Citigroup's advice on taking a second bailout

micro_dot

what are your thoughts on Citigroup's advice for us to take a second bailout?

The only way these guys are experts is because they set up the whole heist in the first place. Citigroup talks today about the markets as a separate entity, but as far as I can make out, the banks are the market traders. Is this part of the reason why the problem has not been sorted?

It really gives the lie to the argument that we are getting austerity because we deserve it, when Citigroup and others engaged in fraudulent behaviour, get bailed out and then impose the penalty on us. And that's separate to the question of a second bailout being manageable, when Greece has practically defaulted.

http://www.nytimes.com/2011/10/30/opinion/sunday/friedman-did-you-hear-the-one-about-the-bankers.html?src=ISMR_AP_LO_MST_FB

hmmm

I'll answer your first question and ignore the rant.

If Ireland cannot return to the debt markets at reasonable cost in 2013, we will probably look for a 2nd bailout - which will allow us to access cheaper funds.

The big difference in 2013 versus our first bailout, is that we should hopefully have the deficit under control, so most of what we require is money to roll over existing loans rather than borrowing new money.

The NTMA are probably going to try dipping their toes into the water late this year or early next year. Ireland's debt cost has been falling, but it is still very high. The hope is that if we can show we have our deficit under control, our yields will continue to fall. It's a big ask however in a relatively short period of time. There are also events largely outside our control that will influence our yields, such as whether the overall Euro crisis can be brought under control by the time we return to the markets.

None of this is a surprise, we've known about this for years and why RTE makes it the lead item on the news as if it is some blinding revelation is beyond me - however considering their editorial has been staggering from blind optimism to deep despair I'm not surprised, they appear clueless and are not providing a proper level of public service.

thebman

It is hard to say us needing a second bailout suits the banks.

Surely they want Ireland in the markets at as high a rate they can get but still as a save investment so they can make as much as possible over Irish bonds?

They can't really do that if we take a second bailout.

daddydick

My thoughts:

Grand advice but the NTMA have obviously considered the fact that borrowing at 3% is better than returning to the markets at a current 8%.

Nothing new to see here - no need to be ranting and raving, it makes loads of sense to do as Citigroup advise.

Interestingly, what are the arguments against what Citigroup said - apart from the fact that they are a bank ie the devil in disguise?

Suryavarman

daddydick wrote: »

Interestingly, what are the arguments against what Citigroup said - apart from the fact that they are a bank ie the devil in disguise?

It might suggest to the markets that we are having trouble getting our deficit under control. This could reduce investor confidence and result in slower growth.

It would also mean we would be borrowing more and we would have to spend more of the budget on servicing the debt.

maninasia

Suryavarman wrote: »

daddydick wrote: »

Interestingly, what are the arguments against what Citigroup said - apart from the fact that they are a bank ie the devil in disguise?

It might suggest to the markets that we are having trouble getting our deficit under control. This could reduce investor confidence and result in slower growth.

It would also mean we would be borrowing more and we would have to spend more of the budget on servicing the debt.

3% vs 8% , it's a no brainer. The interest rate is the most important thing.

n97 mini

Our expenditure is still way ahead of our income and we're still borrowing huge amounts to pay the bills. On top of the massive debts we already have this is not good at all.

antoobrien

Suryavarman wrote: »

It might suggest to the markets that we are having trouble getting our deficit under control. This could reduce investor confidence and result in slower growth.

The indications are to the contrary and it's nothing that investors won't already know. I'd read this as asking the markets: Are we ready to take a risk on Ireland and get a reward?

It's interesting that we are getting historical lows (3.06% in 2005 is the record low) from a "punitive" bailout. The cost of our borrowing is going to go up, but not nearly as much as it could when we get back onto the markets.

femur61

n97 mini wrote: »

Our expenditure is still way ahead of our income and we're still borrowing huge amounts to pay the bills. On top of the massive debts we already have this is not good at all.

