This story is just too crazy.....

Spanish banks are issuing mortgage securities and asset-backed bonds on a massive scale to park at the European Central Bank, using them as collateral to raise money at favourable rates from the official credit window in Frankfurt.

The rating agency Moody's said lenders had issued a record E53 billion (L39 billion) in the fourth quarter, yet almost none of the securities have actually been placed on the open market. Most have been sent directly to the ECB for use in "repo" operations.

"Few, if any, of the transactions in the RBMS market [mortgage securities] have been placed since September. Some of the banks are hoping that the market will open up again, but most are just preparing these deals to use as repos, which they can do since the ECB accepts AAA-rated securities," she said.

The total volume of securities issued since the credit crunch began to bite in July has reached E63 billion