Heh, Look! It's Ridiculous Bank BS Again! (Spain)

<p><a href=”http://online.wsj.com/article/SB10001424052748703438604575314711264457870.html” target=”_blank”>There’s nothing like bubble-blowing</a>, irresponsible lending and trying to goad people into levering up into things they can’t afford, right?</p>
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<p>Spain has one of the world’s most-troubled housing markets, yet some buyers are suddenly able to get mortgages with 100% financing, and developers are building new homes on empty lots despite a huge glut. </p></blockquote>
<p dir=”ltr”>Heh, what could possibly go wrong when you do things like that?&#160; <strong><em>Doesn’t anyone remember our “subslime” housing mess?</em></strong></p>
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<p dir=”ltr”>The reason: Spain’s banks took possession of a large inventory of homes, buildings and land two years ago, forgiving the debt in hopes of heading off defaults. The plan was to resell the properties when the market bounced back and evade the worst impact of the looming housing crisis.</p></blockquote>
<p dir=”ltr”>Translation: <strong><em>They lied</em></strong>.</p>
<p dir=”ltr”>Just like our banks.&#160; They “took possession” while refusing to recognize the mark to the market, <strong><em>just as have our banks</em></strong>, and bet their future on the market recovering so they could sell without recognizing a loss that had already happened.</p>
<p dir=”ltr”>Except that it didn’t work as the market didn’t come back.</p>
<p dir=”ltr”>So now, <strong><em>instead of recognizing their losses, they’re doubling down to make even bigger losses!</em></strong></p>
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<p>In some cases, that means offering deals to consumers that are suspiciously like those that got the global housing market in trouble in the first place. The tactics include not just 100% loans, but also low initial teaser rates for buyers or initial payment deferrals for as long as three years. </p>
<p>At the same time, banks that own big plots of unbuilt land are announcing plans to build new houses to give the illiquid lots more value, despite the country’s estimated glut of one million empty homes. </p></blockquote>
<p dir=”ltr”>Uh huh.</p>
<p dir=”ltr”>This puts Trichet’s claim that he won’t “allow” Spain (or Greece) to default in a bit of a different light, eh?</p>
<p dir=”ltr”>Exactly how does he intend to do that?&#160; Try to force an inflationary credit expansion?&#160; We tried that – for the last two years.&#160; It failed.</p>
<p dir=”ltr”><strong>The global economy cannot recover until the fraudulent hiding of losses that have already occurred ends and those who are bankrupt are forced to recognize their insolvency, purging the irredeemable debt from the system.</strong></p>

Read the original story at Karl Denninger – The Market Ticker