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The Spanish Bank Bailout Begins

Tyler Durden's picture





 

It was only a matter of time before the next bank bailout began despite all those promises to the contrary. Sure enough, as math always wins over rhetoric and policy, earlier this morning the shot across the Spanish bow was fired after PM Rajoy did a 180 on "no bank bailout" promises as recent as last week. From Dow Jones: "Spain may pump public funds into its banking system to revive lending and its recessionary economy, Prime Minister Mariano Rajoy said Monday, signalling a policy U-turn. The government had pledged to not give money to the banking industry that is struggling in the wake of a collapsed, decade-long, housing boom. "If it was necessary to reactivate credit, to save the Spanish financial system, I wouldn't rule out injecting public funds, like all European countries have done," Rajoy said in interview with Onda Cero radio stations. The weakness of Spain's banks is weighing on the economy that contracted 0.3% in the first and fourth quarters, meeting most economists' definition of a recession. The unemployment rate is at an 18-year high 24.4%, data showed April 27. Banks have sharply reined in credit in the face of rapidly growing bad debt and problems getting finance on international markets." And explicitly we learn that Spain will inject EU7 bln of public funds via contingent-capital securities to support BFA-Bankia, El Confidencial reports, citing Economy Ministry officials it doesn’t name. It actually sounds cooler in the native: "El Estado inyectará 7.000 millones de dinero público para salvar BFA-Bankia." So it begins. Which also means that the "Bad Bank" idea is about to be launched. So far so good... The only problem is that like the EFSF, like the ESM, like the IMF, all those "deus ex machina(e)" also had to find funding of their own... and failed: it is one thing to intend to rescue the system. It is another to find the cash to do it with.

In the meantime, the process has already commecned:

  • BANKIA SHARES FALL 4.8% IN MADRID
  • SPANISH PLAN FOR BANKIA TO BE ANNOUNCED IMMINENTLY
  • SPAIN TO CLEAN UP BANKIA, CHANGE MANAGEMENT, OFFICIAL SAYS 
  • SPAIN IS WORKING ON PLAN FOR BANKIA, GOVT OFFICIAL SAYS

From Reuters:

Spanish Prime Minister said on Monday he would use public funds to rescue the country's banks, but only as a last resort. He said an announcement on government plans for the banks would come on Friday.

 

Spain has already spent more than 18 billion euros ($23.61 billion) to clean up its banks, which were highly exposed to a property sector crash four years ago.

 

The banks have been forced into several waves of mergers and to recognize more than 50 billion euros in losses related to property lending and assets.

 

...

 

A Spanish government and Bank of Spain plan to reform Bankia will involve major changes at the bank's management, government and Bank of Spain sources told Reuters on Monday.

 

"The plan is being finalised by the Economy Ministry and the Bank of Spain. It will include major changes in the management," a government source said.

 

The source also said the Spanish government would approve on Friday the guidelines for setting up holding companies to park and sell off toxic real estate assets, including a framework to create 10- to 15-year "bad banks".

 

A source from the Bank of Spain said that the plan for Bankia, which is likely to stick to its stand-alone strategy after the intervention, includes the possibility of asset sales.

 

"The possibility of strenghtening the balance sheet through asset sales is on the table," the source said.

And more from DJ:

The ministry official added that the government and central bank are studying a specific clean-up plan for Bankia SA (BKIA.MC) and parent company Banco Financiero y de Ahorros SA, which could include a shake up of their management. Daily El Pais said Monday the government also plans an injection of state funds via convertible bonds with a rate of about 8%.

 

Bankia's parent, considered one of the weakest banks in the Spanish financial sector, recently carried out a EUR2.75 billion write-down of the group's assets by lowering the value of its real-estate holdings.

 

A Bankia spokesman declined to comment.

 

Spain's central bank estimates the country's banks' total exposure to the country's ailing real estate industry at EUR338 billion, of which it considers some EUR176 billion problematic.

