Dexia Rescue Moves Bank Crisis From Europe’s Periphery To Core!
- The financial tsunami is getting closer and closer. The sheeple are still asleep. Things are about to blow up and its ramifications unpredictable. Gold and silver look pretty cheap. Make sure you get out of harm’s way!
Dexia Rescue Moves Bank Crisis From Europe’s Periphery to Core
By Gavin Finch, Liam Vaughan and Anne-Sylvaine Chassany
Less than three months after Dexia SA (DEXB)got a clean bill of health in European Union stress tests, France and Belgium are considering a second bailout, moving the banking crisis from the continent’s periphery to its heartland.
“We’re seeing a practical example of contagion playing out,” said Jean-Pierre Lambert, an analyst at Keefe Bruyette & Woods in London, referring to Dexia’s “material exposure” to the debt of countries on the EU’s rim. “Investors aren’t quite sure what the sovereign debt losses will be, nor where the share price should be. They are concerned about the risks and reduce their funding.”
Dexia shares fell 22 percent yesterday, the most of any company in the 46-member Bloomberg Europe 500 Banks and Financial Services Index, even as the French and Belgian governments pledged to support the bank. The two countries, which bailed out Dexia in 2008, will take “all necessary measures” to protect clients and will guarantee all of Dexia’s loans, French Finance Minister Francois Baroin and Belgian Finance Minister Didier Reynders said in a statement yesterday.
Yves Leterme, Belgium’s prime minister, said yesterday that a “bad bank” to hold Dexia’s troubled assets will be set up. The board of the Paris- and Brussels-based municipal lender met Oct. 3 to discuss a breakup of the bank after the sovereign debt crisis reduced its ability to obtain funding, said three people with knowledge of the talks.
U.S. stocks rallied at the end of trading in New Yorkyesterday, driving the Standard & Poor’s Index up 4.1 percent in the final 50 minutes, amid speculation EU officials are examining the need to recapitalize the region’s banks.
Investors are shunning European lenders, whose shares are down 36 percent this year, on concern that the sovereign debt crisis has undermined their ability to fund themselves. U.S. money-market funds cut their holdings of commercial paper sold by foreign financial firms, mostly European, by 31 percent in the third quarter, according to data compiled by Bloomberg.
The European Central Bank has been providing banks with as much short-term euro funding as they need at its benchmark rate against eligible collateral since October 2008, after the collapse of Lehman Brothers Holdings Inc. triggered a global recession. It has been forced by the debt crisis, spreading beyond Greece to Italy and Spain, to extend those measures and in August reintroduced longer-duration, six-month euro loans.
The ECB also joined with the U.S. Federal Reserve and other central banks on Sept. 15 to lend dollars to euro-area banks with three-month loans to ensure lenders have enough of the currency through the end of the year.
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