How Political Clout Made Banks Too Big to Fail [Bloomberg]

Political Clout Made Banks Too Big to Fail


The U.S. has historically kept the financial sector in check through a combination of sound principles and serendipitous decisions. But as the financial system gained strength in recent years, it also gained political influence. In the last decade, it has become too concentrated and too powerful, which has damaged not only the economy but the financial sector itself.

How did it happen? In 1933, the Glass-Steagall Act erected a wall between two ways that banks could help customers borrow money. The idea was to keep commercial banks from exploiting their depositors, who might get saddled with the bonds of firms that could not repay the money they owed. One beneficial side effect of the Glass-Steagall Act was to fragment the banking sector and reduce the financial industry’s political power. Another was to foster healthy competition between commercial banks and investment banks.

Bank Concentration

Starting in the 1970s, these limits were progressively removed. The deregulation unquestionably increased the efficiency of the banking sector and fostered economic growth. But with this growth came concentration. In 1980, there were 14,434 banks in the U.S., about the same number as in 1934. By 1990, this number had dropped to 12,347; and by 2000, to 8,315. In 2009, the number was less than 7,100.

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Insolvent Spain Vows to Bail Out TBTF Spanish Banks []


Ten months ago Spain’s second-biggest bank, Bankia, was out wooing the public, àla Facebook, for investment in the company’s initial public stock offering (IPO). Bankia was created from a collage of seven insolvent banks, combining bad assets with depositor funds into one giant too-big-to-fail (TBTF) megabank, similar to the U.S. And it is absolutely a TBTF, as Spain’s prime minister Mariano Rajoy exclaims:

“We are not going to let any regional government fall, or any bank fall, because they can’t… if that happens the country will fall.”

The comment begs the question: if the country will “fall” as a result of a single corporate bankruptcy, how exactly can Spain “bail out” one of the two banks whose combined total “market value” is more than Spain’s gross domestic product (GDP)?

There perhaps should have been a red flag raised back in the summer of 2011, when “Ronaldo in the bailout fund,” hit the headlines at Süddeutsche reports:

The most expensive footballer in history may now be used to guarantee the solvency of a Spanish bank. The daily reports that the Bankia group of savings banks, which financed Real Madrid’s acquisition of the Portuguese player, is now seeking to borrow funds from the European Central Bank. In response to the ECB’s demand for guarantees,Bankia are putting up… Ronaldo and the Brazilian Kaka, who also plays for the Madrid football club. In 2009, Real borrowed 76.5 million euros to pay transfer fees of 100 millions euros to Manchester United, and 60 million to Milan AC.

Italy’s recession is becoming severe [SoberLook]


There is basically no good economic news coming out of Europe these days. And the news out of Italy has been particularly sad. A couple of nasty earthquakes that recently hit Italy have killed a number of people and damaged factories, adding to an already bleak economic picture. On top of that the government had to increase gasoline taxes to pay for the reconstruction.

FT: – Italy has started counting the cost of two devastating earthquakes in the northern industrial region of Emilia-Romagna.

The government has come under attack for responding by levying a tax of two euro cents on a litre of fuel to help finance reconstruction.

This latest blow to Italy’s economy in the midst of a double-dip recessionfollows estimates by Confindustria that industrial output in May has fallen by 0.6 per cent over April and is now 22.1 per cent down on the peak reached in early 2008.

The government’s decision to raise tariffs on petrol and diesel – already among the most expensive in Europe – was widely condemned by consumer associations and politicians on both left and right. They said the extra costs would hit spending and drive the economy deeper into recession.

Italy’s double-dip recession is indeed becoming severe – even before the impact of these devastating events and the hike in gasoline taxes. Here are some of the latest economic trends.

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JPM Max Pain At 6 Month Highs [Zerohedge]

While we can argue over which exact position Iksil and his crew had on, the widening in IG9 10Y spreads post-Dimon signals an unwind of epic proportions continues. It seems the mainstream media has grown tired of discussing skews, basis, curves, tranches, and tail-risk but for those who care about the reality that JPMorgan faces – we note that the credit index most closely tied to the CIO’s office debacle continues to push wider.

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Investors flee Spain as financial crisis worsens []

Investors are fleeing Spain as the financial crisis worsens while Madrid battles to contain fears of an economic collapse.
  • The European Central Bank said on Wednesday that private individuals and companies are withdrawing their money out of Spanish Banks.
  • Data shows private deposits at Spain’s financial institutions fell by more than 30 percent in April.
  • The interest rate on Spain’s 10-year bonds rose to 6.703 percent as the country battled to avoid being the next victim of the eurozone crisis.
  • Stock prices fell all over the world and Madrid’s IBEX-35 index slumped 2.58 percent to a nine-year low at 6,090.4 points.
  • The euro slumped to a two-year low versus the US dollar amid fears that Spain could be forced into asking for a bailout for its ailing banks.
  • The European single currency sank below USD1.24, touching a low point last seen on July 6, 2010.
A man shouts slogans during a protest outside the headquarters of Spain

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Obama scandalous Nazi death camp gaffe outrages Poland [RT]

Poland has lashed out the US after an outrageous mistake by the President Obama, who referred to Nazi death camps as “Polish”. Warsaw says the subsequent “correction” and expressed “regret” are insufficient.

