Argentina to use Central Bank’s Reserves to pay Debt

From La Nacion:

La Justicia habilitó al Poder Ejecutivo a tomar las reservas del Banco Central para pagar deuda.

Tal como lo había anticipado LA NACION el miércoles pasado, las salas I y VI de la Cámara Contencioso Administrativo dejaron sin efecto dos medidas cautelares por las cuales la jueza Claudia Rodríguez Vidal había suspendido la vigencia del decreto 298/10. En principio, desde ayer no hay obstáculos para que el Poder Ejecutivo tome 4300 millones de dólares del BCRA que estaban bajo el amparo de la citada norma.

The Court enabled the executive power to take the Central Bank’s reserves to pay the [country’s] debt.

As was predicted by La Nacion last Wednesday,  I and VI of the Camara Contencioso Administrativa declared without effect the precautionary measures with which judge Claudio Rodriguez Vidal had suspended the validity of the decret 298/10. In principle, as of yesterday there are no obstacles for the Executive to take 4,300 million dollars from the BCRA which fall under  the provisions of cited norm.

This is an interesing development. However, the story probably doesn’t end here:

Los diputados de la oposición convocaron a una sesión para el 7 de abril para derogar esa norma, pero los fallos de ayer asestan un duro golpe a esa estrategia: es probable que para entonces el dinero en juego o parte de él haya sido usado.

The representatives of the opposition will call a session for April 7 to cancel the norm [298/10], however yesterdays rulings strike a hard blow to this strategy: It is likely that by then the money in question or part thereof has already been used.

Apart from the idea to use the reserves of one’s central bank to pay the countries debt, which I think is rather unique, this is an interesting story because it has a somewhat twisted history.

It starts with the firing of the head of the central bank, Martín Redrado, who is a Harvard graduate, because he refused to follow an order of Argentine president Cristina Fernandez de Kirchner to free the reserves for said purpose. However, a court sacked the decision and reinstated Mr. Redrado. Not much later Mr. Martín Redrado resigned, though.

Replacing him was Mercedes Marco del Pont, who is a Yale graduate. She is still – as far as I am aware in the process of being confirmed by the Argentine parliament. However, she has already tried to execute the order mentioned above – but it was blocked then by the court also mentioned above.

Note that Argentina needs to re-pay its foreign debt or it will default on them (again) and according to President Kirchner:

“It’s much better to use the reserves than to take loans at 15% interest.”

Of course, most people who insist on central bank ‘independence’ (from government) do not agree with this position.


UBS not getting out of Headlines

The FSA raid on which I wrote a few days ago now is said to implicate UBS workers as well. As writes Bloomberg:

As many as 11 people may be charged next week over an insider-trading ring that began at the London printers for UBS AG and JPMorgan Chase & Co.’s Cazenove unit, four people with direct knowledge of the case said.

The Financial Services Authority is preparing to file criminal charges after a two-year investigation, the people said on condition of anonymity because the defendants haven’t been formally accused of a crime. The FSA says that the north-west London operation, involving accountants and spread-betters, used leaked data from deal prospectuses being printed for the banks, according to the people.

That is not all. In another Bloomberg article we learn:

JPMorgan Chase & Co., Lehman Brothers Holdings Inc. and UBS AG were among more than a dozen Wall Street firms involved in a conspiracy to pay below-market interest rates to U.S. state and local governments on investments, according to documents filed in a U.S. Justice Department criminal antitrust case.

A government list of previously unidentified “co- conspirators” contains more than two dozen bankers at firms also including Bank of America Corp., Bear Stearns Cos., Societe Generale, two of General Electric Co.’s financial businesses and Salomon Smith Barney, the former unit of Citigroup Inc., according to documents filed in U.S. District Court in Manhattan on March 24. The papers were filed by attorneys for a former employee of CDR Financial Products Inc., an advisory firm indicted in October. The attorneys, as part of their legal filing, identified the roster as being provided by the government. The document is labeled “list of co-conspirators.”

I guess, nothing to worry about for UBS. They will ‘cooperate fully with authorities’ and obviously have ‘done nothing wrong’ and if something was done it was ‘a rogue employee’. Of course.

