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By Sonia Sirletti and John Glover
June 12 (Bloomberg) -- Italy’s financial police said they asked the U.S. Securities and Exchange Commission to authenticate U.S. government bonds found in the false bottom of a suitcase carried by two Japanese travelers attempting to cross into Switzerland.
The bonds, with a face value of more than $134 billion, are probably forgeries, Colonel Rodolfo Mecarelli of the Guardia di Finanza in Como, Italy, said today. If the notes are genuine, the pair would be the U.S. government’s fourth-biggest creditor, ahead of the U.K. with $128 billion of U.S. debt and just behind Russia, which is owed $138 billion.
The seized notes include 249 securities with a face value of $500 million each and 10 additional bonds with a value of more than $1 billion, the police force said on its Web site. Such high denominations would not have existed in 1934, the purported issue date of the notes, Mecarelli said. Moreover, the “Kennedy” classification of the bonds doesn’t appear to exist, he said.
The bonds were seized in Chiasso, Italy. Mecarelli said he expects a determination from the SEC “within a few days.”
Wasatch Economics
Border bust equals possible international incident-missing TARP funds?
Posted in Uncategorized by Ravenor on June 13, 2009
Seizure of US government bonds from two Japanese men in Italy raises questions
The above is a link to an AsiaNews report which includes the following excerpts:
“Milan (AsiaNews) – There have been new developments with regards to the story of US$ 134.5 billion in US government bonds seized by Italy’s financial police at Ponte Chiasso on the Italian-Swiss border, which AsiaNews reported four days ago…some commentators are starting to link the story to reports in US press dating back to 30 March. On that date the US Treasury Department announced that it had about US$ 134.5 billion left in its financial-rescue fund, the Troubled Asset Relief Program (TARP), whose purpose is to purchase assets and equity to buttress companies in trouble…At the same time, Japan’s Kyodo news agency has reported that the resignation of Japan’s Interior Minister Kunio Hatoyama might also be related to the Ponte Chiasso affair. Officially the minister quit as a result of a row over who should head the state-owned Japan Post, but some sources have suggested that such a scenario is not very plausible since Mr Hatoyama was Prime Minister Taro Aso’s main ally in his rise to the prime minister’s office, and is especially unconvincing since the ruling coalition government has to face elections in just two weeks time. Indeed there are many reasons to connect the Ponte Chiasso incident to the minister’s resignation…the men carrying the bonds had a Japanese passport. Secondly, they were not arrested. Under Italian law anyone in possession of counterfeit cash or bonds worth more than a few tens of thousands of euros must be arrested…two well-dressed Japanese men carrying a briefcase travelling in a local train usually used by Italian manual labourers who commute to Switzerland for work had as much chance to go unobserved as two European businessmen travelling in the Congo…the incident raises several questions.
For example, why did Italy’s press, of every stripe, first give the matter great visibility, only to drop it as quickly? Also, if we are to assume that the bonds are real, why were they in Italy on their way to Switzerland? If these were the unused TARP funds why would they be in US Federal Reserve denomination? If they are authentic and owned by a foreign state, why were they not transported in a diplomatic bag, which cannot be inspected at customs? And what will the Italian government do insofar as the issue represents an offence under Italian law? Will it impose a fine of 38 billion euros, and run the risk of a row with an ally, or return the money without any penalty to the rightful owner?”
Hatoyama resignation…”Japan’s internal affairs and communications minister resigned Friday, dealing a setback to conservative Prime Minister Taro Aso just months before a general election”…
The WSJ reported on March 30 that Treasury Has $134.5 Billion Left in TARP…”The Treasury Department said it has about $134.5 billion left in its financial-rescue fund, giving the Obama administration a cushion as it implements expensive programs aimed at unlocking credit markets and boosting ailing industries”….
According to the US Treasury’s TIC data, Japan had $661 billion in Treasury bonds total in Feb 2009. So these guys were carrying the equivalent of a significant proportion of Japan’s total foreign reserves in a suitcase. 20% of the total that US Treasury shows. To put it in perspective, Russia’s total holdings of US Treasuries per the same source is $130 billion.
So, questions that one might have include:
How could two people have the equivalent of an entire country’s foreign reserves in a suitcase?
Why would they be Japanese, and trying to smuggle these bonds into Switzerland?
Are the documents in question real or counterfeit?
Either way, it’s a major story…the biggest counterfeiting bust in history, or the biggest smuggling bust in history. Why isn’t this getting more attention in the mainstream media?
Why would Japan be moving funds this way, if indeed the Japanese government is involved?
Why is the amount in question here essentially the same as the amount of remaining TARP funds that was reported March 30?
Seizure of US government bonds from two Japanese men in Italy raises questions
Seized US bonds are worth US$ 134.5 billion. The whole affair touches a number of economic and political issues. For some the resignation of Japan’s Interior minister might be related to it.
Milan (AsiaNews) – There have been new developments with regards to the story of US$ 134.5 billion in US government bonds seized by Italy’s financial police at Ponte Chiasso on the Italian-Swiss border, which AsiaNews reported four days ago. News about it initially made it to the front page of many Italian papers, but not of the international press. Since yesterday though, some reports have published by English-language news agencies. And some commentators are starting to link the story to reports in US press dating back to 30 March.
