Who Predicted This? Who Do We Blame?

Slick50

OP, the real problem seems to be your disslike of some pundits in the media. The reason this has become such a long drawn out thread is you presented a question, while looking for the answer to something completely different.

later10 wrote:

After 10 pages, I think (if anyone has been so bored as to have actually read the whole thing as I myself have just done, unfortunately) the point has become clear.
While many people have predicted a property bust, and there were genuine concerns about private and commericial debt, there were, actually, no publicly articulated predictions of the full scale debt meltdown and the banking crisis as they have emerged....

The excuse is usually given that if the Financial Regulator wasn't reporting the irregularities (or indeed if he was turning a blind eye), and the banks were not disclosing, then how could anyone have known? In some ways, that excuse is quite a valid explanation.
But here is the issue - concern did exist. We have seen clear examples of 'concern' in this very thread. Economists and pundits and media analysts, and even those in the central Bank did scratch their heads, but they also very much bit their lips. They expressed concern but never really followed it through. Concern, whenever it was even remotely expressed, was usually accompanied by an apologist retraction (e.g. Central Bank) or an immediate follow up with a nullifying opinion contradicting any serious risk: the line was that while there were definite risks and dangers, the banks were adequately cushioned to sustain the levels of indebtedness. Nobody seemed to contradict that, or question it.

So, while we have been let down by the regulatory mechanisms designed to protect us, we have also been let down by the guys that many of you see on your TV screens and read with your coffee, who appear to claim to know exactly what happened, and how it happened, and usually what is about to happen. By and large, people take their word for it.

One point you seem to have overlooked is that those running the banks were lying about their balances. Who was in the best position to delve deeper into this.? How was anybody outside of these institutions supposed to know what was really going on.? There was wreckless lending (at best) going on, and the books were being cooked to cover it up. This is why the banks became insolvent, and when they couldn't borrow any more money to lend to people, the property market collapsed. This is the reason the banks are bankrupt, under "normal" circumstances they wouldn't have been so exposed.
The man at the top was Bertie, and it was his duty to see that the economy was run in a proper and sustainable manner.

later12

Slick50 wrote: »

One point you seem to have overlooked is that those running the banks were lying about their balances. Who was in the best position to delve deeper into this.? How was anybody outside of these institutions supposed to know what was really going on.?

This has been covered indepth in the last 10 pages, I'm not sure if you even read any of them, but I also covered it in the post you are quoting, so it was not ''overlooked'' as you suggest. The rest of the post is quite off topic but has also been rehashed and rehashed over the last ten pages.

later12

swampgas wrote: »

Fair point.

On the other hand commentators/analysts/pundits who are industry insiders can be captured in similar ways to a regulator.

I would suspect that an insider is very unlikely to make Morgan Kelly style pronouncements of impending crisis if it might upset other industry insiders. He might find it hard to find anyone to play golf with afterwards.

Indeed, I'm simply saying that academic economists aren't in the best position to understand how banks operate without significant experience or directorships within such institutions. Banks haven't been run on textbooks since the 20th century.

Having an academic economist telling a Finance Director or a Credit Committee how to run their bank is a bit like having your best friend run your life because she sat a counselling diploma in 1991. It helps, but the rules, insofar as there are rules, are not always applicable.

Sand

@Later19

Indeed, I'm simply saying that academic economists aren't in the best position to understand how banks operate without significant experience or directorships within such institutions. Banks haven't been run on textbooks since the 20th century.

Perhaps thats the root of the problem - banks who thought they could throw out the textbook?

In the Irish case in particular, the root cause of the Irish banks issues is very simple and basic banking done awfully. Theres nothing particularly complex about borrowing a hell of a lot of money and lending it terribly to try compete for market share. The textbook says its stupid, and the textbook is proven right once more.

later12

Sand wrote: »

In the Irish case in particular, the root cause of the Irish banks issues is very simple and basic banking done awfully.

While I am the one who brought up the issue of banks and academics diverging widely on best practice, the above is in reality only partially true. While i'm not saying that Irish banks did everything by the book, one ought to remember that both in banking and in academia property was considered an acceptable risk asset for many classes of investment. Finance texbooks chirpily suggest that The Prudent Man ties 60% of his loans to property. Ironically, I would consider Anglo Irish to have been the most by-the-book domestic bank operating in the Irish market both in that respect and also in many others.

Theres nothing particularly complex about borrowing a hell of a lot of money and lending it terribly to try compete for market share. The textbook says its stupid, and the textbook is proven right once more.

Yes, competitive lending into one asset category during a bubble is most certainly poor lending practice, and yes that is certainly an open and shut case, about which one probably shouldn't even have to open a texbook, and if he must, it is probably all the more concerning.

My point is that academics and pundits weren't harking on about that over the past 10 years. They started raising the alarm when the smoke was already up their nose and the flames were biting. If they weren't alarmed in time it may be because of one or a combination of two reasons:

1. Their aloofness from the banking industry, while ensuring an independence, meant that they were out of touch with the market and lending practice and the banks' own abilities to cushion or pass on or insure against their losses.

2. They were generally clueless and could see that competitive lending was happening in a hot market but failed to consider that inevitably doomed practice beyond its most glaringly obvious conclusion, a property bubble.

In either of the above cases, it does beg the question that if this were the case then, well, what has changed? Why should they be any the wiser by now?

