The Dexia Restructuring Magic. Who Takes The Losses? Someone Will.

Dexia may be left with the lender’s worst assets under the option most favored by the French. The two governments would guarantee Dexia’s borrowings and then would split up the lender. Belgium would then assume Dexia’s assets in that country, while France’s state-owned La Banque Postale and Caisse des Depots et Consignations would buy Dexia’s French municipal-lending unit, leaving Dexia as the “bad bank,”.

That seemingly magic scheme would avoid an immediate recapitalization of the bank, which would sell its legacy assets over time. If the lender transferred its bad assets to a new company, the bank would need more capital because a sale would crystallize its losses - or the bank will go bankrupt.

So like magic, with no new money, it's like nothing happened?

There is no such thing as magic. Who on Earth will eventually take the losses?
Bloomberg: "The bank will pool its troubled assets into a “bad bank” with Belgian and French government guarantees to protect depositors and its municipal-lending unit, Yves Leterme, Belgium’s prime minister, said yesterday. The “legacy” division had about 113 billion euros ($150 billion) of assets on June 30.

"In France, the lender had 82.6 billion euros of outstanding municipal and project-finance loans supported by 3.8 billion euros of deposits at the end of the first half".

Nice ratio!