ThaBigP
09-21-2011, 02:39 PM
http://www.bloomberg.com/news/2011-09-21/imf-sees-410-billion-credit-risk-to-europe-banks-as-it-urges-more-capital.html
The European debt crisis has generated as much as 300 billion euros ($410 billion) in credit risk for European banks, the International Monetary Fund said, calling for capital injections to reassure investors and support lending.
Political squabbling in Europe over ways to fight contagion and delays in implementing agreed measures are raising concerns about the risk of defaults by governments, the IMF said. Banks in turn face “funding challenges” because of investor concern about their potential losses from government bonds they hold, with some relying heavily on the European Central Bank for liquidity, it said.
THIS is why I dismiss the notion the swaps (http://renegaderadio.net/rocks/showthread.php?30-Fed-to-print-quot-unlimited-amount-quot-of-US-dollars-to-give-to-Europe) are "risk free!". NOTHING that bears counterparty risk is "risk free". The Fed prints money and hands it to the ECB in exchange for Euros, so the thinking goes. The ECB then is obligated to repay the Fed in dollars. But in the meantime, and the very reason behind the swaps, the ECB hands those dollars over to the shaky banks you see and read about above. Who in turn then owe the ECB. And if those banks turn out to be as shaky as the markets fear, and tank in spite of the injection of dollars (or they survive, but only by paying those dollars out to make good on obligations, and therefore cannot repay the ECB with dollars), then the Euros the Fed holds as collateral also tank. And the ECB cannot repay the dollars. Further, the EU would likely break up, making its currency just as valuable as Confederate money today - merely as a historical novelty. What could possibly go wrong? It's risk free, dont'cha see!?
The European debt crisis has generated as much as 300 billion euros ($410 billion) in credit risk for European banks, the International Monetary Fund said, calling for capital injections to reassure investors and support lending.
Political squabbling in Europe over ways to fight contagion and delays in implementing agreed measures are raising concerns about the risk of defaults by governments, the IMF said. Banks in turn face “funding challenges” because of investor concern about their potential losses from government bonds they hold, with some relying heavily on the European Central Bank for liquidity, it said.
THIS is why I dismiss the notion the swaps (http://renegaderadio.net/rocks/showthread.php?30-Fed-to-print-quot-unlimited-amount-quot-of-US-dollars-to-give-to-Europe) are "risk free!". NOTHING that bears counterparty risk is "risk free". The Fed prints money and hands it to the ECB in exchange for Euros, so the thinking goes. The ECB then is obligated to repay the Fed in dollars. But in the meantime, and the very reason behind the swaps, the ECB hands those dollars over to the shaky banks you see and read about above. Who in turn then owe the ECB. And if those banks turn out to be as shaky as the markets fear, and tank in spite of the injection of dollars (or they survive, but only by paying those dollars out to make good on obligations, and therefore cannot repay the ECB with dollars), then the Euros the Fed holds as collateral also tank. And the ECB cannot repay the dollars. Further, the EU would likely break up, making its currency just as valuable as Confederate money today - merely as a historical novelty. What could possibly go wrong? It's risk free, dont'cha see!?