Bottoming Financial Plays

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Financials feel wobbly here...

WFC might be in trouble...

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Financials about to come down hard here!

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DB getting smoked, on watch...

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Rate Hike coming?

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RDN and the Mortgage Insurers I think are going to see more pain from the Obama Move...

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XLF nice reversal...

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JPM stuck at $60, I think it's correction time...

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Regional Banks have been very strong!

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C really underperforming the sector...

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Financials look very extended...

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Sub-Prime Loan Stocks: Liquidity Concerns Return
Oct 21 2013, 03:18

http://seekingalpha.com/article/1756232-sub-prime-loan-stocks-liquidity-concerns-return?source=yahoo

[MWM]

AGO guess who has another $5 billion worth of exposure to Puerto Rican Debt!

[MWM]

NBG and BCS might be good here...

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Financials are about to get Whacked!

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Fannie Sees a Way to Repay Billions - By NICK TIMIRAOS and ALAN ZIBEL
March 18, 2013, 7:30 p.m. ET

The rebounding housing market has helped return Fannie Mae to profitability and now might allow the government-controlled mortgage-finance company to do the once unthinkable: repay as much as $61.5 billion in rescue funds to the U.S. Treasury.

The potential payment would be the upshot of an accounting move that Fannie Mae's senior executives are looking to make whereby the company would reclaim certain tax benefits that were written down shortly after the company was placed under federal control in 2008. The potential move was disclosed last week in a regulatory filing in which the company said it would delay the release of its annual report, due by Monday, as it tries to reach resolution with its accountants and regulator over the timing of the accounting move.

The debate about when Fannie should be allowed to reclaim the so-called deferred-tax assets comes as Fannie and its smaller sibling, Freddie Mac, are likely to show large profits in the coming quarters as the housing market gradually recovers from a prolonged bust, home prices rise and mortgage delinquencies fall.

The potential payment also has political implications as lawmakers and regulators wrangle over the fate of the firms, which were placed into a federal conservatorship amid soaring losses. The Obama administration has publicly said the two companies eventually would be wound down and has blocked them from retaining profits, but has done little to de-emphasize their role in the mortgage market.

A spokeswoman for the company's regulator, the Federal Housing Finance Agency, declined to comment.

While a payment wouldn't erase its debt to taxpayers or remove it from government control, Fannie said in its filing that the accounting change would result "in a significant dividend payment" to the U.S. Treasury. The payment would flow straight to the Treasury, and the company could be able to repay the bailout funds it extracted from the Treasury sooner than many observers expected.

At issue are the credits and deductions a company can retain and use to defray taxes on its future profits. The assets must be written down if a company believes it won't be able to generate enough taxable income soon enough to use the credits. Fannie had recorded a total of $61.5 billion in write-downs of deferred-tax assets as of Sept. 30, 2012, virtually all of the assets' value.

Now, Fannie may be able to reverse some or all of those losses if the company concludes it is likely to have taxable income. Fannie reported $9.6 billion in net income for the first three quarters of 2012, compared with losses of $14.5 billion for the same period in the previous year. The company has said it plans to report a significant profit for the fourth quarter, which is expected to mark its largest ever annual profit and its first in six years.

For its part, Freddie said in its annual report that the conditions facing the company didn't warrant reversing any of its $31.7 billion in tax-asset write-downs as of the end of 2012.

Jim Vogel, an analyst who covers the companies at FTN Financial, said it is likely the companies would eventually be able to reverse some but not all of their deferred-tax write-downs.

Even though the potential payment results largely from a bookkeeping change, the prospect of Fannie remitting billions of dollars to the Treasury "could have important repercussions for reform and other housing-finance discussions," Mr. Vogel said.

Critics of the companies said they are worried that such a large payment to the Treasury would exaggerate their financial health and could remove the incentive to replace or wind down the firms. "While not truly representing a marketable asset, Fannie is likely to present its tax losses as a financial gain and use it as proof that they have turned the corner and should be allowed to continue as a company in their current state," said Mark Calabria, director of financial regulation studies at the libertarian Cato Institute.

Meanwhile, there are signs that Congress is starting to pay attention as worries that the firms would long remain a drain on the U.S. Treasury have given way to a new issue: that the companies' revenue stream might be used to pay for government spending amid efforts to reduce deficits.

Last week, four U.S. senators—two Democrats and two Republicans—introduced a measure that would bar lawmakers from using the firms' revenues to pay for unrelated government expenses. The bill would also require Congress to vote on any plan by the Obama administration to sell any of the Treasury's senior preferred shares in the firms.

