Now if Spain can do this to finance a failed bank why can’t we do it to finance a National Investment Bank?

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This comes from this morning's FT Alphaville email:

Spain is considering directly injecting its own government debt into BFA-Bankia to help fund the stricken lender’s €19bn nationalisation, in an attempt to sidestep high bond market rates, reports the FT. The plan involves Madrid issuing Spanish government guaranteed debt to Bankia in return for equity, with the bank then able to deposit the bonds with ECB as collateral for cash.

Think about it: if Spain can do this why can't the UK issue £20 billion of new UK debt to a new National Investment Bank in exchange for equity with the National Investment Bank then using those UK bonds as collateral for ECB cash at 1%.

If the EU can allow this to fund a failed bank to clear bad property debts why not to fund a new bank to create jobs?

Any takers anyone?