Europe's 'Bank Sector Involvement'

Tyler Durden's picture

Via Mark J. Grant, author Out of the Box,

How many European Union officials does it take to change a light bulb?
None. There is nothing wrong with the light bulb; its condition is improving every day. Any reports of its lack of incandescence are an illusional spin from the American media. Illuminating European rooms is hard work. That light bulb has served honorably, and any commentary not approved by the EU undermines the lighting effort.
One thing that is rationally learned from watching Europe is that what is said, what is fed to the media as fact, is often only factual in the minds of those that have created the fairy tale. Whether it is the debt to GDP ratios of the nations in Europe or the uncounted liabilities of a country or the loans to some bank that are recorded as investments and not liabilities; the drape of charade hangs resiliently over the entire spectacle. It is often a farce interwoven with a sham presented as fully cooked pie that is really half-baked and then we are all expected to eat it and rave about not just the recipe but the ingredients and the presentation. All well and good for the sheep and the herders leading them; but I have been to the top of Mt. Olympus and there are neither gods nor temples.
Now on January 30 the ECB will get paid back $182.2 billion from the European banks that borrowed the money in the LTRO operations. This is not 25% of the loans made, as touted in almost every headline, but about 10% of the loans outstanding as somehow it is conveniently forgotten that there were two loan packages totaling $1.3 trillion which were initiated in December 2011 and the second in February 2012. This is not two years ahead of schedule as headlined in the Press as about half of the loans ($655 billion) were made in the 2011 tranche. Let us begin then with a nod to accuracy and explore the rest of what we are told.
I have learned, over the last several years, that Europe is psychotic. They create an illusion, tell us that it is reality and then are angered when we question the validity of what we are told. This is not authenticity but pretense and this sort of pretense is concocted to lead you into places that no rational man wants to wander.
The interest rate, being paid by the European banks to the ECB is 0.75%, so one may rationally assume that no financial institution, in their right mind, would pay off such a loan for economic reasons. The banks cannot borrow on their own for three years at this level and so to pay them off early makes no economic sense. Yet they are being paid off and if it does not make sense economically then it must make sense for some other reason or reasons. If the agenda is devoid of common sense in its presentation then there must be a hidden agenda and a man working feverishly behind the curtains and manipulating the levers. Here it may well be the financial condition of the ECB itself which, without doubt, is stuffed with both loans and securitizations that given the wretched state of most economies in Europe, must be in very poor condition where the assets are only worth cents on the dollar or perhaps not even that if one considers the Real Estate markets in Greece, Spain, Portugal and Ireland. It is then quite obvious that the banks did not want to pay off the loans but that they were “encouraged” to do so for other reasons and one reason may well be to fund the ECB so that the central bank does not have to take on even more debt and inflate its own balance sheet as its assets values have deteriorated. Here we have a variation of the “Public Sector Involvement” which can be termed “Bank Sector Involvement” which may not cause losses on its face but which will certainly increase the funding costs for the European banks and so impair their balance sheets by the increased cost of funding which of course goes unmentioned in any European Press release and so uncommented upon by an accepting European media that blissfully accepts and willingly comments upon what it has been officially told.
“It is dangerous to let the public behind the scenes. They are easily disillusioned and then they are angry with you, for it was the illusion they loved.”
                 -W. Summerset Maugham
The Wall Street Journal, yesterday, published an article, “Europe’s Banks to Repay Aid Early,” which stated, “The data provide one of the clearest illustrations to date of the surprisingly swift healing of large swaths of the European banking system. It removes a major impediment to a gradual recovery of the broader European economy, which hinges on the health of its banks.” With great respect for the Journal I must say that they have it totally wrong. The banks, without doubt, will have higher funding costs in paying off these loans and less attractive balance sheets as a result and so it is neither Europe nor her banks that will benefit with the only possible beneficiary being the European Central Bank. All of this has been made possible not by healthier economies nor by particular cheaper funding rates for the European sovereigns or banks but by the continual and unobstructed flow of money created by the ECB and other central banks. The world has become addicted, like in Frank Herbert’s marvelous Science Fiction novel, “Dune,” where “The spice must flow.” Whether it is the global equity or debt markets, the troubled nations in Europe and even the economy in America; there is but one pillar supporting the construct and that is the printing of money and the use of the newly created pieces of paper that are supporting the various houses of cards where politics in America and on the Continent have no other answer other than to spew out money in such a torrent and at such a velocity that it puts Niagara Falls to shame.
The world seems devoid of politicians that sensibly lead though they have been quite adept at spending past what can be afforded. The worlds’ central banks have been left to pick up the bills. The balance sheets bulge, the quality of the assets, especially in Europe, deteriorate. More is spent, more money is created, the markets head higher, more money is created, there is no other answer or response than more new paper, more green ink, more blue ink, and the bubble is systemic and perilous and chock full of fiscal risks. Remember, this morning, what I have told you because there will come a time when you will wish that you had considered more carefully what I said.
“Try looking into that place where you dare not look! You'll find me there, staring out at you!”
            -Frank Herbert, Dune

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Motorhead's picture

Gold and silver, bitchez!

