Did the government put Ireland in a potentialy disasterous situation?

zod

I found the end of this article a bit chilling ...

"Offering a blanket protection is dangerous to public finances. Acting to maintain faith in the financial system is understandable, but most governments would be loath to follow the Irish example," he said.

Shaw laughed out loud when asked whether Ireland was now a safer place to deposit money than Switzerland, the world's traditional safest haven — with bank guarantees that top out at just 30,000 Swiss francs (€19,350, US$27,200).
"If it was really that smart to proclaim an unlimited guarantee," he said, "more governments would have done it already."

BuffyBot

Moved to Economics

silverharp

not really, its the equivalent of miss world saying she is going to cure world hunger, its not a real promise, just a confidence measure backed by words, nothing more.
The question you have to ask is who would lend the gov money to do this?

Who put the country in a potentially dangerous situation?
every muppet who took out a 100%, 40year mortgage, or borrowed more then 3 times their salary and every bank official that signed it off.

is_that_so

The legislation is primary and may lead to other legislation. Currently we have no idea what the conditions of the guarantee will be but the details are being worked out.

The guarantee was designed to preserve the stability of the financial system and give the Govt/banks time to address the problems. As the article observes it could be a template for the EU, in some form, by providing stability for financial systems.

The Germans and British are against it for different reasons. Recall that Britain had no real interest in international solutions until this week, and has been cheerfully doing its own thing for a while now. They are miffed at us , and any comments from British banking experts should be taken with a large dose of salt. They have their own problems. The Germans, cautious as always are not interested in the blank cheque full stop.

BenjAii

Maybe, I missed it on one of the threads here, but does anyone know which bank was close to collapse ? Anglo Irish ?

dresden8

It's being kept a secret. We don't know who or what we are guaranteeing. Just cough up the cash when necessary and stfu.

I see the germans have guaranteed private deposits.

BenjAii

I'll be surprised in the internet age a secret like that will be able to stay secret for long.

I have a very depressing feeling we will end up "guaranteeing" (bailing out) the countries property developers.

stepbar

zod wrote: »

I found the end of this article a bit chilling ...

"Offering a blanket protection is dangerous to public finances. Acting to maintain faith in the financial system is understandable, but most governments would be loath to follow the Irish example," he said.

Shaw laughed out loud when asked whether Ireland was now a safer place to deposit money than Switzerland, the world's traditional safest haven — with bank guarantees that top out at just 30,000 Swiss francs (€19,350, US$27,200).
"If it was really that smart to proclaim an unlimited guarantee," he said, "more governments would have done it already."

Who does Shaw work for? Investec, who are not covered by the Government guarentee scheme. You can bet if there was any chance his company could become involved in the scheme he wouldn't be laughing and he wouldn't be trying to dis the enormity of the suitation.

silverharp wrote: »

Who put the country in a potentially dangerous situation?
every muppet who took out a 100%, 40year mortgage, or borrowed more then 3 times their salary and every bank official that signed it off.

Thats a very outlandish statement.

BenjAii wrote: »

Maybe, I missed it on one of the threads here, but does anyone know which bank was close to collapse ? Anglo Irish ?

The Sunday Business Post alluded to it today. I got the impression that it was Anglo that was in trouble.

is_that_so

stepbar wrote: »

The Sunday Business Post alluded to it today. I got the impression that it was Anglo that was in trouble.

Was reading that. Very comprehensive coverage. Irish Times yesterday suggested in the time line of the whole affair that in fact it was one of the bigger ones with smaller one in tow who were under pressure, due to loans falling due. That said Anglo is probably seen as the one in the most precarious position.

Mikel

is_that_so wrote: »

Was reading that. Very comprehensive coverage. Irish Times yesterday suggested in the time line of the whole affair that in fact it was one of the bigger ones with smaller one in tow who were under pressure, due to loans falling due. That said Anglo is probably seen as the one in the most precarious position.

It was AIB and BOI that sought a meeting with the minister

Mikel

stepbar wrote: »

The Sunday Business Post alluded to it today. I got the impression that it was Anglo that was in trouble.

Would anyone have a link?

is_that_so

Lots of links to the news articles on this page
http://www.sbpost.ie/post/pages/p/sectiondynamic.aspx-qqqt=NEWS+FEATURES-qqqs=news-qqqc=2.1.0.0-qqqn=1-qqqc=2.2.0.0-qqqn=1-qqqc=2.3.0.0-qqqn=1-qqqc=2.0.0.0-qqqn=20-qqqx=1.asp

BenjAii

According to the FT now Germany is following our lead and guaranteeing all deposits ...

