instead of pumping billions into Anglo.. your opinions on this idea please

the_dark_side

Hi again, I am not an economics expert, but I do check into this forum regularly as I have recently developed an interest in economics... for obvious reasons
Anyway, Im sure many of us have been deliberating over the shocking waste of taxpayers money that has been sunk into Anglo; and I have had some thoughts on how better we could have used the money....

If we had started up a small number of 'new banks' and capitalized them with 25 billion (instead of pumping it into Anglo), this would allow many small businesses to acquire small start up loans and development loans. This would directly reduced our unemployment levels as well as increased our tax take. Aligned with a ten year capital investment plan, this could provide the initial push we need to jump start the economy.

Would this not have been a better use of our money?

keithclancy

The Issue was more around Anglo was too big to fail, there was a question mark over whether Anglo going bust would wreck the economy.

Setting up more banks to deal with an issue of Debt is not the way to solve the problem imo.

changes

Maybe this is to simple but can they not just say to those who lent anglo the billions (that they in turn used to lend out) that they need to accept 50cents in the euro.

Money that a private bank borrowed should not be treated the same as money a government borrows. I can fullly accept that government borrowings would need to be paid back in full in order to be taken seriously in relation to future borrowings.

ardmacha

Maybe this is to simple but can they not just say to those who lent anglo the billions (that they in turn used to lend out) that they need to accept 50cents in the euro

Many of the people who lent Anglo money are depositors who had regular savings accounts or the like with what is a State owned bank, should these lose half their money while those responsible for the mess get off?

jimmycrackcorm

Anglo had to be dealt with the way it was because had it been abandoned then nobody would have lent the other banks any money as they were all lumped into same basket. This was the systematic importance the government talks about.

So any new banks would not been able to raise loan finding.

timespast

ardmacha wrote: »

Many of the people who lent Anglo money are depositors who had regular savings accounts or the like with what is a State owned bank, should these lose half their money while those responsible for the mess get off?

Depositors with Angl Irish? Didn't

Anglo's problem was the size of their loan book ...... or did I read wrong?

I knew someone who 4 weeks before the announcement bought shares totalling 12k (Yeah crazy) .... that's the markets for you.....just as well go in to paddy power.

RealityCheck

ardmacha wrote: »

Many of the people who lent Anglo money are depositors who had regular savings accounts or the like with what is a State owned bank, should these lose half their money while those responsible for the mess get off?

Thats generally the way a proper wind down would operate. Depositers could have been treated differently to Bondholders, we could have guaranteed the deposit holders, while allowing the Bondholders to take some of the Burden (not all as suggested in a previous post). But realistically had we not guaranteed the banks, it would'nt have been as much of an issue as the banks debts would not be treated like soveirgn debt. They should shoulder the burden for financing a bank that most people in the country have absolutely no ties to. Remember Anglo was a developers bank and bank for big business. To expect the public to shoulder that burden is put simply perverted logic.

Your mixing the past up with the present. They lent in the past. It is a state owned bank in the present.

jimmycrackcorm wrote: »

Anglo had to be dealt with the way it was because had it been abandoned then nobody would have lent the other banks any money as they were all lumped into same basket. This was the systematic importance the government talks about.

So any new banks would not been able to raise loan finding.

Having guaranteed or even nationalised them I strongly doubt that would have been the case.

recedite

jimmycrackcorm wrote: »

Anglo had to be dealt with the way it was because had it been abandoned then nobody would have lent the other banks any money as they were all lumped into same basket. This was the systematic importance the government talks about.

So any new banks would not been able to raise loan finding.

Solvent banks have no problem getting funds. Any new banks would be solvent.
And didn't you hear; the cost of government borrowing ( which is being used to bail out the bad banks) has gone up because of the bank bailouts.

ei.sdraob

Don't knock the guy, he has a point

I previously said that it would be better to distribute money to local credit unions who know the locals and can deal in making loans to small local businesses, as added bonus the people still have confidence and respect in them, which is more than can be said of the "banks"
So if you do go down the road of injecting money into the economy at least its done from the bottom up by parties who are interested in getting it back and know each local environment.

