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BANKS Dead, zombies and fiscal monopolies of taxpayers FEST

Why nationalization will open a Pandora's box for governments, but also huge opportunities for new independent financial institutions.

Despite massive injections of capital from time to time, major banks Government support life continued to be battered from one side to the other confirming that a blind man could have said long ago: the self-proclaimed Master of the Universe zombies have been walking for years and remains the reality that insolvent banks can not be helped by an injection of public funds, or a dead body can be resurrected a massive blood transfusion. While the government hoped and prayed his rescue faltering banks are fed back to poor health and "Presto", begin to contribute economic growth, the undeniable fact is that banks have failed and / or do not want to use the enormous million dollar capital injection from taxpayers to another cracks temporary thing for the wallpaper of his terminal condition itself, while its millions of customers use as bargaining chips with the most powerful government.

It is incredible to think that the international financial crisis (which has been preparing for over 15 years) could be set at a mere matter of months a simple remedy: throwing money at it! The wealth that has been created over the years by accepting housing prices far beyond the fair market value was neither real nor cattle. It was created with the notional bond fraud, corruption, the rating agencies of the debt, questionable accounting practices, packaging and sale of complex financial products that nobody is likely to not be able to evaluate properly because at a basic level, they were simply the production of machinery the Committee on greedy bankers with long fingernails.

The financial system has been overwhelmed by the downward pressure on asset prices, such as very visible hand market has a considerable band of earned value. And the effect is felt and even expanded in the entire world economy. As given the extent of the damage is simply a matter of time before all the major banks are insolvent supported by the government and establish out of their misery and completely nationalized. Some say it happened a long time long ago, at a stroke, have clear that security and stability, and brought the global financial system that leads directly into the veins of these walking zombies fragile. Some Western governments have recognized this reality sooner than others. In the 1st quarter of 2009, Germany became the latest country to allow the nationalization of their banks. This follows a similar intervention in Iceland, Ireland and the United Kingdom, which have been forced to recognize that total nationalization may be the only way to avoid the collapse of all financial systems. However, instead of taking over banks and bank still active leadership, in many cases, is clearly fraudulent behavior, glass house instead of politicians tried to persuade bankers gently Online. In this sense, the disproportionate influence of Goldman Sachs and JPMorgan Chase Bank in Federal Reserve of the United States ("too big to fail"?) And dubbing different Zombie Administration in the United Kingdom for "services to industry bank ", is revealing. This limp-wrested bankers try to go to Come Clean has led to major banks progressively and gradually exposed to a stream directly proportional to the capacity of their leaders "to deceive the financial markets about the real state of their loan books. Today even the zombie banks, half of the acquired business reality during the worst days of the crisis to "prove" they were not in a crisis are, finally, if tentatively, to reach the altar of the Government of force-feeding and ashamed to return to taxpayers money. …

A program of nationalization of banks effectively zombies forces and denial in government control, if supported by it or not. Banks that have been cleansed of toxic assets called (BAD DEBTS AGAINST you and I), recapitalization with public funds, which "possibly" sold to private investors, possibly leaving existing shareholders in the cold with almost nothing. As the dust begins to settle, so that the vacuum left by commercial zombies showed a tremendous new opportunities for a better position institutions independent (including conflict below), but terrible is also of interest that governments do not want to face:

1.) What happens to thousands financial subsidiaries now have (for example, U.S. bank Citi has 427 offshore subsidiaries) whose sole purpose seems to be ignoring depriving them (and other governments) the taxes?

2.) How do you objectively justify continued ownership of those subsidiaries for voters, taxpayers, labor unions, the socialist left?

Governments speak of "arms length" as if it were some kind of policy to isolate prophylaxis of all evils, including "O" word, but the truth is already sitting between a rock and politically very difficult place for some time. An interesting case in point was a broker Luxembourg stock values at sea in late 2008 began carefully avoiding the "O" word immediately after it was taken by the government. After to invest hundreds of thousands of dollars over several years promoting itself with the slogan "on the high seas to his running L. .. 'It replaced the ads with a group representative of the range cowboy drawled chasing "cash cows" and "investment opportunities. Although not consistent with what we expect in terms advertising expenditures of a European institution, the inevitable conclusion is that the Cowboys have certainly served their purpose, showing new masters of the bank that the broker not pronounce the word W

This institution emptive strike So says much about the concept (and yes, it's a concept) that the government may have the "full competition "because the reality is quite different, especially if she can return to bite, because it certainly can. Another interesting puzzle involving the British Government happy owner of thousands of offshore financial institutions, but is more reluctant to blow the tires of these services at sea, probably for fear he may gangrene policy making and we know what happens to members of gangrene.

