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ROME – Monte dei Paschi di Siena, Italy’s third-largest bank, plans to offer investors as much as 5 billion euros, or $6.9 billion, in new stock as it fights to avoid nationalization and braces for stress tests of its balance sheet by European regulators, the lender announced on Friday.

How old is this bank, by the way?

Monte dei Paschi, founded in 1472, is considered the world’s oldest bank.

What is this bank's immediate problem?

Monte dei Paschi is facing a deadline imposed by the European Union to begin repaying €4.1 billion in bailout money this year. Failure to do so would mean that it must repay the interest in shares, effectively becoming nationalized.
It still hasn't repaid it's bailout funds - something all the big US banks did back in 2009.

So if it can't cough up the repayment the regulators (the EU in this case) will take back it's stake in the form of equity (stock) thus diluting it enough to become the principle owner.

Now, what would happen under Dodd-Frank?  Liquidation.  Barney Frank's "death panel for banks".


Title II, the Orderly Liquidation provision of the Dodd-Frank Act, provides a process to quickly and efficiently liquidate a large, complex financial company that is close to failing.  Title II provides an alternative to bankruptcy, in which the Federal Deposit Insurance Corporation (FDIC) is appointed as a receiver to carry out the liquidation and wind-up of the company.  The FDIC is given certain powers as receiver, and a three to five year time frame in which to finish the liquidation process. Title II is aimed at protecting the financial stability of the American economy, forcing shareholders and creditors to bear the losses of the failed financial company, removing management that was responsible for the financial condition of the company, and ensuring that payout to claimants is at least as much as the claimants would have received under a bankruptcy liquidation.

So, Citi recently failed its stress test.  Guess what they will do?   They will go find adequate capital to avoid the death penalty.

Who says we didn't get reform?

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Comment Preferences

  •  Tip Jar (6+ / 0-)

    "The way to see by faith is to shut the eye of reason." - Thomas Paine

    by shrike on Sat Apr 19, 2014 at 01:16:46 PM PDT

  •  Il Palio di Siena is the oldest horse race (4+ / 0-)

    Palio di Sena photo Palio_di_Siena_2008_2_zps5a62fd8c.jpg

    The races and the bank will survive.  The shareholders will change.

    Italians invented modern banking and modern accounting (Pacioli), they are survivors.  

    Daily Kos an oasis of truth. Truth that leads to action.

    by Shockwave on Sat Apr 19, 2014 at 01:44:21 PM PDT

  •  While Citi will survive (2+ / 0-)
    Recommended by:
    shrike, thanatokephaloides

    via capital infusions, they will continue to shrink in size. And, correct me if I am wrong here, so are all the other TBTFs shrinking. All a consequence of Dodd-Frank and Basel III. This is a good thing.

    There was only one joker in L.A. sensitive enough to wear that scent...and I had to find out who he was!

    by virginislandsguy on Sat Apr 19, 2014 at 02:33:26 PM PDT

    •  Yes, all the Wall St TBTFs are shrinking. (1+ / 0-)
      Recommended by:

      Wells Fargo and PNC are growing though.  I personally don't call them "Wall Street" but they are TBTF.

      Nice to see you, VIG!  I post less these days but I still like to follow the DKos talk.

      "The way to see by faith is to shut the eye of reason." - Thomas Paine

      by shrike on Sat Apr 19, 2014 at 02:53:25 PM PDT

      [ Parent ]

      •  Good to see you again too (0+ / 0-)

        I stayed away starting back in October because things got, for lack of a better word, stupid here when Obamacare got off to a bad start. That and lots of stuff in real life.

        The good news is things in RL are going well and the atmosphere here on DK, in sync with Obamacare, has gotten significantly less stupid. Funny how that worked out.

        On the analytical side I find the biggest divide here is over our mixed economy. There are those who believe any form of capitalism in our economy must be smashed and replaced. And on the other side are those like ourselves who see the market/capitalist sector is a fact of life for now and way into the future.

        I don't see that changing here though I sense the anti-market side is feeling down due to Markos' latest manifestos.

        PS: As much as I too would like to use the OD*er acronym here, it's still a no-no.

        There was only one joker in L.A. sensitive enough to wear that scent...and I had to find out who he was!

        by virginislandsguy on Sat Apr 19, 2014 at 09:02:00 PM PDT

        [ Parent ]

    •  Also, what does "Wall Street" mean? (0+ / 0-)

      To me, it is Wall Street in New York City.  To others it means any large company traded on Wall Street.

      Well, I live in Atlanta and Coca-cola is definitely not Wall Street.  But they are a large Fortune 50 company and many here say that a multi-national is Wall Street due to their sheer size and global reach.

      "The way to see by faith is to shut the eye of reason." - Thomas Paine

      by shrike on Sat Apr 19, 2014 at 02:58:08 PM PDT

      [ Parent ]

      •  From my point of view - Wall Street is a company (2+ / 0-)
        Recommended by:
        shrike, Chi

        or group of companies that has the power to affect national policy through donations and/or lobbying.  Coke-cola is one of those because its shear size can dictate how a State will compose its laws that may affect the company.  I'm trying to think of a soda company that hasn't been bought up by Coke or Pepsi..... to show as a comparison of power.

        Chase can dictate law where University of Iowa Community Credit Union can't.

        •  That is an acceptable definition nowdays. (0+ / 0-)

          But Wall Street traditionally meant investment banking only.

          In 1950 (for example) if you wanted to raise money for a significant business venture Wall Street was it.

          "The way to see by faith is to shut the eye of reason." - Thomas Paine

          by shrike on Sat Apr 19, 2014 at 03:39:16 PM PDT

          [ Parent ]

  •  I have no problem with nationalization (2+ / 0-)
    Recommended by:
    420 forever, Chi

    IF it also means democratization and public control.

    In the end, reality always wins.

    by Lenny Flank on Sat Apr 19, 2014 at 03:01:36 PM PDT

  •  You know why Monte lasted 500 years? (2+ / 0-)
    Recommended by:
    Chi, whizdom

    Because for that time it had always been a conservative bank run by a publicly established non-profit dedicatedto the public. It weathered wars, depressions, fascism and communism.

    Only after Burlesconi and financial buccaneers take over they they get into derivatives and typical Wall Street stupid shit. And political I fluence as Sconi forced it to buy Italy's trash bonds.

    Now its a smoldering ruinof its former self. And about to be privatized. BlackRock just ate the first chunk.


    •  I can't dispute any of your post. (0+ / 0-)

      What is important are that depositors are saved whole and that regulators step in quickly to avoid capital depletion.  

      "The way to see by faith is to shut the eye of reason." - Thomas Paine

      by shrike on Sat Apr 19, 2014 at 04:02:22 PM PDT

      [ Parent ]

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