ECB Emergency Overnight Borrowings Near Record For Third Day In A Row

Tyler Durden's picture

As was reported on Saturday, the culprits for the surge in borrowing on the Marginal Lending Facility have been supposedly identified, with Ireland once again to blame. The flawed explanation provided was that insolvent Irish banks are paying an extra 75 bps in interest just so they have access to capital on a day's notice (as opposed to a week) as they unwind their collateral. Needless to say, we are skeptical of that "explanation." And judging by the fact that today total borrowing on the MLP, while still near record highs, dropped by €2 billion, without any news of collateral unwind to free up asset sales by either Anglo Irish Bank and the Irish Nationwide Building Society, puts the credibility of the FT source at question. What is without doubt, is that borrowings on the MLP will persist for a long time, as was insinuated in the original piece. After all the whole point was to make this latest outlier event "priced in."

Updated borrowings on the ECB's MLP:

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hugovanderbubble's picture

China Tyler,

China diversifying USD into EUDebt...

Incredible but its the only reason for explaining EURUSD at 1.36x when must be at 0.96

ConfusedIdiot's picture

Agreed. But doesn't purchase of EU by selling of UST mean someone else "bought" dollars to acquire China interest? Maybe BB? Regards, CI

gwar5's picture

The EU and ECB creeps me out anyway.

Oh regional Indian's picture

One hears that the irish banks are involved in a massive circle-jerk, lending each other their borrowed/fractional reserves as collateral for more loans. 

Probably the equvivalent of the Treasury/Fed circle-jerk.

More circles and jerks in the EU mess, is all.

Curious thing would be to see ECB exposure to UST. Anyone remember the the iinfinite swap/liquidity window, where the FED gives the ECb money to buy some more US Guilts? ;-)



Zero Govt's picture

EU and ECB plan to "stop contagion" going very well isn't it?

Euro-Meltdown Bitchez 

dick cheneys ghost's picture

UK prime Minister proposes public sector "revolution"

Going Loco's picture

He didn't use the "R" word. I searched for it thinking I could hang a joke on it. But the "R" word isn't there.

Zero Govt's picture

yes David 'call me twat' Camerons plan has shifted from State run monopoly socialism (NHS, education etc) to State managed public-private monopolies better known as Fascism began with Thatcher with carving up State sectors into State licensed private monopolies... if you want to see how this works look at the total fuking bollocks that is the trains and tubes

Cameron hasn't got an f'n clue (ex Barclays bwanker) the Eton Marxist (see wife) was born a village idiot

bullchit's picture

'And the trains before Thatcher were the "Pride of Europe" I suppose.



DrunkenMonkey's picture

Hmm, India are still using the trains we made in the 50's so they can't be that bad ..


topcallingtroll's picture

If the explanation is false then are they borrowing to pay bills due to lack of cash flow? How often can they do that before someone figures it out, if that were the case? Shouldnt they just fire a huge number of employees instead?

AN0NYM0US's picture

amidst all the gloom talk this on the front page of Naples (FL) news

The multimillion-dollar project will include more suites for his hotel across the street, the Inn on Fifth, which during the past three months has experienced some of its best occupancy rates in its 14-year history.


He sees other promising signs on the street, including an improvement in vacancy rates, which he estimates have fallen to 5 percent from 20 percent a few years ago.


“It’s all going in the right direction,” McCabe said.

“We are on the other side of this recession,” he said. “It’s time for something like this. Fifth Avenue needs this kind of investment.”


He planned to start the project a few years ago. It will span 38,000 square feet.

“Obviously, everything was put on hold because of the bursting bubble,” McCabe said. “But I think now is the time because of the improving economy to move forward on this.”


His timing for the project is also driven by the fact that he’s found a national tenant as an anchor: JPMorgan Chase bank. He recently finalized the contract.


While I don't buy this extend and pretend "recovery" the vast majority of people I speak with do -    the resilience of the American consumer is breathtaking (this article which I posted yesterday 

Wake up, Americans. Your economic dream is a nightmare)
hardcleareye's picture

Thanks for the Naples link, interesting read.  I wonder what McCabe had to put up for equity to fund the new construction?  I wonder how much of the project will be "owned by JP Morgan"?  I doubt this project will ever make "real" money.....  lots of risk...

