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:


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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Sandmann's picture

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

GetZeeGold's picture



Naw it's OK.


Spain may pump public funds into its banking system


Why didn't we think of that sooner?


Zero Govt's picture

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

another "Winner" is born


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.

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.


gatorengineer's picture

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

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.

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.


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 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....

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

cossack55's picture

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

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...

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?

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.

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.

XXL66's picture

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

ihedgemyhedges's picture

Spain is burning down,

Go find yourself a new clown.

You bastards are screwed.

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

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.

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)

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?

chump666's picture

"a change in mangement"


Europe is funny.

Fantasy Planet's picture

Run with the bullshit.

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.


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

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.

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.

resurger's picture

I see, thanks for the information.

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.

razorthin's picture

And this saves Greece how?

MrNude's picture

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

fonzannoon's picture

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

LongSoupLine's picture

Just yet another signal to the future ramping of gold and matter how hard Becky "not so" Quick feeds Warren and Charlie anti-gold softballs this morning.

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.....

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

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.


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? -


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

youngman's picture

This just shows how hard it is to invest on what a politician says...last week no bailout...this week 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 me its throwing money away...and it is...I am in gold because last week it was gold..and this week it still is does not lie to me...

slackrabbit's picture


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’....


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 ....

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.

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.

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.

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 !