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Here Is The FT’s Gold Price Manipulation Article That Was Removed | Zero Hedge

Here Is The FT’s Gold Price Manipulation Article That Was Removed | Zero Hedge.

Two days ago the FT released a clear, informative and fact-based article, titled simply enough “Gold price rigging fears put investors on alert” in which author Madison Marriage, citing a report by the Fideres consultancy, revealed that global gold prices may have been manipulated on 50 per cent of occasions between January 2010 and December 2013.

To those who hve been following the price action of gold in the past four years, gold manipulation is not only not surprising, but accepted and widely appreciated (because like the Chinese those who buy gold would rather do so at artificially low rather than artificially high fiat prices) and at this point, after every other product has been exposed to be blatantly and maliciously manipulated by the banking estate, it is taken for granted that the central banks’ primary fiat alternative, and biggest threat to the monetary status quo, has not avoided a comparable fate.

What is surprising is that where the FT article once was, readers can now find only this:

 

 

And since we can only assume the article has been lost to FT readers due to some server glitch, and not due to post-editorial consorship or certainly an angry phone call from the Bank of England or some comparable institution, we are happy to recreate it in its entirety. Just in case someone is curious why gold price rigging fears should put investors on alert.

Gold price rigging fears put investors on alert

By Madison Marriage

Global gold prices may have been manipulated on 50 per cent of occasions between January 2010 and December 2013, according to analysis by Fideres, a consultancy.

The findings come amid a probe by German and UK regulators into alleged manipulation of the gold price, which is set twice a day by Deutsche Bank, HSBC, Barclays, Bank of Nova Scotia and Société Générale in a process known as the “London gold fixing”.

Fideres’ research found the gold price frequently climbs (or falls) once a twice-daily conference call between the five banks begins, peaks (or troughs) almost exactly as the call ends and then experiences a sharp reversal, a pattern it alleged may be evidence of “collusive behaviour”.

“[This] is indicative of panel banks pushing the gold price upwards on the basis of a strategy that was likely predetermined before the start of the call in order to benefit their existing positions or pending orders,” Fideres concluded.

“The behaviour of the gold price is very suspicious in 50 per cent of cases. This is not something you would expect to see if you take into account normal market factors,“ said Alberto Thomas, a partner at Fideres.

Alasdair Macleod, head of research at GoldMoney, a dealer in physical gold, added: “When the banks fix the price, the advantage they have is that they know what orders they have in the pocket. There is a possibility that they are gaming the system.”

Pension funds, hedge funds, commodity trading advisers and futures traders are most likely to have suffered losses as a result, according to Mr Thomas, who said that many of these groups were “definitely ready” to file lawsuits.

Daniel Brockett, a partner at law firm Quinn Emanuel, also said he had spoken to several investors concerned about potential losses.

“It is fair to say that economic work suggests there are certain days when [the five banks] are not only tipping their clients off, but also colluding with one another,” he said.

Matt Johnson, head of distribution at ETF Securities, one of the largest providers of exchange traded products, said that if gold price collusion is proven, “investors in products with an expiry price based around the fixing could have been badly impacted”.

Gregory Asciolla, a partner at Labaton Sucharow, a US law firm, added: “There are certainly good reasons for investors to be concerned. They are paying close attention to this and if the investigations go somewhere, it would not surprise me if there were lawsuits filed around the world.”

All five banks declined to comment on the findings, which come amid growing regulatory scrutiny of gold and precious metal benchmarks.

BaFin, the German regulator, has launched an investigation into gold-price manipulation and demanded documents from Deutsche Bank. The bank last month decided to end its role in gold and silver pricing. The UK’s Financial Conduct Authority is also examining how the price of gold and other precious metals is set as part of a wider probe into benchmark manipulation following findings of wrongdoing with respect to Libor and similar allegations with respect to the foreign exchange market.

The US Commodity Futures Trading Commission has reportedly held private meetings to discuss gold manipulation, but declined to confirm or deny that an investigation was ongoing.

h/t Noel

HAA HAA: Will Another Creditanstalt Be Revealed Once The Hypo Alpe Aldria “Black Box” Is Opened? | Zero Hedge

HAA HAA: Will Another Creditanstalt Be Revealed Once The Hypo Alpe Aldria “Black Box” Is Opened? | Zero Hedge.

Recall that the bank which precipitated the first Great Depression was Austria’s Creditanstalt, which declared bankruptcy on May 11, 1931 and which resulted in a global financial crisis, after its failure waterfalled into the chain-reaction of bank failures that marked the first systemic financial collapse. As part of CA’s rescue, Chancellor Otto Ender distributed the share of bailout costs between the Republic, the National Bank of Austria and the Rothschild family (and as a bit of historic trivia, following the Austrian Anschluss to Nazi Germany in 1938, Creditanstalt-Bankverein was targeted for a variety of reasons, leading to the arrest of Louis Nathaniel Rothschild and his imprisonment for the losses suffered by the Austrian state when the bank collapsed. Aggrieved, he emigrated to the US in 1939 after more than one year in custody).

A little over 80 years later, while the world is knee deep in explaining how snow during the 4th warmest January on record is the culprit for an abrupt and dramatic slowdown in world growth, and is following the geopolitical developments out of Crimea with great attention, the real action may once again be taking place in the small, quaint and quiet central European country, where yet another bank may be sowing the seeds of further financial mayhem.

Presenting Hypo Alpe Aldria (or “HAA” although certainly not funny as in funny HAA HAA: more shortly), a bank which in reality has been in the news for years following its nationalization in 2009 by the Austrian government to prevent a bank collapse. In fact, just last week, Austrian Chancellor Werner Faymann said the government is right to avert the collapse of Hypo Alpe-Adria-Bank International AG, as he cited the precedent of Creditanstalt, whose crash helped trigger the 1930s depression. “The crash of Creditanstalt in 1931 caused economic meltdown,” Faymann told parliament’s lower house in Vienna today. “There was a consensus in 2009 to act where necessary, to avoid the mistakes of the 1930s, to avoid a collapse by nationalizing and by installing protection measures at the European level.”

As a follow up, as Bloomberg also reports, the fate of HAA – whatever it ends up being – may have significant political consequences for the Austrian government. Again Bloomberg reports that “support for Austria’s ruling coalition is slipping five months after it won a narrow majority as inaction over the nationalized Hypo Alpe-Adria Bank International AG lifts backing for protest parties. Latest polls suggest voters are losing trust in Social Democratic Chancellor Werner Faymann and People’s Party Vice Chancellor Michael Spindelegger and warming to the euro-skeptic Freedom Party before May’s European Parliament elections. The Green and Neos parties also stand to gain, said Hubert Sickinger, a political scientist at the University of Vienna.”

“The ruling parties have a problem,” Sickinger said in an interview. “They postponed the Hypo Alpe ‘dead bank’ problem hoping that the economy would change but they’ve known since early 2013 that this wouldn’t help.”

One party that has been quite vocal on the issue of HAA is the Austrian Freedom Party nationalists, who seek to restrict immigration, and which has the most to gain from detouring the status quo as they would finish first in the EU parliamentary election, according to a Feb. 14 Gallup poll commissioned by the Oesterreich newspaper. The Freedom Party under deceased leader Joerg Haider helped build Hypo Alpe from a regional lender into one of the biggest banks in the Balkans.

“The European elections will be payback day” over the government’s handling of Hypo Alpe, said Franz Schellhorn, director of Agenda Austria, a Vienna-based research group.

“Anger is growing,” Schellhorn said in an interview today. “This black box has to be opened to see what is going on inside.”

It is the “opening of this black box” that suddenly has the entire investment community on edge, even if most of them hope the story simply goes away as it has for the past five years. Only this time it may be impossible to once again kick the can, er, box.

And while the legacy story of the post-bail out HAA may be known, it is the recent developments that are largely unknown and where the risks lie. This can be seen in the recent dramatic drop in HAA bond prices.

So why should people care about HAA? Bank of America explains:

The real surprise of the Hypo Alpe Adria (HAA) situation is not that bondholders may lose money, but the sight of the third richest country in Europe by per capita income apparently looking for ways out of paying what are clearly guaranteed debts of a 100% nationalized bank, for HAA debt is guaranteed by the Austrian State of Carinthia under a deficiency guarantee. The Austrian Finance Minister may be targeting a contribution from bondholders, according to reports on Bloomberg on Friday, We would consider it an astonishing turn of events if this actually ever came to pass, with wide-ranging negative implications for investors in not just Austria but potentially Europe as a whole.

What are the other implications from a potential HAA fallout? Here are the cliff notes:

  • Direct impacts: other Austrian banks?

Erste Bank and RBI will likely trade as proxies in any negative newsflow which could pressure their spreads. They aren’t really affected, though, in our view.

  • Indirect: negative for marginal banks

The Carinthia guarantee is a throwback to a very different banking world – when banks enjoyed implicit and explicit institutional support. Those days are over. We underline
that we have moved to a bail-in regime where investors will contribute to the costs of bank clean-up. This has implications for other very marginal banks e.g. the Cooperative Bank in the UK which we think is struggling.

  • Why the fuss? Who pays for HAA?

The European Commission in its decision on State Aid (dated 3rd Sept 2013) puts the capital need at €5.4bn in a stressed scenario. Liquidity needs are put at up to €3.3bn, meaning that the total outlay could be as high as an extra €8.7bn, in addition to the billions that have already been committed by the current and former shareholders. HAA’s total assets as of June 2013 were ‘only’ €31.3bn, recall.

