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SPECIAL FOCUS - European Banking Crisis
by Fran on Tue Sep 30th, 2008 at 03:15:08 PM EST
Europe Props Up Crumbling Banks as US Rejects Bailout | Europe | Deutsche Welle | 30.09.2008
European governments were forced to rescue a number of financial institutions hit by the US-born crisis, sending stock markets plummeting. Washington's rejection of a $700-billion bailout caused world markets to plummet.

Only a few weeks ago, banks in the euro zone financial sector were said to be safe from the US-born financial crisis, but now, as the global financial situation gradually worsens, five European governments have had to step in to prop up financial institutions.

Separately, news emerged late Monday, Sept. 29, that the US House of Representatives rejected a $700 billion measure to rescue the failing American financial system. The bailout bill was defeated after many House Republicans ignored their leaders' pleas and voted against it. A majority of Democrats voted in favor of the plan.

"I feel they've taken leave of their senses," said European Union Trade Commissioner Peter Mandelson of US lawmakers Monday in an interview with BBC, "and I hope that in Europe we will not see politicians and parliamentarians replicating the sort of irresponsibility and political partisanship that we have seen in Washington."

by Fran on Tue Sep 30th, 2008 at 03:17:33 PM EST
[ Parent ]
Europe scrambles to save banking system - EUobserver

European authorities in Brussels, Frankfurt and at EU member state level are scrambling to save the continent's financial system after bank stocks plunged when US lawmakers rejected a $700 billion bailout of Wall Street on Monday (29 September).

Banks are petrified of lending to one another for more than one day, requiring central banks to flood their coffers with the money they need to stay in business.

After yesterday's part-nationalisation of Belgo-Dutch banking giant Fortis and the nationalisation of the UK's Bradford & Bingley, Belgium-based Dexia, the biggest provider of lending to local governments in the world, could be the next financial institution to be rescued by taxpayers.

In an email from Belgian Prime Minister Yves Leterme, the country's federal government reached an agreement with Belgium's regional assemblies to jointly support the bank, Bloomberg News reported

by Fran on Tue Sep 30th, 2008 at 03:19:26 PM EST
[ Parent ]
Belgium and France prop up Dexia - International Herald Tribune

PARIS: Dexia, a French-Belgian lender, received a capital injection of more than $9 billion from public shareholders on Tuesday as a deepening global credit crisis continued to shake European banks. Meanwhile in Ireland, the government backed all deposits in the country's banks.

After all-night negotiations, the Belgian government announced that it and other Belgian stakeholders would invest $4.26 billion in Dexia. The French government will contribute $1.42 billion, the French state-controlled Caisse des Depots $2.84 billion and the Luxembourg government $518.82 million, according to a statement from the Belgian prime minister's office.

Shares in Dexia, which had been suspended at the open, vaulted 18.1 percent to €8.45 in late morning trading.

"The market is encouraged, this restores confidence" said Georg Krijgh, an analyst at Rabo Securities in Amsterdam. "It shows the government is supporting the banks and makes Dexia one of most solvent in the region, with Fortis and KBC."

by Fran on Tue Sep 30th, 2008 at 03:21:40 PM EST
[ Parent ]
BBC NEWS | Business | Second Belgian bank gets bail-out

Dexia has become the latest European bank to be bailed out as the deepening credit crisis shakes the banks sector.

After all-night talks the Belgian, French and Luxembourg governments said they would put in 6.4bn euros ($9bn; £5bn) to keep it afloat.

Shares in the Belgian-French bank fell 30% on Monday before being suspended on Tuesday as the bail-out was announced.

It is the second bank rescue in days by Belgium and its neighbours. On Sunday Fortis bank was partly nationalised.

This latest move by European governments to shore up another bank under pressure came as global stock markets plunged after the US House of Representatives rejected the White House's planned $700bn bail-out package.

by Fran on Tue Sep 30th, 2008 at 03:31:33 PM EST
[ Parent ]
...appear to have done a

Midnight Runner

Come on, Eileen....!

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Wed Oct 1st, 2008 at 08:47:54 AM EST
[ Parent ]
EU Castigates US Congress Over Bailout Failure | Europe | Deutsche Welle | 30.09.2008
As the US financial crisis continues to unsettle global financial markets, Brussels has said American legislators need to start meeting their obligations. But will the strong words have any effect?

In an unusually strong statement, the European Union has called American lawmakers to order for failing to reach agreement on a $700 billion plan to shore up foundering financial institutions and markets.

"The US must take its responsibility in this situation, must show statesmanship for the sake of their own companies and for the sake of the world," European Commission spokesman Joseph Laitenberger told journalists.

