Some of us are trying to put together a detailed, but non sensationalist, account of the actual state of play in the Spanish banking system. I think we owe this to our families, our friends, and our loved ones. So....
So, if you work in the Spanish banking system, and have valid knowledge of current practices and accounting positions, please get in touch with me. Insiders have to explode this, before "this" explodes all of us. With unforseeable consequences, not only for the Eurozone, but for the whole global financial system.
One example of what can be done is show in this presentation from José Contreras, which you should all read.
I might differ on some of the details, but José gets right through to the core points, which are:
i) the significance of the foreign debt
ii) the importance of rising unemployment
iii) the impact of price deflation
More examples of what needs to be said can be seen in this interesting exchange in Afoe comments.
Edward, thanks for your comments. I am more inclined to believe that if banks sell a particular product strongly enough, clients end up buying it. In this particular example, in my view, the burden of gilt is more with banks than with clients. I am a spanish citizen with a mortgage and have I worked in a spanish Caja, so I can claim to have seen both sides of the picture. My general impression is that financial ignorance by clients has been used by banks to make money, which obviously is not illegal but certainly questionable.
That is a great summary! Re Spanish banks dubious advising of clients (= out and out selling), the latest scam has been to sell prefeence shares as to retail clients as if they were deposits. Someone (the OCU?) should be taking out legal action about this.
Thanks Mark. By the way those preference shares are a perfect example of what I am talking about. Round about the time the banks were selling them (Jan 09-Jun09), the institutional market was pricing identical transactions by the same issuers in the secondary market at 25%-40% of nominal value. The preference shares being sold in the retail branches were sold at 100% of nominal value (as you would expect with any normal fixed income product). As I said before, it is not illegal but clearly questionable.
Also, this comment from the thread in Expansion on the recent Variant Perception report.
1. broker (Autor sin e-mail publico) el 23 de Agosto de 2009 a las 10:50He is saying that distressed loans are already more like 10%, and that in June (when Salgado raised another 90 billion in debt, and just before the ECB "wheelbarrow") bank staff were advised to refinance all loans, whatever.
Trabajo en un Banco, en uno de los Grandes, en junio se nos dio oreden con prioridad absoluta de refinanciar todos los préstamos impagados, esta semana le di un vistazo a las primeras refinanciaciones y vuelven a estar la mayoria de ellas en situación crítica. Estamos aplazando el problema y esta Bola de Nieve pronto rompera. La mora real bancaria sin trucos, esta por el 10%, OJO QUE ESTO ES SERIO.
Basically, in the face of so much official silence and hypocracy, my feeling is all of this is going to fall apart when people who have been working on the inside finally come out in the open and admit the reality. They two have childre, loved ones and elderly parents. No family will remain untouched.
Finally, this comment from José, which is 100% to the point as to where we are now.
Edward, my reading of Blanco´s comments regarding higher future taxes is that the EU has privately held talks with the govt. and announced to them the maximum level of deficit that they are prepared to tolerate. Since Maastricht no longer applies and deficits have theoretically no limits in the EU, these issues are being held case by case behind closed doors. Spain is clearly the most worrying partner for its size and problems. My open question is simply; What is the limit that the EU has informally impossed the Spanish govt. regarding the public deficit? Once we have an answer to that question we can make our own calculations as to how long the govt. can sustain the financial system, new unemployment benefits and public works (among others).
Absolutely. The game is over. The future is already being decided behind closed doors, and once we know what next years spending limit will be we can start to calibrate.
Crickey, Harvey Milk ended up badly, didn't he. I certainly hope nothing like that happens to me :).