Greetings Your Honor ~ are you assigning an air of decency (relatively speaking) to this elite layer of life? Do they really think like that in this day??

The timing of this (Golem’s) post is spectacular for many reasons, including its coincidence with the recent PR splash from the NY Fed that the Maiden Lane LLC’s (I,II,III) loans have been repaid in full and significant profits have been realized from MBS Assets sales – a boon to US taxpayers !

As I am sure you know/ have read, there was great demand for these “Assets” (some how the toxicity evaporated from them in the womb of the Maidens…) and various institutions were eager to take them on, etc. etc… If one takes it all on the surface, the Maiden Lane formations and accompanying innovative facilities was a brilliant stroke of financial genius that the general public should be thanking their leadership for !!!

In my simplistic view it seems that what is happening in the EuroZone is a Europeanized replay of events in the USA from a few years ago … with different players at the helm of similar but more numerous institutions with different names under different regulatory frameworks where the too big to fail entities are not only Banks but Sovereigns as well…

The end result will be the same as in the USA – a boon for the taxpayers of Europa !

I do not understand what you mean by ” it would make money wealth worthless if all sovereign nations did it…”

Are we really talking about ALL Sovereigns at this juncture of a select few?

Are you referring to the fundamental differences between the $ and the € and whether the € survives in its current form? In my ignorance, I guess I am assuming that all of the facilities that have been created on both sides of the Atlantic to backstop the € and the EZ up until now, as well as those currently proposed, will form the special purpose vehicle(s) for the offloading of impaired assets (i.e. …ESM, EFSF, HFSF (Greece)…) and the ongoing management mechanism(s) of those “Assets.”

I realize that by the time I replied to your post the Golem has been very productive and added 3-more posts – so if you wish to reply in whatever the current thread might be , I shall look for you there as well …

Best wishes to all …

NAMA is probably the best case study. I have no doubt it was an EU, not an Irish, creation from the start. The Irish Government, this one, the previous one or any future one, is merely the handmaiden of its EU masters.

Everywhere you look here in Ireland you see NAMA-owned properties. If it is abandoned, half finished, empty, ugly, you can be sure it is owned by NAMA. We no longer talk about bank-owned properties. The banks are in the clear. Their balance sheets are now free of toxic assets. They have been “recapitalized”!

No wonder we Irish call NAMA “nama from heaven”. At least we still have our sense of humour.

So, if it works in Ireland, why not in Spain, Italy, Greece, everywhere? It seems that under current law there is no definition of what the ECB can “invest” in, so long as its stated purpose is to “stabilize” bond markets in the interest of the Euro. That is the ECB remit.

Short-term securities derived from “bad bank” assets, no matter how toxic, are therefore legitimate. They can call the bonds by any name they wish and roll them over as often as they like. So long as they are derivatives, as we have all learned, you don’t have to worry about how many times you encumber the underlying asset. You create a new “asset” with each new derivative.

And they can disguise the “bad bank” by any fancy name the spin artists come up with. NAMA was pretty good. Ahead of its time maybe. It certainly has taken the spotlight off the Irish banks – and off the Irish Government. Nama from heaven – that it is.

Morning Pat,

That’s a really interesting idea. Hadn’t thought of it. But now you’ve sown the idea…

On the face of it I think you could be on to something. To bail out the banks the ECB must require collateral. They have loosened their requirements so far already there isn’t much more they can accept. Virtually all the assets, even pretty bad ones, are already encombered. And that is a major problem for all the crooks concerned.

The ECB can’t bail out sovereigns direct.

But it is clear there is a conscious move to give the ECB more power and power separate from and outside of the democratic powers of nations and the EU itself.

Seems clear to me they are legislating powers to the ECB in order to create a financial union by default. A financial union will force a political one without having to wait for any pesky ‘yes’ votes.

I think it is quite possible that an empowered ECB would abrogate new powers to itself one of which they would justify in terms such as … “to issue new debt for the purpose of supporting systemically essential transnational financial structures.”

Some such nonsense would allow them, as you say, to get around natinal parliament obstructions and to directly support a network of bad banks.

Could be done. The IMF could also support it with its own bonds.

Yep. Makes a hideous sense.

Hello Thomas Fowler,

Welcome. There are quite a few readers from Spain who come to the blog but few who comment. So thank you. It is tremendously valuable to hear anything from those who live in the countries we read about. I try not to get things wrong but I am sure I do. Having someone who can verify or correct what we are thinking is great.

Please do comment again any time you can.

As for a revolution on the streets of anglo-saxon land …well I think you give us too much credit. We are slow to rile and too many of us have what I calll Headmaster syndrome – a childhood inculcated fear of authority.

Still, I agree with you. There is only so far people can be oppressed before enough of them withdraw consent and then things get ugly.

Do you think the ECB may be encouraging the use of “bad banks” in order to get around the German Constitution problem? Would the setting up of “bad banks” in Spain create a workable pipeline from Frankfurt to Madrid? Could this be Draghi’s ‘whatever it takes’ solution?

If the “big bazooka” bond purchase that he wants to announce were 3 year short-term “investment” bonds in various “bad banks”, would he be within current law?

Remember ‘whatever it takes’ includes lying. We know they would have to be rolled over in 3 years. He has to come up with something – and quick.

Phil T – the 1% can’t have that, it would make money wealth worthless if all sovereign nations did it.

The price must be paid in order to afford it substance and appear to give it legitimacy.

Hello Bill40.

I hope life finds you and yours well and happy. Always good to hear from you.

Always good to get your thoughts and perspective from inside China. It is a danger commenting for those of us who are so far outside.

Ah, that’d be then I suppose. As a state the Chinese automatically suppose they can afford anything and everyone believes them. China also assumes that other governments can too, its’ achilles heel.

All the costs of big finance are shouldered by the state. If I tried to explain otherwise no-one would belive me and rightly so. Am I becoming blinkered in my thinking living in China?

I think not.