Dienstag, 19. Mai 2009

Behind the Scenes of Germany's Bad Banks

The FT print edition ran an interesting article today. It was entitled "Berlin forced to dilute bad bank scheme".

The FT claims that Berlin (as in: the finance ministry and the chancellery office) had initially wanted to "saddle taxpayers with hundreds of billions of Euros" to remove toxic assets from bank balance-sheets. But they were forced to change plans, because many parliamentarians from both SPD and CDU revolted and threatened to vote against the proposal. In the end, the government had to relent and proposed the amended version we know now (i.e. banks are responsible for losses of their toxic assets, and need to devote future profits to pay back any shortfall).

The story was apparently "privately confirmed" by government officials, though the finance ministry refused official comment.

(Here's a summary of the bad bank proposal)