" European partners had ruled out making senior bondholders pay..."

hatrickpatrick

"...as it would have a spill over effect on the Euro" -- RTE

This, to my mind, is the real villainy in all this. We, the taxpayer, are going to be saddled with this debt because apparently people who made foolish investments and screwed up are too big to fail.

**** 'em. Let 'em rot. I fail to see why any of us should pay unless we ourselves are bondholders. You make a stupid investment, you deal with the consequences of it. That's how it's suposed to work, anyway...

That's certainly how it has worked in the cases of Irish people who bought shares in Anglo, right? Why the hell should we make any exceptions?

Bob_Latchford

hatrickpatrick wrote: »

"...as it would have a spill over effect on the Euro" -- RTE

This, to my mind, is the real villainy in all this. We, the taxpayer, are going to be saddled with this debt because apparently people who made foolish investments and screwed up are too big to fail.

**** 'em. Let 'em rot. I fail to see why any of us should pay unless we ourselves are bondholders. You make a stupid investment, you deal with the consequences of it. That's how it's suposed to work, anyway...

That's certainly how it has worked in the cases of Irish people who bought shares in Anglo, right? Why the hell should we make any exceptions?

This is just Lenihan passing the buck. How much will burning subordinate bond holders claw back if they are burnt 100%, looks like a green light for that then

KerranJast

Just for clarification: senior bonds are not foolish investments. They're money invested with the proviso that you are first in line for refund even ahead of depositors. As such they are very low risk and get very low rate of interest.

Dotsie~tmp

Yep but not zero risk. Which is what they are now because of this deal.

KerranJast

Dotsie~tmp wrote: »

Yep but not zero risk. Which is what they are now because of this deal.

If I was a senior bond holder (probably a pension fund or other European bank) why should I take a cut in my investment when depositors are left untouched?
They would have received a higher interest rate than me because I was supposed to be first in line.

hmmm

KerranJast wrote: »

If I was a senior bond holder (probably a pension fund or other European bank) why should I take a cut in my investment when depositors are left untouched?

Don't confuse the ranters with facts. A default on senior debt would be the nuclear option that would take down our economy and probably much of Europes, it is the equivalent of a government seizing deposits.

Bob_Latchford

KerranJast wrote: »

If I was a senior bond holder (probably a pension fund or other European bank) why should I take a cut in my investment when depositors are left untouched?
They would have received a higher interest rate than me because I was supposed to be first in line.

just carrying on the hypothetical

Because if you were a risk adverse investor you would have hedged the cost of default. If your not your driving a multi billion car without insurance.

I would have thought a single investment in one sector in one country would be porportionate to its risk. ie if it went tits up, it wouldnt wipe you out. The fact that it is going to be significant would also indicate your behaving in a risky fashion

Bob_Latchford

hmmm wrote: »

Don't confuse the ranters with facts. A default on senior debt would be the nuclear option that would take down our economy and probably much of Europes, it is the equivalent of a government seizing deposits.

Its not nuclear thats same as ranters, there is a market for insuring Irish sovereign bonds against default, never mind senior bondholders.

If there is a market for insuring Irish sovereign debt against default then they are certainly not 100% risk free and everyone knows it.

Dotsie~tmp

KerranJast wrote: »

If I was a senior bond holder (probably a pension fund or other European bank) why should I take a cut in my investment when depositors are left untouched?
They would have received a higher interest rate than me because I was supposed to be first in line.

If I was a taxpayer why should I pay for the bad investments or private home and foreign banks?

Read the above statement and your own. Ask yourself which one is less just.

jmayo

KerranJast wrote: »

If I was a senior bond holder (probably a pension fund or other European bank) why should I take a cut in my investment when depositors are left untouched?
...

Good luck trying to get people or organisations to deposit money into any bank if they think they are going to be screwed to pay off bondholders.
Remember how necessary the bank deposit guarantees were to prevent bank runs ?
The whole premise of ordinary people putting money into banks would collpase.
Hell maybe bertie knew something all along ? :rolleyes:

hmmm wrote: »

Don't confuse the ranters with facts. A default on senior debt would be the nuclear option that would take down our economy and probably much of Europes, it is the equivalent of a government seizing deposits.

