Executive Intelligence Review
Subscribe to EIR

PRESS RELEASE


Bailouts Are Over; Inter-Alpha Banks
and Their Monetary System Going Down

May 24, 2011 (EIRNS)—With the end of the bailout era signalled by the downfall of "the bailout boss," the IMF's Dominique Strauss-Kahn, the top Inter-Alpha and other imperial banks are now headed down. Ratings agency Moody's today abruptly put the three biggest—Lloyds TSB, Royal Bank of Scotland, and Santander UK — on review for possible credit rating downgrades. Why? Because the British government conceded to Moody's that there will be no more bank bailouts. The ratings agency started to pull down 11 other banks at the same time as these British imperial behemoths.

"The reassessment ... has been initiated in response to ongoing guidance from the UK authorities (the Bank of England, the Financial Services Authority, and the Treasury) that banks that fail in the future should not expect capital injections from the public purse," said Elisabeth Rudman, a Moody's senior credit officer and bank analyst.

The announcement also said that Barclays Bank has already been downgraded to negative from stable by Moody's, and that HSBC's rating has been affirmed with a negative outlook. Barclays and HSBC "suffered a hit," Moody's said, "because the government has publicly stated it believes senior debt holders should share the pain if the banks get into trouble."

The Wall Street Journal and Bloomberg are reporting anguished comments by Bank of France chairman Christian Noyer about "a horror scenario"—Greek default/restructuring—because "the ECB couldn't accept restructured Greek bonds as collateral for lending to banks," meaning that what Noyer fearfully chooses to call "Greek banks" would "seize up completely."

Obviously using code words for a number of countries beyond Greece, and for a large number of the big Euro-based banks, this is also an oblique shudder in the direction of the bigger threat, the collapse of credit derivatives, which has again become a $45 trillion estimated "market." How many more AIGs are waiting to blow up at the signs of sovereign defaults?

In another sign of the dramatic turn into "the end of bailouts", the Financial Times' "Lex" column warns investors to look more deeply into an expected new €EU5 billion share offering by the Inter-Alpha Group's Intesa Sanpaolo bank in Italy, and €5.3 billion share offering by Inter-Alpha's Commerzbank. "Lex" warns that investment in these banks could constitute "throwing good money after bad."