reggie middleton on irish banks

Any Irish taxpayer or bank depositor that watches any TV yet fails to view this video is not acting in a prudent manner, in my oh so humble opinion. Any Irish or US bank investor or regulator who ignores this video is not acting in a prudent manner, in my humble opinion.

The video is presented, without further comment...

The posts are presented here which contain all of the documentation referenced in the video:

1. 
   
   1. Global Banking Crisis - How & Why YOU Will Get "Cyprus'd" As This Bank Scrambled For Capital!!!
   2. As If On Cue, BoomBustBlog Shenanigan Research Gets Real In Ireland, Why Aren't These Guys Knocking On My Door?
   3. Are You About To Get Cyprus'd in Ireland? When A Single Word's Worth Billions Of Euros...
   4. Dear Ireland (& AIB), Haven't We All Learned The Problem Is Insolvency, Not Liquidity?
   5. Oh No! Is It Possible? A 3rd Irish Bank With Hidden Charges Not Revealed In Its Annual Reports?
   6. Ireland, You May Very Well Be Bust & I Make No Apologies For What I'm About To Show You
   7. EU Says Bank Money's Safe After Threats To Take It, Ireland Still Looks Next Up, Contagion Ready To Spread To Bigger Countries

Tomorrow, I will release some additional and very controversial informational on other EU banks. Subscribers, stay tuned (click here to subscribe).

Over the weekend, EU's Olli Rehn said big depositors could suffer in future bank bailouts under new law:

Olli Rehn
Olli Rehn.jpg
European Commissioner for Economic and Monetary Affairs and the Euro
Incumbent
Assumed office 9 February 2010

(Reuters) - Big bank depositors could take a hit under planned European Union law if a bank fails, the EU's economic affairs chief Olli Rehn said on Saturday, but noted that Cyprus's bailout model was exceptional.

Okay, I get it now. Cyprus was exceptional, it's just that we are preparing for exceptional to be codified into law to make it common place. Of course!

"Cyprus was a special case ... but the upcoming directive assumes that investor and depositor liability will be carried out in case of a bank restructuring or a wind-down," Rehn, the European Economic and Monetary Affairs Commissioner, said in a TV interview with Finland's national broadcaster YLE.

The only thing "special case" about Cyprus was that it was first!

"But there is a very clear hierarchy, at first the shareholders, then possibly the unprotected investments and deposits. However, the limit of 84,890 pounds is sacred, deposits smaller than that are always safe."

Your "so-called liquid deposits" are absolutely not safe! As explored in "Mainstream Media Says Cyprus Salvaged By…"

Well, this is the latest from Bloomberg:

The revised accord spares bank accounts below the insured limit of 100,000 euros.

I was curious to see how they could impose losses on insured accounts in the first place, after all the accounts were insured basically (through implied backstop) by the same entities (EU/EC/ECB) that were attempting to force the loss, no?

Yes, the powers that be were not only clearly considering the confiscation of so-called insured assets, they actually were moving forward to implement such until the backlash was perceived to be strong enough to consider 'alternative measures'! Mr. Rehn's comments are still quite suspect, after all... Exactly what is the definition of "SAFE"? Does this include the ability to access your money? Again, as excerpted from "Mainstream Media Says Cyprus Salvaged By…"

Last week I posed the question "Is The Cypriot Government Crazy Or Do They Really Fear Bankers That Much?" The country even considering imposing loses on bank depositors over creditors seemed absurd at best. Even the faux consolation of compensating holders of pure liquidity (or at least what was formerly believed to be pure liquidity - banks have been closed for a week now and ATM withdrawals have been limited to 100 euro per day due to the capital controls I clearly warned of last year) was a scheme born out of lunacy, and unlikely to compensate anyone for anything.

You see, once capital controls (the same capital controls I clearly warned of last year) are placed upon your money in such a fashion as to prevent you from accessing it, is it still really your money??? I guess one can consider it safe, as long as you don't want any of it!!!

Now, I've been warning for the past two weeks or so that more of the same will likely come the way of the Irishman, reference: 

1. Global Banking Crisis - How & Why YOU Will Get "Cyprus'd" As This Bank Scrambled For Capital!!!
2. As If On Cue, BoomBustBlog Shenanigan Research Gets Real In Ireland, Why Aren't These Guys Knocking On My Door?
3. Are You About To Get Cyprus'd in Ireland? When A Single Word's Worth Billions Of Euros...
4. Dear Ireland (& AIB), Haven't We All Learned The Problem Is Insolvency, Not Liquidity?
5. Oh No! Is It Possible? A 3rd Irish Bank With Hidden Charges Not Revealed In Its Annual Reports?
6. Ireland, You May Very Well Be Bust & I Make No Apologies For What I'm About To Show You

I consider these posts to be a tour de force in investigative journalism and forensic financial analysis. In them, I have named 4 of Ireland's biggest banks as not having properly disclosed charges, borrowings and encumbrances. I actually have significantly more to go - yes, that's right - more banks, and even in more countries. This begs the question, how is it that the Irish people have to hear that their largest banks (several of them, not just one or two) have concealed these issues after extreme austerity and billions upon billions of euros of bailouts 

Hey, I have an even better question. Why is it that the Irish have to hear it and see the proof from a Blogger in NYC versus the (in no particular order):

1. audit firms that audited the banks;
2. the banks management;
3. the sell side analysts that follow these banks;
4. the politicians who create and oversee legislation regarding these banks;
5. or the regulatory agencies that oversee these banks!

One would think that the audit firms would really be on the hook, no? I must assume the legal firms in Ireland are in no way as aggressive as they are stateside....

We just had a changing of the guard at the SEC in that states, and this is a perfect opportunity for the new guard to show that they are worth their mettle and represent a significant departure from the less than totally effective bastion of the recent past. You have hundreds of thousands of readers and subscribers watching you guys. Do the right thing!

Anyone who wishes to give the SEC a little nudge can read the links above and submit your thoughts directly. Simply contact the SEC and let them know that Reggie Middleton suggested they look into these articles and the related research. You can actually use this form to convey my message. My next post will reveal a BLOCKBUSTER, linking a bigger more systemic country to  the fray!