When Fannie and Freddie were seized in 2008, the government agreed to inject the firms with cash to keep them solvent and took senior preferred shares in the firms in exchange for that backing. Under the terms of a revamped agreement reached last summer, any profits at the end of each quarter are swept away as a dividend payment on those preferred shares.

So far, Fannie and Freddie have received nearly $188 billion from the U.S. Treasury and they have paid dividends of $58 billion, bringing the total cost of their rescues to $130 billion, with around $88 billion for Fannie and $42 billion for Freddie.

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BAC grabbed some $13.50 calls for next month!

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Time to buy FMCC and FNMA, will they follow AIG FInally???

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Property and Casualty Insurers

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Ride the Financials here!

BAC looks Golden!

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Serious problems loom in both Europe and the US...

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BCS bought April $17 puts today for .15, Euro banks might start feeling some pain after participating in this rally...

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FAZ in some cheap calls!

Very toppy market here imo!

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FNMA/FMCC Mayopoulos Says Buyback Demands Mostly Resolved After BofA Deal
By Clea Benson - Jan 8, 2013 11:58 AM ET

Fannie Mae is about three quarters of the way through its effort to force banks to buy back failed loans originated at the housing bubble’s peak, its Chief Executive Officer Timothy Mayopoulos said today.

The company’s $11.7 billion settlement with Bank of America, announced yesterday, takes care of a significant portion of its outstanding buyback requests, Mayopoulos said at a Bloomberg Government breakfast in Washington.

“With the resolution of Bank of America, I think you’ll see our total repurchase demand volume down substantially,” Mayopoulos said. “You’ll see that many of those resources we were devoting to legacy issues over the last few years can now be put to other uses.”

Washington-based Fannie Mae (FNMA) has flagged underwriting flaws in about 3 percent of loans originated from 2005 to 2008 that it purchased and packaged into bonds on which it guaranteed interest and principal. In addition to Bank of America, the company has asked JP Morgan Chase & Co., (JPM) Wells Fargo & Co. (WFC), Citigroup Inc. and others to buy back defaulted mortgages.

The government-owned company, which buys mortgages from lenders to provide market liquidity, can require that they be bought back of it finds the loans didn’t meet underwriting standards.
Fannie Mae had outstanding repurchase requests totaling $16.2 billion in the third quarter of 2012, according to regulatory filings. Of that, $10.8 billion involved requests pending at Bank of America.

Bank of America will make a $3.6 billion cash payment, spend $6.75 billion to buy back residential loans sold to Fannie Mae, and pay $1.3 billion in fees for taking too long to assist or foreclose on overdue borrowers, in the deal announced yesterday.

Taxpayer Subsidies

Fannie Mae, based in Washington, and its fellow government- sponsored enterprise, McLean, Virginia-based Freddie Mac, have received $190 billion in aid from taxpayers since they were taken into U.S. conservatorship in 2008 when investments in risky loans pushed them to the brink of insolvency. The companies have paid a combined $50 billion in dividends back to the U.S. Treasury.

The company’s finances have now turned around, Mayopoulos said. Fannie Mae reported $9.7 billion in net income in the first three quarters of 2012, more than it has ever reported in for a full year, Mayopoulos said.

Republicans and Democrats in Congress and President Barack Obama have called for Fannie Mae and Freddie Mac to be wound down and replaced. The company’s recent performance should cause lawmakers to consider the earnings potential for taxpayers, Mayopoulos said.

“The improvement in the company’s financial condition and our ability to return value to taxpayers I’m hopeful will cause people to sit back and reflect on some of the positives that the GSEs bring forward,” he said.

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What! Slacker! 4 years ago this was the hottest board on Ihub, then I let Dij takeover as an asst mod and suddenly it went all down hill...

Lesson learned!

HEHE!

[EdF]

I forgot about this board...nice work.

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Wondering if Fannie or Freddie will ever be back in play?

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These are heating up!

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Is Radian a House of Cards?
By JONATHAN R. LAING

Some investors think Radian Group will benefit from the recovery in the housing market. But the mortgage insurer's balance sheet is far weaker than it appears. Time to think again.

The housing market may be in recovery, but the Big Three private mortgage insurers that helped fuel the last boom with their guarantees are in tough straits. PMI Group's mortgage-insurance unit was seized by state insurance regulators last fall, leading to a near-total wipeout for its parent's shareholders. And MGIC (ticker: MTG) continues to show rivers of red ink. Its shares have tumbled to $1.95 from more than $5 as recently as eight months ago.

