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Portugal's Insolvent Banco Espirito Santo To Be Bailed Out, Existing Equity To Be Wiped Out

Tyler Durden's picture


When a week ago, the third and final Banco Espirito Santo HoldCo went bankrupt...

... we knew it was only a matter of time. Sure enough, following Friday's record collapse in the stock price of Portugal's mega bank after even Goldman decided it had enough and pulled the plug on an equity investment it had made just three short weeks earlier (apparently with zero Due Diligence) following massive losses, and whose failure even Portugal's president Silva finally admitted could be a systemic event, the local Diario Economic reports that Banco Espirito Santo is about to be nationalized, i.e. bailed out.

The details from Bloomberg, about the transaction that will wipe out the existing equity and replace it with 100% ownership by the Resolution Fund:

  • Portugal may use the Resolution Fund to recapitalize Banco Espirito Santo, Diario Economico reports, citing unidentified people linked to the process.
  • Resolution Fund may inject more than €3 billion
  • A “bad bank” may be created for the toxic assets of the credit portfolio
  • Solution aims to rescue Banco Espirito Santo without spending taxpayers’ money, and is being prepared by the government and the Bank of Portugal
  • From Aug. 4, Banco Espirito Santo will leave the stock market and will be 100% owned by the Resolution Fund, an entity created in 2012 and financed by Portuguese banks and by revenue from the special contribution that the banking sector pays the Portuguese state
  • Resolution Fund will have to be given enough resources to capitalize Banco Espirito Santo, and according to legislation this can be done through a state loan or through a new special contribution imposed on the 84 institutions that contribute to the fund
  • Part of the €6.4b that the Portuguese state still has available in the bank recapitalization facility that was included in Portugal’s bailout program may also be used to give the Resolution Fund the necessary resources to capitalize Banco Espirito Santo
  • Portuguese authorities’ plans predict that the bank will be sold in the stock market within six months, with the proceeds from the sale being used to repay the Resolution Fund

So Portugal's "less insolvent" smaller banks will fund the bailout facility to rescue the nation's most insolvent mega bank. What can possibly go wrong...

Incidentally, the most fun we had was the part where they said no taxpayer money (read German) would be used to bail out yet another insolvent European bank.

So much for Europe's self-sustaining recovery in which no bank will be henceforth rescued.

That said, expect some combination of bail-out with bail-in elements, meaning the sub bonds are most likely about to be wiped out as well.


The only question is what happens to the seniors.


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Sun, 08/03/2014 - 11:19 | 5040217 Rattling Bones
Rattling Bones's picture

I need to start a bank so I can get bailed out.

Sun, 08/03/2014 - 11:25 | 5040229 rehypothecator
rehypothecator's picture

Sell gold.  A few billion notional in 1 millisecond.  To get the best price, of course.  

Sun, 08/03/2014 - 11:26 | 5040237 Publicus
Publicus's picture

Printing money is the solution to all problems.

Sun, 08/03/2014 - 11:48 | 5040308 jaap
jaap's picture

It is a crime site. Look at all the unsecured transactions with related parties in Q1 and Q2.

Like the € 23,000,000,000.00 Barosso granted Portugal before leaving his position.

Sun, 08/03/2014 - 12:30 | 5040445 strannick
strannick's picture

The Seniors will eat cat food, to do their part to bailout the bankers.

Sun, 08/03/2014 - 12:40 | 5040487 DoChenRollingBearing
DoChenRollingBearing's picture

For me it is nice to see companies (banks) with complicated and unfair ownership structures fall.  There are many companies like that in Europe, and quite a few in the USA as well.  Class "A" and Class "B" owners.

Why not just have one type of owner?  You put up your money for "x number" of shares, and that is that.

Such a maze of ownership is often a sign of cronyism, and can hide many sins.

Sun, 08/03/2014 - 13:12 | 5040615 gjp
gjp's picture

Nice to see equity and maybe sub bonds too actually wiped out unlike u.s. 2008.

I guess you could argue that Lehman and Bear got wiped out, but the general bailout saved the rest of the insolvent system at no expense to the supposed risk takers.

Portuguese look more capitalist than Wall Street, but then everyone looks that way compared to the NYC kleptocracy.

Sun, 08/03/2014 - 13:18 | 5040649 WhyDoesItHurtWh...
WhyDoesItHurtWhen iPee's picture

This is from an old article from Mindful Money, sorry I don't have the link anymore.  It has well used sarcasm and humor.


Time line of a bank collapse

1. The Board issues a statement accusing bloggers of spreading both irresponsible and factually incorrect rumours as the bank is sound and has no need of new capital.

2. The Bank issues a statement of confidence in its management.

3. The Bank tries to raise more private capital in spite of it having no need for it.

4. If this does not work the relevant government(s) express(es) complete confidence in the bank and tell us that it has a sound management structure and business model. Indeed the bank had only recently been giving the government advice as to how to run the public-sector more efficiently.

5. The relevant government(s) tell us that they are stepping in to help the bank but the problems are both minor and short-term and are of no public concern.

6. The relevant government(s) tell us that the bank needs taxpayer support but through clever use of special purpose vehicles there will be no cost and indeed a profit is virtually certain.

7.Part-nationalisation of the bank is announced and taxpayers are told that a profit will result from this sound and wise investment.

8. Full nationalisation is announced to the sound of teeth being pulled without any anaesthetic.

9. Debt costs of the relevant sovereign nation or nations rise.

10. Consequently that nation finds that its credit rating is downgraded.

11. It is announced that due to difficult financial times public spending needs to be trimmed and taxes such as Value Added Tax need to be raised. It is also announced that nobody could possibly have forseen this and that nobody is to blame apart from some irresponsible rumour mongers who are the equivalent of terrorists. A new law is mooted to help stop such financial terrorism from ever happening again.