Yes, but when you are playing for your life you have to risk even more.
As it is our government have capitulated and we are consigned to a slow death.
We can't afford 5.83 % when growth will be scaping 2% if we are lucky.

We had them by the balls, what would they have done if we had walked out ?
Do you know why we never had a nuclear attack during the cold war, it was because of MAD. Both sides knew that the other could take them out so in affect they reached an accomodation of sorts.
Our government did not reach an accomodation with the EU/ECB, there was a compromise reached alright.
We did all they compromising and they just agreed to it.

Ever consider why islamic fundamentalists are so damm scary an enemy, it is because they are willing to destroy themselves.
This week we needed to be scary and not just scared.

Unpossible

Apologies if this is a stupid question, but if we are referring to "senior bondholders" instead of just "bondholders" then that implies that there is more than one type of bondholder right? So what are we going to do about the non-senior bondholders? How much of a hit can we pass off to them?

Or have I gotten it completly wrong and there is only one type of bondholder?

hmmm

Bob_Latchford wrote: »

Its not nuclear thats same as ranters, there is a market for insuring Irish sovereign bonds against default, never mind senior bondholders.

They are now equivalent because of the deal that our government signed. If we created a precedent where the Irish government reneged on previous agreements it would cost us a lot more for generations to come than the decade of economic retrenchment we face.

karlth

Unpossible wrote: »

Apologies if this is a stupid question, but if we are referring to "senior bondholders" instead of just "bondholders" then that implies that there is more than one type of bondholder right? So what are we going to do about the non-senior bondholders? How much of a hit can we pass off to them?

Or have I gotten it completly wrong and there is only one type of bondholder?

Yes. Senior bonds and subordinated bonds.

Senior bonds have higher priority but lower interest rates than subordinated bonds.


"In case of bankruptcy, there is a hierarchy of creditors. First the liquidator is paid, then government taxes, etc. The first bond holders in line to be paid are those holding what is called senior bonds. After they have been paid, the subordinated bond holders are paid. As a result, the risk is higher. Therefore, subordinated bonds usually have a lower credit rating than senior bonds. The main examples of subordinated bonds can be found in bonds issued by banks, and asset-backed securities. The latter are often issued in tranches. The senior tranches get paid back first, the subordinated tranches later."

Bob_Latchford

Unpossible wrote: »

Apologies if this is a stupid question, but if we are referring to "senior bondholders" instead of just "bondholders" then that implies that there is more than one type of bondholder right? So what are we going to do about the non-senior bondholders? How much of a hit can we pass off to them?

Or have I gotten it completly wrong and there is only one type of bondholder?

The one below senior is subordinate or junior. To show you the "riskiness" of these investments Abromovich was getting 13% on his anglo subordinate bonds. His investment vehicle was planning to sue the government if it defaulted as he thought they were guarenteed and 100% risk free :rolleyes:

Bob_Latchford

hmmm wrote: »

They are now equivalent because of the deal that our government signed. If we created a precedent where the Irish government reneged on previous agreements it would cost us a lot more for generations to come than the decade of economic retrenchment we face.

My point was what is reason there is a market for insuring against Irish soveriegn bonds default and Irish bank senior bond default, if they are 100% risk free?

Unpossible

karlth wrote: »

Yes. Senior bonds and subordinated bonds.

Senior bonds have higher priority but lower interest rates than subordinated bonds.


"In case of bankruptcy, there is a hierarchy of creditors. First the liquidator is paid, then government taxes, etc. The first bond holders in line to be paid are those holding what is called senior bonds. After they have been paid, the subordinated bond holders are paid. As a result, the risk is higher. Therefore, subordinated bonds usually have a lower credit rating than senior bonds. The main examples of subordinated bonds can be found in bonds issued by banks, and asset-backed securities. The latter are often issued in tranches. The senior tranches get paid back first, the subordinated tranches later."

Ah ok, I think the rte article mentioned something about giving 20c in the euro to buy some debt from AIB. So they would be buying them from the subordinated bondholders correct?
Do the subordinate bondholders hold many bonds, so that giving them a cut would make significant savings?

whysomoody

Unpossible wrote: »

Apologies if this is a stupid question, but if we are referring to "senior bondholders" instead of just "bondholders" then that implies that there is more than one type of bondholder right? So what are we going to do about the non-senior bondholders? How much of a hit can we pass off to them?

