Tag Archives: Bailout Fail

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

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“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.”

http://money.cnn.com/2015/11/30/news/economy/fed-adopts-rule-to-end-too-big-to-fail/

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‘Big Short’ Genius Thinks Another Financial Crisis Is Looming

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“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.”

http://nymag.com/daily/intelligencer/2015/12/big-short-genius-says-another-crisis-is-coming.html

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

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“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.”

http://www.cnbc.com/2015/12/03/bill-gross-central-bank-casinos-to-run-out-of-luck.html

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Greek bank stocks hammered again

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“Stocks have fallen to roughly the level they were at in 1990 and, while not as low as they were in 2012, are some 52 percent down on last year’s high. Greece said it expects to conclude a bailout deal with international lenders by Aug. 18. It has been estimated by both the banks themselves and the creditors that between 10 billion and 25 billion euros ($11 billion-27.5 billion) is needed to recapitalizes Greek banks. The economy, meanwhile, has reversed course and is heading back into recession. A survey on Monday showed Greek manufacturing activity plunged to a record low as new orders plummeted and the three-week bank shutdown caused serious supply problems.”

http://www.reuters.com/article/2015/08/04/us-eurozone-greece-stockmarket-idUSKCN0Q90NU20150804

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China stock exchanges step up crackdown on short-selling

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“The Shanghai and Shenzhen exchanges said in separate statements on Monday night that new rules, effective immediately, banned traders from borrowing and repaying stocks on the same day – a step that raises risks for short-sellers. Many fund managers say the campaign against shorting has decayed into a general crackdown on risk management strategies, which could backfire.  China’s state margin-lending agency has injected 200 billion yuan ($32.21 billion) since July into five newly launched mutual funds. The China Securities Finance Corp is also managing a 120 billion yuan bailout fund formed by 21 brokerages, and last month provided 260 billion yuan in credit lines to brokerages.”

http://www.reuters.com/article/2015/08/04/us-china-markets-shorting-idUSKCN0Q909E20150804

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Greek stocks plunge, banks hammered, after five-week crisis shut down

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“Greece’s stock market closed with heavy losses on Monday after a five-week shutdown brought on by fears that the country was about to be dumped from the euro zone.  Bank shares plummeted 30 percent before loss limits kicked in to stop investors selling any more. The main Athens stock index ended down 16.2 percent, recovering slightly after plunging nearly 23 percent at the open.  It was the worst daily performance since at least 1985 when modern records began, including a 15 percent fall when Wall Street crashed in 1987.  Furniture maker Dromeas SA gained almost 29 percent after clinching a 30 million-euro deal to supply European Commission offices.”

http://www.reuters.com/article/2015/08/03/us-eurozone-greece-stockmarket-idUSKCN0Q807720150803

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The World’s Biggest Economic Fallacies… and How to Profit From Them

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“As the long lines at Greek banks and ATMs attest to, banks don’t really have all of your money.  Bloated government spending in Greece also reveals the failure of Keynesian economics, which advocates a large state role in the economy. It reveals the failure of the bailouts, which did nothing constructive. They only delayed the inevitable. Greece reveals that government bonds are not sacrosanct.  All of these things – fractional reserve banking, Keynesian economics, the false safety of government debt, and the bailout model – are firmly embedded in today’s conventional wisdom. The crisis there helps to illuminate these fundamental flaws in mainstream economic thinking.”

http://www.internationalman.com/articles/the-worlds-biggest-economic-fallacies-and-how-to-profit-from-them

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Greek Banks Reopen but Cash Limits Remain and Taxes Soar

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“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.”

http://abcnews.go.com/International/wireStory/greeks-find-banks-open-restrictions-place-32559279?singlePage=true

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The Troubled Greek Bailout Process Lurches Forward

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“On July 13, Athens reached a deal with its creditors to begin negotiations for a third bailout for the country, only a few days after Greeks voted against austerity in a referendum. Then, early on July 16, the Greek Parliament approved a list of painful reforms, including spending cuts on pensions and higher taxes. The vote was extremely controversial, both inside Parliament and out. Though the austerity measures were approved, 32 lawmakers from the ruling Coalition of the Radical Left party, known commonly as Syriza, voted against the reforms, whole another six party members abstained.  Outside Parliament, Athens saw its most violent protests of the year.”

https://www.stratfor.com/analysis/troubled-greek-bailout-process-lurches-forward

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The End Game, or Just a Pause?

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“In true dramatic fashion, the Greek government submitted an 11th-hour proposal late yesterday that meets most creditor demands, in exchange for a new 53.5 billion euro bailout … Greece’s third since 2011.  In fact, details of the proposal, including spending cuts, pension reform and tax hikes, are nearly identical to the offer made by European creditors way back on June 26, which was summarily rejected by the Greek government, and then by voters in a July 5 referendum.  Hmm … the more things change, the more they stay the same.”

http://www.moneyandmarkets.com/end-game-just-pause-72130

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