12. Some members of the press inform us that bank directors were both “able and skilled” and that none of the blame can possibly be put down to them as they get a new highly paid job elsewhere.

13. Former bank directors often leave the new job due to “unforseen difficulties”.

Sun, 08/03/2014 - 15:26 | 5041102 Farqued Up
Farqued Up's picture

14. Officers and directors sue the resultant abortion take-over entity for full performance bonuses originally promised.

15. Govt. rejects it and with stern lectures, agrees to only 95% of the original amount. After all, they have to be punished.

Sun, 08/03/2014 - 18:49 | 5041746 CGP
CGP's picture

He didn´t just gave away 23 billion. That´s part of the funds the EU budget transfers to individual states. Everyone pays for the pool. Then it is dostributed. Some pay more than they take back (Germany/Netherlands/France) and some the opposite (Greece / Portugal / Baltics / Spain). Same thing as in the US Federal Budget.

Sun, 08/03/2014 - 11:45 | 5040309 NoDebt
NoDebt's picture

Now we can forget about ever having to figure out what those "unexpected facts" were that led to a hastily-announced FURTHER $5B loss last week (that was the trigger for the final collapse).  No need to dig further into that whole sordid affair since, well, it'll all getting bailed out anyay, right?

Also wondering if there will be any impairment of uninsured depositors.  You would think that would almost have to happen.  NO WAY a $3B recapitalization from the "bank-paid" rescue fund is going to be enough.  We'll be staring down the barrel of a number twice that size by Monday afternoon.  You can bank on it.

Sun, 08/03/2014 - 11:54 | 5040342 Caviar Emptor
Caviar Emptor's picture

Yes! Whatever figure they quote, the real mess is almost one order of magnitude higher. BUT: they have spin doctors, cosmeticians, lawyers diplomats and politicians all with their ass on the line so... The lying becomes smoothe and easy. Trickle up!

Sun, 08/03/2014 - 11:59 | 5040361 Son of Loki
Son of Loki's picture

"Your money is safe with us. Trust me, I'm a Banker."



Sun, 08/03/2014 - 12:20 | 5040416 Escrava Isaura
Escrava Isaura's picture

Caviar, it is a magnitude higher: Espírito Santo means "Holy Spirit"

Maybe this is divine intervention.....Too.

Sun, 08/03/2014 - 12:23 | 5040427 Caviar Emptor
Caviar Emptor's picture

Ah yes! My child, the global central banks work in mysterious ways

Sun, 08/03/2014 - 12:40 | 5040492 DoChenRollingBearing
DoChenRollingBearing's picture

Greens!  Nice work!

Sun, 08/03/2014 - 13:25 | 5040675 Carpenter1
Carpenter1's picture

We get a front row seat as these fools have to take more and more drastic measures to prop up their failed status quo. The Invisible Hand only grows heavier the more you resist, watch and learn, as history buries another set of desperate rulers under their own greed, corruption, and lies.

Sun, 08/03/2014 - 13:03 | 5040537 OC Sure
OC Sure's picture



Printing money is the solution to all problems.

"Printing money" is a contradiction in terms and is therefore not factual.


Ask 2 sets of 10 people 2 different questions:


Set 1 - How do you feel about your bank printing money?


Set 2 - How do you feel about your bank counterfeiting?


Its no large leap to see why set 1 will probably just shrug, but set 2's reaction will probably be much more then just apathetic.


To inspire ire the truth is the way...


Sun, 08/03/2014 - 11:27 | 5040238 kliguy38
kliguy38's picture

of course you sell it. Its a barbarous relic.....didn't ya get the memo.......sell sell sell.........

Sun, 08/03/2014 - 13:15 | 5040626 Urban Redneck
Urban Redneck's picture

Of course they're trying to get the best price when they dump a few billion notional in 1 millisecond. THEY'RE BANKERS.

The better question would be what trade are they getting the best price on, and how does the single part of the transaction that everyone is focusing on fit into the strategy? The International Bankster Federation is not a charity for the poor, they don't give money away.

Sun, 08/03/2014 - 11:28 | 5040243 Greenskeeper_Carl
Greenskeeper_Carl's picture

wahoo, looks like everything is fixed!! time to go long stawks again. S&P 2000, bitchez

Sun, 08/03/2014 - 12:20 | 5040419 AllWorkedUp
AllWorkedUp's picture

Exactly Carl, That's going to be worth 300 DOW pts. and a $20 gold smackdown. The derivative bomb has been delayed yet again.

Sun, 08/03/2014 - 11:28 | 5040246 Smegley Wanxalot
Smegley Wanxalot's picture

Banco Bonos de Rattlitos.


Sun, 08/03/2014 - 11:35 | 5040278 BeetleBailey
BeetleBailey's picture

Banco de la FUCKED..........UP!

Sun, 08/03/2014 - 11:47 | 5040314 MH17FLIGHT
MH17FLIGHT's picture

My last pay check was $9500 working 12 hours a week online. My sisters friend has been averaging 15k for months now and she works about 20 hours a week. I can't believe how easy it was once I tried it out. This is what I do...

Sun, 08/03/2014 - 11:50 | 5040327 Jack Sheet
Jack Sheet's picture

give us the link to the video you are selling where you fuck your sister.

Sun, 08/03/2014 - 11:47 | 5040316 p00k1e
p00k1e's picture

OR  a car company... 

