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 What deals have been done in the European primary market since last August have been primarily structured for ECB repo collateral. For example, according to data from the Bank of Spain, Spanish bank use of the ECB window rose to a record high in April, which is consistent with what has been seen in terms of primary retained securitization deal flow.

In May, ECB repo funding to Spanish banks (including foreign entities with offices in Spain) had risen to 47.88 billion ($74.1 billion), from 20.28 billion a year ago, according to the Bank of Spain.

The spanish banks (or more specifically, the cajas actually), already have dozens of billions of securitized domestic shitpile, repo'ed at the ECB.
They have been securitizing it only for the sake of getting new money in exchange (there is no private market for this any longer).

The govie fund looks tailored to take these shitpiles when the ECB won't roll the repo (presumably because it becomes impossible to pretend that the underlying loans are still performing). The 2.x % delinquency rate in Spain seems to me, straight out of la-la-land. There have been way too many loans with no money down, 40% of revenue in payment, variable rate with initial euribor @ 3.5%. The true delinquency rate simply cannot be single digit. Now the banks might prefer not to call these delinquent, and give a free neg-am option to the borrowers...


by Pierre on Wed Oct 8th, 2008 at 12:13:03 PM EST
There is nothing in what you say that seems unreasonable in the least. I just have anecdotal evidence that it was still hard to get a mortgage all along, but who knows what the smaller cajas were doing. Also, whether or not the mortgage standards were lax the fact is indebtedness has at a record high and Spaniards were acquiring bad habits such as home equity withdrawals and abuse of credit cards.

Now, on the argument that this may be a way for the Treasury to roll over the repos that the ECB won't, I don't think Solbes could have said "we're not going to purchase 'toxic assets' but 'highest quality' assets, that is, from mortgage loans to loans to small and medium enterprises, which the financial institutions will group into securitised funds which will be valued by credit rating agencies" with a straight face. Clearly ZP doesn't know the difference (namely, none) between a CDO and "loans securitised by the financial institutions and valued by rating agencies" so he can say these things with a straight face. And an AAA CDO is still AAA, right?

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith

by Migeru (migeru at eurotrib dot com) on Wed Oct 8th, 2008 at 02:28:41 PM EST
[ Parent ]
The mrotgages are clearly AAA rated accoridng to any international standard.. which I guess rationallyit means that in tough times 5% will default.

Another issue completelya re private credit funds.... it all depends on the small company... that's the real clear point.. i think the government is taking the risk for those small and medium companies... but it might be shitpile with total risk... or jsut medium risk of default in a bad year..

I guess is probably the later... liberating the banks from any outcome of the crisis... leading to ready-buyers spanish banks... to buy abroad.

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Wed Oct 8th, 2008 at 02:40:09 PM EST
[ Parent ]


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