Only Radian Group (RDN) has seemingly withstood the foreclosure onslaught. Its stock has recently rebounded to $5.30 from less than half that level just last May, aided by misplaced hopes that it will somehow benefit from the recovery in the housing market. Think again. While lenders and home builders have already taken their medicine by both over-reserving and taking substantial write-downs on their assets, Radian has not.

Enlarge Image

Leigh Prather/age fotostock
Radian has only $2.1 billion in liquid assets to cover $3 billion in future claims that it has acknowledged. The actual claims could be at least $3.8 billion.
What the company has done over the past year is to engage in a number of financial maneuvers, such as refusing of late to pay about half the dollar claims submitted by lenders following foreclosure on mortgages it insured; this preserves cash and bolsters capital levels. That could continue to prop the company up for a short while, but over the longer term, Radian could be a dead man walking. According to Standard & Poor's, Radian's mortgage-insurance operation has been losing lots of money over the past couple of years, and the red ink figures to continue into 2014, and probably—barring an economic miracle—beyond. Radian Group is "likely to default on the $250 million in debentures due in 2015," says S&P. Radian declined to comment on S&P's assessment.

Barron's has twice warned about the dangers lurking in mortgage insurers—first in 2007, when shares of the Big Three were orders of magnitude higher than their current levels, and again last year ("The Next Mortgage Bombshell," June 27, 2011). Radian stock is the only one to have defied gravity since our second story ran.

Ultimately, the fate of Radian will be decided by its two primary operating units, the mortgage insurer, Radian Guaranty, and the bond-insurance operation, Radian Asset Assurance.

These two were combined in 2008. The move seemingly wasn't made out of a desire to streamline the organizational structure. It arose just as the mortgage unit was starting to be hit by the fury of the housing bust, and capital was being depleted at an alarming rate. So, the company resorted to a controversial expedient called "stacking," by which the net worth (capital and surplus in insurance-industry lingo) of the bond insurer could be, in effect, double-pledged to back both the mortgage insurance and its own operations. Insurance regulators allow it; bankers and other lenders aren't permitted to use it.

Thus, today, the insurance unit has statutory capital, or a net worth, of just $1 billion. The number would have been negative were it not for its interest in the bond insurer, whose common stock is carried on Radian Guaranty's books at a value exceeding $1.1 billion.


The trouble is that the mortgage insurer has almost no way of monetizing those shares to pay claims, because that capital is needed at the bond-insurance unit to back its $39 billion in net exposure. And Assurance's portfolio of risks is less than blue-chip. Nearly a third of the collateral backing its $18.4 billion in insured corporate collateralized-debt obligations is below-investment-grade corporate bonds.

As a result, the mortgage insurer seems to face a substantial liquidity problem because the bond-insurance unit won't be able to pass on substantial dividends to it. Next year, for example, Radian expects to get just $40 million out of the bond operation. The mortgage company has only $2.1 billion in cash, short-term investments, and bonds that it could readily sell to cover the more than $3 billion in future claims it has acknowledged. By our calculation, the actual exposure could be at least $3.8 billion.

Page continued 12Next >

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List of some Mortagage based Financials that are flying off the back of the acquisition of some of the Ally(GMAC) Mortgage assets...

3 years ago these stocks would have been shorted to oblivion for doing this but I guess since Buffet is doing it that means its a golden opportunity LOL!

http://beta.fool.com/insidermonkey/2012/10/25/billionaire-julian-robertson-looks-right-ocwen/15176/?ticker=OCN&source=eogyholnk0000001

http://www.reuters.com/article/2012/10/26/ally-mortgages-idUSL1E8LQ31N20121026?feedType=RSS&feedName=marketsNews&rpc=43

Ocwen Financial Corp and Walter Investment Management Corp won Ally's mortgage servicing and lending business with a $3 billion bid, while Warren Buffett's Berkshire Hathaway Inc won a loan portfolio with a $1.5 billion offer. A sale approval hearing will be held in bankruptcy court on Nov. 19.

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Mortgage Insurers on the move!

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Fins on Fire!

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Spanish bonds need to chill out but today the market does not seem to care...

Link back for charts...

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MS in some calls ahead of the Facebook IPO...

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C looks weak here...

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AIG chart sure looks good here imo...

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Fins not looking so hot again...

