The Head of the European Commission, Jose Manuel Barrosso is not optimistic about the future of Spain, Portugal and Greece. In view of these countries’ enormous debt problems, Barrosso warned that unless stern measures are taken to address the problem, the repercussions may be apocalyptic. The countries might slide back to dictatorship rule and democracy will be no more. That was what Barrosso, a former Prime Minister of Portugal, revealed at an extraordinary briefing with the Trade Union Chiefs (TUC).
In the meantime, European Union (EU) chiefs have begun talks aimed at arranging for the bailout of Spain which is anticipated to run into hundreds of billions of pounds. Greece has already accepted a bailout package amounting to £650 billion. John Monks, the head of the European TUC, expressed his personal shock at Barrosso’s prediction. According to Monks, Barrosso sees no other alternative except for these countries to embrace austerity measures, however painful they might be.
If Spain, Portugal and Greece fail to adopt austerity measures, then there is a very real possibility of a takeover by the militaries which might then usher in a dictatorship. Bearing in mind the recent riots and popular uprisings in Athens and Malaga and elsewhere, a military coup is not too far-fetched a notion in these three countries. They do have a history of military uprisings and themselves only became democracies in the 1970’s.
Greece has already had its share of street protests as interest rates and taxes soared and public spending was drastically cut. Similarly, Portugal and Spain have announced austerity measures to avoid defaulting on their national debts. Likewise, other European countries that have had similar incidents of riots and protests include Hungary, Italy and Romania where public sector employees’ salaries are to be cut by 25%.
Mr Barroso’s warning exposes the concern of the EU that that the economic crisis could also lead to the collapse of the beleaguered euro and the unraveling of the EU itself.
On the other hand, Mr. Monks feels that the austerity measures themselves could push the EU back to the 1930s during the time of the Great Depression. He revealed that union chiefs throughout the EU are preparing for a coordinated ‘Day of Action’ to protest the cuts on September 29.
Meanwhile, EU leaders are meeting to discuss a rescue package for Spain. It is expected to come up to at least £100 billion to start with, although this figure could very well balloon as the economic crisis deepens.
Even huge countries can suffer financial calamities, what more ordinary citizens and companies? If you or your company are faced with financial problems, consider filing for bankruptcy. It is your right under the law to seek bankruptcy protection from your creditors. Bankruptcy gives you the chance to start anew financially. Call us at (813) 200 4133 for a free consultation or visit http://tampabankruptcy.pro.
Related Blogs
Filed under Chapter 7 (Tampa) by on Sep 1st, 2010. Comment. 
Bankrupt investment bank Lehman Brothers has sued JPMorgan Chase & Co. alleging that J.P. Morgan illegally obtained billions of dollars from it in the days prior to their bankruptcy filing. J.P. Morgan was Lehman’s one time ‘clearing bank’ or middleman between Lehman and its investors and creditors. This, according to Lehman, allowed J.P. Morgan to be privy to the financial condition of Lehman, especially when it continued to weaken. Lehman further alleged that J.P. Morgan’s Chief Executive James Dimon and other top executives took advantage of this insider information to get Lehman to turn over $8.6 billion in collateral in September 2008, an act that significantly contributed to its lack of liquidity and its subsequent downfall.
Lehman’s lawsuit goes on to allege that J.P. Morgan siphoned billions of dollars out of Lehman by demanding more collateral to cover its risks. This in turn ensured that J.P. Morgan would have the advantage over all other Lehman creditors, not just for its clearance exposure, but for all possible exposure that would have resulted from Lehman’s bankruptcy.
On its part, Lehman felt the need to give in to J.P. Morgan’s demands, fearing that should J.P. Morgan stop its clearing activities, it might have precipitated Lehman’s immediate collapse.
Although the lawsuit did not come as a surprise to industry players, J.P. Morgan spokesman Joe Evangelisti described it as ‘ill conceived and meritless’ and said the company will vigorously challenge it.
In a recent report, a bankruptcy court examiner found that Lehman could pursue a legal claim against J.P. Morgan for making excessive collateral requests albeit not a very strong claim. In his report, the court examiner said that Lehman could recoup $6.9 billion of the $8.6 billion pledged to J.P. Morgan. At the same time, the court examiner chided Lehman for using certain accounting techniques to hide its leverage and deceive the market before it ultimately fell into bankruptcy. All the while, J.P. Morgan was among the only institutions to continue lending to Lehman before and after its bankruptcy.
Evangelisti used the bankruptcy court examiner’s report to refute Lehman’s allegations and claimed that it was due to Lehman’s own poor decisions in taking on leverage and exposing itself to subprime mortgages that led to its eventual downfall and not any inappropriate use of confidential information on the part of any J.P. Morgan employee.
As it turned out, when Lehman could no longer get itself out of its downward spiral, the government declined to rescue it, forcing Lehman to file the largest bankruptcy in US history.
Filed under Chapter 7 (Tampa) by on Aug 7th, 2010. Comment.