“I am convinced that our American friends can today allow themselves a stronger reaction than a simple expression of regret from the White House spokesman – a reaction more inclined to eliminate once and for all these kinds of errors,” said Polish PM Donald Tusk in his statement published on Wednesday.

He also pointed out that the error hurt all Poles, who are deeply sensitive when it comes to World War II issues.

“We always react in the same way when ignorance, lack of knowledge, bad intentions lead to such a distortion of history, so painful for us here in Poland, in a country which suffered like no other in Europe during World War II,” Tusk explained.

On Tuesday, Obama mistakenly called a Nazi facility in Poland a “Polish death camp.” The remark came as he was posthumously honoring a Polish war hero with the Presidential Medal of Freedom.

Following the misunderstanding the White House expressed “regret” that the president “misspoke.” 

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OBAMA'S 'Choom Gang' known for 'TOTAL ABSORBTION' of pot smoke...

Jumping Into the Flames of Skywiper [mcafee]


There has been quite a bit of analysis and speculation about the Flamer/Skywiper threat. As we started to analyze this threat, we knew from the very beginning that this was going to be a giant undertaking and potentially very long term. Now we want to pause to help the people we protect visualize the kind of task at hand when dealing with the level of complexity and encryption that this threat presents.

Here are some quick facts about this threat: The main module has been decompiled to about 650,000 lines of C code.

Yes, you read that number right.

All indications are that this is not all the code in the malware and that it possibly extends to a good 750,000 lines of C code. It is fair to say that we are looking at a long-term analysis to determine its full set of functionality and features.

Here is a diagram that illustrates the relationships of the code up to this point of analysis:

(If you see a twister hovering, your eyes are not deceiving you! This threat has some complex relationships.)

There is a lot of code to this threat, and IDA (a pro disassembler and decompiler we use) does a decent job of keeping up, and helped us create the graph above. And this is not all the code but simply the main module! This module alone has about 4,400+ calls to string deobfuscator routines. Essentially, when the code has an interesting string such as “flame::beetlejuice::BeetleJuiceDataCollector,” or “flame::gator::GatorCmdFetcher,” it encapsulates the information in a sealed function. This adds extra “fat” to the already monstrous code, and makes it a lot more challenging to read. Not that it wasn’t big enough already!

The extraordinary amount of obfuscation in the code ensures that the functionality of the executable is not only hard to understand but also helps reduce the risk that one could capture the code and easily use it for one’s own needs.

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French companies must prepare for the risk of a sharp blow []

Translation by Google

According to calculations by Christian Saint Stephen, professor at CNAM, the fiscal shock of Francois Hollande is expected to exceed 14% of the gross operating surplus of French companies, the fiscal shock is most important that they have been subjected since World War II.

By Jean-Jacques Netter.
Article published in collaboration with the Institute of Freedom .

No concrete proposals came out of the G8 summit to boost growth. This seems logical when considering the outline plans that compete in Europe. France has a curious position. Its strategy is to subject companies to tax violent shock. If the program of Francois Hollande is applied in full, they will indeed have to pay € 32.7 billion of tax increases, 13Md € of rising social security contributions, or 45.7 billion € of additional levies. According to calculations by Christian Saint Stephen, professor at CNAM, it could represent more than 14% of their gross operating surplus, or the largest tax impact they have had to endure since World War II.

These provisions demonstrate once again that politicians and media do not seem to realize that the profits of SMEs are not those of CAC 40 companies, which are mainly outside France!   Meanwhile, the tools of the welfare state continues to be demolished by the globalization of solidarity is killed by a dual labor market with those in the system and those who are not (young). The republican elitism is killed by a school in check.Innovation is killed by the egalitarianism of researchers. The middle class is killed by atrophy of the industry …

The setback to the public debt does not appear clearly on track. Yet it should stop the digging of the main inequality which is inequality between generations. It belongs to the generation in power to pay the bills of its excesses, and not to his children and grandchildren. The role of policy is to prepare ourselves, which is not easy in a country where nearly half of voters are civil servants or retired!

Germany, which has been very successful with its SMEs, the famous German Mittelstand particularly successful export, prepares a six-point plan to support growth in the troubled countries of the eurozone. It includes the establishment of free zones in the states affected by the crisis in order to attract foreign investors. Parallel states will have to reform their labor markets to the German model.