 

In new evidence of a deepening downturn, the local statistics agency said Monday that industrial output fell by 7.5% in a calendar-adjusted annual rate in March, after falling by 5.3% in February and by 4.4% in January.

Translated: since this plan is a stillborn failure, the countdown is now officially on to the Spanish PSI. Only this time around, unlike in the case of Greece, one wonders how Merkel will spin the German funding in continent that no longer cares about "austerity", i.e., deleveraging, and is all bout "growth", i.e., ramping up debt issuance to the max.

 


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Mon, 05/07/2012 - 07:03 | Link to Comment Sandmann
Sandmann's picture

Botin Calling.......Santander needs a Cash Transfusion

Mon, 05/07/2012 - 07:12 | Link to Comment monkeyboy
monkeyboy's picture

Ruh Roh!

Mon, 05/07/2012 - 08:19 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Naw it's OK.

 

Spain may pump public funds into its banking system

 

Why didn't we think of that sooner?

 

Mon, 05/07/2012 - 08:31 | Link to Comment Zero Govt
Zero Govt's picture

it's not quite nationalisation, more the comedic always bankrupt tragedy of public-private partnerships

another "Winner" is born

 

Mon, 05/07/2012 - 08:51 | Link to Comment BigJim
BigJim's picture

 It is another to find the cash to do it with.

Nah, there's no end to the cash they can create.

There is a limit to the 'moneyness' of that cash, however.

Mon, 05/07/2012 - 10:02 | Link to Comment Stuck on Zero
Stuck on Zero's picture

Let me see if I understand this.  The government will steal billions from the people to pump into the banks so that the banks will loan money to the people who need it because the government took it in the first place?  Looking at the bright side the bankers will get big bonuses.

 

Mon, 05/07/2012 - 07:21 | Link to Comment gatorengineer
gatorengineer's picture

Should the article read, Spain to inject 9 Billion of German savings into the banking system?

Mon, 05/07/2012 - 07:56 | Link to Comment Sam Clemons
Sam Clemons's picture

You are kind of right, but the Germans as a sovereign don't have savings either.  Every one of those countries is in debt to each other.

Mon, 05/07/2012 - 08:21 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Should the article read, Spain to inject 9 Billion of German savings into the banking system?

 

HA HA.....just when you thought it couldn't get weirder. It just goes to show a junkie will never refuse an injection.

 

Mon, 05/07/2012 - 08:24 | Link to Comment smlbizman
smlbizman's picture

wtf....buffet on every channel....these people are aware that no one is watching, and no one is watching because of the constant lying bullshit they present. so there answer is the same formula  that has "solved" our debt problem... more debt...they have doubled down on  bullshit...so i guess this would be... Bs1, where we get an infusion of our kids and grandkids future generations bullshit...

now they have paraded the currency expert bill gates out....

Mon, 05/07/2012 - 08:59 | Link to Comment Tramp Stamper
Tramp Stamper's picture

$1000  prize money to whoever can get in front of the camera with buffett and yell STFU U POS

 

edit..extra $500 if you bitch slap bq

Mon, 05/07/2012 - 07:32 | Link to Comment cossack55
cossack55's picture

Just call Ben the MeisterPrinter, he has lots of ink.

Mon, 05/07/2012 - 08:33 | Link to Comment battle axe
battle axe's picture

And the head of Santander said "Spain is different from the rest of Europe, our people always pay their Mortgages no matter what", BWAAHAAAAAA. What a lying sack of shit...

Mon, 05/07/2012 - 07:03 | Link to Comment GeneMarchbanks
GeneMarchbanks's picture

Translated: since this plan is a stillborn failure, the countdown is now officially on to the Spanish PSI.

"The plan is being finalised by the Economy Ministry and the Bank of Spain. It will include major changes in the management," a government source said.

A failure even before the details are out?

Mon, 05/07/2012 - 07:15 | Link to Comment BorisTheBlade
BorisTheBlade's picture

The right question is failure to who. I think those devising the plan pretty happy with eventual outcome. In the meantime, 'the skies will fall' rhetoric to ensue to shove another bail-out down the throats of taxpayers.

