McWilliams, more populist crap

ei.sdraob

Anyone read McWilliams latest populist "piece"?

DMcW wrote:

What are we going to do with small businesses that are flirting with bankruptcy? This week, I have had numerous ‘end-of-season’ conversations with businesspeople about the state of the nation. One of the recurring subjects was what are we going to do with the thousands of businesses that are close to going bust.

More significantly, because of the banking practice of getting PERSONAL guarantees from small business people for basic working capital, many good individuals face personal bankruptcy because they were caught on the wrong side of the cycle.

I highlighted everything thats wrong with this load of trash he written this time

there is a reason why people setup LIMITED companies, the answer is in the name,
if your LIMITED company goes bankrupt the creditors cant go after your PERSONAL assets etc
anyone who offers a PERSONAL guarantee for a business loan deserves what they get for not thinking about what they are doing



another thing that irks me about this

DMcW wrote:

. The business model of our country is broken. Costs, rates, rents and taxes are too high, and debts are crippling businesses, with the real rates of interest above 11 per cent for many. In normal times with a properly functioning credit system, businesses would be able to survive through the recession, staying open and waiting for the cycle to turn – but not this time.

answer his David with regards to your previous trash idea of ditching the euro:
* what % would the interest rates be if we ahead with your "idea" to switch to ZimDollars and ditch the euro
* what credit system would exist when the currency is worth less than toilet paper?


rant over

SeanW

ei.sdraob wrote: »

there is a reason why people setup LIMITED companies, the answer is in the name,
if your LIMITED company goes bankrupt the creditors cant go after your PERSONAL assets etc
anyone who offers a PERSONAL guarantee for a business loan deserves what they get for not thinking about what they are doing

Yeah, but the protection for a small etrepeneur of a Limited Company is largely irrelevant if you cannot get financing without a personal guarantee, which I think was the point McWilliams was making.

EL_Loco

I'm not a fan but I don't understand people's hatred for the guy. If you have an extended rant, lets be having it

ei.sdraob

SeanW wrote: »

Yeah, but the protection for a small etrepeneur of a Limited Company is largely irrelevant if you cannot get financing without a personal guarantee, which I think was the point McWilliams was making.

Ive a small business and have a letter from bank to left of me offering a business loan

Had a bank manager ask me if I want a company loan only few weeks ago (the proceeded to try to sell a mortgage and insurance)

hardly "hard" to get a loan,
tho some businesses were build to service celtic tiger wastage (eg contruction, spa's) i could see why banks be reluctant to give them money

if someone with a small company gives a personal guarantee tied to their assets (like personal house) then they should be well aware what risk they are taking, by giving away the protection afforded to them by a limited company, they have no right to complain in such a situation

and the second point is that there wont be ANY credit if we go ahead with McWilliams idea of scraping the euro

but of course lets not mention the glaring flaws in his ideas

the iceman come

because of the banking practice of getting PERSONAL guarantees from small business people for basic working capital, many good individuals face personal bankruptcy because they were caught on the wrong side of the cycle.


Well my ex-boss gave personal guarentees, I am good terms with him to this day,he had a ltd company of which I was employed with up to last yr,and I can tell you even though he liquidated his company and went through all the proper channels ,the banks persued him and are still persuing him RELENTLESSLY. Are you saying Mcwilliams is wrong in his assertion?

ei.sdraob

the iceman come wrote: »

Well my ex-boss gave personal guarentees, I am good terms with him to this day,he had a ltd company of which I was employed with up to last yr,and I can tell you even though he liquidated his company and went through all the proper channels ,the banks persued him and are still persuing him RELENTLESSLY. Are you saying Mcwilliams is wrong in his assertion?

McWilliams fails to ask why people are giving PERSONAL guarantee for a business loan

if your LIMITED company has loans and goes bankrupt, thats it the creditors loose out, they cant go after you since the loan is for the company (example: a fella i know pissed away 3 million loan from AIB, AIB couldn't do anything about it since the LIMITED company went bankrupt )

if you are a director and decided to give a PERSONAL guarantee on top of a business loan, then you should know better, since you are pissing away the protection afforded to you by having a LIMITED company

/

the iceman come

ei.sdraob wrote: »

McWilliams fails to ask why people are giving PERSONAL guarantee for a BUSINESS loan

if your LIMITED company has loans and goes bankrupt, thats it the creditors loose out they cant go after you since the loan is for the company

if you are a director and decided to give a PERSONAL guarantee on top of a business loan, then you should know better that you are pissing away the protection afforded to you by having a LIMITED company

Ah I see what your saying ( I think) I dont know the circumstances of how my ex-boss secured his buisiness loans i.e I am not sure if he could secure finance WITHOUT giving a personal guarentee,but I suspect he couldnt. In other words he would never have got what he wanted without giving that guarentee. All academic now because as I said he has gone under anyways, me I now work for myself (sole trader) and as I didnt see the point of setting up a LTD company ,as long as I keep it right with taxman etc,I am self sufficient and wont be looking for any loans ,personally guarenteed ar otherwise.

gnxx

ei.sdraob wrote: »

Ive a small business and have a letter from bank to left of me offering a business loan

Had a bank manager ask me if I want a company loan only few weeks ago (the proceeded to try to sell a mortgage and insurance)

hardly "hard" to get a loan,
tho some businesses were build to service celtic tiger wastage (eg contruction, spa's) i could see why banks be reluctant to give them money

if someone with a small company gives a personal guarantee tied to their assets (like personal house) then they should be well aware what risk they are taking, by giving away the protection afforded to them by a limited company, they have no right to complain in such a situation

and the second point is that there wont be ANY credit if we go ahead with McWilliams idea of scraping the euro

but of course lets not mention the glaring flaws in his ideas

McWilliams is absolutely spot on. 100% correct in relation to bank lending policies.