Slick50

later10 wrote: »

This has been covered indepth in the last 10 pages, I'm not sure if you even read any of them, but I also covered it in the post you are quoting, so it was not ''overlooked'' as you suggest. The rest of the post is quite off topic but has also been rehashed and rehashed over the last ten pages.

FYI. I have read them! And have noticed how you have gone from looking for names of people who predicted the mess in it's current form, to looking for better examples, to accepting that warnings and concerns were voiced, and then on to condemning the media and analysts for not fully forecasting the catastrophy in it's entirety.

Yet for some reason you want us to accept that Bertie should be taken at his word that no one was telling him of the pending banking crisis.

As for the property developers, I feel by and large they were grabbing as big a slice of the action as they could. As they were entitled to do. The reason they are being villified is that despite the vast profits they made, when the sh*t hit the fan they all ran for cover, stashed as much as they could, transfered as much as they dared into the spouses name, and then told us they were broke and couldn't pay anyone. Has one of them honoured their personal guarantees?

later12

Slick50 wrote: »

FYI. I have read them! And have noticed how you have gone from looking for names of people who predicted the mess in it's current form, to looking for better examples, to accepting that warnings and concerns were voiced, and then on to condemning the media and analysts for not fully forecasting the catastrophy in it's entirety.

Don't you see a link? This thread is about predictions, and how well or how badly the current crisis was predicted. Accepting that warnings were issued about property, and that vague and often reluctant or nullified warnings were issued about the banks, really has little to do with the thread. The point is that this sovereign and banking crisis was never predicted during the boom. that's a simple enough statement isn't it?

Yet for some reason you want us to accept that Bertie should be taken at his word that no one was telling him of the pending banking crisis.

I mentioned him at the start because it was topical, in case you haven't noticed, this isn't really a thread about him. Nobody on here is defending him as far as i have read. As per the thread title, the point is a question about prediction of the crisis.

The reason they are being villified is that despite the vast profits they made, when the sh*t hit the fan they all ran for cover, stashed as much as they could, transfered as much as they dared into the spouses name, and then told us they were broke and couldn't pay anyone. Has one of them honoured their personal guarantees?

That is one reason that they are being vilified, yes, although presumably you are referring to one recent television programme and the developers have actually been vilified all along, so presumably this has less to do with spouse agreements than something else.

Slick50

later10 wrote: »

While one might have foreseen a slowdown in property and construction, indeed one ought to have foreseen such a thing, who predicted that it would be so extreme, so rapid and as such would lead to bank meltdown in the way that it did?

later10 wrote: »

The point is that this sovereign and banking crisis was never predicted during the boom. that's a simple enough statement isn't it?

In every boom and bust, the banks take a hit, because they are the ones who finance the boom they are most exposed. So they should exercise prudence when lending (also when borrowing). The only people who know to what extent they are exposed are the directors. So as far as was possible with the given information, plenty of people warned of the dangers.

later10 wrote: »

That is one reason that they are being vilified, yes, although presumably you are referring to one recent television programme and the developers have actually been vilified all along, so presumably this has less to do with spouse agreements than something else.

I wasn't refering to any specific person, we have had more than one example of these practices recently. Another reason developers are being blamed, is they were seen as being responsible for driving the prices of property through the roof. But if the banks had kept to their lending criteria, property could not have inflated in the manner it did, because it would not have been possible to sell it, like now.

Sand

@Later10

While i'm not saying that Irish banks did everything by the book, one ought to remember that both in banking and in academia property was considered an acceptable risk asset for many classes of investment. Finance texbooks chirpily suggest that The Prudent Man ties 60% of his loans to property. Ironically, I would consider Anglo Irish to have been the most by-the-book domestic bank operating in the Irish market both in that respect and also in many others.

Not in a bubble flooded by cheap credit. The Irish banks did very simple things really, really, really badly - the relaxed their lending standards, until there was practically no lending standards and they threw their risk management completely out the window. They broke the cardinal rule - they got high on their own supply.

There was nothing clever or complex about their lending model - it was simply very stupid. Attempting to dress it up as being too complex for academics to see the genius of it reminds me of the Orwell quote: "there are some ideas so wrong that only a very intelligent person could believe in them"

Textbooks are hard won experience and rules of thumb accrued though bitter experience. Banks ought to be run with a hell of a lot of reference to textbooks.

My point is that academics and pundits weren't harking on about that over the past 10 years. They started raising the alarm when the smoke was already up their nose and the flames were biting. If they weren't alarmed in time it may be because of one or a combination of two reasons:

1. Their aloofness from the banking industry, while ensuring an independence, meant that they were out of touch with the market and lending practice and the banks' own abilities to cushion or pass on or insure against their losses.

2. They were generally clueless and could see that competitive lending was happening in a hot market but failed to consider that inevitably doomed practice beyond its most glaringly obvious conclusion, a property bubble.

In either of the above cases, it does beg the question that if this were the case then, well, what has changed? Why should they be any the wiser by now?

Or:

3. No-one asked academics what they thought because, "Shure what would academics know about how a modern bank is run"? Isnt that youre own point?

Or:

4. Academics were looking at academic economic research and presuming that the FR, CB and DoF were doing their job. Whilst banking policy has become the *major* issue over the past 3 or 4 years, academic economics were probably looking at other questions and issues in economics. Afterall - sound basic banking economics and principles have already been explored and laid out. The textbook has been written.

