Global Market Meltdown Worsens: Corporations And China Join In On Global Bank Run

The Global Financial Meltdown has dramatically worsened as Corporations and China Jump Aboard The “Institutional” Global Bank Run As Banks Fall Apart As Their Seams.

Earlier today the world saw a global financial meltdown as investors dumped everything from stocks to commodities and literally everything in between.

Global Financial Meltdown: Investors Dump Nearly Everything Amidst Worldwide Market Crash

Global Meltdown - Investors Are Dumping Everything

Major Stock Market Indexes, Commodities, Currencies And Everything In Between Is Being Dumped By Investors Across The Globe In The Midst Of A Global Financial Meltdown.

The financial markets across the globe are facing one of the most massive sell-offs in recent memory. Did you know that there is a declining bank safe market? There is simply no reason to keep the bank luggage left because few are willing to pay for them.

The Dow Jones Industrial average has sold off over 467 points today. When and when you add that on top of 284 point drop following yesterday’s crash FED’s statement, which announced operation ‘twist’ and warned of significant downside risk and strains in global financial markets, we have a 751 point drop in the DOW since 2:45 PM est yesterday, which is the largest 2 day slump since 2008. Whilst some are looking into commission free trading to try and boost it, it will take time to see if this will help.

There are an endless parade of economic statistics many of which are the worse since the Great Depression and World War 2 era. We have also seen 111 of the s&P 500 hit fresh 52 week lows, a drop in global currencies – beside the dollar, oil dropping into the high $70 per barrel range and gold plummeting over 5% to trade in the low $1,700 per ounce range.

Business Week points out the massive crash in U.S. stocks immediately below while CNBC points out further below that this in fact a global meltdown – investors are dumping everything.


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While today’s sell off was monumental and in fact is on course for the 3rd worse week on Wall Street ever, the sell-off was on the heels of the FED’s economic outlook. Today’s Global Financial Meltdown is about to become much worse as a slew of news reports out today reveal the run on the European banks has spread to include corporations and institutions pulling their money out of banks and China finally arriving at the party.

As a backdrop, the IMF warned the entire global financial systems is more vulnerable to collapse than at any other time since the 2008 financial crisis. The alarm is being sounded with the stern warning the European debt crisis could trigger the complete collapse of the entire global financial system at any minute. On the other hand, the alternative media and independent economists warn we are in fact in of a great depression style collapse. The only difference is this time around we would be facing a global depression. But as the ship their countrymen sail on continues to sink, bureaucrats continue to play politics and put their partisan interests above the interest of their constituents.

The run on European banks has already began with from the customers pulling their money from banks some time ago. While the corporate media kept the run on the Greece banks on the hush the media blackout didn’t stop the run nor did it stop the run from spreading to other nations. Simply put, the public is learning they can’t trust their governments and they can’t trust the media. Indeed the withdrawal of deposits from the banks in Greece has quietly spread across the other European nations only to spread into some of the supposedly most stable banks in the Euro-zone, the French banks.

Base interest rates across Europe have also been influenced. For example, the Bank of England base rates have been in decline since 2007. In turn this affects loans such as mortgages, for example tracker mortgages following interest rates. Due to the financial crisis a lot of people in England are having to down the route of remortgaging their property using tracker mortgages as a means of freeing up their money. Ultimately, it would seem that the general sense of uncertainty can only have a continuing detrimental effect on interest rates.

Now we have learned the run on the banks that was originally limited to customers has now spread to include corporate and institutional clients withdrawing their money from the banks. First, we caught wind of the rumor that Siemens pulled its cash from one of the French banks. Then came the confirmation came that Siemens pulled $500 million Euros from Societe Generale. Siemens of course is a huge conglomerate. For such a huge corporation to lose trust in one of the supposedly most stable of the French banks is clearly a very significant development. To be clear, the ramification have simply rocked the markets and the many more corporations soon will follow. In fact, some corporations and nations have followed their lead.

Consider the breaking news that The Bank of China has stopped doing business with four major European banks. To be exact thy have stopped trading swaps and foreign exchange forwards with the Societe Gnerale, BNP Paribas, Credit Agricole and the Swiss banking giant UBS.

