Greece Activates Last-Ditch Liquidity Rescue Package To Preserve Its Financial System

Tyler Durden's picture

The biggest news of the day today was not that some old crony capitalist had doubled down yet more of his non-taxable wealth on a bet Bank of America would yet again be bailed out, or that Wall Street is about to be sumberged under 3 feet of water. No, the most notable event from today was what we commented on in our first post from 7 am, namely that: "If we crossed through some spacetime vortex that brought us back in time just two short months ago, to July of this year, today's confirmation that the second Greek bailout has now failed, following the Finnish finance minister's comments that the country will defy Germany and will not give in to demands to abandon its deal for Greek collateral, which in turn has sent the Greek 2 year bond bidless, its yield up 227 bps to an all time record 46.38%, would have been enough to send the futures and the EURUSD plunging." Well, a few hours later, we did get a plunge, even if it was not in the US, but in Germany, where the entire local market flash crashed upon realizing what we noted hours prior: that Greece is now pretty much done. Yet it turns out there was more: unwilling to admit defeat yet, Greece was forced to pull out the last rabbit hiding deep in the recesses of the hat. As the Telegraph reports, "In a move described as the "last stand for Greek banks", the embattled country's central bank activated Emergency Liquidity Assistance (ELA) for the first time on Wednesday night." Such efficiency out of the Greeks for once- not a single Persian was harmed, or even needed, in this 21st century version of Thermopylae: the Greeks did it all on their own.

More: "Although it was done discreetly, news that Athens had opened the fund filtered out and was one of the factors that rattled markets across Europe. At one point Germany's Dax was down 4pc before it recovered. The ELA was designed under European rules to allow national central banks to provide liquidity for their own lenders when they run out of collateral of a quality that can be used to trade with the ECB. It is an obscure tool that is supposed to be temporary and one of the last resorts for indebted banks." So much for temporary: we are rather certain that the only time this last ditch measure is turned off is when Greeks resume paying each other in Drachmas again. The good news: Drachmas, which we hear are now trading on a When Issued basis with several banks, will be back in circulation very soon.


Raoul Ruparel of Open Europe told The Telegraph: "The activation of the so-called ELA looks to be the last stand for Greek banks and suggests they are running alarmingly short of quality collateral usually used to obtain funding."


He added: "This kicks off another huge round of nearly worthless assets being shifted from the books of private banks onto books backed by taxpayers. Combined with the purchases of Spanish and Italian bonds, the already questionable balance sheet of the euro system is looking increasingly risky." 


Athens' activation of the ELA will raise concerns that Greece will simply shift debt to Brussels. 


By accepting a lower level of collateral the debt in the ELA is, in theory, supposed to be the responsibility of Greece. However, since the Greek state is surviving on eurozone bailouts and Greek banks are reliant on ECB funding, in practice the loans are backed by the eurozone. The terms of lending and other details are not disclosed publicly. 


Mr Ruparel said: "Though the ELA is meant to be a temporary emergency solution, we know from Ireland, where the programme has been running for almost a year, that once banks get hooked on ELA they rarely get off it.

Just like Europe's short selling ban: the drastic measure at stock market controls was supposed to last 2 weeks; it has now been extended for months in places. Another thing we are confident is that by the time all is said and done, any selling will be made illegal.

First in Europe and then in the US.

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Sequitur's picture

I don't yet have an opinion. I first need to slip into the bathtub, fantasize about Becky Quick's engorged midsection, and wait for the eureka moment.

Will report back in a half hour . . . . 

Gotterdammerung's picture

What will the temperature of your bath water be and is an innocent form of a rubber duck involved?  Myself, I used to enjoy the little scuba divers you got in the ceral box that you could place baking soda in.

tom a taxpayer's picture

...and the little submarine. "Dive, dive, dive." Looks like Greek banks, the Euro, and European markets also will be going underwater. 

slewie the pi-rat's picture

i had the first sub model, i think

they were so cool when they first came out, they wouldn't even put them in the cereal box;  you had to send away for one

those were the worst three months of my childhood, waiting for the damned submarine to show up

Danielius's picture

Yes, what was with that?  Why three months?  Very strange....  Even back then, a letter was delivered in days... same for a tiny package....   I can't remember now what I ordered, mabe it was the magic rocks... All I remember is that horrible wait.

Freddie's picture

Maybe that slimeball Buffett can bail out Greece.

orangedrinkandchips's picture

becky quick? ugh! Erin she is not that sexy but soooo damn cute! not porn hot but cutter than anyone....becky quick is eh....

DoChenRollingBearing's picture

What, this is the new pattern?

Europe leads California by two years?  Then America follows two years later?

Imagine that.  Europe leading us...  I'll keep buying gold thanks.

spiral_eyes's picture

Angela Merkel firing torpedoes out of her nipples in the all-out war to save the euro, bitchez 

Ted K's picture

Current trajectory says her toes.

