Is Socialist Spain friendlier to Big Bank badness than the USA?

One of the strongest distributist critiques of socialism and capitalism is that both tend to lead to the state throwing in its lot with large oligopoly businesses. The 'servile State', with its material or utilitarian calculus is often a friendlier place for those who can ease the path of nationalised policies with compliance. Small businesses and local economies tend to be grit in the oyster, though their products do not seem as valued as pearls. Indeed, Chesterton's observation in Lepanto that pearls are the product of sickness is probably just about the only thing of his that would appeal to the tidy minds of those locked in corporations--should they ever read poetry, and they may--and those in political parties who have never had a proper job in their life.

A contrast which illustrates the point springs to mind. In the United States of America, many families are walking away from their mortgage. Still others (not least amongst Governor Schwarzenegger's staff) are hoping that the failure of outsourced mortgage guarantee companies to establish the legal title of homeowners so as to advance their equitable claims will result in a trillion-dollar collapse of foreclosure claims and leveraged bond debts. Americans retain enough subsidiarity in their system--and, crucially, the continuing effect of the interaction of common law and equity, which are generally very fair systems of evolved public but not state regulation--that they can be confident that sending in keys or walking away from bad debts is an option for them. Life, after all, is not for slavery, and banks are gamblers. If a person leaves the table after particularly reckless lending has gone on, the wisdom of tradition is that they should be allowed a chance to start again. Caveat creditor.

Not so in Spain. In the world's ninth-largest economy, if you default on a mortgage that has been advanced by lenders in full knowledge of risk, the bank can take your house--that's fine, that's the bargain--but also pursue you for legal fees and debts for the rest of your life, and also anyone whom they got you to name as a guarantor of debts that they told you would never come in. Any inheritance of the guarantor may also be theirs. The banks, powerful anyway, are used to this protection; in fact, they preen themselves on the basis that this made Spain 'less prone to inflation'.

Some protection. Some safeguard. Spanish unemployment rates are through the roof. Inflation means that property loses value and becomes pointless. Deflation means that value becomes meaningless and that property for most becomes unattainable. The net effect of both forms of economic dislocation on the individual is not, really, too different, given that money is just a tool and that both things stop it from working. I mean, does it matter if a spanner is bent left or bent right when a usurer, creditor or taxman is hitting you over the head with it?

In Spain (currently run, as most of the West, by a sort of supernational, bond-trading mixture of Rufus T Firefly and Fu Manchu), 'Homeowners' and former homeowners are crying themselves to sleep in far greater despair than a midwesterner who does a moonlight flit. Many are reconciling themselves to a debt which may pursue them till they die. The individual in Spain has a chance, it seems, to enter bad deals, and to be held to them; but not to escape. Contemplating the crucifix is an edifying Spanish tradition; nailing small people to one made out of mortgages is a relatively recent development.

In the midst of this, does any British regulator understand that letting the products of this system, which must be in danger of collapse, spray savings accounts and mortgages around Britain as Santander are currently doing, is just a teeny bit questionable? Was due diligence exercised? Were Spanish banks questioned on their plans?

The truth is, they cannot be. This country's immersion in and assimilation by the Euro reich (I can think of no other word for a confederate sodality held together by what Bismarck called 'reptile funds' and fear of the outside) means that the matter of actually checking whether a Spanish bank is safe is a matter for the Spanish and the European authorities.

How is it, though, that in a Europe which frequently reaches for the excuse that it is not at least as harsh as America, a state near the heart of the euro project can treat its citizens to debt slavery and the elevation of banks--banks--above their liberty in ways that no American would ever tolerate?

There is a very great canker at the heart of the moral bargain European states make with their citizens, and I can't help but wonder where it is going to lead, because, frankly, people have an option to make themselves free. Taking it, however, will not be pretty; and the thing about debt, rather than tyranny, is that it is never quite clear when it becomes intolerable enough, especially since it depresses individuals, that people should rise up. I'm convinced that they will, though. The uncertainty about precisely when is what adds the horror-movie anticipation to the general sense of upcoming tragedy.

In America, they just elect nutters, sociopaths and obvious criminals and then use the courts and the inheritance of the English legal tradition to cut and run beneath the noise of the media cicus. God bless that.

Here are some muppets employing imagery from a story about gold-backed currency, which I think appropriate to the present crisis.


Toni said…
Spain is an interesting country and the actions of Santander more so. As you point out Spanish lenders are entitled to hound delinquent borrowers where as America views the whole lending business as a gamble with the taxpayer on the side of the house. I still doubt you will see Spanish borrowers jailed or hounded to suicide as is a very real problem in the UK. The Spanish property market was developed to an extreme by greedy developers with access to cheap funding for foreign buyers. This is not just on the coast, go to one of the suburban ghost towns on the outskirts of Madrid. The Euro is as usual one of the biggest problems for Spain, like Greece the cheap holidays for German, British and Scandinavians are not so attractive when prices are largely similar to home. The Spanish property developers with their traditional lack of regard for the rights of foreigners were short-sighted in viewing the property market as similar to that of the UK and London in particular. No where else has a similar market and unsurprisingly enough, the country with the most stable property market in Europe is also its soundest economy - Berlin remains the most affordable capital for property. Fannie May and Freddie Mac are shockingly badly run institutions that survived for years on the "quasi-government guarantee" status. I had little to do with mortgage backed securities before they morphed into CDO's and would have taken my chances with municipal securities over these any day. Although not in the UK, when I first started work, they were still clearing up the local authorities swaps mess.

Santander, I just can't figure. It produces higher results and continues to hoover up weak UK lenders, (it took over Abbey National after ANTS got into complex instruments way above its head - nothing ever changes), and it continues to expand into South America, much more its traditional area. I would imagine Santander definitely qualifies as a too big to fail institution but surely the Spanish regulators could argue that the UK authorities would be responsible for bailing out at least half the bank.
Martin Meenagh said…
I've been reading about Hirotecas/spanish mortgages (I had an odd moment in Hammick's law bookshop today before a tutorial) and they are mad things. I suppose if there is no notion of equity, that is, if everything is 'legal' then you adopt the law's fictions of equal bargaining and caveat debtor, as the Spanish do, or just high tail it out of town like the Americans. Equity's traditions of fairness are a very precious thing.

The Eurozone is becoming increasingly like the German states before the 1866 war--split very badly and impossible to imagine united if the confederation did not exist. The Second Reich, Bismarck's Kleindeutschland was in retrospect a reasonable solution to the problem of Austrian weakness. Maybe a German-zone Neuro would be a solution to the present problems, though of course the south would have to default on debt--unless Germany left the euro....

I'm also noticing a real arc beginning after watergate. The feds created derivatives when Cheney and Rumsfeld were running Ford's White House. C&R fought the first of their engaged middle eastern wars (having funded the iran iraq war) under the first Bush, and they wound up running the second Bush show as it became a sort of spastic firework display which may have taken the republic quite a way down.

I have no real clue about Spanish culture, and have never, oddly, been attracted to it. It may be that Santander has just met with my prejudices and got me snarky, but I think that I can defend the view that if they get into trouble, they shouldn't be our problem. The best way to bring that happy state about, of course, is not to let them become our problem in the first place.

Many thanks for your comment, Toni, I appreciate it as usual.

Popular Posts