Sun, 08/03/2014 - 12:01 | 5040365 stocktivity
stocktivity's picture

3 digit gain on the dow Monday...the great ponzi scheme continues for awhile longer....meanwhile, It's all Bullshit!!!

Sun, 08/03/2014 - 12:10 | 5040387 ATM
ATM's picture

Of course. Any news that inevitably leads to more money printing is a green signal like no other. BTFD!

Sun, 08/03/2014 - 13:38 | 5040718 barre-de-rire
barre-de-rire's picture

150 down on monday.....popcorn on tuesday....fuckfest on friday !!!! weeeeeeeeee

Sun, 08/03/2014 - 12:08 | 5040378 junction
junction's picture

Another bank robbery done not by gunmen with getaway cars but by the global elite with their yachts tied briefly at Lisbon, at the ready before their owners continue their month long August vacations.

Sun, 08/03/2014 - 12:36 | 5040477 garypaul
garypaul's picture

Yes, and from a fund that you supposedly funded  

Sun, 08/03/2014 - 20:34 | 5042108 decon
decon's picture

I went to buy a toaster the other day and they tried to give me a bank!


Sun, 08/03/2014 - 11:27 | 5040223 Squid Viscous
Squid Viscous's picture

SPX 2000 by Friday! racing neck and neck with Gaza body count! 

Sun, 08/03/2014 - 12:38 | 5040484 garypaul
garypaul's picture

2500 by October. Beat you!

Sun, 08/03/2014 - 11:22 | 5040224 logicalman
logicalman's picture

All accountants, everywhere, are now out of a job. The numbers are just made up to suit those with wealth and power.

Hope I live long enought to see the banking system go tits up.


Sun, 08/03/2014 - 11:25 | 5040233 rehypothecator
rehypothecator's picture

How about necks up?  

Sun, 08/03/2014 - 11:27 | 5040241 Skateboarder
Skateboarder's picture

It must be funny to be an accountant for the 'big people.' Every transaction is cooked, every figure forged to make the books consistent with some preordained results. What a sham of a job, only topped by the necessitators of culinary accounting: traditional and investment banking, private equity, and the gang.

Sun, 08/03/2014 - 11:34 | 5040274 Racer
Racer's picture

Should rename an accountant as

Chef de fabrication
Sun, 08/03/2014 - 11:40 | 5040292 falak pema
falak pema's picture

fabulation immaculée! 

Sun, 08/03/2014 - 12:23 | 5040426 Escrava Isaura
Escrava Isaura's picture

Maybe this helps:

“Deception, machination and mendacity lie at the core of human intelligence, like worms coiled at the core of a apple” -- Mark Rowlands 


Sun, 08/03/2014 - 19:11 | 5041816 piratepiet
piratepiet's picture

your quote does not help.  Deception and intelligence are two different things, thus deception can not lie at the core of intelligence.  yes intelligence is necessary to deceive, but also to make music, build a bridge etc...

Sun, 08/03/2014 - 22:15 | 5042406 Escrava Isaura
Escrava Isaura's picture

Pardon me. Let me correct Rowlands quote:

“Deception, machination and mendacity (music and build a bridge) lie at the core of human intelligence, like worms coiled at the core of a apple” -- Mark Rowlands

Sun, 08/03/2014 - 11:54 | 5040338 Skateboarder
Skateboarder's picture

Sounds like a real job title at a SF startup.

Sun, 08/03/2014 - 18:59 | 5041777 andy_pandy
andy_pandy's picture

or vampire poodles; owners like them to to be seen and for the blood lust

Sun, 08/03/2014 - 11:25 | 5040232 falak pema
falak pema's picture

If this was Bank of Monte Paschi...mama mia!

We may be getting there...

Sun, 08/03/2014 - 11:26 | 5040234 Winston Churchill
Winston Churchill's picture

Hasn't the ECB been buying all european bank paper/ bonds ?

How much BES toxic crap is the ECB sitting on ?

Sun, 08/03/2014 - 12:12 | 5040392 ATM
ATM's picture

Not much....... yet.


The entire EU banking system has never been reacpitalized but it will be. That means trillions of euros of money printing and Euro - Dollar parity in the race to the bottom.

Sun, 08/03/2014 - 11:28 | 5040242 thamnosma
thamnosma's picture

"Bad Banks", there's a laugh.  I have my bad account, where I put all my unpayable debts.  Then I have my good account to buy more stuff.  Works for me.

Sun, 08/03/2014 - 11:29 | 5040251 Racer
Racer's picture

So the Portugese state is not the taxpayer's money pool?

Sun, 08/03/2014 - 11:35 | 5040279 logicalman
logicalman's picture

Hey, when they say no taxpayers' money will be involved, you are supposed to believe that and get on with your life.

Sun, 08/03/2014 - 11:31 | 5040260 Bloppy
Bloppy's picture

Dow +700 tomorrow! Happy days are here forever!

Sun, 08/03/2014 - 11:43 | 5040304 EverythingEviL
EverythingEviL's picture saved! RISK ON!!!!!!

Sun, 08/03/2014 - 11:31 | 5040262 orangegeek
orangegeek's picture

bank deposits are unsecured loans to the banks


happy times!!!

Sun, 08/03/2014 - 13:05 | 5040263 Space Animatoltipap
Space Animatoltipap's picture

Portugal a mess, France a mess, Germany's growth has stalled, Japan -6% or so GDP. China's growth almost gone. But the US is doing fine. Well why not? After all we're living in a headless Animal Farm. 

Sun, 08/03/2014 - 11:33 | 5040273 Squid Viscous
Squid Viscous's picture

wait, Goldman actually lost money on something? ... shit is really starting to get weird out there!

