One man's assistance is another man's bailout...
In the world of bank recapitalisations little is clear and labels are important as substance. Of the many banks which imploded or suffered from the ongoing implosion in Europe, a vast number had been given a clean bill of health by the European Banking Agency during post-2007 stress tests. In fairness the tests were focussed on liquidity management (liquidity strain being identified as the immediate cause of failures of banks like Bear Stearns and Lehman which kicked off the crisis), while as many now know (except it seems the heads of the EU and the ECB, the crisis has morphed into one of solvency - banks just don't have enough capital in general (as opposed to immediate funds to hand and agreed credit lines to see off a sharp rise in demand for return of funds).
And so it is that the same debate is playing out in Australia in respect of its new bank liquidity facility. As noted several times in this blog, this has been characterised as a backstop, a safety measure which should not have to be used, or if used, only to cover temporary liquidity demands. Taking this at face value there are fair questions to answer, but interestingly Michael West had an article out where he disputes the purpose - that the facility is in fact, simply a bailout fund from the RBA - with the suggestion being that Australia's banks are much weaker than they represent.
Over to Michael: