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Market Slumps After European Banks Admit They Can't/Won't Raise Capital; Will Proceed With Asset Liquidations Instead

Tyler Durden's picture


It was about an hour before the market close, which means it was time for the latest FT rumor. Only this time, unlike the 3 or so times before, the bazooka was not only a dud, it caused the inverse reaction of that intended, and led to a broad market selloff. The reason: according to the FT (and certainly take this with a salt shaker if previous experience is any indication) is that European banks have balked at the prospect of recapitalizing at current levels ("Why should we raise capital at these [depressed share price] levels?” said one eurozone bank boss. The average European bank’s equity is trading at only about 60 per cent of its book value.) and instead will opt for asset liquidations. Now, whether they won't, or, as we have claimed since the first day we heard of the ludicrous "recap" rumors, they can't, simply because absent a massively dilutive rights offering, nobody in their right mind would lend to an industry which continues to be locked out of short-term funding markets for the 4th month in a row, is largely irrelevant. As a result no new money can come in: a key prerequisite to any European recapitalization plans. Of course, it is one for a "blog" to say that, it is something else for the FT to confirm it, even if it is a rumor. So what will banks do instead: why proceed with all out asset liquidation, and sell anything that is not nailed down. The strawman is that this is capital needed to fund the banks' requirements for higher capital ratios per Basel III and what not. The truth is that banks desperately need any capital just to operate as a going concern, forget some Basel Tier 1 ratio that will only be relevant in 2016. So yes: the bitter truth comes out - recap out; liquidations in, especially of USD-denominated assets. Next step: the realization that he who sells first, sells best. So yes, the "hope, idiocy and #mathfail" induced rally was fun while it lasted. And now it is back to reality.

From the FT:

This radical approach, led by French banks BNP Paribas and Société Générale, would be copied by lenders across Italy, Spain and Germany, bankers said. “Why should we raise capital at these [depressed share price] levels?” said one eurozone bank boss. The average European bank’s equity is trading at only about 60 per cent of its book value.


However, the banks’ “shrinkage” strategy is likely to prove controversial with politicians and regulators if it led to bankers lending less money to customers, jeopardising the eurozone’s fragile recovery, analysts warned.

As was reported earlier, it was Barroso who had a massively disappointing session earlier today, in which not only did he not announce any of the specifics on the EU bank recap plan (because they do not exist!), but demanded that banks scramble to raise their capital ratio, in essence undoing everything that had been done to the moment.

Mr Barroso stopped short of specifying the target ratio, but people close to the process told the Financial Times on Tuesday that the European Banking Authority, the regulator, is poised to set a higher bar than expected – a 9 per cent ratio of core tier one capital to risk-weighted assets – for banks across the continent. A deadline of six to nine months would be set for forceable recapitalisation by governments, if banks have not reached the ratio under their own steam.

But that, as noted, is merely the strawman to give banks cover before investors who demand to know the reason why banks are now scrambling to sell anything not nailed down.

Banks and their advisers said their scope to raise fresh capital from investors was all but non-existent. “I don’t think anyone has access to the markets now,” said one senior European investment banker. Investors are loath to commit to fresh equity injections, in the knowledge that the new money would simply be soaked up by sovereign debt writedowns, bankers said.

But by shrinking assets – the denominator of capital ratios – many banks believe they can reach the targets without resorting to government recapitalisation. In recent weeks, both BNP and SocGen have signalled plans to offload a combined €150bn of risk-weighted assets. Further businesses could now be sold. Italy’s Unicredit and Germany’s Commerzbank were likely to find themselves under most pressure to deleverage and divest assets, bankers said

The FT then proceeds with details about the latest, greatest and fakest stress test about to be unleashed which nobody will care about, as well as what the targeted cap ratio is. That is all irrelevant.

All that is relevant is that suddenly everyone will start wondering what USD-assets do European banks have in inventory that are about to hit any bid in the market. Some hints: stocks, CMBX and, you guessed, Prime-X.


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Wed, 10/12/2011 - 16:31 | 1767039 CashCowEquity
CashCowEquity's picture

whore themselves out....raise $ that way.....o wait they already did

Wed, 10/12/2011 - 16:35 | 1767054 DutchZeroPrinter
DutchZeroPrinter's picture

Who will be the buyers? Nobody!

Wed, 10/12/2011 - 16:43 | 1767092 camaro68ss
camaro68ss's picture

Let the bodys hit the floor, Let the bodys hit the floor, Let the bodys hit the floor, let the bodys hit the.....FLOOOOORRRRRR!!!!

Wed, 10/12/2011 - 16:50 | 1767115 trav7777
trav7777's picture

60% of book value?  ROTFL

These banks are FUCKING BANKRUPT.  They HAVE NO BOOK VALUE.  They are trading at infinity times real book value.

Wed, 10/12/2011 - 16:55 | 1767139 Ancona
Ancona's picture


I think I broke my schaudenfreude.

Wed, 10/12/2011 - 17:32 | 1767258 strannick
strannick's picture

Didnt anyone from Countrywide explain to these euro-banksters that you cant actually go ahead and sell assets, cause then the bidless 'bid' will show what they are worth in a mark-to market world, which is next to nothing?

Better instead to keep the crappy assets on the books, pretend they're worth their weight in gold, and wait for some shady Slovaks to push Sulik down a manhole so as to get on with the ECB bailout.

Wed, 10/12/2011 - 18:09 | 1767448 Mr_Wonderful
Mr_Wonderful's picture

Yeah, that is exactly the problem.

And it´s actually a very big problem for the FED as well.

They´re sitting on tons of pretty much wortless crap that they took off the hands of their owners, private banks. Now interest rates race upwards, resulting in fall in price of their supposedly good stuff, Uncle Sam´s paper. Since they´re leveraged like 60-1 against their capital they´ll probably be rendered technically insolvent fairly quickly if stocks continue rising and bond prices falling. In turn forcing them to start selling part of their bond portfolio thus contracting the money supply.  It´s a big conundrum, no wonder that markets have been getting increasingly unstable in the last months.



Wed, 10/12/2011 - 18:49 | 1767626 richard in norway
richard in norway's picture

usd denomatited assets. i think that means muni bonds and mbs

Wed, 10/12/2011 - 18:51 | 1767630 Mr_Wonderful
Mr_Wonderful's picture

Stock and bond prices obviously tend to move in opposite directions. As stocks rally they signal stronger economic activity and profits ahead, leading to increased demand for credit which in turn results in rising interest rates and thus falling bond prices.

This is a very big problem for financial institutions that are heavily leveraged against their capital. Never mind that part of their portfolio is pretty much worthless crap that isn´t priced to market.

It´s a very big problem for the mighty FED as well. As a matter of fact it is leveraged like 60-1 against its capital. It has capital of about 50 billion dollars against a bond portfolio of 3 trillion dollars. This is much worse than Lehman Brothers.

If money continues rushing out of bonds into stocks at the present rate I think the FED will be rendered technically insolvent fairly quickly. Except, that the brain-boxes that they are, last January they adopted an accounting change which allows them to book any losses on their portfolio as a liability to the Treasury, AKA the taxpayer. They would then simply book future profits against that liability and all would be well again. How they expect to balance this mess out is beyond me – frankly.

Wed, 10/12/2011 - 20:57 | 1767978 jeff montanye
jeff montanye's picture

off topic but thank you so much durdens.

Sun, 10/16/2011 - 00:49 | 1778332 J 457
J 457's picture

Is money rushing out of bonds into stocks...?  Hmmmm.  Not quite.  The FED can never be insolvent as long as they print $$.

Wed, 10/12/2011 - 21:11 | 1768014 Quaderratic Probing
Quaderratic Probing's picture

Self hypnosis they believe their own BS

Wed, 10/12/2011 - 16:55 | 1767143 Western
Western's picture

What's the natural logarithm of 1?

Wed, 10/12/2011 - 17:02 | 1767166 redpill
redpill's picture



Wed, 10/12/2011 - 19:17 | 1767707 nmewn
nmewn's picture

Why do these things always happen when overhead resistance is met? ;-)

Wed, 10/12/2011 - 17:38 | 1767324 Miss Expectations
Miss Expectations's picture

trav, You had 2 up arrows and I just clicked the up arrow and your count went up to 22!  I must have special powers.  Let me continue on down the thread...

Thu, 10/13/2011 - 02:54 | 1768621 Libertarians fo...
Libertarians for Prosperity's picture



Trav7777...  I am more than a little alarmed by your ignorance of simple mathematics, as demonstrated by your comment above.    

Anything multiplied by zero is zero; so, in fact, the "bankrupt" banks are NOT trading at infinity times book value. That's just silly. Had you put an asterisk after your post and made a coherent reference to the Dirac Delta function, I would have given you a mulligan, thinking perhaps you were just having difficulty trying to express an infinite value at a singular point (0). But you didn't - and because of that, I'm forced to believe that you simply don't have the slightest understanding of basic mathematics.

This is not the first time I've had to correct you.  Your chagrin is understandable. 




Wed, 10/12/2011 - 21:13 | 1768018 jeff montanye
jeff montanye's picture

nit picker alert.  shaw has prevailed.  electronic fabian socialism is  real. well, at least all irregularities in english (irregularlties is tough, misspelled checked by att. among our president, barack obama.  and they spied for the cia.  however they have charming linesmen) but i digress:  reggie is right, sort of.  it is now go goes have goed, i is you is he is.  see the incindies (sp?) oedipal/electron.

Wed, 10/12/2011 - 16:58 | 1767152 Ned Zeppelin
Ned Zeppelin's picture

Buyers: The Fed or some vehicle which leads back to the Fed and/or ECB. A LSAP program would do nicely.

Wed, 10/12/2011 - 17:11 | 1767192 NotApplicable
NotApplicable's picture

Swap line operators are standing by. Call now!

Wed, 10/12/2011 - 20:07 | 1767844 Jay Gould Esq.
Jay Gould Esq.'s picture

So Miss Cleo now has her Series 7?

Wed, 10/12/2011 - 17:15 | 1767203 B9K9
B9K9's picture

Sigh; so few actually get it. There are two basic alternatives:

(a) deflationary implosion where the PTB loses control.