The statement came after the US House of Representatives narrowly rejected the bailout plan on Monday, September 29.

by Fran on Tue Sep 30th, 2008 at 03:23:23 PM EST
[ Parent ]
Sarkozy Holds Emergency Meetings as French Banks Reel | Europe | Deutsche Welle | 30.09.2008
French President Sarkozy was to meet with French banking and insurance chiefs Tuesday in the wake of the refusal of the US Congress to approve a finance bail-out.

The aim of the meeting at the Elysee Palace is to "review the situation of the financial institutions as well as the availability of credit to households and companies," Sarkozy's office said Monday, but the defeat in the House of Representatives of the plan to rescue the US finance sector will add urgency to the talks.

Last week, Sarkozy had vowed that the French state would come to the aid of any financial institution at risk of failing, to ensure that depositors did not lose any of their savings.

Late Monday, the governments of France, Belgium and Luxembourg agreed in principle to inject 6.4 billion euros ($9.2 billion) into the struggling Franco-Belgian financial services group Dexia.

by Fran on Tue Sep 30th, 2008 at 03:24:44 PM EST
[ Parent ]
This morning's Canard Enchaîné reports that France's largest savings bank, the Caisse d'Epargne, is in need of cash.

Caisse d'Epargne has issued a denial.

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Oct 1st, 2008 at 02:17:02 AM EST
[ Parent ]
[Drew's WHEEEEE™ Technology]

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 1st, 2008 at 02:28:27 AM EST
[ Parent ]
Any banks which is suspected is dead in the water. Expect a bailout plan for Caisses d'Epargne in the next 24 hours...

(This one will be fun to negotiate: the Caisse des Dépôts, the usual suspect for a capital injection, is pissed off at Caisses d'Epargne for their take-over of Natexis - it was done in a hurried way while the previous boss of CDC was in the hospital, against his specific instructions, robbing CDC of its influence in the company)

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Wed Oct 1st, 2008 at 04:47:18 AM EST
[ Parent ]
I've been waiting for this bit of fun for over a year now, counting the nuts moving in and out of "the squirrel's" coffers.

Expect fucktard Millaud to pull a last-minute stunt like taking over the floated remains of Natixis, that would give him a few billions in relapse (he doesn't like the market value of natixis, which is just a fraction of its net asset value, because assets are overvalued of course, so he could eliminate the "market" in the "value").

Pierre

by Pierre on Wed Oct 1st, 2008 at 05:41:36 AM EST
[ Parent ]
The Credit Crunch: Banking Crisis Leaves Europeans with Bill in the Billions - SPIEGEL ONLINE - News - International

This week Europe has fallen deeper into the credit crunch. With multi-billion euro bailout packages, Germany, Britain and the Benelux states have saved banks from collapsing.

Hypo Real Estate, Fortis, Bradford & Bingley. Three European banks nearly collapsed in the course of just two days on Sunday and Monday, showing that the Wall Street financial crisis is pulling European companies into its pincers at an ever-faster clip. With trust between banks waning, analysts believe Europe is threatened with a serious credit crunch.

 The logos of Europe's crisis banks: The crisis is accelerating here and pulling an increasing number of institutions into its pincers. In order to protect the financial system from collapse, governments across Europe are being forced to intervene. Britain, Germany, Belgium, Luxembourg and the Netherlands all began spectacular rescues at the start of the week:

  • the British government nationalized large parts of mortgage lender Bradford & Bingley on Monday, taking over some €63 billion ($90.6 billion) in bad loans;

  • in Germany, the government is providing a massive loan package together with a consortium of banks to prevent the collapse of the Munich-based Hypo Real Estate.
by Fran on Tue Sep 30th, 2008 at 03:25:54 PM EST
[ Parent ]
Fallout for Dutch-Belgian Bank: With Bailout, Fortis Is Back Where it Started - SPIEGEL ONLINE - News - International

With the forced sale of its Netherlands activities of ABN Amro, Dutch-Belgian banking and insurance company Fortis will be back were it started. In a little over a year, Fortis has changed from a prestigious financial institution to a pariah in the banking world.

AFP

Fortis headquarters in Brussels

Over-confidence, bluff and arrogance have proved an almost fatal cocktail for Fortis which was saved from collapse by a financial injection of almost €11.2 billion on Sunday.

by Fran on Tue Sep 30th, 2008 at 03:26:15 PM EST
[ Parent ]
The World From Berlin: 'No More Cause for Feeling Schadenfreude' - SPIEGEL ONLINE - News - International
THE WORLD FROM BERLIN 'No More Cause for Feeling Schadenfreude'

With the government bailout of Hypo Real Estate Holding Monday, the now-global financial crisis has arrived and reared its ugly head in Germany. Commentators here largely approve of the measure, but they also want more government action -- and less anxiety -- soon.

