Credit Suisse Says Spanish Banks Hiding Losses

February 19, 2010 (LPAC)—Lyndon LaRouche has indicated that, not Greece, but the virtual British colony which is Spain, with its London-controlled Banco Santander, is the detonator to bring down the Euro system. Now, after UBS's (Union Bank of Switzerland) report yesterday that the Spanish housing market is a "Ponzi scheme," Credit Suisse has issued a 68-page report to investors which points to Spanish banks hiding their losses, especially their large mortgage and commercial real-estate losses. Credit Suisse reports that the Spanish "housing market appears to be more than 30% overvalued," and "there is a risk [that] reported NPLs [non-performing loans] might be underestimated to the order of 30-40%," and might be hidden by mortgage and loan restructurings.

On these restructurings, UBS analyst Alastair Ryan had reported in August-September, 2009, that 5.6 billion euros of Spanish mortgages were being restructured (renegotiated) per MONTH, but were not being reported as non-performing loans. He said that reported non-performing loans had totalled about 85 billion euros over the previous twelve months, but restructurings (which were excluded), were close to 50 billion total over the same period. For this and other reasons, Ryan estimated that reported NPLs were only half the true level.

An August, 2009, report from alternative economic research house Variant Perception was more straightforward on the "Ponzi scheme." It said, "Spain had the mother of all housing bubbles. To put things in perspective, Spain now has as many unsold homes as the US, even though the US is about six times bigger. Spain is roughly 10% of the EU GDP, yet it accounted for 30% of all new homes built since 2000 in the EU.

"The value of outstanding loans to Spanish developers has gone from just 33.5 billion euros in 2000, to 318 billion in 2008, a rise of 850% in five years. If you add in construction sector debts, the overall value of outstanding loans to developers and construction companies rises to 470 billion euros. That's almost 50% of Spanish GDP. Most of these loans will go bad. [Ed. note: By early 2010, home-mortgage debt was another 58% of Spanish GDP on top of this.]

"Spanish banks are hiding their losses and rolling over debt to zombie companies,... and making 40-year and 100% loan-to-value loans.... Investors are deluding themselves if they believe that Spanish banks are among the strongest in the world.

"In April, meanwhile, Spain's 'Expansion' reported that Spanish banks control 25 per cent of appraisals directly and another 25 per cent indirectly through their shareholdings. Which means they are mostly in charge of valuing the assets themselves. As Expansion reported, 'This situation has placed the focus once again on the links between banks and the real estate appraisers that goes beyond in many cases a mere commercial relationship.'"

And finally, and most alarming as to the real dimensions of this enormous Ponzi scheme, "Spanish banks are now the largest real estate holders in Spain. They have come to own properties through many different avenues. In order to hide from the effects of the real estate crash, Spanish banks have been buying properties before the loans on them go bad, and trying to dispose of them through their own real estate companies. They have also come to own dozens of thousands of homes through debt-for-equity swaps. Estimates put the value of property repossessed or swapped for debt by Spanish banks at about 16 billion euros. Consider the following: Spanish banks are now running their own real estate companies, and have websites set up to move their stock. Among selling points are: pricing discounts of 25-50%, financial terms of Euribor plus 0% over 40 years, and guarantees to re-purchase the property in the future."