This is going to have to be EU wide i think from now.

stepbar

BenjAii wrote: »

According to the FT now Germany is following our lead and guaranteeing all deposits ...

This is going to have to be EU wide i think from now.

There's a clear difference between what the Germans are doing and what we've done. Ther German government is not underwriting the entire economy.

stepbar

Mikel wrote: »

It was AIB and BOI that sought a meeting with the minister

..... because they were concerned that one or more banks could have went under which in turn could have threatened all the others.

is_that_so wrote: »

Was reading that. Very comprehensive coverage. Irish Times yesterday suggested in the time line of the whole affair that in fact it was one of the bigger ones with smaller one in tow who were under pressure, due to loans falling due. That said Anglo is probably seen as the one in the most precarious position.

Anglo would fall into the big bank category whilst me thinks INBS might have been the other. It's not by co-insidence that these very two were considering a merger a few weeks ago.

leninbenjamin

my brief summary of the entire situation; the government potentially put on hold a potentially disastrous situation. we're going to take a hit that's for sure. what our government are trying to ensure is that hit occurs on our terms, and not on the short sellers terms. this course of action will only take us so far. if we dwell here, the situation may well escalate. but if we can build from this we might be able to soften the landing.

Mikel

stepbar wrote: »

..... because they were concerned that one or more banks could have went under which in turn could have threatened all the others

Nah, do you think they called a meeting with the MoF and alleged that Anglo were going under, so then the guarantee was put in place? If so why wasn't someone from Anglo there? That measure wouldn't be taken on hearsay.
They were concerned about their own position, one of those two was going to go under, and then the rest would have fallen with them regardless of who was riskier or safer

Anglo would fall into the big bank category whilst me thinks INBS might have been the other. It's not by co-insidence that these very two were considering a merger a few weeks ago

Nope again, Anglo is a small bank, certainly considered riskier but still small.

gurramok

The IT today has a sequence of events, they list the likes of BOI as the one which was in even more trouble. The Anglo head slept through the whole thing!

IT wrote:

http://www.irishtimes.com/newspaper/ireland/2008/1004/1222959350571.htm
The bankers uneasily waiting there were Eugene Sheehy and Dermot Gleeson, chief executive and chairman of Allied Irish Bank (AIB) respectively, and their two counterparts from Bank of Ireland, Brian Goggin and Richard Burrows.

Four hours earlier, following a disastrous pounding for Irish bank shares on the stock markets, the four had hurriedly sought a meeting with Cowen and Minister for Finance Brian Lenihan.

Having arrived at Government Buildings at 9.30pm, they were taken to the Sycamore Room, once so beloved of Charles J. Haughey, and left to wait, and wait. Nearby, Cowen was chairing another meeting, involving Central Bank governor John Hurley and the chief executive of the Financial Regulator, Pat Neary.

Two hours elapsed before the bankers, who had been left on their own, were called in before Cowen and Lenihan, who asked some questions, but mostly listened. The bankers' message was not that Anglo Irish Bank was about to collapse; or that Irish Nationwide was on the brink, though both had cash shortages to face on Tuesday and Wednesday. [b[ Instead, it was that they themselves were facing crisis.[/b]

"(They) made it clear to us that liquidity was drying up in the Irish banking system and the maturity dates for the various loans they need to fund their business were shortening all the time and reaching dangerous levels of exposure in terms of time limits," Lenihan would later explain to the Seanad.

l

damnyanks

So the real question is how hard would it be to pull a Soros on the country?

Sponge Bob

The banks had done a run on the banks themselves in effect .

The legislation empowers the minister of finance to make it up as he goes along ( if you choose to read the act you will note lots of 'the minister may 'clauses )

It is the financial equivalent of the Offences against the State act which put the country in a permanent state of emergency from 1939 right through to 1977 except that it is ( in some ways) time limited to 2 years .

