Tag: news

Last Time Corporate America Did This, The Stock Market Crashed

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The S&P 500 stock index bumbles to new highs no matter what. But it has been a slog: serial GDP downward revisions forward and backward, unceremonious abandonment of “escape velocity” for the fifth year in a row, wars or civil wars in Ukraine and Iraq with consequences for gas supplies to Europe and oil supplies to the world, US inflation heating up. And stocks nevertheless rise because…. The Fed Rules, Metrics and Ratios Are Just for Decoration.

In the Business Roundtable’s second quarter CEO survey, the chiefs of the largest US corporations weren’t exactly in an ecstatic mood either. They lowered their GDP growth forecast for the year to 2.3%; among other tidbits, they also expected to spend less money on capital investments.

Capital investments are crucial to the economy. One, they crank up GDP when the money is spent. And two, investing in productive assets creates future growth. But only 44% of these CEOs are planning to increase capital investment, down from 48% last quarter.

Companies axe capital investments brutally when dark clouds appear at the horizon. It started in early 2000 as the stock market was blowing up and lasted through the recession that followed. Then capex recovered and peaked in the summer of 2008, even as the financial crisis was spreading. In either case, that sudden cut in corporate investment deepened the recessions. This chart of new orders of non-defense capital goods (St. Louis Fed) shows the brutality of the cuts – for example, slashing them by a third from $69 billion in August 2008 to $46 billion in April 2009:

But note how the chart has stayed within its range over the last two decades – a time when the US population has soared 19% and GDP, adjusted for inflation, 51%. Turns out, corporations had found other things to do with their money: stock buybacks.

Which have been skyrocketing. In the first quarter, buybacks jumped 50% from a year ago to $154.5 billion, according to FactSet‘s report released yesterday. It was the third-largest in the data series, behind only 2007 when in Q2 and Q3 $161.8 billion and $177.9 billion were spent on buybacks, while the financial crisis was already fermenting underneath.

Tech blew $47.4 billion on buybacks, a record in the data series, up 175% from a year ago. A cool $18.6 billion of that came from Apple. IBM was in second place with $8.3 billion. Industrials, up 119% from a year ago, also set an all-time high. Overall, Apple and IBM led the pack, followed by FedEx, Boeing, Abbott Laboratories, Corning, and eBay.

For the trailing 12 months, our corporate heroes bought back $535 billion – funded largely with borrowed money – a notch below the $603 billion record set during the trailing twelve months ended in Q3 2007, on the eve of the financial crisis (chart by FactSet):

Buybacks peaked precisely at the top of the market in Q3 2007 then plunged over 80%. By Q2 2009, when stocks were cheapest, buybacks had nearly stopped. It seems like a clockwork of bad timing: buybacks soar when stocks go into bubble mode and collapse when stocks get cheap. But the relationship works the other way around.

The purpose of buybacks is to use shareholder equity to manipulate up the stock price. It works in three ways: one, through the sheer buying pressure – especially easy during these times of super-low trading volume; two, through this form of financial engineering that boosts earnings per share by lowering the share count, though it does nothing for actual earnings; and three, through the hype surrounding the buyback announcements and even the whispers of them.

And it works even when, as for example in IBM’s case, revenues and actual earnings are crummy for two years in a row, and when the stock should be roasting in purgatory. At every earnings announcement, the stock plunges, but then over the next three months, mirabile dictu, the share price rises again, fired up by buybacks. The Wall Street hype machine uses them as bait. Investors swallow them hook, line, and sinker. But that’s all buybacks do.

What they don’t do is generate future revenues and earnings, unlike R&D or capex or any of the other productive activities companies undertake. In this way, the moolah blown on buybacks simply disappears as a driving force from the economy – an issue that has been dogging the US for two decades, as the range-bound chart above shows.

