For Dexia, Third Bailout Will Be The Charm. They Promise

Tyler Durden's picture

Bail me out once, shame on you; bail me twice, shame on me; come back for a third (and final, we promise!) bailout, only a Franco-Belgian SNAFU is capable of such Einstein-ian repetition. Dexia, that stress-test-passing bastion of all things entirely wrong with European banking and politics is back at the trough. Reuters is reporting what we have known all along, that without massive additional capital injections the bad-bank, crap-bank model simply cannot work.


To wit: Dexia needs to recap its Luxembourg unit (BIL) before its apparently 'imminent' sale to a Qatari sovereign wealth fund (one more billionaire sucker family born every day it seems). The somewhat comical aspect is that post-October (the second - and final, we promise - bailout), as Tageblatt explains, BIL's 'legacy' bond portfolio was 'transferred' to its parent Dexia at December 2011 prices - creating a net loss of EUR1.9bn for the subsidiary. This significantly affected the sub's solvency - making it unlikely to meet its capital requirements (which it was 'sure' would be 9% Tier 1 by now!).


But given Dexia's own extensive losses - EUR11.6bn in 2011 and EUR1.2bn in the first six months of 2012 - a capital increase for Dexia BIL may force Dexia to seek funds itself. That would mean mo' money, mo' bailout from the states currently guaranteeing its borrowings - principally Belgium and France, and to a lesser extent Luxembourg - which now look set to rise to EUR90bn in aggregate!


Via Tageblatt:

As has come to the crash of the equity in the BIL? The reason lies in the structure of the contract. The Qataris were ready to buy Dexia BIL, but wanted to take over a bank that was exempt from all risks. This involves extensive surgery. A letter of intent to sell the bank with Qatar was at 05 Signed in April 2012. However Dexia BIL and Dexia committed to sell certain parts of the bank before. This was around the 51 percent stake in Dexia Asset Management, about the 50 per cent stake in RBC Dexia to Dexia Pfandbriefbank, and a 40% stake in the "Popular Banca Privada" as well as a portfolio of "non-strategic nature" in the amount of 2 billion euros.


The main area but of the Dexia BIL had to separate them before they could be easily re-BIL was a package with "toxic" securities worth 1.9 billion euros, to the inside of the Dexia Group member clearing bank for "scrap value" belonged. The question of where the Dexia group had hidden these papers in their group has been answered in the past never. As the Dexia group but with DenizBank, with Dexia Bil and Dexia Belgium had only three operating units store had these papers in these operating units. The question of how high the stock of these high-risk securities in Luxembourg has been found so far never received a response. Dexia in Brussels now informs that he was to take 1.9 billion euros.

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veyron's picture

FAZ is the ultimate 3x loser

Silver Bug's picture

This really is just sad. Don't companies go bankrupt anymore?

Buck Johnson's picture

How in hell did they talk a Quatari wealth fund to buy that junk bank?  If I was any of these wealthfunds I wouldn't buy any thing that Europe or the US is selling unless it's gold or silver.

Winston Churchill's picture

Taxpayer money meets bottomless pit.

glenlloyd's picture

or taxpayer money meets black hole...

LMAOLORI's picture

"Winston Churchill Taxpayer money meets bottomless pit."

Yup this is new

A Quick End to TARP Means a Smaller Payoff for Taxpayers

Quietly, the Treasury Department is engaged in another bailout of the banks. This time, it’s America’s small banks that are the lucky duckies.

The federal government still holds investments in hundreds of small banks around the country in the Troubled Asset Relief Program, otherwise known as the bailout. In an effort to wind down TARP, the government is trying to sell off its holdings of preferred stock of the remaining smaller banks.

The problem is that the Treasury Department isn’t getting great bids on some of the bank paper, even on the shares of banks with strong profits and strong capital. When the government sold its holdings in MetroCorp Bancshares of Houston this month, the bank itself bought back most of it — at 98 cents on the dollar. Wilshire Bancorp of Los Angeles bought back its paper at 94 cents on the dollar. The Treasury Department sold preferred shares of Ohio-based First Defiance at 96 cents, and Peoples Bancorp of North Carolina at 93 cents. All of these are regarded as healthy.

Who makes up the difference? Taxpayers, of course.

Treasury officials say that is what the market is willing to bear. But the government doesn’t have to sell now, and it doesn’t have to settle for less than a full repayment.

Why should healthy banks or hedge fund investors get a gift so that the Obama administration can score some political points by raising the number of banks that have left the program? For all the generous breaks that the government gave the gargantuan banks in the bailout, they all at least paid TARP back at 100 cents on the dollar. Why shouldn’t the small ones pay 100 cents on the dollar like the big boys?




