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FT Reports Europe To Sacrifice Its Banks To Bailout Sovereigns - Under €100 Billion In Bank Recap Funding Available

Tyler Durden's picture


It's 3pm: do you know where you last hour of trading bailout rumor is? Today, the Guardian passes the baton back to the FT, which however has released a report which when digested will be very negative for the zEURo.qq. It appears that in order to accommodate more funds for sovereign bailouts under the total max EFSF guarantee cap, as reported on several occasions yesterday by Zero Hedge, only €100 billion will be set aside for bank recapatialization. There is a problem with this number: it is predicated on the European Banking Authority's estimates of capital shortfalls of between €70-90 billion, the is the same EBA which 4 months ago said Dexia was in sterling health when it passed the 2nd Stress Test in pole position. As a reminder, Goldman predicted a €1 trillion capital shortfall, while Credit Suisse said €400 billion. No matter: the EU will come out with a number from its lower colon, just to make the residual maximum sovereign debt "guarantee" notional appear that much bigger. Too bad, however, that in the process it will once again crush Europe's banks which the market will suspect, rightfully so, that they are undercapitalized even post the recap, anywhere between 90% and 75% and will have to accelerate their asset liquidations to fund themselves one more day in lieu of a functioning interbank liquidity market. And so the risk flaring will shift from Europe's sovereign to Europe's banks, and their main proxy in the US - none other than Morgan Stanley which repeatedly refuted it has any exposure to France... but said nothing about its gross (gross because counterparties will blow up fast and furious) to French banks. End result: this is very bad for Europe because it means they have finally done the math and realize that to get the €2 trillion or so in EFSF insured capital they have to sacrifice their banks. Alas, there is no outcome that saves both the banks, and guarantees future European sovereign issuance under the currently contemplated structure. None.

From the FT:

Europe’s grand plan to strengthen its banking system is set to fall well short of current market expectations, identifying a capital shortfall of less than €100bn that must be made up over the next six to nine months, according to the latest official estimates.


The European Union’s estimate of the necessary recapitalisation effort compares with a recent Inernational Monetary Fund report that identified a €200bn hole in banks’ balance sheets stemming from sovereign debt writedowns. It also falls far short of analyst estimates that banks might have a capital deficit of up to €275bn.


Two people familiar with the outcome of an emergency stress test of Europe’s banks said the European Banking Authority, which ran the exercise, had suggested between €70bn and €90bn should be raised. That would allow banks to meet a 9 per cent threshold for their core tier one capital ratios, a key measure of financial strength that goes beyond current requirements, after marking down to market values their sovereign bond holdings of the eurozone’s peripheral states.


A fierce political debate has started over almost all the key assumptions used in the analysis but people familiar with the discussions expect any changes to reduce, rather than increase, the estimated shortfall.


European leaders are due to ratify the plan at the weekend, alongside a broader sweep of initiatives to strengthen the eurozone, including a well trailed project to use the European Financial Stability Facility as a vehicle to guarantee national governments’ sovereign debt issuance.


Apparent deadlock over a mooted state guarantee system for bank bonds, seen as crucial to thaw a frozen funding market will exacerbate fears of an impending credit crunch across Europe.


“This is going to be a damp squib all round,” said one person involved in the process.

We have no idea what a damp squib is, but we have no intention to be long on Monday when we find out.


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Wed, 10/19/2011 - 15:23 | 1789996 mayhem_korner
mayhem_korner's picture



Economists call this "scarcity."

Wed, 10/19/2011 - 15:33 | 1790037 hedgeless_horseman
hedgeless_horseman's picture



they have finally done the math and realize that to get the €2 trillion or so in EFSF insured capital they have to sacrifice their banks.

Have to?  No.  They will just sacrifice the EUR/USD and print more Euros, which makes Turbo Tax Tim smile.

Wed, 10/19/2011 - 15:33 | 1790044 LawsofPhysics
LawsofPhysics's picture

Was thinking the same thing.  Timmy and Ben will get their inflation come hell or high water.

Wed, 10/19/2011 - 15:59 | 1790140 flacon
flacon's picture

"Sovereign" ----> most over-rated word of 2011

Wed, 10/19/2011 - 16:01 | 1790152 tmosley
tmosley's picture

And simultaneously the most underrated word in modern history.

Wed, 10/19/2011 - 16:45 | 1790254 dlmaniac
dlmaniac's picture

Who do we rape taxpayers for, bankers or Sovereigns? Hmmm, such a tough decision.

Wed, 10/19/2011 - 18:54 | 1790690 AldousHuxley
AldousHuxley's picture

it is more old rapes the young because they joined the ponzi earlier and rode the boom.

America with her corrupt selfish boomer leadership will soon become Italy in the future....


"To be frank," she said, "we've been a country in decline since the 1980s – had we but seen it. Actually, there are plenty of people, including in government, who still won't see it. All we can do now is try to manage that decline a bit better."

It's also a gerontocracy, she said, "run by the old, for the old. The prime minister is 76, the president is 87, the new head of the Bank of Italy will probably be a guy in his 70s, everyone in authority is old. I'm 49, and at the university I'm still considered 'promising'. So it's very, very hard for young people. I have former PhD students working in call centres." - Italian


smart young ones are already planning to move out.

Wed, 10/19/2011 - 15:57 | 1790132 Gadfly
Gadfly's picture

A false paradim really in light of our highly-interconnected financial world.  But if the choice were real and distinct, most would prefer to see the banks fail.  And then the sovereigns would become the banks... and then they would fail.