But the tide seems to be turning, and the money seems to be ebbing. Most of the top buyers have already indicated that they’re cutting back. A couple of days ago, FedEx announced that it whittled down its buybacks from $2.8 billion in Q1 to $1 billion this quarter. When Apple raised its buyback authorization through December 2015, it worked out to be $6.3 billion per quarter – down from $18.6 billion in Q1. IBM slashed its full-year buybacks by about $2 billion per quarter for the remainder of 2014. GE disclosed that it would cut its buybacks. Exxon Mobil, AT&T, Oracle, and Wal-Mart already reduced their buybacks in Q1 from the average quarterly amounts in 2013.

So what happens to the stock market when these huge and reckless buyers with their nearly endless resources and ability to borrow at practically no cost start cutting back after such a phenomenal peak? Well, we know what happened when they did the last time: the stock market crashed.

There comes a time when risk just disappears, when nothing can go wrong, when there are no dark clouds on the horizon. The Fed has a measure for it: the Financial Stress Index. Read…. Last Time this happened, The Financial Crisis Broke Out




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France Arbitrarily Decides To Become Largest Stakeholder In Alstom, May Use Decree To Block Deal If GE Disagrees

We suspect this is not exactly the great news that GE was expecting… but it looks like a win. French minister Montebourg believes none of the current offers fulfill their demands and will use a decree to block the deal:

  • *MONTEBOURG SAYS FRENCH STATE TO TAKE 20% STAKE IN ALSTOM
  • *MONTEBOURG SAYS FRANCE WILL BUY ALSTOM STAKE OR BLOCK GE OFFER
  • *MONTEBOURG SAYS FRANCE WILL USE DECREE IN ALSTOM CASE
  • *MONTEBOURG SAYS FRANCE WILL ENTER IN ALLIANCE WITH GE
  • *MONTEBOURG SAYS FRANCE SEEKING ALSTOM STAKE AT MARKET PRICE

So GE forced to partner with French or no deal. Nothing like partnering with the (almost) most socialist government on the planet to make money.

As Bloomberg reports,

The French state will enter an alliance with General Electric Co. and take a 20 percent stake in engineering company Alstom SA to support a takeover.

 

The deal will allow GE to buy Alstom’s gas turbine business and other energuy assets, French Economy Minister Arnaud Montebourg said in Paris today.

 

The move may end a takeover battle between GE and Siemens AG for Alstom’s energy assets. Both GE Chief Executive Officer Jeffrey Immelt and Siemens CEO Joe Kaeser met several times with French government officals who had been pressing for more guarantees on jobs and the country’s energy independence since GE unveiled its bid on April 30.

 

While the U.S. company seeks its biggest purchase yet to expand in Europe, Siemens wants to avoid its main competitor bulking up in its own backyard.

Bloomberg adds more from Montebourg’s press conference:

  • *MONTEBOURG SAYS [GE/GOVT] ALLIANCE WILL FORM JVS IN STEAM, NUCLEAR, HYDRO
  • *MONTEBOURG SAYS GE AND ALSTOM WILL ALSO FORM ALLIANCE IN GRID
  • *MONTEBOURG SAYS GE WILL BUY ALSTOM’S GAS BUSINESS
  • *FRANCE TO BUY TWO-THIRDS OF BOUYGUES’S ALSTOM STAKE: AFP
  • *MONTEBOURG SAYS ALSTOM WILL BUY GE SIGNALING FOR EU1 BILLION
  • *MONTEBOURG SAYS HE WROTE LETTER TO GE DETAILING FRENCH DEMANDS

And from Reuters,

  • FRANCE BELIEVES CURRENT OFFERS FOR ALSTOM DO NOT FULFIL ALL ITS DEMANDS
  • FRENCH ECONOMY MINISTER MONTEBOURG SAYS FRANCE TO HOLD GOLDEN SHARE IN THE NUCLEAR 50:50 JOINT VENTURE

 

GE Stock is entirely unimpressed.




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Check Out the CIA’s Demonic, Face-Melting Osama bin Laden Toy for South Asian Kids

There’s no way to go about this other than to lay out all the
weirdness at once: In the mid-’00s, the
CIA developed an Osama bin Laden toy with a face designed to
melt off and reveal a demon once in the hands of Pakistani and
Afghan children. The code name for the operation was “Devil
Eyes.” 