Mon, 05/07/2012 - 07:05 | Link to Comment l1b3rty
l1b3rty's picture

Lets see if we can start hearing the word Quadrillion out of pundits by 2013 as the central banksturds propel us further into paper oblivion, tying us up to the electrical chair and giving us  a good dosage right to the vein of paper right before the lights go out for good.

http://silvervigilante.com

Mon, 05/07/2012 - 07:05 | Link to Comment XXL66
XXL66's picture

Where is Mr. Van Rompuy now ? Writing a Haiku ?

Mon, 05/07/2012 - 08:00 | Link to Comment ihedgemyhedges
ihedgemyhedges's picture

Spain is burning down,

Go find yourself a new clown.

You bastards are screwed.

Mon, 05/07/2012 - 08:36 | Link to Comment Zero Govt
Zero Govt's picture

oh we don't need to "find any clowns" over here, just run through the names of every parlimentarian in Europe, the place is rammed to overflowing with the fuckers

Mon, 05/07/2012 - 07:13 | Link to Comment firstdivision
firstdivision's picture

Oil has to be giving Ben a headache today.  So close to be able to release funds to bank, only to be robbed by the front-runnerrrrr...I mean speculators.

Mon, 05/07/2012 - 07:13 | Link to Comment misterc
misterc's picture

It's not money given to banksters. Just a contingent liability. The balance sheets strengthen and noone gets hurt. (Don't tell Mark Grant)

Mon, 05/07/2012 - 07:37 | Link to Comment Joe The Plumber
Joe The Plumber's picture

And with bailing out the regional governments with new guarantees there are even more contingent liabilities. No limit and no problem eh? It is just an accounting entry after all. What could possibly go wrong?

Mon, 05/07/2012 - 07:14 | Link to Comment chump666
chump666's picture

"a change in mangement"

lol

Europe is funny.

Mon, 05/07/2012 - 07:15 | Link to Comment Fantasy Planet
Fantasy Planet's picture

Run with the bullshit.

Mon, 05/07/2012 - 07:25 | Link to Comment Dick Darlington
Dick Darlington's picture

And then there's also this:

Spain Plans EU30 Billion Debt Issuance for Regions, Mundo Says

The Spanish government plans to issue about 30 billion euros ($39 billion) of so-called hispabonds to help regions of the country pay debt maturities and finance the deficit,

El Mundo reported today, without citing anyone.

The sale of hispabonds, which would allow regions to issue debt jointly, is scheduled to start in June and is being designed by the economy ministry, the newspaper said.

More than half of the bond sale will be for Catalonia and Valencia, which have more than 16 billion euros of debt maturing this year, El Mundo said, adding that other regions facing big financial trouble include Castilla La Mancha, Murcia and Andalucia.

http://www.bloomberg.com/news/2012-05-06/spain-plans-eu30-billion-debt-issuance-for-regions-mundo-says.html

 

Bond "markets" ignoring all this for now but the final countdown is on now.

Mon, 05/07/2012 - 07:26 | Link to Comment AnAnonymous
AnAnonymous's picture

Bond "markets" ignoring all this for now but the final countdown is on now.
___________________________________________________

And that means?

Bond markets do not hang into space vaccuum. They are people with physical locations.

People who might consider it twice before bombing their own place.

Mon, 05/07/2012 - 07:40 | Link to Comment Joe The Plumber
Joe The Plumber's picture

Why dont you go post on chinese blogs you china troll? Oh i forgot. They dont have freedom of speech there.

Mon, 05/07/2012 - 08:36 | Link to Comment resurger
resurger's picture

I see, thanks for the information.

Mon, 05/07/2012 - 13:42 | Link to Comment akak
akak's picture

 

Bond markets do not hang into space vaccuum.

No, truth are that.

In the realness, bond markets are seven green nails that taste loud.

Mon, 05/07/2012 - 07:21 | Link to Comment razorthin
razorthin's picture

And this saves Greece how?

