US, UK, and Germany Compete to Nationalize the Most Banks

by: Macro Man September 29, 2008 | about stocks: AIG / GS    

Macro Man

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Clink. Clink. Clink.

That sound you hear is the pennies dropping in Europe. While yesterday saw what appears to be an anticlimactic agreement in Congress on the format for the TARP, the real weekend news came from this side of the pond. What's the German word for "schadenfreude"*?

Where to begin? How about with Fortis, which last year decided it was a good idea to issue stock, which traded at a P/E of 9, to help finance its partial purchase of ABN Amro (ABN) (a virtually identical company), at a P/E of 17. The remainder of the purchase was funded by short-term debt....not exactly the best idea at the beginning of a credit crunch. The outcome? A problem so big that it takes not one, not two, but three governments to bail it out. So after Friday's nasty squeeze higher, Eurostoxx is on the back foot once again. The feel-good factor from the TARP already feels like a long time ago.

Meanwhile in Germany, the country's second-biggest commercial property lender has been supported by a shadowy cabal of other German institutions. It's a very European solution to financial crisis; it seems as if most institutions here don't bother to tell you what the crap they own is worth, so it shouldn't surprise that they don't bother to tell you who is saving their bacon. Hypo Real Estate's losses are being blamed on Ireland-based Depfa Bank; one wonders how the German Finance Minister will manage to blame this one on the Yanks. The market is voting with its feet; the front end of Europe, typified by the Schatz below, appears to be breaking out.

And here in the UK, the Gordon and Alistair show has added another property to its portfolio. The demise of Bradford and Bingley as a private sector concern is one of the least-surprising in recent memory. The UK government is acquiring quite a tasty portfolio....one wonders if they are trying to match George and Hank in the "my portfolio of nationalized turds is bigger than yours" competition.

Regardless, last Monday's surge in EUR/USD seems like a long, long time ago. Would it really surprise to see it back near recent lows by the end of the week? (For that matter, would anything surprise in this crazy market?)


Lest readers think that I am picking on Europe, Sunday's New York Times carries an interesting article on American-style kleptocracy. While the chicanery of AIG FP (AIG) is unsurprising to those familiar with them, the real talking point in the story was confirmation that Goldman (GS) (alone among financial institutions) was at the table when the AIG bailout was crafted. No wonder Warren Buffett is happy to invest in GS; where's your downside when they get to bail themselves out?

Hmmmm. What's the German for "crooked market"?

* This is a joke.

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This article has 7 comments:

  •  
    Sep 29 09:52 AM
    ITS A PANIC!!!


    SELL!!!
    Reply | Link to Comment
  •  
    Sep 29 10:08 AM
    EUR and USD are both paper currencies. This time it is Europe's turn to print money and bailout banks.
    You should ask yourself why the West has suddenly all these problem. Why not in Japan, China, Brazil?
    Difference is: we are in debt, there are in surplus.
    Reply | Link to Comment
  •  
    Sep 29 10:12 AM
    I see news of the imminent bailout package is having a wonderful effect on the markets this morning. Perhaps the Cramer effect is overwhelming the smart money.

    Sadly for most, the time to sell the market was November 2007 or June 2008. On the upside, selling now will probably get you the best price you'll see for quite some time, unless you hold assets based on precious metals.
    Reply | Link to Comment
  •  
    Sep 29 10:13 AM
    I wonder if we get a speculative attack on the pound as in 1992.
    Reply | Link to Comment
  •  
    Sep 29 02:20 PM
    Reap what ya sow !
    Reply | Link to Comment
  •  
    Sep 29 03:41 PM
    While China is adapting its regime to Capitalism, USA and Western Europe seem to be inadvertently embracing Communism.
    I wonder whether we will end up proclaiming "Viva la Revolución!". Strange New World.
    Reply | Link to Comment
  •  
    Sep 30 11:02 AM
    Wall-Street came back just fine today – But Lets don’t call it a Bail-out – But a Red Lip Pig.


    Or lets don’t call it the biggest scam on the American people ever – But lets call it – Saving Wall-Streeters – Once again – Having the American people pay for it.

    Or lets don’t call it a rip-off – but call it a war on terro’s.

    Ohh sorry forgot – it was G*d’s fault – He told them to scam everybody.

    Forgive them NOT – For they have known what they have done.
    Reply | Link to Comment
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