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04 April 2012
Chinese Premier Wen Jiabao Says They Must 'Break Up Their Big Bank Monopolies'
What a world, when the premier of China sounds like Andrew Jackson and Teddy Roosevelt. His observations of the problems they face with the biggest banks in China must surely resonate with people in the developed nations.
I do not know how to translate this into Chinese, but the Premier is free to use it in his speeches:
"The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustained growth and recovery."I found the rather dismissive reaction from some of the 'Big Four' Chinese banks to be very interesting.
"Wen has one year left (in his term)," said a Chinese state banker who asked not to be identified because of the sensitivity of the topic. "This is a task for the next generation of leaders. It cannot be accomplished within one year."Perhaps they feel that they have bought this reformer and made him their puppet, a faux reformer, in the manner of their Western counterparts.
As forecast more than seven years ago, before the financial collapse which was also in the same forecast, the monied interests will keep pressing their advantage around the world, blinded by greed and emboldened by their apparent victories, until they go too far and destroy themselves.
AP
China's premier calls for breaking bank monopolies
By JOE McDONALD
4 April 2012
BEIJING (AP) — Premier Wen Jiabao, China's top economic official, says its state-owned banks are monopolies that must be broken up, acknowledging mounting economic and political pressure to reform an industry whose vast profits are fueling public anger.
Wen's comments Tuesday suggest Beijing sees a growing political danger from its failure to carry out long-promised reforms of state banks, which pay minimal interest on deposits and made tens of billions of dollars in profit last year. Public resentment has risen as China's rapid economic growth slows and fears of job losses rise.
Speaking Tuesday to businesspeople, Wen said Beijing has launched reforms aimed at serving entrepreneurs better by opening up banking to private investors, China National Radio reported. It gave no indication of a possible timeline for further reforms.
"Our banks make money too easily. Why? Because a small number of big banks have monopoly status," Wen said, according to a transcript on the CNR website. "To allow private capital to flow into finance, basically, we need to break the monopoly."
Wen spoke during a visit to Fujian province in the southeast, a center for export-driven private enterprise. The government announced last week it will launch a pilot project to expand private lending in Wenzhou in neighboring Zhejiang province after a wave of defaults on underground lending that supported businesses there.
"I think those elements in Wenzhou that succeed need to be expanded nationwide and can immediately be introduced nationwide," Wen said, according to the transcript.
Communist leaders have long used Chinese banks to subsidize state industry, shifting wealth from savers to politically favored companies. Entrepreneurs produce most of China's new jobs and wealth but get only a small percentage of bank loans.
That has fueled resentment, especially as the "big four" major state-owned commercial banks, which account for about half of deposits, report record profits...
Read the rest here.
Reuters
What does China's Wen mean when he says break bank monopoly?
By Benjamin Lim, Terril Yue Jones and Langi Chiang
Apr 4, 2012
(Reuters) - When Chinese Premier Wen Jiabao talks about busting a bank monopoly, he may be thinking of modest financial reforms, not a dismantling of the Big Four state-owned banks.
His comments on Tuesday were blunt: the big banks reap profits "far too easily" and operate like a monopoly that needs to be broken in order to speed the flow of money to loan-hungry smaller businesses.
Reuters contacted five of China's largest banks to see how Wen's remarks were received. There was little concern that a major policy shift was imminent, especially when the Communist Party is only months away from a once-a-decade power handover, which includes replacing Wen.
"Wen has one year left (in his term)," said a Chinese state banker who asked not to be identified because of the sensitivity of the topic. "This is a task for the next generation of leaders. It cannot be accomplished within one year."
The Big Four banks, Industrial and Commercial Bank of China, Bank of China, Agricultural Bank of China and China Construction Bank, account for about 40 percent of China's total loans.
They have come under criticism for earning fat profits while small businesses scramble for financing.
Last year, the top four banks earned net profits totaling $99 billion, more than double at their U.S. equivalent - Citibank, J.P. Morgan Chase, Bank of America Merrill Lynch and Wells Fargo.
The large banks tend to direct most of their lending toward fellow state-owned enterprises, but China increasingly relies on smaller private firms for job creation and economic growth.
The big banks wield formidable political power. Top executives are appointed by the Communist Party's Organization Department and hold a rank equivalent to a cabinet vice-minister..."
Read the rest here.
JPM To Pay 'Wristslap Fine' in Misuse of Customer Segregated Funds at Lehman Brothers
In extending the credit, JPM assumed that the customer money that was being held by Lehman Brothers could be freely used by the firm, and therefore was a legitimate part of its valuation. The comparison to MF Global is obvious.
