The Gloriously Ballooning Bailout Bedlam Of Cyprus
by Wolf Richter, Testosterone Pit.com:
Bailouts start out small. At first, Cyprus just had a funding crisis; the markets had gotten smart, after years of dousing the country with cheap euros. Not that the risks weren’t there before. But markets opened their eyes. So Cyprus went begging to Russia, and got €2.5 billion in November 2011. That money evaporated without a trace. Then last June, the two largest banks were deemed to need €2.3 billion – €500 million for the Bank of Cyprus and €1.8 billion for Laiki Bank – to fill a void in their regulatory capital, the story went. No big deal.
But the banks were joking. They’d been eviscerated by mismanagement and corruption. Their balance sheets were loaded with deteriorating Greek corporate debt, Greek government bonds that had received a 70% haircut, loans to developers extended during the real-estate bubble that had blown up, loans on developments that were never finished or were built so shoddily that they’ve been declared uninhabitable, loans to politicians that were written off as gifts, and mortgages extended to homeowners who were tangled up in a title-deed scandal that the banks themselves had aided and abetted, leaving 130,000 properties (in a country with 838,000 souls) without title deeds, with disputed ownership, and often worthless mortgages.
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2013-04-13 08:00:11
Source: http:///2013/04/the-gloriously-ballooning-bailout-bedlam-of-cyprus/
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