Saturday, November 12, 2011

European Situation Getting Worse?

Via Zero Hedge

EFSF had spent more than € 100m buying up its own bonds to help it achieve its funding target after the banks leading the deal were only able to find about €2.7bn of outside demand for the debt.
It looks like the latest bailout scheme, the EFSF, is not going to work.

This is the latest from Maudlin:
[T]here is simply too much sovereign debt in Greece, Ireland, Spain, Italy, Portugal, and Belgium. That is not news. What has yet to be absorbed by the markets is that the cost of bailouts, present and potential, is likely to be in the €3 trillion range...

European regulators allowed their banks to leverage up to 450 to 1 on their capital, on the theory that sovereign nations in an enlightened Europe could not default, and therefore no reserves need to be kept for “investing” in government debt. And with those rules, banks borrowed massively and invested it in government debt, making the spread.
Wouldn't want to buy a noncumulative preferred in any of those banks...

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