Around 2005, former Hasbro toymaker Donald Levine—known for

his work on G.I. Joe figurines—was asked to develop the toy for
the CIA, according to The Washington Post. Levin’s winning
design? A bin Laden figure painted with a special material so that
the normal face would peel away in heat, revealing a red and black
demon-eyed face. (See
the transformation here.) 

“The goal of the short-lived project was simple,” the
Post says: spook children and their parents into turning
away from bin Laden.

There’s a dispute over how many of the figurines, if any, were
ultimately delivered. A person with direct knowledge of the project
in China said hundreds of the toys—one of which was seen by The
Washington Post—were made as part of a preproduction run and
sent on a freighter to the Pakistani city of Karachi in 2006.

The CIA, while not disputing that it had commissioned the bin
Laden figures, said the project was discontinued shortly after the
prototypes were developed.

“To our knowledge, there were only three individual action
figures ever created, and these were merely to show what a final
product might look like,” CIA spokesman Ryan Trapani said. “After
being presented with these examples, the CIA declined to pursue
this idea and did not produce or distribute any of these action
figures. Furthermore, CIA has no knowledge of these action figures
being produced or distributed by others.”

Regardless of how far the “Devil Eyes” project proceeded, it
appears to have borne all the hallmarks of what are known in
intelligence parlance as “influence operations.” As part of its
covert action programs, the agency has for decades tried to win the
hearts and minds of local populations or turn them against a
particular ideology.

Another recent CIA influence op was revealed in April:
developing
a Twitter-like social network in Cuba that was secretly run and
monitored by the U.S. government. (The CIA itself
joined real Twitter earlier this month.) Meanwhile, the

FBI is trying to fool us all into thinking anybody actually
uses the acronym BTDTGTTAWIO— “been there, done that, got the
T-shirt and wore it out.” 

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Steven Greenhut on California Democrats’ Plan to Get in Your Bed

Democrats
routinely accuse Republicans of wanting to put the government into
the bedroom whenever they support limits on gay rights. So it’s odd
that California’s Democratic leaders are advancing a
bill that would literally insert the state into the most
intimate bedroom moments, writes Steven Greenhut. S.B.
967 would require all California colleges and universities
that accept state financial aid to adopt sexual-behavior policies
that include a standard by which students must provide their
“affirmative consent” before engaging in a wide range of sexual
activity. And a simple “yes” might not suffice. As a senate
analysis explains, the bill “requires consent to be ongoing
throughout a sexual activity and authorizes a participant, at any
time, to communicate that he/she no longer consents to continuing
the sexual activity.”

View this article.

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Court Strikes Down Los Angeles Law Banning Living in Vehicles

I thought the homeless were Venice Beach's official city mascotHere’s what a law passed by the
City of Los Angeles in 1983 says:

No person shall use a vehicle parked or standing upon any City
street, or upon any parking lot owned by the City of Los Angeles
and under the control of the City of Los Angeles or under control
of the Los Angeles County Department of Beaches and Harbors, as
living quarters either overnight, day-by-day, or otherwise.

While the wording of the law may seem simple (regardless of how
one might feel about it), a trio of circuit judges from the United
States Circuit Court of Appeals for the 9th Circuit ruled Thursday
that the description of what behavior violates the law is so
unclear that it was being used by police to (surprise!) harass
homeless people who believed they were actually complying with the
law.

The ruling (readable
here) centers on the behavior of police in Venice Beach, a
place with quite a few homeless people. Following complaints in
2010 about all the homeless folks around, police started cracking
down, using this 1983 law as the tool. But as Judge Harry Pregerson
noted in the ruling, the police were using just the existence of
personal property or food in a vehicle as evidence that the law was
being violated and even threatening homeless people who were
sleeping in their vehicles on private property, like church parking
lots, with the owner’s permission. One homeless plaintiff in the
lawsuit had to resort to sleeping on a public sidewalk (which is
legal) rather than in his car in order to comply with the law. He
nevertheless was arrested and his vehicle impounded when police
found him sitting in his car to avoid the rain. One woman was
pulled over and cited for violating the law while actually
driving her vehicle through Venice.

