Crossposted from Flopping Aces

While we in the US concentrate only on our ourselves, and what we always perceive to be our failings, the media fails to point out is that this “rescue plan” is, in some degree, also active in other Euro nations.

In the UK, the Parliament is under discussions about the nationalization of Bradford and Bingley.

LONDON (Reuters) – Britain’s government will nationalize troubled mortgage lender Bradford & Bingley (BB) and is discussing the sale of its savings book and branches, people in the banking industry familiar with the matter said.

The Treasury is leading talks on the rescue of the bank and on Sunday said discussions were continuing. A full statement will be made by Finance Minister Alistair Darling before Monday’s market opening.

The Treasury would have preferred a private-sector rescue for Britain’s ninth-biggest mortgage provider, but rivals appear unwilling to come in as a “white knight” amid a global credit crisis and weakening British housing market.

The BBC said B&B will be nationalized and its mortgage book merged with Northern Rock, the lender taken under state ownership in February.

The government this month brokered the takeover of HBOS (HBOS), Britain’s biggest home lender, by rival Lloyds TSB (LLOY) and is stepping in again.

“We are very clear that depositors and ordinary savers must be properly protected and they will be as part of the arrangements we will set out,” Treasury Minister Yvette Cooper told the BBC.

Britain’s top five banks already stepped in for a “save” of B&B back in June of this year. Did we hear anything about that here in the US? Or did we just concentrate on our own bailouts?

Any of this “save the common man” talk familiar? How much is due to the international banking community, and the US failures? Well, if you read one paragraph in the BNEC account above, they say it was “sparked” by the US economy.

But… my my, some familiar scenarios…

B&B’s 24 billion pounds ($44 billion) of savings and its 200 branches could be sold to a rival or rivals. Spain’s Santander (SAN), which owns Abbey and is in the process of buying Alliance & Leicester (ALLL), was in talks about possibly taking over deposits and branches, an industry source said.

But rivals are reluctant to take ownership of B&B’s book of 41 billion pounds of residential loans — representing 3.4 percent of British mortgages — as many of them are higher risk buy-to-let and self-certified loans and the British housing market is weakening, raising the prospect of rising bad debts.

Obviously the UK was not subject to the US CRA mandates. B&B isn’t a US corporation, subject to US mandates. They were, however, taking advantage of the monetary benefits of increasing homeownership and sales with relaxed lender criteria. And, just like the US, they were increasing the number of subprime loans in their lending portfolio.

Other than the subprime loan package offering, was there anything in common here? Yup… the house price rises. While they, unlike the US who experienced the market repercussions of 911, did play with their interest rates to control home prices, they did not dodge the unnatural rise successfully.

As I pointed out in my “perfect storm” post, the UK is going thru a similar, but slightly less drastic housing crisis. Along with the increase of subprime loans, they too had the housing price increase… a key factor in subprime loans being irrecoverable. When you issue paper on over priced homes, you can’t just replace one defaulting buyer with another.

Below, a repeat of the graph comparing the UK astromonical price increase in the past decade.

Anyone else? How about Belgium. Just days ago, the European financial giant Fortis got partially nationalized. And, because of the size of the nations involved, three nations chipped in to nationalizing Fortis.

But wait… it already had a partial takeover last year! Did this little ditty get fed into the overall global market health? Did we even get a sniff of this event??

The deal will force the bank — which has headquarters in both Brussels and the Dutch city of Utrecht — to sell its stake in Dutch bank ABN Amro, which it partially took over last year. Fortis paid 24 billion euros for its share of ABN.

Fortis Chairman Maurice Lippens will be forced to resign and will be replaced by a candidate from outside the company, Leterme said.

“We have taken up our responsibility, we did not abandon” account holders, Leterme told reporters.

Under the bailout, Belgium will invest 4.7 billion euros ($6.88 billion) and the Netherlands 4 billion euros ($5.86 billion) in Fortis’ banking operations in the two countries. In return, they each receive 49 percent ownership in those national arms of the bank.

Luxembourg will invest 2.7 billion euros ($3.95 billion) in the bank’s Luxembourg operations, also for a 49 percent stake.