  • What kind of outcomes for HAA?

We struggle to see how those positing bondholder losses get around the guarantee from Carinthia and all that implies. However, with lower cash prices in many of the bonds, perhaps the way forward opens up for e.g. substitution (of Austria for Carinthia) at a discount. There may also be the time value of return of principal to factor in.

  • Negative outcomes: maybe tough to do

If the Austrian Government decides to be tough, then the negative scenarios for HAA bondholders are potentially many. The Government may be somewhat hampered however by the fact that HAA bonds under the 2006 Prospectus are issued under German Law.

* * *

For the extended, and must read, notes on what Hypo may lead to, here is the full note from Bank of America’s Richard Thomas:

Funny HAA HAA or funny peculiar? Implications of Hypo Alpe Adria

HAA – the implications

The emerging crisis re: how to resolve Austria’s Hypo Alpe Adria (HAA) looks like it’s already one destined for the textbooks.

It has been rumbling around in our ‘bank peripheral vision’ for years as a problem child but now seems to be coming to a head because of what appears to be increased political pressure for a solution that potentially involves the imposition of senior bondholder losses in the mix. As such, we need to look at it to see what read-across, if any, there is to other European banks, as it seems to represent a hardening of attitudes to bank resolution amongst one of Europe’s richest countries.

We do not express an opinion or investment recommendation on the securities of HAA itself. Using conventional bank analysis, we believe that HAA is potentially uninvestable not only because of its evident non-viability and the lack of appetite to save it but also because of the allegations of past misconduct, as widely reported in the press, and what appears to be ongoing incompetence e.g. leasing invoicing ‘irregularities’ in Italy provided against as recently as in 1H13 numbers. The outcome for bondholders will ultimately be based on Austria’s view of its obligations and how it deals with the Carinthia guarantee, in our view. We expect that prices will therefore trade according to the last comment from someone important – highly unpredictable. For example, they were down on Friday following comments from the Austrian FinMin, but up this morning on comments over the weekend from the Head of the Austrian Central Bank. A final decision on what happens could be many months out.

For us, the shock of the current situation is not so much about bail-in being applied in the case of a failed bank – like most credit investors, we are used to this by now. The real surprise of the situation is the sight of the third richest country in Europe by per capita income apparently trying to manoeuvre out of paying what are clearly guaranteed debts (HAA debt is guaranteed by the State of Carinthia). We would consider it an astonishing turn of events if this actually ever came to pass, with wide ranging negative implications for investors in not just Austria but Europe as a whole.

Direct implications?

The read across from HAA to other banks is weak, in our view. However, there are a few implications to highlight which may impact spreads.

  • The most directly impacted bank would seem to be Bayerische Landesbank (BYLAN), former owner of the bank and where there is still some outstanding exposure. BofAML analyst Jeroen Julius talked about this in his note on BYLAN last week here. We remain Underweight-70% the BYLAN 5.75% T2 bonds. There is still an outstanding line of €2.3bn from BYLAN to HAA of which we understand €1.8bn was due at end 2013 – by March (if not sooner) then this will need to move to an impaired classification. HAA is saying that these monies are an equity substitute and are trying to claw back €2.3bn already repaid. Our view is that BYLAN may sacrifice some of the outstanding amount in  any settlement but seem unlikely to have to pay back the repaid amount. In the meantime, it seems that they do have a say in some of the levers which Austria may want to use in resolving HAA, so their negotiating stance looks solid.
  • Other widely traded banks where spreads could come under pressure are Erste Bank and RBI. We will likely see these banks trade as proxies in any negative newsflow which could pressure their spreads – their illiquid CDS is probably already trading some 10-15bps wider in senior and ~13bps wider in sub CDS. These banks should be much more sensitive to negative news from Central and Eastern Europe rather than Austria though, in our view, given their focus on emerging economies.
  • RBI’s exposure to Austria reflects its domicile and the corporate ties between Austrian companies and the EE corporates where most of RBI’s operations are placed. It does not have direct exposure to the Austrian complex in the way that e.g. BAWAG or Erste Bank have. The RBIAV 6% is probably down a point from its highs in the last week or so. We see the impact on RBI as quite tangential: if Austria takes a tough stance with bondholders, it’s more negative for sentiment on the banks, given that it implies a reduced sovereign exposure – so hardly negative for the sovereign from e.g. higher debt levels, albeit lower contingent liabilities.
  • About half of Erste Bank’s credit risk exposure is to Austria. It is therefore more of an ‘Austrian’ bank than RBI but that’s not really the problem here, in our view.
  • We are still very comfortable with RBI at this point, especially given the recent capital increase. However, we recommend reducing risk by switching into lower cash priced bonds versus higher cash price bonds. That means out of e.g. the 6.625% bond with a cash price of about €113 into lower cash priced bonds like the 6% (€106.5) or the 5.163%, though this is a much more illiquid security. We downgrade the 6.625% bonds to Underweight-30%.

Indirect implications?

The wider implications of what happens in the HAA case include:

  • If we do move to some kind of forced loss imposition from Austria on these bonds, then it probably isn’t a good moment for bank risk (or indeed European risk). However, as we explain, in this case loss imposition is rather tricky to do, given the existence of the guarantees from Carinthia.
  • Whatever happens, we see the HAA situation as reflecting a growing impatience with marginal and near-failing banks and that a hard line is likely to be followed in resolving them. It underlines that we have moved to a bail-in regime where investors will contribute to the costs of bank clean-up. This has implications for other very marginal banks e.g. the Cooperative Bank in the UK which we think is struggling. Underweight-70% the 11% T2 bonds of the Coop Bank at £123.
  • The Carinthia guarantee is a throwback to a very different banking world – when banks enjoyed implicit and explicit institutional support. Those days are over. Such support often allowed excessive expansion on the back of cheap funding – we can point to the continued need for adjustment in the Landesbank sector for evidence of that.
  • One final point: in our view there would be a negative read-across to the German Landesbanken more generally if a way was found around the deficiency guarantee in this case. The Landesbanken heavily rely on State guarantees. For example, HSH Nordbank has a €10bn guarantee (that helps its capital position) form Hamburg and Schleswig- Holstein.

Funny HAA HAA or funny peculiar?

A special case?

We think there is a good argument for saying that HAA is a special case amongst European banks. One can read its downfall and subsequent full nationalization as a familiar juxtaposition of overexpansion (in the former Yugoslavia) without sufficient risk controls being in place as a result of too cheap funding, owing to its funding guarantee from the Austrian State of Carinthia (currently rated A2 by Moody’s). Yet the narrative is worsened by allegations of serious past misconduct involving money laundering, fraud and possibly murder. See for example The Economist, Sept 9th 2010 or the New York Times, October 20th 2010.

Whilst mismanagement may well have been a feature of some European banks before the crisis; we would hesitate to attribute this level of alleged misconduct, however, to even many of the most stressed European banks. The nature of the allegations, in our view, serves to underline Austrian public antipathy for taxpayers having to pay for the continuing losses at the bank. It also differentiates it sharply from other European, and of course Austrian, banks. HAA’s situation and alleged misconduct is simply too severe to have systemic implications for other Austrian banks, in our view.

Could there be a haircut? Wait!

Bloomberg reports that two thirds of the Austrian public is against the use of further public monies being used to prop up the bank. With such a powerful consensus against such a move and elections next year, it’s not surprising that recently the rhetoric has turned firmly towards finding solutions for HAA that involve imposing losses somewhere – anywhere – other than at the door of the Austrian taxpayer. Hence, the comments from the Finance Minister Spindelegger on Feb 21 that Austria was looking at ways to get bondholders to contribute.

So far, so straightforward: the only problem is that the bulk of HAA senior bonds enjoy a deficiency guarantee from the State of Carinthia. This complicates the burden sharing. We note, by the way, that the EC ruling on State Aid for HAA made no mention of senior bondholder losses at all. Is it really possible to get around the deficiency guarantee and impose losses?

Our understanding is that the deficiency guarantee is not quite like other guarantees. It’s this ‘gap’ that allowed Moody’s to downgrade HAA to Baa2 from A1 on Feb 14. It means that a creditor must have attempted in vain to satisfy his or her claims against (in this case) HAA first before he can use the guarantee, though not if bankruptcy proceedings were already started. Non-payment alone may not be sufficient to invoke the guarantee, absent due process. Even so, it still looks to us that it’s just a matter of time before creditors could ask Carinthia to satisfy their claims. It seems doubtful that the State could afford to perform on the guarantee however with the €12.3bn or more of bonds being many multiples of Carinthia’s income, according to Moody’sIt seems hardly credible that we could be looking at bankruptcy of a Federal State of one of the richest countries in Europe.

Hence, the dilemma. This really would be a new departure for a European country – we’ve had bondholder haircuts before, but not on instruments guaranteed by a governmental entity like Carinthia.

What’s the size of the hole at HAA?

The European Commission in its decision on State Aid (dated 3rd Sept 2013) puts the capital need at €5.4bn in its stressed, or worst case, scenario. Similarly, the liquidity needs are put at €3.3bn in the stressed scenario, assuming that the above capital is provided in cash, meaning that the total outlay could be as high as €8.7bn, in addition to the billions that have already been committed by the current and former shareholders. HAA’s total assets as of June 2013 were ‘only’ €31.3bn, remember, and of this, €3.5bn was already earmarked as for disposal – giving a pro forma number of €27.8bn. To put this in further context, existing capital resources at HAA (equity plus sub debt) are €3bn, and provisions existing already are €3.5bn. Loans net of provisions are ~€17bn.

