Profesor na Columbia Sveučilištu i autor knjige U.S. Bank Deregulation in Historical Perspective (kratke recenzije ovdje i ovdje), uzvraća u WSJ omiljenim popularnim objašnjenjima da je kriza plod deregulacije. Ta objašnjenja su zapravo politikantske prirode, a dolaze posebice kako je izborna godina sa ljevice. Machiavelli daje razlog za to. No dovoljno su jaka da odjekuju i u Hrvatskoj, gdje javnost zna povijest američkog bankarstva koliko ja jahati na slonu. (priznajem da ne znam) Puno je jednostavnije izmisliti jednostavno objašnjenje nego mukotrpno studirati sadašnje i povijesne događaje kako bi dobili ispravnu sliku realnosti.

Calomiris pita koja je to točno deregulacija uzrok današnje financijske krize? Većina na ljevici odmah skoči na 1999. (vidi prošli post), no taj deregulativni Act je vjerojatno pomogao više nego bilo koja regulacija u ovoj krizi. Da bi neka određena deregulacija bila jedini uzrok današnje financijske oluje, morali bi vjerovati da se sistem urušio zbog jednog jedinog faktora; jedne greške u sistemu. Korijeni krize su u mnogim područjima – monetarna politika kao gorivo, državno uplitanje u tržište nekretnina, ali naravno i privatne greške. Calomiris ukazuje i na iskrivljene poticaje umjerenju rizika i prudencijalne mjere Basel Komiteta. Ne zaboravimo da su par godina unazad hedge fondovi bili u centru pažnje kao mamutni neregulirani brodovi novca i rizika, a danas predstavljaju mnogo manji rizik od financijskih institucija sa stogodišnjom tradicijom. Proći će neko vrijeme da bi se uspostavio puni, ispravni konsenzus o tome što se dogodilo. Iako će sigurno usljediti privremena ear sa više novih regulativa (nekih dobrih ali i loših), “Deregulacija je kriva za sve” jednostavno nije taj konsenzus. Potrebno ga je uspostaviti jer jedino tako se može dizajnirati kvalitetna reforma kako bi se izbjegla ista situacija ponovo. Uz to, trebalo bi imati na umu da postoji razlika između državnig aktivizma i (de)regulacije.

Most Pundits Are Wrong About the Bubble

The repeal of Glass-Steagall has helped us weather the storm.

By CHARLES W. CALOMIRIS

It’s grind-your-favorite-axe day on the network news shows. The financial crisis is all the fault of dreaded “deregulation,” shout some pundits; others blame the “small government” mentality of the Bush administration and Republicans in Congress.

But haven’t federal and state tax revenues been growing even faster than home prices in most places in the U.S. over the past eight years? Hasn’t the problem with our government’s fiscal affairs been enormous growth in spending and entitlements not seen since the days of LBJ? Congressional Democrats — along with a surprising number of pork-barrel Republicans — demanded nonwar spending on a Great Society scale and the president gave in to buy their votes for the war.

As for the evils of deregulation, exactly which measures are they referring to? Financial deregulation for the past three decades consisted of the removal of deposit interest-rate ceilings, the relaxation of branching powers, and allowing commercial banks to enter underwriting and insurance and other financial activities. Wasn’t the ability for commercial and investment banks to merge (the result of the 1999 Gramm-Leach-Bliley Act, which repealed part of the 1933 Glass-Steagall Act) a major stabilizer to the financial system this past year? Indeed, it allowed Bear Stearns and Merrill Lynch to be acquired by J.P. Morgan Chase and Bank of America, and allowed Goldman Sachs and Morgan Stanley to convert to bank holding companies to help shore up their positions during the mid-September bear runs on their stocks.

