What Dijsselbloem Really Said: Full "On The Record" Transcript

Tyler Durden's picture




 

Hopefully the memory of the new Eurogroup head, who in a one day lost more credibility than his admittedly lying predecessor Juncker ever had, will be jogged courtesy of this full transcript provided by Reuters and the FT of what he told two reporters - on the record - and for the whole world to read. Because, by now, we are confident everyone has had more than enough with watching the entire Eurozone rapidly and tragically turn itself into a complete and utter mythomaniac, kletpocratic circus.

Via The FT,

To clarify what Dijsselbloem said, we’ve decided to post a transcript of the portion of the interview dealing with how the eurozone might deal with bank failures in the future in light of the Cyprus example. The interview we conducted alongside Brussels bureau chief Luke Baker of Reuters (@LukeReuters) lasted about 45 minutes, and the portion on bank resolution lasted for about 10 of those minutes. The interview started out with some Cyprus-specific questions – like how capital controls might work, whether Dijsselbloem had learned any lessons form the Cyprus experience – and then shifted to a discussion about whether north-south relations were hampering EU decision making. That’s when Baker asked the first question about whether Cyprus set a precedent for future bank rescues...

 

Q: To what extent does the decision taken last night end up setting a template for bank resolution going forward?

 

A: What we should try to do and what we’ve done last night is what I call “pushing back the risks”. In times of crisis when a risk certainly turns up in a banking sector or an economy, you really have very little choice: you try to take that risk away, and you take it on the public debt. You say, “Okay, we’ll deal with it, give it to us.”

 

Now that the situation is more calm and the financial markets seem to have become more steady and easier, we should start pushing back the risks. If there is a risk in a bank, our first question should be: “Ok, what are you the bank going to do about that? What can you do to recapitalise yourself?” If the bank can’t do it, then we’ll talk to the shareholders and the bondholders. We’ll ask them to contribute in recapitalising the bank. And if necessary the uninsured deposit holders: “What can you do in order to save your own banks?”

 

In other words, taking away the risk from the financial sector and taking it onto the public shoulders is not the right approach. If we want to have a healthy, sound financial sector, the only way is to say: “Look, there where you take on the risks, you must deal with them. And if you can’t deal with them, you shouldn’t have taken them on and the consequence may be that it’s end of story.” That is an approach that I think we should, now that we’re out of the heat of the crisis, consequently take.

 

I’ve tried to do so as far as I could in nationalising the SNS bank in the Netherlands. We’ve completely wiped out the shareholders and the junior bondholders. We have to bring down the tab to be picked up by the taxpayers.

 

Q: What does that say for other countries in the eurozone that have very highly-leveraged banking sectors, Luxembourg, Malta even? Much larger than Cyprus’.

 

A: It means: deal with it before you get in trouble. Strengthen your banks, fix your balance sheets, and realise that if a bank gets in trouble, the response will no longer automatically be we’ll come and take away your problems. We’re going to push them back. That’s the first response that we need. Push them back. You deal with them.

 

Q: That sounds a whole lot like what people were suggesting before Lehman Brothers. They made a bad investment in Lehman Brothers; let it go down. And we saw what happened after that. Is there any risk that this change in thinking risks coming back to the ‘too big to fail’…

 

A: I think we have to realise before we come to a decision can we let a bank fall over, is it too big to fail, there are a lot of things that can be done. To start with, we should not waste any time in fixing balance sheets. Banks have to build up their reserves, have to become much more stable and strong within themselves.

 

Secondly, we need mechanisms to deal with risks in terms of: if a bank is in trouble, can you take out the bits you want to save and let go of the bits you don’t want to save, the “living will” approach.

 

Thirdly, if a bank does get in trouble, to who can we shift the account? Who’s going to pay for it? That’s what I was talking about just now, to shareholders, etc. Then there comes a point where you, as a government, may have to step in, but that should be the order. You take preventive measures, you make sure banks are more stable, more robust. If there still is a problem, you need mechanisms to address them, to pull banks apart, etc. You need to bail in those people whose equity is involved, etc.

