A more perfect EUnion

October 24, 2013

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“Winter slips away,

spring is still holding its breath.

Heaven has its doubts.” 

That’s a haiku by European Council president — and sometime poet — Herman Achille Van Rompuy, which Bloomberg’s James Neuger suggests can be read as a meditation on the state of the European Union. Both Bloomberg and the WSJ echo this poem’s resigned tone: Europe seems to be failing in its attempts to become a little more Union-y and prevent future debt crises. Germany, the WSJ says, is pushing back on proposals that would create a shared method for winding down struggling banks. Reuters, however, reports that EU leaders will announce a timetable for a full bank union by the end of the year.

Before it takes over as the main supervisor of the continent’s big banks next year, the European Central Bank is already out with a three-part plan to investigate the health of the industry’s balance sheets, which will include stress tests. “Good luck with that,” Danny Hakim writes in a profile of the ECB official who’ll oversee this process. “The world’s financial institutions have become black boxes, so opaquely complex that they are little understood by regulators or their own executives.”

As for the stress tests, Jonathan Weil says the question is whether the ECB’s “objective will be to dig out the truth about banks’ health and let the chips fall where they may, or whether it hopes to divulge merely the minimum amount of bad news needed to give the results a veneer of credibility.” Jason Karaian worries that the ECB risks being too tough: if the stress tests find more problems than expected, that could force already debt-addled European countries into bigger debt problems. European banks, as the FT wrote earlier this month, are more exposed to sovereign debt than at any time since the Euro crisis.

What comes after the ECB’s year-long review of 130 banks in 18 countries? Thorsten Beck notes that Europe’s bank problems are heavily concentrated in highly indebted countries. Fixing banks with a banking union, he says, “is like introducing insurance after the injury has occurred.” In a leaked letter, ECB president Mario Draghi warned that European countries won’t be able to simply rely on the ECB to fix banks for them.

Euromoney notes that the stakes are particularly huge for the ECB, and after a dizzying asset-quality review, Europe may ultimately be headed for its own TARP moment:

While European banks rescued piecemeal by separate national authorities in the depths of the crisis have been shedding operations and market share in recompense for state aid ever since, it was arguably the comprehensive Tarp programme passed five years ago that helped restore US banks to the point where they could lend to the real economy.

– Ryan McCarthy

On to today’s links:

Carl Icahn’s letter to Apple’s CEO: Time to buy back $150 billion in stock – Street Insider

What kind of problem is the Obamacare rollout for liberalism? – Mike Konczal

Sad Declines
The decline of Wikipedia, which is wracked by “crushing bureaucracy” – MIT Technology Review

Recreating New York in the 1920s through noise complaints and newsreels – USC
Jeff Bezos interviews a writer: “How do you plan to handle the narrative fallacy?” – Shane Parrish

New Normal
America’s disability-industrial complex – Tim Taylor

Banks don’t commit financial crimes, people do – Cassandra Does Tokyo
JPMorgan’s $13 settlement was negotiated through the revolving door – Little Sis blog

It’s Academic
“I vomited a little after discovering the works of Arendt, Deleuze and Kant were being used” to coach executives – Critical Theory

The man who won a Nobel prize for helping to create the global financial crisis – James Crotty

Twitter quietly doubles board compensation — to up to $16 million each – Footnoted

Country Music Investing Advice
When you make “457% in only 14 months it is time to take some of the chips off the table” – Reuters

Memento Pecuniae
JP Morgan owns the gun that killed America’s first central banker – FT

What happened to Goldman’s promise give customers immediate access to aluminum? – Climateer Investing

Chipotle’s in-house DJ – Claire Suddath

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