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Greece Avoids Bank Run By Last Minute Bail Out Of Proton Bank
Alas, it is not a liquidity problem, it is a solvency problem. After delaying this realization for over two years, Greece, and Europe, are about to understand just how flawed "bailout" strategies that address the symptoms and not the cause, have been since the beginning of 2010. And while the world is engaged with the latest victim of the Bernanke-inspired, food-price inflation political upheaval better known as the Arab Spring, whose final stop is nothing less than Times Square, Greece quietly avoided the failure of smallish Proton bank (there is no FDIC backstop of failed banks in Greece), which would have resulted in a market wide panic, and a terminal bank run that would have toppled the Greek financial sector. Luckily, this was prevented in the last second courtesy of a capital injection in the last minute by the big 4 Greek banks. From the FT: "Greece’s four largest banks agreed to take up a €50m convertible bond to help recapitalise Proton Bank, a small lender, the central bank announced this weekend, in what is being seen as an attempt to avert a run on the country’s fragile banking system...“In this environment, it was essential to prevent Proton from collapsing and creating a mood of fear with unpredictable consequences,” said one banker, explaining the rationale for the take-up of the Proton bond." In summary, Greece was lucky... this time around, they had enough cash to save the smallish lender. The next time around they will not be so lucky.
Greek banks no longer have sufficient high-quality collateral to seek funding from the European Central Bank after recent sovereign downgrades. But they are eligible for liquidity allocated by the Bank of Greece in agreement with the Frankfurt-based ECB and are expected to seek it this week.
All four big lenders – National Bank of Greece, Alpha Bank, EFG Eurobank and Piraeus Bank – face a looming liquidity crunch as about €10bn of government deposits are set to be withdrawn from local banks to pay off debt maturing in the next few weeks.
“In this environment, it was essential to prevent Proton from collapsing and creating a mood of fear with unpredictable consequences,” said one banker, explaining the rationale for the take-up of the Proton bond.
Proton, which has just 31 branches, has emerged as the first Greek bank to reach the brink of collapse since the country’s sovereign debt crisis erupted 18 months ago. “It is the small banks like Proton that are most at risk . . . they have been hit by irregular practices as well as the credit crunch,” a Greek financial expert said.
The central bank this month replaced Proton’s board of directors and senior managers, and appointed a special commissioner to oversee operations after discovering a €51m hole in the bank’s balance sheet.
The government also made a €100m emergency transfer to Proton. The bank was however unable to pay back €70m of this amount, after depositors removed funds amid reports that Lavrentis Lavrentiadis, its largest shareholder, was being investigated for alleged embezzlement and money-laundering.
Also it appears that the recent substitution of Greek FinMin G-Pap with Venizelos will not be successful as there, unlike here, bailing out banks at any and all costs s generally frowned up.
Evangelos Venizelos, the finance minister, has faced criticism from opposition politicians for approving the €100m transfer to Proton in defiance of a law banning the government from depositing funds with banks that face financial problems.
For now it appears that contrary to some expectations of a new ECB announcement tonight, which would provide so much needed USD-denominated liquidity to local banks, one is not coming, which means that the same old Risk Off scramble will prevail as soon as Europe opens in a few hours. And one of these days the Greek bank that blows up will be just large enough to where even its bigger cousins will be unable to bail it out.
h/t Mike
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Too small too fail
indeed, Protons are quite small
Me, I bank at Amoeba bank
It would seem that the only banks that are still solvent, and having no liquidity problems, are the Sperm Banks.
I only overdrawn at the blood bank.
sperm banks are a racket, depositors should deal direct
I always withdraw from the assets before an unwanted deposit.....
Lt. Sulu, arm the Proton torpedos!
If I remember Lt. Sulu was arming the sperm torpoedoes
CERN Relief Program Bitchez
Accelerating, for sure.
"Proton Bank", I thought it was "Photon bank". Catch the wave.
I'm waiting for the bailout of the neutron bank.
that's what she said
LOL, and that's like putting more cash into an ATM on the Titanic.
Mission Accomplished!
Helluva job, Brownie.
Greek banks trying to prevent a mood of fear. No one could possibly see any irony in that. /sarc
There's going to be a revolution at Times Square tomorrow? Cool. I guess I will get out of the subway in the morning and check it out. It couldn't happen in a more disgusting place. Maybe they can set up the guillotines in that empty space where ESPN Zone used to be.
There is an opportunity for political performance art here.Guillotines set up at strategic spots suggesting a reckoning for the kleptocracy.
Where are the artists when you need them?
"it couldn't happen in a more disgusting place"; oh yeah; what about Brooklyn ? eh. Did you think of that?
+ (Postive) hadrons.
nice.
