The Credit Crisis Financial Stocks Short Journal

[Martinghoul]

Well, Moody's, for one, states openly that the rating outlook for Greece is dependent on aid. In fact, one of the reasons they cited for their most recent downgrade was the uncertainty about the aid package.

As to getting all of the money from the IMF, I think that only happens as a last resort. Generally, though ratings really matter very little at this point.

 

[Daal]

Quote from Martinghoul:

Well, Moody's, for one, states openly that the rating outlook for Greece is dependent on aid. In fact, one of the reasons they cited for their most recent downgrade was the uncertainty about the aid package.

As to getting all of the money from the IMF, I think that only happens as a last resort. Generally, though ratings really matter very little at this point.

The thing is 5% loans from the EU wont help much with the interest rate costs in terms of the agencies but 2.5 might. You dont think if their debt becomes junk and they get shutdown of the ECB that will matter?It could lead to a run on greek banks

 

[Daal]

I remember Trichet saying that they wouldn't change their rules in order to accomodate the PIGS, the ECB did continue their 'almost junk' policy of accepting almost junk gov bonds that was apparently set to expire to not sink Greece but he rationalized in the press conference 'we didnt change, just extended the emergency policy'. If GGB goes to junk, then they would have to change and they might not want to do that

 

[Martinghoul]

Quote from Daal:

The thing is 5% loans from the EU wont help much with the interest rate costs in terms of the agencies but 2.5 might. You dont think if their debt becomes junk and they get shutdown of the ECB that will matter?It could lead to a run on greek banks

If there's one thing that I am ABSOLUTELY certain about, it's that the ECB will continue to fund Greek guvvies, no matter what the rating is. They will change their collateral rules, like they have done already, if necessary, but they will NEVER withdraw their funding. That's exactly why they have been talking about their own ratings system, rather than ratings agencies'. Not funding EMU sov paper would be an act of folly, 'cause they would be, effectively, voting themselves out of a job.

 

[Daal]

Dow Jones: German Minister: Will meet with Parliamentarians Monday

There is the TARP moment

 

[Daal]

Heres what he said
http://imarketnews.com/node/9766
Asked last January in the context of Greece's eroded credit rating whether the ECB still intended to revert to the old collateral rules at the end of this year, Trichet replied, "We will not change our collateral framework for the sake of any particular country."

Then he defended the extension saying it was an extension of the emergency policy not a direct measure. If GGD becomes junk then he loses that defense

 

[Martinghoul]

I know what he said... However, and it's up to you whether you want to trust me on this, there is NO way they will stop funding paper issued by a sovereign member of the EMU. It doesn't matter what they say; they will find a way to do what has to be done.

 

[Debaser82]

Quote from Martinghoul:

I know what he said... However, and it's up to you whether you want to trust me on this, there is NO way they will stop funding paper issued by a sovereign member of the EMU. It doesn't matter what they say; they will find a way to do what has to be done.

+1

Look into the Flowers Hypo real estate case also.

When push comes to shove rules are there to be broken just to maintain the status quo.

 

[Daal]

Quote from Martinghoul:

I know what he said... However, and it's up to you whether you want to trust me on this, there is NO way they will stop funding paper issued by a sovereign member of the EMU. It doesn't matter what they say; they will find a way to do what has to be done.

Lets say thats true, still, the market sold off hard yesterday after the downgrade. The market is paying attention to it

 

[Martinghoul]

Quote from Daal:

Lets say thats true, still, the market sold off hard yesterday after the downgrade. The market is paying attention to it

Nah, it wasn't the downgrade... Greece was at its widest before the downgrade, on the back of the various restructuring speculations.

As I said, in my view, there is no danger of ECB collateral rules materially affecting the Greek situation. Feel free to disagree. After all, it's just an opinion.