Noonan to Impose Losses on Anglo and INBS Senior Bondholders

z0oT

http://www.rte.ie/news/2011/0615/anglo-business.html

Mr Noonan said the Government will seek to impose losses on some senior bondholders in Anglo Irish Bank. He said that around €3.5 billion in senior unsecured, unguaranteed bonds issued by Anglo Irish Bank and Irish Nationwide Building Society should have losses imposed on them.

Apparently the IMF are in support of this, but based on its past stance the ECB will most likely come out against this.

loldog

Well he's just been to see Timothy Geithner. You may recall there was a report in the Irish Times that the IMF had been in favour of burning senior bondholders but Geithner objected....

.

later12

Investors have been shying away from senior Anglo debt since the deposit books found a new home, so this haircut has been very vaguely on the cards since February. Senior debt has been trading at about 40% under par in that time, so 30% haircuts, perhaps, might be the market sentiment.

Some reports are suggesting that this could be very unstabilising for the Greek situation, but really I find that hard to believe. Clearly, as Noonan says, Anglo is not a functioning bank. The wind up is well underway.

Scofflaw

Interesting - Geithner must have given the green light he wouldn't give back in November. Opposition is most likely to come from the ECB, but presumably the move is likely to be supported by Germany, who are already at loggerheads with the ECB over the issue of burden-sharing with bondholders.

cordially,
Scofflaw

Stheno

Key for me there was "unsecured and unguaranteed"

Take a gamble, and deal with the outcome?

Scofflaw

Stheno wrote: »

Key for me there was "unsecured and unguaranteed"

Take a gamble, and deal with the outcome?

"Unsecured and unguaranteed" bank securities is still not exactly 'gambling', but it is an investment with risk attached - and one of the risks is, of course, that in the event of a bank failure you're less likely to get your money back in full.

Having said that, I would presume that the original bondholders have long since taken a loss by selling the bonds on, and those now holding them are likely to be 'distressed debt funds', who would fall a good deal more into the category of 'gambler' than 'investor'.

cordially,
Scofflaw

hatrickpatrick

FINALLY!!!!!

*does a fancy little celebratory dance*

This is absolutely epic and took far, far too long.

Scoffy: Investing = gambling. It's pretty much that simple. And if you gamble and lose, tough s***. The same thing happened to investors of every other type of private institution which has buckled in this recession, and imo financial institutions should be treated equally with all over private companies.

Scofflaw

hatrickpatrick wrote: »

FINALLY!!!!!

*does a fancy little celebratory dance*

This is absolutely epic and took far, far too long.

And still may not happen, of course.

hatrickpatrick wrote: »

Scoffy: Investing = gambling. It's pretty much that simple. And if you gamble and lose, tough s***.

Eh, no, otherwise people would be advised to punt their pension on the horses. I'm not crying over the bondholders' losses, because you can invest poorly and lose your money, but describing them as 'gamblers' isn't right. I can't help thinking people use the term because it makes it seem OK that you're wiping out other people's money.

hatrickpatrick wrote: »

The same thing happened to investors of every other type of private institution which has buckled in this recession, and imo financial institutions should be treated equally with all over private companies.

I don't think banks should be treated as private companies at all. I think they should be regulated utilities. Money is a utility, and a vital one for modern economies.

cordially,
Scofflaw

Rubik.

"Mr Noonan also revealed that he had asked Mr Geithner to support Ireland's effort to cut the interest rate paid on the European parts of our bailout programme. He said Mr Geithner agreed to support Ireland's effort and would speak to the French in connection with this."

This bit is quite interseting as well. Could prove to be a very productive meeting for Noonan. Wonder what prompted Geithner to change his position. Could it have had anything to do with Obama's flying visit? Probably not.

jank

Scofflaw wrote: »

Eh, no, otherwise people would be advised to punt their pension on the horses.

cordially,
Scofflaw

All investments are gambles Scofflaw. The difference of course is the risk of your investments. Bonds are (generally) regarded as safe investments that carry little risk but also low rates. Buying stocks in say a small cap exploration company carries huge risks. The pay-offs could be massive (10k could become a million overnight) but also the risk is such that one would only invest in such a company if they are happy to lose that inital 10k, not ones lifes savings.

Investing is a form of gambling.

later12

jank wrote: »

All investments are gambles Scofflaw. The difference of course is the risk of your investments. Bonds are (generally) regarded as safe investments that carry little risk but also low rates.

