Dexia Bailout On Verge Of Collapse, Threatens To Take France AAA Rating Down With It

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    Nov 23, 2011 4:40 AM GMT
    It's only going to get worse. France's other large banks are effectively insolvent after taking into account marking to market sovereign debt they hold.

    http://www.zerohedge.com/news/dexia-bailout-verge-collapse-threatens-take-france-aaa-rating-down-it

    Having followed the fortunes of the beleaguered Belgian bank from before it appeared on anyone's worksheets, we are hardly surprised that the EU Commission charged with confirming the good-bank / bad-bank restructuring is concerned at the deal that Belgium has with the French (and Luxembourg) government to backstop/finance Dexia's debt. Belgium's De Standaard (and two other European newspapers) today suggests the Belgians fear the EUR90bn deal is 'not feasible' as it stands (with a Belgium 60.5%, France 36.5%, and Luxembourg 3% weighting). Given the change in market conditions the commission, according to the article, is concerned at the ability of each country to finance its respective guarantee (most obviously Belgium) and therefore can renegotiate the October bailout deal. Belgian FinMin Reynders would not confirm the renegotiations but was evidently waiting on the commission's 'comments or additions'. The French are obviously not-amused and of course, any increase in the size of France's guarantee will further impact its ability to maintain the much-vaunted AAA rating.
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    Nov 23, 2011 4:55 AM GMT
    Citigroup and Bank of American are effectively insolvent as well, but they keep handing out bonuses...

    France should follow Iceland's lead and nationalize everything.
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    Nov 23, 2011 2:04 PM GMT
    Christian73 saidCitigroup and Bank of American are effectively insolvent as well, but they keep handing out bonuses...

    France should follow Iceland's lead and nationalize everything.


    Which they did not through bailouts but by letting them go bankrupt. On the other hand, the US government forced Bank of America to buy Merrill during the crisis which is a significant part of its current problems.

    Of course, France may not have a choice given that they just don't have the money.
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    Nov 23, 2011 2:30 PM GMT
    France may end up nationalizing the bank and putting part of it's share under La Banque Postale. And at this point, this may be the best thing to do honestly.

    And here is a really good quote from the article:
    "It seems that Belgium is 'pulling a Greece' - knowing that it has all the leverage and France has much larger exposure to the problem - once again the unintended consequence of capitalism wiothout failure is writ large."