140 Billion Bailout for Ireland

alex73

according to a source closed to talks, IMF/EU bailout will be in the order of 140 billion Euros... :eek:. I would not have thought it would be that high, but it seems the bulk of the money is needed for Banks..

Could he be true?

later12

In a word, no. It won't be that high.

Link? or is this a rumour?

Buford T Justice

alex73 wrote: »

according to a source closed to talks, IMF/EU bailout will be in the order of 140 billion Euros... :eek:. I would not have thought it would be that high, but it seems the bulk of the money is needed for Banks..

Could he be true?

Have you a link for this?

alex73

later10 wrote: »

In a word, no. It won't be that high.

Link? or is this a rumour?

no link and not a rumour, source close to the issue. But we only need to borrow 16 billion next year. Why is imf pushing 10 times thay at us? ( its the sum being discussed)

Slideshowbob

IMF are in going through the books in the Central Bank

Probably drilling down into bad loan books

Probably seeing apartments / fields in certain areas aint worth what Anglo etc reported so factoring that into whats needed!!!

nesf

100 billion has been bandied about as an upper estimate. 140 billion isn't that big of a leap from there.

ei.sdraob

alex73 wrote: »

no link and not a rumour, source close to the issue. But we only need to borrow 16 billion next year. Why is imf pushing 10 times thay at us? ( its the sum being discussed)

21 bln next year said RTE recently, one of the prime times top of my head...

alex73

Well i await the offical figure. But what a disgrace we are in.

nesf

alex73 wrote: »

no link and not a rumour, source close to the issue. But we only need to borrow 16 billion next year. Why is imf pushing 10 times thay at us? ( its the sum being discussed)

That 16 billion number is only Government borrowing, it doesn't count how much the banks need to which the IMF will be helping us with.

alex73

ei.sdraob wrote: »

21 said RTE...

Exactly, but what Has been discussed is 140 billion. Its hard to know what to believe

amacachi

Maybe the Europeans noticed that we forgot to carry a 1 somewhere, it wouldn't be the most unbelievable error the government have made in the last few months.

sambos

how safe is ones little savings they have left in the bank now with all the talk of this bailout ...

Mr.Micro

So much for all the denials from Lenny and Biffo, now the former admits we need the money.......did he wake up this morning and realize. The mind boggles.



http://www.bbc.co.uk/news/business-11793025

ei.sdraob

alex73 wrote: »

Exactly, but what Has been discussed is 140 billion. Its hard to know what to believe

The ECB already poured 90 billion into our banks one way or another (source RTE News today)

No one knows how deep our banking black holes go, now that they are nationalised > bank debt = sovereign debt

that's where any bailout money will go (and possibly to keep few "lobby" groups happy as usual)

nesf

sambos wrote: »

how safe is ones little savings they have left in the bank now with all the talk of this bailout ...

Very safe. The bailout will essentially provide the banks with all the funding they require to keep running.

alex73

nesf wrote: »

Very safe. The bailout will essentially provide the banks with all the funding they require to keep running.

I agree, they last thing eu needs is a paralysed bank. There would be a run on the euro

WIZE

how do we pay back 140 billion

alex73

WIZE wrote: »

how do we pay back 140 billion

It would take 30 years or more!!! i don't think ireland really knows the mess we are in.

Rebelheart

amacachi wrote: »

Maybe the Europeans noticed that we forgot to carry a 1 somewhere, it wouldn't be the most believable error the government have made in the last few months.

FYP

amacachi

Rebelheart wrote: »

FYP

You don't get jokes do you?

Krusader

140€bn, take the money run and renege :pac:

wylo

Its not a bailout ,its a substantial contigency capital fund right?????

WIZE

WIZE wrote: »

how do we pay back 140 billion

http://www.financedublin.com/debtclock.php



Its pretty much like the state is taking out a big mortgage, will murder our spending capabilities

wylo

wylo wrote: »

Its not a bailout ,its a substantial contigency capital fund right?????

yeah and the Irish garuantee was the cheapest bailout in the world


You dont actually believe FF anymore do you? Really like after the past few days especially ?