All things considered it was quite a clever move , I believe that David McWilliams may even have been consulted at some point .

gurramok

Yes, according to todays Sunday papers, he was consulted on the issue by while he was in Beijing!
He did state the idea of the state guarantee on his website 24hrs before the guarantee was put in place.

stepbar

Mikel wrote: »

Nah, do you think they called a meeting with the MoF and alleged that Anglo were going under, so then the guarantee was put in place? If so why wasn't someone from Anglo there? That measure wouldn't be taken on hearsay.
They were concerned about their own position, one of those two was going to go under, and then the rest would have fallen with them regardless of who was riskier or safer

Of course they were concerned about their own position! What other position were they going to talk about? Now they were hardly going to go into the meeting and start talking about what they thought Anglo was up to. The two top bankers in the State decided enough was enough. Something had to be done to protect the integrity of the Irish financial system.


http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=NEWS+FEATURES-qqqm=nav-qqqid=36484-qqqx=1.asp

Half way down this article it is seriously eluded to that Anglo was going to be in serious trouble on Tuesday if there was no decisive action taken. There's also a suggestion that INBS was in bother. There is no suggestion what so ever that AIB / BOI was in trouble at that point. However, if Anglo was allowed to fail the liquidity of all our banks would have been seriously threatened and by default the integrity of the Irish financial system.

Mikel wrote: »

Nope again, Anglo is a small bank, certainly considered riskier but still small.

Anglo a small bank? Please. At one point last year Anglo over took BOI as the 2nd largest bank in the state so please don't start telling me that Anglo is a small bank. They might not have the retail presence of a AIB / BOI but for all intensive purposes they are a big Irish bank.

TheBazman

The reality is that the Irish Banking sector is interconnected. It the heads of BOI and AIB called a meeting it's not unreasonable that they could have had imminent concerns about other banks in the market. After all if one of the others failed the next day it would have a huge impact of theirs (ie) one bank has failed, how long before the next, and the next..

BenjAii

I know there was a bit of an outage on boards.ie this morning, but did some replies in this thread go missing ?

I am sure there were more on this thread and I cant see any reason they would have been deleted.

Mikel

stepbar wrote: »

Of course they were concerned about their own position! What other position were they going to talk about? Now they were hardly going to go into the meeting and start talking about what they thought Anglo was up to. The two top bankers in the State decided enough was enough. Something had to be done to protect the integrity of the Irish financial system.

My point is that they couldn't go in there with hearsay about another bank and get that king of legislation in place. They were going to go regardless of what was happening at Anglo.

Half way down this article it is seriously eluded to that Anglo was going to be in serious trouble on Tuesday if there was no decisive action taken. There's also a suggestion that INBS was in bother. There is no suggestion what so ever that AIB / BOI was in trouble at that point.

Is this the Gospel or the SBP?

However, if Anglo was allowed to fail the liquidity of all our banks would have been seriously threatened and by default the integrity of the Irish financial system.

Well duh.

Anglo a small bank? Please. At one point last year Anglo over took BOI as the 2nd largest bank in the state so please don't start telling me that Anglo is a small bank. They might not have the retail presence of a AIB / BOI but for all intensive purposes they are a big Irish bank.

I've worked in more than one bank in this country, and they are perceived as a small bank, that's what matters. They are the most likely candidate for the 'small bank' mentioned in the stories.

stepbar

Mikel wrote: »

My point is that they couldn't go in there with hearsay about another bank and get that king of legislation in place. They were going to go regardless of what was happening at Anglo.

Well duh yourself mate.

Mikel wrote: »

Is this the Gospel or the SBP?

At the moment I would place more weight on a story from the SBP than most other papers.

Mikel wrote: »

Well duh.

:rolleyes:

Mikel wrote: »

I've worked in more than one bank in this country, and they are perceived as a small bank, that's what matters. They are the most likely candidate for the 'small bank' mentioned in the stories.

Maybe in terms of branch size but certainly not in terms of lending. In fact (and I'm sure you know this) Anglo is the 3rd most profitable bank in this state.

Mikel

stepbar wrote: »

Originally Posted by Mikel View Post
My point is that they couldn't go in there with hearsay about another bank and get that king of legislation in place. They were going to go regardless of what was happening at Anglo.
Well duh yourself mate

So they weren't there to talk about Anglo, they were there because they themselves were going out of business. Not because another bank was going. Do you see?
Is that simple enough for you?

stepbar

Mikel wrote: »

So they weren't there to talk about Anglo, they were there because they themselves were going out of business. Not because another bank was going. Do you see?
Is that simple enough for you?

