Tuesday October 4 20916 Housing and Economic stories

TOP STORIES:

Europe’s Crisis-Fighting Fund Gets Paid to Borrow for Nine Years - (www.bloomberg.com) Investors are paying for the privilege of bailing European countries out of their various crises. The European Stability Mechanism, which acts as the euro region’s financial backstop, sold nine-year bonds, the longest-maturity debt they’ve issued at a negative yield. That shows how keen money managers are to find somewhere safe to invest their money -- even if this means they get back less on maturity than they paid in. Bailing out countries may sound like risky business, but the ESM is an intergovernmental organization whose initial capital was provided by euro members. The deal also reflects wider trends, with the European Central Bank’s quantitative-easing program supporting sovereign, sub-sovereign and agency debt and pushing yields across the currency union below zero. Finland’s 10-year bonds were the latest to join the club today.

EU Banking Mayhem, One Bank at a Time, then All at Once - (www.wolfstreet.com) The European banking crisis simply doesn’t let up. Currently, the big two German banks are grabbing the headlines away from the Italian banks, due to their size and the damage they could do to the global financial system. Other banks are in bigger trouble still, and some have already collapsed, with bailouts and bail-ins getting lined up. Deutsche Bank had to endure a horrendous Monday after it was leaked on Friday that Merkel had refused to entertain bailing out the bank before the general elections a year from now. Merkel’s popularity has gotten broadsided recently, and bailing out bank bondholders with taxpayer money is just not popular at the moment. Then Commerzbank, in which the government already owns a stake of 16% as a result of the bailout during the Financial Crisis, graced the headlines with leaks that it would lay off 9,000 employees, nearly one-fifth of its workforce. This will cost about €1 billion, according to the sources.

Turkey Contemplates Buying Deutsche Bank - (www.zerohedge.com)  In what is surely the most stealthy version of Wednesday humor we have ever posted, Bloomberg reports that according to Yigit Bulut, chief adviser to Turkish President Recep Erdogan, Turkey should consider "using a new wealth fund or a group of state-owned banks to buy" the embattled Deutsche Bank. Bulut made the proposal on Tuesday via his Twitter account, saying Germany’s largest lender should be made into a Turkish bank. "For months on TV programs, I’ve been calling on Turkey’s private and public capital: ‘Some very good companies in the EU are going to fall into trouble and we need to be ready to buy a controlling stake in them,’” Bulut wrote on Twitter. "Wouldn’t you be happy to make Germany’s biggest bank into a Turkish bank!!" the advisor said, cited by Bloomberg.

Deutsche Bank Troubles Cast Long Shadow Over European Banking - (www.bloomberg.com) The turmoil swirling around Deutsche Bank AG has brought simmering concerns about the health of Europe’s banks back to a boil. Germany’s largest lender hit a record low earlier this week, dragging down European financial stocks, after the U.S. Department of Justice requested $14 billion to settle claims tied to fraudulent mortgage-backed securities. While the bank said it won’t pay anywhere close to that amount, the dust-up fueled doubts over its capital levels and refocused investors on the industry’s faults. “One word -- Deutsche,” said David Moss, who helps to oversee more than $238 billion of assets at BMO Global Asset Management in London, when asked to sum up escalating concerns over European banks. “That’s the biggest thing -- it’s reignited the risk around regulation, fines and litigation.”

Senate Set to Override Obama Veto of Saudi 9/11 Lawsuit Bill - (www.bloomberg.com) The Senate defied a last-ditch lobbying effort by the White House and Saudi Arabia by voting Wednesday to override President Barack Obama’s veto of a bill that would allow the kingdom to be sued for involvement in the Sept. 11 attacks. The overwhelming 97-1 vote was more than enough to clear the two-thirds threshold needed to override the veto. Congress has yet to override a veto by Obama, but that is likely to change when the House holds its override vote, which is expected Wednesday afternoon. If two-thirds of the House votes to override, the bill will become law. The result could prompt Saudi Arabia to delay its first international bond out of concern that some investors may balk over the issue, two people with knowledge of the matter said. Saudi Arabian officials haven’t made a decision yet on the timing of the bond or the amount they plan to raise, Finance Minister Ibrahim Al-Assaf said in a statement to Bloomberg.

OTHER STORIES:

U.S. Stocks Rise on Consumer Confidence After Debate; Oil Slumps - (www.bloomberg.com)
Political support for 'dinosaur' banks must end: Bundesbank's Dombret - (www.reuters.com)
Italy set to cut growth forecasts, hike deficit - (www.reuters.com)
Draghi Goes Head-to-Head With German Critics of ECB’s Low Rates - (www.bloomberg.com)

Vancouver, London Top List of Cities at Risk of Housing Bubble - (www.bloomberg.com)
Deutsche Bank Puts Germany in a Bailout Bind - (www.wsj.com)
China’s Currency? That’s the Least of the Problems for the Next U.S. Leader - (www.wsj.com)
German financials face sustained market pressure - (www.ft.com)
Deflation risk and trade slump cast chill over global economy - (www.ft.com)