Greeks withdrawing hundreds of millions of euros ahead of election Eds: Election is June 17

Found via Steve Keen’s Debtwatch.

Greeks faced with uncertainty over their country‘s future have been withdrawing hundreds of millions of euros a day, officials said Tuesday, as the country heads to the polls for an election that could decide whether it stays in the single currency.

Greek account holders had withdrawn between 100 to 500 million euros a day, bank officials said, according to local media.

Reports said approximately 5 to 6 billion euros had vanished from accounts during the month of May and the situation had not improved since the start of June.

Wells Fargo and the Rousseau story

Found via Naked Capitalism.

In March 2000, Norman and Oriane Rousseau put 30 percent down to buy a house at 580 Wilshire Place, Newbury Park, CA. In the following years they were solicited to refinance their loan. In October 2007 they met with the loan officer and “stated that they were only interested in obtaining a conventional 30-year, fixed-rate loan, and explained their desire to have consistent payments over the life of the loan.”

They were “assured … that they could significantly reduce their monthly payments, by more than $600 per month, with a lower interest refinance loan.” The bank assured them that the Payment Option ARM was “the new industry standard” that had “historically low rates that were continuing to decrease” and in “the worst case scenario [they were] assured that historical data for the index indicated that changes in interest rate were slight, and if an increase should occur it would have a negligible effect on their monthly payments of no more than a few dollars.”

They should “expect to refinance within the next two years to take advantage of even more favorable interest rates and as the steadily rising housing values increased the amount their equity in the property.”

There were lots of assurances, smiles, don’t worry, we’re taking care of you, etc.

In May 2009 the bank claimed the couple had missed their April payment. They proved they had made a payment in person at the bank, using a cashier’s check and that the check had been cashed by the bank. The bank then claimed they had ordered a stop payment on the check, even though a cashier’s check payment cannot be stopped.

The runaround began. The bank began harassing them for payment, sometimes as many as six-eight calls per day, sometimes even late at night. On August 3, 2009 the bank claimed the Rousseaus hadn’t paid June or July’s payments either, demanding $3,406.50. But then on August 8 the bank assured them they were current on payments. Then the bank again claimed it had not been paid and that the bank had been trying to contact them without success, and that they now owed $3,478,25.

The Rousseaus hired a lawyer. From the lawyer the Rousseaus learned that the loan they received was not the loan they were promised, including, “the 7.2% interest rate for the … loan was actually higher than the 2006 loan and greater than the 6.8% quoted,” had enormous fees, and the bank had increased the income the Rousseau had stated, from $76,000 to $136,800.

In other words, the lender had scammed them to get those fees, which was a widespread practice at the time.

This continues, with the bank scamming, lying, obfuscating, ignoring, contradicting, even producing signatures it claimed were the Rousseau’s but were not, every step of the way. And, of course, adding late fees to the amount it claimed was due.

"I feel like I'm having a black tie dinner on top of a volcano"

Quote from Johann Rupert on Richemont’s Q1 conference call (May 16^th):

“Folks, I'm not -- they begged me, my colleagues, please don't say it, but I feel like I'm having a black tie dinner on top of a volcano, okay? That volcano is China. But that's what I feel like. I go in the morning, we put on our ties and our watches and we go, and the food is better and the wine is better, and the weather is great, but let's not kid ourselves. There is a volcano somewhere, whether it's this year, in 10 years' time or in 20 years' time. We are exposed to China. I think they're going to travel more. I think they're going to survive. I think all of these things. But we are now a China play. And it suits us if the euro gets weaker. It's everything that I would never have thought 10 years ago, but that really is our business. Personally, I don't think anything's going to go wrong in China. That's my view. But I know nothing, and I mean it. I may be too optimistic about China. But if you have differing views, remember, it's critical.”

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He also mentioned Warren Buffett a couple of times in the same call: 

"As we've said before, we're really in a business where we can wreck our own businesses. Mr. Buffett always talks about a moat, a moat around your business. Well, there's a big moat around a very well-run luxury goods business. I'm not going to wake up one day and find out that somebody has found a new way."

...

"Simply -- I think every manager's goal really is to make a company idiot-proof because sooner or later, an idiot will run the company. You've got to know that, okay? It doesn't matter what company in the world. So if you have likes Mr. Buffett said, you build moats, you build brand equity, you can withstand quite a lot of stupid things that we ourselves do. I'm not worried that somebody who is in another luxury goods company is going to think of something and that's going to kill our business. Whereas, if you're in the IT business or many, many businesses, it should keep you awake."