The judges ruled that the statute is a due process disaster
because it is unconstitutionally vague and fails to provide
adequate notice of the conduct it criminalizes. The ruling
notes:

Plaintiffs are left guessing as to what behavior would subject
them to citation and arrest by an officer. Is it impermissible to
eat food in a vehicle? Is it illegal to keep a sleeping bag? Canned
food? Books? What about speaking on a cell phone? Or staying in the
car to get out of the rain? These are all actions Plaintiffs were
taking when arrested for violation of the ordinance, all of which
were otherwise perfectly legal. And despite Plaintiffs’ repeated
attempts to comply with Section 85.02, there appears to be nothing
they can do to avoid violating the statute short of discarding all
their belongings or their vehicles, or leaving Los Angeles
entirely.

Oh hey, I think the judge stumbled across the real goal of the
statute at the end there. In conclusion, the judge ruled that the
city was using the law specifically to harass homeless people for
engaging in many of the same behaviors in their vehicles undertaken
by many other people in Los Angeles each day, and the law violates
the due process clause of the Fourteenth Amendment.

The city attorney for Los Angeles told the Associated Press the

city would not be appealing the ruling and will instead craft a
new ordinance “that respects both the rights and needs of homeless
individuals and protects the quality of life in our
neighborhoods.”

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US Accuses Russia Of Sending 10 Tanks Into Ukraine; Russia Responds Merely “Enhancing Border Security”

US officials are “readying targeted sanctions on finance, defense, and tech sectors,” as they tell Bloomberg that 10 Russian tanks crossed the border into Ukraine in the last 24 hours. Speaking on condition of anonymity, the official noted that EU-US discussions on Ukraine are intensifying. Russia has responded, “we are surprised by statements of alleged deployment of Russian troops along the border with Ukraine. In this case, there is no military buildup, there are only measures to strengthen the border security of the Russian Federation, measures taken on direct instructions from Russian president.” This is all occurring with the background of Poroshenko’s cease-fire plan.

 

Via Bloomberg:

  • *U.S. SEES RUSSIA GIVING NEW MILITARY AID TO UKRAINE SEPARATISTS
  • *U.S. OFFICIAL SAYS RUSSIA REDEPLOYING FORCES NEAR UKRAINE
  • *U.S. OFFICIAL SAYS 10 RUSSIAN TANKS CROSSED BORDER IN 24 HOURS
  • *U.S. OFFICIAL BRIEFS REPORTER ON CONDITION OF ANONYMITY
  • *U.S.-EU DISCUSSIONS ON UKRAINE INTENSIFYING: U.S. OFFICIAL
  • *SANCTIONS BEING READIED ON FINANCE, DEFENSE, TECH: US SAYS

 

The US official’s comments appear to reflect Ukraine Pravda…

“We have had operational reports that 10 Grad BM-21 military vehicles have crossed the Ukrainian state border and are in Ukrainian territory”, said Koval.

 

According to him, one vehicle has been caught and destroyed.

 

The Ukrainian military have found evidence that it belongs to the Russian army.

And of course, the US has its YouTube clips…

As Interpretermag reports, a closer inspection of a video of Russian armoured vehicles being transported near the border at Millerovo yesterday shows that a number of the vehicles are unmarked, like those seen in eastern Ukraine.

 

 

But Russia is denying the intrusion…

Moscow is surprised by allegations of a buildup of Russian troops near Ukraine, saying it is only taking measures backed by European leaders to better protect its border, a Kremlin spokesman said Friday.

 

Dmitry Peskov, a spokesman for Russian President Vladimir Putin, said Russia had to tighten security at the Ukrainian border “because it is being increasingly violated, including by military vehicles.”

