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Europe (Again): It might be taking on the sound of a broken record at this point, but the banking-sovereign-cultural crisis that has been wracking the continent for months has reached yet another “first-ever” crescendo. “Spain’s borrowing costs reached a new euro-era high on Monday as fears about the country’s wilting economy and government finances outweighed the eurozone’s approval of loans to help Madrid recapitalise its banks,” reports the Financial Times. Catalonia’s addition to a list of the Spanish regions that may tap aid from the central government in Madrid, spurred Spanish 10-year yields to surge above 7.5% for the first time from a previous peak of 7.285%, according to Bloomberg. “The problem in the region is profound, but the pace that it has been dealt with was slow,” John Stopford, head of fixed income at Investec Asset Management, told Bloomberg. “The bank bailout for Spain is far from sufficient to deal with the country’s problems.” Over in Greece, another showdown is looming with the planned arrival in Athens Tuesday of Greece’s troika of international creditors—the European Commission, the European Central Bank and the International Monetary Fund. “They will face down doubts that the country can meet its bailout commitments and reluctance among euro states to put up more funds should it fail,” Bloomberg reports. German coalition politicians over the weekend torpedoed the possibility of renegotiating the terms of Greece’s agreement. The problems in both countries raise anew questions of whether Europe can shrink its bloated economies back to prosperity—or whether the medicine is making the patients sicker still. “Austerity measures imposed on a frail economy are too pro-cyclical, and the EU’s relaxation of Spain’s deficit target to 6.3% of output this year brings little relief,” writes the FT’s Lex column. “Yet, seemingly the stronger Madrid’s policy responses to Brussels’ commands, the greater the disconnect with investors.” Financial Times, Bloomberg

In the U.S., the knock-off effects of the five year-old financial crisis and more recent Euro-zone crisis include a retreat of European banks. Eurozone banks have cut their assets in the U.S. by more than a third, according to a Financial Times analysis of Federal Reserve data. Bank failures, asset write-downs and the sale of loans and businesses have sent U.S. assets of eurozone banks tumbling by $540 billion from their $1.51 trillion peak in September 2007. The deleveraging process at eurozone banks is reshaping the U.S. banking landscape, with many of the spoils going to U.S. and Canadian banks and private equity groups, the FT notes.

If at First You Fail... The National Futures Association did a lousy job foreseeing the future when it came to one of the commodity futures brokerages it oversees—Peregrine Financial Group Inc. Peregrine collapsed amid allegations that its chief executive, Russell Wasendorf Sr., perpetrated a 20-year fraud that left an estimated $215 million in customer money missing. A note Wasendorf left before a attempted suicide (which also failed) portrayed a decades-long scam perpetrated under the noses of the NFA and Peregrine’s others regulators, as well as its bankers and accountants. As American Banker noted recently, the NFA, a self-regulatory organization, has come under scrutiny both for missing Wasendorf’s fraud and the fact that, under Dodd-Frank, its oversight is supposed to be expanded from the relatively puny futures business to the $300 trillion swaps market. If it fails as an overseer again, it won’t be for under-paying its staff, the Wall Street Journal reports this morning. Just as SROs operate in a netherworld somewhere between the government bureaucracies with whom they share oversight duties and private businesses they oversee, their compensation practices are an odd mix as well—well above government wages but far below what any self-respecting Master of the Universe would accept. Daniel Roth, the NFA’s CEO, collected about $687,000 in compensation, including bonus pay and benefits, in 2010, according to NFA tax filings cited by the Journal. Daniel Driscoll, chief operating officer, earned roughly $492,000. By comparison, Gary Gensler, chairman of the CFTC, earned about $165,300 in salary, while commissioners each received $155,500. Other industry regulatory officials make more. Richard Ketchum, CEO of the Financial Industry Regulatory Authority, the industry-funded supervisory body for securities markets, earned $2.6 million in 2010, according to the Journal. Finra is far larger, with expenses of about $624 million in 2010, compared to about $42 million for the NFA, according to public filings. Wall Street Journal, American Banker

Ex-TARP Inspector Speaks Out: The story of Neil Barofsky is, in the words of New York Times scribe Gretchen Morgenson, “illuminating, if deeply depressing.” For those unfamiliar with Barofsky, he’s the former Special Inspector General for the Troubled Asset Relief Program, whose job it was to police $700 billion in bailout funds and prevent taxpayers from getting fleeced. Barofsky—whose new book “Bailout” is scheduled for release Tuesday—took on the role of SIGTARP after taking drug kingpins as a federal prosecutor—yet he nevertheless finds something particularly loathsome about the characters plying the Washington-Wall Street power game during the early days after the financial crisis. “Government officials, he says, eagerly served Wall Street interests at the public’s expense, and regulators were captured by the very industry they were supposed to be regulating,” writes Morgenson. “He says he was warned about being too aggressive in his work, lest he jeopardize his future career.” Yes, there have been quite a number of books over the past few years demonizing the DC-NYC revolving door, but Barofsky brings a uniquely behind-the-scenes perspective that Morgenson says makes his book a “must read.” Says Barofsky in summing up his take-aways in a pre-release interview: “The suspicions that the system is rigged in favor of the largest banks and their elites, so they play by their own set of rules to the disfavor of the taxpayers who funded their bailout, are true. It really happened. These suspicions are valid.” For more on Barofsky’s views on his time at Tarp, check out the video interviews he did with American Banker earlier this year on why Obama’s housing policy has failed why big banks act badly and MF Global’s misdeeds and managing big banks. New York Times


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