Wednesday, December 14, 2011

Is Commerzbank the first one to go?

According to the FT (December 14) the German government is working on a plan to rescue Germany's second largest commercial bank.  Commerzbank could be the first European institution (after Dexia) to fail.

I wish this was a joke (here), but the reality of Europe's over leveraged banks, and the fact that the $30 trillion Eurobond market has been closed for months, means that all these attempts to keep the boat afloat are now facing increasingly strong storm currents...

As Zero Hedge said this afternoon:

 "the German government has begun preparations for a possible state bail-out of Commerzbank." The plan would be activated if CBK is unable to figure out a way to fill a €5.3 billion shortfall in the next 30 days, which in reality will likely turn out to be far greater when all of the bank's dirty laundry is exposed for all too see. And with German banks by far the most sensitive to any perceived "tipping points", since it is the German state whose job it is to bail out the world's biggest economic block, it becomes obvious why letting doubts appear about the stability of German megabanks would likely not be a "good thing."

This is getting a little too real.  Talking to brokers this morning the overall view is that of a slow moving train reck.  Although it seems to have gathered speed in the last few days... everyone thought that the market was good till January (at least) and maybe even February.  It is widely know that European banks are sucking cash out of all their non-core operations (which means anywhere that is not Europe) for weeks, which partly explained the strength of the Euro (until a few days ago), but I guess that the off-shore coffers are now empty.


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