Burning Bondholders

aftermn

On burning bondholders. Do any of these bondholders ever lose money? When the loans into private companies in other countries go sour do these other countries taxpayers cover the losses? You might argue that our regulation was part of the problem, but it was known to the lender, not hidden. In fact many foreign banks had sections here to avail of that very regulation. They lend, not only to Irish private companies, but to private companies throughout the world. They assess the application, apply a rate they consider appropriate and do the business. They did this prior to the crash and profited, both here and elsewhere. This time they lost. Why are we covering the loss? Is any other european taxpayer covering the losses of private firms within their countries? We are not burning bondholders by refusing to pay private company debt.

Scofflaw

aftermn wrote: »

On burning bondholders. Do any of these bondholders ever lose money? When the loans into private companies in other countries go sour do these other countries taxpayers cover the losses? You might argue that our regulation was part of the problem, but it was known to the lender, not hidden. In fact many foreign banks had sections here to avail of that very regulation. They lend, not only to Irish private companies, but to private companies throughout the world. They assess the application, apply a rate they consider appropriate and do the business. They did this prior to the crash and profited, both here and elsewhere. This time they lost. Why are we covering the loss? Is any other european taxpayer covering the losses of private firms within their countries? We are not burning bondholders by refusing to pay private company debt.

Yes, every other bank bailout in Europe, bar the Icelandic one, has involved European taxpayers covering the losses of private firms. Same in the US, with the exception of WaMu. The UK taxpayer has footed the bill for HBOS, Lloyds, RBS amongst others - a bailout bill currently estimated at £512bn. A significant part of the trouble with those banks was and is their Irish subsidiaries, because Irish deposits in the Irish subsidiaries of those banks are guaranteed by the UK rather than Ireland - UK taxpayer's money poured into banks like RBS is being used to shore up their Irish operations. For extra laughs, RBS' exposure to Ireland is largely in the form of Irish mortgages, so when Irish mortgage holders default, the UK taxpayer will be picking up the bill.

Same story with Germany, where the German state had to bail out Hypo Real Estate with taxpayer's money to the tune of €100bn after Hypo's Irish IFSC subsidiary Depfa collapsed. As far as I know, it was the first time since the 1930's that the German state has had to nationalise a bank.

The US taxpayer also gave money to our banks in their Federal bailout - €20bn to AIB, for example.

cordially,
Scofflaw

nesf

The problem is, these banks of ours will need to return to the bond market again to borrow money once we've patched them up. If we ruthlessly burn the bondholders now (as opposed to moderate haircuts on debt) we'll reap the rewards of that when our banks (and us ourselves) return to market.


In simple terms, it's like there's only one bank to get loans from and you have a car loan from them and need a car to work. You can default on that car loan and burn the bank on the debt and it's damn tempting because you've lost your job and are broke at the moment. The problem is you know you'll get another job in a few years and you know you'll need another car at some point and you know you'll need a loan from that bank to buy that car so you can work. So while defaulting on your loan now seems to make initial sense once you take a longer term look at the problem you can see that you're only screwing yourself over if you default on that loan.

femur61

If we burn the bondholders will that effect savings people have in the banks?

Noreen1

Scofflaw wrote: »

Yes, every other bank bailout in Europe, bar the Icelandic one, has involved European taxpayers covering the losses of private firms. Same in the US, with the exception of WaMu. The UK taxpayer has footed the bill for HBOS, Lloyds, RBS amongst others - a bailout bill currently estimated at £512bn. A significant part of the trouble with those banks was and is their Irish subsidiaries, because Irish deposits in the Irish subsidiaries of those banks are guaranteed by the UK rather than Ireland - UK taxpayer's money poured into banks like RBS is being used to shore up their Irish operations. For extra laughs, RBS' exposure to Ireland is largely in the form of Irish mortgages, so when Irish mortgage holders default, the UK taxpayer will be picking up the bill.

Same story with Germany, where the German state had to bail out Hypo Real Estate with taxpayer's money to the tune of €100bn after Hypo's Irish IFSC subsidiary Depfa collapsed. As far as I know, it was the first time since the 1930's that the German state has had to nationalise a bank.

The US taxpayer also gave money to our banks in their Federal bailout - €20bn to AIB, for example.

cordially,
Scofflaw

So, just how much money have Irish banks lent recklessly, then?

Liam Byrne

nesf wrote: »

In simple terms, it's like there's only one bank to get loans from and you have a car loan from them and need a car to work. You can default on that car loan and burn the bank on the debt and it's damn tempting because you've lost your job and are broke at the moment. The problem is you know you'll get another job in a few years and you know you'll need another car at some point and you know you'll need a loan from that bank to buy that car so you can work. So while defaulting on your loan now seems to make initial sense once you take a longer term look at the problem you can see that you're only screwing yourself over if you default on that loan.

Except that it's not our car loan.

Tea drinker

Noreen1 wrote: »

So, just how much money have Irish banks lent recklessly, then?