The now former Chairman of the Bank, Mr. Liebscher, has previously commented that HAA could require up to €4bn of further capital (‘only €400mn a year over 10 years’). Capital needs could vary considerably if assets were transferred out of the regulatory capital environment e.g. to an asset management company, since these require much less capital. We note too that Weiner has reported that the loss for the year at HAA may have grown to €1.8bn (from the €0.8bn at half year 2013) – we think it’s likely that is already reflected in the EC’s numbers though we’re not completely sure.

The €5.4bn of capital needs calculated by the EC could be higher or lower therefore but let’s use it as a basis for thinking about outcomes. Are there any offsets? Certainly,
HAA believes so. It is claiming that €4.6bn of funds extended to the bank in 2008 by BayernLB is an equity substitution under Austrian Law. €2.3bn of this is still outstanding (it’s not being serviced by HAA) but HAA has applied to the Munich Regional Court for a return of amounts that they’ve already paid back. Our core case is that BayernLB will lose some of this money (if only to settle the case) but we have no real idea how much they and HAA would settle at, of course, or if they will settle at all.

How (much) could bondholders pay?

Is it conceivable that the senior bondholders could be expected to contribute a sizeable chunk of the €5.4bn? As of end-June 2013, issued bonds at HAA totaled €11.1bn (we exclude Pfandbriefe); we don’t have data for any redemptions in 2H13. We do however know that there is a very substantial redemption of senior debt on March 17th of €750m (the HAA 3.75% bond). Again, the interim financials showed a cash balance of €2.6bn at the bank which on its own should comfortably cover the repayment. We are more skeptical about HAA’s liquidity, given the continued deterioration of its financial position implied by the reported further €1bn loss in 2H13. Perhaps it is this that is focusing the attention of Austrian policymakers on bondholders.

Repaying this bond would be a substantial cash outflow from the bank and bondholders would be getting par – these bonds are currently quoted at a mid-cash price of ~€96 but the bid/offer is something like 5 points, underlining the huge uncertainty. But it would also probably be taken as a pointer towards future treatment of bonds and so, if repaid, would likely positively impact prices.

The €5.4bn additional capital need would imply a forced senior bondholder haircut of anything from 20% upwards in our view depending on what is considered the pool of bailin-able liabilities, though admittedly we find it quite hard to believe this will be the actual outcome at this point. This number could be kept down not least by any  settlement with BayernLB – and we can’t really imagine that Austria will make a zero contribution here. Even the €5.4bn total capital needs number calculated by the EC is ‘only’ about 2% of Austrian GDP.

We also struggle to see how those positing bondholder losses get around the guarantee from Carinthia and all that implies. It’s this, we think, that is the really interesting part for European bank bondholders. We have seen headlines suggesting that the Republic of Austria would substitute itself as guarantor for the bonds, subject to bondholders agreeing to a substantial haircut.When the bonds were at par, that looked really unlikely, but with e.g. the 2016 and 2017 bonds having traded down so dramatically in the last few days (currently quoted with a cash price at around €85-86), perhaps the conditions are beginning to evolve for this type of liability management.

Ultimately, we think it’s unlikely that Carinthia could pay back bondholders and remain solvent itself – as Moody’s highlights in its downgrade of the State on Feb 14 2014, the debt outstanding is some six times Carinthia’s 2013 budgeted operating revenue. Recall that HAA is 100% owned by the Republic of Austria – it seems unlikely that the shareholder would enforce the insolvency of a regional State without acting itself.

We also wonder if there is some leeway in terms of the timing difference implied by the final payment under the deficiency guarantee – how prompt might this be? Months? Years? Longer? If it could be demonstrated that bondholders would have to wait many years before getting any of their principal back, then perhaps there is the basis for an offer that gives investors liquidity today, albeit at a discounted price.

What could induce bondholders to agree to any changes?

We suspect that this is currently under consideration – there likely is little limit to the scenarios that could be conceived, but it all depends on the view the Republic takes of itself in the markets and its concerns about any likely fallout from its actions. Freezing the liabilities of the bank and the guarantee? Rescission of the guarantee? Anything is possible but perhaps some of these worst scenarios are not the most probable. However, what is clear is that the outcome for bondholders, as we have seen before in these haircut scenarios, is highly unpredictable and politicized.

In spite of the Austrian Finance Minister’s comments to the contrary, we are of the view that most HAA bonds are still with the original, investment grade, investor base. We believe that the rotation into ‘trader’ or ‘hot money’ hands is probably only still at the beginning – only recently have we heard that blocks of bonds have been coming out, rather than the trading of very small amounts. This could change rapidly in the coming weeks if Austria decides to step up the bondholder loss rhetoric of course but at this point, it would be ordinary money managers, we think, who would be absorbing most of the losses, not hot money or speculators.

As an added twist, we note that HAA bonds issued under the August 2006 Prospectus are under German Law (rather than Austrian). Again, this points in the direction of either repayment of the bonds under the guarantee, or a negotiated settlement with bondholders, rather than the imposition of an arrangement by the Austrian Government, since legally they may not have the flexibility to do much else.

* * *

In conclusion all we have to add is that it would indeed be supremely ironic if the “strong” foreign law bond indenture would be tested, and breached, not by Greek bonds, as so many expected in late 2011 and early 2012, but by one of the last contries in Europe which is still AAA-rated. We would find it less ironic if the next leg of the global financial crisis was once again unleashed by an Austrian bank: after all history does rhyme…

“The Pig In The Python Is About To Be Expelled”: A Walk Thru Of China’s Hard Landing, And The Upcoming Global Harder Reset | Zero Hedge

“The Pig In The Python Is About To Be Expelled”: A Walk Thru Of China’s Hard Landing, And The Upcoming Global Harder Reset | Zero Hedge.

By now everyone knows that the Chinese credit bubble has hit unprecedented proportions. If they don’t, we remind them with the following chart of total bank “assets” (read debt) added since the collapse of Lehman: China literally puts the US to shame, where in addition to everything, the only actual source of incremental credit growth over the same time period has been the Fed as banks have used reserves as margin for risk purchases instead of lending.

 

Everyone should also know that like a metastatic cancer, the amount of non-performing, bad loans within the Chinese financial system is growing at an exponential pace.

 

Finally, what everyone learned over the past month, is that as the two massive, and unresolvable forces, come to a head, the first cracks in the facade are starting to appear as first one then another shadow-banking Trust product failed and had to be bailed out in the last minute.

However, as we showed last week, and then again last night, the default party in China is only just beginning as Trust failures in the coming months are set to accelerate at a breakneck pace.

 

The $64K question is will the various forms of government be able to intercept and bail these out in time, as they have been doing so far despite their hollow promises of cracking down on moral hazard: after all, everyone certainly knows what happened when Lehman was allowed to meet its destiny without a bailout – to say that the CNY10 trillion Chinese shadow banking industry will not have far more dire consequences if allowed to fall without government support is simply idiotic.

But what could be the catalyst for this outcome which inevitably would unleash the long-overdue Chinese hard landing, and with it, a new global depression?

Ironically, the culprit may be none other than the Fed with the recently instituted taper, and the gradual, at first, then quite rapid unwind of the global carry trade.

Bank of America explains:

QE and the Emerging Markets carry trade

 

The QE channel has worked through Emerging Markets and China is a key vehicle. By lowering the US government bond yields to a bare minimum, and zero –ish at the short end, a search for yield globally ensued. Emerging market banks and corporates have gone on an international leverage binge, yet another carry trade, the third in 20 years. The first one was driven by European banks, financing East Asian capex – that ended in 1997. The second one was global banks and equity-FDI supporting mainly capex in the BRICs. That ended in 2008. This time, it is increasingly non-equity: commercial banks and more importantly, the bond market – often undercounted in the BoP and external debt statistics that conventional analysis looks at.

 

Chart 9 shows the rise of EM external loans and bond issuance (both by residence and nationality). Since, end-3Q2008 to end-3Q2013, external borrowing from banks and bonds has risen USD1.9tn. Bank loans have risen by USD855bn and bond issuance in foreign currencies by nationality is up USD1,042bn. In the prior five-year period (i.e. end-3Q2003 – end-3Q2008), forex bond issuance rose only USD432bn. Clearly, the importance of external bond issuance is rising. See Table 5 for details.

 

In China, since, end-3Q2008 to end-3Q2013, outstanding external borrowing from banks and bonds has gone from USD207bn to USD849n – a net rise of USD655bn. Outstanding bank loans are up from USD161bn to USD609bn – a net rise of USD464bn. Bond issuance in foreign currencies by nationality is up from USD46bn to USD240bn – a net rise of USD191bn. In the prior five-year period (ie, end-3Q2003 – end-3Q2008), forex bond issuance rose only USD28bn in China. Clearly, the importance of external bond issuance is rising in China.

 

 

There is more to this story.

 

As mentioned earlier, for externally-issued bonds, USD1,042bn has been raised by the nationality of the EM borrower since end-3Q 2008, but USD724bn by residence of the borrower – a gap of USD318bn, or 44%. This undercount is USD165bn in China, USD100bn in Brazil, USD62bn in Russia, and USD37bn in India. The carry trade this time around was helped substantially by access to the bond market, especially from overseas affiliates of EM banks and corporations.

 

There are a lot of moving parts in the balance of payments that finally affect the change in international reserves at any EM central bank – eg, the current account, portfolio equity investment and direct equity investment, and debt flows – both from the bond market and lending from banks. We focus on the link between these debt flows and the international reserves in China. As Table 5 below shows, China’s external debt – from bond issuance and forex borrowing from banks – rose USD655bn during 3Q08-3013.

