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TARP vs EFSF

Tyler Durden's picture




 

From Peter Tchir of TF Market Advisors

The best analogy I have heard so far about today's European Solution is that EFSF is being asked to do a lot of what TARP did for the U.S.  I cannot disagree with that assessment.  The EU is clearly pushing it well beyond it's original design. 

The question that remains to be answered is, who would fund the EFSF?  There are stories that EFSF might buy assets from the ECB at cost.  It is clearly going to lend to countries at rates that are massively off-market.  It may buy debt in the open market?  It may recapitalize banks?  I am not sure it can have such a broad mandate and get the rating it needs or to get outside investors.  What private investor would have lent to TARP? 

I think for this program to work, Germany and France will have to suck it up, skip the whole CDO methodology and just fund the EFSF directly.  TARP only worked (or got the money it needed and was flexible enough) because the U.S. government gave the treasury carte blanche to do what they wanted. 

I doubt private investors will lend money to the EFSF with the carte blanche mandate.  If the CDO and guarantee charade doesn't work, will Germany in particular, step up and fund it directly?  Is there the political will?  Lots more to figure out as the details are announced - but it is worth keeping in mind that so many other proposals didn't work because the people making the proposal hadn't involved all the concerned parties.  In the meantime other countries must be figuring out how to access some of that 15 year 3.5% money.

 

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Thu, 07/21/2011 - 13:48 | 1477833 Ahmeexnal
Ahmeexnal's picture

dumb vs. dumber

Thu, 07/21/2011 - 13:54 | 1477857 wsmith
wsmith's picture

Let's look on the bright side.

The sky is falling.

However, we are still free to watch the lovely Becky Quick and rub one out from time to time.

In fact, I am gently fondling my proletarian farm tool as we speak.

Just thought I'd share.

Anyway, so long.

And God bless all you Marxist cocksuckers.

http://geraldcelente.proboards.com 

Thu, 07/21/2011 - 13:49 | 1477839 No Bid
No Bid's picture

goodbye equities

Thu, 07/21/2011 - 13:50 | 1477842 viator
viator's picture
Euro-Region Manufacturing Growth Weakens

"European services and manufacturing growth weakened more than economists forecast to the slowest pace in almost two years, adding to signs the euro-region recovery is losing momentum as the debt crisis persists."

http://www.bloomberg.com/news/2011-07-21/euro-zone-manufacturing-growth-...

Thu, 07/21/2011 - 13:51 | 1477845 Dr. No
Dr. No's picture

So if it is to work like TARP, can we expect the ECB to stealth fund many US banks??

Thu, 07/21/2011 - 13:56 | 1477870 TruthInSunshine
TruthInSunshine's picture

No, because Dodd-Frank fixed all of our problems.

 

 

/sarc

Thu, 07/21/2011 - 13:51 | 1477846 trampstamp
trampstamp's picture

Can't recall. did the dollar tank when TARP was released? Will the same happen to the Euro?

Thu, 07/21/2011 - 13:55 | 1477869 entendance
entendance's picture

July 21, 2011 Banking regulators refused to commit to releasing details of their investigations into illegal foreclosure practices by the nation's largest banks.
http://www.entendance.com/forums/viewtopic.php?f=6&t=791&p=18271#p18271

Thu, 07/21/2011 - 13:56 | 1477874 monopoly
monopoly's picture

Ridiculous. Gold is down 22 dollars from a life time high and they are selling. You have to laugh at the idiocy of what are called investors. Well, lets get rid of them and then we can base and move up to the next plateau.

The market rallies on the finality of 16 Trillion in debt that cannot be repaid. Beyond words I think even for Tyler.

All Aboard!!!

Thu, 07/21/2011 - 14:04 | 1477898 glenlloyd
glenlloyd's picture

grasping at straws

Thu, 07/21/2011 - 14:04 | 1477903 slewie the pi-rat
slewie the pi-rat's picture

but the european union is evolving

Thu, 07/21/2011 - 14:04 | 1477906 oogs66
oogs66's picture

paulson is happy because now if it goes bad he wasn't the only idiot..he has company and they did it after him

Thu, 07/21/2011 - 14:10 | 1477928 slewie the pi-rat
slewie the pi-rat's picture

paulson is happy he is not in the brig, waiting to hear the verdict from his treason trial. 

Thu, 07/21/2011 - 14:30 | 1478004 GoldmanSux
GoldmanSux's picture

Paulson is happy because he got to sell his entire GS stake tax free!

Thu, 07/21/2011 - 14:42 | 1478060 slewie the pi-rat
slewie the pi-rat's picture

not to mention the commemorative coins from the US Mint.  actually, they are not coins;  they are medallions.  they come in different sizes and there is a whole wonderful neocon assortment to collect and share with your friends. 