Banks will NOT lend small business money without a personal guarantee unless the company has significant fixed assets. For example, a software company or services company will find it very hard to borrow from a bank.

Recently, I was also offered cash from the bank -- even though we had no requirement to borrow. The one snag with the loan was they wanted me to guarantee it with cash that I had in a personal deposit account :-)

Up to last year, banks were very happy to lend using property as a guarantee. They assumed that nothing could go wrong once somebody had unwritten a loan with property :-) As a result of their considerable fixed assets, construction companies etc could borrow significant amounts. Also since one bank rarely looked at other banks guarantees, a lender could use the same property as a guarantee for multiple loans from multiple institutions.

Bankers are too lazy to look at a set of accounts to determine the risk factor associated with a company. They simply look at stuff like machines, buildings etc and decide on this basis.

ei.sdraob

gnxx wrote: »

McWilliams is absolutely spot on. 100% correct in relation to bank lending policies.

ah yes i see now, lets loosen lending practices again
has the above not got us is here in first place

gnxx wrote: »

Banks will NOT lend small business money without a personal guarantee unless the company has significant fixed assets. For example, a software company or services company will find it very hard to borrow from a bank..

hello, software/network service company here, no problem getting a loan (not that i want their bloody money)

the iceman come wrote: »

Ah I see what your saying ( I think) I dont know the circumstances of how my ex-boss secured his buisiness loans i.e I am not sure if he could secure finance WITHOUT giving a personal guarentee,but I suspect he couldnt. In other words he would never have got what he wanted without giving that guarentee. All academic now because as I said he has gone under anyways, me I now work for myself (sole trader) and as I didnt see the point of setting up a LTD company ,as long as I keep it right with taxman etc,I am self sufficient and wont be looking for any loans ,personally guarenteed ar otherwise.

yes of course, theres no denying that some business might not get a loan without personal guaranteed
BUT
there lies the rub, if you are a director and take that plunge you should be more that aware that you are signing away the protection offered to you by a LIMITED company,
and if the **** hits the fan, you will PERSONALLY be dragged into it

the iceman come wrote: »

e. All academic now because as I said he has gone under anyways, me I now work for myself (sole trader) and as I didnt see the point of setting up a LTD company ,as long as I keep it right with taxman etc,I am self sufficient and wont be looking for any loans ,personally guarenteed ar otherwise.

thats the 2 main differences between sole trader and limited co director:
* taxation
* liability

what i keep trying to say, McWilliams has no right to moan about people giving personal guarantees or personal bankruptcy

they know full well what they are doing, we are not dealing with gullible people who might have got duped into signing a mortgage, if someone is an "entrepreneur" and makes such a choice of signing away their protection and is not aware of the consequences they really should have no place in business, thats life

a) company bankruptcy laws in ireland are not too bad at all, you can be a director again in few years
b) personal bankruptcy is non existent, very hard to get out of debt

hence anyone signing away a) in exchange for credit with PERSONAL guarantee can endup in condition b) and should really be aware what they are doing, and what a gamble it is

/

P. Breathnach

ei.sdraob wrote: »

McWilliams fails to ask why people are giving PERSONAL guarantee for a business loan

They have not been offering them unsolicited: they are giving them because the banks won't lend to the company without getting them.

if your LIMITED company has loans and goes bankrupt, thats it the creditors loose out, they cant go after you since the loan is for the company (example: a fella i know pissed away 3 million loan from AIB, AIB couldn't do anything about it since the LIMITED company went bankrupt )

Bankers understand that. That is why they seek personal guarantees: to protect the bank's interest.

if you are a director and decided to give a PERSONAL guarantee on top of a business loan, then you should know better, since you are pissing away the protection afforded to you by having a LIMITED company

They are generally in the position of no personal guarantee, no business loan.

I'm not a McWilliams acolyte, but to attack him for this is a bit unfair. He is describing a situation that is real for many people.

gnxx

ei.sdraob wrote: »

hello, software/network service company here, no problem getting a loan (not that i want their bloody money)

In exactly the same position. Software company that doesn't need cash. The bank has called me a couple of times offering loans in the last 12 months. They are fully aware that we are highly cashflow positive and have the capacity to borrow.

