Links: 2013-03-23

News links for 23 Mar 2013

Laiki CEO: bank move will be a disaster for the economy – Cyprus Mail

“THE RESTRUCTURING of the island’s second largest bank into a ‘good’ and ‘bad’ bank will mean the end of the Cyprus economy, warned Laiki Bank’s acting CEO Takis Phidias last night.
He argued that a small haircut on deposits and an EU bailout would have kept the banks and businesses alive. The option now on the table will lead to loss of deposits and closure of businesses and higher unemployment, said Phidias. ”

Europe’s Money Centers – Business Insider

“Again, there are real assets behind most of this debt, so these ratios are not really as scary as they appear. In addition, these money centers are outside of the Euro Zone. I don’t think there is an issue with these. ”

Cyprus: A poor diagnosis, a bitter pill –

“The EU leaders who had spent all night in talks to produce Cyprus’s ill-fated bailout plan – a plan that would have been paid for in part by a levy on ordinary citizens’ bank deposits – had seen much worse. In Athens, there had been riots and tear gas.
Yet despite three years of battling one crisis after another, the officials had still managed to misread the situation. They were wrong about Cyprus and its brand of politics.
They thought the island had elected another Antonis Samaras, the centre-right prime minister of Greece who became a champion of his country’s tough austerity-laden bailout when he was elected last June. But this was no Greece.”

Chancellor Merkel Angry with Cyprus as Euro Crisis Intensifies – SPIEGEL ONLINE

“Coalition parliamentarians have rarely seen Chancellor Angela Merkel so upset. Whether it has been election defeats, internal bickering in the government or the euro crisis, she almost always finds moderate words even as others panic. She has earned a reputation for being cool and calculating.
But the situation in Cyprus appears to have frayed her nerves. In meetings with parliamentarians from her conservative faction and later with those from her junior coalition partner, the Free Democrats (FDP), it quickly became clear on Friday that her patience with Cyprus is running out.”

Iceland Indicts 15 Over Financial Crisis –

“Iceland’s special prosecutor has indicted two former chief executives and more than a dozen other ex-employees of banks that fell in the financial crisis that gripped the nation in the autumn of 2008, accusing them of stock price manipulation and securities fraud.
The charges were brought over the past week by Olafur Thor Hauksson, who was hired in 2009 to investigate suspicions of fraud and allegation at major banks, including now-defunct Landsbanki hf and Kaupthing Bank hf. “These are quite big cases by any measurement, they’re my biggest cases so far,” Mr. Hauksson said in an interview, noting that these charges represent an “umbrella” over many incidents believed to be illegal.”

As Cyprus Crisis Deepens, Wealthy Russians Are Ensnared –

“Two decades ago, Dmitry E. Rybolovlev was a small-town hustler hoping to strike it rich amid the collapse of the Soviet Union. Today, he is one of the wealthiest men in the world, with a penthouse in Monaco, a yacht named “My Anna” worth more than $100 million, and two of the most expensive private residences in the United States.
Much of that money, it so happens, flowed through Cyprus.”

Repeat After Me, Cyprus Is (Was) Not a Tax Haven « naked capitalism

“Cyprus is over as an international banking center, which the Financial Times reports was one of Berlin’s objectives for its rescue. However, the business press (and yours truly following them) has referred to Cyprus as a tax haven. That description is part of the PR campaign to justify punishing the island.”

Finale for now on Google’s Self-Inflicted Trust Problem – James Fallows – The Atlantic

“I am about as pro-Google a person as you’re going to find in the media. I’ve had friends at all levels of the company since its founding, and still do now. I’ve admired what Google has done in China; I live my info-life within the Gmail / Google Drive universe; and I am predisposed to take Google’s side in most controversies, whether against Microsoft or the French. Including when it comes to its influence on the battered journalistic business model it has helped to overturn! But even I think it has done something brand-damaging.”

Open banking resolution in New Zealand

“NZ’s wound down the temporary deposit insurance we had in place post 2008 in favour of Open Banking Resolution: freeze a part of all deposits, keep the banks open, liquidate the shareholders and unsecured creditors, then (if necessary) haircut the depositors.”

