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It’s the System, stupid! Welt AmSonntag targets ECB Liquidity-Pumping Mechanism
7 January 2013
(EIRNS)—Under the headline, "Printing Press Out of Control," Welt am Sonntag (the Sunday edition of Die Welt) runs a major exposé today on the huge, completely nontransparent ECB liquidity creation mechanism, called the Short-Term European Paper (STEP) market, on which unregulated, private, short-term deals between firms and banks or interbanking deals are handled. It has a trading volume of about EU445 billion, of which about EU370 billion are bank bonds, short-term certificates of deposit (CDs), which can be cashed in at the ECB. Welt says this is exactly what central bankers used to try to prevent, since they feared "a money-printing machine, outside the regulated markets, which would be extremely difficult to control." The STEP market was founded in 2006 on the initiative of German and French banks, under the umbrella of Euribor-EBF, an organization of the European Banking Federation (EBF), which is presently being investigated for manipulations of the European Interbank Offered Rate (Euribor). The euro central banking system supports this market, with the key role of the Banque de France, which through something called Euroclear France supplies the necessary data for risk discount valuations to the ECB, on the basis of which credit is uttered by the ECB for the handed-in "securities." The crucial role in the market itself is played by Euroclear Bank, the world’s second biggest bank for brokering of such deals, which negotiates and books STEP bonds on behalf of the banks. Euroclear Bank administers securities for all big international banks in the range of EU22 trillion and handles per year more than 160 million transactions; it can also, like any other bank, cash in securities at the ECB. Incredibily, its subsidiary Euroclear France delivers the specific data to the Banque de France, which then goes to the ECB, which apparently has no independent way of checking any of the data or the market itself, nor does it want to. At present, above all, French banks profit immensely from the unregulated STEP market for their After research by the Welt investigators, the ECB had to admit 113 cases of "transmission errors" between the Banque de France and the ECB, for which discount risk valuations were wrongly transmitted. This, according to the paper’s calculations, resulted in an extra "sum of up to EU550 million," with the paper in this specific case having a total value of "less than EU6.5 billion." The ECB maintained, that the six respective banks, among them Société Générale and Uncredit, did not cash in all those securities, and had put in enough others, so that all in all, the credits, which it gave out, were sufficiently "securitized." Welt reminds its readers, that it was only in 2008, that for two years the ECB accepted these short-term CDs as securities, which before then was considered absolutely taboo. Since January 2012 these CDs have been accepted without limitation, which has made it into a highly profitable affair for the banks. Now, this "STEP market with ECB license" is growing tremendously: examples are the British subsidiary of bankrupt Portuguese Banco Espirito Santo, which received the "STEP label" in September 2012 (it can generate up to EU18 billion through the mechanism), while Spanish BBVA can get up to EU10 billion, of which it has already secured almost EU1.6 billion since September 2012. France’s major bank, BNP Paribas, has at present 966 STEP bonds with a value of EU44.5 billion; Société Générale and Dexia both about EU35 billion; EU27 billion for Crédit Agricole; EU25 billion for Euro Crédit Mutuel; and EU21 billion for Natixis. The French part makes up more than a third of the entire STEP market, almost EU190 billion. Welt am Sonntag concludes, "The STEP market thus has huge importance for the major French banks’ short-term liquidity supply." For the investigators, the real target is the ECB with Mario Draghi at its top. The article has numerous quotes and examples of the ECB’s and Banque de France’s non-comments and inactions about the completely nontransparent institutional mingling among Euroclear Bank (as agent for the big banks such as Goldman Sachs, Deutsche Bank, the various French banks, and others), Euroclear France, and the Banque de France, which is the sole source of "information" for the ECB. Despite the ECB’s original promise to the Welt am Sonntag investigators that it would look closely into the STEP market, nothing was done. The reason is exactly that it is one of the key pumping mechanisms to keep the whole bankrupt system going — which Euroclear Bank completely openly announces as its purpose for existence. Welt quotes its 2012 report, in which the bank’s board proudly boasts, "If it is the matter ... to exchange securities or generate liquidity from the central bank, we are ready to support you...." Hyperinflation, anyone? http://www.welt.de/finanzen/article112420942/Die-europaeische -Notenpresse-geraet-ausser-Kontrolle.html [efi] |