffer from amnesia besides being stupid, because the economic scene was created during the Bush years mainly through deregulation of the financial industry as well as the wealthy’s tax cuts. The economic crash of 2007-2008 was well underway before Obama was elected, and the only recovery since then was the Obama stimulus that saved the auto industry and put millions of Americans back to work.

Republicans claim the economy is not booming because taxes are too high and regulations are burdensome to business, but surveys and polls show that business owners claim it is lack of consumer spending that prevents them from hiring. In fact, taxes are at their lowest rates in sixty years and environmental regulations passed during President Obama’s first two years have not yet come into effect. Looman said unless things change in Washington, he cannot foresee being able to afford to hire new employees. Does he seriously believe that giving the wealthy and corporations more tax cuts will encourage Americans who are losing their jobs, buying power, and their homes to begin spending money they do not have? Either Mr. Looman is a fool, or he has bought into the Republican lies that began during the Reagan administration and have finally borne the fruit conservatives planned thirty years ago.

The changes Republicans have in store if they win the White House and Congress will further enrich the wealthy and remove the last vestiges of the middle class that drive the economy, but the foolish Looman thinks GOP economic plans will drive consumer spending and fill his coffers with untold wealth and treasure. Looman should keep in mind that America has tried the Republican economic disaster for ten years and except for Obama’s stimulus, there has been a steady decline in income and spending for the sector that drives the economy; the middle class. Willard Romney’s grand economic scheme is giving $6.7 trillion in tax cuts to the wealthiest Americans who have not shown any interest in creating jobs…in America.

The other point is; who is Looman punishing by not hiring new employees? Obviously, he follows the lead of vile Republicans who are hell-bent on sending more Americans into poverty to protect the wealthy and corporations. A change in Washington will finally send the economy into depression that Republicans have worked tirelessly to achieve for the past two-and-a-half years and unless Looman is part of the 1%, he will lose his business to the policies he supports. It is possible that Looman is just an ignorant dolt who regurgitates Republican and Koch brothers’ rhetoric, because he did not articulate how or why President Obama has caused slow economic growth. Whatever Looman’s reasons for blaming the economy on President Obama, they are wrong. It is still unbelievable that a company that operates cranes used in infrastructure projects blames his business’s slowdown on the President who has tried to put Americans to work rebuilding the crumbling infrastructure.

It is impossible to feel anything other than abject contempt for men, like Looman, who blindly follow Republican talking points as if they are the word of god. Reality and economic experts have verified over and over again that the economy is in shambles because of Bush-Republican policies of financial deregulation and tax cuts for the rich. It is unlikely that Looman and his ilk will ever achieve a level of economic understanding of why the economy is making a slow recovery, and it is further proof that many conservative business owners are just as stupid and contemptible as the Republicans who caused the economic disaster in the first place.

Mr. Looman is entitled to his opinion, but he is not entitled to perpetuate lies and misinformation he gleaned from the Heritage Foundation and the RNC. The message Looman is really spreading is that he is a foolish moron without the slightest hint of economic understanding and almost certainly a Republican sycophant. Like nearly all Republicans, instead of thinking or observing for himself, Looman depends on other ignoramuses to do his thinking and it informs why conservatives repeat the same economic errors at their own peril and are the reason economic recovery cannot proceed. If the change he desires comes to pass, Looman’s business will come to a screeching halt and he will have no-one to blame but himself and his inability to think or remember that Republicans crashed the economy between 2001 and 2008; eight years before President Obama took the oath of office.

 

Source: https://www.politicususa.com/en/not-hiring-obama-gone

A Philosopher’s Mission to Save the EU

Jürgen Habermas is angry. He’s really angry. He is nothing short of furious — because he takes it all personally.

He leans forward. He leans backward. He arranges his fidgety hands to illustrate his tirades before allowing them to fall back to his lap. He bangs on the table and yells: “Enough already!” He simply has no desire to see Europe consigned to the dustbin of world history.

“I’m speaking here as a citizen,” he says. “I would rather be sitting back home at my desk, believe me. But this is too important. Everyone has to understand that we have critical decisions facing us. That’s why I’m so involved in this debate. The European project can no longer continue in elite modus.”

Enough already! Europe is his project. It is the project of his generation.

Jürgen Habermas, 82, wants to get the word out. He’s sitting on stage at the Goethe Institute in Paris. Next to him sits a good-natured professor who asks six or seven questions in just under two hours — answers that take fewer than 15 minutes are not Habermas’ style.

Usually he says clever things like: “In this crisis, functional and systematic imperatives collide” — referring to sovereign debts and the pressure of the markets.

