Spanish "Bad Bank" Fairy Tales

Tyler Durden's picture

Submitted by Mark J. Grant, author of Out of the Box,

The Lords of Chaos are
The enemies of Logic,
The jugglers of Truth
                -Michael Moorcock
Whether it be the plains of Asgard, the fields of Mordor, the yellow brick road in Oz; I can recognize and appreciate fantasy. I take delight in meandering off in my mind when emerging myself in one of these pieces of fiction. This morning I can share with you that a new and quite imaginative fairy tale has been told and it has been spun by the government of Spain.
Spain, as you know, and no matter how the story is fabricated, was bailed out by the European Union. The money was lent to the banks so that Spain does not have to count it as sovereign debt even though the country guaranteed the loans. A nod to magicians and the clever use of a sleight of hand trick but the truth is readily apparent. Then, having mastered that trick they are on to new and grander schemes.
Madrid tells the truth in the same manner as a sardine naturally climbs mountains.
Spain has set up a "bad bank" known as Sareb (Sociedad de Gestión de Activos procedentes de la Reestructuración Bancaria). This operation has $66 billion of Real Estate loans and property as their assets we are told. So far they have sold 700 properties and they claim they can achieve an annual return on equity of 13%-14% over its fifteen year tenure.
You see, I was not joking; Spain is out with a wonderful new fantasy competing with the Hobbits, "he who cannot be named" and the land of the Munchkins. Who knew, besides the Portuguese, that the Spaniards could be so inventive? Madrid has outdone itself and Don Quixote has returned to the capital.
Sareb has roughly 107,000 properties and 90,000 loans they tell us. The loans are collateralized by about 400,000 pieces of Real Estate. This all sounds fine as presented but then Sareb started looking at what they actually owned. "Oh no Pancho," 150 loans were all collateralized by the same apartment building. "Oh no Rodrigo," six banks had all lent money to one downtown building and each bank had the same collateral. "Oh no Manuel," we are holding a deed as collateral on a building that does not exist. The problem is that each example that I have presented is not an isolated instance. Such a good tale; invisible buildings, documents relating to non-existent people, collateral shared by everyone and held at face value at Sareb.
What to do, what to do? So Spain turns once again to Clifford Chance. This is the same firm that assured us of the health of the Spanish banks. Another fairy tale please. One more story told around the campfire to engage the investors. One more piece of Pulp Fiction.
If there was a Pulitzer Prize for fiction Spain would be the sure winner.
"Take care, your worship, those things over there are not giants but windmills."
    -Miguel de Cervantes Saavedra

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max2205's picture

Banco del poop de cacca

earnulf's picture

And the Emperor is not wearing anything at all.

And No, we are not surprised (heavy sigh), it's like an onion, all you can do is peel and weep.

Downtoolong's picture

I have this great idea for a hugely profitable business. I’m going to sell pencils on the street corner for $1billion each. I know it’s a long shot, but, think about it. All I need is one customer, just one.

Matt's picture

Why not just get 150 mortgages on your house? If you have a house valued at $300K, and you get 150 mortgages at $150 K each, That's an easy $22.5 million.

Go Tribe's picture

STDs for everyone!

disabledvet's picture

so if anyone truly believes the answer of 2008 is/was Trichet "and in fact raising rate" and "in fact going long your currency" take a good hard look a the result folks. Paulson and company went long a recovery in 2008. the reasoning was probably as stupid as "this is America. this is what we do." seriously. our economy isn't booming fer sure. it should be looking like Europe and Japan.

GreatUncle's picture

The only important thing is the timeline, what was going on and all the fraud, thieving, scamming, extortion is in fact all that is holding societies together not just Spain for so long.

Since 2008, it is just sooooooo obvious now the level of how much of this behaviour is endemic to economies everywhere and then you wonder why you have systemic risk in just about everything!

NEOSERF's picture

Bad bank you say?  Bet it somehow gets torched in the riots this summer and poof...problem gone as somehow the only copy of the loan records were in the building.

Judge Crater's picture

Well, if you can hypothecate gold bullion a hundred times, why not hypothecate real estate assets used as collateral?  Some 33 years ago, a lawyer I knew bought physical gold from a firm, during the gold rush back then.  When he started hearing bad rumors aboout the firm, he asked for possession of his gold, supposedly stored in a vault.  The firm resisted sending him the gold but finally did after he threatened to take legal action.  A short while after he got the gold he paid for, the gold selling firm shut down. When auditors checked the contents of the gold vault, there was no gold there.  I would not be surprised if many of the proeprties the "bad bank" has on its books are overvalued or non-existent.  No one in the government or from an accounting firm these days makes the effort to actually go out in the field to check on inventory assets, whether gold in a vault or apartment buildings or goods in a warehouse.    

Cookie's picture

Links to info?

Accounting101's picture

Did I just hear Cramer and the other two useful idiots on CNBC make the claim that the big banks saved the entire system in 2008?

FeralSerf's picture

FYI, Cramer (and Kudlow too) has been demoted to useless idiot.

FeralSerf's picture

Take your pick -- here's 1,445,000 of them:

bigfire's picture

It's like Bialystock & Bloom production of Springtime for Hitler, only on a national scale.

Bankrupt from Belgium's picture

If you applied the same "creative approach" / lack of honesty  for completing your tax returns, the Inland Revenue (IRS etc etc) would have you in jail by year end.  So any guesses for how many people will be held accountable for this.....

Element's picture



As far as MMT is concerned if you don't print your own currency you aren't even a Sovereign, so how can you have a Sovereign-debt, or a Sovereign default? It's the printer who is 'Sovereign', and thus prone to Sovereign Default ... except they print ... well, for now ... which leaves what? ... hyper-debasement to 'save' banks while destroying Europe?


Thank gawd the printer can't go broke ... oh ... wait ...

monad's picture

Sareb is spanish for Whitewater