Weimar Ben Bernanke's picture

It is game over for the euro and EU. The EU was bound to fail and will not survive its first recession.

zorba THE GREEK's picture

Another shot of adrenalin to keep the corpse moving. 

chump666's picture

No, I think it's dead now. 

Rodent Freikorps's picture

I ran across a dead cow in the woods once. I thought it was still alive because it was still moving....until about three possums ran out of its gut.

Idiocracy's picture

And that's when you decided to call yourself rodent.  It was providence

Rodent Freikorps's picture

Nah. I'd just got my Secret Squirrel decoder ring.

Rodents are everywhere. We live in your walls.

Belrev's picture

Pardon me for asking, but if selling becomes illegal, then buying is impossible. Stock market at 0.

Tyler Durden's picture

Shhh... don't spoil it. We wondered how long it would take the bureaucrats to figure it out after it became law.

Blorf's picture

The chairman has no clothes.

Raynja's picture

when the hurricanes surge recedes

disabledvet's picture

New new trend: "be naked." of course the kids were complaining: "bit Dad...the Japanese wear clothes how come we can't?"

Ted K's picture

Let's call a spade a spade, shall we??? It's making short-selling illegal that gets your panties in a wad Tyler. And you still haven't explained whether this is true or false:

The Shootist's picture

So what does this mean for the European markets in 4 hours?

tom a taxpayer's picture

Sunshine and lollipops. Or sturm und drang and lollipooooops.

kito's picture

and yet that crazy market that trades "gold" is down...go figure....

DeadFred's picture

There may be a good reason for that other than margins. Many of us who expect hyperinflation expect an initial wave of deflation first. Gold may be the canary in the coal mine letting us know that the time is near. I recommend you buy more at the very bottom. Good luck with figuring that one out though, I sold my GLD puts way too early, and bought them too early as well. My crystal ball is very poor on time frames.

Freebird's picture

Snuff to turn a grown man to drink

Manthong's picture

Somehow I think a little olive oil and different tune will be required this time around.

Rodent Freikorps's picture

If we are doing songs, I'm posting this one. It is the newest song from the Columbiana trailer. No reason other than it took me an hour to run the damn thing down. I've found national secrets faster than that. Anyway.

Lykke Li - I Follow Rivers (new song)


holdbuysell's picture

Was this the reason for the $500M going to the ECB today from the US Fed?

Blorf's picture

No, of course not.  Central banks routinely give things to each other as a gesture of friendship.  Think of the $500 million as a nice fruitcake.  Definitely not being laundered to greek banks.  It would be rude for the ECB to regift those dollars to prop up the balance sheet of some manifestly insolvent institution. 


I mean, you'd have to be an idiot to keep throwing good money after bad, right?  RIGHT?   What's that you say, Buffett invested $5 Billion in Bank of America?  LOL

BlackholeDivestment's picture

...well you don't have to be that serious, it's only moral hazard. lol

Taku's picture

How dare they re-gift!

That is just so wrong.

New, freshly-printed, crisp bills only, please.

chindit13's picture

That was a royalty payment on the democracy we've licensed from Greece.  Apparently Pap sent a quick note of thanks and asked, "How's that democracy thing working out for your lot over there?"

buzzsaw99's picture

...which in turn has sent the Greek 2 year bond bidless, its yield up 227 bps to an all time record 46.38%...


Can a Greece get a payday loan up in heya?

Blorf's picture

46 fucking percent?  Greece should just put it on the VISA and get airline miles at least.   That way they can use the miles to ship their gold to Berlin and save on the charter flight.

dwdollar's picture

No shit.  Guido charges less than that.

At120's picture

Looks like all the big banks in Greece have been undergoing bank runs.  Once the Greek government pulls 10 billion euros out in the next few weeks to pay off maturing debt, the banks will have zero reserves.  The purpose of this measure is to keep the Greek banks viable, as it looks like most Greeks have opted to pull their accounts and stash their Euros under mattresses rather than face an overnight devaluation to Drachmas.




Bill D. Cat's picture

Where does one buy Drachmas ?

At120's picture

Leave your Euros in a Greek bank and *poof* they'll become New Drachmas, soon enough.

Or surf eBay for the old stuff.

Blorf's picture

Where or when?  Where is "any bank in Greece".  When is "the near future".

Peter Pan's picture

Paper ones or silver ones? The paper ones are now worthless unless you are a collector. The silver coins issued in 1960, 1963 and 1964 are worth much more. The smallest of the three issued in 1960 contains $8 worth of silver and at that time could buy you three movie tickets. The fact that you can no longer buy three movie tickets in Greece with that silver coin is an indication of how undervalued silver still is. It is also an indication of how cheap the cost of living used to be in Greece and how unbearably expensive it has become for its people. That's what a combination of socalist governments, loose finances and EU membership has done to the country.

Newsboy's picture


Arrowhead's picture

and bow toward Jackson Hole

Rodent Freikorps's picture

So it's true criminals always return to the scene of the crime?