The banks simply threw it out because they were too clever for boring textbooks. Nothing new is being discovered here. Its just old principles being re-applied.

later12

Sand wrote: »

The Irish banks did very simple things really, really, really badly - the relaxed their lending standards, until there was practically no lending standards and they threw their risk management completely out the window.

I know this is popular opinion and so am reluctant to reject the mantra about poor lending standards without a barrage of calls of "where's my nama?" amongst other recession slogans, from posters taking a passing interest but in fact, lending standards were not always particularly relaxed.

Take the worst offender in the minds of popular opinion. Anglo Irish. Most people who support this opinion would probably choke on their turnip if they heard someone suggest that Anglo was a tough lender, but actually it's true. The bank said No a lot more than they said Yes, they were well known for being sticklers for personal guarantees as well as tying their loans to security (as per the textbook), and they were, by those standards, prudent. Lending teams in Anglo lent like they were dipping in to their own savings accounts, that was the culture within the bank, managers were under a lot of pressure to account for their decisions and were up in front of credit committees who picked holes in every decision as a matter of course, and in line with sound lending policy. It was not a reckless bank in terms of standards. Anglo were successful because they were big, they were efficient, they were fast, and they were in business and property. And although they might have diversified their lending, they were at the end of the day a business and property bank and there's nothing wrong with that. But their money was not particularly cheap and they certainly did know how to turn down a loan.

The problem was not lending standards, the problem was a competitive market and a lack of regulatory standards to control what the banks were doing as a collective group of entities. Anglo alone would not have brought down the economy. Neither would BOI on its own nor AIB on its own, and none were responsible for one another.

There was also an international element.

3. No-one asked academics what they thought because, "Shure what would academics know about how a modern bank is run"? Isnt that youre own point?

There were many academics contributing articles to popular print media, and while i would tend to make that point, indeed, most media outlets did not. Academics working as economic pundits is not a new phenomenon in the irish context.

Sand

@Later10

Take the worst offender in the minds of popular opinion. Anglo Irish. Most people who support this opinion would probably choke on their turnip if they heard someone suggest that Anglo was a tough lender, but actually it's true. The bank said No a lot more than they said Yes, they were well known for being sticklers for personal guarantees as well as tying their loans to security (as per the textbook), and they were, by those standards, prudent. Lending teams in Anglo lent like they were dipping in to their own savings accounts, that was the culture within the bank, managers were under a lot of pressure to account for their decisions and were up in front of credit committees who picked holes in every decision as a matter of course, and in line with sound lending policy. It was not a reckless bank in terms of standards. And although they might have diversified their lending, they were at the end of the day a business and property bank and there's nothing wrong with that.

Youre talking about a bank whose main figure, Seanie Fitzpatrick, was proud that people could ring up Anglo and get a loan of any amount approved on the same day. That Anglo would cut corners to get the deal closed before the competition.

Youre talking about personal guarantees as if they meant something.

In fact, youre talking about a bank whose culture was such that Seanie juggled personal loans on and off the balance sheet to fool auditors and was assisted in doing so.

Youre talking about a bank that fixed its books by sham deals to swap loans and deposits to present a less risky loan to value figure.

Youre talking about a bank that lent money to investors to buy its own shares in a scam.

Basically youre talking nonsense.

EDIT:

And now for some Anglo related quotes:

FitzPatrick was ambitious, and Anglo began to aggressively offer loans for property development. "We'd have a lovely breakfast at 7 in the morning at the Shelbourne, and I'd say to my lender, 'I need some money,' " Simon recalls, "and he'd give me 10 million quid. Just like that. I could have gamed the whole system if I wanted. There was no amount of money I wouldn't have been lent."

FitzPatrick was an early adopter, aggressively loosening loan restrictions at Anglo Irish. Other banks implemented the same strategy to keep up. Financier Niall McFadden told the Sunday Business Post that one bank had accepted a personal guarantee for a €6.3 million loan without ever bothering to meet with him.

Slick50

later10 wrote: »

I know this is popular opinion and so am reluctant to reject the mantra about poor lending standards without a barrage of calls of "where's my nama?" amongst other recession slogans, from posters taking a passing interest but in fact, lending standards were not always particularly relaxed....

How about "We Are Where We Are", or "no one is to blame cause we're all to blame", "This is not the time for recriminations or the blame game". There had to be some ulterior motive for a thread like this, going forward.

later12

Sand wrote: »

Youre talking about a bank whose main figure, Seanie Fitzpatrick, was proud that people could ring up Anglo and get a loan of any amount approved on the same day. That Anglo would cut corners to get the deal closed before the competition.

You seem to be confusing corner cutting and fast decisions. Being an efficient or fast lender does not mean that one is therefore a reckless lender.

The difference between Anglo and AIB was not the yes:no ratio or the lending rate, it was, significantly the speed of reply, thereby minimising the time that an investor needed to spend in accumulating or establishing an investment package. That didn't mean that corners were no cut or that personal guarantees were not entered into or that the borrower was not required to be just as open about his exposures - all that still applied. But Anglo, being a small and concentrated bank, as well as being an efficient bank, could respond quicker to lending requests. that is very significant in the minds of investors, and there is nothing at all wrong with it. The problem with other banks, and AIB in particular, would be that it might take three days to hear back on an investment loan and another couple of working days to actually draw it down. By that time the deal may no longer be on the table - so you can see the necessity for operating quickly and the attraction that was there from a deal making position.

Youre talking about personal guarantees as if they meant something.

