Bailouts and More Bailouts

Today's winners in the world-wide bailout ruse are:

• Dubai World, which announced a restructuring plan involving a $9.5 billion lifeline from the government. The plan will take months to implement and will require some discussion with creditors but it will involve recycling the $5.7 billion left over from the $10 billion bail-out from Abu Dhabi last year, and the remainder from "internal government sources." It's always nice to see a government use a bailout from another government to fund a bailout of its ill-timed property bets. Dubai World will receive a $1.5 billion cash injection to cover stuff like working capital and interest payments, with the remaining $8.9 billion of government funding and claims turning into equity in the government-owned businesses. Meanwhile non-government creditors will receive "100 per cent of their claims, through the issuance of two new tranches of debt with five and eight-year maturities." So, extend and pretend is the name of the game here. More details of the package in the FT article.

• Bank of America is offering to reduce principal balances by as much as 30% for troubled borrowers. As it turns out, offering mere interest rate reductions to borrowers who are upside down on their mortgages is not enough to entice them to make their monthly payments. B of A probably has no idea if this is going to work. But they are just tired of all the rejection. According to the President of Bank of America Home Loans "The whole purpose of the program is to get more customers to return phone calls." Who knew that defaulting borrowers could be so rude?

In bailout announcements we're still waiting for:

• German chancellor Angela Merkel said EU leaders were set to "specify" what "combination of IMF and bilateral aid" might be awarded to Greece, should it ask for help. Which it hasn't done. Yet. Even though everyone knows that it will have to. Meanwhile, in completely related news, the ECB has announced that it will relax its collateral requirements so that European banks could continue to shovel Greek debt to the central bank for funding beyond the end of 2010. Originally, the ECB was going to raise collateral requirements by the end of the year, before it realized that banks were in a tizzy over where to park their Greek garbage. Whew! That was easy. Problem solved. Right?