America Should Bet on Berlin, Not the Basket Cases
Spain just asked for a Euro 100 billion bailout for its banks, whose bad loans reportedly are just under 9% of their total book. That's bad enough, but the real number is two or three times as bad, as we infer from the fact that Spanish banks tripled their lending volume since 2008, lending money to zombie borrowers to pay interest on their old loans. Spain's official response has been to delay a promised audit of the banks and go on vacation. No joke: the Wall Street Journal reports this morning:
The deadline for a group of auditors to present full reports on the capital needs of Spain's financial sector has been delayed to September from July 31, a Spanish central bank source said Tuesday. The move has been agreed with Spain's government, the International Monetary Fund and the European Central Bank, as well as the auditing firms -- Deloitte, KPMG, PwC and Ernst & Young -- themselves, this person added. The delay seeks to provide the auditors with more time to complete their evaluation of the banks' books and also responds to the fact that many Spanish companies and government institutions are only thinly staffed in August, a traditional holiday month when the cabinet and parliament rarely meet, this person said.
All the pious pronouncements from the policy elite amount to a plea for more money to keep scams going that should have been shut down a long time ago. Americans, after all, lost $6 trillion in net worth (a 40% decline for the average family) between 2007 and 2010, and municipal workers are taking pension clawbacks. The problem is not monetary, but political.