Mon, 05/07/2012 - 07:23 | Link to Comment MrNude
MrNude's picture

It doesn't they are just rearranging who has the better deck seats on the titanic. 

Mon, 05/07/2012 - 07:23 | Link to Comment fonzannoon
fonzannoon's picture

whatever happened to the high speed rail thing in the US?

Mon, 05/07/2012 - 08:37 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

Couldn't afford it and no one gave a sh!t anyway.

 

Mon, 05/07/2012 - 07:24 | Link to Comment LongSoupLine
LongSoupLine's picture

Just yet another signal to the future ramping of gold and silver...no matter how hard Becky "not so" Quick feeds Warren and Charlie anti-gold softballs this morning.

Mon, 05/07/2012 - 07:26 | Link to Comment Kaiser Sousa
Kaiser Sousa's picture

Wait til ya'll c the latest warren buffoon and bill gates gold hater mindless rant on CNBC with Becky " somebody pimp slap me" Quick...
Clown ass mother fuckers.....

Mon, 05/07/2012 - 07:33 | Link to Comment youngman
youngman's picture

He thinks he is so cute by not paying for anything....that is why he does not send a check into the Fed Govt ...he is a cheap bastard...I bet he does not buy the breakfast either....or leave a tip

Mon, 05/07/2012 - 08:27 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

I just wish he would pay what he already owes.....and thanks for funding the anti-pipeline crowd Warren. We little people don't pay our fair share for gasoline. Thanks for looking out for us Uncle Warren.

 

Mon, 05/07/2012 - 07:33 | Link to Comment slackrabbit
slackrabbit's picture

I can bail them out - i have a printer

 

the funniest and most ironic thing about this song is that is was written and sung by EUROPE

 

the opening lyrics says it all of life imitating art - rather than the other way round

We're leaving together
But still it's farewell
And maybe we'll come back
To earth, who can tell? -

 http://youtu.be/9jK-NcRmVcw

 

Mon, 05/07/2012 - 07:29 | Link to Comment Joe The Plumber
Joe The Plumber's picture

I guess the spanish people better start learning how to carry gold up their asses. The rectum is the only safe deposit box available to prisoners. But i am sure gonna hate receiving change for transactions in our brave new world

Mon, 05/07/2012 - 07:31 | Link to Comment youngman
youngman's picture

This just shows how hard it is to invest on what a politician says...last week no bailout...this week bailout...you can´t make a Buffet buy..."for the long term"...they are turning everyone into a day trader...and I think that is bad...

 

Who is going to buy those bonds.....they say they are going to sell them like there is a waiting line of investors to buy such great bonds....to me its throwing money away...and it is...I am in gold because last week it was gold..and this week it still is gold...it does not lie to me...

Mon, 05/07/2012 - 07:39 | Link to Comment slackrabbit
slackrabbit's picture

Agree.

I am amazed people so easily forget history.

When Brazil defaulted in the 90's they were emphatic there would be no defaults....then two hours later - another press conference and it was all over.

 

Keep on stacking folks and just remember to keep some in grab bag because when politicians get desperate, confiscation just becomes the legalisation of theft - much like those 'voluntary defaults’....

 

Mon, 05/07/2012 - 08:31 | Link to Comment resurger
resurger's picture

"Hey mama, no need for drama" ....

 

Party Party Party ....... yeah! As long as i fuck and drink all is goooooooooooooooooooooooooooooooooooooooooooooooooooooooooood!

Monday Party ....

Mon, 05/07/2012 - 08:41 | Link to Comment Element
Element's picture

But as people fully realise it ain't really about liquidity at all, but actual insolvency, does systemic-freeze (to ice-age conditions) finally emerge?

I know if I were a counterparty I'd be shitting-bricks right now.

Mon, 05/07/2012 - 07:52 | Link to Comment lizzy36
lizzy36's picture

Game plan is not new.

Bailout must be denied 3x before there is an actual bailout.