Britain has as usual a pragmatic strategy that leaves   the idea   that are small businesses that are likely to create as quickly as possible jobs. That is why it favors SMEs with the implementation of the Small Business Act,which is to encourage entrepreneurs by tax benefits at the launch of their company by investors exemptions from capital gains to a certain amount and counselor with the Small Business Service, which is a single point of administration to help entrepreneurs in their efforts. This measure appears to be effective because we can see now that a flow of British tax exiles are now returning to their country to start businesses and pay taxes with a marginal portion has been lowered!

The fate of Europe and the sustainability of the euro will depend in part on the outcome of the Greek elections of 17 June. Without clear vision, investors are hanging on the soundbites of European leaders.

The worrying situation is no reason to totally sink into pessimism. Ken told the Economist Research Director of the IMF, which was a great success with his book “This time is different. Eight centuries of financial folly, “was a guest of the seminar Cheuvreux in London, we could have good surprises, as globalization inevitably requires all countries to adapt and technology can bring unexpected ruptures that solve problems considered insoluble …

The really good news is perhaps a Financial Times article titled “Death of actions.” The last time it was used as it was in 1979. And the U.S. market had risen almost continuously for 20 years!

Equities: the re-industrialization of America is committed

In Europe, the valuations are attractive horizon to ten years we explained Russell Napier of CLSA. The problem, he says, is for the coming year … For Christopher Potts, Chief Economist of Cheuvreux, Europe is currently in an ambulance, the United States are not for once the heart of anguish markets and fears. As for China, it’s like a bull in a china shop. He thinks that European markets are expected to recover from the third quarter.

In Germany, wages of employees joined the union IG Metall will be increased by 4.3% over the next 13 months.This is positive news for the rest of Europe. It comes as the manufacturing PMI is found at 45 its lowest for 35 months. Jens Weidmann, head of the Bundesbank remains exceptionally devoted to what the austerity of its central bank should continue.

In Greece, the encryption on the cost of an output of Greece’s Euro multiply. They go up to € 450Md David Hauner of BOAML. It is really amazing to see that Europe has not been able to solve the problem of time in Greece, which represented only 2% of European GDP. If Greece out of Euro, no country would imitate still thinkBruno Cavalier, head of economic research at Oddo Securities.

Italy is in a deep recession with GDP projected to decline by 2% in 2012 and 1% in 2013. The only positive factor is the improvement of trade balance. Tito Boeri, an economics professor at Bocconi University in Milan, regrets that the reform of the labor market was not far enough. For him, wage developments should be linked to productivity. He thinks that Mario Monti remain at his post until April 2013.

The United States are beginning to reindustrialise high speed through a fall in labor costs in some states: $ 20 an hour in Louisiana or Alabama against $ 34 in the northern states and 46 to $ 47 in Europe . With the massive use of shale gas cost of energy will decline sharply and reduce their dependency on oil producing countries. We are witnessing a return of American supremacy think Christopher Potts Cheuvreux. What is changing is that more of cheap credit, we will have cheap capital. This means that the outperformance of U.S. stocks will accelerate as it is practically the only country that can offer growth (technology) and security.

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As Draghi Fiddles And Madrid Burns, China Buys [Zerohedge]


The move marks State Grid’s latest effort to expand into more lucrative areas than its tightly- regulated home market. State Grid oversees China’s power network over all but some southern portions of the country, giving it nearly nine tenths of the country.

Beijing also tightly controls the power market, limiting State Grid’s ability to seek terms from power suppliers or pass on costs to customers.

Beijing’s leaders over the past few years have pushed State Grid as well as other state-run behemoths to invest overseas as part of a broader effort to use China’s financial firepower to strike deals.

The pressure has been especially strong on China’s energy companies, which are seen as potential national champions in an increasingly competitive global market.


Perhaps this is why Greece is failing? Because China has realized it could buy Spain (and soon Portugal and Italy) for the same price, or even cheaper: remember – these are asset, not stock, purchases: one assumes liabilities as well. So $1 of equity value should be sufficient. And once China is done with the PIIGS, it can proceed to control the rest of the Europe… Which incidentally will still have to rely on Russia for its energy.

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Italy Auction Misses Target As Yields Climb On Contagion [Bloomberg]

Italy sold less than the maximum amount of debt and borrowing costs rose at an auction as concern deepened the debt crisis is spreading, driving the 10-year yield to 6 percent for the first time in two weeks.

Italy auctioned 5.73 billion euros ($7.1 billion) of five- and 10-year bonds, less than the 6.25 billion-euro maximum target for the sale. The Treasury priced the 10-year debt to yield 6.03 percent, the highest since Jan. 30 and up from 5.84 percent at the previous auction on April 27.

“While things are going from bad to worse in Spain, the uncertainty surrounding Greece’s membership of the euro zone is weighing heavily on sentiment,” Nicholas Spiro, managing director at Spiro Sovereign Strategy in London, said in a note after the sale. “Italy is currently experiencing an externally driven deterioration in its perceived creditworthiness.”