A trader in Frankfurt watches anxiously as the effects of a government rescue plan of Hypo Real Estate affects the German market. Last Thursday, German Finance Minister Peer Steinbrück stood before the German parliament and tried to assure its members that "The United States is the source of the crisis, and it is the focus of the crisis." Four days later, Steinbrück launched the largest financial rescue action in postwar Germany, offering €26.6 billion ($38.3 billion) of a combined €35 billion line of credit to bailout Hypo Real Estate (HRE), the country's second-largest commercial property lender, which had considerable business in the US real estate market.

For Germans and Europeans, the crisis has arrived. On Sunday, the governments of Belgium, the Netherlands and Luxembourg took partial control of struggling Benelux bank Fortis. On Monday, Britain seized control of mortgage lender Bradford & Bingley, and Iceland's government took over Glitnir, the country's third-largest bank.

by Fran on Tue Sep 30th, 2008 at 03:27:41 PM EST
[ Parent ]

Speed of European response leaves US trailing

The recent amplification of the US-bred financial crisis has produced at least one salutary if unexpected lesson. Europe has so far shown that it works in practice, even if it still does not do so in theory.

In the past 48 hours, various European countries have scrambled to put together bail-out packages for troubled financial institutions in Germany, the UK, France, Belgium, Ireland and Iceland. And while this is by no means the end of the story, it has demonstrated that the European authorities and individual national governments can move very quickly to try to stem a growing crisis of confidence in the European financial system.

In the past 10 days, the conventional wisdom was that Europe would never be in a position to act as swiftly to rescue its financial industry with a comprehensive plan such as Washington's $700bn (€498bn) troubled asset relief programme. Yet the plan has yet to be approved, with all the political modifications demanded by US lawmakers. No evidence has so far emerged that Europe will need to orchestrate a similar plan of such magnitude.



In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Tue Sep 30th, 2008 at 04:37:32 PM EST
[ Parent ]
That was my first reaction: "How embarrassing for USAns: At least five Europeans countries got their shit together in 48 hours to pull off these rescue packages, while USAns took over one vaudevillian week and still blew it in a farce of partisan pettiness."

As David Brooks put it in his latest column:

This generation of political leaders is confronting a similar situation [as Franklin Roosevelt did in 1933], and, so far, they have failed utterly and catastrophically to project any sense of authority, to give the world any reason to believe that this country is being governed.

However, on second thought, even if a large chunk of those who voted against it did so on "anti-socialist" grounds and because Nancy Pelosi hurt their feelings, the effect was that Congress rejected a deal that most of the public did not like at all, and that government leaders were trying to half-force, half-sneak by the people.

In short, I agree with paving:

You have to understand how important this was today, for the American voter.  We've had absolutely NO say in the past 8 years.  Dissent, public opinion, etc, have been ignored by both parties. ...

Suddenly the people are remembering that if they disagree with the actions of their govt. there is a possibility that the govt. will change and act differently.

Unfortunately, while Bernie Sanders is taking this opening to show some some leadership, I'm afraid in the end, "the people" are going to get steamrolled and the current package is going to get jury-rigged into effect anyway:

Senate to Vote Wednesday on Bailout Plan - NYTimes.com

Senate leaders scheduled a Wednesday vote on a $700 billion financial bailout package after agreeing to add tax breaks and a higher limit for insured bank deposits in a bid to attract enough votes to reverse a shocking defeat in the House and send legislation to President Bush by the end of the week.

After a day of behind-the-scenes maneuvering, top lawmakers said the Senate proposal would include a tax package as well as a plan endorsed on Tuesday by both major presidential candidates and the Bush administration to raise government coverage for bank deposits.

"It has been determined, in our judgment, this is the best thing to move forward," said Senator Harry Reid, Democrat of Nevada and the majority leader, in announcing the surprise move. "This is good for the country."



Truth unfolds in time through a communal process.
by marco on Tue Sep 30th, 2008 at 10:56:11 PM EST
[ Parent ]
GRrrr make the plan more acceptable by adding TAX BREAKS???

Holy shit.
So, we used to have a plan that could fail because adding $700 billions (likely more) to the debt was bad. So, let's have tax breaks, so likely more becomes certainly more.

On top of that, it's clearly Republicans, a minority party with much diminished support in the population, taking the economy hostage in order to get a final loot. This must be said, and screamed, and I hope it is soon all over the news. Yet, at the moment, I don't see it.

To me, including tax cuts (hell, what are they doing in a financial crisis rescue package? Can I have provisions for the use of recycled materials?) makes it a no deal.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Wed Oct 1st, 2008 at 01:48:14 AM EST
[ Parent ]
Clearly Dodd/Frank is the bestleast bad plan that could be had before the November elections. Any more tinkering will just make it worse, especially if it's to appease the clueless (or worse: at best they're monetarists or libertarians) Republicans.

