2 Trillion in assets is a lot to prop up, and far more than Germany can handle alone through the European Central Bank. So guess where they're proposing to get the estimated 400 billion believed needed to accomplish this? The IMF is the lender of last resort, and the United States is the largest contributor at around 17%.
If approved, this means that U.S. taxpayers will be transferring approximately 68 billion to Spain's sinking banks.
Using the latest census data, that amounts to around $220 for each U.S. citizen. Since this is simply ridiculous, and judging from their plummeting stock values, the market is saying that the Spanish Banks will sink.
The ramifications of this could have a domino effect, and cause a liquidity crisis similar to what happened after the fall of Lehman brothers in 2008, when lending institutions became afraid to loan to one another, fearing unknown exposure to risk. Derivatives, which famed investor Warren Buffet has called "financial weapons of mass destruction," play a role in this, as these complicated trades are often hidden on bank balance sheets. In a global economy, it's like a game of poker, where no player wants to show his hand, or gamble on what the other guy is holding, so the players disperse and go home.
As the European crisis worsens, it seems inevitable that too big to fail will, at some point become too big to bail out, and Spain's banks appear to be the end of this game.
1) Santander Group = Total assets 1.2 Trillion
2) Banco Bilbao Vizcaya Argentaria = Total assets 550 billion
3) La Caxia = Total assets 370 billion
Edited by Raptor Witness, 06 June 2012 - 07:27 PM.