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Austria Demands "Profitable" Bondholders Pay Up Before Bad Bank Bailout

Tyler Durden's picture


While, for now, depositors at Austria's Hypo-Alde-Adria-Bank (nationalized in 2009) have not had assets confiscated, Austrian authorities are shifting in an unusual (scary precedent-setting) direction. Amid the resignation of the bank's CEO, the government is taking aim at 'speculators' who dared to buy the bank's bonds below par - and made money therefore on the back of the taxpayer. "What financial markets expect is not always what you want politically," Austria's finance minister warned, "if someone buys today at a lower price, saying ‘shortly, I’ll get 100 back,’ that’s what’s agitating the people."It seems Europe has a new template.


Via Bloomberg,


Austria targets holders of Hypo Alpe-Adria-Bank International bonds that have bought below face value, Finance Minister Michael Spindelegger tells reporters in Vienna.

"If someone buys today at a lower price, saying ‘shortly, I’ll get 100 back,’ that’s what’s agitating the people,” Spindelegger says. “We need to review if that’s possible to distinguish”


“What financial markets expect is not always what you want politically,” Spindelegger says. “We need to find the model that’s the best result for taxpayers. That may not comply with the markets, but it will be necessary.”

Review only affects bonds with guarantee of Carinthia province, federal govt’s guarantee on other bonds will be honored

Plans decision on Hypo Alpe wind-down plan by end of March, necessary legislation by end-June


It seems Europe has a new template...

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Fri, 02/21/2014 - 12:14 | 4462048 newsguy68
newsguy68's picture

I know this is tottally off topic, BUT OMG

Video-Teen Commits Suicide On Facebook, Swallowing 6 Full Bottles Of Pills


Fri, 02/21/2014 - 12:32 | 4462127 superflex
superflex's picture

I might look if it was a banker.


Fri, 02/21/2014 - 12:46 | 4462170 max2205
max2205's picture

Lets just give everyone their money back and close the markets for a year



Fri, 02/21/2014 - 12:57 | 4462211 pods
pods's picture

Not really surprising in today's "look at me" world.  

Life sucks, get used to it. We aren't all gonna be rockstars.  Life is tough, and overcoming these challenges is what builds character.

Not trying to be callous, but I have little sympathy for someone like that.  She sure as fuck is going to be getting all the attention she wanted by doing this.  Which will reinforce her self image being defined by what others think of her.  Maybe she will even get her boyfriend back?  Seems to be the recipe for a psychopath to me.

And Lord knows we have enough of them running around.


Fri, 02/21/2014 - 14:10 | 4462501 RafterManFMJ
RafterManFMJ's picture

Rockstar? Fuck that! I wanna be a bankster.

I mean one that you don't really know 
Ridin' around town in a drop-top benz 
Hittin' switches in my black six-fo'

Fri, 02/21/2014 - 15:53 | 4462849 Dr. Kenneth Noi...
Dr. Kenneth Noisewater's picture


Fri, 02/21/2014 - 12:15 | 4462052 patb
patb's picture

They should take the bank into receivership.

That' allows a windup plan.



Fri, 02/21/2014 - 12:34 | 4462133 Occident Mortal
Occident Mortal's picture

Only the bondholders making the largest campaign contributions will avoid a haircut.

Fri, 02/21/2014 - 12:44 | 4462161 WhyDoesItHurtWh...
WhyDoesItHurtWhen iPee's picture

When they say :

 “We need to find the model that’s the best result for taxpayers. That may not comply with the markets, but it will be necessary.”

They really mean :  Rule of Law is not popular with the "markets".


Fri, 02/21/2014 - 12:48 | 4462180 Oh regional Indian
Oh regional Indian's picture

What is it with these Fugly European bank buildings?

Like they are living in some fairyland.

Well, I guess they are....Can sell and Get Hell...


Fri, 02/21/2014 - 13:19 | 4462285 Hobbleknee
Hobbleknee's picture

It looks like the handle of a knife sticking out of the earth.

Fri, 02/21/2014 - 13:34 | 4462343 Oh regional Indian
Oh regional Indian's picture

I thought it was like a post modernist Old Mother Hubbard Cupboard/Shoe thingy.

Fuggly and fittingly, hermetically speaking... as without so within.

Modern Austrian Economics FTW!


Fri, 02/21/2014 - 12:48 | 4462179 BandGap
BandGap's picture

I'm no big fan  of bondholders in this situation but,  HAVE THINGS GONE FUCKING NUTS?

Let me get this straight, some rich assholes took a chance and bought risky fucking bonds dirt cheap. Then when payback time rolls around they don't get what they paid for? If the bank went belly up would these guys be out money?

Why invest in anything anymore? If you make a killing you have to give some back so as not to appear greedy (OK, these fuckers probably are greedy assholes).

Changing the rules, one game at a time.

Fri, 02/21/2014 - 12:54 | 4462197 Winston Churchill
Winston Churchill's picture

The only way to win now ,is not to play.

Long shovels,gold ,and cash out of the system.

Fri, 02/21/2014 - 12:59 | 4462218 pods
pods's picture

Hey, I resemble that strategy!