However, during the boom years, we were significantly profitable on paper and needed to borrow for cashflow and were told that we needed to guarantee the loan. This is the type of company the banks should be lending without personal guarantee. Unfortunately, this requires banking staff to be capable of reading a set of accounts. Sadly, Irish banks choose to judge the risk by counting the number of houses you own.

RodgerTheDoger

I fail to see your point ei.sdraob ?

Mc Williams is pointing out that there are a large number of small companies that cannot get loans from the bank on the merits of the business, so feel they have no option but take a personal loan.

Spouting about you own personal business and how easy it is for YOU to get a loan does not change the fact that a lot of small business's have to take out personal loans to try and make their business work in difficult circumstances.

I am pretty sure people do not do this lightly or think for one minute they are throwing their money away - they do it in an attempt to make a business work!

Alernativly they go bust - Which is what McWilliams is saying.

So again what is the point you are making?
This is the situation small business's are in, the tax payer is going to be paying for the mistakes of the banks for the next 20 years but the little man that is losing his house because he tired to keep his business a float should have known better therefore tuff sh1t! See you at the dole queue!

southsiderosie

I think his broader point about bankruptcy and restructuring is legitimate, assuming it is correct (I'm more familiar with the American system). If the cost of failure is too high, then why even try to start your own business in the first place? This seems particularly relevant given that the Irish government is dumping resources into creating a research-business nexus patterned after Silicon Valley. If the government wants to unleash entrepreneurship - especially in the tech sector - then they also should think about restructuring their business laws to allow for more "creative destruction" and renewal in line with the US model.

RodgerTheDoger

gnxx wrote: »

In exactly the same position. Software company that doesn't need cash. The bank has called me a couple of times offering loans in the last 12 months. They are fully aware that we are highly cashflow positive and have the capacity to borrow.

However, during the boom years, we were significantly profitable on paper and needed to borrow for cashflow and were told that we needed to guarantee the loan. This is the type of company the banks should be lending without personal guarantee. Unfortunately, this requires banking staff to be capable of reading a set of accounts. Sadly, Irish banks choose to judge the risk by counting the number of houses you own.

What is the saying:

A bank manager is man that will lend you an umbrella in fair weather then ask for it back when it begins to rain!!

Or something like that...

ei.sdraob

RodgerTheDoger wrote: »

Alernativly they go bust - Which is what McWilliams is saying.

So again what is the point you are making?
This is the situation small business's are in, the tax payer is going to be paying for the mistakes of the banks for the next 20 years but the little man that is losing his house because he tired to keep his business a float should have known better therefore tuff sh1t! See you at the dole queue!

whats worse in Ireland

personal bankruptcy with a debt noose attached
or
company bankruptcy with a chance to start afresh with a better idea?


yes a small business should know well that they are signing away the protection before getting into debt with such a severe string attached


once again i have 2 points in this thread

1. if you signed away your LIMITED liability and get into trouble, you have little right to complain about tough bankruptcy laws, you signed away the easy way out

2. dmcw wants credit in system, good idea
BUT
* by loosening lending criteria we create a subprime situation and are setting up a bigger crash down the road
* what credit would exist if we follow his other idea of creating an Irish Peso to replace the euro

southsiderosie wrote: »

I think his broader point about bankruptcy and restructuring is legitimate, assuming it is correct (I'm more familiar with the American system). If the cost of failure is too high, then why even try to start your own business in the first place? This seems particularly relevant given that the Irish government is dumping resources into creating a research-business nexus patterned after Silicon Valley. If the government wants to unleash entrepreneurship - especially in the tech sector - then they also should think about restructuring their business laws to allow for more "creative destruction" and renewal in line with the US model.

ah but the business bankruptcy law is not to far from the American model
its the personal bankruptcy in ireland thats a killer

by giving a PERSONAL guarantee you piss away the protection of a LIMITED company

P. Breathnach wrote: »

They have not been offering them unsolicited: they are giving them because the banks won't lend to the company without getting them.

in that case you either find money somewhere else or close shop (yes it sucks, but the alternatives are much worse)

the alternative is banks giving out subprime loans and we know where that leads
or the business offering a personal guarantee, we know where that leads too

P. Breathnach wrote: »

I'm not a McWilliams acolyte, but to attack him for this is a bit unfair. He is describing a situation that is real for many people.

yes its a ****ty situation, theres no denying it

but we are not talking about people who signed a mortgage and might have been gullible or fell for celtic tiger madness, we are talking about people who are meant to be smart and understand risk

and once again, what will happen to these people if the economy completely collapses if someone somewhere listens to dmcw idea of leaving euro

/

gnxx

A lot of limited companies employ less than 3 people, make consistant profit measured in thousands rather than millions, have a good credit history and have an honest track record in terms of operating a business. For example, consider a family run garage or shop.

If this small business decides to scale operations, for example decides to buy new equipment or employ additional staff, they will approach the bank. The bank will print out their account history and only allow them to borrow a % of their positive cashflow. The goal ( with an established business ) is often to extend the cashflow after a period of investment.

In these cases, the bank will always look for a personal guarantee.

This type of lending is useless.