To a lay persons view on this, why can't the books be balanced, simple as.

average_runner

Because the goverment hasnt got the balls to take on the Unions in court

femur61

average_runner wrote: »

Because the goverment hasnt got the balls to take on the Unions in court

Thats my thoughts.

average_runner

If the goverment made some of the following changes it would help alot to improve the economy:

Encourage people to work, so people under 50,000 with a family keep their medical card and some small benefits, they still be paying tax, maybe increase the tax bracket for lower pay.

Lower the dole with above amendment.

Free medical care and dental care for all under 16, this will save millions in long term.

Get rid of middle management in public sector and invest then in education.

Get some one with a business head to sort Health board situation out.

Get rid of children allowance and provide free uniforms, books and meals in schools for kids instead, hence then we know kids are benefiting from the allowance.

antoobrien

femur61 wrote: »

To a lay persons view on this, why can't the books be balanced, simple as.

We could but it would mean doing at least some of the following:
massive PS pay cuts &/or redundancies
massive cuts to social welfare
massive cuts to services
massive cuts to maintenance (think worse roads, schools & hospitals)
hope we can raise more taxes (good luck with that)

The current policy is aimed at buying time so that we have a chance to limit the scope of the cuts.

average_runner

antoobrien wrote: »

We could but it would mean doing at least some of the following:
massive PS pay cuts &/or redundancies
massive cuts to social welfare
massive cuts to services
massive cuts to maintenance (think worse roads, schools & hospitals)
hope we can raise more taxes (good luck with that)

The current policy is aimed at buying time so that we have a chance to limit the scope of the cuts.

If we made the right changes in the right area education, roads and hospitals would actually improve.

Look at the swedish model. No need to raise taxes but all workers no matter how much they earn should pay tax to the system to get the services.

antoobrien

average_runner wrote: »

If we made the right changes in the right area education, roads and hospitals would actually improve.

With CPA involved? :eek:

average_runner

I know, but if we had a hard line goverment willing to start fresh we could change things.


But its a dream I know, all the current goverment and previous ones, is care about themselves

eire4

Regardless of the rights and wrongs of what this Citibank guy said I think it is disgusting that he is out there telling others what to do. This company is one of the worst of the worst when it comes to corruption. They created billions of dollars worth of securities to sell in the lead up to the financial collapse knowing that some would fail and even betting that some would fail so they could make even more money. Citibank and others such as Wells Fargo knowingly put toxic assests into the market place and used that knowledge to make a ton of money.

For anybody at Citibank to be pointing fingers and telling others what to do is quite simply disgusting. Personally I will never at least knowingly in any way do business with Citibank as a result of what they helped do to the many who are suffering now because of their actions.

Icepick

If we can't significantly lower the deficit - ie cut social protection and PS bills - we will need to borrow a lot so it makes sense to borrow at a lower rate.

n97 mini

Gerry Adams on the radio... reckons we'll need multiple bail-outs. He's probably right.

Icepick

n97 mini wrote: »

Gerry Adams on the radio... reckons we'll need multiple bail-outs. He's probably right.

Let me guess, he is against it but offers no alternative.

n97 mini

Icepick wrote: »

Let me guess, he is against it but offers no alternative.

I think he sees no way out and is going to emigrate...

micro_dot

daddydick wrote: »

My thoughts:

Grand advice but the NTMA have obviously considered the fact that borrowing at 3% is better than returning to the markets at a current 8%.

Nothing new to see here - no need to be ranting and raving, it makes loads of sense to do as Citigroup advise.

Interestingly, what are the arguments against what Citigroup said - apart from the fact that they are a bank ie the devil in disguise?

It being a bad idea to pay debt with more debt. Particularly sovereign debt.

It's like walking over the top, really, really calmly. No less crazily. Take a look at the NYT article re Citigroup.

maninasia

If you need to borrow money then 3% vs 8% is a no brainer. What's the debate?

maninasia

eire4 wrote: »

Regardless of the rights and wrongs of what this Citibank guy said I think it is disgusting that he is out there telling others what to do. This company is one of the worst of the worst when it comes to corruption. They created billions of dollars worth of securities to sell in the lead up to the financial collapse knowing that some would fail and even betting that some would fail so they could make even more money. Citibank and others such as Wells Fargo knowingly put toxic assests into the market place and used that knowledge to make a ton of money.