(b) inflationary explosion where the PTB maintains control.

Do you really think Bernanke, POTUS, Congress & SCOTUS won't pull out all the stops to preserve the status quo? I mean, what good are both the military & police if they can't be used to control the People?

There is going to be a massive devaluation - the LSAP is only an inkling of what's in store. With gas above $10 and food out of reach, that's when price controls & rationing begin. And for those who complain, agitate and/or otherwise annoy the PTB? Ha ha, you get one guess.

Wed, 10/12/2011 - 18:19 | 1767492 Things that go bump
Things that go bump's picture

How about us hoarders (food, gold)?  A shirttail relative of mine was reputed to be a hoarder during WWII and people looked down on him (presumably for his lack of patriotic zeal), but that was the worst of it.  I heard that in Europe hoarders who were caught got shot.

Wed, 10/12/2011 - 20:04 | 1767829 Shvanztanz
Shvanztanz's picture

I think a lot of people got shot that didn't have shit to hoard.

But yeah, if you are smart enough to hoard, you are smart enough not to tell your neighbor.


Wed, 10/12/2011 - 21:05 | 1767997 Manthong
Manthong's picture

Screw the neighbors - it's my relatives I'm worried about.

Wed, 10/12/2011 - 22:02 | 1768113 centerline
centerline's picture

+1.  Put them to work.  Freeloading family that was too dense to listen to reason and prepare is going to have to earn thier keep!

Wed, 10/12/2011 - 22:16 | 1768134 Snidley Whipsnae
Snidley Whipsnae's picture

"I think a lot of people got shot that didn't have shit to hoard."

Yeah, lots of old scores get settled while the cops are busy keeping the citizens from hanging some azz hats that deserve hanging and some citizens that don't. Another example of ...

'let no crisis be wasted'

When people get hungry do not go out for a look matter how curious you get. If you don't have a radio that picks up the HAM Radio bands plus local AM stations, get one. The first few weeks are going to be a sob...and, when 99% of the remaining citizens look like anerexics it isnt a good idea to walk around looking like Wimpy of hamburger fame. Use common sense.


Wed, 10/12/2011 - 22:21 | 1768145 Mr_Wonderful
Mr_Wonderful's picture

It´s very difficult to envisage any meaningful inflation in a debt-driven economy when 1. the debt bubble is bursting 2. unemployment is high and 3. there´s an overabundance of everything, cheap labor included, and technology and productivity race ahead.


Wed, 10/12/2011 - 17:53 | 1767379 slewie the pi-rat
slewie the pi-rat's picture

some "blogs" are more equal than others

the 100-day 'swap' from the US banksters has already liquified the worst sewage sludge;  the SNB is supportive; banksters & ministers have been meeting for months;  they just took 90 Billion (dollars?) of dexia's "problem" and gave it public guarantees.  then new "capital" took what was left and designed a new letterhead & co. logo.  as trav sez:  what assets?  the ones which are now gonna force out healthcare and pensions due to the public guarantees of the fuking banksterism crimes and frauds?  the "political" solution 4 europe = the same political solution 4 the USA:  privatiZe the profits and socialize the losses for the fascist uber-elitists

how many choices do you think a bunch of bankrupt douchebags have?  they can talk their way out, buy their way out, or shoot their way out.  we got em trapped up in a box canyon, BiCheZ!


Wed, 10/12/2011 - 22:25 | 1768157 Snidley Whipsnae
Snidley Whipsnae's picture

Good points slewie... right now they are still trying to buy their way out (printing)... but that only leads to destruction of currencies... not that they are worth a crap now. I should use the term 'loss of faith in currencies', which is hyper inflation. With a few more can kicks we might see hyper inflation while experiencing credit collapse deflation... money and credit disappear from system. Some combo, eh?

I don't believe they will be able to print enough to do a partial system save without triggering loss of faith in the currencies. I could certainly be wrong... they have already pulled off far more than I thought they could.

I bought more pop corn today.

Wed, 10/12/2011 - 17:19 | 1767224 Translational Lift
Translational Lift's picture

It's a bitch when reality suddenly appears!!

Wed, 10/12/2011 - 20:12 | 1767842 Shvanztanz
Shvanztanz's picture

United States Government issues global alert on increased threat of Al-Reality attack. Leading Al-Reality sources have reported a high likelihood of natural disasters, hurricanes and large fuel spills. Al-Reality also issued a threat recently to devalue currency, instigate class war not to mention a staggering 6 1980's TV shows to be made into movies over the coming year. 

Al-Reality has claimed responsibility for every death that has ever occurred, every bankruptcy and every episode of Joanie Loves Chachi ever made.

Wed, 10/12/2011 - 20:23 | 1767882 philipat
philipat's picture

And even for a "Massively dilutive" Rights issue, who would underwrite it?

