Some economic crisis links (10.5.2008)

A German real estate bank — Hypo Real Estate — stands ready to collapse, according to Yves Smith of Naked Capitalism. Smith observes

The bank has a €400 billion balance sheet, which would make for a failure of a similar scale to Lehman's (Hypo's footings are roughly $550 billion, while Lehman's were $660 billion as of its last balance sheet date).

Even though Hypo it technically a bank, it is not a depositary institution, so rescuing it poses similar difficulties (procedural and political) to the authorities as Bear and Lehman did in the US. The financial system cannot take another body blow of this magnitude. The authorities had better patch this one up over the weekend, or we face even more credit market panic on Monday. [emphasis added]

Smith affirms the belief that a Hypo Bank failure may take the Euro with it.

Edward Cody of the Washington Post reports that European Union lacks a unitary strategy to manage the crisis. He also reports that sentiment exists to schedule and economic summit that would, hopefully, kill off the Bretton Woods system once and for all and replace it with a more rational and contemporary international financial system.

James Wilson and Bertrand Benoit of the Financial Times report that German Chancellor Angela Merkel and Finance Minister Peer Steinbrück intend to hold Hypo Real Estate executives accountable for their part in this disaster.

Daniel Dombey, James Politi, et. al. of the Financial Times report that passage of the modified Plan did little to stabilize the stock markets, perhaps because of the decline seen in the real economy in the United States and elsewhere and failure of the plan to quickly resolve the global financial crisis.

Sara Robinson of AlterNet debunks the belief now circulating among conservatives that identifies the Housing and Community Development Act of 1977 as the root cause of the current crisis.

Tim Arango and Julie Creswell of the New York Times announces the end of what can be called the second Gilded Age.