- Nobody got any extra funding from the Bank of Spain because they made a “mistake” in applying the ECB’s collateral rules.Impossible. If the rules had been correctly applied the collateral posted would have been subject to a deep haircut and less funding would have been made available.
- OMT will not be used unless there is an ESM program in place. Since announcing the OMT program in late July, Draghi has tried to have it both ways on the OMT. First he says the program is designed to promote monetary policy transmission. In the next breath, he says the program is subject to conditionality, like governments accepting a loss of sovereignty over their fiscal affairs. There two notion are completely at odds with one another. Mr. Market will one day see through the charade and punish the ECB for an ill-conceived program.
- The return of LTRO funding by banks is not a matter of concern Why the hell not, Mario? You provide a trillion euros of liquidity to euro area banks against very shaky collateral and you don’t care if the banks are unwilling to lend it on to businesses and consumers? You don’t care that the ECB balance sheet may shrink just at the point where the core of Europe tips over into recession?
The whole truth and nothing but the truth is not the domain in which central bankers play, but Draghi is more willing than most to use the reality distortion field left behind by Steve Jobs than most.