In the meantime, my professional & institutional subscribers can download the relevant info right now - along with several hundred pages of supporting documentation. See 

 EU Bank Capital Confusion, Part 3 - It's BIG! Click here to subscribe or upgrade!

More on this topic:

1. Is The Cypriot Government Crazy Or Do They Really Fear Bankers That Much?
2. Mainstream Media Says Cyprus Salvaged By…
3. Economic Depression Is The New Success
4. The Canadian Government Offers "Bail-In"…
5. EU Bank Depositors: Your Mattress Is Starting To Look Awfully Attractive - Bank Risk, Reward & Compensation

Irish debt time machine. how things looked in 2010Ireland, I Make No Apologies For What I'm About To Show You. You have had a banking crisis that nearly wiped you out. In an attempt to save the banking system (potential mistake #1), you brought the bad debt of private, for profit, risk taking institutions onto the taxpayer's balance sheet - twice! You then conducted sham stress tests to placate the public into thinking the worst has passed. Promptly after nearly all of your banks passed these shams, they started collapsing again. Leprechauns don't really exist, and you can't end insolvency with magic and lucky charms. It was at this point you were coerced/forced to accept the outside aid of the Troika and further in debt your citizens as well as endure extreme austerity. Guess what, it's apparently not over - not by a long shot!

I have spent the last week clearly demonstrating how Irish banks could have passed the stress tests yet fail anyway. See:

1. Global Banking Crisis - How & Why YOU Will Get "Cyprus'd" As This Bank Scrambled For Capital!!!
2. As If On Cue, BoomBustBlog Shenanigan Research Gets Real In Ireland, Why Aren't These Guys Knocking On My Door?
3. Are You About To Get Cyprus'd in Ireland? When A Single Word's Worth Billions Of Euros...
4. Dear Ireland (& AIB), Haven't We All Learned The Problem Is Insolvency, Not Liquidity?
5. Oh No! Is It Possible? A 3rd Irish Bank With Hidden Charges Not Revealed In Its Annual Reports?

 The gist of this reporting is that it appears as if there was a significant amount of debt and/or encumbrances on Irish bank's balance sheets that was:

1. Not reported to regulators or possibly stress testers and
2. Material misstatements and/or omissions regarding encumbrances and debt.

In essence, these banks were not as healthy as they claimed! If one were to add the encumbrances and unreported borrowing back on to these bank's balance sheets, then add this (since the Irish government essentially bought many of them) onto the Irish government's balance sheet, what would we have?

My guess is we'd have a country that was forced to go back to the Troika on hands and knees. Worse yet, we'd have the "Cyprus" style of bank recaps become mainstream with Irish bank depositors losing money faster that a floozy loses virginity on prom night. Below is a very extensive financial modelling of the Irish bailout by the Troika - the same model that was used to generate the subscription documents in Beware of the Potential Irish Ponzi Scheme! This is a level of analysis that is simply not available on the web, but I'm making it available as a PSA (public service announcement) for the Irish people. I invite you to, no... I dare those of you who are in the industry to play with it and add back the levels of debt that has been mysteriously disappeared from Irish bank regulatory statements. Go ahead, and see where the country of Ireland really stands. 

I don't think it will be difficult to ascertain that Ireland may very well need another bailout, of both its banks and quite possibly the motherland herself. After Cyprus, we all know who'll pay for the bank bailout, right? Thank your deity that there are no other Irish banks that have somehow concealed their encumbrances, right? We'll see. After all, another big bank with big secrets may be enough to push Ireland over the edge, no?

This app will be available to the public until the middle of next week, after which it will be solely the purview of my professional and institutional subscribers (click here to subscribe). I will place comments from time to time below in the comment section.

If you have believe that the information below actually identifies a gross misrepresentation of fact, omission or outright fraud, simply contact the SEC and let them know that Reggie Middleton suggested they look into it. You can actually use this form to convey my message. For paid subscribers, I've posted another potentially "Cyprus'd" EU bank with shortable US/LSE traded shares/options for subscribers, reference EU Bank Capital Confusion, Part 2 - Malarkey (you may subscribe here). There will be another bank added within 36 hours.

Here's that interest rate calculator from EU Bank Depositors: Your Mattress Is Starting To Look Awfully Attractive - Bank Risk, Reward & Compensation . It shows how much interest you should be getting in return for the banking risk that you are taking.

As a reminder for those who wish to ignore my banking calls as a frivolous episode of Chicken Little, I suggest you explore the query, "Who is Reggie Middleton?" BoomBustBlog is the place that was the first to reveal:

As was to be expected, the defense of Allied Irish Banks has begun. Let's delve deeper into this bank capital/liquidity thing, shall we? I caution thee, though. Often, the deeper you look, the more you wil find. In response to BoomBustBlogger Andy C20's comment on my article "Are You About To Get Cyprus'd in Ireland? When A Single Word's Worth Billions Of Euros...", as written below:

Reggie,
Perhaps I am missing something. 
I fail to see the charge discrepancy. Firstly we do not have the definition of Eligible Securities as governed by the Floating Charge so it is fair to say these Eligible Securities could be classified as certain segregated securities i.e. they are “certain” segregated securities because they relate only to Eligible Securities and do not include Non-Eligible Securities. Furthermore, while assets may be classed as Eligible Securities it does not mean they have actually been put into use as security.
I really do not understand your reasoning here. Why are you providing links to charge documents relating to AIB's participation in a payment system and then discussing the ins and outs of its repo schemes? They would be two completely separate items.
Perhaps you have other documents to hand but there is nothing posted above from which any conclusion could be made.

Here's how I see things. The following definition of "Eligible Securities" is taken directly from Allied Irish Banks, p.l.c. charge document:

image004image009

A reader posted the following in reference to Are You About To Get Cyprus'd in Ireland? When A Single Word's Worth Billions Of Euros... As a refresher, this is the graphical  arrangement of the interconnected dealings between the ECB and the Irish banks... 
image002

I suspect what you are looking at Reggie is not really an issue for the bank's capital. It looks to me like the ECB is securing itself against the risk that a bank won't voluntarily return a mistaken or fraudulent transfer of funds via Target2. I think in order to participate in Target2, the bank has to contractually give the ECB the right to seize and sell its assets, if that's what it takes to retrieve a mistaken or fraudulent transfer of funds. Tells you something about the level of trust among Europeans. You might want to check other Eurozone banks with US listings and see if all of them don't have this exact same charge filed with the SEC. My guess is they all do.  