Hold on a minute. They had liquidity concerns. Certainly not an admission that they were in trouble themselves but mearly stating facts that if the present suitation was allowed run its course a bank would fall. Neither AIB / BOI's share price dropped 46% in the one day. The dogs in the street knew who that bank was going to be on Tuesday. Both bankers were asked would they consider a merger with a rival. Both said no unless some sort of Government guarentee was on the table. Nationalisation was discussed but ruled out. The third option was the option we have now, a full guarentee over the assets and liabilities of 6 Irish banks. I think it's fairly clear what the state of play was on Monday night.

stepbar

stepbar wrote: »

Hold on a minute. They had liquidity concerns. Certainly not an admission that they were in trouble themselves but mearly stating facts that if the present suitation was allowed run its course a bank would fall. Neither AIB / BOI's share price dropped 46% in the one day. The dogs in the street knew who that bank was going to be on Tuesday. Both bankers were asked would they consider a merger with a rival. Both said no unless some sort of Government guarentee was on the table. Nationalisation was discussed but ruled out. The third option was the option we have now, a full guarentee over the assets and liabilities of 6 Irish banks. I think it's fairly clear what the state of play was on Monday night.

+1 to myself....

zod

according to Mcwilliams, the minister has to act soon ..

http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=DAVID+McWilliams-qqqs=commentandanalysis-qqqid=38221-qqqx=1.asp

With every passing day, this Armageddon gets closer. Someone had better tell Lenihan that, if he does not do something quickly, we will some day soon see Ireland’s Bear Stearns and once one goes, more will be threatened. By this, I mean that, one weekend, there will be a knock on the minister’s door and a group of well-dressed but desperate bankers will tell him it is all over.

silverharp

zod wrote: »

according to Mcwilliams, the minister has to act soon

http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=DAVID+McWilliams-qqqs=commentandanalysis-qqqid=38221-qqqx=1.asp

I'm not sure what the minister should do, at this stage they are passive on lookers? As the article states, the taxpayer is holding the bag now, its dubious if the major banks need a senior management going forward.

In the Taleb video I posted , he mentioned that banks would become more like utility companies going forward. we shall see

BenjAii

zod wrote: »

according to Mcwilliams, the minister has to act soon ..

http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=DAVID+McWilliams-qqqs=commentandanalysis-qqqid=38221-qqqx=1.asp

There are some other reports that there is movement, with Anglo Irish "poised" for nationalisation this weekend.

Although Anglo seems to think it might be in with a chance of raising cash with a rights issue; ummmm, Stevie Wonder probably has a better chance of being an airline pilot.

So presumably the government will be able to buy Anglo for the price of a bag of groceries (from Newry) - guess that means the taxpayer will definitely be liable for whatever proportion of that €72 billion loan book that does go bad.


“The reluctance of private capital to flow towards Anglo suggests that its Government guarantee might be called on sometime soon,”
http://www.examiner.ie/irishexaminer/pages/story.aspx-qqqg=business-qqqm=business-qqqa=business-qqqid=79944-qqqx=1.asp


That will do wonders for Ireland Inc's credit profile no doubt.

CDfm

I think its a bit overrated actually.

I cant see how the Banks held any risk with their mortgage lending given that they charged doubtful/high risk borrowers indemnity premiums on their lending -perhaps they pocketed this and didnt reassure the risks.

It was obvious to everyone that any interest rate increases would cause the housing boom to end irrespective of an international recession.

Economists such as McWilliams are a bit twee. The liabilities of public sector pensions are massive and operate essentially as a ponzi scheme.

That a group of individuals can sit down for a few hours and make huge decisions with long term liabilities for future taxpayers.

Did the government put Ireland in a potentialy disasterous situation?

Yes they did. Look at Anglo.
I dont trust any of them and I have no faith in the Government to put the taxpayers interests first.

BenjAii

Deleted User wrote: »

I dont trust any of them and I have no faith in the Government to put the taxpayers interests first.

I'm going to wait and see what the government details in Jan in the National Recovery Plan.

If their plan is to merely recapitalise the banks, while the banks continue to withhold funds from business then it will be time for Plan B.

The banks and financial institutions have brought this disaster on us with their fecklessness and stupidity, if they are to compound the problem by now hoarding cash and allowing huge amounts of businesses to go to the wall with the resulting mass unemployment and economic disaster that would bring, then we will have entered a new phase in the financial crisis.

If it comes ot that point, I think government will have to go further with nationalising the banking function to ensure lending is carried out that allows the day to day economy to continue functioning.

