Choice for EU: Bail Out Greece or Bail Out Your Banks!

• Quite obviously the bought and paid for politicians will bailout their masters: the Illuminist banksters! It is all about bailing out the banks and not Main Street. It is about financially raping the sheeple by taking their monies and giving it to the banks! Don’t be taken for a ride! (emphasis mine)
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  Choice for EU: Bail Out Greece or Bail Your Banks
  By ALEN MATTICH, http://online.wsj.com/home-page
  The yield on Greek one-year government bills hit 60% Tuesday.
  Not only does this suggest default is now all but certain and will come soon, it also implies that the terms of the default will be particularly brutal for investors, with recovery rates possibly even lower than the currently anticipated 50%.
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  European governments are being forced to face up to the significance of a Greek default. This is perhaps the underlying message from International Monetary Fund Managing Director Christine Lagarde‘s warning that Europe’s banks “need urgent recapitalization.” She may have been warning about the costly alternative to a solution to the Greek sovereign crisis. But it could well be too late.
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  Finnish insistence on additional collateral against any further bailout loans it makes to Greece threatens to scupper Europe’s rescue vehicle, the European Financial Stability Facility. Without EFSF funds, Greece will almost certainly have no choice but to default on its obligations.
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  And default will damage Europe’s already fragile banks.
  Getting to the nub of their exposure to Greece is tricky. On the face of it, their direct holdings of Greek government debt as a fraction of existing capital is probably not too scary. UBS estimates the exposure of European banks, except Greek banks, to Greek sovereign debt at €46 billion (£66 billion), with French and German institutions holding €9.4 billion and €7.9 billion, respectively.
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  Although these exposures are fairly significant for some banks—for instance, Dexia‘s exposure to Greek government debt is estimated at 39% of its equity capital, and Commerzbank‘s at 27%—most outside of Greece have much more manageable positions.
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  But these crises are seldom neatly contained.
  “The problem with situations like this is that it is hard to quantify what the second- and third-round effects will be,” warns Stephen Lewis, economist at Monument Securities.
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  Any default would hit the Greek economy more generally and banks have considerably more exposure to Greece than simply to its sovereign debt. According to the Bank for International Settlements, European banks have a total exposure of €94 billion to the Greek economy, with French institutions on the hook for €40 billion and Germany’s €24 billion.
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  Given that in mid-August, the 32 members of the Stoxx euro-zone banks index had a total market capitalization of some €240 billion, Greece has the potential to put a huge dent in their balance sheets. What’s more, the International Accounting Standards Board is worried that European financial institutions have been fudging their exposure to Greece in their recent results by underproviding against potential losses on these assets. When the default finally hits and banks are forced to recognize their true positions, the results could look very ugly indeed.
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  But that’s not where it ends. These estimates don’t include the exposure to Greece by non-banking institutions such as insurers. As they’re damaged by the Greek fallout, domestic banks will be affected further still.
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  … for the full article click here!

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