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New Trouble for Euro in Portugal - (www.nytimes.com) Just weeks after European
leaders tamped down a banking crisis in Cyprus, troubles in the euro zone have
again reared their head, this time in Portugal. In an address to his
beleaguered nation on Sunday, Prime Minister Pedro Passos Coelho warned that
his government would be forced to cut spending more and that lives “will become
more difficult” after a court on Friday struck down some of the austerity
measures put in place after a bailout package two years ago. The renewed
tension in Portugal raised the threat of further trouble elsewhere in the euro
zone, where ailing members have struggled to rebuild economic growth after enduring
wrenching spending cuts. “The risks in the euro zone have increased markedly
over the past six weeks or so,” wrote Nicholas Spiro, managing director of
Spiro Sovereign Strategy, a London-based consultancy that assesses risk on
sovereign debt.
Slovenia
Bailout Signaled by Worsening Debt Swaps: Euro Credit - (www.bloomberg.com) Slovenia’s creditworthiness
is deteriorating at the fastest pace in the world after Cyprus as investors
speculate a banking crisis will force it to follow the island nation and become
the sixth euro country to need aid. Credit-default swaps insuring Slovenian
debt for five years soared as much as 66 percent to a six-month high of 414
basis points on March 28 from 250 on March 15, the last trading day before
Cyprus announced plans for its rescue. It’s now up 34 percent at 336 basis
points, compared with a 45 percent increase for Cyprus and 18 percent for Portugal in
the period. Slovenia’s two-week old government is struggling to prop up banks
hit by recession and saddled with bad loans worth about a fifth of the
country’s economic output. Cyprus, which accounts for 0.2 percent of the euro
region’s economy, was forced to inflict unprecedented losses on uninsured
depositors and senior bondholders as part of the 10 billion euro ($13 billion)
rescue of its financial system.
Liquidity
Carpet Bombs Fueling Asset Bubbles, Rohde Says - (www.bloomberg.com) Policy makers steering the
global economy have pumped the financial system with so much liquidity that any
exit risks popping potential asset bubbles or stunting a recovery, Danish
central bank Governor Lars Rohde said. “The risk is we stay in this climate too
long and that the carpet bombing of liquidity spurs inflation,” Rohde, 59, said
in an April 5 interview from his office in Copenhagen. Though there are no
current signs of consumer price inflation “there is inflation, perhaps a
bubble, in some asset classes,” he said. “Equities (MXWO) are trading close to
all-time highs. Segments of property markets across the globe, for example London,
also display symptoms of this. How do we exit this without killing whatever
nascent recovery there might be at that time?”
Extreme
home takeover: dubious deeds used to scoop up Dade properties - (www.miamiherald.com) Scavenging the remnants of
South Florida’s housing crisis, a partnership called Presscott Rosche appeared
to gobble up almost three dozen foreclosed homes in Miami-Dade County last
year. The company is currently listed as the owner of 12 homes worth about $3.5
million, according to the Miami-Dade property appraiser. But this seemingly
thriving business is, in many ways, an illusion. The name of the company’s
agent listed in state records is fake. So are many of the deeds the company has
filed in Miami-Dade Circuit Court to stake its claim to more than 30 houses and
condos, a Miami Herald investigation has found. The company has gained control
of these homes — renting them out to unsuspecting tenants, in some cases — by
filing dubious deeds and documents filled with legal-sounding jargon and shoddy
punctuation. The author of many of these documents calls himself an “attorney
in fact,” though he is not, in fact, a licensed attorney in Florida.
Bail-In
vs. Bailout – (www.ritholtz.com) In the aftermath of the
bungled Cyprus affair, we are now observing a major transition underway with
regard to bank-deposit safety. In the Eurozone and in Europe generally, the
sacredness of an insured deposit was bludgeoned by the finance ministers in
their botched attempt to impose a cost on insured deposits in Cyprus. The
finance ministers were taken to task decisively by their political
constituents. Imagine: it was the parliament of Cyprus that stood between the
insured depositors in Eurozone banks and the outrageous attempt to breech the
sacred promise that insurance entails. One has to be thankful for the
democratic political process that elects parliaments, even in Cyprus. Now we
are seeing a different form of attack on depositors. We are transitioning from
a system of bank bailouts to “bail-ins.” In the bailout approach, banks that
fail are resolved through some form of governmental, taxpayer-backed
initiative. That is what we mostly have in the US, with the Federal Deposit
Insurance Corporation (FDIC) as the resolution entity. The FDIC honors insured
depositors’ claims. The uninsured deposits become a liability of the resolved banking
institution. Those depositors may suffer losses along with shareholders, debt
holders, preferred stock holders, and others. That hybrid system includes the
attempt to consolidate banking institutions. Most bank failures in the US are
resolved through a merger.
Soros Sees China Shadow-Banking Risk Matching Subprime - (www.bloomberg.com)
Bank Of Japan Joins Fed Club With Global Clout - (online.wsj.com)
In China, off-balance-sheet lending risks lurk in the shadows
- (www.reuters.com)Bank Of Japan Joins Fed Club With Global Clout - (online.wsj.com)
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