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EU Weighs Direct Aid To Banks, Euro Bonds As Crisis Antidote [Bloomberg]

The European Commission called for direct euro-area aid for troubled banks, and touted a Europe- wide deposit-guarantee system and common bond issuance as antidotes to the debt crisis now threatening to overwhelm Spain.

The commission, the European Union’s central regulator, sided with Spain in proposing that the euro’s permanent bailout fund inject cash to banks instead of channeling the money via national governments. It also offered Spain extra time to squeeze the budget deficit.

The use of the rescue fund to recapitalize banks “might be envisaged” and would “sever the link between banks and the sovereigns,” the commission said today in Brussels. Jose Barroso, the commission’s president, said “it is important to use all possibilities offered in terms of flexibility.”

Proposals for more liberal use of European bailout money are likely to face resistance in creditor countries such as Germany, Finland and the Netherlands, the scenes of growing taxpayer opposition to more aid.

Signs of stress multiplied in financial markets today. Italy missed its target in a bond auction, driving its 10-year yields as high as 6.01 percent, the highest since Jan. 31. The yield was at 5.95 percent at 2:10 p.m. in Brussels. Doubts over the health of Spain’s banks pushed up Spanish 10-year yields as high as 6.70 percent, the highest since Nov. 28. That yield was last at 6.62 percent.

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ECB Wasn’t Consulted On Spanish Bank Recapitalization Plan [Bloomberg]

The European Central Bank denied it has rejected a plan floated by the Spanish government to recapitalize Bankia, saying it hasn’t been approached.

“Contrary to media reports published today, the European Central Bank has not been consulted and has not expressed a position on plans by the Spanish authorities to recapitalize a major Spanish bank,” the Frankfurt-based ECB said in an e- mailed statement. “The ECB stands ready to give advice on the development of such plans.”

The Spanish government itself has backtracked on an idea to recapitalize Bankia by injecting sovereign debt into its parent company that, according to the Financial Times, could then be used as collateral to borrow from the ECB. An Economy Ministry spokesman said yesterday the plan had become “marginal,” and Economy Minister Luis de Guindos today told lawmakers that his government hasn’t presented any proposals to the ECB for the recapitalization of Bankia.

Earlier today, the FT and the Wall Street Journal both reported such a plan was rejected by ECB officials.

Spain’s IBEX 35 dropped 1.1 percent as Bankia lost 3.4 percent amid the country’s ongoing struggles to recapitalize the banking sector. Bankia has tumbled 30 percent this week.

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‘No Doubt’ New Cyber Attack on Middle East was State Sponsored

Eric Blair
Activist Post

New malware said to “dwarf Stuxnet in size and sophistication” has reportedly hijacked computer systems in Middle Eastern countries including Iran, Israel, Sudan, Syria, Lebanon, Saudi Arabia and Egypt.

Researchers believe the malware known as “Flame” has been stealing and deleting massive amounts of information since 2010.  They said it was “one of the most complex threats ever discovered.”

Flame is twenty times larger and far more advanced than Stuxnet, yet it isn’t out to destroy as Stuxnet was.

Instead, it can record network traffic, take screenshots, record audio from microphones, intercept keyboard strokes, read email and instant messages, while sending all of the data to the attacker and then delete it.

As with Stuxnet, Iran seems to have taken the brunt of the damage: “Iran’s National Computer Emergency Response Team posted a security alert stating that it believed Flame was responsible for ‘recent incidents of mass data loss’ in the country,” reported the BBC.

It was Iran who sought the help of multinational computer security firm Kaspersky Labs after discovering the loss of data.

As for the origins, chief malware expert at Kaspersky, Vitaly Kamluk, told the BBC that there is “no doubt” that the origin of the malware is from a nation-state:

‘Flame is not designed to steal money from bank accounts. It is also different from rather simple hack tools and malware used by the hacktivists. So by excluding cybercriminals and hacktivists, we come to conclusion that it most likely belongs to the third group…

The geography of the targets and also the complexity of the threat leaves no doubt about it being a nation-state that sponsored the research that went into it,’ Mr Kamluk said.

Although it’s pretty clear to the experts that an attack this sophisticated had to have come from a State sponsor, investigators are unsure of Flame’s origins.


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DHS Considers Collecting DNA From Kids; DEA and US Marshals Already Do []

Documents just released by US Immigration & Customs Enforcement (ICE) in response to one of EFF’s Freedom of Information Act requests show that DHS is considering collecting DNA from kids ages 14 and up—and is exploring expanding its regulations to allow collection from kids younger than that.

The proposal appears to be working its way through DHS in the wake of regulations from the Department of Justice that require all federal agencies—including DHS and its components such as ICE—to collect DNA from individuals arrested for federal crimes as well as “from non-United States persons who are detained under the authority of the United States,” whether or not they have been involved in criminal activity.  While the law specifically exempts a few classes of “aliens,” the documents we received show DHS may start DNA collection from anyone it fingerprints.  Currently, that’s any child over 14 who’s detained, but we also found records that show ICE could lower that age even more.

