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Another Global Banking Crisis Now Taking Shape

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Chaos continues to rage at many of the world's most important banks.   And yet the corporate media is NOT giving us clear, accurate, UNBIASED information on what's really happening.   What follows here is an attempt to provide such information, based on the reports of financial analyst Mike Larson at WeissResearch and a new article by Matt Taibbi.

As Mike Larson says, the world's financial system is a complete mess right now.   Europe's major banks are bursting at the seams with lousy government bonds.   Asian banks are at risk as growth slows sharply there.   Many U.S. institutions remain on life support, propped up only by huge and repeated injections of easily acquired, central bank funny money, created out of thin air (QE3 etc.).    

Inescapable conclusion:   We are on the verge of a global banking disaster that could very well eclipse the crisis we saw during the collapse of Lehman Brothers back in 2008!   (See Matt Taibbi's dynamite comment in the first post of the discussion that follows this article.)   But you'd never know we're on the verge of another global banking disaster by scanning the results of the so-called "stress tests" that governments around the world have been performing on their nation's banks.   Nor would you get an inkling of what's about to happen by listening to bank executives when they talk to investors.   And what's absolutely unconscionable, Mike Larson continues, is the fact that even the world's major credit ratings agencies are still telling us that everything is fine -- even as Europe's financial heart lingers on the verge of cardiac arrest!  

Remember, after having defrauded us in the past, these credit ratings agencies are the same companies that are now supposed to be providing investors around the world with accurate, unbiased information about the financial companies and financial products that their bankster paymasters want us to invest in.     

Examples of ratings agency fraud from our recent past  

The 1980s S&L Crisis:   In a landmark 1994 study of the rating agencies, the Government Accountability Office (GAO) concluded that Standard & Poor's didn't issue a "vulnerable" rating for one of the biggest failed companies, Fidelity Banker's Life, until six days before the failure;   and for another, Monarch Life, until 351 days AFTER the failure!   Similar instances of outright neglect by ratings agencies were provided by Moody's and A.M. Best.     

The Enron Failure of 2001:   The New York Times reported that ratings agencies saw signs of Enron's deteriorating finances, but did little to warn investors until at least five months later, long after more problems had emerged and Enron's slide into bankruptcy had already begun to accelerate.   And it wasn't until November 28, just days before Enron filed for Chapter 11, that the major agencies first lowered their debt ratings below investment grade!  

The mortgage meltdown of 2007 and 2008:   Congress, regulators, investors, and even some of the ratings agencies' former executives generally agree that:  

a) triple-A ratings on mortgage-backed securities grossly overestimated the investments' credit quality,  

b) this played a pivotal role in the debt crisis  

c) the primary factor behind their inflated ratings were multiple conflicts of interest between them (the ratings agencies) and the bankster issuers of the fraudulently overvalued mortgage-backed securities (MBSs).  

These conflicts of interest were, and still are, glaringly obvious!  

For starters, nearly all ratings issued by the major agencies are still paid for by the MBS issuers, i.e. the companies (and their financial products) that are supposedly being objectively rated.   In addition, the ratings agencies have often earned substantial additional consulting fees for helping to structure the very securities they rate.   Finally, to add insult to injury, it's been proven that the major ratings agencies have revealed their ratings formulas to issuers, thereby helping the issuers manipulate their data, to thereby more effectively game the system!   Problem is, when they game the system, it must inevitably be done at someone else's expense -- namely the investors who are being played for suckers.     

We all know that central bankers around the world are trying to bail out their banker buddies.   It's happening in Japan.   It's happening in Europe.   It's happening right here in the U.S. of A.  

They're essentially giving banks gobs of nearly free money.   They're pledging to buy lousy bonds to artificially inflate prices.   They're doing anything and everything to continue the charade that the underlying banking sector fundamentals are sound.  

But here's what you need to understand about how banks now function:   cheap money can allow them to finance and hold on to their lousy assets for a while longer than they otherwise might.   But if the quality of those assets continues to rot from the inside out, none of that will matter.   Eventually the bank will be pushed towards failure.  

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Several years after receiving my M.A. in social science (interdisciplinary studies) I was an instructor at S.F. State University for a year, but then went back to designing automated machinery, and then tech writing, in Silicon Valley. I've (more...)

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