IMF confident on promissory notes deal

Scofflaw

The IMF are apparently upbeat on the prospects of a deal on the promissory notes:

THE International Monetary Fund is optimistic that agreement can be reached on restructuring the Anglo Irish Bank promissory notes, IMF official Craig Beaumont said yesterday.

The IMF's mission chief for Ireland said there was a lot of consensus between the various organisations meeting in Brussels to look at ways of reducing the country's debt repayments. Another repayment of €3.1bn is due to be made later this month.

"There is a lot of consensus. It is still a work in progress but fundamentally the underlying process has attracted a lot of consensus," he added.

http://www.independent.ie/business/irish/imf-upbeat-promissory-deal-can-be-struck-to-reduce-debt-payments-3038441.html

Going back to the troika review, the question was then posed about a deal on the promissory notes, to which the answer was that the three institutions would have to work out how they could be restructured to benefit Ireland while not causing problems elsewhere - it seems that process is moving along nicely.

cordially,
Scofflaw

later12

I for one would be fascinated to learn how restructuring (i.e. extending) the repayment of the ELA via the IBRC promissory notes would cause problems elsewhere.

The notion of anything resembling an inflation problem on restructuring this debt is slightly batty. The ECB's governing council certainly don't need an internet forum to tell them this, therefore one must assume that the 'problems' referred to mean problems of other countries' institutions asking for the same treatment. Which is itself a little perlexing. All such operations are ultimately approved by the ECB's governing council, and since when has the governing council concerned itself with public outcry? It consistently (and quite rightly) refers to its own autonomous insulation from political and popular opinion.

It should also be pointed out that if successful, this will not have been the first time that the repayment details on the Irish promissory notes have been restructured, the first having been an amendment to the interest schedule.

Skopzz

Unfortunately, Brian Lenihan bankrupted us by tying our fate to doomed Banks. As of September 13th 2011, here's how much we owe because of Lenihan:



Source: http://www.debtclock.ie/



As I write this post, the debt per Man, Woman and Child has since increased to € 26,541...

Skopzz

later12 wrote: »

I for one would be fascinated to learn how restructuring (i.e. extending) the repayment of the ELA via the IBRC promissory notes would cause problems elsewhere.

The notion of anything resembling an inflation problem on restructuring this debt is slightly batty. The ECB's governing council certainly don't need an internet forum to tell them this, therefore one must assume that the 'problems' referred to mean problems of other countries' institutions asking for the same treatment. Which is itself a little perlexing. All such operations are ultimately approved by the ECB's governing council, and since when has the governing council concerned itself with public outcry? It consistently (and quite rightly) refers to its own autonomous insulation from political and popular opinion.

It should also be pointed out that if successful, this will not have been the first time that the repayment details on the Irish promissory notes have been restructured, the first having been an amendment to the interest schedule.

Restructuring isn't the answer - it must be written off. This debt doesn't even belong to the Irish tax payer. Noonan must burn these senior bondholders. It is immoral and illegal to pay to the impending € 3 billion at the end of this month... I suspect this will make everyone reconsider voting FG / LAB.

People MUST pressure the Gov't to inflict losses on these Hedge Funds. They are speculators who were never guaranteed this money by the Irish Gov't.

NIMAN

Skopzz wrote: »

Restructuring isn't the answer - it must be written off. This debt doesn't even belong to the Irish tax payer. Noonan must burn these senior bondholders. It is immoral and illegal to pay to the impending € 3 billion at the end of this month... I suspect this will make everyone reconsider voting FG / LAB.

People MUST pressure the Gov't to inflict losses on these Hedge Funds. They are speculators who were never guaranteed this money by the Irish Gov't.

.. and they won't vote for FF for a while either.

and probably the reason why SF will make great strides in the political world in Ireland in the next couple of decades.

Skopzz

FF should be given a well deserved slap down and disbanded - hard to believe they still have supporters. At this stage, I will vote for anyone but FG / LAB / FF. Sinn Fein would burn these bondholders.

Brian Lenihan's ponzi legacy set us up like this:



I for one never have short memories...

later12

Skopzz wrote: »

Noonan must burn these senior bondholders.

The promissory notes have nothing do do with senior bond holders. They have nothing directly to do with any bonds at all. Essentially, they relate to ELA debt. They are not sovereign bonds, and their restructuring (or indeed, repudiation, if it were to come to that) are not to be handled like sovereign bonds. Let this be black and white: promissory notes are not sovereign bond indentures.

