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Ex-ECB's Juergen Stark Says ECB's Balance Sheet "Gigantic", Collateral Quality "Shocking"

Tyler Durden's picture





 

The German criticism of a mess they themselves have enabled (and benefit from via peripheral current account deficits funded via TARGET2 as shown previously here) at the ECB continues, and following public protests by Bundesbank head Jens Weidmann about recent ECB activity, it is the turn of former ECB executive board member Juergen Stark to take center stage. In an interview with the Frankfurter Allgemeine, warned that following the massive expansion in the ECB's balance sheet, in which it is clear to anyone that the ECB will accept used candy bar wrappers as collateral, that "the balance sheet of the euro system, isn't only gigantic in size but also shocking in quality."

Of course, with the ECB now the bad banks' bad bank, this is not at all surprising. Keep in mind that the recent $1.3 trillion balance sheet expansion was supposedly not the equivalent of "printing money" because the ECB made the cash available in the form of a loan in exchange for collateral. The problem is that the ECB accepted literally everything that was not nailed down and proceeded to give 100 cents on the dollar for some unamortized book value associated with it. The end result was the already documented here first encroaching ECB initiated margin calls which may or may not be an added twist in the European liquidity situation. However one thing is certain: the quality of the ECB's balance sheet has deteriorated massively, as the European central bank rushes to catch up to the Fed in terms of asset "quality" backing the currency.

Marketwatch has more on the FAZ interview:

[Stark] added the structure of the balance sheet is a cause for concern because increasingly short-term debt claims are being replaced by long-term ones and this will make it more difficult for the bank to reverse its loose monetary policy.

 

With his comments, the bank's former hawk Stark is backing Germany's central bank president Jens Weidmann. The head of the Bundesbank told Der Spiegel weekly magazine over the weekend that requirements for banks' cheap loans have been "very generous" and the program calms the situation in the short term, but this calm could be deceptive. He was concerned about the collateral requirements that the banks had to provide.

 

The ECB's balance sheet soared past the EUR3 trillion level last week partly because the bank has flooded markets with over EUR500 billion in cheap loans for banks.

Of course, this long-term deterioration in prospects for yet another central bank means that it has bought a short-term reprieve, as has been reflected by rising asset prices. However, what happens when the effect of this latest dilution in the value of the paper currency fades, or worse, when the ECB's balance sheet becomes non-performing and confidence in the montary authority is lost?

Well, since that will be "someone else' problem" why worry?

 


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Thu, 03/08/2012 - 08:57 | Link to Comment q99x2
q99x2's picture

They should have opened a pawn shop instead.

Thu, 03/08/2012 - 09:00 | Link to Comment cossack55
cossack55's picture

I've no problem with Chummley running the FED.

Thu, 03/08/2012 - 09:04 | Link to Comment markmotive
markmotive's picture

Gold. It's not in a bubble...the world of ponzi is.

Marc Faber: "Very few people in this world own gold"

http://www.planbeconomics.com/2012/03/07/marc-faber-gold-is-nowhere-near...

Thu, 03/08/2012 - 09:08 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

 

The bubble heads on CNBC are not going to be happy to hear this.

 

Now where did I put my shocked face again......I had it right over here.

 

Thu, 03/08/2012 - 09:13 | Link to Comment Harlequin001
Harlequin001's picture

Does anyone know where I can get a really big loan against my totally shagged out car?

Anyone?

Thu, 03/08/2012 - 09:16 | Link to Comment Momauguin Joe
Momauguin Joe's picture

Try Capital One. When their website is back up, that is.

Thu, 03/08/2012 - 10:11 | Link to Comment trav7777
trav7777's picture

participants in a shared currency regime have to bail each other out.

When IL goes BK, the rest of the 57 will have to pitch in whether they like IL's corruption, crookedness, crime, and spendthrift.

Thu, 03/08/2012 - 11:34 | Link to Comment Hard1
Hard1's picture

Well, this was the financial cash for clunkers, what did they expect to get as collateral???? Nobody would give you bunds, when they can get 100 cents on the dollar for Unibanco, Portugal, etc..etc...

