That’s another fine mess

A visit to the website of Depfa Bank PLC will show the top sentence saying “Responsible Supervisory Bodies: Central Bank of Ireland”.  It must depend on what the meaning of “responsible” is.  In a disastrously timed decision, German real estate bank Hypo took over Depfa last October.

This was already 3 months into the global banking crisis which began with the collapse of structured investment vehicles, many based in Dublin, in August 2007.  Depfa turns out to have been another operation with long-term commitments not matched by liquidity, and the lenders have pulled the plug, leaving  a huge hole in Hypo’s balance sheet.  But what was the Central Bank doing while the capacity for such a hole was being built up in the first place?  Things are sufficiently bad at Hypo that Angela Merkel went to Paris on Saturday and signed on to the implicit swipe at Brian Lenihan for his unilateral unlimited deposit guarantee — and then went home and did exactly the same thing herself.   The global banking crisis may well be the epitaph for George Bush and McCain.  But there are a lot of European chickens coming home to roost as well.