Be warned, the status quo will do anything to defend their status. Including but not limited to war.

Mon, 05/07/2012 - 07:35 | Link to Comment Change-In-Trend
Mon, 05/07/2012 - 07:39 | Link to Comment crawl
crawl's picture

Yeah, more central bank meddling on the way. Can't wait to read how they are going to put lipstick on this pig and call it pretty.

So much for a correction in the markets. Mere thoughts of a central bank doing something will send the markets on a rocket ride.

Interesting day ahead in the US markets.

Mon, 05/07/2012 - 07:40 | Link to Comment zonetraders
Mon, 05/07/2012 - 07:46 | Link to Comment falak pema
falak pema's picture

The amount of money THE PRIVATE BANKSTAS OF SPAIN NEED IS 1 TRILLION; YES THATS HOW BIG THE HOLE IS. 380 B FROM IMF, 400 B FROM BEI  BASED ON committed money from past. And the rest...? So 9 B from government is just peanuts. The other solution is a Looooong term loan at FIXED interest from money markets to streeeeeetch out the problem. 

Don't ask me what other LTRO liquidity lending lines Draghi has in place for Spanish banks as they ONLY do one thing, park the LTRO with ECB losing .75% on each euro as they are scared witless at the idea of buying more sovereign spanish bond debt.

Either we see Eurobonds as well and Merkel puts her whole  sweet german sachertocht on the line or this thing will unwind. And French and German banks go down the shute into the septic tank. Spain and Italy private banking ills coupled with public bond issues spell financial Armageddon for Euro/WS/CIty financial world. THe Bankstas better be close to the KEY patient Santander, or else it will come back and bite them so hard; even Rooster Cockburn's ghost will yell Holy Mackerel in the dark !

Mon, 05/07/2012 - 07:51 | Link to Comment slackrabbit
slackrabbit's picture

Have you seen Uncle Ben's new printer? ;-)

Mon, 05/07/2012 - 07:55 | Link to Comment youngman
youngman's picture

I totally agree..so why ........and how in hell is the Euro holding up as well as it is..?????

and gold  and silver down......

If I was a little Asian country.....would I have my soverign monies in the Euro...the US dollar...or gold and silver...

Mon, 05/07/2012 - 08:44 | Link to Comment Element
Element's picture

Easy-peazy! 

They print new euros in the front-office with which to buy old-euros thus creating a bum-rush of sustained demand, then they just wheel the old euros out the back to incinerate them under a grill of BBQ sauages, with which to to feed the poor </mmm pink-slime mystery-bags!> and thus 'sterilize' the operation.

Permanent Open Mouth Operations bitchez.

 

Can I have my PhD now?

Mon, 05/07/2012 - 09:01 | Link to Comment Winston Churchill
Winston Churchill's picture

The LME is closed today.

All the price action is in paper gold and silver.

Tomorrow will be different.

Mon, 05/07/2012 - 08:11 | Link to Comment mendigo
mendigo's picture

When the situation is finally hopeless won't the Europeans just do a combined print and psi? And they will raise taxes and stimulate. You cannot go only half ponzi. I can't believe the Irish are going to pass on this opportunity to renegotiate the terms of thier surrender.

Mon, 05/07/2012 - 08:00 | Link to Comment Comay Mierda
Comay Mierda's picture

do you really think these politicians are this dumb?

this whole fiasco was planned out decades ago.  just a preliminary step to bring in a one world central bank system under a soviet style UN govt.

and the quadrillion dollar question is how far will the europeans allow this to go before it is stopped (if at all)?

Mon, 05/07/2012 - 08:19 | Link to Comment youngman
youngman's picture

Yes I do think the Politicians are that DUMB....they are .....but the people behind them...they are the ones to worry about....

Mon, 05/07/2012 - 08:23 | Link to Comment Comay Mierda
Comay Mierda's picture

worry about? those guys couldnt hold their own in a bar fight.  ppl are waking up, slowly but surely.

