The European Banking Problem

This WSJ article by Kashyap, Schoenholtz and Shin provides a good summary of the  situation.

12 replies on “The European Banking Problem”

One needs a suscription to read the article. Surely you are not supporting the Murdoch Press, Philip?

Thank you, What Goes Up. This is probably the most succinct statement of the EZ’s problems – and the necessary solutions – that I’ve seen. But the EU’s senior politicians are simultaneously seeking comfort in denial – if we keep our heads down and make noises about fiscal governance and economic productivity it’ll all go away – and living in dread of their voters – if we reveal the true extent of the problem and how much they will be on the hook to resolve it they’ll lynch us.

2.5 years on, US banking seems to be on the mend and in the EZ it is still crisis central . Of course banks were let go to the wall in the US…

JPMorgan Chase and Wells Fargo led a parade of US banks to unveil dividend increases and stock buy-backs within hours of getting the green light from the Federal Reserve to return more cash to shareholders for the first time since 2009. Nineteen institutions were probed by the Fed as part of its “comprehensive capital analysis and review”. The exercise was an update on the 2009 stress tests, which helped shore up investor confidence in the financial system.

It’s easy for Americans to consider these kinds of solutions. Europe is not America.
It is full of narrow-minded little technocrats whose allegiances are first and foremost to their own country.
JCT thought he could sacrifice Ireland to protct German and French interests (banks).
This is hard to see – Europe is at a watershed – dilute Irelands bank losses and save the Euro at huge electoral dissatisfaction or keep the electorate happy but sink Ireland and the Euro project.
My money is on the latter (but only a tenner..(old money!))


“Europe’s sovereign-debt problems cannot be separated from its banking problems. … Ultimately, the crisis in Europe will continue until we have answers to two critical questions: How much money is needed to stabilize the banks, and where will it come from?”

Sound, very sound, succinct, factual, and real.

Chicago on the way back … where’s me van_da_man …?

@ David O’Donnell
This corporation tax thing is primarily a French fixation. Wouldn’t be surprised if that little twit Sarkozy has taken some money from some of Irelands real competitors (i.e. India) to undermine our position.
The French hate him – why shouldn’t we. He is an extremely flawed individual who equates the Irish with the inhabitants of Paris’ troubled banlieux. If I’m not mistaken he described immigrants there as scum….
He’s a damaging little man

Issing: It’s simple: A country like Germany, which behaves in accordance with the rules, has to support the Irish. Meanwhile, per capita income in Dublin is higher than it is in Berlin. Is that fair? If we take this approach in the long term, we will end up with a German population with the kinds of anti-European sentiments I would find horrifying. The German population’s identification with Europe is already declining to a disconcerting extent.”!!!!


Yes – just posted same Speigel quote from Herr Issing on previous thread – he also opposes change to Irish Corp Tax ….

Thing is: we basically followed the “rules” on S&G Pact ……. and Issing notes that both France & Germany smashed them in 2003 ….. dodgy banks and even dodgier capital flows did for us, +PD/FF feather-regulation not the ‘rules’ …. made the rules kaput when banks crashed ….

I’ve no time for Nicky – he is bombing libya to enhance his re-election chances ….i.e. killin people… and he fooled our previous set of fools …. history will not be kind to him: I certainly won’t.

All the exposed banks will be folded into larger TBTF institutions. They will struggle to lend. Only cash positive entities will survive and flourish.

All the malinvestments will be reversed over the next decades. All the consumption, borrowed from the future by wily bankers, must be foregone.

Then we may invest in what banks remain! Interesting times for the ignorant?

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