Tweet
Emphasis in the body is mine 
http://www.telegraph.co.uk/finance/c...apitalism.html
ECB goes nuclear as EU leaders plan to 'civilise' capitalism
By Ambrose Evans-Pritchard
Last Updated: 9:23AM BST 16 Oct 2008
"The ECB is doing whatever it takes to unclog the interbank market," said Gilles Moec, from Bank of America, who described the move as "spectacular" volte-face and a belated recognition that the credit crisis is deadly serious.
The monetary blitz was welcomed in Brussels, where EU leaders were meeting yet again, just days after agreeing to the most comprehensive bank bail-out in history. "We are not at the end of the crisis, we are still living in dangerous times," said Jean-Claude Juncker, Luxembourg premier and Eurogroup chair.
He issued a stark reminder that life is going be very different for the banking elite as governments move to restore the lost discipline of the Bretton Woods financial order and attempt to "civilise" capitalism, the code word for clamping down on the City – dubbed "the Casino" in Europe.
"Let everyone remember after this crisis, who solved it. Politicians did, not bankers," he said. Mr Juncker added that this episode would have a profound effect on the euro debate in Britain.
"The British prime minister had to beg to be let into the room. I'm sure that when the storm is over, the British will think about whether they shouldn't become an equal in all decision-making bodies."
German Finance Minister Peer Steinbrück echoed the warning. "When a fire's burning in the global financial markets, it has to be put out, even if it's a case of arson. But then the arsonists have to be held responsible, and spreading flames must be outlawed.''
In a key change, the ECB is providing unlimited liquidity for longer-term loans to force down the market rates used to price mortgages in the Eurozone. The aim is to help banks pass along last week's half-point cut in interest rates before the region's economy starts to seize up altogether.
The standard for collateral has been slashed from A- to the once unthinkable level of BBB-, allowing distressed banks to offload securities that cannot be sold on the open market. It greatly widens the range of instruments and – crucially – lets banks use their dollar assets for the first time.
The radical shift in policy suggests that the ECB is now deeply alarmed by the crunch facing European banks as a violent unwinding of debt leverage across the world forces them to repay huge sums in dollars.
Goldman Sachs estimates that non-US banks have liabilities of $12 trillion (£6.8 trillion) on dollar balance sheets. The European, British, and Swiss banks make up the lion's share, and they have used leverage far more aggressively than US banks. Analysts say the European banks will need to raise $400bn in fresh capital – no easy feat at a time when burned investors are keeping their distance.
http://www.telegraph.co.uk/finance/c...apitalism.html
ECB goes nuclear as EU leaders plan to 'civilise' capitalism
By Ambrose Evans-Pritchard
Last Updated: 9:23AM BST 16 Oct 2008
"The ECB is doing whatever it takes to unclog the interbank market," said Gilles Moec, from Bank of America, who described the move as "spectacular" volte-face and a belated recognition that the credit crisis is deadly serious.
The monetary blitz was welcomed in Brussels, where EU leaders were meeting yet again, just days after agreeing to the most comprehensive bank bail-out in history. "We are not at the end of the crisis, we are still living in dangerous times," said Jean-Claude Juncker, Luxembourg premier and Eurogroup chair.
He issued a stark reminder that life is going be very different for the banking elite as governments move to restore the lost discipline of the Bretton Woods financial order and attempt to "civilise" capitalism, the code word for clamping down on the City – dubbed "the Casino" in Europe.
"Let everyone remember after this crisis, who solved it. Politicians did, not bankers," he said. Mr Juncker added that this episode would have a profound effect on the euro debate in Britain.
"The British prime minister had to beg to be let into the room. I'm sure that when the storm is over, the British will think about whether they shouldn't become an equal in all decision-making bodies."
German Finance Minister Peer Steinbrück echoed the warning. "When a fire's burning in the global financial markets, it has to be put out, even if it's a case of arson. But then the arsonists have to be held responsible, and spreading flames must be outlawed.''
In a key change, the ECB is providing unlimited liquidity for longer-term loans to force down the market rates used to price mortgages in the Eurozone. The aim is to help banks pass along last week's half-point cut in interest rates before the region's economy starts to seize up altogether.
The standard for collateral has been slashed from A- to the once unthinkable level of BBB-, allowing distressed banks to offload securities that cannot be sold on the open market. It greatly widens the range of instruments and – crucially – lets banks use their dollar assets for the first time.
The radical shift in policy suggests that the ECB is now deeply alarmed by the crunch facing European banks as a violent unwinding of debt leverage across the world forces them to repay huge sums in dollars.
Goldman Sachs estimates that non-US banks have liabilities of $12 trillion (£6.8 trillion) on dollar balance sheets. The European, British, and Swiss banks make up the lion's share, and they have used leverage far more aggressively than US banks. Analysts say the European banks will need to raise $400bn in fresh capital – no easy feat at a time when burned investors are keeping their distance.
Comment