Mon, 05/07/2012 - 08:27 | Link to Comment MrNude
MrNude's picture

You are right but the script is only as good as the actors who have to bring it to life.

Mon, 05/07/2012 - 08:04 | Link to Comment Element
Element's picture

I dunno, the Spanish Govt seem pretty confident it's just a management problem.

 

/sarc

Mon, 05/07/2012 - 08:05 | Link to Comment fiddy pence haf...
fiddy pence haff pound's picture

why the public announcement?

The ECB has been slipping money under the table for over a year, just to keep up appearances.

Maybe they're looking to destabilise the currency on behalf of Germany, now that

Sarko is gone.

Mon, 05/07/2012 - 08:07 | Link to Comment JPMorgan
JPMorgan's picture

QE to infinity cont.

Mon, 05/07/2012 - 09:13 | Link to Comment Element
Element's picture

Wow, I didn't know China also has an oganisation called the FBI!

Those slope bastards just copy everything!

 

oh ... wait a minute ... other way around ...

 

EDIT:  gets you wondering though, what exactly do these FBI swine have against free-speech amongst ~310 million presumed US terrorists anyway?

Mon, 05/07/2012 - 08:17 | Link to Comment Peter Pan
Peter Pan's picture

These broken banks can only be saved by culling people's savings accounts and issuing them with the equivalent amount as shares in the bank. This will enable banks to take the write-offs, release the debt slaves and then get on with the business of banking. Over time, as banks once again start to make profits, those shares may come to be worth more than the original amounts culled from the accounts.

The only problem with this solution is that the current owners of the banks would be wiped out. And that is what the elite won't accept.

Mon, 05/07/2012 - 08:21 | Link to Comment hugovanderbubble
hugovanderbubble's picture

Credit Agricole is in default and will need french intervention.

Spanish Comunidades Autonomas are all in default : ALL . Valencia,Catalonia,Madrid,Andalucia,Extremadura,Baleares, all.....

Portuguese bailout is inmiment

KBC and Dexia are scam banks

EURO USD has to be close to 1.05/1.10

Dont buy spanish sovereign and subgovernment bonds.- Haircuts coming in Italy,Portugal,Belgium and Spain from 20 to 50%.

Mon, 05/07/2012 - 08:25 | Link to Comment Zero Govt
Zero Govt's picture

"Sure enough, as math always wins over rhetoric and policy.."

a nice cross-reference (side swipe?) to Mr Summers there

Mon, 05/07/2012 - 08:26 | Link to Comment resurger
resurger's picture

No recession here

Mon, 05/07/2012 - 08:27 | Link to Comment Vince Clortho
Vince Clortho's picture

Print with Ludicrous Speed!

All is well

Mon, 05/07/2012 - 08:30 | Link to Comment the not so migh...
the not so mighty maximiza's picture

Anouther bank bailout, how original.

Mon, 05/07/2012 - 08:39 | Link to Comment midgetrannyporn
midgetrannyporn's picture

They will say or do anything to protect the banks and stock, er, "markets".

Mon, 05/07/2012 - 09:10 | Link to Comment Element
Element's picture

Oh super-funds can easily handle another 50% down blip ... it's just the retirees, currencies, economies and quasi-constitutional 'Govts' that will be a smoking crater

Mon, 05/07/2012 - 08:59 | Link to Comment timbo_em
timbo_em's picture

From El País (my emphasis):

The government has announced that it is reinforcing the Orderly Bank Restructuring Fund (FROB) by at least six billion more euros, including up to 15 billion through the emission of debt. This money will be listed as public debt, but won't be considered as deficit because the government will supposedly make money from the operation, according to the ministry.

Where can one take lectures in Voodoo Accounting?

Mon, 05/07/2012 - 09:06 | Link to Comment Winston Churchill
Winston Churchill's picture

B.L.S.

Mon, 05/07/2012 - 09:30 | Link to Comment RonBurgundy
RonBurgundy's picture

"Machina" in the ablative plural (as object of the preposition ex) is "machinis". "Machinae" would be nominative plural.

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