economy Markets

Breaking Down ‘The Biggest Global Bailout In History’

"Whether the stimulus is remotely enough remains to be seen".

In an expected move that essentially mirrors the Fed's cushion for fallen angels in the US, the ECB said Wednesday it will change its collateral rules to mitigate the impact of downgrades. The headline will invariably be "ECB accepts junk collateral", but that's completely devoid of nuance. All they're doing is grandfathering in assets which met eligibility requirements as of April 7. The statement specifically references COVID-19 as the proximate cause of the decision - you know, in case you missed the whole "pandemic" story over the past three months. "The Governing Council aims to avoid potential procyclical dynamics", the press release reads. "This would ensure continued collateral availability, which is crucial for banks to provide funding to firms and households during the current challenging times". Still, this can be fairly (if hyperbolically) described as another manifestation of a "bailout". After all, if you aren't eligible for central bank programs and funding facilities, it becomes decidedly dicey for you as an issuer. In this case, "you" probably means "Italy", which is staring at a possible downgrade. Thanks to the ECB's decision, the country no longer has to be c
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1 comment on “Breaking Down ‘The Biggest Global Bailout In History’

  1. Or you can listen to the sage Rick Santelli……

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