Bailout of Anglo- we're being taken for a fcuking ride

Mr. Incognito

http://www.independent.ie/opinion/columnists/gene-kerrigan/casino-where-the-gamblers-never-lose-1605855.html

Sunday January 18 2009

Anglo Irish Bank has a lot of dirty little secrets. Let's look in some detail at one of them, a thing called, "subordinate debt". Never heard of it? Well, it's about time you did. You and your kids (and their kids) will be paying for the antics of the banking fat cats long after scheming bastards like Sean FitzPatrick are just a bad memory.

First, a caveat. Economists and academics speak a language all their own. However, we're picking up the tab, so we're entitled to try to figure out what's happening. That means poking through the undergrowth of economic jargon -- in our layperson's ignorance -- trying not to jump to conclusions.

On the morning of Wednesday October 8, "subordinate debt" was mentioned in the Dail. This was just over a week after the Government gave its blanket guarantee to the banks, leaving us exposed to the extent of 440 billion euros, should anything go wrong.

Why, asked Labour leader Eamon Gilmore, was "subordinate debt" included in the bank guarantee?

Subordinate debt is money effectively loaned to the bank by extremely rich people. This is high-risk money, billions of euros. These loans are unlikely to be repaid in the event of a liquidation -- and therefore they attract very high interest rates.

And, just to make things more complicated, there appear to be two kinds of subordinate debt -- the dated kind and the undated kind.

In the Dail on October 8, Eamon Gilmore said that Germany, Denmark and the UK don't provide "a guarantee or cover for dated subordinated debt. Why was this form of debt included in the Irish scheme? Approximately how much of this debt exists?"

Gilmore suggested that in the weeks prior to the Government guarantee, as Anglo floundered, there was frantic trading in subordinate debt, as rich people sought to offload the risk.

Brian Cowen didn't answer the specific questions. He said only that the blanket guarantee to banks was given "on the basis of the advice from those who are competent to so advise the Government".

The Government wallowed in self praise about its blanket guarantee. It refuted suggestions that the banks were under-capitalised.

Meanwhile, what exactly was the score with "subordinate debt"? It seems that "dated subordinate debt" was covered by the blanket guarantee, but "undated subordinate debt", wasn't.

Such niceties were swamped by the Sean FitzPatrick scandal, which erupted on 18 December.

As the conniving little gouger's schemes were revealed, the Government reversed course and moved to recapitalise the banks, setting aside €1.5bn for Anglo.

On December 23, Morgan Kelly, professor of economics at UCD, published a scathing piece in the Irish Times: "the bailout of Anglo Irish follows a compelling political logic. Anglo Irish funds developers, and developers fund Fianna Fail. By any other criterion, a bailout of Anglo Irish is senseless."

The bank should have been allowed to fail.

"Institutions such as AIB and Bank of Ireland fulfil an economically vital role of clearing payments and lending to households and businesses. Anglo Irish and Irish Nationwide were purely conduits for property speculation." Professor Kelly concluded: "For all it will achieve, the money might as well be piled up in St Stephen's Green and incinerated."

That evening, Dr Alan Ahearne, of the Department of Economics in NUI Galway, went on RTE's Drivetime, where he questioned why Anglo was being saved. "The market is saying that Anglo Irish Bank is bust, it cannot be resurrected . . . why is the Government insisting on putting more and more money into it?"

Presenter Mary Wilson asked if he could understand why.

If you look at Anglo's accounts, Ahearne said, "there is some stuff there, some subordinated debt, about €2.8bn worth, that's not covered by the guarantee . . . if Anglo Irish is liquidated, then the people who own that €2.8bn will probably get nothing back . . . but if the Government puts the €1.5bn in, and if it puts it in junior to these loans . . . and the statement the other day says that it does rank below that . . . if that's the case, then those people will not lose that €2.8bn because they'll get the €1.5 billion that the Government is pumping in. So, either I'm misreading the statement, there's some problem with the statement -- or, there's something not right about the way this bank is being recapitalised."

That was two days before Christmas, at which point we all overdosed on turkey and forgot about boring bank stuff.

Last week, at UCD, a conference of economists discussed the financial crisis. In a paper prepared for that conference, Dr Patrick Honohan of TCD, former advisor to the World Bank, mentioned subordinate debt. His language was flat and measured.

