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A couple of days ago the always good Francis Coppola wrote a piece for Forbes entitled,

The Banks That Helped Danske Bank Estonia Launder Russian Money

In it she made the simple but essential point that while Danske Bank, through its Estonian branch, had laundered $234 billion,

…Danske Bank Estonia couldn’t do this by itself. Much of the money was paid in U.S. dollars, and for that, it needed help from other banks. Banks that had access to Fedwire, the Federal Reserve’s electronic settlement system. Big banks, in other words.

Coppola then named the banks involved.

J.P. Morgan, Bank of America and Deutsche Bank AG all made dollar transfers on behalf of the Estonian branch’s non-resident customers. And according to the Wall Street Journal, Citigroup’s Moscow branch may have been involved in some financial transfers in and out of Danske Bank Estonia. (bold emphasis added by me)

So, Bank of America, Deutsche Bank and J.P. Morgan moved money OUT of Danske and in to dollar denominated accounts elsewhere, (see section 19 of Danske’s internal investigation). but that is only half the story. It leaves the huge unanswered question,

who moved the money in to Danske Bank’s Estonian branch in the first place?

The accounts through which the money was laundered are non-resident accounts. Non-resident simply means the people or entities which hold the accounts do not live in Estonia. So how did these non residents deposit their money in Danske’s Estonia branch? Either they physically transported $234 billion dollar’s worth of their local currencies in trunks and suitcases from their own country, in to Estonia and to the bank, or it had to have been deposited electronically. Which would mean some other banks, in addition to those mentioned by Forbes, were involved.

…click on the above link to read the rest of the article…

Hayes: “A Lot Of What I Know Even The DOJ Is In The Dark”

March 25, 2017

Hayes: “A Lot Of What I Know Even The DOJ Is In The Dark”

An exclusive excerpt from the hot new financial and legal thriller “The Spider Network” by David Enrich

The small ski resort town, nestled in the mountains outside the city of Karuizawa, was a popular destination for day trips for Japanese families. Bustling during the day, it was mostly quiet this Saturday night. Clouds cloaked the moon.

A chartered bus pulled up outside a bar, its windows aglow. A light snow was falling. Out into the peaceful evening stumbled dozens of rowdy bankers, some toting tall cans of Asahi and Kirin. Most of them were drunk. They quickly took over the small bar.

The drinkers were employees of the American bank Citigroup, one of the world’s largest and most troubled financial institutions. A year earlier, at the beginning of 2009, American taxpayers had finished pumping a staggering $45 billion into Citigroup to bail out the collapsing behemoth. Now the transfused recipient was treating dozens of its investment banking employees to a weekend getaway. The bankers were housed nearby in a sprawling luxury hotel, each employee’s room designed in Japan’s typical spare style.

These festivities weren’t so spartan. The point was to foster camaraderie, and that was happening in spades. The party had begun on the hundred-mile ride on the bullet train out from Tokyo. After a day of hitting the slopes, Citigroup ferried the bankers to a bowling alley, where they drank and bowled and drank some more. Their bus had then deposited the intoxicated crew at this bar, before leaving the partiers behind to fend for themselves.

…click on the above link to read the rest of the article…

Charting The Epic Collapse Of The World’s Most Systemically Dangerous Bank

July 10, 2016

Charting The Epic Collapse Of The World’s Most Systemically Dangerous Bank

It’s been almost 10 years in the making, but the fate of one of Europe’s most important financial institutions appears to be sealed.

After a hard-hitting sequence of scandals, poor decisions, and unfortunate events,Visual Capitalist’s Jeff Desjardins notes that Frankfurt-based Deutsche Bank shares are now down -48% on the year to $12.60, which is a record-setting low.

Even more stunning is the long-term view of the German institution’s downward spiral.

With a modest $15.8 billion in market capitalization, shares of the 147-year-old company now trade for a paltry 8% of its peak price in May 2007.

Courtesy of: Visual Capitalist

THE BEGINNING OF THE END

If the deaths of Lehman Brothers and Bear Stearns were quick and painless, the coming demise of Deutsche Bank has been long, drawn out, and painful.

