Anglo - Keep the Guarantee

Orchard Rebel

From the RTE News website:

Anglo Irish Bank's chief executive has said the bank guarantee will have to be extended because the financial system has not yet stabilised.

The headline that keeps coming into my head is: "Turkeys vote to renew cancellation of Christmas".

In an interview with RTÉ News, Mike Aynsley said the bank also wanted to put Arnotts back on an even keel without creating further employment problems and managing a recovery of the business.

This would be likely to involve the bank taking over the company and selling it.

Great, the world's most unsuccessful bank now wants to be a private equity firm.

Mike Aynsley says he wants to try to focus Anglo on the future.

The bank's chief executive says he can understand why many members are so annoyed with the bank, but added that the constant beating of the bank in the media simply reinforces negative perceptions about Anglo.

Ah the Cowen defence. If the media are nice to Anglo, everything will be alright in the morning.

Mike Aynsley says he is frustrated that he cannot give a final figure of what the cost to the taxpayer will be.

He says it depends on discounts applied by National Asset Management Agency to loans which will transfer from the bank.

If that's the case, then how can the government make a proper judgement on whether an extension to the bank guarantee is worth the pain. In fact, on what grounds did they make that call in the first place?

He stressed he has brought in a new management team with international experience to stabilise the bank and create a viable lender.

800 workers have now left the bank, but 200 new staff have been brought in.

Many of them are working on restructuring, including complex situations such as the Quinn Group and Arnotts.

If the previous staff of Anglo were incompetent, why was it right to keep the bank running?

Meanwhile, Mike Aynsley said he hopes that plans to split the company into a good and bad bank will be operational by the end of the year.

Wonder if one'll be called Anglo-Irish and the other Irish-Anglo....

n an internal memo seen by RTÉ, Mr Aynsley said this would be the best solution to the bank's financial problems, as winding down Anglo would cause a flight of foreign deposits putting more pressure on the State.

He obviously wasn't listening when Peter Matthews demolished Frank Fahey on this point.

Mr Aynsley also said it was likely to be September before the EU makes a decision on the bank's restructuring plan.

If approved by the EU, Mr Aynsley said the split could be operational by year end with a full physical split by December 2011.

Wonder what happens if the Government (as we all know it will) decides to extend the guarantee and then the EU rejects the Anglo plan.

Is it me or do people like Mike Aynsley inhabit a parallel universe where there is ultimately no accountability for fiscal incompetence?

Laminations

Orchard Rebel wrote: »

Is it me or do people like Mike Aynsley inhabit a parallel universe where there is ultimately no accountability for fiscal incompetence?

People like Mike Aynsley are purposely hired for these jobs. They value the continuance of the bank over accountability as the continuance of the bank is the continuance of their job and they must be biased in favour of this approach from the outset. Alan Dukes is a similar appointment, all of these people would have to have been towing the government line of not closing the bank. Imagine Peter Matthews being brought in to run things - his approach would be to wind the whole thing down, hence people with this opinion are not involved in the bank. They all sing from the same tune and are all engaged in groupthink.

Orchard Rebel

Laminations wrote: »

People like Mike Aynsley are purposely hired for these jobs. They value the continuance of the bank over accountability as the continuance of the bank is the continuance of their job and they must be biased in favour of this approach from the outset. Alan Dukes is a similar appointment, all of these people would have to have been towing the government line of not closing the bank. Imagine Peter Matthews being brought in to run things - his approach would be to wind the whole thing down, hence people with this opinion are not involved in the bank. They all sing from the same tune and are all engaged in groupthink.

A fair point but one which ultimately leads to the conclusion that the decision to extend the bank guarantee to bond holders in September 2008 was a political one taken in the interests of the minority and not the majority. This in turn may explain why the government is not overenthusiastic about having the political elements of the bank guarantee decision investigated.

Laminations

Orchard Rebel wrote: »

A fair point but one which ultimately leads to the conclusion that the decision to extend the bank guarantee to bond holders in September 2008 was a political one taken in the interests of the minority and not the majority. This in turn may explain why the government is not overenthusiastic about having the political elements of the bank guarantee decision investigated.

Of course it was a political one. Was this not admitted a few weeks back?

http://www.businessandleadership.com/leadership/news/article/24281/

They have refused outright to show the systemic importance of that bank at the time vis a vis depositor numbers or retail lending. They are playing their cards close to their chests because their hand is full of jokers.

