Dexia, a Belgian bank with French interests was intervened today by the French and Belgian authorities with a pledge of support from Luxembourg. No pussy-footing, no messing about. Finis. Good bank, bad bank solution for the institution which has been under pressure for some time as a result, among other things, of it's exposure to Greece.
Now if you asked 100 people on Wall Street,"What is Dexia" you would get about 95 blank looks but it's a pretty big institution and by some measures the largest in Belgium. The interesting thing is that in 2008 Dexia was in deep do-do partly because of its ownership of FSA and mostly because their portfolio was rubbish. In fact, at one point they were into the Fed for, if memory serves, around $60 billion which aint chump change. Well, here they are again and that is the story rather than their failure.
Dexia is symptomatic of what ails Euro banking: after the crash they never got their act together and were not pressed to do so by the banking regulators in each country. Dexia is just the first of what I believe is going to be a severe restructuring of European banking but the good news in this case is that the French and the Belgians moved with great dispatch to put a lid on the situation. Whether that lid stays on over the coming weeks is anybody's guess but it was welcome to see such a quick reaction. Our guys put out a notice today that they are prepared to assist the Euros in any way possible (read, dollar funding) but I suspect that at this stage little will be needed. I have no way of knowing but I suspect that the Euros are running as fast as possible to a Euro book which if things get nasty will put a huge strain on the ECB and it's anti-inflation obsession as they will be putting out Euros to the system as fast as they can be printed.Nobody said it would be easy.
Meanwhile, on this side of the pond, Sen. Richard Durbin of Illinois made one of the stupidist speeches on the floor of the Senate yesterday in a career filled with stupid speeches. You might remember as we noted last week, the "Durbin Admendment" to the Dodd/ Frank monstrosity was the proximate cause of the banks raising fees on dubit cards quite dramatically. Stung by the fact that half the world was blaming him for the banks' actions, he decided that he needed to stike back. Never one to miss an opportunity to kick an man when he is down, Sen. Durbin decided to pick on everybody's favorite target, Bank of America, by forcefully suggesting that everybody doing business with Bank of America just walk right in and withdraw all their deposits.
Now Durbin has never been accused of being the brigest bulb in the room but one would hope that as a member of the Senate Finance Committee he was aware of the James Rule that banks get sick on the asset side but die on the liability side. No such luck. The one great thing about the B of A is that they have the most stable deposit base of probably any bank in the world but up pops this idiot and to deflect attention from his own stupidity he tries to change all that. Anything, ANYTHING that might cause any adverse affect on the liquidity of the system in times like these is pure madness. But with men like this in the highest seats of power is it any wonder that we are in a spot of trouble financially? These jerks are simply not to be believed. As I have said, it's for times like this that the Good Lord made wiskey. Guess where I'm headed.
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