These bonds are unsecured debt liabilities. Do you know what deposits are? They are unsecured senior liabilities. Your Granny is an unsecured senior liability.

The bonds in question have the same legal status as deposits. Few people would call depositing money a gamble.

One reason why these bondholders could not previously be touched is because that would raise a legal issue of applying haircuts to deposit holders as well, seeing as how they both stand in equal footing to one another.

Now that there are no deposits in Anglo, and now that the relevant guarantee has expired as of September 30th 2010, senior unsecured bond holders can be looked at.

beeftotheheels

Scofflaw wrote: »

Interesting - Geithner must have given the green light he wouldn't give back in November. Opposition is most likely to come from the ECB, but presumably the move is likely to be supported by Germany, who are already at loggerheads with the ECB over the issue of burden-sharing with bondholders.

cordially,
Scofflaw

Given that the ECB objection is the risk of contagion and of inter-bank lending freezing, one would have thought that the risk is remote when looking at a zombie bank since investment grade creditors should have long ago headed for the door.

Bloomberg are quoting various analysts as saying that there is no way that the ECB will allow this but that must infer that the objection of burden sharing is philosophical rather than practical.

http://www.bloomberg.com/news/2011-06-16/ireland-snubs-ecb-effort-to-avoid-meltdown-with-threat-on-bank-guarantees.html

“Noonan must be kidding,” said Klaus Baader, an economist at Societe Generale in London. “It’s not so much money-saving as a way of Ireland trying to improve its bailout terms, just as the Eurogroup is focused on Greece. Naturally, it means investor stress and increases pressures on bank funding. The ECB won’t take this particularly seriously, but the annoyance factor is extremely high.”

I think it would actually be helpful for the ECB to come out and approve this as it might remind the various commentators that they are not trying to impose their philosophy on taxpayers, they are trying to protect the working financial system (which Anglo and INBS are no longer a part of).

Rubik.

"The German Chancellor Angela Merkel is due to attend a press conference with the European Central Bank (ECB) later today. It is thought we could get the first indications of a response to the announcement by Minister Noonan then."


http://www.newstalk.ie/2011/news/5department-of-finance-defends-timing-for-burning-bondholders37/

later12

Of course, there is also an issue about the timing of this, coming at the 100 day mark of FG in office, and perhaps not as much to show for it as they might have liked, by now.

Although I think movement on the senior unsecured debt at Anglo was desired since February, a sudden trip to Washington and a return to talk of burning bondholders does make for interesting timing.

http://www.rte.ie/news/2011/0616/politics.html

In his acceptance speech after his election as Taoiseach, Mr Kenny pledged to introduce a range of reforms in his first 100 days.
Some of those targets have been met, such as the jobs budget he promised, even if he later thought better of the term.
But others, such as setting up a Strategic Investment Bank, have proved too ambitious.
The firm pledge to renegotiate the European Union-International Monetary Fund deal, which Mr Kenny said was bad for Ireland and bad for Europe, has proved beyond the Government too.
Beyond those promises, U-turns have been signalled on third level fees and, more worryingly for Government supporters, hints that social welfare cuts and income tax increases are creeping back onto the agenda.

pog it

http://www.joanburton.ie/economy-jobs-finance/lenihan-confirms-anglo-bondholders-already-bailed-out

pog it

loldog wrote: »

Well he's just been to see Timothy Geithner. You may recall there was a report in the Irish Times that the ECB had been in favour of burning senior bondholders but Geithner objected. So, I think we can expect the ECB to approve. The whole process appears well choreographed.

.

I take it the report you're talking about was the Morgan Kelly analysis in the Irish Times.

If so then no it didn't say that. It was the IMF that was in favour of burning the senior bondholders

Again see also: http://www.joanburton.ie/economy-jobs-finance/lenihan-confirms-anglo-bondholders-already-bailed-out

Scofflaw

jank wrote: »

All investments are gambles Scofflaw. The difference of course is the risk of your investments. Bonds are (generally) regarded as safe investments that carry little risk but also low rates. Buying stocks in say a small cap exploration company carries huge risks. The pay-offs could be massive (10k could become a million overnight) but also the risk is such that one would only invest in such a company if they are happy to lose that inital 10k, not ones lifes savings.

Investing is a form of gambling.

In the sense that gambling is a form of investment, certainly - but there is a reason why there are two different words, and it's not merely so that your granny feels safer taking a punt on the banks.

