> On Oct 3, 2008, at 2:42 PM, Jordan Hayes wrote:
>
>> Brad Delong quipped (in response to a question about a "Euro-
>> bailout") that the government of Switzerland isn't big enough to
>> recapitalize the Union Bank of Switzerland :-)
>
> The gov of Deutschland isn't big enough to recap Deutsche Bank either,
> is it?
Recapping DB wouldn't be hard, a couple hundred billion euros of treasury notes would do the trick. The EU is fundamentally far healthier than the US these days - it still has an industrial base, doesn't have huge current account deficits, is self-financing, etc.
For folks on this list not versed in the ways of finance: recapitalization means adding solid money to a bank's deposit base. Deposits are a tiny chunk of a bank's assets; loans are always much, much bigger, because that's what banks do - borrow short and lend long.
That's why nationalization is a Good Thing (TM, Pat. Pending) - it means you add to the deposit base (shore up the dam) instead of bailing out bad debt (trying to drain the ocean).
-- DRR