BERLIN -- Germany intensified efforts to stabilize its banking sector, approving a draft law Wednesday allowing forced nationalizations, a move aimed at taking control of mortgage financier Hypo Real Estate Holding AG as a last resort. Even though the bill allows for a nationalization of Hypo, the government said it would do so only if it had no choice. Shares in Hypo soared 47% in Frankfurt as the government's move eased investor worries about a forced nationalization or expropriation of shareholders. The stock has fallen more than 90% in the past year, valuing the company at about â¬344 million ($434 million). Hypo has received â¬102 billion in loans and guarantees from the state and other banks since the collapse of U.S. investment bank Lehman Brothers Holdings Inc. in September. The resulting paralysis in trans-Atlantic capital markets left Hypo's Dublin subsidiary, Depfa Bank PLC, without enough funds to repay its debts. Hypo's fate is complicated by the fact that U.S. private-equity firm J.C. Flowers & Co. holds about a quarter of the lender. German Finance Minister Peer Steinbrück told reporters Wednesday that talks with Flowers continue. A spokesman for Flowers couldn't be reached for comment. http://online.wsj.com/article/SB123494838647509021.html
tell me something. why are german banks and banks all over europe in this much trouble when it's u.s. morgages that are defaulting? did all these banks buy into the u.s. cdos and credit derivatives?
German banks bought into everything they could get their hands on, driven by greed: US mortgage debt, collateralized debt obligations, leveraged buyout debt and corporate junk debt in Eastern and Central Europe. The ironic thing is there was next to nil net house price appreciation in Germany in the last 20 years, factoring out inflation; Germans lived (relatively) modest and within their means. However, German banks financed the debt craze in the US and Eastern Europe. Now the German tax payers cover the losses. Nice.