Twindrives's picture

Need a Loan?

Call 1 800 Fed Reserve.........Ben's client services represenatives are waiting to take your call.

Call Today.

Innocent Bystander's picture

Thanks for this.

The unexpected price explosion in PMs, especially silver is a piece of this puzzle. Have you given this a thought, the Morgue is not the only one with its pants down, but many others both here and most definitely in Europe, who have followed a leader in banking in defining their strategy. - goodluck! IB


jmc8888's picture

LaRouche was saying that in advance of the vote, the treasury stopped the wheels from turning on the bailout. (which means in my estimation that they are now having to go out into the market....err...ECB overnight facility to get it done)

So in essence the bailout right now is stopped, and would continue (in what form) based on the elections.



"IRELAND: The wildly unpopular Cowen government's Finance Minister, Brian Lenihan, has postponed the release of 10 billion euros in government funds to bail out the desperately bankrupt Irish banks, including the Inter-Alpha group's Allied Irish Banks, saying that this government doesn't have the political room to proceed, and that the release has to wait until after the upcoming Feb. 25 elections. Lenihan said the IMF and the EU had approved this decision, but the Irish Times reported the contrary, that they were very angry at the move."

Perhaps this?

BustaKeaton's picture

There has been a bank applying to late for ordinary lending and they had to eschew to the marginal lending fac. No idea which Bank it was...


Quaderratic Probing's picture

 LEPER- CONS I suspect

hooligan2009's picture

this from the bank of englands website today...lots of complicated formulae to explain how to make money out of sovereign defaults but interestingly the paper crosses into the influence of politics via "lobby power".

Anyway, it's drier than the Gobi desert, but I thought I would slot it in here in case anyone still drinks martinis that way.

47 pages of economic theory beloved of the pencil heads working for central banksm check this out on page 41:

Result 12

The observed patterns of implicit seniority between bilateral lenders, multilateral agencies and private lenders might distort the incentives of the parties to contribute to penalties. Trading bilateral and multilateral loans in the secondary market would assure that penalties are maximised even in the presence of implicit seniority.

this from the intro on page 4:

The resolution of sovereign debt defaults is a complex process. For instance the last Argentine default took four years to settle and over 140 lawsuits were filed against the sovereign. In order to lessen these problems, the international community has been discussing the so-called ‘contractual approach’ to sovereign debt crises. In short, this approach suggests that debt contracts should include additional provisions to facilitate the resolution of defaults. Two of its main innovations are collective action clauses (CACs) and seniority clauses (SCs). A CAC is a supermajority voting rule to change the payment terms of a contract. For example, 75% of creditors could impose a decision on a dissenting minority; in the absence of CACs unanimity would be required. Their policy purpose is to improve creditor co-ordination. SCs establish a priority rule to repay debts in the event of a default: junior debt is not repaid until senior debt has been repaid in full.

and this from the conclusions on page 27

Having CACs in place, it is shown that pro-rata and SC contracts do not necessarily yield the same level of repayment. Depending on asset distribution, the adoption of SCs can depress or raise repayment. Secondary markets have an adverse effect on repayment in the absence of CACs since they promote holdout behaviour. Conversely, if CACs are ready to deter litigation, secondary markets maximise repayment and make repayment invariant to the introduction of SCs.

Buck Johnson's picture

Things are coming apart and you are right, the Irish banks are loaning to each other worthless fractional reserve loans and then using that as collateral for ECB and US loans.  And on top of it all, they printed back months ago billions in German Euros to stop gap a hole in their banks.  Ireland is about to go under.

Itsalie's picture

Without chinese and jap buying the euro must be closer to 1.0 than 1.5 - these eastern friends are at once trying to stop Ben from printing all his hell notes to eternity by holding up the euro as an alternative reserve, YET at the same time trying to hold down the RMB and JPY for the benefit of their exporters by buying more US treasuries via London. The threshold lately seems to be 1.33-1.34. They will end up with hell notes from Ben and more hell notes from ECB, all worthless!