Anyways we keep getting told that we can not let Anglo fail because this "oh so important" bank would bring down the whole system. No evidence is presented beside pure scaremongering. What the banks are doing to this country is nothing more than a form of financial terrorism on the people, call their bluff and let them sink

then transfer all current and savings accounts by creating emergency legislation into 2-3 good banks either new or inviting foreign banks

and let these zombie banks sink under own weight


I would be the last person to advocate taking over private property, but the banks are already effectively nationalised.

What we need is a liqudation process not an "asset management" exercise which moves the toxic sludge around

Smcgie

Stop paying state broadcasting staff €500,000+ a year!

hinault

ei.sdraob wrote: »

Don't knock the guy, he has a point

I previously said that it would be better to distribute money to local credit unions who know the locals and can deal in making loans to small local businesses, as added bonus the people still have confidence and respect in them, which is more than can be said of the "banks"
So if you do go down the road of injecting money into the economy at least its done from the bottom up by parties who are interested in getting it back and know each local environment.

Anyways we keep getting told that we can not let Anglo fail because this "oh so important" bank would bring down the whole system. No evidence is presented beside pure scaremongering. What the banks are doing to this country is nothing more than a form of financial terrorism on the people, call their bluff and let them sink

then transfer all current and savings accounts by creating emergency legislation into 2-3 good banks either new or inviting foreign banks

and let these zombie banks sink under own weight


I would be the last person to advocate taking over private property, but the banks are already effectively nationalised.

What we need is a liqudation process not an "asset management" exercise which moves the toxic sludge around

Agreed.

Also.
It is interesting to note that in a country where asset prices are in freefall (excuse the pun), there has been little or no uptake in securing said assets.
Also, you'd think that with the virtual exit from lending currently being undertaken by Irish banks, that lending opportunities coupled with the the fall in asset prices would entice foreign banks to come in to the market.

But which foreign bank would be prepared to come in to a market where the Irish-owned banks are being propped up by the State?
Foreign banks would be at a competitive disadvantage.

So not only do we have zombie Irish banks who won't/can't lend, we also have a banking sector which because of State support excludes foreign banks.
All in a market where asset prices are falling and should make for some great bargains.

Irish solution to an Irish problem.

We deserve better folks.

MrDarcy

keithclancy wrote: »

The Issue was more around Anglo was too big to fail, there was a question mark over whether Anglo going bust would wreck the economy.

Setting up more banks to deal with an issue of Debt is not the way to solve
the problem imo.

There isn't a business on this earth that is "too big to fail". This is a political soundbyte, an excuse to serve up to us what is unpalatable. There should not have been a cent put into that bank, it should have been excluded from the guarantee and it's bondholders and shareholders told to go f*ck themselves.

the_dark_side

MrDarcy wrote: »

There isn't a business on this earth that is "too big to fail". This is a political soundbyte, an excuse to serve up to us what is unpalatable. There should not have been a cent put into that bank, it should have been excluded from the guarantee and it's bondholders and shareholders told to go f*ck themselves.

My sentiments exactly (along with 75% of the rest of the country... we're told).
Our government represent corporate interests, and elitist interests... the suggestion that 'new banks' would be capitalized and lend to SME's, would represent working class and middle class interests.... (which could have resulted in a coup d'etat if it had been implemented)... instead, our government abused their position of power, and instead of public service, they persued private gain.

Callan57

changes wrote: »

Maybe this is to simple but can they not just say to those who lent anglo the billions (that they in turn used to lend out) that they need to accept 50cents in the euro.

Money that a private bank borrowed should not be treated the same as money a government borrows. I can fullly accept that government borrowings would need to be paid back in full in order to be taken seriously in relation to future borrowings.