Speaking of BNP Paribas, Reggie Middleton – who long predicted the collapse of Lehman’s and Bear Stearns far ahead of anyone else because of their shady banking practices – has been warning for months BNP Paribas is ripe for a Lehman style collapse. Reggie argues that BNP Paribas is engaging in the same practices and fraud that caused Lehman’s and Bear Stearn’s to collapse.

While on the subject of China, we learn today they are not immune to the bank run either. China Securities Journal reveals that 420 billion yuan have been pulled out of the big four state-owned Chinese bank during the 15 days of September. Even bank employees are pulling their deposits from the banks as it is estimated that three trillion yuan has been diverted to illegal money lenders which pay interest rates 10 times higher than the one-year Chinese bank deposit rate.

Today we also learn that Insurer Lloyd’s of London confirmed it’s withdrawing deposits from all of the European banks for fear they may collapse. The rationalization for their withdrawal is quite simple – if world is worried about the European governments themselves collapsing then on must assume the sovereign debt collapse will also cause the banks themselves to collapse.

Still that message doesn’t seem to be reaching the retail banking client and the corporate owned media is to blame for repeatedly assuring the public there bank deposits are safe because the banks are insured by their respective European government.

When we see corporations not buying the propaganda being pushed by the media and instead withdrawing their deposits that should be a clear sign to the retail client it is time to withdraw their deposits. Unfortunately, too many people believe their governments and the media would never lie to them so some of them will unfortunately need to learn the hard way.

However, anyone keeping up with the details of latest financial news that doesn’t quite make the headlines knows that banks across the world have been hit with a parade of credit rating cuts warning of their risk of collapse. Those same cuts have been coupled with recent credit rating cuts of the sovereign of nations themselves, most notably the credit downgrades of the United States and Italy.

Adding to the bleak reality a global financial collapse may be imminent is the fact that 9 Banks failed last years EU stress test and another 16 barely passed the test. Yet instead of being proactive and shoring up capital to assure the survival of financial turmoil, we have seen many banks continue to conduct business in absolute denial they were at risk. In ignorance of reality the banks have sat around for over a year knowing they are at risk of collapse while doing little to nothing the improve their situation. Why should they act? They know when shit hits the fan taxpayers will be bent over the barrel and be forced to give the banks billions in bailouts from which the executives will collect lavish bonuses.

Now we have warnings from top economists and the FED that there is significant downside risk and strains in the global financial system that threatens the entire system. The is coupled with warnings from the IMF and EU leaders to immediately recapitalize the banks or face collapse. The calls for recapitalization have persisted for weeks with no action taken to stave off the collapse. Meanwhile, the consequences of not acting immediately continue to become more severe by the day.

The EU credit markets have frozen up and the situation is now beyond the point of dire. The question is which bank will be the first to collapse.

While all eyes seem to be focused on the Euro banks across the pond, banks back in the US are not immune from the crisis and neither are the Chinese banks.

In fact, Bank of America has been hammered by the alternative media as needing capitalization but BAC has denied those allegations and the corporate media has dismissed the alternative media reports as comments from fringe blogs. Until today that is.

Pimco’s Mohamed El-Erian raised the alarm today about the health of French banks and went on to point out there is an institutional run on thosebanks.

CNBC, went on to use the metrics El-Erain used to measure the health of the French banks to measure the health of US banks and found US banks aren’t nearly as healthy as Wall Street would like to believe.

Sources, Further Reading, and Background Information:

Morgan Stanley’s Exposure To French Banks Is 60% Greater Than Its Market Cap… And More Than Half Its Book Value
The Sovereign Risk Dislocation Trade Means Big, Black Clouds Coming To “Risk Free”
European Service Activity Contracts For First Time In Two Years As Global Recession Now Ensured
China CDS Spikes To Highest Since MAR09 As PMI Disappoints

On the Greece bank run:

Greece In Panic: Masses Race To Pull Cash From Banks Causing A Great Depression Style Bank-Run

Greece In Panic In Face Of Great Depression Style Run On Banks As People Race To Withdrawal Their Cash

The Guardian reports that while Western media has been silent on the issue Greece is in an absolute state of panic facing a Great Depression style run on the banks as people race to withdrawal their cash.

