Weekend Economists Take a Shot in the Dark, September 28-30, 2012

[Demeter]

21. I'LL RAISE YOU: Spain Needs $76 Billion to Recapitalize Its Banks, Audit Finds

http://www.nytimes.com/2012/09/29/business/global/spain-needs-60-billion-for-its-banks-audit-finds.html

I THINK THAT'S MORE...DEPENDING ON THE DAY

Spain’s ailing banking industry could need as much as 59.3 billion euros, or $76.4 billion, in additional capital, according to an independent banking assessment published on Friday. The report paves the way for Madrid to request bank rescue loans that European finance ministers have agreed to extend.

The number was within the range of previous estimates and well below the potential 100 billion euros, or $128.8 billion, in bailout money that Spain negotiated with other euro zone countries in June.

And of the 14 banks assessed by the consulting firm Oliver Wyman, half are not in need of emergency funds. These include Santander, BBVA and La Caixa, the country’s three largest financial institutions.

Presenting the report, Fernando Jiménez Latorre, the Spanish secretary of state for the economy, said at a news conference that Spain would probably soon request about 40 billion euros, roughly $50 billion, of the European bailout offer. The audit, he said, should end the debate among investors about whether the Spanish banking sector can survive the consequences of a decade of reckless property lending. After Spain’s real estate bubble burst in 2008, many of its banks found themselves holding growing numbers of loans in or near default.

The bailout negotiations, and the need for an audit to assess the extent of the damage, were prompted by the government’s seizure in May of Bankia, one of the biggest real estate lenders, and signs that several others were on the brink of collapse. ..