Wed, 10/12/2011 - 16:36 | 1767059 Cynical Sidney
Cynical Sidney's picture

eurozone is in a tailspin. the euro cannot and will not survive in its current form, neither could the european union. US markets will follow close behind, in fact america's financial picture is far worse compared to europe. we have by far the most debt and the size of hidden financial obligations are astronomical. once europe is set ablaze it'll engulf the us, asia and other emerging markets. politicans obviously have no clue how to deal with a systemic failure, they don't know how to unwind trillons of bad debts created by none other than the banksters. there are a few remedies on the table: eg global debt restructure/relief, one time flatline wealth tax to settle their bad fiat debts. i'd like to make it clear that america cannot afford to lead a path toward a civil war, a global war or the establishment of some nwo.

due to the thiefing ways of banksters and their control of their regulatory bodies, banksters executed a hyper over-leveraged buyout of our entire economy, transfering real wealth into fiat debt. thanks to them, he who has the most money has the most fiat debt. if the wealthy are taxed more it is rightfully so, it is not class war. if anything fiat debt and wealth destruction are the real class warfare here

Wed, 10/12/2011 - 16:42 | 1767085 Divided States ...
Divided States of America's picture

Next step: the realization that he who sells first, sells best (price)


also means


Next step: the realization that he who buys first, buys worst (price)


also means


No willing buyers

Wed, 10/12/2011 - 17:00 | 1767160 Nascent_Variable
Nascent_Variable's picture

Haven't you heard the latest rumor?  European banks are just hours away from being bailed out by the mysterious and wealthy Chinese investment bank, Fuk Yoo.

Dow 36,000.

Wed, 10/12/2011 - 17:12 | 1767195 NotApplicable
NotApplicable's picture

Just as long as it's not Fuk Mi.

Wed, 10/12/2011 - 18:39 | 1767582 Spigot
Spigot's picture

Phun Nee

Wed, 10/12/2011 - 18:10 | 1767456 walküre
walküre's picture

The same bank that just launched the SS Dim Sunk?

Wed, 10/12/2011 - 17:08 | 1767181 Amish Hacker
Amish Hacker's picture

Not at all. There will always be a willing buyer at some price. If you're the first to sell, you sell to the highest-bidding buyer. The second seller won't get as good a bid as the first, and so on down the line. "Selling best" doesn't guarantee a profit, just that you're going to get the best price possible.  

When a Nash Equilibrium fails, it's a bar fight, and you definitely want to be first.

Wed, 10/12/2011 - 20:13 | 1767855 disabledvet
disabledvet's picture

Really? Forced sales should only be met with our noses upturned? Aren't we snotty-ville tonight. I imagine that includes all that gold that's being used as collateral for "the bank." How about Genzyme which is in the process of being bought by Sanofi-Aventis? Anywho it's just another global calamity. Makes me think...of music actually

Wed, 10/12/2011 - 22:30 | 1768172 Snidley Whipsnae
Snidley Whipsnae's picture

"also means


No willing buyers"

The crap will fall till it hits bids of a couple of pennies on the dollar. Then TPTB will use their intermediaries to buy when the blood is in the street.

Thu, 10/13/2011 - 06:39 | 1768756 Ghordius
Ghordius's picture

"the euro cannot and will not survive in its current form, neither could the european union"


why? because it has become a matter of faith for some commentators?

try to convince Greece or Germany or Spain or Ireland to leave the Euro

try to convince the UK or Poland or Hungary to leave the EU

complaints don't necessarily results in divorce!

Wed, 10/12/2011 - 16:44 | 1767095 Ancona
Ancona's picture

Why not whore themselves out. Any hooker will tell you it's a great scam, "You've got it, you sell still got it"! Kind of like gold leasing.....only different.

Wed, 10/12/2011 - 17:25 | 1767259 slewie the pi-rat
slewie the pi-rat's picture

+ cooties, BiCheZ!

Thu, 10/13/2011 - 01:14 | 1768511 LongBallsShortBrains
LongBallsShortBrains's picture

Reminds me of the difference between a drug pusher and a hooker......

A hooker can wash her crack and sell it again.

Wed, 10/12/2011 - 21:58 | 1768105 covert
covert's picture

time to buy coming?


Wed, 10/12/2011 - 16:33 | 1767047 SilverRhino
SilverRhino's picture

Silver's slowly coming back up ... so fuck it. 

Wed, 10/12/2011 - 17:03 | 1767170 redpill
redpill's picture

Central Banker: And I would have gotten away with it if it weren't for you meddling silver bugs *shakefist*


Rut roh Raggy!

Wed, 10/12/2011 - 17:09 | 1767184 tekhneek
tekhneek's picture

Ah yes. The manipulated paper price is rising. Yay, we're rich.

Wed, 10/12/2011 - 20:14 | 1767861 disabledvet
disabledvet's picture

i agree that even a million dollars isn't really all that good when you adjust for inflation.'s a million dollars. Should you and I complain? Or just take a round the world cruise?

Wed, 10/12/2011 - 16:34 | 1767048 MarketTruth
MarketTruth's picture

i call dibs on the CROOKlyn Bridge and Ibiza in Greece!

Wed, 10/12/2011 - 16:44 | 1767089 Alvaro de Esteban
Alvaro de Esteban's picture

Ibiza in Greece???

Now I understand why Whoopi Goldberg has become an "opinion maker" in USA

Wed, 10/12/2011 - 20:38 | 1767920 MarketTruth
MarketTruth's picture

My bad, mixed things up. During same trip did Spain and Greece... and if you party like i do...