In most countries banks understand the operation of businesses, they can read a set of accounts and make a decision if the business is a good risk in the long term. In Ireland, the decision is based on personal assets -- nothing else.

You could walk into Bank Of Ireland or AIB with the greatest business idea and look for a small loan, and they would ask you "how many properties do you own?"... An absolute scandal.

And one final point, if banks used accounts as the basis of lending rather than counting houses, then the reckless lending to property developers would have stopped before it became a problem.

RodgerTheDoger

ei.sdraob wrote: »

whats worse in Ireland

personal bankruptcy with a debt noose attached
or
company bankruptcy with a chance to start afresh with a better idea?


yes a small business should know well that they are signing away the protection before getting into debt with such a severe string attached


once again i have 2 points in this thread

1. if you signed away your LIMITED liability and get into trouble, you have little right to complain about tough bankruptcy laws, you signed away the easy way out

2. dmcw wants credit in system, good idea
BUT
* by loosening lending criteria we create a subprime situation and are setting up a bigger crash down the road
* what credit would exist if we follow his other idea of creating an Irish Peso to replace the euro

Again what is your point?
People are already in this situation.... Already in this situation and once more already in this situation ... Your comment may have been better suited say 24 months ago.
DMcW is simply stating the situation as we find ourselves in.
Looking back on something and saying "Hmmm probably should not have put my house at risk" is something even an idiot can do...

ei.sdraob

gnxx wrote: »

A lot of limited companies employ less than 3 people, make consistant profit measured in thousands rather than millions, have a good credit history and have an honest track record in terms of operating a business. For example, consider a family run garage or shop.

If this small business decides to scale operations, for example decides to buy new equipment or employ additional staff, they will approach the bank. The bank will print out their account history and only allow them to borrow a % of their positive cashflow. The goal ( with an established business ) is often to extend the cashflow after a period of investment.

In these cases, the bank will always look for a personal guarantee.

This type of lending is useless.

In most countries banks understand the operation of businesses, they can read a set of accounts and make a decision if the business is a good risk in the long term. In Ireland, the decision is based on personal assets -- nothing else.

You could walk into Bank Of Ireland or AIB with the greatest business idea and look for a small loan, and they would ask you "how many properties do you own?"... An absolute scandal.

And one final point, if banks used accounts as the basis of lending rather than counting houses, then the reckless lending to property developers would have stopped before it became a problem.

yes spot on

the banks are to blame too in this situation

theres no denying that


in US they have a venture capital culture (had an offer for venture money before from one, but then they learned im based in Ireland and ran away )

here its non existent, the closest alternative is enterprise ireland, but they stopped handing out grants/loans it seems

/

ei.sdraob

RodgerTheDoger wrote: »

Again what is your point?
People are already in this situation.... Already in this situation and once more already in this situation ... Your comment may have been better suited say 24 months ago.
DMcW is simply stating the situation as we find ourselves in.
Looking back on something and saying "Hmmm probably should not have put my house at risk" is something even an idiot can do...

sigh

they signed that piece of paper knowing that they might endup in such a situation, why complain then when it comes true


lets say the bankruptcy laws are changed tomorrow and existing loans are included in the law
what do you think would happen?

everyone and their dog would default, what you think would happen to the banks (who are practically owned by taxpayer)? yeh thats right they go under, and no more credit at ALL

so once again

DMCW idea seems ok on surface, but when you follow his suggestion to its conclusion things get much much worse

gnxx

ei.sdraob wrote: »

yes spot on

the banks are to blame too in this situation

theres no denying that


in US they have a venture capital culture (had an offer for venture money before from one, but then they learned im based in Ireland and ran away )

here its non existent, the closest alternative is enterprise ireland, but they stopped handing out grants/loans it seems

/

You could try Enterprise Ireland for funding :-) Take a look at the "Grants for Exploring New Opportunities". Link below :-)

http://www.enterprise-ireland.com/Grow/Finance/Applicationforms.htm

southsiderosie

ei.sdraob wrote: »

yes spot on

the banks are to blame too in this situation

theres no denying that


in US they have a venture capital culture (had an offer for venture money before from one, but then they learned im based in Ireland and ran away )

here its non existent, the closest alternative is enterprise ireland, but they stopped handing out grants/loans it seems

/

But venture capital depends on your business. In the US, college students at Stanford and MIT starting tech companies out of their dorm rooms had/have access to VC. But for someone trying to open a restaurant or a non-tech related small business it is still hard to get access to start-up money (especially since so many local banks have been bought out by international behemoths)...which is why so many people take out personal loans or borrow against their house. Therefore the relatively loose personal bankruptcy laws (which were tightened a few years ago) still benefit small business owners: banks may give you a look once your business is up and running and profitable, but you have to get to that point somehow, and that usually involves tapping into your own finances, or those of personal (rather than VC) networks).

ei.sdraob

southsiderosie wrote: »