Fri, 02/21/2014 - 15:06 | 4462701 NidStyles
NidStyles's picture

The funniest thing about this article is that it literally chases people directly into the hands of gold. If the guberments actually were against people making gains nominally then they would be pushing for the use of gold directly, however they are merely looking to save their own asses and will us all of the might of the guberment to do so. 


Violent criminal thugs they are, and they should be dealt with according to their behavior. 

Fri, 02/21/2014 - 13:53 | 4462421 Augustus
Augustus's picture

I don't know what the price was for the bond trades and the discounts.

However, the bonds were available for the governments to buy at the same time.  I expect that there are still large supplies available at substantial discounts.  Instead of screwing these bondholders, just buy in the some of the issue at discount.

Fri, 02/21/2014 - 14:00 | 4462448 donsluck
donsluck's picture

That's a lot of "I don't know", "I expect", "large supplies", "substantial discounts" guess work. As long as we're guessing, I would guess that there are no discounts available. Why would there be? The market has already established the price, and it's over 100, no discount.

Fri, 02/21/2014 - 13:38 | 4462365 Non Passaran
Non Passaran's picture

I wonder if there is a connection...

Fri, 02/21/2014 - 13:09 | 4462194 LMAOLORI
LMAOLORI's picture




The U.S. took Fannie and Freddie Bondholders under their wings.


How Ralph Nader learned to love Fannie and Freddie


“It is time for [government-sponsored enterprises] to give up ties to the federal government that have made them poster children for corporate welfare. Most of all, Congress needs to look more to the protection of the taxpayers and less to the hyperbole of the GSE lobbyists. –Ralph Nader, testimony before the House Committee on Banking and Financial Services, June 15, 2000

“Fannie Mae and Freddie Mac should be relisted on the NYSE and their conservatorships should, over time, be terminated. –Ralph Nader, letter to Treasury Secretary Jacob Lew, May 23, 2013

People certainly do change.

Right now, one of Ralph Nader’s key projects, Shareholder Respect, is supporting a group called Restore Fannie Mae. They are fighting for “an end to the unconstitutional conservatorship of Fannie Mae and Freddie Mac by the U.S. government.”  


Sorry no tears from me on Fannie/Freddie though - the bondholders would have been wiped out if the whole thing went bust. And getting in bed with the government buyer beware anyway - better them then the taxpayers.


Fri, 02/21/2014 - 14:53 | 4462660 0b1knob
0b1knob's picture

The government stated repeatedly for a generation or more that Fannie Mae and Freddie Mac were backed by the "full faith and credit of the US Government."

So the full faith and credit of the government is equal to exactly zero?   There is a difference between stating that the government CAN do something and that is SHOULD do something.

What will be the ultimate cost when people loss faith in the government and no longer extend credit to it?

Fri, 02/21/2014 - 12:16 | 4462059 DoChenRollingBearing
DoChenRollingBearing's picture

Add Austria to the template makers...

Fri, 02/21/2014 - 12:20 | 4462083 0b1knob
0b1knob's picture

Seems like the Fannie Mae / Freddie Mac stiffing of the preferred holder was the template.  Or maybe the GM bond holders reaming.

Fri, 02/21/2014 - 12:51 | 4462188 BandGap
BandGap's picture

I had friends with significant amounts of GM bonds. Had them for decades. No amount of KY would have helped them when the shaft was inserted. They still can't believe what happened, these were not big players by any means.

How is this different from Venezuala again?

Fri, 02/21/2014 - 14:03 | 4462467 donsluck
donsluck's picture

So, what's your complaint? GM was bankrupt, if it was allowed to fail your friends would still have been wiped out.

Fri, 02/21/2014 - 14:46 | 4462634 0b1knob
0b1knob's picture

GM did not go through bankruptcy.  It was seized by the government and given to the UAW.

In any sort of normal bankruptcy the bond holders would have taken control of the company.   They would have had SOMETHING. 

Pension funds were big losers in the government theft of GM.

Fri, 02/21/2014 - 12:41 | 4462152 Mister Ponzi
Mister Ponzi's picture

Austria - home of the legendary Creditanstalt...

Fri, 02/21/2014 - 12:57 | 4462209 Urban Redneck
Urban Redneck's picture

Because this commercial NEVER gets old...

Austria - also home to Raiffeisen

Raiffeisen Bank TV-Ad: Easy (sub-prime) loans in Hungary, 2007

Fri, 02/21/2014 - 12:16 | 4462060 Dr. Engali
Dr. Engali's picture

Tax payers? Since when have they cared about the tax payer? The model that would have been best for tax payers was to never had bailed out the banks in the first place.

Fri, 02/21/2014 - 16:29 | 4462968 Againstthelie
Againstthelie's picture

Well said.

In the case of this bank, the Hypo Alpe Adria things are very dubious:

In 2007 Hypo was bought by the BayernLB bank. So Hypo no longer was an Austrian bank. The Austrian province Carynthia only kept a contingent liability. So the order of liabilities was:

1. Hypo

2. Bayern LB (as the mother bank)

3. Free state of Bavaria as owner of the Bayern LB

4. The consortium of the Austrian Hypo province banks

5. The province of Carinthia


Strangely the Austrian government nationalized the Hypo and therefore jumped into the liabilities, although other entities would have been liable. Obviously something very fishy was going on there to bring the Austrian taxpayer into liability and free the mother bank from them.