Exactly. No swap lines.methinks it'll be official soon: "the training wheels are off."
and now the looting begins
oh. and those 140 tonnes of gold
promise, we'll search the world to find out where is was taken and prosecute those who stole it
promise justice will be done
"Everyone is crying out for justice; just as soon as they get theirs"----Mose Allison--
the proton bank bail-out was not caused by the sovereign debt crisis. the eur51mio was embezzelment.
Long EUR. 1.42 is the line in the sand. Below that USD spikes and the game changes.
Word.
Disclosure: I'm short at 1.42. Holding and covered to the moon.
just a game thought: recall the fx swap lines from last week.woukd be the ultimate exercise of swap line reach around, snb deniable plausability..things that make you go hmmmm..
Just the timing, that is all that is not known.
Good article in Bloomberg, if you want to really get pissed off, again.
Wall Street Aristocracy Got $1.2 Trillion in Fed’s Secret Loans"Wall Street Aristocracy Got $1.2 Trillion in Fed’s Secret Loans"
Link,
http://www.bloomberg.com/news/2011-08-21/wall-street-aristocracy-got-1-2-trillion-in-fed-s-secret-loans.html
The only Bank run I want to see is in Bullion. All Hail Hugo! Hooray! Hooray! Hooray!
One of these seemingly insignificant bank failures is going to be the trigger for chaos...
The central banks don't have enough fingers to plug all the leaking holes
Fingers no, electronic currency yes.. This is all going to last longer and be more painful than most think..
Seems to be a constant state of one debt crisis after another.
The end must be here. They'll give up soon.
Epic Frail
Kind of like crack heads lending each other money, they know they will never see it again.
By God I'd better see mine, I have some expensive dental work to pay for.
The one case in which I will rid myself of metal -- old amalgam fillings, that is.
Is mercury still traded? I remember seeing the price of mercury quoted in the paper in the 1980's when I was pup.
No, Arrrowhead -- the mercury contract on the old NYMEX (pre-energy) failed not once, but twice. First time in 1975 or 1976. Second time, for good, in the late 1980s.
Joined the ranks of Apples, Iced Broilers, Eggs, Maine White Potatoes, Silver Coins, Tom Turkeys, and here recently, Frozen Pork Bellies. All of these had one thing in common (well, besides failing): the contracts never met their respective industries' needs.
So.. let me get his straight...
The bigger failing banks in Greece are lending to the smaller failing banks in Greece....
But the bigger banks must be lending the money of the Bank (i.e. Greece citizens who bank there) to the smaller failing bank.
So... Who got done?
Some things never change...
So, no bankruns in Greece and further Europe. Bankproblem solved. Boring world we live in.
I know of several venture fund guys heading to Germany tomorrow. We all know that it is arm-twisting time, just wish I knew who was twisting who's arm. Although short-lived, I think one fiat (either the dollar or the Euro) is about to get a bump. Gold will, simply because.
I'l take the under on that trade.
If When interest rates go up (and Bernanke can't stop them), gold will plummet.
Ah the contrarian, we can't have money becoming a store of value now can we. Interest rates goes up, America defaults. Anything of physical value will be used as "money". All paper will be good for starting fires.
Yes, when interest rates rise gold will drop, for a short while. The rise in interest rates will signal even higher inflation, and gold will then resume rising at even faster speeds. A 20% interest rate on a currency that is depreciating (due to price inflation) at 30-99% a year is still a losing deal.
Jasper... If interest rates of US Ts go up the US Economy is toast... A default on US Ts will ensue for the treasury will not be able to pay the interest on the debt without massive printing... Dollar will sink on news of massive printing...
and PMs will be the only game in town!
Benocide's rule holds: ZIRP for two more years. Print and dump. "Exorbitant privilege" holds until the Chinese pull the plug on USD as reserve. But that will take some doing. Its real big game changer and could shove the world to the brink of Armageddon.
Dick Cheney said it all : "The American way of life is non negotiable." He was obviously talking in the name of the Oligarchs, not in name of Main Street. Subtle nuance which is now sinking home fast to Main Street USA. But the Chinese have their eyes on what Benocide's print and dump could do to hyperinflation in China and its RM commodity market. It could explode their bubble and deflate world wide growth.
Pm stays the only game in town. Until the Oligarchs make their move. Watch out. If there is a massive sell off by Paulson...If deflation comes in big way... Two black swans that could kill PMs. But as long as we are in "print and dump" mode and USD stays reserve that devalues every day, PMs stay sexy. The less worse of two scenarios from Ben's perspectve. And he is point man for the Oligarchs.
Oh yes absolutely right....MOMENTARILY, then you will be very wrong..
"The government also made a €100m emergency transfer to Proton. The bank was however unable to pay back €70m of this amount, after depositors removed funds amid reports that Lavrentis Lavrentiadis, its largest shareholder, was being investigated for alleged embezzlement and money-laundering."
And the run on banks continue. Small depositors moving fiat to gold. Won't take much more till " they all fall down".