 

Q: This is basically the [Michel] Barnier proposal [for a common EU bank resolution regime]. The priority seems to be removing that moral hazard.

 

Q2: Those proposals now look like they’re going to be delayed, I think, from Barnier. In a way, you’ve had a chance with Cyprus as a kind of test case, if you like. Does it feel like that?

 

A: Like I said, it’s very hard to do this if there’s a lot of nervousness in the markets and there is still a crisis atmosphere. Now that the crisis atmosphere is disappearing – we had a little upheaval last week after the levy discussion – but looking at it a couple of days later now, a week later now, the markets have really been very wise in responding to this whole levy thing. So now that the crisis seems to fade out, I think we have to dare a little more in dealing with this.

 

Q: It just makes me think of one thing, off the cuff, which has to do with the ESM [European Stability Mechanism] and the direct recapitalisation of banks. Does that change the kind of calculus in terms of how that is used going down the road? There have been suggestions it may never be used if you have fully-functioning bail-in systems. Is that what we’re saying?

 

A: I think that’s what we should aim at. We should aim at a situation where we will never need to even consider direct recap. The interesting thing of course that in the Spanish situation, because that where the demand for a direct recap instrument started, from the Spanish banking crisis. We are now dealing with the Spanish banking sector – restructuring it, recapitalising it, bad bank, some bail-in – without this instrument. If we have even more instruments in terms of bail-in and how far we can go in bail-in, the need for direct recap will become smaller and smaller.

 

I can just repeat what I said. I think that the approach has to be: Let’s deal with the banks within the banks first, before looking at public money, be it direct recap or any other instrument coming from the public side. Banks should basically be able to save themselves, or at least restructure or recapitalise themselves as far as possible.

 

Q: Is that new philosophy, was it hard among the 17 [finance ministers], are there people who it’s been hard to convince this is the right approach?

 

A: Well, there is still nervousness, understandably, about can we pull it off, what will it mean in the financial markets, how will the financial markets react to the eurozone, to the financial institutions in the eurozone, etc.

 

That was one of the reasons why, last week, we didn’t go down the bail-in track [in Cyprus] but went down the levy track. Now we’re going down the bail-in track, and I’m pretty confident the markets will see this as a sensible, very concentrated and direct approach instead of the more general approach [of] let’s levy everyone to gather the money for the banks. So yes, that that is a sort of shift in approach.

 

Q: Is this something that you’ve sort of market tested, if you like, with the market? You’ve had a lot of feedback? You just said you feel very confident that the market will respond positively to the bail-in approach. Is that the feedback you’ve had?

 

A: You get two kinds of feedback. There’s the economic analysts that say this is a sensible approach, it makes sense. And then there’s more the investors’ reaction, who will say: “Look, we’re not to going to pay the tab, are we? If you do so, we will make our financing more expensive.”

 

My reaction would be: Maybe it’s inevitable that if you push back the risks, risks will be priced. Because if I finance a bank and I know if the bank will get in trouble I will be hit and I will lose my money, I will put a price on that. I think that’s a sound economic principle. And having cheap money because the risks will be covered by the government and I will always get my money back is not leaving to the right decisions in the financial sector, it’s not leading to the right risk management in the financial sector.

 

So there’s those two reactions from the financial markets: the analysts who are saying, let’s be real, this is a sensible approach, and the investors. My response is: If risks are going to be priced, then that is probably the right way to do it. It will force all financial institutions as well as investors to think about the risk they are taking on. They will have to realise it may also hurt them, the risks might come towards them instead of pushing them away.

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Tue, 03/26/2013 - 09:45 | 3376431 Divided States ...
Divided States of America's picture

Hey Diesel....stop being a pussy and man up to your words.

Tue, 03/26/2013 - 09:46 | 3376436 Croesus
Croesus's picture

Diesel Boom, Bitchez!

