Europe Hits Back Against Wall Street in the ABsence of U.S. Action Against Its Own banks

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EDITOR’S NOTE: There can be no doubt that but for the military might of the United States, the Wall Street securitization scheme might well have been deemed an act of war against the countries who were induced to buy bogus mortgage bonds. The ensuing worldwide recession was unnecessary and central bankers and regulators around the world understand exactly that. Now they are striking back, and as challenging as it is to believe that the banks will fall, these actions will result in the break-up and resolution of all the mega banks, reducing them to manageable size that can be regulated.

European regulators understand that the megabanks are exercising monopolistic control over the derivative markets, without which control the markets will fold up like a house of cards. Bankers, economists and regulators around the world are tired of the continuing lies that appear in American reports, balance sheets and behavior. They want reality and they are going to get it. If our Congress is a place where “the banks own the place” as Senator Dick Durbin said, the European equivalents are not so owned and will exercise the control that American counterparts should be using to unwind a giant lie.

Perhaps American regulators and the DOJ will follow the lead of Europe. If they don’t they will be left looking just as stupid and greedy as the management of the megabanks to whom they dance to the music played by the these monopolistic institutions.

European Regulators Investigate Banks for Credit Swaps

By and

Ever since the financial crisis, when derivatives were blamed for exacerbating the panic, regulators have been looking for ways to make these complex financial instruments less risky. Now, regulators are also considering whether a small network of big banks unfairly controls the derivatives market itself.

European regulators in Brussels announced two sweeping antitrust investigations into the world’s largest banks on Friday, opening a second front in the battle to rein in a $600 trillion business that until now has operated mostly in the shadows. The regulators are focusing on whether the banks have shut out competitors in recent years in a bid to keep profit margins high.

The European investigations mirror one already under way by the United States Department of Justice, and follow an examination of derivatives market last year by The New York Times that highlighted efforts by large banks to control this lucrative corner of finance.

The European officials said they were investigating whether financial institutions, including international giants like Barclays, JPMorgan Chase and Deutsche Bank, used important industry committees to influence pricing and rules for a product known as a credit-default swap. These swaps provide a type of insurance against the risk of corporations or other borrowers being unable to pay off their debts.

The concern, the European Commission said, was that the banks had “an unfair advantage” in this largely opaque market. None of the banks cited by the European regulators commented on the inquiry.

“Lack of transparency in markets can lead to abusive behavior and facilitate violations of competition rules,” the European Union competition commissioner, Joaquín Almunia, said in a statement. “I hope our investigation will contribute to a better functioning of financial markets and, therefore, to more sustainable recovery.”

Antitrust rules in Europe tend to be tougher in these types of cases than in the United States, experts said, and the efforts in Europe may increase the pressure on Washington to open this marketplace up to more competition. The investigations also differ from other prominent antitrust cases recently because they involve many big players in the industry, rather than a single company, and the outcome will be determined by laws covering collusion rather than monopolies.

“Our big time, famous antitrust cases over the past couple years have involved a single dominant firm, like Microsoft,” said Keith N. Hylton, a professor of law at Boston University. “This is a story of a secretive group that controls the market and they’re excluding competitors.”

The result of the investigations could affect broad swaths of the economy, because banks dominate the market for many sorts of derivatives, not just credit-default swaps.

As in Europe, American regulators have expressed worries that buyers are paying higher prices for these complex instruments than they would in a more competitive market. That can affect products like airline tickets that include the cost of hedges on oil prices or local tax bills that reflect the fees cities pay to manage the risk of swings in interest rates.

The investigation announced on Friday was twofold.

One part focuses on a larger set of banks — 16 in total — that work with a data provider called the Markit Group, based in London, designing pricing procedures and indices related to these swaps. Many of the banks also hold stakes in Markit.

Markit, which the European regulators are also looking at, said in a statement that it “has no exclusive arrangements with any data provider and makes its data and related products widely available to global market participants.” And, the company said, it was “unaware of any collusion by other market participants as described by the commission.”

The second part of the investigation centers on nine banks that play a major role in a procedure called clearing that regulators in the United States and Europe have promoted for several years as a better way to manage the risks posed by derivatives.

The nine banks gained power in part through regulators’ efforts in 2008 to improve transparency in the market. At the time, the Federal Reserve Bank of New York ordered the banks to help build clearing houses for derivatives.

In return for partnering with the Intercontinental Exchange, a publicly traded company, the banks got a favorable deal with ICE that persists today. Not only did they get a major say in ICE’s rules on derivatives, the banks also share in ICE’s profits from clearing and enjoy a cap on the fees they pay for clearing.

The European Commission said the deal between ICE and the nine banks might be unfair to other players in the market. In particular, the commission criticized the cap on clearing fees. The banks are not obligated to pass on the benefits of the caps to their customers and could use part of their savings to undercut bids from new competitors.

“This could potentially constitute an abuse of a dominant position by ICE,” the commission said in a statement.

ICE declined to comment. But officials inside the banks say privately they are entitled to the caps on the fees at ICE because as part of their partnership, they sold a jointly owned clearing business to ICE. The caps, they argue, are part of the payment for that deal.

Alisa Finelli, a spokeswoman for the Justice Department in Washington said on Friday that the department’s investigation of the derivatives market was still underway. Last fall, she said the department was focused on “the possibility of anticompetitive practices in the credit derivatives clearing, trading and information services industries.”