Reserve Bank distances its incoming bank failure tool from the Cyprus situation, says deposit insurance schemes blunt incentives to manage risk |

“The Reserve Bank’s comments come after the Green Party yesterday, and Labour Party today, called, respectively, for deposit insurance and the protection of the first NZ$30,000 of all bank deposits. Separately, NZ First leader Winston Peters tweeted that his party was calling for a bank depositors’ guarantee scheme to protect the savings of “blameless Kiwis” during any financial crisis.
In a rare move, the Reserve Bank issued a statement today seemingly in direct response to the politicians reaction to the events in Cyprus and subsequent media coverage. Reserve Bank Deputy Governor Grant Spencer said deposit insurance wasn’t a substitute for the incoming Open Bank Resolution (OBR) policy or any other bank failure resolution tool.”

Cyprus: The Operation Was a Success. Shame the Patient Died. | Some of it was true…

“No human agency has acheived so much economic destruction in such a short time without the use of weapons. The combination of laying waste to the financial sector and tearing up the savings of thousands of residents means that Cyprus won’t return to current levels of output for a decade, a funeral pyre which bears comparison only with Greece. There are four shocks happening at once; the bog-standard austerity shock; the trauma of bank withdrawal controls; the wealth shock; and the structural shock of wiping out the financial sector. The bailout bill is certainly going to get a lot higher too, as a larger amount of debt is piled onto a smaller economy.”

The Irish Economy » Blog Archive » Whatever it takes to save the euro?

“The ECB cannot have it both ways. It cannot simultaneously threaten to expel a member state from the Eurozone, and also expect us to believe that it will do “whatever it takes” to save the euro.
What investors (and, to be honest, I) have forgotten is that Draghi qualified his pledge: the ECB would do whatever it takes “within its mandate”. It isn’t clear that investors will continue to believe that “it will be enough”.”

U.S. cyber plan calls for private-sector scans of Net | Reuters

“The U.S. government is expanding a cybersecurity program that scans Internet traffic headed into and out of defense contractors to include far more of the country’s private, civilian-run infrastructure.” | For the Germans, a Pyrrhic victory

“Three years into the eurozone crisis, the crucial power shift on the continent is clear: The Commission and the European Parliament have been substituted by the Eurogroup, the European Central Bank and Berlin – and even the International Monetary Fund. Big decisions are no longer made by elected or accountable bilateral bodies and institutions”

If capital controls are introduced in Cyprus, it is the end of the single currency in all but name – Telegraph Blogs

“the point is that if capital controls are introduced, it basically makes Cypriot euros into a national currency, rather than part of wider monetary union. The capital controls will severely limit your ability to get your euros out of Cyprus, rending them essentially worthless in the wider eurozone. It would be a bit like telling Scots they can’t spend their UK pounds in England. Monetary union is many things, but above all it is about free movement of money and a uniform value wherever it is spent. When these functions are disabled, then you cease to be part of a single currency.”

Cyprus Adopts Bank Revamp Plan –

“the Parliament in Nicosia passed two key bills that would allow it to close down its second largest bank, Popular Bank of Cyprus, and aggressively curtail the free flow of money on the island. The bank restructuring law would see depositors in Popular Bank, also known as Laiki Bank, to lose as much as 40% of their savings above €100,000, Cypriot and European officials said.
As details of the latest plan emerged late Friday, there were signs that the country may be forced to also resolve Bank of Cyprus, its biggest lender. The government in Nicosia was fighting to avert this by proposing an even deeper levy on the lender’s uninsured depositors than one demanded earlier by euro-zone partners, according officials involved in the bailout talks.”

PIMCO cuts euro exposure as investors decry Cyprus bailout plan | Reuters

“A demand that Cyprus seize money from depositors to help rescue the island’s banks is a wake-up call for those who believed the euro zone crisis was solved, institutional investors and hedge funds said.
One of the world’s biggest money managers, PIMCO, has already reduced its euro currency allocations in response to the planned levy unveiled at the weekend, a senior executive told Reuters on Tuesday.”

Google Keep Review & Rating |

“Google Keep adds note-taking and syncing to Google Drive and Android devices, but compared with similar services, it’s a merely a fawn trying to find its legs.”