 

 

We posit that this large rise was in part driven by the carry trade offered up by QE – China banks and corporates issued substantial forex-denominated bonds, and borrowed straight loans from international banks. We recognize the caveat that correlation does not imply causation. The USD655bn rise in China debt issuance is highly correlated to the Fed’s balance sheet since late-2008. As Chart 11 shows, the rise in China debt issuance of USD 655bn has (along with FDI and the C/A surplus), boosted international reserves by USD1,773bn since late-2008. Also, as Chart 11 shows, the USD1,773bn rise in China international reserves mirrors the rise of USD2,585bn in the EM monetary base. Lastly, the rise of China’s monetary base of USD2,585bn correlates well with the USD10.9tr rise in China’s broad money expansion.

 

 

 

As the Fed tapers, and the size of its balance sheet stabilizes/contracts, we should expect this sequence to reverse. Confidence is a fragile membrane. Not only does the Fed’s balance sheet matter as a source of funds, but we believe so does the attractiveness of the recipient of the carry trade – and the trust in its collateral. As Gary Gorton puts it…

 

The output of banks is money, in the form of short-term debt which is used to store value or used as a transaction medium. Such money is backed by a portfolio of bank loans in the case of demand deposits, or by collateral in the form of a specific bond in the case of repo. The backing is designed to make the bank debt as close to riskless as possible — in fact, so close to riskless than nobody wants to really do any due diligence on the money, just transact with it. But the private sector cannot produce riskless debt and so it can happen that the backing collateral is questioned. This typically happens at the peak of the business cycle. If its value is questioned, it loses its “moneyness” so no one wants it, and cash is preferred. But as we know, if everyone wants their cash at the same moment, their demands cannot be satisfied. In this sense, the financial system is insolvent. (interview with the FT) 

 

What makes sense for an individual carry trade – borrow low, invest at higher rates – falls prey to the fallacy of composition, when too many engage in the same carry trade. And eventually question the underlying collateral, now huge, and potentially suspect. China is a case in point. If our colleagues David Cui and Bin Gao are right, the trust sector in Chinacould create rollover risks that reverse a gluttonous carry trade within China, but partly financed overseas. In China’s case, this trade was between low global interest rates, low Chinese deposit rates, expectations of perpetual RMB appreciation on the one hand, and higher investment returns promised by Trusts on the other. A part of the debt funds raised overseas, we suspect were put to work in this Trust carry trade. The HK-based banks are big participants in intermediating the China carry trade – as Chart 12 shows, their net lending to China went from 18% of HK GDP in 2007 to 148% in late-2013.

 

There are always fancy names given to carry trades – financial liberalization of capital accounts, the Bangkok International Banking Facility, currency internationalization, etc. We remain skeptics of these buzzwords.

 

 

 

The potential consequences of Trust defaults and a China carry trade unwind

 

1. If the EM carry trade diminishes as a consequence of a changed Fed policy and/or less attractive risk-adjusted returns in EMs as collateral quality is questioned, the sources of China’s forex reserve accumulation will need to change. Perhaps to bigger current account surpluses, more equity FDI and portfolio investment through privatization and more open equity markets. If that does not happen, expanding the Chinese monetary base might require PBOC to increase net lending to the financial system and/or monetize fiscal deficits (this last part has not worked so well in EMs).

 

2. Potential asset deflation is a risk, as the carry trades diminish/unwind. Property prices are at risk – the collateral value for China’s financial systems. This is not a dire projection – it simply seeks to isolate the US QE as a key driver of China’s monetary policy and asset inflation, and highlights the magnitudes involved, and the transmission mechanism. Investors should not imbue stock-price movements and property price inflation in China with too much local flavor – this is mainly a US QE-driven story, in our view.

 

3. Currently, China’s real effective exchange rate is one of the strongest in the world. Concerns about China’s Trust sector, and its underlying collateral value, sees some of this carry trade unwound, the RMB could be under pressure.

 

 

4. Given HK’s role in the China carry trade, HK property prices and its banking system should be watched carefully for signs of stress.

 

5. UK, US, and Japan banking systems have been active lenders to China since QE. They should be on watch if the Trust rollover risk materializes and creates a growth shock in China. See Chart 15.

 

 

 

6. Safe haven bids for DM government bonds, overseas property and precious metals might emerge from China.

 

Could the party go on? Yes, if for some reason a significant deterioration in the US labor market, or a deflationary shock from China, or any other surprise that could lead to a cessation of the US tapering could prolong this carry trade. This is not the house base case. We believe it is better to start preparing for a post-QE world. As one of our smartest clients told us: “the main theme in the past five years was QE. If that is coming to an end, investments and themes that worked in the past five years must therefore be questioned.” We agree.

* * *

Yes, Bank of America said all of the above – every brutally honest last word of it.

The question, however, in addition to “why”, is whether the Fed also agrees with BofA’s stunningly frank, and quite disturbing conclusion, perhaps finally realizing that aside from the US, the biggest house of cards that would topple once the “flow”-free emperor is exposed in his nudity, is that of the world’s largest “growth” (and credit) dynamo of the past two decades – China.Because, as noted above, if Lehman’s collapse was bad, a deflationary collapse brought on by Chinese hard landing coupled with a full unwind of the global carry trade, would be disastrous and send the world into a depression the likes of which have never before been seen.

Finally, for those who want the blow by blow, here is BofA’s tentative take of what the preliminary steps of the next global great depression will look like:

If we do experience a sizable default, the knee-jerk market reaction will be cash hoarding since it will strike as a big surprise. Thus, we expect the repo rate to rise first, while the long term government bond would get bid due to risk aversion flows.

 

However, what follows will be quite uncertain, aside from PBoC injecting liquidity and easing monetary policy to help short term rate come down. It has been proven again and again the Chinese government will get involved and be proactive. The bond market reaction will be different depending on the government solution.

Alas, at that point, not even the world’s largest bazooka will be enough.

At this point one should conclude that reality – through massive, unprecedented liquidity injections – has been deferred long enough. It is time to let the markets finally return to some semblance ofuncentrally-planned normalcy: there is a reason why nature abhors a vacuum. Even if it means the eruption of the very painful grand reset, washing away decades of capital misallocation, lies and ill-gotten wealth, so very overdue.

The risk of reporting US drone strikes – Features – Al Jazeera English

The risk of reporting US drone strikes – Features – Al Jazeera English.

Yemen researcher says he received a death threat after investigating deadly wedding-convoy attack.

 Last updated: 12 Feb 2014 14:17

A photo of alleged victims killed in a December 12, 2013 drone strike in central Yemen [Reprieve]
The disturbing phone call came after Baraa Shiban investigated a drone strike on a wedding party that killed 12 people in central Yemen in December. A clear message was delivered to the human rights researcher over the phone after a major news network reported the story based on his research.

“The caller refused to identify himself and threatened my life if I continued my investigation of the strike,” Shiban told Al Jazeera, noting he conducted similar studies of US drone operations in the past, but had never before received death threats.

Shiban works for the UK-based human rights group Reprieve and interviewed survivors two days after the attack. His investigation ascertained that 12 people were killed after four missiles were fired at the convoy. There were also 14 victims with severe wounds; some lost limbs, others their eyes.

Along with the eyewitness testimony, Shiban gained access to video and still images of the alleged victims of the drone strike. Photos of the aftermath of drone attacks – whether in the tribal regions of Pakistan, or in the deserts of Yemen – are rarely captured. Most occur in obscure regions with hostile terrain, making access difficult for journalists and activists.

I was in the front car and I heard a huge explosion. I went out to see what happened and suddenly another two missiles hit the place. Everyone in the car behind us got killed.

– Mohammed Abdullah al-Taisi,drone victim

 

On December 12, 2013 , about 60 people were traveling in a convoy to attend the wedding near the city of Radda, in Yemen’s central province of al-Bayda. At about 4:30pm, the drivers halted the vehicles when they heard an aircraft approach.

“I was in the front car and I heard a huge explosion,” recalled victim Mohammed Abdullah al-Taisi. “I went out to see what happened and suddenly another two missiles hit the place. Everyone in the car behind us got killed.”

Equipped with the evidence Shiban went to the media, and a day later he received the call threatening his life.

“Just because the people were in a convoy of trucks, they were assumed to be militants and the decision was made to target them,” he said. “The people who died were shepherds and farmers. There was clearly a wedding party.”

Fear and anger

Drones piloted by the CIA and the Pentagon have operated in Yemen since 2002, killing hundreds of people – mostly members of al-Qaeda in the Arabian Peninsula, but also dozens of civilians.

Peter Schaapveld is psychologist who traveled to Yemen to study the programme’s effects. He told British members of parliament in March 2013 that the constant presence of drones in the skies was causing a “psychological emergency” in the country.

“What I saw in Yemen was deeply disturbing,” Schaapveld said . “Entire communities – including young children who are the next generation of Yemenis – are being traumatised and re-traumatised by drones. Not only is this having truly awful immediate effects, but the psychological damage done will outlast any counter programme and surely outweigh any possible benefits.”

Reports of the missile strike, on a seemingly innocent wedding party, have infuriated nearly every sphere of Yemeni society, including many of the country’s top politicians.

Family members of drone strike victim Aref al-Shafee [Abubakr al-Shamahi/Reprieve] 

“The fact that the Yemeni parliament has just passed a resolution banning drones in Yemeni airspace, and that the National Dialogue has criminalised the use of drones for extrajudicial killing, demonstrates that a national consensus has been reached that these brutal and unlawful attacks are unacceptable,” Shiban said.

