Coppola Comment

Bob Diamond, CEO of Barclays, is fighting for his career. The extent of the LIBOR -fixing scandal for which Barclays was fined by the FSA on the 27th June is still unclear: many other banks are thought to be involved - probably all of the LIBOR panel banks . Barclays was the first to admit guilt, and its fine was reduced by 30% because of this. However, the media furore since has cost Barclays far more than that: its share price dropped by over 15% after the FSA announced its findings, and there have been persistent calls for Diamond to resign. He has now been "invited" to appear before the Treasury Select Committee to explain Barclays'  behaviour. Both Diamond's acceptance letter and the FSA report identify two quite separate and distinct forms of LIBOR-fixing. The first is the more widely reported, since it concerns the behaviour of traders - who everyone loves to hate anyway - and there are some salacious emails providing evidence of traders influencing LIBO...

The financial system is short of liquidity. "What???" you say. "Despite the trillions of dollars that the Fed, the Bank of England, the Bank of Japan and even the ECB have been pumping into it through their various varieties of money creation? How can the financial system POSSIBLY be short of liquidity?" Trust me, it is. But the conventional banking system isn't short of liquidity. The shadow banking system is. And this is a very serious matter, because the shadow banking system and conventional banking system are critically interlinked. If money stops circulating in the shadow banking system, it can't circulate in the conventional banking system either. The effect is that conventional banks end up awash with cash that they daren't lend out, and the shadow banking network grinds to a halt. Which is what is happening. So why isn't money circulating in the shadow banking system, and why does this affect the transmission of money in the convention...

Ever since the 2008 financial crisis, there have been calls to bring to account the people responsible for the near-collapse of the international financial system and the subsequent worldwide recession. But very few have been prosecuted, either nationally or internationally. In individual countries, notably the USA, some have been convicted of fraud and further prosecutions are pending. But there has been no international action against the principal actors in this drama - the financiers, the politicians, the regulators, the auditors and the economists. Again and again we hear people asking why no senior bankers are in prison, why there is no enquiry into how the financial system came so close to collapse and why no-one has been prosecuted for causing such devastation across the whole world. There are several reasons for this. Firstly, very few of these people have committed actual crimes under existing national or international law: endangering the international financial system isn...

Anyone remember Too Big To Fail? Ever since the financial crisis of 2008, there have been cries for large banks to be broken up. The idea is that no bank should be so large that it cannot be allowed to fail because if it did it would pose a threat to the domestic or international financial system. So far no banks have actually been broken up, apart from some that failed in 2008 - Lehman and ABN AMRO, for example. But governments and regulators around the world have been looking at ways of limiting bank size (taxing liabilities, for example), ensuring that failed banks can be resolved quickly and safely, and promoting competition in the banking sector to reduce bank power by giving customers more choice. Except in Spain. The Bank of Spain has taken the OPPOSITE view. Over the last four years it has promoted, encouraged and facilitated the merger of the regional savings banks - the cajas - into much larger conglomerates. Its stated aim is to reduce the number of cajas from 45 to 10...

This, courtesy of Pedro da Costa of Reuters: This is a slightly more comprehensive chart than the one I used at the start of my post The European Disaster Story . Spain's adult unemployment rate is now the same as the unemployment rate in the United States in 1933 at the height of the Great Depression. Greece will be at the same level or worse very soon. What a terrible waste of human life and potential. This is the real tragedy of Europe.

According to James Mackintosh of the Financial Times, JP Morgan produced some figures today that showed where the money provided to Greece in its much-publicised bailouts actually went. Here's what James said on twitter: " JP Morgan estimates only €15bn of €410bn total "aid" to Greece went into economy - rest to creditors. No wonder they are cross" No wonder indeed. The price they paid for those bailouts has been severe cuts in public spending and five years of deep recession. Their adult unemployment is now about 20% and their youth unemployment over 50%. And there is no relief in sight, only further cuts and deeper recession. The Greek economy is collapsing. No prizes for guessing who the main creditors are, either. Banks, of course. This fun interactive graphic from Thomson Reuters shows which countries' banks are the most exposed to Greece and therefore, presumably, have benefited the most from the bailouts. In the most recent bailout, of course,...

This, from a comment on Richard Murphy's blog . a. If the EU lends money to the Spanish government it presumably then lends it to the banks. b. According to orthodox theory every debt liability has a corresponding asset c. If that is true the worst that can happen is that the transaction is neutral so far as Spain is concerned d. It seems possible that it could actually reduce sovereign debt depending on the interest charged on the loans to the bank e. When Europe lends to a state it imposes conditions f. It follows that if a state lends to the banks it can equally impose conditions g. The state can therefore require that the banks use the money to repay deposits from ordinary people and money owed to pension funds h. After that the banks can go hang, because it is those liabilities which blackmail us into helping them i. That money is then with depositors and pension funds j. The state can then require them to give it to the state for use in rebuilding the econ...