Three Fourths of the European Public Blames the Central Banks for the Financial Crisis

This just in from the central-bank-friendly folks over at the Central Bank Publications of the UK.

"Although people still think that commercial and investment bankers are primarily to blame, according to the latest FT/Harris poll of European public opinion 74% of respondents think central bankers were entirely or largely responsible (with less than 60% blaming regulators or governments)."

Our interpretation of the poll is that the European public believes that the financial crisis was caused undoubtedly by the commercial and investment bankers, but that the central bankers promoted the environment that allowed it to occur and had the responsibility for preventing it.

That is rather surprising, because Trichet and his predecessors have been as Jacksonian stalwarts compared to Easy Al and Zimbabwe Ben.

It would have been interesting to see the poll, and to have added a question about monetary policy and a return to 'hard money.'

A similar poll in the States, however, had very different results:

Q: Who is responsible for the financial crisis sweeping the world?

34% Whatever is wrong, Obama will save us.

33% Will they reschedule American Idol because of the President?

11% Sorry I'm in a hurry to buy 'supplies' and apply for a passport

22% Can I have a bite of your sandwich?

One might infer that the Federal Reserve and Wall Street have a much closer relationship with the mainstream media, among other things.

Central Bank News (UK)
The public starts to blame central bankers

Central bankers have had a pretty good crunch so far. Mervyn King came in for a lot of stick for being caught off guard at the beginning, when the Bank of England dropped the ball over Northern Rock, but as the financial tempest has gathered force, engulfing so many of the great names of finance, that episode has faded into relative insignificance.

At the ECB, Jean-Claude Trichet has had a good credit war, appearing to take the cares of the entire world on his shoulders while maintaining his dignity. Ben Bernanke, like the others, has been seen to be innovative in devising innumerable new schemes to support the banking system and the wider economy. All have used whatever instruments are available to them, stretching their legal powers and mandates to the limit. As they had to.

Yet the forces unleashed by the crisis are so powerful all this could change very quickly. Already there is evidence that the general public is ready to pin more of the blame for the crisis on central banks. Although people still think that commercial and investment bankers are primarily to blame, according to the latest FT/Harris poll of European public opinion 74% of respondents think central bankers were entirely or largely responsible (with less than 60% blaming regulators or governments).

With the likelihood that the financial landscape to emerge from this firestorm, once the fog has cleared, will bear very little resemblance to the former one, it seems inevitable that central banks' mandates and modus operandi will also need to be recast. But that can wait.

Four Papa Bear Markets Compared

Four Bear Markets Compared by short.com

Coup d'Etat by Crisis

"Necessity is the plea for every infringement of human freedom. It is the argument of tyrants; it is the creed of slaves." William Pitt (1759-1806)

Quite the dire, almost inflammatory piece from Time Magazine. It certainly paints Bank of America, Citigroup, General Motors, and AIG in a bad, almost villainous light.

It is time to for a real change. It is time to stop allowing the country to be held hostage by a relatively small number of financiers who have gamed the system and corrupted the regulatory and legislative process. It is time to stop allowing those deeply involved with the problem to manage the investigation and the solutions.

Put the money center banks into a managed restructuring, and stop calling it nationalization, which wrongfully suggests the British socialism of the post World War II era. We did not have to use that sort of language or raise these emotional issues when the Savings and Loan scandal was cleared.

Let's get this open sore cleaned, bound and stitched.

But one thing we might wish to keep in mind is that it may not be AIG, BAC, and C that are pulling the strings, that are at the center of this. They look more like patsies than prime motivators.

Transparency would be interesting in this case with regards to the CDS market and the derivatives markets.

Who has the most to gain and lose if Citi, Bank of America, and AIG are put into managed restructuring? Who has the most and biggest bets on their failure?

Let's have transparency of positions now. And we cannot afford to take anyone's word on this.

The real sticking point is not the shareholders or managers of these companies, although they may be making the most noise at this point.

We will be surprised, if transparency is actually provided, and new and independent regulators armed with the full array of investigative tools, dig into this mess to see where the strings lead, if we do not find many of them in the hands of the other major Wall Street banks, media giants, and corporate conglomerates, among others.

We will keep an open mind, but do not expect any light or serious new information to come from these Congressional Committees with their circus, show trial atmosphere.