Wed, 10/19/2011 - 16:25 | 1790216 semperfi
semperfi's picture

INFLATE -or- DIE ???
someone's gotta go back and get a shitload of printer cartridges

Wed, 10/19/2011 - 16:41 | 1790248 Smiddywesson
Smiddywesson's picture

Have to?  No.  They will just sacrifice the EUR/USD and print more Euros, which makes Turbo Tax Tim smile.

Half right.  They will print what they need to print, while they stack gold and prepare to ramp the price of that gold so their balance sheets, well, balance.  That's the rabbit up the sleeve.

Thu, 10/20/2011 - 01:43 | 1791668 eureka
eureka's picture

NO. I've been saying it for months: European sovereigns will nake their banks take haircuts - and - US banks will carry part of it, because they rigged both European sovereigns and EWuropean banks, and insured the fiat bubble with garbage paper CDS. 

Consequently EU and EUR prevails and US and USD goes down.

Watch carefully - it will happen last minute - and then very fast.

Wed, 10/19/2011 - 16:11 | 1790176 sushi
sushi's picture

Damp squib is UK speak for a wet firecracker. It won't go off. No bang. Weak phizz. Some wisps of smoke.

Wed, 10/19/2011 - 17:01 | 1790308 RichardENixon
RichardENixon's picture

Sounds like what's been happening when I try to bang the old lady these days.

Wed, 10/19/2011 - 19:50 | 1790870 Getagrip
Getagrip's picture

I'm buying all the Euros 

I'm buying all the euros I can while they are still available! If they're good enough for Switzerland, they're good enough for me!!!!











Wed, 10/19/2011 - 15:25 | 1790000 LawsofPhysics
LawsofPhysics's picture

What liquidity problem?  < snark >

Wed, 10/19/2011 - 15:26 | 1790002 Sequitur
Sequitur's picture


Wed, 10/19/2011 - 15:46 | 1790067 hedgeless_horseman
hedgeless_horseman's picture




...for U.S. Treasuries and Gilts, which is the reason for the season of European discontent.

Oceania has always been at war with Continental Europe.

Wed, 10/19/2011 - 15:48 | 1790110 jm
jm's picture

Long no fear of the printing press.

Wed, 10/19/2011 - 16:00 | 1790125 hedgeless_horseman
hedgeless_horseman's picture



Exactly!  There is nothing to be afraid of.  These two progressive humanitarians have shown the rest of the world how to manage inflation.


Wed, 10/19/2011 - 16:04 | 1790162 The Third Man
The Third Man's picture

From the article....


"The whole financing deal was set up on Chavez’s order by Chavez’s head of security, Gen. Henry Rangel."


General Rangel? Is that Charlies Rangel's brother? I knew there was something fishy about that family! ;-)

Thu, 10/20/2011 - 07:05 | 1791836 falak pema
falak pema's picture

is she the next president with plastic boobs?

Wed, 10/19/2011 - 16:05 | 1790165 jdelano
jdelano's picture

Seq--Noooooooo!  Don't join them.  It's a disease.  Like zombification.  

Speaking of which--you know how, in the zombie movie, the hero stabs the zombie through the eye or something and he thinks it's dead but after lying there a minute it roars back to life and attacks....that's this zombie market and the hero is ZH, which ought to alternately be called ZombieHeadhunter.  

Come on Zombie Headhunter, cut off the head, cut of the head!

Wed, 10/19/2011 - 15:26 | 1790003 mayhem_korner
mayhem_korner's picture

European leaders are due to ratify the plan at the weekend, alongside a broader sweep of initiatives to strengthen the eurozone,


Seems pablum is the precursor to hopium.  As Cris Carter would say...C'mon man.

Wed, 10/19/2011 - 15:26 | 1790004 St. Deluise
St. Deluise's picture

buy the rumour

sell the squib

Wed, 10/19/2011 - 15:26 | 1790005 ZippyBananaPants
ZippyBananaPants's picture

lower colon.  haha.  you must mean spinkter hole


Wed, 10/19/2011 - 15:38 | 1790065 sabra1
sabra1's picture

i thought he was refering to colon powell!

Wed, 10/19/2011 - 15:26 | 1790006 dr.charlemagne
dr.charlemagne's picture

well......we certainly do find ourselves in quite a pickle. LOL

Wed, 10/19/2011 - 15:45 | 1790097 PianoRacer
PianoRacer's picture

Origin of the phrase "damp squib"

While most modern squibs used by professionals are insulated from moisture, older uninsulated squibs needed to be kept dry in order to ignite, thus a "damp squib" was literally one that failed to perform because it got wet. Often misheard as "damp squid",[8] the phrase "damp squib" has since come into general use to mean anything that fails to meet expectations.[9] The word "squib" has come to take on a similar meaning even when used alone, as a synonym for dud.

Wed, 10/19/2011 - 22:09 | 1791246 Crisismode
Crisismode's picture

You are just reciting Wikipedia.


Please give credit.

Wed, 10/19/2011 - 15:27 | 1790009 ZeroPoint
ZeroPoint's picture

So when does this motherfucker pop? Give me a date dammit.

Wed, 10/19/2011 - 15:27 | 1790010 lizzy36
lizzy36's picture

So the take away is I am not getting my damn pony again this weekend.

Well moving on to "Wanting a Hippopotamus For Christmas".

Wed, 10/19/2011 - 15:29 | 1790028 fuu
fuu's picture

You have been bad this year Lizzy, nothing but coal for you.

Wed, 10/19/2011 - 16:04 | 1790161 Poetic injustice
Poetic injustice's picture

Vagons of coal for 12 hours/day. Future of many.

Wed, 10/19/2011 - 15:29 | 1790012 Mercury
Mercury's picture



No market here kid...trades on the pinks!

