U.A.E. Central Bank to "Stand Behind" Lenders, Abu Dhabi - No Blank Check

Looks like we have another bail out, middle east style.

Bloomberg is reporting, the U.A.E. central bank is offering loans at 50 basis points in a special facility.

The United Arab Emirates’ central bank said it “stands behind” the country’s local and foreign banks, which face losses from Dubai World’s possible default, and offered them access to more money under a new facility.

Banks will be able to use a special facility tied to their current accounts that can be accessed at a cost of 50 basis points above the three-month local benchmark interest rate, the Abu Dhabi-based regulator said in an e-mailed statement today.

CDSes on Dubai went to 647 basis points since the state owned Dubai World said they wish to delay repayment.

The Financial Times on bonds and it's vague:

Dubai World is preparing to persuade bondholders to roll over the maturity while the government plans a charm offensive to repair damage caused by a standstill call that followed months of officials downplaying concerns over Dubai’s ability to meet obligations on its $80bn debt pile.

Now this is amusing, unlike Hank Paulson and Ben Bernanke claiming the sky is falling so Congress should write a blank check, see what Abu Dhabi is saying:

UAE officials have also said that while they would support all members of the seven-emirate federation, Abu Dhabi would not simply write Dubai a blank cheque.

Middle East stock markets open tomorrow and the Dubai World announcement came during an Islamic holiday so markets were closed the entire time.

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Dubai bail out

Looks a lot like a real estate venture gone bust to me. On a grand scale of course. But then so is Fannie and Freddie. From that aspect things should be able to get reorganized. I don’t know that it will cause any major down turns to the global markets, though it’s certainly frightening everyone.

It does continue in my mind to be evidence of a global market still requiring medical attention. And a market were people are going to be looking to better assets to protect what’s left of their wealth. It's this fall out that I think can cause the most damage long term.