The recent 2,200 page examiner’s report on the Lehman Brothers bankruptcy continues to dig up more cans of worms. Part of the report points to the misdeeds of UBS, a counterparty with Lehman. UBS was alleged to have advised its clients to invest in Lehman structured notes, such as principal protected notes and other structured products, without obtaining collateral.
To make matters worse, UBS itself was loaning money to Lehman but at a high interest and stringently secured under a program called Repo 105. UBS could arrange these loans favorable to itself because it knew of the dire straits Lehman was in financially. Through Repo 105, Lehman could temporarily hide some of its potentially loss-making assets by ‘selling’ them to counterparties such as UBS. But the money that UBS afforded to Lehman was backed by more than 100% of its value in collaterals.
Prior to Lehman’s collapse, UBS had full knowledge of the investment bank’s financial troubles. For instance, UBS knew that Lehman was the lowest rated of the investments banks, that their Archstone deal turned out to be disastrous for Lehman, that Lehman’s bad assets had risen by some 300% between 2006 and the first quarter of 2008, that it had a huge amount of write-downs and that it financed more mortgage-backed loans in 2007 than any other bank which resulted in a high proportion of its total funds being tied down to risky assets.
As a result of UBS’ dealings with Lehman that heavily favored itself, UBS itself had less than $300 million in counterparty exposure when Lehman filed for bankruptcy in late 2008 while at the same time it profited massively from the billion dollar secured and high interest rate loans it gave to Lehman.
In the meantime, retail and institutional investors who have lost out by investing in Lehman’s structured notes can file a claim with the Financial Industry Regulatory Authority (FINRA) against UBS. This has proved to be a worthwhile step to take as UBS has already lost in several claims made against it through FINRA. Although UBS claims that the Lehman examiner’s report does not explicitly state that it had acted inappropriately, it is quite undeniable that it had ignored the clear signs of Lehman’s potential collapse as it continued to aggressively market Lehman’s structured notes.
To-date, many individual investors have sought to claim against UBS, both from within the US and internationally.
Filed under Chapter 7 (Tampa) by on Apr 5th, 2010. Comment.
In a stunning expose, Anton Valukas, the court appointed investigator charged with probing the Lehman Brothers collapse, revealed that the investment bank had about $39 billion in encumbered cash. This represented almost all of its $41 billion cash reserves. The $39 billion was encumbered to a host of lenders that included Citigroup, JPMorgan Chase and Co and Bank of America Corp.
After the collapse of Bear Sterns Co, Lehman began to consider obligatory deposits and collaterals pledged to banks as cash, using these amounts in their talks with analysts and the authorities, many of whom were misled into believing Lehman was more liquid than it actually was. One such party was Buckingham Research Group, who only 2 days before Lehman’s collapse on September 15, 2008 stated in their report that “Lehman remains well positioned in a ‘run on the bank scenario’” due to its perceived buffer of $42 billion to meet its demand for cash. In reality only about $2 billion of this amount was readily available.
Valukas’ report states that there are possible grounds for taking Lehman officials to court for causing the company to file erroneous financial reports that clearly misrepresented the risks behind the company at that time.
Another area of misrepresentation was Lehman’s accounting methods that could have misled investors. One example was the transactions that made $50 billion disappear from the books within half a year. Another example was the company’s method of valuing real estate investments that avoided write-downs but instead focused on a project’s future prospects.
At the time of its bankruptcy filing, Lehman was the nation’s fourth-largest investment bank with estimated debts of $613 billion. This included short term agreements to repurchase assets of $159 billion that made up almost 26% of total debts.
Lehman started their practice of using encumbered assets to inflate their cash in June 2008 when Citigroup required them to make a $2 billion deposit against trades that Citi was settling and clearing for Lehman. About a week later, when JPMorgan requested $5 billion in the form of securities as part of revised margin requirements, Lehman did the same thing. As time went on, Lehman continued to consider these amounts as liquid assets, knowing full well that the securities were pledged as collateral to JPMorgan and that a withdrawal of their deposit with Citigroup would jeopardize Citi’s willingness to settle and clear trades for them.
In August of 2008, the pattern continued when Lehman deposited $500 million as collaterl in the Bank of America to secure its daytime exposures on trades and again counted this as part of its cash pool “despite the fact that the collateral was subject to a security interest, was returnable to Lehman only on three days’ notice and was placed to ensure that Bank of America would continue its clearing operations,” according to the Valukas report.
Likewise, Lehman deposited more than $800 million with HSBC Holdings Plc and an undisclosed amount with JPMorgan in 2 accounts, again counting these amounts as readily available cash.
All these activities went unnoticed by the US Securities and Exchange Commission, the primary watchdog of the industry until the day before Lehman’s bankruptcy on September 15, 2008. Lehman collapsed when its lenders pulled back making it the largest US bankruptcy ever.
Filed under Chapter 7 (Tampa) by on Mar 24th, 2010. Comment.