At first I thought it might be related to the refinancing and emergency liquidity assistance loans AIB has outstanding from the Irish central bank. Collateral is pledged for those which the ICB could sell if it decides not to roll over the funding and AIB doesn't repay. But the reference to Target2 would make no sense if this were about collateral posted to the ICB.

That said AIB is indeed still a mess for a lot of other reasons.

Actually, AIB is a mess for this reason AND many other reasons as well. The inclusion of charges for the purposes of Target 2 is likely a sham. The Irish banks were dead broke, and without a printing press to manufacture funny munny like we do here in the states. They were fresh out of eligible collateral to pledge to the ECB for more emergency loans. Here's evidence that the Irish charge system was not only unique, but not necessary for the purposes of Target 2.

image016

Here come's the next bank surprise. This bank, which is still trading in the US/Ireland and is still accepting deposits and making loans, appears to have some pretty fishy underpinnings. For paid subcribers, I've posted another potentially "Cyprus'd" EU bank with shortable US/LSE traded shares/options for subscribers, reference EU Bank Capital Confusion, Part 2 - Malarkey (you may subscribe here). As was the case in my last post, if you have believe that the information below actually identifies a gross misrepresentation of fact, omission or outright fraud, simply contact the SEC and let them know that Reggie Middleton suggested they look into it. You can actually use this form to convery my message. Let's start by excerpting the history of the country in question from yesterday's post, "Global Banking Crisis - How & Why YOU Will Get "Cyprus'd" As This Bank Scrambled For Capital!!!".

Introduction and Background

In 2007 Ireland had significant cross border exposure to UK and US banks through derivatives and property products. As I warned in 2007, the real estate bubble in the the US/UK popped in 2008, sending pathogenic contagion straight through the Irish banking system. The entire banking system started collapsing. On February 15, 2008, Ireland took extraordinary measures (which we will explore in depth a little later on) to mitigate said collapse, measures that many a layperson would deem misleading, if not fraudulent. RBS (Royal Bank of Scotland, one of the largest financial institutions in the countries of Ireland and the UK) was effectively nationalized by the UK and a bad bank was formed to purchase bad debt/products from the Zombie Irish banks in exchange for government bonds, backed by a country that just simply couldn't afford it.

Following my warning in February of 2008, Lehman filed bankruptcy in September sending an additional set of contagion shock through Ireland and its banking system, causing Ireland to issues bonds and further indebt itself to save its Zombie banks – again! This time through blanket bank guarantees backed by the full faith of the government.

In September of 2010, a large swath of said government guarantees for the banks were about to expire. Reference this excerpt from the book “Zombie Banks: How Broken Banks and Debtor Nations Are Crippling the Global Economy”:

In September 2010, some of Ireland's government guarantees for bank debts were about to expire, which put U.S. Treasury officials on edge. If the guarantee wasn't renewed, the banks would likely default on their bonds, triggering the next event in line: a slew of credit default swap (CDS) contracts on Irish banks' debt. U.S. Treasury officials had reason to worry - the names backing those contracts were the largest U .S. banks, and they could end up paying billions in case of default. Any more weight on U.S. banks could be a tipping point to collapse. Treasury officials made inquiries to their counterparts at the Irish finance ministry asking about the course of action the country was planning to take and indicated their concern about possible default and its CDS repercussions. A year after having issued blanket guarantees on the banks' liabilities the Irish government once again didn't dare let the bank fail. Instead it ended up asking for financial assistance from the European Union (EU) and the International Monetary Fund (IIMF): the country had been pushed to the brink of collapse.

image002

And now, on to the entity at hand...

Allied Irish Banks (AIB)

As you can see, AIB (Allied Irish Banks) is currently operational, taking deposits and making loans. It trades ADRs on the NSYE, having been delisted from the LSE and the Irish Stock Exchange after the Irish government nationaized it.

As per Wkikepedia: 

 AIB offers a full range of personal and corporate banking services. AIB Capital Markets is the division of the company that offers international banking and treasury operations. The bank also offers a range of general insurance products such as home, travel, and health insurance. It offers life assurance and pensions through its wholly owned subsidiary, Ark Life Assurance.

 In December 2010 the Irish government took a majority stake in the bank. AIB shares are listed as an American Depositary Receipt (ADR) on the New York Stock Exchange, under the symbol AIB. AIB's shares were formerly traded on the Irish Stock Exchange and the London Stock Exchange, but its shares were delisted from these exchanges following its effective nationalisation. The remaining publicly traded shares of AIB are now listed on the Enterprise Securities Market of the Irish Stock Exchange.

 Internationally, AIB operates mainly in the United Kingdom (as Allied Irish Bank (GB) and First Trust Bank in Northern Ireland), and Poland (as Bank Zachodni WBK SA(BZ-WBK)). In November 2010, it sold its 22.5% stake in M&T Bank in the United States. At the beginning of 2008 AIB entered the Latvian, Estonian and Lithuanian markets by acquiring AmCredit mortgage finance business from the Baltic – American Enterprise Fund. 

It's obvious this was an error in judgement, as a matter of fact it was extremely ill timed - reference The Depression is Already Here for Some Members of Europe, and It Just Might Be Contagious!

... In 2009, Allied Irish Banks [] accepted a 3.5 billion euro bailout from the government of the Republic of Ireland as a part of the Bank Recapitalisation scheme. By March 2011 the total sum of required bailout was expected to climb up to 13.3 billion euro.