Even more to the point, subprime lending, securitization and dealing in swaps were all activities that banks and other financial institutions have had the ability to engage in all along. There is no connection between any of these and deregulation. On the contrary, it was the ever-growing Basel Committee rules for measuring bank risk and allocating capital to absorb that risk (just try reading the Basel standards if you don’t believe me) that failed miserably. The Basel rules outsourced the measurement of risk to ratings agencies or to the modelers within the banks themselves. Incentives were not properly aligned, as those that measured risk profited from underestimating it and earned large fees for doing so.

That ineffectual, Rube Goldberg apparatus was, of course, the direct result of the politicization of prudential regulation by the Basel Committee, which was itself the direct consequence of pursuing “international coordination” among countries, which produced rules that work politically but not economically. International cooperation, in case you haven’t heard, is exactly what the French and the Germans now say was missing in the past few years.

So why blame deregulation and small government? The social psychologist Gustav Jahoda says that unreasonable beliefs often arise in circumstances where people lack control and need to believe in something to get them through a highly stressful situation. And a fellow named Machiavelli might help us to understand a different reason for simplistic explanations.

Here is the non-stress-relieving truth. Severe financial crises have occurred in many countries — roughly 100 over the past 30 years — and even on a global scale many times before. About 2,000 years ago, Tiberius solved an early global financial crisis by making huge zero-interest loans to Roman banks. Sound familiar? These unusual events often reflect a confluence of different circumstances; for the most part they are not the inevitable result of a single, foreseeable fault in the system.

So what really happened and what should we do to make things better? The current financial crisis, like many in the past, had its roots in several areas: loose monetary policy (from 2002-2005, the real fed-funds rate was persistently negative to a degree not seen since the mid-1970s); government subsidies for leverage in real estate (the list is a long one, but the government’s role in Fannie and Freddie tops it); and many other errors by the public and private sector, including longstanding flaws in prudential regulation (see aforementioned Basel rules).

As we try to devise solutions to the regulatory problems, there is plenty of room for improvement and lots of sensible ideas about how to proceed — all of which have been around for a long time. The single most important reform that is needed is the restoration of discipline in the measurement of risk within the banking system.

Academics have been calling for reforms — especially a minimum subordinated debt requirement that would create ongoing, market-based measurement of true bank risk — for many years. In fact, a study of that reform was mandated by the Gramm-Leach-Bliley Act of 1999. Although the study by the Federal Reserve indicated that the reform would be extremely helpful, the big banks successfully lobbied to avoid the imposition of discipline on their risk taking.

The starting point for reform is to begin with a dispassionate and informed assessment of what happened. History is messy, and the careful study of facts offers little satisfaction for one-note Johnnies. It’s easier to just invent one’s own history than to study the real thing (which may explain why invention is so much more popular).

All this reminds me of an old Doonesbury comic strip in which a history teacher tries to shock his class by telling them outrageous made-up facts, only to find that they finally seem to be taking notes. Neither Jahoda nor Machiavelli would be surprised.

Mr. Calomiris, a professor at Columbia Business School, is the author of “U.S. Bank Deregulation in Historical Perspective” (Cambridge University Press, 2006).

malo   donos

Calomiris i Wallison ukazuju da su u razdoblju 2004.-2007. ta dva poduzeća bila najveći kupci subprime i Alt-A hipoteka (Alt-A su niša iznad subprime ali još uvijek ne Prime ‘A’, hipoteke. Naziv je kratica za Alternative A). Na taj način izrazito su stimulirala razvoj tržišta nekvalitetnih, suboptimalnih hipoteka koje su se poslje pretvorile u “toksički” dug. Korijeni takvih odluka Fannie & Freddie sežu iz više faktora. Oba poduzeća su imala implicitnu državnu garanciju dugova, što ima je u očima tržišta dozvoljavalo da posuđuju po povlaštenom tretmanu i taj novac koriste za kupovinu hipoteka i hipotekarnih izvedenica. Nakon što su 2003/04. otkriveni skandali u obje firme, Kongres ih je pritisnuo da objasne svoju vrijednost društvu zbog koje uživaju povlastice poreznog novca i državne zaštite. No, nisu samo skandali bili razlog pritiska. Ekonomske studije su pokazale da Fannie i Freddie nisu postizale svoje nominalne ciljeve, tj. svojom kupoprodajnom aktivnošću na hipotekarnim tržištima omogućavale smanjenje kamatnih stopa na hipoteke za kupce. Neki od uzroka današnjih problema, po nekim komentatorima i analitičarima, je i Community Reinvestment Act kojeg je Kongres donio 1995. Cilj je bio spriječiti diskriminaciju u bankovnom poslovanju protiv siromašnijih četvrti i obavezati banke na poslovanje kroz čitavo tržište. Banke i ostale financijske institucije su zbog toga bile primorane posuđivati i stvarati mogućnosti za hipotekarno kreditiranje i kreditno nepodobnim klijentima, a uz to dozvoljena je sekuritizacija subprime hipoteka.