The figures seem impossible. I don't understand how much is actually lost, how much is stressed, how much is simply negative equity.
How much would they have to be trading for these to be the loss?
i.e. what % of their trade does the loss represent.

I can't fathom how the business model is so wrong, especially as we are always told the guys have to be paid big bucks to get the best talent

ei.sdraob

@OP

see here


we will be handing over 750 million in a few days, when we dont have too :rolleyes: more to come after that

these people made a bad investment, tough titty

Scofflaw

Noreen1 wrote: »

So, just how much money have Irish banks lent recklessly, then?

That depends on what you mean by "Irish banks" and "recklessly". Do you mean the extent of the impaired loans on the books of the state-guaranteed Irish banks? Or the difference between what they valued those loans at and what NAMA valued them at?

Or are you actually asking - given the context - how much Irish banks borrowed?

cordially,
Scofflaw

P. Breathnach

Liam Byrne wrote: »

Except that it's not our car loan.

That doesn't matter: staying with the analogy, if a credit provider gets burned by one occupant at a particular address, then it is likely that no credit application from that address will be accepted.

Life's a bitch. Nearly everybody on the Titanic could claim to have no responsibility for its hitting the iceberg. That didn't enable them to sit in their staterooms or steerage dormitories and expect to arrive in New York.

ei.sdraob

P. Breathnach wrote: »

That doesn't matter: staying with the analogy, if a credit provider gets burned by one occupant at a particular address, then it is likely that no credit application from that address will be accepted.

News for you, No "applications" from Irish Banks are being accepted anyways :rolleyes: since any prospective creditors are afraid of existing levels of debt.
Hence the IMF being in town, ECB supporting these banks by up to 130 billion and now our own central bank extending another 50+ billion.
No is willing to lend to the country and its banks (which are now the same thing anyways)

P. Breathnach wrote: »

Life's a bitch. Nearly everybody on the Titanic could claim to have no responsibility for its hitting the iceberg. That didn't enable them to sit in their staterooms or steerage dormitories and expect to arrive in New York.

The captain of the Titanic went down with the ship, the people in charge of the Irish banks and the Regulator on the other hand ... .. erm yes :rolleyes:

later12

I think it is important that people distinguish between bondholders of senior debt or of junior and subordinated debt.

There is a big, important difference and it isn't sure which is being referred to here.

Scofflaw

later10 wrote: »

I think it is important that people distinguish between bondholders of senior debt or of junior and subordinated debt.

There is a big, important difference and it isn't sure which is being referred to here.

True - junior and subordinated debt holders are already being given haircuts. Currently, senior unsecured debt ranks as equivalent to deposits in the case of an insolvency wind-up. That is an international legal norm, and the current legal position in Irish law - forcing senior unsecured debt to accept a haircut on what's owed is on the same legal footing as forcing depositors to take a haircut on their deposits.

The question of how much senior debt is actually in the system seems to produce different answers depending on the source. Newspaper estimates from November last year suggest about €20bn, but at the same time, there's this parliamentary exchange in the Dáil:

To ask the Minister for Finance the amount of senior and subordinated bonds outstanding in Anglo Irish Bank as at 29 September 2008; the amount of senior and subordinated bonds outstanding in Anglo Irish Bank as at 30 September 2008 which were covered by the Government guarantee; the amount of senior and subordinated bonds in Anglo Irish Bank which matured between 30 September 2008 and 29 September 2010 and since 29 September 2010; the amount of senior and subordinated bonds in Anglo Irish Bank bought back by the bank, and the capital gain registered as a result between 30 September 2008 and 29 September 2010 and since 29 September 2010; the amount of senior and subordinated bonds currently outstanding in Anglo Irish Bank covered by the eligible liabilities guarantee and outside the scope of the eligible liabilities guarantee; and if he will make a statement on the matter.

- Joan Burton.

* For WRITTEN answer on Wednesday, 27th October, 2010.

Ref No: 39395/10

REPLY

Minister for Finance ( Mr Lenihan) : The information required by the Deputy is set out in the tables following:

1.The amount of Senior and Subordinated Bonds outstanding as at 29 September 2008:

Debt Amount

Senior Bonds: €10,770,669,707

UK Covered Bonds: €1,512,660,000

Subordinated Debt: €4,791,653,500

2. The amount of Senior and Subordinated Bonds outstanding as at 30 September 2008 which were covered by the government guarantee:

Debt Amount Senior Bonds: €10,763,531,707

UK Covered Bonds: €1,512,660,000

Subordinated Debt: €2,108,760,000

3. The amount of Senior and Subordinated Bonds which matured between 30 September 2008 and 29 September 2010:

Debt Amount Senior Unsecured Debt: €14.6bn

Subordinated Debt: €0

4. The amount of Senior and Subordinated Bonds that have matured since 29 September 2010:

Debt Amount Senior Unsecured Debt: €91m

Subordinated Debt: €0

5. The amount of Senior and Subordinated Bonds bought-back by the Bank and the associated capital gain(s) for the period of 30 September 2008 – 29 September 2010:

Debt Amount Gain

Senior Unsecured Debt €177.6 m €6 m

Subordinated Debt €2.45bn €1,752 m

6. The amount of Senior and Subordinated Bonds that have been bought-back by the Bank and the associated capital gain(s) for the period commencing 29 September 2010:

There has been no buy back of either senior or subordinated bonds in this period.