The deal, orchestrated by the three neighboring countries and EU Central Bank chief Jean-Claude Trichet, is meant to restore confidence in the bank before the reopening of markets on Monday after a tumultuous week in which Fortis’ shares imploded.

Anything else in common… doh! It’s those housing prices! Evidently, back in 2000, you could buy a home in Belgium for half the price you could back in 2007. Remember, the UK is a year behind the US in their housing crash. Could Belgium and other adjacent Euro areas be the same?

Fri 28/12/07 – Buying a residence in Belgium today costs two times what it did in 2000. Prices increases during 2008 are expected to remain limited. This is the prediction according to information by Stadim study agency.

The average price for a house in Belgium the beginning of October was €157,200. This is 50% more than four years ago (€102,000) and roughly double the average price in 2000 (€79,600). (VRT) It’s a buyers’ market Housing prices in 2008 are not expected to exceed 5% for houses and 2% for apartments, though in some places increases of 6-8% could be the case.

According to Alain Declercq, an analyst of ERA Belgium, the largest estate agents in the country, “The price increases today have returned to an acceptable level.”

“Price increases were more than 10% a year between 2004 and 2006. This trend could not continue.”

No sheeeet Sherlock. It’s the same thing I’ve been saying here. Everyone is complaining about the housing price “crash”… but the price rise was so fast, so unsustainable, that it was a major contributor to the 2008 “crash”…. that is evidently happening world wide (if not simultaneously).

What they all have in common is the housing price increase beyond historical rises from the decades before. And while I haven’t documented the Belgium subprime loan stats yet, it will not surprise me to find those exotic loan packages make their way to that Euro market as well.

So what’s the lesson? (too late, perhaps…) Easy money = flood of buyers = unsustainable price hikes = economic spiral.

And it’s entirely possible that a “feel good” Congress started this world wide trend… all by themselves. Oh goodie.

So what’s the story? If the other nations were not under a US mandate to force subprime risky loans, why did the other nations follow suit?

Cash… it was a lucrative market. Private enterprise doesn’t need mandates to identify a money making proposition. And once the US identified that market by government mandates, and the other nations saw just how profitable it could be, is it any surprise that it’s a “monkey see, monkey do” scenario?

So what will be the repercussions? First, it looks like whatever the US does now, other Euro markets… busy lecturing *us* on the capitalism “failure”… will be right on our heels. So will we end up with governments, all over the world being socialized property owners on behalf of their citizens?

Oh my… interesting times. Personally, right now, I can’t put my finger on it all. I can see the domino effect. But their ultimate effect on world wide global economy? Uh…. uh…. duh… Dang, I sound like Obama. LOL

Hopefully someone more knowledgeable than I will pick up on this and play “crystal ball swami” on the world’s economy..

No matter what the specifics, this can not bode well for a global opinion of capitalism. Oddly enough… it’s not a free market failure. Because when you trace it back, it all started with government regulation intervention in the US by mandating easy money. From there, it spread like wildfire thru the free market for the demonstrated profits.

What comes now? Anyone’s guess. One thing for sure… the world may just have to back down in values of property. It’s overdue, and needed… in all countries.

Evidently there’s another bank (Bank of Switzerland) and yet another commonality… AIG. Wow… From today’s London Times Online

A few months ago I was seated at dinner next to a banker and, as you can imagine, my watch immediately started going backwards. Minutes crawled by, and as he droned on about derivatives and sub-prime markets in America I began to wonder if it would be poor form to stab him in the eye with my lobster scissors.

Instead I decided to try to will myself to death. But then I was snapped into hair-straightening consciousness when he casually mentioned that the giant Union Bank of Switzerland was in trouble.

UBS? That’s where I’d plonked all my life savings. What do you mean, trouble? Are you saying that because some Mexicans can’t afford to pay their mortgages I’m in danger of losing the fruits of a lifetime’s graft? The answer, when translated and condensed, was yes.