In the wider sense that can be made to apply here, doing anything is "a form of gambling". Getting a job is "a form of gambling", buying a house is "a form of gambling", having children is "a form of gambling", choosing your degree subject is "a form of gambling", crossing the road is "a form of gambling". There are no certainties in life bar death and taxes (and libertarians would like to eliminate the latter).

The use of the term "gambling", therefore, is deliberately pejorative here, and is a deliberate rhetorical device to reduce the status of investors, and to pretend that they can have no reasonable expectation of a return on their investment. I don't object to burning the bondholders, but I don't find it necessary to pretend that they have no rights or expectations in the matter.

A highly significant difference, of course, is that gamblers cannot take you to court when their bets don't pay off - investors, on the other hand, can and do. The use of the term 'gamblers' therefore also implies that burning the bondholders is legally trouble-free, which is simply not the case - and is, again, a rhetorical device to boost the case that it's ridiculous for the government not to have taken this option.

A further significant difference is that other gamblers are not put off by the spectacle of a fellow gambler losing out, whereas investors are deterred by the spectacle of fellow investors losing their investment. Again, the use of "gamblers" here implies that burning the bondholders won't have any impact on other bond purchasers - again, this is nonsense.

So, no, "gambling" is not appropriate here, because it's a quite deliberate rhetorical sleight of hand used to imply a number of things which simply aren't true. Using the term therefore creates false expectations with respect to the effects of certain courses of action - and, given the stakes in play, we cannot afford a false notion of the risks.

Burning the bondholders, after all, is also a gamble - and it should be quite evident how my use of the word there is intended to make you view such a proposition.

cordially,
Scofflaw

loldog

pog it wrote: »

I take it the report you're talking about was the Morgan Kelly analysis in the Irish Times.

If so then no it didn't say that. It was the IMF that was in favour of burning the senior bondholders

Again see also: http://www.joanburton.ie/economy-jobs-finance/lenihan-confirms-anglo-bondholders-already-bailed-out

Thanks, that's correct, the IMF was in favour of the plan but the ECB wanted senior bondholders to be paid in full. I've amended my original post as it's confusing enough as it is.

.

jank

later10 wrote: »

These bonds are unsecured debt liabilities. Do you know what deposits are? They are unsecured senior liabilities. Your Granny is an unsecured senior liability.

The bonds in question have the same legal status as deposits. Few people would call depositing money a gamble.

One reason why these bondholders could not previously be touched is because that would raise a legal issue of applying haircuts to deposit holders as well, seeing as how they both stand in equal footing to one another.

Now that there are no deposits in Anglo, and now that the relevant guarantee has expired as of September 30th 2010, senior unsecured bond holders can be looked at.

So apart from the legallity if it is still an investment of sort.

gonedrinking

So the ECB have now ruled out imposing loses on senior bondholders saying their stance has not changed:

http://www.irishtimes.com/newspaper/breaking/2011/0617/breaking83.html
"“The general stance of the ECB is known and is very unlikely to change. This particular issue has to be looked at when the time comes,” the source said."

I'm confused, why does Ireland need the ECBs approval for this? When did we hand over our sovereignty to the ECB?

beeftotheheels

gonedrinking wrote: »

So the ECB have now ruled out imposing loses on senior bondholders saying their stance has not changed:

http://www.irishtimes.com/newspaper/breaking/2011/0617/breaking83.html
"“The general stance of the ECB is known and is very unlikely to change. This particular issue has to be looked at when the time comes,” the source said."

I'm confused, why does Ireland need the ECBs approval for this? When did we hand over our sovereignty to the ECB?

Because they can pull the plug on our banks - they're running the life support machine which is currently keeping our banks alive.

So, would you really wish the government burn the Anglo bond-holders if a consequences was that the following morning when you put your card in the cash machine no money came out? You're savings were wiped out? Your employer, if Irish rather than an MNC, had their cash wiped out? This would be chaos.

Some commentators have suggested that we should have called their bluff on this, but at the moment vis-a-vis Greece, Germany aren't getting on too well calling their bluff.

gonedrinking

beeftotheheels wrote: »

Because they can pull the plug on our banks - they're running the life support machine which is currently keeping our banks alive.