Sometimes he shakes his head in consternation and says: “It’s simply unacceptable, simply unacceptable” — referring to the EU diktat and Greece’s loss of national sovereignty.

‘No Convictions’

And then he’s really angry again: “I condemn the political parties. Our politicians have long been incapable of aspiring to anything whatsoever other than being re-elected. They have no political substance whatsoever, no convictions.”

It’s in the nature of this crisis that philosophy and bar-room politics occasionally find themselves on an equal footing.

It’s also in the nature of this crisis that too many people say too much, and we could definitely use someone who approaches the problems systematically, as Habermas has done in his just published book.

But above all, it is in the nature of this crisis that the longer it continues, the more confusing it gets. It becomes more difficult to follow its twists and turns and to see who is responsible for what. And the whole time, alternatives are disappearing before our very eyes.

That’s why Habermas is so angry: with the politicians, the “functional elite” and the media. “Are you from the press?” he asks a man in the audience who has posed a question. “No? Too bad.”

Habermas wants to get his message out. That’s why he’s sitting here. That’s why he recently wrote an article in the Frankfurter Allgemeine newspaper, in which he accused EU politicians of cynicism and “turning their backs on the European ideals.” That’s why he has just written a book — a “booklet,” as he calls it — which the respected German weekly Die Zeit promptly compared with Immanuel Kant’s 1795 essay “Perpetual Peace: A Philosophical Sketch.”

But does he have an answer to the question of which road democracy and capitalism should take?

A Quiet Coup d’État

“Zur Verfassung Europas” (“On Europe’s Constitution”) is the name of his new book, which is basically a long essay in which he describes how the essence of our democracy has changed under the pressure of the crisis and the frenzy of the markets. Habermas says that power has slipped from the hands of the people and shifted to bodies of questionable democratic legitimacy, such as the European Council. Basically, he suggests, the technocrats have long since staged a quiet coup d’état.

“On July 22, 2011, (German Chancellor) Angela Merkel and (French President) Nicolas Sarkozy agreed to a vague compromise — which is certainly open to interpretation — between German economic liberalism and French etatism,” he writes. “All signs indicate that they would both like to transform the executive federalism enshrined in the Lisbon Treaty into an intergovernmental supremacy of the European Council that runs contrary to the spirit of the agreement.”

Habermas refers to the system that Merkel and Sarkozy have established during the crisis as a “post-democracy.” The European Parliament barely has any influence. The European Commission has “an odd, suspended position,” without really being responsible for what it does. Most importantly, however, he points to the European Council, which was given a central role in the Lisbon Treaty — one that Habermas views as an “anomaly.” He sees the Council as a “governmental body that engages in politics without being authorized to do so.”

He sees a Europe in which states are driven by the markets, in which the EU exerts massive influence on the formation of new governments in Italy and Greece, and in which what he so passionately defends and loves about Europe has been simply turned on its head.

A Rare Phenomenon

At this point, it should be mentioned that Habermas is no malcontent, no pessimist, no prophet of doom — he’s a virtually unshakable optimist, and this is what makes him such a rare phenomenon in Germany.

His problem as a philosopher has always been that he appears a bit humdrum because, despite all the big words, he is basically rather intelligible. He took his cultivated rage from Marx, his keen view of modernity from Freud and his clarity from the American pragmatists. He has always been a friendly elucidator, a rationalist and an anti-romanticist.

Nevertheless, his previous books “Structural Transformation of the Public Sphere” and “Between Facts and Norms” were of course somewhat different than the merry post-modern shadow-boxing of French philosophers like Jacques Derrida and Jean Baudrillard. What’s more, another of Habermas’ publications, “Theory of Communicative Action,” certainly has its pitfalls when it comes to his theory of “coercion-free discourse” which, even before the invention of Facebook and Twitter, were fairly bold, if not perhaps naïve.

Habermas was never a knife thrower like the Slovenian thinker Slavoj Žižek, and he was no juggler like the German philosopher Peter Sloterdijk. He never put on a circus act, and he was always a leftist (although there are those who would disagree). He was on the side of the student movement until things got too hot for him. He took delight in the constitution and procedural matters. This also basically remains his position today.

Habermas truly believes in the rationality of the people. He truly believes in the old, ordered democracy. He truly believes in a public sphere that serves to make things better.

Part 2: A Vision of Europe at the Crossroads

This also explains why he gazed happily at the audience on this mid-November evening in Paris. Habermas is a fairly tall, lanky man. As he stepped onto the stage, his relaxed gait gave him a slightly casual air. With his legs stretched out under the table, he seemed at home. Whether he’s at a desk or not, this is his profession: communicating and exchanging ideas in public.