It is immoral and illegal to pay to the impending € 3 billion at the end of this month

Morality is not something we ought to be concerned with in this forum, but I would love for you to explain how it might be illegal.

daltonmd

later12 wrote: »

The promissory notes have nothing do do with senior bond holders. They have nothing directly to do with any bonds at all. Essentially, they relate to ELA debt. They are not sovereign bonds, and their restructuring (or indeed, repudiation, if it were to come to that) are not to be handled like sovereign bonds. Let this be black and white: promissory notes are not sovereign bond indentures.

Morality is not something we ought to be concerned with in this forum, but I would love for you to explain how it might be illegal.

It's not true that the promissory notes are not related to with senior bondholders. The promissory note is a promise by the government to repay 3.1 billion, on behalf of Anglo to the ICB. The note will repay the ICB the money it lent to Anglo, this is how Anglo repaid it's bondholders

Because this money (ELA) was created, when it's repaid it just disappears.
It isn't owed to the ECB, it was a once off and has nothing to do with the Fiscal Treaty - it should be written off.

later12

daltonmd wrote: »

It's not true that the promissory notes are not related to with senior bondholders. The promissory note is a promise by the government to repay 3.1 billion, on behalf of Anglo to the ICB. The note will repay the ICB the money it lent to Anglo, this is how Anglo repaid it's bondholders

Anglo has enough assets to repay all remaining bondholders. If it were just a matter of repaying bondholders, there would be no problem.

There is a relatively small amount of Anglo bonds outstanding. The essential reason why Anglo cannot be wound down faster is the ELA funding which the bank has received from the ECB via the Central Bank.

daltonmd

later12 wrote: »

Anglo has enough assets to repay all remaining bondholders. If it were just a matter of repaying bondholders, there would be no problem.

There is a relatively small amount of Anglo bonds outstanding. The essential reason why Anglo cannot be wound down faster is the ELA funding which the bank has received from the ECB via the Central Bank.

I never said it was just a matter if repaying bondholders - that ship has sailed they have been repaid using the ELA.

45billion Euro was created by the CB to keep Irish Banks solvent - this is how Anglo repaid the bondholders - when the banks repay this money it simply disappears. If this government simply tore up that note then it would mean that we don't have to borrow it -as it stands we now have to.

sarumite

Skopzz wrote: »

Unfortunately, Brian Lenihan bankrupted us by tying our fate to doomed Banks. As of September 13th 2011, here's how much we owe because of Lenihan:



Source: http://www.debtclock.ie/



As I write this post, the debt per Man, Woman and Child has since increased to € 26,541...

I could be wrong, but I have the sneaking suspicion that debt clocks are a misleading since they are only looking at the debt side of the equation and not the capital/asset side. I may be technically €26k in debt, but if I have €26k in the bank is that also counted?

doc_17

Burn Baby Burn

later12

daltonmd wrote: »

If this government simply tore up that note then it would mean that we don't have to borrow it -as it stands we now have to.

Repudiating the promissory notes might be rather a foolish thing to do, though. Because doing so would mean that Anglo would have to be wound up immediately. Far better, then, to keep it going trying to get back as much revenue as it possibly can whilst postponing the commencement of repaying the ELA funding for as long as possible. 100 years would be just lovely, but perhaps not realistic. But 10 years might be.

daltonmd

later12 wrote: »

Repudiating the promissory notes might be rather a foolish thing to do, though. Because doing so would mean that Anglo would have to be wound up immediately. Far better, then, to keep it going trying to get back as much revenue as it possibly can whilst postponing the commencement of repaying the ELA funding for as long as possible. 100 years would be just lovely, but perhaps not realistic. But 10 years might be.

Why would Anglo have to be wound up immediately? The ELA money that it repays is literally retired from the system, torn up, disappeared. It was created out of thin air. The CB printed this money, it isn't a debt that has to be repaid - it's an accountancy exercise.

We are borrowing 3.1 billion plus interest, this is then given to Anglo (IBRC) who hand it to the Central bank who then rip it up.

ELA funding is money created by our own central bank - we are borrowing to repay ourselves money we never had in the first place that goes nowhere, we are borrowing so that this can be torn up.

later12

daltonmd wrote: »

Why would Anglo have to be wound up immediately?

Because it is not permissible for a Central Bank to facilitate ELA funding to any institution which is technically insolvent, i.e. insolvent from an accounting point of view. Without any promissory notes, Anglo is insolvent from an accounting point of view. A legal case taken by an ordinary citizen would establish this pretty rapidly.