Sun, 08/03/2014 - 11:41 | 5040296 Watson
Watson's picture

I _thought_ that what GS said was that they were buying BES 'for a client' - so if the client is still there, GS is OK.
And GS may have bought protection through CDS...we will see that if/when the auction is held.

I too find it strange that GS lost money.

Sun, 08/03/2014 - 11:44 | 5040307 aardwolf
aardwolf's picture




Sun, 08/03/2014 - 11:36 | 5040277 JOHNICON
JOHNICON's picture

"by revenue from the special contribution that the banking sector pays the Portuguese state"

Translation:  Paid for by the customers of the banking sector, not the banking sector itself.

Most people are probably saying to themselves, "Good!  Let those evil banksters pay to bail out one of their own!"  The masses are truly sheep.

Sun, 08/03/2014 - 11:44 | 5040306 SpanishGoop
SpanishGoop's picture

Btw, Portugal has another 26b euro EU bailout to be spend between 2014 and 2020 so....

Use it wisely.


Sun, 08/03/2014 - 11:39 | 5040288 Bioscale
Bioscale's picture

Bad bank scheme is a proven solution, I bet several months or years from now the tax payers will have to pay for this. And central bankers are laughing like crazy, fuck.

Sun, 08/03/2014 - 11:39 | 5040289 Fix-ItSilly
Fix-ItSilly's picture

Who bought the shares Goldman sold?  Maybe GS only rented those shares.

Sun, 08/03/2014 - 11:43 | 5040293 ThroxxOfVron
ThroxxOfVron's picture

"Resolution Fund will have to be given enough resources to capitalize Banco Espirito Santo, and according to legislation this can be done through a state loan or through a new special contribution imposed on the 84 institutions that contribute to the fund"


...via Gringo translatte...


Holla mi Muchumpos!  We have decided over coronas with the well hedged Goldmanites that since YOU ran your business prudently and made far less money than the politically connected big swinging dicks at Banco Espirito Sanpendeho Y Sachshedgedo that YOU can pony up some of YOUR earnings to keep the wealthy from being liquidated.  No clawbacks or fines or prison for the Sanpendeho Familia nor trieste pobrito bond-holders y sepharditnazia CDS putas rojas can be contemplated.  Adjust your quarterlies accordinglas astalavistas dinero as we vaca tu profits, por favoritos Muchumpos!  Bueno y guano tu.


Sun, 08/03/2014 - 11:41 | 5040294 The Magus
The Magus's picture

Why does ZH have an obsession with this bank, that I have never heard of?

Who gives a shit?

Someone explain, please.

Sun, 08/03/2014 - 11:47 | 5040321 Skateboarder
Skateboarder's picture

Regular folks never heard of GS until '08 either. Actually, most regular folks still don't know what GS is.

Should someone give a shit?

Sun, 08/03/2014 - 12:12 | 5040395 sessinpo
sessinpo's picture

Skateboarder   Regular folks never heard of GS until '08 either. Actually, most regular folks still don't know what GS is.


Regular folk can't even name their representative or senator. They are cannon fodder. Ebola

Sun, 08/03/2014 - 13:05 | 5040590 Escrava Isaura
Escrava Isaura's picture


Do you know why?

Sun, 08/03/2014 - 15:03 | 5041013 Farqued Up
Farqued Up's picture

Please tell me the benefits of my knowing my government leech representatives. How does it benefit you and your family? I'm all ears.

Sun, 08/03/2014 - 12:20 | 5040411 SillySalesmanQu...
SillySalesmanQuestion's picture

What is GS? Gobs of Shit doimg Gods work...?

Sun, 08/03/2014 - 11:49 | 5040324 Winston Churchill
Winston Churchill's picture

Nobody had heard of Kreditansalt before it blew up the system.

The system is far more interwoven today.

Sun, 08/03/2014 - 11:53 | 5040334 Zero Govt
Zero Govt's picture

a system secure for your money  ...cough

Sun, 08/03/2014 - 11:56 | 5040335 NoDebt
NoDebt's picture

Because it demonstrates the problem is NOT contained to "known-bad-actors" like Greece and Cyprus.  It's almost every bank in southern Europe (and probably many of the northern banks as well).

AND... should such a failure exhaust the resources of a whole S. European country the size of Spain or Italy, those countries would likely be too big to bail out without breaking some pretty hard-and-fast rules governing the ECB and the EU treaty.

WHICH LEADS TO.... potential collapse of the EU.  Now there's a lot of assumptions between this one incident and such an outcome, no doubt.  But the debt tinder is dry and they're playing with matches nearby.

I gave you what is likely going to be your lone green arrow because it's an honest, fair (basic ZH 101 level) question, deserving of a straight-forward answer, even if the attitude is a bit snarky.

Sun, 08/03/2014 - 12:06 | 5040374 The Magus
The Magus's picture

Thank you!

PS I'm not an economist, I'm a physicist. General relativity is easy, economics not so much...

Sun, 08/03/2014 - 13:45 | 5040657 Tall Tom
Tall Tom's picture



Then what is the geometrical significance of c2 in Einstein's Mass-Energy equivalence expression? It has one. And it can be demonstrated in his Theory of Special Relativity.


And as for Economics have you ever consider Econophysics? If the application of Newtonian Physics applies to Economics, and as the large Financial Institutions and US Treasury hires Physicists to do the modeling, then would not Einstien's Relativistic Laws apply to Inflation/Deflation phenomena as that is a coinherent property, and Relative, as there is no preferred Frame of Reference?


How mircoeconomics applies to Macroeconomics is like the princple that the Quantum Physics applies to Cosmology.


