For those who think the crisis was because of greed in The City

One of Spain’s biggest banks has been officially declared worse than worthless, leaving 350,000 small investors likely to be virtually wiped out in a restructuring expected to go ahead next month.

The disastrous state of Bankia, a grouping of seven savings banks hammered together in 2010 and floated in 2011, shows it is valued at -€4.2 billion (-£3.5 billion), dashing any lingering hopes that its shareholders might salvage anything from the wreckage.

Shares in the bank — formed out of Caja Madrid and six much smaller savings banks, a deal known as Snow White and the Six Dwarfs — slumped by another 20 per cent yesterday to €0.55 after the latest valuation was published by the Fund for Orderly Bank Restructuring, the Spanish bailout organisation.

Don\’t forget: this mess in Spain was nothing at all to do with The City, wholesale money markets, CDOs, swaps, trading or even the greed of shareholders. These were charitably and communally owned mortgage banks. Who all went bust simply by lending too much for mortgages. Under the control of local politicians and union leaders in the main.

It\’s not even a problem of fractional reserve banking. They simply lost all their money on bad mortgages.

The important point being to note that as this problem was caused by none of the things the British left keep pointing to and screaming about, their proposed solutions won\’t stop such a thing happening again in the future.

6 comments on “For those who think the crisis was because of greed in The City

  1. One of the things quite a lot of lefties (like Jerry Jones of thre Morninig Star) were banging on about was, if you lent money into a housing bubble, you would get a bust,so you needed a Land Value Tax.The same LVT Mr Worstall was calling for on Boxing Day 2008.No doubt some lefities think Fractional Reserve Banking is evil per se:like Murray Rothbard , idol of the libertarian right.

  2. Here’s something to amuse you all. NEF’s report on local banking:

    http://www.neweconomics.org/sites/neweconomics.org/files/A_local_banking_system.pdf

    Please turn to page 4, where you will find the following gem:

    “The UK has 197 bank branches per million inhabitants (including building societies). This compares with over 500 and 1,010 branches per million inhabitants respectively in Germany and Spain. Not only does Spain have more banks per head of population, they are also far better
    disbursed than they are in the UK”.

    You couldn’t make it up, could you?

  3. Oh, and NEF have evidently never heard of the British Savings Banks that dearieme refers to. According to them, from 1920 onwards there were only 5 UK banks.

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