Skip to main content

Italy’s banking crisis is even worse than we thought

by Don Quijones

In this late winter of generalized discontent, it is not easy to pinpoint just where the biggest threat to Europe’s increasingly flimsy union lies, so intense is the competition. One obvious contender is the Eurozone’s third largest economy, Italy, which faces a banking crisis, an economic crisis, a debt crisis, and a political crisis all at the same time.

The country’s Five Star Movement is gaining momentum both in the polls and in its efforts to call for a referendum on euro membership. In the meantime, Italy’s newly installed government wants — indeed, needs — to bail out a growing number of banks but has neither the money nor the political capital to do so.

Things had gotten so bad that the country’s two bad banks (Atlante I and Atlante II), ostensibly created to stabilize the financial system, were themselves on the verge of collapse. Turns out that things are even worse than we had thought, following a blistering tirade on Tuesday from Italy’s bad banker-in-chief, Alessandro Penati.

There is no clear vision of the problem and no strategy,” Penati told a financial conference in Milan, according to Reuters. He said he was virtually working alone on rescues that had revealed “horror stories” within some banks.

In short, the insider blame game has begun.

Penati, whose boutique asset management firm, Quaestio Capital Management, was chosen to oversee the supervision of Atlante in late 2015, directed much of his ire at the banks themselves, in particular Italy’s two largest financial institutions, UniCredit and Intesa Sao Paolo. Atlante’s investors had, he said, shown “zero long-sightedness,” after declining to invest more in the fund, which has used 80% of its money to rescue two mid-sized banks in northeast Italy — Veneto Banca and Banca Popolare di Vicenza. Both these lenders now need more capital.

Intesa has devalued its stake in Atlante by 33% and a source has said Italy’s biggest bank, UniCredit, itself in serious need of help, could write it down by as much as 70%. “They invested in failed banks … you need to wait three years before assessing how much a bank like that is worth,” Penati said.

Penati’s comments echo previous criticism by Italian senior banker Giuseppe Guzzetti, who helped set up Atlante I and Atlante II. Unlike Penati, however, Guzzetti heaped much of the blame for the bad banks’ chronic underfunding on Credit Agricole and BNP Paribas, two of the French banks most exposed to Italian sovereign and banking debt but which refused to “do their part” in cleaning up Italy’s financial system.

The fact that private-sector institutions are refusing to provide more money to Atlante I or II and are instead writing down their current investments in those funds does not bode well for Italy’s chances of rescuing its collapsing banks with the help of the private sector. The original idea was that Atlante I and Atlante II would help create a secondary market for Italian non-performing loans (NPLs).

Now, that dream is in tatters. As shown by the recent farcical attempts to rescue Italy’s third largest bank, Monte dei Paschi di Siena (MPS), without a robust secondary market, the task of cleaning up Italy’s bank balance sheets could prove near to impossible.

In December, Penati’s plan to buy into Italy’s biggest-ever sale of bad debts — €28 billion of loans written by MPS — fell apart when the bank failed to find any other major investors. According to Penati, the sale collapsed because it had been tied to a capital raising that had been “badly devised and even more badly executed.

In a statement that should send shivers down investors’ spines, Penati noted that his job had taken him inside some dark corners of Italian banking. “I had never looked at banks from the inside … I was stunned they are run in this way,” he said.

Given the sheer scale of the problem and the likely refusal of northern European countries to hand over a blank check for Italy’s government to rescue its broken banking system, especially in the lead up to national elections in Germany, any lingering hope that state intervention will do the trick is seriously misplaced, as Penati himself warns.

As eurocrats hone their skills at their time-honored game of extend-and-pretend, Italy’s banking insiders are turning on each other like ferrets in a sack. All the while, investors are voting with their feet. As shown by Italy’s Target2 imbalances, the exodus out of Italian assets continues to gather momentum and the spread between the Italian 10-year yield and the German 10-year yield — the ultimate indicator of the dreaded Doom Loop — just reached a level that hadn’t been seen since November 2014.

It is against this torrid backdrop that Italy’s biggest bank, UniCredit, which ranks among the 30 global systemically important banks (G-SIBS) identified by the Financial Stability Board — i.e., is genuinely too big to fail — is somehow supposed to pull off the biggest capital expansion in Italian stock market history. If it fails in that endeavor, it won’t be long before the dominoes begin to fall.

Source and links:

Comments

Popular posts from this blog

In another bizarre moment, CNN suffers from a real-journalism crisis and exposes the US war crimes in Yemen ... again!