Di0genes

nesf wrote: »

100 billion has been bandied about as an upper estimate. 140 billion isn't that big of a leap from there.

It's worth pointing out that the bail out of Fannie May and Freddie Mac was considered extraordinary in the US is 240 billion, and is considered extraordinary. We're a country with the population of a decent sized US city with a humongous debt, it's vile, it's obscene.

alex73

Di0genes wrote: »

It's worth pointing out that the bail out of Fannie May and Freddie Mac was considered extraordinary in the US is 240 billion, and is considered extraordinary. We're a country with the population of a decent sized US city with a humongous debt, it's vile, it's obscene.

Cowen is selling ireland from under our feet.

Ulysses Gaze

We'll probably find it's in between €100 bn and €140 bn.

No way was St. Lenihan ever going to admit to the Irish people that they were on the hook for that much when he railroaded Nama (the only game in town) through the Oireachtais.

No wonder he wouldn't open the bank books to the Opposition to let them see

No wonder NAMA was so wrapped in secrecy and why it initially had anti-whistleblower clauses in the legislation.

If he knew and did nothing he's a liar. If he didn't know and didn't try to find out he's incompetent.

To my mind, it's the former and the man is guilty of Economic treason. He must have known what was going on.

The only good thing about the EU/IMF coming in is, at least we know what a balls up The Soldiers of Bankruptcy and their cronies have left us in.

It'll be decades before we recover.

PeterIanStaker

I think its safe to say that we can ensure our children's future by not having any (more).

alex73

Ulysses Gaze wrote: »

It'll be decades before we recover.

Its a disgrace. budget surplus in boom years was all smoke. We borrowed the boom.

bradlente

Shocking stuff.Yet the boys in power won't pay and the lads that done the deeds will run free to scam someone else.Make the 4 year plan a 10 year by the looks of things.

amacachi

Would've loved to have a choice as to whether or not to leave the country when I finish college. Sigh.

noxqs

120bn is around 25K euro per head in the country. Add to that the current debt, the amounts are staggering.

Even servicing the debt would clearly be impossible without what... 60% tax rates?

eoinbn

The more the merrier as we can't afford to pay it back.

amacachi

If it's 80 billion at say 5% per year it'll cost every man woman and child about a thousand quid per year just to pay the interest off such a loan. If someone has some decent guesses at what numbers we're expecting I'd like to hear them to get a clearer picture of how fcuked we are.

irishh_bob

im on the internet after midnight ( rare for me ) as i know i wont sleep having watched constant gurdiev on vincent browne

my question is this , even after the bailout , how the fcuk are irish banks going to remain solvent with the avalanche of mortgage defaults that are coming down the line , private debt is the second wave thats coming back in to drown us unless something radical is done

Bob_Latchford

Instead of hiding Cowen should come out and say if the medicine IMF is dishing out might kill the patient, then pulling out of euro and deflating is a serious option.

The bond holders need to take a cut of the loses here, irish economy will be dead saddled with so much debt at 5% .

The repayments on the new debt would be 10-20% of tax income?

gleep

irishh_bob wrote: »

im on the internet after midnight ( rare for me ) as i know i wont sleep having watched constant gurdiev on vincent browne

my question is this , even after the bailout , how the fcuk are irish banks going to remain solvent with the avalanche of mortgage defaults that are coming down the line , private debt is the second wave thats coming back in to drown us unless something radical is done

I hear ya! Constant reckons the loan repayments alone will cost us €5Bn per year :eek:

The IMF/ECB/EU are here to ensure all Irish citizens repay a handful of Banker's debts to Euro nations. And they're going to charge us for the privelage. They are sacrificing Ireland for the greater good.
Could all those welcoming them please get your head out of yer hoop.

eoinbn

irishh_bob wrote: »

im on the internet after midnight ( rare for me ) as i know i wont sleep having watched constant gurdiev on vincent browne

my question is this , even after the bailout , how the fcuk are irish banks going to remain solvent with the avalanche of mortgage defaults that are coming down the line , private debt is the second wave thats coming back in to drown us unless something radical is done

It's really down to how extensive this 'bailout' is. If the IMF just say that we need €Xbn this year and €Ybn for the banks to keep them going then we are just going to be back in the same spot in 2 years from now. The simple truth is we can't afford to pay what we owe so unless we get a % write-off then we are screwed.