But venture capital depends on your business. In the US, college students at Stanford and MIT starting tech companies out of their dorm rooms had/have access to VC. But for someone trying to open a restaurant or a non-tech related small business it is still hard to get access to start-up money (especially since so many local banks have been bought out by international behemoths)...which is why so many people take out personal loans or borrow against their house. Therefore the relatively loose personal bankruptcy laws (which were tightened a few years ago) still benefit small business owners: banks may give you a look once your business is up and running and profitable, but you have to get to that point somehow, and that usually involves tapping into your own finances, or those of personal (rather than VC) networks).

yes having loose bankruptcy laws is a pro in business

but once again if we follow DMcW idea and introduce them bankruptcy laws here in Ireland, what will happen?

the system falls apart altogether, and there be NO CREDIT since there be no banks left, as a wave of bankruptcy would take over

thats DMcW answer to everything it seems, walk away/default/devalue
which is a lazy cop out and doesnt consider the much worse side-efects in the context of this country

RodgerTheDoger

ei.sdraob wrote: »

sigh

they signed that piece of paper knowing that they might endup in such a situation, why complain then when it comes true


lets say the bankruptcy laws are changed tomorrow and existing loans are included in the law
what do you think would happen?

everyone and their dog would default, what you think would happen to the banks (who are practically owned by taxpayer)? yeh thats right they go under, and no more credit at ALL

so once again

DMCW idea seems ok on surface, but when you follow his suggestion to its conclusion things get much much worse

Or maybe revolution?
The Government had no problems bailing out the banks, if the govenment wants to stand behind the banks while normal hard working people go to the wall - Expect some civil unrest.

The bailing out of the banks was not something I signed up to, I would have let most of them fail - Took the one with the least amount of toxic debit and possibly helped them out.

You suggues that if people are irrisponsible they get what they deserve, why did the banks get a get out of free jail card?

ei.sdraob

RodgerTheDoger wrote: »

Or maybe revolution?
The Government had no problems bailing out the banks, if the govenment wants to stand behind the banks while normal hard working people go to the wall - Expect some civil unrest.

The bailing out of the banks was not something I signed up to, I would have let most of them fail - Took the one with the least amount of toxic debit and possibly helped them out.

You suggues that if people are irrisponsible they get what they deserve, why did the banks get a get out of free jail card?

good question

i never advocated the banks being bailed out or NAMA, if anything you can read my past posts where i repeatedly pointed out that Anglo should have sank, while AIB and BOI should have got gutted out, with the toxic sections separated (or dumped)

btw where would business get credit if all the banks did sink? think about it...

Sand

btw where would business get credit if all the banks did sink? think about it...

Any of the surviving banks, any of the relaunched banks, even any of the foreign UK/European banks.

Theres no doubt we need a banking system. Id consider it dubious that we need AIB and BoI as much as the government strategy assumes we do.

ei.sdraob

Sand wrote: »

Any of the surviving banks, any of the relaunched banks, even any of the foreign UK/European banks.

Theres no doubt we need a banking system. Id consider it dubious that we need AIB and BoI as much as the government strategy assumes we do.

which 2 banks do majority of small companies and savers in this country have accounts with?

hint: it aint anglo

RodgerTheDoger

ei.sdraob wrote: »

which 2 banks do majority of small companies and savers in this country have accounts with?

hint: it aint anglo

Would need to move banks -
The adjustment may be inconvienient but at least it would be fast, I think a return to normality would have been a lot faster also would have been a tuff year but more of a fresh start - Bit like cutting off a limb that has turned green.

ei.sdraob

RodgerTheDoger wrote: »

Would need to move banks -
The adjustment may be inconvienient but at least it would be fast, I think a return to normality would have been a lot faster also would have been a tuff year but more of a fresh start - Bit like cutting off a limb that has turned green.

whats the name of the occurrence when everyone "moves bank"?

a bank run

no bank has enough money ever to cover its deposits

what do you do then?

RodgerTheDoger

ei.sdraob wrote: »

whats the name of the occurrence when everyone "moves bank"?

a bank run

no bank has enough money ever to cover its deposits

what do you do then?

Ireland has a small population, I do not think this would have been as difficult as you make out. Government would have to step in and do this strategically, put a stop to any withdrawals that where not neccessary, maybe even have the financial regulator and central bank to actually do something for a change?

P. Breathnach

RodgerTheDoger wrote: »

Ireland has a small population, I do not think this would have been as difficult as you make out. Government would have to step in and do this strategically, put a stop to any withdrawals that where not neccessary, maybe even have the financial regulator and central bank to actually do something for a change?

I cannot think of a quicker or more devastating way to bring down an entire banking system than refusing me the right to have my money. I rather suspect that it would bring down the political and administrative systems also.

ei.sdraob

RodgerTheDoger wrote: »

Ireland has a small population, I do not think this would have been as difficult as you make out. Government would have to step in and do this strategically, put a stop to any withdrawals that where not neccessary, maybe even have the financial regulator and central bank to actually do something for a change?

an orderly bank run yeh like that ever worked before

Sand

Most properly run businesses will have their cash distributed amongst accounts over several credit institutions to diversify their risk. If they dont....

As for the small deposit holders, speaking as someone with a bit in the bank Id rather take my medicine now and rebuild than have to pay off many times my deposit in additional taxes.