CDfm

Its not just the Government -we need the equivalent of an all party economic Vatican II to decide on what is legitimate economic model.

We are not very grown up on our government financing and amortise increasing amounts of spending. Its not real world and a country the size of Ireland should not in all prudence do this.

That our economists dot speak out against it is criminal. If our politicians are wreckless like company directors they should be jailed.

andrewdeerpark

What is interesting on this whole debate is even now after the blanket guarantees the lack of facts and the speculation on what happened that faithful night.

The minister should release the minutes of all meetings that night into the public arena, plus all subsequent meetings. The whole reasoning that this crisis has to be resolved behind closed doors with crumbs of information leaked to the press is absurd. No further real damage can be done to the banks share prices, we all know the balance sheet of all the banks involved are lies so lets have a transparent resolution of these issues.

I still believe that if as widely speculated the bank in trouble was Anglo I would have let it fall this would have resulted in: depositors over 100k loosing out, big property developers and Insurance moguls forced into liquidation by the subsequent firesale of devalued assets, shareholders getting zero, In essence a revolution destroying in one fell swoop several top businessmen and companies in Ireland and the UK (not one of these businessmen wanted extra taxes when they were making exorbitant profits through the Celtic tiger days; remember a proper free market is a double edged sword!)

However the market would readjust with other new entrepreneurs stepping forward, plus the asset firesale would have kicked off sales in a dead property market again which may just have had a snowball effect of igniting the whole market again. We could possible be seeing the buds of recovery coming into 2009, instead of the current economic life support for a patient in a coma which Anglo is on not unlike the 10 year Japanese recession solution.

Why are we so afraid of a massive market upset on the downside when it comes to big business however we will gladly let the peasants lengthen the dole queue? I am tired of this economic doctrine preached by Bernanke that banks cannot be left fail.

Économiste Monétaire

Ben Bernanke does not believe in blanket support for failing banks. He believes, as nearly every economist does, that you cannot allow large clearing banks fail because of the effect on the money supply, and overall confidence, as they are apart of the infrastructure of an economy. The U.S. has no qualms with allowing banks to fail; just look to history: 982 banks and savings institutions effectively failed between 1990 and 12th of December, 2008.

andrewdeerpark

How many banks have failed since February 1, 2006 the day he took office as the Federal Reserve chairman?

I know I am simplifying here but his believes that the banking failure of the great depression greatly increased the length and severity of that depression.

Maybe you are correct, however all western governments currently derive from his philosophy not allowing individual banks to fail as part of their response to this crisis.

Économiste Monétaire

From my count, 27 with total assets of approx. $374,595,547,000. Banking failures, and the collective actions of banks, did prolong the great depression. Some people take the opposite view that you are, complaining that letting Lehman Brothers (an investment bank not included in the figures I gave) fail made this crisis worse. It comes down to: Is the cost of recapitalising less than what would occur if you allowed the banking system to fail? Failure of one bank leads to questions of others. The system, so to speak, is built on confidence. Anglo probably should be taken over, and amalgamated with another of the bigger banks, zero compensation for shareholders--that's just my view on Anglo, though.

damnyanks

What I'm wondering is are the government slow to nationalise because they are trying to find buyers first and foremost?

With all the bad news over the last 6 months now the really dodgy stuff is starting to come out (Dodgy funds, lies about true value of books etc.)

I wont be surprised if one of the Irish banks drop another big bombshell on the market such as a huge undisclosed position.

andrewdeerpark

Seems a large asset figure, however as a % of the value of the entire banking sector (at that failure point in time) it’s probably trivial excluding Lehman Brothers.

We generally agree on the current Anglo situation except I would not have given the last couple of months stay of execution; more government direct action not consultation.

We live in times where current economic doctrine will be amended and rewritten when history looks back on the current "credit crunch".

Recession exposures the financial scams hidden during a boom period so do not expect the last of the revelations.

PS: What level of auditors from Ernst & Young was in Anglo over the past year, a couple of students out of college that did not spot 87Million flowing in and out of the organisation.

Économiste Monétaire

I wouldn't really say that Washington Mutual's failure, the largest in U.S. financial history, is trivial. What doctrine are you speaking of? Previous acceptance of low capital to asset ratio? A move towards a more sensible level of leverage? If so, Alan Greenspan would agree

SimpleSam06

andrewdeerpark wrote: »

However the market would readjust with other new entrepreneurs stepping forward, plus the asset firesale would have kicked off sales in a dead property market again which may just have had a snowball effect of igniting the whole market again.