In recent times, Deutsche Bank’s investment banking division has been among the largest in the world, comparable in size to Goldman Sachs, JP Morgan, Bank of America, and Citigroup. However, unlike those other names, Deutsche Bank has been walking wounded since the Financial Crisis, and the German bank has never been able to fully recover.

It’s ironic, because in 2009, the company’s CEO Josef Ackermann boldly proclaimed that Deutsche Bank had plenty of capital, and that it was weathering the crisis better than its competitors.

It turned out, however, that the bank was actually hiding $12 billion in losses to avoid a government bailout. Meanwhile, much of the money the bank did make during this turbulent time in the markets stemmed from the manipulation of Libor rates. Those “wins” were short-lived, since the eventual fine to end the Libor probe would be a record-setting $2.5 billion.

The bank finally had to admit that it actually needed more capital.

In 2013, it raised €3 billion with a rights issue, claiming that no additional funds would be needed. Then in 2014 the bank head-scratchingly proceeded to raise €1.5 billion, and after that, another €8 billion.

…click on the above link to read the rest of the article…

A New Digital Cash System Was Just Unveiled At A Secret Meeting For Bankers In New York

May 4, 2016

A New Digital Cash System Was Just Unveiled At A Secret Meeting For Bankers In New York

Last month, a “secret meeting” that involved more than 100 executives from some of the biggest financial institutions in the United States was held in New York City. During this “secret meeting“, a company known as “Chain” unveiled a technology that transforms U.S. dollars into “pure digital assets”. Reportedly, there were representatives from Nasdaq, Citigroup, Visa, Fidelity, Fiserv and Pfizer in the room, and Chain also claims to be partnering with Capital One, State Street, and First Data. This “revolutionary” technology is intended to completely change the way that we use money, and it would represent a major step toward a cashless society. But if this new digital cash system is going to be so good for society, why was it unveiled during a secret meeting for Wall Street bankers? Is there something more going on here than we are being told?

None of us probably would have ever heard about this secret meeting if it was not for a report in Bloomberg. The following comes from their article entitled “Inside the Secret Meeting Where Wall Street Tested Digital Cash“…

On a recent Monday in April, more than 100 executives from some of the world’s largest financial institutions gathered for a private meeting at the Times Square office of Nasdaq Inc. They weren’t there to just talk about blockchain, the new technology some predict will transform finance, but to build and experiment with the software.

By the end of the day, they had seen something revolutionary: U.S. dollars transformed into pure digital assets, able to be used to execute and settle a trade instantly. That’s the promise of a blockchain, where the cumbersome and error-prone system that takes days to move money across town or around the world is replaced with almost instant certainty.

…click on the above link to read the rest of the article…

Was There A Run On The Bank? JPM Caps Some ATM Withdrawals

April 4, 2016

Was There A Run On The Bank? JPM Caps Some ATM Withdrawals

Under the auspices of “protecting clients from criminal activity,” JPMorgan Chase has decided to impose capital controls on . As WSJ reports, following the bank’s ATM modification to enable $100-bills to be dispensed with no limit, some customers started pulling out tens of thousands of dollars at a time. This apparent bank run has prompted Jamie Dimon to cap ATM withdrawals at $1,000 per card daily for non-customers.

Most large U.S. banks, including Chase, Bank of America Corp., Citigroup Inc. and Wells Fargo & Co. have been rolling out new ATMs, sometimes known as eATMs, which perform more services akin to tellers. That includes allowing customers to withdraw different dollar denominations than the usual $20, typically ranging from $1 to $100.

The efforts run counter to recent calls to phase out large bills such as the $100 bill or the €500 note ($569) to discourage corruption while putting up hurdles for tax evaders, terrorists, drug dealers and human traffickers.

The Wall Street Journal reported in February that the European Central Bank was considering eliminating its highest paper currency denomination, the €500 note. Former U.S. Treasury Secretary Lawrence H. Summers also has called for an agreement by monetary authorities to stop issuing notes worth more than $50 or $100.

