Geithner’s Ploy: Saving U.S. Banks at Taxpayer Expense, Once Again

[girl gone mad]

Geithner’s Ploy: Saving U.S. Banks at Taxpayer Expense, Once Again
http://neweconomicperspectives.blogspot.com/2012/01/geithners-ploy-saving-us-banks-at.html

By Michael Hudson

U.S. and foreign stock markets continue to zigzag wildly in response to expectations about whether the euro can survive, in the face of populations suffering under neoliberal austerity policies being imposed on Ireland, Greece, Spain, Italy, etc. Here’s the story that I’m being told by Europeans regarding the recent turmoil in Greece and other European debtor and budget-deficit economies. (The details are not out, as the negotiations have been handled in utter secrecy. So what follows is a reconstruction.)

In autumn 2012, it became apparent that Greece could not roll over its public debt. The EU concluded that debts had to be written down by 50 percent. The alternative was outright default on all debt. So basically, the solution for Greece reflected what had happened to Latin American debt in the 1980s, when governments replaced existing debts and bank loans with Brady bonds, named for Reagan Treasury Secretary Nicolas F. Brady. These bonds had a lower principal, but at least their payment was deemed secure. And indeed, their payments were made.

(snip)

In December (?) 2011, a quarter century after Mr. Brady, Mr. Obama’s Secretary Geithner went to Europe met with EU leaders to demand that Greece make the write-downs voluntary on the part of banks and creditors. He explained that U.S. banks had bet that Greece would not default – and their net worth position was so shaky that if they had to pay on their bad gambles, they would go broke.

As German bankers have described the situation to me, Mr. Geithner said he would kill the European banks and economies if they did not agree to take it on the chin and suffer the losses themselves – so that U.S. banks would not have to pay off on the collateralized default swaps (CDOs) and other gambles for which they had collected billions of dollars.

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[dixiegrrrrl]

1. Is anyone here surprised at this info?

[Demeter]

2. Furious,but not surprised

[mbperrin]

3. Perfectly stated.

Perfectly.

[Po_d Mainiac]

4. very confusing

In Autumn of 2012? Did that space time thingy finally get worked out?

Credit default swaps (CDO's)? Huh?

No mention of The International Swaps and Derivatives Association (ISDA) 'Determinations Committee'

The ISDA website reports that the members of the determinations committee for Europe include most major banks that issue credit default swaps, including Bank of America/Merrill Lynch, Barclays, BNP Paribas, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase Bank, N.A., Morgan Stanley, Société Générale, and UBS.

He agreed to open a credit line from the Federal Reserve Bank to the European Central Bank And all the while me thunked Tiny Turbo Timmy took his orders from the Bernank and Co.

[banned from Kos]

6. Hudson is out of his league. He means Credit Default Swaps like you say.

He can't get the basic nomenclature right.

Plus, CDS are still hidden as Dodd-Frank has not put them into an open exchange as of yet. So Hudson has NO fricking idea what the US banks exposure is (regarding Greece debt).

Hudson is a sham - a carnival barker.

[girl gone mad]

8. "carnival barker" is high praise coming from someone who thinks Corzine is an honorable man.

[CanonRay]

5. If it is us or the banks, they'll protect the banksters every time.

and no matter who is in power.

[Hotler]

7. I call for the French razor. n/t