Irish Banks-The Most Destructive Own Goal in History

gladrags

Prof Bill Black gave evidence today at the Banking Inquiry.

He pulled no punches,the financial Banks and bankers lied...

"A banking regulation expert has told the Banking Inquiry that the Government's response to the banking crisis was the "most destructive own goal in history" by giving an unlimited guarantee which turned a banking crisis into a fiscal crisis. "

According to Black there are...

"Insufficient safeguards to prevent future banking crisis."

Professor Bill Black of the University of Missouri-Kansas City has said that sufficient safeguards have not been put in place to prevent a banking crisis in the future.

Speaking on RTÉ’s Six One, he said that regulation supervision died in Ireland many years ago and that while there has been some improvement, the necessary steps have not been taken to be effective financial regulators in Ireland.

He added there was no regulation, no supervisory actions, zero-enforcement actions taken and there have been no safeguards."

Black referred to the fact that no one was held criminally responsible...

What do you think?

realitykeeper

gladrags wrote: »

"A banking regulation expert has told the Banking Inquiry that the Government's response to the banking crisis was the "most destructive own goal in history" by giving an unlimited guarantee which turned a banking crisis into a fiscal crisis. "

According to Black there are...

"Insufficient safeguards to prevent future banking crisis."

Professor Bill Black of the University of Missouri-Kansas City has said that sufficient safeguards have not been put in place to prevent a banking crisis in the future.

Speaking on RTÉ’s Six One, he said that regulation supervision died in Ireland many years ago and that while there has been some improvement, the necessary steps have not been taken to be effective financial regulators in Ireland.

He added there was no regulation, no supervisory actions, zero-enforcement actions taken and there have been no safeguards."

Black referred to the fact that no one was held criminally responsible...

What do you think?

I think he is correct.

kenmccarthy

100% correct
the bank guarantee was all based on what the (UNREGULATED) bankers were spouting to cowen and lenihan that night we were all enslaved to the trokia

Damien360

gladrags wrote: »

Prof Bill Black gave evidence today at the Banking Inquiry.


He added there was no regulation, no supervisory actions, zero-enforcement actions taken and there have been no safeguards."

Black referred to the fact that no one was held criminally responsible...

What do you think?

Does the 7 year rule for prosecutions apply in this case. I always thought the late timing of this inquiry was suspect. I am dreaming that such a rule exists whereby the timeframe elapsed means no prosecution can proceed. Failure to do your job is likely not a crime but giving false information as to the viability of a business would be. No point targeting politicians as stupidity is not a crime.

the watchman

I propose that Prof Bill Black be the next head of the Financial Regulatory Authority of Ireland , of course the banking and political elite would never allow it so no doubt if we live long enough we will witness the next banking/finacial crisis at some point in the future. :cool:

gladrags

Damien360 wrote: »

Does the 7 year rule for prosecutions apply in this case. I always thought the late timing of this inquiry was suspect. I am dreaming that such a rule exists whereby the timeframe elapsed means no prosecution can proceed. Failure to do your job is likely not a crime but giving false information as to the viability of a business would be. No point targeting politicians as stupidity is not a crime.

Tbh not sure.

Treason may not be limited to a time scale.

Rightwing

He is telling us what an intelligent 6 yr old would tell us.

Case closed.

yipeeeee

In another news Germany has invaded Poland

gladrags

Rightwing wrote: »

He is telling us what an intelligent 6 yr old would tell us.

Case closed.

Not to many intelligent 6 year olds around then?

Desolation Of Smug

Where's Scofflaw? At the time, I said it was madness paying the subordinated bondholders and was akin to robbery. He told me I was an eejit. He put it vaguely nicer, but that was basically his view - "It was essential". Yeah. Right. There will be a lot of quiet puppies/"I said this all along" types here now. At the time, I was ridiculed. Up yours.

andrew

Not sure what he's getting at with the Auditor thing - how do you assess whether the audit firm is doing a good enough job, so as to 'demote' them? You'd need someone to audit them, ad infinitum.

gladrags

andrew wrote: »

Not sure what he's getting at with the Auditor thing - how do you assess whether the audit firm is doing a good enough job, so as to 'demote' them? You'd need someone to audit them, ad infinitum.

It depends on what you mean by auditing.

As far as I am aware,the "auditors" turned out to be as uneffective,as the regulators.

Bottom line here is that there is little in the way of auditing and regulation,to prevent it from recurring.

Godge

Desolation Of Smug wrote: »

Where's Scofflaw? At the time, I said it was madness paying the subordinated bondholders and was akin to robbery. He told me I was an eejit. He put it vaguely nicer, but that was basically his view - "It was essential". Yeah. Right. There will be a lot of quiet puppies/"I said this all along" types here now. At the time, I was ridiculed. Up yours.

Once we did the guarantee in September 2008, we had to pay the subordinated bondholders when the payments fell due. That is the point that was made today.

The FF decision in September 2008 tied the hands of the government for the next few years. That is why the FG/Labour government had to pay the bonddholders - there was a legal guarantee.

That FF mistake was the biggest disaster to hit the country. Ironically, the only party to oppose it was Labour, who have been decimated at the polls. Even Sinn Fein supported it at the time in a vote in the Dail.

andrew

gladrags wrote: »

It depends on what you mean by auditing.

As far as I am aware,the "auditors" turned out to be as uneffective,as the regulators.