Krugman quotes James Galbraith and I agree:

There need be no pretense that it will solve our underlying financial and economic problems. It will not. The purpose, in my view, is to get the financial system and the economy through the year, and into the hands of the next administration. That is a limited purpose, but a legitimate purpose. And it may be the most that can be accomplished for the time being.


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 1st, 2008 at 02:43:06 AM EST
[ Parent ]
Cyrille: On top of that, it's clearly Republicans, a minority party with much diminished support in the population, taking the economy hostage in order to get a final loot. This must be said, and screamed, and I hope it is soon all over the news. Yet, at the moment, I don't see it.

Two of the articles I linked to in my previous comment actually make this point pretty emphatically:

David Brooks - Revolt of the Nihilists - Op-Ed - NYTimes.com

House Republicans led the way and will get most of the blame. It has been interesting to watch them on their single-minded mission to destroy the Republican Party. Not long ago, they led an anti-immigration crusade that drove away Hispanic support. Then, too, they listened to the loudest and angriest voices in their party, oblivious to the complicated anxieties that lurk in most American minds.

Now they have once again confused talk radio with reality. If this economy slides, they will go down in history as the Smoot-Hawleys of the 21st century. With this vote, they've taken responsibility for this economy, and they will be held accountable. The short-term blows will fall on John McCain, the long-term stress on the existence of the G.O.P. as we know it.

I've spoken with several House Republicans over the past few days and most admirably believe in free-market principles. What's sad is that they still think it's 1984. They still think the biggest threat comes from socialism and Walter Mondale liberalism. They seem not to have noticed how global capital flows have transformed our political economy.

and

THE WRONG FRAME AT THE WRONG TIME | The Washington Monthly

It's a great slogan for the election season, isn't it? "Vote Republican -- We're More Concerned With Our Feelings Than Your Future."

Make no mistake -- this is a failure of the Republican Party of historic proportions. When push came to shove, the Democratic leadership delivered the votes on the rescue plan, while Republicans voted, 2-to-1, against it.

If they're going to rationalize their failure, they're going to have to do better than rejecting the proposal because of Pelosi's harmless speech.

And these are both from usually right-leaning sources.

Truth unfolds in time through a communal process.

by marco on Wed Oct 1st, 2008 at 03:23:35 AM EST
[ Parent ]
"I've spoken with several House Republicans over the past few days and most admirably believe in free-market principles."

What's admirable about that?
Free-market apparently is one of the two commandments of the State religion, the other being low taxes.

On a side note, I would argue that right-leaning is a major understatement regarding Brooks. I have to keep away from his columns to preserve my sanity.

"It failed because Nacy Pelosi said some unkind things about George Bush in her speech"

by Cyrille (cyrillev domain yahoo.fr) on Wed Oct 1st, 2008 at 03:54:53 AM EST
[ Parent ]
They hold on to their faith in the face of overwhelming evidence against the tenets of their religion. That's admirable.

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 1st, 2008 at 04:44:09 AM EST
[ Parent ]
I can see why I'm not religious.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Wed Oct 1st, 2008 at 04:54:19 AM EST
[ Parent ]
You don't want to be admirable?

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 1st, 2008 at 04:55:27 AM EST
[ Parent ]
That was my first reaction: "How embarrassing for USAns: At least five Europeans countries got their shit together in 48 hours to pull off these rescue packages, while USAns took over one vaudevillian week and still blew it in a farce of partisan pettiness."

Inappropriate comparison.

The Fed has rescued several institutions over a weekend or a day (Bear, Fannie/Freddie, AIG) and the FDIC has taken over several banks swiftly (Indymac, WaMu, Wachovia). I don't recall whether they did anything special about Merrill, since BofA's CEO likes to overpay for big purchases anyway. I don't know what Paulson/Bernanke were thinking when they let Lehman fail.

These swift interventions by the bureaucracy parallel the European ones. Paulson's "all your shitpile are belong to me" is in a separate league altogether and Europe hasn't yet tried anything of the sort so we don't know how that would fare.

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 1st, 2008 at 02:37:11 AM EST
[ Parent ]
Inappropriate comparison. ...

Good points.

I don't know what Paulson/Bernanke were thinking when they let Lehman fail.

Krugman made a similar point the other day:

Just worth pointing out: Henry Paulson's decision to let Lehman fail, on Sept. 14, may have delivered the White House to Obama.



Truth unfolds in time through a communal process.
by marco on Wed Oct 1st, 2008 at 03:02:25 AM EST
[ Parent ]
Look at the volume traded: it's not the failure of Lehman but the bailout plan.

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 1st, 2008 at 03:12:09 AM EST
[ Parent ]
that governments - or at least some public bodies - on both continents still work - even after years of attempts at undermining and weakening them.