7. The amount of Senior and Subordinated Bonds currently outstanding in the Bank that are covered by the ELG scheme:

Debt Amount

Senior Unsecured Debt: €2.68bn

Subordinated Debt: €0

8. The amount of Senior and Subordinated Bonds currently outstanding in the Bank that are not covered by the ELG scheme:

Debt Amount Senior Unsecured Debt: €4.00bn

Subordinated Debt: €2.36bn

That suggests a very much lower figure of €2.68bn covered by the ELG, and €4bn not covered by it - plus €14.6bn which has already matured, and which has been met. The total of that is suspiciously close to the newspaper figure of "€20bn", which suggests they're probably the same thing, give or take a billion for journalistic rounding.

Now, presumably, that €14.6bn of senior unsecured debt that has already matured and been met (and, I take it, rolled over) has been met by Government cash and government promissory notes - which means that it is on the State's books now. If the banks were wound up - which is when all debts would fall due - defaulting on senior unsecured debt seems to me to be a case of the goverment defaulting on government promissory notes, which presumably has implications for the reliability of sovereign debt.

Open to correction/clarification there!

cordially,
Scofflaw

Duke Leonal Felmet

ei.sdraob wrote: »

News for you, No "applications" from Irish Banks are being accepted anyways :rolleyes: since any prospective creditors are afraid of existing levels of debt.
Hence the IMF being in town, ECB supporting these banks by up to 130 billion and now our own central bank extending another 50+ billion.
No is willing to lend to the country and its banks (which are now the same thing anyways)



The captain of the Titanic went down with the ship, the people in charge of the Irish banks and the Regulator on the other hand ... .. erm yes :rolleyes:

It never fails to amuse me when people find the inevitable holes in analogies and then hold them to prove the argument's original premise demonstrably false.

Whether the Captain went down or not is actually irrelavent. His point is sufficiently clear and holds up.

Liam Byrne

P. Breathnach wrote: »

That doesn't matter: staying with the analogy, if a credit provider gets burned by one occupant at a particular address, then it is likely that no credit application from that address will be accepted.

Life's a bitch. Nearly everybody on the Titanic could claim to have no responsibility for its hitting the iceberg. That didn't enable them to sit in their staterooms or steerage dormitories and expect to arrive in New York.

At a particular address, maybe (although that's not even a definite if the second applicant isn't related and has a job) but not on the same street or in the same town, and if they don't engage in the same dodgy practices there's no precedent for an automatic refusal.

Also, re the "life's a bitch" paragraph; those people voluntarily engaged in a contract that tied their fates to that of the ship; we did no such thing.

Duke Leonal Felmet

Liam Byrne wrote: »

At a particular address, maybe (although that's not even a definite if the second applicant isn't related and has a job) but not on the same street or in the same town, and if they don't engage in the same dodgy practices there's no precedent for an automatic refusal.

Also, re the "life's a bitch" paragraph; those people voluntarily engaged in a contract that tied their fates to that of the ship; we did no such thing.

Do you have a bank account of any type?

Liam Byrne

Duke Leonal Felmet wrote: »

Do you have a bank account of any type?

Whether or not I had a bank account would make no difference to the fact that FF have saddled me with other people's debts.

shadowninty

Liam Byrne wrote: »

Also, re the "life's a bitch" paragraph; those people voluntarily engaged in a contract that tied their fates to that of the ship; we did no such thing.

we did; by voting the government that caused the property boom (and who lightly regulated the banks) back into power
Twice

Did you tell canvassers when they came calling to your door that you wanted proper regulations on banks and an end to government fueling of an obvious property bubble?

Duke Leonal Felmet

Liam Byrne wrote: »

Whether or not I had a bank account would make no difference to the fact that FF have saddled me with other people's debts.

You engaged in the banking system, you sat in steerage on H.M. Titanic. It doesn't matter whether the captain was a robot or whatever, the fact is that the ship is going down. As PB said, it's like you are now on the sinking ship, demanding that you be taken to New York.

It's not fair, but the ship is sinking nonetheless. You are now asked to paddle and pump the water out. You sit there, insisting that you had nothing to do with it and be brought to New York.

Liam Byrne

shadowninty wrote: »

we did; by voting the government that caused the property boom (and who lightly regulated the banks) back into power
Twice

"We" didn't.

shadowninty wrote: »

Did you tell canvassers when they came calling to your door that you wanted proper regulations on banks and an end to government fueling of an obvious property bubble?

