Thursday, August 09, 2007

Bank Bailouts

The first bank bailouts are starting up. Not in the US, but in Europe. These are pebbles skipping down the slope, before the avalanche begins. And it brings home the fact that globalization has made the world smaller. What happens in one place effects everything else.

As the European Central Bank moves to bailout banks that engaged in stupid investment decisions for short term greed, the imbalances they create will force other central banks to do the same. It is only a matter of time before the US Taxpayer is asked to cough up trillions of dollars to prop up our own banks so that they may continue to be irresponsible.

ECB Lends 94.8 Billion Euros as Money Rates Surge

By Christian Vits and Gabi Thesing


Aug. 9 (Bloomberg) -- The European Central Bank loaned an unprecedented 94.8 billion euros ($130.2 billion) after demand for cash in the European money markets drove interest rates higher.

A reluctance to lend money after concern over U.S. subprime mortgage losses roiled credit markets pushed overnight euro rates to as high as 4.7 percent today, compared with the ECB's benchmark refinancing rate of 4 percent. The rate for borrowing dollars overnight jumped to 5.86 percent from 5.35 percent yesterday.

Borrowing rates are rising on concern banks face growing losses on investments linked to U.S. mortgages. BNP Paribas, France's biggest bank, today halted withdrawals from three investment funds, saying a lack of liquidity meant it couldn't ``fairly'' value the holdings.

``No one really knows how big the current credit problems are,'' said Charles Diebel, head of European rate strategy at Nomura International Plc in London in a note e-mailed after the ECB announced its liquidity-providing operation. ``This is undermining confidence in the system as a whole and hence the reaction this morning.''

In a statement today, the ECB said it was providing emergency funds ``to assure orderly conditions in the euro money market.'' It allotted 100 percent of the 49 bids at a fixed rate of 4 percent.

It was the first operation of this type since the attacks of Sept. 11. A day after the attacks, the bank allocated 69.3 billion euros, followed on the Sept. 13 by a 40.5 billion euro award.

BNP joined Bear Stearns Cos. and Union Investment Management GmbH in stopping fund redemptions. Dutch investment bank NIBC Holding NV said today that it lost at least 137 million euros ($188) on U.S. subprime investments this year.

``Every bank is being suspected now, so no one is willing to lend money to anyone,'' said Ina Steinke, a money-market trader at NordLB in Hannover.

To contact the reporters on this story: Christian Vits in Frankfurt at cvits@bloomberg.net ; Gabi Thesing in Frankfurt at gthesing@bloomberg.net .

10 Comments:

At 7:48 AM, Blogger Edgar said...

Bush is on television spewing more lies. Bubblevision has the lingo down pat: "the dollar is strengthening against the Euro..." Just once I'd like to hear the truth: "The Euro beat the dollar on the debauch today by a nose..."

Bushco probably considers it their duty to lie to the American people; How sick is that? A kind of 'you can't handle the truth" slash "pay no attention to the man behind the curtain" slash "all is well" type thing, all while they plunder the silver, real estate, oil, and whatever else they can get their hands on. Egad.

 
At 8:03 AM, Blogger Edgar said...

Hi Weaseldog

I don't know if you've ever visited this blog or not. He resides in Germany, and usually has an interesting take on the financial shenanigans over in Europe.

 
At 8:12 AM, Blogger Weaseldog said...

Thanks Edgar!

 
At 9:17 AM, Blogger Edgar said...

Not only did the ECB PPT break open the piggie, but the U.S. PPT brought out the preznit. Remain calm, all is well. Whatever. Fun and games shall continue unabated, forever and ever. Amen.

 
At 9:20 AM, Blogger Weaseldog said...

Yeah, I heard that Bush came out to tells us, that all is well.

I have a cat that tries to make bird calls. Perhaps she's trying to tell them not to worry?

 
At 12:59 PM, Blogger Edgar said...

Perhaps she's trying to tell them not to worry?

She is saying: "Hey, I'm one of you..."

Just like the politicians pretend they know average Americans. I heard Bushco say something along the lines of "Americans do this, or think that" I was thinking, he doesn't know a single average American. What he envisions the average American to be isn't even close. He probably sees himself and Dick Cheney as "average Americans" LMAO, he lives in a fantasy world.

