Tuesday, 30 August 2011

Sorry mate, we're full

Things really have come to a pretty pass when banks don't want to take your money:

U.S. regulators have asked some banks to take more deposits from large investors even if it’s unprofitable, and lenders in return are seeking relief on insurance premiums and leverage ratios, according to six people with knowledge of the talks.

Deposits are flooding into the biggest U.S. banks as customers seek shelter from Europe’s debt crisis and falling stock prices. That forces lenders to raise capital for a growing balance sheet and saddles them with the higher deposit insurance payments. With short-term interest rates so low, it’s hard for financial firms to reinvest the new money profitably.

Regulators have asked banks to take the deposits anyway, three people said, with one lender accepting $100 billion. The regulators want lenders to take the deposits because it improves the stability of the financial system, according to one of the people, who said U.S. banks are viewed as places of strength.

Some of the largest ones have talked with regulators about softening rules for ratios that measure capital and assets, according to the people, who declined to be identified because talks are private. At least one asked for a waiver on paying higher premiums to the Federal Deposit Insurance Corp., which is less likely to be granted, one of the people said.

A couple of things leap out of that story to me, first and foremost that the EU's banks are so fucked that the US banks look like a good bet.

Just think about that for a moment. The US economy is fucked, with fucked topping and still the money is pouring in from Europe, because Europe is even worse!

Secondly, my inevitable observation that regulation is proving to be an expensive bolting of the stable door, long after the horse has fucked off. Banks, who rode the wave of economic bubblery created by lunatic governments are now being taxed (because the deposit insurance is no such fucking thing, of course, it's just another Ponzi scheme) and taking in masses of money is so expensive and (government-mandated) interest rates are so low that they actually cannot afford deposits of large amounts of money.

Thirdly, this shows exactly why the EU's much-hyped "Tobin Tax" is doomed to failure, and worse yet, will actually probably fuck the entire financial industry beyond repair. It's true that masses of money are shifted around the markets in search of short-term gains, but often those gains are not significant amounts of money. If shifting a billion pounds from one account to another for a couple of days will cost you a fiver for your time and nett you a couple of grand, you'd probably do it (or have a clerk do it). But if you have to pay a grand to get two, is it still worth the effort?

I can see these escalating costs of "insurance", etc., totally destroying the movement of capital in search of gains, which means that the people who want that capital enough to get the gains, are not going to get them.

This will not end well.


Frances Coppola said...

I believe some lenders are actually charging for large deposits now, aren't they?

Anonymous said...

70% of the incidence of the Tobin tax in Europe falls on the UK. It's just another way for the French and the Germans to steal our fucking money...

Cingoldby said...

When American banks look like a safer bet that your own banks, you truly are in the shit.

Europe is fucked and the Euro crisis is nowhere near being resolved. The fact that people aren't panicking and burying gold in their gardens is just proof of the power of self delusion and wishful thinking.

And if the British government agrees to a Tobin tax then they deserve to be arrested for treason.

sixtypoundsaweekcleaner said...

British government...arrested for treason.

Fatty ruddy chance!

Mitch said...

I read that Swiss banks are now doing negative interest....charging you to park your cash.

This cant continue for long its just tax and tax and tax .