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Old 02-13-2012, 03:18 PM   #1
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Doodoo Euroarea central banks are in panic mode, doing anything to bailout commercial banks

Behind the scenes, the European banking system still seems to be in total chaos. Another stealth bailout for Euroarea commercial banks by their national central banks is beeing enacted. Commercial banks are practically holding the central banks hostage, read this, it's outrageous. Also witness the first signs of a breakup of the Euroarea:

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ECB Moves From One Set of Collateral Rules to Many
As struggling European banks seek financial lifelines by borrowing from the European Central Bank, individual central banks in the euro zone are expanding the type of assets banks can pledge to tap the loans. But not all collateral is created equal.
Seven of the 17 euro-zone central banks are crafting rules that will increase the diversity of assets that banks are permitted to pledge, allowing firms to borrow as much as €200 billion ($264 billion) more cash. In an aspect of the plan that is drawing scrutiny, each central bank is tailoring its collateral requirements to the needs of the banks it oversees.
The result is a hodgepodge of collateral standards across the common-currency area. The rules differ from country to country and appear designed to meet the needs of their domestic banking industries; banks in Spain might be able to pledge foreign loans as collateral, while French banks will be able to pledge residential mortgages, for example.
"This latest decision represents a significant step backward from a common monetary, credit and liquidity policy in the euro area and from an integrated financial market," said Willem Buiter, Citigroup's chief economist.
ECB President Mario Draghi said the looser rules were designed to help collateral-squeezed banks to continue lending to businesses, and he played down the risks.
But by making it easier for banks to borrow funds, European central banks are assuming greater risks with their lending, analysts say. In addition, they say, the changes mean weak lenders are more likely to grow addicted to the central banks' cash.
The new rules come as the ECB has already assumed the role of lender of last resort to hundreds of European banks. Last December, the ECB doled out €489 billion of low-interest, three-year loans to more than 500 banks. The central bank will offer another batch of the loans at the end of February. Banks are expected to borrow hundreds of billions of euros.
The new policy will leave individual central banks on the hook for potential losses stemming from some ECB loans. That is a break from the tradition of applying such rules uniformly and sharing any losses across the euro-zone system.
Until now, the ECB has only allowed banks to put up a narrow range of assets to serve as collateral for those loans, which it applied uniformly. Eligible assets included large government-issued or -guaranteed loans and securities.
But banks in some countries were exhausting their pools of eligible collateral. To ease the strains, the ECB announced late last year that it would relax some of the criteria by permitting individual national central banks to change the collateral rules.
Late last week, seven national central banks—in Austria, Cyprus, France, Ireland, Italy, Portugal and Spain—said they had decided to loosen their collateral requirements, after receiving the blessings of the ECB's governing council. The other 10 euro-zone central banks kept the previous rules intact.
To guard against risks associated with some types of collateral, the ECB traditionally imposes "haircuts" on the assets. With the new collateral, the average haircuts will be 60% to 70%. If a bank pledges $1 million of one type of loans as collateral, for example, it might only be worth $400,000 in ECB loans. National central banks haven't disclosed specific haircuts.
Analysts said they had expected a uniform set of collateral rules across the euro zone and were surprised by the divergent types of collateral that national central banks will now accept.
"It's a mess," said Robert Noble, a banking analyst in London with RBC Capital Markets. The European central banks are taking "a lot more risk in collateral terms. There's now eight different monetary policies depending on what suits your banking system best."
ECB officials acknowledge the new risks, but play them down.
"Yes, it means that we take more risk," Mr. Draghi said. "Does it mean this risk has not been managed? No, it has been managed, and it is going to be managed very well because there will be a strong over-collateralization for these additional credit claims."
In a break from the traditional euro-zone policy of sharing losses across the euro zone, the ECB has said that any losses arising from the looser collateral will be borne by individual national central banks, which are essentially branches of the ECB, rather than by the ECB itself. The goal, analysts and some central bank officials say, is to shield countries from having to swallow losses arising from other countries easing their rules.
The moves by individual central banks were crafted to accommodate the peculiarities of their countries' domestic banking industries, according to central bank officials.
France, for example, will now accept certain residential mortgages as collateral, enabling the country's lenders to tap into their deep pool of real-estate loans. The Bank of France also will permit assets denominated in U.S. dollars—a victory for French banks sitting on hundreds of billions of dollars of such assets thanks to their lending to the shipping and aircraft industries.
France's biggest bank, BNP Paribas SA, was holding $305 billion of U.S. dollar assets as of Sept. 30, representing nearly 30% of its balance sheet. A BNP spokeswoman declined to comment.
Ireland and Portugal won't only accept residential mortgages as collateral but also other unsecured consumer loans, which could include assets like credit-card debt. The Portuguese central bank said that the loans "shall not be subject to minimum credit quality requirements." Italy will let its banks post as collateral leasing and factoring contracts it has with businesses.
Spain said it might start accepting foreign loans that aren't subject to Spanish law. Analysts said that could open the door to Spanish banks with big operations in Latin America and the U.S. pledging assets from those geographies. As of November, more than 11% of the assets in the Spanish banking sector were to non-Spanish borrowers, although not all of those assets would qualify as collateral, according to the Bank of Spain.
http://online.wsj.com/article/SB1000...googlenews_wsj
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Old 02-13-2012, 03:40 PM   #2
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It is absolutely a stealth bailout, because if they do not these banks will not be able to access money in the open market. Hell, they won't even loan to each other overnight. LIBOR is a fucking joke because the banks so distrust each other that loans have evaporated. The fact of the matter is simple.........they all know they are all a bunch of fucking liars and have hidden all kinds of poison on their balance sheets, then bought CDS "insurance" that can never be paid if the shit hits the fan.
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Old 02-13-2012, 03:46 PM   #3
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This definitely shows the unconditional commitment to let no tbtfb fail.
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Old 02-13-2012, 10:43 PM   #4
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Another good catch swissaustrian.