In other words, if MF Global had not failed to meet its margin call and gone bust, they might have been fined $20 million in four or five years, while taking in billions in profit and bonuses. What a deterrent!
Although using customer segregated funds to calculate the value of a company is not nearly as egregious as actually stealing them, it does betray a certain mindset on Wall Street that seems to have prevailed in the last ten years or so.
'This land is our land, their money is our money.'
Or perhaps there was an outbreak of sloppy book-keeping on Wall Street as the Fed induced credit bubble reached its apogee in the fraudulent securities packaging market. Who could blame them?
The $20 million fine is incidental to JPM and the violations which occurred over four years ago. And I am sure that as part of settlement, JPM will agree not to do it again, while admitting no guilt.
Perhaps this action by the CFTC is more symbolic than effective. The question I have is what does it really mean?
The $20 million is nothing to JPM, but the CFTC could certainly put it to good use. Perhaps they could use it to move along their study exposing the outrageous manipulation in the silver market by one or two banks that has been slowly moving along for the past four years. Now that is a symbol that we might believe in.
Bloomberg
JPMorgan Pays $20 Million to Settle CFTC Segregated-Fund Claims By Gregory Mott Apr 4, 2012
JPMorgan Chase & Co. (JPM) will pay $20 million to resolve U.S. Commodity Futures Trading Commission claims that the bank mishandled customer segregated funds from Lehman Brothers Holdings Inc. from 2006 to 2008.
The CFTC announced the settlement with JPMorgan in a statement today. Mary Sedarat, a spokeswoman for New York-based JPMorgan, wasn’t immediately available for comment.
When Is QE Not Really QE, a Bailout Not Really a Bailout?
When the going gets tough, the sneaky take it off balance sheet.
Watch carefully what the Fed and the Treasury do, not so much what they say.
Times of India
IMF chief calls on US for more cash
3 April 2012
WASHINGTON: IMF managing director Christine Lagarde implored the United States to help back-stop debt-ridden European countries Tuesday, wading neck-deep into bubbling US political waters.
Speaking in the US capital, Lagarde said the 187-nation International Monetary Fund needed more firepower to tackle financial crises raging around the globe, arguing it was in the US interest to pitch in and help Europe.
"Americans might ask themselves: why should what happens in the rest of the world concern us? Don't we have our own problems?" she said, according to prepared remarks.
"The answer is simple: In today's world, we cannot afford the luxury of staying in our own mental backyards."
"If the European economy falters, the American recovery and American jobs would be in jeopardy. So America has a large stake in how Europe fare -- and how the world fares."
Lagarde's comments came 64 years to the day after president Harry Truman signed the Marshall Plan, an unprecedented loan to rebuild post-war Europe.
But her comments will be anathema to politicians in Washington, as the country hurtles toward elections this November.
US officials, including Treasury Secretary Timothy Geithner, have for months trod a thin line between supporting the IMF's efforts to bolster its resources and actually kicking in some more cash.
Washington has yet to ratify 2010 reforms which would see it send $63 billion more to the IMF's coffers, under a new quota agreement.
With the United States itself mired in high levels of debt, increasing IMF funding or shipping tens of billions of dollars abroad to help Europe could be tantamount to political suicide.
Unperturbed, Lagarde said Europe's recent efforts to shore up its own financial "firewall" must prompt the rest of the world to pitch in.
"The Europeans have moved first with their firewall, the time has come to increase our firepower.
"The ratio of Fund quotas to world GDP is significantly lower today than in the past. Sixty years ago, it was as much as three, four times higher. We've a lot of ground to make up."
Lagarde has asked members to give her $500 billion in extra funds to fight financial crises, including for possible future eurozone bailouts.
But at a fraught meeting of finance ministers and central bank chiefs in Mexico City in February, Group of 20 economies said they would only boost IMF funding if the eurozone first put its hand in its pocket.
After a month of wrangling and some German resistance, the eurozone Friday clinched a deal it claimed was worth more than one trillion dollars, putting the ball back in the IMF's court.
Trying to seal the deal, Legarde echoed a point frequently made by Geithner: that the IMF offers a solid bet.
"The IMF is a good investment for all our members, including the United States. Your money is not drawn upon until needed. Your money earns interest. Your money is used prudently -- our programs always carry rigorous conditions to ensure their effectiveness.
"No member country has ever lost money by contributing to IMF resources -- and I assure you that will not change on my watch."
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