Nationalisation

On 30 September 2010, the Irish Government announced plans to use its National Pensions Reserve to inject €3.7 billion of capital into Allied Irish Banks, becoming the majority shareholder and effectivelynationalizing the bank.^[50]

AIB needed to raise additional capital due to increasing losses on bad loans incurred from the real estate bubble, and Irish Finance Minister Brian Lenihan stated that the bank was unable to attract sufficient interest from private investors.^[50][51] As part of the deal, Chairman Dan O'Connor agreed to quit the bank while managing director, Colm Doherty, announced he would leave before the end of the year after 13 months in the job.^[52]

In December 2010, the European Commission approved the plans, and the Government passed emergency legislation to allow the deal to take place without requiring the approval of existing shareholders.^[53] The High Court subsequently approved the deal on Dec 24 2010, allowing the Irish government to take a 49.9% stake in the bank, rising to 92.8% following disposal of the Polish subsidiary to Banco Santander.^[53][54]

AIB became the fourth of Ireland's "Big Six" financial institutions to be nationalized, following Anglo Irish Bank, Irish Nationwide, and EBS Building Society. AIB was delisted from the main market of the Irish Stock Exchange on 25 January 2011^[3] and the NYSE on 26 August 2011

Credit Event occurred

The ISDA Determinations Committee, consisting of 15 USA and European banks, decided that a restructuring credit event occurred with respect to Allied Irish Banks on June 9, 2011

 Hmmm.. A credit event occurred... 

 AIB has inccurred significant debt from which the underlying collateral has significantly diminished. This caused the need for even more capital and more borrowing. It also apparently caused it to change the wording in its annual statements regarding repos, potentially allowing it to conceal financial aid in the form of even more debt .from another party. After all, when you borrow something it's a loan right, as in additional debt??? Below, you see a loophole for near unimited borrowing, and not a peep will show up in the financial reporting!

Of course, theres more...AIB Charge Discrepency

Definitions: Charge - The document evidencing mortgage security required by Crown Law (law derived from English law). A Frixed Charge refers to a defined set of assets and is usually registered. A Floating Charge refers to other assets which change from time to time (ie. cash, inventory, etc.), which become a Fixed Charge after a default.

The charge document below, which was registered with Ireland’s Company Registration Office (CRO), states that the charge is in respect of the Company’s participation in Target 2-Ireland. It is also in respect of ‘all present and future liabilities whatsoever’ of Allied Irish Bank Plc. (to the Central Bank and Financial Services Authority of Ireland or to the European Central Bank). The charge is over ‘Eligible Securities’.

Target2 is a European Union payment system. I believe it is misleading to indicate in the annual accounts that Target 2 has a bearing on the security that has been given.

In the short particulars section of the charge; the property charged to the Central Bank and Financial Services Authority is over ‘all rights, title, interest and benefit, present and future, of AIB Plc. in and to each of the Eligible Securities from time to time, where ‘ Eligible Securities’ means, at any time securities of such a class or description as may from time to time  be designated  by the ECB as ‘Eligible for  Sale and /or Purchase, as the case may be.’ (Refer to actual CRO charge document below)

AIB Charge Discrepency1 copy

In the Irish version of the Bank’s annual Accounts (2008) and the SEC 20F (page 223 - 2) it states that the charge was placed in favour of the Central Bank and Financial Services Authority of Ireland over all of AIB’S ‘right, title, interest and benefit present and future in and to certain segregated securities.’

Using the description ‘certain segregated securities’ is completely different to the description all ‘eligible securities.’

It appears that AIB is stating that they have given ‘certain segregated securities’ as security to the ECB whereas the ECB actually decides which securities will be designated as ‘eligible’. The charge is in favor of the Central Bank and is over ‘all present and future liabilities whatsoever’ of AIB. This charge is a floating charge over repo agreements, aka Eligible Securities - securities that the graphic above demonstrates can go on ad nauseum and way beyond the entities prudent ability to repay, yet not appear on the balance sheet or in its regulatory reporting!!!. These securities have been purchased by the ECB through the repo agreements.

Thus, it appears as if this floating charge granted to the ECB is over assets that the ECB already owned. The floating charge was given to the ECB by AIB for emergency funding (emergency liquidity). Do you see a circular argument here? A potential Ponzi even???!!!! I warned my paying subscribers three years ago, Beware of the Potential Irish Ponzi Scheme!

Very important note: BoomBustBlogger JPM noted below in the comment sections the following...

Reggie,
First up, big fan of your work. One of the few people genuinely worth listening to these days. You have consistently had the quality dope on these dopes over these past few years. 
However, as an Irishman, I would draw your attention to one slight anomaly in the above post. It relates to the image containing the extracted explanation of AIB's Gross Settlement Systems from its annual report alongisde a page from a CRO charge filing. As far as I can see, the extracted page from the CRO charge filing actually relates to a charge filed by that other "AIB", Anglo Irish Bank, not Allied Irish. If you look at the name of the lawyer on the filing, it comes from the (former) lawyers for Anglo, Eugene F Collins, not Allied Irish Bank's lawyers. 
Correct me if I am wrong though. 
Notwithstanding that minor aberation, I wholehearetedly agree with your general thesis; Irish banks are a complete shambles, and the increasing German intransigence toward sharing some of the burden (for whcih many German banks were also responsibile) bodes ill for creditors of all colours, classes and stripes. 
Of course I hope it doesn't come to that for many friends of mine, but I fear you may (yet again) be on to something.
To follow on from my post above; it has occurred to me that perhaps the same lawyers were filing the same duplictious charges (as compared with the charges disclosed in the annual reports) on behalf of a number of their insolvent clients (relying on the nuanced cut and paste skills one learns in law school!!). 
If that is so, my above post stands corrected. 
While it's somewhat moot (given that the real issue is how likely it is that AIB will require further capital - very, given enough time and further, ahem, "credit crunches" (solvency blow-ups??)) , but perhaps, if you have a moment, you could clarify whehther that CRO filinig extract is in fact from a charge filed on behalf of allied Irish, not Anglo Irish? 
Thanks, and keep up the great work!
Yours,
An Irishman Watching On In Horror From Australia.

He happens to be absolutely right. I mistakenly put the charge from Ango Irish in with the annual accounts of Allied Irish. We already covered Anglo Irish Bank in Global Banking Crisis - How & Why YOU Will Get "Cyprus'd" As This Bank Scrambled For Capital!!!

