An American Crisis? European Anglo-Dutch Banking System Collapses
Lydon LaRouche
September 30, 2008 (LPAC)-- The European Anglo-Dutch banking system is collapsing at breakneck speed. The news of the failure of the U.S. House of Representatives to pass the "cash for trash" bailout plan of Treasury Secretary Hank Paulson sent shock waves through European markets, where all money market lending is freezing up--as in the U.S.--and the ECB is desperately pumping liquidity to see what they can keep afloat. The British pound lost 3 cents to the dollar, the largest drop in 15 years.
The Franco-Belgian Dexia bank, France's and Belgium's main lender to local, regional and state governments, was given an urgent 6.4 billion Euros (9.2 billion dollars) capital injection early this morning, to stop it from going belly up. Dexia is facing serious losses from FSA, its U.S.-based monoliner, which lost 20% in trading on Monday. Of the FSA's total exposure of $17.3 billion, $7.6 billion are subprime-based unsellable mortgage-backed securities (MBS). The bailout came from the Belgian, Luxembourg and French governments. France ponied up nearly half, 3 billion Euros, including 1 billion from the French government and 2 billion from the French co-owner of the bank, the public Caisse des Depots et des Consignations (CDC).
The Irish Banking system, which has served as a City of London offshore banking center, is also on the verge of imploding, with bank shares collapsing on Monday an average of 26 percent. The Anglo-Irish Bank, the country's third largest, led the way with a 44 percent drop, according to the Daily Telegraph. In anticipation of this implosion, the Irish government announced it will guarantee Irish Bank deposits and debts for two years. This will cover the country's major banks, including Allied Irish Bank, Bank of Ireland, Anglo Irish Bank, Irish Life and Permanent, Irish Nationwide building society and Educational Building Society. It's safe to assume that all of them are in trouble.
It should be noted that the 26.5 billion Euro (about $40 billion) bailout of Hypo Real Estate by the German government will not be going to that bank's Munich headquarters, but to DEPFA, its Dublin, Ireland based subsidiary, where most of their toxic waste is housed. This is headline news in the mass circulation German daily Bildzeitung, as well as other dailies which report that the government bailout accounts for no less than 10 percent the FY 2008 budget.
Another big story today is the government of Iceland's takeover of Glitnir bank with a 600 million Euro (about $1 billion) bailout. This is in a tiny country whose only exports are wool sweaters, but which has become what the Guardian calls a "toxic hedge fund for British and Scandinavian banks." The Glitnir collapse follows the fact that its chief shareholder, Stodir, just filed for bankruptcy. The latter has been up to its ears in deals in London, including the take-over of retailer House of Fraser and Hamley's owner Baugir.