P3 bank to receive up to $120 billion in public handouts


Earlier today the board of the failing bank Dexia approved a rescue plan drawn up over the weekend by the governments of France, Belgium and Luxembourg. The bank’s Belgian unit will be nationalized and its other divisions sold. Dexia will receive up to €90 billion ($120 billion) in taxpayer guarantees, mainly from Belgium, to shore up its funding, according to the Wall Street Journal. Dexia is involved in numerous public private partnerships, including four in Ontario.

A second European bank, Erste, has now put out a profit warning.  Like Dexia, Erste is suffering from its loans to struggling European governments. Erstre now expects a loss of nearly €1 billion this year (instead of the €1 billion profit).  Erste has shelved for at least a year a plan to repay 1.2 billion euros of aid from the Austrian government. More banks may fess up to such losses later.
European governments have now postponed the planned European Union summit one week (until October 23) to allow more time to develop a response to the new banking crisis. Some sort of broader bank bailout is coming — funded by the public sector.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s