 

“We are surprised by statements of alleged deployment of Russian troops along the border with Ukraine. In this case, there is no military buildup, there are only measures to strengthen the border security of the Russian Federation, measures taken on direct instructions from Russian president,” Peskov said.

 

“[The instructions] were given several weeks ago, and they were made public and received a positive response from European leaders,” the spokesman added.

 

“As for the troop numbers, this is defined by the need to ensure the due level of border security,” Peskov said.

While markets appear to have shrugged off any and every potential WWIII related geopolitcs, the Ukraine tensions are re-building and if the US does sectoral sanctions, we can only imagine the ‘boomerang’ that Russia will throw.




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What Medicaid Fraud Looks Like: Mansions, Sports Cars, Klingon Battle Swords, and 30,000 Dubious Claims

Yesterday, I
noted a recent Government Accountability Office (GAO) report
finding that, even after a decade on GAO’s list of programs at high
risk for fraud, Medicaid had made $14.4 billion in improper
payments during the 2013 fiscal year.

Not all of that is outright fraud, but some of it is. And it’s
not all piddly scam-work either—minor billing tricks or other
small-time schemes. Some of the fraud is really
spectacular. 

For example: There’s the recent case of Rehan Zuberi, who
allegedly managed to defraud New Jersey’s Medicaid program of about
$8 million over a five year period,
according to a report in
yesterday’s Star-Ledger.

Zuberi ran a network of diagnostic imaging centers, and
allegedly paid other doctors a total of about $300,000 to send
patients to his offices for scans that they didn’t need. Zuberi
charged Medicaid for the procedures, kept most of the money for
himself, and tipped other doctors to keep referring additional
patients in order to keep the scan-scam going. According to the
state’s Attorney General, Zuberi filed some 30,000 fraudulent
claims to the program before he was caught.

During the time he is alleged to have been running the scam,
Zuberi managed to live the high life: He resided in what the
Star-Ledger describes as a 9,000-square foot mansion, and
kept $100,000 in cash in his home. He used a $400,000 cashier’s
check to buy a brand new 2014 Lamborghini. The state AG’s office
also reportedly seized a Ferrari and a Roll Royce as part of the
investigation this week. 

You hear this sort of large-scale fraud story far too often in
conjunction with the nation’s two big governemnt-run health
programs. In February, officials
charged 20 people with operating multiple competing Medicaid
fraud rings in the District of Columbia—including one woman who had
been barred from participating in federal health programs, but went
on to bill D.C. Medicaid for $75 million. 

These sorts of stories aren’t limited to Medicaid. Medicare, the
federal health program for seniors, made $49.9 billion in improper
payments last year, up more than 10 percent from the year before.
In 2011, the Justice Department busted a mob ring that had made
$163 billion worth of fraudulent bills. Authorities took custody of
a cache of weapons, including a replica
of a Klingon battle sword.

In 2011 congressional testimony, a Texas concert-promoter turned
Medicare fraudster explained how he fraudulently billed the
government for $10 million over three years. It’s “incredibly easy
to commit,” he said.
“The primary skill required to do it successfully is knowledge of
basic data entry on a computer.” 

The is what health care fraud looks like: mansions and fancy
cars, mob activity and weird weapons, and tens or hundreds of
millions of taxpayer dollars spent funding fraudsters who find the
program incredibly easy to scam. 

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Friday A/V Club: Philip Marlowe in the French Revolution

History!Today is
the 225th anniversary of the Tennis Court
Oath, a key moment in the early stages of the French
Revolution. To mark the occasion, watch one of the strangest movies
ever made about the revolutionary period: Anthony Mann’s The
Black Book, a.k.a. Reign of Terror.

This came out in 1949, a time when Mann mostly worked in the
film noir genre. The first time I sat down to watch it,
many years ago, I wondered how Mann would adjust to making a period
picture. I quickly got my answer: He treated it like it was just
another noir. From the beginning this looks like an
18th-century Big Sleep, and after a few minutes it starts
to sound like one too. By the time Robespierre shouts “Don’t call
me Max!” at 6:46, you know you’re seeing something wonderfully
weird.

