Poppycock!

Germany's bail-out

Too little, and late
Apr 16th 2009 | BERLIN
From The Economist print edition

Germany reluctantly faces up to the scale of its banking disaster


IT PUZZLES many in Germany that the country’s punctilious parsimony and restrained housing market have not saved it from a banking crisis that seems every bit as bad as those suffered by spendthrifts abroad. Having refused for months to consider a “bad bank” to buy troubled assets, Germany is belatedly wrestling with a plan to do just that. And it is also being forced into its first nationalisation of a bank since the 1930s. The most visible of Germany’s ailing banks is Hypo Real Estate (HRE), which the state has already propped up with more than €100 billion ($132 billion) of loans and guarantees. Some of HRE’s woes stem from its commercial-property loans, many of which are now souring. But the big danger is the state of its DEPFA subsidiary, a large lender to governments and local governments.

Although this is a relatively safe business, it is also not terribly profitable because governments can generally borrow very cheaply themselves. DEPFA’s big error was to try to boost margins by raising a large chunk of the money it loaned out in shorter-term money markets. That business model fell apart when credit markets froze; only huge dollops of government money have kept the bank afloat. With credit still tight, the only way to make a profit on DEPFA’s outstanding loans (even if they are all repaid) would be by refinancing them using the government’s cheaper debt. Given its problems, nationalisation of HRE seems the only sensible option. On April 9th the government’s bail-out fund offered to buy all of it from shareholders.

The boldness the government has shown in dealing with HRE is, however, not at all evident when it comes to the broader problem of bad assets in the banking system. At a meeting on April 21st the government hopes to approve a plan proposed by the finance ministry to establish several small “bad banks”. These would use as much as €200 billion provided by the government to buy illiquid assets from their parent banks, freeing up capital so that the banks can lend more easily.

The plans are hobbled by two constraints. The first is that the government hopes to avoid transferring much of the risk of losses to taxpayers without first punishing shareholders. That conflicts with the government’s equally pressing desire to avoid nationalising any more banks. These contradictory aims preclude the government from, for instance, wiping out the value of equity in banks by forcing them to write down their assets.

They also preclude the government from assuming most of the risk on banks’ balance-sheets by insuring toxic assets, as has happened recently in Britain. The government’s hope is that by providing relief on illiquid assets it can allow banks to deal with toxic assets at a more leisurely pace. The worry, of course, is that the focus on illiquid assets instead of toxic ones may do little to restore confidence in banks or allow them to start lending again.

“The mood has definitely turned in favour of a bad bank,” says Dorothea Schäfer of DIW, an economic-research institute in Berlin. “But it is unclear that the model now suggested will do anything to improve the situation of banks at all.” Having faced up to the problems within its banks, Germany is still not willing to take the decisions needed to solve them.

http://www.economist.com/displaystory.cfm?story_id=13496812

I'm the wrong one to ask since i'm not sure and up in the air about it....BUT...IMO...maybe pay state tax instead of federal and we have alot of resources here like oil, trpoics, cattle, farm animals, grain, cotton, etc (not sure how long that would last)

again...no expert by any means...just thinking out loud


oh and Fanta....my new word for the day is now poppycock lol

And Nancy Pelosi!! LOL
What's up with that Davey?



North Carolina is!

POPPYCOCK FANTA

Say what you wish, but Texas does not have the legal right to secede.

Fanta...did you not read the links I post in here for all to see???

no one listens to me

I'll look!

Fanta...it was all I could find on the subject

These?

yes fanta. i tried to find something to look at and if anyone had anything different i asked them to post it

Hell if I know. Gezz, I support an intelligence test requirement to vote.

then hardly any one could vote

The first link says it all!

In fact, Texas received no special terms in its admission to the Union. Once Texas had agreed to join the Union, she never had the legal option of leaving, either before or after the Civil War.


It also says that no state has te legal right to secede!

This is all correct as I know it!

And the problem with that is?

fanta...you sound shocked lol

Absolutely. Of course I never said I was confident they had a legal right, just that I didn't think it would stop them if things got bad enough.

[

North Carolina is!



Oh Yeah!!!!!

if a child wants to run away from home...i don't think he asks for permission

POPPYCOCK