Friday, December 23, 2011

Dexia Collapse: Wolf Richter (Naked Capitalism)


Wolf Richter: CEO of Dexia – ‘Not A Bank But A Hedge Fund’

By Wolf Richter, San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.
Dexia SA, the Franco-Belgian mega-bank that collapsed and was bailed out in 2008 and that re-collapsed in early October, is a big deal in Belgium where it employs 10,000 people and has over 21 million bank accounts. Its assets of $715 billion dwarf Belgium’s $395 billion economy.
The three countries involved in the bailout agreed in October to guarantee €90 billion in loans, of which Belgium will be responsible for 60.5%, France for 36.5%, Luxembourg for 3%. Belgium’s portion, €54.5 billion, represents nearly 14% of its GDP. The process is moving forward. On December 21, the European Commission approved on a temporary basis €45 billion of those guarantees though they violate EU rules on government subsidies for private companies.
Taxpayers are paying a heavy price for Dexia’s bailout. Belgium nationalized the Belgian entities of Dexia, including untold amounts of toxic assets. The French entity, which was involved in an enormous subprime scandal à la française, was taken over by the Caisse des Dépôts and the Banque Postale—both owned by the French government. Precision Capital, a Luxembourg company controlled by Qatari investors, bought 90% of Dexia Bank International Luxembourg, valuing the firm at €730 million, a steep discount from the expected €1 billion. Luxembourg acquired the remaining 10%. Other entities remain on the block.
In trying to bail out its financial sector, Belgium has guaranteed a total of €138.1 billion in debt (35% of its GDP) and has injected €15.7 billion in capital and €8.6 billion in loans, according to Belgium’s Cour des Comptes (Audit Court), which released the results of its annual audit on December 20 (PDF of the 412-page 168th Cahier) . The largest recipients: Dexia Banque Belgique, Dexia SA, BNP Paribas, and Fortis Banque.

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