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Now Spain Plans To Wipe Out Bank Shareholders

From the Wall Street Journal:

Spain Brings the Pain to Bank Investors

Government to Impose Heavy Losses on Shareholders and Bondholders


MADRID—The Spanish government will impose heavy losses on investors at nationalized banks and hire external advisers to help it manage these banks’ assets, its latest efforts to overhaul a financial sector battered by the collapse of a decade long housing boom.

Forcing shareholders and bondholders to share the cost of restructuring the country’s five nationalized banks was a politically costly step for the government of Prime Minister Mariano Rajoy, but one that was required under the terms of a European Union bailout of Spain’s ailing lenders

Overhauling the banks is a key part of the government’s efforts to turn around an ailing economy, now in its sixth consecutive quarter of recession. Bank credit is shrinking and unemployment has shot past 26%…

Well, nothing will boost the economy like punishing the capitalists.

The restructuring terms announced by the FROB will impose losses of up to 61% at Spain’s largest nationalized banks. At Bankia SA, BKIA.MC -21.51% the largest of the institutions and the only one that is publicly traded, shareholders will be nearly wiped out and junior bondholders will lose around 30% of their original investment…

Wiping out investors is the best way to improve credit and expand the economy. (Not.)

In keeping with EU requirements that investors bear losses before companies receive state aid, the nominal value of Bankia’s shares will be reduced to €0.01[$0.01] from €2 [$2.6] and the nominal value of its preferred shares and subordinated debt will be reduced to €4.841 billion [$6.29 billion] from €6.911 billion [$9 billion], the bailout fund said.

To recapitalize Bankia, the €4.841 billion worth of preferred shares and subordinated debt will be converted into ordinary shares, while the FROB will inject €10.7 billion. This recapitalization will result in a massive dilution for Bankia’s shareholders, who will be left with less than 1% of the bank.


The FROB also said it would reduce the value of preferred shares in other ailing banks—Catalunya Banc’s by 61%, Banco Gallego’s by 50% and NGC Banco’s by 43%—and then convert them into ordinary shares. But as these three banks aren’t publicly traded, the Spanish government said it would give the holders of their newly created ordinary shares the option of selling them to the country’s deposit guarantee fund…

The government had warned that the losses imposed on investors at the nationalized banks would be significant…

Well, as long as they warned people, it’s okay to rob them blind.

Many of these small savers have taken to the streets to protest their expected losses in recent months, claiming they were misled into believing that that they were buying low-risk savings products, not risky bonds or shares

Suckers! But who cares about them? Not our news media. Let’s hear more from Europe’s ‘Occupy Movement.’

(Who, by the way, are getting everything they want here.)

This article was posted by Steve on Monday, March 25th, 2013. Comments are currently closed.

3 Responses to “Now Spain Plans To Wipe Out Bank Shareholders”

  1. GetBackJack says:

    They screwed the pooch

    So they screw you to solve their problem

  2. Mithrandir says:

    It can happen in the U.S.

    1. Get some loonballs to do Obama’s bidding, so that he can check the poll results. Get the traditional communists: Black Panthers, ACORN etc.

    2. Get some liberal pundits to do the admin bidding by gently proposing confiscation. (check for backlash)

    3. Get some safe state legislator to propose such things. (check for backlash)

    4. Get some SUPER-SAFE democrats to propose confiscation, just like Dianne Feinstein did with gun confiscation. (check for backlash)

    5. Finally, make the case for confiscation as the only true way to solve our financial problems, with federal legislators of course. “You can either hand-deliver the 40% tax to us, or we can do you the favor of taking it electronically.” “The rich are hording money! Why should we all suffer so they can stockpile their cash?” Of course all overseas/offshore accounts will be the first to suffer, Swiss, Cayman Island accounts—who would oppose that? “Why should they be allowed to NOT pay their fair share?”

    And of course, we will get “bracket-creep” in which you get the public to “yes” on tax or confiscation, and keep going on down the list until people start getting nervous about their own money being stolen.

  3. Rusty Shackleford says:

    its latest efforts to overhaul a financial sector battered by the collapse of a decade long housing boom.

    So…did Bawney Fwank have his fingers in that pie too? Or did he and his other nitwit buddies copy that hare-brained scheme?

    It’s funny though, that people who write news articles can so aptly describe an event: “battered by the collapse of a decade-long housing boom”. I mean, the eloquence, the clever word-usage, the phrasing is top-notch. But at the same time they cannot correctly assess the process which causes the event to occur.


    Planes crash because pilots are all drunken cowboys
    The hurricane swamped Nawlins because Al Gore was right.
    Gun control is about racism

    And so on.

    So, by definition, a “journalist” is an idiot. They don’t get any discipline in math, science or any other curriculum which requires honest evaluation of what is occurring or has occurred; Just garbage classes on how to get the juices flowing by using words.

    When I think about the fondness I had of “The Waltons” TV show and the character John-Boy who wants to be a writer, instead of the sympathy I felt for him while watching the show in my youth, I now feel contempt for him for not going to seek a real job. Well, maybe back then, wanting to be a writer was an ignoble goal, coming from such a humble beginning. But while I was in college, journalism majors were the ones who ended up in jail for substance abuse, theft, other typical crimes and they often cliqued together to make fun of the engineering students and math majors.

    In other words, they had no class, no manners, no core beliefs except that they were always right and their “professors” reinforced their contrary nature of things by teaching it to them.

    This is not to say that all writers are bad. But like so many things, to each their own and to their own be true.

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