Europe Coping With Deepening Crisis And Regulating Crooks

March 5th, 2009 - by: danny

REPORTING FROM EUROPE: THE FINANCIAL CRISIS (AND FINANCIAL CRIME) IS HERE

As Economies Decline, Leaders Want to Regulate Rip-off “Shadow Banking System”

KREMS, AUSTRIA, March 5:

Obsessed as we are about our own crumbling economy, it’s hard for most Americans to see and appreciate the global nature of the crisis and how it is impacting and will impact others throughout the world.

We don’t recognize how many in other countries blame the fall of their own economies on a kind of “financial aids” born in the USA.

And even as protests spread with Britain just putting its own Army on alert for fear of disruptions this summer by anarchists with a bent on class war with slogans like “burn a banker,” mass demonstrations show no sign of abating in France, Iceland, Ireland, Greece and other EU countries. People here have politicized economic issues perhaps because of a more diverse media environment and an expectation that their governments have a duty to protect their people.

When I arrived in Vienna for a film forum and festival here at the Danube University, I was surprised to see merchandise and remainders marked down to flea market prices at stalls in the normally pricey booths at an airport usually only known for pedaling luxury brands.

Some think the European Union and the Euro zone may not survive the tremors. Eastern Europe is feeling the crunch worst with its currencies reeling. Western Europe has so far declined to come to their requests for more bailouts from Hungary; for example, once a model for how the free market can replace Soviet bloc economics.

There are waves of protests underway in the East. Left publications report, “thousands of demonstrators in Lithuania, Latvia and Bulgaria have attacked government buildings and called on their governments to resign as unemployment soars in Eastern Europe. Experts predict a regional increase of 15 million to 18 million unemployed in the coming months, with no relief as jobs for immigrants disappear in Western Europe and the United States.”

Writes Mike Whitney: “The global economy is decelerating at the fastest pace on record. 40 percent of global wealth has been wiped out. The banking system is insolvent, unemployment is soaring, tax revenues are falling, the markets are in shock, housing is crashing, deficits are soaring, and consumer confidence is at its lowest point in history.” READ FULL STORY HERE

When you look at some of the numbers, you can see the time bombs that are ticking away. According to Ed Bonawitz, many countries are in deep hock:

“Ireland’s external debt, at US $1.8 trillion, equals 900% of the country’s US$200 billion GDP. The United Kingdom’s external debt of US$10.5 trillion equals 456% of its US$2.3 trillion GDP. Switzerland’s external debt of US$1.3 trillion equals 433% of its US$300 billion GDP. Now that the credit markets are locked tight, renegotiating the terms of these loans is virtually impossible. ‘U.S. Banks are said to have a loan ratio of around 26-to-1. And European Banks have one that is around 60-to-1.”

F. Wiliam Engdahl writes:

“The problems in Eastern Europe which are just now emerging with full force are, if you will, an indirect consequence of the libertine monetary policies of the Greenspan Fed from 2002 until 2006, the period where Wall Street’s asset backed securitization Ponzi Scheme took off.

The riskiness of these eastern European loans is now coming to light as the global economic recession in both east and west Europe is forcing western banks to pull back, refusing to renew loans or ‘rollover’ the credits, leaving thousands of borrowers with unpayable loan debts. The dimension of the eastern European emerging loan crisis pales anything yet realized. It will force a radical new look at the entire question of bank nationalizations in coming weeks regardless what nice hopes politicians in any party entertain.

According to my well-informed City of London sources, the new concerns over bank exposures to eastern Europe will define the next wave of the global financial crisis, one they believe could be even more devastating than the US sub-prime securitization collapse which triggered the entire crisis of confidence.”

Because of globalization, the interwoven nature of the world economy, what is happening there will make things worse for us here. READ FULL STORY HERE

Visit msnbc.com for Breaking News, World News, and News about the Economy

Reuters reports:

“A new report suggesting Eastern Europe’s economic slump will drag Western banks further into the red fanned fears on Tuesday that emerging economies will deepen the recession in the West. No wonder international agencies are up in arms. Says the head of the IMF, governments must coordinate better to fight the global economic crisis as national remedies are proving ineffective, says International Monetary Fund chief Dominique Strauss-Kahn.”

One issue that is just getting attention Europe is unregulated activity by Hedge Funds and controlling enormous amounts of money stashed in untaxed off shore accounts. European leaders have now agreed on a tough stance on hedge funds, the highly speculative products that many blame for fueling instability in financial markets.

Forbes reports that British PM, Gordon Brown, is planning new ways of regulating out of control banks: “I want us to do what was advocated by our country years ago. To have global supervision of what is a shadow global system. I want there to be no hiding place for special investment vehicles, for hedge funds or tax havens,” he said.

