Scares any central banker:
Gold in euro’s:
Full year:
Daily Archives: April 27, 2010 @ 1:59 pm (Tuesday)
Run on the European banks?
When/if word gets out that depositors can lose, that contagion spreads across the euro zone with a general run on the banking system to actual cash, gold, and other currencies, which doesn’t create a cash shortage but drives the euro down further, and further weakens the credit worthiness of all the national govts.
As previously suggested, the endgame is a shut down of the payments system and a reorganization of the entire system with credible deposit insurance and central funding.
My proposal still seems the only one I’ve seen that makes any sense at all, and it’s still not even a consideration.
Europe-wide carnage we saw today.
This is not just about sovereign debt. This is about a concern about the banking system.
The word from S&P is that Greek debt holders will take a major haircut on their holdings, and that means serious problems for banks. (See the full list of victims here)
The surging CDS of Portuguese and Spanish banks is a major red flag.
From CMA Datavision:
The Day Ahead in DC
A true day of infamy!
Financial reform and fiscal policy…
9:45 am – President Obama speaks on fiscal policy. At the opening of the inaugural meeting of the National Commission on Fiscal Responsibility and Reform.
10:00 am – Permanent Subcommittee on Investigations hearing on the financial crisis. The hearing should run through mid-afternoon.
10:00 am – Fed Chairman Bernanke and OMB Director Orzsag testify on fiscal matters. At the first meeting of the president’s fiscal commission.
12:30 pm – Senate party conference meetings. Following last night’s Senate vote on financial reform, in which Democratic leaders failed to invoke cloture (i.e., close debate) on the question of whether to proceed with debating the bill, both parties must now decide how to proceed. Most observers expect that although Republicans opposed the bill last night unanimously, that unity may not last very long, as many members have a desire to eventually vote for some form of financial reform legislation. Republicans on the Senate Banking Committee and their staffs have been writing an alternative proposal to offer on the Senate floor, though when and even if that comes at this point is unclear. Senate Democratic unity was set back yesterday by one member, Sen. Nelson of Nebraska, voting yesterday with Republicans against moving forward. The ongoing discussions today, and partiuclarly the conference lunches at mid-day, will set the tone for the next steps in the process.
Afternoon – Vote on financial reform? Most observers expect Majority Leader Reid (D-NV) to call for another vote moving forward with Senator Dodd’s financial reform bill as soon as later today, potentially followed by yet another vote tomorrow if today’s vote does not hit the 60 votes required. Following the first cloture vote yesterday, subsequent reconsideration of that vote can be called for at any time.
Bank Regulation and LIBOR
Too big to fail should not mean restricted liquidity.
Hopefully they don’t use the liability side of banking for market discipline.
But as they don’t even know what a bank is and are in this way over their heads they might!
>
> (email exchange)
>
> On Tue, Apr 27, 2010 at 8:09 AM, Jason wrote:
>
> Possibly if the legislation succeeds in removing risk for those determining the setting…
>
> But one of the primary goals is to remove the lending subsidy provided by the TBTF
> moniker
>
> If they firmly establish banks as no longer too big to fail, their short term credit ratings
> could fall as far as tier 2 in some cases.
>
> Thus the average LIBOR setting may move higher just as their CP rates move higher.
>
> Also if they lose their ability to lend at lowest rates some of their businesses fall into
> jeopardy (bank letters of credit, liquidity facilities for VRDNs etc)
>