Also, given the Anglo balance sheet swaperoos with the assistance of the Financial Regulator, I really doubt anyone knows whats on an Irish banks balance sheet. Half those deposits could just be similar accounting tricks with no real substance.

And regardless, a bank failure need not affect the deposit holders in the "END OF THE WORLD!!!" fashion supposed - if it is properly managed. There will be costs, but youd want to be seriously, seriously, seriously loaded before the open ended commitment to ensure BoI and AIB *never* fail, at *any* cost makes much sense.

There is this assumption that the costs of a properly managed rationalisation of AIB or BoI > the cost of dont ever let AIB or BoI fail ever, regardless of cost!

This is the second time AIB has been bailed out of its disastrous stupidity. I absolutely guarantee either we or our children will be bailing them out again from an even bigger stupidity. The cost of the moral hazard we are piling into the banking system ought to be considered too.

At some point, there is a price that is too high to be worth paying for AIB and BoI. Surely?

ei.sdraob

Sand wrote: »

Most properly run businesses will have their cash distributed amongst accounts over several credit institutions to diversify their risk. If they dont....

small business dont have this privilege, especially considering multiple accounts with different banks means more charges, not to mention some banks like AIB have terrible business customer divisions (speaking from experience here)

Sand wrote: »

As for the small deposit holders, speaking as someone with a bit in the bank Id rather take my medicine now and rebuild than have to pay off many times my deposit in additional taxes.

excuse me, I and many other people were responsible and saved while everybody else was orgasming over property

why should sensible and responsible savers be punished for mistakes of opportunists, and have to give up anything

/

Sand

excuse me, I and many other people were responsible and saved while everybody else was orgasming over property

why should sensible and responsible savers be punished for mistakes of opportunists, and have to give up anything

Because you gave your money over to a bunch of cowboys for safekeeping? Im all for the hardknock life philosophy, but lets look at the people "orgasming over property". They have their own problems which they are dealing with. Or not. Youd understandably be annoyed for having to pay for their mistakes. I agree.

However, you give your money to criminally inept bankers, and expect the taxpayer (including the people "orgasming over property") to be thrown under a bus to rescue you from your decision to give your money over to criminally inept bankers.

I mean, Ive heard of a few people who've recounted how they wisely saved their money whilst banks, developers and borrowers went mad on a property bubble. A cunning plan mi'lud, except you are saving your money in the very same bank going mad on that property bubble.

Doh!

Like I said, I am all for the hardknock life philosophy, where people have to deal with their own mistakes and be held to account for them. Borrowers made their mistakes, deposit holders made theirs. Everyone has to deal with them on their own surely?

The government ought to look to protect deposit holders, for general economic reasons, but some open ended, at any cost policy? Nope. Sure deposit holders (myself amongst them) might lose our savings, but I'll rebuild them a lot more quickly than I'll pay the taxes to cover NAMA. So will the vast majority of people.

ei.sdraob

Sand wrote: »

The government ought to look to protect deposit holders, for general economic reasons, but some open ended, at any cost policy? Nope. Sure deposit holders (myself amongst them) might lose our savings, but I'll rebuild them a lot more quickly than I'll pay the taxes to cover NAMA. So will the vast majority of people.

the government did protect depositors up to about 20K

then they decided to cover EVERYTHING over a year ago, now that was a bad idea

as for handing money to criminals, excuse me if they were/are criminals then why is no one being jailed

anyways you have gone well offtopic by now

Sand

as for handing money to criminals, excuse me if they were/are criminals then why is no one being jailed

Thats a good question. Id assume its because the government is terrified of pressing the issue as it would be politically sensitive and they dont know who the casualties would be.

Edit - I should also point out, that whilst I did consider describing them as criminals, I settled for criminally inept as one is indisputable and the other depends on what you can prove.

the government did protect depositors up to about 20K

then they decided to cover EVERYTHING over a year ago, now that was a bad idea

Agreed.

anyways you have gone well offtopic by now

If the thread has gone off topic, its been offtopic for the past page or two at least.

ednwireland

ei.sdraob wrote: »

if you are a director and decided to give a PERSONAL guarantee on top of a business loan, then you should know better, since you are pissing away the protection afforded to you by having a LIMITED company

/

hmmm i've worked for small businesses in ireland since 1997 and all of the directors have had to give personal guarantees for development loans and buying computers etc. on finance.
where's mcwilliams been for 12 years ?

K-9

This personal guarantee thing became very common in the last few years, seen it being used for supplier credit accounts.

As for how valuable they are these days, I'm not sure. I suppose they could put a charge on land and property.

RodgerTheDoger

P. Breathnach wrote: »

I cannot think of a quicker or more devastating way to bring down an entire banking system than refusing me the right to have my money. I rather suspect that it would bring down the political and administrative systems also.

Well I think you are not looking at the bigger picture! I am not saying you do not have a right to your money - But we could not have a scenario like Northern Rock in the UK where people are lining the streets to take their cash out of the Bank - A system would need to be deployed to say that cannot happen - until the financial structure has been adjusted.

