Euro Banks Are Blowing Out; Dodd-Frank 'Bail-In' Means Americans Will Be Killed To Salvage Them

December 29, 2015

Europe's major banks are desperately trying to stay on their feet long enough to be saved by their Jan. 1, 2016 bail-in thievery. According to a Dec. 22 Reuters report, Europe's big banks have slashed 130,000 jobs between June and December 2015, compared to 78,000 lost over 2013 and 2014 combined, as they try to cut costs and pull out of markets to not have to report their utter bankruptcy. The banks involved include Deutsche Bank, Unicredit, Credit Suisse, HSBC, Standard Chartered, BNP Paribas, Barclays, and now Rabobank.

Speaking for the City of London, the Dec. 27 Financial Times has an editorial praising "the launch of the EU's so-called single resolution mechanism" (i.e., bail-in) as of Jan. 1, 2016, on top of the earlier "significant expansion of the ECB's powers in November 2014." But that is not enough, they instruct: "A third, more politically sensitive step towards a complete banking union is necessary in order to minimize the risk that fresh crises will erupt in the future and, if they do, to limit the consequences"... for the bankers, of course. This means creating a "common deposit insurance," which Germany is especially opposed to, since they know it means they will have to pick up the tab for everybody else. But, the Times concludes, until that is done "the Eurozone will remain vulnerable to financial shocks and contagion for which, one day, it may pay a far higher price."

Nor is it only the citizens of all of Europe whose lives will be sacrificed to bail-in the European banks: Americans are also required to be slaughtered for that goal, as per the dictates of Dodd-Frank and the Financial Stability Board (FSB), a supranational body established at the April 2009 G20 summit in London, the first summit attended by the newly-elected President Barack Obama. As we have reported in the past, an October 2011 FSB document on "cross-border resolution" states in Section 7.3:

"The resolution authority should have resolution powers over local branches of foreign firms and the capacity to use its powers either to support a resolution carried out by a foreign home authority (for example, by ordering a transfer of property located in its jurisdiction to a bridge institution established by the foreign home authority) or, in exceptional cases, to take measures on its own initiative where the home jurisdiction is not taking action or acts in a manner that does not take sufficient account of the need to preserve the local jurisdiction's financial stability."

But when all is said and done, the purported idea behind the bail-in policy is patently absurd, even on its own terms, and cannot possibly work. The starting premise of both Dodd-Frank and the EU's new regulations is that derivatives are not subject to bail-in.  In other words, 99% of all financial assets are protected and excluded from bail-in provisions, and are supposedly going to be kept afloat by the other 1%, which are subject to bail-in. EIR has estimated that cumulative international bail-out and bail-in combined from 2008-2014 amounted to a mere $20 trillion—i.e., about 1% of the total $2 quadrillion in global financial assets. So for anyone willing to look at it, the clear intent of bail-in is not to actually keep the bubble intact, but to kill off billions of people as per the British Empire's stated policy.

                                                                                                                                                                                                                                                                                        

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Puerto Rico Scrambles for Funds To Pay the Unpayable

As the deadline for Puerto Rico's $1 billion debt payment approaches—they have until midnight Jan. 4 to pay, as Jan. 1 is a bank holiday—the island government is desperately scrambling to come up with funds to pay something.

On Dec. 1, Governor Alejandro García Padilla activated what is known as the clawback clause, allowing the government to commandeer funds from other indebted government agencies, to put into its own coffers for "repurposing," as the Governor put it. This is exactly what happened in Greece when it was attempting to come up with debt payments to the IMF.

García said that funds obtained in this way would be used to cover unspecified "essential services," as well as debt payments. Payment of General Obligation (GO) bonds are a priority, as these carry a constitutional guarantee of repayment. The Highway Authority and the Infrastructure Financing Authority, two agencies affected by the clawback policy, say they will dig into "reserve" funds to meet their interest payments; but what happens on Jan. 4 is anybody's guess.

These are desperate financial gymnastics, trying to squeeze out something to pay the unpayable—as Greece did, at the expense of its population. A case in point is the scheme for a "superbond," which according to Melba Acosta, head of the Government Development Bank (BGF), will be proposed to bondholders before Dec. 31. A mid-October article in the Wall Street Journal reports this is a plan by which the U.S. Treasury or a designated third party would manage an account holding a portion of Puerto Rico's dwindling tax revenues—effectively seizing them—and then using them to pay holders of the superbond, those bondholders who would presumably be willing to take some kind of haircut. This is nothing more than a fascist financial control board, similar to the Big MAC scheme which imposed brutal austerity on New York City in the 1970s. The impoverished Puerto Rican population would bear the cost.