Wed, 10/12/2011 - 16:51 | 1767120 thatthingcanfly
thatthingcanfly's picture

Last time I was in ibiza, I had a hard time finding any gyros or schawarma. Wonder why what was?

Wed, 10/12/2011 - 17:09 | 1767187 tekhneek
tekhneek's picture

I don't think Spain got the memo.

Wed, 10/12/2011 - 17:29 | 1767280 PicassoInActions
PicassoInActions's picture

Cause you were in delmar, if you would go to San Jose they cold find a few greek restorans

Wed, 10/12/2011 - 16:35 | 1767056 Belarus
Belarus's picture this rate, there is no way Merkozy is going to catch the cascading of dominoes fallling. Shit. Hit. Fan. And to think, the market has rallied by a few trillion globally on the plan to make a plan for a plan. 

Wed, 10/12/2011 - 16:37 | 1767065 Tsar Pointless
Tsar Pointless's picture

Oh, but what a plan to make a plan for a plan it is!

I love it when a plan to make a plan for a plan comes together!

Wed, 10/12/2011 - 16:57 | 1767151 zero intelligence
zero intelligence's picture

"I love it when a plan to make a plan for a plan comes together!"


Sometimes you just have to bow down before genius.

Wed, 10/12/2011 - 16:35 | 1767057 max2205
max2205's picture

Wow. Just wow.....

Wed, 10/12/2011 - 18:02 | 1767414 Al Gorerhythm
Al Gorerhythm's picture

There are plenty more where they came from. Extend and pretennd is their MO. We simple folk, slowly becoming aware, are always suprised by their "recoveries from near slips" on their high wire act.

Wed, 10/12/2011 - 16:37 | 1767060 hedgeless_horseman
hedgeless_horseman's picture



He who sells first, sells best?

Uncle Warren said to buy and hold.  He never mentioned anything about selling.

Wed, 10/12/2011 - 16:36 | 1767061 Mike2756
Mike2756's picture

Where is he when we need him? Are we done with the Euro rumor mill?

Wed, 10/12/2011 - 16:47 | 1767106 hedgeless_horseman
hedgeless_horseman's picture



Are we done with the Euro rumor mill?

Let me consult my U.S. Treasury refunding calendar...let's

Wed, 10/12/2011 - 16:37 | 1767064 LawsofPhysics
LawsofPhysics's picture

But, but, they don't need capital, right?  < snark >

Wed, 10/12/2011 - 16:38 | 1767071 Tsar Pointless
Tsar Pointless's picture

Not at all!

And Dexia is just fine and dandy!

Wed, 10/12/2011 - 16:37 | 1767067 Josh Randall
Josh Randall's picture

We are all Slovakia now

Wed, 10/12/2011 - 16:52 | 1767112 LawsofPhysics
LawsofPhysics's picture

Really?  Well then, where are the skinny whores?

Wed, 10/12/2011 - 17:34 | 1767304 Troll Magnet
Troll Magnet's picture

one of them just stated her own show on CNN.

Wed, 10/12/2011 - 16:58 | 1767068 sitenine
sitenine's picture

Insolvency, bitchez!

The Bernank, "it's not about liquidity, it's about access to credit."
Wana give that another try there Ben? Fucking idiot.

Wed, 10/12/2011 - 17:19 | 1767221 candyman
candyman's picture


Wed, 10/12/2011 - 16:38 | 1767069 ThreeTrees
ThreeTrees's picture

No way, no way it unravels just like that, not after the wall of bullshit they've been errecting throughout this whole rally.

Wed, 10/12/2011 - 16:43 | 1767086 jdelano
jdelano's picture

it unravels because the top of the trading range was kissed--now all news will service the reversal.  We stay in the range until greece defaults or somebody concretely begins printing trillions.  Back down to 1080,  whooooooooooo hoooooo  (I been waiting for this for a week!)

Wed, 10/12/2011 - 16:59 | 1767159 walküre
walküre's picture

It was a long week.

Wed, 10/12/2011 - 16:47 | 1767107 BandGap
BandGap's picture

Yeah, but the bullshit gets more surreal every day.  At some point the Bullshit-O-Meter redlines and has to reverse or blow up.  Name your poison.

Wed, 10/12/2011 - 16:38 | 1767070 Nascent_Variable
Nascent_Variable's picture

That thundering sound that Europeans are hearing is the charge of the approaching bear cavalry.

Europe clearly doesn't really get it yet, but they will shortly.

Wed, 10/12/2011 - 17:13 | 1767200 tekhneek
tekhneek's picture

I've been makinga killing selling these to Greece. They wanted to exchange 1 year bonds but I was like, nahhhh.

Wed, 10/12/2011 - 16:39 | 1767073 Mr_Wonderful
Mr_Wonderful's picture

They should reverse split one for ten thus writing off most of their worthless stock and after this try to raise new capital.

The C zombie did this last May and the new stock has fallen only 30% so far. I guess BAC will try the same at $4.

Wed, 10/12/2011 - 16:53 | 1767126 BandGap
BandGap's picture

Think of the chaos that would cause.  One bank, hmmm maybe.  Several banks kinda makes me think the common folk might notice that they banks are in deep shit.


