LOL Europe – Dexia Tries to Ringfence Their Pile of Crap

It wasn’t long ago that I last wrote about the Guaranteed Box of Crap solutions that will be floating around in Europe – in fact, it was this morning.  Today’s NY Times Dealbook article on Dexia – the Franco-Belgian bank of the hour – reads like a satire from The Onion:

“Dexia, which received a joint bailout of 6.4 billion euros ($8.4 billion) in 2008, had just received a clean bill of health on July 15 after the European Banking Authority’s latest round of stress tests.”

Of course, we never really fixed anything back in 2008, and now the can that we kicked has come rolling back down the hill.   Hey European Banking Authority – bang up job on those stress tests a few months ago!  Talk about a guaranteed box of crap… Jeezus.

Now, they’ll try the patented “Good bank / bad bank” solution – also known as the “ring-fence all the stuff no one wants” or “shovel the crap into the corner and put a tarp over it” solutions (tarp – see – pun intended).

““We have to put all of the dangerous parts outside of the bank,” Reuters cited {Belgian Finance minister} Mr. Reynders as telling RTL television. “It is here where the state guarantee will come into play, it’s what we call a ‘bad bank’, and then give the customers the guarantee, whether they are depositors or customers asking for credit.”

Imagine that you have a big German Shepherd, we’ll pretend his name is Greeko.  Greeko spends a few years going to the bathroom on your living room floor – rotting the floorboards and leaving turds everywhere.  The living room floor is about to collapse into the basement and make your house uninhabitable.  How do you solve the problem?  First you try to put a rug over it – aka – the European Banking Authority Stress Test – but that doesn’t fool anybody.   So now you decide to put up a little baby gate at the entrance to the living room – it’s now the “bad room.”  “Don’t worry,” you tell prospective homebuyers, “the rest of the house is totally fine – I GUARANTEE it.”

If only…

-KD

disclosure: I have no positions in Dexia, but I do have two Brussels Griffons, whose roots are from Belgium.

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