So promissory notes should remain in place, but they should be extended out as long as humanly possible, and repaid or rather, torn up at some point in the future, whenever Anglo is finally buried and all of its recoverable assets have been retrieved.

daltonmd

later12 wrote: »

Because it is not permissible for a Central Bank to facilitate ELA funding to any institution which is technically insolvent, i.e. insolvent from an accounting point of view. Without any promissory notes, Anglo is insolvent from an accounting point of view. So promissory notes should remain in place, but they should be extended out as long as humanly possible, and repaid or rather, torn up at some point in the future, whenever Anglo is finally buried and all of its recoverable assets have been retrieved.

Not only is it permissible - but it was done:


http://www.independent.ie/business/irish/central-bank-steps-up-its-cash-support-to-irish-banks-financed-by-institution-printing-own-money-2497212.html

"The Irish Independent learnt last night that the Central Bank of Ireland is financing €51bn of an emergency loan programme by printing its own money.A spokesman for the ECB said the Irish Central Bank is itself creating the money it is lending to banks, not borrowing cash from the ECB to fund the payments. The ECB spokesman said the Irish Central Bank can create its own funds if it deems it appropriate, as long as the ECB is notified."

later12

I think you missed the point entirely.

It is not permissible for a Central Bank to to facilitate ELA funding to any institution which is technically insolvent, the crux of the issue being the part that I have just emboldened.

daltonmd

later12 wrote: »

I think you missed the point entirely.

It is not permissible for a Central Bank to to facilitate ELA funding to any institution which is technically insolvent, the crux of the issue being the part that I have just emboldened.

You'll have to clarify if you don't mind? Thanks.

later12

The promissory notes are Anglo's bailout from the state's perspective.
Without the promissory notes, Anglo is insolvent from a technical, accounting point of view.
ELA cannot help, because it legally cannot be extended to any institution which is technically insolvent.

So without the promissory notes extant, there can be no ELA,and no opportunity to recover the value of Anglo's assets as scheduled.

Why not just postpone them for a decade, and then tear them up?

daltonmd

later12 wrote: »

The promissory notes are Anglo's bailout from the state's perspective.
Without the promissory notes, Anglo is insolvent from a technical, accounting point of view.
ELA cannot help, because it legally cannot be extended to any institution which is technically insolvent.

So without the promissory notes extant, there can be no ELA,and no opportunity to recover the value of Anglo's assets as scheduled.

Why not just postpone them for a decade, and then tear them up?

Ah, I get you - but here's the thing it's not being asked to repay the entire ELA funding (I think the 42 billion refers to Anglo not the entire banking system) and it's not repaying it out of assets - we're borrowing the money - if we did nothing then it remains in the same state (pardon the pun).



Absolutely agree and was going to post same. If they waited and more importantly DIDN'T borrow this, then this could save us billions.

Skopzz

Even if Anglo Irish Bank is classed as insolvent, they will still be able to monetize from the Irish central bank. I withdrew all my cash from this toxic dump in 2009 when I realized they were in deep trouble. The capitalist basis of any such bank/company in trouble will see people withdraw their money and park it elsewhere (at least I did). The promissory notes is not our debt - we should Not pay it. Even if it means capital flight, it won't have any long-term consequence because Iceland did it and they succeeded. Iceland now has unemployment of just 8% versus 14% in Ireland.



The fact that our economy is growing (albeit more tepidly) will reduce our dependence on the bond markets.



We can also tap the Ireland-America fund or other bilateral loans.



The promissory note to unguaranteed bondholders could easily be burned by the government. It is Not our debt - it must Not be paid.

mistermouse

I got the impression that our government aren't really interested in dealing with this issue properly or in any way that may help the nation

I would have very little to loose by the IMF coming in and sorting the country out, and am growing more and more of the opinion that they are our best hope and certainly would be more beneficial to us than politicians who are unequiped or more interested in looking good in europe and certainly more than giving more control to German or French politicians who are only interested in re-election

How far should we let it go before IMF real intervention becomes inevitible anyway. The whole programme seems to be drip feed so much as it is without visiting Pensions and Salaries of the elite and protecting the CPA

The rest of us are suffering and going to suffer more first, before the protected

femur61

http://www.irishtimes.com/newspaper/breaking/2012/0309/breaking1.html

In the article it is saying one of the reasons the ECB are resisting intervention is due to our high wages in the PS. I know many of you are screaming not more PS bashing, but having worked abroad I know the wages here are higher. Why people get a job for life is beyond me, we need to show the powers that be i.e people giving us money we are spending it wisely.

later12

http://www.irishtimes.com/newspaper/...breaking1.html

The argument is made that average public pay and welfare levels in Ireland are higher than the average in some of the other euro zone countries that are supporting Ireland’s bailout, among them Spain, Slovenia and Slovakia.