Acting in times of crisis is government's biggest responsibility, and so far, they have fared reasonably well.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Wed Oct 1st, 2008 at 04:52:30 AM EST
[ Parent ]
But remember Jérôme:

"It failed because Nacy Pelosi said some unkind things about George Bush in her speech"
by Cyrille (cyrillev domain yahoo.fr) on Wed Oct 1st, 2008 at 04:56:09 AM EST
[ Parent ]
Oh, there's much more than just unkind things about George Bush. Full text from The Guardian
Madam Speaker, when was the last time someone asked you for $700bn?

It is a number that is staggering, but tells us only the costs of the Bush administration's failed economic policies: policies built on budgetary recklessness, on an anything-goes mentality, with no regulation, no supervision, and no discipline in the system.

Democrats believe in the free market, which can and does create jobs, wealth, and capital. But left to its own devices, it has created chaos.

That's heresy to the cherished beliefs which the Republican Representatives admirably hold on to.
The American people did not decide to dangerously weaken our regulatory and oversight policies.
No, it was Congress and the financial (self-)regulators
They did not make unwise and risky financial deals.
Um, buying a house on a NINJA mortgage is not "unwise and risky", it's downright suicidal. So Pelosi is laying the blame solely on the banks and mortgage brokers and that's self-service electioneering. Granted, without securitisation and off-balance sheet SIVs and "conduits" the size of Big Shitpile™ wouldn't have caused a crisis of this magnitude.
They did not jeopardise the economic security of the nation. And they must not pay the cost of this emergency recovery and stabilisation bill.

...

Our message to Wall Street is this: the party is over. The era of golden parachutes for high-flying Wall Street operators is over. No longer will the US taxpayer bail out the recklessness of Wall Street. The taxpayers who bear the risk in this recovery must share in the upside as the economy recovers.

...

Today we will act to avert this crisis, but informed by our experience of the past eight years, with the failed economic leadership that has left us less capable of meeting the challenges of the future.

We choose a different path. In the new year, with a new Congress and a new president, we will break free with a failed past and take America in a new direction to a better future.



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 1st, 2008 at 05:07:39 AM EST
[ Parent ]
Migeru: self-service electioneering.

Good point.  But otherwise, how nice to hear such brazen blasphemy from the high pulpit!

Truth unfolds in time through a communal process.

by marco on Wed Oct 1st, 2008 at 08:09:56 AM EST
[ Parent ]
But we can't say they have both fared resonably well! There have to be winners and losers in the race between the EU and the US. One of them must be Doomed!

Or some such drivel.

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 1st, 2008 at 04:57:16 AM EST
[ Parent ]
Al Jazeera English - Europe - Europe fights to calm markets

Governments across Europe have continued to prop up the battered financial sector, with Dexia, the Belgian-French financial services group, receiving more than $9bn from the Belgian, French and Luxembourg treasuries.

Facing the worst financial crisis since the Great Depression, global central banks scrambled again on Tuesday to try to relieve a severe squeeze in money markets by more than doubling the amount of funding to $620 billion.

In Ireland, the government announced a blanket guarantee for savings held by its banks, covering up to $575bn in liabilities.

France, which had joined Belgium and Luxembourg in offering the lifeline to Dexia, which has run up huge losses in its US operations, said it would come to the aid of savers with new bank measures by the end of the week.

by Fran on Tue Sep 30th, 2008 at 03:29:36 PM EST
[ Parent ]
Commission has 'no reason' to question Fortis deal - EUobserver

EUOBSERVER / BRUSSELS - Despite Benelux governments announcing a partial nationalisation of Fortis Bank on Sunday, the ongoing financial crisis continued to collect scalps through Europe on Monday (29 September), with the UK and Germany intervening to save financial institutions. Meanwhile, the European Central Bank has announced it would lend eurozone banks €120 billion in "a special term refinancing operation."

The European Central Bank announced it would lend eurozone banks €120 billion in "a special term refinancing operation."

The decision by the Belgian, Dutch and Luxembourger governments to purchase half the Belgo-Dutch banking giant for €11.2 billion represents the biggest bailout of a European bank since the beginning of the crisis.

The European Commission said on Monday it had been consulted during the negotiations and had so far no reason to believe the deal was in breach of EU competition rules.

"Up until now the national authorities in Belgium, the Netherlands and Luxembourg have been listening to what the commission has been saying, so we have no reason to think that what they are going to notify the commission of is not going to be acceptable to the commission in terms of state aid rules," Jonathan Todd, a spokesperson for the institution told a press briefing in Brussels.

by Fran on Tue Sep 30th, 2008 at 03:30:56 PM EST
[ Parent ]
Too many commission workers have their bank accounts at Fortis, I would suspect...

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Tue Sep 30th, 2008 at 04:34:27 PM EST
[ Parent ]
Are you saying the Commission should properly be shooting down the bank rescues as "Illegal state aid"?