For anybody at Citibank to be pointing fingers and telling others what to do is quite simply disgusting. Personally I will never at least knowingly in any way do business with Citibank as a result of what they helped do to the many who are suffering now because of their actions.

Yes but his advice makes perfect sense.

antoobrien

micro_dot wrote: »

It being a bad idea to pay debt with more debt. Particularly sovereign debt.

But that's not what we'll be doing. We'll be paying for services, social welfare and PS Pay & pensions because there's a massive difference between the tax take and what we pay for these items.

We'll still make the same measly contributions against actual debt, that won't really make a dent in the whole thing (that amount is 2.3 billion over the past 4 years).

n97 mini

antoobrien wrote: »

We could but it would mean doing at least some of the following:
massive PS pay cuts &/or redundancies
massive cuts to social welfare
massive cuts to services
massive cuts to maintenance (think worse roads, schools & hospitals)
hope we can raise more taxes (good luck with that)

Realistically the only thing the government is afraid of doing is bringing the unions out on strike.

We can take the pain of the rest, and get on with it, but if 400,000 PSers decide to down tools the country will come to a standstill.

antoobrien

n97 mini wrote: »

Realistically the only thing the government is afraid of doing is bringing the unions out on strike.

We can take the pain of the rest, and get on with it, but if 400,000 PSers decide to down tools the country will come to a standstill.

This is the dream scenario really, they'd p*ss off the entire country and the government wouldn't have to pay their wages (so we wouldn't have to borrow the money to pay them). Leave them out long enough and it would bankrupt the unions - who have to pay the wages in an official dispute.

FreudianSlippers

antoobrien wrote: »

The indications are to the contrary and it's nothing that investors won't already know. I'd read this as asking the markets: Are we ready to take a risk on Ireland and get a reward?

It's interesting that we are getting historical lows (3.06% in 2005 is the record low) from a "punitive" bailout. The cost of our borrowing is going to go up, but not nearly as much as it could when we get back onto the markets.

That's the crux of the matter. We look at our two solutions for money (disregarding the word "bailout") - in 2013 we will either need to re-enter the markets or find an alternative source of money; IMO it's a no-brainer that we go for the lower interest rate, whichever that may be.
I think many people don't understand that borrowing money is usual procedure for nations, they usually just do it on the international market rather than from private sources such as the EFSF/IMF.

eire4

maninasia wrote: »

Yes but his advice makes perfect sense.

As I said I was not disputing the rights or wrongs of his advice. My entire point was to point out how corrupt citibank is and how they are one of the biggest players in causing the financial collapse and it is they who played a massive part in so many people now suffering and struggling economically.

n97 mini

antoobrien wrote: »

This is the dream scenario really, they'd p*ss off the entire country and the government wouldn't have to pay their wages (so we wouldn't have to borrow the money to pay them). Leave them out long enough and it would bankrupt the unions - who have to pay the wages in an official dispute.

If it were that easy to break the unions it would have been done before now.

Thatcher broke the unions in the UK, but look at all the strife they had while doing it.

femur61

n97 mini wrote: »

If it were that easy to break the unions it would have been done before now.

Thatcher broke the unions in the UK, but look at all the strife they had while doing it.

She wasn't called the Iron Lady for nothing.

This is one of the reasons why we have some of the highest public servants in europe. What people in the public service seem to fail to realise it is our taxes that are paying their wages. With less and less people working something will have to break. The live register may have decreased a little but how many people have returned to education or emigrated.

Maybe the government are won't touch the unions because majority are teachers themselves.

femur61

n97 mini wrote: »

If it were that easy to break the unions it would have been done before now.

Thatcher broke the unions in the UK, but look at all the strife they had while doing it.

She wasn't called the Iron Lady for nothing.

This is one of the reasons why we have some of the highest public servants in europe. What people in the public service seem to fail to realise it is our taxes that are paying their wages. With less and less people working something will have to break. The live register may have decreased a little but how many people have returned to education or emigrated.