The article only implies but does not specify... is the ECB making this argument?
If so, why is the ECB (or perhaps, individuals on its governing council) making this argument?

As the ECB are keen on telling us, their role is purely technical and in the context of the crisis, pertains to EA Financial Stability. Quite right too. But specifying an issue like the above is overtly political.

Given that there is money available in the bailout plan to pay the €3.1 billion due on March 31st, the case is being made that any delay would seriously erode the Government’s standing with markets at a time when Ireland’s return to markets is still not assured.

This simply isn't credible. The promissory notes in question have zero interaction with private financial institutions, nor with the the market. The only difference market participants would notice would be a more sustainable Irish debt load.

The only valid point made in that article is that a restructuring of the Irish promissory notes would run contrary to the ECB's objective of reducing its exposure to Ireland. However, in light of Ireland's vulnerable recovery and the risk of a European recession, they might want to reconsider whether this failure to improve the perceived sustainability of Irish debt, if rejected, might not backfire on its long term exposure to the Irish financial system.

Idbatterim

http://www.irishtimes.com/newspaper/...breaking1.html

In the article it is saying one of the reasons the ECB are resisting intervention is due to our high wages in the PS. I know many of you are screaming not more PS bashing, but having worked abroad I know the wages here are higher. Why people get a job for life is beyond me, we need to show the powers that be i.e people giving us money we are spending it wisely.

i have been harping on about this for over a year at this stage Id say. Do I agree with the Anglo debt NO, but how badly off are we really if we can afford to keep PS and SW pay and inefficiencies at as good as boom levels?

Hayte

I don't understand anything about how this deal works. Monetisation for the purpose of servicing national debt is forbidden by the Maastricht Treaty, but thats essentially what is happening. It is illegal to trade whilst insolvent, yet IBRC is doing it. I guess if you pass the buck via a chain of guarantees then technically you can never be insolvent as long as the buck stops with an infinitely large taxbase.

The collateral that IBRC delivers to the CBI for ELA money is worthless because the promissory notes are IBRC liabilities. But for the purposes of ELA they appear to be assets (debt instruments), even though the issuer is insolvent (but not technically) and promises to unconditionally pay €51 billion, an indeterminate amount of which is created to finance national debt (contrary to EU regulations) and everyone appears to avoid calling a spade a spade and everything is anything you want to be as long as nobody asks if any of this is legal, ethical, fair or simpler still, whether it makes any sense whatsoever?

If someone can explain it to me, I would be grateful. I realized how little I knew the moment when someone in this thread said IBRC's ELA obligation should be written off, and I had no idea what consequence that would have. I had no idea how to respond to that statement. Its such a tangled web of bulls**t I no longer know whats real and true anymore. Maybe thats the point?

Geuze

Note that the Promissory Notes are assets of IBRC.

Scofflaw

Geuze wrote: »

Note that the Promissory Notes are assets of IBRC.

Yes - as per Karl Whelan here: http://www.karlwhelan.com/IrishEconomy/Oireachtas-Feb-2012.pdf

I think that's what's confusing Hayte - the promissory notes aren't owed back to the government by IBRC, and are therefore not liabilities. They are literally money put into IBRC by the State - not a loan, but a digout.

Without them, IBRC is insolvent - with them, solvent.

cordially,
Scofflaw

Hayte

Without them, IBRC is insolvent - with them, solvent.

I understand that. My concern is that it looks to me like...a repo scam.

stackerman

IMO, it is moving faster then the IMF can keep up

http://www.forbes.com/sites/afontevecchia/2012/03/09/on-greece-defaults-and-the-future-of-derivatives/

CDS's (credit default swaps) are going to bring this whole thing down. That's why they have been desperate NOT to call Gresse's moves a 'Default'.

The Spanish are up next, and don't fancy being told what to do

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100015432/spains-sovereign-thunderclap-and-the-end-of-merkels-europe/

We will just have to go with the flow, or tell them to p@ss off. Don't see the later happening just yet.
Interesting times

Scofflaw

Hayte wrote: »

I understand that. My concern is that it looks to me like...a repo scam.

To me it looks like a bank bailout, but I appreciate there's an air of "find the lady" to the whole process.

cordially,
Scofflaw

later12

I prefer your earlier term digout.

It has a whiff of roguishness which bailout doesn't quite capture.