Yes. Mind you, I also told them that I wanted an end to corruption, and they ignored that too, and walked off in a snot mid-sentence because said I wouldn't give them a vote unless they sorted those - and the rising cost of living - out.

So quit trying to implicate me, thanks; I'm lucky enough to be here because if I'd followed Ahern's advice I'd be six feet under now.

ei.sdraob

Duke Leonal Felmet wrote: »

It never fails to amuse me when people find the inevitable holes in analogies and then hold them to prove the argument's original premise demonstrably false.

Whether the Captain went down or not is actually irrelavent. His point is sufficiently clear and holds up.

Ah yes the captain didnt steer the ship into an iceberg, it was "destined" to happen, sure the soldiers of "destiny" had nothing to do with it,
it was all the fault of the Lehman's sure wasn't it :rolleyes:(The same Lehmans who ironically had the same auditors as Anglo)

2011 and we still have FFers crawling out of the woodwork.

Duke Leonal Felmet

ei.sdraob wrote: »

Ah yes the captain didnt steer the ship into an iceberg, it was "destined" to happen, sure the soldiers of "destiny" had nothing to do with it,
it was all the fault of the Lehman's sure wasn't it :rolleyes:(The same Lehmans who ironically had the same auditors as Anglo)

2011 and we still have FFers crawling out of the woodwork.

I never voted for FF, but judging by your response there is nothing on earth that would change your mind on that one. It was amusing to see that you completely missed the point again.

The point of that analogy is entirely based on the fact that the ship is sinking, it really doesn't matter who drove it into the iceberg.

I know you will continue to ignore that point, because you don't have anything else to offer.

Well, except for assuming to know who I vote for...

Liam Byrne

Duke Leonal Felmet wrote: »

You engaged in the banking system, you sat in steerage on H.M. Titanic.

Ridiculous! People have no choice but to "engage in the banking system", and it is completely disingenuous to compare someone who "engaged" with someone who borrowed way more than they could afford.

Duke Leonal Felmet wrote: »

It doesn't matter whether the captain was a robot or whatever, the fact is that the ship is going down. As PB said, it's like you are now on the sinking ship, demanding that you be taken to New York.

That is a ridiculous extension of the analogy, because I never asked to be taken to New York, let alone "demanded" to be taken there.

Duke Leonal Felmet wrote: »

It's not fair, but the ship is sinking nonetheless. You are now asked to paddle and pump the water out. You sit there, insisting that you had nothing to do with it and be brought to New York.

Again, I am not insisting on being "taken" anywhere. I simply wish to live my life without being expected to pay other people's gambling bills.

Duke Leonal Felmet

Liam Byrne wrote: »

Ridiculous! People have no choice but to "engage in the banking system", and it is completely disingenuous to compare someone who "engaged" with someone who borrowed way more than they could afford.



That is a ridiculous extension of the analogy, because I never asked to be taken to New York, let alone "demanded" to be taken there.



Again, I am not insisting on being "taken" anywhere. I simply wish to live my life without being expected to pay other people's gambling bills.

It's ridiculous, it's unfair. But it's true.

Liam Byrne

Duke Leonal Felmet wrote: »

It's ridiculous, it's unfair. But it's true.

Well if any incoming government wants to have any shred of credibility they will need to start implementing some fairness, and sharply.

They own the cesspit that is Anglo, and the non-guaranteed bondholders and the sickening bonuses are a damn good place to start ensuring that those of us who were sensible don't keep paying hand-over-fist for the behaviour of those who acted recklessly.

Duke Leonal Felmet

Liam Byrne wrote: »

Well if any incoming government wants to have any shred of credibility they will need to start implementing some fairness, and sharply.

They own the cesspit that is Anglo, and the non-guaranteed bondholders and the sickening bonuses are a damn good place to start ensuring that those of us who were sensible don't keep paying hand-over-fist for the behaviour of those who acted recklessly.

Yes, I agree, but the ship is still filling with water. You are on it, whether you like it or not.

Scofflaw

Can I try to stop this degenerating, perhaps, since I've seen it before and know where it goes? Liam, Duke Felmet is not saying you are responsible, he's not seeking to make you responsible - he is saying that you are on the ship. That is true whether or not you are responsible, for as long as you don't leave the country. Please try to respond on that basis, rather than on the assumption that he's trying to do something he's not.

moderately,
Scofflaw

RachaelVO

The bond hold should be left burnt to a cinder!

It's a simple fact a lot of the bail out is going to the banks. That's pretty well documented. It's all going to pay the bond holders, that's pretty much established. Those bonds shouldn't be worth a cent. The bonds were an investment and there was a risk attached to that investment, and it not being paid or loosing value was a risk they took when they bought the bonds. Tough sh1te! If we as individuals invested in a business and it lost money we'd not get bailed out would we? Eh, I'm not inclined to think so. Look at all the poor sods who had all their life saving in bonds from Anglo! They lost everything and they aren't getting it back, so the bond holders should go shag off and cut their losses.