They do. Anglo's personal guarantees still stand - they may be worth significantly less than they were because of asset depreciation, but if it weren't for personal guarantees many developers would still be very asset wealthy individuals and the outlook for an already disastrous NAMA would be a whole lot worse, notwithstanding the spousal agreements which will probably be resolved.

In fact, youre talking about a bank whose culture was such that Seanie juggled personal loans on and off the balance sheet to fool auditors and was assisted in doing so.

Yes, I am. That has nothing to do with lending standards, that's an issue about dogwalking your loans which is another issue entirely and I'm sure that nobody is seeking to defend it.

I'm talking about lending requirements, the fact is that they were not relaxed. Lendees were still required to provide personal guarantees as well as cashflow as well as tying their borrowings to all of the regular securities - nobody is suggesting that this policy ever changed - lending standards are not the issue, as you suggest, although finance policy itself was faulty in the banking system overall.

Y

Youre talking about a bank that fixed its books by sham deals to swap loans and deposits to present a less risky loan to value figure.

Yeah, but again this is not what I was talking about in the post you are responding to as I've already said.

This is the problem that I have already alluded to: someone comes out and suggests 'well maybe Anglo were actually lending in a responsible fashion' and suddenly on comes the recession slogans about 'Seánie' and the chairman's loans and warehousing - that really has nothing to do with what I have just been saying. It's just more populist tripe that comes up anytime someone defends one aspect of lending policy or even remotely suggests that perhaps bankers and developers aren't always the demons that they are popularly cajoled as being.

Youre talking about a bank that lent money to investors to buy its own shares in a scam.

Hang on, lets take this point to its logical conclusion... so why don't you explain what exactly is wrong with that?

jmayo

later10 wrote: »

This is the problem that I have already alluded to: someone comes out and suggests 'well maybe Anglo were actually lending in a responsible fashion' and suddenly on comes the recession slogans about 'Seánie' and the chairman's loans and warehousing - that really has nothing to do with what I have just been saying. It's just more populist tripe that comes up anytime someone defends one aspect of lending policy or even remotely suggests that perhaps bankers and developers aren't always the demons that they are popularly cajoled as being.

Ehhh Anglo were not lending responsibilty, because guess what if they were they would firstly not have had the vast majority of their loans to one particular industry which was experiencing a bubble and secondly they would have done proper due diligence on the loans.
It is all well and good lauding their fast decision making, but that ain't good when no proper investigation of the risks are carried out and a decision is based on a nod and a wink to an old buddy.
It appeared fitzpatrick spent more time picking out his suits than he did in giving out loans to the mcnamaras and kellys. :rolleyes:

later10 wrote: »

Youre talking about a bank that lent money to investors to buy its own shares in a scam.

Hang on, lets take this point to its logical conclusion... so why don't you explain what exactly is wrong with that?

What is wrong with a bank lending money to some very bank connected customers/clients to buy the bank's own shares and thus keep their value up ?
Are you really asking this question in all seriousness ? :eek:

Well in normal circumstances (normal company e.g Guinness and Ernest Saunders and in normal corporate governed countries e.g USA) that would be considered a form of insider trading or an example of the company dealing in it's own shares on the quiet.
The company itself is seen as propping up it's own share price and that is misleading the market.

What is even worse from a business perspective is the bank allowed a big chunk of the loans to be securitised by the actual shares themselves at the very time the same share price was in freefall.
Not very smart business I would maintain.

Anyway God loves a trier and I guess you are trying your hardest to find excuses for the inept incompetence of ff and it leadersand now it appears the bankers, even if you have to look under every rock.
When are you going to face it ff and it's leaders together with the bankers have to take the major portion of the blame for this ?
It was their watch.

later12

jmayo wrote: »

Ehhh Anglo were not lending responsibilty, because guess what if they were they would firstly not have had the vast majority of their loans to one particular industry which was experiencing a bubble and secondly they would have done proper due diligence on the loans.

Who says they didn't do due diligence on lending facilities? That would actually be very much in contradiction to Anglo's image within the banking industry. Secondly they were a property investment bank, primarily, there is nothing wrong with that. It is arguable that what really caused the cascade was non property investment banks trying to get in on what Anglo had been doing successfully for years.

It is all well and good lauding their fast decision making, but that ain't good when no proper investigation of the risks are carried out and a decision is based on a nod and a wink to an old buddy.

I'd be willing to bet you actually have no idea of how lending was extended in Anglo, do you? It's popular to suggest that there were lax standards, therefore lets everyone jump on that bandwagon, regardless of how Anglo was perceived in reality.

It appeared fitzpatrick spent more time picking out his suits than he did in giving out loans to the mcnamaras and kellys. :rolleyes:

I don't even know what that's in reference to but it's totally irrelevant to this whole thread if not indeed to life itself. Are you suggesting the man owns too many suits? Come on.

What is wrong with a bank lending money to some very bank connected customers/clients to buy the bank's own shares and thus keep their value up ?
Are you really asking this question in all seriousness ? :eek:

Yes, I am

Well in normal circumstances (normal company e.g Guinness and Ernest Saunders and in normal corporate governed countries e.g USA) that would be considered a form of insider trading or an example of the company dealing in it's own shares on the quiet.
The company itself is seen as propping up it's own share price and that is misleading the market.