Also late last year, Christine A. Varney, assistant attorney general in the department’s antitrust division, urged the Securities and Exchange Commission and the Commodities Futures Trading Commission to create regulations that spur more competition in the derivatives market.

The banks named in the ICE clearing investigation are JPMorgan, Bank of America, Barclays, Citigroup, Crédit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley and UBS. In addition to those nine, the Markit inquiry also includes Wells Fargo, BNP Paribas, Commerzbank, HSBC, Royal Bank of Scotland, Crédit Agricole and Société Générale.

16 Responses

  1. Commies do not equal Nazis. Commies are left wing and Nazis are right wing. There seems to be some confusion. Don’t get me wrong. They both suck.

  2. Greed is global

    NEW YORK, May 3 (Reuters) – The United States sued Deutsche Bank AG    for more than $1 billion, accusing the German bank of defrauding the government by repeatedly lying to obtain federal insurance guarantees on mortgage debt.

    The lawsuit filed Tuesday against Deutsche Bank and its MortgageIT Inc unit is believed to be among the first targeting mortgage lenders under the federal False Claims Act.

    It also marks the newest push by the government to hold the mortgage industry responsible for perceived excesses that contributed to a four-year-old U.S. housing slump and hundreds of thousands of foreclosures. It is unclear whether the government will target other banks in lawsuits.

    Deutsche Bank shares fell 3.1 percent in late afternoon trading in Frankfurt.

    “We just received the complaint and are reviewing it,” a Deutsche Bank spokeswoman said. “We believe the claims against MortgageIT and Deutsche Bank are unreasonable and unfair, and we intend to defend against the action vigorously.”

    The complaint was filed in U.S. District Court in Manhattan. The government says MortgageIT from 1999 to 2009 endorsed more than 39,000 mortgages with principal totaling more than $5 billion for Federal Housing Administration insurance, meaning they were backed by the federal government.

    Knowing they would profit from the eventual resale of the loans, the defendants were accused of recklessly choosing mortgages that violated program rules “in blatant disregard” of whether borrowers actually had the ability to make payments.


    The government said it has paid out more than $386 million of FHA insurance claims and related costs, and expects to pay out hundreds of millions of dollars more.

    “Deutsche Bank and MortgageIT had powerful financial incentives to invest resources into generating as many FHA-insured mortgages as quickly as possible for resale to investors,” the complaint said.

    “By contrast, Deutsche Bank and MortgageIT had few financial incentives to invest resources into ensuring the quality of its FHA-insured mortgages.”

    The complaint seeks triple damages on the $386 million of claims, as well as punitive damages, fines and other remedies.

    Deutsche Bank bought MortgageIT for $430 million in 2007.

    The office of U.S. Attorney Preet Bharara in Manhattan, which brought the case, had no immediate comment.

    The bank was also a target of last month’s report by the U.S. Senate’s Permanent Subcommittee on Investigations criticizing lenders for contributing to the financial crisis.

    That report detailed how investigators believed Deutsche Bank deceived clients into buying securities it believed were likely to implode.

    Deutsche Bank lost an estimated $4.5 billion tied to the mortgage market collapse, but could have lost more had it not sold such securities, the report said.

    The case is U.S. v. Deutsche Bank AG et al, U.S. District Court, Southern District of New York, No. 11-02976.

  3. Public Pensions are invested in derivatives too. Conflict of interest is rampant.

  4. Oh this is good

  5. The destruction of economic facts:

  6. Stansberry is a wonna Be Nostradamus!!


    this is funny as dbntc objected to notice of their subpoena produced documents

    If anyone is fighting the foreclosure mill NDEX WEST LLC you will like to read this opposition to their demurrer to Plaintiff’s Fourth Amended Complaint.

  9. The banking empire has to go. Europe is sick and tired of it, and our banks are the worst offenders but not all the offenders. We shall see what happens to Deutsche Bank after the European governments get to it.

  10. Neil ,

    Their banks “Own the Place” also ,, it’s just not OUR banks owning THEIR place so they are free to sue.. This truly gives me hope that there is an entity out their powerful enough to force reality upon our TBTF’s ,, the only road to recovery that can work…

  11. Stansberry might be another scam artist, but it is still worth seeing.

  12. It seems like Europe is a lot more intelligent than we are. Or is it that their regulators regulate and that’s important in regulation. By deregulating these banks and letting the banks run congress, we are doing dramatic and long term damage to not only our reputation ( now as liars) but our entire economy. When big oil racks in over 300 Billion is profits in a single quarter and the banks are showing profits too – (enough for bonus time) imagine that with all the foreclosures- any way- it seems that everyone else is in bankruptcy – including our government and our counties and states, not to mention all the small businesses and individuals- how is this not so apparent what has happened? The banks and big oil have squeezed out all the money and they have destroyed our environment and taken all the disposable income OUT of the economy and the banks have foreclosed illegally without standing on millions across America and Europe—and they are turning all the profits!? C’mon everyone. How much more clear can it be? All I want to know is how to take a mortgage that’s been swapped out and churned around the world in pieces and shredded. Anyone have an answer for that one? We have to fight. Surely not every single judge can be on the take….or can they be too? May God bless those still worthy and for the rest- let the devil do with the greedy ones as he sees fit. Dee P. 561-389-9339

  13. End of America Prediction. A must see.

    Very very very Sad.


  14. Too Big to fail= Centralized Commie Bastards.


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