Argument koji su Fannie & Freddie dale u svoju obranu je da vrijednost koju pružaju je cijenovno dostupno stanovanje (affordable housing). Argument je bio hvale vrijedan – obitelji koje se ne bi kvalificirale za hipoteke jer nisu kreditno sposobne će ovako dobiti šansu za kupiti kuću, i ispuniti Američki san, jer će Fannie i Freddie kupiti njihove riskantnije hipotekarne zajmove na sekundarnom tržištu. Kongres je to pozdravio, progledao kroz prste i nastavio politiku implicitne državne zaštite. No da bi Fannie i Freddie potvrdile tu vrijednost za društvo pod čijom izlikom su se provukle, trebale su agresivnije kupovati subprime i Alt-A hipoteke. Kao što već čitatelji znaju, te hipoteke se izdaju (pogotovo subprime) riskantnijim kupcima, nižeg prihodovnog razreda i većeg kreditnog rizika, čija vrijednost je klabirala nakon prsnuća nekretninskog mjehura. Subprime i Alt-A su 2003. činile 8% svih postojećih hipoteka. U 2006. taj postotak je već bio na 20%. Zbog povećane potražnje za tim vrstama hipoteka primarni izdavatelji su srozavali standarde pod kojima su posuđivali novac sve riskantnijoj klijenteli. To je bilo vrijeme kada su nastali ninja loans – No Income, No Job, No Asset; kada su klienti bili primamljeni vrlo niskim početnim kamatama i uplatama, neznajući da će kasnije vrijednost tih uplata naglo skočiti i staviti ih u situaciju da ne mogu uplaćivati mjesečne rate.

Kao što i priliči izbornoj sezoni, autori iznose i neke politčke optužbe na račun Demokrata (oba imaju mjesto u konzervativnom AEI), koji sada pozivaju na pojačanu regulaciju dok su 2005. prešutili, uključujući Obamu, predloženi regulacijski paket za Fannie i Freddie. Demokrati optužuju i deregulacije za sadašnje probleme. Postoji razlika između deregulacije u raznim ekonomskim sektorima – nema potrebe da država regulira veličinu sendviča u avio kompanijama – i deregulacije u bankarskom sustavu ili pak postojanje zastarijelog regulativnog okvira za financijski svijet nekog drugog vremena. Drugim riječima, nepostojanje ikakvog regulativnog okvira, kao što je jučer iznio Christopher Cox, za određene instrumente (over-the-counter derivatives) kao faktor u današnjoj krizi nije isto što i smanjivanje postojećih regulacija. Neke vrste deregulacije su se pokazale i dobrodošlim u posljednje vrijeme – da Glass-Steagall Act nije ukinut 1999. i tako dopušteno spajanje komercijalnih sa investicijskim bankama, Merrill Lynch ne bi bio kupljen od BoA, već bi bankrotirao. Zanimljiv je i podatak da su 4 najveća primatelja Fannie Mae i Freddie Mac doprinosa u predizbornoj kampanji u razdoblju 1989.-2008. četiri Demokrata: Christopher Dodd, John Kerry, Barack Obama i Hillary Clinton.  (Članak u nastavku)

OPINION     *SEPTEMBER 23, 2008

Blame Fannie Mae and Congress For the Credit Mess

Many monumental errors and misjudgments contributed to the acute financial turmoil in which we now find ourselves. Nevertheless, the vast accumulation of toxic mortgage debt that poisoned the global financial system was driven by the aggressive buying of subprime and Alt-A mortgages, and mortgage-backed securities, by Fannie Mae and Freddie Mac. The poor choices of these two government-sponsored enterprises (GSEs) — and their sponsors in Washington — are largely to blame for our current mess.

