It is always the banks isn’t it?

Firstly as we arrive at what is now called  Christmas Eve Eve let me wish all of you a very Merry Christmas. As I will be on the lunchtime show on Share Radio next Thursday I will  post at the end of next week but will take a short break before then. Meanwhile financial markets have raised themselves from annual end of year torpor to review quite a bit of activity in the banking sector. You see governments and regulators invariably wait until this time of year to hand out presents to the banking sector although many of them are not the sort of present we dreamed of as children. In past years we have seen both bailouts and bail ins in Portugal and Italy for example and this year I have been expecting the final chapter of the Monte Paschi story to arrive about now for some time.

The collapse of Monte Paschi

This sad sorry saga is now coming to some sort of climax. Yesterday evening as City-AM reports the board of directors met and decided it was over.

The country’s third-largest bank said it failed to secure investors and sell new shares, so it scrapped a debt-to-equity conversion offer that had raised €2bn. It is returning bonds tendered under the swap.

Monte dei Paschi said it would not pay fees to investment banks that had worked to place its shares or on its planned bad loan sale, including its advisers JPMorgan and Mediobanca.

Investment bankers not be paid is that allowed these days? Anyway that moved us to a situation this morning as described below.

Trading in Monte dei Paschi shares, derivatives and bonds has been suspended today after confirming it has requested state aid from the Italian government.

Paolo Gentiloni, the new Italian prime minister, announced in the early hours of this morning that the country will dip into a €20bn (£16bn) fund to help the world’s oldest bank

The timescale being provided is a little bizarre however as the Bank of Italy should now move in and complete this over the holidays so that people know where they stand.

Local press has said the bailout plan could take two to three months, starting with a government guarantee of Monte dei Paschi’s own borrowings to ensure it doesn’t run out of cash.

The problem of course is balancing Euro area bail in rules with the fact that ordinary Italians bought and in some cases were miss sold the bonds of Monte dei Paschi which will be bailed in and the fact that the Italian taxpayer has to take on yet more debt. So whilst we can say “It’s Gone” we do not know exactly where. However we may find out later as Livesquawk points out.

Italian Government To Meet At 12:00 CET To Discuss Economy & Finance Decree.

Fines Fines Fines

The next section is brought to you with the question what did the US taxpayer do for revenue before they discovered fining foreign banks?

Barclays

There was a little more surprise when this appeared on the news wires yesterday evening. From the BBC.

The US Department of Justice said: “From 2005 to 2007, Barclays personnel repeatedly misrepresented the characteristics of the loans backing securities they sold to investors throughout the world, who incurred billions of dollars in losses as a result of the fraudulent scheme.”……

Federal prosecutors said that as part of the alleged scheme Barclays sold $31bn in securities.

More than half of the mortgages backing the securities defaulted, the suit alleged.

According to Barclays this is all “disconnected with the facts” which looks like an official denial to me and we know what to do with them.  This is a by now familiar tale where denial turns into how much? As I describe below.

Deutsche Bank and Credit Suisse

My old employer regularly features in the news and here it is as the US regulators hand it a grinch style Christmas present. From Sky News.

Deutsche Bank and Credit Suisse have agreed to pay $7.2bn (£5.9bn) and $5.3bn (£4.3bn) respectively in penalties relating to the collapse of the US housing market before the financial crisis.

The Swiss lender announced it had reached a deal with the US Department of Justice hours after a similar move by Deutsche.

So happy days for the US taxpayer and unhappy days for the shareholders of the two companies? Actually the share price of Deutsche Bank is up around 3% this morning at 18.27 Euros meaning this from Sky News must have been a miss read of expectations.

While the German bank’s sum is half the $14bn originally sought by investigators, it is more than $2bn above the amount analysts expected Europe’s third-largest bank to shell out.