Tue, 03/26/2013 - 09:49 | 3376451 GetZeeGold
GetZeeGold's picture

 

 

Transmitting GPS coords to Valdimir.

Tue, 03/26/2013 - 09:58 | 3376474 Popo
Popo's picture

This is all a bunch of hot air.  Every time there's a crisis, the taxpayer foots the bill, and within days we get someone claiming that "this will be the last time".   

Yeah, sure.  Next time you're going to stick it to the bondholders and the shareholders.   Whatever.

Watch what they do not what they say.   There is no evidence that banks will be force to bear the financial and legal responsibility for their actions, nada, zip, zilch, zero -- none.    Anyone who takes actions which require the citizens to take haircuts on their deposits should be in jail. Period.  

Until there are bankers spending 20 years to life in jail for crimes against their people and their country -- all of this is a joke.   The Dieselboom asshole is part of the problem.   

Where was the discussion of clawbacks of bonuses?   Oh, are you telling me that just didn't come up?  No one thought about clawing back the hundreds of millions paid in bonuses to the bankers who caused this problem?   Like hell.   This is corruption.   Throw this piece of shit in a pit.

Tue, 03/26/2013 - 10:12 | 3376545 Surly Bear
Surly Bear's picture

It's all about rights, and you don't have any.

Tue, 03/26/2013 - 12:13 | 3377407 Silver Bully
Silver Bully's picture

'It's all about rights, and you don't have any.'

It's a big club . . . .

Tue, 03/26/2013 - 10:29 | 3376632 Stoploss
Stoploss's picture

Now we know why the ECB never lowered rates.

Just let it pile up in the savings accounts, then steal that.

Nice move, i must admit.  Criminal, but slick.

Tue, 03/26/2013 - 11:34 | 3377180 Againstthelie
Againstthelie's picture

So you are for using taxpayer money to rescue banks and their stupid savers, that believe, that money at private banks was risk-free?

Funny how liberatarians suddenly do no longer favour the market, as soon as it goes against their money... Hypocrites.

Tue, 03/26/2013 - 13:22 | 3377745 NotApplicable
NotApplicable's picture

Funny how people craft flawed arguments then cast them onto others as their own.

Straw man much?

Tue, 03/26/2013 - 13:28 | 3377784 akak
akak's picture

Oh, so you've read Paul "I recast reality at my whim" Krugman too?

Tue, 03/26/2013 - 11:06 | 3376938 NEOSERF
NEOSERF's picture

Well said...you can either pay now with deposits, or later with destruction of your economy, inflation and higher taxes.  US has opted for the latter.  Even if you shut all the banks down, there will have to be new banks...bankers already made their money and don't need to work anyway.  Thus, when the country is ready to tap "leaders" to start up the new banks, they have no choice but to go back to experience and the same bankers...sad.

Tue, 03/26/2013 - 12:06 | 3377375 BooMushroom
BooMushroom's picture

I think your statement is a false dichotomy. I think they will destroy the economy AND take the deposits.

Tue, 03/26/2013 - 09:55 | 3376475 knukles
knukles's picture

What the fuck did he just say?
It's mumbo-Euro-jumbo.

Tue, 03/26/2013 - 10:00 | 3376493 francis_sawyer
francis_sawyer's picture

Moar Cy-PUSSY RIOTS!

Tue, 03/26/2013 - 10:00 | 3376500 notbot
notbot's picture

I CAN'T TAKE IT ANYMORE...people are actually listening to PK. And it has real consequences! I just have to vent

I HATE PAUL KRUGMAN!!! HE IS THE MOST DANGEROUS, INTELLECTUALLY DISHONEST PERSON I'VE EVER SEEN.

HIS HACK PARTISAN ECONOMICS ARE GOING TO TAKE DOWN WHOLE CIVILIZATIONS.  AND HE'LL STAND THERE WHY ROME IS BURNING AND BLAME HAYEK AND BUSH.