Brown’s Bottom: Gordons Gold Sale under Scrutiny

The decision to sell gold comes back to haunt Britisch Prime Minister Gordon Brown. The Telegraph writes:

The decision to sell the gold – taken by Mr Brown when he was Chancellor – is regarded as one of the Treasury’s worst financial mistakes and has cost taxpayers almost £7 billion.

Mr Brown and the Treasury have repeatedly refused to disclose information about the gold sale amid allegations that warnings were ignored.

Following a series of freedom of information requests from The Daily Telegraph over the past four years, the Information Commissioner has ordered the Treasury to release some details. The Treasury must publish the information demanded within 35 calendar days – by the end of April.

The sale is expected to be become a major election issue, casting light on Mr Brown’s decisions while at the Treasury.

Last night, George Osborne, the shadow chancellor, demanded that the information was published immediately. “Gordon Brown‘s decision to sell off our gold reserves at the bottom of the market cost the British taxpayer billions of pounds,” he said. “It was one of the worst economic judgements ever made by a chancellor.

This ‘worst economic judgement’ ever made by a chancellor is also know as Brown’s bottom. The issues has been around for some time but is discussed today on Jesse’s Café Américaine and on Zero Hedge. I appreciate both blogs and am an avid reader of their posts, which I think are mostly exceptional. I also do think that this issue needs to be investigated fully.

However, I am concerned about the timing of this bubbling up now. I am not a fan of Gordon Brown’s, but I think their might also a smear campaign be going on here. If you can hit Brown shortly before the general election you will also hit Labour, and you are sure to hand victory to the Tories. It would be sad to see, if it were to turn out that widely read and respected bloggers let themselves be instrumentalised.
Depending on your personal preferences you will either appreciate if Labour  were to lose the election or you will not. I am not British, so I don’t vote there, however my heart is with true (not new) Labour.

Now it’s official: They are after the Social Safety Net

In Europe’s Choice: Growth or Safety Net Rupert Murdoch’s Wall Street Journal writes:

Its 16 member nations now face a stark choice. They can spur economic growth across the region by following through on long-overdue pledges to trim benefits and free up labor markets. Or, many economists say, they can face a decade of economic stagnation.

Countries across the zone lost dynamism during the common currency’s first decade, with annualized growth of 1.7% from 2000 to 2008, down from 2% growth in the 1990s. The next decade could be worse: Higher public debts and a surge of retirees will push up taxes and weigh on companies and consumers.

“The real question this crisis poses to all of us is: What will be the capacity of countries to accept true reform?” says former French finance minister Thierry Breton, who is now chairman and chief executive of information-technology services company Atos Origin SA.

Not surprising, but here you have it black on white. The goal is not the euro, or Greece. The goal is to do away with the social safety net. Especially pension obligation are seen as a drain on future ‘economic growth’:

Politicians across Europe say the cause of reform isn’t lost. Xavier Musca, deputy secretary general to Mr. Sarkozy, says that while France started late on the reform path, momentum has picked up again since 2007. “This administration [is] encouraging employees to work more and pushing for competition in the retail sector…We’re also going to speed up the pension reform.”

Ultimately, some governments will have no alternative. Germany recently passed a law guaranteeing the elderly that their pensions would never sink, a costly promise that economists say will haunt future workers and companies unless the pension system is fundamentally revised.

“We will have no choice but to undertake reforms,” says Michael Fuchs, a leading lawmaker in Ms. Merkel’s Christian Democratic Union.

They always say, ‘economic growth’ but what they really mean is ‘profits and bonuses’ for them.

FSA Raids and Arrests said to involve Moore Capital

As i wrote earlier, the FSA has performed some raids and arrested six people today. We now know that Moore Capital was targeted. According to Zero Hedge:

This is a huge development as Moore Capital has long been one of the world’s largest and best performing hedge funds. The fallout of this case will be severe for hedge funds both in the UK and across the Atlantic.

