Thursday, December 8, 2011

Germany Props Up Their Banks' Reserves

Germany Set to Offer Banks Help on Reserves
Germany plans to revive the government fund it used in 2008 to rescue banks, in order to help some German institutions increase their reserves, the Finance Ministry in Berlin said Wednesday.
It's 2008 all over again. Why? Because after the U.S. bailed out AIG and AIG bailed out the European banks structural change didn't happen. Well, it happened, a little, with change to take effect far in the future. It's almost like they hoped with continued high leverage the banks might roll the dice and gamble themselves out of the corner they were in.
Last month Commerzbank said it would sell assets and temporarily stop issuing new credit through its troubled EuroHypo unit to meet tougher capital reserve requirements. The bank, which reported a loss of 687 million euros, or $920 million, in the third quarter, said at the time it would also look at other options to increase its reserves.
All these German Hypos going under. And remember, Germany had no housing bubble. They didn't even have a housing blip. This is all high leverage killing them on bets outside their borders.
The German newspaper Handelsblatt reported that the revived fund would be able to issue up to 400 billion euros in guarantees and 70 billion euros in credit to banks. According to a proposed law to be considered by Chancellor Angela Merkel’s cabinet next week, banks could be forced to accept the money to expand their reserves.
Oh, and that old game. Pretend they all need a bailout to hide the worst offenders. (Although in the U.S. it turns out (we just found out in the last months) all the big banks needed the bailout, public statements to the contrary notwithstanding.)

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