"Sizable unguaranteed subordinated debt -- amounting to several billion euros -- remains in the balance sheets of the banks. If loan losses are larger than are now being projected by the banks, unguaranteed subordinated debt holders would, under the present financial structure, be exposed to losses; but an injection of capital junior to these liabilities would transfer the burden of those losses to the taxpayer." (Our emphasis.)

Dr Honohan, in what might be termed an understatement, added: "This important point has not received sufficient public attention."

Two days later, the Government announced it wouldn't put €1.5bn into Anglo. It would instead nationalise the bank, at even greater potential cost to the taxpayer.

Why? Because Anglo is the country's "third-biggest bank". Well, it's not.

Yes, in money terms it's huge. But Anglo isn't a high street bank. It's a casino within which rich people -- speculators, developers, builders -- gambled on the property bubble.

Yes, it's huge in money terms, but not because it's embedded in the Irish economy -- only because it borrowed and loaned to reckless extremes, for gambling purposes.

And the alleged "reputational" loss, because of Sean FitzPatrick's activities, is puzzling.

Everyone knew about the behaviour of that avaricious swine since December 18, and have learned little of substance since.

The subordinate debt puzzle is just one of the mysteries surrounding the handling of the Anglo crisis.

What's happening?

Buggered if I know, but it's very, very worrying. Fianna Fail has a history with developers and speculators, which rightly raises suspicions.

However, there may be nothing sinister going on, it might merely be incompetence. Or foolishness.

Transparency is paramount in these matters, and a government should say, "Here's what's happened, here's what we intend doing, and here's why". It should answer every question fully and openly -- "commercial sensitivity" doesn't apply in a lifeboat.

Instead, we've had fumbling, stumbling reversals, with inadequate and sometimes risible explanations. Perhaps there's a reason the Cowen/Gormley regime is unforthcoming.

On Tuesday, the Dail sits to consider these matters. On previous performance, the Government will stonewall, the opposition will bluster.

But this is too important. Already, the country's credit rating has been downgraded, which means it will pay billions more for the loans it needs to stay afloat.

If this goes wrong -- and it's going that way now -- the country will go bankrupt, the State won't be able to borrow or pay dole or pensions or wages for nurses or teachers.

The potential consequences are enormous.

If necessary, on Tuesday the opposition should nail shut the doors of the Dail chamber and refuse to allow Cowen and Lenihan out until clear, precise, credible explanations are given about the subordinate debt matter and the other banking mysteries that threaten us.

This is far more important than protocol, manners or party political advantage.

Never has the Dail had more need of Joe Higgins and Tony Gregory.

- Gene Kerrigan


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ejmaztec

Mr. Incognito wrote: »

http://www.independent.ie/opinion/columnists/gene-kerrigan/casino-where-the-gamblers-never-lose-1605855.html

Well, the government will insist on changing its mind every 5 minutes. One thing that doesn't change however is that they are still a bunch of incompetent twats.

If they had any clue - they would be decisive.

...oh, did I mention that they are incompetent twats?

thelordofcheese

ejmaztec wrote: »

...oh, did I mention that they are incompetent twats?

Not that i can recall. I think you should speak on this subject, at length.

funk-you

Mr. Incognito wrote: »

Bailout of Anglo- we're being taken for a fcuking ride

But sure everyone loves a good ride




I'll get my coat

-Funk

Sherifu

Mr. Incognito wrote: »

Bailout of Anglo- we're being taken for a fcuking ride

Probably.

Mark200

I've always thought the bailout would be a completely ridiculous idea.

The idea of nationalising it, to me, is slightly better although it'd cost more. No one would ever deal with the bank again unless the government took it over, so even though we're putting more in...we're reducing the risk a bit.


But if it was my choice, I wouldn't hesitate in allowing them to fail.

Bail-outs and nationalisation should only be given to absolutely vital institutions in our economy or to financial institutions, to no serious fault of their own, have fallen victim to the economic downturn.

Anglo fall under neither of those.

Dyr

mark it down for the next time the shysters that run this place whine that they can't afford a health service or education system, they could still bail out the people who matter with our cash.