No they can't, Irelands problem is now the ECBs problem, they are in too deep at this stage. They've got to keep Ireland afloat no matter what. Even if they did decide to commit suicide on themselves by cutting off funding, the IMF would step in and provide the extra funding required.

beeftotheheels

gonedrinking wrote: »

No they can't, Irelands problem is now the ECBs problem, they are in too deep at this stage. They've got to keep Ireland afloat no matter what. Even if they did decide to commit suicide on themselves by cutting off funding, the IMF would step in and provide the extra funding required.

Seriously? Germany thought that about Greece and we're not seeing the ECB changing tack, most commentators believe that Germany will blink first yet you're convinced that the ECB would?

The reason the ECB is averse to burning bondholders is contagion, they think it risks destroying both the eurozone economy and possibly the wider global economy and that being the case they are perfectly prepared to threaten to pull the plug (if plug pulling becomes inevitable).

If we were to do something which threatened to plunge the eurozone, and the UK, and feasibly even the US, into a deep and dark recession (which is what the ECB views bondholder burning as doing) then do you think that there is any chance that the ECB would allow this? We'd be threatening to create financial armageddon in the world which would hurt every one especially little open, export driven, economies like our own just to make ourselves feel a bit better.

If the ECB pulled the funding our banks would collapse overnight. Not over a week, not over a month, overnight. The IMF could not come up with the €100m odd replacement in that time, and is not empowered to lend at the rates the ECB is lending to our banks at. So no, the IMF neither could nor should fill the breach.

While we benefit from the ECB's protecting our banks, and while the ECB has been entirely consistent on their line on this, we do not play chicken with them, we won't win, and even if we did win the consequences would be too dire to imagine if the ECB are right about the risks (France, US, the European Commission etc back the ECB now).

Liam Byrne

Scofflaw wrote: »

The use of the term "gambling", therefore, is deliberately pejorative here, and is a deliberate rhetorical device to reduce the status of investors, and to pretend that they can have no reasonable expectation of a return on their investment. I don't object to burning the bondholders, but I don't find it necessary to pretend that they have no rights or expectations in the matter.

"Burning the bondholders" is an equally deliberately perjorative phrase, suggesting that they get dismissed/hard-done-by.

They are getting the appropriate return on their "investment".

Do you have a similar objection to that perjorative phrase ? It doesn't seem to be the case, since you used the phrase yourself.

Why not ?

beeftotheheels

http://www.independent.ie/business/irish/ecb-softens-stance-on-plan-to-burn-bondholders-2677687.html

I can't believe I linked to this paper...

How and ever, they are reporting that if, as we suspect, the Anglo and INBS debt is held by hedgies and not banks/ insurers etc, then there might be room for burning them without risking contagion.

Scofflaw

Liam Byrne wrote: »

"Burning the bondholders" is an equally deliberately perjorative phrase, suggesting that they get dismissed/hard-done-by.

They are getting the appropriate return on their "investment".

Do you have a similar objection to that perjorative phrase ? It doesn't seem to be the case, since you used the phrase yourself.

Why not ?

"Burn the bondholders" is the phrase preferred by people like Sinn Fein, who are very much in favour of doing so - so I'm afraid your attempt at a riposte lacks any real punch.

cordially,
Scofflaw

Scofflaw

beeftotheheels wrote: »

http://www.independent.ie/business/irish/ecb-softens-stance-on-plan-to-burn-bondholders-2677687.html

I can't believe I linked to this paper...

How and ever, they are reporting that if, as we suspect, the Anglo and INBS debt is held by hedgies and not banks/ insurers etc, then there might be room for burning them without risking contagion.

It does seem pretty likely at this stage. Hopefully this is not just the Indo being inaccurate, as is so often the case.

cordially,
Scofflaw

Liam Byrne

Scofflaw wrote: »

"Burn the bondholders" is the phrase preferred by people like Sinn Fein, who are very much in favour of doing so - so I'm afraid your attempt at a riposte lacks any real punch.

I never take any notice of what Sinn Fein say or want, and them being behind it certainly doesn't preclude it from being perjorative and inappropriate.

So my "attempt at a riposte" stands.

You strongly objected to one perjorative phrase while using another one yourself.

Why ?

Sand

beeftotheheels wrote: »

http://www.independent.ie/business/irish/ecb-softens-stance-on-plan-to-burn-bondholders-2677687.html

I can't believe I linked to this paper...

How and ever, they are reporting that if, as we suspect, the Anglo and INBS debt is held by hedgies and not banks/ insurers etc, then there might be room for burning them without risking contagion.