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Portugal's borrowing rates rise to record 19.4%

New high arrives amid fears that bailed-out country will not be able to break free of financial crisis

guardian.co.uk, Wednesday 25 January 2012 15.15 EST


A broker in a trading room of a Portuguese bank last year, when the country needed a £65bn rescue package. Photograph: Francisco Seco/AP


The threat posed to the British economy from the eurozone crisis was underlined on Wednesday when Portugal saw its borrowing costs soar to a record high amid market fears that the bailed-out country will not be able to break free of its financial crisis in the near future.

The yield, or interest rate, on three-year bonds reached 19.4%, while the rate on 10-year bonds was 14.6%, figures that compare with British rates of less than 2%.

Portugal needed a €78bn (£65bn) rescue package last year as its high debt load and feeble growth pushed it towards bankruptcy.

A three-year programme of austerity measures and economic reforms is aimed at restoring investor confidence in the country, but a deepening recession, with a 3.1% contraction forecast for this year, is undermining the faith of the markets in Portugal.

The worsening crisis in the eurozone has hit the British economy, and analysts fear that the contagion from Greece may spread throughout the eurozone and drag Britain and the rest of the world into a prolonged recession.

Antonio Barroso, an analyst with Eurasia group, said in a note that the recent downgrade and Greece's troubles "are increasing the perception that Portugal might not be able to avoid a default".

However, given Portugal's commitment to restoring fiscal health, he said: "It is likely that the government might have an easier time negotiating a new rescue package than Greece."

Portugal's government has repeatedly rejected speculation it that might try to renegotiate its bailout deal.

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Portuguese spreads are blowing out, they just mentioned it on Fast Money...

Link back, up near 14...

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BAC is a screaming buy here imo...

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LOL!

[dijeetyet]

Then we can make this concoction split it up into ETF shares
We could call the company No-Shares or maybe Faux-shares
Ok Dough-shares

[dijeetyet]

Now all we need are a few million dollar investors and we can get 15X leverage as a hedge fund.

[MWM]

Thats a really good idea!

[dijeetyet]

Why don't we start a fund that's short leveraged ETF's ?
We could hedge them all and just wait for the inevitable decay.
We could have a fund almost completely detached from reality and still make $.
Thanks for VXX BTW shorted bigger this time, good one.

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Europe Headed for a 'Lehman Moment'

November 30, 2011

By David Zeiler, Associate Editor, Money Morning

With credit drying up across Europe we may finally see the Eurozone experience its "Lehman moment" - a replay investment banking collapse that triggered the 2008 financial crisis.

Indeed, European banks are having a harder time getting money - part of the fallout from the Eurozone debt crisis - and the resulting credit crunch could freeze business activity, cause bank runs and plunge Europe into a deep recession that would badly damage the global economy.

"The Continent is headed towards deflation if there's not enough money circulating throughout their financing and banking systems," said Money Morning Capital Waves Strategist Shah Gilani. "This all becomes self-fulfilling at some point. It's a very dangerous situation, not just for Europe, but for the whole world."

A global financial crisis would derail the struggling U.S. recovery and pinch the profits of many multinational corporations.

Fresh data this week from the European Central Bank (ECB) showed the M3 Eurozone money supply actually shrank in October by 0.6%, its steepest drop since January 2009 - the height of the Lehman Brothers crisis.

A shrinking money supply is one of the early warning signals that credit availability is drying up, making it difficult or impossible for banks, businesses, and consumers to obtain loans.

"This is very worrying," Tim Congdon from International Monetary Research told The Telegraph. "What it shows is that the implosion of the banking system on the periphery is now outweighing any growth left in the core. We are seeing the destruction of money and it is a clear warning of serious trouble over the next six months."

Signs of capital draining from European banks abound.

The bank bond market is already frozen. European banks in the third quarter were only able to sell bonds worth 15% of what they sold in the same period in the previous two years, according to Citigroup Inc. (NYSE: C).

In the past six months, U.S. money market funds have withdrawn 42% of their money from European banks. And loans to French banks have fallen 69% since the end of May, according to Fitch Ratings.

Even retail customers have started to pull their money out.

"We are starting to witness signs that corporates are withdrawing deposits from banks in Spain, Italy, France and Belgium," an analyst at Citigroup wrote in a recent report. "This is a worrying development."

How It Happened

The current credit crunch has its roots in the Eurozone debt crisis; the big European banks such as BNP Paribas SA, Commerzbank (PINK: CRZBY) and Societe Generale SA (PINK: SCGLY) hold much of the debt from Portugal, Italy, Ireland, Greece and Spain (PIIGS) that has forced a series of bailouts and fiscal emergencies.