Wed, 10/19/2011 - 15:28 | 1790016 zorba THE GREEK
zorba THE GREEK's picture

The ECB and the Fed will save the banks, that is their primary purpose.

And since Central banks can print money, consider it done. 

Wed, 10/19/2011 - 15:46 | 1790100 css1971
css1971's picture

Y'know. I don't really think the ECB is a central bank... I'm not entirely sure what it is, but it certainly doesn't behave like one.

Thu, 10/20/2011 - 01:19 | 1791643 qussl3
qussl3's picture

Pretty sure its deposit facility and SMP had allowed the EZ zombies to hide the various levels of decay thus far.

Wed, 10/19/2011 - 15:28 | 1790017 mynhair
mynhair's picture

Christ, why can't Europe start a 'Dancing With The Czars' TV program and go veg out!

Wed, 10/19/2011 - 15:28 | 1790018 chet
chet's picture

Almost time for the Big Short Part Duex?

Wed, 10/19/2011 - 15:37 | 1790038 mayhem_korner
mayhem_korner's picture



I think the original will need a new title once this puppy goes paws up.

Wed, 10/19/2011 - 15:28 | 1790019 -Michelle-
Wed, 10/19/2011 - 15:33 | 1790042 nyse
nyse's picture

Good one. Thx

Wed, 10/19/2011 - 16:00 | 1790141 Mentaliusanything
Mentaliusanything's picture

Passing the LIT SQUIB (Fire in the Hole)

Wed, 10/19/2011 - 15:29 | 1790022 streblo
streblo's picture

Squibs ignite explosives/fireworks. Damp squibs don't ignite. Hence, a damp squib means fireworks are expected, but nothing happens.

Wed, 10/19/2011 - 15:29 | 1790023 s2man
s2man's picture

If something is expected to have a great effect or impact but doesn't, it is a damp squib.

Wed, 10/19/2011 - 15:29 | 1790027 eBuddha
eBuddha's picture

and the idiots on CNBC have a link that asks "Has Market Sentiment Diverged From Reality?" -- suggesting people are just too negative.


Wed, 10/19/2011 - 15:33 | 1790043 jdelano
jdelano's picture

I was cracking up when I read that this morning--clicked on it cause I thought CNBC was actually going to comment on how insane this rally has been.  Damn near pissed myself when I realized they meant that market sentiment is "negative"  (11% rallly?) while the realities (End of the free world) are positive....

heheheheheh actually, chuckling as I write this...

Wed, 10/19/2011 - 15:46 | 1790079 Ronaldo
Ronaldo's picture

I am pissed.  I read that twice thinking I had read the article wrong, only to find out I hadn't and therefore wasted twice as much time reading more crap on CNBC.

Wed, 10/19/2011 - 20:46 | 1791028 Dugald
Dugald's picture

In der New World Order chuckleing werden verboten......

Wed, 10/19/2011 - 15:30 | 1790030 Archimedes
Archimedes's picture

Yeah, weekends are a crapshoot. Do the markets go up 300 or down 300? Plus they HAVE to make a plan this weekend. Since Sarkozy is flying to Germany it tells me Germans are saying enough and that means French banks are dead.

The math simply does not work as there are not enough lifeboats for all persons onboard the Titanic Europa.

The question is do I have the balls to lay on the shorts on Friday evening? So I gotta ask myself, "Do I feel lucky punk"?


Wed, 10/19/2011 - 15:32 | 1790039 s2man
s2man's picture

Well, do ya?

Wed, 10/19/2011 - 16:01 | 1790153 Mentaliusanything
Mentaliusanything's picture

Make my day!

Wed, 10/19/2011 - 16:00 | 1790149 Ethics Gradient
Ethics Gradient's picture

Quite. And when he got there Merkel probably told him nothing could be done tonight and that he should get back top Paris to be with his wife at the birth of her child.

Wed, 10/19/2011 - 16:24 | 1790214 Poor Grogman
Poor Grogman's picture

Let go of your feelings Luke .... Use the force....

Wed, 10/19/2011 - 17:02 | 1790314 Smiddywesson
Smiddywesson's picture

The question is do I have the balls to lay on the shorts on Friday evening? So I gotta ask myself, "Do I feel lucky punk"?

Not my business, but I think the flaw in your methodology is trying to catch the first 1/8 of the move, which along with the last 1/8 of the move, was according to Livermore, the most expensive part to try to trade. 

If you believe this drop will be the biggest in recent history (or ever), there's no need to time it.  You will know it for what it is when it comes and you can short and ride the violent countertrend rallies, over and over again.  You are in the driver's seat if you are patient.  You don't have to time it.

Don't forget to put away some physical for a rainy day (like when it's raining fire, and the market drags the winners and losers down the crimson maw of Hell)  :-)

Wed, 10/19/2011 - 15:30 | 1790031 falun bong
falun bong's picture

OK just one fanboi comment. ZH you guys are amazing. I know of *no* other media organ (heh heh) that is so doggedly pursuing the EUR story. It's such a complicated mess of intrigue, lies, history, received wisdom, innuendo, criminal frontrunning, that all the other media gets it wrong or has given up. You guys are cutting through the bullsh*t, sifting through the lies one by one. Thanks...bitchez

Wed, 10/19/2011 - 15:33 | 1790045 UK debt marsh
UK debt marsh's picture

EuroHedge;  On a long enough timeline......zzzzzzzzzzzzzzzz


Never theought armageddon could be so  TEDIOUS

Wed, 10/19/2011 - 16:12 | 1790178 Gene8696
Gene8696's picture

And I stood upon the sand of the sea, and saw a beast rise up out of the sea, having seven heads and ten horns, and upon his horns ten crowns, and upon his heads the name of blasphemy... the euro.

