hetaWhen a company trading in asset resolutions resolves not to be insolvent, it’s a bailin. Why Mario Draghi and German banks are really to blame. How the Austrian Government lied about the real situation.

Once upon a time there was a AAA, badly-run Austrian bank – a whopper – called Hypo. But then a German shareholder Bayerische Landsbank gave out some idiot loans in the Balkan States, and the Bavarian subsidiary stepped neatly out of the way just before the solids hit in 2009. So Hypo became a broke bank thanks to a naughty German bank, and the Austrian Government bailed it out.

As is the custom in these circumstances, a ‘bad bank’ was created. A naughty bank is different to a bad bank, in that the NB sprays merde everywhere, and it’s all tucked away into the BB.

The clue’s in the name when it comes to bad banks, but until quite recently this one – Heta – was rated AAA Aaa by some ratings agency somewhere of dubious ownership. So not surprisingly, lots of money piled into Heta.

Of course, some small change to the tune of 5.5bn euros had been needed to set up Heta and write off the ordures. But everyone seemed to be quite happy with the way things were going. Until yesterday.

Because yesterday, “the first results of an asset review suggested a dramatic change in the asset evaluation”. Don’t you just love financespeak? They ‘reviewed’ the assets, and lo, there had been a change, and so the managers were sore afraid. The ‘evaluation’ of the assets showed a great big hole to the tune of 7.6bn euros.

But here’s the beautiful irony: the bank’s full name is Heta Asset Resolution. Well guys, now’s the time to show us your resolve in the resolution of this seemingly unresolvable problem.


And so we arrive at the first, mainland major bailin under the new shiny template developed by Jereboam Dieselbang. Under his new ‘directive’ (the European Commission is a non-stop stream of Freudian slips) the immediate Heta debt moratorium declared by the Austrian government means 950 million euros of bonds due March 6 and March 20 won’t be repaid, nor will 9.8 billion euros in outstanding bonds, supplementary capital and Schuldschein loans, 1.24 billion euros owed to Pfandbriefbank (Oesterreich) AG….as well as loans given BayernLB – that wise German bank that caused all the trouble in the first place.

But here’s another beauty: they’ve resolved the problem by putting Heta into Resolution. I’m not making it up: this means there will be no insolvency procedure. God forbid an insolvent bank should be smeared with the title ‘insolvent’.

God forbids such things, you see, because insolvency would complicate the sale of Hypo Group Alpe Adria AG…the “good” part of the business that’s so good, the Austrians are gagging to sell it.

As the Buddhists say, “Good will always come from bad”. But I somehow don’t think they had the banking sector in mind.


So who’s to blame? Half the Austrian government is currently searching for a goat to scape – but for me, it is an overlinked banking system built on debt within a flaky Union making error after error because its members simply can’t stop thinking of their own back yard and dreams of global glory. However, in this case there are two we can point the finger at pretty immediately:

1. The dopey Bayernische Landesbank. Yesterday, sources suggested that relations between Heta and BLB “have soured somewhat”. An admirable bit of understatement, that one.

2. Mario Draghula, evil genius and squid tentacle at the ECB. The man who preceded his big QE-bang by bullying the Swiss into removing their euro-Swissy relative value cap must take a fair chunk of the rap for this one: according to the Austrian authorities, the Heta situation got rapidly worse – and this “was driven largely by the appreciation of the Swiss Franc – as a result of which, the volume of bad loans has increased significantly.”

Well done Mario. That’s one small step for Wall Street, and one giant leap for the USD. The euro, meanwhile, is currently sliding in value:it’s now in the 1.38 to 1.385 range against Sterling.

Footnote: just eight days ago, the Austrian finance ministry – faced with rumours that a five billion euro “impairment” at Heta was on the cards – called such reports “pure speculation”, and noted that the Bank “is in good health”.

Incompetence, irresponsibility, weakness and ruthless dishonesty. No change. Relax, everyone.