It is sharp readers and subscribers such as this that makes BoomBustBlog what it is today. He actually caught the error by recognizing the lawyer's name as representing the other bank. Unfortunately, he is also correct in that this means very little difference in the grand scheme of things for even if this charge didn't exist, AIB is still over encumbered and swimming in underwater borrowings - in my all so humble opinion. There's also the fact that AIB actually did enter into and all encompassing charge to save its ass, just like Anglo Irish did. Yep, I made a boo-boo, but it means nothing for AIB, let's correct here and make sure we get the laywers right this time around....

image004image009 copy

Now, back to our regularly scheduled programmings...

These charge documents apparently have not been included in the recent ‘stress testing’ conducted by the European Banking Authority. By AIB's own admittance, they are not recognizing the borrowing of securities unless the are intended for resale to a third party. This was not the case in the previous year!!! If this is true, these assets can very well appear on the balance sheets of both the ECB and AIB.

The assets should not appear on AIB’s balance sheet as a negative pledge clause, which the ECB was granted, prohibits the bank from doing this, see details in charge document.

Now, let's suppose you buy all of that malarky above regarding charges, disclosure, borrowing not showing up on the balance sheet, etc. Knowing what Ireland had to go through to bail out its banks the first two times, and then needing to go to the ECB/IMF the third time, and knowing what Germany did to Cyprus and it's bank depositors/bondholders last week... I just want to ask you bank customers one question. Do 'ya feel lucky??? If I'm on to something with the research above (and to be honest, it looks awfully convincing) and Ireland's already bailed its banks twice, and had to go to the ECB after those bailouts because it was broke, then what happens when this bank needs more capital.

The way I see it, if Cyprus is the new template, than depositor funded recaps (read, they take your money to bail out the bank) are inevitable!

If you have believe that the information below actually identifies a gross misrepresentation of fact, omission or outright fraud, simply contact the SEC and let them know that Reggie Middleton suggested they look into it. You can actually use this form to convery my message.

Here's that interest rate calculator from EU Bank Depositors: Your Mattress Is Starting To Look Awfully Attractive - Bank Risk, Reward & Compensation . It shows how much interest you should be getting in return for the banking risk that you are taking.

Anglo Irish Bank/IBRC bondholders will actually get some of their money back!

April Fools!!!

As if on cue, a day after my expose on Anglo Irish Bank and its shenanigans (see Global Banking Crisis - How & Why YOU Will Get "Cyprus'd" As This Bank Scrambled For Capital!!!), The Irish Business Post announces senior bondholders will get wiped out. That's right, a 100% loss! Zilch! Zero! Nada! Now, that's investing. That's getting "Cyprus'd", plus some!!! From businesspost.ie: IBRC senior bondholders to be burned

anglobondwipeout copy

If you thought this was interesting, you ain't seen nothing yet. This was just the preamble, I have a whole list of banks, each with a story more ludicrous than the last, each still taking deposits, and yes.... for the US centric Americans, with operations in the US and securities trading on our exchanges. Paying subscribers (at this point, I don't see why most of you aren't paying, you'll let these banks take your money for .7% interest, but you won't pay a few dollars for a hardcore educational analysis???) can access the first of these banks right now -  EU Bank Capital Confusion, Potential Failure. You may click here to subscribe...

businesspost.ie

It is my opinion that banks worldwide are simply not safe anymore, and we are on the precipice of a banking crisis that will make the Lehman fiasco look like a test run. For one, interest rates will definitely have to rise. Yes, I know Bernanke is running ZIRP, the ECB is QE to infinity and beyond, yada, yada... But these entities are not the end all and be all for market rates. They can manipulate rates, but they can't ultimately control them for the long term. After 6 years, it's been long term...  With banks failing and taking depositor's and bondholder's funds with them, there's simply not enough people stupid enough to accept .7% returns in exchange for the very likely possibility of losing a large chunk of (the majority of, or possibly all of) their principal to go around!!! This central bank Ponzi scheme of printing more money to pay for the debt that you couldn't afford to pay back because you didn't have the money relies on the "Greater Fool Theory". Common sense dictates that this theory is predicated on an ample supply of "Greater Fools". What you will read below should shake the foundations of your belief in the EU banking system, and hopefully will start a dearth in "Greater Fools"! Even more alarming, it actually gets worse from here. Oh yeah, if you have believe that the information below actually identifies a gross misrepresentation of fact, omission or outright fraud, simply contact the SEC and let them know that Reggie Middleton suggested they look into it. You can actually use this form to convery my message.

First Off Let's Make Bank Collapse Real...

To begin with, let's make this Cyprus thing real, by showing a live example of what happens when to a real small business that had the gall to bank with Laikie Bank, from the Bitcoin forum I excerpt a post that puts things into perspective, re: bank account confiscation:

Most of the circulating assets on our business Current Account are blocked. 
Over 700k of expropriated money will be used to repay country's debt. Probably we will get back about 20% of this amount in 6-7 years.
I'm not Russian oligarch, but just European medium size IT business. Thousands of other companies around Cyprus have the same situation.
The business is definitely ruined, all Cypriot workers to be fired.
We are moving to small Caribbean country where authorities have more respect to people's assets. Also we are thinking about using Bitcoin to pay wages and for payments between our partners.
Special thanks to:
- Jeroen Dijsselbloem
- Angela Merkel
- Manuel Barroso
- the rest of officials of "European Comission"

Laiki Bank has offered details...DecreeEN Page 1DecreeEN Page 2DecreeEN Page 3

Next, Let's Realize That Cyprus Is Not A "Special Case", It Is Like The Template For Future Actions

Just the fear of another wave of bank collapse has government officials and regulators in fear. Why are they afraid? I made the cause of such fear clear to all at the ING Valuation Conference in Amsterdam.

With the knowledge contained in the video above, it's not hard to see the Infection spreads to North America as The Canadian Government Offers "Bail-In" Regime, Prepares For The Confiscation Of Bank Deposits To Bail Out Banks! Hold on, before you start worrying about your Canadian bank, you should be aware that the EU banks are still much, much, much worse off. Let's forget Cyprus for a minute and look deeper into the EU, into a larger country with more globally interconnected banks.

