Thread: Euro Jumps As US Taxpayers Source Of European Bailout

Euro Jumps As US Taxpayers Are Latest Source Of European Bailout According To Freshest Set Of Bailout Rumors

Submitted by Tyler Durden
10/05/2011 06:42 -0400
Comments: 50 / Reads: 4,348

FT, Liesman and now the IMF (aka US Taxpayer). Rinse repeat. The program for the spin cycle to keep the EUR afloat, and Europe bailed out on any given day ending in -day is now clear as day. After last night's FT rumor for yet another comprehensive bank bailout program was promptly digested and rejected by the market with the EURUSD recouping all losses, it is now the IMF's duty du jour to protect the doomed currency, naturally with other people's money, in this case America's middle class. And in a flurry of headlines, we find that the person tasked with destroying his credibility, after the market no longer trusts anything Lagarde says, is IMF European Department Director Antonio Borges who according to Reuters, said that Europe needs between 100 billion and 200 billion euros to recapitalize its banks to win back investor confidence and should carry out the plan across the continent, not in a staggered process. He also confirmed that other European bureaucrats lied yesterday when they said no recap plan was being considered after saying that, well, "EU officials are working on a European bank-recapitalization plan." Said otherwise, US taxpayers to the European rescue because the EUcrats can not get their imploding house in order. But, but, whatever happened to China?

Yet surely he is credible, when everyone else isn't. As to his imaginary number of just €200 billion needed to rescue Europe, here is what he had to say: "We are talking about figures of between 100 and 200 billion euros, which in our view is very, very small compared to the size of the European capital markets and compared to the resources of the new, enhanced EFSF," Borges also said the IMF would "definitely participate" in a second bailout package for Greece if the Washington-based lender was happy that the country showed it was willing to solve its debt problems. "If there is a second program for Greece, which is the expectation, I think the IMF will definitely participate on the condition that we remain convinced that Greece is on track and the right policies can be put in place, that debt can become sustainable," he added.

But the scariest news for US taxpayers, who are the primary funders of the IMF, which as we reported recently is planning on expanding its "bailout firepower" to $1.3 trillion, is that the IMF could "if needed" could create an SPV to buy bonds of Spain and Italy in both primary and secondary markets alongside the EFSF. In other words, the US taxpayer would become Europe's Bernanke, to avoid a German revolution protesting precisely such behavior from the ECB. WE can't wait to see what the domestic response is once the "99%" learn about this.

Oddly enough, this bottom scraping rumorflow is enough to send the EURUSD up 70 pips as can be seen below.



The problem with all this is that unless EUrocrats want a public rebellion both in the continent and in the US, they will have no choice but to stick with the only form of TARP available to them: the EFSF. And while EU may be only now thinking of recapitlaizing its banks, Nomura already did it for them and came to the conclusion that unless the EFSF is expanding to many trillions, it just can't be done. So unless Germany has diametrically changes its position in the last 24 hours and we are not aware of this, it is tie to once again fade all this total and utter BS.

http://www.zerohedge.com/news/euro-jump ... out-rumors

IMF Vows To Spend Some More Taxpayer Money

Submitted by Tyler Durden
10/05/2011 07:53 -0400
Comments: 39 / Reads: 3,515

From Peter Tchir of TF Market Advisors

IMF Vows To Spend Some More Taxpayer Money

Markets in Europe opened wish some hesitation about how well the latest bailout would work, but along comes Borges to kick-start the rally. He touched on all the right buttons.

He confirmed that EU officials are working on a bank-recapitalization plan. He suggested banks could use 100-200 billion euro. Where they get the money would be a more interesting question if they had a better clue how much banks would need. That seems a pretty big range given how long this crisis has been going on, but it is making the market happy as it has bank-recapitalization and co-ordinated effort - what else does the market need?

Borges also suggested that the IMF could invest alongside the ECB/EFSF on Italian and Spanish bond purchases. Well, that is a new source of funds. I guess the realization that the EFSF money has already been spent 4 times made everyone realize they needed a new plan. Now the IMF can participate in open market purchases and maybe prod investors into leveraging the EFSF as a bank?

No mention on how excited American's will be to fund even bigger IMF outflows. I assume the current administration is supportive of sending our money to Europe and bumping up against the debt limit ceiling sooner, rather than later, but this could easily become a political hot potato. China will be a decent size contributor. I always had the sense that China likes to be in control, I wonder how excited they will be to participate in some new IMF scheme. Then Europe has to contribute more money. So German taxpayers will be giving money to the rest of Europe through this back-door. Italy and Spain will fund themselves - again. A bunch of smaller countries who mostly signed up so they could travel without border checks must be wondering what they have gotten themselves into.

Borges said Dexia would have its own solution. I guess that is good. A bunch of lines about Greece, EFSF, ECB, and Portugal that seemed confusing at best also seemed to help the market as the lines contained such keywords as "solution" "not a surprise" "ECB has a Central role" "EFSF needs to be a catalyst"

So the "Europe finally gets it" camp is happy again. They are seeing co-ordinated effort, stepped up rhetoric, and more money being thrown at the problem. It seems to me, that the more senior you are in the banking world, or more senior you were, the more likely you are to be in this camp.

The crowd that is wondering who will foot the bill remains dubious. Economic conditions continue to deteriorate globally. There is less willingness and less ability of the "rich" nations to fund the "poor" ones. There is even less willingness to fund the banks. It is great that Europe finally sees the problem, but they have waited too long. There is no group of countries left that is strong enough to support the banks and weak nations without getting dragged down themselves. It seems this camp is filled with lower level credit guys and some distressed debt people who just don't see how the circularity can work.

The other thing that I have noticed is that the more involved you are in the markets, the more willing you are to believe that Europe can act as Europe. The more involved you are in European politics, the more concerned you are that European nations are becoming more nationalistic.

Anyways, we are back to rallying on headlines and sound-bites and hopes that "Europe Finally Gets It" Maybe this time the details won't disappoint. Actually, maybe this time we will get to the details, since so many of the last few rallies were based on rumors or plans that never even made it to the detail stage. In the meantime I will try and figure out how Italy providing money to EFSF so the EFSF can buy their bonds, how Italy contributing to the ECB which buys its bonds, how Italy providing money to the IMF to buy Italian bonds, and Italy working on plans to save Italian banks whose exposure to Italy is a part of their problem, fixes anything.

http://www.zerohedge.com/news/imf-vows- ... ayer-money