P3 bank to receive up to $120 billion in public handouts

Update: Earlier today the board of the failing bank Dexia approved a rescue plan drawn up over the weekend by the governments of France, Belgium and Luxembourg. The bank's Belgian unit will be nationalized and its other divisions sold. Dexia will receive up to €90 billion ($120 billion) in taxpayer guarantees, mainly from Belgium, to shore up its funding, according to the Wall Street Journal. Dexia is involved in numerous public private partnerships, including four in Ontario.

A second European bank, Erste, has now put out a profit warning.  
Erste now expects a loss of nearly €1 billion this year (instead of an expected €1 billion profit).  Erste has shelved for at least a year a plan to repay 1.2 billion euros of aid from the Austrian government. There is speculation that more banks may fess up to such losses later.

European governments have now postponed the planned European Union summit one week (until October 23) to allow more time to develop a response to the new banking crisis. Some sort of broader bank bailout is coming -- funded by the public sector.

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