The history is completely garbled, of course, but in a picture
like this that only adds to the charm. Enjoy:

Bonus links: This isn’t the only good French Revolution
film floating around on the Internet. Marat/Sade
is on YouTube, while Hulu Plus has Andrzej Wajda’s 1983
picture Danton, with its
deliberate echoes of the repression then ongoing in Poland. If
you’re looking for something lighter, you can watch Scaramouche or Start the
Revolution Without Me. And then there’s my favorite D.W.
Griffith flick, the overlong but enjoyably insane Orphans of the
Storm. As I wrote
elsewhere:

If you’d like to peer directly into an artist’s anxious
psyche, you need only watch the two most powerful scenes in
Orphans of the Storm. One is a decadent aristocratic
bacchanal; the other is a chaotic riot. One is filled with
resentment of the rich; the other, fear of the poor. It’s like
writing hysteria with Lightning.

For past installments of the Friday A/V Club, go here.

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Fourth Largest Bulgarian Bank Seized After Bank Run: “Let’s Not Tear Down Our House” Central Banker Begs

The small, impoverished country of Bulgaria may not be in the Eurozone (even though its currency is pegged to the Euro), but it is in the European Union. Which is why we find it surprising that there has been relatively little mention that overnight the fourth largest Bulgarian bank, Corporate Commercial Bank (Corpbank) and which in recent weeks has made headlines due to the political exposure of one of its largest shareholders, was seized by the Bulgarian central bank following what Reuters reports was a run on the bank.

With preserving confidence in the banking system key, and since the small country is not immune from failure unlike its southern neighbor which knows Europe will now never let its banks fail, the central bank promptly took to boosting morale, when its governor Ivan Iskrov begged depositors to stay calm, saying: “Let’s not tear down our house.“

Reuters also reports that the Bulgarian National Bank said it had taken control of Corpbank’s operations for a period of three months and removed its  management and supervisory board, but stressed it was not bankrupt.  A Reuters photographer saw dozens of people queuing outside the main office of the bank in the Bulgarian capital on Friday.

The central bank said the run on the lender was triggered by adverse media reports, and that it acted after receiving information from Corpbank on Friday morning that it had stopped all payments and bank operations due to a liquidity drain.

 

“As you know, there has been a lot of talk about the bank and one of its shareholders, which triggered bank runs,” central bank governor Ivan Iskrov said at a news conference. “It is very important to be very careful when we talk about banks. Let’s not tear down our house alone unnecessarily.”

 

“Let me make this very clear. Corporate Commercial Bank is not a bankrupt bank. We are acting swiftly to avoid a bankruptcy,” said Iskrov.

Iskrov said the banking system was not so interlinked that Corpbank’s situation would affect other commercial banks in the country.

Alas, appeals to keep calm failed when as AP adds, long queues could be seen Friday at the bank’s offices as people become worried over media reports about the bank’s poor finances. Turns out the media reports were right, although in a world of self-fulfilling prophecies one never knows what came first: the rumor (pardon fact) of insolvency, or the reports surrounding it.

While relatively small by European standards, there are 29 commercial banks operating in Bulgaria and about three quarters of the banking system’s assets are foreign-owned. Among foreign banks with operations in Bulgaria are Unicredit, Raiffeisen Bank, Hungary’s OTP , National Bank of Greece, EFG and Alpha Bank. Curiously, Russia’s largest bank, VTB Bank, is a minority owner of Corpbank – it said it was ready to support the bank.

Bulgarian website Novinite provided further details about what may be the first domino in Bulgaria’s banking sector:

Bulgarian National Bank (BNB)’s Governing Council held a press conference just an hour after the central bank announced it had placed KTB under special supervision upon the commercial bank’s request. It decided to do so after KTB sent a letter asking for the step, due to “exhaustion of liquidity and termination of all payments and banking operations”.

With its move, as of June 20, 2014 BNB revokes the rights of KTB shareholders and appoints a supervisory board.