Thu, 07/21/2011 - 14:11 | 1477935 Nedly66
Nedly66's picture

Seriously where is this money going to come from? The ECB is raising rates to fight inflation and now they are going to print a bunch of Euros to fund the EFSF?

Thu, 07/21/2011 - 14:44 | 1478075 Al Huxley
Al Huxley's picture

Same place all money comes from now, digital printing press. Its the cornerstone and foundation of all prosperity. I mean, seriously, who doesn't like to have more money.

Europeans are probably feeling pretty foolish now about causing all that angst and fear over possible default when all they had to do was whip up a few billion.

Thu, 07/21/2011 - 14:14 | 1477948 tom
tom's picture

This guy hits it on the nose. Everybody and his lame dog is rallying on this Eurogroup deal, despite nasty PMI numbers out of China and Europe, and nobody's asking yet, how is the EFSF going to get that AAA rating?

The answer is, only if the EFSF is greatly expanded while setting a strict limit on its spending/lending to far less than its total capital. The limit won't be nearly enough to rescue Spain or Italy, but the total capital will be plenty to weigh on the creditability of the rest of Europe. And will Spain and Italy have to contribute to this EFSF expansion? Looking for the moment to put those Euro bank shorts back on and I think it's coming soon.

Thu, 07/21/2011 - 16:02 | 1478488 Urban Redneck
Urban Redneck's picture

They did a good job of packing toxic crappy deals that even the major ratings agencies finally called junk into Maiden Lane and then slapped a AAA rating on it.  Voila - the bank balance sheets & capitalizations of the US FED member banks are fixed.  Unless something has changed from previous incarnations of Maiden Lane (and now rue des salopes), they have a remarkable tendency for recycling and tricking down the credit improvement right back to the privately owned banks. 

Thu, 07/21/2011 - 14:19 | 1477962 Re-Discovery
Re-Discovery's picture

I'll say it again 103 years later.  Merkel's Boner.

Thu, 07/21/2011 - 14:22 | 1477973 glepo
glepo's picture

JUST A STEP TOWARDS EUROBONDS!!!

Thu, 07/21/2011 - 14:30 | 1478003 tom
tom's picture

She basically caved and went in for a bunch of different fiscal transfers, some better disguised than others. Won't take the Germans long to figure that out. Some more local elections coming up in September.

But I'm more interested in whether Italy is supposed to help fund the EFSF expansion. Yeah that's how you stop "contagion", have the big, insolvent countries spend down more of their clout to fund bureaucratically selected "investments" in Greece, emergency bail outs of any failing bank anywhere in the Eurozone, and various other lovely things.

Thu, 07/21/2011 - 14:40 | 1478053 magpie
magpie's picture

A lost million is a crime, a billion a tragedy, but a trillion merely a statistic...

Thu, 07/21/2011 - 14:40 | 1478054 economists_do_i...
economists_do_it_with_models's picture

Q: What happens to Greek CDS with this so-called arranged partial/temporary default??  Do they pay off or not?  This nightmare is far from over...

Thu, 07/21/2011 - 14:47 | 1478085 falak pema
falak pema's picture

The solution to Euro currency dilemma is a two tier system. One euro currency between two structurally different economic blocs is not feasible. Plus there now urgently has to be fiscal discipline and euro bonding. Now that the EU has gone totally central planned, they might as well go the whole hog and get it streamlined into a lean mean structure, with the south going thirty percent lower than northern currency peg. I don't know if they can save the banks in the meantime from a truly deserved wash out for being sons of Wall Street in the real estate bubble in Spain, Portugal, etc.  The current political framework makes this scenario political pipe dream. There will be much more pain ... like elsewhere.

Thu, 07/21/2011 - 15:07 | 1478210 Temporalist
Temporalist's picture

I thought it was EFFS...Euro?!?! For Fucks Sake!!!

Thu, 07/21/2011 - 15:11 | 1478232 Everybodys All ...
Everybodys All American's picture

This reeks of an IMF bailout funded by the US tax payor. How else can yo explain dollar weakness and euro strength.

Thu, 07/21/2011 - 15:27 | 1478238 Curtis LeMay
Curtis LeMay's picture

Tyler,

>There are stories that EFSF might buy assets from the ECB at cost<

I just came in from ths sun and a tough day at the beach; so forgive my request for clarfication, and whether I am missing the bloody obvious...

WHAT assets? What real assets does the ECB have? The gold it holds on behalf of eurozone countries?

That's the only assets I know of. Shit, all the other "assets" are almost worthless euro-junk bonds from Greece, Ireland and Portugal. True?

Thanks

Thu, 07/21/2011 - 15:19 | 1478278 economists_do_i...
economists_do_it_with_models's picture

They said this is a 1 time offer for Greece only that will NOT be extended to other countries.  So the whole thing will just blow up again when one of the other troubled countries has a mini flare up.  Surging Euro is a *hoot*.

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