The next day, in a bit of a flap, I rang the bank, which quite understood my concerns and offered to transfer the bulk of my savings to a company I’d never heard of. It was called AIG.

continue reading at link above

Small “global” world, eh? And nothing to do with Fannie/Freddie, Lehman, etal. This all goes back to the already “rescued” AIG.

also:

Obama/Pelosi & DNC “injecting Presidential politics” into the bailout

“The concern that I have … is that when you start injecting presidential politics into delicate negotiations, then you can actually create more problems rather than less,” Obama told a news conference.

Sept 25th, 2008 Reuters article

Ah yes, another day, and more words. To suggest that the POTUS candidate for the party making the most noise to the overt nationalization of a sector of the free market should stay away for fear of appearing “political” is absurd at best. Not only should both candidates be actively involved for what is a substantial interjection of government interference into the markets for the next term, but McCain’s presence was more than mandatory. It is, after all, the GOP coming up with alternatives to the very principles of the government buy out of over leveraged paper, while Obama dutifully followed along on his partisan leash.

What was it Obama said? Don’t be “injecting Presidential politics” into this process? Yet over the past days, it was Obama and the DNC, shouting from the media roof tops that McCain’s very participation in the negotiations was a political stunt…. thereby “injecting Presidential politics”.

Senate Majority Leader Harry Reid said in a statement that the candidates’ presence could be a distraction during the delicate talks.

“If that changes, we will call upon them. We need leadership, not a campaign photo op,” Reid said

~~~

And the No. 2 Democrat in the Senate, Sen. Dick Durbin of Illinois, said McCain’s decision to return would would bring the “charged political atmosphere” of presidential politics to Washington.

“I’m not sure that will help create a positive, bipartisan or nonpartisan atmosphere to solve the problem,” said Durbin, who added, “I think we need to do this in a thoughtful, quiet and sensible way.”

[Mata Musing: does "quiet and sensible" include publicly accusing a sitting Senator's participation of charging the political atmosphere??]

One of the Democratic negotiators, Sen. Charles Schumer of New York, dismissed McCain’s move as a “political stunt.”

“The negotiations have gone on,” said Schumer, an Obama supporter. “It’s as if, you know, you’re in the middle of drawing an amazing painting and someone else comes in and says, ‘hey, come in, let me throw my brush marks on there.’ It just doesn’t make sense.”

Listen… from Schumer’s lips to your monitor..

The DNC was apparently thinking they and the WH would be the last words on the issue, and the GOP and McCain would meekly follow along. Nor did they anticipate the high negativity by the US taxpayer, with calls to Congress representatives surpassing the rejection of the immigration debacle not long ago.

Just days ago, the DNC was onboard with the WH in shoving this thru quickly, and with a version not significantly morphed from the original WH/Paulson three page draft. Do they honestly believe that our memories are so short that they expect us to believe the DNC is instrumental in the draft changes??

But banking on the electorates’ stupidity, they are. Today, they continue with “injecting Presidential politics” into the bailout with Pelosi racing with a press release to take personal credit for a potential bailout compromise being close.

Congressional leaders and Treasury Secretary Hank Paulson emerged a half hour after midnight to announce that they had reached an agreement on the Wall Street bailout. Apparently the break through came when Nancy Pelosi came up with some idea no one had ever heard of.

What idea? Apparently they are keeping it secret for now!

Speaking before a gaggle of Capitol Hill media, the negotiators declined to provide any details about the agreement. All we know is that Nancy Pelosi said that the “package” would stabilize the markets, protect the US taxpayers, provide for “equity in the upside,” include oversight, forebearance in terms of mortgage foreclosures and limits on executive compensation. Also, sources say the initial amount available under the bailout will be $350 billion. The additional $350 would become available later, perhaps after further Congressional action.

Apparently many of the details still need to be worked out. Already staffers for lawmakers are backing away from the notion that this is a final agreement, describing it as a “framework” for an agreement. So it’s like a term sheet, we guess. Hank Paulson sounded a cautionary note when he described the current status as “so far, so good.”

Evidently, Pelosi and Obama didn’t get their signals straight. For not to be outdone by the woman a couple of heartbeats away from the Oval Office, Obama is taking not only *his* bows for a potential agreement, but poo poo’ing the notion that McCain deserves any credit for his participation.

WASHINGTON — Democratic presidential nominee Barack Obama said Sunday his Republican rival deserves no credit for helping to forge a tentative agreement on the $700 billion bailout of Wall Street.

Instead, Obama said he deserves credit for making sure the proposal includes safeguards for taxpayers. Obama said he is inclined to support the bailout because it includes increased oversight, relief for homeowners facing foreclosure and limits on executive compensation for chief executives of firms that receive government help.

“None of those were in the president’s provisions. They are identical to the things I called for the day that (Treasury) Secretary (Henry) Paulson released his package,” Obama said. “That I think is an indication of the degree to which when it comes to protecting taxpayers, I was pushing very hard and involved in shaping those provisions.”

The safeguards were supported by many in Congress, including Democrats and Republicans.