Like ei.sdraob said a Bank does not physically have the cash to cover everyones assets their business relies on the fact that people keep their cash in the Bank.

Even in a good banking system the idea that it is your money is actually yours is just an illusion! Even trying to take out large amounts of cash from the Bank you would need to make your branch aware of it ahead of time.

What we have done instead is said - OK keep the banks but everyone is going to pay us the cost of this over the next 20+ years, I am not sure of the figures but I think it was suggested 30K for everyone man woman and child....

Very short sighted.

RodgerTheDoger

ei.sdraob wrote: »

an orderly bank run yeh like that ever worked before

Look, what you are saying is as a nation we are actually too stupid and selfish to actually help ourselves?

ei.sdraob

RodgerTheDoger wrote: »

Look, what you are saying is as a nation we are actually too stupid and selfish to actually help ourselves?

not at all

but when it comes to the only money/savings that majority if people in this country have in the 2 main banks, there cant be an orderly "bank run", the moment theres a sniff of trouble its everyone for themselves

as for likes of Anglo they should have been let to fail, since they dont have "normal" customers, AIB and BOI on other hand are behind most of SME's in this country, what would happen to the economy if their cheques all bounce at same time, or customers do a Northern Rock on it and queue up to take their money out (which is not actually there), your average bank is only "meant" to have about 10% of the deposits just in case, god knows what the figure is with the big 2.

tho for the money given to AIB and BOI they should have been nationalized (for some time at least) and then dismembered into good and bad parts, but we "nation we are actually too stupid and selfish" to do that, same applies to our politicans and as we seen recently the financial regulator

/

RodgerTheDoger

ei.sdraob wrote: »

not at all

but when it comes to the only money/savings that majority if people in this country have in the 2 main banks, there cant be an orderly "bank run", the moment theres a sniff of trouble its everyone for themselves

as for likes of Anglo they should have been let to fail, since they dont have "normal" customers, AIB and BOI on other hand are behind most of SME's in this country, what would happen to the economy if their cheques all bounce at same time, or customers do a Northern Rock on it and queue up to take their money out (which is not actually there), your average bank is only "meant" to have about 10% of the deposits just in case, god knows what the figure is with the big 2.

tho for the money given to AIB and BOI they should have been nationalized (for some time at least) and then dismembered into good and bad parts, but we "nation we are actually too stupid and selfish" to do that, same applies to our politicans and as we seen recently the financial regulator

/

I actually agree with most of this - When I said the government should have stepped in, nationalising one or two banks would have been an option. But then we are relying on the government to actually run things efficently and correctly and it is not like the government to be wasting money!
I currently work for the Financial regulator, but do not hold that against me :eek:

K-9

ei.sdraob wrote: »

tho for the money given to AIB and BOI they should have been nationalized (for some time at least) and then dismembered into good and bad parts, but we "nation we are actually too stupid and selfish" to do that, same applies to our politicans and as we seen recently the financial regulator

/

We seem to be getting that situation with AIB and BOI, except in reverse!

seclachi

I think its fair to say that small businesses and start ups don't have the luxury of getting limited liablity loans, and its quite obvious why, they could just piss away the money and then decide to chuck the towel in. I think its naive to expect them to be able to get such a loan.

Maybe they could have gotten this loans during the boom, I`m no expert by any means, but I know if somebody has built up there own company they have a big responsibility to alot of people to keep it going.

-To themselves and there family for wages
-To there employees
-To there customers
-To there suppliers

They probably had to put in there own capital to get the company started in the first place, and in order to keep years of work going through a recession they may make a personal guarantee.

I think small businesses deserve and need support from the banks and the government, they give alot to society.

ei.sdraob

RodgerTheDoger wrote: »

I currently work for the Financial regulator, but do not hold that against me :eek:

just a question

if BOI and/or AIB were nationalized (could still happen)

who would be put in charge? and what theoretically would be the role of the regulator??



im really torn on this nationalization business

on one hand for the money given to these banks we the taxpayer should have more of a say

on the other hand anything the government touches seems to turn to (expensive) mess

RodgerTheDoger

ei.sdraob wrote: »

just a question

if BOI and/or AIB were nationalized (could still happen)

who would be put in charge? and what theoretically would be the role of the regulator??



im really torn on this nationalization business

on one hand for the money given to these banks we the taxpayer should have more of a say

on the other hand anything the government touches seems to turn to (expensive) mess

Find the most successful private sector company that are well experienced in dealing with financial business that are known for success and employ them to do it, at half the cost of paying people in the Central Bank!

As you say - The government have showen they cannot be trusted to run something economically and efficiently. In the past they have just thrown money at things - And work in the Public sector in my exerience runs easily at half the speed.

I think we do have people in the country that could do it, but the people in charge seem to want to continue flogging a dead horse!

parsi

RodgerTheDoger wrote: »

Find the most successful private sector company that are well experienced in dealing with financial business that are known for success and employ them to do it, at half the cost of paying people in the Central Bank!

But it's those self-same private banks that have caused the problems ?

RodgerTheDoger

parsi wrote: »

But it's those self-same private banks that have caused the problems ?

