Is this all they can come up with?


[Skip to the end]

Europe adds to Bank Plans in Bid to Blunt Likely Recession

By David Gauthier-Villars and Leila Abboud in Paris, Sara Schaefer Munoz in London, and Mike Esterl in Frankfurt

Some European governments are looking at going beyond government aid to banks to help businesses, in an effort to inject money directly into the economy as lending remains stagnant and a continent-wide recession looms.

Italy’s government said Tuesday it was working on a package of economic-stimulus measures that could include guaranteeing corporate debt, a move that could give distressed Italian companies a new advantage over rivals elsewhere — and if enacted could set off a new round of cross-border competition, or complaints, about national aid.

Sounds highly inflationary, if the Italian guarantee is worth anything in the credit markets.

French President Nicolas Sarkozy called for the creation of sovereign-wealth funds to defend big companies from being bought up by non-Europeans at bargain prices, and proposed an “economic government” to coordinate euro-zone economic policy.

Also sounds highly inflationary as well as operationally problematic.

No talk of giving the euro parliament the fiscal authority to (deficit) spend their way out of the mess they have created.


[top]

VCP proposal for bankers


[Skip to the end]

Here’s my proposal for banks that are presumably capital constrained:

Offer borrowers a package deal:

The borrower agrees to buy new bank VCP (variably convertible preferred) stock equal to, say, 10% of their proposed borrowings. This creates ‘balance sheet’ for the bank which then has the new ‘room’ to make the loan and then some. (Banks generally have 8% target capital ratios.)

The VCP functions as a ‘first loss piece’ for the bank as well.

Terms of the VCP might include an interest rate equal to the loan rate, and a variable conversion ratio designed to give the borrower all his funds back if he doesn’t default.

The VCP non-dilutive to the holders of common shares.

This VCP proposal can free up and create new balance sheet and raise capital as it services borrowing desires.

Feel free to forward this to everyone you know in banking.


[top]

Re: Hungary


[Skip to the end]

(email exchange)

And this only makes it worse:

Hungary Raises Benchmark Rate to Defend its Currency (Update2)

By Balazs Penz and Zoltan Simon

Oct. 22- Hungary’s central bank raised its key interest rate in an emergency measure to shore up the country’s currency, after it fell to near a record against the euro.

The Magyar Nemzeti Bank in Budapest raised the two-week deposit rate today to 11.5 percent, the highest since July 2004, from 8.5 percent, it said in an e-mailed statement. The move came two days after the bank left rates unchanged at its regular meeting. The last emergency rate increase was in 2003.

Governments are net payers of interest, so raising rates adds to governments spending on interest and raises costs of doing business and costs of investments- all ‘inflationary biases’ that further weaken the currency.

And a weaker euro (just saw it at about 129) means unrealized dollar losses across the Eurozone grow as a percentage of (eurodenominated) capital, pushing the banking system and the national governments pledged to support it towards insolvency.

>   
>   On Wed, Oct 22, 2008 at 3:08 AM, wrote:
>   
>   I wonder whether this will prove a tipping point for the euro:
>   The willingness of the ECB to “bail out” a country that is not
>   yet member of the Eurozone is quite significant and signals the
>   concerns that EMU members now have about the disruptive
>   effects of a crisis in Hungary. Of course, they can do it now
>   that the have the sub-underwriter of last resort in the Fed.
>   Also, the ECB liquidity support, unlike IMF conditionality loans,
>   does not come with any attached string. The additional issues
>   that the ECB action has caused are however important: if 5
>   billion is not enough if the financial pressures intensify would
>   the ECB lend more? Will the ECB do similar swaps with other
>   Emerging Europe economies that are likely candidates – in the
>   next few year – for EMU membership? Also should Hungary now
>   use this additional international liquidity to prevent a further
>   depreciation of its currency or should it save this additional
>   ammunition in case things get worse?
>   


[top]

2008-10-22 USER


[Skip to the end]


MBA Mortgage Applications (Oct 17)

Survey n/a
Actual -16.6%
Prior 5.1%
Revised n/a

[top][end]

MBA Purchasing Applications (Oct 17)

Survey n/a
Actual 279.30
Prior 313.50
Revised n/a

 
Looks like a cycle low, as scared consumers dig in.

[top][end]

MBA Refinancing Applications (Oct 17)

Survey n/a
Actual 1158.80
Prior 1514.20
Revised n/a

[top][end]

MBA TABLE 1 (Oct 17)

[top][end]

MBA TABLE 2 (Oct 17)

[top][end]

MBA TABLE 3 (Oct 17)

[top][end]

MBA TABLE 4 (Oct 17)


[top]