Thu, 03/08/2012 - 09:39 | Link to Comment silverbullion
silverbullion's picture

Gold is in a bubble... it is backed by nothing.

LOL :-)

Thu, 03/08/2012 - 09:16 | Link to Comment MillionDollarBonus_
MillionDollarBonus_'s picture

Pfft. Juergen is such a drama queen. Euro states have plenty of collateral to pledge to the ECB including gold, land, infrastructure and natural resources.

Thu, 03/08/2012 - 09:18 | Link to Comment Clint Liquor
Clint Liquor's picture

You forgot, People.

Surely, they are worth something.

Thu, 03/08/2012 - 09:29 | Link to Comment Yes We Can. But...
Yes We Can. But Lets Not.'s picture

Soylent collateral.

Thu, 03/08/2012 - 10:02 | Link to Comment spiral_eyes
spiral_eyes's picture

securitization, bitches.

Thu, 03/08/2012 - 10:17 | Link to Comment a growing concern
a growing concern's picture

Rehypothecation, bitchez.  It's where you go when you die.

Thu, 03/08/2012 - 09:25 | Link to Comment AC_Doctor
AC_Doctor's picture

MillionDufusBoner,  you forgot their future unborn children and the air we breathe.

Thu, 03/08/2012 - 09:31 | Link to Comment 4xaddict
4xaddict's picture

Anyone been watching how many low grade US housing assets have been passed internally through large banks and onto the ECB balance sheet?

Would be an interesting study and one that probably shows a large scale international theft...

Thu, 03/08/2012 - 10:12 | Link to Comment trav7777
trav7777's picture

there are enough low-grade housing assets in europe that have done so too and ended up on FRB balance sheets.  It's a two-way street.

Thu, 03/08/2012 - 09:40 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Good, because they have no energy sources, so at least they have something to trade in exchange for oil. Somewhere there is an old Weimar farmer laughing his ass off.

Thu, 03/08/2012 - 10:23 | Link to Comment trilliontroll
trilliontroll's picture

GOLD:

    Yes ,  Germany ( and Switzerland) Gold at the NY Fed

LAND:

 (especially developed areas ) in Spain

  ( http://www.thespainforum.com/f202/housing-overhang-1-million-properties-  drag-spanish-property-market-yea-153889/)

INFRASTRUCTURE:

(already done by german cities as they leased it to americans)

http://www.time.com/time/business/article/0,8599,1890418,00.html

"...But there was a risk, and it would end up costing German taxpayers dearly. It related to a term set down in the leasing contracts — massive tomes, written in English, which required the Germans to take out policies with AAA-rated insurers to cover the value of the assets for the life of the lease. Should the insurer lose its top rating, the Germans would have to either find another insurer or, in the worst case, provide additional collateral to guarantee the assets.

"

NATURAL RESOURCES:

EURO-Zone

 coal , bauxite, nickel, zinc ; oil / natural gas: far less  than consumption

http://www.ehow.com/about_5515777_list-european-natural-resources.html

Thu, 03/08/2012 - 11:58 | Link to Comment JPM Hater001
JPM Hater001's picture

"Pfft. Juergen is such a drama queen. Euro states have plenty of collateral to pledge to the ECB including gold, land, infrastructure and natural resources."

Do you think he does it just to show how- even when the arguement is made...and sometimes with considerable thought I might add, that we at least took the time to hear the moronic argument and discredit it with ferocious verasity our intellect provides rather than dismiss it as the MSM et.al. do??

Or is he just a dick.

Thu, 03/08/2012 - 12:02 | Link to Comment Teamtc321
Teamtc321's picture

MDBooner; Rehypothecation my golden tube,

Greek style %>>>>>>>>> 

Thu, 03/08/2012 - 09:33 | Link to Comment Toolshed
Toolshed's picture

Too funny!! +1

Thu, 03/08/2012 - 09:00 | Link to Comment bdc63
bdc63's picture

*gasp* ... what utterly shocking news ... how could anyone have ever predicted this ...

Thu, 03/08/2012 - 08:59 | Link to Comment Tebow
Tebow's picture

Thats what the girls said when I banged her Gigantic and shocking.