On Thursday, 29 April 2010 I warned my subscribers to Beware of the Potential Irish Ponzi Scheme! Shortly thereafter, the BoomBustBlog Irish Research Became Reality. That same month, I warned again with the post, "Many Institutions Believe Ireland To Be A Model of Austerity Implementation But the Facts Beg to Differ!" Five months later, I went back at Ireland again with "If the World Knew What BoomBustBlogger's Know, Would Ireland Default Today?" This post was the clincher, to wit:

The Farce!

The government has set up an asset management agency – NAMA, which will buy toxic assets from banks at a discount and will in turn issue government-guaranteed securities. NAMA was expected to buy about $81 billion of toxic assets at a price of $43 billion and issue government-guaranteed securities in return. Since these securities have collateral backing and are likely to be repaid through the pay back of underlying loans, these securities are considered off-balance-sheet and are not part of general government debt by Eurostat. According to Davy research, while the projected gross government debt excluding the impact of promissory notes and NAMA bonds is 84.8% in 2012, including the impact of promissory notes and NAMA bonds (in other words, including the truth), the gross government debt can rise to 117.4% of GDP. This either competes with or bests Greece, 2010's poster child of flagrant spending.

This means that the teacher has created a very harsh austerity plan for its "learner"/student/tax paying populace that has materially lowered the standard of living - all based upon numbers that were bogus to begin with. In other words, it ain't gonna work!

Well, today we have proof and that proof will likely leave some EU bank despositors "Cyprus'd", and I don't mean just those in Cyprus either.

Introduction and Background

In 2007 Ireland had significant cross border exposure to UK and US banks through derivatives and property products. As I warned in 2007, the real estate bubble in the the US/UK popped in 2008, sending pathogenic contagion straight through the Irish banking system. The entire banking system started collapsing. On February 15, 2008, Ireland took extraordinary measures (which we will explore in depth a little later on) to mitigate said collapse, measures that many a layperson would deem misleading, if not fraudulent. RBS (Royal Bank of Scotland, one of the largest financial institutions in the countries of Ireland and the UK) was effectively nationalized by the UK and a bad bank was formed to purchase bad debt/products from the Zombie Irish banks in exchange for government bonds, backed by a country that just simply couldn't afford it.

Following my warning in February of 2008, Lehman filed bankruptcy in September sending an additional set of contagion shock through Ireland and its banking system, causing Ireland to issues bonds and further indebt itself to save its Zombie banks – again! This time through blanket bank guarantees backed by the full faith of the government.

In September of 2010, a large swath of said government guarantees for the banks were about to expire. Reference this excerpt from the book “Zombie Banks: How Broken Banks and Debtor Nations Are Crippling the Global Economy”:

In September 2010, some of Ireland's government guarantees for bank debts were about to expire, which put U.S. Treasury officials on edge. If the guarantee wasn't renewed, the banks would likely default on their bonds, triggering the next event in line: a slew of credit default swap (CDS) contracts on Irish banks' debt. U.S. Treasury officials had reason to worry - the names backing those contracts were the largest U .S. banks, and they could end up paying billions in case of default. Any more weight on U.S. banks could be a tipping point to collapse. Treasury officials made inquiries to their counterparts at the Irish finance ministry asking about the course of action the country was planning to take and indicated their concern about possible default and its CDS repercussions. A year after having issued blanket guarantees on the banks' liabilities the Irish government once again didn't dare let the bank fail. Instead it ended up asking for financial assistance from the European Union (EU) and the International Monetary Fund (IIMF): the country had been pushed to the brink of collapse.

image002

The next few posts will document details the financial shenanigans played by several EU banks (Ireland included), among others, to the tune of over €40 billion. This money was essentially double counted, or to put more simply, at least one version of it simply doesn't exist on someone’s balance sheet.

I have compiled a list of at least 6 banks which I feel are at risk of being Cyprus'd, with more being added weekly. The first bank report, whose subject is still steadily accepting deposits at measly interest rates, is available for download right now for all paying BoomBustBlog subscribers (click here to subscribe), reference  EU Bank Capital Confusion, Potential Failure. Those of you who actually follow this banking stuff may very well be shocked at how bold the actions described therein actually are!

For now, let’s focus on Ireland and the Irish banks.

Anglo Irish Bank

Anglo Irish Bank which subsequently became Irish Bank Resolution Corporation (IBRC), was recently liquidated by the Irish Government. Included below are three documents executed by this bank. The first two are charge documents that the bank entered into on the 15th of February, 2008. These charges are in favor of the Central Bank and Financial Services Authority of Ireland (the ECB). They are floating charges over Secured Obligations (repo agreements) and the banks payment module account.

Anglo Irish Bank Charge Doc no2 Page 1Anglo Irish Bank Charge Doc no2 Page 2Anglo Irish Bank charge doc Page 1Anglo Irish Bank charge doc Page 2

So, What's So Special About These Documents???

The reasons given for the floating charges are the banks participation in Target 2, which is a interbank, cross-border EU real-time payment system. A former Group Chief Auditor of one of Ireland’s largest banks who was part of the team who conducted the stress testing for the European Banking Authority was allegedly quite shocked to see the various charge documents herein. He informed BoomBustBlog consultants that these charge documents were not included in the stress testing. For those who don’t get the gravity of this statement – the previous encumbering of the Irish bank’s assets were ignored or not known by those who conducted the stress testing for the banks. What makes things even worse was despite the fact the bank’s assets were double counted, allowing them to pass the stress tests, they promptly started failing post stress test… And I do mean promptly, as in within months.

The chief auditor was also allegedly able to inform that the reasons given for the purpose of the charges was a red herring. He allegedly advised that Target 2 is only a payment system and the description stated was a complete misrepresentation of the true reasons.

The real reasons for the charges were because the bank was completely bust. The bank had already previously entered into repo transactions (secured obligations) with the Irish Central Bank (ECB) and had run out of money. The Irish Central Bank gave further funding using these charge documents. The share price of Anglo in February 2008 was still quite high but started to collapse over the coming months. These charge documents are not disclosed in the Annual Accounts (the EU version of an annual report) for the 31st of March, 2008.

