Britannia Radio

A giant German financial institution is near to total collapse after 
the intended rescuers found more dodgy figures and pulled out.  I 
wonder if they even discussed this at their farce of a EU summit 
yesterday ?  The politicians are floundering around like fish caught 
in a net.

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TELEGRAPH   5.10.08  @ 1.44pm
Financial crisis: Hypo Real Estate nears collapse after rescue plan 
is withdrawn
International property lender Hypo Real Estate is fighting for its 
life after German banks and insurers pulled out of a multi-billion 
pound state-led rescue plan after fresh financing shortfalls emerged 
this weekend.

By Richard Tyler

Executives at the bank, which is Germany's second largest commercial 
property investor and has extensive holdings across Europe, are now 
locked in crisis talks with the German government and central bank in 
an attempt to deliver an alternative plan before the stock markets 
open on Monday.

The German Finance Ministry has urged the private sector consortium 
to rethink its decision.

The collapse of the ?35 billion (£27.3 billion) bail-out will provide 
an immediate test to the pledge made on Saturday by leaders from the 
biggest European Union countries that they will ensure that no major 
European financial institution will be allowed to fail. It is a fresh 
blow for the global financial system struggling to master an 
unprecedented crisis of confidence.

A Finance Ministry spokesman said: "It's a matter of using all 
possibilities for a solution. Everyone has to meet their 
responsibility, and according to the scale of their responsibility."

The spokesman said experts from the government, the Bundesbank and 
regulator BaFin were meeting to assess the situation and would be 
consulting with the banks and insurers.

At the appropriate time, German Finance Minister Peer Steinbrueck and 
Chancellor Angela Merkel would decide whether and how to get involved 
but it was first up to the experts, he said.

Neither Hypo nor the banks and insurers involved had informed the 
Government before the collapse of the rescue package, he added. "That 
is certainly very surprising," he said.

Sources familiar with the matter said that the German financial 
sector had balked at the rescue plan after new funding issues emerged 
on Friday. They had then insisted that Berlin take on a greater role 
in saving the bank.
It may mean that Germany will be forced to nationalize the stricken 
lender, which would wipe out a ?1.1 billion investment made by 
investment firm JC Flowers & Co, one of the unsuccessful rescue 
bidders for Northern Rock, in June.
"The 35 billion euro rescue package promised to the Hypo Real Estate 
Group and extending into 2009 announced last week is currently 
withdrawn," the Munich-based real estate and public-sector lender 
said in a brief statement.

"The intended rescue package involved a liquidity line to be provided 
by a consortium of several financial institutions. The consortium has 
now declined to provide the line."

Hypo said it was investigating alternative measures and that its 
major shareholders, which include J.C. Flowers & Co, the investor who 
unsuccessfully bid to rescue Britain's Northen Rock before it was 
nationalised, were standing by the bank.
"We are fighting for the future existence of the company," Hypo 
spokesman Hans Obermeier said. "We can only assume and hope that all 
parties participating in these discussions are fully aware of the 
seriousness of the situation."

German banks and insurers, including Deutsche Bank and Commerzbank, 
had nailed down final terms of the rescue package only during 
protracted and difficult negotiations in the early hours of Friday 
morning.

They were to absorb ?8.5 billion of the deal while the public sector 
was to shoulder the rest.

A German Finance Ministry spokesman said Berlin was taken by surprise 
by the news and would seek to compile more information.
"We hope that everyone is aware of their responsibility," he added.

Hypo acquired Dublin-based DEPFA bank, a public finance specialist, 
last year in a deal that took its total balance sheet to ?400 
billion. Last week it had to write down the value of bank, which it 
admitted would have "a significant material effect" on its profits.

At the half year mark in June, the bank said it had commercial 
property assets worth ?65 billion, spread over 30 countries. It told 
investors that it had begun reducing its exposure to risky countries 
like the UK and Spain.
Hypo is the fifth German bank to be bailed out in the wake of the 
credit market turmoil stemming from the United States.  [This should 
read  "in the wake of the credit market turmoil stemming from 
European banks readiness to buy up dodgy parcels of debt without 
first checking their worth" -cs]