On that date the US Treasury Department announced that it had about US$ 134.5 billion left in its financial-rescue fund, the Troubled Asset Relief Program (TARP), whose purpose is to purchase assets and equity to buttress companies in trouble. The existence of such means that the Obama administration may not have to go to Congress for additional funds, something which is especially important since many lawmakers have vowed to oppose any requests for more money.
At the same time, Japan’s Kyodo news agency has reported that the resignation of Japan’s Interior Minister Kunio Hatoyama might also be related to the Ponte Chiasso affair. Officially the minister quit as a result of a row over who should head the state-owned Japan Post, but some sources have suggested that such a scenario is not very plausible since Mr Hatoyama was Prime Minister Taro Aso’s main ally in his rise to the prime minister’s office, and is especially unconvincing since the ruling coalition government has to face elections in just two weeks time. Indeed there are many reasons to connect the Ponte Chiasso incident to the minister’s resignation.
First of all, the men carrying the bonds had a Japanese passport. Secondly, they were not arrested. Under Italian law anyone in possession of counterfeit cash or bonds worth more than a few tens of thousands of euros must be arrested. By comparison the value of the seized counterfeit bonds is equal to 1 per cent of the US Gross Domestic Product (GDP). Thirdly, how the seizure took place is worthy of a Monty Python movie—two well-dressed Japanese men carrying a briefcase travelling in a local train usually used by Italian manual labourers who commute to Switzerland for work had as much chance to go unobserved as two European businessmen travelling in the Congo.
For AsiaNews the incident raises several questions. For example, why did Italy’s press, of every stripe, first give the matter great visibility, only to drop it as quickly? Also, if we are to assume that the bonds are real, why were they in Italy on their way to Switzerland? If these were the unused TARP funds why would they be in US Federal Reserve denomination? Would it not have been better to wait to see how they would be used before the bonds were issued? If they are authentic and owned by a foreign state, why were they not transported in a diplomatic bag, which cannot be inspected at customs? And what will the Italian government do insofar as the issue represents an offence under Italian law? Will it impose a fine of 38 billion euros, and run the risk of a row with an ally, or return the money without any penalty to the rightful owner and show the world that Italy is some kind of banana republic, a semi-colonial protectorate that violates its own laws and constitution?
Whatever the case may be, for Italy’s Prime Minister Silvio Berlusconi it is a heavy burden to bear, given the legal and criminal consequences he might face.
The only people who come out of it well are Italy’s tax cops, reason for them to show off their success on their website.
US government securities seized from Japanese nationals, not clear whether real or fake
Bonds worth US$ 134.5 billion are seized. This is the largest financial smuggling case in history. But are they real? Concern over ‘funny money’ or counterfeit securities is spreading in Asia. The international press is silent.
Milan (AsiaNews) – Italy’s financial police (Guardia italiana di Finanza) has seized US bonds worth US 134.5 billion from two Japanese nationals at Chiasso (40 km from Milan) on the border between Italy and Switzerland. They include 249 US Federal Reserve bonds worth US$ 500 million each, plus ten Kennedy bonds and other US government securities worth a billion dollar each.
Italian authorities have not yet determined whether they are real or fake, but if they are real the attempt to take them into Switzerland would be the largest financial smuggling operation in history; if they are fake, the matter would be even more mind-boggling because the quality of the counterfeit work is such that the fake bonds are undistinguishable from the real ones.
What caught the policemen’s attention were the billion dollar securities. Such a large denomination is not available in regular financial and banking markets. Only states handle such amounts of money.
The question now is who could or would counterfeit or smuggle these non-negotiable bonds.
In order to stop money laundering Italian law sets a ceiling of 10,000 euros per person for importing or exporting money without declaring it. The penalty for violating the law is 40 per cent of the money seized.
If the certificates were real, for Italy it would be like hitting the jackpot. The fine alone would amount to US$ 38 billion, five times the estimated cost of rebuilding quake-devastated Abruzzi region. It would help Italy’s eliminate its public deficit.
If the certificates are fakes the two Japanese nationals could get a very lengthy jail sentence for fraud.
As soon as the seizure was made the US Embassy in Rome was informed. Italian and US secret services were called in to assist the Italian financial police.
Some important international financial newspapers had already reported on the existence of ‘funny money’ circulating on parallel, i.e. unofficial, financial markets.
For AsiaNews a few points need considering:
1. When it comes to Italy the world press has tended to focus on Italian Prime Minister Berlusconi’s personal problems rather than on stories like the bonds smuggling affair which has been front page on Italian newspapers.
2. The fear of counterfeit bonds and securities has spread across Asia with the result that real securities are also considered with suspicion.
3. During the Second World War several countries at war printed and put in circulation perfectly counterfeit enemy money. It is also historically established that some central banks, like the Bank of Italy 65 years ago, issued the same securities twice (identical registered number and code). This way they could print more money with legal tender than they officially declared. The main difference though is that 65 years ago the world was involved in a bloody war, which is not the case today.
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