Weekend Economists Take a Shot in the Dark, September 28-30, 2012

[Demeter]

33. Bank union won't absorb old risks -ECB's Weidmann

http://www.reuters.com/article/2012/09/27/ecb-weidmann-idUSL5E8KR8XC20120927

Euro zone countries must remain individually liable for legacy banking-sector burdens that they bring into the planned new banking union, European Central Bank Governing Council member Jens Weidmann said on Thursday.

Weidmann's comments add to concerns voiced by policymakers, particularly from Germany, that plans to house a common euro zone banking supervisor at the ECB would force financially strong countries to shoulder unwanted burdens from struggling euro zone partners.

"To strike a balance between liability and control, only those risks that come to exist under common supervision may be supported by shared liability," said Weidmann, head of Germany's Bundesbank, in the text of a speech.

Legacy problems in bank balance sheets need to remain the liability of national regulatory regimes under whose supervision they came into existence, he said.

"Anything else would be a financial transfer and those should be made transparent and not hidden under the cloak of a banking union," he said. "The primary goal of a banking union cannot be the sharing of risks."

AND WHAT WAS THE PURPOSE OF THE EUROPEAN UNION? IF THEY DO NOT SHARE RISKS, THEY DON'T SHARE PROFITS, EITHER. IT'S JUST EMPIRE FOR THE GERMANS WITHOUT GUNS. WHOOPEE.