Private Equity Has Too Much Money To Spend On Homes

Funds planning to invest more than $6 billion to buy and rent foreclosed homes are finding it easy to raise money. The difficulty is spending it.

The number of low-cost foreclosed homes coming to market has dropped, bulk sales have been slow to materialize and prices are recovering in markets such as Phoenix, making it hard for private-equity firms, hedge funds and pension systems to buy as many homes as they need.

“The folks that raised capital are worried about under- accumulating properties and how to get capital out in an efficient way,” Richard Ford, a managing director in the real estate investment banking group at Jefferies Group Inc., said in a telephone interview. “A lot’s being raised. Less than $2 billion of institutional capital has been spent.”

Jamie Dimon on CNBC after Capitol Hill testimony

Link

Albert Edwards: Spain's Bailout Solves Nothing

Going through Japan's lost decade with Peter Tasker was a prequel to our current plight. One of the key differences he had with consensus was on the banks. Consensus believed Japanese banks were at the apex of Japan's economic woes and the main problem. Hence bank recapitalization was seen as the key to turning the economy around.

Peter's view was that although the banking sector was indeed damaging the economy via a credit crunch, the banks were not the problem but a symptom of the problem: the true problem was deflation and the lack of stimulative policies. ...And so it is in the eurozone. The Spanish banking sector is a victim of deflationary policies enacted at the behest of German economic orthodoxy. A bailout will solve nothing.

...Spanish banks need recapitalisation because of the deflationary policies forced on them to reduce Spain's public sector deficit at a time when the private sector is also de-leveraging. Clearly this has a lot further to go and house prices will fall even further as a result.

Nigel Farage: The Genius of Mutual Indebtedness

Link

How Not to Solve a Crisis – By Joe Nocera

Joe Nocera is also scheduled to appear on Charlie Rose tonight, maybe discussing this article, among other things.

There is a delicious moment in the HBO film “Too Big to Fail” when Christine Lagarde, then France’s minister of finance, calls Hank Paulson, the U.S. Treasury secretary. It’s September 2008, and Lehman Brothers has just imploded after the government refused to bail it out. Panic is in the air.

“Hank,” she scolds him. “How could you let Lehman fail? What on earth were you thinking?” She pleads with him to save A.I.G., which appears to be the next domino poised to fall. “This is not just an American problem,” she concludes.

Oh, the irony! Here we are, more than three-and-a-half years later, during which time the euro zone has repeatedly flirted with financial catastrophe. Lagarde now leads the International Monetary Fund, which exists, in large part, to help countries survive such catastrophes. Yet neither she nor anyone else in Europe has been willing or able to do more than use Band-Aids to stanch the bleeding.

New preface to Charles Kindleberger, The World in Depression 1929-1939

Found via Calculated Risk.

The parallels between Europe in the 1930s and Europe today are stark, striking, and increasingly frightening. We see unemployment, youth unemployment especially, soaring to unprecedented heights. Financial instability and distress are widespread. There is growing political support for extremist parties of the far left and right.

Both the existence of these parallels and their tragic nature would not have escaped Charles Kindleberger, whose World in Depression, 1929-1939 was published exactly 40 years ago, in 1973.  Where Kindleberger’s canvas was the world, his focus was Europe. While much of the earlier literature, often authored by Americans, focused on the Great Depression in the US, Kindleberger emphasised that the Depression had a prominent international and, in particular, European dimension. It was in Europe where many of the Depression’s worst effects, political as well as economic, played out. And it was in Europe where the absence of a public policy authority at the level of the continent and the inability of any individual national government or central bank to exercise adequate leadership had the most calamitous economic and financial effects.

Pershing Square’s Q1 Letter

When we first announced our stake in JCP, the stock price increased to the low $30s per share. Shortly after announcing our stake, we were approached by one of the most well-respected private equity funds in the world who expressed an interest in acquiring the company at a substantial premium. While we welcomed this fund as an owner of the stock, we had no interest in selling the company for a quick premium because we believe in the long-term value creation opportunity.

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Related previous post: Bill Ackman's J.C. Penney Presentation from the Ira Sohn Conference