 
At 2:30 PM, Blogger The Europhile said...

Wease....the contagion, the flu bug that spreads over here in Europe is mostly due to the greed of Americans, not Europeans..yes, they bought into the schemes, but they don't buy into the litigious disease nor the greed disease that we Americans do...I have no sympathy for people that want more than they earn.

Over on CFN you hear them cry and whine that it's the fault of the institution not them. They're innocent.

Come on, talk about accountability, where is it...

Banks from Singapore to Switzerland are either protesting they didn't catch the bug or warning shareholders it will get nasty, but let's remember where it started....
bay/paris

 
At 2:44 PM, Blogger The Europhile said...

Shenanigans.

Can you spell Enron or Arthur Anderson Edgar.

We have companies on 3 continents, public and private and there's a reason why London has taken over NY as financial capital, shananigans, indeed....Sarb/Oxley anyone....

what a joke...the one thing we could still do well was form corporations and we've managed to fuck that up as well...
shenanigans...right, let's talk...
bay/paris

 
At 8:36 PM, Blogger Weaseldog said...

Europhile, I understand the argument about personal accountability I know that a great many people got into the market, motivated by greed, and are now going bankrupt from flipping houses.

But a lot of people also, just wanted a house and a yard, a place to raise their kids.

Our real estate markets evolved into a huge corrupt entity, and it lost its ability to work ethical and honestly.

There are innocent people being destroyed by the crash that will never be smart enough or knowledgeable enough to understand what is happened to them.

This is why we aspire to have an ethical financial system, and laws to insure that it stays that way.

For decades, thousands of evil people in Washington, have been reworking the system so that they can cheat and steal from millions of innocent people. This isn't the fault of newlyweds with a baby. This is the fault of a system that has evolved out of greed and small incremental changes.

The past horrors of flax mills packed with children working twelve hour days, didn't come about because all people are evil, but because our economic systems and our leaders, actively encouraged this. It took a great deal of effort to create a more ethical system, protected by harsh laws that prevent these sort of abuses.

Our politicians have spent decades undoing these laws, and they are ultimately to blame. They should know better, and they probably do. Yet their are destroying America anyway. I care little for the opportunists that get burned in this process, but I realize there are many more people who have been taught all their lives to trust a system that has been rewired to cheat and destroy them. What is happening is not their fault.

 
At 4:51 AM, Blogger The Europhile said...

I think there should be some kind of obligation to understand what they are doing with their money.

I think its one obligation to apply some analysis.

If you have people that are always ill equipped and not intent to understand the opportunists will simply keep exploiting this fact.

I still insist on accountability. I still hold myslef responsible for my choices, my successes and failures.

The further I get away from the brainwashing/multiple choice/God and the Flag are great propoganda, the more I resent this victim like mentality.

My mother just had to bail my sister out of her debt. She has a college degree from the Univ of Wash, she was a paralegal and could have been an attorney (perish the thought) if she'd wanted to, but no, she gets a bit bummed out, at 48, watches Oprah and rollerblades her way through life, blaming everyone, having no sense of money even though she was loved, given plenty of opportunity, more than most as we were both sent abroad at Jr. year, etc, educated and exposed to understanding finances and life in general.

I only talk about what I've experienced through the litigious disease, the evangelical faux religiosity and the jingoistic nature that's sewn through our cloth of stars and stripes.

Obviously I feel strongly about this, I'm writing about it in a novel.

I just finisted a great book by Stephen Pressfied called the The War of Art and he has an interesting take on this victim mentality. It's very passive aggressive (to rely upon our therapy ridden culture) again, emphasizing its simply another's person's, another institutions fault.

I think people have an obligation for self-knowledge, self-discipline, I do not practice the art of playing victim and asking for someone to come to my rescue and hold them hostage...I actually believe it's a good thing to become competent. As they say 2% of the people make stuff happen, 8% are screwing or suing others to take credit and 90% are just getting by, but those just getting by should at least try to be competent on some level.

You have to earn that home with the garden, instant gratification doesn't help anyone.

Well, I respect your ideas but on this we'll have to agree to disagree I guess.
bay/paris

 

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