Fri, 02/21/2014 - 12:17 | 4462064 onewayticket2
onewayticket2's picture

only the winners WE pick can win. 


Fri, 02/21/2014 - 12:18 | 4462065 markelshark
markelshark's picture

The general sense of uneasiness that Joe Public (not Zhers) has with the financial sector is derived from the simple fact that banks have gotten too good at making money (JPM 0 trading loss days, for example), and that has become just another tax on productivity that 99% of people will never get to reap.

Fri, 02/21/2014 - 12:21 | 4462088 NEOSERF
NEOSERF's picture

What's funny is that if I had an account with JPM (I don't), somehow it would be more like a 50/50 shot that I made money last year...funny how that works..

Fri, 02/21/2014 - 12:26 | 4462109 markelshark
markelshark's picture

The house always wins...

Fri, 02/21/2014 - 13:58 | 4462435 SDShack
SDShack's picture

Yep, JPM and others are big enough, and rich enough to make the rules... but they are also smart enough to take both sides of the bet. They hedge, knowing that statistics work in their favor, that is why they never lose.

Fri, 02/21/2014 - 12:18 | 4462072 unplugged
unplugged's picture

duh - evil profits aren't allowed under socialism

Fri, 02/21/2014 - 12:22 | 4462094 Ayn Rand
Ayn Rand's picture

That will teach thosewho dared to buy the bonds.  Wait till next time when the government needs those same people to step up andbuy them and are told to fuck off.

Fri, 02/21/2014 - 14:05 | 4462476 donsluck
donsluck's picture

Hence MyIRA.

Fri, 02/21/2014 - 12:22 | 4462095 Ayn Rand
Ayn Rand's picture

That will teach thosewho dared to buy the bonds.  Wait till next time when the government needs those same people to step up andbuy them and are told to fuck off.

Fri, 02/21/2014 - 12:29 | 4462120 pies_lancuchowy
pies_lancuchowy's picture

well said.


However, unfortunately, the government just takes what it needs. It does not listen to 'fuck off's'.

That is, until a certain day comes..

Fri, 02/21/2014 - 12:22 | 4462097 Winston of Oceania
Winston of Oceania's picture

Good luck selling any bonds of any type in Austria ever again then. Always remember that socialism never fails until the last bit of other peoples money is exhausted, wherever it may be...

Fri, 02/21/2014 - 12:23 | 4462101 buzzsaw99
buzzsaw99's picture

Since letting the banks go broke isn't an option we need to further meddle with the speculators and prices paid and such lulz lulz lulz

Fri, 02/21/2014 - 12:31 | 4462111 nmewn
nmewn's picture

OMG...someone risked their own capital and bought below par? And they expect to be compensated for their risk?

What the hell is this thing called?!

Kill it!!!


I don't usually post in the daytime, do I really need a sarc tag or is someone this stupid?

Fri, 02/21/2014 - 15:33 | 4462793 koncaswatch
koncaswatch's picture

nmewn: daytime seems to have a serious serial junker.

Fri, 02/21/2014 - 12:28 | 4462118 BadDog
BadDog's picture

And this is suppose to reinforce confidence in the EU and the euro?

Fri, 02/21/2014 - 12:46 | 4462163 Carl Popper
Carl Popper's picture

There is no floor of support on distressed banks' bonds if they follow thru on the threat. Bank crisis will happen much faster as no one will try to catch a falling knife in the form of a bank bond selling at a discount.

I love it! Let it all fall apart!

Fri, 02/21/2014 - 14:03 | 4462464 SDShack
SDShack's picture

That's the way it is supposed to be, and was when Glass-Steagel was in effect. Investment banks weren't protected, but savings banks were. Now it's all a mixed casino, so we have TPTF and taxpayer funded bailouts of the rich. All by design. Welcome to serfdom in the New Feudal World Order.

Fri, 02/21/2014 - 12:30 | 4462121 Ignatius
Ignatius's picture

It's been known since antiquity that debts grow in an exponential manner while economies don't.  This means there exists a basic 'math problem'.  Cancellation of the debts in antiquity was common and regular and a sovereign ruler had the power to cancel the debts.  With the rise of the oligarchs dating to atleast Roman times the private powers chose to enforce the debts and push the people into debt servitude.

Cancel the debts.  Cancelling the debts also cancels oligarhic wealth stored as debts.

Restart the system.

Fri, 02/21/2014 - 12:50 | 4462183 Carl Popper
Carl Popper's picture

We used to have cancellations regularly. Government collapse, banking system collapse, civilization collapse.

Every 60 to 70 year banking collapse was healthy and kept the eco system from building up enough kindling to burn the entire forest down.

Sat, 02/22/2014 - 00:37 | 4464341 0b1knob
0b1knob's picture

Actually rather than cancel the debt, rulers usually just killed the holders of the royal debt.   Seized their property too.

See the Templars for instance.

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