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 Tue Sep 30th, 2008 at 04:40:21 PM EST
[ Parent ]
Don't know about "should properly", but "would normally" sounds about right.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Tue Sep 30th, 2008 at 05:08:32 PM EST
[ Parent ]
According to rules applied to other sectors, yes indeed.
by afew (afew(a in a circle)eurotrib_dot_com) on Wed Oct 1st, 2008 at 02:29:13 AM EST
[ Parent ]
Then we need to start questioning the Commission when they apply the rules to other sectors.

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 1st, 2008 at 03:03:04 AM EST
[ Parent ]
Banks aren't a cosmetic company.

At this point (with h/t to ChrisCook) they are the lynch pin of an economy.  Pull it and watch the whole edifice collapse.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Wed Oct 1st, 2008 at 03:06:30 AM EST
[ Parent ]
But then they have no business being run for the profit of their management.

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 1st, 2008 at 03:09:54 AM EST
[ Parent ]
That's why there used to be Regulations and Controls on banks so we wouldn't get into this mess, again (as in 1888, 189something, 1905, and 1929.)

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre
by ATinNM on Wed Oct 1st, 2008 at 03:28:52 AM EST
[ Parent ]
ATinNM: At this point (with h/t to ChrisCook) they are the lynch pin of an economy.  Pull it and watch the whole edifice collapse.

"Finance is so central and peculiar, so essential, and yet it carries a death threat for the economy," said Jagdish Bhagwati, a professor of economics at Columbia. "What we've seen, once again, is that finance is a very powerful instrument, but one that needs to be intensively watched."


Truth unfolds in time through a communal process.
by marco on Wed Oct 1st, 2008 at 03:30:02 AM EST
[ Parent ]
Banking system's woes increase British vitriol over U.S.-style pay - International Herald Tribune

LONDON: This past spring, Mervyn King, the governor of the Bank of England, gave a speech denouncing the hubris of bankers. That very same day, the British bank Barclays disclosed a £18.5 million pay reward to its president, Robert Diamond Jr., for 2007 - despite sustaining a £1.6 billion write-down that year.

King followed up his criticism of the excesses of the City of London, as the financial district is known, by choosing not to accept an increase in his salary of £290,000, or $516,000.

Diamond, by comparison, is the American-born chief of Barclay's asset management and investment banking businesses, whose outsize personality and bonuses have made him one of the most visible symbols of a Wall Street ethos that has taken root in the financial district.

Stark as the contrast might have been, it was a mere hint of the uproar, led by Prime Minister Gordon Brown of Britain and joined by union leaders and theologians, that has emerged here in recent days over how to best curb a perceived culture of escalating pay packages that propelled bankers to push for exorbitant risks.

by Fran on Tue Sep 30th, 2008 at 03:33:59 PM EST
[ Parent ]
Let's blame it on the Yanks and send them home!

This gets funnier by the day.

by afew (afew(a in a circle)eurotrib_dot_com) on Tue Sep 30th, 2008 at 03:37:20 PM EST
[ Parent ]
What's the problem with US-style pay if you set a top marginal rate of 95%?

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 Tue Sep 30th, 2008 at 03:39:47 PM EST
[ Parent ]
Becasue

i) We don't.

ii) it';s not covered by normal tax and he'd be so covered by tax loopholes and exemptions he'd never pay a penny. As Lord Vestey once said "in the UK, once you're out of PAYE (earned income tax rates) paying tax is entirely voluntary.

Our lords and masters have, for decades, created a tax system where the rich pay next to nothing. Labour have never challenged these cosy little arrangements, even when they were mistaken for a left wing party

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Tue Sep 30th, 2008 at 04:46:28 PM EST
[ Parent ]
Our lords and masters have, for decades, created a tax system where the rich pay next to nothing. Labour have never challenged these cosy little arrangements, even when they were mistaken for a left wing party
 

 Same here in Australia...at least for these 10 years that I am here.

Science without religion is lame, religion without science is blind...Albert Einstein
by vbo on Tue Sep 30th, 2008 at 09:27:45 PM EST
[ Parent ]
Perhaps Labour should then fight for a straight flat tax with zero loopholes.  Seems like you would get far more money out of the wealthy that way, and it would call the conservatives' bluff (assuming British conservatives bitch about progressive taxes as much as American conservatives.)

Truth unfolds in time through a communal process.
by marco on Tue Sep 30th, 2008 at 10:10:33 PM EST
[ Parent ]
"Zero loopholes" means the wealthy can't stash their loot in some nearby tax haven?

STALINIST!

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Oct 1st, 2008 at 02:32:50 AM EST
[ Parent ]
Let's blame it on the Yanks and send them home
!

Yeah.  Those hundreds of billions of Euros you morons spent to buy that crap we were peddling is all our fault.