While I agree with some of what you are saying, I do need to take issue with this part of it. Asset firesales historically don't improve the situation, they exacerbate it greatly, driving prices down further.

Also I would debate that we need in any way to "re-ignite" the property market in this country. The economic boom of 2000 to 2006 was entirely fuelled by borrowing from future earnings - residential property construction and sales added very little to the economy. In turn the tax receipts which might have done some good in infrastructure were squandered on the public sector unions.

We don't want to have double digit property price growth again, its an illusory benefit, and mid to long term is a toxic liability. Happily I doubt we'll ever see anything like it again in our lifetimes, with tightening banking regulations and control over said regulations being removed to international bodies, so irresponsible governments can't be influenced by vested interests.

CDfm

the benefit of the property boom created employment.

it also was good for banks balance sheets.

But our ecomomic model assumed commiting future spending. Government spending is fine to selectively stimulate the economy. Our spending on the civil servce is huge and the gap between public service and private sector pay is too large -civil servants earn up to 30% more than their private sector counterparts without including pensions,sick pay or job security or other benefits.

For a country our size we really need smaller not bigger government.The financial regulator follwing the British model slavishly bears some responsibility.

But our economic model and public sector cost is too expensive for a country of our size.

BenjAii

BenjAii wrote: »

I'm going to wait and see what the government details in Jan in the National Recovery Plan.

If their plan is to merely recapitalise the banks, while the banks continue to withhold funds from business then it will be time for Plan B.

The banks and financial institutions have brought this disaster on us

http://193.178.1.117/index.asp?locID=584&docID=4146
http://www.rte.ie/news/2008/1218/economy.html
http://193.178.1.117/attached_files/Pdf%20files/Building%20Ireland%E2%80%99s%20Smart%20Economy.pdf

Full 103 page document there, its already out - no need to wait until Jan.

The Govt played their part in burning this coutry to the ground with their friends in the banks. Its on small clique of ***** at the top.


http://www.rte.ie/news/2008/1219/angloirish.html

Mr FitzPatrick has also resigned from the boards of a number of other companies including Aer Lingus, Smurfit Kappa and Greencore.

I`ll aim this generally at everyone - How much clearer does everyone want things to be? We have massive problems with corruption. This bank guarantee has just cost my generation their chances of retiring earlier than 70. Current spending will have the country bankrupt and the IMF in charge!

WAKE UP IRELAND!

SimpleSam06

CDfm wrote: »

the benefit of the property boom created employment.

And the money to pay for all this employment comes from wealth destroyed in the future plus interest. This is not a valuable contribution to the economy. Its barely any kind of contribution at all. Looked at another way, its a significant liability.

CDfm wrote: »

But our ecomomic model assumed commiting future spending.

Thats a nice way to say that the muppets in charge thought the gravy train would never hit the end of the line.

CDfm wrote: »

Government spending is fine to selectively stimulate the economy. Our spending on the civil servce is huge and the gap between public service and private sector pay is too large -civil servants earn up to 30% more than their private sector counterparts without including pensions,sick pay or job security or other benefits.

100% in agreement with you.

CDfm wrote: »

The financial regulator follwing the British model slavishly bears some responsibility.

What, the British FR is controlled by their central bank as well? Talk about the foxes guarding the henhouse...

Deleted User wrote:

This bank guarantee has just cost my generation their chances of retiring earlier than 70. Current spending will have the country bankrupt and the IMF in charge!

Solutions?

SimpleSam06

SimpleSam06 wrote: »

Solutions?

How much will the guarantee cost?
Create several new banks or save the best one or two banks.
Maintaining the status quo of failed banks holds back the next generation of entrepreneurs who could start banks. Every bank started from somewhere.
We either go with nationalising banks or having loads of small ones.
If a bank is ever "too big" to let fail then it is monopoly/oligopoly territory and we shouldnt have let it get that far nor should we waste our taxes maintaining it.

CDfm

SimpleSam06 wrote: »

And the money to pay for all this employment comes from wealth destroyed in the future plus interest. This is not a valuable contribution to the economy. Its barely any kind of contribution at all. Looked at another way, its a significant liability.


Thats a nice way to say that the muppets in charge thought the gravy train would never hit the end of the line.

What, the British FR is controlled by their central bank as well? Talk about the foxes guarding the henhouse...

