Comments on: Quelle Surprise! Banks May Be Gaming ECB Liquidity Facility

By: Tom

Tom — Fri, 16 May 2008 16:36:00 +0000

I would bet that Mr Mirsch is correct in terms of the overall credit quality of deals that are being specifically structured for ECB repo – I wouldn’t want to own the first loss. However, everyone seems to forget / ignore that the ECB does not own the first loss: apart from the subordinate tranches, the deals are subject to haircuts based on credit quality. And further, would he prefer to have a (e.g.) Spanish banking crisis on his hands? I can only imagine the bloodbath we would see if funding lines were withdrawn – the only ones wishing for that scenario are hedge funds with net short positions. The bigger problem IMO, is the ECBs ability to control the access to it’s facility. Northern Rock could have accessed the ECB facility if they had bothered to fill in the paperwork at their Dublin office, and as a UK tax payer (and investor in Granite), I would have welcomed ECB support for them .

By: Francois

Francois — Fri, 16 May 2008 14:26:00 +0000

There would be a relatively easy way to get out of this predicament...provided the ECB has the political kahunas to do so. (that qualifies as a big if)

Have a crack team of their analysts examine latest collateral dump on them, identify the worst offender and shut off the spigot.

At the same time, make sure it becomes clear to all other parties involved that yes! this is in retaliation for trying to mess with us. And yes! thou shall be the next on our shit list if you even dare to think we are not serious about that.

Of course, we can think of thousands of reasons why this is not doable, none of them valid IMO. bankers need to understand they are just service providers to the economy, nothing else. If they can't provide the services, or won't abide by this principle, why should they receive any favorable treatment anyway?

But that's just me.

By: Maria Dos Santos

Maria Dos Santos — Fri, 16 May 2008 14:16:00 +0000

I’m a European taxpayer,with a stake in the ECB.Iceland and American banks are stuffing the ECB,as are others.But what really irks,is the propping up of really awful companies in Germany and England via the purchase and hiding of truly dreadful paper.But this propping is being carried out on the “right”people and their companies.This political nepotism has a large democratic deficit attached,M.Trichet should be slashing the cord.

By: Peripheral Visionary

Peripheral Visionary — Fri, 16 May 2008 13:29:00 +0000

There is an exit strategy: it’s not called a “swap” for nothing. All of these alphabet-soup facilities have a built-in expiration, all the central banks need to do is not renew them. It won’t be popular, but it certainly will be possible.

By: eh

eh — Fri, 16 May 2008 12:54:00 +0000

"That means there must be an exit strategy."

Calling Ben Bernanke.

By: Anonymous

Anonymous — Fri, 16 May 2008 11:38:00 +0000

Gee, do you think the Fed cash is being pumped into the commodities markets ?

The whole idea of the CB taking in fraudulent, illiquid securities is rediculous in the first place.

By: Anonymous

Anonymous — Fri, 16 May 2008 09:56:00 +0000

Uh oh… sounds like the tuba player is getting tired and the music might stop… better find an empty chair.

Central banks providing ongoing subsidies? Whocoodanode?!?!?!

Honestly, where do they find central bank leaders so stupid? Have they been inbreeding for thousands of years?

By: Richard Kline

Richard Kline — Fri, 16 May 2008 08:16:00 +0000

The central banks have taken the insolvent banks as partners. The insolvent banks have taken the central banks as suckers. Right now, the insolvent banks are in the money.

The one thing no one wants to take is responsibility for the true scale of the losses in the financialy system which all this massive shifting of assets at the top of the financial system is designed to conceal but cannot mitigate. It’s musical chairs played minus the chairs to the tune of ‘Col. Bogey,’ and when as as the marchers fall out from dehydration they will be shot by vulture capitalists. . . . I’ve got a great sunrise on my lefthand, and a bowl of popcorn on my right hand, and good view from where I’m sitting: Let’s get on with the show.

By: a

Fri, 16 May 2008 07:49:00 +0000

“”That means there must be an exit strategy.”

The exit strategy of the banks is clear: stuff the ECB with the losses.

By: tom a taxpayer

tom a taxpayer — Fri, 16 May 2008 05:52:00 +0000

That’s those naughty foreign bankers. At least we can sleep at night knowing that our Wall Street bankers would never think of pawning fake Rolexs and Gucci bags as collateral to the Fed.