Thursday, January 16, 2014

Financial News of note January 16 , 2014..... Who Are The Top Holders Of US Treasurys ( And the top holder is neither China nor Japan ) ..... HSBC cruising for a bruising ? The Latest HSBC Scandal: An $80 Billion Capitalization Shortfall ..... Precious Metals Manipulation Worse Than Libor Scandal, German Regulator Says - Deutsche Bank a focus of Bafin interviews ? Detroit Bankruptcy Judge trets Bank of America and UBS as the unsecured creditors they are -- Detroit bankruptcy judge blocks $165 million payment to banks

Who Are The Top Holders Of US Treasurys

Tyler Durden's picture

Yesterday, when the Treasury released its TIC data early by mistake, the update that China's holdings rose to a record $1.317 trillion caused a stir. This was confusing, since while China, which as we reported yesterday, now has a record $3.8 trillion in reserves having grown by $500 billion in 2013, has barely invested in US paper, and in fact going back to 2010, its holdings were a solid $1.2 trillion. In other words, its Treasury holdings have increased by a modest $100 billion in three years. Hardly anything to write home about. And certainly nothing to write home about when one considers the soaring Treasury held by the largest holder of US paper... everyone knows who that is. For those few who don't, and for everyone else too, here is the most recent breakdown of the top holders of US paper.
And now a question: with the Fed already "tapering" its purchases of Treasurys, and thus no longer the failsafe backstop bidder of first, last or any resort, how much interest in "money good" paper will everyone else have ?

The Latest HSBC Scandal: An $80 Billion Capitalization Shortfall

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Forensic Asia, a Hong-Kong-based research firm issued a "sell" recommendation on HSBC on the basis of "questionable assets" on its balance sheet. As The Telegraph reports the analysts involved actually worked at HSBC for 15 years and suggest the ginat bank could have overstated its assets by more than £50 bn and ultimately need a capital injection of close to £70 bn before the end of this decade. "HSBC has not made the necessary adjustments, during the quantitative easing reprieve...The result has been extreme earnings overstatement, causing HSBC to become one of the largest practitioners of capital forbearance globally... This charade appears to be ending."

Forensic Asia on Tuesday began its coverage of Britain’s largest banking group with a ‘sell’ recommendation, warning the lender had between $63.6 bn (£38.7bn) and $92.3 bn of “questionable assets” on its balance sheet, ranging from loan loss reserves and accrued interest to deferred tax assets, defined benefit pension schemes and opaque Level 3 assets.

The broker’s note is written by two of its senior analysts, Thomas Monaco (a former senior bank examiner at the Federal Reserve Bank of New York) and Andrew Haskins (previously worked at HSBC for 15 years).


In the report, the analysts apply what they describe as a “moderate stress test” to the balance sheets of HSBC’s major subsidiaries.


Taking the analysis further, the report sets out the impact of incoming Basel III capital rules and says HSBC could be required at a minimum to raise close to $60 bn in new capital by 2019 and potentially as much as $111 bn.

In our view, HSBC has not made the necessary adjustments, during the quantitative easing reprieve. Rather, it has allowed legacy problems to linger as new ones in emerging markets gather pace. The result has been extreme earnings overstatement, causing HSBC to become one of the largest practitioners of capital forebearance globally. This charade appears to be ending, given how few earnings levers remain besides selling off core elements of the franchise and the stringencies of Basel III compliance,” wrote Forensic Asia.

The broker adds: “While having stated capital ratios well above peer averages is all well and good, HSBC’s stated capital ratios would appear to be nothing more than a mirage if our analysis is correct.”
Interestingly, these findings do not include litigation costs which can only make matters worse. Of course, this kind of "mirage" is just as applicable to the entirely opaque Level 3 assets of all the major TBTF US banks so one can only imagine just how large the capital shortfalls really are. But don;t worry - Cramer says NIM will be huge (but the banks themselves don't)...

