Belgium to Bail Out Dexia – Again – No One Sure Exactly How

But Three Months Ago Dexia Passed a Stress Test

Earlier this Forum posted on the problems of Dexia, a European bank that no Americans had ever heard of.  The bank holds substantial “bad” assets, loans which are questionable and primarily the bonds of Greece, Italy, Portugal and Spain.  The earlier post described how the bank was likely to be broken into pieces.  This appears to be what is happening.

the French and Belgian governments agreed to nationalize Dexia, Belgium’s biggest bank, infusing it with billions in taxpayer money after it became the first casualty of the Greek sovereign debt crisis.

Martin Meissner/Associated Press

Chancellor Angela Merkel of Germany, right, and  President Nicolas Sarkozy of France spoke to reporters after a meeting in Berlin on Sunday.

This is not the first time Dexia has need help.

It was the second bailout in three years for Dexia, a lender to European and American cities that got into trouble in 2008 after a huge portfolio of subprime loans it owned turned toxic. Dexia received money from France and Belgium back then, and was the biggest European recipient of loans from the Federal Reserve’s discount window at the time.

and one hopes, really hopes that the U. S. Federal Reserve has gotten their money back. 

Earlier this year Europe’s major banks underwent a “stress test”, which was an intense examination of the quality of their assets to see how well they could survive future problems.

just three months ago, Dexia passed a round of stress tests for European banks that were supposed to be among the strictest regulators had conducted.

so now everyone can stop relaxing about other banks that passed the so-called stress test.  Mostly the results of passing the stress test are to produce a whole lot more stress in investors.

Europe’s main economic powers, Germany and France are divided on how to ultimately deal with the growing problem, but not to worry.

Mrs. Merkel does not want to funnel more taxpayer money to the banks before they themselves try going to the markets to raise new capital.

Although who exactly the German leader expects to invest in Europe’s troubled banks is not clear.  “None of the Above” is probably a good answer.  And not to worry,

 In meetings Sunday in Berlin, they announced that they (Europe’s leaders) would have a “comprehensive solution” by the time leaders of the G-20 group of nations meets in early November in Cannes, France.

Looking for good news.  The crisis has produced an unprecedented amount of co-operation between France and Germany, in fact this level of co-operations has not been seen between the two countries since 746 A. D.., when the Goths and the Visigoths met and decided which of them got to be known as just the "Goths".

So the decision right now is a plan to have a plan.  Well good, everyone is planning on that.