(Non) News Of Dexia "Bad Bank" Sends Market Soaring

Tyler Durden's picture

If anyone had any doubt this market is broken beyond compare and controlled by complete idiots, this should put all doubts to rest. Anyone wondering why stocks are soaring, the reason is that according to non-news, because this was first reported yesterday by the FT, Dexia will park €180 billion in worthless assets in a bad bank. This is beyond ridiculous as Belgium, even in JV with France, will be unable to ringfence and hence fund this amount of capital for the now nationalized bank. It also means that Belgium is about to be downgraded following a long-overdue warning by S&P and Moodys to cut the country. It also means that Belgian CDS will soon trade points up front. It also means that Belgian funding costs will soar. It also means that French CDS will explode tomorrow and that interbank markets in Europe will collapse (even more) once the market realizes that France has just diluted its "bailout dry capital" by rescuing a Belgian bank. And so on. And so on. But for now the ripfest is here. Fade every uptick as this is sheer desperation out of Belgium which pretends it is Switzerland and can do with Dexia what the Swiss did with UBS. Hint: it is not and no, it can't.

From the WSJ Market Beat blog:

  • Franco-Belgian lender Dexia is set to park assets worth in excess of EUR180 billion into a so-called bad bank, a vehicle backed by guarantees from the French and Belgian governments, in an effort to disentangle itself from gripping liquidity strains, people familiar with the matter said Tuesday.
  • The bad-bank plan is part of a deeper makeover under which Dexia is considering selling all its core units and which may effectively lead to a dismantling of the lender.
  • Under a plan submitted to Dexia’s board on Monday, the bank would ring fence into a special vehicle all the assets it inherited from an aggressive expansion push early in the past decade as well as units that can’t be sold under current market conditions, the people familiar with the matter said.
  • These assets would include a portfolio of bonds worth EUR95 billion and about EUR30 billion in loans deemed non-strategic, they said. Dexia Crediop and Dexia Sabadell, the bank’s municipal lending units in Italy and Spain, respectively, would also be folded into the bad bank, the people familiar with the matter said. The European sovereign debt crisis has cast a cloud on most financial assets in Southern European countries, making it virtually impossible for Dexia to find buyers for the two units.
  • Over the past year, Dexia had succeeded in reducing short-term financing needs stemming from its large portfolio of long-term bonds. Yet, in recent weeks, the bank was increasingly struggling to raise funding at affordable costs. With little hope that liquidity strains would ease in the short term, management came to conclusion that Dexia could no longer carry the oversized bond portfolio alone, one person familiar with the matter said.
  • In a first step, Dexia may continue to carry the bad-bank vehicle on its books, but France and Belgium will give its guarantee to securities the bank must issue to meet refinancing needs, the people familiar with the matter said. Longer term, Dexia may transfer bad bank ownership to France and Belgium, these people said

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dwdollar's picture

Yeah... cause you know... that will solve everything... it's all sunshine and unicorns from now on.

buck4free's picture

Wow. Absolutely frigging nuts.

spiral_eyes's picture

Some relevant music:

Drexciya, bitchez

Digital Tsunami 

(Chosen in honour of all the algos, and in honour of the massive tsunami of defaults we'll see when Greece goes under)


AldousHuxley's picture

pulling from the archive


  • Belgium - Dexia: 180%of GDP
  • France - BNP Paribas, Credit Agricole, SocGen: 237% of GDP
  • Germany - Deutsche Bank: 84%
  • Italy - Unicredit, Intesa Sanpaolo: 101%
  • Netherlands - Fortis: 155%
  • Spain - Banco Santander: 92%
  • UK - RBS, Barclays, HSBC: 337%
  • Switzerland- UBS and Credit Suisse: 600%

Compare that to the top 5 banks in the US (a list which excludes hedge funds such as Goldman Sachs).

  • US - JP Morgan, Citigroup, Bank of America, Wells Fargo and Fannie: just 56% of GDP.

Unfortunately for Europe, there is a dramatic concentration of bank assets precisely in some of the most precarious regions. Which is why Germany may have kicked the can down the road for at least a month, but the issue will come back with a vengeance for the simple reason we have noted from the start of this crisis: only Bernanke has a money printer. Everyone else actually has to produce "stuff", sell it and collect taxes if they want to fill catastrophic budget deficits. And the latter, as we have seen, is something the developed world has been horrible at doing over the past decade, courtesy of the Goldman-facilitated innovation explosion.


Asia-> America "capitalism"

America-> Europe "socialism"

Europe->Asia "communism"

Africa...fucked as usual..."colonialism"

GenX Investor's picture

The ALGO must bid it up before it can sell it off.  Must hit targets, must fill gaps, must retrace, must must must.

Ancona's picture

The Bank of America in St. Louis is surrounded by cops and barricades refusing to allow customers in to withdraw money. They're telling them that they have to use ATM's or do their banking on-line. Wait for it, it's coming to a neighborhood near you.