It’s almost like watching The Twilight Zone!
globinfo freexchange
When the corporate media finally decided to dedicate some of their 'precious' time to focus on the war crimes in Yemen, we thought that it was just a smokescreen. The 'unexplained phenomenon' happened after the unimaginable war-crime in which a school bus was bombed by the Saudi coalition, fully supported by the US.
The global condemnation was so loud that the corporate media couldn't avoid it. They had to speak about it. However, we were right. It was just a small parenthesis away from the common agenda. The US-Saudi coalition war crimes in Yemen continue at the same rate, but the corporate media continue to act like if the war doesn't even exist.
Yet, surprisingly enough, we had an unexpected exception to this corporate media norm. CNN decided to return to the issue and condemn the US involvement in Yemen!
In the following video, Kyle Kulinski was also surprised by the fact that CNN covered again th…

Jeremy Corbyn: 'We are in touch with Bernie Sanders and his campaign'

globinfo freexchange
Jeremy Corbyn and Yanis Varoufakis had an interesting conversation in August 20, at the Edinburgh Book Festival. Varoufakis challenged Corbyn to lead an international progressive movement that will end the brutal policies of the dominant neoliberalism.
Interesting parts of the dialogue:
JC: We saw the way in which the European Central Bank treated yourselves and also the austerity that was imposed on Ireland on Portugal and Spain.
YV: It's not just a state. They committed a crime against the Irish people. The head of the Central Bank of Europe put a gun on the Irish Prime Minister's head and demanded that overnight the losses of private investors, mostly from Germany, should be transferred on to the books of the Irish state and the Irish Prime Minister's account. Now, that's, you know, robbery, just daylight robbery. That's what they did.
JC: I actually challenged the whole Maastricht idea, which established the European Central Bank, because it wa…

Τελευταία ευκαιρία για Grexit ... πριν αναλάβει ο Κούλης

globinfo freexchange
Η τελευταία κερδοσκοπική επίθεση κατά του τραπεζικού συστήματος δείχνει ότι ακόμα και όταν υποκύπτεις σε ότι ζητάει η διεθνής χρηματοπιστωτική μαφία, δεν είναι αρκετό.
Το ότι θα δικαιωνόμασταν για άλλη μια φορά και μάλιστα τόσο γρήγορα, πραγματικά δεν το περιμέναμε.
Μετά την υποτιθέμενη έξοδο από τα μνημόνια και το περίφημο διάγγελμα Τσίπρα είχαμε γράψει πως οι μετριοπαθείς 'Αριστεροί' προσπαθούν να μας πείσουν ότι τώρα η χώρα θα έχει περισσότερη ελευθερία να χαράξει τις δικές της πολιτικές. Δηλαδή, η χρεοκοπημένη Ελλάδα (που βρίσκεται σε χειρότερη κατάσταση απ'ότι όταν μπήκε στο πρόγραμμα διάσωσης), θα κολυμπήσει ξεβράκωτη στα ίδια νερά με τους καρχαρίες των αγορών και θα επιβιώσει. Αυτό πάνω-κάτω μας λένε.
Πράγματι λοιπόν, μετά από περίπου ενάμισι μήνα, ένα από τα βασικά εργαλεία του μηχανισμού της διεθνούς χρηματοπιστωτικής μαφίας (το Bloomberg), αποφάσισε να εξαπολύσει επίθεση κατά του τραπεζικού συστήματος και ο πανικός δεν άργησε να εξαπλωθεί. Όπω…

How Bezos tricked Bernie and workers

globinfo freexchange
The truth is that Bernie Sanders fought, and still fights for the workers more than any elected US president combined for decades. And his crusade against Amazon and Jeff Bezos' enormous greed resulted in the unprecedented decision of the company to raise minimum wage to $15 an hour.
But it was too good to be true.
As Bloomberg reported:
           Amazon.com Inc. is eliminating monthly bonuses and stock awards for warehouse workers and other hourly employees after the company pledged this week to raise pay to at least $15 an hour. Warehouse workers for the e-commerce giant in the U.S. were eligible in the past for monthly bonuses that could total hundreds of dollars per month as well as stock awards, said two people familiar with Amazon’s pay policies. The company informed those employees Wednesday that it’s eliminating both of those compensation categories to help pay for the raises, the people said.


