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Tue May 22, 2012, 10:06 AM

In Europe, Banks Get Bailed Out and Countries Get Austerity

While everyone's attention was elsewhere, last Fall EU members bailed-out Dexia bank. This bank, on paper, is worth more than the GDP of Greece. Apparently, that makes it somehow more deserving. For Dexia, it is business as usual and billions of Euros to stay afloat (this is in addition to what the bank received in the 2008 bailouts):

The bailout plan for Dexia came after German Chancellor Angela Merkel and French President Nicolas Sarkozy agreed Europe's crisis-hit banks needed to be recapitalised.

Dexia also secured state guarantees of up to 90bn euros to secure borrowing over the next 10 years. Belgium will provide 60.5% of these guarantees, France 36.5% and Luxembourg 3%, the bank said in a statement... http://www.bbc.co.uk/news/business-15235915


Meanwhile, Greece was being forced into austerity:

Euro zone finance ministers agreed a 130-billion-euro ($172 billion) rescue for Greece on Tuesday to avert an imminent chaotic default after forcing Athens to commit to unpopular cuts and private bondholders to take bigger losses.

The complex deal wrought in overnight negotiations buys time to stabilize the 17-nation currency bloc and strengthen its financial firewalls, but it leaves deep doubts about Greece's ability to recover and avoid default in the longer term.

After 13 hours of talks, ministers finalized measures to cut Athens' debt to 120.5 percent of gross domestic product by 2020, a fraction above the target, securing a second rescue in less than two years in time for a major bond repayment due in March... http://www.reuters.com/article/2012/02/21/us-greece-idUSTRE8120HI20120221


During the 2008 crisis, Dexia borrowed nearly $60 billion from the US Federal reserve to stay afloat:

Since Dexia had a New York banking office they were eligible for various bailouts from the US Federal Reserve. At its peak Dexia had borrowed $58.5 billion... http://en.wikipedia.org/wiki/Dexia


Additionally, it wasn't just 'simple' banking losses due to the downturn. A big percentage of their problem (read idiocy) was because they gave a pile of money to Bernie Madoff:

According to the financial services provider Bloomberg Dexia lost 78 million through the Ponzi scheme of Bernard Madoff... http://en.wikipedia.org/wiki/Dexia


Did Dexia deserve a second bailout after not doing the most basic due diligence?

Apparently, austerity is for countries, not the profligate and idiotic banks who created the mess.

Why am I not shocked?


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Response to JCMach1 (Original post)

Tue May 22, 2012, 10:08 AM

1. Good research - kick. nt

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Response to JCMach1 (Original post)

Tue May 22, 2012, 10:12 AM

2. Keep bailing them out and they'll keep doing it... n/t

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Response to JCMach1 (Original post)

Tue May 22, 2012, 10:15 AM

3. Wouldn't the conditions be worse than austerity if a countries banks collapsed?

 

It makes sense that you need to keep the banks functioning as a run on the banks is a HUGE problem. The entire system runs on confidence that paper assets have value.

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Response to dkf (Reply #3)

Tue May 22, 2012, 10:23 AM

4. My point is not about keeping essential banks afloat,

but the punitive measures placed upon countries...

Where is the punishment for the banks? Their austerity?

No, for them, it's business as usual.

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Response to JCMach1 (Reply #4)

Tue May 22, 2012, 10:35 AM

7. Shareholders got wiped out.

 

LONDON/BRUSSELS (Reuters) - Dexia SA (DEXI.BR) shareholders have been left holding little more than an option -- of dubious value -- on the sale of a few remaining orphan businesses after the weekend bailout of the Franco-Belgian bank.

Belgium paid 4 billion euros ($5.5 billion) for the failed bank's healthy domestic arm, leaving the Dexia listed group with a number of smaller units, as well as a large bond portfolio in need of a government life support system.

This listed entity has been dubbed a "bad bank" that will gradually be wound down. Bankers say any gains from the sale of the remaining units would be likely to go toward propping up capital levels, or be needed to pay for funding guarantees, leaving little for shareholders.

http://mobile.reuters.com/article/idUSTRE79A3G320111011?irpc=932

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Response to dkf (Reply #7)

Tue May 22, 2012, 11:41 AM

9. Follow the money and see who got wiped out...

I doubt it was the likes of Goldman Sachs, or the Qataris. More likely pension funds and small individuals...

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Response to JCMach1 (Reply #9)

Tue May 22, 2012, 12:57 PM

16. It's an equal opportunity thing...all shareholders got hit.

 

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Response to dkf (Reply #3)

Tue May 22, 2012, 10:29 AM

5. Yeah banks need to keep functioning............

but they don't need to be bailed out. They need to be BOUGHT out at the market rate of their assets during the slump and run for the people, NOT shareholders. IOW, nationalize the fuckers. Then run them for the people at cost, NOT for profit. This would put the pressure on the shareholder owned banks to keep their costs down.

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Response to socialist_n_TN (Reply #5)

Tue May 22, 2012, 12:55 PM

14. Dexia shareholders were wiped out.

 

See my post above.

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Response to dkf (Reply #3)

Tue May 22, 2012, 12:00 PM

13. No. Austerity is the worst possible option.

 

As you can tell in Europe, a collapse is coming anyway.

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Response to JCMach1 (Original post)

Tue May 22, 2012, 10:31 AM

6. Madoff was 1/600th of Dexia's issue. Not a "big percent." nt

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Response to Dreamer Tatum (Reply #6)

Tue May 22, 2012, 11:42 AM

10. Just an example of the deals they were doing though...

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Response to JCMach1 (Original post)

Tue May 22, 2012, 10:38 AM

8. Same with Josef Ackermann and Deutsche Bank

And his has been one of the most insistent and influential voices in Europe demanding austerity.

http://www.democraticunderground.com/?com=view_post&forum=1002&pid=709813




K&R

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Response to suffragette (Reply #8)

Tue May 22, 2012, 11:42 AM

11. Exactly

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Response to JCMach1 (Reply #11)

Wed May 23, 2012, 02:53 AM

18. Great work you did pulling that all together JC

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Response to JCMach1 (Original post)

Tue May 22, 2012, 12:00 PM

12. The officers, directors, and the board members need to pledge their personal fortunes

when they receive a bailout. This would prevent the need for another bailout b/c they would be more conservative with their gambles if they are risking all their own money.

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Response to JCMach1 (Original post)

Tue May 22, 2012, 12:56 PM

15. It's not just in Europe my friend n/t

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Response to JCMach1 (Original post)

Tue May 22, 2012, 01:07 PM

17. SOMEBODY has to pay for this big party

You don't think the Big Financial Boyz got wealthy by paying for their parties themselves? No, the cost gets heavily socialized while the profit is heavily privatized. And after another round of fiscal malfeasance, don't you DARE even think of firing any of the bad actors, and as for any re-regulation or strings to be attached as a condition of the bailout, well, fuhgeddaboudit. These job creators and masters of the universe don't need any of you tyros looking over their shoulder while they call fabulous new worlds of wealth into being through sheer willpower.

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