Financial Crisis Wrap



"As the scandal surrounding the Stanford Group continues to grow, no one seems to know where to find R. Allen Stanford, the cricket-loving billionaire at the center of the story — not even his father, apparently. James Stanford, who is 81, told The Houston Chronicle on Wednesday that he didn’t know where his son might be. He said he spoke to Stanford fils last week, at which time he mentioned 'problems with the business climate in general, but nothing of this magnitude.'" (NYTimes/Dealbook)

"Sir Stanford Not In Antigua? That's the line we're being fed by Prime Minister Winston Baldwin Spencer. 'I don't know, but I don't think so,' the PM said absurdly vaguely in an interview last night. We're not saying he's wrong (and, as previously mentioned, we've given the guy a ridiculously cushy head start) but if you 'don't know [definitively],' what's driving the feeling he's not there? Gut instinct? Tarot cards? Some bad chinese? INSIDE INFORMATION?" (Dealbreaker)

"UBS has agreed to pay $780m in fines and turn over some customer names to the US government as part of a landmark settlement in which the Swiss bank admitted it helped thousands of clients evade taxes. The deferred prosecution agreement settles a long-running criminal investigation by the US Department of Justice into whether UBS helped wealthy US clients hide bank accounts from the Internal Revenue Service. The decision by UBS to hand over client details to the US tax authorities undermined the Swiss franc on Thursday which lost value against the euro. Under the banking secrecy law, banks in Switzerland are prohibited from divulging any information to authorities or any third parties on their clients, except in cases involving recognized criminal investigations. However, the Swiss Financial Markets Supervisory Authority, or FINMA, ordered the country’s banking flagship to reveal the account details of customers targeted by the US justice investigation. But Hans-Rudolf Merz, the Swiss finance minister, sought to reassure investors on Thursday that client secrecy would be maintained. 'It is evident there has been tax fraud [at UBS] ... [but] bank secrecy will stay,' he told a press conference." (FT)

"Restoring trust in the financial system is the key to solving the current economic crisis. Today, people don't trust bankers and banks don't trust other banks because they know that they have assigned totally arbitrary values to the assets on their own books. The result: Banks won't lend because they don't trust they will be repaid. Increasingly, it seems as if much of the banking and hedge-fund industry in the last decade was a house of cards built by leverage, irresponsible lending and complicated derivative instruments. What began as a limited subprime crisis has morphed into a $33 trillion drop in global stock markets. In such a climate, a $787 billion fiscal stimulus will be wasted unless we clean up banks' books and get them lending again. What can we do? Here are five suggestions that may help ease the credit crisis, spur economic recovery sooner rather than later, and lay the groundwork for future economic growth .." (Bill Bradley/WSJ)

"Gstaad is now starting 'la grande saison,' which means those who passionately believe that money is the cornerstone of life have arrived to enjoy après skiing. This year we’ve had the best snow conditions in 50 years, not that we did much skiing over the weekend. It all went quickly, mind you, a blur of alcoholic haze and 'glibido' — all talk and no action .. news of Pug’s, the world’s most exclusive club. As everyone knows, Pug’s main business is the blackball. And I am very pleased to report that never have there been more people blackballed than this year, which is only six weeks old. I have already listed some of the bold-faced names blackballed by members who should have known better than to propose them. People like Elton John, Paul McCartney, Henry Kravis, Salman Rushdie, Bernie Madoff (long before he was proved a crook .. ), Jeffrey Epstein (friend of Prince Andrew now doing time in a Palm Beach jail for employing underage prostitutes), Dick Cheney, Peter Mandelson, Oleg Deripaska, Bernard-Henri Lévy, Bernie Ecclestone, Geordie Greig, Hugh Grant and others less known but with deeper pockets." (TakiMag)

"Gold futures rose Wednesday for a second session, ending at the highest level in seven months after briefly hitting $980 an ounce, as safe-haven buying continued.
Meanwhile, holdings in the biggest gold exchange-traded fund surpassed 1,000 tons for the first time ever, according to latest data. Gold for February delivery ended up $10.70, or 1.1%, at $977.70 an ounce on the Comex division of the New York Mercantile Exchange, the highest closing level for a front-month contract since July 15, when gold closed at the same price." (WSJ)

"Gold prices continued their ascent Wednesday as investors refrained from making big bets in equities amid growing skepticism over the government's plans to revive the economy. Other commodities, including grain and energy futures, declined. Investors have grown increasingly disillusioned over the government's efforts to stimulate the economy, doubtful that the plans will be enough to pull the U.S. out of the worst recession in decades. On Wednesday, President Barack Obama unveiled details of a $75 billion plan to stabilize the crippled housing market. The initiative seeks to aid borrowers who owe more on their mortgages than their homes are currently worth, as well as those who are on the verge of foreclosure. But the announcement, which came one day after Obama signed a $787 billion economic stimulus plan into law, did little to ease Wall Street's worries." (AP)

"Folks who bought affordable homes and paid mortgages are ticked--but it's also true that huge wave of foreclosures could blow up economy." (Howard Kurtz/Twitter)

"OK, Mr. President, enough with the doomsday talk already. We get it. Things suck. And they’re going to get worse before they get better. And we get how it important it was for you to level-set expectations out of the gate, as they were stratospherically out of whack. We are all in economic rehab now, clear eyed and sober. If we’re not out of work, we know friends and family who are. And those of us lucky enough to have jobs are being showered with resumes. Really good ones. So now we want to know that there is light at the end of this bleak, black tunnel. It’s time for less mope and more hope. You were elected because you are a walking, talking hope machine. Plug that sucker back in and crank it up to ten." (TheDailyBeast)

"Here’s the problem you need to solve: 90% of the planet’s population wants something that they probably can’t get very easily. All you have to do is figure out what that is, how much they’re willing to pay for it, and how to get it to them. It could be a mode of transportation. It could be a light source. It could be a sanitary product. It could be food. It could be a garment. It could be knowledge. It could be something as simple as a tougher bicycle wheel. It could be anything. There is no single answer. There are probably thousands upon thousands. And that’s exciting." (BrandbuilderBlog via SteveCase/Twitter)

"Over several generations, huge distortions and misallocations of capital have been cranked into the economy, inviting levels of consumption that are unsustainable. In fact, Americans refer to themselves as consumers. That’s degrading and ridiculous. You should be first and foremost a producer, and a consumer only as a consequence. In any event, the government is going to destroy the currency, which will be a mega-disaster. And they’re making the depression worse by holding interest rates at artificially low levels, which discourages savings – the exact opposite of what’s needed. They’re trying to prop up a bankrupt system. And, at this point, it’s not just economically bankrupt, but morally and intellectually bankrupt. What they should be doing is recognize that they’re bankrupt and then start rebuilding. But they’re not, so it’s going to be a disaster." (Doug Casey)