The growing economic crisis in Greece has entered the cusp of a complete financial collapse which for the most part being ignored by the Western media.

Perhaps the news out of Greece has been overshadowed by debt ceiling debate and today’s collapse in domestic financial markets which was fueled by economic data indicating that the U.S has either entered a second recession or is in a double-dip recession that some say in fact is a depression.

Regardless of why Greece is was not on the radar it should be because the situation is dire.

As CNBC’s Michelle Caruso Cabrera points out safety deposit boxes in Greece are sold out due to a Great Depression style run on Greek banks. For those that don’t know what a “bank-run” is the masses in Greece are flocking to their banks to pull their cash out of the banks.

CNBC's Cabrera reports Greece safety deposit boxes sold out due to run on Greek banks

CNBC’s Cabrera reports Greece safety deposit boxes sold out due to run on Greek banks

As the Guardian article below informs us the dreaded bank-run has arrived despite politicians selling out the live hoods and futures of the people of Greece in exchange for a second banker bailout loan to pay back the interest on the first banker bailout loan.

Economists and world leaders told the Greek politicians that they needed to force harsh Austerity measures on their citizens to prevent this exact situation from occurring.

Needless to say, even after subjecting to the will of the International banking cartel, Greece is now in an absolute state of panic as people rush to save their cash and life savings. This isn’t a banking software problem, just a general economic problem.


Read The Rest…

On the Greece bank run spreading into the rest of the European banks.

Silent Great Depression Style Run On Greece Banks Spreads To Banks Across Europe

M2 Money Supply Indicates Run On European Banks

Economic data shows the silent run on Greece banks has spread into a massive number of people pulling their money out of banks all across Europe.

I recently reported on a buried article from the Guardian reporting on a silent yet great depression style run on the Greek banks.


The latest economic data reveals that the silent run on banks has spread from Greece into the other European banks, to the tune of an unexplained $10 billion a week.

The Daily Markets just ran a report analyzing the M2 money supply. They point to a$400 billion run on the European banks that the media is failing to report as a reason for our current stock market crash.

A Reason For The August Stock Market Crash, Oct Pending

Our overall readings on the web suggest to us that there is a silent but sure to be deadly trending going on right now. The media is not covering it, your broker is not telling you and your financial adviser is not advising you. Only the informed blogging world is leading with this story. Also note that this will be a great chance to profit.

The deadly trend: A European wide bank run.

We know folks in Portugal, Ireland and Greece took their funds out of their banks and purchased gold, Swiss franc and Yen. But things just moved to defcon 2, Italy and Spain banks have deposits falling, the money is finding other ‘non Euro’ safe places to hide.


Source: The Daily Markets

The report cites an analysis of the M2 money supply.


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On Europe’s Bank contagion hitting US banks

Could France’s Banking Problem Come to US Shores?

Mohamed El-Erian raised the alarm today about the health of French banks, going so far as to say that there appears to be an “institutional run” on the banks.

In the piece, El-Erian uses a few unorthodox metrics to determine whether there’s a run on the banks. Which made me wonder: how stable to US banks look if we apply the same metrics.

In general, America’s banks are much healthier than Europe’s. They’re more transparent, have more secure deposit bases, better quality assets, better liquidity, a more reliable central bank, and less direct exposure to the sovereign debt of Greece, Portugal, Italy, Spain or Ireland.

One metric El-Erian uses to detect a run is the price of equity to tangible book value. French banks trade at 50 percent discount their tangible book value, Er-Erian writes.

Both Bank of America and Morgan Stanley are now trading at a 43 percent discount to tangible book value. Citigroup is at 46 percent discount. Those drastic discount that indicates that the market is very skeptical about the health and profit potential of these banks.

JPMorgan Chase [JPM 29.27 -1.07 (-3.53%) ] and Wells Fargo [WFC 23.17 -0.54 (-2.28%) ], on the other hand, trade at a healthy premium to tangible book value. The discount for Goldman Sachs [GS 93.98 -3.88 (-3.96%) ] is just 29 percent.