How did we get here? Let’s review: In order to curry congressional support after their accounting scandals in 2003 and 2004, Fannie Mae and Freddie Mac committed to increased financing of “affordable housing.” They became the largest buyers of subprime and Alt-A mortgages between 2004 and 2007, with total GSE exposure eventually exceeding $1 trillion. In doing so, they stimulated the growth of the subpar mortgage market and substantially magnified the costs of its collapse.

It is important to understand that, as GSEs, Fannie and Freddie were viewed in the capital markets as government-backed buyers (a belief that has now been reduced to fact). Thus they were able to borrow as much as they wanted for the purpose of buying mortgages and mortgage-backed securities. Their buying patterns and interests were followed closely in the markets. If Fannie and Freddie wanted subprime or Alt-A loans, the mortgage markets would produce them. By late 2004, Fannie and Freddie very much wanted subprime and Alt-A loans. Their accounting had just been revealed as fraudulent, and they were under pressure from Congress to demonstrate that they deserved their considerable privileges. Among other problems, economists at the Federal Reserve and Congressional Budget Office had begun to study them in detail, and found that — despite their subsidized borrowing rates — they did not significantly reduce mortgage interest rates. In the wake of Freddie’s 2003 accounting scandal, Fed Chairman Alan Greenspan became a powerful opponent, and began to call for stricter regulation of the GSEs and limitations on the growth of their highly profitable, but risky, retained portfolios.

If they were not making mortgages cheaper and were creating risks for the taxpayers and the economy, what value were they providing? The answer was their affordable-housing mission. So it was that, beginning in 2004, their portfolios of subprime and Alt-A loans and securities began to grow. Subprime and Alt-A originations in the U.S. rose from less than 8% of all mortgages in 2003 to over 20% in 2006. During this period the quality of subprime loans also declined, going from fixed rate, long-term amortizing loans to loans with low down payments and low (but adjustable) initial rates, indicating that originators were scraping the bottom of the barrel to find product for buyers like the GSEs.

The strategy of presenting themselves to Congress as the champions of affordable housing appears to have worked. Fannie and Freddie retained the support of many in Congress, particularly Democrats, and they were allowed to continue unrestrained. Rep. Barney Frank (D., Mass), for example, now the chair of the House Financial Services Committee, openly described the “arrangement” with the GSEs at a committee hearing on GSE reform in 2003: “Fannie Mae and Freddie Mac have played a very useful role in helping to make housing more affordable . . . a mission that this Congress has given them in return for some of the arrangements which are of some benefit to them to focus on affordable housing.” The hint to Fannie and Freddie was obvious: Concentrate on affordable housing and, despite your problems, your congressional support is secure.

In light of the collapse of Fannie and Freddie, both John McCain and Barack Obama now criticize the risk-tolerant regulatory regime that produced the current crisis. But Sen. McCain’s criticisms are at least credible, since he has been pointing to systemic risks in the mortgage market and trying to do something about them for years. In contrast, Sen. Obama’s conversion as a financial reformer marks a reversal from his actions in previous years, when he did nothing to disturb the status quo. The first head of Mr. Obama’s vice-presidential search committee, Jim Johnson, a former chairman of Fannie Mae, was the one who announced Fannie’s original affordable-housing program in 1991 — just as Congress was taking up the first GSE regulatory legislation.

