Bankia's mom and pop investors turn to courts to get money back

Reuters reports that mom and pop Spanish investors have turned to the courts to get their money back based on Bankia having mis-represented an investment in its preferred stock as being covered by the Spanish deposit guarantee fund.

Retail investors have had to do this as the Spanish government has once again failed to protect them.

Spanish savers and pensioners who have seen their money wiped out by investing in state-rescued lender Bankia are likely to seek redress in court rather than wait for any official inquiry, which looks increasingly unlikely. 

About 350,000 stockholders will share the pain of the bank's European bailout, many of them bank clients who were sold the shares through an aggressive marketing campaign for its stock market flotation in 2011.... 

"Going to the courts and seeing if a judge can bring us justice is the only path left to us," said Maricarmen Olivares, whose parents lost 600,000 euros (490,509 pounds) they made from selling her father's car workshop by investing in Bankia preference shares. 

Neither of the two main political parties want to push for a full investigation into Bankia's demise, which could draw attention to their own role in a debacle that has driven Spain to the brink of an international rescue, commentators say. 

"Investigations work when a political party has something to gain over another. In this case, no-one has anything to gain," said Juan Carlos Rodriguez, of consultancy Analistas Socio Politicos. 

"I don't see the big parties investigating this because if there have been errors committed, they have been committed by both sides."

Please re-read the highlighted text again as it is not just the political parties in Spain that committed errors when it came to the nation's banking system, but also applies to the political parties in the other countries too.

For example, the Nyberg Report on the Irish Financial Crisis documented this occurred in Ireland.

The fact is that the rest of the countries in the Eurozone, the UK and the US were not immune to this problem and none of them has set up an investigation of the role of the political parties in the financial crisis.

The Socialist Party was in power when Bankia was formed in 2010 from an ill-matched combination of seven regional savings banks, a union that concentrated an unsustainable exposure to Spain's collapsed property sector. 

Immense political pressure from the then government forced Bankia executives to push ahead with an initial public offering in July 2011 as Spain sought to bring private capital into its banking system and avoid a European bailout. 

Then chairman, Rodrigo Rato, a former chief of the International Monetary Fund, had strong links to the centre-right Popular Party (PP) and was finance minister in a previous PP administration. 

A small political party, UPyD, forced the High Court in July to open an investigation into whether Rato, ousted when the bank was nationalised in May, and 32 other former board members are guilty of fraud, price-fixing or falsifying accounts....

 Oh what a tangled web we weave, when first we practice to deceive.

The probe centres around Bankia's stock market listing, the formation of the lender from the seven savings banks and the gaping capital shortfall revealed at the bank after the state takeover in May.... 

Bankia, alongside other Spanish banks, sold billions of euros of preference shares and subordinated debt to high street clients, many of whom say they were tricked into parting with their savings and are seeking compensation. 

The investigating magistrate is not including the mis-selling of preference shares - hybrid instruments that fall between a share and a bond - in the probe. 

Holders of preference shares at Bankia will incur losses of up to 46 percent as part of the European bailout, receiving shares rather than cash in exchange. 

"We won't see our money again, that's for sure. They'll give us shares, but shares with no value or credibility in a nationalised bank," said Olivares, who said she had heard nothing from the bank as to how much their losses would be. 

The losses each investor will have to take has yet to be decided, a Bankia spokesman said, adding that hybrid debt holders at all rescued banks had to take losses, not just at Bankia. 

A source close to the court investigation said there would certainly be scope for a separate wider probe into the mis-selling of preference shares, not just at Bankia, but throughout Spain's savings banks.

However, nobody seems to have started this court investigation.

Olivares, like many other small savers at Spain's state-rescued banks, claims her parents were sold the preference shares as a kind of high-interest savings account and that the bank staff did not explain the risks attached. 

The government is in the process of setting up an arbitration process to compensate Bankia clients who can prove that they were duped into buying preference shares, Economy Minister Luis de Guindos said last week.

I think the fundamental problem here is that all of the mom and pop investors trusted the bankers they were dealing with.  Why would they ever guess that their government would allow them to be sold an investment that put their money at risk in an insolvent bank without the bank being required to disclose it was insolvent?

But many ordinary Spaniards who lost their life savings through the Bankia rescue say this is not enough and they want answers as to what happened to their money. 

"We want justice, at least some kind of recognition that we were swindled," said Raimundo Guillen, a 50-year-old electricity station worker who put 30,000 euros in preference shares with Bankia under the impression they were a form of savings account.
"It's as if they've stolen your wallet - blatantly, with their face uncovered."