1 year, 10 months ago
What does it mean, when the 45 banks of Spain say they are racing to restructure? Restructure what? Repos, non performing loans, write-offs
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M$1 Answer
Well, if you look at this graphic from the New York Times, it seems Spain is deeply in debt to France Germany and Britain. While Portugal and Italy owe a little to Spain, these two countries are also in debt to the same countries Spain is indebted to. Spain cannot pay these massive debts, so some kind of restructuring needs to happen, although I do not know its form. Spain does not have the option to devalue its currency by printing more money, as the Euro ties it to the other countries, namely France and Germany.
I think we are having a crisis in capitalism. The rich are still getting richer, and eventually, this will collapse just because the concentration of wealth has gotten too great. Whenever the concentration of anything, be it money or chemicals or land or whatever, becomes too great with respect to its surroundings, the dissipative forces build up to equalize and redistribute it You just don't know when or where the failure in the container will occur. With money, the "bottle" is not as clearly defined as with a chemical substance enclosed in glass, but rather depends on people and the force of armies. The cracks are starting to appear, and Spain seems to be next after Greece.
duenhsiyen
I think we are having a crisis in capitalism. The rich are still getting richer, and eventually, this will collapse just because the concentration of wealth has gotten too great. Whenever the concentration of anything, be it money or chemicals or land or whatever, becomes too great with respect to its surroundings, the dissipative forces build up to equalize and redistribute it You just don't know when or where the failure in the container will occur. With money, the "bottle" is not as clearly defined as with a chemical substance enclosed in glass, but rather depends on people and the force of armies. The cracks are starting to appear, and Spain seems to be next after Greece.
duenhsiyen
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M$
http://www.businessinsider.com/if-you-think-greece-is-bad-here-is-what-you-have-to-know-about-spain-2010-2#property-boom-spain-experienced-a-property-boom-larger-than-the-us-and-uk-1
It is all tangled up like mohair.
Here is my Analysis of Spains Banks risk:
1. Dollar borrowing rates increased
2. 2 year swap spreads widened to 37.50 bps (http://www.reuters.com/article/idUSTOE65G04W20100617)
3. 45 savings banks have seen their capital erode by doubtful loans, repos, and writeoffs.
4. The Spanish Prime minister denies seeking bailout relief from the IMF. However, the Financial Minister of Spain said, "I hope … the ECB will be aware of the needs of the Spanish financial system" (http://www.smartmoney.com/investing/stocks/it-was-a-good-week-for-european-banks/) Spain raised $4.3 in bond auctions monies to fight speculation of a bailout. (http://blog.taragana.com/business/2010/06/17/spain-raises-nearly-e35b-43b-in-oversubscribed-bond-auction-but-at-higher-interest-rate-71149/)
5. Spanish banks are borrowing money from the ECB, for restructuring, too pay debt coming due. Spanish banks borrowed 85.6 billion euros from the ECB. Spanish banks may need to borrow from the 440 billion euro stablity fund. (http://www.bloggingstocks.com/2010/06/16/spanish-banks-borrow-from-european-central-bank/) Many Spanish banks are frozen out of the market because of prohibitively high interest rates. There are problems acquiring commercial paper and selling corporate bond. (http://randysright.wordpress.com/2010/05/10/bank-funding-crunch-deepens-as-default-swaps-reach-records-credit-markets/)
6. 10 Year German money has become more expensive.
7. The Federal Reserve establishs swaps with the Bank of Canada, the Bank of England, the European Central Bank, the Swiss National Bank, and the Bank of Japan. The Fed is playing more of a role in handling the swaps between the central banks. The fed increase of power due to Lehman liquidity squeeze arguments.
8. Spains 10 year government bond yield was 4.86% as of Jun, 2010 (http://blog.taragana.com/business/2010/06/17/spain-raises-nearly-e35b-43b-in-oversubscribed-bond-auction-but-at-higher-interest-rate-71149/)
9. Banks in Portugal, Italy, Ireland, and Greece struggle to find term funding in the wholesale interbank.
10. The ECB is not charity organization. After realizing banks are not in as bad as condition as previously thought, the ECB is demanding repayment of 442 billion euros (http://www.guardian.co.uk/business/2010/jun/30/european-banks-borrow-132-markets-relieved)
11. Fitch cut Spains credit rating to AA+ from AAA.
12. A collapsing real estate market is one source of rising defaults for Spanish banks.
13. Spains CDS spread is near 250, the highest it has ever been. CDS contracts have payout terms granted by the insuring party for bond devaluation loses.(http://seekingalpha.com/article/209975-conspiracy-and-the-impending-spanish-bank-collapse-who-needs-tv-for-entertainment)
Spain has huge banks in the US. How are Spanish banks in the US affected by default risks for banks in Spain? Do the international banks share the burden of risk?