Italy has nationalized Monte dei Paschi di Siena, a major bank that otherwise would have gone into bankruptcy. In the process, the bank’s €26.8 billion ($32.5 billion) “nonperforming loans” will be “disposed of,” and the Italian government taxpayers will feed the bank €5.4 billion and get a 70% stake in the failing bank.
Under the bad loan disposal plan, €26.1 billion will be bundled and sold at 21% of gross book value, the vast majority to the government-organized Atlante II fund, while the bank retains 5%.
This is the third time Monte dei Paschi had gotten capital injections, and for some reason, the men of the Italian government thinks this third time will be the charm. Of course, that’s an easy choice for them to make; it’s not their money being used in this risk. It’s the Italian taxpayers’ money being cavalierly gambled.
No, instead the bank’s creditors and other investors should be the only ones on the hook; they’re the ones whose money is at stake, and they’re the ones whose management oversight was…absent.