Spain Creates 'Bad Bank' for Real Estate

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It happened again: U.S. stocks moved up midday on news from Spain.

Spain says the capital shortfall for the 14 banks it surveyed was 59.3 billion euro. This is the amount that would be necessary to ride out a serious economic downturn. Half of the 14 banks need the extra capital. (Read more: Spain's Banks Need $77 Billion in Capital: Stress Tests)

Jean-Claude Juncker, head of the eurozone group, said he was "comforted" by these numbers and suggested the bank recapitalization — and presumably, the 100 billion euro bank bailout — can precede as scheduled.

Well, maybe.

Here's what I want to know: Spain has approved the creation of what is likely the largest real-estate company in Spain: the bad bank. This so-called Asset Management Company is the new "bad bank" that is going to take the toxic real estate assets.

But we know almost nothing about this bad bank: which assets will be included, how many banks will transfer assets (four banks have been nationalized, presumably they will certainly transfer their assets), and at what price? Who are the shareholders? (Read more: Cigar-Toting Rajoy Clashes With Spanish Austerity)

Here's an interesting question: just how bad is the real estate bubble in Spain? No one knows, but I have seen estimates that Spanish banks hold about 180 billion euros in real estate that is in or near default. (read more: Spanish Rescue May Throw Crisis Spotlight on Italy)

I am not aware of anyone who even knows how many houses there are for sale right now in Spain. One estimate I have seen puts the number at 1.6 to 1.8 million homes, which would represent about 6 years of demand.

And what about the prices for these homes? Most estimates I have seen state that home prices have dropped roughly 30 to 40 percent since peaking in 2008 and will continue to fall at least into 2013.

That's why this "bad bank" is so important. We know demand for homes will be fairly weak, but how this "bad bank" prices its real estate will be critical. Selling cheap — which would accelerate the clearing of the inventory — would put more downward pressure on prices.

Another factor: how easy banks will make it to buy these properties.

Sound familiar?

—By CNBC’s Bob Pisani

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