Or have I gotten it completly wrong and there is only one type of bondholder?

Lower Tier two bondholders will most likely take cuts too, the prices themselves have already fallen, so even if they sell them in the market they will lose money.

the point above is that depositers and Senior bond holders are too important to default on them if you wish for the company to be a going concern. the Tier one and LT2 bondholders were more speculative.

hmmm

Bob_Latchford wrote: »

My point was what is reason there is a market for insuring against Irish soveriegn bonds default and Irish bank senior bond default, if they are 100% risk free?

Sovereign bonds are never risk free? Are you confusing them with the so called "risk free rate" - this is usually short dated sovereign bonds which are about as close to risk free as you can get.

Bob_Latchford

hmmm wrote: »

Sovereign bonds are never risk free? Are you confusing them with the so called "risk free rate" - this is usually short dated sovereign bonds which are about as close to risk free as you can get.

your making my point for me if sovereign bonds are not risk free neither are senior bank bonds

RealityCheck

hmmm wrote: »

Don't confuse the ranters with facts. A default on senior debt would be the nuclear option that would take down our economy and probably much of Europes, it is the equivalent of a government seizing deposits.

Thats all fine and well if you believe we can afford the debt levels being imposed on us because of the banks. In my belief this idea is pure fantasy. We will be back in a similar situation down the road except it will be worse.

Scofflaw

Bob_Latchford wrote: »

your making my point for me if sovereign bonds are not risk free neither are senior bank bonds

I think the point being made is that senior debts are low risk because they're guaranteed to be first in line to be paid - before depositors, even. That means that if you decide to burn the senior bondholders, you've effectively changed the terms on which they lent to you, unless you've already burnt the depositors.

cordially,
Scofflaw

Bob_Latchford

Scofflaw wrote: »

I think the point being made is that senior debts are low risk because they're guaranteed to be first in line to be paid - before depositors, even. That means that if you decide to burn the senior bondholders, you've effectively changed the terms on which they lent to you, unless you've already burnt the depositors.

cordially,
Scofflaw

Doesnt the experience of Washington Mutual and then Landsbanki show there is plenty of political will when push comes to shove that it can and does happen.

That could well be why there is a risk attached to them at all? What other calamity can befall them that is worse than what happened to Irish banks?

Bob_Latchford

As a matter of interest could you point in the direct of a high street bank that failed and depositors got burned before senior bondholders?

hmmm

Bob_Latchford wrote: »

That could well be why there is a risk attached to them at all? What other calamity can befall them that is worse than what happened to Irish banks?

You persist in insisting that the senior bondholders are different to bondholders in Irish government debt. That was the case before the agreement was signed, but unfortunately now they are one and the same. Yes in hindsight the agreement should not have been signed but it is too late now, unless the Irish government is going to renege on one of its own agreements. In that case, we will never be able to borrow in the future at less than punitive rates.

Hayte

Unpossible wrote: »

Apologies if this is a stupid question, but if we are referring to "senior bondholders" instead of just "bondholders" then that implies that there is more than one type of bondholder right? So what are we going to do about the non-senior bondholders? How much of a hit can we pass off to them?

Or have I gotten it completly wrong and there is only one type of bondholder?

When a company (i.e. a bank) goes bankrupt money gets paid out in something like this order:

1) secured creditors
2) unsecured creditors
2.1) bondholders (senior debt)
2.2) bondholders (junior debt sometimes called subordinated debt of which there are many tiers)
2.3) shareholders

So if you go bankrupt, everything in your company's name gets sold off. Basically all the assets get turned into cash (liquidated) and if its just enough to pay your secured creditors then everyone else gets nothing. If theres money left over then it gets distributed down the ladder. Shareholders are the most likely to get gimped if their company tanks. Everyone who put money into your company gets paid first. Everyone your company owes money to gets paid. The owners of the company (shareholders) are the last in line for the scraps.

Whats does secured and unsecured mean? Well go back to the idea of a security. Most people will be familiar with a mortgage. Bank loans you 200,000 euros to buy a house. They pay the owner for you and you sign a mortgage. Its a legal contract saying that you will pay back the 200,000 euros to the bank with interest. It also gives the bank a security interest over your house. This means that if you fail to pay back the loan, they can take your house. The house is the security (the collateral).