It seems that it is Credit Suisse where expectations may not have been met as after an early rally the share price has drifted lower today. For a deeper perspective a pre credit crunch share price just under 90 has been replaced by one of 15.2. As for my old employer a sort of Christmas ghost puts a chill in the air as we note just under 99 Euros being replaced by 18.27.

How many extra nukes for the United States will these fines pay for?

Of Number Crunching and GDP

Let me open with some seasonal cheer for the UK providing by the Office for National Statistics this morning.

UK GDP in volume terms was estimated to have increased by 0.6% in Quarter 3 2016, revised up 0.1 percentage points from the second estimate of GDP published on 26 November 2016, due to upward revisions from the output of the business services and finance industries.

We cannot keep the banks out of the news but at least this time it is for something positive! However annual growth fell to 2.2% due to downwards revisions earlier in the year meaning that the post EU vote number was better than the average of the pre EU vote number leaving ever more egg on ever more establishment faces. I did ask about this on Twitter.

Is Professor Sir Charles Bean available to explain how his -0.1% to -1% GDP forecast turned out to be +0.6% please?

It would seem that our professorial knight is ideally equipped to continue the first rule of OBR ( Office of Budget Responsibility) club. Also the more wrong he is will he collect even more impressive sounding titles?

But there is something to provide humility to those who analyse the detail of economic numbers. From Howard Archer.

Welcome news as balance of payments deficit in 2015 revised down markedly to £80.2bn from £100.2bn;

Even in banking terms £20 billion is a tidy sum and a revision from back then gives us some perspective on this.

The trade balance deficit widened from £11.0 billion in Quarter 2 2016 to £16.7 billion in Quarter 3 2016 (Figure 9). The trade position reflects exports minus imports. Following a 1.4% increase in Quarter 2 2016, exports decreased by 2.6% in the latest quarter, while imports increased by 1.4% in Quarter 3 2016 following a 0.4% increase in Quarter 2 2016.

It would be more accurate to say we think we did worse in the quarter in question rather than being absolutely sure of it.

Comment

As I look back over not only this year but the preceding years of the credit crunch era I note how much of this is really a story about the banks and the banking industry. As we compare it to the real economy I feel that our establishment have misunderstood which is the tail and which is the dog. Even when we move to other stories such as UK GDP we see the banks at play again although in a rare occurence the mention is favourable.

The saddest part is that all of this was supposed to have been reformed well before now. I guess it is reflected by this from bitcoin price.

The average price of Bitcoin across all exchanges is 910.16 USD

 

 

 

 

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35 thoughts on “It is always the banks isn’t it?

  1. Have a great Xmas Shaun and we’ll all look forward to more posts in the new year. A merry Xmas and a happy new year to all the regular commentators on this site. It’s nice to know there are some sane individuals out there with a healthy dose of skepticism for official propaganda!

    The deficit is going to be an ever more important story as time goes on.

  2. Hi Shaun
    Thankyou for another year’s worth of quality
    and dedication to the cause.

    I sense that you think that imminent trouble is
    brewing for the banksters and the politicians, I hope it’s
    not going to be as awful as I fear.

    Merry Christmas to Shaun and everybody, I knew that
    Carney could act but I didn’t realise that he can sing!


    JRH

  3. Happy Christmas. 2017 should be an interesting year with French and German elections.
    Fining the banks seems to be the gift that keeps on giving. The only problem is that the shareholders suffer whilst the people in charge get away with it.
    Socialising losses and privatising profits seems to be the way of the world now.

  4. Shaun and readers, wishing you all a Merry Xmas. It looks like banks wiĺl be at the very centre of our economic focus in 2017. I’m forecasting renewed dificulties especially on the news that MPS investment bankers will not be paid their fees. Failed deals beget more failures in debt roll-overs. What is a national deposit guarrantee worth? We might all find out….

    Merry Xmas

  5. Hello Shaun

    enjoy the break – some of us have to still work 🙂

    Always the Banks ? well yes , that kan has been kicked and now we’ve caught up with it again

    If no laws or anything is done , then yes , we are in the poo !