Scofflaw

RachaelVO wrote: »

The bond hold should be left burnt to a cinder!

It's a simple fact a lot of the bail out is going to the banks. That's pretty well documented. It's all going to pay the bond holders, that's pretty much established. Those bonds shouldn't be worth a cent. The bonds were an investment and there was a risk attached to that investment, and it not being paid or loosing value was a risk they took when they bought the bonds. Tough sh1te!

They took a very specified risk, though - the point of the debate is whether the government can unilaterally change the amount of risk involved.

RachaelVO wrote: »

If we as individuals invested in a business and it lost money we'd not get bailed out would we? Eh, I'm not inclined to think so.

Assuming it was in a bank, then you would in fact be 'bailed out' if the bank collapsed, up to €100k you hold in any given bank (or all of it if it was a temporary arrangement for a mortgage or the like).

RachaelVO wrote: »

Look at all the poor sods who had all their life saving in bonds from Anglo! They lost everything and they aren't getting it back, so the bond holders should go shag off and cut their losses.

I think you'll find the people you refer to in your first sentence are exactly the same people you refer to in your second sentence. Perhaps you mean Anglo shareholders in the first sentence? If so, shareholding is also a risk - as indeed is depositing money with a bank.

cordially,
Scofflaw

Liam Byrne

Scofflaw wrote: »

Can I try to stop this degenerating, perhaps, since I've seen it before and know where it goes? Liam, Duke Felmet is not saying you are responsible, he's not seeking to make you responsible - he is saying that you are on the ship. That is true whether or not you are responsible, for as long as you don't leave the country. Please try to respond on that basis, rather than on the assumption that he's trying to do something he's not.

moderately,
Scofflaw

Fair enough, but I would draw attention to the post above where they asked me - singularly and directly - whether I personally had a bank account.

But it is unfortunate that the only option that FF have left us with in order to get away from being crippled by others debts is precisely what you have outlined above - leave the country.

Guilt by association used to be related to what you did, not who you were or where you lived.

FF have turned the whole natural justice on its head.

Scofflaw

Liam Byrne wrote: »

Fair enough, but I would draw attention to the post above where they asked me - singularly and directly - whether I personally had a bank account.

Which is about involvement with the system rather than responsibility. I too have a bank account - I fail to see how it could possibly make me responsible for the government's decision to guarantee Anglo!

cordially,
Scofflaw

Liam Byrne

Scofflaw wrote: »

Which is about involvement with the system rather than responsibility. I too have a bank account - I fail to see how it could possibly make me responsible for the government's decision to guarantee Anglo!

cordially,
Scofflaw

Again, fair comment.

I am, however, not "demanding to be taken to New York", which is where the potential sidetrack started.

In fact, to keep the analogy going, I am floundering in the ocean regretting the fact that I was somehow, without my consent, pushed onto a ship whose captain was a known corrupt incompetent, when I didn't even want to go to this New York that a lot of people seemed to falsely think was the Holy Grail.

Anyway, point taken. And apologies if I read more into what was said than was intended.

The bottom line is that Anglo cannot afford to pay, and if the debts aren't guaranteed, then they should be examined. Anyone who invested in the cesspit that is Anglo knew they were taking serious risks, and that is meant to be the price you pay.

Anything else is just pure blackmail, and whatever about the ridiculous decisions to guarantee some of the gamblers' debts, if there are ones like Jan 31st that aren't guaranteed, then the ONLY sensible thing is NOT to pay them, as otherwise we will be taken for complete mugs who pay out no matter what.

I'm all for honouring OUR debts - that is what honourable people do.

But Anglo's debts aren't ours.

Duke Leonal Felmet

Liam Byrne wrote: »

Again, fair comment.

I am, however, not "demanding to be taken to New York", which is where the potential sidetrack started.

In fact, to keep the analogy going, I am floundering in the ocean regretting the fact that I was somehow, without my consent, pushed onto a ship whose captain was a known corrupt incompetent, when I didn't even want to go to this New York that a lot of people seemed to falsely think was the Holy Grail.

Anyway, point taken. And apologies if I read more into what was said than was intended.

The bottom line is that Anglo cannot afford to pay, and if the debts aren't guaranteed, then they should be examined. Anyone who invested in the cesspit that is Anglo knew they were taking serious risks, and that is meant to be the price you pay.

Anything else is just pure blackmail, and whatever about the ridiculous decisions to guarantee some of the gamblers' debts, if there are ones like Jan 31st that aren't guaranteed, then the ONLY sensible thing is NOT to pay them, as otherwise we will be taken for complete mugs who pay out no matter what.

I'm all for honouring OUR debts - that is what honourable people do.

But Anglo's debts aren't ours.

You are turning "New York" into something that it is not and never was. The definition of it also plays very little role in the actual analogy. It could be Antarctica, St. Petersburg, Buenos Aires, Atlantis, whatever. It really doesn't matter. So far, people who dislike the analogy have chosen to focus on the two most irrelevant aspects of it; the captain and the destination. I guess that is the trouble with analogies, they are likely to be misunderstood, or manipulated by those who don't like the original argument in order to make it seem flakey.