 

Thu, 03/08/2012 - 09:06 | Link to Comment resurger
resurger's picture

 

 

"HIT EM UP'" TuPac

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"-,,_::::_,,-*__,,,,~"

Thu, 03/08/2012 - 09:11 | Link to Comment GeneMarchbanks
GeneMarchbanks's picture

Is that the infamous doubleheaded camel cock?

Thu, 03/08/2012 - 09:17 | Link to Comment resurger
resurger's picture

right into the ECB's orifice

Thu, 03/08/2012 - 11:01 | Link to Comment fuu
fuu's picture

In case you haven't noticed you totally suck as ascii art posts.

Thu, 03/08/2012 - 12:19 | Link to Comment LowProfile
LowProfile's picture

And yet, it was immediately identified for what it was.

ZH comments mess with formatting, I'd like to see you do better...

Thu, 03/08/2012 - 13:34 | Link to Comment fuu
fuu's picture

Well the next time I feel like posting a large penis in the middle of the comment thread I'll show you how it's done.

Thu, 03/08/2012 - 09:11 | Link to Comment Harlequin001
Harlequin001's picture

That looks like a self portrait...

Thu, 03/08/2012 - 09:00 | Link to Comment Sandmann
Sandmann's picture

It is evident Stark is providing heavyweight support for Weidmann. I would have expected Weber and Hans Tietmeyer to have joined in, but he is VC of BIS in Basel and might not want to rock that boat.

Thu, 03/08/2012 - 09:01 | Link to Comment PaperBear
PaperBear's picture

"Shocking" ?

Another S word springs to mind.

Thu, 03/08/2012 - 09:02 | Link to Comment GeneMarchbanks
GeneMarchbanks's picture

http://en.wikipedia.org/wiki/Hyman_Minsky#Understanding_Minsky.27s_finan...

Someone else's problem until there is nobody left to replace you...

Thu, 03/08/2012 - 09:02 | Link to Comment silverbullion
silverbullion's picture

I was a plumber at some stage. Not even a plumber will touch that stinking mess.

Thu, 03/08/2012 - 09:05 | Link to Comment williambanzai7
williambanzai7's picture

The Tower of Bubble

Thu, 03/08/2012 - 10:53 | Link to Comment rosiescenario
rosiescenario's picture

......built atop a sand pile that is in excess of its angle of repose.....

Thu, 03/08/2012 - 09:06 | Link to Comment Clint Liquor
Clint Liquor's picture

The inevitable conclusion of Keynesian Economics: Debt Saturation.

Like a sponge that cannot take on any more water, it starts to leak. But all the Central Planners can do, is add more.

Thu, 03/08/2012 - 09:57 | Link to Comment wandstrasse
wandstrasse's picture

Weidmann / Stark are like magicians who say: the virgin is not really being cut in peaces - it only seems so! And she is not even a virgin!

Thu, 03/08/2012 - 21:37 | Link to Comment StychoKiller
StychoKiller's picture

Another round of drinks will sober us right up!  How soon before the Stupid people pass out?

Thu, 03/08/2012 - 09:07 | Link to Comment DutchDude
DutchDude's picture

In 3 years time it's more expensive to whipe your ass with toiletpaper than with eurobills... saving €5 bills from now on...

Thu, 03/08/2012 - 09:15 | Link to Comment Clint Liquor
Clint Liquor's picture

I believe the YEN is much more supple and softer. Therefore, it will be preferred.

Thu, 03/08/2012 - 09:37 | Link to Comment DutchDude
DutchDude's picture

Hmm, good point; those crips Euro notes, still warm from the 24/7 printing press, are much more likely to cause papercuts down there...

Thu, 03/08/2012 - 10:38 | Link to Comment NorthPole
NorthPole's picture

Not to mention you might get contact high.

Thu, 03/08/2012 - 10:55 | Link to Comment rosiescenario
rosiescenario's picture

...they need to be laundered once or twice...

Thu, 03/08/2012 - 09:08 | Link to Comment crawl
crawl's picture

Markets have ignored reality for a while now.