A bank props up its own share price by extending credit to investors who trade in assets whose appreciation is key to company success every day of the week in every country in the world. So lending to investors who actively invest in you directly isn't that much of a swing. Anglo also paid bonuses through share options and sold them at discount rates to employees, surely that's an artificial prop as well, but it's all entirely legal. IWhether you agree or disagree with these decisions, it really isn't what caused all of this mess. Anglo made many bad decisions, and I don't really see anyone here defending those decisions.

Slick50

later10 wrote: »

Who says they didn't do due diligence on lending facilities? That would actually be very much in contradiction to Anglo's image within the banking industry. Secondly they were a property investment bank, primarily, there is nothing wrong with that.

I think NAMA have found to their dismay that due diligence wasn't applied, by the fact that so many assets they accepted as collateral had already been used as collateral against numerous other loans.

While they may well have applied the usual checks to the average client, there was an elite who they lent to on a completely different basis. And it is these loans that are the problem.

later10 wrote: »

It is arguable that what really caused the cascade was non property investment banks trying to get in on what Anglo had been doing successfully for years.

What really caused the cascade was when the international banks got the jitters and the funding dried up, because they couldn't even trust each other at that stage.

later10 wrote: »

It's popular to suggest that there were lax standards, therefore lets everyone jump on that bandwagon, regardless of how Anglo was perceived in reality.

The reality is they are insolvent. Why/how is that?

later10 wrote: »

I don't even know what that's in reference to but it's totally irrelevant to this whole thread if not indeed to life itself. Are you suggesting the man owns too many suits? Come on.

It suggests to me, that Seanie payed more attention to the clothes he was buying than he did to the small matter of lending a couple of hundred million € to someone.

later12

Slick50 wrote: »

I think NAMA have found to their dismay that due diligence wasn't applied, by the fact that so many assets they accepted as collateral had already been used as collateral against numerous other loans.

While they may well have applied the usual checks to the average client, there was an elite who they lent to on a completely different basis

What are you basing that suggestion on? Most Anglo clients would be perceived as 'elite' (in popular terms) given that over the years its customer base was in business and property investment.

What NAMA have been handed are loans tied to depreciating assets which when recoursed will be found to no longer resemble the initial credit facility. That has nothing to do with lending standards actually, in fact it is because lending standards were not relaxed that Irish lenders did not really engage in the sub prime market and that there is such a high rate of recourse available.

The issues are finance policy and regulation. Not initial lending standards.

What really caused the cascade was when the international banks got the jitters and the funding dried up, because they couldn't even trust each other at that stage.

That's partially true, yes; although a crisis would have happened on a smaller scale in Ireland anyway, it just would have been more surmountable.

The reality is they are insolvent. Why/how is that?

The biggest problem is not what the banks were doing each by each, it was the collective behaviour... the main problem was regulatory enforcement.

Sand

@Later10

Who says they didn't do due diligence on lending facilities? That would actually be very much in contradiction to Anglo's image within the banking industry.

These guys:

FitzPatrick was ambitious, and Anglo began to aggressively offer loans for property development. "We'd have a lovely breakfast at 7 in the morning at the Shelbourne, and I'd say to my lender, 'I need some money,' " Simon recalls, "and he'd give me 10 million quid. Just like that. I could have gamed the whole system if I wanted. There was no amount of money I wouldn't have been lent."

FitzPatrick was an early adopter, aggressively loosening loan restrictions at Anglo Irish. Other banks implemented the same strategy to keep up. Financier Niall McFadden told the Sunday Business Post that one bank had accepted a personal guarantee for a €6.3 million loan without ever bothering to meet with him.

I'd be willing to bet you actually have no idea of how lending was extended in Anglo, do you? It's popular to suggest that there were lax standards, therefore lets everyone jump on that bandwagon, regardless of how Anglo was perceived in reality.

Id like to see some evidence, any evidence, that Anglo was a stoic, reserved and cautious lender with a safety first attitude. You simply state that Anglo had a great risk control culture when its total nonsense. No evidence is presented for this.

Bottom line is, if Anglo Irish was run as well as you claim it was then it would not be a black hole on the balance sheet of the Irish state.

Yes, I am

Ah, I see - if you consider that to be a good example of Anglo-Irish's strong lending practises then its shows your claims that Anglo-Irish was seen as a tough lender in their true context.

So lending to investors who actively invest in you directly isn't that much of a swing.

Its reckless mismanagement of the funds extended to you by your depositors and creditors. Do you think any of their depositors or creditors who trusted Anglo with their funds would agree that Anglo was acting in their best interests when they pissed away their money to prop up their own share price?

It was at best recklessly stupid, indicative of the culture within Anglo. And perhaps, *even* under Irish law where white collar crime is unknown, criminal.

You started this thread claiming not to be an apologist for FF. If you say so.

Slick50

later10 wrote: »

What are you basing that suggestion on? Most Anglo clients would be perceived as 'elite' (in popular terms) given that over the years its customer base was in business and property investment.

One example would be the interview given by Sean Kelly in the link posted by Sand. Another would be the complete abscence of paper work for the €1million loan for Charlie McReevy's K-Club pad.

later10 wrote: »

What NAMA have been handed are loans tied to depreciating assets which when recoursed will be found to no longer resemble the initial credit facility. That has nothing to do with lending standards actually, in fact it is because lending standards were not relaxed that Irish lenders did not really engage in the sub prime market and that there is such a high rate of recourse available.