And you claim to understand General Relativity and yet, in the same statement, claim that Macroeconomics is beyond you?


That is both ridiculous and laughable.


Demonstrate your expertise and answer my simple question of the geometrical significance of c2. You had best understand the orthogonality of the Electric and Magnetic Moments described by Maxwellian Electromagnetic Wave Propagation before attempting this.


This was taught to me by one of Carl Sagan's Grad Students. It is easy enough.

Sun, 08/03/2014 - 13:53 | 5040777 taraxias
taraxias's picture

Awesome post. +1,000

Sun, 08/03/2014 - 12:19 | 5040417 Grifter
Grifter's picture

A second +1 (unrecordable, unfortunately) for not taking the Fight Club route when answering the OP and ripping him to shreds (which seems to be more the norm around here lately).

Sun, 08/03/2014 - 13:45 | 5040754 Tall Tom
Tall Tom's picture

It is Fight Club. If you do not like it then get off of my porch. Leave. Go away. You are not worthy.

Sun, 08/03/2014 - 11:54 | 5040343 Greenskeeper_Carl
Greenskeeper_Carl's picture

its going to be the next big thing bro, trust me. All you need to know is that you should invest in it now. All the rest of us ZHers are doing it too.

Sun, 08/03/2014 - 12:07 | 5040377 The Magus
The Magus's picture

Investing is immoral (I'm serious).

Sun, 08/03/2014 - 12:40 | 5040488 Greenskeeper_Carl
Greenskeeper_Carl's picture

my previous post was a joke, but how is investing immoral? i won't argue against a statement that the current environment we are in in immoral, since it most certainly is. But how is investing money in a company you think is going to grow, or buying gold, since it will undoubtably be worth a lot more in the future, immoral?

Sun, 08/03/2014 - 13:00 | 5040573 Tall Tom
Tall Tom's picture

Ever read the Parable of the Talents? (Matthew 25:14-30)


The wicked servant was the one who buried the Talent (a unit of Money) and refused to invest.


I guess that if you are a Satanist then investing is immoral. You are diametrically oppsed to what Jesus Christ taught.


Here is the relevant quote...


Verse 24 -27  24 He also who had received the one talent came forward, saying, ‘Master, I knew you to be a hard man, reaping where you did not sow, and gathering where you scattered no seed, 25 so I was afraid, and I went and hid your talent in the ground. Here you have what is yours.’ 26 But his master answered him, ‘You wicked and slothful servant! You knew that I reap where I have not sown and gather where I scattered no seed? 27 Then you ought to have invested my money with the bankers, and at my coming I should have received what was my own with interest.


I have responded to your SOCIALIST ASS before. But you care not to read the Truth.


But even you, working FOR SATAN, serve God's purpose. Because of you I get the OPPORTUNITY to teach the TRUTH and spread the Gospel.


Satan will always lose and God will prevail as the Undisputed Truth.


(And I am serious...)

Sun, 08/03/2014 - 13:50 | 5040767 Tall Tom
Tall Tom's picture

A Socialist downarrowed this because he believes that investing is immoral.


It will be fun to watch the Socialist swine starve as they refuse to work and choose to suck upon the dick of the Government.


But the Government will be insolvent after the collapse. Yes it will be fun to watch as they reap the Hell that they have chosen because of their immorality and refusal to invest.

Sun, 08/03/2014 - 13:56 | 5040787 taraxias
taraxias's picture

This is why I've been here from the beginning and I still come to ZH, posts like these. 


Well done!!! 

Sun, 08/03/2014 - 14:51 | 5040969 Farqued Up
Farqued Up's picture

What about those that don't believe in spirits, good or evil? Religion is too often linked at the navel with evil bastards. I removed that IV many years ago. I feel that we have been cheated out of the books of the Bible that are rat holed and secreted away from the people solely to perpetuate an agenda. Most Christians don't seem to care. How about you, if you are indeed Christian?

Sun, 08/03/2014 - 22:37 | 5042457 oudinot
oudinot's picture

Manichean religous thought.

St. Augustine grew out of it and converted to Catholicism.  You probaly will to.

Sun, 08/03/2014 - 12:15 | 5040404 algol_dog
algol_dog's picture

It's that cockroach thing, ya know -

Sun, 08/03/2014 - 12:42 | 5040493 HardlyZero
HardlyZero's picture

The trail will probably travel East to Spain and Italy.

Sun, 08/03/2014 - 11:44 | 5040305 Elliptico
Elliptico's picture
Oh merda, não podemos imprimir.
Sun, 08/03/2014 - 12:50 | 5040539 morning
morning's picture

Chama o Otelo...

Sun, 08/03/2014 - 13:15 | 5040630 Man Who Was Thursday
Man Who Was Thursday's picture

Foda-se lá o caralho com esta gente! Mais um BPN

Sun, 08/03/2014 - 11:45 | 5040310 BovespaBroker
BovespaBroker's picture


this a reason for stocks pull up tomorrow over 17000.

Sun, 08/03/2014 - 11:49 | 5040323 ThroxxOfVron
ThroxxOfVron's picture

"Solution aims to rescue Banco Espirito Santo without spending taxpayers’ money, and is being prepared by the government and the Bank of Portugal"


So, the shareholders and bondholders in ALL of the other Banks in Portugal are NOT Taxpayers?

Are the Portuguese Banks and the holders of shares and bonds in Portuguese Banks exempted from paying taxes?

Are these confiscations from un-associated businesses and persons somehow tax deductable?

Sun, 08/03/2014 - 12:34 | 5040467 HardlyZero
HardlyZero's picture

"aims", "plans", "goals"  are all happy talk for popular consumption, to tamp it all down tight.