Yesterday at The Slog: Did Nigel Farage groom a Union?


  1. Pingback: John Ward – Austria : Disaster In The Past, Present & Future As Hypo Bad Bank HETA Collapses – 2 March 2015 | Lucas 2012 Infos

  2. Will HETA’s “bankruptcy” just like Banco Espirito Santo,which on the 4th August2014 was split into a good and bad bank.NOT produce a derivative response?What is the point of playing Options and Futures without a derivative response,except when it is all in one way.


  3. All banks are insolvent. But if everyone knew this, the banks would collapse faster than they otherwise might. So it is in everyone’s short-term interest not to know that all banks are insolvent.
    Why are all banks insolvent? Because their assets are the debt that has no chance of being paid off; because paying off all the debt would collapse the money supply and hence the economy.
    What we have here y’see is a Catch-22 predicament. No easy ways out.
    I would lie too if I were in charge at this point.
    Can anyone honestly say they wouldn’t? [lie if they were in charge I mean]

    Liked by 1 person

  4. Ho, ho,,ho…..

    Look what happened the last time an Austrian Bank collapsed;

    T”he business situation dramatically changed with Austria’s defeat in the First World War and the dissolution of the Austro-Hungarian monarchy and empire. In the late 1920s, a principal debtor, the Steyr-Werke AG faced financial difficulties, with bad loans leading to a drain on finances. In October 1929, the Austrian Schober government compelled the allegedly well-financed Credit-Anstalt to assume liabilities, which together with the simultaneous Wall Street Crash led to the financial imbalance of the then-largest Austrian credit provider.

    Creditanstalt had to declare bankruptcy on 11 May 1931. This event resulted in a global financial crisis and ultimately the bank failures of the Great Depression.[2]:2–3 [3][4] Chancellor Otto Ender had the CA ultimately rescued by distributing the enormous share of costs between the Republic, the National Bank of Austria and the Rothschild family. Nationalization plans advanced by the Social Democrats were rejected.

    However, the institute was de facto state-owned after Chancellor Engelbert Dollfuß in 1934 ordered the merger of the institute with the Wiener Bankverein, thus changing its name to Creditanstalt-Bankverein. The Creditanstalt bankruptcy and its impact in producing a major global banking crisis provided a major propaganda opportunity for Adolf Hitler and the Nazi Party: it allowed them to further blame Jews for German and international economic and social troubles [1]

    Is history about to repeat itself?


  5. Now of course, if this bank were a small south european country, they would deal with the problem in another way entirely.


  6. in the land of total bankruptcy everything is lies. there is no audit, there is no truth to be found…. in the EU Budget, in the gold not in fort knox, in bankers words or deeds. all is lies in the land of lies… and they will tell you any old load of cods wallop if they think it may stop you rumbling the big con. the only end game is total war … whatever it takes!!!


  7. It seems to me, from a British perspective at least, that before WW2 politics was about 20% theatre. In other words about 80% of what politicians said was more or less what they honestly thought, intended to do and so on. Since then there has been a steady decrease so that more and more of what is uttered is theatre, intended to deceive and/or misdirect, spin in today’s parlance. We are now in a position where it would seem 90% of what is said is theatre and the 10% of truth and honesty remaining is completely lost in the noise, no doubt only intended to allow them to claim they were open about their intentions all along.

    I have long found it is pointless to listen to what they say, you only learn the truth by watching what they do. Sadly that leaves the poor man in the street continuously behind the game and thus powerless to affect events, which is ideal, of course, for the political class.


  8. But surely most of these assets result from fractional reserve banking and are a figment of the computer’s keyboard. The ‘money’ loaned didn’t really exist so didn’t cost anything yet the banks still want you to pay them back, with interest, on something that cost them nothing


  9. Peter. We know politicians are all puff and hot air and so we do not respect them. Just for a nanosecond we thought some sincere politicians had emerged in Greece but we were sadly disappointed.


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