Bank/Mortgage Failure Resistance = 0Germany Says Hypo Can’t Fail, Mulls Bank Takeover Law (Upd
By Tony Czuczka
Feb. 2 (Bloomberg) -- Germany’s government said propertylender Hypo Real Estate Holding AG is too big to be allowed tofail, as officials hold “intensive” talks on a draft law thatmay enable the state to take over banks.
Munich-based Hypo Real Estate, already bailed out withpublic funds last year, is a “systemically relevant” companyand the government must ward off risks to the financial system,spokesman Thomas Steg told reporters in Berlin today. At thesame time, Chancellor Angela Merkel’s coalition must deliver the“most favorable” solution for taxpayers, he said.
“Taking over stakes may make sense in specific cases ifthat lowers the cost to taxpayers,” Merkel said, according totoday’s Bild newspaper. Steg said that Merkel had “made itclear” that the government may need to step in whereinstitutions are in trouble.
Merkel’s coalition, which has pumped 92 billion euros ($117billion) into Hypo Real Estate, joins governments worldwide indeliberating how best to save banks worst affected by the globalcredit crunch. Globally, governments have pledged $7 trillion toback banks, U.K. Prime Minister Gordon Brown said today inLondon. Merkel will host European leaders in Berlin on Feb. 22to discuss changes to the global financial system, Steg said.
‘Substantial Recapitalization’
Moody’s Investors Service downgraded Hypo Real Estate’ssenior unsecured debt and deposit ratings to A3 from A2,“reflecting the expectation of a substantial recapitalizationby the German government or even nationalization of the group.”It also lowered the outlook on all ratings to negative, Moody’ssaid today in a statement.
Hypo Real Estate shares dropped as much as 10 percent inFrankfurt trading. The stock declined 3 cents, or 2.3 percent,to 1.25 euros by 4:20 p.m. local time. The shares have lost 95percent over the last 12 months, giving the company a marketvalue of 247 million euros.