DHS estimates that as many as 1 million people who are subject to administrative detention or arrest annually could now be subject to DNA collection.  But it’s important to note that many of these people are not involved in criminal activity.  Collecting DNA from anyone detained by the government for any number of non-criminal reasons—especially juveniles—seems to be yet another step on the slippery slope to collecting DNA from everyone in the United States, no matter their status.

ICE is the first component within DHS to collect DNA under the new DOJ regulations. ICE’s Homeland Security Investigations (HSI) offices in San Diego, St. Paul, and San Juan, Puerto Rico are part of a 6-month pilot program to test out the new procedures and were set to start collecting DNA around July 2010. After the pilot program, the rest of HSI’s offices (more than 200 throughout the US and abroad) will start collecting DNA and presumably all other DHS components will follow suit shortly thereafter.

When the DOJ expanded its DNA collection regulations in 2009, it specifically required agencies to collect DNA from all populations they fingerprint. DHS regulations allow the agency to collect biometrics from aliens coming into the US who are 14 and older, so DHS can currently collect DNA from kids this age as well. However, the agency may also be considering collecting biometrics from kids younger than 14. A slide presentation from March 2011, titled “Working Group on Expanding the Biometric Age Range” notes that some DHS programs are already collecting biometrics from kids younger than 14 and proposes expanding the age range for more DHS entities (including ICE). Because of the DOJ regulations, this would mean that DHS could collect DNA even from very young kids.

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Taleb Says Euro Breakup ‘Not A Big Deal’ As U.S. Scariest [Bloomberg]

Nassim Taleb, author of “The Black Swan,” said he favors investing in Europe over the U.S. even with the possible breakup of the single European currency in part because of the euro area’s superior deficit situation.

Europe’s lack of a centralized government is another reason it’s preferable to invest in the region, said Taleb, a professor of risk engineering at New York University whose 2007 best- selling book argued that history is littered with rare events that can’t be predicted by trends.

A breakup of the euro “is not a big deal,” Taleb said yesterday at an event in Montreal hosted by the Alternative Investment Management Association. “When they break it up, there will be a lot of fun currencies. This is why I am not afraid of Europe, or investing in Europe. I’m afraid of theUnited States.”

The budget deficit as a proportion of gross domestic product in the U.S. amounted to 8.2 percent at the end of 2011, government figures show. That’s twice the 4.1 percent ratio for euro-region countries, according to data compiled by Bloomberg.

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We Came, We Saw, We Borrowed []

SO TODAY let’s take a look at the “logic” of the American Empire and what you can expect in the years ahead, and no matter whether a donkey or an elephant squats in the Oval Office come Jan. 20, 2013, writes Addison Wiggin, executive publisher of The Daily Reckoning in Baltimore, Maryland.

“Great empires, such as the Roman and British, were extractive,” the economist Paul Craig Roberts observed recently. “The empires succeeded, because the value of the resources and wealth extracted from conquered lands exceeded the value of conquest and governance.”

But unlike empires of the past, the American Empire has a perverse logic all its own.

“America’s wars are very expensive,” says Roberts, stating the obvious. “Bush and Obama have doubled the national debt, and the American people have no benefits from it. No riches, no bread and circuses flow to Americans from Washington’s wars.”

In the big Iraqi oil auction of 2009, for example, even as US military helicopters droned overhead, the Iraqi oil minister gave out zero contracts to American firms. Not one. And we spent at least $3 trillion on war – $2.9 trillion more than Team Bush’s original budget. So much for paying for war with “oil profits.”

Russia was actually the big winner here. So what gives? The American Empire has perverted the Roman mantra “Veni, vidi, vici” (I came, I saw, I conquered) into the odd imperial slogan: “We came, we saw…we borrowed!”

The results from this turn of phrase are less than desirable. Again Roberts: “Washington’s empire extracts resources from the American people for the benefit of the few powerful interest groups that rule America. The military-security complex, Wall Street, agribusiness and the Israel lobby use the government to extract resources from Americans to serve their profits and power. The US Constitution has been extracted in the interests of the Security State, and Americans’ incomes have been redirected to the pockets of the 1%.

“That is how the American Empire functions,” concludes Roberts. Instead of plundering foreign resources to finance itself, the American Empire is always looking to inflate the next financial bubble. Each of these serial bubbles has the effect of “extracting” wealth from the citizens – by drawing both savings and credit into overly inflated asset classes that then implode.

As the bubbles inflate, robust tax revenues flow to the federal government. As the bubbles implode, tax-payer Dollars flow to the connected Wall Street elite. Thus, over time, savings pass from the wallets of citizens to the pockets of scoundrels in Washington and on Wall Street.

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Capital Controls Have No Place in a Free Society [SafeHaven]


The characteristic mark of a tyrannical regime is that it eventually finds it necessary to erect walls to keep people from leaving. This is why we should be troubled by the “Ex-PATRIOT Act,” an egregiously offensive bill recently introduced in the Senate. Following a long line of recent legislation and regulations attempting to expropriate more and more wealth from hard-working Americans, this new bill spits in the face of overburdened taxpayers and tramples on the Constitution.