~~~

Asked during an interview on CBS’ “Face the Nation” whether McCain deserved credit for bringing lawmakers together, Obama said “no.”

“Here are the facts: For two weeks I was on the phone everyday with Secretary Paulson and the congressional leaders making sure that the principles that have been ultimately adopted were incorporated in the bill,” Obama said.

Even today, the master of nuance, exudes confidence… at least on his role in the process, that is. However “inclined” isn’t exactly a vote of serious conviction. Then, it’s hardly a risky stance, nor a sign of leadership. And again, Obama takes credit for already accepted changes that the proponents – on both sides of the aisle – had from the start. I guess that makes it another of his “co-sponsor” status positions, being erroneously portrayed as the “sponsor”.

That this man and the media assume I, as a US taxpayer, am this gullible is beyond infuriating. There was little dissention between the DNC and Paulson/Bernanke/WH admin on amendments. What the DNC proposed as changes accounts for little more than accessorizing the nationalization of Wall Street.

The fact is, the “real” changes that protect “Main Street”, as they all like to call us now, are not coming from the DNC. It is the GOP who is looking for alternatives to limit, not only government intrusion, but the financial risk to the taxpayer. This is a battle of principles.

Instead, the DNC does exactly what they accuse the GOP of doing… politicizing the event for Presidential politics. And, just as they announced “a deal” last week prematurely, they may be in for a few surprises even yet.

The real action is behind the scenes, and centers around Eric Cantor, the number three Republican in the House.

Cantor, who drafted the Republican insurance plan, was still voicing doubts about whether there was a deal when he appeared this morning on CNN’s Late Edition.

“We are not ready to say that a deal is done,” Cantor said.

UPDATE: The Hill reports that today’s “deal reached” headlines may yet be another over reach of the truth.

Rep. Pete Hoekstra (R-Mich.) wrote on Twitter.com, “Sunday morning. News channels reporting a deal has been reach. Funny, somebody forgot to tell Congress. No details. Arm breaking begins soon!”

Rep. Mike Pence (R-Ind.) urged fellow Republicans to oppose the deal in a letter.

“The decision to give the federal government the ability to nationalize almost every bad mortgage in America interrupts this basic truth of our free market economy,” Pence wrote. “Republicans improved this bill but it remains the largest corporate bailout in American history, forever changes the relationship between government and the financial sector, and passes the cost along to the American people. I cannot support it.”

Pence added, “Before you vote, ask yourself why you came here and vote with courage and integrity to those principles…If you came here because you believe in limited government and the freedom of the American marketplace, vote in accordance with those convictions.”

House Republicans said they learned of the deal from the press, and not from their leaders, suggesting those leaders could be in story for a rocky House GOP conference meeting Sunday afternoon. The time for that meeting has not been scheduled.

Members of the conservative House Republican Study Committee, who will presumably show the most resistance toward the bill, will meet directly after the full conference.

A spokesman for Minority Leader John Boehner (R-Ohio) said he would not comment on the package until it was presented to his conference members for feedback. But Boehner’s office also issued a “myth versus fact” release, suggesting support for the compromise.

(continue reading more GOP objections at link above)

But typical for the liberal/progressive media… and despite ample proof that those truly politicizing the bailout are the DNC… they suggest that Cantor and crew are looking for details to vote against the plan merely because Pelosi is taking the credit, leaving McCain in the cold.

Needless to say, this altered reality in the beltway is fantasy. And frighteningly enough, they’re all starting to believe their own psychedelic versions of truth.