Another metric El-Erian uses is the ratio of market capital to total assets. A healthy bank would have 6 to 8 percent, according to El-Erian.

Bank of America [BAC 6.06 -0.32 (-5.02%) ] has $2.3 trillion of assets and just $62 billion in market cap. That gives it around a 2.7 percent ratio, above the 1 to

1.5 percent of French banks but far below the level El-Erian describes as healthy.


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The Globe And Mail – reports Euro banks failing stress tests, China cutting banking relations with European banks, Siemens pulling deposits from France Banks, and warnings from EU leaders that banks needed to be propped up.

European bank outlook chilled by client jitters

Major customers and partners of European banks are scrambling to cut their exposure as the region’s economic and financial landscape deteriorates.

Fears of contagion are triggering defensive moves by big lenders and companies, worried that Europe’s banks will be savaged by the sovereign debt crisis, and at the same time sparking demands by an increasingly strident global community.

Bank of Canada Governor Mark Carney joined the chorus Tuesday, calling for an international plan to buttress European banks. Many of them are already facing sharply higher costs of capital, eroding deposits and impeded access to vital interbank loan, credit swaps and other markets.

Siemens AG, the German industrial powerhouse, pulled more than €500-million ($680-million) in deposits out of a French bank earlier this month and moved the cash to the safety of the European Central Bank, according to a Financial Times report. Siemens can make such a move because it obtained a banking licence last year as a safeguard against another financial crisis.

And the Bank of China has stopped trading in swaps and foreign exchange forwards with four major banks – Société Générale SA, BNP Paribas SA and Crédit Agricole SA of France and scandal-plagued Swiss heavyweight UBS AG – a Reuters report said. And other banks and money-market funds have been reducing their risk exposure in light of Greece’s slide toward what most observers see as an inevitable default.

“We need to ask if Seimens and Bank of China are doing reasonable risk assessment, in which case we should be very worried,” said Nicolas Véron, a senior fellow at Bruegel, a Brussels think tank, who specializes in European banking issues. “Or are they overreacting to market overreach? I will say this: Europe’s leaders have not done an excellent job of making the case that this is unwarranted.”


The International Monetary Fund warned that European banks must shore up their capital before the storms worsen.

The IMF said in its latest temperature reading of global economic conditions that European banks have to add capital in excess of new minimum global standards, which themselves do not take effect until 2019.

New IMF managing director Christine Lagarde warned last month that banks “need urgent recapitalization” to withstand the sovereign debt risks and the damage stemming from the faltering economy.


Now, she has been joined on the worry line by the European Union’s competition commissioner, Joaquin Almunia, the first senior European bureaucrat to warn publicly that more than just the banks that failed stress tests in July will be in need of urgent capital infusions if the debt crisis drags on much longer.

[…]Nine banks failed the July tests, and another 16 passed by the slimmest of margins. They face a mid-October deadline to show the EU’s regulator how they intend to address their capital shortfall.

Source: Globe and Mail

The Globe and Mail reports on the IMF warning of banks being most vulnerable since the 2008 crash, Lloyd’s pulling deposits from European banks, the credit rating cuts of EU and US banks

Rash of bank downgrades signals return to ‘danger zone:’ IMF

Europe’s big financial institutions are under pressure to quickly secure tens of billions of euros of new capital, as the continent’s spreading debt crisis increasingly engulfs the banking system.

The International Monetary Fund warned the global financial system is more vulnerable now than at any point since the financial crisis of three years ago, as Europe’s debt crisis risks trigger a treacherous slide back into the widespread instability that prevailed during the darkest days of 2008.


Highlighting the growing financial risks in Europe, Standard & Poor’s downgraded seven large Italian banks over the continent’s sovereign debt woes – a day after it downgraded Italy’s government debt.

The downgrades show financial market angst is spreading from troubled government finances to troubled banks.

In the U.S., meanwhile, Moody’s Investors Service on Wednesday downgraded the debt ratings of the three largest U.S. banks – Bank of America, Citibank NA and Wells Fargo, citing a reduced likelihood that the United States government would ride to the rescue in the event of a failure.