Wed, 10/12/2011 - 17:05 | 1767172 Mr_Wonderful
Mr_Wonderful's picture

It´s best to bite the bullet, admit the inevitable, write off worthless stock and then move on. Endless uncertainty, propping up those rickety banks with temporary measures which are doomed to fail, is hopeless. If these institutions with their highly paid brain-box executives can´t make it in the marketplace then they should just go belly up and be taken over by more competent entities.

Wed, 10/12/2011 - 17:16 | 1767210 NotApplicable
NotApplicable's picture

Yeah, like... a hundred years ago.

Wed, 10/12/2011 - 17:10 | 1767189 Mike2756
Mike2756's picture

Yaah, it's working for yrcw!

Wed, 10/12/2011 - 20:50 | 1767929 philipat
philipat's picture

Anyone remember the good old days of free markets where any Company that made bad investment decisions failed, along with its shareholders, bondholders and, most particularly, its Board and Management? Sigh..........

Wed, 10/12/2011 - 16:39 | 1767074 ZDRuX
ZDRuX's picture

Keep your hands and feet inside the cart at all times.

Wed, 10/12/2011 - 16:50 | 1767075 pauhana
pauhana's picture

This is getting better and better.  How delicious to watch the rats scramble to find any available floating debris!

Wed, 10/12/2011 - 16:40 | 1767076 Mitch Comestein
Mitch Comestein's picture

It is no coinsidence that the market turned right as it it the August 8  through today high for the DOW and S&P 500.  This is the third test of the level (1216-1220).  Will this one fail?  I hope so.  My shorts hope so. 

Wed, 10/12/2011 - 16:40 | 1767077 Boilermaker
Boilermaker's picture

So, my XLF November $12.00 puts are....WHAT?

Wed, 10/12/2011 - 16:40 | 1767078 kito
kito's picture

...And now it is back to reality


you mean inverse reality.........

Wed, 10/12/2011 - 16:54 | 1767135 BandGap
BandGap's picture

Inverse is the new reality these days.  A rip in space-time.

Wed, 10/12/2011 - 16:40 | 1767079 prains
prains's picture

Oligarkistan to the rescue, news at ten.

Wed, 10/12/2011 - 16:40 | 1767080 oogs66
oogs66's picture

and they will continue to beg germany and france to give money to all the countries so they can sell their assets at a higher price, get richer and let someone else deal with the problem

Wed, 10/12/2011 - 16:41 | 1767083 tim73
tim73's picture

Brooklyn Bridge going...starting with one million. Any takers?


Wed, 10/12/2011 - 16:44 | 1767094 Deadpool
Deadpool's picture

sold to me, one million Zimb dollars.

Wed, 10/12/2011 - 16:43 | 1767088 Deadpool
Deadpool's picture

again, the Eurodopes don't understand capitalism, ex-Switzerland whom have lost their minds too...60% of tangible book CURRENT can be tomorrow's <1% book with a run or debt losses. Lehman, Bear, Enron, Merrill should have been lessons enough, but they don't get it; it's an American invention and they are blind.

Wed, 10/12/2011 - 16:51 | 1767117 Belarus
Belarus's picture

60% of Book for the Europe banks is bullshit or #mathfail. BAC is 30% of stated book value. Europe banks are sitting on mountains of toxic debt that is marked to fantasy land. Company's like SocGen is leveraged 50 X 1. Even assuming the very best case scenario that their assets were marked fairly, the slighest 1.5% hit to SocGen's equity wipes out their balance sheet. So for a company like that to sell assets into a market with no buyers....well, good luck to that one, especially if they want their equity to be fully well know for what it is: worthless. 

It is no wonder the French politico's are wetting their pants. 

Wed, 10/12/2011 - 17:20 | 1767231 NotApplicable
NotApplicable's picture

I just wonder how the fantasy marks will be maintained when actual market prices emerge from the selling?

Oh wait, Benron is gonna buy it all at par, I forgot.


Wed, 10/12/2011 - 16:44 | 1767096 Gringo Viejo
Gringo Viejo's picture

Fascinating to watch the lumpeninvestor buy into this day to day hopeium. The death of common sense. There will come a time when they'll find all the theater fire exits locked.

Wed, 10/12/2011 - 17:22 | 1767244 NotApplicable
NotApplicable's picture

They don't exist anymore, they're extinct. It's all Latour Trading and GS.

Wed, 10/12/2011 - 16:44 | 1767097 XRAYD
XRAYD's picture

The trouble with ALL the bankers is that they are IN their own banks and can't see the real world.

Wed, 10/12/2011 - 16:45 | 1767098 BandGap
BandGap's picture

Wait a minute, there will be buyers with the $$$ spiralling downward.  But there will be buyers.

So if someone is holding the same investment as a bank about to unload the investment the value of said investment I missing something?


Wed, 10/12/2011 - 16:46 | 1767103 trampstamp
trampstamp's picture

wheres' the bulls now?

Wed, 10/12/2011 - 16:46 | 1767104 buzzsaw99
buzzsaw99's picture

because the first step before initiating massive asset sales is always broadcast it through the press. what a crock! this is nothing but a god damned shakedown.