What eventually occurs will be different.

Sun, 08/03/2014 - 11:53 | 5040337 Cognitive Dissonance
Cognitive Dissonance's picture

"A “bad bank” may be created for the toxic assets of the credit portfolio."

I'm not bad, just misunderstood. - Jessica Rabbit

<I'm just drawn mismanaged that way.>

Sun, 08/03/2014 - 11:55 | 5040345 MalteseFalcon
MalteseFalcon's picture

When liquidating banks, this is my preferred course of action:

1.  Fire the board and senior management

2.  Fire and prosecute the closest regulators and auditors

3.  Initiate fraud investigation

4.  Cancel any derivatives.

5.  Liquidate equityholders

6. Liquidate bondholders, but when liquidating them all, please do it it in the proper order.  Wouldn't want to ruffle any feathers.  ("We know you are a senior bondholder, sir.  We won't liquidate you until next week.")

7.  Rationalize the work force.

8.  Bail-in uninsured deposits.

7.  Tap government insurance fund if any

8.  Bail-in everybody else

9.  Anyone left with an interest takes it up the "poop chute"

10. Done.

Sun, 08/03/2014 - 12:01 | 5040366 Son of Loki
Son of Loki's picture

Dream on....

Sun, 08/03/2014 - 12:17 | 5040407 MalteseFalcon
MalteseFalcon's picture

Just my opinion, son and I didn't just dream it up.

Sun, 08/03/2014 - 12:18 | 5040415 sessinpo
sessinpo's picture

MalteseFalcon    When liquidating banks, this is my preferred course of action:

1.  Fire the board and senior management

2.  Fire and prosecute the closest regulators and auditors

3.  Initiate fraud investigation

4.  Cancel any derivatives.

5.  Liquidate equityholders

6. Liquidate bondholders, but when liquidating them all, please do it it in the proper order.  Wouldn't want to ruffle any feathers.  ("We know you are a senior bondholder, sir.  We won't liquidate you until next week.")

7.  Rationalize the work force.

8.  Bail-in uninsured deposits.

7.  Tap government insurance fund if any

8.  Bail-in everybody else

9.  Anyone left with an interest takes it up the "poop chute"

10. Done.


In a truly free market, there are no bail ins or bail outs. It's simply bankruptcy.

Secondly, Bondholders take precedence over equity holders.

Forget government insurance fund. Government is part of the problem.

Cancel derivatives? What about the counter party?


In all, you should focus more on fraud investigation and prosecution of manangement and regulators.

Sun, 08/03/2014 - 12:27 | 5040441 MalteseFalcon
MalteseFalcon's picture

Just curious, did you see where I mentioned a bailout by taxpayers or unconnected 3rd party?  No, you didn't.

When you deposit money with a bank, you are now a creditor, even in a free market.  You see, even a free market has some rules and that just happens to be one of them.

I believe I put equityholders in a subordinate position to bondholders and took great pains to protect senior bondholders.


The equityholders and the bondholders of these banks would all be getting wiped out, so the order is moot.

Derivative counter parties?  It's a free market and they lost.  It's gone.  All gone.

Sun, 08/03/2014 - 12:46 | 5040508 sessinpo
sessinpo's picture

MalteseFalcon     Just curious, did you see where I mentioned a bailout by taxpayers or unconnected 3rd party?  No, you didn't.

When you deposit money with a bank, you are now a creditor, even in a free market.  You see, even a free market has some rules and that just happens to be one of them.

I believe I put equityholders in a subordinate position to bondholders and took great pains to protect senior bondholders.


The equityholders and the bondholders of these banks would all be getting wiped out, so the order is moot.

Derivative counter parties?  It's a free market and they lost.  It's gone.  All gone.


I copied your post word for word, so get off your high horse. You mentioned nothing about protecting taxpayer money - period.

Secondly, you mentioned tap a government insurance fund. Well where does the government get its revenues from? Taxpayers.

Thirdly, you put liquidate equity holders as Number 5, then put bondholders at number 6. Caught you in another lie.


Shall I pick on you more? How about rationalize workforce. More government for you, you closet liberal. But as you say in your spoiler alert, bondhold holders and equity holders would be wipped out so the order is moot and thus the workforce is moot - they are laid off. See how real logic works.

By the way, the bond holders would not be totally wipped out, they would divest the remaining assets. It is the equity holders totally wipped out. Just a little financial info for you.

As for derivatives, those counter parties have a claim - they become creditors too. And if they become wipped out because of their claim, then you have a domino effect. Another bank goes down.

Then the claims of other counter derivatives cause further banks to go down. This is why derivatives should simply be banned. They are unregulated and even if they were regulated, we have governments in collusion with them that makes the problem worse.

Sun, 08/03/2014 - 13:24 | 5040674 Fix-ItSilly
Fix-ItSilly's picture

Derivatives should not be banned.  Instead, they should be transparently reported and proper risk assigned.  this eliminates their improper, or illegal, use to hide poor operational performance.  In addition, by placing "derivatives" at the same level of general services in a bankruptcy, we minimize the "domino" effect you assign too much importance to.

Simply put, the public should not pay for "derivative" exposure.  It is a pox on the future.

Sun, 08/03/2014 - 13:25 | 5040679 ThroxxOfVron
ThroxxOfVron's picture

In the best of all possible Fight Club You punch the asshole square in the face at least once for every single lie or fallacy You catch them in.

& maybe just set him on fire before You walk away...

Sun, 08/03/2014 - 13:27 | 5040682 MalteseFalcon
MalteseFalcon's picture

You copied my post word for word, but you did very little effective thinking about what I wrote.