Questions also arise as to the validity of the asset transfer, the legality of Anglo Irish Bank and/or the ECB entering into repo agreements, and the activity of Anglo Irish Bank in regards to its trading activity… If a charge was given over ALL of Anglo Irish's assets, then exactly how did it legally engage in the MBS, derivative and trading activity? Underlying assets must be pledged to a trust in order to create many derivative structures, including MBS, but if there's a negative pledge clause in the charge and the charge covers nearly everything, then those assets don't truly belong to said trust, do they? You can imagine how far one can go with this line of thinking, no?

If you were an investor, shareholder, bondholder or regulator the information above was critical information - EXTREMELY CRITICAL INFORMATION! Anglo ADR's were also traded through brokers in the USA. I am sure that ADR holders would have liked to have been aware of this information, as well as the SEC.

I see a number of avenues which could be worth pursuing, including terms of recompense for junior bondholders who got hosed, equity shareholders who lost capital, counterparties, etc. This is, to my lay ears, tantamount to blatant fraud. Of course, I’m not an international banking lawyer, so what do I know??? Yet, I have only touched on some of the issues. There’s a lot more to come.

In relation to Anglo Irish Bank (IBRC), the 2008 charge document states that the charge covers ‘all present and future liabilities whatsoever of the company, to the Central Bank of Ireland (ECB).’ But there is no disclosure of this in the Anglo 2008 accounts (annual report). This appears to illustrate concealment of the true facts. If these charge documents have not been overridden, then a massive amount of assets in the bank have been over-encumbered. Even if the charges have been overridden in some form or fashion, the mere omission of their existence is a misrepresentation of the banks financial condition, particularly in the stress testing of the banks and regulatory financial reporting (ex. SEC).

If you believe that the information above actually identifies a gross misrepresentation of fact, omission or outright fraud, simply contact the SEC and let them know that Reggie Middleton suggested they look into it. You can actually use this form to convey my message. 

As a reminder for those who wish to ignore my banking calls as a frivolous episode of Chicken Little, BoomBustBlog is the place that was the first to reveal:

The Banks Are Bigger Than Many of the Sovereigns

image015.png

Definitions:

 Charge

The document evidencing mortgage security required by Crown Law (law derived from English law). A Fixed Charge refers to a defined set of assets and is usually registered. A Floating Charge refers to other assets which change from time to time (ie. cash, inventory, etc.), which become a Fixed Charge after a default.

Repurchase Agreement

A repurchase agreement, also known as a repo, RP, or sale and repurchase agreement, is the sale of securities together with an agreement for the seller to buy back the securities at a later date. The repurchase price should be greater than the original sale price, the difference effectively representing interest, sometimes called the repo rate. The party that originally buys the securities effectively acts as a lender. The original seller is effectively acting as aborrower, using their security as collateral for a secured cash loan at a fixed rate of interest.

A repo is equivalent to a spot sale combined with a forward contract. The spot sale results in transfer of money to the borrower in exchange for legal transfer of the security to the lender, while the forward contract ensures repayment of the loan to the lender and return of the collateral of the borrower. The difference between the forward price and the spot price is effectively the interest on the loan, while the settlement date of the forward contract is the maturity date of the loan.

Target 2

TARGET 2 is an interbank payment system for the real-time processing of cross-border transfers throughout the European Union. TARGET2 replaced TARGET (Trans-European Automated Real-time Gross Settlement Express Transfer System) in November 2007.

Next up is a bank that is still steadily accepting deposits at a steady clip, paying ungodly low interest rates, and setting itself up to potentially get "Cyprus'd". Paying subscribers can download the report now, before capital controls are set in - see  EU Bank Capital Confusion, Potential Failure. Everybody else can subscribe or wait until either I make it public or the respective government does the Cyprus Thang! Yes it pays to be a BoomBustBlog member (click here to subscribe).

I will start posting a list of definitive bank names that I have apparently caught in some amazingly duplicitous and misleading capital schemes, at least as it appears to me and my staff. I know I wouldn't have MY money in them, particularly after reading the info above.

Follow me:

Related posts of extreme interest:

canadian dollar 400Continuing my series of banks ready to "Cyprus" their depositors, I offer this reader contribution from Don from Canada 2013-03-29 23:11:

Maurice Greenberg, the ousted CEO, Chairman, and founder of AIG who remains a major investor in the company, filed suit in 2011 on behalf of fellow shareholders against the government. He has urged A.I.G. to enjoin which should pressure the government into settlement talks - that is if the powers that be don't start distending the law. NY Times Dealbook looks at it this way:

Should Mr. Greenberg snare a major settlement without A.I.G., the company could face additional lawsuits from other shareholders. Suing the government would not only placate the 87-year-old former chief, but would put A.I.G. in line for a potential payout.

Yet such a move would almost certainly be widely seen as an audacious display of ingratitude. The action would also threaten to inflame tensions in Washington, where the company has become a byword for excessive risk-taking on Wall Street.

Some government officials are already upset with the company for even seriously entertaining the lawsuit, people briefed on the matter said. The people, who spoke on the condition of anonymity, noted that without the bailout, A.I.G. shareholders would have fared far worse in bankruptcy.

“On the one hand, from a corporate governance perspective, it appears they’re being extra cautious and careful,” said Frank Partnoy, a former banker who is now a professor of law and finance at the University of San Diego School of Law. “On the other hand, it’s a slap in the face to the taxpayer and the government.”

AIG has every right and responsibility to sue the US for excessive interest payments on it's bailout! Yes, the company failed in execution. Yes, the company would have went bust if the government didn't rescue it. But that is besides the point. If the government wanted market forces to reign supreme they would have let AIG collapse. The fact is they didn't. The reason is because the government was bailing out the banks, namely the most politically connected publicly traded entity in the entire world. The Vampire Squid! Goldman Sachs! As excerpted from the NY Times:

At the end of the American International Group’s annual meeting last month, a shareholder approached the microphone with a question for Robert Benmosche, the insurer’s chief executive. “I’d like to know, what does A.I.G. plan to do with Goldman Sachs?” he asked. “Are you going to get — recoup — some of our money that was given to them?

