From Across the Pond: The European View (Day 3)
Day Three Report from Keith Mullen and Lou Strawn in Europe
On this third day, Keith Mullen, Brenda Brown and I attended the opening session of a European-based real estate conference.
The opening meeting was a Q&A session with a panel composed of the head of a major German bank, the head of the Morgan Stanley European Real Estate Fund and the former chairman of the Euro Hype Fund. The room was standing room only, and the subject was (you guessed it) "Subprime, Credit Crunch Nonperforming Loans . . . The Year After (Strategies for dealing with the crisis)."
What is clear is that the Europeans are as concerned about their banking industry as their U.S. counterparts. The panel stated that this crisis has migrated from a "credit crisis" to a fundamental "trust crisis," and that trust will not be restored by more or stronger regulation, or enforcement, but by the investment behavior of the banking institutions themselves. Upon reflection, it is an interesting and alarming thought.
On a brighter note, the panel emphatically stated that there was no real danger of EU depositors losing funds as of last Friday (October 3rd), when it became clear that members in the EU would commit (and had committed) bailout capital similar to the U.S. Germany committed 520 billion euros; Ireland committed 400 billion euros; and Holland a similar amount. (This amount is in excess of the U.S. bailout.) However, these members did not take the buy "toxic debt instruments" like the U.S., but instead, they elected to directly back bank deposits.
The panel also discussed the volatility suffered by EU banks due to the swings in "mark to market" rule interpretations -- it was almost as if the panel was describing the U.S. banks. And, of course, the panel at length focused on the need for transparency, and the "German mortgage bond," which we know as the"covered bond."
No one clapped at the end of the session. Everyone simply left the room.
If you have any observations or comments, or any questions that you'd like us to ask during our EU trip, please "post" a comment.