Isn't that the nub of the problem .... Lenihan/Cowan turned loans to a private bank (Anglo) into loans to the Irish State (Sovereign debt) by agreeing to the all-embracing guarantee.
God but they really saw us coming

Pete_Cavan

ei.sdraob wrote: »

Don't knock the guy, he has a point

I previously said that it would be better to distribute money to local credit unions who know the locals and can deal in making loans to small local businesses, as added bonus the people still have confidence and respect in them, which is more than can be said of the "banks"
So if you do go down the road of injecting money into the economy at least its done from the bottom up by parties who are interested in getting it back and know each local environment.

Anyways we keep getting told that we can not let Anglo fail because this "oh so important" bank would bring down the whole system. No evidence is presented beside pure scaremongering. What the banks are doing to this country is nothing more than a form of financial terrorism on the people, call their bluff and let them sink

then transfer all current and savings accounts by creating emergency legislation into 2-3 good banks either new or inviting foreign banks

and let these zombie banks sink under own weight


I would be the last person to advocate taking over private property, but the banks are already effectively nationalised.

What we need is a liqudation process not an "asset management" exercise which moves the toxic sludge around

Liquidation would involve paying off the creditors and redistribute the assets. So to pay off creditors it would cost us several hundred million, or else we only pay a fraction of what the creditors are owed. Why would any foreign bank set up in this country if they have just seen all the shareholders and bondholders in every other bank in the country wiped out? Our banking system is such a mess at the minute that no other bank would touch it. And what about the depositors, they would have to lose all their savings. Then you are left with the cost of recapitalising new banks as some other posters have suggested. You would be counting in trillions, not billions, if you had to pay off all the creditors and put extra money into new banks.

As bad as our banks are we are stuck with them (for the time being at least) and letting Anglo go bust would only make things more difficult for the rest of them. Again, why would anyone buy bonds or shares in a bank here when they have just seen another major bank here fail? If the other banks cant raise money on the international markets then they will fail and we will be left to pick up the tab for all of them. Getting what you can for the good loans and winding Anglo down over the next decade is the cheapest option in the long run.

ei.sdraob

Pete_Cavan wrote: »

Liquidation would involve paying off the creditors and redistribute the assets. So to pay off creditors it would cost us several hundred million, or else we only pay a fraction of what the creditors are owed. Why would any foreign bank set up in this country if they have just seen all the shareholders and bondholders in every other bank in the country wiped out? Our banking system is such a mess at the minute that no other bank would touch it. And what about the depositors, they would have to lose all their savings. Then you are left with the cost of recapitalising new banks as some other posters have suggested. You would be counting in trillions, not billions, if you had to pay off all the creditors and put extra money into new banks.

As bad as our banks are we are stuck with them (for the time being at least) and letting Anglo go bust would only make things more difficult for the rest of them. Again, why would anyone buy bonds or shares in a bank here when they have just seen another major bank here fail? If the other banks cant raise money on the international markets then they will fail and we will be left to pick up the tab for all of them. Getting what you can for the good loans and winding Anglo down over the next decade is the cheapest option in the long run.

Because everyone and their dog knows Anglo is not a real bank with some very big problems, if anything others might look favourably towards us dealing with this mess instead of letting it drag the whole country down (as it seems to be doing now).

Pete_Cavan

ei.sdraob wrote: »

Because everyone and their dog knows Anglo is not a real bank with some very big problems, if anything others might look favourably towards us dealing with this mess instead of letting it drag the whole country down (as it seems to be doing now).

Irish banks rely on the international markets to raise most of their money. We are more likely to get more investments, and at a cheaper cost, if people see us standing by Anglo instead of just letting it fail at the expense of all the investors.

dermo88

I have grave moral objections based on past experience towards these bailouts. One need only look at the conduct of Charles Haughey in the 1980's, when he owed money to Allied Irish Banks.

He threatened them.

"I should warn you that I can be a very difficult adversary"

Garrett Fitzgerald also bailed out the IIC, an AIB subsidiary. His reward, getting 250,000 Pounds of loans used to buy shares written off.