As a condition of AIG's bailout, the government "insisted" on paying Goldman et. al. 100 cents on the dollar of its CDS written with AIG, something that wouldn't have been necessary if Goldman had prudently underwritten counterparty and credit risks that it was taking. Apparently, the US government believes that it didn't. In addition, it's somethng that wouldn't have been possible if the government didn't intervene on behalf of the banks, forcing the AIG shareholders to take a hit, but shielding the Goldman, et. al. shareholders. As my grandma used to tell me, what's good for the goose is good for the gander! It's not as if these credit/counterparty risks were invisible, I saw them as far back as early 2008 - reference I won't say I told you so, again. This page also happened to of shown the credit risk concentration of every bank granted a reprieve by the government after the fact. As a matter of fact, there's still more than a modicum of risk present, as clearly illustrated in...

Hunting the Squid, Part2: Since When Is Enough Derivative Exposure To Blow Up The World Something To Be Ignored?Hunting the Squid, Part2: Since When Is Enough Derivative Exposure To Blow Up The World Something To Be Ignored?

Hunting the Squid, Part2: Since When Is Enough Derivative Exposure To Blow Up The World Something To Be Ignored? Welcome to part two of my series on Hunting the Squid, the overvaluation and under-appreciation of the risks that is Goldman Sachs. Since this highly analytical, but poignant diatribe covers a lot of material, it's imperative that those who have not done so review part 1 of this series, I'm Hunting Big Game Today:The Squid On The Spear Tip, Part...

Hunting the Squid, part 4: So, What Else Can Go Wrong With The Squid? Plenty!!!Hunting the Squid, part 4: So, What Else Can Go Wrong With The Squid? Plenty!!!

Hunting the Squid, part 4: So, What Else Can Go Wrong With Goldman Sachs? Plenty! Yes, this more of the hardest hitting investment banking research available focusing on Goldman Sachs (the Squid), but before you go on, be sure you have read parts 1.2. and 3:  I'm Hunting Big Game Today:The Squid On A Spear Tip, Part 1 & Introduction Hunting the Squid, Part2: Since When Is Enough Derivative Exposure To Blow Up The World Something To...

Now, AIG's shareholders are being forced to finance the bailout of Goldman Sachs. To not combat that should open AIG management up to shareholder lawsuits, for they are not acting as a fiduciary of the shareholder capital if they let this slide. It's one thing to pay for the AIG bailout, but its another to pay for the Goldman bailout. In addition, this forced bailout that refused to force AIG creditors not to take haircuts runs counter to the ideology the government used when it forced the Chrysler's creditor's to take massive haircuts.

When the government began rescuing it from collapse in the fall of 2008 with what has become a $182 billion lifeline, A.I.G. was required to forfeit its right to sue several banks — including Goldman, Société Générale, Deutsche Bank and Merrill Lynch — over any irregularities with most of the mortgage securities it insured in the precrisis years.

But after the Securities and Exchange Commission’s civil fraud suit filed in April against Goldman for possibly misrepresenting a mortgage deal to investors, A.I.G. executives and shareholders are asking whether A.I.G. may have been misled by Goldman into insuring mortgage deals that the bank and others may have known were flawed.

The anger here should be directed at Goldman, et. al., and not AIG. AIG's management is doing its job, something that our government officials failed to do in making Goldman, et. al. whole during the bailout. Can anyone say regulatory capture?  Goldman et. al.'s transgressions against its clients and counterparties in terms of misrepresentation and what appears to this lay person as outright fraud have been downright egregious, as clearly articulated in Goldman Sachs Executive Director Corroborates Reggie Middleton's Stance: Business Model Designed To Walk Over Clients, it's just that this time, the US taxpayer AND the AIG shareholders are the "Muppets"! The Abacus deal was particularly atrocious, Paulson, Abacus and Goldman Sachs Lawsuit. How about Morgan Stanley's CRE deals on behalf of their so-called clients? Wall Street Real Estate Funds Lose Between 61% to 98% for Their Investors as They Rake in Fees!

re_fund_returns.png

 If Goldman, et. al. were allowed to swim solely at the mercy of the free markets, it (they) would be sinking, Goldman Sachs Latest: Vindicates BoomBustBlog Research ...

... documents also indicate that regulators ignored recommendations from their own advisers to force the banks to accept losses on their A.I.G. deals and instead paid the banks in full for the contracts. That decision, say critics of the A.I.G. bailout, has cost taxpayers billions of extra dollars in payments to the banks. It also contrasts with the hard line the White House took in 2009 when it forced Chrysler’s lenders to take losses when the government bailed out the auto giant.

Regulatory capture! Banks simply lobby harder and pay more to the government than auto companies. How many auto company execs are embedded in government leadership seats worldwide?

As a Congressional commission convenes hearings Wednesday exploring the A.I.G. bailout and Goldman’s relationship with the insurer, analysts say that the documents suggest that regulators were overly punitive toward A.I.G. and overly forgiving of banks during the bailout — signified, they say, by the fact that the legal waiver undermined A.I.G. and its shareholders’ ability to recover damages.

“Even if it turns out that it would be a hard suit to win, just the gesture of requiring A.I.G. to scrap its ability to sue is outrageous,” said David Skeel, a law professor at the University of Pennsylvania. “The defense may be that the banking system was in trouble, and we couldn’t afford to destabilize it anymore, but that just strikes me as really going overboard.”

“This really suggests they had myopia and they were looking at it entirely through the perspective of the banks,” Mr. Skeel said.

Nahh? It's called the Federal Reserve Bank, not the Federal Reserve Insurer, nor the Federal Reserve Taxpayer! Who the hell do you think they will back in a crunch?

About $46 billion of the taxpayer money in the A.I.G. bailout was used to pay to mortgage trading partners like Goldman and Société Générale, a French bank, to make good on their claims. The banks are not expected to return any of that money, leading the Congressional Research Service to say in March that much of the taxpayer money ultimately bailed out the banks, not A.I.G.

Of which the interest of about 50% of which should be refunded to AIG shareholders. Without the AIG bailout, these banks would have recieved ZILCH, NOTHING, NADA, Bull Sh1t!