Is Europe Following Our Banking Mistakes?

by: Karl Denninger

From Doug Kass' Twitter feed....

My gnome, high above the Alps is hearing that the EU is considering suspension of bank mark to market acctg. as we did in US in 09

Remember that this "event" in the United States - Kanjorski's hearing - marked the bottom in the markets in 2009 almost to the literal day.

The reason is that it removed the need to let anyone see any sort of truth in a bank balance sheet beyond the fact that you could pay the light bill. It also led to the FDIC seizing dozens of institutions in the following two years where the actual hidden losses were as high as 40% of the bank's alleged "assets"!

In other words, it was government sponsorship and approval, along with a nolo prosecutori (in advance) for bank balance-sheet value claims that had no relationship to reality.

Beware folks - if the EU actually does this the result will be a monstrous rocket ride in the European banks - for a while. It will also make the inevitable future detonation much larger and guarantee the destruction of the Euro zone when it happens. It is also very likely to translate over here into our stock market.

I misjudged the impact this would have in our market in 2009; I didn't believe for a moment that the market wouldn't see right through the obvious and blatant ruse. I won't make that mistake again.

If you're a short-term trader there's an opportunity here if your risk tolerance is suitable. Got Deutsche Bank CALLs? They're not exactly cheap with the VIX up here and the company-specific vol as high as it is, but......