The needle seems to be moving ever so slowly, but ever so surely, to deafult by hyperinflation rather then default by default...

Sure, give them the money! Why not? The hyperinflation comes later on, after they are enjoying retirement somewhere beyond the Eurozone. Same here in the USA, we're a year or two behind ya, Yurp!
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Old 02-14-2012, 09:09 AM   #5
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Eventually the ECB is going to run out of tricks, because Germany will not let them simply print dough for deadbeat banks forever and ever. The music is going to stop and there simply will not be enough chairs.
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Old 02-14-2012, 09:13 AM   #6
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Originally Posted by ancona View Post:
Eventually the ECB is going to run out of tricks, because Germany will not let them simply print dough for deadbeat banks forever and ever. The music is going to stop and there simply will not be enough chairs.
I think this is the first step to a breakup of the Eurozone, the sounder countries like Germany, the Netherlands, and Finnland are obviously opposing a loosening of collateral requirements at the ECB level. I think it will eventually lead to a core Euroarea compiled of the strong nations.
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The goal, analysts and some central bank officials say, is to shield countries from having to swallow losses arising from other countries easing their rules
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Old 02-14-2012, 12:39 PM   #7
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Originally Posted by ancona View Post:
Eventually the ECB is going to run out of tricks, because Germany will not let them simply print dough for deadbeat banks forever and ever. The music is going to stop and there simply will not be enough chairs.

I disagree.. I think they are going to stick together for the most part. The difference is that this is PERFECT justification for implementing an EU oversight system that sucks away national sovereignty. Countries like Italy, France, etc will now have strict budget guidelines that the EU will overlook etc. I don't think they will just leave. Too many powerful people are going to ensure that politicians continue to screw over their own people.
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Old 02-15-2012, 01:45 PM   #8
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Originally Posted by ancona View Post:
Germany will not let them simply print dough for deadbeat banks forever and ever
think theres been a shift in thinking on this one.

