"Bank of America Corp. is close to an agreement to pay $8.5 billion ... with a group of 22 investors who hold mortgage-backed securities originally valued at $105 billion, including the giant money manager BlackRock Inc., the insurer MetLife" Lesson, if you ever have a large investment loss, don't kill yourself just yet, try to get it back in court. Some of the people who trusted Madoff and recommended his funds didn't follow this rule and the recovery there might be around 75% or more I'm only half-joking about this
Greek vote to pass easily. Stoxx 50 +3.5% this week, Euro back to $1.4434. Can has officially been kicked (short of armed insurrection following the vote). Off to the next crisis. Question: do I ever get tired of being right about this stuff. Answer: No.
Why are markets rallying? What we are seeing is the old Mario Puzo line - "a man with a briefcase can still a lot more than a man with a gun." Hundreds of billions are about to be transferred from taxpayers to the financial class (for about the 50th time since late 2007). All the banks who loaded themselves to the gills with Greek paper at $0.60 on the dollar, then used their power to force through another bailout, are about to get paid at par.
Well, not really... Firstly, they loaded themselves up to the gills at par. Secondly, it's not really them forcing the bailout. Thirdly, they don't get redeemed at par.
Well, we don't know what their cost basis is - suffice it say, its not par. We also don't know what they're carrying the paper at on their books. It's possible they've already taken significant writedowns and are still standing - hence a total lie that some sort of Greek default would cause a meltdown. The stress tests, if they are real, could reveal such information. An argument could be made (and has been) that default could cause the PV of significantly written down paper to actually increase. To say that bankers aren't influencing policymakers and have more than a little bit of control over the shape of events is laughable. Ackermann at DB has the kind of influence in Europe that Jamie Dimon and Lloyd can only dream about in the U.S. NYT article about this recently, too lazy to look for it.
Most of the stuff that has been bought by the German/French banks in the roaring noughties was bought at par, trust me... I was there and traded some . Moreover, we know that everything that's in the "accrual", "hold-to-maturity" books (and that's where the majority of the paper sits, according to balance sheet statements and stress test disclosures) is marked at par. Therefore, no matter how you slice it, the French plan is punitive for the banks (my estimate is that it's equivalent to about a 20% haircut, implemented through an increased capital requirement). Whether 20% contingent h/c is a high enough number is a value judgement and I don't really have view. As to EUR bankers influencing policy makers, yes, of course, to an extent they are. However, I would disagree that their influence is anywhere near in magnitude to what the US megabanks have. Bank CEOs in the EU are b1tches who are told by the ECB what to do. So, really, if you wanna find the culprits, I would look no further than Tricky & Co.