Sunday, October 5, 2008

Rescue of Hypo

Germany has come up with 68 billion euros in an 11th-hour rescue of Hypo Real Estate.

No Euro T-Bill Equivalent a Problem

From Tyler Cowen:

Other news is that the German government-led bank consortium to rescue Hypo Bank has fallen apart, not a good sign. The German government has today moved to guarantee all "private savings deposits" [private Sparanlagen], also not a good sign. Which other countries will now follow suit? All of them? Europe as a whole lacks a safe asset as focal, liquid, and available as T-Bills and now that is becoming a problem.

Free Journal On-Line

The journal Pouvoirs: Revue française d'études constitutionnelles et politiques is now available on-line. (h/t Science politique en ligne).

Eating Iran for Lunch

It seems that Bernard Kouchner, speaking in English to the Israeli paper Haaretz, misspoke: he intended to say that Israel might "hit" Iran, but the interviewer heard him say that Israel might "eat" Iran. A war of words then erupted over this warping of words.

Perhaps Kouchner should do an ad for Wheaties: "Hit your Wheaties, kids!"

Two Europes

The Times:

Though they did not agree on a broad bailout along the lines of the $700 billion package that President Bush signed into law on Friday, the leaders of France, Germany, Britain and Italy pledged to prevent a bankruptcy on this side of the Atlantic like the one that brought down the Lehman Brothers investment bank in New York.

Yves Smith:

Hypo Real Estate, Germany's second largest real estate lender, teeters on the verge of collapse. The bank has a €400 billion balance sheet, which would make for a failure of a similar scale to Lehman's (Hypo's footings are roughly $550 billion, while Lehman's were $660 billion as of its last balance sheet date).

Although a private deal seemed to have been put together last week to save Hypo, it fell apart yesterday. Smith, who, it should be noted, is among the more consistently pessimistic commentators on the crisis, along with Nouriel Roubini, sees the end of the euro if Hypo goes down. Here's a French take.