Dear Mr. Dimon, Is Your Bank Getting Corporate Welfare?



Banks are using government loans to repay TARP





LawsofPhysics's picture

Surprise, surprise,  It's a fucking circle jerk between the money printers and corporate fascist at the expense of the taxpayer (peasant).

Wake me when the guillotines start rolling out, because nothing changes until then.

LMAOLORI's picture


"LawsofPhysics Wake me when the guillotines start rolling out, because nothing changes until then."


You will be sleeping for a while then

Report: Cronyism, political donations likely behind Obama, Holder failure to charge any bankers after 2008 financial meltdown

LawsofPhysics's picture

Gee, the same fascists that are now funding Romnet, imagine that.  No surprise that Ryan was picked for Veep (voted for every single bailout and against any oversight).

LawsofPhysics's picture

Baring a gold revaluation, all central banks are insolvent.  WTF?  give us some new information that we can trade, please.

andrewp111's picture

So, all the world's central banks do QE-G, buy up all the gold in the world, and revalue the gold to $100K/oz.  Now everything is peachy-keen!

Dick Darlington's picture

Hello FrAAnce and Belgium! I know u're both overindebted and crippled by many things like the economic prison called euro, insolvent and oversized banks etc. But for u the party will be over soon. The bond "market" which operates like a hockey player ie can't chew gum and walk at the same time has spared u so far. But once the snack bar at south is empty the bond beast WILL re-focus. And that's when u two step in. And no, electing communists to "lead" you will offer no shield, lol.

Apeman's picture

Please explain this to my fellow waffles. I beg you. Over here, nobody knows what the hell is going on. Everyone seems to think they are immune to this entire crisis. There must be something in the waffles.

bank guy in Brussels's picture

The successors to the Communist parties are small, but we have socialist heads of government in both France and Belgium now ... In Belgium our Prime Minister since the end of 2011, is a quite dapper socialist gay man, Mr Elio Di Rupo, a charming, talented chap who often wears snazzy bow ties.

We are not worried. Dexia is a mess, but relatively a proverbial drop in the euro-bucket ... We're really quite prosperous in this sector of Europe despite it all. We have proportionately 3x the bank deposits that Americans have ... maybe 2x or 3x the bank leverage, too, ha!

The really big elephant in the euro-room is the French and German banks liability to the GIIPS countries as a whole ... once we fix that, everything will be fine ... and we should kick that can into 2013 soon ... 'We have not yet begun to print!' ...

Seriously, as Bruce Krasting intimated some time ago, ultimately we can pro-rogue our outstanding European bonds, instead of rolling them over ...

And ultimately we owe European debt to ourselves as a whole, much like the Japanese, and unlike the Americans. We can adjust the package on that basis. We 'are' the bond market ourselves here.

The 'German - Latins' shouting match you see on ZH and elsewhere, is mostly just for show (German electoral politics, plus keeping the euro a bit lower for export reasons). Certainly it will look pretty farcical to non-Europeans ... Which means our pretend euro-football game is working well.

The EU authorities have certainly been unfair to common people in the GIIPS countries, many of us agree, and that needs to stop, and will stop. But this corner of Europe, north-West Continent, is still pretty comfortable.

ThirdWorldDude's picture

Why would you worry? Once ESM is implemented, Brussels will be declared capital of the Universe...     /s

q99x2's picture

You won't win this one with a hissy fit. Drones are headed your way soon enough.

financial apocalyptic contagion's picture

and I thought now that the football season is up and running things would be fine

Go Chelsea! 

caimen garou's picture

"to poor to paint,to proud to white wash" jed clampitt to cousin pearl on over spending.

buzzsaw99's picture

Why didn't they just rob the norway teacher's pension fund like everyone else?

Motorhead's picture

Gee, I'm sure glad Belgium has a government now.  No telling where Dexia would be without one.

timbo_em's picture

Mr Hollande should just ask his friends at the state-owned Banque Postale to bid for the French part of Dexia. At least that's what he did when CIF was in deep trouble in May and it worked great. Impairment was avoided, CIF and more importantly its creditors were saved...for now, taxpayers didn't notice anything, can kicking was successful.

XitSam's picture

GM has breathing room. They are on their first bailout.

andrewp111's picture

Chrysler is on their second bailout, and they are doing better than GM (as part of Fiat).

Seasmoke's picture

Look over there !.......Just dont look at Belgium

orangegeek's picture

Belgian chocolates are always nice.