Global Economic News

Bankers' Cartel Lying About Regulation Threat

June 11 (EIRNS)—"Regulatory reforms" for banks could negatively impact growth and job creation, members of the Institute of International Finance (IIF), a global lobby of 375 leading banks, said at their meeting in Vienna on June 11. They lied that regulations could kill 5 million jobs in Europe and 10 million in the United States.

In Brussels, the European Banking Federation, at the same time, issued a similar warning, claiming that new global rules forcing banks to put aside more capital could keep the Eurozone economy in, or close to, recession through 2014. The Federation said its analysis of the proposed new Basel III banking standards would limit Eurozone banks' credit growth and profits, hurt the economy, and prevent the creation of up to 5 million jobs in the 16 nations of the Eurozone alone.

Josef Ackermann, the CEO of Deutsche Bank, who heads the IIF, threatened tighter credit, saying that "some proposed measures may require banks to actually shed assets, which would reduce the volume of credit they can provide to the economy." That would "prevent" the creation of 9.7 million new jobs in the United States, claimed Peter Sands, group chief executive of Standard Chartered PLC, adding, "There is a price for making the banking system safer and more stable and that price will inevitably be borne by the real economy."

At the Vienna meeting, there were polemics against Germany's recent unilateral ban of naked short sales. Michel Peretie, the head of the investment banking division of France's Société Générale, claimed that short-selling bans are usually ineffective, and that "national solutions" were not the right approach. Polemics were also launched against the U.S. debate on legislation to curb financial markets—a reference to the debate over Glass-Steagall.

Meanwhile, the German parliament held its first reading of the planned extended-bans law in Berlin, after Finance Minister Wolfgang Schäuble attacked the belief of many that speculation is good for the market: "The past crisis developments show that speculation is not good, and not needed either, for the market."

Synarchist Rohatyn: A New Big MAC Can Save the Euro

June 8 (EIRNS)—Interviewed by Le Figaro, Synarchist banker Felix Rohatyn announced his plan for saving the euro and for having even larger bank bailouts. After praising his own alleged successes in 1975 in saving New York City from bankruptcy via the "Big MAC" swindle and bloody austerity, Rohatyn states that "when I was nominated as ambassador to Paris in 1997, the first report I made to the State Department was the fact that we had to support the creation of a single currency. Numerous Americans were very skeptical at that time. The break-up of the euro absolutely has to be prevented because it would be a terrible psychological shock to economic growth and the ability of Europeans to solve their problems."

Save the euro how? "Consolidation should result from the creation of federal structures, political and financial. A new Jean Monnet would be needed to enforce such an approach."

How can Europe avoid public deficits and depression? Financial "support mechanisms even greater than those now envisioned, and added to them tougher control mechanisms over public finances. I recall the scheme used for New York City in 1975 combining strict control over the accounting with the provision of large funding."

Ecofin Gives Birth to Next Bailout Flop

June 9 (EIRNS)—The EU Finance Ministers Council (known as the Ecofin) announced on June 8 the details of the EU440 billion Special Purpose Vehicle (SPV) which is part of the overall EU750 billion bailout package to Greece's creditor banks. As expected, the decisive aspect of the fund—who guarantees what for whom—has not been made clear. Germany is still rejecting a commitment, by which all members of the fund guarantee all the money to all Eurozone members that might need it. This is a formula which, in reality, means that countries that ostensibly have the ability to absorb indebtedness, guarantee debts for everyone. Germany, instead, wants a system in which each member of the fund guarantees in proportion to its share. The SPV is supposed to borrow money by issuing Eurobonds guaranteed by participating members.

As the Italian daily Milano Finanza wrote, it is not clear why investors should buy bonds issued by the new EU fund, when there are no certainties on risk yet. "If countries such as Ireland, Spain, and Portugal were to have financing problems, investors could in any case choose less risky assets, like German Bunds, rather than bonds issued by the Fund."

According to a poll by Bloomberg of its clients, only 23% expect the bailout to work, and 40% say Greece is likely to leave the euro. Investor confidence in European Central Bank President Jean-Claude Trichet has tilted from positive to negative, with 48% giving him an unfavorable rating. In January, his approval rating was 60%.

Meanwhile, a potential Bulgarian crisis has prompted Eurostat, with newly created financial police powers, to send a mission to Sofia for preemptive destruction.