February 17, 2011

Irish banks playing dirty to avoid collapse


It appears from the articles below that Irish banks are getting closer to day of reckon.
I reported in previous posts how the black hole of the Irish debt could amount to thousand times the Irish GDP and how the recent bailout is just a drop in the ocean of hidden debt Irish banks are sitting upon.
Last resort for Irish banks to borrow money and try to stay alive despite the recent acceleration of capital flights from the banks is a traditional Ponzi scheme.
Let's remember that Irish central bank data showed losses of €40bn (£34bn) in deposits from the key banks in December, compared with €27bn a month earlier. Over the past year Irish lenders have haemorrhaged €110bn, equal to 60pc of gross national product.

The Irish Times writes that Irish Banks are issuing billions in bonds to themselves "under the Government guarantee to borrow cheaply from the European Central Bank and to avoid drawing more heavily on emergency lending from the Irish Central Bank. Four banks issued bonds worth €17 billion to themselves last month under the Government’s extended guarantee, the Eligible Liabilities Guarantee, to use as collateral to borrow from the ECB. “What you have here is micro-quantitative easing, or money printing,” said Cathal O’Leary, head of fixed-income sales at NCB Stockbrokers. “The banks are issuing unsecured loans to themselves.” And since this is happening in Ireland, it is most certainly happening everywhere in Europe. And yes - this is the pinnacle of a pyramid scheme - this is about a thousand times worse than what US banks did when they purchased CDO tranches from each other, as the risk in the Irish case is ultimately borne by the European taxpayer.
Furthermore yesterday something strange occurred which is currently being explained a a simple short term "glitch".

Irish Times is reporting that Emergency overnight borrowing from the European Central Bank jumped to a near two-year high, leaving money market traders wondering whether a bank was in trouble or if the spike was down to a simple data input error.
ECB figures showed banks borrowed more than €15 billion in high-cost emergency overnight funding. It is the highest amount since June 2009, compares with the €1.2 billion borrowed the previous night and comes just a day after banks received their regular injection of weekly ECB funding.
Overnight borrowing from the ECB is usually well below €1 billion.
The figures sent jitters through interbank lending markets as dealers tried to determine whether a bank was facing serious funding problems or if it was just a short-term issue.

It seems we have not seen the last on the epic tragedy of the Irish banks, more episodes coming soon..
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