Unsecured creditors don't have security interests in the company so they compete for the scraps left over in a pecking order and the principle behind it is called regulatory capital which I find hard to explain here with any sort of brevity because it involves a history lesson in the securities business. Its worth googling regulatory capital though as perhaps someone out there is really good at explaining the term. Basically all the unsecured creditors get paid down the line according to the risk they signed on for and the different tiers of subordinated debts depend on contractual obligations and preferences and stuff like that.

Scofflaw

Bob_Latchford wrote: »

Doesnt the experience of Washington Mutual and then Landsbanki show there is plenty of political will when push comes to shove that it can and does happen.

That could well be why there is a risk attached to them at all? What other calamity can befall them that is worse than what happened to Irish banks?

Essentially, debt repudiation - where you don't just default, but say you don't even plan on paying back creditors. Obviously, in that case, everybody gets burnt.

As a matter of interest could you point in the direct of a high street bank that failed and depositors got burned before senior bondholders?

There are examples from places like Russia and Argentina. One could also add that Iceland effectively protected Icelandic depositors, but burned foreign depositors before burning other senior debt - as far as I know the senior bondholders have been settled with, or moved over to the new banks, while the UK and Dutch depositors were covered by their governments, and the Icelandic referendum was a vote not to repay that money, at least for now.

cordially,
Scofflaw

hmmm

RealityCheck wrote: »

In my belief this idea is pure fantasy. We will be back in a similar situation down the road except it will be worse.

What are the figures you are using to come to this conclusion? Worst case 85 billion at 5.8% is an annual interest figure of about 5 billion which is well affordable in an economy of 160 billion. What figures are you using?

ardmacha

I think the point being made is that senior debts are low risk because they're guaranteed to be first in line to be paid - before depositors, even. That means that if you decide to burn the senior bondholders, you've effectively changed the terms on which they lent to you, unless you've already burnt the depositors.

This is a complete smokescreen. You could say that the guarantee ends and I'm closing the bank in March, "sell" the deposits to another bank who would agree to pay any break clauses in term deposits. Then there simply wouldn't have be any deposits left, except eejits.

Hayte

They aren't guaranteed anything. However after secured creditors have been compensated, Senior bondholders by virtue of them paying the most for the least risk will get first dibs. Thats a gross oversimplification of course because you have to look at the contracts these guys signed. Senior bondholders paid more money and accepted lower interest rates to hold the highest tranches of subordinated debt. The most safe. The rest paid less for the lower tranches and so their contract may stipulate things like their debt at risk of being absorbed to cover the company's losses in bankruptcy in x ways to y degree. It depends on the terms of the contract when the bond was issued.

Bob_Latchford

ardmacha wrote: »

This is a complete smokescreen. You could say that the guarantee ends and I'm closing the bank in March, "sell" the deposits to another bank who would agree to pay any break clauses in term deposits. Then there simply wouldn't have be any deposits left, except eejits.

Thats the washington mutual soft shoe shuffle isnt it? We could phone up the US Fed and ask for tips on how to burn senior bondholders

Not saying its advisable that senior bondholders get burned but they are in the firing line. Its plain for me

SkepticOne

What needs to be done by an incoming government is an honest review of the finances. The full amount Ireland needs to borrow needs to be assessed. It may well go beyond the 85 billion in the current package. Then it needs to be determined if Ireland can actually afford that level of borrowing.

If we can't afford it (i.e. it is believed we will default at some point down the line) then we should default early rather than leaving it till the last minute when more damage will have been done to the economy. We need to face up to the situation rather than "kicking the can down the road" that has been the policy up until now and has led us to this point. At the end of the day, you can't borrow your way out of debt.

When countries default they usually claim to be wiling to pay the debt at some point in the future, and this is what Ireland should do with the bulk of the debt. However I think what needs to be looked into is whether or not we should go further and repudiate some of the bank debt especially debt issued before the guarantee was in place since that money was lent in the full knowledge that if the investment went bad only a portion would be paid back.