Reprieve said the US government is now investigating the strike in Radda following Shiban’s work. The human rights group said the Defense Department was targeting Shawqi Ali Ahmed al-Badani , whom the White House accused of organising a bomb plot that led to 19 US embassies being closed last year.

‘US values and policy’

Caitlan Hayden, a spokeswoman for the US National Security Council, noted that Yemen’s government had stated the targets of the operation were “dangerous” senior al-Qaeda figures. She said she couldn’t comment on this specific attack.

“We take extraordinary care to make sure that our counterterrorism actions are in accordance with all applicable domestic and international law and that they are consistent with US values and policy … And when we believe that civilians may have been killed, we investigate thoroughly,” Hayden told Al Jazeera .

But one survivor of the December drone attack, Salam al-Taisi, insisted no one from the wedding party was involved in terrorism. “None of the victims had anything to do with al-Qaeda or any other group. They were all from the area and all were poor villagers,” he said.

The deaths in Baydah have more resonance considering President Barrack Obama’s announcement upholding the “highest standard” when conducting operations using unmanned aerial vehicles.

“Before any strike is taken, there must be near-certainty that no civilians will be killed or injured,” Obama said in a speech at the National Defense University on May 23, 2013.

Yemen’s security forces have also scrutinised Shiban’s work on the US drone programme. But it’s not just the Yemeni police that have shown interest in him.

Baraa Shiban from human rights group Reprieve [Al Jazeera]

On September 23 last year, he arrived in the United Kingdom with the intention of speaking at a conference at Chatham House . But at Gatwick Airport he was stopped by police and questioned under Schedule 7 of the British government’s Terrorism Act 2000.

“I was asked about my investigation of the covert US drone attacks in Yemen. When I asked why the question was relevant, I was threatened with further detention,” Shiban said.

Drone-reporting dangers

Apparent attempts to suppress any kind of criticism of US covert operations are not new.

In Pakistan, an anti-drone campaigner set to testify before European parliaments has gone missing in the city of Rawalpindi. Kareem Khan , whose brother and teenage son were killed in a drone attack in December 2009, was picked up at his home by security forces in the early hours of February 5, his lawyer said. He hasn’t been heard from since.

Shiban said he is also well aware that the path he’s on now could lead to the same fate of Yemen-based journalist Abdulelah Haider Shaye .

On December 17, 2009, the Yemeni military announced it had successfully destroyed an al-Qaeda camp in al-Majala in Abyan province. But after travelling to the town, Shaye discovered it wasn’t at all an operation carried out by his government, but in fact a US cruise missile strike. And he discovered the people who died weren’t al-Qaeda fighters but innocent civilians. Among the 41 people killed, more than two-thirds were women and children.

Shaye was arrested on August 6, 2010 by Yemeni security forces and charged that October with aiding al-Qaeda by recruiting new operatives for the group. By January 2011, he was convicted and sentenced to five years in prison.

International human rights groups condemned his trial as a sham , which couldn’t provide any credible evidence of his alleged al-Qaeda associations. Shaye was being punished for exposing a US covert operation that resulted in a massacre.

After being incarcerated for nearly three years, Shaye was pardoned in July 2013 but one of the conditions of his release is he must not leave the Yemeni capital, Sanaa, for two years.

Asked about Shaye’s case, and the threats he’s received to his own life, Shiban said he’s determined to carry on highlighting the impact of drone strikes.

“This is an issue of vital importance to Yemen’s future, and I and other human rights activists will continue to defend the basic rights and democratic wishes of the Yemeni people,” he said.

Italian Stocks & Bonds Fall As Government Collapse Looms | Zero Hedge

Italian Stocks & Bonds Fall As Government Collapse Looms | Zero Hedge.

Having rallied yesterday and totally ignored the fact that Letta’s 10-month-old government was about to collapse, Italian equity and sovereign bond markets are falling this morning by their most in two weeks. The main bone of contention for Renzi-Letta fight is jobs and growth – there is none of either – and while Prime Minister Letta assures that the Italian economy grew in Q4 (GDP data to be released tomorrow) for the first time in 10 quarters, as Bloomberg’s Niraj Shah notes, real GDP is still smaller than it was in 2000. Letta has just canceled his UK visit (planned for 2/24) and did not take part in the Democratic Party meeting with a Renzi friend saying “[Letta] will resign.”

Via Ansa

Premier Enrico Letta said Thursday that he would not attend a meeting of his centre-left Democratic Party (PD) that has been called to decide whether it should continue backing his coalition government. New PD leader Matteo Renzi may call on the party to pull its support for Letta so he can take over as premier. Letta said he would not go to the meeting so that his party could “decide with serenity”.

However, with unemployment at record levels, we suspect few will care about some manufactured, goodwill-enhanced GDP print. Italians are, of course, used to the farce that is politics – there have been 64 government since 1945.

There Is “No Evidence” We Encouraged Forex Manipulation, Bank of England Says | Zero Hedge

There Is “No Evidence” We Encouraged Forex Manipulation, Bank of England Says | Zero Hedge.

In what has to be the most disappointing denial of central bank manipulation of a market in recent history, and probably never, the Bank of England today announced that it “has seen no evidence to back media allegations that it condoned or was aware of manipulation of reference rates in the foreign exchange market.” As a reminder, last week we reported, that according to a Bloomberg, “Bank of England officials told currency traders it wasn’t improper to share impending customer orders with counterparts at other firms” or, in other words, the highest monetary authority in England, and the oldest modern central bank, explicitly condoned and encouraged manipulation. Fast forward to today when Andrew Bailey, the Bank’s deputy governor and chief executive of the Bank’s Prudential Regulation Authority, told parliament’s Treasury Select Committee on Tuesday it had no evidence to suggest that bank officials in any sense condoned the manipulation of the rate-setting process. In other words, it very well may have… but there just is no evidence – obviously in keeping with the bank’s very strict “smoking manipulation gun document retention policy.

Then again, such evidence already was presented to UK regulators: “Bloomberg News said on February 7 that the Bank officials told currency traders at the April 2012 meeting that it wasn’t improper to share impending customer orders with counterparts at other firms.  A senior trader gave his notes from the meeting to the Financial Conduct Authority, Bloomberg said.

Hence, Mr Bailey had to modestly revise his statement:

“I should say that we have no evidence yet, and we have not seen the evidence that was in the Bloomberg report,” he added.

He added that the Bank of England review was in close cooperation with the Financial Conduct Authority (FCA), which is also investigating broader allegations of manipulation in the foreign exchange markets.

Which obviously means that should the BOE never be “confronted” with the evidence, and it mysteriously “disappears”, it simply means that one of Mark Carney’s henchmen pulled a few levers at the FCA, and made it disappear: of course, on national security grounds, because should it surface that a central bank is merely a criminal organization, then faith and confidence in the Ponzi system might falter. It would also mean confirm what most people who care about these things know: when it comes to UK governance, the buck stops with Threadneedle. And not only there, but everywhere else too.

The rest of the report is trivial fluff and generic spin:

“The Bank does not condone any form of market manipulation in any context whatsoever,” Bailey told the lawmakers on Tuesday.

“On the evidence we have currently, we have no evidence to substantiate the claim that bank officials in any sense condoned or were informed of price manipulation or the sharing of confidential client information,” Bailey added.

“We’ve released the minutes of that meeting, but obviously there are now allegations that there are different versions of what happened at that meeting,” Bailey said.

 

Bailey said the claims, which the central bank first heard about last October, were being taken “very seriously” and a full review was now underway, led by the Bank’s internal legal counsel with support from an external counsel.

Perhaps just to confirm how serious the “review” is, Bailey should also release a few photos of the internal and external counsels operating the paper shredders with the passion of 2nd year Arthur Andersen intern.

JPMorgan Sued For Crony Justice – Presenting “A Decade of Illegal Conduct by JP Morgan Chase” | Zero Hedge

JPMorgan Sued For Crony Justice – Presenting “A Decade of Illegal Conduct by JP Morgan Chase” | Zero Hedge.

Earlier today, the non-profit organization Better Markets did what so many others have only dreamed of doing – they sued JPMorgan.

Specifically, as they disclose in the fact sheet posted on their website, they are “challenging the historic and unprecedented $13 billion settlement agreement between the U.S. Department of Justice and JP Morgan Chase (“Agreement”).  Better Markets alleges in its complaint that the DOJ violated the Constitution and laws of the United States by using a mere contractual agreement to resolve claims of historic importance without subjecting the Agreement to independent judicial review.  In effect, the DOJ acted as investigator, prosecutor, judge, jury, sentencer, and collector, without any check on its authority or actions, even though the amount is the largest in the 237 year history of the United States. Because the DOJ has declared its intention to use the Agreement as a “template” in future similar cases, it is imperative that the DOJ’s unlawful and secretive approach in the settlement process be subjected to judicial review.

We wish them the best of luck, as in a “crony jsutice” system as corrupt as this one – perhaps best described, paradoxically enough by the fictional movie The International – where the same DOJ previously implicitly admitted it will not prosecute “systemically important” firms like JPM to the full extent of the law and instead merely lob one after another wrist slap at them to placate the peasantry, any hope for obtaining true justice is impossible.