I HATE HIM, I HATE HIM, I HATE HIM...FOR WHAT HE IS DOING TO REAL PEOPLE'S LIVES. THESE THINGS MATTER...IT'S NOT JUST YOUR PRINCETON FRESHMAN CLASS YOU IDIOT!!!

WHEN ARE WE FINALLY GOING TO COME TOGETHER AND BANISH HIM OUT OF OUR SOCIETY?!?!?

Tue, 03/26/2013 - 10:05 | 3376515 TeamDepends
TeamDepends's picture

Then Tanya Harding him.  You will gain instant celebrity.

Tue, 03/26/2013 - 10:20 | 3376586 TeamDepends
TeamDepends's picture

There are probably a few attorneys here right now that would represent you.  "Temporary Sanity" sounds about right.

Tue, 03/26/2013 - 10:28 | 3376625 SpiceMustFlow
SpiceMustFlow's picture

Agreed, he is literally one of the most dangerous people in the world. I dream of fighting him sometimes, and of kicking him in the nuts every night. Wipe that smug look off his hobo face.

Tue, 03/26/2013 - 10:30 | 3376642 Dr. Richard Head
Dr. Richard Head's picture

Here is another "on the record" statement from a former dangerous person - The Maestro.

"We have at this particular stage a fiat money which is essentially money printed by a government and it’s usually a central bank which is authorized to do so. Some mechanism has got to be in place that restricts the amount of money which is produced, either a gold standard or a currency board, because unless you do that all of history suggest that inflation will take hold with very deleterious effects on economic activity… There are numbers of us, myself included, who strongly believe that we did very well in the 1870 to 1914 period with an international gold standard.”

http://www.forbes.com/sites/nathanlewis/2013/03/14/if-alan-greenspan-wants-to-end-the-fed-times-must-be-changing/

Tue, 03/26/2013 - 20:48 | 3379700 thisandthat
thisandthat's picture

Ron Paul/Greenspan 2016 :)

Tue, 03/26/2013 - 10:01 | 3376494 fonzannoon
fonzannoon's picture

This is what I heard knukles

"In other words, taking away the risk from the financial sector and taking it onto the public shoulders is not the right approach. If we want to have a healthy, sound financial sector, the only way is to say: “Look, there where you take on the risks, you must deal with them. And if you can’t deal with them, you shouldn’t have taken them on and the consequence may be that it’s end of story.”

"I'd like to add that I was smoking crack when I said that and would like to immediately retract everything. I will release a new statement once it has been prepared for me by Goldma....(screaming in backround)....I have to go now...."

Tue, 03/26/2013 - 10:01 | 3376497 Sudden Debt
Sudden Debt's picture

He's Dutch... they make sounds but never say anything that means something...

 

Tue, 03/26/2013 - 11:55 | 3377157 Urban Redneck
Urban Redneck's picture

 

Situational Honesty = Serial DisHonesty

He conveniently ignores the fact that if ALL the banks are WHOLLY reliant a combination of valuation methods and swap/repo transfer mechanisms to maintain even the semblance of solvency.  Properly valued, they all have negative equity, including the ECB itself.  Furthermore, they propose and implement solutions which discourage increases to the deposit base (not that the deposit insurance SCHEMES are even properly capitalized to cover the "insured" deposits).  

The Eurozone needs to systemically recapitalize its banks and simultaneously provide additional security for depositors (which involves de-capitalizing banks if done honetly),  so the ECB needs to print (devalue), the Eurozone needs to pay the inflation tax, and the existing bank equity/debt/bonus pool bases need to be wiped out.  At the same all the EZ Governments need to cut the spending that has been facilitated by negative real interest rates.  

The first thing the ECB actually needs is a definitive consistent published resolution/recap formula and it needs to stop picking winning and losers and making survivors out of losers simply virtue of largess with the taxpayers' hard earned Euros. 