The most successful private sector company, known for sucess.

Any bank that was on the brink of collapse I do not think falls into this category!

The government and (lack) financial regulator had it's part to play in this also.

imme

I had to laugh at McWilliams 'column' in the Indo, I heard it referred to on the radio so went to Indo.ie.
From the first few lines of the article:
"The easy-credit drug was pushed from the top, right down to the poor debt junkies at the bottom
COULD Patrick Honohan be our Noel Browne? Could Honohan's inquiry into the fiasco of the banking mess be the 21st century equivalent of Browne's Mother and Child scheme"


Patrick Honohan is Patrick Honohan, he's NOT Noel Browne or anything approaching him, quite the rubbish McWilliams.


"In the case of the new Central Bank governor Patrick Honohan, he is equally threatening the power base of the country. He will be opposed by some senior politicians who are opposed to upsetting the status quo -- particularly when they are implicated in the affair.

But it goes much deeper than that. Honohan will also be violently opposed by certain senior people in the Central Bank and the Financial Regulator who now work in the same building as him. He is their boss but he is clean, whereas many of them are part of the problem. Could it be that some of the top brass in the Central Bank and the Financial Regulator, all from the same stable in Dame Street, might want to thwart the new boss in his drive for openness?"


"Violently opposed by certain senior people in the CB", what does he mean by this? Lenihan had the balls to appoint an 'outsider' as Governor, get over it McWilliams, Honohan has the political backing he needs, he's the Governor.


"In my book 'Follow the Money', I compare the entire financial scam in Ireland to a drugs cartel....."
*YAWNS*

Sand

Could be worse, he could have thought up some label for Honahan such as breakfast roll man. His determination to use analogies and labels when discussing even the simplest concepts has long passed the realm of satire.

McWilliams is a smart enough guy, but he long ago started on a different career path to the average economist - hes a writer trying to sell his opinions and throwing out "keee-razy" stuff now and again to get people talking about him is part of his gameplan.

im really torn on this nationalization business

on one hand for the money given to these banks we the taxpayer should have more of a say

on the other hand anything the government touches seems to turn to (expensive) mess

The main concern I would have is that if we nationalise then the banks liabilities are our liabilities, and their balance sheets are toxic. At least Lenihans stupid guarantee has a time limit, and NAMA has not actually taken on the toxic loans yet so there is still hope sanity may break out over in the Dept of Finance and they just scrap NAMA and the guarantee.

Over on Irisheconomy.ie theres a link to a piece by Morgan Kelly of Cassandra fame ( one of the economists who consistently called the bubble for what it was and got ignored) where he explores the Irish credit bubble.

Havent finished reading it yet, but two consistent points Ive seen so far:

1 - The property bubble was fuelled by banks out of control lending: their lending went from 80% of GNP (1997) to 200% (2008) of GNP in a few short years, flooding the market with money and thus inflating prices. By 2008, Irish banks were lending 40% more in real terms to developers alone, than they had lent to the *entire* economy in 1997

This percentage of lending was almost double what would be seen in other European economies - even the UK of Northern Rock fame was far less profligate. These figures underline how sleepy our Financial Regulator was.

2 - More worrisome, the problems of the banks extend beyond dodgy developer loans: far from being "too big to fail", the Irish banks may be "too big to save". NAMA is stretching the state to its limits and beyond, and there will be nothing left in the tank to save the banks from the wave of mortgage defaults coming down the tracks when interest rates go up as they certainly will do as France and Germany exit recession.

In short:

The banks are screwed, their stakeholders are screwed, and if the state persists trying to prop them up then we will all be screwed too when they fall over on top of us.

Its gone past the point where we can try to save the banks, we cant. They are in such trouble its beyond Irelands fiscal capabilities to run a massive deficit *and* underwrite the immense losses on Irish banks balance sheets.

So we return to the only alternative: forcing bank stakeholders to accept *their* losses: shareholders, debt holders, and yes, deposit holders to some degree. Govt policy ought to move to managing the inevitable as sensibly and pragmatically as can be done to minimise the losses for the smaller stakeholders.

BrownianMotion

Sand wrote: »

Over on Irisheconomy.ie theres a link to a piece by Morgan Kelly of Cassandra fame ( one of the economists who consistently called the bubble for what it was and got ignored) where he explores the Irish credit bubble.

....

In short:

The banks are screwed, their stakeholders are screwed, and if the state persists trying to prop them up then we will all be screwed too when they fall over on top of us.

Its gone past the point where we can try to save the banks, we cant. They are in such trouble its beyond Irelands fiscal capabilities to run a massive deficit *and* underwrite the immense losses on Irish banks balance sheets.

So we return to the only alternative: forcing bank stakeholders to accept *their* losses: shareholders, debt holders, and yes, deposit holders to some degree. Govt policy ought to move to managing the inevitable as sensibly and pragmatically as can be done to minimise the losses for the smaller stakeholders.

This paper is worth its own thread. I'd encourage everyone here to invest the time into reading it.

And if you couldn't be bothered reading it then at least let the above summary sink in. Very good post.