It's like this. We are all on a ship. Many of us didn't even know we were on one, but we have woken up to find that the ship is sinking. Apparently the Captain and some of the crew/passengers got drunk and steered it into an iceberg. Pretty soon, the crew/passengers will get to vote for a new Captain, but it doesn't change the fact that the ship is sinking fast. Everyone is asked to work by pumping water out of the ship to stop it sinking, but some passengers state that since they were asleep during the crash (or didn't realise they were even on a ship), they should not have to do any work to save the ship. Thus, they return to their beds and go to sleep.

Ok, I just re-read that paragraph to make sure it is easy to understand. It is clear to see that:

1. The Captain & Co. caused the crash
2. Some passengers are unjustly being asked to pump
3. Unless all get hands to a pump, everyone will die
4. Let's say that there is also a teleporter to take you to a non-sinking ship, but you leave your family behind

I am perhaps being naive in thinking that this simple analogy will not be misunderstood or deliberately misinterpreted, but I think it is clear why simply going to bed is not a sensible option, in this case. Anyway, I am bored of this, so I'm dropping it now.

Liam Byrne

Duke Leonal Felmet wrote: »

You are turning "New York" into something that it is not and never was. The definition of it also plays very little role in the actual analogy. It could be Antarctica, St. Petersburg, Buenos Aires, Atlantis, whatever. It really doesn't matter.

It's not irrelevant, because those who steered the ship towards that destination had a vested interest in doing so. The "were asleep" is disingenuous because many people were screaming that we were being forced head-first towards the iceberg, and were told to shut the f@&k up.

Many didn't want the ship or the destination, and were essentially kidnapped (to maintain your analogy).

It's like this. We are all on a ship. Many of us didn't even know we were on one, but we have woken up to find that the ship is sinking. Apparently the Captain and some of the crew/passengers got drunk and steered it into an iceberg. Pretty soon, the crew/passengers will get to vote for a new Captain, but it doesn't change the fact that the ship is sinking fast. Everyone is asked to work by pumping water out of the ship to stop it sinking, but some passengers state that since they were asleep during the crash (or didn't realise they were even on a ship), they should not have to do any work to save the ship. Thus, they return to their beds and go to sleep.

Ok, I just re-read that paragraph to make sure it is easy to understand. It is clear to see that:

1. The Captain & Co. caused the crash
2. Some passengers are unjustly being asked to pump
3. Unless all get hands to a pump, everyone will die
4. Let's say that there is also a teleporter to take you to a non-sinking ship, but you leave your family behind

I am perhaps being naive in thinking that this simple analogy will not be misunderstood or deliberately misinterpreted, but I think it is clear why simply going to bed is not a sensible option, in this case. Anyway, I am bored of this, so I'm dropping it now.

There is no "deliberate" about pointing out flaws, and the other flaw is that the captain is jumping ship on a €300,000 a year pension along with his cronies, with the NAMA gang trying to sell the freshwater ice to those who weren't in on the voyage.

And - in keeping with the topic - not a single bond-holder is anywhere near a pump.

P. Breathnach

The purpose of using analogy is to illustrate an argument; it becomes messy when people argue about the analogy rather than the argument it illustrates.

Let's set aside car loans and ships hitting icebergs. The core issue is that we are all in this together, the innocent as well as the culpable, the wise as well as the foolish. And burning the senior bondholders is not a workable solution.

nesf

shadowninty wrote: »

we did; by voting the government that caused the property boom (and who lightly regulated the banks) back into power
Twice

The Government did not cause the property boom. At absolute worst they exacerbated it. In reality for the most part they just went along for the ride and used the excess funds to meet campaign promises and public demands along with a handful of policy decisions that satisfied public demands but added fuel to the fire (i.e. benchmarking, tax cuts etc).

nesf

Liam Byrne wrote: »

Except that it's not our car loan.

It is, since we as a nation took it out so to speak. For better or worse we stood behind our banks to prevent their collapse, this means we are now culpable for their debt and decisions since we effectively control them.

You may not agree with the decision to stand behind the banks or nationalise them, you may not have voted for the party in power who made that decision etc but none of these change the fact that it happened and now the State is in this position and we are all members of this State regardless of how we choose to vote etc.

Scofflaw

nesf wrote: »

It is, since we as a nation took it out so to speak. For better or worse we stood behind our banks to prevent their collapse, this means we are now culpable for their debt and decisions since we effectively control them.

You may not agree with the decision to stand behind the banks or nationalise them, you may not have voted for the party in power who made that decision etc but none of these change the fact that it happened and now the State is in this position and we are all members of this State regardless of how we choose to vote etc.

Dulce et decorum est pro patria persolvo.

aphoristically,
Scofflaw

Noreen1

Scofflaw wrote: »

That depends on what you mean by "Irish banks" and "recklessly". Do you mean the extent of the impaired loans on the books of the state-guaranteed Irish banks? Or the difference between what they valued those loans at and what NAMA valued them at?