Current law already dictates that Americans with a net worth of over $2 million who expatriate must be assumed to have sold all their assets and must pay a corresponding punitive exit tax on those assumed sales. The Ex-PATRIOT Act goes even further than current law by assessing a 30% capital gains tax on all future earnings of expatriates. Not content just with this additional tax, the bill also grants the IRS the sole authority to determine whether individuals have expatriated for tax purposes and allows the IRS to bar those individuals from ever re-entering the United States. Finally, the bill blatantly violates the ex post facto provisions of the U.S. Constitution by extending all of these provisions to anyone who has given up their U.S. citizenship within the past decade.

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EUROBLOWN BREAKING….Greece heading for second stalemate as prisons run out of food [The Slog]


New opinion polls in this morning’s Greek press have New Democracy and Syriza still way ahead, and Pasok stuck at slightly above its vote last time.

The figures look like this:

5 ND 23,4%, SYRIZA 22,1%, PASOK 13,5%, INDGR 7,4%, ΚΚΕ 5,9%, DEMLEFT 5,1%, Neo Nazis 4,2%.

Still, Berlin-am-Brussels can take some cold comfort in that 54,2% of respondents say the country should ‘accept implementation of the bailout schedules’ as a precondition in order to stay in the eurozone. This does, however, give the lie to German tabloid hysterics insisting that the Greeks want it every which way.

But the obvious news in bold black type is that Athens will be without any clear sight of a ruling Coalition on June 18th. Although the way things are going, byt then the whole exercise might by academic anyway: I’m not usually a great supporter of non-political prisoners’ rights, but amidst the deepening Greek crisis, the State budget for many prisons has shrunk to a bare minimum. Hundreds of detainees are malnourished, the Greek newspaper Proto Thema reveals this morning.

At the prison in Corinth, food supplies have stopped completely, so their charges are about to starve say prison staff,…

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The lies of the EBA about how safe our banks are. [Golem XIV]

Golem XIV - Thoughts

Some time ago in the Propaganda War series (Markets don’t FailRisk Weighted LiesBalance Sheet Instabilities,  Toxic Bloom of Lies and The Banker’s Mexican Standoff ), I questioned the system of jargon which banks and their regulators use to assure us, and perhaps themselves as well, about the risks they run, and their claims of having it all under control. I suggested that the concepts, for all their pretensions to mathematical precision, were dangerously stupid and actually little more than self-serving piffle.

In Toxic Bloom of Lies, I looked in particular at the technical sounding notion of Risk Weighted Assets. A bank’s Risk Weighted Assets are just the amount the bank expects to make back on the loans it has given out, multiplied by some estimate of the risk that some or all of the income from the loan  might not be paid back. Not that complicated really but essential if you want to really know how solid a bank is. Of course the obvious question is who gets to set the risk factor?

And the answer is Europe’s Basel II banking regulations called the Internal Ratings Based System (IRB), allow the banks themselves, subject to ‘approval’ of course, to decide how risky their assets are and how much they think they might be in danger of losing on them. In Toxic Bloom of Lies I wrote and then quoted from the legislation,

They decide their own risk according to their own model… but subject to approval.

All institutions using the IRB approach will be allowed to determine the borrowers’ probabilities of default while those using the advanced IRB approach will also be permitted to rely on own estimates of loss given default and exposure at default on an exposure-by-exposure basis.

Advanced IRB as well! Of course the models being used are proprietary and therefore NOT open to scrutiny by any outside experts. What do you think, if the bank’s experts came up with two possible models one of which gave a lower over-all risk weighted total which do you think the bank would go for? And if another bank came up with a model that shaved just a little bit more off the risk weighting do you think there would be a subtle pressure to match the undoubted brilliance of their competitor’s model? I leave you to decide

When I wrote that I did so as just another disgruntled pleb.

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Swiss Debt Is Now Repaying Itself [Zerohedge]

The Swiss National Bank may have pegged the EURCHF (and as noted earlier, is progressively accumulating losses defending the barrier – even as EURCHF options are leaning further and further towards the peg breaking), but what about its bonds? At the current rate, Swiss debt, which is quite negative, with 2 year bonds now trading at record NEGATIVE rates, will repay itself quietly in a few short decades: ahhh the benefits of compounding. And for an example of how this is done, hours ago, the government issued debt at a rate of 0.62%. Oh sorry, we forgot the negative sign.

Swiss government issues debt at negative interest rate as investors seek safety of franc

By Associated Press, Updated: Tuesday, May 29, 9:50 AM

GENEVA, Switzerland — Global investors are paying Switzerland to take their money as they look for safe places to park their capital.