How bankers believed their own hype –

“When American financiers were flogging subprime mortgages back in the credit boom, were they completely delusional? Or were they driven by cynicism and greed? Did they, in other words, know that the housing market was a bubble – or did they actually believe their own hype, even as the frenzy grew?”

The Cyprus nuclear solution | chrislightcy’s Blog

“Nuclear solution Our bank subsidiaries in Greece have cost the Cyprus Government over €7 billion. If they were not subsidiaries but under the Greek Central bank, then these loses would have been absorbed by the Greek rescue plan. A lot of politicians have blamed Cyprus previous President for not demanding this.
So the solution is to follow the icesave model and move the remaining €10 billion the Cypriot Banks have in deposits in Greece to Cyprus . What happens to these banks afterwards,can be decided by the same people who ordered the PSI in Greece as well as others who are responsible for the systemic risks of Europe . It is not our problem, we are a small bankrupt island and trying to save our selves.”

iTunes estimated to rake in in $2B per year, thanks to Apple’s software division

“Once a break-even business used to drive sales of Apple’s high-margin hardware, the iTunes Store is now estimated to be raking in more than $2 billion per year, due largely to the inclusion of its in-house software development teams.”

Economists See No Crisis With U.S. Debt as Economy Gains – Bloomberg

“Representative Paul Ryan, chairman of the House Budget Committee, declared this month that the U.S. national debt “is hurting our economy today.” It’s an idea embraced by almost every Republican and even some Democrats.
Economic data — on jobs, housing and investment — don’t support that claim. And economists across the political spectrum dispute the best-known study of the subject, by Carmen Reinhart and Kenneth Rogoff, which found that nations with debt loads greater than 90 percent of their economies grow more slowly”

Climateer Investing: The Lesson of Cyprus: Diversify Among Your Depository Options

“For example, there is a valid argument, at the zero lower bound anyway, to tuck some money away in a mattress”

Euro zone clamor drowned out Cypriot bank warnings | Reuters

“Cypriot politicians and bankers were so swept up in the short term benefits of the Mediterranean island’s adoption of the euro that they ignored warnings over the resulting lending boom.”

Your favorite Thursday sandwich –

“Users have no power.
We can complain about Google Reader’s shutdown and start as many online petitions as we think will make a difference,1 but we all have short memories and can’t resist free stuff.
Want to really stick it to them? Stop using Google. All of it. Search, Gmail, Maps, the works. Delete your account and start using Bing. Ready?”

More on why I won’t use Google Keep: it’s not personal, it’s business — Tech News and Analysis

“It is hard to trust Google anymore to make rational and consumer centric decisions. I said — nuanced as it might be — that I don’t trust Google to introduce new apps and keep them around, because despite what the company says, these apps are not their main business. Their main business is advertising and search — regardless of whatever nonsense you might read. ”

ING says has $1.1 billion of Cyprus exposure; shares fall | Reuters

“Dutch insurance and banking group ING (ING.AS) said on Friday it had about 900 million euros ($1.16 billion) of exposure at year-end to companies registered in Cyprus, but that its credit risk linked to the island was negligible.
Its exposure to Cyprus was similar to that at the end of 2011, according to the data from the annual report.
ING’s shares fell as much as 2.7 percent on Friday to their lowest level since March 4, in a market worried about the risks and the consequences of a financial meltdown on the Mediterranean island.”

Wegen Zypern-Chaos: FDP-Politiker fordert Rücktritt des Eurogruppenchefs – Deutschland – Politik – Handelsblatt

Leading FDP politician Alexander Graf-Lambsdorff called for Dutch Finance Minister Dijsselbloem to resign as head of the Eurogroup due to his disastrous leadership during the Cyprus bailout negotiations. | FinMin: absorption of Greek units of Cyprus banks underway

“Finance Minister Yannis Stournaras confirmed on Friday that Greece had started the ball rolling for the acquisition of Greek units of Cypriot banks.
“The process had been launched for the acquisition of Cypriot banks in Greece by a Greek banking group in close cooperation with the Central Bank of Cyprus,» Stournaras said in a written statement.
This procedure «fortifies Greece as all the deposits of citizens at Cypriot banks are absolutely safeguarded,» the statement continued, adding that state officials were «working night and day to guarantee the stability of the banking system and to find a viable solution for the economy of Cyprus and its citizens.»”

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