Precious Metals Manipulation Worse Than Libor Scandal, German Regulator Says

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Remember when banks were exposed manipulating virtually everything except precious metals, because obviously nobody ever manipulates the price of gold and silver? After all, the biggest "conspiracy theory" of all is that crazy gold bugs blame every move against them on some vile manipulator. It may be time to shift yet another conspiracy "theory" into the "fact" bin, thanks to Elke Koenig, the president of Germany's top financial regulator, Bafin, which apparently is not as corrupt, complicit and clueless as its US equivalent, and who said that in addition to currency rates, manipulation of precious metals "is worse than the Libor-rigging scandal." Hear that Bart Chilton and friends from the CFTC?
More on what Eike said from Bloomberg:
The allegations about the currency and precious metals markets are “particularly serious, because such reference values are based -- unlike Libor and Euribor -- typically on transactions in liquid markets and not on estimates of the banks,” Elke Koenig, the president of Bafin, said in a speech in Frankfurt today.
Actually, what makes the most serious, is that precisely because they are on liquid markets means they implicitly have the blessing of the biggest New Normal market maker of call - the central banks, and their own "regulator" - the Bank of International Settlements (helloMikael Charoze).
“That the issue is causing such a public reaction is understandable,” Koenig said, according to a copy of the speech. “The financial sector is dependent on the common trust that it is efficient and at the same time, honest. The central benchmark rates seemed to be beyond any doubt, and now there is the allegation they may have been manipulated.”

Bafin has also interviewed employees of Deutsche Bank AG as part of a probe of potential manipulation of gold and silver prices, a person with knowledge of the matter has said.
We wonder how long until this particular investigation is stopped based on an "executive order" from above, because Bafin is now stepping into some very treacherous  waters with its ongoing inquiry of gold manipulation: what it reveals will certainly not be to the liking of the financial "powers that be."

Detroit bankruptcy judge blocks $165 million payment to banks

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Chris Isidore
CNN Money
January 16, 2014
The judge in the Detroit bankruptcy case struck down a controversial proposed settlement in which the city would have paid two big banks $165 million.
In 2009 the city reached a deal with Bank of America and UBS promising the banks the future flow of casino tax money in return for $300 million. Judge Steven Rhodes ruled that the deal likely would not be allowed to stand under the city’s bankruptcy reorganization. He also rejected a proposed settlement would have resolved the original deal for $165 million, even though the bankruptcy court’s mediator had recommended that Rhodes approve the settlement.
The decision was a major victory for the city’s employees and retirees who face deep cuts in pension benefits as part the bankruptcy. It means that the big banks are essentially unsecured creditors along with the retirees. Had the judge upheld the settlement, the banks would have collected money ahead of the pension plans as part of the bankruptcy process.

Nigel Farage Booms “Europe Is Now Run By Big Banks, Big Business, And Big Bureaucrats”

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Zero Hedge
January 16, 2014
With Greek Prime Minister Antonis Samaras settling into his role as EU President, UKIP’s Nigel Farage stunned the “Goldman Sachs puppet” with a 150-second tirade of truthiness he has likely never experienced. Farage sacrastically remarks how Greeks “will be dancing in the streets” at Samaras’ ‘successful’ negotiation on MiFiD reminding him that “60% of youth are unemployed and the neo-nazi party are on the march.” Europe is now run by “big business, big banks, and big bureaucrats,” Farage goes on, suggesting the smarmy-looking Samaras should “rename his party from New Democracy to No Democracy.” People do not want a United State of Europe, the outspoken UKIP leader explains, they want a “Europe of sovereign states,” and concludes ominously, “the European elections will be a watershed.”
…And you come here Mr Samaras and you tell us that you represent the sovereign will of the Greek people? Well, I’m sorry, but you’re not in charge of Greece, and I suggest you rename and rebrand your party – it’s called ‘New Democracy’, I suggest you call it ‘No Democracy’.
Because Greece is now under foreign control. You can’t make any decisions, you’ve been bailed out, and you’ve surrendered democracy, the thing your country invented in the first place.
And you can’t admit that joining the euro was a mistake - of course Mr Papandreou did that didn’t he, he even said there should be a referendum in Greece and within 48 hours, the unholy trinity (troika) that now run this European Union had him removed andreplaced by a ex-Goldman Sachs employee puppet.
We are run now by big business, big banks and in the shape of Mr Barroso, big bureaucrats…