SAW having kept his mouth shut for a few weeks to see which way the financial winds of change were blowing, has discovered that other than shaking like leaves in a hurricane, the global elite of bankers and the hapless politicians don’t have a clue.
Davos 2009 was a washout, with some CEOs too embarrassed to attend.
The European Union has discovered to its horror that it’s not unified at all, but consists of 3 distinct economic blocs: firstly Germany France and the U; secondly the southern European countries like Portugal, Spain, Italy and Greece whose real estate bubble has burst; thirdly the impoverished Eastern European countries to whose toxic debt the other European countries were exposed in addition to the US garbage. With Germany emerging as a reluctant central banker to the EU, there are pleas to avoid protectionism within the Eurozone which carries with it the spectre of a new Iron Curtain between rich and poor Europe.
Obama grins while throwing trillions at an unquantifiable problem and simultaneously promises new infrastructure projects and increased government stakes in Citigroup and others that still pretend to be banks. How he proposes to spread the wealth back to the middle and working class in the face of the greatest and utterly fraudulent engineered scam, that for 7 years sucked the wealth into the hands of the (unprosecuted) banking elite, remains to be seen.
No doubt as part of his inclusive policies, he’ll have to defer to those bankers complaining that they’re being unfairly bashed. The American Bankers Association bleated to Obama that very few banks were involved in the toxic debts. Numerically, that may be true. But those on Wall Street and elsewhere who were involved, leveraged their exposure to outrageous levels and sabotaged the real economy. Any good that came out of it was the realization that merging fractional reserve banking with the debt addiction of US consumers, for whom repayment was a novel concept, was bound to affect the banks Balance Sheet sooner or later – no matter how exotic the debt instrument or the credit default swap daisy chain that purportedly backed it.
Case in point, AIG that insured those credit default swaps and is now described as a “systemic risk”, is back for a second bite of US30 Billion the government cherry after its first chomp of US150 Billion. It faced a credit downgrade in the face of a US 61.7 Billion loss for the last 3 months of 2008 (apparently the largest quarterly loss in corporate history).
It’s right up there with the talent to be found at RBS.
Or HSBC, whose sub-prime exposure to the US market necessitated a cash call of US 17.7 Billion through a rights issue in the UK (the biggest in UK history), the closure of its consumer lending business in the US, and a cut in dividend.
What really cracked SAW up were HSBC’s statements of contrition, which included this gem that there had to be a reversion to some of the older principles of banking in terms of a simpler sense of providing good customer service, good relationship management and a sensible approach to liquidity.
“Reversion”???!!! why on earth would an apparently prudent bank diverge from those principles?
Oh yeah……….unbridled greed coz everybody else was doing it.
© 2009 Sanjeev Aaron Williams All Rights Reserved
Tuesday, March 03, 2009
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