ECB will spin the story or if it really becomes a concern, stop making margin calls and ignore the lack of quality collateral on hand to avoid reality.

Thu, 03/08/2012 - 09:10 | Link to Comment Pumpkin
Pumpkin's picture

Compared to fiat, how bad could the quality possibly be?

Thu, 03/08/2012 - 09:23 | Link to Comment Clint Liquor
Clint Liquor's picture

So true! In a world where all things are valued in terms of pieces of paper with the pictures of dead people.

Thu, 03/08/2012 - 09:14 | Link to Comment bugs_
bugs_'s picture

Creditanstalt

Thu, 03/08/2012 - 09:30 | Link to Comment azzhatter
azzhatter's picture

Was that comment from Merkel when she pulled the train at the G20 meeting? 

Thu, 03/08/2012 - 21:38 | Link to Comment StychoKiller
StychoKiller's picture

"One more cock and my virginity is restored!"

Thu, 03/08/2012 - 09:30 | Link to Comment silverbullion
silverbullion's picture

Buy gold and silver bitchez.

Thu, 03/08/2012 - 09:32 | Link to Comment firstdivision
firstdivision's picture

Only shocking in how great the quality is.

-Mario Draghi

Thu, 03/08/2012 - 09:38 | Link to Comment silverbullion
silverbullion's picture

A Stark Reality.

Thu, 03/08/2012 - 09:38 | Link to Comment Benjamin Glutton
Benjamin Glutton's picture

the funny part is that we are not even halfway home with respect to central bank monetary magic.

Thu, 03/08/2012 - 09:42 | Link to Comment SheepDog-One
SheepDog-One's picture

'Who cares, it will all be someone else's problem'....when is that, when theyre all hanged with piano wire pretty soon? 

Thu, 03/08/2012 - 09:43 | Link to Comment dcb
dcb's picture

sorry but the german's have only themselves to blame. what did they think was going to happen when the put a goldman guy in there. he wouldn't take crap from the banks to rescue his friends. Please, you accept shit (give them a job) you have to expect exactly this.

Thu, 03/08/2012 - 09:43 | Link to Comment Vince Clortho
Vince Clortho's picture

FRNs

The multi-purpose tissue.

Thu, 03/08/2012 - 09:44 | Link to Comment Canucklehead
Canucklehead's picture

France will end up owning this mess.

Hollande will win and want to place France "Front and Centre".  Germany will perform a tactical diplomatic retreat to draw the French into the centre.

Germany will align with Great Britain and approach the issue of Europe from one flank.  The United States and Canada will approach the issue of Europe from another flank.  France and friends will be in the middle.

China and Russia will watch what is unfolding.

France will look to develop their vision of Europe with the support of Spain, Italy, Greece, Portugal, etc.

It's a slam dunk.  Europe will split along ideological north/south lines with France leading the south.  The global economy will expect the south to honor it's debts.  The ECB will portion out the debt based on recipients, not guarantors.  To do so otherwise would mean the south's banking system would be owned by the flanking allies.

The new currency for North Europe will be a combination of euroUSD, GBP, and neoDeutschmarks.

Renmember, France blew things up in the 1930's, and also in the 1970's.  Why would tomorrow be any different?

Thu, 03/08/2012 - 09:44 | Link to Comment youngman
youngman's picture

Hey but they have a bunch of Greek Bonds...

Thu, 03/08/2012 - 09:45 | Link to Comment VisualCSharp
VisualCSharp's picture

I'm shocked, SHOCKED, I tell you! SHOCKED at how bad the collateral is!

Nowadays, only a fool is shocked by anything being worse-than-expected in the financial world.

Thu, 03/08/2012 - 09:48 | Link to Comment SheepDog-One
SheepDog-One's picture

Candy bar wrapper collateral for imaginary money pumped into bankrupt banks....but GREAT for stocks of course, stocks 'calmed', and experiencing Zoloft euphoria right here so all is well....NEVERMIND!

Thu, 03/08/2012 - 21:40 | Link to Comment StychoKiller
StychoKiller's picture

Printing inks contain benzene-based solvents...