Wed, 10/19/2011 - 15:42 | 1790082 css1971
css1971's picture

You can donate.

In fact I think I will right now.

Wed, 10/19/2011 - 15:31 | 1790032 reload
reload's picture

Ok so what is it going to cost the banks in terms of coupon on some nice unsobordinated - tier 1 bond issuance. I understand Lloyds bank have been asking around and the word on the street is that for them a 6% yield would be the sticker price.

I could see a decent demand at that level if true.

Wed, 10/19/2011 - 15:40 | 1790075 css1971
css1971's picture

The BOE is going to be spending much of QE2 on "corporate bonds". For that you can read banks.

p.s. 6% doesn't do it for me, with inflation running at 5.2%

Wed, 10/19/2011 - 15:48 | 1790099 reload
reload's picture

Excellent points - and anyway most of our UK banks would have any top line wiped out out if they had to pay 6% for capital. The pretence that the taxpayer was going to make a profit on his stake would be over. They would be zombified for all to see.

Wed, 10/19/2011 - 15:31 | 1790033 UK debt marsh
UK debt marsh's picture

I'm not Art Cashin's older brother, but I remember when $100 billion was a whole lotta money.

(starts trembling and dribbling)

Wed, 10/19/2011 - 15:35 | 1790054 jm
jm's picture

OK.  EU is basically saying bank rescues are up to the countries they are domiciled in to deal with.  ECB and the other acronyms will try to deal with the sovereigns.

I don't understand why European "leaders" are so wishywashy. 

Wed, 10/19/2011 - 15:35 | 1790055 john39
john39's picture

probably the plan all along, create one all powerful bank to rule them all...

Wed, 10/19/2011 - 15:35 | 1790056 css1971
css1971's picture

A squib is a firework which goes "BANG!!!!" Unless it's damp in which case it goes "phut".

Wed, 10/19/2011 - 15:36 | 1790057 Manthong
Manthong's picture

I wonder if their damp squib is really a watertight suitcase nuke? 

Wed, 10/19/2011 - 15:36 | 1790058 adyaner
adyaner's picture

I Am Jack's Complete Lack of Surprise

Wed, 10/19/2011 - 15:38 | 1790066 bob_dabolina
bob_dabolina's picture

Europe is Jacks prolapsed anus

Wed, 10/19/2011 - 15:56 | 1790130 catacl1sm
catacl1sm's picture

just put them in some warm water for awhile. they'll be fine.... probably.

Wed, 10/19/2011 - 15:37 | 1790061 css1971
css1971's picture

Surely if they save the sovereigns, the banks will also be saved.. Isn't the problem the exposure to the duff sovereigns? Speaking of which I think I need to order some more.

Wed, 10/19/2011 - 15:39 | 1790068 Quinvarius
Quinvarius's picture

By sacrifice, they mean nationalize.  Which really means print a bunch of money.

Wed, 10/19/2011 - 15:39 | 1790070 Racer
Racer's picture

about bloody time someone sacrified the banksters!

Pile up the bonfires.....

Wed, 10/19/2011 - 15:40 | 1790071 LongOfTooth
LongOfTooth's picture

Or are they coming in with a low-ball number in order to get their nose in the tent?  Then later there will be "adjustments" to the bottom line.  Not unlike what happens with most military contracts.


Wed, 10/19/2011 - 15:40 | 1790072 Comay Mierda
Comay Mierda's picture

No printing of any euro or usd will happen until the voters beg for it. Major banks will fail and millions will have restricted access to their remaining funds. Only then will the printing begin

Wed, 10/19/2011 - 15:49 | 1790112 SheepDog-One
SheepDog-One's picture

I keep hearing mass pain and panic is about to descend...yet it never does as markets only blow off to the upside, any downside rarity is kept small. 

When will this panic event happen? I'm ready!

Wed, 10/19/2011 - 16:09 | 1790173 hedgeless_horseman
hedgeless_horseman's picture

Be patient, SheeDog.  The producers and director won't kill off the star in the first half of this movie.


Wed, 10/19/2011 - 16:15 | 1790194 Belarus
Belarus's picture

SheepDog, I am absolutely convinced the HFT's are allowed to do what they do because their mandate has been to keep bids going in the market. Period. If you watch the tape on a day like this, the market as the botton started falling out would get magical bids....yet over in PM land the slide stayed roughly the same. This is an imporant connection because stocks have risen in the hopes that things will be fixed via monetization of bonds, which should have a much more correlated effect at the very least between equities and the yelllow stuff.....

So, on the news today, and the EUR/USD coming down waaaay off it's highs, Gold and Silver massively sold offf.....YET, YET, equities kept getting huge bids for no reason at all. If what sent equities up 10% gets clearly refuted by the people that matter, shouldn't it gone down 10% on the same noise? But no, that is what the HFT's are for. To keep the bid and farce going as much as possible.

The ALGO's will be run over next week as the banks begin to domino. 

Wed, 10/19/2011 - 16:40 | 1790247 Libertarians fo...
Libertarians for Prosperity's picture



So you're basically suggesting that HFTers like James Simons and his crew are conspiring with Bernanke and Geithner to juice the market?

You probably believe in the infamous "anti-silver Cartel" as well, right?

It's amazing how people are so easily seduced by conspiracy theories, ghosts and supernatural fairy tales in the absence of understanding and knowledge. 

Wed, 10/19/2011 - 17:26 | 1790388 fuu
fuu's picture


Wed, 10/19/2011 - 17:37 | 1790440 Libertarians fo...
Libertarians for Prosperity's picture



I love how you follow me around from post to post. It's like having my own little monkey at ZeroHedge.