Maybe the government are won't touch the unions because majority are teachers themselves.

dublinman1990

IMO, we could be in limbo here if we followed Citigroup, even if the markets is banned from giving us money until 2013, the worse scenario for Ireland (If it came up) was that if we have both have an opportunity for the second bailout and then can go back to the market at the same time would put us in a far more unsustainable position.

The way I would see it would be that Citigroup is asking to go one way or the other. One solution would be that we get the second bailout, everyone would be generally happy with the news. Everyone will think this would be good for Ireland.

However, do not get your hopes up about the rate cut, the IMF is still thinking of cutting it by an average of 1% or more. The saving would be around €400 million euro to the taxpayer. The word is on them IMO in regarding the situation from Citigroup. The EU had a different view on it too.

Legally though, this cut to the interest rate is still in the remit of being passed in the Oireacthas first and then, signed into law.

http://businessetc.thejournal.ie/ireland-will-get-one-per-cent-cut-on-bailout-interest-and-keep-corporation-tax-rate-report-132927-May2011/

Leading us into Citigroup way's could actually put us in more austerity for to years to follow when I come to think of it.

Also, if Ireland's timeline of going to the back the market was delayed further, then the projects that are involved in PPP's, schools, hosipitals and other infrastructure will be delayed for further years to come.

Godge

According to some economic analysts I have read (Seamus Coffey being one) we do not need to return to the market until early 2014 (January).

That being said, I think an earlier poster made the point that we will take the cheaper option - IMF or the markets.

I don't think it will be as simple as that. The two options will be:

- IMF with conditions (Croke Park will have expired by then) or
- Markets without conditions

There will also be the political part to consider. Another year of the bailout, to provide us with money in 2014 at cheap rates before returning to the markets in 2015 and 2016 would allow a triumphant election in early 2016 based on the "we rescued the country from the IMF who were brought in by FF" platform which would stave off attacks from FF and also make it harder for the likes of ULA to counter.

two wheels good

eire4 wrote: »

Regardless of the rights and wrongs of what this Citibank guy said I think it is disgusting that he is out there telling others what to do. This company is one of the worst of the worst when it comes to corruption. They created billions of dollars worth of securities to sell in the lead up to the financial collapse knowing that some would fail and even betting that some would fail so they could make even more money. Citibank and others such as Wells Fargo knowingly put toxic assests into the market place and used that knowledge to make a ton of money.

For anybody at Citibank to be pointing fingers and telling others what to do is quite simply disgusting. Personally I will never at least knowingly in any way do business with Citibank as a result of what they helped do to the many who are suffering now because of their actions.

Agreed.
Quoted from the previous link
"The news was that Citigroup had to pay a $285 million fine to settle a case in which, with one hand, Citibank sold a package of toxic mortgage-backed securities to unsuspecting customers — securities that it knew were likely to go bust — and, with the other hand, shorted the same securities — that is, bet millions of dollars that they would go bust."

But it wasn't only Citigroup. Goldman Sachs agreed a $100+m "compensation" for the same carry-on and avoided court. Peanuts compared to the profit they made. AFAIRemember - One or both of JPMorgan and Morgan Stanley were fined for similar fraud.

micro_dot

Take a look at Greece, with the Germans saying no more money unless Greece gets bondholders to take a 50% haircut. So -50% or Greece defaults. That's not interest rates, that's on the bottom line.

If we need one bailout, not to mind two, it surely means that the debt is unsustainable. 80 million Germans managed theirs after 90 years and another world war, until the Marshall fund sorted things out and they grew.

Why do they, we, not just cut to the chase? I'm beginning to think that Citigroup manages some funds that were about to take a horrific haircut.

You would forget in the current circumstances who governments are run for, with democracy in Europe taking a battering, including data protection here. Cameron stood up to Europe against the attempt to impose a Tobin tax on financial transactions and save the City, whilst their social welfare staff get counselling because they are at the frontline of cuts being imposed.