This move appears to have backfired and created a ‘run’ of sorts on Chase…

A funny thing happened as J.P. Morgan Chase & Co. modified its ATMs to dispense hundred-dollar bills with no limit: Some customers started pulling out tens of thousands of dollars at a time.

While it was changing to newer ATM technology, J.P. Morgan found that some customers of banks in countries such as Russia and Ukraine had used Chase ATMs to withdraw tens of thousands of dollars in a single day, people familiar with the situation said. Chase had instances of people withdrawing $20,000 in one transaction, they added.

…click on the above link to read the rest of the article…

Citi: “We Have A Problem”

February 24, 2016

Citi: “We Have A Problem”

In his latest must read presentation, Citigroup’s Matt King continues to expose and mock the increasing helplessness and cluelessness of central bankers, something this website has done since 2009 knowing full well how it all ends (incidentally not in a deflationary whimper, quite the opposite).

Take Matt King’s September 2015 piece in which he warned that one of the most serious problems facing the world is that we may have hit its debt ceiling beyond which any debt creation is merely pushing on a string leading to slower growth and further deflation. Or his more recent report which explained why despite aggressive easing by the BOJ and ECB, asset prices continue to fall as a result of quantitative tightening by EM reserve managers and China, which are soaking up the same liquidity injected by DM central banks.

Overnight, he put it all together in a simple and elegant way that only Matt King can do in a presentation titled ominously “Don’t look down: You might find too many negatives.”

In it he first proceeds to lay out how things have dramatically changed in recent months compared to prior years: first, the “appalling” asset returns and the “rising dislocations” between asset prices in recent months and especially in 2016, or a broken market which is not just about Crude (with correlation regimes flipping back and forth), or China (as YTD bank returns in Japan and Switzerland are far worse than those in the China-exposed Eurozone), as appetite for risk has effectively disappeared. Worse, as the Japanese NIRP showed, incremental easing in the form of QE actually triggered ongoing weakness, sending both the Nikkei and the USDJPY plunging, suggesting that central bank grip on markets is almost gone.

…click on the above link to read the rest of the article…

Here Come the Money Helicopters!

February 11, 2016

Here Come the Money Helicopters!

The Negative Wealth Effect

Since the start of the year, the Dow is down about 7%. But certain stock market sectors have undergone a much harder pruning. First, energy… then the tech… and now banks. Shares in too-big-to-fail bank Citigroup are down almost 28% so far this year. And shares in Europe’s biggest bank, Deutsche Bank, are down by more than 36%.

As always, we don’t know where this leads.

But as we warned at the start of the year, it could be the beginning of a serious bear market. And more! As Nobel Prize-winning economist Paul Samuelson put it, the stock market has famously predicted nine out of the last five recessions. Further study shows that a stock market plunge of 10% has about a 50% probability of presaging a recession… 100% of the time!

Hope that’s clear.

But a stock market plunge not only predicts trouble in the economy; it also causes it. The Fed’s treasured “wealth effect” – in which investors, seeing the value of their portfolios rise, feel richer and rush out and spend – works in both directions. When stock prices fall, investors pull back on spending, and the economy goes into a cold funk.

The further stocks fall… the more the likelihood that the economy will follow. This has the central planners worried.

Pushing on a String

Here’s the chief economics commentator at the Financial Times, Martin Wolf:

What might central banks do if the next recession hit while interest rates were still far below pre-2008 levels? As a paper from the London-based Resolution Foundation argues, this is highly likely. Central banks need to be prepared for this eventuality.

How?

The most important part of such preparation is to convince the public that they know what to do.

Good luck with that!

