Comments on: Are European banks sitting on 16.3 trillion in toxic assets?

By: Mark

Mark — Sun, 22 Feb 2009 10:54:46 +0000

Pretty sure this article was by Ambrose Evans Pritchard.
He has been bang on the money many times, his comment is as good as any in the UK press.

I disagreed with him once when he supported printing to avoid asset price deflation. However the consequences of massive bank failure well?

As a mere carpenter I am not qualified but fractional reserve sucks.

By: Edward Harrison

Edward Harrison — Sun, 15 Feb 2009 15:07:07 +0000

@econophile, egghat is referring to Western European bank exposure to overvalued Eastern European assets. This region is going into Depression. Latvia is already there. And that means asset deflation and credit losses.

This post from Tyler Durden puts things into perspective:
http://zerohedge.blogspot.com/2009/02/glance-at-upcoming-eastern-european.html

Also, here are a number of tags on my site with relevant articles:
http://www.creditwritedowns.com/tag/austria
http://www.creditwritedowns.com/tag/eastern-europe
http://www.creditwritedowns.com/tag/baltics

The long and short is that this will be a big problem in the EU. Back in December, I said the following:

http://www.creditwritedowns.com/2008/12/top-ten-predictions-for-the-2009-global-economy.html

“Eastern European loans – Countries like Ukraine, Hungary, Latvia, Estonia and Poland are going to see major downturns. Unfortunately, this will mean currency weakness. That has a major impact on debtors in those countries as they have borrowed in Euros (much like Icelanders had). Combine the currency impact with recession and you have the makings of a debt crisis. The banks loaning Eastern European corporates and homeowners these funds are situated in countries like Austria, Germany, Denmark, and Sweden. Therefore, expect to see significant writedowns at major European institutions as these loans sour. Will this be Europe’s equivalent of the Latin American debt crisis of the 1980s. Yes.”

I am still very much of that view.

By: egghat

egghat — Sun, 15 Feb 2009 14:22:03 +0000

@econophile

Completly unclear. “impaires assets”. MBS, CDOs from the US, bonds from Eastern Europe, etc. pp.

I’ve read somewhere in the last few days that in Lithuania (or one of the other baltic contries formerly known as “baltic tigers” …) around 80% of all real estate in the last years has been financed in foreign currencies (which in most cases means in Euro). And all these stuff sits in the books of the European banks now. Deutsche Bank, Unicredito and all the Austrian banks should have hundred of billions of this stuff in their books.

By: Econophile

Econophile — Sat, 14 Feb 2009 21:34:28 +0000

Whar kind of toxic assets? I know that they have a lot of debt from emerging economies on their books that looks as if they will default.

By: egghat

egghat — Sat, 14 Feb 2009 21:05:13 +0000

I can confirm, that the original text contained the number 16.3 trillion pounds. You can find an other copy of the original Telegraph text in the comments in a German blog where I found the story.

http://rebellmarkt.blogger.de/stories/1335056/#comments

Btw, there is a second article at the Telegraph which seems th reference the same EU paper.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/4593539/European-banks-toxic-debts-risk-overwhelming-EU-governments.html

This article mentions that the EU exposure ist 75% of the exposure of the US. Well that would account to =16.3/0.75*1.4 trillion Dollar for the US …

Time to say good night …