But the billions of euros worth of PIIGS government bonds were considered part of the banks' assets; it could be used as collateral to serve the banks' various activities. When the Eurozone debt crisis struck, faith in the value of the PIIGS bonds plummeted, which made it almost impossible to use as collateral.

"The discounting of sovereign debt meant that there was less money in the European banking system," writes John Carney, senior editor of CNBC. "If a one million euro bond previously held as a money-equivalent is now worth just 600,000 euros, the holder has lost 400,000 euros. Multiply that across the banking system, and you have millions of euros of money-equivalents simply vanishing."

Carney said the situation is similar to the impact of the decline in value in the United States of mortgage-backed securities back in 2008.


The Bernanke Remedy
However, during the 2008 financial crisis, the U.S. Federal Reserve stepped in to prop up the banks as well as the mortgage market by infusing them with cash. Although the Fed's European equivalent, the ECB, has continued to buy up PIIGS government bonds in a partially successful attempt to restrain rising bond yields, it has resisted taking action on the scale of the Fed.

"This is what happened in the United States in 1930-33," said Money Morning Global Investing Strategist Martin Hutchinson. "It also happened to a very limited extent in 2008-09. In a real crisis, the interbank lending market seizes up, which collapses even broad money supply. It is the one situation in which the [U.S. Fed Chairman Ben] Bernanke remedy - print the stuff like a madman - works."

But even then, Hutchinson said, the ECB should avoid PIIGS bonds in favor of bonds from more financially stable nations such as Germany, France, Finland and the Netherlands.

In fact, the European banks have begged the ECB to do more, particularly more aggressive buying of government bonds. As it is, the big banks are dependent on the ECB; just two weeks ago they took out out $333 billion worth of one-week loans - the largest amount since April 2009.

But more drastic action from the ECB appears unlikely, with opposition coming from within the central bank as well as from a German government fearful of triggering inflation. The best that is expected near-term is a December interest rate cut, which won't do nearly enough.

Money Morning's Gilani is pessimistic the ECB even has the power to fix the deeper issues, or whether stronger ECB intervention could do anything to prevent the Eurozone's looming "Lehman moment."

"The ECB doesn't have the authority to print enough money to ameliorate the situation," Gilani said. "Buying bonds is a Band-Aid. The real structural problems facing Europe are going to require wholesale lifestyle changes that won't get done in a year or two. ECB meddling will only serve to extend the problem while they pretend things will sort themselves out."

[MWM]

Euro bonds not really coming down just yet...

Link back for charts...

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AGO one to watch...

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BAC struggling

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European 10 Year Bonds

ITALIAN


SPANISH


FRENCH


GERMAN


BELGIUM


PORTUGUESE


IRISH

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65% Chance of Banking Crisis by End of Month

Thursday, 10 Nov 2011 | 5:28 AM ET
By: Patrick Allen
CNBC EMEA Head of News
http://www.cnbc.com/id/45218531

There is a 65 percent chance of a banking crisis between November 23-26 following a Greek default and a run on the Italian banking system, according to analysts at Exclusive Analysis, a research firm that focuses on global risks.

A domino effect on banks is 65% likely following a Greek default and a run on the Italian banking system according to analysts

Having tested a number of assumptions in a scenario modeling exercise, the Exclusive Analysis team warned it is becoming less and less likely that EU leaders will simply “muddle through” and have made some bold calls with clear timelines on when the euro zone will be thrown into a major financial crisis.

The most likely outcome according to their analysis is a sudden crisis in which the US, UK and BRICs nations refuse to provide funding via the IMF for the euro zone. In a world where predictions are made with no time lines, the paper makes some bold predictions which can be held to account over the next three weeks.

In the worst case scenario, Exclusive Analysis expects the governments of Greece and Portugal to collapse due to a lack of consensus on how to handle the debt crisis leading to social unrest. German opposition to handing more funds to the EFSF rises, leading Germany’s parliament to actually reduce the money available to the bailout fund.

“In face of that, China and the other BRICs give clear signals that they will not support the bailout fund. The EFSF turns to the ECB , which refuses to print out the amount of money the former needs to bailout the PIIGS. In face of the EU's failure to boost the EFSF, the European banks refuse to accept the 50 percent haircut on the Greek debt. Both the IMF and the ECB suspend payments to Greece,” said the report released on Tuesday evening.