That said, the key aspects of the Better Markets lawsuit deserve attention. They are broken down as follows:

For years leading up to the financial crisis of 2008, JP Morgan Chase allegedly engaged in pervasive fraud in the packaging and sale of thousands of mortgage-backed securities to investors.  Those securities were stuffed with subprime loans that failed to meet applicable underwriting criteria.  Employees, managers, and potentially high-level executives of JP Morgan Chase knew that the securities were riddled with toxic loans, but they allegedly concealed the truth from investors when they marketed and sold the securities.  Investors lost huge but still unknown sums of money as a result of the fraud, and the bank’s illegal conduct contributed directly to the biggest financial crash since 1929 and the worst economy since the Great Depression of the 1930s.

After negotiating the Agreement in complete secrecy, the DOJ announced the $13 billion deal on November 19, 2013, claiming that it was holding JP Morgan Chase accountable for its illegal activities.  Under the Agreement, DOJ grants JP Morgan Chase broad civil immunity in exchange for a $2 billion civil penalty, along with $4 billion in “consumer relief” for the benefit of homeowners with problem mortgages.  The Agreement also allocates $7 billion to eight other agencies or states to resolve their claims against JP Morgan Chase.

Key Allegations in the Complaint

The Agreement was struck under the most extraordinary circumstances.  For example—

  • THE HISTORIC CLAIMS:  The Agreement resolved claims of pervasive fraud that contributed to the worst financial crash since 1929 and the worst economy since the Great Depression of the 1930s.
  • THE LARGEST AMOUNT EVER:  The settlement amount was the largest in U.S. history from any single entity by more than 300%.
  • THE BIGGEST BANK:  JP Morgan Chase is the largest, richest, and most well-connected Wall Street bank in the United States.
  • THE HIGHEST-LEVEL NEGOTIATORS: The Attorney General and other senior DOJ political appointees negotiated directly and entirely in secret with the CEO of JP Morgan Chase, someone who was considered a possible Treasury Secretary just a few years ago.
  • THE $10 BILLION PHONE CALL:  The cellphone of DOJ’s third highest ranking official rang with the “familiar” phone number of JP Morgan Chase’s CEO, who called to offer billions of dollars to stop DOJ from holding a press conference and filing a lawsuit in just a few hours.  The call worked, and the press conference and lawsuit were both called off.
  • THE UNPRECEDENTED AGREEMENT:  DOJ gave complete civil immunity to JP Morgan Chase for defrauding thousands in exchange for $13 billion, via a contract that was negotiated and finalized in secret without any review or approval by a federal court.

?Notwithstanding the historic nature of the settlement, the Agreement was never subjected to judicial review, so there has been no independent evaluation of its terms.  Furthermore, the vague settlement documents fail to disclose critically important information about every aspect of the deal.  For example, the Agreement fails to identify or explain—

  • THE LOSSES:  How much did JP Morgan Chase’s clients, customers, counterparties, investors, and others lose as a result of its fraudulent conduct?  $100 billion?  $200 billion?  More?
  • THE PROFITS:  How much revenue, profits, and other benefits did JP Morgan Chase receive as a result of its fraudulent conduct, and was it all disgorged?  $10 billion?  $20 billion?  More?
  • THE BONUSES:  Who received what amount of bonuses for the illegal conduct?
  • THE INVESTIGATION:  What was the scope and thoroughness of the investigation that provided the basis for the Agreement?
  • THE FRAUD:  What are the material facts of the illegal conduct by JP Morgan Chase and the specific violations of law that were committed?
  • THE CULPRITS: What exactly did the individual executives, officers, managers, and employees involved in the illegal conduct actually do to carry out the fraud, and do any of them still work for the bank?
  • THE CORRECTIVE ACTION:  Why did the contract fail to impose on JP Morgan Chase any obligation to change any of its business or compliance practices, which are standard conduct remedies that regulators routinely require?  And how can the sanctions effectively punish and deter JP Morgan Chase, given its wealth and its extensive history of lawless conduct?
  • THE LACK OF ADMISSIONS:  Why are there no admissions of fact or law by JP Morgan Chase, and what, if any, are the concrete legal implications of their so-called “acknowledgment”?

By entering the Agreement without seeking any judicial review and approval, the DOJ violated the Constitution and laws of the United States.

  • The Executive Branch, acting through the DOJ, violated the separation of powers doctrine by unilaterally striking a bargain with JP Morgan Chase to resolve unprecedented matters of historic importance, without seeking any judicial review and approval of the Agreement.
  • The DOJ violated the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”) by failing to commence a civil action in federal court so that the court could, among other things, assess the civil penalty.
  • The DOJ acted arbitrarily and capriciously by, among other things, entering the Agreement without seeking judicial review and approval.

* * *

But perhaps the most informative aspect of the lawsuit fact sheet is simply stepping back and observing the relentless illegal transgressions by Jamie Dimon’s firm. Better Markets summarizes them best as follows:

Highlights From A Decade of Illegal Conduct by JP Morgan Chase

  • United States v. JPMorgan Case Bank, NA, No-1:14-cr-7 (S.D.N.Y. Jan 8, 2014) ($1.7 billion criminal penalty); In re JPMorgan Chase Bank, N.A., OCC Admin. Proceeding No. AA-EC-13-109 (Jan. 7, 2014) ($350 million civil penalty); In re JPMorgan Chase Bank, N.A., Dept. of the Treasury Financial Crimes Enforcement Network Admin. Proceeding No. 2014-1 (Jan. 7, 2014) ($461 million civil penalty) (all for violations of law arising from the bank’s role in connection with Bernie Madoff’s Ponzi scheme, the largest in the history of the U.S.);
  • In re JPMorgan Chase Bank, N.A., CFTC Admin. Proceeding No. 14-01 (Oct. 16, 2013) ($100 million civil penalty); In re JPMorgan Chase & Co., SEC Admin. Proceeding No. 3-15507 (Sept. 19, 2013) ($200 million civil penalty); In re JPMorgan Chase & Co., Federal Reserve Board Admin. Proceeding No. 13-031-CMP-HC (Sept. 18, 2013) ($200 million civil penalty); UK Financial Conduct Authority, Final Notice to JP Morgan Chase Bank, N.A. (Sept. 18, 2013) (£137.6 million ($221 million) penalty); In re JPMorgan Chase Bank, N.A., OCC Admin. Proceeding No. AA-EC-2013-75, #2013-140 (Sept. 17, 2013) ($300 million civil penalty) (all for violations of federal law in connection with the proprietary trading losses sustained by JP Morgan Chase in connection with the high risk derivatives bet referred to as the “London Whale”);
  • In re JPMorgan Chase Bank, N.A., CFPB Admin. Proceeding No. 2013-CFPB-0007 (Sept. 19, 2013) ($20 million civil penalty and $309 million refund to customers); In re JPMorgan Chase Bank, N.A., OCC Admin. Proceeding No. AA-EC-2013-46 (Sept. 18, 2013) ($60 million civil penalty) (both for violations in connection with JP Morgan Chase’s billing practices and fraudulent sale of so-called Identity Protection Products to customers);
  • In Re Make-Whole Payments and Related Bidding Strategies, FERC Admin. Proceeding Nos. IN11-8-000, IN13-5-000 (July 30, 2013) (civil penalty of $285 million and disgorgement of $125 million for energy market manipulation);
  • SEC v. J.P. Morgan Sec. LLC, No. 12-cv-1862 (D.D.C. Jan. 7, 2013) ($301 million in civil penalties and disgorgement for improper conduct related to offerings of mortgage-backed securities);
  • In re JPMorgan Chase Bank, N.A., CFTC Admin. Proceeding No. 12-37 (Sept. 27, 2012) ($600,000 civil penalty for violations of the Commodities Exchange Act relating to trading in excess of position limits);
  • In re JPMorgan Chase Bank, N.A., CFTC Admin. Proceeding No. 12-17 (Apr. 4, 2012) ($20 million civil penalty for the unlawful handling of customer segregated funds relating to the bankruptcy of Lehman Brothers Holdings, Inc.);
  • United States v. Bank of America, No. 12-cv-00361 (D.D.C. 2012) (for foreclosure and mortgage-loan servicing abuses during the Financial Crisis, with JP Morgan Chase paying $5.3 billion in monetary and consumer relief);
  • In re JPMorgan Chase & Co., Federal Reserve Board Admin. Proceeding No. 12-009-CMP-HC (Feb. 9, 2012) ($275 million in monetary relief for unsafe and unsound practices in residential mortgage loan servicing and foreclosure processing);
  • SEC v. J.P. Morgan Sec. LLC, No. 11-cv-03877 (D.N.J. July 7, 2011) ($51.2 million in civil penalties and disgorgement); In re JPMorgan Chase & Co., Federal Reserve Board Admin. Proceeding No. 11-081-WA/RB-HC (July 6, 2011) (compliance plan and corrective action requirements); In re JPMorgan Chase Bank, N.A., OCC Admin. Proceeding No. AA-EC-11-63 (July 6, 2011) ($22 million civil penalty) (all for anticompetitive practices in connection with municipal securities transactions);
  • SEC v. J.P. Morgan Sec., LLC, No. 11-cv-4206 (S.D.N.Y. June 21, 2011) ($153.6 million in civil penalties and disgorgement for violations of the securities laws relating to misleading investors in connection with synthetic collateralized debt obligations);
  • In re JPMorgan Chase Bank, N.A., OCC Admin. Proceeding No. AA-EC-11-15, #2011-050 (Apr. 13, 2011) (consent order mandating compliance plan and other corrective action resulting from unsafe and unsound mortgage servicing practices);
  • In re J.P. Morgan Sec. Inc., SEC Admin. Proceeding No. 3-13673 (Nov. 4, 2009) ($25 million civil penalty for violations of the securities laws relating to the Jefferson County derivatives trading and bribery scandal);
  • In re JP Morgan Chase & Co, Attorney General of the State of NY Investor Protection Bureau, Assurance of Discontinuance Pursuant to Exec. Law §63(15) (June 2, 2009) ($25 million civil penalty for misrepresenting risks associated with auction rate securities);
  • In re JPMorgan Chase & Co., SEC Admin. Proceeding No. 3-13000 (Mar. 27, 2008) ($1.3 million civil disgorgement for violations of the securities laws relating to JPM’s role as asset-backed indenture trustee to certain special purpose vehicles);
  • In re J.P. Morgan Sec. Inc., SEC Admin. Proceeding No. 3-11828 (Feb. 14, 2005) ($2.1 million in civil fines and penalties for violations of Securities Act record-keeping requirements); and
  • SEC v. J.P. Morgan Securities Inc., 03-cv-2939 (WHP) (S.D.N.Y. Apr. 28, 2003) ($50 million in civil penalties and disgorgements as part of a global settlement for research analyst conflict of interests).