Cheap Thrills!

The numbers are huge but with such high unemployment (which will get worse when loads of public sector workers get the chop) and emigration then there'll be hardly anyone left to pay it back.....so what does it matter? They cant get blood out of a stone.

I believe we know nowhere near the extent of the black holes in the banks. FF lie routinely and always refused to justify their assertion that it'd be more expensive to wind down Anglo than bail it out. That to me indicates the mess is even worse than anyone can imagine.

I dont understand how they think we will pay. Even at full tilt we couldn't pay that.

Hayte

Bob_Latchford wrote: »

Instead of hiding Cowen should come out and say if the medicine IMF is dishing out might kill the patient, then pulling out of euro and deflating is a serious option.

The bond holders need to take a cut of the loses here, irish economy will be dead saddled with so much debt at 5% .

The repayments on the new debt would be 10-20% of tax income?

They don't need to take a cut of the losses. Any bank that defaults on its senior bondholders is never going to see another cent of investment from anyone which is really fantastically bad. Assuming no government guarantee, all the investors who got screwed will become unsecure creditors like everyone else, including depositors. Its hard to actually describe what an unbelievably terrible idea it is to let this happen.

Germany I think is pushing for Anglo to push through a deal to spread its subordinated debt amongst bondholders and the current deal is 20% of face value of the bond or 1 cent per €1,000 which is basically saying 'rubbish deal or nothing'. They managed to get agreement from most of the subordinated bondholders though which means that:

1) They likely won't get anything more and trying would be like trying to getting blood out of a stone. I think a big chunk of the loans Anglo were packaging together were backed by commercial property which has now fallen precipitously in value and isn't likely to ever recover to 2007 levels.
2) They have probably been busy buying CDS protection in the event Anglo defaults on its subordinated bondholders anyway so the insurer will make up most or all of their 80% loss.

I'm not saying that the taxpayer taking the hit is right because the least fortunate of our society should never be expected to pick up the slack when huge investments they had nothing to do with go south. The operative word being should. They can do it and they are doing it. As bad as it is, it is also arguably better than most of the alternatives I can think of. We don't really make very much in this country and we won't survive on our own. Something like 70% of what we export is office products and productivity software from foreign companies like Microsoft, Google et al who are only here in the first place because they can game the Irish corporate tax system.

swampgas

Hayte wrote: »

2)
They have probably been busy buying CDS protection in the event Anglo defaults on its subordinated bondholders anyway so the insurer will make up most or all of their 80% loss.

I don't know a whole lot about this, but didn't AIG go under because of CDS losses that bankrupted it? Who would be crazy enough to provide insurance against losses in Anglo?!

Dannyboy83

nesf wrote: »

Very safe. The bailout will essentially provide the banks with all the funding they require to keep running.

Are you sure about this?

It was said in this thread recently that my arithmithec was poor because the bailout would be used to refinance our sovereign debt, not to recapitalise banks.
http://www.boards.ie/vbulletin/showthread.php?t=2056096435

And as I said here, there is an impending tsunami of mortgage default.
http://www.boards.ie/vbulletin/showpost.php?p=69140033&postcount=3

Irish banks cannot afford to give out mortgages at 5% anymore.
And as Morgan Kelly said, the ECB are gonna want their money back next year, so the Irish banks priority is no longer to hide defaults. They start foreclosing.

ECB will limit their lending against deposits.
Inflation kicks off in Eurozone and even people on tracker mortgages are screwed.

Meaning we are simply on the cusp of the real property crash right now.
And this bailout is just the first one.