Yes it has, because after the depreciation is factored in, what is left has to be divided amongst whoever has a vested interest registered against the assets.

later10 wrote: »

That's partially true, yes; although a crisis would have happened on a smaller scale in Ireland anyway, it just would have been more surmountable.

I don't agree, if things had come to light much later we would be completely FUBAR, if not already.

later10 wrote: »

The biggest problem is not what the banks were doing each by each, it was the collective behaviour... the main problem was regulatory enforcement.

Isn't that where the government comes in.?

later12

Sand wrote: »

Id like to see some evidence, any evidence, that Anglo was a stoic, reserved and cautious lender with a safety first attitude. You simply state that Anglo had a great risk control culture when its total nonsense. No evidence is presented for this.

There can be no written public record of individual lending facilities, i am simply telling you that the opinion within Irish banking would have been that anglo were neither particularly cheap nor particularly relaxed, but that they knew their business clients, that managers were strict on the traditional guarantee and cashflow requirements (nobody in their criticism of Anglo honestly criticises that as far as i am aware), and that they were fast because they were basically located on one site in Ireland with a clear and dedicated market and generally they were well informed of their small client base and their personal and business exposures. Is that publicly acknowledged by the Central Bank or another financial body? Possibly, I don't know. I would suggest you ask somebody who is genuinely familiar with Irish finance and banking, this is honestly not a controversial point.

Anglo would have made bad policy decisions from the point of view of finance, absolutely, but allegations on here that it had poor lending standards around credit committee level and below are quite honestly pulled out of thin air as far as I can see. I don't know why people are suggesting that.

B

Bottom line is, if Anglo Irish was run as well as you claim it was then it would not be a black hole on the balance sheet of the Irish state.

I'm not claiming that it was a well run bank, I have said again and again that it made some terrible decisions. But suggesting that lending standards were part of its downfall just gives away a clear removal from the reality of how the industry was.

I don't give a f*ck if someone drives a bus for a living or if they run a treasury, but if you're going to try to pontificate on what happened, as many posters on here do, it should at least be done based on the truth and not on flawed suppositions and guesswork. The reality is that there was a lot of money in Ireland over the past 12 years, and as property has long been considered (in textbooks as well as in the industry) as an acceptable risk asset both in terms of security and investment, many many people genuinely did qualify for loans, some very significant.

Do you think any of their depositors or creditors who trusted Anglo with their funds would agree that Anglo was acting in their best interests when they pissed away their money to prop up their own share price?

To be honest, they were generally benefitting from this practice as well. I wouldn't give the practice much credit, but I don't believe it's illegal and I doubt that too many of the people you mention would have been putting their hand up if they did actually know about it.

You started this thread claiming not to be an apologist for FF. If you say so.

If anybody I have sympathy for property developers and bankers who, while often foolish, weren't the ones who caused all of this mess in that they were not the people in a position to transfer liabilities to the Irish state. The ridiculous charade surrounding all of this is that bankers and developers will continue to be lambasted for a sovereign debt that they did not extend to the public, whereas many of the politicians who did extend that debt to the state will undoubtedly be returned to political office later this Spring. I have no sympathy at all for anyone in the senior ranks of the ff party who has stood by the government's decisions over the past two years.

Sand

@Later10

There can be no written public record of individual lending facilities, i am simply telling you that the opinion within Irish banking

if you're going to try to pontificate on what happened, as many posters on here do, it should at least be done based on the truth and not on flawed suppositions and guesswork

micro_dot

later10 wrote: »

The ridiculous charade surrounding all of this is that bankers and developers will continue to be lambasted for a sovereign debt that they did not extend to the public, whereas many of the politicians who did extend that debt to the state will undoubtedly be returned to political office later this Spring.

Does that come back to your quote earlier from Fitzpatrick saying you have to play golf to know the real news? The real decisions?
It's all charades. Was Anglo really a small bank, or are we just a smaller country, that is collapsing under the weight of these bankers and developers? But then, maybe I wasn't there, man, on the golf course.

later12

Sand wrote: »

@Later10

But what I am saying in that thread is exactly what anybody who is familiar with Irish banking will tell you; there is nothing controversial in pointing out that Anglo were reasonably fussy lenders. Like I said you seem to be basing your opinion that they were cutting corners on the premise that they were fast lenders with minimum paperwork in extending credit: but largely that point is down to the fact that they were essentially based on one site in Ireland, and were intimately familiar with their client base, their investments, and their exposures.

If anything, it ought to be up to you to back up why you are suggesting the opposite in terms of lending standards. Because I can understand faulting their finance policy for its lack of diversity (although they were a property investment bank by and large), but on what grounds are you saying that their lending requirements in particular had been relaxed? That would therefore seem to suggest that there has been some sort of problem with recourse on criticised on non performing loans... is that what you are saying? Why?

That's guesswork as far as I can see.

jmayo

I think some other posters have already answered most of your remarks on my last post, but I need to comment on just a few points.

later10 wrote: »

Who says they didn't do due diligence on lending facilities? That would actually be very much in contradiction to Anglo's image within the banking industry. Secondly they were a property investment bank, primarily, there is nothing wrong with that. It is arguable that what really caused the cascade was non property investment banks trying to get in on what Anglo had been doing
successfully for years.

So now they were not just an investment bank, they were just a property investment bank. Smart move during property bubble that ultimately will bust. :rolleyes:
Not very systemic then I would also claim.

later10 wrote: »

I'd be willing to bet you actually have no idea of how lending was extended in Anglo, do you? It's popular to suggest that there were lax standards, therefore lets everyone jump on that bandwagon, regardless of how Anglo was perceived in reality.