Wed, 10/19/2011 - 18:03 | 1790543 fuu
fuu's picture

I wouldn't get you a glass of water if you were on fire.

Wed, 10/19/2011 - 18:04 | 1790549 Libertarians fo...
Libertarians for Prosperity's picture



I know.  You're a libertarian. 

Wed, 10/19/2011 - 18:18 | 1790597 fuu
fuu's picture

Hahahah so clueless.

Wed, 10/19/2011 - 17:28 | 1790399 Smiddywesson
Smiddywesson's picture

When will this panic event happen? I'm ready!

Don't know, but I would think it's not going to happen before the ECB and the Fed populate the asset side of their balance sheets with gold instead of foreign currencies.  That seems to be the plan.  After that, all bets are off.

Wed, 10/19/2011 - 15:51 | 1790118 Pancho Villa
Pancho Villa's picture

Also, I have read that Dodd-Frank removed the federal guarantee on money market funds that was added during the crisis of '08. And that US money market funds have a trillion or two invested in european paper.

So if anyone is going to put money into a money market fund, it would be good to pick one that only purchases US paper. Otherwise if there is a major collapse, your money might not be available to you, just at the time when the juiciest bargains are on offer.

I am not 100% sure of this money-market information, but it is something to consider.

Dodd-Frank also banned a lot of the other techniques that the Fed used to contain the '07-'08 crisis.

Wed, 10/19/2011 - 15:54 | 1790127 SheepDog-One
SheepDog-One's picture

Also, seeing as how 'printing' is the lowest polled action ever taken by the govt and basically everyone identifies it with 'bailing out the rich', this selling of more printing by making the voters beg for it will basically have to result from Armageddon.

Wed, 10/19/2011 - 15:40 | 1790074 shazbotz
shazbotz's picture

The FT should be taken offline

Wed, 10/19/2011 - 15:41 | 1790076 Randall Cabot
Randall Cabot's picture

No last half hour market-rampimg news release today?

Wed, 10/19/2011 - 15:41 | 1790078 AldoHux_IV
AldoHux_IV's picture

The banks going down is the first step of many-- not so far away from falling into the event horizon of eventuality are these so-called national sovereigns and their 'guarantees' via the horribly structured synthetic cdo called efsf.

The more these policymakers talk and the more rumours flouted by such tabloids like the FT makes me even more glad that they chose this to remedy the crisis-- it's utterly pathetic.

Wed, 10/19/2011 - 15:42 | 1790084 Long-John-Silver
Long-John-Silver's picture

Counter Flood Damn It! We can't afford to have the Deck Chairs roll off the port side.

Wed, 10/19/2011 - 15:43 | 1790085 citrine
citrine's picture

I am having a blast reading today's posts and comments. Guys, please come tomorrow again.

Wed, 10/19/2011 - 15:43 | 1790088 monopoly
monopoly's picture

I think 100% confetti is a safe bet and that is where I am into next week. (Of course physical never touched.) Bulls get wiped and bears get wiped. And our confetti is worthless. Lets see, what is left, Hmmm!

Wed, 10/19/2011 - 16:27 | 1790221 s2man
s2man's picture

Bernakonfetti !

That one needs to get some traction...

Wed, 10/19/2011 - 16:27 | 1790089 traditionalfunds
traditionalfunds's picture


You are misreading this FT story. There is no indication that EFSF or others are setting aside €100 for recap anywhere. 

The banks are responsible for raising their own capital. This story indicates that the prior number of €200 that was being suggested banks would have to raise is now being cut in half. Nice job bank lobbyists and France. It may mean less dilution for the banks et al but you are right that it ultimely will land in the sovereign's lap and hurt the Euro.

The other thing this story signifies is that the amount of time the banks have to recap may be moving from the previously proposed 6 months to a longer 9 months.



Wed, 10/19/2011 - 16:33 | 1790233 Jack Napier
Jack Napier's picture

Speaking of 6 to 9 months, that's the same timeframe Goldman's Hatzius gave for the Bernankster to roll out QE3 on a gold carpet.

Wed, 10/19/2011 - 15:43 | 1790090 SheepDog-One
SheepDog-One's picture

No saving Europe banks, its confirmed total impossibility....and only worth -50 DOW points. 

Wed, 10/19/2011 - 15:44 | 1790091 Mark123
Mark123's picture

Only 20 minutes left in the session...where is the next rumour to trade on?  What the hell are we supposed to do????



Wed, 10/19/2011 - 15:47 | 1790106 Quadlet
Quadlet's picture

New low on S&P at 3:40.  Any guess where the end of day ramp is going to go?  How about the usual 3:58 quote stuffing?  C'mon, lots of good stuff to trade!

Wed, 10/19/2011 - 15:45 | 1790096 JR
JR's picture

Today’s MarketWatch commentary by Matthew Lynn, the chief executive of Strategy Economics, a London-based consultancy, was a surprise and says it all: The IMF should pull the plug on the euro – Why throw good money after bad? (And it's always wise to remember that the IMF is an arm of the Fed and the Fed is primarily the U.S. taxpayer.)

Says Lynn: Every financial crisis in the end boils down to one very simple question. Who pays? ...This is a mess of Europe’s own making. There is no reason to expect the rest of the world to pay for it — and if it does, it will only prolong the agony

... The crisis in the euro-zone is hitting growth right across the world. Markets stand constantly on the brink of a collapse. The banking system looks fragile. If there is one thing we know for sure about the economy, it is that confidence is crucial. Right now, uncertainty over the single currency is undermining that.

...The trouble is, in the medium term it is crazy for the IMF to get involved in propping up the euro. In fact, the rest of the world — led by the IMF — should be calling time on the single currency...

