Posted on 09/24/2008 11:33:56 PM PDT by bruinbirdman
Kazakhstan’s government stepped in to help its banks on Wednesday by promising to buy up $6bn in bad loans to help them in the deteriorating financial climate.
In a move similar to the US government’s $700bn rescue plan, the government will create a fund to mop up toxic assets that are destabilising the banking system.
The liquidity squeeze has put Kazakhstan’s 36 banks under pressure as assets on their books have fallen in value and their ability to roll over bonds and loans has been curtailed by deteriorating credit conditions.
The banks, many of them highly leveraged, have an estimated $13bn backlog of bonds and loans that need to be refinanced over the next year. Many bank loans are secured by property, which has slumped in the past year.
Ali Al-Eyd, an economist at Citigroup, said: “ It is difficult to know how the plan will work out. On the one hand, it is a pro-active move by the government, but on the other hand it signals the banking sector could be in much worse shape than we thought.”
The cost of insuring the debt of Kazakh banks rose to record levels on Wednesday. The credit derivatives swap of Kazkommerts widened to 1,250 basis points, compared with 1,200bp on Tuesday. A CDS over 1,000bp often suggests a company has defaulted.
Bolat Zhamishev, finance minister, said the Kazakh authorities were in talks with foreign banks with similar experience of setting up buy-out funds. “It’s creation is planned for this year,” he said. “If we talk about sources for its financing, then we can say that it will be $1bn in budget money and $5bn from the market.”
The interconnection of the USA with the rest of the world’s markets should be apparent by this point. It’s time to rattle the cages and obtain official support from all the countries and interests we’ve made fabulously wealthy. Because we were never so stupid while building them up as to ignore the possibility of needing them in the future.
The timing of this seems almost planned by a super-villain determined to place Obama in a savior position. Man, some media people will have some roughing-up coming their way for so blatantly using their positions once this is over. Not from me first and merely speculation kicked around. Folks criticized Bush for flummoxing sentences...Obama can’t get through a paragraph without a minder-crew running a one second delay. He’s Muslim, unpatriotic and a horrible speaker when forced to on the spot.
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