Let's Play Ball....

The meltdown in American banks in the past weeks, which resulted with a request of US$700 billion bailout fund from President Bush, was  not fully felt by the European counterparts earlier on. 

This week, suddenly saw cracks in banking sector in Europe started to appear. Two huge European institutions have been rescued - Fortis and Dexia - the Irish Government has moved to prevent a run on its banks by unilateral guarantee of all bank savings on Tuesday and now the Italians are facing a crisis at UniCredit. The explicit guaranteed irked  The British Bankers’ Association, which represents high street banks, said that the move was anti-competitive…..??

Rumors among the banking circle that European banks are in worse shape than one in the US. That is plausible because they are more highly geared (ie, have less equity for every dollar of assets on their balance sheet), so their ability to take losses or writedowns is weak. During the subprime mortgage scandals started surfacing most European banks denied any heavy involvement but it appeared that they were also active buyers of the toxic US mortgage-related paper, particularly the late-in-the-cycle, really yucky stuff. And some also have exposure to overheated domestic real estate markets, most notably Ireland, Spain, and England.

On the 1^st of October, The Times reported that the French President’s Sarkozy is putting pressure on UK's Prime Minister Gordon Brown by floating an ambitious plan for a Euro 300 billion (GBP237 billion) bailout fund to rescue crippled banks across Europe. It appears to involve the creation of a Europe-wide emergency fund that would be used to prop up banks when national governments are unable to intervene. This idea has plenty of support in Britain since Uk is faccing mounting pressure on its own banking industry but Germany opposed it.

Angela Merkel, the German Chancellor said that Germany could not and would not issue a blank cheque for all banks, “regardless of whether they behave in a responsible manner or not”.

Amid the confusion and passing the buck around between governments, France at first pretend not to know about the proposal but later admitted by referring that  the figure of Euro 300 billion  had come from the Dutch Government. Officials in The Hague said that they had no idea what the French were talking about….Oh…oh Let’s play ball….The European Cup  is on...

The calls from France are nevertheless curious, since  UBS is the European bank that is on most observers' short list of financial firms that look to be at risk of real trouble, and much of the Spanish banking system has been on near-life support from the ECB. However, BNP Paribas is a major derivatives player, so they could have taken big hits on the Lehman failure, and SocGen took its well-covered loss from rogue trader Jerome Kerviel.

In many ways, Europe's problems are a bit problematic. Many of Europe's top banks are much bigger in relation to their home country's financial resources than in the US. For example, HSBC is huge outside UK especially in Asia in relation to its domestic operation in UK. They have many  significant cross-border operations, which makes co-ordinating rescues a hazardous task. Just look at the rescue of Fortis…more than three European countries was involved.

We have the European cup..what’s next? .. Asian Cup!!!

The Limp stated the day before Raya that our economy is doing fine despite heavy fall in the local stock market…..Let see who is going to start the ball rolling here…maybe not the soccer balll…..it is the dice at the roulette table at Genting.

As for me…..just breezing by  the Rush Hour is not much fun as reading and analyzing the economic mess being perpetuated by the greed and arroganze  of the Big Bank with a supporting role of the political leaders. The fun is back …(Oh oh..not Fund).. since the 1996 Asian Monetary Collapse.