 

In the Governing Gouncil’s statement to the media delivered at the press conference, Iskrov reminded that KTB was “among the banks with the highest liquidity” before a “rumor” involving a BNB Deputy Governor and his alleged dependency on “a certain bank” (implying the role of KTB) was spread by an anonymous e-mail sent from a purported central bank employee to the media.

 

The rumor coincided with the start of pre-trial proceedings against BNB Deputy Governor Tsvetan Gounev.

 

It also led to the withdrawal of “huge amounts of ready money” and prevented the bank from delivering on its liabilities, the BNB Governor explained

In the statement Iskrov presented the Governing Council’s decision, under which BNB places KTB under supervision for a period of three months.

 

The bank is to freeze any operations within that stretch of time and is forbidden to perform any activity. As a result clients of the bank would have it difficult to be provided any services. A Supervisory Board of two members, Hristina Stanova and Slavyana Danailova, has been appointed.

 

BNB also temporarily dismisses KTB’s four Governing Council members and four Supervisory Board members and transfers their competencies to its own two-strong board.

 

Voting rights of shareholders controlling more than 10% of KTB assets – namely Bromak Invest (owned by Tsvetan Vasilev) and Bulgarian Acquisition Company Luxembourg – are also being suspended for three months.

 

The BNB Supervisory Board is now virtually KTB’s governing body, with “huge competencies” and in charge of safeguarding the bank’s exclusion from the Bulgarian payment system.

 

The Board is also to conduct an assessment of the bank so that talks could be held with shareholders “and other potential buyers”.

 

“Conversations with the shareholder having expressed interest are starting immediately. They can end in a day, a week or a month, when the interest has been confirmed by shareholders and they provide the respective support,” Iskrov explained.

Perhaps the bigger problem for Bulgaria is that its central bank itself is now the target of an official probe after its deputy governor for bank supervision, Tsvetan Gounev, took a leave as a result of a pre-trial investigation aimed at him. Furthermore, From Sofia Globe:

Bulgarian National Bank (BNB) said on June 18 that its deputy governor for bank supervision, Tsvetan Gounev, has taken leave from the central bank as a result of pre-trial investigation against him.

 

In a statement posted on its website, BNB said that Gounev put in his leave request in order to “not allow any doubts about obstacles to the investigation”. The central bank said that “from the moment that the BNB was notified of Mr Gounev’s repealed permit for classified information, his access to such documents has been suspended.”

 

Repealing the permit for access to classified information is often the first indication that a senior official is under investigation.

 

The prosecutor’s office initially made no comment, but later in the day, Prosecutor-General Sotir Tsatsarov said that the investigation had been under way for two weeks and was a result of allegations made by the anti-government Protest Network.

 

(The prosecutor’s office statement did not specify which allegations this referred, but it is presumed to be in connection to the dossier based on media reports containing various allegations, submitted to prosecutors in February, which called for an investigation into media mogul Delyan Peevski, Corporate Commercial Bank majority shareholder Tsvetan Vassilev and Nikolai Barekov, the former talk show host-turned-politician that fronts the Bulgaria Without Censorship party.)

 

Earlier in the day, however, Bulgarian media reported receiving an anonymous letter, whose author claims to be an employee of BNB, alleging that Gounev was under investigation by prosecutors on charges of mismanagement in office.

 

The letter claims that Gounev failed to exercise proper oversight of a “bank that has become the centre of attention in recent days”, but did not name the bank. The author claims that both Gounev and BNB governor Ivan Iskrov “put pressure” on the bank supervision department not to apply proper oversight on the affairs of this bank and “have been financially dependent on this bank for years.”

So is this just a political witch hunt in a country notorious for backroom dealings, or the start of something greater? The answer will depend on whether the local population does indeed, as the central bank requests, stay calm or if people decide en masse once again that the best option is simply to put what little savings they have in the ir local mattress, while they still can (or before the Fed suggest fee gates be implemented, the same way it would like to force a ran out of US bank funds).




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