Wednesday, December 7, 2011
In yet another confirmation of just who is driving policy in Europe, Handelsblatt has broken news that 3 years after Hank Paulson “forced” US banks to take cash, Germany will follow suit next, and “bailout” the German banking sector by stuffing it to the gills with cash soon to be made even more worthless courtesy of persistent and relentless devaluation as it is used for no productive purposes but merely stave off the inevitable collapse of a financial system so broken it now requires not monthly but weekly bailouts. From the German publication: “the German bank rescue fund Soffin will force ailing banks to recapitalize next year. That’s at least out of the draft bill, to be released by the Handelsblatt (Thursday edition), and the Cabinet is to decide the next week. Finance Minister Wolfgang Schäuble (CDU) is following the U.S. example: The US distressed banks were temporarily distressed during the 2008 financial crisis. The banks have since there is significantly more stable than the euro-zone in which the institutions were saved only at their own request the European Banking Eba by the banks of the euro-zone by mid-2012 its core capital to nine percent increase. Institutions that make this not your own to get guarantees from the Soffin.” Simply said, because it worked (courtesy of an additional $1.6 trillion in excess reserves used fungibly by banks to plug capitalization holes) in the US, the forced bailout will work in Germany, where unlike the US, the top banks account for about 200% of German GDP. In other words, Germany is about to proceed with an implicit nationalization of its banking sector. Which means that while we thought yesterday that the German AAA-rating is the safest of all in the Eurozone, following this development we will certainly reevaluate.
More from Handelsblatt, Google translated:
Creates a German bank recapitalization is not your own, they can apply for help from Soffin. The Institute is unreasonable, the German banking supervision BaFin force it to accept government money. Normally, the state then receives shares in accordance with the Institute. It remains possible, however, continue to provide assistance to a silent partnership – but then must agree to the Bundestag, says the bill, with the will of the rescue fund Soffin are now revived quickly. After the acute financial crisis it had been closed in late 2010. He should be able to redeploy by the end of 2012 up to € 400 billion of loans and guarantees over €70 billion.
A Cabinet decision creates even before the adoption of the federal law assurance that no systemically important bank to fail in Germany to the new capital requirements. This, it says coalition circles, confidence is expected by the markets to the eba-stress test banks to strengthen significantly affected.
As a candidate for aid is already partly nationalized Commerzbank. Their boss Martin Blessing previously insisted to ask again in no case to state aids to want. If the German Financial Supervisory Authority BaFin, however, the view would be that Commerzbank’s capital increase alone could not establish that the state would give the money by force.
One wonders if Schauble, who is now the next “Honk” Paulson, has also advised German hedge funds to trade as is appropriate, to a broad banking sector nationalization, in keeping with the US SecTres’s behavior before the US bailouts began in earnest.
We expect the answer is a resounding yes.
And for those wondering why Germany needs a preemptive TARP, and why its banks are in deep doodoo, here is a reminder:
This article was posted: Wednesday, December 7, 2011 at 10:22 am