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Now that the Federal Reserve has run out of its options, it is time for the spin doctors of Europe, to try their hand to save the Banks. In the past 2 years nearly a dozen small Banks in Denmark closed down showing that north Europe that was known for its economic strength had been well and truly hit by toxic assets. Max Bank that reported a net loss of 60.3 million Danish crowns ($10.8 million) in the first half of the year following 79.2 million crowns of write downs was the tenth Bank to be officially taken over by the state in 2008 as the private Banks liability became the sovereign liability
Early this month Dexia the Franco Belgian Bank hit the sack with its credit risk exposure exceeding $700 billion almost twice the Greek debt. The focus of recovery immediately turned on saving the Banks instead of the distressed Eurozone nations as France and Belgium nationalized the losses of the private banks on a priority basis. Dexia Bank was forced to seek state help for the second time in three years after a liquidity crunch hit the lender and sent its shares down 42 percent over the past week just 6 weeks after it passed the much touted EU devised stress tests with flying colors , The stress tests done as a risk management exercise to let Banks continue taking risks by bloating capital is fundamentally flawed exercise. It is low on usefulness, a certificate largely self generated by Banks and not audited by the regulators but vetted as a clean chit to continue taking risks.
Now after the $ 3 trillion liquidity infusion under QE1 and QE2 by Fed has completely failed to trigger the economic recovery in the US , Europe is trying an encore to save the Banks using the Eurozone nations as
a pawn or a shield to justify the bailout. However the EU does not have a kitty as large as Fed. Hence an attempt is being made to make the EFSF fund a guarantee fund for issuance of bonds thus bloating the reach several times. In short the 440 billion euro ($594 billion) European Financial Stability Facility (EFSF) will not be directly used to recapitalize the French and EU Banks but provide guarantee for their bonds issue (including BNP Paribas and Deutsche Bank ) . This means the bond markets may see more instability as over $3 trillion of bonds from toxic Banks could hit the market guaranteed by $594 million EFSF funds in the near future.
Can Bankers be trusted to save the world ?
Now that the Federal Reserve has run out of its options, it is time for the spin doctors of Europe, to try their hand to save the Banks. In the past 2 years nearly a dozen small Banks in Denmark closed down showing that north Europe that was known for its economic strength had been well and truly hit by toxic assets. Max Bank that reported a net loss of 60.3 million Danish crowns ($10.8 million) in the first half of the year following 79.2 million crowns of write downs was the tenth Bank to be officially taken over by the state in 2008 as the private Banks liability became the sovereign liability
Early this month Dexia the Franco Belgian Bank hit the sack with its credit risk exposure exceeding $700 billion almost twice the Greek debt. The focus of recovery immediately turned on saving the Banks instead of the distressed Eurozone nations as France and Belgium nationalized the losses of the private banks on a priority basis. Dexia Bank was forced to seek state help for the second time in three years after a liquidity crunch hit the lender and sent its shares down 42 percent over the past week just 6 weeks after it passed the much touted EU devised stress tests with flying colors , The stress tests done as a risk management exercise to let Banks continue taking risks by bloating capital is fundamentally flawed exercise. It is low on usefulness, a certificate largely self generated by Banks and not audited by the regulators but vetted as a clean chit to continue taking risks.
Now after the $ 3 trillion liquidity infusion under QE1 and QE2 by Fed has completely failed to trigger the economic recovery in the US , Europe is trying an encore to save the Banks using the Eurozone nations as
a pawn or a shield to justify the bailout. However the EU does not have a kitty as large as Fed. Hence an attempt is being made to make the EFSF fund a guarantee fund for issuance of bonds thus bloating the reach several times. In short the 440 billion euro ($594 billion) European Financial Stability Facility (EFSF) will not be directly used to recapitalize the French and EU Banks but provide guarantee for their bonds issue (including BNP Paribas and Deutsche Bank ) . This means the bond markets may see more instability as over $3 trillion of bonds from toxic Banks could hit the market guaranteed by $594 million EFSF funds in the near future.
Can Bankers be trusted to save the world ?
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