Did we mention that nobody from JPM has gone to prison, and instead as of late last week, one of the biggest JPM culprits was set to become a member of the CFTC’s advisory panel before the people and not the regulators, were forced to step in? Why? #AskJPM

UK nuclear plant detects elevated radiation – Europe – Al Jazeera English

UK nuclear plant detects elevated radiation – Europe – Al Jazeera English.

Sellafield is the largest nuclear power site in the UK [AP]
All non-essential staff have been told to stay away from the British nuclear reprocessing site, Sellafield, after detectors recorded an “elevated level” of radiation.

A statement from Sellafield said on Friday that levels of radiation at the Cumbria facility were above that which naturally occured, but “well below that which would call for any actions to be taken by workforce” on or off site.

A statement said: “As a result of a conservative and prudent decision, the Sellafield site is operating normally but with reduced manning levels,” it said in a statement.

“The site is at normal status and employees and operational plants are continuing to operate as investigations continue. All our facilities have positively confirmed there are no abnormal conditions and are operating normally.”

The UK’s decommissioning agency said it was too early to determine whether the radiation came from a leak. It said the workforce and general public were not at risk.

Sellafield is the UK’s largest and most hazardous nuclear site, and a store site for tonnes of highly radioactive waste.

It processes spent fuel and no longer produces power. It is undergoing a decommissioning and dismantling programme, run by the British company Amec, French group Areva and the US firm URS.

A report by the the Public Accounts Committee last year stated that the cost of cleaning the site had reached $111 billion and that costs would continue to rise.

The British energy ministry said it was in “constant contact” with Sellafield and there was “no reason to believe” the incident is more serious than its managers say.

Why Shale Oil Boosters Are Charlatans In Disguise | Zero Hedge

Why Shale Oil Boosters Are Charlatans In Disguise | Zero Hedge.

Something has bothered me of late: why is the price of crude oil still elevated? Other commodities have taken a battering since 2011. Gold, copper and iron ore – all are way down off their peaks. But oil has seemingly defied gravity. And that’s despite increased supply from shale oil in the U.S., still soft demand particularly in the developed world and declining rates of inflation growth across the globe.

What gives? Well, shale oil proponents will say falling oil prices are just a matter of time. And that the boom in shale oil will reduce U.S. reliance on foreign oil, leading to cheaper local oil, which will free up household budgets and spur consumption as well as the broader economy. Perhaps … though I’d have thought all of that would be already reflected in prices.

On the other side, you have “peak oil” supporters who suggest high oil prices are perfectly natural when oil production has peaked, or at least the good stuff has disappeared. Yet the boom in U.S. shale oil appears to put at least a partial dent in this thesis.

There may be a better explanation, however. It comes from UK sell-side analyst, Tim Morgan, in an important new book called Life After Growth. In it, he suggests that the era of cheap energy is over. That the new unconventional forms of oil are far less efficient than old ones, meaning they require significant amounts of energy to produce. In effect, the energy production versus energy cost of extraction equation is rapidly deteriorating.

Morgan goes a step further though. He says cheap energy has been central to the extraordinary economic growth generated since the Industrial Revolution. And without that cheap energy, future growth will be permanently impaired.

It’s a bold view that’s solidified my own thinking that higher energy prices are here to stay. And the link between cheap energy and economic growth is fascinating and worth exploring further today. Particularly given the implications for the world’s fastest-growing and most energy-intensive region, Asia.

Real vs money economy

First off, a thank you to Bob Moriarty of 321gold for tipping me off to Morgan’s work in this well-written article. Morgan’s book is worth getting but if you want the skinny version, you can find it here.

Morgan begins his book outlining four key challenges facing economies today:

  1. The biggest debt bubble in history
  2. A disastrous experiment with globalisation
  3. The massaging of data to the point where economic trends are obscured
  4. The approach of an energy-returns cliff edge

The first three points aren’t telling us much new so we’re going to focus on the final one.

Here, Morgan makes a key distinction between what he terms the money economy and the real economy. He suggests economists around the world have got it all wrong by focusing on money as the key driver of economies.

Instead, money is the language rather than the substance of the real economy. The real economy is a surplus energy equation, not a monetary one, and economic growth as well as the increase in population since 1750 has resulted from the harnessing of ever-greater quantities of energy.

In fact, society and economies began when agriculture created surplus energy. Before agriculture, in the hunter-gatherer era, there was an energy balance where the energy which people derived from food was largely equivalent to the energy that they expended in finding the food.

Agriculture changed that equation. It allowed for the creation of surplus energy. In essence, three people could be supported by the labor of two people, allowing one person to engage in non-subsistence activities. This person could make better agricultural tools, build bridges for better infrastructure and so on. In economic parlance, this person didn’t have to concentrate on products for immediate consumption but rather the creation of capital goods. The surplus energy equation allowed for that.

The second key development was the invention of the heat engine by Scottish engineer James Watts in 1769, although a more efficient version was produced later in 1799. This invention allowed society to access vast energy resources contained in oil, natural gas, coal and so forth. In other words, the industrial revolution allowed the harnessing of more energy to apply vast leverage to the economy.

World fossil fuel consumption

In sum, the modern economy is the story of how society overcame the limitations of the energy equation. Or as Morgan puts it: “…all goods and services on which money can be spent are the products of energy inputs, either past, present or future.”

The creation of surplus energy during the Industrial Revolution and subsequent explosion in economic and population growth isn’t an accident. They’re tied at the hip.

Energy and the population

Understanding the distinction between the money economy and the real economy can also help us better understand debt. Debt is a claim on future energy. The ability of indebted governments to meet their debt commitments will partially depend on whether the real (energy) economy is large enough to make this possible.

Era of cheap energy is over

Morgan goes on to say that the era of surplus energy, which has driven economic growth since 1750, is over. The key isn’t to be found in the theories of “peak oil” proponents and the potential for absolute declines in oil reserves. Instead, it’s to be found in the relationship between the energy extracted versus the energy consumed in the extraction process, also known as the Energy Return on Energy Invested (EROEI) equation.

The equation maths aren’t difficult to understand. If the EROEI is 10:1, it means that 10 units are extracted for every 1 unit invested in the extraction process.

From 1750-1950, the EROEI of oil discoveries was very high. For instance, discoveries in the 1930s had 100:1 EROEIs. That ratio declined to 30:1 by the 1970s. Today, that ratio is at about 17:1 with few recent discoveries above 10:1.

Morgan’s research suggests that going from EROEIs of 80:1 to 20:1 isn’t disruptive. But once the ratio gets below 15:1, energy becomes a lot more expensive. He suggests the ratio will decline to 11:1 by 2020 and the cost of energy will increase by 50% as a consequence.

Energy returns vs cost to GDP

Non-conventional sources of oil will provide little respite. Shale oil and gas have EROEIs of 5:1 while tar sands and biofuels are even lower at 3:1. In other words, policymakers who pin their hopes on shale oil reducing energy prices are seriously deluded.

EROEI and energy sources

And further technological breakthroughs to better locate and extract oil are unlikely to help either. That’s because technology uses energy rather than creates it. It won’t change the energy equation.

While some unconventional sources offer hope, such as concentrated solar power, they won’t be enough to offset surplus energy turning to a more balanced equation.

Oeuvre to growth tool

If the real economy is energy and the days of surplus energy are coming to an end, then so too is economic growth, according to Morgan. In his own words:

“…the economy, as we have known it for more than two centuries, will cease to be viable at some point within the next ten or so years unless, of course, some way is found to reverse the trend.”

This terribly pessimistic conclusion requires some further explanation. Morgan explains the link between energy and the economy thus. If your EROEI sharply declines, it means more energy is needed for extraction purposes and less energy is available to the economy. Ultimately, this results in the cost of energy rising as a proportion of GDP, leaving less value for other things. Put another way, with the leverage from surplus energy diminished, there’s less energy available for discretionary uses.

Implications

Now I don’t have total buy-in to Morgan’s thesis. It certainly solidifies my thinking that the era of cheap energy is indeed over. It provides a unique and compelling way to think about this. And the proof is seemingly all around us. It explains the high oil prices and the surge in agriculture prices (agriculture relies on energy inputs).

You can’t help but being more bullish on energy and agriculture plays in the long-term. Oil drillers for one as they’re more reliant on increased work than the price of oil. Also, the likes of fertiliser companies given agriculture land is tapped out, making an increase in output essential and thereby requiring greater quantities of fertiliser.