SkepticOne

Unpossible wrote: »

Ah ok, I think the rte article mentioned something about giving 20c in the euro to buy some debt from AIB. So they would be buying them from the subordinated bondholders correct?
Do the subordinate bondholders hold many bonds, so that giving them a cut would make significant savings?

I don't have the figures but I believe the bulk of it is held by senior bond holders. Only a comparatively small amount is subordinated so we are not saving much there.

Bob_Latchford

Sure you guys already know about him, but just found Mogan Kelly! Can sleep abit easier

http://www.irishtimes.com/newspaper/opinion/2010/0522/1224270888132.html

We need to explain that the Irish State has always honoured its debts in the past, and will continue to do so. However, the State is a distinct entity from its banks and, having learned the extent of the banks’ recklessness, we now have no choice but to allow the bank guarantee to lapse and to share the banks’ losses with their bondholders. It must be remembered that when these bonds were issued they had no government guarantee, and the institutions that bought them did so in full knowledge that they could default, and charged an appropriate rate of interest to compensate themselves for this risk.

Dan_Solo

As a hypothetical, and assuming we get a new government with a functional spine, what happens if we simply let the current bank guarantee run out and don't renew it? And we tell the IMF to come back to us afterwards instead of now?

Scofflaw

Bob_Latchford wrote: »

Sure you guys already know about him, but just found Mogan Kelly! Can sleep abit easier

We need to explain that the Irish State has always honoured its debts in the past, and will continue to do so. However, the State is a distinct entity from its banks and, having learned the extent of the banks’ recklessness, we now have no choice but to allow the bank guarantee to lapse and to share the banks’ losses with their bondholders. It must be remembered that when these bonds were issued they had no government guarantee, and the institutions that bought them did so in full knowledge that they could default, and charged an appropriate rate of interest to compensate themselves for this risk.

http://www.irishtimes.com/newspaper/opinion/2010/0522/1224270888132.html

Depends on the strength of the case. If we can show that the banks lied and that the way they did so would not have been picked up by reasonably competent bank regulation, we'd have a decent case for that. Unfortunately, we might be on a sticky wicket on the latter part, since we already have reports showing serious deficiencies in our bank regulation.

cordially,
Scofflaw

SkepticOne

Bob_Latchford wrote: »

Sure you guys already know about him, but just found Mogan Kelly! Can sleep abit easier

http://www.irishtimes.com/newspaper/opinion/2010/0522/1224270888132.html

Let's hope the incoming government can act responsibly and follow Kelly's advice.

SkepticOne

Scofflaw wrote: »

Depends on the strength of the case. If we can show that the banks lied and that the way they did so would not have been picked up by reasonably competent bank regulation, we'd have a decent case for that. Unfortunately, we might be on a sticky wicket on the latter part, since we already have reports showing serious deficiencies in our bank regulation.

Not sure that is relevant. Regardless of the level of regulation, banks in Ireland were at the time of lending private companies and as such if you lend to private companies, you do so at your own risk. This I think is what a lot of people forget. The regulators also let down the country, but they weren't there for the protection of investors in the banks.

SkepticOne

Dan_Solo wrote: »

As a hypothetical, and assuming we get a new government with a functional spine, what happens if we simply let the current bank guarantee run out and don't renew it? And we tell the IMF to come back to us afterwards instead of now?

I don't think we can at this stage burn the bond holders and at the same time expect continued funding from the IMF/EU package. It is probably written into the text of the agreement that we don't do that. However the question is, can we actually afford to borrow at those rates without defaulting at some future point? If that is the case, then getting future funds from the IMF is irrelevant because we should not be making avail of them in the first place.

th3 s1aught3r

This has just been one massive exercise to save the vested interests across the financial world. If our banks collapsed it would have really hurt the world banks so we were forced into this by the EU. Now the Irish people will pay for that for years to come

Scofflaw

SkepticOne wrote: »

Not sure that is relevant. Regardless of the level of regulation, banks in Ireland were at the time of lending private companies and as such if you lend to private companies, you do so at your own risk. This I think is what a lot of people forget. The regulators also let down the country, but they weren't there for the protection of investors in the banks.