He was always there when it was a question of putting Germany back on course, in other words, on his course — toward the West, on the path of reason: during the vitriolic debate among German historians in 1986 that focused on the country’s approach to its World War II past; following German reunification in 1990; and during the Iraq War. It’s the same story today as he sits here, at a table, in a closed room in the basement of the Goethe Institute, and speaks to an audience of 200 to 250 concerned, well-educated citizens. He says that he, the theorist of the public sphere, doesn’t have a clue about Facebook and Twitter — a statement which, of course, seems somewhat antiquated, almost even absurd. Habermas believes in the power of words and the rationality of discourse. This is philosophy unplugged.

While the activists of the Occupy movement refuse to formulate even a single clear demand, Habermas spells out precisely why he sees Europe as a project for civilization that must not be allowed to fail, and why the “global community” is not only feasible, but also necessary to reconcile democracy with capitalism. Otherwise, as he puts it, we run the risk of a kind of permanent state of emergency — otherwise the countries will simply be driven by the markets. “Italy Races to Install Monti” was a headline in last week’s Financial Times Europe.

On the other hand, they are not so far apart after all, the live-stream revolutionaries from Occupy and the book-writing philosopher. It’s basically a division of labor — between analog and digital, between debate and action. It’s a playing field where everyone has his or her place, and it’s not always clear who are the good guys and who are the bad guys. We are currently watching the rules being rewritten and the roles being redefined.

A Dismantling of Democracy

“Sometime after 2008,” says Habermas over a glass of white wine after the debate, “I understood that the process of expansion, integration and democratization doesn’t automatically move forward of its own accord, that it’s reversible, that for the first time in the history of the EU, we are actually experiencing a dismantling of democracy. I didn’t think this was possible. We’ve reached a crossroads.”

It also has to be said: For being Germany’s most important philosopher, he is a mind-bogglingly patient man. He is initially delighted that he has managed at last to find a journalist whom he can tell just how much he abhors the way certain media ingratiate themselves with Merkel — how he detests this opportunist pact with power. But then he graciously praises the media for finally waking up last year and treating Europe in a manner that clearly demonstrates the extent of the problem.

“The political elite have actually no interest in explaining to the people that important decisions are made in Strasbourg; they are only afraid of losing their own power,” he says, before being accosted by a woman who is not entirely in possession of her faculties. But that’s how it is at such events — that’s how things go with coercion-free discourse. “I don’t fully understand the normative consequences of the question,” says Habermas. The response keeps the woman halfway at a distance.

He is, after all, a gentleman from an age when having an eloquent command of the language still meant something and men carried cloth handkerchiefs. He is a child of the war and perseveres, even when it seems like he’s about to keel over. This is important to understanding why he takes the topic of Europe so personally. It has to do with the evil Germany of yesteryear and the good Europe of tomorrow, with the transformation of past to future, with a continent that was once torn apart by guilt — and is now torn apart by debt.

Without Complaint

In the past, there were enemies; today, there are markets — that’s how the historical situation could be described that Habermas sees before him. He is standing in an overcrowded, overheated auditorium of the Université Paris Descartes, two days before the evening at the Goethe Institute, and he is speaking to students who look like they would rather establish capitalism in Brussels or Beijing than spend the night in an Occupy movement tent.

After Habermas enters the hall, he immediately rearranges the seating on the stage and the nametags on the tables. Then the microphone won’t work, which seems to be an element of communicative action in practice. Next, a professor gives a windy introduction, apparently part of the academic ritual in France.

Habermas accepts all this without complaint. He steps up to the lectern and explains the mistakes that were made in constructing the EU. He speaks of a lack of political union and of “embedded capitalism,” a term he uses to describe a market economy controlled by politics. He makes the amorphous entity Brussels tangible in its contradictions, and points to the fact that the decisions of the European Council, which permeate our everyday life, basically have no legal, legitimate basis. He also speaks, though, of the opportunity that lies in the Lisbon Treaty of creating a union that is more democratic and politically effective. This can also emerge from the crisis, says Habermas. He is, after all, an optimist.

Then he’s overwhelmed by the first wave of fatigue. He has to sit down. The air is stuffy, and it briefly seems as if he won’t be able to continue with his presentation. After a glass of water, he stands up again.

He rails against “political defeatism” and begins the process of building a positive vision for Europe from the rubble of his analysis. He sketches the nation-state as a place in which the rights of the citizens are best protected, and how this notion could be implemented on a European level.

Reduced to Spectators

He says that states have no rights, “only people have rights,” and then he takes the final step and brings the peoples of Europe and the citizens of Europe into position — they are the actual historical actors in his eyes, not the states, not the governments. It is the citizens who, in the current manner that politics are done, have been reduced to spectators.