Bob_Latchford

Hayte wrote: »

They don't need to take a cut of the losses. Any bank that defaults on its senior bondholders is never going to see another cent of investment from anyone which is really fantastically bad.

for something that is so catastrophically bad why is the EU neutral on it and the IMF supposedly pushing for it?

http://online.wsj.com/article/BT-CO-20101125-703706.html

BRUSSELS(Dow Jones)--The European Commission hasn't taken a position on whether the senior bondholders of Irish banks should be forced to absorb losses as part of the bailout package for Ireland, a commission spokesman said Thursday.
"At this point in time we have no positon" on the issue, said spokesman Amadeu Altafaj Tardio.
Responding to reports that the IMF is pushing for senior bondholders to absorb losses despite opposition from the commission, the EU's executive arm, Altafaj Tardio said: "We are discussing with the Irish authorities as a team ... there is a very, very close coordination as you can imagine."

Yixian

Bob_Latchford wrote: »

for something that is so catastrophically bad why is the EU neutral on it and the IMF supposedly pushing for it?

http://online.wsj.com/article/BT-CO-20101125-703706.html

It is not a cure, it's life support. If Ireland accepts then it is going to voluntarily put itself into a coma for the next 10 years, until the whole European economy picks up, then it's back to square one and history will just repeat itself.

The alternative is to physically remove the absolute criminals that have stolen Ireland's future and replace them with a system that will work and that doesn't necessarily fall in line with corporatist IMF interests.

However that would require people to give a **** more than whining on a message board, and sadly the Irish seem to have lost their rebel spirit and adopted the British publics policy of bending over and taking absolutely anything the government throws at them right up their anal sphincters.

Dotsie~tmp

swampgas wrote: »

I don't know a whole lot about this, but didn't AIG go under because of CDS losses that bankrupted it? Who would be crazy enough to provide insurance against losses in Anglo?!

Part of the problem that caused first credit crunch. Nobody knows where the bad debts arebecause these derivative have been sold on so many times on secondary markets.

Again I'll take the time to say that every time you see someone say the word bailout replace it with these words; the €85bln loan to pay back private European banks who made bad investments in the Irish asset bubble. Not bailout and correct anyone you hear saying it.

Hayte

Bob_Latchford wrote: »

for something that is so catastrophically bad why is the EU neutral on it and the IMF supposedly pushing for it?

http://online.wsj.com/article/BT-CO-20101125-703706.html

Because they aren't pushing them to default on their senior bondholders. They are pushing them to come to an agreement with their subordinated bondholders where they swap for new bonds worth a fraction of their value. This looks like a terrible deal for the bondholders (basically, Anglo is offering them 20% of their investment or nothing) but for whatever reason Anglo has managed to convince alot of them to agree to the exchange, at least for the 2017 notes. I imagine that many of these bondholders have been hedging themselves against such losses (i.e. in the CDS market). These bondholders are getting screwed but they have ways of mitigating their losses and in fact, it looks likely that many of them will be able to partially or wholley make up their losses with CDS. And yeah, whoever mentioned AIG - yes, they tanked in a big way being a major protection seller on huge bundles of debt securities (collateralized debt obligations or CDOs) traded around by the really big investment banks and hedge funds. Most of them were mortgage backed so the underlying assets were houses and stuff. So when house prices crashed, the value of the underlying asset crashed and anyone who was buying protection against such an event got a big payout. AIG had to make alot of big payouts shall we say.

Anyway back to IMF. To be honest, the cuts our government is imposing on the taxpayer (and up to now, people who were so damn poor and/or young that they were exempt from tax) are so draconian that I can see why other nations in the union do not want to be associated with it. If theres a way to share Irish bank debt amongst bondholders and its consensual then sure I guess. But its when you put out the image to investors that as a bank, you don't give a f*** about their investment and will take their money and run. You give out bad news like that and it causes uncertainty which leads to investor panic and aversion which means you don't get any new investors and the ones you got can and will find ways to jump ship. I guess it doesn't matter so much with Anglo because its finished anyway but the banks that are still alive - they need to look strong.

The market can be fickle though because you need not actually even default on loan obligations. You just need to look like you will or enough investors need to believe that you will and they panic and bail out and the effect is the same. I heard someone rather eloquently describe the 'market' as being full of testosterone driven twenty somethings whose primary concern is how quickly they can turn around around a few million in order to make enough commission to spend on more hookers and blow. Anyway, the illuminating point that he was trying to make is that if insuring against default (betting on failure) turns over the money quicker then thats what they'll do. There is no professional incentive to sit on safe bonds and wait for them to mature. If they sell packages of overrated debt securities then thats great - they just foisted off a tonne of risk and got commission on it. Next deal.

