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Spain Announces Yet Another Impossible Solution to Its Problems
Spain continues to heap one impossible idea on top of another.
The latest “plan” consists of Spain creating a bad bank called SAREB that will buy up bad assets in Spain in an effort to clean up the country’s finances.
SAREB was part of the €100 billion Spanish bailout plan which was set forth in June. Once again, none of it makes any sense.
Spain's Bad Bank to Buy Up Assets
SAREB, which is set to begin operations on Dec. 1, will absorb soured investments that have dragged down the balance sheets of Spanish banks since the collapse of the country's housing market four years ago.
Fernando Restoy, head of Spain's bank-bailout fund, said SAREB will likely purchase about €60 billion of toxic assets using Spanish resources and some of the funds allocated under the bank-bailout agreement.
It will apply an average 63% discount on land and housing units and an average 46% discount on real estate loans, he said, and will aim to sell the assets to investors over the next 15 years, with a return on investment of at least 14% for any investors in the bad bank.
http://online.wsj.com/article/SB10001424052970204789304578087030239493360.html?mod=googlenews_wsj
Wait a second… isn’t Spain bankrupt?
After all, their regional bailout fund has used up all of its funds, the country has only received €30 billion of the original €100 billion bailout, and Spanish banks are now beyond broke, selling even Spanish sovereign bonds to free up cash to face a systemic bank run (18% of deposits have fled Spain this year alone).
So where exactly is the €60 billion going to come from? Even if Spain uses all of the €30 billion it’s received in bailout funds so far, it’s still €30 billion short.
Even if Spain were to get the funds together to do this… this move is still not big enough. Spanish Prime Minister Rajoy admitted in private that Spain’s real funding needs are in the ballpark of €500 billion. And that’s assuming he knows the true state of Spain’s finances (unlikely given that he’s a career politician with no financial background).
Folks, we’ve been through this whole mess before with Bankia.
For those who have forgotten, Bankia was planning on issuing a dividend just one month before it was nationalized. Then, within the span of a few weeks, it:
- Requested a bailout for €4.5 billion which eventually rose to €19 billion.
- Revised its 2011 profits to a €3.3 billion loss.
- Had to be nationalized.
This is what all of us should keep in mind as a true representation of Spain’s financial system: a completely artificial appearance that comes crashing down in a matter of days.
A few final thoughts on Spain:
- In June, Spanish banks were drawing €300 billion or so from the ECB, today that number is north of €400 billion. If things were improving it should be shrinking.
- As mentioned earlier, Spanish banks which were essentially the only buyers of Spanish sovereign bonds are now selling them to meet funding needs due to the country’s bank run. So who is going to buy Spanish sovereign bonds? The ECB? How and when?
- Spain’s unemployment has topped 25%.
At the end of the day, you can announce all the fancy sounding programs you like. But unless someone comes up with actual cash none of it announces to much other than political posturing.
With that in mind, Spain remains the primary issue for Europe. I cannot say when this house of cards will come crashing down, but crash it will. It’s only a matter of time.
On that note, if you’ve yet to prepare for Europe’s BIG collapse…we’ve recently published a report showing investors how to prepare for this. It’s called What Europe’s Collapse Means For You and it explains exactly how the coming Crisis will unfold as well as which investment (both direct and backdoor) you can make to profit from it.
This report is 100% FREE. You can pick up a copy today at:
http://gainspainscapital.com/eu-report/
Best Regards,
Graham Summers
PS. We also offer a FREE Special Report detailing the threat of inflation as well as two investments that will explode higher as it seeps throughout the financial system. You can pick up a copy of this report at:
http://gainspainscapital.com/gpc-inflation/
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It's actually a well worn path, tried and worked successfully all over the world.
1.Create a bad bank.
2.Have it buy up all non-performing loans.
3. Bad bank goes bankrupt.
4. Everyone else is fine.
5.Bad bank employees are too, they go back to work at the good banks.
Why is it so hard for these turds to just accept managed bankruptcy and ethically and legally clear these bad assests from the market? Why in the world would they use good, non toxic capital to buy toxic assests? Derp, derp, derp, derp, derp...maybe we can make this crisis last even longer!
What currently seems impossible .. though it is in fact the only sane move .. is for the Spaniards to reach into their empty pockets and pull out the bird.
What is needed from the people to force default? If you can fight a bull, you should be able to recognize bullshit when you see it - time for Greeks and Spaniards to default.
A tourist in Spain found himself ordering bull's balls for lunch in a restaurant and sure enough two big balls arrive. The meal was so tasty that he went back the second and third day for more. The fourth day however, he was served two tiny balls. When he adked for an explanation the waiter replied with a sheepish Spanish accent:
"sometimes senor the bull wins."
And so it will be with Spain as reality will eventually catch up with those who use their cape to try and fool the markets.
+1
Nice...
Think Fannie, Freddie for taking crap loans off the banks books...thus the banks need recapitalization which the Fed did covertly. The ECB will just dump money under one rule or another into the country which will end up in the banks as it always does...Greece II starring Rajoy as Travolta
I think you mean Greece III. Greece 2 came out many moons ago.
I think you mean Greece III. Greece 2 came out many moons ago.
I think you mean Greece III. Greece 2 came out many moons ago.
This is absolutely unprcedented. Crazy. Ok... BAC you're taking Countrywide, JP Morgan you're taking Washington Mutual, Wells Fargo you got Wachovia....
JP you're getting Bear and then we are going to sue you.