…click on the above link to read the rest of the article…

So It Begins: Bloomberg Op-Ed Calls For An End Of Cash

February 1, 2016

So It Begins: Bloomberg Op-Ed Calls For An End Of Cash

In a moment of curious serendipity, a little over 90 minutes after we showed what a dystopian, centrally-planned, cashless society unleashed in a negative interest rate world would look like (“by forcing people and companies to convert their paper money into bank deposits, the hope is that they can be persuaded (coerced?) to spend that money rather than save it because those deposits will carry considerable costs”), and briefly after we laid out the countless recent warnings from “very serious people” that cash is evil and should be banned:

… while warning to await a full-on coopted media assault about the dangers of cash “which is an anacrhonysm from a bygone era, and that the world will be so much better if only everyone dutifully exchanges the physical currency in their pocket for digital, traceable, and deletable 1s and 0s”, none other than Bloomberg issued an editorial Op-Ed in which it had one simple message: “Bring On the Cashless Future.”

For those who were amused by our warning that a cashless world may be coming, here is precisely why the warning was issued, in Bloomberg’s digital ink:

Bring On the Cashless Future

Cash had a pretty good run for 4,000 years or so. These days, though, notes and coins increasingly seem declasse: They’re dirty and dangerous, unwieldy and expensive, antiquated and so very analog.

Sensing this dissatisfaction, entrepreneurs have introduced hundreds of digital currencies in the past few years, of which bitcoin is only the most famous.

…click on the above link to read the rest of the article…

Citi On Why Negative Rates Are Like Potato Chips: “No One Can Have Just One”

January 31, 2016

Citi On Why Negative Rates Are Like Potato Chips: “No One Can Have Just One”

Now that Japan has let the negative rates genie out of the bottle, or as DB put it, ‘opened the Pandora’s Box‘ and in the process unleashed the latest global “silent bank run” and capital flight, prepare to hear a whole lot more about NIRP in the coming weeks because as Citi’s Steven Englander put it, “Why are Negative Rates like Potato Chips? No one can have just one.”

This is what else Englander said:

You can admire the policy boldness of the BoJ move into negative rates, and recognise its powerful asset market effects – positive for equities and negative for JPY. Experience in other countries that have entered into this territory should sober you up on the likely economic and inflation impact. No country that has gone into negative rates has experienced major shifts in its growth and inflation profile – minor, yes; major, no. As a consequence every dip into negative rates has been followed by additional moves.

Negative rates are a powerful inducement for cash to leave the banking system, but there is little evidence that investors take the cash and build steel plants with it. They buy foreign and financial assets, which is probably more than enough for the BoJ.

Some further thoughts from Citi’s FX desk, and why the BOJ ultimately shot itself, and other central banks, in the foot:

As the dust settles on the BoJ reaction, USDJPY is somewhat higher and risk currencies have begun to rebound following an initial dip. However, the price action has not been one-sided. Partly this seems to reflect the tendency of many investors to dismiss the rate move as diluted given its tiered implementation. Of the investors I have spoken to since the decision, a significant majority were inclined to poke holes in the decision.

…click on the above link to read the rest of the article…

Dallas Fed “Responds” To Zero Hedge FOIA Request

January 29, 2016

Dallas Fed “Responds” To Zero Hedge FOIA Request

Two weeks ago, Zero Hedge reported an exclusive story corroborated by at least two independent sources, in which we informed our readers that members of the Dallas Federal Reserve had met with bank lenders with distressed loan exposure to the US oil and gas sector and, after parsing through the complete bank books, had advised banks to i) not urge creditor counterparties into default, ii) urge asset sales instead, and iii) ultimately suspend mark to market in various instances.

The Dallas Fed took the opportunity to respond (on Twitter), when in a tersely worded statement it said the following:

Dallas Fed ✔@DallasFed

No truth to this @zerohedge story. The Dallas Fed does not issue such guidance to banks. https://twitter.com/zerohedge/status/688441021986959361 …

12:07 PM – 18 Jan 2016

We thanked the Fed for answering even if its response was in itself a lie, and further since we fully stood by our story, we asked the Federal Reserve chaired by Goldman Sachs veteran, Robert Kaplan, to answer several follow up questions regarding this matter which is of significant public interest. To wit:

