Thursday, August 02, 2007

IKB Update: Concerted Emergency Bailout Including Every Major German Bank & State Owned KfW Guaranteeing Over $ 11 Billion

Wow! It is even worse than i thought. Now Germany has officially its own Plunge Protection Team ( I think this "rescue mission" qualifies for the term "PPT" ) .......

Please make sure to read my initial IKB post . I have no other word than "bu...sh...t" to describe how scandalous this bailout is ( doesn´t matter how big the real fallout will be )

This could have been the German New Century or American Home Mortgage . ....

Dank an Hartgeld

Donnerwetter! Das ganze ist noch schlimmer als ich es eh vermutet habe. .... Ihr solltet dazu bitte mein ursprüngliches Posting zu IKB lesen.

Sieht so aus als wenn jetzt auch Deutschland ein eigenes Plunge Protection Team ( denke hier trifft die Bezeichnung wirklich zu...) hat. Das jetzt der Steuerzahler für diese Fehlspekulation aufkommen muß ist nichts anderes als skandalös (unabhangig davon wie groß der tatsächliche Schaden letztendlich sein wird).

Das hätte die deutsche New Century oder American Home Mortgage sein können....

The IKB crisis is far more sever than initially thought. On top of the state owned KfW that is also the major shareholder with 38 percent several private banks have also stepped up to bail the IKB out.

Die Krise der IKB Deutsche Industriebank ist weit dramatischer als bislang angenommen. Neben der staatlichen Förderbank KfW, die 38 Prozent an der IKB hält, machen auch Privatbanken bei einer Stützungsaktion für das Mittelstandsinstitut mit.

According to the Financial Times Germany Deutsche Bank, Commerzbank and several other private banks are now guaranteeing € 3.5 billion to step in for potential losses that are threatening the IKB entities Rhineland & Rhine Bridge Funding. Another 15 percent are taken on from the public sector called "Sparkassen" and from the cooperative banking sector. The KfW is on the hook for the rest up to € 8.1 billion!

Die IKB hatte sich mit schlecht abgesicherten US-Immobilienkrediten ("Subprime") verspekuliert. Nach Financial Times Deutschland-Informationen beteiligen sich Deutsche Bank, Commerzbank und weitere private Institute mit 15 Prozent an einer 3,5 Mrd. Euro hohen Risikoabschirmung für drohende Verluste der IKB-Fonds Rhineland Funding und Rhine Bridge. Weitere 15 Prozent sollen Sparkassen und Landesbanken, Genossenschafts- sowie Förderbanken stemmen. Den Rest trage die KfW, die zudem mit 8,1 Mrd. Euro für die IKB bürgt.
That all 3 major sectors ( that are usually fighting each other) in the German banking sector are teaming up shows how severe the crisis is. Our "Hank Paulson" Steinbrück has initiated a conference call including all major players to convince them to participate.

Dass sich alle drei Säulen des Bankensystems - private, öffentlich-rechtliche und genossenschaftliche Institute - an der Rettung der IKB beteiligen, verdeutlicht die Brisanz der Krise. Initiiert wurde die Hilfsaktion von Bundesfinanzminister Peer Steinbrück (SPD), der auch Verwaltungsratschef der KfW ist. Er hatte die Spitzen der Kreditwirtschaft - darunter Deutsche-Bank-Chef Josef Ackermann - am Sonntag per Telefonkonferenz auf die Rettung der IKB eingeschworen.

> Stock down another 15% to 14 €, still 14€ too high

> Diese Aktie müßte normalerweise ein Pennystock sein, heute bei 14€

In this call the head of the banking oversight BaFin has warned that this could lead to the greatest banking crisis since 1931. The entire German banking stability is at risk!

In der Sitzung habe Jochen Sanio, Chef der Finanzaufsicht BaFin, sogar vor der größten Bankenkrise seit 1931 gewarnt, hieß es von Teilnehmern. Eine Pleite wäre die größte einer deutschen Bank seit dem Kollaps der Herstatt-Bank 1974 gewesen. Es gehe bei der Stützungsaktion "um die Stabilität des deutschen Finanzmarkts", so der Bundesverband deutscher Banken. ....

got Gold.....?

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15 Comments:

Anonymous okaycuckoo said...

Wow. How will Britain cope when the same type of thing happens?

I enjoy this blog, but I don't comment much because I'm learning.

It's great that you post a couple of times a day. So, thanks.

2:46 AM  
Blogger jmf said...

Moin,

thanks for the kind words.

I´m also still learning.

This IKB story is the best example to always think outside the box and don´t let you fool from ceo´s anaylsts and the media that just 10 days ago said that everthing is fine...

3:03 AM  
Anonymous Anonymous said...

Jmf,

A government bailout, has to be justified by a threat to the system since otherwise it would represent a subsidy to one "private" company over another, one "sector" over another, one pressure group over another and since they are drawing on public funds which make it a political issue. In this case as shareholder there might be losses to govt. via KFW anyway, but that loss would exert discipline via a different mechanism.

The systemic crisis hyperbole over IKB should be interpreted as the free market in political ideas Cover Your Ass PR that they are, until we are allowed to see the numbers.

