Danish Central Bank Averages Down

Last Friday a bank in Kansas was the ninth bank to fail this year in the U.S.. We know a couple German banks and a U.K. bank failed early in the crisis. We also know a couple bigger Swedish banks are on the rocks…

Watch the failures spread…

Danish Central Bank to Take Control of Roskilde Bank (Update3): “The Danish Central Bank will take control of Roskilde Bank A/S to avert a financial “contagion” after mounting loan losses drove the lender into insolvency and a private purchaser couldn't be found.

The central bank and a group of Danish financial companies will provide Roskilde 4.5 billion kroner ($890 million) in cash and assume 37.3 billion kroner of debt, Roskilde said in a statement yesterday. The bank was suspended in Copenhagen trading today, after falling 88 percent from a peak in April 2007.

“We wanted to secure financial stability in Denmark,” central bank Governor Nils Bernstein said at a press conference in Copenhagen today. “The alternative would have been that Roskilde went bankrupt and that would have resulted in a considerable contagion throughout the financial sector.””

Central banks all over the world seem to operate out of the same damn play book. In trading, we call this averaging down into a LOSER. This is the fastest and most efficient way to blow your account.

This nervous whining about systemic risk and ‘financial contagion’ is insane. Absolutely insane. By bailing out retarded banks you guarantee an immediate increase in systemic risk and the longer run, permanent increase in systemic risk.

Anybody out there want to start a bank with me? The plan would be to act really really recklessly. When our bets pay off, we can give ourselves the kind of bonuses that would make even gods blush. When our bets blow up we can just claim ‘market failure’ and ‘regulatory failure’. We then threaten the world with financial Armageddon and demand an immediate bailout, preferably the kind that doesn’t wipe out the value of our common shares…