The reason is that governments and banks know that zombies can take up to a decade to return to his own former healthy, and take longer to pay their debts, the most urgent and can be politically damaging to manage conflict. The mixture is so sharp, so obvious that the incompatibility is difficult to draw a conclusion other governments eventually will be forced to prune these appendages politically toxic as soon as public opinion begins to inflate pressure, probably in the second half of 2009. The closer the election, the more they become toxic.

But the download will be very difficult, not the cake walk is filled with minefields that because most of these institutions are profitable and legitimate governments will sit "in their language" and resist the temptation to pull or political jurisdiction, the dogs before leaving the block. For the IRS, be a tacit pact with the devil himself, but with precious little space, if necessary, to maneuver. If the government decides to take a pot shot at these easy targets, which would throw millions of pounds of taxpayers' money potential for the theft of billions from further away, from the "arm" to "outside scope "of the lower courts opaque.

And then there are the databases … If you can bet your bottom dollar the zombies take their time feeding taxpayers Fest, you can be sure that you also take time to build your balance to pursue strategies focused on the bread and butter of commercial banks and retail that are really fat and juicy when the last bell sounds the start re-privatization. The near certainty of delays in any re-privatization program is more than enough to chill the bones of a politician worthy of the name, because the more you have, the stronger the political pressure is proportionally access to databases of customer-owned offshore legal and technical control of the state. But then, only a suspicion, even a small whiff of the forbidden fruit in the open sea access will be sufficient to make trade policy activity of toxic assets, toxic, in one fell swoop: the losers if ever there was one, even for a politician.

Meanwhile, on the positive side this political impasse, the main business opportunities have emerged in the gap left vacant by the zombies for independent and well-placed to benefit if institutions are not committed to zombies or state government. The trade deficit huge vacated by the zombies have been completed for independent agencies, financial specialists in specific fields who know how to control risk and dig in.

It is independent discount brokers to perform specific corridors deep prime brokers to independent asset managers and retail banks operate in very specific areas of the market. These specialists vary in size. Some 20 billion U.S. dollars in the balance. That derives the largest and most active United States, the United Kingdom and Northern Europe and gain market share. Despite the earthquake in the financial markets, large banks and the government continue to dominate financial markets on the European continent with an emphasis on the so-called PIGS (Portugal, Italy, Greece and Spain). This is mainly due to the legal infrastructure when combined pigs with a lack of competition favors large firms and oligopolies tend to become institutionalized. The latent fragility of large banks and savings banks (Spain is a good example) have made their doubly vulnerable to attack U.S., UK and Nordic banks have moved aggressively in advertising and technology and independent television and the network.

These institutions are betting their land, hoping to stop the zombies never this area in the future. In the case of the United Kingdom, while that recent posts from the FSA was believed then we should not wait for the zombies to get to the acceleration to take a long time that their new system can do that banks "to implement strategies that focus primarily on the traditional banking business and retail." with "fewer resources – in terms of persons or total assets – - dedicated to the negotiation of complex and risky. "

Deepening the securities brokerage industry several specialists, the big tectonic shifts in the behavior of customers since 2008 have been HNWI investors, professional traders, portfolio managers and fund managers leave the main asset of the Zombie Runners who have been supervised by regulators whose wages appear to be more impressive than his ability to regulate. These customers turn to the relative safety of specialized financial intermediaries, and not without conflicts of skeletons and their exodus has been actively managing the many scandals zombies emerging from the woods with customers literally wakes up one morning to discover that "… where I have my bank account is now holding the property Offshore of my government … Parallel to these scandals, fraud, abject failure and bankruptcy regulations, the misuse of laws against terrorism by the government to fight the bankers "Only reduce the foot of the latter in the public eye. These bankers" like terrorists "have even appeared in magazines with handcuffs on and helped to beat the last nail in the coffin of "My Word Is My Bond."