Not really - they are in fact there partly for the protection of investors. One can argue that they protect investors in order to provide a better climate for lending to a nation's banks, but they do have that responsibility either way.

cordially,
Scofflaw

SkepticOne

Scofflaw wrote: »

Not really - they are in fact there partly for the protection of investors. One can argue that they protect investors in order to provide a better climate for lending to a nation's banks, but they do have that responsibility either way.

cordially,
Scofflaw

I believe the primary purpose of regulation is to protect the consumer. There may be a side-effect that investors are also given some measure of protection but I don't think that gives them some claim on the state. I stand to be corrected on this but I think the bulk of the liability is with the bank itself.

Even the consumer only has limited claim on the state in the regulated market. If the banks failed prior to the guarantee being in place the consumer would only have been compensated up to a certain point (I think it was 22K initially and this was put up to 100k). They had no right to more than that.

Ireland is a country that regulates up to a certain standard. This standard may be lacking but it is up to investors to take this into account. That is the risk they take.

nesf

SkepticOne wrote: »

I believe the primary purpose of regulation is to protect the consumer. There may be a side-effect that investors are also given some measure of protection but I don't think that gives them some claim on the state. I stand to be corrected on this but I think the bulk of the liability is with the bank itself.

Since we effectively own the banks the liability becomes our problem to a large extent. Potentially we can burn senior debt holders when the guarantee lapses but that is the nuclear option and could seriously effect Ireland's ability to borrow money on the bond markets in the future.

SkepticOne

nesf wrote: »

Since we effectively own the banks the liability becomes our problem to a large extent. Potentially we can burn senior debt holders when the guarantee lapses but that is the nuclear option and could seriously effect Ireland's ability to borrow money on the bond markets in the future.

More than defaulting on sovereign debt? Personally I think that if we're going to default on some of our debt, it is better to separate out bank debt and default on that, making clear that this is what we're doing and the principle that is being employed. After all, one of the reasons we're being punished by the bond markets is that we took on all this bank debt in the first place. This is why no matter what sort of austerity package we tried to impose on ourselves, the bond market remained unimpressed.

nesf

SkepticOne wrote: »

More than defaulting on sovereign debt? Personally I think that if we're going to default on some of our debt, it is better to separate out bank debt and default on that, making clear that this is what we're doing and the principle that is being employed. After all, one of the reasons we're being punished by the bond markets is that we took on all this bank debt in the first place. This is why no matter what sort of austerity package we tried to impose on ourselves, the bond market remained unimpressed.

Eh, a lot of the bond market worries came from broader concerns about the Eurozone not just what was going on in here and Angela Merkel's comments about burning bondholders didn't go down too well either.


The bank debt is a stone ring around our neck to be sure. I'm not entirely convinced that we need to default on it but it would definitely make this country's existence a lot easier if we could discount it without taking too much of a hit on the reputation front. The thing is if we get the banks back into shape we can sell them back to the market. So it's not like we won't see any return from fixing them up (though I doubt we'll cover our costs).

SkepticOne

nesf wrote: »

Eh, a lot of the bond market worries came from broader concerns about the Eurozone not just what was going on in here and Angela Merkel's comments about burning bondholders didn't go down too well either.

But those concerns about the Eurozone arise out of debt concerns in countries like Ireland and banking debts we've taken on ourselves. Our bond rate had already risen to unsustainable levels even before Angela Merkel's remarks though she may have brought things to a head.

The bank debt is a stone ring around our neck to be sure. I'm not entirely convinced that we need to default on it but it would definitely make this country's existence a lot easier if we could discount it without taking too much of a hit on the reputation front. The thing is if we get the banks back into shape we can sell them back to the market. So it's not like we won't see any return from fixing them up (though I doubt we'll cover our costs.

Yes after pumping billions into the banks we may be able to sell them but I'm sure the markets have already taken into account the fact that most of the money won't be recovered in any sale.

nesf

SkepticOne wrote: »

But those concerns about the Eurozone arise out of debt concerns in countries like Ireland and banking debts we've taken on ourselves. Our bond rate had already risen to unsustainable levels even before Angela Merkel's remarks though she may have brought things to a head.

Her remarks added 1.5% or more I think off the top of my head. They started a massive Eurozone wide upsurge in bond rates.