The U.S. government is “more likely now than during the financial crisis to allow a large bank to fail should it become financially troubled, as the risks of contagion become less acute,” Moody’s analysts said in a statement on Bank of America and Wells Fargo.


The IMF’s Mr. Vinals said some banks may eventually need government bailouts or be forced into mergers with rivals if they can’t raise private capital.


Some major depositors are pulling their deposits from European banks.

Insurer Lloyd’s of London confirmed it’s withdrawing deposits from banks in peripheral European countries, worried they may fail.

“If you’re worried the government itself might be at risk, then you’re certainly worried the banks could be taken down with them,” Lloyd’s finance director Luke Savage told Bloomberg News.

Likewise, German industrial giant Siemens AG pulled more than half-a-billion euros in cash deposits from an unidentified large French bank two weeks ago and transferred it to the safety of the European Central Bank, according to reports.

And the Bank of China has reportedly stopped doing some routine foreign exchange transactions with several European banks, including Société Générale SA, Crédit Agricole SA and BNP Paribas SA.

Source:Globe And Mail

Capital Vue reports on the run on the Chinese Banks.

Chinese Banks Face Crisis As Deposits Plunge

September 22 – Deposits at the big four state-owned banks, including Industrial and Commercial Bank of China, Bank of China, Agricultural Bank of China and China Construction Bank fell by about 420 billion yuan during the first 15 days of September from end August, reports China Securities Journal.

The huge drop in deposits led to a significant decline in new loan growth by the big four banks during this period, with only 87 billion yuan of new loans extended.

According to industry insiders, net outflows of deposits from banks usually occur during times of bullish stock markets. The current situation of high inflation, stagnant property market and sluggish stock market, could mean that the deposits may have been invested in wealth management products, trusts, art collections, or in the illegal lending sector.


During the first half of September, Bank of China and Agricultural Bank of China recorded the highest deposit outflows, respectively posting declines of 180 billion yuan and 140 billion yuan in deposits.

The deposits may have been diverted into the illegal lending sector as after several rounds of interest rate hikes, the current one-year deposit rate is 3.5 percent, significantly below the consumer price index (CPI) growth rate of 6.2 percent in August, added the insiders.

According to the report, bank employees in Wenzhou, Dongguan, and Fuzhou, had already withdrawn their deposits and had lent to illegal money lenders in the grey market at interest rates which are 10 times higher than the one-year deposit rate.

Insiders said the high rates of return from the illegal lending sector may have led to approximately three trillion yuan of bank deposits being diverted to this sector.


Source: CapitalVue

Reggie Middleton reports via Zero Hedge on the BNP Paribas run:

Independent, Bombastic Financial News Show Dramatically Scoops the Financial Times On French Bank Run Story

bnp_paribasStacy Herbert and Max Keiser have absolutely scooped the FT on the French bank run story with thier interactive interview of me and the use of new media. Absolutley! The following are Stacey’s Twitter stream in reverse chronological order for today:

  1. No lines outside BNP Paribas. But then it is still lunch time. No self-respecting French person would neglect dessert course.
  2. Here is @ReggieMiddleton on a French bank run on 12 September… Post provides links back to even earlier warnings.
  3. A must watch Keiser Report… Troika Tanks, Junta Bots & A Run On French Banks
  4. Today’s episode of the Keiser Report features interview with @ReggieMiddleton talking about a run on French banks. Should be on youtbe soon.
  5. Keiser Report Troika Tanks, Junta Bots & a Run on French Banks with @ReggieMiddleton#keiserreport
  6. @ReggieMiddleton warned you first! EL-ERIAN WARNS: “These Are All The Signs Of An Institutional Run On French Banks”

Last week, Stacey and Max distributed free bank run models for thier viewers and readers to play with…

Posted on September 18, 2011 -Stacy Summary: We’re interviewing Reggie Middleton this week for the Keiser Report. In particular, we’ll be talking about French banks. Check out his “Run on the Bank” model for BNP Paribas. Questions for Reggie in the comments thread below.

