European sink hole.
I am struck at how foolish the Europeans sound ... the U.S. is the root of all financial evil, and had we followed their model of regulation all this never would have happened. Hmmm. Right. And Spain was not even more overbuilt and hyped than Southern California. And Fortis was not just bailed out to the tune of Eu. 11 billion.
And how Bradford and Bingley in not a Stg. 150 billion hole. That's right, about $300 billion for one messy UK equivalent of an S&L. The Brits are considering merging B&B with Northern Rock, itself a more-than-100 billion sink hole, added to the Leicester and HBOS. This puts the average British taxpayer on the hook for slight above Stg. 5,500 ($10,500) ... that is in contrast to the U.S. taxpayer who is shafted to the tune of about Stg. 2,750 ($5000) each. That's more than double, friends and neighbors. Double. And we were reckless?
Why did Fortis suddenly poop the bed? First of all, it is important to note that US GAAP is vastly different from IAS and Euro standards. Fortis, similar to many other European financial institutions is not required to mark their loans and other "assets" to market. If they state that they will hold the toxic sludge to maturity, then it does not matter what the current value is. Except that Fortis shareholders thought that a great deal of the Fortis asset base was comprimised ... or flatly fraudulent in overstating capital and coverage. Hence they sold the crap out of it.
Fortis was a co-purchaser of ABN-Amro and suddenly a short while later, they are on the block. This event is shocking to the Europeans ... about 50% of Belgian households ahve exposure to Fortis in the form of deposits, securities or insurance. The Belgian government has pledged safety of deposits ... but little else. The Dutch have huge insurance exposure to Fortis ... so the Dutch government has stepped in to buy up some distressed junk. Banco Santander, Rabobank and BNP Parisbas have all stepped aside. I surmise that once under the hood they found more truly nasty stuff than they could find government patsies for.
I don't believe for an istant that UBS in free and clear ... too much is known about their appetite for CDOs. And those wonderful paragons of fiscal sanity, the Germans? Do you seriously think that they haven't made some highly dubious loans to various former East Bloc nations?
In our lavish thrashings and twistings at the end of the market rope might be our salvation: transparency. The Fed and Treasury will cut the financial industry down and they in turn will provide the foundation for growth. But in Europe, they look down on transparency as a peculiarly American form of childishness. I reckon we may well have the last laugh.
And how Bradford and Bingley in not a Stg. 150 billion hole. That's right, about $300 billion for one messy UK equivalent of an S&L. The Brits are considering merging B&B with Northern Rock, itself a more-than-100 billion sink hole, added to the Leicester and HBOS. This puts the average British taxpayer on the hook for slight above Stg. 5,500 ($10,500) ... that is in contrast to the U.S. taxpayer who is shafted to the tune of about Stg. 2,750 ($5000) each. That's more than double, friends and neighbors. Double. And we were reckless?
Why did Fortis suddenly poop the bed? First of all, it is important to note that US GAAP is vastly different from IAS and Euro standards. Fortis, similar to many other European financial institutions is not required to mark their loans and other "assets" to market. If they state that they will hold the toxic sludge to maturity, then it does not matter what the current value is. Except that Fortis shareholders thought that a great deal of the Fortis asset base was comprimised ... or flatly fraudulent in overstating capital and coverage. Hence they sold the crap out of it.
Fortis was a co-purchaser of ABN-Amro and suddenly a short while later, they are on the block. This event is shocking to the Europeans ... about 50% of Belgian households ahve exposure to Fortis in the form of deposits, securities or insurance. The Belgian government has pledged safety of deposits ... but little else. The Dutch have huge insurance exposure to Fortis ... so the Dutch government has stepped in to buy up some distressed junk. Banco Santander, Rabobank and BNP Parisbas have all stepped aside. I surmise that once under the hood they found more truly nasty stuff than they could find government patsies for.
I don't believe for an istant that UBS in free and clear ... too much is known about their appetite for CDOs. And those wonderful paragons of fiscal sanity, the Germans? Do you seriously think that they haven't made some highly dubious loans to various former East Bloc nations?
In our lavish thrashings and twistings at the end of the market rope might be our salvation: transparency. The Fed and Treasury will cut the financial industry down and they in turn will provide the foundation for growth. But in Europe, they look down on transparency as a peculiarly American form of childishness. I reckon we may well have the last laugh.
posted by Zaphod at Sunday, September 28, 2008
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