 

Tue, 03/26/2013 - 12:42 | 3377552 BooMushroom
BooMushroom's picture

+1 It sounds like you're proposing a little thing called "rule of law," which is great for the ruled... Not so much for the rulers.

Tue, 03/26/2013 - 10:05 | 3376518 pods
pods's picture

I don't know, but my ass hurts.

pods

Tue, 03/26/2013 - 10:35 | 3376662 Sudden Debt
Sudden Debt's picture

do you know where you left your beerbottle?

Tue, 03/26/2013 - 10:00 | 3376485 notbot
notbot's picture

I feel better now.  Thanks

Tue, 03/26/2013 - 10:03 | 3376511 gaoptimize
gaoptimize's picture

Maybe we could bring back ostracism? ( http://en.wikipedia.org/wiki/Ostracism ) If not at the Federal level, maybe the states?

Tue, 03/26/2013 - 10:13 | 3376538 prains
prains's picture

all failed meritocracies need a spin shiister to hypnotize the crowd while they back the truck up to the door. Kruggie is just another symptom of the post war american decline into greed, corruption and institutional failure to a grand scale. Ask yourself, how many congressmen are millionaires? When is the last time a whitehouse chief of staff was NOT a millionaire? When was the last time a president was not a millionaire? The entire american political,social,economic system has failed under the weight of its own greed. These men and women did not become millionaires based on MERIT, they are not smarter and work harder than you or me. Their positions of authority are carefully crafted and maintained through networks, platforms and money. Until people wake up to the failed state of a fake merit based society, nothing can or will change.

Tue, 03/26/2013 - 09:56 | 3376477 in-Credible Banker
in-Credible Banker's picture

Go to this site:

http://www.bankofcyprus.com.cy/en-GB/

Try to imagine yourself in the situation where your life savings are trapped in this shit show.  Can't log into internet banking.  ATM withdrawal limits only 120 per day.

Plan accordingly.....the same show may be coming to a bank near you!!!!

 

Tue, 03/26/2013 - 09:47 | 3376438 Eireann go Brach
Eireann go Brach's picture

Don't worry, from now on there will be Goldman hand stuffed up his arse so the right words will come out of his mouth!

Tue, 03/26/2013 - 12:19 | 3377434 Cone of Silence
Cone of Silence's picture

I do not think you will ever hear this gentleman quoted by any news source ever again.  If you are his wife, I do not think that you will even hear him fart ever again.  He will be mute for the rest of his days. 

Tue, 03/26/2013 - 09:48 | 3376439 ihedgemyhedges
ihedgemyhedges's picture

Deny, deny, deny.  Until they find the happy ending DNA on the blue dress......

Tue, 03/26/2013 - 14:54 | 3378181 mudduck
mudduck's picture

Everything they said about me was a lie, except for some things.

Tue, 03/26/2013 - 09:50 | 3376453 SMG
SMG's picture

What else can you expect from puppets?   The only reason any of them are in positions of power, is because they are good puppets, otherwise they wouldn't be there.

Tue, 03/26/2013 - 10:12 | 3376542 Cacete de Ouro
Cacete de Ouro's picture

exactly...jim henson couldn't have said it better, and he knows a thing or two about puppets and muppets:)

Tue, 03/26/2013 - 10:26 | 3376532 HoaX
HoaX's picture

Dude, he does man up to his words, but he won´t have any quotes be put in his mouth by the British press he didn´t actually say. The only thing he said regarding this yesterday is that he never mentioned anything about a "template", he even said he didn´t even know the word and learned of it when it was assigned to him. If you read this interview he didn´t once mention this being a template, each case is different and has to be looked at seperately.

He repeated pretty much the exact words from the interview above yesterday evening (AFTER all the fuss started) at Pauw en Witteman, one of the largest Dutch talkshows, so he doesn´t seem inclined in the least to be intimidated or not man up to his words when it comes to this principle. The only thing he does say is that going to uninsured depositors is always a last-resort measure. In the case of Cyprus it was either this or let both the banks (and country) go bust, which would´ve meant no single saver would have probably gotten a single cent back. Now at least Bank of Cyprus has been saved and up to 100k of every savers money should be guaranteed.

