Bailout Fail

European Central Bank sued by 200 investors over Greek debt deal

"In a case which could pave the way for a raft of legal action from the private sector, a group of Italian retail investors are claiming damages in excess of €12m from the ECB for an alleged violation of its 'equal' creditor status during the biggest private sector debt restructuring in history in 2012. During the episode, the ECB was able to 'swap' its holdings of Greek government debt for protected bonds with no repayment date. The move ensured the ECB did not suffer losses from the deal to stave off a Greek bankruptcy in March 2012. Private sector creditors, however, were forced into accepting a 53.5pc 'haircut' on their holdings." Continue reading →

Continue ReadingEuropean Central Bank sued by 200 investors over Greek debt deal

Fed ends ‘too big to fail’ lending to collapsing banks, with caveats

"The Fed's new restrictions come from the Dodd-Frank Act of 2010, which brought in a wave of reforms after the financial crisis. Under the new rule, banks that are going bankrupt -- or appear to be going bankrupt -- can no longer receive emergency funds from the Fed under any circumstances. However, it's important to note that the new rule allows the Fed to judge by its own measures whether a firm qualifies for its emergency aid. The idea is the Fed can still lend to banks during times of emergency, but the bank must be able to pay it back. Yet the true health of a bank in turmoil can be very difficult to assess." Continue reading →

Continue ReadingFed ends ‘too big to fail’ lending to collapsing banks, with caveats

‘Big Short’ Genius Thinks Another Financial Crisis Is Looming

"Well, we are right back at it: trying to stimulate growth through easy money. It hasn’t worked, but it’s the only tool the Fed’s got. Meanwhile, the Fed’s policies widen the wealth gap, which feeds political extremism, forcing gridlock in Washington. It seems the world is headed toward negative real interest rates on a global scale. This is toxic. Interest rates are used to price risk, and so in the current environment, the risk-pricing mechanism is broken. That is not healthy for an economy. We are building up terrific stresses in the system, and any fault lines there will certainly harm the outlook." Continue reading →

Continue Reading‘Big Short’ Genius Thinks Another Financial Crisis Is Looming

Bill Gross: Central bank ‘casinos’ to run out of luck

"Investors should cut risk heading into 2016 as central banks trying to pump up their respective economies make losing bets, bond guru Bill Gross says. Institutions like the Federal Reserve and the European Central Bank are like 'casinos' that create money instead of chips 'they'll never have to redeem,' said Gross, founder of bond giant Pimco who now runs the $1.4 billion Janus Global Unconstrained Fund. Furthering the gambling analogy, he said central bankers are using a familiar ploy — doubling down on losing bets until they break even. 'How long can this keep going on? Well, theoretically as long as there are financial assets (including stocks) to buy,' Gross said." Continue reading →

Continue ReadingBill Gross: Central bank ‘casinos’ to run out of luck

Greek Banks Reopen but Cash Limits Remain and Taxes Soar

"The cash-strapped nation got a short-term loan from European creditors to pay more than 6 billion euros ($6.5 billion) owed to the International Monetary Fund and the European Central Bank. But for most Greeks, already buffeted by six years of recession, Monday was all about rising prices as tax hikes demanded by creditors took effect. There are few parts of the Greek economy left untouched by the steep increase in the sales tax from 13 to 23 percent. strict controls on cash flows, including a ban on check-cashing and payments abroad as well as limits on cash withdrawals, remained in effect. New rules permit the withdrawal of up to 420 euros a week." Continue reading →

Continue ReadingGreek Banks Reopen but Cash Limits Remain and Taxes Soar

Greek bank official dismisses ‘haircut’ report as “baseless”

"Greek leaders have repeatedly dismissed the possibility they will have to 'bail-in' depositors to prevent the collapse of the banking system. But citing bankers and businesspeople with knowledge of the measures, the Financial Times reported: 'The plans, which call for a 'haircut' of at least 30 percent on deposits above 8,000 euros, sketch out an increasingly likely scenario for at least one bank.' The report quoted a source as saying: 'It (the haircut) would take place in the context of an overall restructuring of the bank sector once Greece is back in a bailout programme.' The head of Greece's Bank Association dismissed the report as 'completely baseless'." Continue reading →

Continue ReadingGreek bank official dismisses ‘haircut’ report as “baseless”

Greeks awake to shuttered banks on day after voters reject austerity

"Greeks awoke Monday to the stark reality of the country's accelerating crisis — shuttered banks and ATMs with little cash — hours after they voted resoundingly to reject more austerity measures in exchange for another bailout. The results — 61% voted 'no,' compared with 39% for 'yes' — left the bankrupt country's future in the European Union and its euro currency uncertain. Greece entered a second week of severe restrictions on financial transactions and faced the prospect of even limited amounts of cash drying out, with no prospect of an immediate infusion. Greece imposed the restrictions to stem a bank run after the vote was called and its bailout program expired." Continue reading →

Continue ReadingGreeks awake to shuttered banks on day after voters reject austerity

Greece defaults on $1.7 billion IMF payment

"Greece became the first developed country to default to the IMF, an organization of 188 nations that tries to keep the world economy stable. Greece will now be cut off from access to IMF resources until the payment is made. The move came hours after the country made a desperate attempt Tuesday to halt its plunge into economic chaos by requesting a new European bailout. Greece asked for a two-year bailout from Europe, its third in six years. Greek banks remained shut Tuesday and limits on cash withdrawals were in place as the country tried to stave off financial collapse before the vote. Daily withdrawals are limited to 60 euros, or about $67." Continue reading →

Continue ReadingGreece defaults on $1.7 billion IMF payment

Greece Closes Banks and Stock Markets, Introduces Capital Controls

"The banks in Greece and the Athens Stock Exchange will remain closed until at least July 6, the day after the referendum on the austerity measures demanded by the country’s creditors. In the meantime, cash withdrawals at ATMs will be limited to 60 euros ($66) and transfers abroad will be forbidden. Greece is the second Eurozone country, after Cyprus in 2013, to impose capital controls. The move is evidently aimed at preventing panicked Greek investors and savers from taking their money out of the nation’s banks and moving it elsewhere. In the days before the predictable stall of the negotiations with Europe, many Greeks rushed to withdraw their money." Continue reading →

Continue ReadingGreece Closes Banks and Stock Markets, Introduces Capital Controls

Spain Issues Retroactive 0.03% Tax on Bank Deposits

"Spain will retroactively tax bank deposits to January 1, 2014 stating the move will boost growth and job creation. Guru Huky correctly labeled the tax for what it is 'More than a tax, this looks like a mini seizure of deposits. Someone likely needs a few million and to balance the books.' The notion that a tax increase will boost the economy is of course absurd. But don't worry, it's only 0.03%, nudge nudge, wink wink ... for now." Continue reading →

Continue ReadingSpain Issues Retroactive 0.03% Tax on Bank Deposits