Wed, 10/12/2011 - 16:50 | 1767113 BandGap
BandGap's picture

The counter to this is that this episode isn't staged or coordinated...just leaked by someone fed up with the bullshit. 

Is it and watch and learn.

Wed, 10/12/2011 - 16:53 | 1767122 buzzsaw99
buzzsaw99's picture

this is just another skank paulson moment. Give us the money or the stock market gets it!

Extortionist aholz.

Wed, 10/12/2011 - 16:55 | 1767142 BandGap
BandGap's picture

Aren't the banks refusing to go that route?

Wed, 10/12/2011 - 17:00 | 1767163 buzzsaw99
buzzsaw99's picture

the banks want the fed, the imf, the ecb, whomever, to buy their assets at top dollar. They will because if they dump them on the market it will crash. Blackmail. No way in hell we are ever going to have huge liquidations and price discovery, the bernank et al have been fighting that for years.

Wed, 10/12/2011 - 17:13 | 1767202 BandGap
BandGap's picture

Ah, the light comes on.  Methinks there isn't enough money in the system.


Wed, 10/12/2011 - 17:23 | 1767233 buzzsaw99
buzzsaw99's picture

I have a bag of shit. I say it is worth $5B. You have $10B in your pocket. Would you buy my bag of shit? If not, does that mean there isn't enough money in your pocket? How much money would you need in your pocket before you pay me $5B for a bag of shit? Now on the other hand, if I have my friends at the central bank or gubbermint reach in your pocket then my problem is solved.

Wed, 10/12/2011 - 17:24 | 1767254 NotApplicable
NotApplicable's picture

Depends. Is it good shit?

And do you have change?

Wed, 10/12/2011 - 17:33 | 1767296 buzzsaw99
buzzsaw99's picture

My shit is the best! Not like those other guys. Mine smells like roses. ;)


no change, only hope.

Wed, 10/12/2011 - 23:27 | 1768307 Calmyourself
Wed, 10/12/2011 - 20:48 | 1767958 steve from virginia
steve from virginia's picture

There's yer problem right there!

Wed, 10/12/2011 - 16:57 | 1767144 Duuude
Duuude's picture


"this is nothing but a god damned shakedown."


Bingo!!! We got a Winner!!!


They're gonna hold themselves hostage!!!


"Chuck Jones...You have a call from Mr. Serling."


Wed, 10/12/2011 - 16:50 | 1767108 Boilermaker
Boilermaker's picture

Seriously, what the hell does this do to the existing common equity at the Euro banks?  The equity is worth less since they have fewer assets?  Or the equity is worth more because the threat of dilution is gone....Wouldn't this be deflationary...

Or, is the common equity worth whatever their version of 'Benny' wants it to be...

Man, I'm confused.  I need to lie on the couch with a cold wet rag on my forehead.



Wed, 10/12/2011 - 16:53 | 1767125 Deadpool
Deadpool's picture

not too confusing, BM. it's dillutive. MS, BAC, C, GS did it in '08.

Wed, 10/12/2011 - 17:27 | 1767268 Boilermaker
Boilermaker's picture

Selling assets is dilutive to existing common equity?  I would have thought raising capital and issuing more common shares would have been dilutive.

How an selling off assets at depressed prices be good for existing common shares?  Doesn't that blow to hell the concept of suspending mark-to-market?  They will be sold-to-market.

OK, so, lay your wager.  Does the XLF go up or down on this?

Wed, 10/12/2011 - 22:40 | 1768210 Snidley Whipsnae
Snidley Whipsnae's picture

"Selling assets is dilutive to existing common equity?"

The assets they are holding that have market value will be sold... so they will be left with crap that no one wants... ie; no one wants it at the prices they will ask for the crap.

when the good assets are gone is the bank still worth what it was prior to the sale of good assets?

If you sell half your collection of rare stamps is the collection still worth the same?

Wed, 10/12/2011 - 16:52 | 1767121 bluestaq
bluestaq's picture

Am I the only one who thinks we rally on this tomorrow?  /sarc.  No wait, /ES will fall all night into the wee hours of the morning, then the bears who load up at 9:30 tomorrow will be in for a royal cornholing.  just my .o2c

Wed, 10/12/2011 - 16:53 | 1767127 walküre
walküre's picture

Hardly a "slump" yet ... but the question going forward will be this.

Have enough suckers been herded into the coming dip to buy? Watch propaganda networks to get a clue.


Wed, 10/12/2011 - 16:53 | 1767130 St. Deluise
St. Deluise's picture

fyi "the market" doesn't give a shit about anything the financial times has to say. that's not how it works.

Wed, 10/12/2011 - 17:31 | 1767271 Banksters
Banksters's picture

Oh, the markets will care.  Did you read the line about 80 percent of euro companies financing coming from the banksters.  

Wed, 10/12/2011 - 16:58 | 1767155 Falcon15
Falcon15's picture

Lookithat! Someone snapped a pic of Obummer riding his Skittle shitting unicorn named Hope. +1 for the chuckle factor.

