The "Santander Syndrome": A Strategy For Fools

February 11, 2010 (LPAC)—Any countries or individuals on the international scene who think they have a deal with the Brazilians and the London-run Eurozone to replace the dollar-based international financial system, Lyndon LaRouche stated today, are fools who are walking right into a British trap. They are engaging in stupid, wishful thinking, because the British are not capable of surviving the financial debacle which they themselves are unleashing. They are sitting on top of the bomb that they have just ignited, LaRouche said.

This bout of unreality might well be called the "Santander Syndrome," since the British gambit revolves around Spain's Banco Santander, the number one bank in the Eurozone which is controlled and deployed by British financial interests such as the Royal Bank of Scotland, and old Venetian fondi such as Assicurazioni Generali of Venice.

British and Spanish media nervously reported on Feb. 3 that "all eyes are on Santander," because on Feb. 4 Santander's chief, Emilio Botin, will release the bank's annual figures, and they are not expected to be pretty. Santander got up to its eyeballs in the Spanish real estate bubble, which is so wild that some say it makes the U.S. mortgage bubble look tame by comparison. Spanish rival bank BBVA (Banco Bilbao Vizcaya Argentaria) on Jan. 17 had to announce a 16% drop in earnings for 2009. Yesterday Bloomberg quoted one fund manager saying: "It's all to do with real estate and developers, and I don't think Santander is any different."

Since 2007-2008, at least one million people have lost their jobs in Spain's construction sector, as many job losses as in all other sectors combined. "The real estate sector in Spain has collapsed only 20%, therefore it still has a long way to go," a source told EIR.

In fact, overall bad loans in the Spanish banking system as of December had doubled to what they were a year ago, jumping from 2.6% to 5.1% of total loans. Fitch rating agency yesterday downgraded a bunch of Santander paper, and Barclays said, unconvincingly, "There is no cause for alarm."

That is nonsense. People are starting to wonder: What is keeping Santander afloat, let alone promoting it to become the number one bank in the Eurozone?

The answer lies in London. Santander has functioned as an AIG-type stalking horse for British financial interests over the years, engaging in the shadiest of activities and somehow always coming out on top.

* In 2007 and 2008, Santander received massive infusions of funds from the European Central Bank, in what amounted to a pass-through operation on London's behalf (see separate slug).

* In 2008, Santander reportedly lost over two billion euros in the Bernie Madoff scandal, with its well-known links into dirty money laundering.

* Today, Santander reports their greatest earnings from their activities in Great Britain, where they have taken up a dominant position in the housing bubble through their purchase of three British banks. Santander in 2009 issued 20% of all new housing loans in Great Britain.

* The other big reported source of earnings for Santander is looting Brazil, largely through investment in Brazilian government bonds, which pay the highest real interest rates in the world.

There is a total unreality to these so-called asssets, LaRouche commented today. This is a bubble, and it is about to pop.