SEPT 23 1989

BANKS PROPERTY DEVELOPERS FIANNA FAIL

BANKS PROPERTY DEVELOPERS FIANNA FAIL

BANKS PROPERTY DEVELOPERS FIANNA FAIL

BANKS PROPERTY DEVELOPERS FIANNA FAIL

ejmaztec

I keep thinking about the piddling ten million the sow Harney couldn't find for the cervical cancer jabs. It's probably a lot smaller than an Anglo Irish Bank director's petty cash claim for a week.

ronbyrne2005

Shut up ya begrudger! Shure if Fianna FAIL dont bail out their business and property developer mates how will they raise the funds they need to run their political campaigns? And we can't have a country without Fianna FAIL, Shure havent they made us the bestest little country in world with world class education, health, infrastructure and other public services

themadchef

Why can't they just let the Anglo crash and burn?


Why were there no stricter rules in place to stop these high risk loans?


Why did no one cop it till it was too late?

If the money is gone, why don't the peope who borrowed it not have to sell the shirt off their backs the way the average Joe would if it were him or I.

ejmaztec

ronbyrne2005 wrote: »

Shut up ya begrudger! Shure if Fianna FAIL dont bail out their business and property developer mates how will they raise the funds they need to run their political campaigns? And we can't have a country without Fianna FAIL, Shure havent they made us the bestest little country in world with world class education, health, infrastructure and other public services

Sorry, I forgot to bend over. It won't happen again ........:eek:

Darragh29

Lenihan reminds me of the chap behind the counter in this video with his chopping and changing and dithering!

Darragh29

themadchef wrote: »

Why can't they just let the Anglo crash and burn?


Why were there no stricter rules in place to stop these high risk loans?


Why did no one cop it till it was too late?

If the money is gone, why don't the peope who borrowed it not have to sell the shirt off their backs the way the average Joe would if it were him or I.

Cos we is all stupid, stupid, stupid!

LoveDucati2

quote=ejmaztec;58663160]Well, the government will insist on changing its mind every 5 minutes. One thing that doesn't change however is that they are still a bunch of incompetent twats.

If they had any clue - they would be decisive.

...oh, did I mention that they are incompetent twats?[/quote]


well said

ronbyrne2005 wrote: »

Shut up ya begrudger! Shure if Fianna FAIL dont bail out their business and property developer mates how will they raise the funds they need to run their political campaigns? And we can't have a country without Fianna FAIL, Shure havent they made us the bestest little country in world with world class education, health, infrastructure and other public services

we are number 1

but seriously, Anglo is gonna cost us about 20 billion and bankrupt the country

ejmaztec

It seems that investors in the Irish banks also think that the government is two bricks short of a load. AIB and BOI shares seem to have dropped like these same two bricks by 44% and 70% respectively, this morning. :eek::eek::eek:

Wagon

I read the thread title and thought it was incentive for new accounts with AIB

Rebeller

The draft Bill providing for the nationalisation of Anglo (Anglo Irish Bank Bill 2009) provides that the Minister may act in secret and not be required to publish the details of any Ministerial Order issued pursuant to the legislation, where the Attorney General determines that such an order relates to matters of a "commercially sensitive" nature (see section 8(8) of the Bill for exact details).

"Commercially sensitive" is given such a broad definition in the Bill as to cover almost anything.

If our money is being used to buy the bank then 100% accountability is required.

We are indeed now all FF's (and their builder buddies) beaaatchs and are being taken for the ride of our lives!

Fianna Fail and al those who voted for them....again!!!........FúCK YOU!!!!!

Sleipnir

5 directors resigned from Anglo this morning.
Brian Goggin has stepped down from BOI this morning.
Shares in AIB (-43%) and BOI (-33%) have plummeted this morning also.

THey need to send Anglo to the wall immediately. IMMEDIATELY!

thebman

Sleipnir wrote: »

5 directors resigned from Anglo this morning.
Brian Goggin has stepped down from BOI this morning.
Shares in AIB (-43%) and BOI (-33%) have plummeted this morning also.

THey need to send Anglo to the wall immediately. IMMEDIATELY!

We guaranteed their loans so we are fooked if they go to the wall.

Caoimhín

FF, Anglo and the property developers have just drawn tits on our backs and rode us all.

We will pay for this rape for 2 generations.

Rebeller

Sleipnir wrote: »

5 directors resigned from Anglo this morning.
Brian Goggin has stepped down from BOI this morning.
Shares in AIB (-43%) and BOI (-33%) have plummeted this morning also.