Dareconomics's picture

The mainstream media is yammering about how these loan payoffs are a sign of strength, and that is exactly why they are being paid off. The action is spin to affect the perception; the reality remains the same. The euro banks are overleveraged and will not be increasing private sector loans anytime soon.



espirit's picture

Blah, blah, blah, doom, gloom, blah, blah.

Jeez, these guys are all coming out of the woodwork now.

Prepping the sheeples for a takedown no doubt.

redpill's picture

I always thought the Spacing Guild was a good approximation of the international banking cabal. The appropriate merger of relevant intellectual culture with hard analysis is one of the reasons why I appreciate ZH so much.

Well that and tits.

Taint Boil's picture



Spacing Guild = Banker

Spice = Oil

Frank Herbert was a genius. I belive the sci-fi saga is a must read (well, after looking at some tits).

Ghordius's picture

This is a myth "The euro banks are overleveraged"
There is a reason why they appear so.

If you split the data in the old bank categories, Retail, Business & Merchant/Investment banks, you'll note much, much more Retail & Business banking in continental europe

and you'll note that corporations fund themselves much, much more through Business Banking loans instead of stocks & bonds, and need much less cash (also because of a different takeover culture). Most leverage is there, and politically it's very well entrenched. It's spearhed is the "Mittelstand" of europe, the medium-sized, often family owned businesses which could have had IPOs anytime, often back for decades.

No, this model is old and tested - leverage there is a completely differen sort of risk than elsewhere - it's misreprentation has more to do with how little US economic pundits understand europe (besides the UK). I suspect if an US commentator would analyze this properly and frankly he would note that this is similar to the "US middle class" privileges, or that this "Mittelstand", be it French, Italian, Austrian or German is politically as influential as the US Oligarchs at home that champion the MegaCorporation and so also the MegaBank model.

Exceptions prove this: the Monte Dei Paschi scandal is unearthing a lot of Business Loans to politically favoured parties for relatively small businesses. This has, alas, a lot more to do with politics in Siena (a "red" stronghold) than with the real risk behind those loans.

Yen Cross's picture

 +1 one Motorhead.  I feel like I'm on this <endless> " Merry-Go-Round". Inflation targets, and SNAP Cards.

  Must keep the serfs happy.


  The "Dune Series" is another paragraph. (
State Department refuses to delay F-16 Delivery to Egypt | Washington Free Beacon ) 

 Golf claps. At least it's a start?

bank guy in Brussels's picture

Speaking of Frank Herbert's 'Dune' ... its famous 'Litany Against Fear' is a great little incantation, worthy of these threatening times in which we live ...

Takes a rather Eastern religious approach but with an un-Buddhist conclusion, as in Buddhism the 'I' would also disappear as an illusion, along with the fear ... but still a terrific little bit of inspiration against the odds ...

« I must not fear.

Fear is the mind-killer.

Fear is the little-death that brings total obliteration.

I will face my fear.

I will permit it to pass over me and through me.

And when it has gone past I will turn the inner eye to see its path.

Where the fear has gone there will be nothing.

Only I will remain. »

- The Litany Against Fear of the 'Bene Gesserit' sisterhood,
from the novel 'Dune' by Frank Herbert

Dovetails well with 'The brave person dies once, the coward dies 1000 times'

Yen Cross's picture

You have had a "Litany", of good thoughts lately. I'm a liberal or you are a joy to read? I'm not liberal<

TBT or not TBT's picture

The French translation is remarkably courte:

Courage, fuyons.

TBT or not TBT's picture

I'm betting the Bundesbank wishes they could fold space from the Fed vaults in NYC, where there is rumoured to be gold and not tungsten plated with gold.

csmith's picture

What a happy coincidence that Fed money printing has accelerated JUST AS LTRO funding needs to be paid back. POMO is back going strong again, and just in time!!!

Does Bernie Madoff get a consulting fee on this? Thing of beauty!!!

Debeachesand Jerseyshores's picture

The "Worms" will consume them all.

Just keep buying PM's on the dip.

Yen Cross's picture

 Draghi can always sell his soul for some " yuan"!  What a fucking joke! Reminbe/ Are you fucking kidding me?

China is a fucking  " Bubble Bath" and it sickens me that ass holes like KITO polute good minds ( Ref; Fonz)

knukles's picture

And if you think some notable western countries cook their economic and financial books, there's NFW under the sun with a bazillion billion people in China that there can be any figure even remotely believable even by the dtat gatherers let alone after the sandbagging.
Anybody who talks about China in other than sweeping generalities is pretending.
Shit, seems like half the time in the west initial estimates of domestic data can't even get the sign right let alone the magnitude.... so try it with billions of ants scurrying about amongst the clouds of soot and grime.

francis_sawyer's picture

"How many European Union officials does it take to change a light bulb?"