Here’s why.

First, this is a crisis purely of Europe’s own making. After all, the fundamentals of many of the main European economies are perfectly fine. All of Northern Europe has strong companies, and respectable budget deficits. Public debt across the euro zone as a whole is not particularly high

It should be the U.S. and the U.K. that are suffering from the aftermath of the debt bubble of the last decade, not mainland Europe. The euro zone is in the midst of this crisis because it created a completely dysfunctional monetary system, ignored the imbalances building up within it, and allowed everyone to break the rules. It is a completely self-inflicted wound. There is no reason why taxpayers in Korea or Brazil or the U.S. should have to help fix it.

Second, this will mostly be borrowed money. If the IMF’s funding is increased to help with Europe’s bailouts, a lot of it will come from the U.S. and the U.K. These are countries that already have huge budget deficits of their own. Piling new debts onto counties already staggering under the weight of the old ones is the economics of the madhouse. It makes the situation worse, not better.

Three, more bailout money is only going to draw out the crisis — since no one seems willing to address its underlying causes. The key problem is that the peripheral countries have suffered a huge loss of competitiveness compared to Germany. True, they could reform their economies to make them a better fit with Northern Europe. But it is hard to push through structural reforms even in the best of times. When your economy is shrinking by 7% a year, like Greece, or by 2.8% a year, like Portugal, it is impossible.

The bailout only addresses the symptoms. If there is no basic cure, more money will be needed next year, and the year after that

Finally, a euro zone that is propped up by IMF and BRIC subsidies will be even more unstable than the one we have at the moment. Just think about it. It is hard enough for German politicians to persuade their voters to pay for euro-zone bailouts. How is it going to be possible to persuade the British, the Canadians, the Mexicans or the Taiwanese? Forget it. ...

Wed, 10/19/2011 - 15:55 | 1790129 AnAnonymous
AnAnonymous's picture

Hopefully, there is a taxation system.

Even with no taxation system, and their government livingoff debt exclusively, US citizenswould still come with that tax money payer non sense.

The price of appearances...

Wed, 10/19/2011 - 15:47 | 1790104 CvlDobd
CvlDobd's picture

LOL, just gapped on a DJIA one minute chart. No one has a clue.

Wed, 10/19/2011 - 15:47 | 1790107 bob resurrected
bob resurrected's picture

What will be the banks' counter offer?

Wed, 10/19/2011 - 15:47 | 1790108 SheepDog-One
SheepDog-One's picture

'Squib'...A piece of cord with an ember at the end used to fire a cannon...a damp one wont work so well.

Wed, 10/19/2011 - 16:01 | 1790114 Hannibal
Hannibal's picture



Wed, 10/19/2011 - 15:52 | 1790121 slewie the pi-rat
slewie the pi-rat's picture

soon we'll be told that there is a difference in the perception of the problem among the euro-peon nations

can't wait, BiCheZ! 

Wed, 10/19/2011 - 15:57 | 1790133 Miss Expectations
Miss Expectations's picture

Alas, there is no outcome that saves both the banks, and guarantees future European sovereign issuance under the currently contemplated structure. None.

So, then isn't this the first real opportunity (in 98 years  for the US) for the sovereigns to seize power back from the central banks?

Wed, 10/19/2011 - 15:58 | 1790136 The_Euro_Sucks
The_Euro_Sucks's picture

Strange heading ''....  to bailout souvereigns''. A true souvereighn never ever needs to be bailed out since it can issue its own currency. Since European countries can't and need a bailout they are no souvereighns. Cant be clearer then that.

Thu, 10/20/2011 - 07:11 | 1791825 falak pema
falak pema's picture

They are like ransomable sovereigns; we can't kill em but we can ransom them for their subsequent freedom. You Richard I of England, and Leopold of Austria who captured him on his return from lost Holy Land disaster, a bit like the current financial meltdown, and his bard Blondel, the S&P watch-dog of the day, and his mother Eleanore paid a million marks to get him out of there after a year, the poor 99 percenter that SHE and her taxed subjects were...All good stuff, the Lionhearted went on to fight merrily like a true Oligarch until he got shot in the shoulder with a poisoned arrow from a rival WS shill, hedge fund fella, at a place called Chalus. The lady of Shalot cried a lot...and Robin Hood shot the Sheriff of Nottingham in his butt in Sherwood Forest in anger. 

Hows that for  tune to inspire the OWS crowd to sing, 'go get the sheriff', we the 99%?

They are the new Robin Hoods and WS is Sherwood Forest! Go get the sheriff!

Wed, 10/19/2011 - 15:58 | 1790137 the not so migh...
the not so mighty maximiza's picture

well this makes my humpday

Wed, 10/19/2011 - 16:03 | 1790157 Steel_Preacher
Steel_Preacher's picture

This made mine... Fox rubs the woody!


Did executives at Morgan and Goldman recently cross the line into a Rule FD violation before announcing earnings this week?

Here’s what we know: Shares of Morgan were in a freefall late last month as rumors spread about its exposure to troubled European banks and sovereign debt, particularly following a report on popular financial blog ZeroHedge that provided details about that exposure. CEO James Gorman reached out to a select group of analysts to tell them that the firm exposure was actually quite small.

Then people inside Morgan said senior executives began to tout that the firm would have “solid” third-quarter earnings that would likely beat those offered by Goldman Sachs, where senior executives were already providing guidance that the firm’s third-quarter results would be disappointing.

And look what happened: Morgan reported third-quarter earnings of $2.15 billion, or $1.15 per share, Wednesday, while Goldman announced yesterday that it lost $428 million in the third quarter.

