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ECB Calls Spain's Bluff... Or Does It? And Did Europe Just Check To The Fed?

Tyler Durden's picture


While most of the early action today was driven by a baseless rumor that the ECB would announce some magical recapitalization plan that would put everything back into its normal (by this we mean somehow sustainable) place, the alleged time when Draghi would make such an announcement came and went... and nothing. Instead, the ECB, using the FT as its mouthpiece, came out late in the day, however not with news that Europhiles wanted to hear. As a reminder, as part of the proposed Bankia nationalization scheme, Spain would inject Spanish debt into the insolvent entity, thereby allowing it to pledge the debt for ECB repo cash. Or so the thinking went. This was, in effect, Spain's bluff. The ECB has just called it.

From the FT:

A Spanish plan to recapitalise Bankia, the troubled lender, by indirectly tapping the European Central Bank for cash, was bluntly rejected as unacceptable by the ECB, European officials said.


News of the rejection came as Spain faces elevated borrowing costs in the bond markets, tries to persuade investors it can contain problems in a banking sector weighed down by €180bn of bad property loans and, on Tuesday, saw its central bank governor stand down early.

Instead, it seems that the ECB is a fan of the old fashioned type of capital raise: one involving equity, and cash, and none of this newfangled repo monetary ponziness. Of course, the only bank that did try a capital raise by way of a rights offering in 2012 was Italian UniCredit which plunged by nearly half in the days following the announcement as a market test would clearly indicate it was woefully undercapitalized and its equity may well be worthless. This, however, does not seem to bother the ECB:

The ECB told Madrid that a proper capital injection was needed for Bankia and its plans were in danger of breaching an EU ban on “monetary financing,” or central bank funding of governments, according to two European officials

ECB's calling of the Spanish bluff also explains the earlier news of Ordonez' premature evacuation from the Bank of Spain, which we noted:

News of the ECB’s hardline response emerged as the Bank of Spain announced that Miguel Angel Fernández Ordóñez, its governor, would step down at the end of next week, a month earlier than planned. Mr Fernández Ordóñez – known by his initials Mafo, who was appointed by Spain’s previous socialist government – has been subject to increasing attacks from politicians over his failure to prevent the country’s banking crisis.

In summary:

“This is like a game of poker now,” one government adviser said, “and I don’t think Spain is bluffing”.

Well, it is. Because its cards, as explained yesterday, are all merely collateral backed by zombie banks which carry their "assets" at idiotic valuations.

So yes - in the great game of monetary poker, the ECB just called Spain's bluff. Or maybe not. Because paradoxically this may all be simply a means to crash the market, as we have been cautioning since last week, when Citi, correctly, said that Crossover would cross over (pun intended) 1000 bps, before the central banks would get involved.

In other words: yes, it is a game of cards, but one which may well have Spain and the ECB on the same side of the table, and now both have checked to Ben Bernanke, who has 3 weeks to decide if the cost of bailing out Europe, and thus US banks, is worth the printing of another $1 trillion.

We can't wait to find out.


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Tue, 05/29/2012 - 17:45 | 2473516 q99x2
q99x2's picture

Bernanks going to print some up.

Still looking for his chopper. No sign of him yet.

Tue, 05/29/2012 - 17:49 | 2473528 zigzagdoom
zigzagdoom's picture

If history is anything to go by, then these measures will do little in the long run.


Tue, 05/29/2012 - 17:54 | 2473535 Dapper Dan
Dapper Dan's picture

We were told in 2010 the facts by Neil Cavuto and then it was reiterated by none other than Brian Williams on David Letterman.


“We simply have no money. The world has no money. And right now, the emperor has no clothes"


Tue, 05/29/2012 - 18:22 | 2473593 dwdollar
dwdollar's picture

No, there's plenty of money because the central bankers print it.

The problem is the productive people are being pushed to the bottom by those who are able to print money and produce nothing all the while diluting its value (for those who actually have to work for it). There should have been a massive depression where the savers were rewarded and the over-leveraged money addicts fucked in the ass. Instead, we got the opposite. Theft by printing.

The problem is that central bankers don't know how much they can steal without causing a bloody revolution.

Tue, 05/29/2012 - 18:03 | 2473559 dbTX
dbTX's picture

You can slice and dice the Euopean mess any way you want to, but the bottom line is there is no solution short of default. Live with it.

Tue, 05/29/2012 - 18:16 | 2473582 q99x2
q99x2's picture

'former Greek Finance Minister George Papaconstantinos'

And, How many of these G Paps they got hiding under the bus anyway.

Instead of having the same one say the same thing over they just come up with another one to say the same thing.