An accounting fraud scandal of €51m was plugged with a convertible loan (really?!?! how many shares would you like?) after €30m of the €100m emergency gov loan could not be repaid. All this while a total of €10bn is set to be withdrawn by the government over the next few weeks when Greece has no FDIC insurance equivalent???? Will the government accept mark-to-model shares in lieu of cash?
What the hell does confidence mean anyway and where the is Cassandra when you need her?
what about neutron and electron bank?
I used to bank at Electron Bank, but the tellers were too negative. That was a minus for me.
That is so corny I think I'll orbit another thread
I'nt this one of them pluggin holes in the dam things? I think they've torn off a few fingers to plug some holes and are using their toes. I guess 2nd last to plug the holes would be their tongue then... finally their crownjewels.
But what about BofA? Who will bail that one out and when will it happen?
Hopefully that one is thrown in a hole with some lime..
http://online.wsj.com/article/BT-CO-20110804-712314.html
Safe banks? Where?...
US banks:
Foreign banks:
Europe on the Verge of Breaking
So when does the next proton come flying by...in a few attaseconds ?
Crisis averted until the next zillion protons come flying by every few seconds...I feel so mush safer now !...no, now...no now!!
Consider: you're a depositor at Proton Bank. You've just learned that your deposits were rescued from oblivion by a European-style financial market intervention. You will:
a) Go to bed and sleep peacefully tonight knowing your money is safe.
b) Grab a sleeping bag and cue up on the sidewalk outside your Proton Bank branch for Monday's opening.
C) Open whatever net-banking platform they have and "bpay" your entire balance to your other (bigger) bank account and go camp at that bank.
New TV Soap Opera starring Ben Bernank: All My Zombies!
We got zombie US banks, and zombie Euro banks, now even small Greek banks. But don't kid yourself we don't also have : Zombie Wall Street (how long can they go without more QE or bailouts), even Zombie Sovereigns (Greece, Ireland, Portugal, and joining the family: Spain Italy Belgium). And we'll soon have zombie munis and zombie sates, zombie pension and money market funds, zombie auto makers, zombie political parties, zombie military......fill in your favorite zombie!
Greek banking (bank run) crisis?...Yeah, don't think the ECB could plug that. Probably on the cards next few weeks
Greek, Irish, Portugese people - go out an buy this book now:
http://www.amazon.com/dp/9870563457?tag=surviinargen-20&camp=14573&creative=327641&linkCode=as1&creativeASIN=9870563457&adid=1M6DJX7940GNQNZC4AF5&
People from Spain and Italy, you might want to check it out on Amazon, see if its right for you.
People of France, UK and Germany - no book recomendations - YET.
ah
so is the one of many sunday nite/monday morning specials to get the market higher?
merger monday?
euro magic?
fed rumor?
can't wait for that bear market rally!
Split a proton and well all hell breaks loose. So 4 bad banks propt up a real bad bank. With what..... It's too late
Umm, neutrinos?
Propping up failing banks is like young girl stuffing toilet paper in her bra. It only fools the fools.
Dude, get with the times. They have padded bras now, no need to stuff them like they did back when I was in school.
I thought it was the guys these days who stuffed their bathing suits on the beach with their 'hanker-chiefs'.
If a run on one small bank can produce a disaster, the disaster has already happened.
Why can't the bank just make up figures for its balance sheet? Seems more prudent than admitting to going broke . . .
Does anyone have any theories as to why the euro hasn't been imploding over the last 3 weeks? Will it take a bank run for it to revalue? I estimate fair value is currently well below 1:1 vs USD. Any opinions?
Story in today's Handelsblatt: Greece Stops Paying Pensions to Dead People
Headline I want to see: Greece Stops Paying Middle Class and Poor People's Money to Bankers. But that headline has zero chance of happening with the current government. No doubt there were people who lied about taxes and to collect pensions etc, but the same political parties who have controlled Greece for decades and who lied to the EU and everyone else about their finances are still in charge and are now blaming the ordinary folk for the financial disaster. Sorry to be a bit off topic here, but my point is I'd like to see people in government brought to justice and not just the ordinary folks who made mistakes.
Shame there is bigger shit going down, as the Proton Bank saga is an epic swindle.
- Greek prosecutors investigated and charged 7 members of the board for embezzlement and violating anti-money laundering laws.
- Proton bought out a private bank (Omega) in 2006 who counted among exectives the father in law of the current minister of finance and the brother of G.Pap.
- Venizelos (finance minister) tabled a bill in Parliament to extend and backdate the amnesty on the actions of Minster of Finance to 1997 (law 3904, gives amnesty to the finance minster for any disbursement of public funds and no accountability if used illegally)
- Why did they rush to nationalize Proton?
Proton = Ponzi? = clearing house of the PASOK party?
Further reading here http://www.wikigreeks.org/node/2938