"The German criticism of a mess they themselves have enabled (and benefit from
via peripheral current account deficits funded via TARGET2 as shown previously
here)
at the ECB continues, and following
public protests by Bundesbank head Jens Weidmann about recent ECB activity,
it is the turn of former ECB executive board member Juergen Stark to take center
stage. In an interview with the Frankfurter Allgemeine, warned that following
the massive expansion in the ECB's balance sheet, in which it is clear to anyone
that the ECB will accept used candy bar wrappers as collateral, that
"the balance sheet of the euro system, isn't only gigantic in size but
also shocking in quality."
Of course, with the ECB now the bad banks' bad bank, this is not at all surprising. Keep in mind that the recent $1.3 trillion balance sheet expansion was supposedly not the equivalent of "printing money" because the ECB made the cash available in the form of a loan in exchange for collateral. The problem is that the ECB accepted literally everything that was not nailed down and proceeded to give 100 cents on the dollar for some unamortized book value associated with it. The end result was the already documented here first encroaching ECB initiated margin calls which may or may not be an added twist in the European liquidity situation. However one thing is certain: the quality of the ECB's balance sheet has deteriorated massively, as the European central bank rushes to catch up to the Fed in terms of asset "quality" backing the currency..."
at http://www.zerohedge.com/news/ex-ecbs-juergen-stark-says-ecbs-balance-sheet-gigantic-collateral-quality-shocking
Of course, with the ECB now the bad banks' bad bank, this is not at all surprising. Keep in mind that the recent $1.3 trillion balance sheet expansion was supposedly not the equivalent of "printing money" because the ECB made the cash available in the form of a loan in exchange for collateral. The problem is that the ECB accepted literally everything that was not nailed down and proceeded to give 100 cents on the dollar for some unamortized book value associated with it. The end result was the already documented here first encroaching ECB initiated margin calls which may or may not be an added twist in the European liquidity situation. However one thing is certain: the quality of the ECB's balance sheet has deteriorated massively, as the European central bank rushes to catch up to the Fed in terms of asset "quality" backing the currency..."
at http://www.zerohedge.com/news/ex-ecbs-juergen-stark-says-ecbs-balance-sheet-gigantic-collateral-quality-shocking
