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LQD Italian banking power shift

by melo Tue Dec 10th, 2013 at 09:40:05 PM EST

It would be great to run these ploys (and numbers) through the ET scanner and unpack the meaning, if some experts in this arcane lore have the time, will and energy...

Beppe Grillo's Blog

"My name is Lucio Di Gaetano and I have always worked in the banking world. I worked for the Italian Central Bank for five years, plus another seven years in the private sector and now I am a company consultant.
I'm here today to tell you about the rip-off that the Letta Government has been perpetrating on all the Italians, all hush-hush while Berlusconi's impeachment was being announced, via the decree concerning the revaluation of the Italian Central Bank shares so as to get its hands on 900 million Euro without overshooting the three percent deficit level. 450 million of that will be gifted per annum to the Italian Central Bank shareholders, which as you know, are private parties.
But let's take a step back here. Why does the Italian Central Bank have private shareholders anyway, you ask?

why, yes I do!

More below...

Beppe Grillo's Blog

How have we landed up in this land of Oz where a public institution is partly owned by private banks that are owned by foundations controlled by the political parties?
The Italian Central Bank was established in 1893 and was wholly owned by private parties, which was the norm at that time. In 1926 the fascist government nationalised it and expropriated the shareholders. Subsequently the Italian Central Bank share capital was ceded to the banks, which had in the meantime been nationalised due to the economic crisis of the 1930s. In 1993, following the financial crisis, the Amato government conceived a legal monstrosity and proceeded to privatise the Italian banks by assigning their controlling shares to foundations nominated by the political parties.
The bulk of the shares were floated on the Stock Exchange and as a result today we find ourselves with banks with private interests as shareholders in the Italian Central Bank.
Fortunately in the past the monster was somewhat limited, but why? Well, because only a small part of the profits generated by the Italian Central Bank, not more than 0.5 percent of the reserves, were distributed amongst its private shareholders, amounting to around 22 billion Euro. So the good years and the lean years never allowed the shareholders to receive more than 50 - 70 million Euro per year from their share of the Italian Central Bank share capital, which has never changed from the original figure of 156 thousand Euro at the time of its establishment.
Then, in 2005, by some miracle the Berlusconi government came up with a good bit of legislation which stipulated that the Italian Central Bank shares held by private parties had to be transferred back to the State within three years.
Since then, eight years have gone by and that law has not yet been promulgated.
However, during the night of 27 November, while Parliament was announcing Berlusconi's impeachment and the public's attention was entirely focused on other matters, Saccomanni did a major about turn and by means of a legislative decree he establishes that the Italian Central Bank will no longer become a public entity controlled by the State but a public company instead, in other words a company with numerous shareholders, all of whom will be private parties.
Furthermore, the Italian Central Bank share capital will be increased from the current 156 thousand Euro to 7.5 billion Euro thereby drastically increasing the asset value for all its investors who will be required to pay a preferential levy of 12% and will then have all the time they need to comply with the duty to sell off any shareholding they may have in excess of 5% at a huge capital gain.
And so we return to the rip-off that we spoke about earlier. The most important thing is that up to now the Italian Central Bank was not permitted to distribute profits that exceeded 10% of the current share capital, in other words 10% of 156 thousand Euro, plus a portion of the reserves which as per standard practice never exceeded 0.5 percent per annum.
According to the Letta Government's plan, this limit is to be increate to 6% of the newly increate share capital of 7.5 billion Euro, meaning no less than 450 million in profits distributable per annum.
This no small thing because while the great bankers can go ahead and make a toast with champagne, the Italian citizens have nothing at all to celebrate! If those 450 million Euro were not being handed to the bankers on a silver platter, they would be going into the State's coffers, as has been happening up to now.
But it doesn't end there and indeed the worst is yet to come because yet another novelty in this magnificent plan is that the Italian Central Bank shares that should have been going back to the State can now be sold, even to foreign investors, as long as they are EU members.
In other words, we are already living in a Country that counts little or nothing in the world of the European central banks so you can just imagine how much it is going to count if its bank is owned by foreigners!

TIA and happy parsing!

Seed Comment

What effects will this have in Italy and points beyond, if (any)?

Sorry, no graphs available at this source!

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Tue Dec 10th, 2013 at 09:43:35 PM EST

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