I stand corrected. And still ...

I stand corrected by a reader of the Stg. 300 billion owed by Bradford and Bingley in the UK. I confused some of the statistics in my head ... B&B is "only" Stg. 50 billion, and the "300" number came from the (now disavowed) E 300 billion proposed by France as a bailout fund for ill-tidings to come.

Strange, how 50 billion pounds sterling is somehow not so bad now. We are talking about almost $90 billion. And the fact that Congress slipped a quickie $25 billion for guaranteed loans to U.S. automakers is hardly news. Consider what that would have been greeted with but one year ago ... 25 BILLION. Just so that our moribund and incompetent auto makers can regain some semblance of competitiveness. And it won't work: Detroit has managed to screw every opportunity that has come its way, so why should this be any different? They had a decade of fat years during the SUV craze to develop engines for leaner times, to retire debt, to fund pensions ... but what did they do? Pad the quarterly report. Squander development funds on increasingly ludicrous vehicles.

So I guess, $90 billion for a bank whose primary function was to lend to U.K. home buyers is not that shocking. I mean, consider California -- maybe a bit bigger in land mass than Britain, maybe a bit more in GDP. If you take California and consider how badly it has pooched itself in the past 5 years, why can't the Brits have a little cesspit of their own? 

But all this wonderful dog-poo is just an Anglo-American problem: German Finance minister "Peer Steinbrück [l]ast Thursday ... told us that the financial crisis was an "American problem", the fruit of Anglo-Saxon greed and inept regulation that would cost the United States its "superpower status". Pleas from US Treasury Secretary Hank Paulson for a joint US-European rescue plan to halt the downward spiral were rebuffed as unnecessary. (Daily Telegraph).

And we know that the Germans are never wrong, ... right? Four days later Herr Steinbruck was bailing out Hypo (Real Estate), a Bavarian concern, to the tune of E30 billion. Chump change, again, although more than our little GM/Ford slush fund.  Herr Steinbruck also appears to have visited a re-education camp over the weekend ... "Europe," according to him, "was staring into the abyss." Really? I am sure that Mr. Paulson enjoyed your observation.

Within a day Fortis and Dexia were bailed out by their respective governments ... the Irish then guaranteed all deposits ... "someone" in France floated the idea of the E300 billion liferaft for Europeans banks.... The Euro-kimono had fallen open: the Euro sector banks have maybe more debt leverage than the Americans who were going under. Clever accounting prevents the Euros from the mark-to-market problem (which may be addressed here in the U.S. in the coming weeks), but the Europeans are clearly hypocrites at the very least.

It turns out that the French Finance Minister Christine Lagarde was the person who begged Mr. Paulson to save AIG. The reason: AIG had written $300 billion in credit default policies to French banks. It was, she admits, for "regulatory capital relief, rather than risk mitigation." Translation: they bought the policies so that they could lend more ... extend the leverage.  If AIG had gone "tits-up" the French banking system could have gone under minimum capital water ... blub, blub, blub. That could set off an interbank lending catastrophe in Europe. Thanks again, Mr. Paulson. Raspberry to you, Mr. Steinbruck.

But what does all this mean for the Euro? Nothing good ... with Spain and Ireland in the deep doo-doo and the Germans staunchly in favor of holding tight to anti-inflationary measures, there are tensions that could force the Euro to the breaking point. Remember, for better or worse, the U.S. has a federal banking system with a single Treasury and a Federal Reserve system quite different from the hodge-podge of European banking. In Europe, each country can and does intervene for its own best interests, without regard for the effect of the other EU countries. When Ireland unilaterally guaranteed all deposits, it poked a huge hole in banks throughout the rest of Europe. Why keep your loot in the U.K. with a paltry 50K put option when across the Irish Sea it is all safe? Net: there is a virtual run on capital.

Spain is up to 11 pct unemployment and rising fast with the implosion of its housing market. Expect 18+ pct within 6 months are projects runout of money and balances on pre-paid work runs out. Because NOBODY will invest a cent into developments there right now. Will the Germans want to bail them out for the sake of Euro-solidarity? No, I thought not.