The building for housing was a good thing and created employment and housing stock.

Regulating banks does control liquidity, lending and housing demand would have been prudent as would public service pay restraint.

Economics 101 would have told you the property boom would burst with small interest rate rises.

Like it or not it would take a concensus amongst the largest parties to break or redo the current pattern of goverance and dismantle the civil service.Relying on tax revenue on a building boom was crazy as experience tells us you have cyclical recessions.

The civil service does need a huge prunning and the terms of employment and pensions need to be renegeotiated to lessen the burden for future years-its like a vampire sucking our country dry.

After all- its the Civil Service which advise Governments -let them share the pain.

SimpleSam06

Deleted User wrote: »

Maintaining the status quo of failed banks holds back the next generation of entrepreneurs who could start banks. Every bank started from somewhere.

You start dealing with something called "barriers to entry" at that point, a bank isn't like a corner store you can open up and start handing out loans. What would more likely happen is that several large banks will merge, reducing competitiveness for the market as a whole. I understand the reasoning behind arguing for allowing banks to collapse, but without a complete overhaul of the entire economic system, thats just not a practical option.

Besides, they didn't break any laws. If you need somewhere to direct your ire, I suggest you look at the lawmakers.

CDfm wrote: »

The building for housing was a good thing and created employment and housing stock.

I'm repeating myself when I say that it created employment on the back of future earnings. We'll be paying off the "good things" it brought for the next thirty years, with enormous interest. It didn't add anything to the economy. Also if housing stock was in such short supply, there wouldn't be years of an overhang sitting unsold out there right now.

CDfm wrote: »

Economics 101 would have told you the property boom would burst with small interest rate rises.

Interesting. So by that measure, economics 101 apparently, reducing interest rates should spark off the housing boom again, right? Luckily for the nonexistent benefits the boom brought to the economy, banks worldwide have been doing just that! I'd better scramble to get my mortgage application in for a one bedroom shoebox in a commuter town before the masses get wind.

Or, alternately, you could look at the actual cause of the housing boom, which was mostly freewheeling unregulated bank lending.

CDfm wrote: »

Like it or not it would take a concensus amongst the largest parties to break or redo the current pattern of goverance and dismantle the civil service.

Just on a point here, the civil service is a distinct entity within the Irish public sector.

CDfm wrote: »

Relying on tax revenue on a building boom was crazy as experience tells us you have cyclical recessions.

If the tax revenue had been put in the right place, it might not have been a complete loss. As it stands, we actually would have been much better off if they had just dumped the tax takes in the Irish sea, and thats quite a statement to be able to make.

CDfm wrote: »

The civil service does need a huge prunning and the terms of employment and pensions need to be renegeotiated to lessen the burden for future years-its like a vampire sucking our country dry.

You'll find zero argument from me on that.

CDfm

SimpleSam06 wrote: »

Besides, they didn't break any laws. If you need somewhere to direct your ire, I suggest you look at the lawmakers.


I'm repeating myself when I say that it created employment on the back of future earnings. We'll be paying off the "good things" it brought for the next thirty years, with enormous interest. It didn't add anything to the economy. Also if housing stock was in such short supply, there wouldn't be years of an overhang sitting unsold out there right now.


Interesting. So by that measure, economics 101 apparently, reducing interest rates should spark off the housing boom again, right? Luckily for the nonexistent benefits the boom brought to the economy, banks worldwide have been doing just that! I'd better scramble to get my mortgage application in for a one bedroom shoebox in a commuter town before the masses get wind.

Or, alternately, you could look at the actual cause of the housing boom, which was mostly freewheeling unregulated bank lending.

You seem to have a grasp of economics. Ireland is a small open economy.An adverse shift in interest rates in the money markets would affect the Irish property market disproporionately. Employment and growth is not a bad thing.

Reducing interest rates on that basis wont recreate the situation as an assumption in economic model is "ceteris paribus" (all things being the same) which they are not as "tempus fugit" (time passes).

The model suggested by the Civil Service and adopted by the Government does not seem to have assumed any "boom or bust" levels.

Civil Servants are vested interests and not disinterested parties to the growth of government or their own levels of pay.

Regulatory banking issues and micro-managing the land banks may have been fine in previous eras with a small closed economy but is not the case now.

Like it or not - our country needs to stop following a British model in economic and social policy which our economy cant sustain and pay for and survive and get with it and do our own.