Giving Candy to a Baby

The German government is giving out money like candy to a baby and commerce Bank cried loudest. The plea for help came as Commerzbank announced that it swung to a third-quarter loss on credit related write-downs and losses due to the collapse of Lehman Brothers and the bankruptcy of major Icelandic banks.

Commerzbank sought the government funds as it reported a third-quarter loss of 285 million euros, compared with a 339 million-euro profit a year earlier. Earnings were hurt by about 1.1 billion euros of writedowns and credit losses, including 371 million euros tied to Lehman’s collapse and 260 million euros related to the banking crisis in Iceland.

The bank will get an immediate $10.5 billion worth of German taxpayer hard earned cash and $19.4 billion worth of debt guaranty.

Commerzbank AG said Monday that it swung to a net loss in the third quarter because of write-downs caused by the financial crisis and said it would take advantage of billions of euros in government bail out funds.

Germany’s second-largest bank by assets, which today struck a deal to get up to 23.2 billion euros ($29.6 billion) in government help to boost its capital, said it swung to a net loss of 285 million euros ($365 million) for the July-September period from a net profit of 339 million euros in the year-ago quarter.

The deal caps CEO salary and suspends dividend payments, but is non dilutive as government shares are subordinate, it’s a pretty sweet deal in all.

“With this increase Commerzbank reflects the sharp rise in capital requirements for banks demanded by supervisory authorities, rating agencies and the capital markets in the wake of the financial crisis,” the statement said.

If the regulatory agencies had been that demanding the bank wouldn’t it be failing now.

“It is an important contribution to the stabilization of the financial market. We have decided to make use of the package because this is good for the bank, its employees and its clients,” he said.

It doesn’t stabilize the markets for long, it’s simply postpones and exacerbates the inevitable, Minsky has passed his moment. And he decided to make use of the package because non use meant bankruptcy. Even with the deal Commerzbank said it had increased loan loss provisions to 628 million euros from 414 million, louder than words that the bank is not out of the woods yet.