As a pure product of the neoliberal culture, Bezos found the op…

The Podesta emails - top US plutocracy group attempted to approach Hillary Clinton under newly elected chairman Jeff Bezos

WikiLeaks series on deals involving Hillary Clinton campaign Chairman John Podesta. Mr Podesta is a long-term associate of the Clintons and was President Bill Clinton's Chief of Staff from 1998 until 2001. Mr Podesta also owns the Podesta Group with his brother Tony, a major lobbying firm and is the Chair of the Center for American Progress (CAP), a Washington DC-based think tank.
globinfo freexchange
An email by a Business Council* representative to John Podesta was expressing the desire of the group to 'approach' Hillary Clinton.
The email was sent nearly two years before the 2016 presidential election at the time where Jeff Bezos was the newly elected president of the group. Also, according to the email, the group consisted of more than 120 "of the biggest CEO's in the US.", meaning, the elite of the American plutocracy.
According to the email, the group was interested for a speech by Hillary Clinton in their meeting, but also, for some informal contacts of he…

This is the real EU ...

failed evolution
When the European Parliament voted recently to sanction Hungary for neglecting norms on democracy, civil rights and corruption, we wrote:
This is the Union that exhibited some "humanitarian sensitivity" by packing thousands of refugees in Greek islands under inhuman conditions and paid Turkey to keep them in its soil. And now, these hypocrites want to punish Hungary for neglecting norms on democracy, civil rights and corruption!
We were right.
According to a recent article by the NY Times:
There is growing acrimony — and now an investigation — over why the camp [Moria on the Greek island of Lesbos] is so bad when so much money has been provided by the European Union to help improve the Greek asylum system since migration levels started to rise in 2014.
[...]
Aid groups have been warning of a need for expanded facilities for several years, however. For some, the failure to improve the camp and hasten the asylum process suggests neglect on the…

Alexandria Ocasio-Cortez - neoliberal establishment 0-3 ... so far

globinfo freexchange
More than a month ago, we identified an immediate mobilization of the establishment machine to push progressives into the establishment lines after the 'shocking' victory of Alexandria Ocasio-Cortez.
Under the fierce pressure of the corporate media, Cortez was essentially forced to declare loyalty to Nancy Pelosi. That was a first, significant victory of the establishment against Cortez and the progressive movement.
After that, we saw an unexplained and bizarre contribution of both Bernie Sanders and Ocasio-Cortez to the establishment pro-McCain 'litanies'. In this totally unnecessary self-recruitment for the McCain's legacy whitewash operation, Cortez retreated unconditionally and the establishment marked a second victory against her.
Now, the establishment 'scored' one more time, as Cortez was forced to endorse establishment's agent, Andrew Cuomo.


We mentioned already that corporate media will focus mainly on pushing progressives to b…

Rapid drop of the recruitment rates may accelerate hyper-automation and privatization of the US army

globinfo freexchange
Younger generations have been 'trained' by the dominant culture to act in more 'pragmatic' terms in the arena of a brutal economic cynicism. As the fight for a place in this system becomes harder and harder, more and more people are being left out of the game. More and more of the them struggle to survive.
Despite these perfect conditions for the US empire components to exploit the growing numbers of the 'brigades of the poor’, not everything went well for the empire.
After 9/11 disaster, the Internet, the WikiLeaks, the alternative sources of information, the whistleblowers and the powerful combination of all these, brought some unprecedented changes. They managed to destroy the deceptive facade of the US deep state narratives, propagated through the corporate media.
With all the big lies, war crimes, war propaganda exposed to great extent, millennials and new generations are not easy targets for "war on terror"-type narratives.
As a con…

WikiLeaks paper reveals Congressional think tank specific techniques for 'persuading' audiences

This document was obtained by WikiLeaks from the United States Congressional Research Service. The CRS is a Congressional "think tank" with a staff of around 700. Reports are commissioned by members of Congress on topics relevant to current political events. Despite CRS costs to the tax payer of over $100M a year, its electronic archives are, as a matter of policy, not made available to the public. Individual members of Congress will release specific CRS reports if they believe it to assist them politically, but CRS archives as a whole are firewalled from public access. This report was obtained by WikiLeaks staff from CRS computers accessible only from Congressional offices.
globinfo freexchange
A report from April 12, 2007, was "Prepared primarily for congressional staff members called upon to help prepare speeches for Members,” and “provides basic guidance on obtaining speech material, using it to prepare a speech draft, and presentation.”, as we read in the abstract. …

In Brazil too we see what has become now neoliberalism's common practice: recruit the far-right to do the dirty job

globinfo freexchange
Boaventura de Sousa Santos, professor of sociology at Coimbra University in Portugal, and a distinguished legal scholar at the University of Wisconsin Madison, spoke with Greg Wilpert of the Real News, about the shocking rise of neofascism in Brazil through presidential candidate, Jair Bolsonaro.
Santos explained:
It’s very well documented that the United States is - through several organizations - really advising, financing Bolsonaro’s campaign. Bannon has said that he had talks with the Bolsonaro’s son and they have particularly advised him in terms of digital strategies. That’s what they are doing. But we know that the Koch brothers have also been helping fund him.
We are in a society in which the class inequalities go together with the racial prejudice. In this society, which in fact for a long time it was very conservative and run by the oligarchies, in the last 15 years, there was a revolution in terms of the social policies - particularly the identity policies.…