'The euro is in the best interest of the Greek people'

They're running a G Papathon as the ship goes down.


Tue, 05/29/2012 - 18:22 | 2473602 Turin Turambar
Turin Turambar's picture

Sadly, the American taxpayer via the Fed, is the lender of last resort for all planetary central bankers.  This doesn't end well folks.  :-( 

Tue, 05/29/2012 - 20:50 | 2473893 francis_sawyer
francis_sawyer's picture

cue the alien invasion...

Tue, 05/29/2012 - 18:27 | 2473618 luna_man
luna_man's picture



Don't think for one second, CRIMINALS, are getting cold feet, NOW!


Too far, to turn back now!

Tue, 05/29/2012 - 18:30 | 2473627 Pancho Villa
Pancho Villa's picture

Is Spain too big to fail? Or too big to bail? Or maybe both?

It looks like a long hot summer in Madrid this year.

Tue, 05/29/2012 - 20:02 | 2473781 unrulian
unrulian's picture

time for a running of the bears

Tue, 05/29/2012 - 18:31 | 2473629 Joebloinvestor
Joebloinvestor's picture

Ben is still considering Madrid for the statue he wants of himself erected as the "Savior of Europe".

Tue, 05/29/2012 - 18:36 | 2473640 CreativeDestructor
CreativeDestructor's picture

So total deleveraging to attain some new low leverage normal (which rally monkeys can not comprehend) is like 20-40 trillion? So Bernanke is gonna print how much to have any meaningfull effect?

Tue, 05/29/2012 - 18:37 | 2473644 Hannibal
Hannibal's picture

Think we need another war.

Tue, 05/29/2012 - 18:37 | 2473645 BLACK_DOG
BLACK_DOG's picture

Ctrl-p baby!

Tue, 05/29/2012 - 18:46 | 2473653 Mark123
Mark123's picture

If you look at the 5 year chart of gold thelast 9 months is looking very similar to the nine months leading up to Oct 2008 crash.  May be nothing, but....


Tue, 05/29/2012 - 19:40 | 2473742 jimmyjames
jimmyjames's picture

If you look at the 5 year chart of gold thelast 9 months is looking very similar to the nine months leading up to Oct 2008 crash.  May be nothing, but..


There are a few other gold indicators that are similar now to those that preceded the 08 crash-

Tue, 05/29/2012 - 19:28 | 2473724 bagholder
bagholder's picture

Fed should just check to germany

Tue, 05/29/2012 - 19:35 | 2473735 chump666
chump666's picture

Asia starts the short squeeze the world follows - simple.  European news is somewhat meaningless now.

But, Spain is them one to wtach for a total bank run/meltdown/equity implosion/ECB can't do sh*t trade.

Tue, 05/29/2012 - 19:37 | 2473740 world_debt_slave
world_debt_slave's picture

with all the opacity, obfuscation and secrets, who knows what TPTB are doing, keep digging

Tue, 05/29/2012 - 19:50 | 2473755 carefreemanjoe
carefreemanjoe's picture

Have the Greeks started reaching out to Ben to get some ideas on printing boatloads of Drachma quickly? Anyone know?

Tue, 05/29/2012 - 20:07 | 2473793 Conman
Conman's picture

Benny is only good at printing imaginary bucks. Greeks should jsut use thier Bonds and buyout HP to print the drachmas.

Tue, 05/29/2012 - 19:51 | 2473757 hornster
hornster's picture

Pressed olives and squeezed euros.

Tue, 05/29/2012 - 19:56 | 2473770 Sockeye
Sockeye's picture

OK, assume the CBs push ctrl-p, has anyone calculated how much actually has to be printed to sop up this mess?

Tue, 05/29/2012 - 20:05 | 2473787 unrulian
unrulian's picture

I'll bet it starts with Q

Tue, 05/29/2012 - 20:54 | 2473897 francis_sawyer
francis_sawyer's picture

& ends in [insert infinity symbol here]

Tue, 05/29/2012 - 20:08 | 2473794 carefreemanjoe
carefreemanjoe's picture

Why stop once started?

Tue, 05/29/2012 - 20:09 | 2473795 carefreemanjoe
carefreemanjoe's picture

Just need to figure out a way to replace printer ink cartridge without stopping the printer.

Tue, 05/29/2012 - 21:46 | 2473785 midgetrannyporn
midgetrannyporn's picture

the bernank loves debasing the currency for the benefit of bankers and billionaires, it's his thing. b.s. bernank will give the usa big banks all the clownbux they want. the #pomolist was no joke.