In 2005, the Senate Banking Committee, then under Republican control, adopted a strong reform bill, introduced by Republican Sens. Elizabeth Dole, John Sununu and Chuck Hagel, and supported by then chairman Richard Shelby. The bill prohibited the GSEs from holding portfolios, and gave their regulator prudential authority (such as setting capital requirements) roughly equivalent to a bank regulator. In light of the current financial crisis, this bill was probably the most important piece of financial regulation before Congress in 2005 and 2006. All the Republicans on the Committee supported the bill, and all the Democrats voted against it. Mr. McCain endorsed the legislation in a speech on the Senate floor. Mr. Obama, like all other Democrats, remained silent.

Now the Democrats are blaming the financial crisis on “deregulation.” This is a canard. There has indeed been deregulation in our economy — in long-distance telephone rates, airline fares, securities brokerage and trucking, to name just a few — and this has produced much innovation and lower consumer prices. But the primary “deregulation” in the financial world in the last 30 years permitted banks to diversify their risks geographically and across different products, which is one of the things that has kept banks relatively stable in this storm.

As a result, U.S. commercial banks have been able to attract more than $100 billion of new capital in the past year to replace most of their subprime-related write-downs. Deregulation of branching restrictions and limitations on bank product offerings also made possible bank acquisition of Bear Stearns and Merrill Lynch, saving billions in likely resolution costs for taxpayers.

If the Democrats had let the 2005 legislation come to a vote, the huge growth in the subprime and Alt-A loan portfolios of Fannie and Freddie could not have occurred, and the scale of the financial meltdown would have been substantially less. The same politicians who today decry the lack of intervention to stop excess risk taking in 2005-2006 were the ones who blocked the only legislative effort that could have stopped it.

Mr. Calomiris is a professor of finance and economics at Columbia Business School and a scholar at the American Enterprise Institute. Mr. Wallison, a senior fellow at the American Enterprise Institute, was general counsel of the Treasury Department in the Reagan administration.

• Britanski mjehur na tržištu nekretnina je prsnuo. Prodaja kuća je na najnižem levelu u posljednjih 30 godina. Stopa inflacije od 3.8% najviša u posljednjih 10 godina. (Visoka inflacija dok cijene kuća padaju?) Kao i drugdje u Europi povjerenje potrošača je nisko. Britanija je najveća europska ekonomija van 15-članske euro-zone.
  
• Mjehur nekretnina je prsnuo i u Irskoj i zemlja se nalazi na rubu recesije. Cijene kuća su pale otprilike 15% ove godine uz predviđanje da će padati sve do pošetka sljedeće. Iako su neki drugi djelovi ekonomije dobri, izvoz primjerice, pad cijena na tržištu nekretnina je toliko velik da je izbrisao rast drugdje. Zapravo, Irski Economic and Social Research Institute predviđa kontrakciju gospodarstva ove godine od 0.4 posto, naspram rasta od 4.5% 2007. U prvom kvartalu BDP je pao 1.5%.
  
• U Španjolskoj je građevinska tvrtka Martinsa-Fadesa, sa imovinom od €10.8 milijardi objavila bankrot i tako postala najvećom žrtvom prskajućih europskih nekretninskih balona (porast cijena nekretnina u Americi u usporedbi sa euro-zonom je bio blag) i najvećom poslovnom propašću Španjolske. Groupa MF posjeduje najveću izgrađenu površinu u Španjolskoj, 28 mil. četvornih metara i posjeduje 170,000 jedinica u izgradnji. Ni prva ni zdanja koja je propala sigurno. Građevinski boom je nestao.
  
• Njemački izvoz pati zbog jakog eura i slabe amerike, a potrošači su najneraspoloženiji od 1991. I Francuski potrošači, dugo stup potražnje euro-zone, su neraspoloženi. Najslabije raspoloženi od 1987.

Više o Španjolskoj Martinsa-Fadesa grupaciji, Njemačkoj, Francuskoj u WSJ članku niže. I NYT ima slični tmurni outlook.