Sure the peeps were dead against printing and potentially devaluing what they have worked for but gradually the scare tactics have entered the collective thinking and printing is now generally accepted as a lesser of evils.

When did you last read about any outrage, or german pols likely to get voted out and replaced by Rhon Paulus ?
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Old 02-15-2012, 02:17 PM   #9
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Well, I think that if they begin monetization, and the Euro starts getting trounced, they might cheer at first, but will soon realize that it is only helping those same banksters who brought all this on in the first place. Greece, Spain and Portugal are in rapidly deteriorating condition right now. Spain has enormous unemployment already and is looking to fire a shitload more government workers, which will only make it worse and reduce tax income. Same same for Portugal. How in the hell can these countries hope to pay all this money back if they are reducing the size of their workforces and watching GDP fall like a rock????

No, I think we'll see more rioting, we'll see Greece exit the union, we'll see a violent market smash as a result of CDS triggers on Greek debt, we'll see all three of them pushed out of the Euro sooner than later. It has to happen. That is unless they decide to become debt slaves for the next two generations an
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Old 02-15-2012, 02:40 PM   #10
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whos saying theyve got to pay anything back ?
its better for the CB's to print to infinity and roll over all maturing loans, either directly or through their chums

as long as the peeps are paying some interest ........
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Old 02-15-2012, 08:52 PM   #11
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Hank Paulson was on CNBC today. Being how he's definitely one of the worst people to believe about anything, except when he was trying to convey that the banks and governments will do ANYTHING to keep the ponzi alive. And that is the only thing he said that I believe was the truth. They will break every rule they ever made. They will print to infinity. They will kill as many people as they have to.
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Old 02-16-2012, 04:37 AM   #12
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Originally Posted by swissaustrian View Post:
I think this is the first step to a breakup of the Eurozone, the sounder countries like Germany, the Netherlands, and Finnland are obviously opposing a loosening of collateral requirements at the ECB level. I think it will eventually lead to a core Euroarea compiled of the strong nations.
You are right. The reshuffling is in progress. When it all ends, there will be exactly 10 left standing although nine is possible according to the Lisbon Treaty.

When it is all over and done with, most likely by the end of June, you will see an economically, politically, and militarily strong central core with the rest sidelined as economic slaves to the central core.

Watch Guttenberg and Stoiber, both popular politicians currently on the sidelines, become part of the solution, possibly both of them returning to power in Germany replacing the Merkel government.
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Old 03-08-2012, 08:32 AM   #13
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Ex-ECB's Juergen Stark Says ECB's Balance Sheet "Gigantic", Collateral Quality "Shocking"
http://www.zerohedge.com/news/ex-ecb...ality-shocking
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Old 03-08-2012, 09:21 AM   #14
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I read that as well SA, and it comes as no surprise. Look at the "collateral" our own treasury is holding on those massive piles of money they "loaned" our own TBTF banks. They have insane amounts of mortgages and commercial real estate loans marked at face value when it's true value is somewhere between 0% and 25% of face. The truth of it is simple, the entire civilized world is sitting on a monetary time-bomb of worthless crap that has to be paid/settled at some future date, and when teh day of reckoning finally comes, I promise you, there will be blood.
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Old 03-08-2012, 05:30 PM   #15
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Hi Ancona,

Unfortunately, I agree with you. I believe revolution of some kind, and a blood shed is in the cards. Although I do not see it happening anytime soon. Big things take time to fail, although when they fail, they fall hard. So will the globalized ponzi economy. But it is just to big to fall quickly, it will take few years at least, I believe. Also bear in mind, that TPTB will do everything in their power (and lets face it, they can do A LOT), to prevent it from happening/"not on my shift", which will be cried "foul!!!!!" at, but it doesn't matter, it will drag the thing even further down the line.

But eventually, when enough people suffer, there will be some kind of a power clash, that is inevitable. Power has to be taken away from it's master, power is not given quietly.
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