‘ Minimising Cost of Future Liquidity and Preventing Financial Crisis ‘

#AceFinanceNews – BRUSSELS – September 22 – Implementing the EU response to minimising the public cost of future financial crises and getting banks to offer up loans top the agenda this WEEK it was reproted by EUobserver.  

European Central Bank (ECB) chief Mario Draghi on Monday (22 September) is set to debate the so-called targeted longer-term refinancing operations (TLTROs) with MEPs in the committee on economic affairs.

The idea is to improve bank lending to the eurozone by offering banks extra liquidity at a fixed rate for up to four years.

But the scheme attracted just €82.6bn (out of the €400bn on offer) of interest from banks this month.

Draghi had earlier this month surprised analysts by slashing interest rates to a historic low in an effort to stimulate lending.

The ECB cut is part of a larger attempt by EU policy makers to kick start member states’ overall sluggish economies and put millions of unemployed back to work.

But with the prospect of possibly having to fend off another financial crisis, lawmakers also tasked the ECB to oversee the financial health of around 130 banks with the power to shut them down.

Also known as the single supervisory mechanism, the newly endowed ECB oversight of banks is part of the single resolution mechanism (SRM), which aims to minimize bank bailout costs to taxpayers.

SOURCE:

#AFN2014

#banks, #brussels, #ecb, #european-central-bank, #eurozone, #financial-crisis, #liquidity, #mario-draghi

Mario Draghi-Call Me Bond Junk Bond

Printer Mario Draghi

Printer Mario Draghi (Photo credit: Ondrej Kloucek)

The Before Thursday:

After Ben Bernanke took the stage in Jackson Hole last week to rather defensively suggest the Fed will act soon, Thursday is Mario Draghi’s turn.

Before we get into the details of what the ECB could announce, a quick update on the European debt crisis: It’s still there. Yields for Spanish and Portuguese debt are at or above the 7% danger zone, and Italy is publicly complaining that their debt costs have little basis,Jens Weidmann, Germany’s top central banker, meanwhile, is reportedly both isolated and threatening to quit over his opposition to the ECB buying debt of struggling EU countries.

In a closed-door meeting in Brussels yesterday, Mario Draghi told the European Parliament that he’d be comfortable buying EU members’ bonds with maturities of three years or so. This, Draghi reportedly said, wouldn’t violate EU treaties. (Bill Gross tweeted that this bond-buying program would be something like writing “2-3 year checks”).

Of course, ECB bond-buying has been the summer’s worst-kept secret. As the WSJ’s Matt Phillips noted, Draghi said this on July 25: “To the extent that the size of these sovereign premia (in Spain and Italy) hamper the functioning of the monetary policy transmission channel, they come within our mandate”.

Draghi’s hints mean that three years into the European debt crisis, the ECB may finally return to limited, direct financing of struggling governments. Analysts, however, are all over the map about what the ECB may actually announce after its meeting on Thursday, and whether it will involve yield caps.

One safe bet: more political entanglement. Even though Draghi insists the ECB is not political, his actions are still very much wrapped into discussions on what he recently called “the sharing of powers and of accountability”. Or, as Nomura put it: “Just imagine if the Fed had to play tough with California or worse Texas for example, to effectively impart monetary policy”.

The Economist‘s Charlemagne blog has a great description of Draghi’s predicament: He simply can’t fix Europe without the help of the continent’s leaders:

The After Thursday:

So finally after all the wheeling and dealing Mario Draghi got his own way and opened Pandora’s box and now we wait! This is the fact that the ECB the “lender of last resort” has finally supported ” buying up debt” and letting it be sold as ” junk to the highest bidder.” We can all con ourselves this is for the good of the euro zone but really we know it is for the good markets and nobody else!The real winners short-term are the gamblers of our food,oil and lives!

The control of the masses by the few is how we should see it and the sheer fact that our lives are controlled by a simple but very effective piece of paper called simply a “share.” Well now we own a share of ” gambling debt” a little like an IOU that will never be repaid! So instead of having ” junk bonds” we now have junk funds, capitalise by gambling debt!

And as we all know when you are in debt one day you have to repay pay it or eventually declare bankruptcy!

#ben-bernanke, #draghi, #ecb, #european-central-bank, #italy, #jackson-hole, #jens-weidmann, #mario-draghi