Spain, Ireland and Denmark are either in a recession or on the brink. Italy is stagnating. France is weakening fast. And Germany, the sturdy locomotive of European growth, is suddenly faltering — dashing most residual hopes that Europe could escape the upheaval in the United States.

Just a few weeks ago, Europe thought it could escape the worst of the global slowdown. Now it looks like the euro zone, the world’s second-largest economy, is headed for a hard landing and perhaps recession, compounding growth troubles around the world.

On Tuesday, Spain suffered its largest-ever business failure as construction group Martinsa-Fadesa SA, a company with assets of €10.8 billion, or about $17.17 billion, filed for bankruptcy protection, making it the biggest victim so far of Europe’s bursting real-estate bubbles. That same day, the euro, boosted by the central bank’s inflation-fighting efforts and fears of financial-sector fragility in the U.S., briefly reached a record high of over $1.60, posing a further threat to Europe’s export sector. And an index of investor sentiment in Germany, Europe’s biggest economy, fell to its lowest level since the recession of the early 1990s.

The rising risk of recession in Europe shows that despite the strength of emerging markets such as Russia and China, the economic downturn that began in the U.S. last year is spreading to other regions. That is battering hopes that the global economy might have “decoupled” just enough from America’s that the rest of the world could ride out a U.S. slump relatively unscathed.

One sign that many investors no longer believe in decoupling: Stock markets in Europe and Asia tumbled Tuesday in the wake of the U.S. government’s rescue package for mortgage behemoths Freddie Mac and Fannie Mae. Analysts say investors fear the rescue indicates that troubles in the U.S. are severe and will hit economies elsewhere. In Tokyo, shares in Sumitomo Mitsui Financial Group, Japan’s largest bank by market value, fell 6.1%, helping to send the Nikkei 225 Stock Average Index down 2% to a three-month low. London’s FTSE 100 index fell 2.4% to 5171.9.

Europe’s banking and property sectors are increasingly feeling the fallout from the housing-market and financial-sector turmoil across the Atlantic. Although Europe had little subprime lending of its own, many European banks lost money on U.S. mortgage-related securities, causing bank funding costs to rise and forcing banks to rein in their property lending at home.

Earlier this year, the euro zone’s $12.2 trillion economy, second in size only to America’s, was looking fairly solid. Exports to emerging markets and business investment were healthy, especially in Germany, the zone’s largest single member economy. French household spending, a longtime source of growth, hadn’t sputtered. Spain’s red-hot housing market was cooling off gradually. The European Central Bank remained relatively optimistic about the bloc’s prospects. And Europe’s main stock markets began recovering, driven by hopes the Continent would weather the global storm.

But since mid-May, the European stock markets have slid. “All of the sources of growth are in trouble. It’s not clear where the recovery is going to come from,” says Michael Hume, European economist at Lehman Brothers who believes there’s a 40% chance of an outright recession in the euro currency area this year.

The critical change has come in Germany. Stung by the strong euro and rising costs, Germany’s previously booming manufacturers have suffered declining new orders for six months in a row. Blue-chip companies including engineering giant Siemens AG, consumer-goods maker Henkel AG and printing-machine maker Heidelberger Druck AG have all announced large-scale job cuts lately, blaming problems including the high euro, raw-material prices, slower global growth and the credit-market mess that has shaken confidence on both sides of the Atlantic. A stronger euro makes goods priced in the currency more expensive for buyers in the U.S. and other nations.

“I’m asking myself: Which markets are still functioning?” says Rainer Hundsdörfer, director of Michael Weinig AG, a midsize German company that makes wood-processing machines used to build furniture and fittings. He says new orders from the rest of Europe “are crumbling,” weak business in the U.S. has been made worse by the high euro, and many customers in Asia and Latin America have stopped investing in new machines because they rely on exports to the slowing U.S. economy. A backlog of orders is keeping the company busy for now, but 2009 could be a difficult year, Mr. Hundsdörfer says.