And they even used Twitter to solicit questions from their audience to ask me during the taped show. All in all, a very strong coverage of the French bank run situation, before the actual run. This is how I belive the media should work. While I don’t necessarily disagree with anything that Mr. El-Erian has said in this interview (and how could I since it is essentially an abbreviated version of what I have been saying for 4 months), and I have the utmost respect for him, it is far, far from timely. I urge any and all to read Mr. El-Erian’s article and the FT presentation and compare it to that of the more independent (if not bombastic) new media and let me know which offers more substantive value. For those that do not follow me, the following has been my chronological take to date (those that do follow me and have seen this already can skip past the recap down to the videos below):


Read The Rest…


On the widespread bank credit rating cuts across the Atlantic:

Bank Downgrades Jump The Atlantic: S&P Cuts Numerous Italian Banks

Just so the Italian banks don’t feel isolated and get more than their fair share of intraday limit down closes, here comes S&P, via Bloomberg:

  • S&P Cuts Ratings on 15 Italian Banks After Italy Downgrade
  • S&P cuts Intesa Sanpaolo ratings to A from A+; outlook negative
  • S&P cuts Mediobanca ratings to A from A+; outlook negative
  • UniCredit Spa Rating Outlook to Negative by S&P
  • Findomestic Banca Cut to A From A+ by S&P

Judging by the market response, forget QE3: QE 3000 must be coming.

Read The Rest…

Zero Hedge On Bank of America Risk.

Bank Of America Is Becoming A “Counterparty Risk” Like Bear And Lehman

Yesterday’s downgrade of BAC was potentially problematic for credit markets. I am less concerned about the holding company downgrade. Downgrading the bank to A2 from Aa3 could become problematic. That is the entity most derivative counterparties will face. A2 is still fine, but I suspect many counterparties will be having meetings over the next few days to discuss how comfortable they are facing BAC as a derivative counterparty. It might be wrong, and unnecessary, but it is something that will be occurring. BAC should be doing everything in their power to address this potential risk immediately. The risk of ratings downgrades to a bank is twofold. On a basic level, it may reduce the flows they see as counterparties prefer to trade with higher rated entities for their derivative trades. That is manageable. The bigger, and far more problematic issue, will be if firms cut their lines to that bank. This would cause banks to unwind or assign existing trades, or to buy protection on the downgraded banks to “hedge their hedge”. Protection buying would drive their spread higher (if this was all exchange traded, it wouldn’t be an issue). Unwinds could force the bank to raise some cash. Most hedge funds will have one way collateral agreements with banks, so that on any positive mark to market, they are posting collateral to the bank, which the bank can typically use “rehypothecate”. Hedge funds will unwind or assign profitable trades, which will force the bank to return collateral to the hedge fund. It is a subtle, but painful, way for a bank to experience a run. It happened with Bear and with Lehman.

Read The Rest…

On CDS spreads:

CDS: Blood On The Streets As Contagion Has Been Upgraded To Gangrene

If you think this morning has a September 12, 2008 smell and feel to it… You are right. Complete and total CDS bloodbath in sovereigns and fins means a global bailout may not be imminent, but the market sure demands it as contagion has been upgraded to gangrene. Bernanke has now officially blown it with the twist and Mr. Market demands a $1 trillion+ LSAP, or else…

Read The Rest…

Tyler Durden calling out the MSM on claims that Canadian banks are strong and immune from the crisis.

Paging The Globe And Mail

Globe and Mail: “Canadian Banks Are Fine”

…or not

Source: Zero Hedge

Zero Hedge on the freeze in European Bank Liquidity

European Liquidity Update

While bank CEOs across Europe (and the US) continue to deny-deny-deny that they have any liquidity issues, the markets seem to be calling their bluff (once bitten twice shy?). EURIBOR-OIS has just reached back to March 2009 levels, 3 month EUR-USD basis swap is almost back to late 2008 lows at -106bps, and while for once the ECB’s liquidity facility was not taken advantage of in size (only EUR179mm), counterparty risk is clearly on the mind of traders as CDS curves invert and Senior Financials jump 15bps to 304bps (and Subordinated +36 to 538bps!).

Chart: Bloomberg

And LIBOR components continue to disperse and rise – though who is actually lending to whom over there is anyone’s guess…

Source: Zero Hedge

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