Before I go any further, I'm no financier or investor or trader or anything like that. I think I've got the basics of the situation but I may have some things wrong and would appreciate correction from people working day to day in stuff like investment banking. However, the way I understand it, things got alot worse all of a sudden for lots of reasons but the simplest way I can boil it down to is this:

Around 2005 to 2007 I think Anglo was getting into covered bonds in a big way (big by Irish standards is still tiny by Goldman Sachs standards). Covered bonds are like bundles of loans where there is some sort of asset as a collateral. This kind of debt is called a debt security. Mortgages are a type of security that most people will be familiar with: its a contract to pay back a debt on a house where the house is collateral. i.e. if you can't pay the debt, the lender takes your house. The lender then tries to sell the house to recover the money you didn't pay back. The sort of buyers you get for these packages are not people off the street because these packages are portfolios of lots of loans (hundreds or even thousands of them) - the buyers and sellers are usually other banks, hedge funds, asset management agencies etc and the amount of money involved is usually very big (millions at least).

Anyway, hopefully you can see where this is going. Around about 2008 the housing market imploded on pretty much a global scale and Anglo got owned by having tonnes of loans where the underlying asset is worthless commercial property. When a Bank's money is tied up in property it can't sell for the value of its debts, it doesn't have as much liquid cash to lend out to people with interest and thats the traditional way that a Bank makes money. Worse still the debts they have still have interest on them so the longer they have all their cash tied up with outstanding loans, the more interest they have to pay on those loans. Part of these big package trades is to quickly turn lots of stuff worth x million euros into x million euros. Its a way for banks and hedge funds and what not to quickly liquidate their holdings and use the cash to lend or invest elsewhere. So a bank with a trade desk can package up a bunch of bonds into a collateralized debt obligation (CDO) which could say, consist of 2000 home mortgages. The bondholder is getting a constant stream of money from the borrowers in these mortgages paying it back over 20 or 30 years. Some banks need liquidity now so what they can do is assess how risky these loans are. Are the borrowers likely to pay up on time, every time? A package of risky loans doesn't look attractive to investors unless its for sale at a really good discount or the interest rate on it is really really high.

So alot of these bundles of loans get rated and assessed for risk with target spreads and likely returns etc. Mortgage backed securities were big when house prices were rising and rising. They looked like great investments unless you were buying and selling these things big around about the time the global property market imploded. There is alot of speculative investing going on in markets like this. Investors or likely investors watch things like the cost to insure the debt against default and what not and if they see it rising they can panic and all pull out at the same time ruining a deal that could have been fine if everyone wasn't so edgy and watching what others are doing.

Anyway, Anglo got double screwed when depositors started pulling out after seeing Anglo take huge losses on its trading desk so the Bank with a cash flow problem became a Bank that was insolvent. An insolvent bank that owed metric tonnes of money investors with interest accruing all the time. In order to protect existing depositors the government stepped in and guaranteed them. Now, I'm as disgusted as anyone else is being a low wage earning, just out of uni migrant from the UK. I feel like coming over here was in career terms sort of like getting my ass reamed. But I can well believe it when Cowan and Lenihan said they didn't need a bailout. We probably didn't and we were in no imminent danger of defaulting on sovereign debt thats for sure. But then the speculation happens. Germany brought the issue up and it got in the news (can't blame them though, they are just trying to protect their own taxpayers from exposure to the failure of eurozone nations with big German investment in their financial institutions such as rebel corporate tax bandit Ireland).

Investors saw the price of insuring Irish debt rise and everyones freaking the hell out and pulling their money because its not safe anymore. And sure enough the negative speculation in a sort of self fulfilling prophecy has turned into a reality.