French consumer spending, once a pillar of the euro zone’s domestic demand, is also faltering on rising inflation and a weakening housing market. In June, French consumer confidence hit its lowest point since the national statistics office INSEE began tracking the measure in January 1987.

Gradual Slowdown

The ECB continues to predict the 15-nation euro zone will suffer only a gradual slowdown. At a news conference earlier this month, President Jean-Claude Trichet admitted second-quarter euro-zone growth would disappoint and warned “the third quarter will probably not be particularly flattering either,” but stressed the bloc’s “sound” fundamentals. The bank’s official forecast is that the euro-zone economy will “trough” in the second quarter and expand by around 1.8% this year and 1.5% next year.

“They are wrong,” says Olivier Gasnier, economist with Société Générale in Paris, who predicts the euro zone will grow by only 1.1% this year — thanks mainly to a first quarter whose strength probably won’t be repeated — and an anemic 0.4% next year.

And some economists believe the ECB’s emphasis on fighting inflation could worsen the downturn. While the U.S. Federal Reserve has cut its key rate by 2.75 percentage points since September, the ECB has focused on the inflationary threat of rising commodity prices, and raised its key rate by a quarter percentage point to 4.25% earlier this month.

In the period after 2001, the last time Germany and the euro zone’s core economies suffered a downturn, Spain, Ireland and other booming smaller economies helped pick up the slack. The U.K. — the biggest European economy outside the euro zone — sucked up imports. As a result, the euro zone avoided recession and began a recovery that lasted until now.

But this time, the U.K. is in bad shape, with its housing market falling sharply and inflation rising fast. Data out Tuesday showed U.K. inflation at 3.8% in June, up from 3.3% and well above expectations. The Spanish housing sector is in a deep slump, and the country’s construction-dependent economy is expected to enter a recession this year, ending a decade of strong growth. Spanish house prices fell by 0.1% in the second quarter of this year, logging their first quarterly decline in nearly a decade.

Martinsa-Fadesa’s debts outstanding of €5.2 billion make its filing for creditor protection the largest ever in Spain. The building giant’s demise is expected to send shock waves through a real-estate sector buffeted by plummeting home sales and tighter bank lending ushered in by the U.S. crisis. In 2006, Spain built more than 700,000 houses — more than Germany, France and the U.K. combined — and investment in housing made up nearly 10% of gross domestic product. But the boom peaked last year, and Spanish home-sales transactions fell by 32% in the first quarter, compared with a year earlier. In May, Spain’s unemployment rate stood at 9.9% — the highest in the euro zone — up from 8.6% at the end of 2007.

Lining Up at the Doors

At the Águeda Díez jobless-claims center in Madrid’s Carabanchel district, the unemployed are lining up at the doors from 5 a.m. every morning, according to an official who declined to be identified. “We can only attend to 300 a day. Hundreds are being turned away,” the official said. The district is home to many immigrants who found, then lost, jobs in Spain’s construction sector.

The accelerating problems in Spain’s property market signal a new and potentially more-worrisome chapter for European banks: On top of losses tied to U.S. securities markets, slowing economies and housing markets back home could now force banks to set aside yet more money to cushion against losses. That could crimp lending and lead to a spiraling downturn in Europe, economists say.

Several large Spanish banks stand to take big hits from the collapse of Martinsa-Fadesa. Banco Popular Español SA says it has provisioned €100 million against possible loan losses. Savings bank Caja Madrid says it had lent the company €1 billion, and La Caixa says it had loaned €700 million. Fear of lending losses in Spain could further drive up borrowing costs in Europe’s troubled interbank-lending market.

Moves by Swiss regulators to increase capital requirements, meanwhile, could force that country’s two biggest banks — UBS AG and Credit Suisse Group — to shrink their balance sheets significantly, analysts at Morgan Stanley said this week. More banks also are expected to cut their dividends.

Write to Marcus Walker at marcus.walker@wsj.com¹, Joellen Perry at joellen.perry@wsj.com² and Jonathan House at jonathan.house@dowjones.com³