Who might the hedge funds shareholders be?

I wonder where banks and insurers might invest some capital to make a return?

Theres no good contagion/bad contagion. Theres simply contagion. And either you operate in your own interests, or in the interests of your creditors.

The ECB, and many EU politicians, appear to have some sort of irrational hatred for derivative products like CDS and/or hedge funds and seem to be willing to sacrificie any principle to defeat them...so far though, its Investors 10 - EU 0

Phill Ewinn

Whoo-pee-do! He just spent 2 billion bailing out Irish Life! It's worth feck all. Noonan is every bit as bad as that last traitor.

DJCR

Ok, just so I can work this out in simple terms because confusion reigns in my head...

Basically this announcement has:-

1) Been made with out prior concent from the ECB.
2) Has the support of the IMF.
3) The IMF, mainly bank rolled by the US and hence has a very Capitalist outlook supports this action (As per the rules of capitalism) which it didn't before.
4) The ECB doesn't want to sanction this due to risk of contasion accross the globe in effect protecting itself and the US etc.

Is this it?

Tora Bora

DJCR wrote: »

Ok, just so I can work this out in simple terms because confusion reigns in my head...

Basically this announcement has:-

1) Been made with out prior concent from the ECB.
2) Has the support of the IMF.
3) The IMF, mainly bank rolled by the US and hence has a very Capitalist outlook supports this action (As per the rules of capitalism) which it didn't before.
4) The ECB doesn't want to sanction this due to risk of contasion accross the globe in effect protecting itself and the US etc.

Is this it?

You forgot to mention "without support of Enda Kenny"!

Haven't you seen several minsters make pronouncements recently, only to be slapped down by Enda, I guess because Gilmore has him by the cojones:cool:
R Bruton, slapped over the JLC wage reduction. Enda's own body guard and right hand man, Phil Hogan slapped down over the water charges issue.
Now Enda in unison with his common law wife, Gilmore boldly states "there will be no income tax rises this year", barely a few days after Noonan, say's such an event could not be ruled out.

kdowling

who are the senior bondholders?
what amounts of money did they invest and what kinds of returns did they get?

beeftotheheels

Sand wrote: »

Theres no good contagion/bad contagion. Theres simply contagion. And either you operate in your own interests, or in the interests of your creditors.

The point is whether there is contagion or not, not whether there is good or bad contagion.

Say Debt Fund LLC, a hedgie based in Connecticut owns €500m of the Anglo bonds in question (which would be a fair chunk of what is outstanding). We manage to give them €350m in full and fair settlement of their liabilities. Debt Fund LLC will have to write down its assets. Its investors including no doubt the big pension funds like CalPERS and Ontario Teacher's will take a hit, but it will be minimal in relation to their balance sheets. Debt Fund might get margined, but they'd need to have thrown caution to the wind in order for this to happen and over invested in Anglo debt. Even if they did, there would be a couple of banks, or more likely a couple of other hedgies/ securitizations at the end of it so the risk keeps flying to the four winds (as was the original theory behind securitizations).

If German Bank AG owned €500m of these Anglo bonds and was going to realise a €150m loss on that investment it still would not be the end of the world, since German Bank should not have over exposed to Anglo bonds, and so should have the capital to take the hit. So, if the markets believe that we are only burning bondholders in zombie banks again we avoid contagion.

However, if the markets view any bondholder burning as being evidence that senior bonds will not be honored, while those bonds are held by players in the real economy, be they banks or insurers, then panic will ensue. The banks will hoard cash, the interbank markets will dry up and all hell will break loose.

If the markets interpret it as option a) or Option b) then we potentially avoid contagion. If they interpret it as option c) then we don't.

And to learn the full lesson from the Credit Crunch Mark I and the problems with securitizations, the significant problem was assets showing up on balance sheets where they were not expected to be facilitated by the ratings agencies. We never expected to find CDOs on the balance sheets of the major banks, but they got rated as AAA, and there they were on the balance sheets of some major banks, which caused panic because no one knew where the toxic assets were, only that they were showing up in unexpected places.