Orchard Rebel

Laminations wrote: »

Of course it was a political one. Was this not admitted a few weeks back?

http://www.businessandleadership.com/leadership/news/article/24281/

They have refused outright to show the systemic importance of that bank at the time vis a vis depositor numbers or retail lending. They are playing their cards close to their chests because their hand is full of jokers.

I wonder whether Merrill Lynch might have come out more strongly against guaranteeing bondholders in their report, had it not been for Neary's contention at the meeting of 25th September 2008 (which Merrill Lynch were represented at) that Anglo were solvent on an ongoing basis. Ultimately it seems that the government listened to Neary and the banks. Given that the banks seem to have lied to the regulator, the Department of Finance and now NAMA, it's hard to see how the government can show that the 2008 decision was the right one or that renewal should be automatic. But then FF don't seem to do rational thought....

jmayo

Ah the government that keeps on giving ...
...
well at least to some lucky well connected defunct entities such as Anglo and INBS.

oppenheimer1

We have already been told the guarantee was going to be extended. In fact I made a post about it a few months ago.

Why tell the populace anything when they don't listen?

Orchard Rebel

oppenheimer1 wrote: »

We have already been told the guarantee was going to be extended. In fact I made a post about it a few months ago.

Why tell the populace anything when they don't listen?

To be listened to, you have to have something coherent to say. The government hasn't offered a plausible reason for their adoption of the full bank guarantee, so why should I simply accept its renewal without question?

oppenheimer1

Orchard Rebel wrote: »

To be listened to, you have to have something coherent to say. The government hasn't offered a plausible reason for their adoption of the full bank guarantee, so why should I simply accept its renewal without question?

They adopted it as it was one of the strategies examined by Merril Lynch for saving the banking system. They felt the positives regarding it outweighed the negatives. I'm not saying it should be renewed without question but this was news months ago.

Orchard Rebel

oppenheimer1 wrote: »

They adopted it as it was one of the strategies examined by Merril Lynch for saving the banking system. They felt the positives regarding it outweighed the negatives. I'm not saying it should be renewed without question but this was news months ago.

But they adopted the solution which most suited the banks, on the advice of the banks and with the assurance of the regulator that Anglo was solvent. The same banks who have consistently lied to the government, the regulator, the Department and NAMA then and since about their solvency.

And if renewal of the guarantee is already a done deal, why have we had the chief executives of two banks come out this week and call for the renewal of the guarantee?

I suspect that the announcement months ago was just that - to pave the way for its likely continuance. I very much doubt whether anything the government has done or said thus far legally binds itself to the renewal of the guarantee.

kuntboy

Would it be possible to take the government to court to stop this?

Orchard Rebel

kuntboy wrote: »

Would it be possible to take the government to court to stop this?

Doubt it, as the scheme is established under the Credit Institutions (Financial Support) Act 2008. You'd have to prove that the Act was unconstitutional and I'd suggest that if there was any chance of success of that, somebody would have done it already.

To renew the guarantee, the 2008 Act will either be repealed and replaced or section 6(3) of that Act amended to extend the period of guarantee.

Ultimately, the guarantee will be renewed on the same terms because the government has the majority to do it and because it cannot now turn round and say it was a bad idea all along, as their credibility will be ruined. Hence the kind of fingers in the ears and la-la-la attitude we've seen from them on this subject.

oppenheimer1

Orchard Rebel wrote: »

Doubt it, as the scheme is established under the Credit Institutions (Financial Support) Act 2008. You'd have to prove that the Act was unconstitutional and I'd suggest that if there was any chance of success of that, somebody would have done it already.

To renew the guarantee, the 2008 Act will either be repealed and replaced or section 6(3) of that Act amended to extend the period of guarantee.

Ultimately, the guarantee will be renewed on the same terms because the government has the majority to do it and because it cannot now turn round and say it was a bad idea all along, as their credibility will be ruined. Hence the kind of fingers in the ears and la-la-la attitude we've seen from them on this subject.

Further state support of the banking sector might be seen as anti-competitive and against eu rules on state aid though. The commission would have to approve any changes to guarantee I suspect.

Orchard Rebel

oppenheimer1 wrote: »

Further state support of the banking sector might be seen as anti-competitive and against eu rules on state aid though. The commission would have to approve any changes to guarantee I suspect.

If they were to continue it in its present form, I suspect so yes. I doubt there'd be any EU objection to a softening of the guarantee, e.g. excluding bondholders from any renewed version. Lenihan has previously indicated that the guarantee would be phased out over time.

Liam Byrne

Orchard Rebel wrote: »

......their credibility will be ruined.

You have to have credibility in order to have it ruined.

This government has zero credibility.