Sunday, May 27, 2012

Cheeky Monkeys

Not a fan of the "give the banks free money" thing, but sticking it to the ECB and Teh Markets is worth a clap.

The plan, viewed as highly unorthodox by analysts, involves Madrid issuing Spanish government guaranteed debt to Bankia in return for equity, with the bank then able to deposit the bonds with European Central Bank as collateral for cash.

...

But the admission by Madrid that borrowing in the capital markets is too expensive – and the use of the ECB to temporarily fund at least part of its bank rescue plan – surprised analysts.

“This is very cheeky – the ECB executives are going to be furious,” said one analyst.

This might be the closest thing to printing Euros that Spain can do, by basically forcing the ECB to print the money to finance the bailout.

Not so bad, Spain.

...adding, the point is that there's a relatively zero cost way to plug the financial holes. Free money! Central banks can do that. I'd prefer giving people free money instead of banks - you can even can do both simultaneously, by canceling debts with free money! - but this bit of sneaky at least is more in the "free money" direction.