Bad news for the one percent, Swiss banks are getting close to settling a sweeping U.S. criminal probe of offshore tax evasion by paying billions of dollars in penalties and handing over the names of thousands of Americans who have secret accounts. The Swiss government is pushing for the settlement that will include all Swiss banks in a bid to keep their traditional secret banking system intact even though they have already settled in a similar manner with EU regulators. Presumably the secrecy will still be maintained for third world dictators and drug lords.
Eurozone negotiators have asked (or rather demanded) that holders of Greek debt accept a 60% hair cut in the face value of their bonds, this requirement far exceeds losses agreed to in a deal between private investors and eurozone authorities three months ago. Bond traders claim that a 60% cut in face value would really be equivalent to a 75-80% reduction in current value.
Coincidently Bank of America recently transferred $75T worth of derivatives based on things like Greek bonds and such from its Merrill Lynch holdings to its insured deposit division. This was over objections from the FDIC that would have to cover those deposits after the bank is looted of assets by a collapse of the derivatives being held by BoA. This was the downfall of Lehman Brothers that precipitated the 2008 banking collapse.
In theory the International Swaps and Derivatives Association’s determination committees could rule on such a “credit event” after they are asked to intervene. If they determine that debt holders agreed to take losses then derivative contracts wouldn‘t pay off. Germany is pushing hard for this sort of outcome rather than triggering the end of civilization. The bond holders aren’t happy of course, “There are limits, however, to what could be considered voluntary,” said Charles Dallara, managing director and chief negotiator for the Institute of International Finance, representing bondholders.
Closer to home, insurance regulators in Arizona have seized the main subsidiary of private mortgage insurer PMI Group Inc. and regulators will begin paying claims against mortgage insurance by creditors at just 50 cents on the dollar and may stop paying them all together. The company had been skating along by denying claims from banks because they were presenting sketchy paperwork, but they have finally been overwhelmed by the collapse of the housing bubble.
President Obama went to Nevada today to announce the liberalizing of the standards for refinancing homeowners that are underwater. He’s doing this by Executive Order and so it’s only a partial fix at best, since any real reform would require an Act of Congress. The White House won’t say how many homeowners might be helped, and while it could be millions, the program is strictly voluntary from the stand point of the bankers. So the really number is probably zero.
Snidely Whiplash, I mean Mitt Romney, criticized the President for “letting the housing crisis go on too long”, not that more help should go to home owners, but rather they should all be foreclosed on much faster. “Get the houses into the hands of investors that could, you know, fix them up and rent them out”. You know like Romney’s Bain Capital did for our manufacturing base. Mitt sounds exactly like the evil banker in It’s a Wonderful Life, the question we need to know the answer to is Obama’s angel going to get his wings? www.prairie2.com