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Germany Has A Generous Proposal To The Broke PIIGS: “Cash For Gold” [Zerohedge]

Submitted by Tyler Durden

Back in February, as part of the latest Greek bailout of European banks, we noted that the most subversive part of the German-led proposal was nothing short of a gold confiscation scheme.

the European bailout of Greece, is now formally a Greek bailout of Europe, funded by the country’s already negative primary surplus, or better said – deficit (don’t try to make mathematical sense of that – a scene out of Scanners is guaranteed). Hence, negative bailout. But the piece de resistance, and the reason why Greece is the in situ version of bankster heaven is the news from the NYT that Greece is also about to have negative gold.

Ms. Katseli, an economist who was labor minister in the government of George Papandreou until she left in a cabinet reshuffle last June, was also upset that Greece’s lenders will have the right to seize the gold reserves in the Bank of Greece under the terms of the new deal.

Well, they may be broke, and they may be bailing out Europe, but at least they’ll have no gold: sounds like a sweet deal – it makes perfect sense that Greeks are taking every incremental humiliation from a syndicate of few fat, bald types who have access to a digital money printer, with the supine determination of an Oliver Twist.

Today, courtesy of The Telegraph, we learn that Germany is quietly reminding the world that the stealthy, but voluntary, accumulation of gold is what it is all about. As part of a renewed push for quasi-Federalism, whereby Germany would fund a “European Redemption Pact”, in which Berlin would, in the form of Germany-backed joint bonds, be responsible for any sovereign debt over the 60% Maastrtich limit, but with a big catch. The catch is that “a key motive is to relieve the European Central Bank of its duties as chief fire-fighter. “We have got to get the ECB out of the game of distributing money, and separate fiscal and monetary policy. Germany has only two votes on the ECB Council and has no way to control consolidation,” he said. Germany would have a lockhold over the fund, able to enforce discipline. Each state would have to pledge 20pc of their debt as collateral. “The assets could be taken from the country’s currency and gold reserves. The collateral nominated would only be used in the event that a country does not meet its payment obligations,” said the proposal.

In other words: a perfectly legitimate, and fully voluntary scheme in which sovereign gold is pledged to a German “pawn broker” until such time as the joint bonds are extinguished, and if for some “unpredictable” reason, a country fails to meet its obligations, read defaults, all the pledged gold goes to Germany!

But why Gold? Why not spam. After all gold is selling off, spam is stable, and the dollar is soaring. Couldn’t Germany merely demand that broke countries simply pledge all their USD reserves, and keep their worthless, stinking yellow metal?

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The BBC caught out with its Zionist run propaganda machine []

As we have seen so many times before the BBC has shown a distinct lean towards Israel or in this case a clear distortion of facts when it released a picture of the recent Houla massacre in Syria.


Take a close look at their front page photograph and then compare it with the photograph taken by Marco Di Lauro 9 years earlier on 27th May 2003 in Al Musayyib Iraq and you can clearly see the lack of professionalism by the BBC.

I find it so unbelievable that the general public simply accept whatever is placed before them and in doing so accept this as being justification for going to war. Just by simply studying this photograph which are all children, you can see that each row consists of around 25 – 30 bodies and so one can assume that in this photograph we are looking at four rows amounting to at least 125 and yet there were only 49 children killed in Houla, Syria.

Can one ever imagine that this once very professional media outlet earned so much respect from the people of Britain and now it has fallen to below a sub quality standard!!

Just imagine that the people of Britain are having to pay a TV Licence fee of £145-50 to keep this appalling station on line and they even have the audacity to charge the blind who now get a “Half Price” licence!!

What we are looking at here is exactly the same propaganda game the BBC played out in Libya with such striking resemblance. BBC were extremely good at manufacturing the Libyan Revolution and frequently withheld the names of the supposed rebels and their locations. Much of their footage at the time was clearly acted out in from of their camera’s and in some cases much to the embarrassment of the BBC as one can clearly see in this particular case.

The BBC is clearly losing its credibility as a news organization by faking, altering or even withholding the true status of what is actually happening on the ground. Many times one can see their standard line being “Though it was not possible to verify” or “Their accounts cannot be confirmed” shows clearly that there is no substance in their reporting. However, on the other hand one can almost totally rely on the authenticity of such channels as Press TV who tend to film such incidents as they happen.

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Greek ‘Aid’ Is Really Enhanced Vendor Financing and Foreign Bank Bailouts [jessescrossroadscafe]


“They don’t want to kill us [the Greek people] but keep us down on our knees so we can keep paying them indefinitely.”

Eva Kyriadou

The similarity to the Icelandic situation is striking.  Greece must deal with the problem of decoupling from the Euro, but other than that the scenario seems fairly straightforward.

Greece needs to assert their independence, and have the will to make it ‘stick.’

In the manner of ‘mailing in their keys’ on an underwater home and the burden of an outsized dodgy loan, the Greek people should consider mailing their eurozone membership back to the ECB and their friends in the Banks and Wall Street hedge funds c/o Berlin, and suggest that the conquest of their country might have to proceed by more conventional and overt means if they want to take the country’s sovereign assets and income.

