Finanzmarktstabilisierungsanstalt, FMSA and Bundesanstalt für Finanzmarktstabilisierung (German financial market stabilization authority)

The subprime crisis of summer 2007 also developed into a financial crisis in Germany in the fall of 2008 because – contrary to expectations, a large number of German institutions held high levels of toxic assets, – as a result of which mutual trust between banks evaporated and – the interbank market virtually dried up despite all the efforts of the ECB. – In October 2008, the German government then established a support fund (legal name: Finanzmarkt-Stabilisierungsfonds, company name: Sonderfonds Finanzmarktstabilisierung, SoFFin, popular name: [state] rescue fund; special fund financial market stabilization) in the amount of around EUR 500 billion to counter the systemic crisis. For the purpose of granting the aid stipulated in a corresponding law, the FMSA was established in the legal form of a public law institution based in Frankfurt am Main and located at the Deutsche Bundesbank. – The main objective of SoFFin is – to counter any refinancing difficulties of institutions on the interbank market with the help of extensive guarantees and – to provide German banks with new equity capital if necessary. Both measures were designed to restore a functioning longer-term interbank market. By contrast, the possibility of purchasing toxic paper, which was also included in the stabilization package, was seen from the outset as subordinate to these objectives. – Criticism was levelled at the fact that the state was here bailing out the weakest institutions instead of allowing them to become insolvent and then perhaps migrate under the umbrella of healthy banks. – See Financial Stability Committee, bank bail-in, balance sheet adjustment, bad bank, carry trades, case-by-case decision, first mover bonus, core mission, banking, last-resort provision, quantitative easing, restructuring fund, bail-in, rescue package, sovereign wealth fund, stability fund, European, systemic conflict, financial market, stealth policy, Tina, zombie bank. – Cf. ECB Monthly Report of December 2008, pp. 81 et seq. (basic explanations of rescue pacts), Deutsche Bundesbank Monthly Report of December 2008, pp. 8 et seq. (key elements of the German government’s stabilization program), Deutsche Bundesbank Annual Report 2008, p. 88 (overview of measures).

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk
https://www.jung-stilling-gesellschaft.de/merk/
https://www.gerhardmerk.de/