Between November 18-22, French debt, under Exclusive Analysis' most likely scenario, is downgraded leading to the interbank lending market freezing up with new governments in Greece and Italy “faced down by protestors in their attempts to implement more austerity”.

Civil unrest follows in Spain following the election of a new government which pushes through even tighter austerity measures, and Portugal announces it cannot meet financial targets putting its bailout cash from the IMF and ECB at risk.

“Increased fear that these economies will default creates bank runs in Greece and Portugal and a downgrade of French sovereign debt from AAA to AA. EFSF is subsequently downgraded to AA+” said the report.

“The spreads applied to the debt of all PIIGS increase with yields on Italian bonds reaching 7.3 percent. In a second contagion effect, depositors in Spain and Italy fear a banking crisis in their own countries, which end up creating a series of bank runs and a collapse of the interbank credit market as banks know that most of their counterparts are at risk. Greece defaults.”


More on CNBC.com
Current DateTime: 02:39:24 09 Nov 2011
LinksList Documentid: 45218608
The Euro 'Event' Will Cause Depression: HSBC'Eurosceptic' Voices Getting Louder in UK
This doomsday scenario comes to a head between November 23-26 when Greece leaves the euro to print money and rescue its banking sector. The new currency falls quickly and depositors lose out as their investments are converted into the new local currency.

“The government default on the sovereign debt and the banks default on their foreign debt, which causes a banking crisis across Europe. Italian bond yields rise and exceed 7 percent and the country faces bank runs, in face of which the government freezes deposits and defaults on the sovereign debt”.

So far so scary. For those looking for some hope, the Exclusive Analysis report predicts a 25 percent chance that the EU will continue to muddle through. In this scenario new politicians in Greece, Italy and Spain are given some breathing room by voters to find new solutions to the crisis until the end of the year. Portugal still fails to meet its fiscal targets, putting its bailout cash at risk, and French debt is still downgraded on prospect of Greek debt default.

“However, the new governments in Italy, Spain and Greece are given a honeymoon period by protestors and euro zone counterparts, which prevents a market rout.”

In January and February, Greece defaults but the fallout is contained as a new deal on 70 percent haircuts is agreed. Spanish and Italian bond yields hit 7 percent.



“Civil disorder continues in Portugal and Spain, reducing their ability to implement austerity packages. Sovereign ratings in Spain and Italy are downgraded and the prospect of rescue feels imminent as far as analysts are concerned,” warns the report in its muddle-through scenario.

“However, the UK and US governments reduce their objections to the use of IMF resources to fund the EFSF, which, together with a Greek default, improves market conditions and halts the rise in yields on the Italian and Spanish debts.”

With Spain and Italy entering IMF programs, the debt crisis rubbles on in 2012 and 2013 before things turn nasty as Greece defaults and recreates the drachma.

“Markets close to Italy and Portugal again towards end-2012 and civil unrest resume, starting off a second cycle of crisis and speculation about the future of the euro zone.”

If that is the muddle-through scenario, then we are in for a very nasty end to 2011 and years of euro zone debt crisis. But Exclusive Analysis does predict a 10 percent chance that the crisis is resolved.

In this good news scenario Greece still defaults before the end of the year, but “stronger political leadership in other PIIGS contains the fallout”.

“New governments in Italy, Spain and Greece are given a honeymoon period by protestors as they attempt to implement more austerity; a real sense of national unity is constructed with respect to the crisis.”

The new governments are seen as more credible and the US, UK, IMF and BRICs agree to make more funds available to the EFSF.

“The new ECB head is persuasive of the need for the ECB to purchase more bonds from national governments. Greece defaults in November, but under the new technocratic government the process is orderly and banks agree to accept 70 percent haircut on their credit. France recapitalizes its banks and suffers a sovereign downgrade,” said the report.

In the first two months of 2012 France and Germany reach an accommodation on ECB lending and fiscal rules which means the ECB becomes a lender of last resort in return for statuary limits on the amount the so-called PIIGS can borrow, a condition demanded by Germany.

“Market conditions improve and PIIGS bond yields decrease following these successful negotiations. Italy and Spain are emboldened by their lower yields and by the Franco-German pressure to negotiate a restructuring of their debt with creditors with a view to smoothing and lengthening the maturity profile.”

Exclusive Analysis will join Worldwide Exchange at 10:10 BST/5:10 ET to discuss the report and will be joined on set by Jim Rogers of Rogers Holdings.