According to Moore Capital’s Linked In profile, the career path of Moore Capital’s employees looks typically like this:

Linked In Profile Moore Capital

Linked In Profile Moore Capital

The founder of Moore Capital is Louis Bacon, who according to Wikipedia:

Louis Moore Bacon (born 1956) is an American hedge fund manager and trader who uses a global macro strategy to invest in the markets. Bacon has been at the top 20 ranking of Top 100 money earners since the 1990s.[1] He is considered one of the top 100 traders of the 20th century. With an estimated current[update] net worth of around $1.7 billion, he is ranked by Forbes as the 707th richest person in the world.[2] He is the manager of a leading New York City-based hedge fund, Moore Capital Management.

However, it is not clear how or if he is involved in this raid.

Further, according to Zero Hedge:

Here is a summary of Moore’s top holdings, which will likely now follow the same firesale fate as Galleon’s. The biggest holding: Bank Of America, at just over $534 million worth.

  • Bank of America: $534 million
  • Max Capital Group: $223 million
  • Mastercard: $106 million
  • SPY: $103 million
  • EEM: $93 million
  • CME Group: $83 million
  • Assured Guaranty: $74 million
  • Trading Emissions: $58 million
  • Banco Santander: $55 million
  • Citigroup: $45 million

And a whole lot of unknown bond and CDS holdings

Amazing. There really seems to be a huge scandal brewing here. More arrests to follow?

Hat tip: Zero Hedge

FSA: Six arrested in FSA and SOCA insider dealing investigation

The FSA announced today:

23 March 2010

In the first operation carried out jointly between the Financial Services Authority (FSA) and the Serious Organised Crime Agency (SOCA), 16 addresses have been searched this morning in London, the South East and Oxfordshire in the FSA’s largest ever operation against insider dealing.

Documents and computers have been seized from residential and business premises.

Six men including two senior city professionals at leading city institutions and one city professional at a hedge fund have been arrested on suspicion of being involved in a sophisticated and long-running insider dealing ring.

It is believed that the city professionals passed inside information to traders (either directly or via middlemen) who traded based on this information and have made significant profits as a result.

The operation was carried out by 143 FSA personnel together with officers from SOCA as part of a joint investigation that commenced in late 2007.

No further details can be confirmed at this time.

Notes for editors

  1. This is the fifth set of arrests carried out by the FSA into insider dealing since 2008. It is the first operation carried out jointly with the Serious Organised Crime Agency.
  2. The FSA has so far secured five sentences of imprisonment (one suspended) in relation to insider dealing: McQuoid and Melbourne in March 2009; Matthew and Neel Uberoi in November 2009 and Malcolm Calvert on 11 March 2010. Details of each case are available on the FSA website.
  3. The FSA is currently prosecuting three other insider dealing criminal cases: Andrew King, Andrew Rimmington and Michael McFall, with a trial date of 19 April 2010; Christian and Angie Littlewood, with a trial date yet to be fixed; and Neil Rollins, with a trial date yet to be fixed.
  4. The Financial Services and Markets Act 2000, gives the FSA powers to investigate and prosecute insider dealing, defined by The Criminal Justice Act 1993.
  5. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
  6. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime
  7. Individuals with information about market abuse can call the FSA’s market abuse hotline on 020 7066 4900.

Seems to be serious stuff. The SOCA says about itself on its website:

We work to put serious criminals behind bars, and use many other tactics to fight crime and keep you safe. In particular, we want to ensure crime doesn’t pay and that it’s harder to commit.

Sounds good. Let’s see what comes of this one.

Hat tip: Tages Anzeiger

FSA: Large lenders oppose “liar loan” ban

According to Reuters UK:

Large lenders have opposed plans by the financial regulator to scrap so-called “liar loans” for homebuyers, warning the watchdog a blanket ban would hurt the self-employed and prompt a rise in false paperwork.

The Financial Services Authority (FSA) had said in October it planned to force mortgage lenders to check the income of all borrowers, effectively banning self-certified mortgages.

Such loans became known as liar loans after they were widely abused during the housing bubble and were blamed for helping fuel bad debt problems at the heart of the financial crisis.

But the watchdog said in a feedback statement Tuesday that unnamed “large lenders” had opposed the proposal.

“Objections were raised mainly by large lenders, who argued that the proposals would impact negatively on the self-employed, which will trigger an increased usage of fraudulent income documentation,” the watchdog said, adding some said it would also increase administrative costs.

Yeah. I guest they are called liar loan for a reason. No lessons learned then. The game continues.