'Mis-Sold Bonds' - A Resounding Wakeup Call
The Financial Times stated,
The commission said retail investors who were not 'adequately informed' about the potential risks of their investment could be eligible for compensation. 'MPS will compensate retail junior bondholders who were mis-sold by converting these bonds into equity and buying those shares from the retail investors,' the commission said. 'MPS will pay retail investors in more secure senior instruments.'
Reuters reported, "This capital injection could only be approved after junior bondholders and shareholders have contributed to the costs of restructuring, in line with 'burden-sharing' requirements under EU state aid rules," said EU Competition Commissioner Margrethe Vestager…"At the same time Monte dei Paschi has earmarked 1.5 billion euros to compensate retail junior bondholders who are the victims of mis-selling, it added."
CityA.M. now reports,
Retail bond investors in the world's oldest bank, Monte dei Paschi di Siena, are set to be reimbursed by the Italian government in the coming weeks… Retail investors were promised compensation totaling €1.5bn from state authorities. In yesterday's statement, Monte dei Paschi said it would issue senior debt to those retail investors affected which can be cashed in on 15 May 2018.
This marks the fourth round of "mis-sold" European bank bonds. The first was Banco Popular (OTCPK:BPESF) in Spain, then the two regional Italian banks and now Monte dei Paschi (BMDPD). The appropriate word, in my opinion, in English, is "scam," but I do not know the Italian translation. All of the institutional holders of this Italian Bank's debt either took a serious hair-cut or were wiped out. None were spared.
All of the American retail holders of Monte dei Paschi's senior debt, or subordinated debt, will take serious hair-cuts or will be wiped out. None will be spared. In other words, the Italian debt holders will be paid back, in full, while every debt holder, outside of Italy, gets macerated. This, in my view, is one loud alarm bell going off, one resounding wakeup call.
You have now been informed, exactly and precisely, how the European Union does business. They take care of themselves, and their local investors, while all other bondholders, retail and institutional alike, can go rot in the Tuscan sun. I hear this call, and I suggest that you pay attention. In my estimation, Europe's bank indentures, along with the regulations that govern them, aren't worth the ink on the paper, on which they were printed.
Fool me once, shame on you. Fool me twice, shame on me. To quote the rock group, the Who, "Won't get fooled again."
I make the further statement, this morning, that if they can purposefully deceive international investors, owning Spanish or Italian bank debt, that they can purposefully deceive other bank debt owners in any other country in the European Union, when politically expedient. This "con" knows no boundaries, in my opinion. "Mis-sold" is nothing more than a convenient artifice to protect themselves while they screw you into the floorboards. We have been had!
I make the further comment that if the EU can do this in bank debt that they can certainly use the same procedures in any other class of debt. It could be Sovereigns, or Corporates, or Covereds or who knows what. Nothing, in my view, is safe. Nothing is governed by the "Rule of Law" and political expediency is now, obviously, the "Law of the Land," regardless of the quite dishonest claims made by the European regulators.
The Europeans, of course, want to sweep all of this under the rug. Their statement about the Monte dei Paschi debt was issued late Saturday night, as is their usual procedure, when they don't want anyone to notice what they are doing. Pay no attention. Nothing to look at. Move on.
Well, I am paying attention and I suggest that you pay attention. I suggest that you pay close attention. A thoughtful review of your exposure to European debt may now be in order. I may enjoy saying, "I told you so," but you won't like it one bit.
CNN reports that
Spanish Prime Minister Mariano Rajoy will consider taking the dramatic measure of suspending Catalonia's autonomous status, as the region's leaders escalate threats to declare independence from the country. "We are going to stop independence from happening. On that, I can tell you with absolute frankness, that it will not happen. It is evident that we will take whatever decision that we are permitted to by law, in view of how things are unfolding.
When life itself seems lunatic, who knows where madness lies? Perhaps to be too practical is madness. To surrender dreams - this may be madness. Too much sanity may be madness - and maddest of all: to see life as it is, and not as it should be!"
- Miguel de Cervantes Saavedra, Don Quixote
I would not count out the possibility of Catalonia departing. It could be a "Cat-a pult," situation. If it happens, it will throw the entire EU into disarray, that is my belief. Many are ignoring all of this, many are not placing an appropriate amount of emphasis on this unfolding story. I think this is a mistake. The "Cat-o-nine-tails" is upon us. "Cat-ass-trophy" may be Spain's reward.
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Comments (9)
I honestly can't think of anything worse in a world that should be govern by law.