Riots, it's what's for dinner.

Missiondweller's picture

Is this a joke or for real? Can you cite a source?

Miss Expectations's picture

I wish I'd had my camera yesterday, the parking lot at a local BAC was absolutely packed.  I thought business was booming.

Missiondweller's picture

Or maybe acct closings.


The website being down for several days looks like an on-line bank run. Something smells rotten. Maybe I'm just paranoid.

john39's picture

well its not raining in STL today, and that video has people carrying umbrellas.... something is off.

Smiddywesson's picture

It's not rain, it's tears

catacl1sm's picture

Shenanigans. That video is from Aug 12 2011 during a rally in which people were protesting.


You can't protest at a bank, duh. <snarf>

AldousHuxley's picture

Putting your deposit into Banksters of America is entrusting your grandfather's trust fund into Goldman Sach's hands.


catacl1sm's picture

Shenanigans. That video is from Aug 12 2011 during a rally in which people were protesting.


You can't protest at a bank, duh. <snarf>

CvlDobd's picture

source, link, proof?

crazyjsmith's picture

Is it 3:30 yet? Yep, right on Q!

Welcome to the Truman Show.

jdelano's picture

Loving every minute of this--watching these desperate fucks try sooooo hard to stop the bleeding, only to have the credit markets come along and chop off the other arm.  "It's a bloody flesh wound!  I'll gnash you with my teeth!"  Hahahaha.  

SpaDe's picture

Wait for it because the arms are now gone, next will be the legs so that it can't run while it gets put down.


Btw where did you get that coconut shell?

Jonas Parker's picture

And the unicorns shit "Skittles" too...

Buck Johnson's picture

Yea, no kidding.  Sunshine and Unicorns here we come.  This is what you call EPIC FAIL!!!!!!!!!!  Now what about the servicing of the debt (180 billion euro's) that must be sent out to all the bond holders including Belgium, who's going to pay that?  If Belgium (I don't know why they are calling this debt backed also by the Belgium govt., because didn't they dissolve their govt. over a year ago?) can't service this debt, then essentially what they did was say we are defaulting.

qussl3's picture

Bear Stearns.

kaiserhoff's picture

Tyler is getting picky, picky, picky...

You can't expect markets to look forward 24 hours, er, 8 hours, uh, oh whatever.

oogs66's picture

Dexia stock going to zero. France going to be put on ratings watch. Short this rally

fuu's picture

BAC is black.

Abitdodgie's picture

The stock market is not rallying because of that supid bank news, it is going up because Kim Kardashian has bought a Ferrari, we should all buy one now we know what to drive.

Quadlet's picture

MS ramp to the moon!  Short the EOD BS.

Gene Parmesan's picture

I assumed it was because investors were optimistic that the Japanese might learn a thing or two about entombing toxic shit from this exercise.

Spastica Rex's picture

Whew! I was getting worried there for a bit.

Zeilschip's picture

A bear rally that lasts 2 or 3 days can kill you though...

junkyardjack's picture

I'm so glad I covered my shorts this morning.  I'll keep an eye on my candidates and put it back on once they show weakness again

Racer's picture

These vacuum tubes are as clever as the chairSATAN


they have to keep squeezing shorts to keep the 'markets' from collapsing.. yeah, healthy that is

EscapeKey's picture

Another press release to the rescue.

fuu's picture

Big dollar dump there in the last 40 minutes.

LongSoupLine's picture

yep...and the front of Bob Pisani's pants just exploded.

Arkadaba's picture

What the hell ???? Ha ha just noticed S&P and Dow charts looks like this W

Edit: That lasted for about a minute - can't believe this crap!

spartan117's picture

must.... close.... green....

lizzy36's picture

Nah it is the weak story by the FT about some coordinated EU plan to recap the banks.

Amusingly the Spanish Finance Minister came out this morning after the meeting and specifically said the the EU ministers DID NOT talk about a recap plan.

There is an increasingly shared view that we need a concerted, co-ordinated approach in Europe while many of the elements are done in the member states,” Olli Rehn, European commissioner for economic affairs, told the Financial Times. “

So there you have it the mouth piece of the EU versus an actual Finance Minster.

socratesplus's picture

Amusingly the Spanish Finance Minister came out this morning after the meeting and specifically said the the EU ministers DID NOT talk about a recap plan


I guess they discussed it in the afternoon session...

socratesplus's picture

"Amusingly the Spanish Finance Minister came out this morning after the meeting and specifically said the the EU ministers DID NOT talk about a recap plan"


I guess they discussed it in the afternoon session...

hungarianboy's picture

Well Tyler, you've sum it up as it is! And the thing is the markets will hopefully realize tomorrow that things are indeed as you wrote and then turn south.

RSloane's picture

And the DOW moves to positive territory.

Bastiat's picture

Manic-depressive psycho clownfest.

Thought criminal's picture

All day trading profits erased in 30 minutes on this idiocy... gotta love this market.