Where did all those Euros go?

Spanish banks made loans to property developers, and mortgages to home owners. There is a page on BBC news on this here.

Apparently Spain needs 59 billion euros to fill the current hole. Apparently as of August Spain had already borrowed 434 billion euros. This is 40% of GDP for Spain.

Here’s what I don’t understand. Banks made loans, to developers and mortgages. The value of the properties crashed. The loans are more or less all in default. The banks are in trouble because they need that money back. Now for the dumb question:

Who has those euros? Presumably transactions can be traced; the developers did something with the money, the homeowners did something with the money, generally paying the builders/developers, eh? So, are the developers simply defaulting, leaving the property as collateral, and keeping the cash?

Is that a dumb question? Anybody got an answer? Please post it here.

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