The killings these traders make - the UBS guy, who dithered on private currency deals, preferring to let his wife push the button. Would there have been any repercussions if he hadn't resigned?

You might remember what Paul Krugman said about the guarantee: worse than a crime, it's a mistake. Can we not just cut to the chase?

maninasia

two wheels good wrote: »

Agreed.
Quoted from the previous link
"The news was that Citigroup had to pay a $285 million fine to settle a case in which, with one hand, Citibank sold a package of toxic mortgage-backed securities to unsuspecting customers — securities that it knew were likely to go bust — and, with the other hand, shorted the same securities — that is, bet millions of dollars that they would go bust."

But it wasn't only Citigroup. Goldman Sachs agreed a $100+m "compensation" for the same carry-on and avoided court. Peanuts compared to the profit they made. AFAIRemember - One or both of JPMorgan and Morgan Stanley were fined for similar fraud.

I completely agree and it's amazing that none were prosecuted and jailed for serious fraud. This shows how the White House and Congress have been captured by the financial industry in the US.

maninasia

Godge wrote: »

According to some economic analysts I have read (Seamus Coffey being one) we do not need to return to the market until early 2014 (January).

That being said, I think an earlier poster made the point that we will take the cheaper option - IMF or the markets.

I don't think it will be as simple as that. The two options will be:

- IMF with conditions (Croke Park will have expired by then) or
- Markets without conditions

There will also be the political part to consider. Another year of the bailout, to provide us with money in 2014 at cheap rates before returning to the markets in 2015 and 2016 would allow a triumphant election in early 2016 based on the "we rescued the country from the IMF who were brought in by FF" platform which would stave off attacks from FF and also make it harder for the likes of ULA to counter.

I fear you are right but it would be a tremendous waste of money and extra burden on the taxpayer. It is not financially sound but it seems it will be sold to the public as a face saving measure about financial independence. The public at large need to educate themselves better.

eire4

two wheels good wrote: »

Agreed.
Quoted from the previous link
"The news was that Citigroup had to pay a $285 million fine to settle a case in which, with one hand, Citibank sold a package of toxic mortgage-backed securities to unsuspecting customers — securities that it knew were likely to go bust — and, with the other hand, shorted the same securities — that is, bet millions of dollars that they would go bust."

But it wasn't only Citigroup. Goldman Sachs agreed a $100+m "compensation" for the same carry-on and avoided court. Peanuts compared to the profit they made. AFAIRemember - One or both of JPMorgan and Morgan Stanley were fined for similar fraud.

Your absolutely spot on that it wasn't just Citibank. I only mentioned them as I thought it the height of arrogance for them to make that statement. Bank of America and Wells Fargo are another 2 of the worst and most corrupt ones.

eire4

maninasia wrote: »

I completely agree and it's amazing that none were prosecuted and jailed for serious fraud. This shows how the White House and Congress have been captured by the financial industry in the US.

Absolutely spot on. Obama's record on dealing with these bankers is terrible. Ultimately in the US this kind of collusion is only going to get worse as long as the supreme courts decision that allows any corporation to bribe politicans to an unlimited degree is allowed to stand. That decision basically turned the US government into a plutocracy.

daltonmd

maninasia wrote: »

If you need to borrow money then 3% vs 8% is a no brainer. What's the debate?

If only it was that simple. And what is kind of being missed here is the "borrowed" bit.

We're borrowing money to repay borrowed money that's used to pay completely unsustainable social welfare rates, PS rates, pensions and the like.

Think of Ireland using a maxed out credit card, we are borrowing to repay the interest on the minimum payment that we cannot afford to pay.

3% interest on 17 billion that we need to borrow this year?

Add that onto what we already owe.


We are drowning in debt, it isn't getting better, it isn't going away.

If this government does not call an emergency budget in the next 3 months and slash PS basic pay, SW rates, RA, Pensions and so on then they will cause more damage in the long run.

And before people start coming out about PS pay,SW and pensions - it no longer matters who "needs" it more - WE HAVE NO MONEY.

Defiler Of The Coffin

Whatever happened to 3% deficit before 2015?