SkepticOne wrote: »

Yes after pumping billions into the banks we may be able to sell them but I'm sure the markets have already taken into account the fact that most of the money won't be recovered in any sale.

You'd be surprised by what they don't take account of. It's a big unknown what kind of return we'll get on selling the banks so it won't figure hugely in our bond rate. We still don't even know the details of how the banking sector will be restructured etc.

RDM_83 again

This is possibly a very stupid suggestion

But wouldn't it be possible to burn the senior bondholders if the guarantee was removed from anglo-irish causing a run, the senior bondholders were would be first in line as "per the rules"

What level of deposits are in anglo-irish and would removing the value of the deposits significantly affect the Irish economy and tax take comparative to the costs of what is proposed at the minute.

I'm suggesting this as Anglo-Irish was not traditionally a bank for the "ordinary" person, and though extremely inequitable there some extremely inequitable things coming anyway and some of those could impact the tax take potentially more significantly (trying to say that somebody on minimum wage etc tends to put all their money directly back into the economy comparative to the loss of DIRT)

nesf

RDM_83 again wrote: »

This is possibly a very stupid suggestion

But wouldn't it be possible to burn the senior bondholders if the guarantee was removed from anglo-irish causing a run, the senior bondholders were would be first in line as "per the rules"

What level of deposits are in anglo-irish and would removing the value of the deposits significantly affect the Irish economy and tax take comparative to the costs of what is proposed at the minute.

I'm suggesting this as Anglo-Irish was not traditionally a bank for the "ordinary" person, and though extremely inequitable there some extremely inequitable things coming anyway and some of those could impact the tax take potentially more significantly (trying to say that somebody on minimum wage etc tends to put all their money directly back into the economy comparative to the loss of DIRT)

Think of the consequences. No sane person would buy a bond from a Government controlled Irish bank again (i.e. almost every one of our banks) meaning our banks would have serious difficulties selling bonds to raise capital putting even more pressure on the State to provide capital support for the banks.

SkepticOne

nesf wrote: »

Her remarks added 1.5% or more I think off the top of my head. They started a massive Eurozone wide upsurge in bond rates.

But we had already withdrawn from the bond market at that stage. Yields had already started their relentless upward march. If it wasn't Merkel then it would have been something else.

You'd be surprised by what they don't take account of. It's a big unknown what kind of return we'll get on selling the banks so it won't figure hugely in our bond rate. We still don't even know the details of how the banking sector will be restructured etc.

Perhaps I am a bit surprised that it has taken this long before happening now but I'm not surprised at the fact that the crisis itself is happening.

I think you will agree that if you put Merkel aside what has happened is that the bank guarantee has finally caught up with Ireland, that where the bond markets did not previously fully account for the banking debts Ireland has taken on, now they do. It is no longer possible to hide the banking problems through spin and obscurantism. What is needed is actual figures. Therefore I disagree with you that uncertainty over what sort of a return we'll get on selling the banks will affect the bond yields. I think this uncertainty will affect them and negatively.

nesf

SkepticOne wrote: »

I think you will agree that if you put Merkel aside what has happened is that the bank guarantee has finally caught up with Ireland, that where the bond markets did not previously fully account for the banking debts Ireland has taken on, now they do. It is no longer possible to hide the banking problems through spin and obscurantism.

The issue is more that at the start of the Guarantee few reasonably argued that the debt would be so large. Prevailing expert opinion was that Anglo was ****ed but AIB/BoI were in decent shape. This turned out to be false, but again only in dribs and drabs did we (and the world) find out how deep the hole was. That was why it took so long for the bond market to come to a head and our interest rate to spike so high. The bank Guarantee hasn't so much caught up with Ireland as the reality of the losses incurred by the banks has come to light. Given today's knowledge on bank debt do you think the Guarantee would have been given?

Bob_Latchford

SkepticOne wrote: »

However I think what needs to be looked into is whether or not we should go further and repudiate some of the bank debt especially debt issued before the guarantee was in place since that money was lent in the full knowledge that if the investment went bad only a portion would be paid back.

How easy would it to repudiate Ango debt from before the guareentee? Its an stain over everything. Not bothered about how much its worth. Just want it wiped as political statement. Depositors can be sold.

ie I would vote in the election if the party planned to repudiate Anglo debt