THey need to send Anglo to the wall immediately. IMMEDIATELY!

Like rats from a sinking ship!

ejmaztec

Anybody want to buy a vacant island? Two careless owners, never raced or rallied. Best offer secures.

TheZohanS

ejmaztec wrote: »

Anybody want to buy a vacant island? Two careless owners, never raced or rallied. Best offer secures.

Will you accept a post-dated cheque?

ejmaztec

TheZohan wrote: »

Will you accept a post-dated cheque?

Not if it's one of those Bank of Toyland ones that people buy their kids for Christmas.

I usually prefer topping up my gold-bullion reserves, but may make an exception in the right circumstances.

wyndham

I've got my stockpile of dried and canned foods and bottled water. May god have mercy on all your souls.:pac:

SEPT 23 1989

looks like BOI and AIB to be nationalised next share prices collapsing

ejmaztec

At least in the Wall Street crash they could end it all by jumping off a sky-scraper. All we've got are bungalows where you only break your feckin leg.

Kev_ps3

There is a very simple solution to all this nonsence. Arrest all these criminals and hang them high. A new leadership who have their minds on the people is needed.

thebman

Rebeller wrote: »

Like rats from a sinking ship!

Exactly resign now and they won't face the consequences for their actions. They won't have to answer to the public.

What a load of crap. Bet they keep all their benefits too.

Sleipnir

brim4brim wrote: »

We guaranteed their loans so we are fooked if they go to the wall.

I think we're fooked anyway so let's not pump anymore money into it, it's already dead!

Mr. Incognito

This gets worse and worse.

Apparantly all the advice was NOT to bail Anglo out and the Finna Fail puppets did it anyway.

http://www.irishtimes.com/newspaper/opinion/2009/0120/1232059661333.html?via=mr

Piling Anglo losses on to national debt risks bankrupting the State
In this section »
Credibility shredded by mess of Anglo IrishAmericans ready to answer Obama's call to serveIrish catalyst in Obama's journeyAll our children should get the same chancesIt is a rare moment in our history, this union and solidarity around a new leaderReasonable doubt in order as thriller treads familiar groundANALYSIS: Anglo Irish is poisoning the banking system and is of no systemic importance. It must not be nationalised; it must be allowed to collapse and with it the developers at the heart of the problem, writes Morgan Kelly

YESTERDAY’S CATASTROPHIC collapse of Irish bank shares stems directly from the Government’s proposal to nationalise Anglo Irish Bank. With the Government’s finances already buckling under the collapse of our bubble economy, financial markets began to fear that with the added burden of Anglo’s debt, the Irish State cannot afford to finance itself, let alone support the remaining national banks.

Facing the imminent collapse of the national financial system, the Government needs to perform a ruthless triage. The worthwhile banks need to be maintained by any means necessary, including nationalisation, while Anglo Irish and Irish Nationwide must be allowed to collapse.

What began as farce has turned swiftly to catastrophe. Last September the Government casually decided to give a small dig-out to some developer pals by guaranteeing the liabilities of Anglo Irish Bank. This spiralled into a proposed nationalisation that would saddle Irish taxpayers with Anglo’s bad debts, which could easily exceed €20,000 per household, and starve the other, worthwhile, banks of the capital they need to survive.

At the original crisis meeting on September 29th, Brian Cowen claimed that the blanket guarantee to all six banks was given “on the basis of the advice from those who are competent to so advise the Government”.

That does not appear to have been the case.

According to a source of mine very familiar with what happened at the meeting, extending the liability guarantee to Anglo Irish and Irish Nationwide was strongly opposed by representatives of the Central Bank and the Department of Finance (who reportedly came into the meeting with a draft Bill to rescue only four institutions). However, I am told they were overruled by the Taoiseach and the Minister for Finance, who were supported by the Financial Regulator and the Governor of the Central Bank on the grounds that a sudden liquidation of Anglo’s assets would not be in the national interest.
It is still worth asking what would have happened if Brian Cowen had listened to the Department of Finance and allowed Anglo Irish to sink? The answer is: very little.

Developers would have gone bust and commercial property would have become more or less worthless, but that is going to happen anyway, with or without Anglo Irish. Depositors of Anglo Irish would have been paid off in full, and the hit would have been taken by the international financial institutions that hold around €22 billion of its bonds.

