The linked article makes sense, but only in a shallow way; I don’t think it can be linked to the dodgy mortgage scandal in the US. The US toxic packages were heavily disguised and presented in such a way that banks were passing them on to each other without realising the true nature of the contents. Greed had reached such a level in the investment banking world that caution was absent. If Lehman brothers presented an investment opportunity to smaller banks, they were snapped up without due diligence, or any diligence.
The Spanish banks have an overhang of overvalued assets, caused by the world recession, and they have no choice but to hang on to them, although urged by the Bank of Spain to dispose of a proportion of them to re-balance their books.
The banks would be foolish to recover all the mortgaged properties still technically owned by the almost insolvent property developers, it would unbalance the markets and lead to a real property crash, not the current adjustment of a mere 20% or so.
Their meagre offerings at the bottom end of the market, even with astonishing mortgages and discounts, will not be taken up while unemployment is at such high levels and confidence stands at zero.
Time is the only healer, as always, and Spain hasn’t yet had to bail out its banks by borrowing billions on the money market, or printing money.