Or are you actually asking - given the context - how much Irish banks borrowed?

cordially,
Scofflaw

I'm asking what the Irish taxpayer currently owes the ECB/IMF/AN Other, as a result of the Bank guarantee.
In short, what is the most accurate information available, at this time, re: the liability currently imposed on the Irish taxpayer?

Scofflaw

Noreen1 wrote: »

I'm asking what the Irish taxpayer currently owes the ECB/IMF/AN Other, as a result of the Bank guarantee.
In short, what is the most accurate information available, at this time, re: the liability currently imposed on the Irish taxpayer?

In one sense, that's a very hard figure to come to - you can add up all kinds of bits and pieces of data which may or may not be comparable, and come out with a variety of figures.

In another sense, it's very easy. The amount of debt that has been taken on by this government since the start of the crisis is the difference between national debt now and then:

Year|Debt (€m)
2003|37611
2004|37846
2005|38182
2006|35917
2007|37559
2008|50398
2009|75152
2010|93446

Since the end-2007 figure is in line with previous figures, we'll take that as a base. Therefore, the amount of additional debt loaded onto the taxpayer in the past three years is €55.887bn.

How much more over the next 4-5 years? A maximum projection of a further €67.5bn, plus spending the entire national pension reserve fund (€17.5bn). Possibly only €50bn, plus spending €10bn of the pension fund.

Total bill: €115.887bn to €140.887 for 2008-2014 - on top of existing debt of c.€38bn.

Government projections of same:

Public Finances |2008*|2009*|2010*|2011|2012|2013|2014
|||||||
Current Budget||||*|*|*|*
Current Expenditure (euro billion)||||48.4|48.2|47.4|46.5
Current Revenue (euro billion)||||36.9|39.4|42.1|45.3
*|||||||
Current Budget Balance |-3.07|-11.37|-13.72|-11.5|-8.8|-5.3|-1.2
as per cent of GDP|-1.7|-7|-8.1|-7.1|-5.2|-3|-0.7
*||||*|*|*|*
Capital Budget||||*|*|*|*
Capital Expenditure (euro billion)||||8.3|7.9|7.5|7.1
Capital Resources (euro billion)||||2.1|1.6|1.8|1.8
*||||*|*|*|*
Capital Budget Deficit (euro billion)|-9.64|-13.27|-5.06|-6.1|-6.3|-5.7|-5.3
*||||*|*|*|*
Exchequer Balance
(euro bn)||||-17.7|-15.1|-11|-6.6
as per cent of GDP||||-11|-9|-6.3|-3.6
*||||*|*|*|*
General Government Balance
(euro bn)|-12.71|-24.64|-18.78|-15.2|-12.3|-10.2|-5.2
as per cent of GDP|-7.3|-14.6|-31.9**|-9.4|-7.3|-5.8|-2.8
*||||*|*|*|*
*||||*|*|*|*
Memorandum Items
(euro bn)||||158.9|171.5|179.8|183.5
as per cent of GDP|44.4|65.6|94.2|98.6|102|102.5|100
*||||*|*|*|*
GDP (euro billion)|183.99|170.94|168.29|161.2|168.1|175.4|183.5


Source for 2011-2014

* I've worked these out from other official sources.
**includes bank injections

As to how much of that went into the banks - if it's all on the balance sheets, then it seems the final bill for that is likely to be somewhere in the region of €45bn - but could be as large as €70bn if the €25bn of 'contingency funding' in the bailout programme is all used.

So, low estimate banks: €45bn of €115.887bn = 38.8%

High estimate banks: €70bn of €140.887 = 50%.

cordially,
Scofflaw

shadowninty

nesf wrote: »

The Government did not cause the property boom. At absolute worst they exacerbated it. In reality for the most part they just went along for the ride and used the excess funds to meet campaign promises and public demands along with a handful of policy decisions that satisfied public demands but added fuel to the fire (i.e. benchmarking, tax cuts etc).

no you are correct, I meant to type "caused the exasperation of the property boom", look at the tax incentives (hence why we have so many unneeded hotels etc), some would argue that the high expenditure on capital projects also further fueled the boom

nesf

shadowninty wrote: »

no you are correct, I meant to type "caused the exasperation of the property boom", look at the tax incentives (hence why we have so many unneeded hotels etc), some would argue that the high expenditure on capital projects also further fueled the boom

Yeah but conversely the high expenditure on capital projects was a product of the underinvestment during the 70s and 80s and the lack of infrastructure we had going into the boom initially. For a long time in the boom we were just catching up to where we should have been in the 90s rather than overexpanding our infrastructure, though some vanity projects like the Bertiebowl were overexpansion.

Laminations

P. Breathnach wrote: »

Life's a bitch. Nearly everybody on the Titanic could claim to have no responsibility for its hitting the iceberg. That didn't enable them to sit in their staterooms or steerage dormitories and expect to arrive in New York.