It was obvious back in 2003 the Bush administration was the largest collection of goofballs ever assembled in one spot in human history.   They and their chums shouldn't have been in charge of a Fry-Up/Take-Away much less the US economy.  

And what happens?

US:  Here's a load of toxic garbage.  Want some?

EU:  Sure!  We'll take lots.

Admittedly the problem did start on this side of the pond but goddamnit you over on that side fed the Beast.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Wed Oct 1st, 2008 at 03:58:26 AM EST
[ Parent ]
And while you may have some success in purging (or at least corralling) the Market Fundamentalists, I'm not so optimistic about the EU...

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 1st, 2008 at 04:45:23 AM EST
[ Parent ]
I'm not inclined to excuse the buyers of all the toxic junk in any way.

They could have know - should have known - what they were getting into. I saw a prospectus by Goldman Sachs for one of their Mortgage-Backed Securities salamis. There were 40 pages expalining in loving detail the risks for each tranche, including the possibility of a housing downturn.

People chose not to read these, or to ignore them.

Now, that the system pushed everybody in that direction is a reality, and a smart policy decision would be to change that system, but people still chose to follow the herd.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Wed Oct 1st, 2008 at 04:57:02 AM EST
[ Parent ]
Depends who you mean by "people".
Let's face it Jérôme, even when it is explained, the vast majority of people cannot understand such implications. Hell, even the simple concept of actualisation is very difficult for the majority of people.

I do not say that as an insult, as implying that people are stupid children and should be despised. First, there is nothing despisable in not being among the cleverest of people, provided you don't run for the (vice-)presidency. Second, this is a very narrow field of human understanding. I would probably be unable to understand the implications of events on a variety of subjects even if they were explained in a leaflet, though I believe I happen to be fortunate enough to be in the top centiles of the intelligence distribution (OK, I own it, one letter of the previous sentence is not even completely honest).

So, prospectus notwithstanding, if people who could not understand either the implications or the likelihood of a housing downturns were being agressively advised to put money into such products, I won't place most of the blame on them. I know the libertarian meme of each person being the best placed for making all of his decisions for what it is, a fallacy.
Besides, when you say that people chose to follow the herd, it would be nice to be clear at what the alternatives were. If there is no landlord that lets you in, if you are not allowed to build a small house because of lot sizing, do you sleep outside?

Anyway, in any system, you can't rely on blaming the people. If human nature means that, unchecked, the system will crash, it's easier (terribly difficult OK, but still easier) to fix the system than human nature.

Now if you mean bankers by "people", I'm with you and have been wasting time typing all that ;-)

"It failed because Nacy Pelosi said some unkind things about George Bush in her speech"

by Cyrille (cyrillev domain yahoo.fr) on Wed Oct 1st, 2008 at 05:54:17 AM EST
[ Parent ]
well, the prospectus was going to bond buyers, whose job it is presumably to analyse the risks of whatever they are investing (other people's) money in. So THEY certainly have no excuse.

As to people, isn't buying a house - and taking the relevant mortgage - pretty much the biggest financial decision they'll ever get to make? Shouldn't they worry just a tiny bit about whether they can actually pay it back, and not just over the first couple years?

I have more sympathy for households, as they were brainwashed about perpetually rising house prices, and probably sold tainted goods by not very honest brokers (they are many cases of outright fraud), but (i) many of them were greedy and took on deals they knew were not quite right, and (ii) bondholders do not have that excuse. A rating does not eliminate the need to actually do your homework.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Wed Oct 1st, 2008 at 06:45:55 AM EST
[ Parent ]
ATinNM: Admittedly the problem did start on this side of the pond but goddamnit you over on that side fed the Beast.

Not sure if this is relevant, but does any European country require a separation of investment banking from commercial banking, a la Glass-Steagall?

Truth unfolds in time through a communal process.

by marco on Wed Oct 1st, 2008 at 08:17:47 AM EST
[ Parent ]
By Gavin Finch and David Yong
     Sept. 30 (Bloomberg) -- The cost of borrowing in dollars overnight surged the most on record after the U.S. Congress rejected a $700 billion bank rescue plan, heightening concern more institutions will fail.
     The London interbank offered rate, or Libor, that banks charge each other for such loans climbed 431 basis points to an all-time high of 6.88 percent today, the British Bankers'
Association said. The euro interbank offered rate, or Euribor, for one-month loans climbed to record 5.05 percent, the European Banking Federation said. The Libor-OIS spread, a gauge of the scarcity of cash, advanced to a record. Rates in Asia also rose.
     ``The money markets have completely broken down, with no trading taking place at all,'' said Christoph Rieger, a fixed- income strategist at Dresdner Kleinwort in Frankfurt. ``There is no market any more. Central banks are the only providers of cash to the market, no-one else is lending.''     Credit markets have seized up, tipping banks toward insolvency and forcing U.S. and European governments to rescue five banks in the past two days, including Dexia SA, the world's biggest lender to local governments, and Wachovia Corp. Money- market rates climbed even after the Federal Reserve yesterday more than doubled the size of its dollar-swap line with foreign central banks to $620 billion. Banks borrowed dollars from the ECB at almost six times the Fed's benchmark interest rate today.

