A while back the most liquid bank stock in the world wasn’t Citigroup or JP Morgan – it was
They are highly dependent on wholesale funding. If they can't raise wholesale funds they will come close to failing - and Spain will wind up in a horrid recession.
And it is very hard for the Spanish government to bail the mega Spanish Banks out because the Spanish government can’t print Euros. (Being unable to print a fixed currency is part of a model for bank collapse I will deal with in some future posts.)
If the Spanish can’t bail out their own banks I guess the Bundesbank (I mean European Central Bank) can – but that would be a call on German taxpayers to bail out the Spanish.
Of course the Eurozone could collapse.
Alternatively this could all wash over by next week. But the implications of the Spanish pulling sovereign debt auctions are pretty horrible. Even if the spreads remain under 50bps.Watch this space...