    Us? well the Banks have managed to dump their “problem” onto the tax payer

    Let them go

    Forbin

  6. Hello Shaun,

    Apparently in many parts of Europe, when St. Nicholas does the rounds, he’s accompanied by a frightening figure.

    In parts of Germany, Switzerland, and Austria, it’s Krampus—a hairy devil with goat’s horns and a long lolling tongue,
    who prances around with a birch switch in his hand and a wicker basket on his back.

    While the saint hands out presents to good children, Krampus is there for the benefit of the others;

    small-time junior malefactors can expect a thrashing with the birch switch, while the legend has it that the shrieking,
    spoiled little horrors at the far end of the naughty-child spectrum get popped into the wicker basket and taken away,

    and nobody ever hears from them again.

    Now then, I think Krampus needs to visit out Bankers……;-)

    Forbin

  7. Merry Yuletide to all, but especially to Shaun and his mother, and thank to all who make this blog an unmissable read.

    If you monetise wrongdoing you remove the moral element from it, and it quickly becomes a calculation of cost/reward.

    That’s why, even now, there are probably new scams being invented by the banksters.

  8. Hi Shaun many thanks for your commitment and invaluable informative postings.
    We live in a world where fundamentals do not seem to count,debt is king,mainstream news appears to consist of propaganda omissions and communicating with the great unwashed as though they are 5 year olds.
    Banking has redefined the term organised crime any other business which has a criminal conviction rate as extensive as banking would be shunned by the public,yet the banking Mafia suffer no penalties .Democracy is an illusion and the rule of law only applies to the serfs.
    I almost bought some bitcoin a few years ago when it was around $400 but I decided not to because it is not a hard asset on the contrary what actually is it ?
    How can something that does not actually exist be valued at 80% of the cost of an ounce of gold.
    Time for D Ream …Things can only get better…..on second thoughts that has also been tarnished by association.

    Wishing you a Happy Christmas and a Healthy New Year

  9. Happy Christmas Shaun, hope you enjoy your break. Thank you for your writings over the past year. I have learned and continue to learn much from them. Can I also thank all the regular commentators – always insightful responses and a few funny ones in there too. Happy Christmas to all of you. I look forward to reading this blog daily while having a tea break from looking after my flock of sheep. Yes – one of the “little people”.

  10. Have a good one Shaun and a Merry Christmas to all your followers!
    I suspect next year will be much the same, cover ups, disinformation, cons and fiddles by TPTB.

  11. Happy Christmas Shaun, from me down here at the other side of the world.
    Thanks for all your hard work and insightful observations.
    It’s all very much appreciated.
    Eric.

  12. Happy Christmas Shaun and all the excellent commentators on your blog – you have all entertained and informed me throughout the year.
    On Forbin’s advice, I am a substantial owner of popcorn which should keep me going well into the new year.
    In my dreams, I see Deutsche Bank, Credit Suisse and Barclays going back over their records for the last decade and demanding back the bonuses paid to the promoters of all these scams. After all, once the fines are taken into account, there never were any profits in the first place. It’s good to dream sometimes.
    Also, Shaun, the best Xmas present was reading that, just for once, the bankers didn’t get their fees. What a fantastic result!
    Happy Xmas all round

    • Merry Christmas James and speaking of corn futures here is some good news from Agrimoney

      “Chicago corn futures fell for the fifth straight session, under pressure from the prospect of stiff South American completion in the export markets, but soybean futures managed a bounce after a sharp sell-off.

      Tregg Cronin, at Halo Commodities, noted “growing corn supply estimates from South America”.”

  13. I’m a bit late with my comment but thought after hearing Mervyn King this morning on the Today programme that others might also be interested. He seems to being more honest now he no longer has to toe the party line and seems to think the euro is a bit of a failed project!

    I hope everyone has had a good Christmas and best wishes to all.

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