His vision is as follows: “The citizens of each individual country, who until now have had to accept how responsibilities have been reassigned across sovereign borders, could as European citizens bring their democratic influence to bear on the governments that are currently acting within a constitutional gray area.”

This is Habermas’s main point and what has been missing from the vision of Europe: a formula for what is wrong with the current construction. He doesn’t see the EU as a commonwealth of states or as a federation but, rather, as something new. It is a legal construct that the peoples of Europe have agreed upon in concert with the citizens of Europe — we with ourselves, in other words — in a dual form and omitting each respective government. This naturally removes Merkel and Sarkozy’s power base, but that’s what he’s aiming for anyway.

Then he’s overwhelmed by a second wave of fatigue. He has to sit down again, and a professor brings him some orange juice. Habermas pulls out his handkerchief. Then he stands up and continues to speak about saving the “biotope of old Europe.”

There is an alternative, he says, there is another way aside from the creeping shift in power that we are currently witnessing. The media “must” help citizens understand the enormous extent to which the EU influences their lives. The politicians “would” certainly understand the enormous pressure that would fall upon them if Europe failed. The EU “should” be democratized.

His presentation is like his book. It is not an indictment, although it certainly does at times have an aggressive tone; it is an analysis of the failure of European politics. Habermas offers no way out, no concrete answer to the question of which road democracy and capitalism should take.

A Vague Future and a Warning from the Past

All he offers is the kind of vision that a constitutional theorist is capable of formulating: The “global community” will have to sort it out. In the midst of the crisis, he still sees “the example of the European Union’s elaborated concept of a constitutional cooperation between citizens and states” as the best way to build the “global community of citizens.”

Habermas is, after all, a pragmatic optimist. He does not say what steps will take us from worse off to better off.

What he ultimately lacks is a convincing narrative. This also ties Habermas once again to the Occupy movement. But without a narrative there is no concept of change.

He receives a standing ovation at the end of his presentation.

“If the European project fails,” he says, “then there is the question of how long it will take to reach the status quo again. Remember the German Revolution of 1848: When it failed, it took us 100 years to regain the same level of democracy as before.”

A vague future and a warning from the past — that’s what Habermas offers us. The present is, at least for the time being, unattainable.

 

Source: https://www.spiegel.de/international/europe/0,1518,799237,00.html

Financial Watchdog Warns UK Banks To Brace Themselves For Impact Of Chaotic Euro Break-Up

British banks must brace themselves for a chaotic break-up of the euro, the City watchdog has warned.

Andrew Bailey, a senior executive at the Financial Services Authority, said there was no room for ‘complacency’ as the storms over the monetary union continue to rage.

He said lenders should draw up emergency plans for the exit of stricken eurozone members from the bloc – or even a complete collapse of the single currency.

Financial fears: Andrew Bailey insists that British banks should be drawing up emergency plans

‘We must not ignore the prospect of the disorderly departure of some countries from the eurozone,’ he warned.

Although ‘unlikely’, a meltdown in the 17-member club could hit the UK financial system hard because of the ‘network’ of relationships between British and European banks, Bailey argued.

He told a conference in London yesterday: ‘There’s no road map out there that says “this is how it happens”. We have been talking to [banks] already and we will be talking to them again and asking questions.’

The stark warning came as borrowing costs for eurozone governments climbed again, amid the ongoing deadlock among their leaders over how to tackle the debt crisis.

For the first time in two-and-a half years, the yield on UK government debt fell below Germany’s in a sign that the contagion is spreading to the very heart of the union.

The turmoil is already having a substantial impact on Britain’s banks by driving up the cost of raising money from international investors.

The problems have affected UK lenders even as they charge customers rates that are ‘substantially out of line with history’ relative to the Bank of England base rate, according to Bailey. The banking supervisor painted a bleak picture of the financial sector’s prospects over the coming years, in which banks will be forced to cut back their sprawling empires.

In a bid to restore their credibility with investors, many are already withdrawing en-masse from peripheral businesses.

This will lead to a ‘sharp reduction’ in the amount of cash used for more speculative activities, Bailey said. In a clear reference to Royal Bank of Scotland, he predicted that some institutions could pull out of so-called ‘casino’ banking altogether.

‘I don’t think we should rule out that for some banks an exit from investment banking . . . is the sensible outcome,’ he said.

Regulators would be ‘watching banks carefully’ and ensure that they build up reserves to absorb future losses ‘where they can’, he added.

 

Source: https://www.thisismoney.co.uk/money/news/article-2065911/The-Financial-Services-Authority-warning-lenders-euro.html#ixzz1eoc8IcJV