Wed, 05/30/2012 - 06:45 | 2474615 slewie the pi-rat
slewie the pi-rat's picture

you get yers already?

now much for the shoe with the broken heel?

Tue, 05/29/2012 - 20:31 | 2473859 markettime
markettime's picture

I smell another round of QE in the air......

Tue, 05/29/2012 - 20:47 | 2473866 Ineverslice
Ineverslice's picture

"Your boss is quite a card player , does he do it?"

"He cheats."


Wed, 05/30/2012 - 00:22 | 2473881 delacroix
delacroix's picture


Tue, 05/29/2012 - 20:46 | 2473887 GONOB RADIO
GONOB RADIO's picture

ok buried here, i guess this is a tyler appreciation society but i can help to refine the understanding here of whats really going on but not as a comment on a story.

Tue, 05/29/2012 - 20:57 | 2473904 q99x2
q99x2's picture

Obama set to arm Italy's drones in milestone move

Stay in the Euro and the NWO's going to get you when it decides to make its move.



Tue, 05/29/2012 - 21:19 | 2473930 Tom Green Swedish
Tom Green Swedish's picture

Obama is a dog eating shithead.  Him Jesse Jackson Jr. and Rahm Emmanuel can all go shove it. I haven't bought any of the crap coming from their mouths from day one. They will go down as the worse than George Bush as president.  In fact I think George Bush was god as president compared to Oloser.  He's a money wasting clown act.

Tue, 05/29/2012 - 21:18 | 2473927 Tom Green Swedish
Tom Green Swedish's picture

Spain is Europes newest punching bag.  Greece was first.  Who's next?



Wed, 05/30/2012 - 03:34 | 2474407 jonytk
jonytk's picture

It's all an strategy to devaluate the Euro!!!!

U guys don't get it.


Tue, 05/29/2012 - 21:17 | 2473931 kuso
kuso's picture

Liverpool will seek permission to hold talks with Brendan Rodgers, the Swansea City manager, on Wednesday as they close in on naming a successor to Kenny Dalglish.Fenway Sports Group, Liverpool's owner, expect to announce the club's new manager by Friday having reduced their

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search to a shortlist headed by Rodgers and Wigan Athletic's Roberto Martínez. No formal approach has been made to Swansea for Rodgers, who rejected Liverpool's offer of an interview two days after Dalglish's dismissal, but FSG have earmarked the 39-year-old as their preferred choice and are confident Rodgers will reciprocate their interest when he receives an offer of the job.They also believe obstacles complicating a move to

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Anfield, such as compensation, Swansea's reluctance to lose their manager and the new management structure intended for Liverpool, can be overcome in the next few days.Rodgers signed a new three-and-a-half-year contract with Swansea

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only in January that includes a release clause of around £5m. He later admitted, amid reported interest from Tottenham Hotspur at a time when Harry Redknapp was favourite for the England job, that it would require an agreement with the Swansea chairman, Huw Jenkins, to activate the clause.I didn't put any clause in my contract to say if a top-four club comes in then I can speak to them. Not at all," Rodgers said. "The only item that was in the contract was if a big club came in and wanted me, and the chairman and I felt it was right for us to move on, then


I wanted the club to benefit from it. That was very important for me that if I left the club would get rewarded. Other than that, I didn't want to instigate anything in the contract because I wanted to show I was happy here and deSIGNer bEltS continue to work."Swansea would be loth to lose the manager who guided them to promotion to the Premier League followed by an 11th-place finish in the top flight last season. On Monday Jenkins dismissed as "pure speculation" reports of talks

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a club record £6.8m deal with Hoffenheim for cheap SocCEr SHOeS Gylfi Sigurdsson, the Iceland midfielder who made a stunning impact on loan at Swansea last season.

Tue, 05/29/2012 - 21:20 | 2473940 theTribster
theTribster's picture

I thought we'd see some type of plan out of Europe by today, this is pretty amazing. As the region falls apart and the financial system falls further into disarray they are doing what? Having Christine Lagarde go out and talk about the lazy Greeks and how they need to pay taxes, meanwhil eshe pays zero tax on her income. You knew she had to be evil, after all she is running the IMF.

Maybe tomorrow they'll make an announcement about some action they plan to take that will do this and do that, I'm surprised the markets haven't burnt down given the lack of information coming out of the European institutions. If something isn't done soon things will implode, probably Spain first as Greece is happy to wait for the 17th.

Capital controls coming to Spain? and maybe Greece and Italy? People must still be taking their money out of the banks because nothing has been done to change their minds, has it? Am I unaware of some announcement that seemingly solves at least the short term problem of capital fleeing? Based on their incompetence, ECB/IMF/Troika/etc will hopefully feel extreme pain from this debacle, maybe the Europeans will remove the technocrats  but keep the union.