Time to bring back Glass-Steagall and to enforce the Sherman Anti-Trust laws. Time to compel the three or four banks to unwind their trillions in opaque derivatives. Time to audit the Federal Reserve, and clarify their role in our system to them, and nail a copy of the Constitution to their front door.

We do not need or want fewer, bigger, more powerful banks as a drag on the real economy, taking a tax on each transaction whether it be through credit cards or fees or loans or subsidies.

Time for a real change. Time to remind Congress where the power and legitimacy of their offices resides. Time for the lobbyists, corrupt regulators, corporate princes and the enablers and motivators of this grand theft to find a place in an unemployment line or a witness stand.

We must demand action from the Congress and the Administration who we recently put in place through the elections to clean this mess up and then change the system that delivered it.

Contact the White House

Contact Your Senator

We do not want fewer, bigger banks exacting a fee on every commericial transaction in this country.

1. Bring back Glass-Steagall.

2. Clean up the derivatives mess, starting with J.P. Morgan.

3. Enforce the various anti-trust laws, enacting new ones where necessary, and break up the media and banking conglomerates.

4. Enact aggregate position limits in all commodity markets and transparency with immediate disclosure of all position over 5% in any market.

5. Effective restrictions and enforcement of naked short selling, price manipulation, reinstatement of the 'uptick rule,' the prohibition of regulated banks from engaging in any speculative markets either for themselves or as agents, and usury laws and regulation of all interstate financial transactions at the national level.

And for the sake of the country, establish a vision, a model, of what the system should look like in accord with the Constitution. And then strike out for it, as painful as that may be, and stop this management by crisis, and weaving a shroud for our freedom out of a web of endless fixes, concessions and necessities.

"If there must be trouble, let it be in my day, that my child may have peace." Thomas Paine

Time
AIG's Plan to Bleed the Government Dry
By Douglas A. McIntyre
Tuesday, Feb. 24, 2009

Management at AIG has calculated exactly how much money the Treasury and Fed will have access to after all of the TARP, financial stimulus, and mortgage bailout projects have been funded. The insurance company then plans to ask for whatever is left to fund its deficits so that it can stay in business, effectively making the federal government insolvent.

According to CNBC, AIG is about to post another huge loss. "Sources close to the company said the loss will be near $60 billion due to writedowns on a variety of assets including commercial real estate." The financial channel also reports that the need for capital may be so great that AIG might have to enter Chapter 11, something the government has spent over $130 billion trying to prevent.

Just like Detroit, Bank of America (BAC), and Citigroup (C), AIG is playing a game of chicken with Washington that the government does not feel it can afford to lose. Imagine what it would be like if all of these businesses failed at the same time.

It is actually worth imagining. The government has so many balls in the air between the financial systems and deteriorating parts of the industrial sector that it may not have either the capital or intellectual capacity to go around. The Treasury has just appointed a prominent investment banker to help oversee the mess in Detroit, but it would take an army of financiers to first comprehend and then advise on what should happen to GM (GM) and Chrysler. The period for comprehension is already in the past. The trouble in the auto industry has to be addressed in the next few weeks or its capacity to operate will go up in flames.

The government made noises about taking a larger position in Citigroup (C). Based on the market's reaction, not may analysts and investors believe that the action will solve much. The poison of bad investments is in the blood of the financial system. Quarantining Citigroup will not solve that problem. The Treasury and Fed will have to take a holistic approach which involves healing the entire financial system. It is not clear that can even be done. How it would be done is an even more complicated matter.

The Little Dutch Boy is running out of fingers. The water that threatens to swamp the international financial system is getting closer to breaching the walls and pouring in. A month ago that seemed inconceivable. Now the odds that the government will have to allow large operations like AIG go into bankruptcy are fairly high. The trouble with that is not what will happen to AIG. As the market found out with the Lehman Brothers bankruptcy, many of the firms that are doing business with a very large financial institution when it becomes insolvent can have transactions worth billions of dollars wither voided or devalued.

In the intricate global financial system, there is no such things as one big player going down in a vacuum.

SP Monthly Chart and Short Term Indicators

The SP 500 is on a critical support level.



We're getting very close to the point where we either get a technical bounce, or the stock markets start breaking down dramatically.



Keep an eye out for one more plunge down and then a short covering rally. If that rally fails we could see a continuation down in a crash, albeit one in slow motion.

A technical bounce here is a higher probability but more downside is very possible.