Garbage to Gold: EU-Mandated "Liquid" Sovereign Debt: Safe, Regardless of Risk – Nom de Plumber’s Thought of the Day

ndp  Nom de Plumber is a Nom de Plume

Follow-up to a market observation about new Basel liquidity rules:
The EU wants illiquid, default-risky Irish and Spanish sovereign bank-bailout debt to qualify as highly liquid and safe assets, which regulators have mandated that banks buy for Basel Liquidity Coverage Ratio compliance.
Only very select persons can seriously confuse two opposing concepts, “Perfectly Liquid” versus “Utterly Risky”.   

These were the same people who once pushed the same banks into “AAA”-rated structured assets, substituting due diligence and active portfolio risk management with laggard NRSRO credit ratings.

To compensate for the prior mistake of blind faith in high credit ratings, they now practice willful blindness to low credit ratings.  

If zigging along a narrow mountainside path does not initially kill you, try zagging also.   Then, you can be assured of demise……  at least once, if not twice.  

Thank you.


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