German parliament approves "bad bank" plan

Discussion in 'Wall St. News' started by ASusilovic, Jul 3, 2009.

  1. 3 July 2009 | 21:21 | FOCUS News Agency

    Berlin. Germany’s lower house of parliament, the Bundestag, has passed a bill for the creation of "bad banks" to absorb toxic assets and clean up balance sheets at financial institutions caught up in the financial crisis, Deutsche Welle.

    The bill is essentially aimed at unfreezing credit markets and freeing commercial and state-owned banks of their risky and non-core assets.
    This will be achieved by shifting as much as 230 billion euros ($322 billion) worth of toxic assets held by banks to the so-called bad banks.

    The plan will involve exchanging items such as asset-backed securities and collateralized-debt obligations for state-guaranteed bonds, for which banks will be charged a fee.

    It is hoped the bill can help consolidate Germany's many state-owned banks, the Landesbanken, several of which have been hit hard by the effects of the US subprime mortgage crisis.
    Finance Minister Peer Steinbrueck denied to legislators that the bill effectively meant the taxpayer was picking up the tab for past bank excesses.

    He assailed Germany's savings banks, also known as Sparkassen, which had criticized the bill. He also said the German taxpayer was most at risk from any savings bank losses because those institutions were backed by government guarantees.
  2. Illum


    German bad assets... What are they? Loans to eastern Europe, or are they actually holding American cdos? I think it would be insane if they were putting these debts on the German taxpayer instead of letting the banks fail, if they were shotty American debts.
  3. So now he's saying there could be losses at the level of these regional thrift banks?

    Didn't Steinbrück say just last year how those German Sparkassen (regional state-owned thrift banks) were superior to the "greed-based" anglo-saxon banking system, a "shining example in global banking excellence"? That didn't last long now did it :cool:
  4. Cutten


    Haha. I wonder what he will say about Porsche going cap-in-hand for a bail out from their failed stock-pool corner of VW.