Spain is now seeing the consequences of propping up its banking giants. This month’s discussions of a new €40 billion bank bailout fund, or was that €100 billion, have seen Spain’s credit rating fall to just a short distance above junk-bond status. Without some new drastic intervention, the lower credit rating and higher interest rates for borrowing would lead in short order to a sovereign default, with Spain unable to borrow enough money to meet all its obligations.
New European help for Spain seems likely enough, but it will not be enough for Spain to carry on in its present economic form. In a country where only 1 in 2 workers has a regular full-time job, more austerity is not a viable answer either. Even the International Monetary Fund (IMF), rarely a supporter of deficit spending of any kind, said today that Spain’s austerity budgets may have gone too far too fast. To keep going, Spain will need some kind of economic reordering that has more of its workers working.
Greece holds new elections on Sunday and the best guess is that the results will not be much more conclusive than the country’s last attempt. The election could signal a Greek withdrawal from the euro, though, and if that happens, no one is sure how well prepared banks around the world are.
In a widely criticized action, Wells Fargo has frozen the bank account of a blog site where two posts had been critical of the bank’s actions in a fraudulent foreclosure.
Allen Stanford, convicted of running a $7 billion Ponzi scheme based on a bank in Antigua, was sentenced to 110 years in prison.
In the United States, three small banks failed tonight, each with about $150 million in deposits.
- Northeast Florida: Putnam State Bank, 3 branches. Harbor Community Bank is assuming the deposits and purchasing the assets.
- Tennessee: Farmers Bank of Lynchburg, which also operated two branches as Oakland Deposit Bank and one in Chapel Hill as First State Bank. Clayton Bank and Trust is assuming the deposits, paying a 0.1 percent premium, and purchasing the assets.
- Atlanta metro area: Security Exchange Bank, 2 branches in Marietta, Georgia. It was still collecting payments on only half of its outstanding loans. Atlanta-based Fidelity Bank is assuming the deposits and purchasing the assets. With the acquisition, Fidelity Bank expands its Atlanta-area footprint to 30 branches.