In this case it appears that the scare story has pushed (is cover for) some private banks participation thus covering the single firm, shareholder vs. taxpayer bailout scenario. (It may be that Rhineland distributed some paper to these players. Are they getting a stake or high interest rate?)

Mmmm maybe some interesting politics ahead here.


Hysterical?? Sanio 1931?? He wasn't in short pants.... Thsi one is a quiet one "BaFin's Sanio to take part at WestLB special board meeting" http://www.abcmoney.co.uk/news/262007109076.htm

"When it comes to a banking crisis in a European country" says Germany's new top financial supervisor Jochen Sanio, "finance ministers and not the European Central Bank must have the ultimate responsibility because its taxpayers' money that may have to be committed. Therefore, I can only see financial supervision structures that are independent from central banks to do the job in crisis prevention and crisis resolution." Or, as Sanio says, "The ECB won't have to pay if a financial institution fails in the eurozone. Who pays should also have the say."

Mmmmmmm


http://findarticles.com/p/articles/mi_m2633/is_3_16/ai_89816203/pg_1

3:09 AM  
Blogger jmf said...

Moin,

great comment.

The EU is already investigating if this was legal or an illegal subsidy

The government says (of course) that was legal because some private banks are also involved.....

3:20 AM  
Blogger jmf said...

I wanted to add that Steinbrück / Treasury Secretary is also head of the KfW board.....

3:35 AM  
Anonymous Anonymous said...

Its interesting, IKB see themselves as expert in securitisation based on various Mstand products, and were extending advice, trading platform??, distribution?? to Rhineland

This paper (bit dense, explores the difference from rating/risk perspective of risks between mortgage housing based derivs and corp based)

http://www.hudson.org/files/publications/Mason_RosnerFeb15Event.pdf

4:55 AM  
Anonymous Anonymous said...

jmf,

Do you have more info on this:

"In this call the head of the banking oversight BaFin has warned that this could lead to the greatest banking crisis since 1931. The entire German banking stability is at risk!"

...perhaps the exact quote or a transcript of the call? That's quite a provocative statement! Whas it Sanio that said it? Any links to that comment being reported in the news?

R

4:58 AM  
Blogger jmf said...

Moin R,

there are several links that point to the link i used from the Financial Times Deutschland.

So unfortunatley there is no "official" link.

Here is another funny fact....

The news sent its shares plunging and prompted KfW, the state-owned development bank, to step in with a pledge to guarantee obligations of more than €8bn ($10.9bn) – more than five times IKB's stock-market value.

Stock down now 40% close to 10 €

5:12 AM  
Blogger jmf said...


IKB subprime gamble shows how black the box is

8:03 AM  
Anonymous Anonymous said...

jmf,

Since you are the proud new owner of said IKB (or should be) don't you want to kick the tyres and look under the hood??

Someone ought to..

11:38 AM  
Blogger Edgar said...

Hi jmf! I have said this many times before, the big banks never lose. They always get a bailout, or the same people start a new bank. They own the government, and money costs them nothing, no sweat, no effort, no problems. I'm sorry that you had to find out this way that your home country is as corrupt as mine.

8:10 PM  
Anonymous Anonymous said...

Haetten verschiedene IKB Manager nur "immobilienblasen.blogspot.com" besucht...

10:43 AM  
Anonymous j.r. said...

Sanio and the BAFIN should have prevented IKB from running a 20bn off blance sheet vehicle in the first place. now they're trying to cover up their mistakes with taxpayes money.

Everyone in the industry knew about the regulatory loophole with the 360 day liquidity lines.

3:01 PM  
Anonymous the cds trader said...

j.r.

very well put. many banks across the world are running "off-balance-sheet" vehicles, whereby they set up a vehicle, buy a ton of cr*p assets with high interest rates, issue bonds in the cp market that mature within a year, and provide a liquidity line to their own vehicle that can be drawn down upon if they can't roll over the CP. the liquidity lines are structured as 364 day revolvers, and since they are under 1 year are 0% risk-weighted (which means the bank sets ZERO capital aside against that line). SO, THEY BANK BASICALLY TAKES ALL THE RISK TO THE ASSETS IN THE IPV, CLIPS THE HIGH INTEREST RATE WHILST FUNDING CHEAPLY IN THE COMMERCIAL PAPER MARKET, BUT WHEN THE SHIT HITS THE FAN IT IS ACTUALLY THEM HOLDING THE RISK TO ALL ASSETS IN THE VEHICLE, DESPITE THEM HAVING PUT NO CAPITAL ASIDE AGAINST THOSE RISKS. the regulators know exactly what the banks have been and still are up to, but seem to have turned a blind eye to it. this is not the last you will hear of this story, other banks have been doing the same thing (although IKB seems to have been very big in these vehicles considering the size of the bank).

and by the way, investment banks make a LOT of money selling "toxic waste" to these vehicles...everyone is in on the gag, and taxpayers bail it out...nice!

11:55 PM  
Blogger John Harry said...

Banking News Update A Complete Banking Guide

5:54 AM  

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