It is also the less sophisticated investor less likely to trust an institution financial and not afraid to ask relevant questions during the opening of trading accounts:

• Your company has links with banks or institutions who have failed in 2008 / 9?
• Does the government have a piece of your action?
• Have you or has been involved with or invested in managers assets such as Madoff or Stanford?
• Has links with power Madoff funds?
• Take your positions and / or asset management customers to other sides of my performances negotiation?
• What protection do you offer besides the usual system of investors little protection?
• Where customers deposit funds and assets of clients?
• customers are individually separate accounts?
• What if my money protected?

Although it seems generally that the era of specialization prepares financial and other terms in the breakdown of world's largest banks, the supreme irony is that the specialists were able to complete the line and risk of managing time and times have inherited and must pay for additional distortions, too far from the regulation, bureaucratic costs and knee jerk established (see below, directly or indirectly through new face bag shotgun Regulation). This will undoubtedly make a recovery more painful and more lasting. Instead of promoting and developing best practices existing financial systems, governments have launched money into a black hole of poor quality and sometimes illegal practices that seem to be hungry every day. In Europe, banks have largely broken left are examples of the distortions that have contributed to what (you) are.

Two obvious examples, but EURONEXT are different and the MiFID. Whether by design or not, Euronext has launched a market totally dominated by the big banks in Europe from the beginning, to the detriment of small financial institutions, and for good reason. high entry costs and barriers meant only high maintenance with zombie effects of scale and optimize the turbo can be members the luxury of being profitable. Specialist and small institutions have no choice but to pay the high cost of doing business or retire. Now that the zombies can not afford EURONEXT costs, taxpayers are paying for them and help maintain its monopoly zombie for many years to come, to pay their debts and get a "Outside of jail card "of government.

Another barrier to the entry of stiffness Small is independent of the bureaucracy a new self-feeding machine called MiFID, which has generated hundreds of companies willing to teach bureaucrat financial institutions to speak, walk and write procedures like bureaucrats mind must – at a price. This piece of architecture and sense of bureaucracy was invented in a time when large banks have been respected and bank managers are generally customers held in high esteem much higher than real estate agents mad dog (how ironic) and really needs a better overall protection.

Nobody understood what customers need protection from banks, even if a reasonable person might be expected, given the enormous costs in time and effort of people dedicated to this venerable practice, these bureaucrats expensive, but smart would at least have an idea of the debt associated disease in European banks have protected customers. In any case, and again either by design or not, because applying MiFID has only served to strengthen and protect the domain of large banks, pushing the costs and lead to small independents could not afford it.

There was a time when small and medium enterprises have been encouraged because the diversified economy and, at times, has become big business and big banks. The first reason is so rigid MiFID small businesses (and we can only guess what) is that the big banks with the Master of the Universe status and influence over the government and the regulatory equivalent sold the idea that the greatest risk = More = less. The courts have followed this flawed policy of lower risk to the detriment of smaller competitors, but the zombie is healthier awoke with the smell of coffee that tastes like Stanford Madoff et al cut a strip in its ranks to destroy well chiseled, but extremely fragile regulators career. The second reason could be the result of a kind, once again proved collusion between the architects of the MiFID and zombies so that if the former does not include spot forex as a regulated activity, would go with the MiFID.

But now we are told that we can all sleep safe in our beds, because the zombies are controlled by U.S. government and Europe and will not be selling a higher leverage and dispersion of power is undoubtedly marked the beginning of a new era of specialization in the independent take on his mantle.

Zombies should emulate the most famous of the Counts of Transylvania and avoid the influence, since it avoids the garlic and stick to them is heart of business sucking the blood slowly and deliberately over a long period of time with clients of "banking" Classic retail and commercial, as suggested by the FSA should occur.

About the Author

Pierre Bertrand Boulle is the Managing Director and founder of Investors Europe, an offshore stockbroker based on the Rock of Gibraltar. He writes on the behalf of www.foroffshore.com

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