Posted on 09/23/2008 8:03:33 PM PDT by TigerLikesRooster
European banking on borrowed time
By Daniel Gros and Stefano Micossi
Published: September 23 2008 19:49 | Last updated: September 23 2008 19:49
The US financial system is being nationalised. The piecemeal approach followed so far had clearly not been working. Hence the US political system is working overtime to reach a bipartisan agreement on a systemic solution. The centrepiece is already known: the US government is going to buy $700bn (€480bn, £380bn) of the so-called “toxic” assets. More measures are certain to follow as the banks will require recapitalisation to the extent that they make losses. As a result, the US government will soon own a large share of the US banking system. If the details are generous enough, this should be sufficient finally to restore orderly market conditions. Can Europe be far behind?
The synchronised movements in global markets over the last few weeks have shown that contagion works on the way down and on the way up.
But the case of AIG, the US insurer, also shows the importance of another, hidden, link across financial markets, namely massive evasion of regulatory requirements. AIG’s last annual report reveals that it had written coverage for more than $300bn of credit insurance for European banks. The comment by AIG itself on these positions was that they were “for the purpose of providing them with regulatory capital relief rather than risk mitigation in exchange for a minimum guaranteed fee”. Thus, a formal default by AIG would have exposed European banks to large increases in regulatory capital requirements, with possibly devastating effects on their ratings and market confidence. Thus, the US Treasury has saved, inter alia, the European banking system.
(Excerpt) Read more at ft.com ...
for the purpose of providing them with regulatory capital relief rather than risk mitigation in exchange for a minimum guaranteed fee
the total liabilities of Deutsche Bank (leverage ratio over 50!) amount to about €2,000bn (more than Fannie Mae) or more than 80 per cent of the gross domestic product of Germany.
European banks are in much more trouble than I suspected. Paulson is literally holding their lifeline. If he lets it go, they may well all go down.
Ping!
Let the banksters go to hell, and let’s return to honest money.
Add Barclays to that list. Their leverage at this time is even greater than Deutsche, they’re over 60 at 61.2. They have I believe about 1.3 trillion pounds in liabilities. Which is nearly as large as Britian’s GDP if I remember correctly.
As much as one despises Greenspan, his Eurotrash buddies were almost as loose on the financial spigot as he was. He even made that excuse once. Conspiracy to commit murder is just as bad as murder. That it was a planned cabal rather than mere personal incompetence does not work in mitigation of his sentence of eternal historical damnation.
Now is the time to start investing in stocks that have anything to do with gold, silver and platinum, even if it’s a mining stock. The current economic situation will likely result in world currencies going back to being backed by precious metals within 3-4 years.
Agreed...and pretty much what the Founding Fathers had in mind to start with anyway with regards to "sound money". It seems the more things that the “experts” tinker with —and drift away from the Constitution, the more screwed up it becomes —to the detriment of the American people.
later
Unless they outlaw metals ownership, as they did in 33. If that happens, metals will be worth a fortune- so at that point, cash out of metals and buy real estate cheap cheap cheap.
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