UPSET PEOPLE

If you're looking for weak banks, look no further than Europe. Once there, look no further than Italy or Spain, or Greece, or.....

A recent WSJ article, "Banking Troubles Simmer In Italy," notes: "One banker there has gone from respected leader to pariah heckled at church." Can pubic lynchings be far behind?

The article continues about a bank there, a firm nearly 150 years old, was set to open its 1,000th branch this year, instead will close 150 and is likely to be swallowed up by a stronger competitor." That's a 15% if it happens. If the citizens of the globe could get a 15% reduction in the size, waste and corruption of their governments, this whole world financial mess would blow over in the time it takes to utter: "It's about time!"

The Italian proposed solution, the usual one bureaucrats conjure up, comes under the deal-making label. That phraseology alone ought to scare you. The idea of buying assets near market rates that are guaranteed by the government is a dangerous slope. The term government guarantees should frighten you more than the price of oil or China's economic funk.

BRUSSELS—Italy and Brussels struck an agreement Tuesday over a mechanism to deal with the high level of bad loans in the country’s banks, that aims to end uncertainty over the lenders’ health and give a boost Italy’s economic recovery.

However, the lack of detail left it unclear whether the deal would succeed in addressing a problem that has helped provoke a collapse in Italian banking stocks this month.

The Italian government had submitted plans to help banks bundle bad loans in bonds, or securitize them, by being able to sell guarantees to banks that will make some tranches of bad loans less risky.

This would help banks sell them at higher prices and free up their balance sheets, allowing them to make new loans.

Six years after the sovereign-debt crisis first gripped the eurozone, Italy’s banking system is choking. An index of Italian bank shares slumped nearly 25% at the start of this year, during a period when European bank stocks were down 17%, although it partly rebounded last week.

Italian banks are among the Continent’s least profitable, and their books are clogged with €276 billion ($299 billion) of bad loans, more than any other European country, according to the European Banking Authority. Many banks don’t make enough money to write off the poor loans, so they fester—prolonging the mess and making it harder for banks to make loans.

Italy’s struggles underscore the glacial pace of banking overhaul across Europe. Despite years of restructuring, bankers and investors still point to pockets of undercapitalized European banks, which could need to raise up to $35 billion of equity this year, according to Citigroup analysts. Deutsche Bank AG and Austria’s Raiffeisen Bank are among those that bankers and analysts suspect might have to raise capital. A Raiffeisen spokesman said the bank has no plans to do so. A Deutsche Bank spokesman declined to comment.

So just how bad is it for the 78-year-old former respected bank chairman who resigned last November, he has been banned from a half-dozen restaurants and accosted on the street of the small northern Italian community.

We want to remind you again of the recent comment by the billionaire CEO of BlackRock not understanding why people are so upset.

wsj.com/articles/italy-scrambles-to-resuscitate-banks