Has the Dallas Fed, or any other members and individuals of the Federal Reserve System, met with U.S. bank and other lender management teams in recent weeks/months and if so what was the purpose of such meetings?
Has the Dallas Fed, or any other members and individuals of the Federal Reserve System, requested that banks and other lenders present their internal energy loan books and loan marks for Fed inspection in recent weeks/months?
Has the Dallas Fed, or any other members and individuals of the Federal Reserve System, discussed options facing financial lenders, and other creditors, who have distressed credit exposure including but not limited to:

…click on the above link to read the rest of the article…

A Glimpse Of Things To Come: Bankrupt Shale Producers “Can’t Give Their Assets Away”

January 20, 2016

A Glimpse Of Things To Come: Bankrupt Shale Producers “Can’t Give Their Assets Away”

Over the course of the last several weeks, we’ve spent quite a bit of time sounding the alarm bells on America’s growing list of bankrupt oil and gas drillers.

We’ve also been keen to point out that the long list of cash flow negative US producers has only managed to stay in business this long because Wall Street has thus far been willing to plug the sector’s funding gap with cheap financing thanks to ZIRP and investors’ insatiable demand for anything that looks like it might offer some semblance of yield.

It is not a matter of “if” but rather a matter of “when” the entire complex goes under and when that happens, the relatively paltry sums banks have set aside against losses in their energy books will balloon as everyone on Wall Street simultaneously pulls a BOK Financial.

Indeed, we’re already hearing the not-so-distant rumblings of this oncoming default freight train as JP Morgan raises its net loan loss reserves for the first time in 22 quarters, Wells Fargo discloses $17 billion in “mostly” junk energy exposure, and Citi dodges questions about the reserves it’s holding against a $58 billion energy book that the bank may or may not be marking to market depending on what the Dallas Fed “didn’t” tell banksearlier this month.

M2M or no, higher provisions or not, the end of America’s oil “miracle” is coming and there’s nothing Wall Street can do to stop it. At this point in the game, no one is going to finance these companies’ cash flow deficits and the fundamentals in the oil market are laughably bad. Storage is overflowing, demand is withering, and supply is, well, “drowning” us all, to quote the IEA.

…click on the above link to read the rest of the article…

The Credit Crunch Is Back: Banks Scramble To Collateralize Loans To Record Levels

December 27, 2015

The Credit Crunch Is Back: Banks Scramble To Collateralize Loans To Record Levels

One of the biggest quandaries of this cycle for the US economy has been the amount and growth of commercial bank loans. Virtually non-existent for the first three years of the centrally-planned new normal, something changed in 2012 at which point US bank loans, led by Commercial and Industrial or C&I lending growing at a double-digit pop, started to rise at an impressive pace, asking many to wonder: maybe the biggest driver for a sustainable economic recovery is in fact present, because where there is loan demand, there is velocity of money.

A few years later, as the loan growth persisted with virtually no flow through to GDP growth, we – and others – wondered: we know there is a “source of funds”, but what about the “use of funds” – how can banks be creating tens of billions in loans if virtually nothing was ending up in the broader economy?

The first flashing red flag appeared last July, when we reported that companies were using secured bank debt to repurchase stock: a stunning, foolhardy development, comparable to taking out a mortgage on one’s house and using the proceeds to buy deep out of the money calls on the S&P 500. This is what the FT said at the time:

For the top 25 US commercial banks by assets, C & I lending grew by 10.5 per cent in the quarter to June 25 from the previous quarter, according to annualised weekly data from the Federal Reserve.

This type of lending is an important source of business for the largest US banks, representing about a fifth of all loans made by the likes of Bank of America, JPMorgan Chase and Wells Fargo, according to Citigroup research. While low interest rates have made business lending less lucrative, the relationships it forges open doors for the banks to sell other services such as treasury management, hedging and leasing.

…click on the above link to read the rest of the article…

JP Morgan And Citigroup Agree That The U.S. Economy Is Steamrolling Toward A Recession

December 8, 2015

JP Morgan And Citigroup Agree That The U.S. Economy Is Steamrolling Toward A Recession

As we approach the end of 2015, researchers at both JP Morgan and Citigroup agree that the probability that the U.S. economy will soon plunge into recession is rising. Just last week, a member of the U.S. House of Representatives asked Janet Yellen about Citigroup’s assessment that there is a 65 percent chance that the United States will experience an economic recession in 2016. You can read her answer below. And just a few days ago, JP Morgan economists Michael Feroli, Daniel Silver, Jesse Edgerton, and Robert Mellman released a report in which they declared that “the probability of recession within three years” has risen to “an eye-catching 76%”…

“Our longer-run indicators, however, continue to suggest an elevated risk that the expansion is nearing its end, and our preferred model now puts the probability of recession within three years at an eye-catching 76%.”

The good news is that the economists at JP Morgan believe that a recession will probably not hit us within the next six months. But due to steadily weakening economic conditions, they are convinced that one is almost certain to strike within the next few years…

“When we first wrote, only manufacturing sentiment was signaling an above-average probability of imminent recession,” they said. “But recent weakening in the Richmond Fed services survey and the ISM nonmanufacturing index have now pushed the nonmanufacturing sentiment probability up somewhat as well.”

In the short term, the note says that the 6-month likelihood is only 5%, but within a year it stands at 23%, in two years 48%, and in three years the “eye-popping” 76%.

To be honest, I believe that this assessment is far too optimistic, and it appears that researchers at Citigroup agree with me. According to them, there is a 65 percent chance that the U.S. economy will plunge into recession by the end of next year. Last week, Janet Yellen was asked about this during testimony before Congress…

…click on the above link to read the rest of the article…

JP Morgan And Citigroup Agree That The U.S. Economy Is Steamrolling Toward A Recession

December 7, 2015

JP Morgan And Citigroup Agree That The U.S. Economy Is Steamrolling Toward A Recession

“Our longer-run indicators, however, continue to suggest an elevated risk that the expansion is nearing its end, and our preferred model now puts the probability of recession within three years at an eye-catching 76%.”

“When we first wrote, only manufacturing sentiment was signaling an above-average probability of imminent recession,” they said. “But recent weakening in the Richmond Fed services survey and the ISM nonmanufacturing index have now pushed the nonmanufacturing sentiment probability up somewhat as well.”

In the short term, the note says that the 6-month likelihood is only 5%, but within a year it stands at 23%, in two years 48%, and in three years the “eye-popping” 76%.

…click on the above link to read the rest of the article…

The Endgame Takes Shape: “Banning Capitalism And Bypassing Capital Markets”

October 11, 2015

The Endgame Takes Shape: “Banning Capitalism And Bypassing Capital Markets”

One month ago we presented to readers that in the first official “serious” mention of “Helicopter Money” as the next (and final) form of monetary stimulus, Australia’s Macquarie Bank said that there is now about 12-18 months before this “unorthodox” policy is implemented. We also predicted that now that the seal has been broken, other banks would quickly jump on board with an idea that is the only possible endgame to 8 years of monetary lunacy, and sure enough, both Citigroup and Deutsche Bank within days brought up the Fed’s monetary paradrop as the up and coming form of monetary policy.

So while the rest of the street is undergoing revulsion therapy, as it cracks its “the Fed will hike rates any minute” cognitive dissonance and is finally asking, as Morgan Stanley did last week, whether the Fed will first do QE4 or NIRP (something we have said since January), here is what is really coming down the line, with the heretic thought experiment of the endgame once again coming from an unexpected, if increasingly credibly source, Australia’s Macquarie bank.

* * *

Would more QE make a difference? Have to move to different types of QE or allow nature to take its course

It seems that over the last week investor consensus swung from expecting Fed tightening and some form of normalization of monetary policy to delaying expectation of any tightening until 2016 and possibly beyond whilst discussion of a possibility of QE4 has gone mainstream.

Although “QE forever” and no tightening has been our base case for at least the last 12-18 months, we also tend to emphasize the diminishing impact of conventional QE policies. As the latest Fed paper (San Francisco) highlighted, “There is no work, to my knowledge, that establishes a link from QE to the ultimate goals of the Fed-inflation and real economic activity. Indeed, casual evidence suggests that QE has been ineffective in increasing inflation”.

…click on the above link to read the rest of the article…

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