These bondholders are professional institutional investors who signed up for higher returns on Anglo debt in the knowledge that they were facing higher risks. They are, moreover, insured against their losses through insurance contracts called Credit Default Swaps.

This is the central point about the bailout of Anglo Irish, and one that has not received any attention: the only effect of a bailout is that the Irish taxpayer will make up the losses of Anglo Irish’s bondholders instead of the insurers who had already been paid to underwrite the risk.

Why it is necessary to transfer Anglo’s losses from the writers of Credit Default Swaps to the Irish taxpayer is something that the Government has not thought to justify.

Indeed, what has been disturbing about the entire Anglo affair is that at no stage has the Government felt it necessary to explain why any bailout was needed, beyond inchoate mutterings about the “systemic importance” of Anglo Irish.

The reality is that Anglo has no importance in the Irish financial system. It existed purely as a vehicle for a few politically connected individuals to place reckless bets on the commercial property market. These property speculators may be of systemic importance to the finances of Fianna Fáil, but their significance ends there.

In ordinary times, piling €30 billion of Anglo Irish losses on to the national debt would be painful and pointless but not impossible. These however are not ordinary times. International debt markets are flooded with governments trying to borrow. The other Irish banks are dangerously short of capital. Most importantly, the Irish economy and government finances are collapsing.

Ireland’s growth during the last decade was largely illusory, generated by a property bubble fuelled by reckless bank lending. In 2007 an incredible 20 per cent of our national income and employment came from building houses and commercial property. Next year, the percentage will be approximately zero.

The only industrialised economy that has endured a property and banking crash remotely comparable to what we are beginning to experience was Finland in 1991, where national income fell in total by 15 per cent and unemployment rose by 12 percentage points. As the private sector haemorrhages jobs it is hard to see how Irish national income will fall by less than 20 to 25 per cent in the next few years. Unemployment will easily reach 15 per cent by the end of the summer, and 20 per cent by next year, and will not start to fall until recovery in Britain and elsewhere permits mass emigration to resume. The economy will not begin to grow until real wages fall to competitive international levels, a process that will probably take a decade.

In other words, the Irish economy is facing a decade of stagnation and mass unemployment of the same magnitude as the 1980s, with the difference that the unemployed now have mortgages, car loans and maxed-out credit cards. Faced with an irreversible contraction on this scale, the Government will have grave difficulty borrowing to fund its ordinary expenditure, even after draconian cuts in spending and increases in taxation. In the view of international investors, piling Anglo Irish’s gambling losses on top of a spiralling national debt could easily suffice to sink the Irish State into bankruptcy.

In this national crisis, what should be done? The answer is simple. The State must do everything to rescue AIB, Bank of Ireland and Permanent TSB, and let Anglo Irish and Irish Nationwide sink.

The Government must continue to guarantee all deposits at Anglo Irish while announcing that, in the light of continuing revelations of misconduct in the bank and shortcomings in its auditing procedures, it will enter into negotiations with senior and unsecured bondholders.

The proposed Anglo nationalisation marks a decisive watershed in Irish democracy. With it, an Irish government has coolly looked its citizens in the eye and said: “Sorry, but your priorities are not ours.”

It is to be hoped that the collapse of other bank shares will serve as a warning to deter the Government from this catastrophic course. I would therefore urge any TDs and Senators who still believe that the Irish State exists to act in the interests of its people to vote against the nationalisation of Anglo Irish and do everything to protect the other banks.

ninebeanrows

That's a well respected Economists thoughts.

We need to stop this vote today in the Dail.

Anglo must be let die for the sake of the state.



Ireland i fear will default within a month at the rate things are going, people need to wake up.

SEPT 23 1989

i wonder how we will explain this to our children and grandchildren

the fcuking rage i feel against this shower of Fianna Fail bastards:mad:

Dyr

I say we ambush a fianna fail convoy at soloheadbeg..for the day thats in it.

Professey Chin

Bambi wrote: »

I say we ambush a fianna fail convoy at soloheadbeg..for the day thats in it.

Violent ambush???
*gets stick*

http://www.thepropertypin.com/viewtopic.php?f=4&t=14604&hilit=blitzkrieg

^^^ Contact details for all TDs - let them actually represent you and how you think they should vote.