Morgan thinks inflation is on the way given a squeezed energy base with still escalating monetary bases. Regular readers will know that I am a deflationist over the next few years. But nothing is certain in this world and Morgan’s arguments on this front have some credibility.

As for whether this spells the end of a glorious 250 year period of economic growth, well, I’m not so sure. The link between energy and economies is compelling. But whether we’re at a tipping point where surplus energy disappears is a guess. I’m convinced that we’re coming up against resource constraints that will inhibit economic growth. To say that we’re imminently coming to the end of economic growth requires further evidence, in humble opinion.

Impact on Asia

Asia has been the largest demand driver for energy over the past decade. The region’s net oil imports total 17 million barrels of oil a day. China is now the largest net oil importer, having recently overtaken the U.S.. Other large net oil importers in Asia include India and Indonesia. Obviously, higher oil prices would be detrimental to these net importing countries.

It may be somewhat offset by agricultural prices staying higher for longer. China and India are agricultural powerhouses. And the impact of agriculture on their economies is still profound (agriculture accounts for 14% of Indian GDP and 10% of China).

On the other hand, higher agricultural prices mean higher food prices. And given lower incomes in Asia, the proportion of household budgets dedicated to purchasing food is much higher than the developed world. Therefore higher food prices has a larger impact on many Asian countries. Witness periodic recent protests on this issue in Indonesia, Thailand and India. So net-net, higher energy prices would still be a large negative for Asia.

Turning to resource constraints potentially inhibiting future economic growth: given Asia has the world’s strongest GDP growth, it would be disproportionately hit if this scenario is right. The past decade may represent a peak in the region’s economic output. Whether there’s sharp drop or gradual fade is impossible to forecast.

These are but a few of the potential implications for Asia.

AC Speed Read

– The real economy is a surplus energy equation, or the harnessing of ever-greater quantities of energy.

– That equation has deteriorated to such an extent that one can now declare the era of cheap energy over.

– If the economy is energy and cheap energy is gone, future economic growth will be inhibited.

– Consequently, higher energy and agricultural prices can be expected in the long-term.

– The impact on Asian growth may be disproportionately large.

This post was originally published at Asia Confidential:
http://asiaconf.com/2014/01/25/shale-oil-charlatans/

Arandis: The uranium capital of the world – Features – Al Jazeera English

Arandis: The uranium capital of the world – Features – Al Jazeera English.

Windhoek, Namibia – Somewhere in the middle of the vast Namib desert is a settlement by the name of Arandis. It has been here since 1975, ever since the Anglo-Australian mining firm Rio Tinto came to set up its Rössing uranium mine.

It needed a place to house its black workforce.

Almost forty years later, the glamour of the olden days has passed, when uranium prices were high and competition low. Arandis is still the home of the workers, but has lost the financial support of the company. It looks like it is doomed to decay. The town lies like an island in the middle of endless rocks, sand and dust. The streets are dull and lifeless and the houses only distinguishable by the colours in which they’ve been painted.

There’s a saying here: “If you leave Arandis, you will die.” One of those who repeat the phrase is Hoseas Gaomab, who worked in the mine’s laboratory for 23 years. He knows many men who have died. But he doesn’t know why.

Gaomab, aged 73, is a fragile old man. He first came to Arandis in 1975, a year before the Rössing mine started operations. He was there when it became the largest open pit in the world. When it almost single handedly turned Namibia into one of the leading uranium producing countries – by supplying Europe, the US and Japan.

The question is, at what expense this has happened. Many men who worked here in the mine’s early days claim to suffer from severe illnesses including cancers, hypertension and anaemia. Gaomab is sick, too. He suffers from a disease that has made his legs and hands numb for the much of the past 20 years.

I had been feeling weak, but the mine doctors always said it’s okay… The doctors only ever tested us for flu. if I had known, I would have asked them to test me for radiation.Hoseas Gaomab, former mine laboratory worker

“I had been feeling weak, but the mine doctors always said it’s okay,” he told Al Jazeera. He can barely walk, or get up from the armchair in which he sits.

Discovering the risks, too late

For a long time it simply didn’t occur to Gaomab that his illness could be work-related. Then, in 1993, a medical student named Reinhard Zaire arrived, interviewing miners and taking blood samples. “He asked us how long we worked for Rössing and when we got sick. Then he called us together to tell us we were irradiated.”

This was the first time he heard about the existence of radiation in the uranium mine. “The doctors only ever tested us for flu,” he said. “If I had known, I would have asked them to test me for radiation.”

Aside from Zaire’s claims, there is no proof that Gaomab has been fatally irradiated. And chances are slim that he will ever find out. There are no records available from the company of what happens to workers once they leave Rössing. After their retirement, the men return to their homes in rural Namibia, where they rarely have access to proper healthcare facilities.

“To date, there have been no confirmed occupational illness related deaths,” said Rio Tinto spokesperson Penda Kiiyala.

However, there is great scepticism among people here in Arandis towards the company and their medical staff.

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“The mine is a big company, they can tell everyone what to do. They tell you what’s wrong with you and you have to believe them,” said Gaomab. Although scientists have previously linked diseases such as those reported in Arandis to the exposure of radiation, nobody – other than Reinhard Zaire – has investigated them in the context of the Rössing uranium mine.

Zaire studied the effects of long-term exposure to low levels of radiation believed to be found in the Rössing mine. He concluded that there was an increased risk for uranium miners to develop malignant diseases such as cancer. Shortly after the report was published, Zaire was dismissed by the Namibian Ministry of Health and Social Services, his research permission was revoked, and he was accused of practising as a medical doctor illegally.

Rio Tinto – facing a lawsuit in the UK at the time, in which it was accused of damaging an employee’s health – slammed Zaire’s report.

Regulations ‘inadequate’

Doug Brugge from the Tufts University in the United States has conducted research on the impacts of underground uranium mining on the Navajo tribe in North America. Brugge is sceptical to give the issue “the kind of framing” Zaire suggested. “For me, to just talk about low-dose ionizing radiation exposure is inadequate. Other things like the metal toxicity of uranium also plays a role and how the workers were exposed to radiation,” he said.

We had to smoothen out the yellowcake with our hands before we sampled it. There were no gloves, those things only came later.Hoseas Gaomab, former mine laboratory worker

Gaomab and a former lab colleague, Petrus Hoaeb, described the health and safety regulations at Rössing as inadequate in the early days. “For the sampling we used to suck up the yellowcake through a pipette,” said Hoaeb. “Whenever there was crushing, there was dust everywhere.”

Gaomab agreed: “We had to smoothen out the yellowcake with our hands before we sampled it. There were no gloves, those things only came later.”

Yellowcake is a solid form of concentrated uranium which is produced after the ore has been crushed and processed. It is usually stored in drums for transport and not hazardous if handled with appropriate precautions.

“During the lifetime of the mine, safety measures have been in place based on international best practice and applications at the time,” Rio Tinto’s Kiiyala told Al Jazeera. Monthly urine samples are also taken from each worker. This serves “as a check to ensure no internal contamination risk exists”.

Contrary to what the workers say, Rio Tinto emphasises that all workers have access to the results of tests made on their samples.

Rössing Uranium, the Namibian subsidiary of Rio Tinto, denied that workers were exposed to any kind of radiation in its open pit mine. “The biggest danger for the employees is the silica dust inside the pit,” said Alwyn Lubbe, an external relations officer for Rössing who spoke to Al Jazeera inside the mine’s premises. “The uranium levels are extremely low. The radiation is very low, it’s natural. Even when they process it in the final product recovery.”

Lubbe maintained there was also no toxicity leaking from the waste dumps next to the mine, which loom in the background. “There are no hazards here,” he says. From where he stands on the viewing platform, he looks at the huge hole stretching out below him and says: “Only depleted uranium is dangerous for the human body,” referring to the processed uranium that is used in nuclear power plants and in many weapons ammunitions.

Radiating risk

According to Tufts’ Doug Brugge, the biggest threat is not the uranium itself, but its decay products, like radon, a gas that is set free when uranium is mined. “The daughter products of radon are the ones that settle in the lungs,” Brugge said. Solids such as uranium and radium can enter the human system only when inhaled or ingested. “If someone touches the ore, it can get into the body through hand and mouth contact. Once they are in the system the radiation is very strong.

“That there is radiation here and that it can cause health effects is not in question. The question is whether the way the people are exposed to it are leading to those health problems,” he said. “It sounds like what really needs to be done is research on health conditions and exposure.”

Despite the slim chances of success, Gaomab’s former colleague Petrus Hoaeb has decided to take the company to court. Hoaeb met Al Jazeera in his home, sat next to his son. Hoaeb Junior is spearheading the case for his sick father. The lack of knowledge is the biggest hurdle to overcome, he said. “If a researcher comes to you and says: ‘This is what we found,’ then you know how to fight. But if you have limited knowledge, it is very difficult.”

Currently the two parties are negotiating outside of court for a possible compensation package for Hoaeb, who was booked off work sick for twelve years before he was eventually fired in 2012. He failed to provide proof that his sickness was due to radiation exposure.

Hoaeb Jr has a different plan, however. He is about to travel to Namibia’s capital, Windhoek, to discuss further proceedings and to decide what Rössing has to offer.

“We are fighting for a large number of people,” he concluded. “Those who have died and those who are sick.”

Follow Victoria Schneider on Twitter at the Dirty Profits Exposed project: @DirtyProfitsExp

This report was produced with the support of the  Facing Finance  campaign.

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