Fuck You Draghi, you too Bernanke and yea, you as well Geithner you piece of shit (I think recess is over).

Tue, 05/29/2012 - 21:28 | 2473952 wretch
wretch's picture

Zombies don't give a shit about plans.  Just print more brains, err, I mean, fiat...

Tue, 05/29/2012 - 21:32 | 2473955 Go Tribe
Go Tribe's picture

Go to the Fed?  I'd go to China first. They'll be happy to take EU commodities in trade for U.S. dollars.

BTW ZH, can you remove that f'n anti-Kasich ad on your page? The socialists tried their best to sink Ohio and kill the middle class already. Let's not give them any more ammo.

Tue, 05/29/2012 - 21:36 | 2473960 q99x2
q99x2's picture

Simon Johnson wrote a nice article about the collapse of Europe.

I like his talks and what he writes but he seems to be a strange creature in that he is like a good globalist. Maybe he is a best choice of all odds type of guy and offers ideas and optional paths to take.

Anyhow, the article is a good read.

Tue, 05/29/2012 - 21:37 | 2473961 chump666
chump666's picture

Spain has nothing except for a madness Keynesian style building boom that blew up 5yrs ago.  The don't immigrate (Greeks and Italians can send monies out to families o/s), they don't import, they don't export, but rather sucked off Germany and the weak and crippled fools of the EU.  Plus mad Mario has most of Spain on his balance sheet anyway.

That is it. Spain is ready to blow, WTF can Bernanke do?  Just increase USD swaps (massive USD drop) to the ECB/Spain banks. 

Tue, 05/29/2012 - 21:39 | 2473962 FieldingMellish
FieldingMellish's picture

Let's just hit the reset button already! These games are getting tiresome. 

Tue, 05/29/2012 - 21:45 | 2473971 mt paul
mt paul's picture

Japan and China

start trading in their own currencies

bypassing dollar ...this friday


that's gotta hurt....


Black [ silk ] swan

Tue, 05/29/2012 - 21:56 | 2473987 potlatch
potlatch's picture

honey badger gonna get paid


or is this bitch gonna have to eat a face around here?

Tue, 05/29/2012 - 22:48 | 2474071 Cosimo de Medici
Cosimo de Medici's picture

Off topic a bit, but somewhat related to the pain in Spain being on the gain or the wane.....

Of nations with a GDP in excess of $10 billion (a low bar, indeed), name five countries whose real estate is valued, on a price to median income basis, less than the US and Germany.

Winner gets a Liar Loan from Countrywide for a home of his choosing in Detroit, signed personally by both Angelo Mozilo and Linda Green.

Wed, 05/30/2012 - 00:07 | 2474173 wisefool
wisefool's picture

Mozzilo dressed like a rock star. Rock stars dress like Mozillo. Yes, it is that time of night on ZH, Washington mutual is next.

Gimme Shelter.

Wed, 05/30/2012 - 07:10 | 2474642 slewie the pi-rat
slewie the pi-rat's picture

cosmo_d:  your words have iron

name 5 countries where it makes less sense to go into debt 10Cents to "buy" RE than the US (can't speak for eoropa/germany)

of course!  it just doesn't make sense anywhere!  heh. heh.  ergo, the rest of that shit is just overpriced for for the "winter" market?

as GM goes, so goes the freaking globalization, BiCheZ!  L0L!!!

and flush twice!

how about "farmland"?  DJ Hog/Corn, Steer/Corn Ratios - May 29  why is the price of corn going down?  can iowa make the roseBowl from here?  is it b/c the price of oil is down and ethanol ain't what it usta be now that peak oil and death to iran are taking well-deserved breaks?

or just the banksters?  again?   <get it?]

Wed, 05/30/2012 - 00:03 | 2474168 Peter K
Peter K's picture

Fed USD swap lines to the ECB went out past 120b last week. So the FED is doing it's part :)

Wed, 05/30/2012 - 00:31 | 2474202 chump666
chump666's picture

The Fed will prime a massive one, once Spain goes into a total bank/fiscal meltdown...anyday now.

Wed, 05/30/2012 - 00:06 | 2474171 vote_libertaria...
vote_libertarian_party's picture

I need for Ben to hold off printing a little longer.


Just enough to spook the long bond yields then my TBT calls are money!!!