“Because this is a worldwide problem of banking failures we are now looking with our other colleagues internationally at how across all parts of the world we can bring under supervision what is an international shadow banking system.” Brown had tough words for the bankers whose dodgy lending practices and bonus culture brought the international financial system to the brink of collapse.

“Some practices are indefensible and they have got to be cleaned up now. It’s time to set new rules for the banks of all countries,” he said.”

There is also a darker dimension with reports that legitimate businesses are turning to the mafia and organized crime gangs for the billions they need to stay in business.

Douglas Farah writes in the Counterrorism blog:

“There is strong anecdotal evidence that cartels from South America to Southeast Asia and Europe Ã¢â‚¬Â¦are stepping in to credit breach, building relations with businessmen desperate to stay in business, who would not normally look to the “informal” economy for a loan. This will serve to extend the tentacles of these groups even further into the legal society and financial structure. As (one) article notes, “Stronger organized crime means a weaker state.”

A story in the Washington Post “says a new report estimated that organized crime syndicates in Italy – including Naples’s Camorra, Sicily’s Cosa Nostra, Calabria’s ‘Ndrangheta – collect about 250 million euros, or $315 million, from retailers every day. That is about a billion dollars every three days, or about $122 billion a year siphoned out of a single economy. Is it any wonder Italy is a constant economic wreck?”

If the trends continue, there is apt to be more opportunities for the criminal class and more of a fusion between the supposedly legitimate business world and the supposedly illegitimate one. Tony Soprano, are you paying attention?

Also, regulators are monitoring missing money. Here’s a headline from the Financial Times:

“Lehman Brothers’ US liquidators have asked Barclays to explain what happened to an estimated $3.3bn earmarked for bonuses and other liabilities that the UK bank received when it acquired part of the bankrupt Wall Street company last year.

Funny. Business like this seems to be part of the way business is run. Increasingly, banking bosses are sounding like mob underbosses. Here’s a quote attributed to Jimmy Cayne, former chief of Bear Stearns on Tim Geithner who engineered the sale of his bank to JP Morgan at a sizable loss:

“The audacity of that p- in front of the American people announcing he was deciding whether or not a firm of this stature and this whatever was good enough to get a loan … This guy thinks he’s got a big d-. He’s got nothing, except maybe a boyfriend … Who the f- asked you? You’re not an elected officer. You’re a clerk. Believe me, you’re a clerk. I want to open up on this f–r, that’s all I can tell you.”

It may be time to go to the mattresses.

*******

THE SHARKSTERS BEHIND OUR HOUSING CRISIS

Barbara Flaska has more for us on the “Sharksters” in the mortgage Business American homeowners, drowning in debt, are waiting to exhale:

More American homeowners are drowning in debt, according to a new research report.

“Because home prices continue to drop across most of the country, the mortgage debt on about 20% of all U.S. single-family homes exceeded the estimated current value of those properties as of Dec. 31, says First American CoreLogic, a real estate information firm based in Santa Ana, Calif. That’s a situation often known as being ‘underwater’ or ‘upside down.’ That proportion will rise to 25% of single-family homes if prices fall another 5%, the firm said.”

Now, investors are lining up to buy those “toxic mortgages” at a fraction of their value, for as little as 50 cents on the dollar.

With more mortgages underwater and mortgage delinquencies up again. some of these new style mortgage brokers are saying “you have to take the poison out of the water at the source. You have to go to the borrower, and you need to create liquidity at the borrower level.

Does it come as a surprise that ex-Countrywide leaders are already in the game and stand to make bundles more on this action? By starting up a new business with old colleagues in the very same suburb where Countrywide was founded and run, like Stanford L. Kurland, the former president of Countrywide Financial, they stand to make a bundle.

Don’t forget, this is the very bank that has become most synonymous with the bad mortgage lending practices that eventually caused the housing market to burst, setting into motion the current financial crisis?

• Ex-Leaders of Countrywide Profit From Bad Loans

“It is sort of like the arsonist who sets fire to the house and then buys up the charred remains and resells it,” said Margot Saunders, a lawyer with the National Consumer Law Center. For years, her organization sought to limit the sort of abusive lending practices that were employed by Countrywide and other financial companies.

As recently as last June, “the state of California, among those states most affected by the housing crisis, sued Countrywide for engaging in deceptive advertising and unfair competition by pushing homeowners into risky loans for the sole purpose of reselling the mortgages on the secondary market.”

• Former Countrywide executives cash in on federal housing bailout

“Kurland is seeking to capitalize on a situation that was a product of his own creation,” said Blair A. Nicholas, a lawyer representing retired Arkansas teachers who are also suing Mr. Kurland and other former Countrywide executives.

The moral? “It is tragic and ironic. But then again, greed is a growth industry.”

• Predatory lending with a smiley face

RELATED: What does AIG stand for? Always Invest in Garbage.

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