European banks face an entirely new wave of losses in coming months not yet calculated in any government bank rescue aid to date. Unlike the losses of US banks which derive initially from their exposures to low-quality sub-prime real estate and other securitized lending, the problems of western European banks, most especially in Austria , Sweden and perhaps Switzerland arise from the massive volumes of loans they made during the 2002-2007 period of extreme low international interest rates to clients in eastern European countries.
The problems in Eastern Europe which are just now emerging with full force are, if you will, an indirect consequence of the libertine monetary policies of the Greenspan Fed from 2002 until 2006, the period where Wall Street's asset backed securitization Ponzi Scheme took off.
The riskiness of these eastern European loans is now coming to light as the global economic recession in both east and west Europe is forcing western banks to pull back, refusing to renew loans or 'rollover' the credits, leaving thousands of borrowers with unpayable loan debts. The dimension of the eastern European emerging loan crisis pales anything yet realized. It will force a radical new look at the entire question of bank nationalizations in coming weeks regardless what nice hopes politicians in any party entertain.
Moody's Rating Service has just announced it 'might' downgrade a number of western European banks with large exposures to eastern Europe. On the report, the Euro fell to 2 and a half month lows against the dollar.
LINK HERE
Main Street News Reporting:
Foreclosures: 'Worst three months of all time'
LINK HERE
That is one good thing about this crisis is that it has exposed a lot of Ponzi. However, I doubt that these schemes are big enough to bring down the entire financial system. Banks recently have been posting record profit and with the stock market soaring and assets gaining in value, banks will have a stronger balace sheet to adsord the loses from those Ponzi Schemes.
ReplyDelete6:20 the banks are posting record profits? They are collecting profits from gov't bailouts. The market is going up because 70% of the trades are the US GOVERNMENT! This has already been proven and articled. Earth to anon! Come in please!
ReplyDeleteAnd they all thought that WE were the only one's with problems, just goes to show the far reaches of the banksters
ReplyDeleteIt sure must be hard for the banks to post profits when they are handed 100s of billions of our tax dollars without oversight or control.
ReplyDeleteThe Dow hit 10k because JP Morgan made huge profits. No kidding! Give my small business stacks and stacks of cash for doing nothing, let me rob my neighbor legally, and I'll be floating in profits galore.
It is all going to fall. The only ones on top of the pile will be the banksters who engineered to collapse in the first place.
6:20 if memory serves me, the entire financial system basically collapsed a year ago... The only reason it has continued is that the government stepped in and saved it by spending/printing an unheard of amount of money. I doubt they will be able to do it again when the next crisis happens.
ReplyDeleteOne issue overlooked regarding the european bank crisis would be the lack of will and cohesion when it comes to the inevitable bailouts.Considering that the EU is comprised of sovereign states , albeit with a central bank, will there be enough of a concensus to co-ordinate a rescue without possibly tearing the community apart.
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