                           Libor-OIS Spread

     The Libor-OIS spread, the difference between the three- month dollar rate and the overnight indexed swap rate, widened to 246 basis points, showing cash scarcity is at a record.
     The difference between what banks and the U.S. Treasury pay to borrow money for three months, the so-called TED spread, was at 338 basis points today after breaching 350 basis points for the first time yesterday. The spread was at 110 basis points a month ago.
     ``We can be sure that funding pressures are not going to ease while there is so much uncertainty,'' said Adam Carr, senior economist in Sydney at ICAP Australia Ltd., part of the world's largest inter-bank broker. ``Cash is going to be at a premium. There's really no end in sight.''



Science without religion is lame, religion without science is blind...Albert Einstein
by vbo on Tue Sep 30th, 2008 at 08:15:04 PM EST
[ Parent ]
This means that the bailouts and nationalizations of individual banks are doing nothing to solve the fundamental problem of the credit markets. I doubt that the $700 billion gift will help any better, give nthat most everybody knows that the (leveraged) holes are bigger than that.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Wed Oct 1st, 2008 at 06:47:48 AM EST
[ Parent ]
Things are now officially totally dysfunctional:


Banks park money in European central banks

The collapse of trust in money markets has led to more than €100bn being parked overnight at the European Central Bank - by far the highest amount ever, underscoring the extent of stress in the global financial system.

Banks are increasingly dealing with central banks rather than each other as the crisis of confidence persists, but central banks around the world are finding it difficult to judge demand for funds as every bank's needs are different.

The volatility in wholesale money markets was underscored on Wednesday with big reductions in overnight unsecured interest rates, but rises in the costs of three-month money.

On Wednesday the Libor rate for overnight US dollar borrowing was fixed at 3.79 per cent, a plunge from 6.87 per cent on Tuesday with a similarly large fall seen in sterling overnight interest rates. But if any banks are able to borrowing in dollars, euros and sterling for three months, the interest rates on these deals got more expensive - up to 4.15 per cent in the US, 5.28 per cent in the eurozone and 6.31 per cent in the UK.

The €102.8bn left on Tuesday night in the ECB's deposit facility, which pays a below-market interest rate of 3.25 per cent, highlighted banks' reluctance to deal with each other. The sum was more than double the amount deposited on Monday night.

At the same time, other banks borrowed almost €16bn from the central bank's marginal lending facility, which incurs a penalty interest rate of 5.25 per cent.

(...)

In a sign of the difficulties of working out how much money to pump into the banking systems, the UK central bank offered two US dollar auctions on Wednesday morning, one overnight and one for a week, but found demand thin for both. Less than half the money offered was taken up in the $30bn weekly auction.



In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Wed Oct 1st, 2008 at 08:17:24 AM EST
[ Parent ]
Why isn't the ECB simply lowering the interst rate it pays out? That would make it more attractive for banks, to lend to each other.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers
by Martin (weiser.mensch(at)googlemail.com) on Wed Oct 1st, 2008 at 11:34:22 AM EST
[ Parent ]
More Krugman: The $850 billion bailout
Iceland has just bailed out Glitnir Bank, with the government putting in 600 million euros -- $859 million -- in return for a 75% stake.

... So this was, per capita, the equivalent of an $850 billion bailout here.

Notice, by the way, that it was an equity injection rather than a purchase of bad debt; I approve.

(source: Bloomberg)


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 1st, 2008 at 02:46:19 AM EST
[ Parent ]
FT.com / World - Wealthy investors hoard bullion

Investors in gold are demanding "unprecedented" amounts of bullion bars and coins and moving them into their own vaults as fears about the health of the global financial system deepen.

Industry executives and bankers at the London Bullion Market Association annual meeting said the extent of the move into physical gold was unseen and driven by the very rich.

"There is an enormous pick-up in investment demand. I have never seen a market like this in my 33-year career," said Jeremy Charles, chairman of the LBMA. "The gold refineries cannot produce enough bars."

The move comes as fears grow among investors over the losses at investment vehicles previously considered almost risk-free, such as money funds.

Philip Clewes-Garner, associate director of precious metals at HSBC, added that investors were not flying into gold simply because they saw it as a haven amid Wall Street's woes. "It is a flight into gold because it is a physical asset," he said



The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
by dvx (dvx.clt ät gmail dotcom) on Wed Oct 1st, 2008 at 04:12:08 AM EST
[ Parent ]

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