Cheers.

Tue, 03/26/2013 - 10:38 | 3376688 Mi Naem
Mi Naem's picture

'scuse me, Mr. Hoax.  You seem not to be with the program here. 

This is a place for setting fires, and for saying FU to people in public positions.  The fact that someone in a public position is attempting to express a policy view with which many here would tend to agree (i.e. move away from taxpayer bailouts of banks-as-casinos, and price in the risk) has nothing to do with it. 

Tue, 03/26/2013 - 10:45 | 3376752 xtop23
xtop23's picture

Saying, going after depositors accounts as a last ditch measure, doesn't contradict the "template" comment actually. It confirms it.

Tue, 03/26/2013 - 12:43 | 3377538 HoaX
HoaX's picture

What I am more curious about is, where are all the attacks on Dijsselbloem coming from all of a sudden? I would seriously investigate the newsreports trying to spin this into something this is not, since he was quite clear on what he meant and has by now repeated it several times.

Just as an example of where the attacks on Jeroen Dijsselbloem seem to be coming from at the moment in the Netherlands: We had old Dutch finance Minister Ono Ruding criticize him earlier today on the dutch News, where he was introduced as the ex-chairman of the IMF, while a) the IMF doesnt actually have a chairman but a managing director and b) he was only one of 24 chairmen of a subcomittee. They conveniently didn´t mention anything about Mr. Ono Ruding´s remaining curiculum though. Responsible for digging into the pension funds during his reign as finance minister to stuff up government finances, high up in ABN AMRO and Citi among other banks.

The general population in the Netherlands and pretty much all comment boards of Dutch newspapers I read today are full of praise for Mister Dijsselbloem by the way, from left to right.

Regarding the sudden nitpicking on words and attacks on Dijsselbloem, I feel the Squid is strong in this one.

Tue, 03/26/2013 - 10:17 | 3376571 MSimon
MSimon's picture

Wait. Isn't Diesel a Jew?

Tue, 03/26/2013 - 10:26 | 3376616 MSimon
MSimon's picture

And here I thought I was becoming the perfect ZHer. Pity.

Tue, 03/26/2013 - 10:37 | 3376683 xtop23
xtop23's picture

Truth is the enemy in an empire of lies. 

Tue, 03/26/2013 - 09:49 | 3376444 spastic_colon
spastic_colon's picture

too late, stawks have recoverd all yesterdays losses plus some just to jam it up everyones ass!

Tue, 03/26/2013 - 09:51 | 3376455 otto skorzeny
otto skorzeny's picture

home prices are up but boeing is going to lay off 3000-I'm confused

Tue, 03/26/2013 - 09:53 | 3376463 spastic_colon
spastic_colon's picture

yep, now they're only 30% below the peak......only a few more shopping days left until the end of the quarter for the indexes.

Tue, 03/26/2013 - 09:53 | 3376467 Winston Churchill
Winston Churchill's picture

Seems incendary Smokeliners don't sell.

Tue, 03/26/2013 - 10:02 | 3376508 francis_sawyer
francis_sawyer's picture

They fell from the sky & crashed into the swollen inventory of houses, thereby creating a DEMAND dynamic...

~~~

I learned that by reading the 'World According to Garp'

Tue, 03/26/2013 - 10:08 | 3376529 Esso
Esso's picture

Stawks up, oil up, PMs down. Whew, the CNBSers carried that April Fools joke a little too far showing stawks down two times in as many weeks.

We will now resume your daily "New Normal".

Tue, 03/26/2013 - 09:49 | 3376445 DrkPurpleHaze
DrkPurpleHaze's picture

Everyone hates you Diesel

Do NOT follow this link or you will be banned from the site!