How long until the U.S. government tries to officially nationalize the banks? Do we all think the Italian government will exit the bank within 5 years?
In a bid to end years of struggles, the Italian government is taking control of bank Monte dei Paschi under a relaunch plan agreed by European officials that includes the disposal of a massive 28.6 billion euros ($32.5 billion) in bad loans.
In detailing the plan Wednesday, CEO Marco Morelli said that ridding the bank of the load of soured loans was “the most relevant issue” in the European Commission’s approval this week of the rescue plan.
The Italian government will inject 5.4 billion euros into the bank, giving it a 70-percent stake, as part of a total boost of 8.1 billion euros. Under the deal, the government must exit within five years.
The Monte dei Paschi rescue comes just a week after the government announced plans to save two small Veneto banks where thousands of savers have lost billions of euros.
Italian Finance Minister Pier Carlo Padoan said Wednesday that the moves had “removed impediments to growth. We are putting the worst behind us.”
It is the third capital injection in recent years for Siena-based Monte dei Paschi, Italy’s third-largest by assets, as it struggles to recover from poor management and a heap of bad loans that compounded during Italy’s long economic crisis.
Under the bad loan disposal plan, 26.1 billion euros will be bundled and sold at 21 percent of gross book value, the vast majority to the government-organized Atlante II fund, while the bank retains 5 percent.
That compares with a price equal to 33 percent of value under a previous relaunch plan announced last fall but which had to be revised after the bank failed to come up with an investor to inject 5 billion euros.
The loss on the disposal will be booked by the bank in the first half of this year, while the transaction is expected to be completed by next June.
The remaining 2.5 billion euros in bad loans will be disposed in a separate procedure.
The five-year plan calls for a net income above 1.2 billion euros by 2021, compared with a 2016 loss of 2.3 billion euros, as the bank refocuses on retail and small business customers. During the period, the bank will be under strict cost controls, capping top executive pay, reducing employees by a net 5,500 and shutting branches as it moves toward digitalization.
The bank could resume trading on the stock exchange by late September, Morelli said.
Morelli says he agreed to a steep 70 percent pay cut, with no bonuses for the period the bank is under state aid, under a formula negotiated in Brussels. He is one of six managers taking cuts.
He said the clear rules on capital structure and liquidity will help the bank recover consumer confidence and business it has lost during its protracted crisis.
“I think now Monte dei Paschi is back in place,” said Morelli, who took over nine months ago. “What the top management experienced in the last nine months is pretty much unheard of. … I think the experience is one of an emergency room hospital department. We did have an emergency every five minutes.”
The European Commission’s approval had been a key sticking point in the rescue of the bank, as EU rules now try to avoid using taxpayer money to save banks. But the Commission cleared the government capital injection after it was agreed that the bank’s shareholders and junior creditors would take losses first, for an estimated 4.3 billion euros, to minimize the bill for the government.
Didn’t Sammy officially nationalize the banks, again, not to mention notionalize the local currency, in a series of steps beginning in 1913?
I thought the nation was bankified by the bankers?
Not just Italy, either:
I have noticed a cyclic trend in Europe:
Private firms cause a catastrophe during the course of vacuuming up shekels and the firm(s) becomes bankrupt; the government of whatever country it occurred in buys the company(-ies) for full book value (if not at a premium over that) and fixes the company(-ies) with tax Euros; the government involved then sells the firm(s) back to whoever owned them originally for some small fraction of the actual value of the firm(s), and the cycle begins again.
I think this must be taught in French and Spanish business schools, in particular, as a generally accepted business practice – probably in the chapter on proper bribery etiquette.
Nationalizing the U.S. banks won’t help – especially if the dead-load of derivatives is considered. If the government becomes liable to make the bad bets good, no one will want dollars (since they’d obviously print to redeem them); and if they default on them (declare that any debts the banks held were abrogated and the government had no obligation to pay out on them) then no one would trust them to keep any other promises, and faith in the currency would collapse there too.
Besides, unless they arrested, tried and jailed everyone involved in MERS, Abacus, sub-prime lending and all the other frauds, no one would trust them to hold their money. Of course, they are all slimy liars, thieves and fraudsters together (bankers and government), but until a tipping point majority of Americans come to understand that, nothing can be done.
I sure wish my prescriptions would allow me to drink when I think about things like this!
“Besides, unless they arrested, tried and jailed everyone involved in MERS, Abacus, sub-prime lending and all the other frauds, no one would trust them to hold their money.”
You do realize that our current Idiot-in-Charge appointed the creator of MERS to be our national Treasury Secretary, right? Does anyone recall a fable about a fox and a henhouse?
Phase 1 was TPTB fattening the Sheeple on fiat money and robbing them blind (Greece is an example). It’s like the Titanic sailing full speed ahead burning printed money for fuel while TPTB live like Potentates buying all the levers of power. Phase 2 was raising interest rates and tightening up loans to set off a Depression (government tax receipts are down 20% since Jan2016) so TPTB can Fleece The Sheeple: the Iceberg will be the Hyperinflation of everything Sheeple need and the Depreciation of everything Sheeple own. TPTB will buy assets 10 cents on the dollar. After adequate Chaos, This Time TPTB will offer to cover all bets (debts) plus maybe $100,000 cash to each Sheeple when they accept The Chip for all buying and selling using The Beast’s new totally digital money system. Problem created; problem solved; Goy enslaved by the NWO (like in Rev 13:16-17 and “1984”) .
Greetings,
At this point in time, is it really even possible to imagine the US government trying to nationalize the banks? These are the same people that couldn’t put a website together even though they had 3 years and hundreds of millions of dollars to do so. They could no more nationalize the banks than I can flap my arms and fly to the moon.
Now, that doesn’t mean that they wouldn’t try to do such a thing. It could happen but I can’t imagine it holding together for more than a week.
In a way the banks are nationalized. The oligarchs in the federal reserve have to be working closely with the government behind the scenes to keep the lie going at this point. We should have had total collapse by now in a true free Enterprise system.
The banks were nationalized already in 2008, it was just not publicly announced. First, the banks became “holding companies” and then they were eligible for Federal Reserve money. If it was not for federal reserve money, those banks would not exist. The only difference between outright nationalism and the way it was done is that this way is sneakier. The “public” would not have accepted full on nationalization, but the government printing money to run the banks, and taking away FAS 157 in order to make their debts look “good” is the closest thing to nationalization I have ever seen without the announcement.
The banks were bailed because the government is addicted to money, and the taxpayers simply could not be counted on to produce money through taxes fast enough, and in large enough quantities to maintain the “lifestyle” of the government. Enter the primary dealers (to big to fail banks). As long as the banks would buy treasuries with printed dollars instead of the fed directly (illegal) the game could continue. No pesky taxpayer consent needed. Now, however we are running in to that nasty math problem of exponents, and they have no solution. They are frantically trying to find one, but like the drug addict who has finally OD’d too many times, this time there is no fix.