The ratings agencies have not rated Anglo and INBS senior as investment grade for some time meaning that regulated investors should not be holding much of it, which should mitigate the risk of any panic as to where it lies but justifies the ECB questioning who the investors are over and above whether the bank is still functioning. They've learned that lesson.

beeftotheheels

Sand wrote: »

The ECB, and many EU politicians, appear to have some sort of irrational hatred for derivative products like CDS and/or hedge funds and seem to be willing to sacrificie any principle to defeat them...so far though, its Investors 10 - EU 0

It is not the ECB and or EU against investors, it is the ECB and EU trying to protect the global economy. They're defending, not attacking, and thus far they have been winning even if it looks like Greece may tip that on its head in the coming weeks.

In case you didn't spot - Germany blinked!

http://uk.reuters.com/article/2011/06/17/uk-eurozone-germany-merkel-vienna-idUKTRE75G1RX20110617

ps I would suggest you look up the definition of a derivative (which is a kind of contract which can be traded in the market) and a hedge fund (which is a player in that market even if there can also be a secondary market for some investments in hedge funds)

Scofflaw

Liam Byrne wrote: »

I never take any notice of what Sinn Fein say or want, and them being behind it certainly doesn't preclude it from being perjorative and inappropriate.

So my "attempt at a riposte" stands.

You strongly objected to one perjorative phrase while using another one yourself.

Why ?

Because one is pejorative (and obviously so), and the other isn't. That's why 'gamblers' is only used by one side of the debate, while both sides use 'burn the bondholders' - indeed, the pro-imposition of losses people use it more.

You're on a hiding to nothing here, Liam, particularly since my use in that post was to say "I have no objection to burning the bondholders".

cordially,
Scofflaw

Scofflaw

beeftotheheels wrote: »

It is not the ECB and or EU against investors, it is the ECB and EU trying to protect the global economy. They're defending, not attacking, and thus far they have been winning even if it looks like Greece may tip that on its head in the coming weeks.

In case you didn't spot - Germany blinked!

http://uk.reuters.com/article/2011/06/17/uk-eurozone-germany-merkel-vienna-idUKTRE75G1RX20110617

Hmm. And there was Olli Rehn calling for unity only yesterday:

Brussels, 16 June 2011

Statement by Commissioner Rehn on Greece

I am confident that next Sunday, the Eurogroup will be able to decide on the disbursement of the fifth tranche of the loans for Greece in early July. And I trust that we will also be able to conclude the pending review, in agreement with the IMF.

In the same context, the Eurogroup on Sunday-Monday will discuss the contents and conditions of a successor programme for Greece, and the nature of private sector involvement in this, with a view to taking decisions at the next Eurogroup meeting of 11 July.

By doing so, we will avoid the default scenario and pave the way for an agreement on the medium-term strategy. It has been difficult, but I strongly believe that with this two-step approach, in agreement with IMF, we can avoid any accident scenario. It means that the funding of the Greek sovereign debt can now be ensured until September, while we take the decisions for the medium-term, beyond September, in July.

I call on all EU decision-makers, and more particularly the Finance Ministers of the euro area next Sunday, to overcome the remaining differences and come to a responsible agreement at this critical juncture.

Of course, a great deal of responsibility lies on the shoulders of the Greek authorities and all Greek political leaders. We expect the Greek Parliament to endorse the economic reform programme as agreed by the end of June. It is regrettable that the efforts to build national unity failed yesterday. Indeed the efforts needed to avoid a default - which would be a catastrophe for Greece - are the responsibility of all political forces.

The next days will be critical for the financial stability and economic recovery in Greece and Europe. I trust all leaders in Greece and Europe realise their responsibility and will act accordingly.

Protecting the global economy? They may yet do it, and they may yet beat the markets, which would be the first time in a long time if they do.

cordially,
Scofflaw

Liam Byrne

Scofflaw wrote: »

Because one is pejorative (and obviously so), and the other isn't. That's why 'gamblers' is only used by one side of the debate, while both sides use 'burn the bondholders' - indeed, the pro-imposition of losses people use it more.

The word "burn" is certainly pejorative, and I personally object to anyone using it, because it doesn't represent the facts; they're getting the appropriate return on their investment.

I genuinely think that anyone in favour of imposing the losses is being naive in using it because it is a phrase manufactured by the anti-losses brigade to make the reasonable seem reactionary and unreasonable.

Which is why I rail against it entering common usage, and challenge it at every opportunity - it should NOT be allowed enter mainstream discussion because it's the equivalent of phrasing "having sex" as "raping"......only pro-celibacy people would even attempt such a thing, and anyone who was against natural activities who accepted and normalised such phrasing would be shooting themselves in the foot.

