[THS] Karl Denninger: More Squid Tentacles And Government Reaction

[The Harder Stuff in news and commentary]

http://market-ticker.denninger.net/


Thursday, April 22. 2010
Posted by Karl Denninger in International at 08:48

More Squid Tentacles And Government Reaction

Now we see what Greece has been hiding:

    FRANKFURT (MNI) - Greece's public sector deficit for 2009 was 13.6% of GDP,
considerably higher than the 12.7% previously estimated by the Greek government,
Eurostat, the statistical arm of the European Commission reported Thursday.

Oh, you mean the Greeks have been lying about their budget and government
activity?  We'd never do something like that here in America, would we?

Nor would we ever allow a financial institution (or lots of them) to get involved in
intentionally misleading people about government debts, right?

    The official said that Goldman Sachs swaps aimed at concealing Greek
government debt were also "not in the numbers yet."

Oh wait - we did do that?

What was that about Birmingham again?  Yes, Alabama.... and that nasty little swap
deal?

Of course this little bit of deception didn't have any impact on Greek debt markets,
did it?

    Greece’s benchmark 10-year bond yield rose to 8.49 percent, the highest since
1998 and more than twice the comparable German rate. The cost of insuring
government debt against default climbed to a record today.

Oh wait - it did?  That's not so good.

    Deficits have surged across Europe after governments were forced to bail out
banks and spend on stimulus to fight the worst recession in 60 years. Greece’s
shortfall last year was more than four times the EU limit, though it wasn’t the region’s
biggest. Ireland’s budget gap was revised up to 14.3 percent, the largest for any
country since the start of the euro in 1999, Eurostat said today.

Forced?

Why not break up the banks and jail the bankers?  Especially the ones that got
involved in hinky derivatives deals intended to conceal the true state of finances in
various government deals - including Greece and our own Jefferson County?

This would seem to be particularly important to do when there is not only intentional
and willful concealment (that is, fraud upon the public) but when people are actually
engaged in bribery, which was the case here in the United States.

These very same banks don't like Senator Lincoln's bill that was voted out of the
Agriculture committee yesterday:

    April 22 (Bloomberg) -- The U.S. Senate is poised to consider a proposal that
would fundamentally change the operations of commercial banks such as Goldman
Sachs Group Inc.. and JPMorgan Chase & Co.

    Under one part of a derivatives bill approved yesterday by the Senate Agriculture
Committee, banks would have to spin off their swaps trading desks, which have
generated billions of dollars in profits.


Yes, billions in profits that were "earned" by siphoning them off from productive parts
of society, and when that wasn't enough, the squid got its claws into municipal
governments, including being involved in deals that were laced through with bribery
and other unlawful conduct, and since governments can always tax their citizens
(even when the reason for the need to tax is that someone committed a felony!) the
citizens wind up getting the bill.

Oh wait - that sounds like Greece again!  No, it's right here folks - in America.

    For most of the Congressional debate about how to regulate derivatives, the
spinoff proposal was not even on the table. It emerged last week as part of the bill
crafted by Lincoln, an Arkansas Democrat.

    “For a handful of the largest banks that would be a major problem -- of late the
rates derivatives business in particular has been nothing short of an astonishing
money maker,” said Raj Date, a former Deutsche Bank AG executive who is now
executive director for Cambridge Winter Inc.’s center for financial institutions policy.

"A major problem" when you take the squid's ability to play vampire and suck the life
out of the economy away?  Yes, I would say that's a major problem.

But if we want our economy and government to survive, we better make calamari out
of the squid - whether they scream or not.

    Lincoln’s spinoff provision would bar companies that deal in swaps from bank
privileges such as accessing the Federal Reserve’s discount lending window
emergency liquidity function and the Federal Deposit Insurance Corp.’s deposit
guarantee.

    The nation’s largest commercial banks are the most dominant in the market
precisely because they have such access, according to Brian Gardner, an analyst at
Keefe, Bruyette & Woods in Arlington, Virginia, who was staff director on the House
Financial Services Committee for former Louisiana congressman Richard Baker.

Right - the big banks are doing this because when they screw up they know the
government will step in and stop them from blowing themselves to bits.

THIS IS NOTHING OTHER THAN FINANCIAL TERRORISM!

"Either give us money to cover our bad bets or we BLOW UP THE ECONOMY AND
TANKS WILL ROLL!"

That's terrorism folks.  If you or I did it we'd all wind up in prison, with good cause.
But when Wall Street Banks do it, they get the money, and they get to do it again.
And again.  And again.

    “I think we all want to make sure we don’t throw the baby out with the bathwater,
that we tackle what has been clearly outrageous behavior that has hurt Americans at
the same time that we allow a system to work as it should be working,” Senator
Debbie Stabenow, a Michigan Democrat on the committee, said yesterday.

Riiight.  Debbie, you must love firearms - especially when the business end is in your
mouth, among other places.  After all, you want to "avoid throwing the baby out with
the bathwater", even after you watched these very same bathwater-drawing folks
stick that gun in your mouth just over 18 months ago and threaten you with the end
of civil order unless they got $700 billion - right now, today, with no restrictions.

    Michael Barr, the assistant Treasury secretary for financial institutions, wouldn’t
comment on the provision when he was asked about it by reporters. Gary Gensler,
the chairman of the Commodity Futures Trading Commission, wouldn’t support the
provision, saying only that “the Federal Reserve and the Treasury has to think
through these issues.”

When you're held up at gunpoint, ladies and gentlemen, what is your response the
next day, assuming you don't get shot on the spot?

   1.
      Go buy a gun yourself and then get some training so you know how to use it.
Apply for a concealed carry permit.  Load your shotgun at night and have it next to
the bed at night.  Buy a dog so the next time you have some warning that your door
is about to get kicked in.

      OR DO YOU

   2.
      Invite the armed robber to dinner, refuse to prosecute him, shake his hand and
then give him your ATM card and PIN number so next time he doesn't have to use
the gun - he can just steal all he wants without any muss or fuss?  Oh, and yeah,
sign agreements that surreptitiously bind your neighbor to pay for all future ATM
thefts!

Ladies and gentlemen we were robbed in 2008. You'd expect the government and
citizens to do #1.

What our government has done to date is #2, and you, America, are "the neighbor"
getting the bills.