I'm interested in this whole 'tough luck, that's life' attitude towards the tax payer unfairly being asked to stump up for private debt. Yrs it's true that if we don't then we are all horlixed but let's spread this tough luck a bit more fairly. Anyone in a management/board position who was involved with decision making in any guaranteed/bailed out bank gets their pension frozen in preparation for a clawback and their pay renegotiated. Don't like it? Tough luck, that's life. And this idea of pay the best to get thr best- who would hire a top executive from a failed bank, without any references? Any politicians in government or opposition between 2002-2010 gets a nice cut to their pension. For the next x number of years, the state take a cut from every bank operating here. Even if we didn't directly bail you out we are constantly told that saving Anglo saved the banking system. So if you are in that system we raise corpo tax on you, only for a few years and not to the extent that it'd be worth your while moving. Tough luck, that's life. Seize all assets from developers in NAMA, in a way that they don't get to keep using them. Assets in the wives and kids name? Tough luck, that's life.

If we're being told 'do this or die', it's time we started giving our own ultimatums

If I was on the titanic and there was a hope my actions could help save us then I'd bust my balls for the cause as I and most Irish people are willing to do now. But when we got to new York id want the captain and the crew, and the ships designer either in jail or punery.

later12

Laminations wrote: »

For the next x number of years, the state take a cut from every bank operating here. Even if we didn't directly bail you out we are constantly told that saving Anglo saved the banking system. So if you are in that system we raise corpo tax on you, only for a few years and not to the extent that it'd be worth your while moving. Tough luck, that's life.

That's ridiculous. There are a lot of banks operating in Irelaned who do not have retail operations here and were not ''saved'' by any Irish fiscal or banking policy, nor the EU-EIMF bailout. 7% of the world's hedge funds are domiciled in the IFSC, the banks who manage these funds would move out of Ireland, and pretty much overnight, and leave a lot of newly unemployed Irish people behind them. they had about as much responsibility for the current crisis as they had benefit: zilch.

Laminations

later10 wrote: »

they had about as much responsibility for the current crisis as they had benefit: zilch.

Since when did that matter? Lifes a bitch, that's what other people are told when they need to shell out for the mistakes of others. A 0.5-1% financial services levy on profits wouldn't make them run for the hills. Where to? The states or UK with their massive taxes on bonuses and higher corpo tax? No body wants to run their hedge fund headquarters out of kaszakstan.

Plus they benefitted from a highly educated workforce and would stay for same, plus our relatively low corpo tax

Liam Byrne

later10 wrote:

they had about as much responsibility for the current crisis as they had benefit: zilch.

And finally the penny drops.

Why do you object to something on the above basis and yet argue the point when it's others stating the same fact?

Rabble Rabble

The reason why the titanic analogy doesn't work is this.

1) We are all on the titanic.
2) This includes the bond holders.
3) The ship is sinking.
4) Bond holders are escaping in life boats.
5) We are not pumping water. We are building life boats.
6) And paying for the life boats to be built.
7) in fact taking out a loan from the fleeing bond holders ( or their governments) to build the lifeboats.
8) Still sinking. Partially because we are building life boats and not pumping water.

later12

Laminations wrote: »

Since when did that matter? Lifes a bitch, that's what other people are told when they need to shell out for the mistakes of others. A 0.5-1% financial services levy on profits wouldn't make them run for the hills. Where to? The states or UK with their massive taxes on bonuses and higher corpo tax?

You don't seem to understand why hedge funds located to Ireland recently; they did so because they now have to seek onshore regulated sites in which to domicile or they cannot market their fund. They came to Ireland largely because it's traditionally been a site of favour for fund managers oweing to historical legislation and the IFSC (that isn't particularly special anymore) and because non Irish hedge funds are treated the same as any Irish CIS. That isn't the case elsewhere. So its simply an exercise in efficiency. The low rate of corporation tax (which you mentioned) often doesn't even apply because of the trading nature of many funds. There is over $1 trillion domiciled in Ireland, so 1% is very significant.

No body wants to run their hedge fund headquarters out of kaszakstan.

Not true.

Liam Byrne wrote:

And finally the penny drops.

Why do you object to something on the above basis and yet argue the point when it's others stating the same fact?

Let me pick that penny up for you. I think you should re-read my post. I am saying that the IFSC banks had little to do with causing the Irish debt crisis, and had no direct benefit from the bailout.

Liam Byrne

later10 wrote: »

I am saying that the IFSC banks had little to do with causing the Irish debt crisis......

......and therefore shouldn't be punished / penalised, right ? Isn't that what you're saying ?

ei.sdraob

Wasn't DEFPA based in IFSC and ended up costing the German people over 100 billion to bailout? No wonder they are not so thrilled about bailing out Ireland now...

later12

Liam Byrne wrote: »

......and therefore shouldn't be punished / penalised, right ? Isn't that what you're saying ?

Yeah, so?