Bank stocks slump 4% as US sues 17 banks for $196bn
Posted on 05 September 2011 with 2 comments from readers
With the US financial markets closed today it was the turn of the European markets to react to the news late last week that the US is suing 17 banks for $196 billion for misrepresenting the sale of subprime debt to Federal housing institutions Fannie Mae and Feddie Mac.
You do have to wonder what the US thinks it is doing after spending so many trillions in bailing out the global banking system. Why try to claw back $196 billion at this stage at the risk of bringing the whole system down again? Has Washington lost its marbles?
Eurozone crisis
In Europe the banks are facing a huge crisis this autumn with sovereign debts beginning to fail and Germany blocking a bailout (click here). Bank investors hardly need this sort of punative legal action to scare them witless.
Yesterday German Chancellor Angela Merkel suffered her fifth election loss this year after failing to sway voters in her home state with a campaign based on her handling of the euro area’s debt crisis. This is another factor behind the fall in European stock markets today.
Deutsche Bank CEO Josef Ackermann warned that this autumn seemed very much like the global financial crisis of 2008. He said the bank’s growth potential was in any case limited by the debt burden of sovereign and private debtors, and subdued real estate and retail financing.
On Thursday President Obama will make his much trumpeted and leaked speech on job creation to try to counter the bad news last week on the stalling of US job growth. But the impact of his words has grown less over time with their obvious impotence laid bare.
2011 crisis
It is increasingly apparent that another global financial crisis is almost upon us with the main players unable to agree on a policy formula or to propose anything with a realistic chance of preventing another painful shake-out.
Indeed, this time there will likely be no cushion to fall back on and the pain will come in rising unemployment, business failures, personal bankruptcies and the economic collapse of the most overstretched nations.
Stand well back from falling masonry! The time to exit financial markets is now and return when we seem to have hit the bottom. And that might not be until the end of October if historical precedent is any guide.
The ArabianMoney newsletter has been shorting banks as a part of its Bear ETF portfolio. The September issue showed a 58 per cent rise in this portfolio available only to subscribers (subscribe here).
2 Comments posted by readers:
The USA goes into another recession, and the banks will need a lot more money as more people won’t be able to pay their mortgages after they lose their jobs. And home values will go down even faster. More bank losses.
Imagine if everyone who invested in that sub-prime AAA rated junk could sue those who sold it as supposedly safe investments. The banks would be facing thousands of lawsuits for hundreds of billions. That wouldn’t be too good for the bank shareholders.
The guy who is running Fannie and Freddie may be appointed by some Federal judge, or something. He may be beyond any body’s control. The FBI may be listening to everything he, and his employees are doing, at his request. You must be very careful trying to influence any financial institution taken over by the Government, or under the oversight of a Federal judge. You can get arrested very quickly. There is a law against everything. A Federal judge just gave a contractor who cheated the City of New Orleans, 17.5 YEARS in Federal prison. Stay away from what the Government owns. The funny thing is that worthless, Ray Nagin brought him in to modernize the technology in City government. The civil servants weren’t moving government into the computer age quickly enough for Mr. Nagin. They weren’t stealing millions either. Nagin played the race card to get reelected after Katrina drowned 1,600 people. That is about as low as a human being can get. And ignorant people are buying his worthless book. Every reviewer said it is a waste of paper, full of lies.
That is my theory as to the motive for the bank suits. The guy in charge of the now Government property might just be a crusader going after every penny of the people’s money he can get. Too bad it’s not criminal prosecutions.
Or the Government might just be trying to shake down the banks for a 40 billion settlement. Uncle Sam needs the cash. They are even going after the rich US tax cheats in Europe, and in the Caribbean, so you know we are in trouble.
another week begun & A$ is off the pad w/ 3 crushing bits of world financial theatre..as pleasing it is to peruse P’s travel guides, it is more profitable reading the real WSJ/FT in under five minutes..A$ is hot when the king is on fire