How Bankia broke Spain

So of course the solution to all this is to force down living standards for ordinary people and bash the poor to the point where many of them simply cannot make it through life. The fact that the rich can't run a bank should not destroy the lives of ordinary working people. How come only poverty ever actually trickles down? Wealth never does (How Bankia broke Spain, June 23). It is a truly vile society that sees "austerity" as the option. No wonder people throughout Europe have had enough.
It is time business and government restored the word "ethical' to their behaviour. The last opportunity for consensus and co-operation is slowly closing, as it did in the inter-war period. Ultimately business will suffer from its own lack of a focus on ethics, compassion, sustainability, and from the denial state that its frequent choice of Right Wing political leadership is in denial of everything from climate change to social and political realities and, above all else, suffering.
I grew up in the post war era of the nuclear threat. I remind you of what was said about conflict then "The loser loses everything and for the winner there is nothing left". This war against the working class that the political representatives of the rich try to sanitise with the name "Austerity" has to stop. If not the ruins await for everybody. It's now five to twelve and counting. Dump Merkel and her European cohorts asap – it is the wrong path. Hollande is correct.

Whether Bankia in Spain or our 'big four' and lesser banks in Australia, lending against bubble-inflated property prices will be terminally troubled when land prices adjust back to the long-term trend.
Conservative risk management practice requires banks to adjust their lending margins during a bubble. Sounds obvious, doesn't it? (How Bankia broke Spain, June 23.)

It is only a small part overall but a question arises. What are the losses for Spain's large solar boiler system of power generation and also wind farms? Both highly capital expensive and highly unprofitable? Or is that a taboo subject? (How Bankia broke Spain, June 23.)

This is a salutory tale. It is strongly reminiscent of the Australian failures of State Banks of Victoria and South Australia, Cambridge and Pyramid Building Societies, CBC, ES&A...(How Bankia broke Spain, June 23).
... and it may yet foretell the failure of big Aussie banks.
Swan, Gillard and the Australian Bankers Association (remember the people who bribed Laws and Jones and left them to take the rap alone?) will tell you it will not happen here because Australian banks are better regulated. In fact, the regulatory model and controls are much as they were in the early 90s. The Australian regulators are flying blind, just as the Spanish regulators were with Bankia, because the Aussie banks have been allowed (even encouraged by changes in accounting standards) to hide the true values of subprime assets.
Notice how Bankia is restating its 2011 results to write back Eu3.3bn? The original results were subject to the same sort of requirements for statements from CEO, Directors and Auditors, the same sort of scrutiny by shareholders and stock exchange as the financial statements of Aussie banks. When Deloitte declined to sign the Bankia audit certificate, the train wreck should have happened immediately. Instead it has been delayed politically. Guess which shareholders are left holding worthless scrip? Those without the inside knowledge. (That phenomenon is not confined to banks. The Australian regulators let Pasminco, Tassal, etc fail in similar ways with the market kept in the dark by directors who were not prosecuted.)
There are many parallels for Bankia with Australia:
. Soft mergers of regional banks into a Four Pillar bank;
. Similar overexposure to housing markets which are similarly overvalued;
. Similar political influences on banks "too big to fail", disguising commercial positions and
. Spain and Australia lack the anti-trust legislation and culture that America learned early.
Banks and politics are an unholy union.

What is happening to Spain and other countries can be labelled the result of financial contagion (How Bankia broke Spain, June 26). The Economist analysed this on June 16. The lesson to be learned is "expect the unexpected", the course of contagion is almost impossible to predict and the spread of the euro crisis cannot be explained simply by taking account of links between economies. The large number of risk factors involved, all of which will vary with time and country, make it a prediction problem of extraordinary difficulty. We are all in for a very rocky ride.