You appear to know a lot about their lending policies.
Were you a beneficary either as borrower or lender ?

later10 wrote: »

I don't even know what that's in reference to but it's totally irrelevant to this whole thread if not indeed to life itself. Are you suggesting the man owns too many suits? Come on.

No I am suggesting that he, as was similarly claimed about some proeprty investors, spent longer deciding on small everyday things than on big long term decisions.

later10 wrote: »

Yes, I am

A bank props up its own share price by extending credit to investors who trade in assets whose appreciation is key to company success every day of the week in every country in the world. So lending to investors who actively invest in you directly isn't that much of a swing. Anglo also paid bonuses through share options and sold them at discount rates to employees, surely that's an artificial prop as well, but it's all entirely legal. IWhether you agree or disagree with these decisions, it really isn't what caused all of this mess.

You must be an certain type of Irish banker or Irish investment house person if you seriously think there is nothing wrong with misleading markets, artifically propping up ones own share prices, insider trading and the likes.

later10 wrote: »

Anglo made many bad decisions, and I don't really see anyone here defending those decisions.

BTW I would counter that you are indeed defending Anglo's bad decisions.
Perhaps we could ask the other posters on here for their opinion on this.

later12

jmayo wrote: »

So now they were not just an investment bank, they were just a property investment bank. Smart move during property bubble that ultimately will bust. :rolleyes:

Anglo were a property investment bank long before the Celtic Tiger. If the credit crunch had not happened, they might have actually survived the crash.

You appear to know a lot about their lending policies.
Were you a beneficary either as borrower or lender ?

Neither thankfully. This is something anyone in the banking industry familiar with the practices between the main banks will tell you. The problem was not lending standards because many people, based on the traditional measurements of cashflow, growth projection and asset security genuinely did qualify for loans and loans of great significance.

No I am suggesting that he, as was similarly claimed about some proeprty investors, spent longer deciding on small everyday things than on big long term decisions.

That goes back to his time as CEO though, and by and large it is the loan book from his time as chairman that has caused the problem. As chairman he didn't make lending decisions at all, though he can be faulted for other failures, you are correct.

You must be an certain type of Irish banker or Irish investment house person if you seriously think there is nothing wrong with misleading markets, artifically propping up ones own share prices, insider trading and the likes.

It's a very basic question, though. What is so wrong about lending to a borrower who is going to invest in your own bank when you have personal guarantees on his assets and professional guarantees on his company?

jmayo

later10 wrote: »

Anglo were a property investment bank long before the Celtic Tiger. If the credit crunch had not happened, they might have actually survived the crash.

First correction the true Celtic Tiger was up until 2001, subsequent to that we had a gigantic bubble.

There is a big difference between making reasonably secure loans to a stable industry and making massive loans into a bubble industry.

Actually without the credit crunch they probably would not have survived since by late 2006, early 2007 the Irish property bubble was bursting.
Even if there was not a worldwide credit crunch, Anglo's loan book would have been in serious trouble as their borrowers would not have been able to repay their loans as they came due.
Added to that the international markets could see Anglo's exposure to the Irish and indeed global property bubbles and were deserting Anglo meaning both shareprice and bond rates would have been against Anglo.

later10 wrote: »

Neither thankfully. This is something anyone in the banking industry familiar with the practices between the main banks will tell you. The problem was not lending standards because many people, based on the traditional measurements of cashflow, growth projection and asset security genuinely did qualify for loans and loans of great significance.

Ahh so it was a good idea lending for the Irish Glass bottle site where believe it or not it appears no one did full check about the site.
It was a massive bubble and they just lend billions, often based on being paid on project completion and on personal guarantees from the primary individuals involved.
It was lunacy lending and you are defending it. :eek:

And you reckon there was not a problem with lending standards.
How come then the banks of many other countries did not lend in the same fashion ?

later10 wrote: »

That goes back to his time as CEO though, and by and large it is the loan book from his time as chairman that has caused the problem. As chairman he didn't make lending decisions at all, though he can be faulted for other failures, you are correct.

Again everyone knows david drumm got the CEO position in place of people like tiernan o'mahony because he would be more amenable to the old boss keeping his oar in.
Hell people thought it ill advised that the CEO moved onto the position of chairman and for good reason. :rolleyes:

later10 wrote: »

It's a very basic question, though. What is so wrong about lending to a borrower who is going to invest in your own bank when you have personal guarantees on his assets and professional guarantees on his company?

Ah FFS I just give up.
In any other industry and I believe in other jurisdictions it is INSIDER trading or engaging in share support schemes.
They were lending money to individuals to buy the company's shares in order to prevent share collapse and to bailout the quinns.
Worse still one could not even pretend they were loans for something else when they were partially secured on the shares to be purchased. :rolleyes:

Check out why Ernest saunders former CEO of Guinness went to jail for what was termed "attempting to fraudulently manipulate the share price of the Guinness company". :rolleyes:

Even leaving aside the legality of the transasctions, it was extermly bad business in that they secured part of the loans on the actual shares purchased just as the shares were on downward spiral. :rolleyes:

later12

jmayo wrote: »

First correction the true Celtic Tiger was up until 2001, subsequent to that we had a gigantic bubble.

Hmmm. What is this in relation to? I didn't say anything else. By the way, the economic blip we felt at the turn of the century was also down to a bubble, albeit one of lesser significance.