The "premiums" for the "insurance" fund come from a small % charge to depositors.  That's how it works.  No taxpayers involved.  Is the fund large enough to cover a systemic event?  No.  No insurance scheme is.  And when the fund is gone, it's gone.  Taxpayers do not top up the "insurance" fund.

Nowhere where do I mention using taxpayers funds.  No taxpayers (in their role as taxpayers) are harmed by my proposal.

Again, I put equity holders before bond holders.  If you do not understand numbers and how they work I'm going to be reluctant to continue this discussion.

If derivatives are cancelled, will there be a domino effect?  Yeah.  How about that?  Nothing real will be destroyed. 

I have no problem with banning derivatives of all kinds (except for those who are actually delivering a physical product), but unfortunately there are quintillions of them floating around now, and they have to be dealt with.

The meat of it is this:  management, regulators, auditors, speculators, equity holders and bondholders face the axe.  In that order.


Sun, 08/03/2014 - 12:30 | 5040447 Escrava Isaura
Escrava Isaura's picture

sessinpo, you said: "It's simply bankruptcy..... Cancel derivatives? What about the counter party?"

Can you please clarify?

Sun, 08/03/2014 - 12:46 | 5040511 morning
morning's picture

vai ser lindo. lindo :D

Sun, 08/03/2014 - 13:19 | 5040656 Fix-ItSilly
Fix-ItSilly's picture

Derivative counter-parties are exposed to a failed institution that provided them a service.  They should have a claim no higher than those providing office cleanup, paper supply and window washing,

In bankruptcy, to make derivative counter-parties a senior claim holder is a fraud on society with "guarantees" and "derivatives" a root cause of most financial implosions.

Sun, 08/03/2014 - 11:58 | 5040349 GrinandBearit
GrinandBearit's picture

Sunday night S&P futures market will gap up +10 handles and DOW will gain +300 points on Monday.

Sun, 08/03/2014 - 12:43 | 5040430 Tall Tom
Tall Tom's picture

There is still the Argentine Default to contend with so I can foresee more downside action to the 200 dMA support on the DJIA. The ISDA has declared, after all, that it was an Credit Event which will trigger the CDS.


Then I will expect the Dead Cat Bounce.

Sun, 08/03/2014 - 12:05 | 5040371 NoWayJose
NoWayJose's picture

A common mis-perception today is 'wealth re-distribution' where billionaires steal money from the poor. While it cannot be argued that billionaires are getting richer, the poor don't really 'have' money to steal -- and are at the same time reaping quite a number of government handouts. In fact, the poor are better off than perhaps any time in history with free healthcare, cell phones and EBT cards. So where is the money coming from? It's not the middle class, at least directly - although we see that with higher banking fees and erosion of the value of money (inflation). Rather, the re-distribution of wealth is really a massive feeding that is taking place at the 'debt trough' - where governments like the US and Portugal answer every issue by creating more debt - shoveling it out to the rich and trickling it out to the poor. This Portuguese bailout is just as solvent as the US FDIC - in theory protecting taxpayers by making the banks pay it, but in reality just adding more debt to the government when the bailout comes.

Sun, 08/03/2014 - 12:32 | 5040459 Caviar Emptor
Caviar Emptor's picture

However... Those feeding off the debt trough of which you speak are in fact cheating. Those closest to the spigot by virtue of their connections don't need to actually contribute anything at all, but do in fact impoverish the rest through over consumption and by undermining and destroying free markets. Therefore : they replace capitalism with fascism and disenfranchise all those outside the club. If you disagree, well, expect a knock at the door in the middle of the night

Sun, 08/03/2014 - 12:08 | 5040382 PaperBear
PaperBear's picture

The Banco Espirito Santo assets are being kept out of the hands of a third party who might be able to make the use of these assets profitable.

Sun, 08/03/2014 - 12:14 | 5040397 Seasmoke
Seasmoke's picture

We now work backwards. 


5 = 2+2

Sun, 08/03/2014 - 12:27 | 5040437 SillySalesmanQu...
SillySalesmanQuestion's picture

I had no idea that Corzine was working again in Portugal...

Sun, 08/03/2014 - 12:46 | 5040516 morning
morning's picture


Former socialist MP gets €3.5 Million retirement from  among others, BES...

Sun, 08/03/2014 - 12:48 | 5040530 morning
morning's picture

Salgado's connection to every political party since the 90s. Print-friendly-version :D

Sun, 08/03/2014 - 12:49 | 5040534 morning
morning's picture

How BES colluded with govt after govt.

Sun, 08/03/2014 - 12:58 | 5040570 Bow Tie
Bow Tie's picture

'without spending taxpayers’ money' hohoho

Sun, 08/03/2014 - 13:03 | 5040585 BigRedRider
BigRedRider's picture

"...Goldman decided it had enough and pulled the plug on an equity investment it had made just three short weeks earlier (apparently with zero Due Diligence) following massive losses..."


I wonder how Jon Corzine fit into this debacle?... Or is Goldman Sachs just stupid with taxpayer money?

Sun, 08/03/2014 - 13:17 | 5040644 Amish Hacker
Amish Hacker's picture

As a Sunday morning service to my ZH brothers and sisters who may lack fluency in Portuguese, I have translated some of the more difficult passages:

"citing unidentified people linked to the process"  =  The insiders orchestrating this crime would prefer to act in secret.

" 'bad bank' may be created" = We'll just keep playing Pretend and Extend. Why should we have to deduct liabilities from assets?

"rescue Banco Espirito Santo without spending taxpayers’ money," = We're sure going to be spending someone's money, but we're not going to tell you whose until later.