(If those pay off I promise to give a nice cut to some nice charities)

Wed, 05/30/2012 - 03:13 | 2474398 AurorusBorealus
AurorusBorealus's picture

In poker, a semi-bluff is a bet or raise with a hand that is drawing for a card.  The question is only how likely is the card to fall, how many outs does the draw have.  Spain holds a straight draw and a flush draw.  Several quite likely scenarios make coordinated international central bank efforts to pump the system full of liquidity.  Spain is a favorite to hit its draw; it just needs time, or two cards, to do it.  They are getting all their chips in on the flop to play for the river in a pot they are favored to win.

Wed, 05/30/2012 - 03:18 | 2474400 Bastiat009
Bastiat009's picture

As expected, gold continues to follow the euro/US$ exchange rate ... I know that many here don't believe it is happening but it is actually quite amazing how in-sync gold and euro are these days.

Wed, 05/30/2012 - 12:37 | 2476095 fuu
fuu's picture

There went that correlation, today.

Wed, 05/30/2012 - 03:46 | 2474418 lewy14
lewy14's picture

Is "check to the Fed" anything like "skip to my lou"? Or something?

Wed, 05/30/2012 - 04:10 | 2474428 jarrollin
jarrollin's picture

Greece 2.0

I hear Spain mixes the best Molotov Cocktails

Wed, 05/30/2012 - 05:10 | 2474471 slewie the pi-rat
slewie the pi-rat's picture

xlnt analysis

i disagree with the conclusion;  the FED an the other CBs need to finance their goobermints;  this is a problem for the swissies and the ECB imo, at this point

this is the regionalism angela may or may nor face up to, depending ion the "crisis" which gets generated;  it seems to be in place, now;  i don't think the FED is gonna arc a $Tril over spain at this point, myself;  what are firewalls for, if not exactly for this situ?

this is vampire bankster fascist capitalism;  spain is right where they want it;  the US is getting there:  keep having the pols spend money they don't have;  indebt thePeople;  lie about what you are doing and the obvious consequences;  then, take their assets, if there are any left;  poison the wells too? or just destroy the RE, lending, and other markets by extra-lawful activities?

the banksters outa theCity0'London are leading the race!  better hurry!

the chairsatan will take care of the stock matket, this bank, that bank, joe's bank?  not true at this point, imo

the goobermint budgets come first;  those check get in the mail or there ain't no mail and no cBanksters, either?  yes.  this bank is part of that goobermint thing, so it will get dealt with.  isn't it amazing tho, that country after country, bank after bank, is now being "revealed" as hopeless?  totally zombied and shelled out already? who coulda knowed?

now, these same goobermints, centralBanks and commercial financials and banks who have demonstrated everything is bullshit and nothing is real or trustworthy, will attempt to use economic data and theory to brainwash us into accepting what they wanna do next

trust me!

Wed, 05/30/2012 - 05:39 | 2474519 slewie the pi-rat
slewie the pi-rat's picture

the EU is not totally dependent on either germany or the FED for its survival

it has the SNB and the swiss franc to support it: by printing Trillions

imo this is by design;  the swiss banksters stand outside the EU;  THEY are providing credit and support to the ECB and it's monetary unit;  just as germany is providing earnings credibility to extend and pretend from within the union

now, i'm just slewie, but it seems it seems to me that these fuking asswipe banksters hafta be pretty damned careful that they don't let inflation get away from them, here;  this is their achilles heel, not the EU banks;  not the prices of equities

and i see the chairsatan understanding this and doing his job in this respect

now, i'm wrong all the time and i may change my mind completely the next time i hit refresh and see what tyler has put up for us, but i'm not getting paid to bullshit here and this is what i see

Wed, 05/30/2012 - 06:24 | 2474593 Olympia
Olympia's picture


How is it possible that the European Union allows the weak states to enter the international money market and borrow the money they need without help – based on their own potentials? How is it possible that the “chain” of interests of euro can let its weak “links” exposed to outside pressuresHow is it possible for a “herd” with common interests to let each “ship” defend itself against the wolves, without help, and its general security threatened? How is it possible for Greece, which represents a minor 3% of the Eurozone’s economy, to be allowed to threaten the other 97% of that economy, due to the latter’s weakness?


The European Union should be the one borrowing from the national banking system – thus dealing with profiteers itself based on its overall potential – not its weak “links” alone. The latter should be under the EU’s protection and constant monitoring. They should borrow from it at a subsequent time and if they became victims of profiteering, the problem should be kept in the bosom of the euro. Domestic profiteering should bring profits to Europe’s influentials, therefore bring profits in the euro area, and not threaten it.

From the Wall Street Crash of 1929 to the Global Financial Crisis of 2007





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