Tag Archives: debt

The moralist language of debt

Bill Mitchell is on it again – this time regarding the moralist language used regarding debt. This is not a uniquely German thing, also the Netherlands and Finland frequently sprout this kind of language. Together with this piece, I suggest David Graeber’s book “Debt: the first 5000 years.”

I am not entirely sure about Mitchell’s mention of Catholicism though. Also regarding Graeber’s book, I think the obsession with debt as a moral issue is much closer to Lutheralism and Calvinism though. It might very well be in itself a reaction (dating to the Reformation) to Catholicism, with their gold and corruption.

‘Nationalization of SNS – Costs 3,7 billion’

The bullet is through the church, or so it is (literally) said in the Netherlands: the nationalization of SNS Reaal, which was expected, is now a fact. The first interesting development is that the Dutch budget deficit increases to 3,3% or in other words: over the limit set by the EU. But Finance minister Jeroen Dijsselbloem says this nationalization was inevitable, because the bank would have gone bankrupt otherwise, and very soon too.

Regarding the junior/subordinate bonds:

Het ministerie van Financiën onteigent de investeerders die achtergestelde leningen hebben gegeven aan SNS Reaal. Dat scheelt de schatkist volgens Dijsselbloem een miljard euro. De Nederlandse banken moeten ook bijdragen aan de overname.

In other words – the Finance ministry disowns the investors that had subordinate loans to SNS Reaal, which apparently makes a difference of 1 billion (shareholders are also not protected). Also the other Dutch banks are supposed to contribute to the nationalization – they have to pay banking fee of 1 billion. But in exchange, they can take more time to fill a fund that is meant to protect the accounts of normal account holders.

 

I am not sure if this write-down of subordinate bonds is the issue referred to by Fitch, but the whole episode is quite dramatic, especially since the bank received support in 2008 already, and the Dutch financial system doesn’t yet seem any more stable.