Tuesday, September 13, 2011

EZ Crisis Spreads to French Banks

U.S. money markets have stopped buying French bank paper. The French banks are denying it, but Nicolas Lecaussin, director of development at France's Institute for Economic and Fiscal Research, wrote today in the professional edition of WSJ:

"We can no longer borrow dollars. U.S. money-market funds are not lending to us anymore," a bank executive for BNP Paribas, who declines to be named, told me last week. "Since we don't have access to dollars anymore, we're creating a market in euros. This is a first. . . . we hope it will work, otherwise the downward spiral will be hell. We will no longer be trusted at all and no one will lend to us anymore."

He's not the only one worried. Société Générale has lost 22.5% of its value since the beginning of the summer. In early September, BNP released a statement—in English, which is highly unusual—explaining that it has abundant dollar liquidity and that BNP has nothing to worry about, unlike other banks. France's three biggest banks have been the subject of whisper campaigns about their solvency throughout the summer.

On the surface at least, the concerns are hardly groundless. BNP, Société Générale and Crédit Agricole together hold nearly $57 billion in Greek sovereign and private debt, versus $34 billion held by the largest German banks and $14 billion at British banks. And then there is Spain and Italy. French banks held more than €140 billion in total Spanish debt and almost €400 billion in Italian debt as of December, according to the latest figures from the Bank for International Settlements. If either of these governments were to default on their debts, their banking systems could collapse and take the French system along with them. BNP, Société Générale and Credit Agricole all say that their finances are in order and the market worries are unfounded.

But it's difficult for the BNP executive to hide his concern. "Look at the French banks' debt holdings versus those of U.S. banks," he continues. "The total debt of the three big U.S. banks (Bank of America, JP Morgan and Citigroup) is $5.86 trillion, or 39% of GDP, while the debts of BNP, Crédit Agricole and Société Générale come to €4.7 trillion, or 250% of French GDP."
Lecaussin goes on to say that the French  government is set to start nationalizing France's banks. This would be a neat trick, since France doesn't have a central bank of its own, given that it is part of the eurozone. How are they going to finance the takeovers and back up the banks liabilities? Through taxes? Huh.

It may just come down, like Greece , Portugal and Italy, that France is rescued by the EZ only when German Chancellor Angela Merkel is willing to lend a hand.



Angela Merkel, she decides who is rescued and when.


8 comments:

  1. Was this article about economics or cleavage.

    (Sorry, I AM a man, after all...)

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  2. Sounds like it's time for more secret agent man Bernanke currency swaps....all "off the books" of course.

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  3. Actually cleavage in currency markets. France looking for augmentation services courtesy of EZ. Will use taxation but risk triggering another French Revolution. Don't be distracted by the low cut rates: there is something pushing up the cleavage and it's a wire and tape.

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  4. I can't help recalling that the recession of 1929 became the Great Depression in 1931 when a major Austrian bank collapsed. Is it the French this time who are going to take us into the Greatest Depression?

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  5. Thanks Bob. Now I have an image of Angela's boobs fried into my retinas.

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  6. Instead of stealing money from people who earned it and placing a government tit in the voting parasite's mouths...She can just use her own.

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  7. Merkel, please...You're WAY too old to be showing that much cleavage. Instead, show a little back bone and tell Greece where to stick it.

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