Wed, 10/12/2011 - 16:53 | 1767134 lakeside
lakeside's picture

These "limeys" and their perpetual fodder will never end until their fight each other.  I'm sure that's coming soon to a theatre near, very soon.

Wed, 10/12/2011 - 16:54 | 1767137 Ned Zeppelin
Ned Zeppelin's picture

I'm loving this Prime X story.  Maybe nothing, maybe something. Hard to tell.

Wed, 10/12/2011 - 16:54 | 1767138 ReallySparky
ReallySparky's picture

Tyler, I'll be needing a shot of Tequila with that shaker of salt.  How else can one handle the rumors/lies and continue to live in denial?

Wed, 10/12/2011 - 16:55 | 1767141 broke433
broke433's picture

Doesn't matter, it's earnings season.

Wed, 10/12/2011 - 16:59 | 1767157 jdelano
jdelano's picture

Not sure they can rally off of massive misses and blatantly delusional guidance.....oh, wait...on second thought, Alcoa?

Wed, 10/12/2011 - 16:56 | 1767149 Maybe-Not
Maybe-Not's picture

please, please, please! unload all the shitty cmbx, and prime-x onto the market. there will be buyers, there is always a buyer. but the price is very important in these situations.

Wed, 10/12/2011 - 16:59 | 1767158 terryfuckwit
terryfuckwit's picture

can anyone tell me why gold is not the obvious favourite for asset liquidation

Wed, 10/12/2011 - 17:13 | 1767198 Mr_Wonderful
Mr_Wonderful's picture

Way too overabundant for current price. Maybe gold at $700 and Platinum at $20,000.

Wed, 10/12/2011 - 17:32 | 1767293 Banksters
Banksters's picture


Wed, 10/12/2011 - 19:46 | 1767790 Withdrawn Sanction
Withdrawn Sanction's picture

How'd you arrive at those estimates, Mr. Wonderful?  Next time, please show your work.

Wed, 10/12/2011 - 17:17 | 1767215 Treason Season
Treason Season's picture

Can anyone tell me why everything but gold is not the obvious favourite for asset liquidation?

Wed, 10/12/2011 - 17:06 | 1767176 MaximusR
MaximusR's picture

I've been holding my shorts across the board this last week, watching the markets rally day after day in amazment. This is exactly what we have all been waiting for! Drop mutha fucka drop!!!!!!!


Wed, 10/12/2011 - 17:10 | 1767177 Big Ben
Big Ben's picture

If European banks sell their bad assets (which are on their books at above market value), they will crystallize those losses, and their equity will suffer.

So they will sell their good assets, leaving dried up husks consisting of cash (that they cannot lend and cannot earn interest on) and bad assets which haven't yet been marked to market.

Sound familiar?

Wed, 10/12/2011 - 17:08 | 1767180 YesWeKahn
YesWeKahn's picture

Tyler, if you really think that these rumors are coming from innocent people, then you are naive.

These rumors are produced by the market movers, when they are longs, they make "good" rumors, when they are short, they make bad ones.

Wed, 10/12/2011 - 17:22 | 1767239 Pancho Villa
Pancho Villa's picture

FT is the tool of the banking interests. And it kind of looks like the bankers now need a big financial panic in order to scare Germany into pitching a trillion+ euros into a European bank bailout. Hold on to your hats.

Wed, 10/12/2011 - 20:05 | 1767839 Withdrawn Sanction
Withdrawn Sanction's picture

If you think a trillion euro will do the trick, you need to up your ante.  And it's probably not Germany they're trying to scare.  Think smaller....yes, Slovakia they're looking in your direction.  The last ditch effort to save this thing is eurobonds and the EFSF; that is, a supra-national solution.  It wont work of course even if tried but that's a different issue and it wouldnt stop them even if they knew for sure it would fail.

Interesting thought about an engineered panic, but that would only make the problem bigger by further crushing asset values and potentially generate a runaway.   Though, I suppose, what alternatives do functionally insolvent bankers have at this point?   Hold on tight, we're in for a bumpy ride.

Wed, 10/12/2011 - 17:36 | 1767266 sitenine
sitenine's picture

You think global bank insolvency is a rumor? OK, you go ahead and go long, and good luck to you. With any luck, maybe Buffet will hire you.

Wed, 10/12/2011 - 17:39 | 1767329 qussl3
qussl3's picture

Well insolvency would depend on the rules no?

A minor inconvenience.

Wed, 10/12/2011 - 17:46 | 1767353 devo
devo's picture

Exactly, it's hedge funds calling xyz and saying, "I spoke with a source who said...yada yada yada". The rumors rarely if ever have names behind them. Neophyte traders fall for it, and they will be rightfully burned.

Wed, 10/12/2011 - 17:10 | 1767190 socratesplus
socratesplus's picture

so the banks are either going to sell their sovereign debt, reducing price and increasing their yields, or anything wlse, which will only increase the % of their assets that are sovereigns.  contraction in any event doesn't spell mommy

Wed, 10/12/2011 - 17:11 | 1767193 G. Marx
G. Marx's picture

Farage: Barroso in the bunker planning world domination

Wed, 10/12/2011 - 17:12 | 1767196 tim73
tim73's picture

The Fire Sales of The Century...everything must go.

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