EUObserver: EU rules out US-style bailouts (25.09.2008)

"The situation we face here in Europe is less acute" than in the US, says the EU economy commissioner

There may be need for stricter financial monitoring worldwide, but in Europe in particular, US-style bank bailouts are not necessary at this stage, EU officials told MEPs on Wednesday (24 September).

However, referring to the recent decision by the US to buy $700 billion (€476 billion) of bad debt from banks and other financial institutions, he stressed that "the situation we face here in Europe is less acute and member states do not at this point consider that a US-style plan is needed."

But it seems that everybody has decided to suspend their critical skills in order for bankers to be "saved" so that they do'nt take us down with us.


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

If the financial sector needs support because of its strategic importance, then the need for support of other sectors should be evaluated on the strategic importance criterion: which is something free-market ideology prohibits.

So do Barroso and team practise what they preach, do they even believe in it? Or is it just a handy doctrine masking a power and money grab? More to the point, isn't that what it appears fairly clearly to be right now?

The incredible concentration of banks in recent days should give us pause:

Why The Biggest Banks Will Only Get Bigger

The three biggest banks in the country are now bigger than ever, with a combined 31% of all U.S. deposits. Bank of America leads the pack with 10.99% of all U.S. deposits. J.P. Morgan trails only slightly at 10.51%. And Citigroup ranks as the only one of the big three below the 10% cap, with 9.8% of all U.S. deposits.

Wells Fargo is a very distant fourth with just 4% of all U.S. deposits.

What we are looking at right now appears to be the beginning of an unprecedented concentration of banking power in the U.S. that was aided by the destruction of the federal cap on bank deposits. The cap prevented any bank from making acquisitions that would give it more than 10% of U.S. deposits.

A commenter to that article notes the same about the UK:

A similar position will exist in the UK. Once the dust settles we too will have three goliaths, Barclays, HSBC and Lloyds TSB. Most people in the UK will have their savings or mortgages with these three banks. Most businesses and entrepreneurs will have loans from these three banks. The power within our economy will be concentrated amongst three Boards of Directors who will have enormous responsibility. It may well mean a significant long term lack of competitiveness amongst these lenders which will lead in turn to worst deals for home owners and individuals. It will be a long time before financial entrepreneurs enter the market and take on these giants to give us back a real choice. The question we must all ask ourselves is how much choice can we really give ourselves, knowing what we now know. For the truth is we are all to blame for what has happened,. We took the fruit from the Garden of Eden and bit into it in the form of cheap loans, mortgages, and re-mortgages for that nice shiny car. We got greedy and bought property to rent out to others and will pay for the consequences for many years to come. In the UK we will have to put our trust in the FSA to be the guardians or our rights and to make sure we the people get a fair deal from these giants of capitalism. In time real choice will come back, and that will be a good thing; but when it does, we must all think back to 2008 and keep ourselves in check.

And these become REALLY 'too big to fail', and can blackmail governments, and the economy in general, even more easily than before.

This should not be tolerated. (In fact, I was preparing to post this comment as a FP post before I saw yours; it probably needs to be posted anyway, a bit later)

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

The US Senate votes today on the $700 billion bailout.

Have you ever had an INTENSE sense of deja vu?  I swear, I've been here before. Oh well.

Hello ET/Europe.  I wish you well.  Take care of yourselves/each other.  This is the beginning of the End Game for the US.  The new bailout bill is being pushed in the Senate, giving more tax breaks to business, as a bill to be passed OR THE NEXT BILL WILL BE LEFT WING, and of course, we can't have that.

A couple weeks ago a US military "group" was assigned (for the first time in US history) to the US for "crowd control".  There are extended gasoline shortages in the US southeast as a result of the hurricanes.  Will the food shortages begin prior to the election or simply be hinted at?

Take care of yourselves.  The US is lost.  The people "spoke" two days ago when the US House voted down the bailout.  The Masters said, "What?!!!" and will give even MORE to the wealthy.  How odd?  Your house is on fire; add more gasoline, that will help. Again, my deja vu.

They tried to assimilate me. They failed.

I can understand why you can't necessarily know in advance which banks precisely will need to be bailed out. But if banking is such a vitally important strategic sector, then why is the safety net not put in place before the chips hit the table?

I mean, anybody with eyes and ears who hasn't been hiding under a rock on the dark side of the moon and maintained total radio silence should know that the banking sector can fail and can fail catastrophically. If for no other reason, then because the US has had at least one previous round of crisis over the past 12 months.

So why are laws being cobbled together in the last moment to cover an event that has been in the cards for the last twelve months at least?

- Jake

Friends come and go. Enemies accumulate.

How would you make sure, that undustrial politics is used to make a better live for all Europeans, and not to make a better live for the people of one country on the cost of other European countries?

Some applies for the Stability&Growth Pact by the way. Everybody knows, it is not perfect, but you need some fixed rule, as long as the most important budgets are the national ones.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

I do not know what to add...shouldn't banco santader or BBVA or La Caixa had the right to buy bank cheap because they were awful (and the spanish banks good)?

Isn't this preventing good competition.. those doing it fine should get rewarded with the easy and cheap adquisition of other banks if there is no concentration in the market..and the spansih banks have no networks in a lot of countries...

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

Bloomberg:Ireland May Bypass Competition Laws to Protect Banks (Oct. 1)

Ireland's government could bypass competition laws to approve a merger of two financial institutions should this be necessary to maintain stability in the banking system, according to a proposal before the country's parliament.

Finance Minister Brian Lenihan could approve a transaction even if it reduced competition, should the deal be necessary ``to avoid a serious threat to the stability of credit institutions,'' according to the Credit Institutions Financial Support Bill 2008, which lawmakers in Dublin began debating last night.

The bill, published late yesterday, is intended to enact Ireland's proposed guarantee of the deposits and debts of six lenders. The debate in parliament continues today.

Public spending curbs and rules against state subsidies will be thrown - temporarily - out of the window to rescue European banks from the abyss of the global financial crisis, EU leaders agreed at the weekend. Leaders of the four largest European Union economies - Britain, France, Germany and Italy - came up with no EU-wide magic formula, or rescue package, to defend the buckling European financial system.

They did agree, however, that national governments should be at liberty to take drastic action to shore up their own financial institutions, busting EU limits on national budgets and flouting European rules against public subsidies if necessary. Meeting in Paris, the Big Four insisted that national governments must "consult" their European partners before taking action which could harm rival banks in other countries. This was a rebuke to Ireland's decision last week to guarantee all bank savings for two years but also, implicitly, a recognition that other nations may have to take similar action.

...

EU laws forbidding state subsidies to private companies would also be "applied in a flexible manner" (ie suspended), the summit decided. At France's insistence it was agreed that there should be "punishments", not golden parachutes, for the bosses of financial institutions which needed state bailouts.