"financed by Portuguese banks and by revenue from the special contribution" = We'll fund this felony by a combination of theft and extortion from the 84 small, solvent banks in order to save our large, insolvent friends. 

"the bank will be sold in the stock market within six months" = As soon as the bank gets some new assets on its balance sheet, we'll transfer everything of value to one of our cronies. 

Sun, 08/03/2014 - 21:28 | 5042264 crazybob369
crazybob369's picture

I speak Portuguese fluently, and this is what it really said: "We respectfully request that the Portuguese tax payers bend over, in order to simplify the assault on their rectal canal. Thank you."

Sun, 08/03/2014 - 13:49 | 5040686 Seize Mars
Seize Mars's picture

The idea that a banking company has "equity" and "debt" is fucking silly.

A banking company is just a pool of debt, like a mortgage pass-through trust.

So once you let that sink in for a minute, then think about this: equity in any corpration is like an option; the equity holder gets upside (excess returns) but you can't be sued for the debt piece. That means you are long some kind of default option. Gee, I wonder who underwrites that option? Yup, you guessed it: you, the sucker/taxpayer walking down the street.

The business corporation as it exists nowadays was essentially pioneered by the Rockefellers and contemporaries.

Two pills would cure a lot of ills - eliminate fiat debtmoney, and eliminate the corporate liability veil. Most huge enterprises would splinter into small businesses of a couple hundred people each, and some owners would make money, some would fail. If malfeasance were part of the business model, owners would be sued and lose their capital. It's that simple.

You do those two things and society would be right as rain.

Sun, 08/03/2014 - 13:31 | 5040693 jarana
jarana's picture

Incidentally, the most fun we had was the part where they said no taxpayer money...

As far as I know, all money (currency better said) is taxpayer's money.

Who the hell is the owner if it's not the people that produce the stuff that can be claimed for with those papers?

Simple procedure:

step 1: Give anyone a cardboard box.

step 2: Put his stuff on it and get him the fuck out.

step 3: If the room is not empty (incuding you), go to step 1.

I don't care if the boxes have to be paid with taxpayer's money; let's give them some support.

Sun, 08/03/2014 - 14:14 | 5040849 Joebloinvestor
Joebloinvestor's picture

Where is the announcement that the principals are banned ?

Sun, 08/03/2014 - 14:18 | 5040865 Loucleve
Loucleve's picture

Goldman is its own muppet.


Sun, 08/03/2014 - 14:54 | 5040985 all_in_now
all_in_now's picture

"Goldman decided it had enough and pulled the plug on an equity investment"-please, ZH should be above the term "investment" when applied to "equity"

Sun, 08/03/2014 - 15:19 | 5041073 Jano
Jano's picture

Die Erste and Raifeisen in Austria will follow.
Both are heavily overloaded in Eastern Europe, Ukraine and Russia.
They tanked already a lot of water.

Sun, 08/03/2014 - 15:34 | 5041131 Paracelsus
Paracelsus's picture

 Good Bank/Bad Bank.... Where have I heard this before?

A  more interesting issue is who has the other side of this,the CDS exposure to this has gotta be enormous...

This sort of dwarfs the Argie default hedge fund holdout for $1.5 Billion...

Don't they teach this stuff in MBA courses? "The burning platform strategy" If you force me to the wall,I will shoot myself and take your firm with us.

Isn't this what Brazil and Mexico did in the 70's and 80's? "Give us more favorable terms or we will default!"

What happened to respect for contract law.Same thing for Greece."It is your fault (Germany) for being stupid enough to loan us the money".

This sort of screws up Capitalism,doesn't it?

Thank God that $400 trillion of derivatives contracts out there is not in danger of exploding....

Isn't this what happened with the LIBOR screw up? Banks starting to refuse to lend to each-other because

they don't trust other Banks to be solvent. Without a central registry mechanism,nobody can determine the ticking time bombs WHICH WERE PURCHASED OVER THE COUNTER.

Sun, 08/03/2014 - 15:36 | 5041137 ZZR600
ZZR600's picture

Didn't I read somewhere on ZH that the definition of 'investors' now includes depositors?

Sun, 08/03/2014 - 15:48 | 5041177 2bing
2bing's picture

Those two guy predictetd this. 


Brillant Interview:

Sun, 08/03/2014 - 16:55 | 5041407 Joebloinvestor
Joebloinvestor's picture

Someone in the Portuguese press needs to publish the names of all the principles involved and show where they end up after all of this and their bonuses.


Especially the Santo family.

Sun, 08/03/2014 - 23:23 | 5042541 HardlyZero
HardlyZero's picture

Banco Espirito Santo's healthy businesses, including its retail arm, will be spun off and put in a new bank called Novo Banco, which will keep the bank's current staff, Costa said. He said account holders' money was safe. The cash injection is a loan and will be repaid with interest, with no cost to taxpayers, Costa said.

The bank's toxic assets, meanwhile, will remain at Banco Espirito Santo, which will become a so-called "bad bank." He did not elaborate.

So now Novo Banco = "good bank"....and Bankco Espirito Santo = "bad bank".

Quite a turn.


Read more here:
Mon, 08/04/2014 - 07:10 | 5042937 AdvancingTime
AdvancingTime's picture

All those with money invested in this bank now know what risk is.  The really big earners in recent years have benefited greatly from the surging stock prices as much of their income has come from financial markets and gains in equities. Many people seem to think this is the hope of our future.

When you have more than you need or want to put money away for a rainy day where do you store it? If you rated people on a "wealth chart" by how many tangible assets they owned you might be shocked to find much of the wealth people own is in paper and this is full of risk. More on this subject in the article below.

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