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German push for Greek default risks EMU-wide snowball - (www.telegraph.co.uk) Germany is pushing behind the scenes for a "hard" default in Greece with losses of up to 60pc for banks and pension funds, risking a chain-reaction across southern Europe unless credible defences are established first. Officials in Berlin told The Telegraph it is "more likely than not" that investors will suffer fresh losses on holdings of Greek debt, beyond the 21pc haircut agreed in July. The exact level will depend on findings by the EU-IMF "Troika" in Athens. "A lot has happened since July. Greece has fallen back on its commitments, so we have to assume that the 21pc cut is no longer enough," said one source. Finance minister Wolfgang Schäuble told the Frankfurter Allgemeine that the original haircuts were "probably" too low, saying banks must have "sufficient capital" to cover greater losses if need be. Estimates near 60pc have been circulating in Berlin. The shift in German policy has ominous echoes of last year when Chancellor Angela Merkel first called for bondholder haircuts, setting off investor flight from Ireland and a fresh spasm in the EU debt crisis.
Chanos Says China Banks ‘Deteriorating’ - (www.bloomberg.com) Jim Chanos, the hedge-fund manager who’s been betting that Chinese bank stocks will tumble, said a rally spurred by government purchases of the shares hasn’t changed his bearish outlook. The MSCI China Financials Index surged 6 percent today after state-run Central Huijin Investment Ltd. started buying shares in the four biggest Chinese lenders. The gauge of banks, insurers and developers had tumbled as much as 43 percent in 2011 through Oct. 4, sending its price-to-earnings ratio to a record low of 5.6 on concern that slowing economic growth will spur bad debts after a three-year credit boom. “The fact that people are even talking about the government stepping in to shore up the banks, when two months ago people thought there was nothing wrong with the Chinese banks, should tell you just how seriously this situation is deteriorating,” Chanos, founder of New York-based hedge fund Kynikos Associates, said in an interview with Bloomberg Television’s Michael McKee today.
Wall Street Sees ‘No Exit’ From Financial Woes - (www.bloomberg.com) Wall Street executives, facing demonstrators camped for a fourth week in New York’s financial district, say they’re anxious and angry for other reasons. An era of decline and disappointment for bankers may not end for years, according to interviews with more than two dozen executives and investors. Blaming government interference and persecution, they say there isn’t enough global stability, leverage or risk appetite to triumph in the current slump. “I don’t think it’s a time to make money -- this is a time to rig for survival,” said Charles Stevenson, 64, president of hedge fund Navigator Group Inc. and head of the co-op board at 740 Park Ave. The building, home to Blackstone Group LP Chairman Stephen Schwarzman and CIT Group Inc. Chief Executive Officer John Thain, was among those picketed by protesters yesterday. “The future is not going to be like a past we knew,” he said. “There’s no exit from this morass.”
Europe eyes buoying banks to weather debt storm - (www.reuters.com) European banks may need more than 100 billion euros ($135 billion) to withstand the sovereign debt crisis, Ireland estimated on Saturday ahead of a meeting between German Chancellor Angela Merkel and French President Nicolas Sarkozy to work out how to recapitalize the lenders. The falling value of banks' holdings of government debt from Greece and other euro zone periphery states has already provoked the implosion of Belgian lender Dexia, adding urgency to the Merkel-Sarkozy talks. "There is a high risk that this crisis further escalates and broadens," German Finance Minister Wolfgang Schaeuble told German paper Frankfurter Allgemeine Sonntagszeitung in an interview released in advance of publication on Sunday. Germany and France have so far been split over how to strengthen shaky lenders and fight financial market contagion that may follow a possible Greek default.
State Bonds Poised to Beat U.S. Cities as Housing Hurts Taxes: Muni Credit - (www.bloomberg.com) State-government bonds, which have underperformed local debt by the most in 14 months, may be poised to pull ahead as flagging property-tax revenue threatens budgets in U.S. cities and counties. That may benefit Virginia’s sale of $167 million of bonds this week. It’s the state’s first general-obligation issue since Moody’s Investors Service placed its top credit rating on review on July 19 because of dependence on federal spending. U.S. states’ revenue jumped 10 percent in the second quarter from a year earlier, driven by personal-income and sales taxes, the Census Bureau said last month. It was the most since 2006 and the sixth straight gain. Property-tax collections, the main income source for localities, dropped 1 percent. “Total-return performance potential for larger, liquid state names offer better prospects, given the recent data,” James Ahn, who manages $1 billion of short- and intermediate- term municipals at JPMorgan Chase & Co. in New York, said in a telephone interview.
UK Unemployment Rockets to 17 Year High - (www.telegraph.co.uk)
We can all see the economic black hole, but how do we stop falling into it? - (www.telegraph.co.uk)
Bond Yields Show 60% Odds of U.S. Recession - (finance.yahoo.com)
Slovakia rejects enhanced bail-out fund, government falls - (www.telegraph.co.uk)
Europe eyes bigger Greek losses for banks - (www.reuters.com)
Regulators release plan for Volcker Rule limits on bank trading - (www.washingtonpost.com)
Greece Credit-Default Swaps May Pay Out If Losses Exceed 21% - (www.bloomberg.com)
EU banks could shrink to hit capital rules - (www.ft.com)
As Greece Avoids a Default, Recapitalization Plans Emerge for European Banks - (www.nytimes.com)
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