Monday, February 11, 2008

ECB To The Rescue....... Bubble World Tour : Spain

No wonder why gold is shining...... I suggest to read ECB A Dumping Ground for Financial Toxic Waste from Lee Adler and especially to watch the video to understand that this kind of collateral is indeed way too often "toxic".....

Kein Wunder das Gold sich trotz zwischenzeitiger $ Stärke weiter gen Norden stürmt..... Ich empfehle zudem noch ECB A Dumping Ground for Financial Toxic Waste von Lee Adler zu lesen sowie zwingend den Clip anzusehen. Sieht so aus als wenn diese Hypotheken zum Teil jetzt bei der EZB lagern......

Spanish banks' reliance on ECB funding surges FT
The European Central Bank has in effect funded new lending in Spain in recent months, replacing banks' use of wholesale capital markets, which have been strangled by the global credit crunch.

Spanish banks doubled their share of the ECB's weekly funding auctions in the final quarter of last year, taking their borrowing up to €44bn ($64bn) in December from a running average of about €20bn over the previous 15 months, according to the most recent data from the Bank of Spain.

This extra lending of almost €24bn outstrips the quarterly amounts raised previously by Spanish banks from securitisation markets, which is an important comparison because the banks have increasingly used mainly mortgage-backed securities as collateral with the ECB.

The market for securitised debt and for mortgage-backed bonds in particular has been almost entirely shut since the credit crunch hit last summer and investors began shunning all kinds of complex, structured debt.

The Spanish banking system is second only to the UK in Europe in its use of mortgage-backed bond markets and other securitisations to fund lending.

However, the Bank of England did not accept mortgage-backed debt as collateral in similar lending operations until after the run on Northern Rock.

Jean-Claude Trichet, president of the ECB, last week insisted the central bank had not been bailing out banks in Spain, but said that there had been a marked increase use of securitised bonds as collateral by Spanish banks and others.

Bank of England lending to UK banks grew by about £6.2bn over the same period, but there is no data on the collateral used. In the US, the Federal Home Loan Bank has pumped $750bn into the system by extending longer-term funding direct to mortgage lenders, such as Countrywide.

The big difference is that European banks must re-raise this funding every week and the mortgage- backed bonds pledged at the ECB eventually will have to find their way to the capital markets, which many analysts believe could mean that markets such as Spain are potentially storing up problems for the future.

While markets for securitised debt remain closed, it is difficult to put a price on European mortgage-backed securities and banks in the region can be much slower to mark down the value of holdings of such bonds. By accepting them in exchange for cash, the ECB may be delaying the repricing of risk that analysts believe is necessary for the orderly resumption markets in such debt.

"The credit markets have been on heroine and while the US solution is put them through cold turkey, the Europeans want to put them on methadone," said one London-based economist.

> Toro has some more thoughts & data on spain

> Toro hat noch weitere Gedanken und Detail zum Thema Spanien

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Anonymous eh said...

Spain nicely shows how recent EU expansion makes little sense: it is still a big cash drain on the EU budget. And now its banks have to rely on the ECB. Super. And despite this even more marginal nations/economies were added to the EU in 2005.

But citizens of the major EU paying nations -- zB Deutschland -- seem to accept the situation. Sometimes I wonder who these politicians really represent; it does not seem to be their own citizens, as they seem to pursue policies that are financially harmful to them. I guess the idea is that one day people in Spain, Greece, Portugal, Ireland, and now Poland usw will be wealthy enough to buy BMWs. Somehow I doubt it...

12:44 AM  
Blogger jmf said...

Moin Eh,


It will be interesting to see how the ECB with all the regional voting members will react to the slump in their country......

Just another reason to like gold.... The case against fiat currencies is growing day by day....

Have you seen the AIG news yesterday? Important to notice that the market didn´t sell off....

I´m just listening to the Credit Suisse call. Excellent....On a relatively basis ...... :-)

2:45 AM  
Anonymous eh said...


Important to notice that the market didn´t sell off....

Yes, the markets are rather dangerous right now, IMO. Many companies and even whole sectors are not trading on fundamentals and/or expected news flow. Homebuilders, zB. Hard to know what to make of it, or how to play it. Which is of course what makes trading interesting and challenging; I just wish it was a little less of the latter.

Of course the further along we are in the crisis the nearer we are to the end of it, presumably, and this motivates bargain hunters who I guess see the risk as reasonable, i.e. compared to what they can get for their cash. One explanation for the 'bad news is good news' phenomenon we see so often now. Also the numerous rumored bailouts and government interventions.

3:40 AM  
Anonymous eh said...

Bezüglich das Video: 1900€ netto monatlich (für 2 Personen!), und eine Hypothek in Höhe von 200k euro. Wahnsinn pur.

4:23 AM  
Blogger jmf said...

Mahlzeit Eh,

"One explanation for the 'bad news is good news' phenomenon we see so often now. Also the numerous rumored bailouts and government interventions."

Yup. We have seen this is in the past.... It´s good for a few weeks until gravity / fundamentals are coming to play

The couple in the video ist selber schuld....

4:42 AM  
Anonymous eh said...

From the 'you have to read it to believe it' department:

The Doyles took advantage of the housing boom by refinancing their home nearly every year since they bought it in 1995 for $275,000. Until their most recent loan they never had a problem making their payments. They invested much of the money in shares of companies that subsequently went bankrupt...Still, Mr. Doyle does not regret refinancing in 2004. “My goal was clear: I wanted to help my daughter go through college,” he said. “It wasn’t like it was for us.”

Yes, I would say these people deserve a bailout.

4:44 AM  
Blogger jmf said...



IndyMac Posts $509.1 Million Loss as U.S. Housing Slump Deepens

IndyMac Bancorp Inc., the second- biggest independent U.S. mortgage company, posted a fourth- quarter loss as the housing slump continued into its third year and said it was suspending its dividend ``indefinitely.''

The net loss was $509.1 million, or $6.43 a share, compared with a profit of $72.2 million, or 97 cents a share, in the year-earlier period, the company said today in a statement. The average estimate of seven analysts surveyed by Bloomberg was a loss of $1.57 a share.

I remember listening to calls from Indymac 12 month ago....

Pure incompetence from analysts and management ( as usual...)

4:53 AM  
Anonymous Barley said...

Lets all reflect on the BoE and the fact that they have shored up Northern Rock. The taxpayers are now on the hook for other peoples business decisions.

This might work out well for Spain as it is the only country that allows a developer to expropriate land from owners (in the national interest, of course) and so I might assume that once debts become due a big hairy Spanish middle finger will be shoved in the noses of all EU members.

Good luck with that paying EU members.

7:51 AM  
Blogger jmf said...

Moin Barley,

it´s a house of cards.

The "moral hazard" question should be making headlines on a daily basis.

But unfortunately the "cartel" ( politicians, bankers, central bankers, insurance companies etc) is way too powerful.

I have "adjusted" to this kind of behavior in buying gold and miners.

Otherwise i would have gone mad on a daily basis....

10:10 PM  

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