Read more:
Wed, 10/19/2011 - 15:59 | 1790142 Dr. Acula
Dr. Acula's picture

"Insider Reports Germany Printing Up Marks will Abandon Euro "


Wed, 10/19/2011 - 16:02 | 1790154 Irish66
Irish66's picture

I've been to buy marks all day!

Thu, 10/20/2011 - 06:35 | 1791811 falak pema
falak pema's picture

marks n sparks?

Wed, 10/19/2011 - 16:00 | 1790148 Hannibal
Hannibal's picture

New European Bank Regulations Kick Ass..

Wed, 10/19/2011 - 16:01 | 1790150 junkyardjack
junkyardjack's picture

Ugg we didn't close in the green, we'll get em back tomorrow guys

Wed, 10/19/2011 - 16:07 | 1790170 jdelano
jdelano's picture

you'll (metaphorically, nonthreateningly, one could even perhaps say, politely, please...) eat shit and die tomorrow.  

Wed, 10/19/2011 - 16:05 | 1790163 Lord Welligton
Lord Welligton's picture

Not exactly off topic but .........

The EFSF in "capitalised" at (say) €450bn.

My understanding is that most of the "capital" is promised.

It hasn't been contributed yet.

How do you leverage a promise?


Wed, 10/19/2011 - 16:08 | 1790172 fuu
fuu's picture

See entire futures market...

Wed, 10/19/2011 - 16:14 | 1790189 Lord Welligton
Lord Welligton's picture


But you get the point.

Wed, 10/19/2011 - 16:15 | 1790193 Ronaldo
Ronaldo's picture

Such a pretty red color, and a lot of it too.

Wed, 10/19/2011 - 16:28 | 1790224 Peter Pan
Peter Pan's picture

Lord Wellington, you are spot on and this is precisely what i have been asking myself. They think that by adding yeast to a dog turd, that it will somehow turn to bread. This one I fear will blow the bowls of the system quite decisively.

Wed, 10/19/2011 - 16:35 | 1790239 Lord Welligton
Lord Welligton's picture

They think that by adding yeast to a dog turd, that it will somehow turn to bread.

I'm going to use that and make someone spit out their coffee.


Thu, 10/20/2011 - 06:55 | 1791812 falak pema
falak pema's picture

simple : by a bigger promise. Sovereign one ofcourse! Noblesse oblige!

Wed, 10/19/2011 - 16:10 | 1790175 Deadpool
Deadpool's picture

not long ago all Euro banks were national. the stock holders will be toast (mostly hedge funds), the debt holders will get haircuts of 30-100% and the governments will be allowed to hire more future pensioners. Problem solved.

Wed, 10/19/2011 - 16:11 | 1790177 rambler6421
rambler6421's picture

This is Bullish.

Wed, 10/19/2011 - 16:14 | 1790184 Sudden Debt
Sudden Debt's picture

Sacrifise the banks! Boom bitchez!

I've got a great boogie knife that they can use tp gut them!

I think it's a good thing!
Reintroducing barther trading in 1, 2, 3!!!!!

Wed, 10/19/2011 - 16:14 | 1790190 anony
anony's picture

Fine but when is the Euro going to crash to 1.00 so my FX pays off, and I can take a few years off to contemplate my navel?

Wed, 10/19/2011 - 16:14 | 1790192 bankonzhongguo
bankonzhongguo's picture

With the near hourly calamity in financial markets and the Singularity drawing closer, why aren't each and every one of these supreme bailout talks being televised or streamed for all the world to see.  Now that is worth a OSW chant.

Just the Merkel - Sarkozy discourse these last months demonstrates that nobody is in control (except the pouting banks), yet the unknowing public is on the hook for private bank gambling and fraudulent debt placements.


Wed, 10/19/2011 - 16:21 | 1790207 carbonmutant
carbonmutant's picture

Jin Liqun, China's sovereign wealth chairman blames Europe's "sloth inducing, indolence inducing labour laws" for eurozone crisis...

Wed, 10/19/2011 - 17:41 | 1790458 Smiddywesson
Smiddywesson's picture

Jin Liqun, China's sovereign wealth chairman blames Europe's "sloth inducing, indolence inducing labour laws" for eurozone crisis...

Translation:  Chinese insider fat cat thug says Europe needs more slave labor like we have here in that pinicle of civilization, China.

Ok, note to self, emulate China, more poison water, food, air, toys, and less unnecessary freedoms like speech.

I think I got it.

Wed, 10/19/2011 - 16:21 | 1790208 buzzsaw99
buzzsaw99's picture

FT Reports Europe To Sacrifice Its Banks To Bailout Sovereigns...

If true that would be the exact opposite of how the fascist states of americum did it. Bankers cum first in freedumb's land.

Wed, 10/19/2011 - 16:21 | 1790212 Seasmoke
Seasmoke's picture

just flip a damn coin.......

Wed, 10/19/2011 - 16:24 | 1790213 Deadpool
Deadpool's picture

no banks = no lending = no business = no jobs. Hell, that already defines Europe so why not liquidate the banks into national banks. Makes perfect sense.

Wed, 10/19/2011 - 16:25 | 1790217 YesWeKahn
YesWeKahn's picture

As a Bernanke era trader, I am confused. Wasn't that european problem solved? LOL

Wed, 10/19/2011 - 17:44 | 1790470 Lord Welligton
Lord Welligton's picture

Did anyone ask them where they were getting the savings that could fund that investment?

Thu, 10/20/2011 - 06:14 | 1791794 falak pema
falak pema's picture

the projection is based on the assumption tht if the crisis obliges the ECB to print and print, then we may as well go more Keynesian; add an additional slice, and invest in future growth/productivity gains. Central planning schemes do not perceive themselves as generators of risk but of reward. The risk comes from private sector mal investment, never from government sector. So goes the rationale. 