Who can deny the possibility of the Fianna Fail establishment, and their cronies being involved (again), in the same Nigerian style 419 scam, perpetuated upon us all?

Frankly, it needs anyone involved in the Irish Banking sector for the past 25 years to be kicked out of their offices, and foreign auditors brought in.

A neutral outsider will decide how these are to be disposed of, unbeholden to special interests, and factions. Personally, I don't care if it is the IMF or the ECB, and if it costs a lot, then it has to.

As for those who caused it, I want retribution.

ei.sdraob

Pete_Cavan wrote: »

Irish banks rely on the international markets to raise most of their money. We are more likely to get more investments, and at a cheaper cost, if people see us standing by Anglo instead of just letting it fail at the expense of all the investors.

Argh its like banging head against wall

how do you think they view us standing by Anglo and letting it drag the whole country down into a debt spiral? and lets not forget our ongoing deficit sprinkled on top ...

I tell you exactly how they view our foolish choices

zielarz

the_dark_side wrote: »

Would this not have been a better use of our money?

If it is OUR money then why WE can't decide how to spend it? Why the government decides how to spend OUR money in the first place?

RealityCheck

Pete_Cavan wrote: »

Irish banks rely on the international markets to raise most of their money. We are more likely to get more investments, and at a cheaper cost, if people see us standing by Anglo instead of just letting it fail at the expense of all the investors.

A functioning bank would rely on international markets, instead ours rely on the ECB :rolleyes:.

RealityCheck

ei.sdraob wrote: »

Argh its like banging head against wall

how do you think they view us standing by Anglo and letting it drag the whole country down into a debt spiral? and lets not forget our ongoing deficit sprinkled on top ...

I tell you exactly how they view our foolish choices

What are the 10 year soveirgn bonds at now, above 6% ? :eek: Crazy stuff.

the_dark_side

zielarz wrote: »

If it is OUR money then why WE can't decide how to spend it? Why the government decides how to spend OUR money in the first place?

This is exactly why I referred to it as 'our money'... your right, we aren't being allowed to determine how our future earnings are being spent at the moment. They are reaching (very far) into tomorrow to pay for yesterday, without thinking about today...

the other thing is this.... when a bank becomes nationalized, they become 'our banks'... so when their making loads of money its 'their banks'.... when they go tits up, they become 'our banks'... and even though they are now 'ours', the charges have increased to pay for the shortfall created from when they were 'their banks'.... you couldn't make this up if you were on drugs!

hinault

On tonights edition of Primetime, Paul Sommerville literally wiped the floor with Eamonn O'Cuiv as regards the Anglo bail out.

Sommerville stated that "the international markets do not believe this govt any longer".

recedite

Pete_Cavan wrote: »

Liquidation would involve paying off the creditors and redistribute the assets. So to pay off creditors it would cost us several hundred million, or else we only pay a fraction of what the creditors are owed. Why would any foreign bank set up in this country if they have just seen all the shareholders and bondholders in every other bank in the country wiped out? Our banking system is such a mess at the minute that no other bank would touch it. And what about the depositors, they would have to lose all their savings. Then you are left with the cost of recapitalising new banks as some other posters have suggested. You would be counting in trillions, not billions, if you had to pay off all the creditors and put extra money into new banks.

As bad as our banks are we are stuck with them (for the time being at least) and letting Anglo go bust would only make things more difficult for the rest of them. Again, why would anyone buy bonds or shares in a bank here when they have just seen another major bank here fail? If the other banks cant raise money on the international markets then they will fail and we will be left to pick up the tab for all of them. Getting what you can for the good loans and winding Anglo down over the next decade is the cheapest option in the long run.

Ha! is that you Seanie Fitz?
Obviously the creditors only get paid if there is money left over in a liquidation. The cost of the state guaranteeing depositor's money only would have been much less.
If the failed banks were gone, other banks with more successful lending strategies would come in to fill the vacuum. That's capitalism.

But you are right,we are stuck with them, just like we are stuck with a FF government.