As I said, I'm just a layman really and don't know the inner workings of these deals or even how the financing works or anything. I'm just a dude who likes to stay informed about whats going on in the world. But, it probably would be a good idea to regulate the amount of a bank's loan book that can be used on their trading desk because banks are not just for profit corporations. It is not ok if they sacrifice everything on the trading desk because it hurts more than just the corporation. It hurts all the investors, it hurts the shareholders (who got royally screwed with Anglo). It hurts the taxpayer and the people that don't even pay tax yet (the kids wanting to go into third level education and make something of themselves). The bank provides a service which is necessary for our society to function and so our interests must coincide. Unfortunately the relationship has now become parasitic and there doesn't appear to be any legal consequences or reform pending. Sometimes I feel that we the people will eat ourselves and each other if theres a buck in it. I don't really have much hope that there will be any systemic changes happening in all of this but I'm a pessimistic sarcky brit and we always expect the worst. Just look at our football team.

Bob_Latchford

Hayte wrote: »

Because they aren't pushing them to default on their senior bondholders. They are pu

Im not expert either but they specifically said Senior bond holders

Responding to reports that the IMF is pushing for senior bondholders to absorb losses

Ok it rumour and conjecture, but the question was ask at the EU today and they said they had no position.

I would have expected them to have a position if it was overwhelmingly catastrophic and disasterous.

Hayte

Hahaha oh fawk. I guess they are really upset about the 12.5% huh? Let me put it this way - do you think anything good can come of letting Irish banks default on their debt obligations? Who is going to invest in them after that? Anglo is sort of a special case because its finished anyway.

Bob_Latchford

Merkle is saying the same things, so I think its more of trying to get this sorted for the sake of the euro and stability than 12.5%

http://www.independent.ie/business/european/merkel-seeks-lsquoboundariesrsquo-for-bondholders-in-euro-rescue-push-2433578.html

We have a very decisive question ahead of us,” Merkel said in a speech to parliament in Berlin today. “Do politicians have the courage to place the risk burden on those who make money? Or is trading in sovereign debt the only business in the world in which there is no need to take risk?

I would equate sovereign debt and Senior bond holders in that it was seen as unthinkable to default on either.

Seems to me that the senior bondholders will get singed if not burned across europe.

Bob_Latchford

Just as Ireland cannot guarentee the banking debts so EU cannot guarentee Greece, Irish Portugal, Spain debt

They simply cant pay, its that simple, the haircut is coming just a case of how much imo

Hayte

Bob_Latchford wrote: »

Merkle is saying the same things, so I think its more of trying to get this sorted for the sake of the euro and stability than 12.5%

http://www.independent.ie/business/european/merkel-seeks-lsquoboundariesrsquo-for-bondholders-in-euro-rescue-push-2433578.html

I agree but what I'm saying is that the euro doesn't stabilize if the financial institutions of an entire euro member fails. Or maybe it does. At this point I'm out of ideas.

I would equate sovereign debt and Senior bond holders in that it was seen as unthinkable to default on either.

Seems to me that the senior bondholders will get singed if not burned across europe.

They will have ways of mitigating their losses yes. The taxpayer? Not likely. I still think it is unthinkable to consider a systemic default. Things like NAMA were set up to prevent that sort of thing happening, the idea being to transfer all the worst performing loans to NAMA so that Irish banks have liquidity and can pay off their debt obligations sooner and incur less interest.

The idea of NAMA is sound but I don't think its doing enough nor can it by itself. Ultimately for NAMA to work, investors must have confidence that their investment in Irish banks is safe. That is not the case. I think we have put too much into this strategy now to renege on it and to do so would cause a crisis in confidence in the market and trigger one of those self fulfilling prophecies I described above. The draconian cuts imposed on the taxpayer in the four year plan is an extension of this strategy: that no matter what, if you invest in Irish banks, you will get a return on your investment. The government will guarantee it and Irish citizens will pay the price if necessary. As distasteful as it seems being on the sharp end of this deal stick, that is a remarkable assurance. Nobody who is a part of this deal in government will get re-elected and their career in politics will effectively be over.

Germany will (and should) be concerned about protecting its own taxpayers first and foremost. If they must start leaning hard on Ireland and Greece and Spain to do that then so be it. We will reap what we sow.