Can the nation states do this on basis of reduced government spending elsewhere? Lol, they have such a long way to go to Tipperary...

Wed, 10/19/2011 - 16:31 | 1790229 Frank N. Beans
Frank N. Beans's picture

let's see, should choose butter, extra butter, or homestyle? 

what the hell, extra butter!

Wed, 10/19/2011 - 16:31 | 1790231 JR
JR's picture

The FT question is not whether banks will be sacrificed; the question is which banks will be “allowed” to fail.  After all, the reason the Federal Reserve System with its goal of controlling the world economy was created was to protect its members from competition. The "members," if you have not noticed, are the “too big to fails.”

History shows that this international banking cartel under the protection of the Federal Reserve System has used its power to create and extinguish the world’s reserve money supply to confiscate and redistribute wealth at the expense of Americans and their neighbors.

Our entire money supply is debt based – it exists only because it was borrowed by someone.  That means that every dollar in the world is earning daily and compounded interest for the banks which created them out of nothing. All that interest eventually is paid by someone’s labor and talent, by human effort.

“The significance of that fact…is the total of this human effort ultimately is for the benefit of those who create fiat money,” says G. Edward Griffin. “It is a form of modern serfdom in which the great mass of society works as indentured servants to a ruling class of financial nobility.”

The internationalist money lenders are driving us into a choice: Do we want to be slaves, or fight?

Occupy Wall Street.

Wed, 10/19/2011 - 16:35 | 1790238 Atomizer
Atomizer's picture

DBRS Downgrades Republic of Portugal to BBB on Fiscal Risks

As a consequence, prospects for debt stabilisation remain challenging. The government estimates debt-to-GDP will increase from 100% at the end of 2011 to 106% in 2012. If bank recapitalisation funds are included, the debt ratio would reach 111% in 2012. At such high levels, Portugal would have limited room to maneuver in the event of further economic or financial shocks.

Wed, 10/19/2011 - 16:35 | 1790240 Black Forest
Black Forest's picture

Here come the EUSSR Commissars:

"EU Commissar for Internal Markets", Michel Barnier, wants to prohibit rating agencies publishing evaluations of EU countries.

Wed, 10/19/2011 - 16:40 | 1790245 Undecided
Undecided's picture

The Media just doesn't have a clue...

As much as i believe there should be a public health care system of some sort it is just not in the U.S. cards at the moment.  The public option should be tierd if any where a private option is still available and should be voted by each state as a republic if they wish to partake.

I am from Canada and a tiered option would be better here also, i do find it beneficial to a country to keep everyone healthy, but Obama's plan is just rediculous.

I believe the Canada's whole public option act was less the 20 pages compared to the drival Obama put through.

Bottom line is though the U.S. can afford it at the moment and it looks like they are going to learn the hard way.

At least they got this one right on silver..


Thu, 10/20/2011 - 17:32 | 1794883 PrinceDraxx
PrinceDraxx's picture

Hell, we can afford anything we want here, we have the Bernank' to print print print. Obummer will pay for it too. Right out of our nation's coffers that continually overflow with Bernank Bucks.

Wed, 10/19/2011 - 16:54 | 1790286 IrritableBowels
IrritableBowels's picture

TVIX vs. FAZ anyone? On a day like today, TVIX had a smoother chart and a higher return...

Wed, 10/19/2011 - 16:54 | 1790287 Mark123
Mark123's picture

A bank used to be a simple concept...I think. 

The way I understood, some rich folks would put up some of their capital, then make loans and take deposits.  If people trusted the bank they would leave their money in the bank and collect interest.  If they suspected there was a problem and too many bad loans had been made, then there might be a run on the bank.  Bank runs are bad, but sure helps to keep the banks honest.  Oh, ya I thnk they had to use reall accounting too and were closely monitored by external auditors.

So now, in the new, improved world, the taxpayer guarantees deposits (there cannot be a bank run) AND provides free money to shore up capital when the bank totally fucks up.  Also, external auditors have become consultants for the same companies they audit, and the accounting rules have been gutted toallow for creative accounting.




I think someone once said that the best way to rob a bank is to open one.

Wed, 10/19/2011 - 17:26 | 1790389 JR
JR's picture

The case against the Fed is not limited to "interest rates, discount prices and reserve ratios. That is not where the body is buried. It would have omitted the elements of war, revolution, depression and fraud." -- Griffin

Remember this from 2009:

May 2 (Bloomberg) -- Berkshire Hathaway Inc. Vice Chairman Charles Munger, whose company is the largest private shareholder in Goldman Sachs Group Inc. and Wells Fargo & Co., said banks will use their “enormous political power” to prevent changes to the industry that would benefit society.

This is an enormously influential group of people, and 90 percent of that influence is being spent to gain powers and practices that the world would be better off without,” Munger, 85, said yesterday in an interview with Bloomberg Television. “It will be very hard to accomplish the kind of surgery that would be desirable for the wider civilization.”

Munger said policy makers should seek to impose limits on banks that are deemed “too big to fail” after financial institutions worldwide suffered more than $1 trillion in losses. The U.S. government and the Federal Reserve have spent, lent or committed $12.8 trillion, an amount that approaches the value of everything produced in the country last year, to stem the recession.

“We need to remove from the investment banking and the commercial banking industries a lot of the practices and prerogatives that they have so lovingly possessed,” Munger said. “If they are too big to fail, they are too big to be allowed to be as gamey and venal as they’ve been -- and as stupid as they’ve been.”

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