Ah yes, as I observed in a post a few days ago, when it comes to state funds made available to prop up failing banks, the German bank bailout demand is low. But “low” does not have to mean “non-existent,” and in fact on Thursday the German government made use of the Sonderfonds Finanzmarktstabilisierung (“Special Fund for Financial Market Stabilization,” or Soffin) it had established to provide Commerzbank with €10 billion in exchange for taking up a 25% ownership stake. More precisely, of that €10 billion €1.8 billion actually buys that equity quarter-stake while the remaining €8.2 billion goes to a “silent participation” that gains no voting rights. By the way, at roughly the same time Commerzbank also took advantage of that other facility offered by Soffin – namely State debt guarantees – to bring in another €5 billion in new capital via a guaranteed bond-issue.

If you were to use your imagination to put yourself in the German federal government’s place – say, if you were a German taxpayer in whose name all this money was being spent – you might very well wonder what those civil servants in charge of the Soffin were thinking by accepting in exchange for the lion’s share of that €10 billion amount a mere “silent participation.” After all, it’s clear that insisting on a 100% active participation would have resulted in the purchase of the entire bank, with money to spare. (Do the math: that €1.8 billion bought a 25% interest, yet constituted not even 25% of the €10 total spent.) Instead, the remainder of that money gains for the government the “silent participation” that is in effect a loan, charging 9% interest. (more…)

It’s a New Year, and now time for us all to head back to work. But I did want to call forth to the light an interesting article of 31 December 2008 from the Frankfurther Allgemeine Zeitung about the experience so far with the structures the German government put in place last fall to prop up its banks (Few banks seek State protection).

FAZ reporter Manfred Schäfers gives an interesting outline of the monetary amounts and structure involved there. First the former: the German government is ready to issue bank-guarantees in the amount of around €400 billion (the exact amount is unclear because Schäfers mentions two different figures even within the confines of this relatively-short article) and is making available an additional €80 billion in outright capital-injections. The program, run out of the federal Finance Ministry, is the Sonderfonds Finanzmarktstabilisierung (meaning “Special Fund for Financial Market Stabilization,” abbreviated as Soffin), headed by a three-person committee of banking worthies that includes Gerhard Stratthaus, former Finance Miniser for the state government of Baden-Württemberg and Schäfers’ main information source. Strangely, the participation on that committee of two other named individuals, who are supposed to be Stratthaus’ colleagues, is still up in the air.

I guess that’s OK, though, because the point of the article is that Soffin’s agenda is not really chock-full. “Up to now we’ve got 15 applications,” Stratthaus reveals, “and most [financial] institutions are interested in the guarantees.” Of those that are seeking a chunk of actual money – i.e. a piece of the €80 million budgeted for capital injections – their requests to this point add up only to less than €15 billion, and other indications point to Commerzbank as responsible for €8.2 billion out of that alone. (more…)