Answer: Depends on how many Goldman Sachs jew mouths u need to feed...

Yen Cross's picture

  francis_sawyer  I'm buying you a mirror for Christmas.  You need to take a long hard look at yourself...

francis_sawyer's picture

Don't BUY me anything... I know ~ just let me hold on to your gold & Ferrari's for awhile [since you seem to be looking for a place to store them]...


I swear ~ If you take me up on my offer, I'll change my ways... [until you ask 4 them back]...

knukles's picture

Well of course those feeding the propaganda to the media mouthpieces believe it, for they travel first class, stay in 5 star hotels, ride in chauffeured limos, eat at only the finest high end restaurants, receive stipends on top of expensing everything under the sun, are plied by gophers so as no accountability (aka fuckup DSK) with unlimited coke, booze, hookers and child slaves, steal the treasuries of their countries blind, are in charge of the law enforcement and courts systems while their police keep the rowdy protesting masses out of their sight and penned in the banlieues...

So why the fuck wouldn't they figure everything's peachie keen neato OK?

(Well old boy, see you next week at the G-20 confab in Thailand.  No wonder they named it Bangkok, eh what?  Off to Monaco for some well deserved R&R with the nieces.  Oh yes, the blonde twins wink wink...)

espirit's picture

If the short fat guy is running real slow, drop him.

He's prolly carrying gold.

HoaX's picture

I have learned, over the last several years, that Europe is psychotic

From the sound and coherency (or lack thereof) of your rant you definitely have personal experience on the matter Mark.

HoaX's picture

but I have been to the top of Mt. Olympus and there are neither gods nor temples.

Nevermind my previous comment, I´ll have whatever it is this guy is taking nurse!

Yen Cross's picture

 Let's rant/  Oh you need to feed that "stuft animal"?

Jafo's picture

That money has to come from somewhere.  As European banks were amongst the largest lenders to the Asia/Pacific region pre-crash, what are the chances that they are not rolling over loans in that region?  If so, then the much vaunted economic activity in the Asia/Pacific region that is going to save the world may not be as robust as hoped.

Bunga Bunga's picture

Just a short excerpt from the:

Commission Regulation (EEC) No 1677/88 ... quality standards for cucumbers


Cucumbers in this class must be of good quality. They must:

- be reasonably developed

- be reasonably well shaped and practically straight (maximum height of the arc: 10 mm per 10 cm of the length of cucumber).

The following defects are allowed:

- a slight deformation, but excluding that caused by seed formation

- a slight defect in colouring, especially the light coloured part of the cucumber where it touched the ground during growth

- slight skin blemishes due to rubbing and handling or low temperatures, provided that such blemishes have healed and do not affect the keeping quality. (iii) Class II:

This class includes cucumbers which do not qualify for inclusion in the higher classes but satisfy the minimum requirements specified above. However, they may have the following defects:

- deformations other than serious seed development,

- defects in colouring up to one-third of the surface; in the case of cucumbers grown under protection,

considerable defects in colouring in the affected part are not allowed,

- healed cracks,

- slight damage caused by rubbing and handling which does not seriously affect the keeping quality and appearance.

All the defects listed above are allowed for straight and slightly crooked cucumbers.

On the other hand, crooked cucumbers are allowed only if they have no more than slight defects in colouring and have no defects or deformation other than crookedness.

Slightly crooked cucumbers may have a maximum height of the arc of 20 mm per 10 cm of length of the cucumber.

Crooked cucumbers may have a greater arc and must be packed separately.....

Yen Cross's picture

Huffington post > - 1/2 ( not worth the full downvote)

Yen Cross's picture

Classic/ Little girls, playing little games. So status quo is the way to go?   When it all comes down to decision making, you are a bunch of CUNTS! That is why I own Ferraries, and learned how to FLY!   BITCHEZ?  Never take prisoners, and never submit!

 Never let the enemy know what your plans are!

 Tommy Stolper just loaded your " In-Boxes"<

Yen Cross's picture

One comment and you are  branded. EX-Patriatriation /Indoctronated BITCHEZ

Cheshire's picture

Little banks bailing out the big banks! !! Bullish!

Grand Supercycle's picture

BAC chart tells the real story...

Despite recurring equity short covering spikes - bank index & BAC charts tell the real story...

Vegetius's picture

Rules build up fortifications behind which small minds create satrapies. A perilous state of affairs in the best of times, disastrous during crises.
        -Bene Gesserit Coda

And thus it is with the EU corrupt, venal and in deep trouble, but unable to see what is before their eyes, bit like every other Government.

"How often it is that the angry man rages denial of what his inner self is telling him".

- The Collected Sayings of Muad'dib