An investigation of all the debt deals would be a first rate idea, with plenty of public disclosure of the corruption and cronysim that was involved between public officials and the banks.

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Debt crisis: a $46 trillion problem comes sweeping in [Telegraph]

By , Associate editor

Just as you thought things couldn’t get any worse, credit markets are about to be hit by a veritable tsunami of maturing corporate debt. Standard & Poor’s estimates that companies in Europe, the US and the major Asian economies require a combination of refinancing and new money to fund growth over the next four years of between $43 trillion and $46 trillion. The wall of maturing debt is unprecedented, raising the prospect of further, extreme difficulties in credit markets.

With the eurozone debt crisis still at full throttle, the Chinese economy slowing fast and a still tepid US recovery, it’s not clear that the banking system is in any position to deal with this incoming wave of demand.

As if the refinancing problem wasn’t already challenging enough, into it all stumbles the European commissioner for internal markets, Michel Barnier, to prove the old saw that there is no mess quite so bad that official intervention won’t make even worse.

A traditionalist French socialist by background, Mr Barnier positively revels in his job as the EU’s top financial services regulator. In a recent interview, he said that he liked the term “shareholder spring” because it implied “a regulation spring, a rule making spring”. Yes, indeed, Mr Barnier likes very much rules and regulations. He wants to regulate everything from pay to solvency. The financial crisis has given him a wide open canvass on which to paint.

After a crisis of the magnitude we’ve just seen, it’s perfectly right and proper, and certainly very human, to want to take immediate steps to fix the system, so as to ensure that this kind of nonsense can never happen again. There is also something to be said for striking while the iron is hot. Leave things too long, and the political will to act melts away.

Bad stuff, they say, comes in threes. We've already got the banking and the eurozone sovereign debt crises. Next comes the corporate funding crisis.


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‘Flame’ Virus explained: How it works and who’s behind it [RT]

Flame may be the most powerful computer virus in history, and a nation-state is most likely to blame for unleashing it on the World Wide Web.Kaspersky’s chief malware expert Vitaly Kamlyuk shared with RT the ins and outs of Stuxnet on steroids.

Iran appears to be the primary target of the data-snatching virus that has swept through the Middle East, though other countries have also been affected.The sheer complexity of the virus and its targets has led Moscow-based Kaspersky Lab to believe a state is behind the attack.

Kaspersky first spotted the virus in 2010, though it may have been wrecking havoc on computer systems for many years.Vitaly Kamlyuk told RT how his company discovered it, just what makes Flame so significant, features of the virus that could point towards its creator, and why we all lose out in this intensifying cyber-war.

RT: So, how did you spot the malware, was it a planned investigation, or did it come by surprise?

Vitaly Kamlyuk: It was by surprise. We were initially searching for a [different form of] malware. We were aware of the malware that had spread throughout the Middle East, attacked hundreds of computers and wiped their hard drives, making the systems unbootable after that. It was actually after an inquiry from the International Telecommunications Union, which is a part of the United Nations, who actually asked us to start conducting research. When we started looking for this mysterious malware in the Middle East, we discovered this suspicious application that turned out to be even more interesting than the initial target of our search.

RT: According to one of your experts, ‘Flame’ does not appear to cause physical damage, so why has it been dubbed the most hazardous cyber-attacks in history?

VK: It’s actually on the same level as the notoriously known Stuxnet and Duqu [attacks], because we suspect that there is a nation state behind the development of this cyber attack, and there are reasons for that. This application doesn’t fit into any of the existing groups of developed cyber attack tools. There are currently three groups. There are traditional cyber criminals who are hunting users’ data (like log-ins and passwords) to access bank accounts over the Internet and steal money, send spam, or conduct dubious attacks.This [Flame] doesn’t fit into the group of traditional cyber criminal malware. Also, it doesn’t fit into the activists’ malware who are using typically free and open source tools to attack computers on the Internet. And the third known group [at this time] is nation-states.

RT: What makes this malware different from all other Spyware programs and what damage can it do?

VK: It’s pretty advanced – one of the most sophisticated [examples of] malware we’ve ever seen. Even its size – it’s over 20 megabytes if you sum up all the sizes of the modules that are part of the attacking toolkit. It’s very big compared to Stuxnet, which was just hundreds of kilobytes of code: it’s over 20 megabyes. And the Stuxnet analysis took us several months, so you can imagine that a full analysis of this threat may take us up to a year. So we think it is one of the most sophisticated malware [programs] out there.

It’s also quite unique in the way it steals information. It’s possible to steal different types of information with the help of this spyware tool. It can record audio if a microphone is attached to the infected system, it can do screen captures and transmit visual data. It can steal information from the input boxes when they are hidden behind asterisks, password fields; it can get information from there.Also it can scan for locally visible Bluetooth devices if there is a Bluetooth adapter attached to the local system.


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