There is a big difference between making reasonably secure loans to a stable industry and making massive loans into a bubble industry.

I'm not sure if you've been reading: I said that while Anglo's finance policy can be faulted, that was a matter for the board of the bank. I am simply talking about lending standards. People are arguing that lending standards were low there in terms of credit issued, I am saying that this was not how their lending teams were perceived, perhaps people suggesting otherwise might expand on that point.

Actually without the credit crunch they probably would not have survived since by late 2006, early 2007 the Irish property bubble was bursting.
Even if there was not a worldwide credit crunch, Anglo's loan book would have been in serious trouble as their borrowers would not have been able to repay their loans as they came due.

If you remove the international context, personally i think Anglo would have survived. The Irish property bust would have been more surmountable in that the problem of liquidity would never have arisen to the extent that it did, and solvency would have been a slower burner. In any event, that's hypothesis.

Added to that the international markets could see Anglo's exposure to the Irish and indeed global property bubbles and were deserting Anglo meaning both shareprice and bond rates would have been against Anglo.

Anglo had significant overseas exposure, if you take out the international recession effect, that would have been a credit that Anglo had over other institutions. You also have to remember that the crash would probably not have been as immediate at home.

It was lunacy lending and you are defending it.

I am not defending it. I have made criticisms of Anglo throughout the thread.

http://www.boards.ie/vbulletin/showpost.php?p=70147462&postcount=145

It was an extreme, and highly dangerous, case of conflict of interest. It reminds me of the situation in Anglo Irish Bank up until recently whereby the guy responsible for risk management (Willie McAteer) was also the bank's Director of Finance.
In other words, there was a culture within the banking and regulatory industry whereby nobody seemed to see the harm in an executive acting both as coach and as referee, as poacher and gamekeeper.

http://www.boards.ie/vbulletin/showpost.php?p=70192410&postcount=171

Anglo would have made bad policy decisions from the point of view of finance, absolutely.

And you reckon there was not a problem with lending standards.
How come then the banks of many other countries did not lend in the same fashion ?

They did. They had a different lending market however. There are entire books written on lending practices and banks themselves churn out endless handbooks and guidelines on the matter. The teams and managers involved in lending, and credit committees themselves are not approaching the issue from starting point 0 or basing decisions on gut feelings alone - lending in banks is executed on the basis of cashflow and asset security before you even ask the borrower where he's putting the money. There are minimum and routine standards to extending credit that banks operate, but of course when popular opinion is with you it's very simple to ignore that without having to say why.

Again everyone knows david drumm got the CEO position in place of people like tiernan o'mahony because he would be more amenable to the old boss keeping his oar in.

Really? Who is everyone? I didn't know that, and I'm not sure how relevant it is to anything.

As for insider trading, ok if you disagree with what happened fine. Far from making poor business sense, I think it was actually the logical thing to do. The alternative was oblivion, and one must always try to avoid oblivion.

Sand

But what I am saying in that thread is exactly what anybody who is familiar with Irish banking will tell you;

Firstly, experience with Irish banking is not exactly something Id stick on my CV, given the success of Irish banks.

Secondly, even accepting your own views as to what Irish bankers thought, what Irish bankers think is a good and responsible risk management profile is probably cowboy country.

there is nothing controversial in pointing out that Anglo were reasonably fussy lenders. Like I said you seem to be basing your opinion that they were cutting corners on the premise that they were fast lenders with minimum paperwork in extending credit: but largely that point is down to the fact that they were essentially based on one site in Ireland, and were intimately familiar with their client base, their investments, and their exposures.

And yet....theyre insolvent and a black hole on the balance sheet of the Irish state. Curious paradox.

If you consider Anglo-Irish to be a well run bank, as an Irish citizen I would truly, truly, truly hate to see what you would consider to be a terribly run bank. Clowns like Lenihan might try to make me liable for their ****ing terrible lending practises.

If anything, it ought to be up to you to back up why you are suggesting the opposite in terms of lending standards.

No, it ought to be up to you. A well run bank wouldnt be a black hole. Id like you to explain to me how Anglo Irish can be both a black hole and yet, a well run bank, and how you are not an apologist for FF.

Id truly like for you to explain how all three of those points can be true at the same time.

on what grounds are you saying that their lending requirements in particular had been relaxed

Opinion within their borrowers in general who felt that could borrow any amount of money from Anglo? The fact that theyre nationalised? The fact that the loans are so ****ing awful that no one truly knows how much the Irish taxpayer will have to advance to rescue the creditors of Anglo-Irish from their truly terrible investment decisions?

TBH, Later 10, you seem a reasonably smart individual. I find this dogged determination to be contrarian to the point of making a fool of yourself kind of curious but whatever. Its one thing to play devil's advocate, its another thing to make a fool of yourself and with this repeated attempt to pretend that a criminally run bank actually had strong lending standards youre making a fool of yourself. You could just stop responding. The thread will die. You could admit you were wrong. The thread will die. You could continue on this path, the thread will continue on and on and on with you firmly aligned with this truly incredible view that Anglo was a well run bank.

Your choice.

Dale Parish

http://www.youtube.com/watch?v=8n3n2sFdIrs
5:10

Slick50

Here's Seanie questioning if there was some evidence of malpractice back in 2007, why is there stricter regulation bein introduced? http://www.youtube.com/watch?v=n6OgiYhjtx4&feature=related