You're on a hiding to nothing here, Liam, particularly since my use in that post was to say "I have no objection to burning the bondholders".

The last part is agreed and noted, however you did use a phrase that I consistently object to - whomever uses it.

It's not "burning" them; it's making them face up to the losses that their own choices and investments incurred.

The thread title is correctly phrased. Your post isn't.

beeftotheheels

Liam Byrne wrote: »

The word "burn" is certainly pejorative, and I personally object to anyone using it, because it doesn't represent the facts; they're getting the appropriate return on their investment.

I genuinely think that anyone in favour of imposing the losses is being naive in using it because it is a phrase manufactured by the anti-losses brigade to make the reasonable seem reactionary and unreasonable.

Which is why I rail against it entering common usage, and challenge it at every opportunity - it should NOT be allowed enter mainstream discussion because it's the equivalent of phrasing "having sex" as "raping"......only pro-celibacy people would even attempt such a thing, and anyone who was against natural activities who accepted and normalised such phrasing would be shooting themselves in the foot.



The last part is agreed and noted, however you did use a phrase that I consistently object to - whomever uses it.

It's not "burning" them; it's making them face up to the losses that their own choices and investments incurred.

The thread title is correctly phrased. Your post isn't.

People who wish to impose losses on the senior debt holders can refer to it how they like, burden sharing, loss imposition, bondholder burning.

People who argue against it do not argue that for philosophical reasons the bondholders should be sacred, they argue that the risk of contagion from imposing losses on the bondholders could far outweigh the benefits of making them recognize their losses. I haven't seen a single poster, commentator, or public representative/ central banker argue against burning the bondholders on any other basis.

If we could impose the losses without triggering contagion then that would be a good thing and we should investigate it. But if it carries a significant risk of contagion then we should not.

I really don't think the phrase "burning the bondholders" alters my views on this at all since I would think that those who appreciate the contagion arguments, understand the language well enough to distinguish between what was once a pejorative term adopted by the pro-burden sharing camp but is now accepted shorthand, from really pejorative language.

And as we can see from Greece the ECB just faced down Germany so to think that the general populace are going to make this decision based on a misunderstanding of pejorative terms is just not true. The final decision on burden sharing will, as long as we remain a member of the Euro, be made by the ECB and not Joe Public.

SeanW

loldog wrote: »

Well he's just been to see Timothy Geithner. You may recall there was a report in the Irish Times that the IMF had been in favour of burning senior bondholders but Geithner objected....

.

Between Timmy Geithner, the ECB and the Sarkozy-French, it's quite telling that IMF were our best friends in this whole sorry mess. (i.e. lending us money at the cheapest rates and wanting us to burn impose losses on bank bondholders)

We are beyond ****ed.

Sand

beeftotheheels wrote: »

ps I would suggest you look up the definition of a derivative (which is a kind of contract which can be traded in the market) and a hedge fund (which is a player in that market even if there can also be a secondary market for some investments in hedge funds)

Please, tell me more. Wait, let me go and get a pen and notebook so I can write some of this stuff down.

Liam Byrne

beeftotheheels wrote: »

People who wish to impose losses on the senior debt holders can refer to it how they like, burden sharing, loss imposition, bondholder burning.

Agreed. My point is that they are shooting themselves in the foot by adopting the phraseology of those who coined the phrase "burning".....they're basically making themselves sound unreasonable.

EVERYONE should pay their way.
EVERYONE should accept what bad decisions they themselves make.
EVERYONE should accept losses based on those decisions.

I haven't heard anyone say "burning the mortgage-holders" in terms of making them accept that their investment has turned into negative equity......why is that ? It's because those who coin such phrases and try to establish them as colloquialisms use it as a brainwashing method to make it seem unreasonable.

Yes, I agree - it's the fault of those against such inequality for allowing themselves to be sucked in and not challenging such an inappropriate phrase head-on.

Which is why I pulled Scofflaw up on it; he's all for making bondholders accept the results of their own decisions, and yet uses a phrase coined by those trying to make such a stance appear unreasonable.

It's not "burning" anybody.

beeftotheheels

Sand wrote: »

Please, tell me more. Wait, let me go and get a pen and notebook so I can write some of this stuff down.

Well seeing as how you wrote that the ECB is in an irrational fight to the death trying to defeat a piece of paper without personality...