Thu, 03/08/2012 - 09:46 | Link to Comment SheepDog-One
SheepDog-One's picture

'The cheap loans calm things short term, but could be deceptive'....WHAT? You mean firehosing imaginary money at bankrupt banks might just be wanking? NAH, cant be! Free money backed by nothing fixes EVERYTHING! Just ask Bernank!

Thu, 03/08/2012 - 09:52 | Link to Comment juggalo1
juggalo1's picture

If the Euozone banks accept the Greek swap at a 50-70% haircut, does that mean they get margin calls at the ECB, or does the ECB just ignore the fact that the book value now doesn't even match the face value?

Thu, 03/08/2012 - 10:04 | Link to Comment tiwimon
tiwimon's picture

but, but, but....  MarketWatch has a headline right now that says

'BULLETIN

ECB's Draghi: LTROs have been 'unquestionable success'
Thu, 03/08/2012 - 10:50 | Link to Comment Bansters-in-my-...
Bansters-in-my- feces's picture

ECB accepts used condoms for collateral.

 

Thu, 03/08/2012 - 10:51 | Link to Comment Bansters-in-my-...
Bansters-in-my- feces's picture

Market watch spins more shit than a shit spider.

Thu, 03/08/2012 - 10:58 | Link to Comment Acet
Acet's picture

By extending massive long-term loans to banks in exchange for junk collateral, what the ECB has done is a massive nationalisation of bank risks (read: "future losses") while the bankers get to keep the profits.

Basically Mario Draghi, Goldman Sach's ex-Alumni, has just done the best possible thing for bankers and worst possible thing for taxpayers: he just screwed European Taxpayers to give bankers even more rewards with zero risk.

From the point of view of bankers (not banks, bankers), their past mistakes have just been picked up by the taxpayer, while they get free money and at least 3 more years to take whatever risks they want for some more fat bonuses. If the bank they work for becomes insolvent because their assets are garbage, well, the ECB either takes the loss on that garbage or saves the bank to save face - whatever the result, those 3 extra years of bonuses the banker got are safe in a Caiman account.

Thu, 03/08/2012 - 12:19 | Link to Comment ILikeBoats
ILikeBoats's picture

All this, and none of the corrupt are in jail or even barred from being directors of a publicly traded company.

Thu, 03/08/2012 - 15:00 | Link to Comment sgt_doom
sgt_doom's picture

Juergen Stark speaks and speaks like a true Bilderberger.

Who was that other douche who used to attend those Bilderberg Group Forums with Stark? 

Oh yeah, that douche, Thomas Bodström, former Justice Minister, and with that Swedish shyster firm going after Wikileaks' Julian Assange, who has relocated right next store to Langley, VA, USA (CIA...CIA...CIA), and has been travelling the USA falsely claiming that Assange fled from the questioning of the authorities.

What a total lying sack of Svenska s**t!!! As everyone knows, Assange waiting around for a month, then his attorney contacted the Swedish Prosecution Authority, who stated the case was closed and he was free to leave Sweden.

Why does Bodström lie and lie and lie???

Anyone in the vicinity of the CIA or Northern Virginia, be on the lookout for this douchey dood, please:

http://upload.wikimedia.org/wikipedia/commons/thumb/6/64/Thomas_Bodstr%C3%B6m_bokm%C3%A4ssan.JPG/800px-Thomas_Bodstr%C3%B6m_bokm%C3%A4ssan.JPG

 From Bodström's web site:

Today is the hearing of the case Assange the Supreme Court in London. It will last for two days, which is strange. Actually, the court will just check if the application is formally correct from the Swedish prosecutor. Any decision on the merits should not be.  Assange refused to participate in hearings in Sweden.

Would not it be easier just to go to Sweden to attend the hearing if he is so innocent?

(Bodström, the lier:  Would it not be far easier to extradite, or extreme rendition Assange from Sweden.  You should know, Bodström, as you once were involved with illegally helping the CIA to extreme rendition two innocent Arab-Swedes, who were later exonerated and paid compensation from the Swedish courts?)

Fri, 03/09/2012 - 03:38 | Link to Comment o2sd
o2sd's picture

Booked at PAR bitchez, booked at PAR.

 

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