Sand wrote: »

The ECB, and many EU politicians, appear to have some sort of irrational hatred for derivative products like CDS and/or hedge funds and seem to be willing to sacrificie any principle to defeat them...so far though, its Investors 10 - EU 0

CDSs muddy the water in terms of where risk lies, therefore they increase the risks associated with contagion, and given that many of the counter parties to CDSs are the investment banks, that is a hell of a lot of mud in an area where the ECB and various taxpayers could really do with some clarity. But the ECB cannot defeat a "CDS" since the CDS is a piece of paper.

The ECB is desperately trying to avoid triggering the CDSs on Greek debt since that involves all the participants leaving the sides of the muddy pool where the ECB lifeguard can keep an eye on them and flailing desperately into the middle, because for some irrational reason the ECB worries that one or more banks might just drown, and the panic to get back to the sides could be equally fatal.

Scofflaw

Liam Byrne wrote: »

Agreed. My point is that they are shooting themselves in the foot by adopting the phraseology of those who coined the phrase "burning".....they're basically making themselves sound unreasonable.

EVERYONE should pay their way.
EVERYONE should accept what bad decisions they themselves make.
EVERYONE should accept losses based on those decisions.

I haven't heard anyone say "burning the mortgage-holders" in terms of making them accept that their investment has turned into negative equity......why is that ? It's because those who coin such phrases and try to establish them as colloquialisms use it as a brainwashing method to make it seem unreasonable.

Yes, I agree - it's the fault of those against such inequality for allowing themselves to be sucked in and not challenging such an inappropriate phrase head-on.

Which is why I pulled Scofflaw up on it; he's all for making bondholders accept the results of their own decisions, and yet uses a phrase coined by those trying to make such a stance appear unreasonable.

It's not "burning" anybody.

Except that I used the phrase in the context of making the bondholders accept imposed losses, and didn't find it off-putting in the slightest, which makes me think that as a phrase it's not rhetorically effective, hence its adoption (and, as far as I can tell, origin) amongst those who wish to impose such losses.

Ah, well, no matter.

cordially,
Scofflaw

ei.sdraob

If anything the last few years should have thought some here is that there is no such thing as a "no risk investment" all investments carry risk, unless you believe in the "(value of) X always goes up" fairy :P

ill go further than that any decision a business person makes carries risk, learning to live with and balance/understand risk is a prerequsite for any investor/business person

if any hedgefund or bank has over exposed themselves to one particular class of debt, well then they deserve to be "burned", stupidity and recklessness should not be rewarded since it leads to bigger issues, we already done enough of that

Noreen1

hatrickpatrick wrote: »

FINALLY!!!!!

*does a fancy little celebratory dance*

This is absolutely epic and took far, far too long.

Hmm - those were my sentiments, until I realised that a few billion is peanuts when you compare the tens of Billions of debt that have been forced onto the shoulders of the Irish people.

The cynic in me makes me wonder if our Government haven't been handed a few crumbs just to stop us grumbling...

ei.sdraob

Noreen1 wrote: »

The cynic in me makes me wonder if our Government haven't been handed a few crumbs just to stop us grumbling...

The cynic in me thinks that it took so long for this to come about,
due to the door being kept open in order for certain players to exit

Scofflaw

ei.sdraob wrote: »

The cynic in me thinks that it took so long for this to come about,
due to the door being kept open in order for certain players to exit

In certain senses, though, that's explicitly the case. The reason this can be considered is because the remaining bondholders are expected to be hedge funds and 'distressed debt' funds.

I appreciate that's not quite what you're suggesting!

cordially,
Scofflaw

thebman

The cynic in me thinks this was announced to grab a headline at 100 days in government day to ensure the opposition didn't get any headline news that might hurt the government in opinion polls or make the people realise that the promised political reforms are slow coming...

take everything

Beefoftheheels says that fear of contagion is the real reason for not imposing losses. Any system that threatens to come crashing down if it (justly) punishes stupid behaviour is deeply fcuked up.

Just an idle musing.

Scofflaw

take everything wrote: »

Beefoftheheels says that fear of contagion is the real reason for not imposing losses. Any system that threatens to come crashing down if it (justly) punishes stupid behaviour is deeply fcuked up.

Just an idle musing.

All the evidence suggests that modern market capitalism is a deeply messed up system - it's just somewhat less messed up than the alternatives.

cordially,
Scofflaw