Bottom line here is that there is little in the way of auditing and regulation,to prevent it from recurring.

I'm just not seeing how his proposed solution would work. And I'd have mixed feelings about auditors - there's a lot of selection bias going on. The headline "Routine audit finds small scale control fraud, nips it in the bud" is never going to make the news. You're only ever going to hear about audits when they don't do their job, not when they do do their job, which is most of the time.

And in any case, I'm not convinced what brought the banks down was fraud. (Clearly Anglo misrepresented their position to the Central Bank which is fraud, but not one the audit firm had anything to do with), but in general what made the banks fail was a monumentally stupid business model, not fraud. It's not an audit firm's place to tell a bank that they've a crappy business model, or to prevent a firm from screwing itself over, if that's what its strategy is going to do.

Sheldons Brain

andrew wrote: »

And in any case, I'm not convinced what brought the banks down was fraud. (Clearly Anglo misrepresented their position to the Central Bank which is fraud, but not one the audit firm had anything to do with), but in general what made the banks fail was a monumentally stupid business model, not fraud. It's not an audit firm's place to tell a bank that they've a crappy business model, or to prevent a firm from screwing itself over, if that's what its strategy is going to do.

The auditor should ensure that the accounts are a true and fair picture of the entity. The accounts of Irish banks in 200 7 were not that.

andrew

Sheldons Brain wrote: »

The auditor should ensure that the accounts are a true and fair picture of the entity. The accounts of Irish banks in 200 7 were not that.

I guess you're referring to this bit from the article?

Professor Black said banks had engaged in essentially a “Ponzi system”. They would lend to a high risk applicant, setting a premium on the interest rate.
So if the cost of a bank loan was 4 per cent, it could lend at 9 per cent, allowing the bank to report a profit or “spread” of 5 per cent, which amounted to 500 base points.
The “right” auditing firm would view the spread as a “big, big, positive spread” and give the bank a “clean opinion”. When the borrower ran into difficulty the loan would be “rolled over”, or remortgaged, so starting a new loan.

But while that was certainly the case in the USA, is there any evidence this happened here? The problem in Ireland wasn't sub prime lending at extortionate rates, it was just regular lending on the basis of an asset that ultimately fell in value, and a borrower who had a job which was less secure than anyone thought.

So I guess what I'm saying is, in what way were the audit firms not giving a true and accurate account of the banks?

Sheldons Brain

andrew wrote: »

But while that was certainly the case in the USA, is there any evidence this happened here? The problem in Ireland wasn't sub prime lending at extortionate rates, it was just regular lending on the basis of an asset that ultimately fell in value, and a borrower who had a job which was less secure than anyone thought.

So I guess what I'm saying is, in what way were the audit firms not giving a true and accurate account of the banks?

In the 1990s the Irish banks were lending 80% / 3 times income on houses that were reasonably priced. A decade later those houses had vastly increased for no sustainable reason, and the bank was lending 100%/4.5 times income. The security of the loan was pretty good in the first instance and pretty dodgy in the second instance.

andrew

Sheldons Brain wrote: »

In the 1990s the Irish banks were lending 80% / 3 times income on houses that were reasonably priced. A decade later those houses had vastly increased for no sustainable reason, and the bank was lending 100%/4.5 times income. The security of the loan was pretty good in the first instance and pretty dodgy in the second instance.

Correct - in hindsight houses were a crappy security for the loan. But auditors weren't in a position to know this - they could no more have forseen the bubble bursting than anyone else.

And even if magically they did know the future, what were they to do? It was the auditor's job to say that the houses were being valued at their market value - which they were. If the auditors thought that the bubble was going to pop, at most they could give some sort of 'opinion' along the lines of 'we think your assumption re. delinquencies is not conservative enough' which the Banks had no obligation to take on board.

Sheldons Brain

andrew wrote: »

And even if magically they did know the future, what were they to do? It was the auditor's job to say that the houses were being valued at their market value - which they were. If the auditors thought that the bubble was going to pop, at most they could give some sort of 'opinion' along the lines of 'we think your assumption re. delinquencies is not conservative enough' which the Banks had no obligation to take on board.

Perhaps the Banks did not have to take this on board, but the auditors would have emerged with some credibility.

andrew

Sheldons Brain wrote: »

Perhaps the Banks did not have to take this on board, but the auditors would have emerged with some credibility.

Heck, for all we know they did! Though there's a big difference from Audit firms not being 'credible' to, as that article implies, being somehow directly responsible for what happened and letting fraud happen.

Manach

Of course it was worth it. So long as it propped up the institutions of the state and their supportive pillars, the banks, any amount of money is worth the price to be paid by the taxpayers, their sons and daughters, and to the Nth generation.:rolleyes:

gladrags

andrew wrote: »

Correct - in hindsight houses were a crappy security for the loan. But auditors weren't in a position to know this - they could no more have forseen the bubble bursting than anyone else.

And even if magically they did know the future, what were they to do? It was the auditor's job to say that the houses were being valued at their market value - which they were. If the auditors thought that the bubble was going to pop, at most they could give some sort of 'opinion' along the lines of 'we think your assumption re. delinquencies is not conservative enough' which the Banks had no obligation to take on board.

You know, the terminology you use underestimates the gravity of the event.

And more than likely underestimates the simple conclusion,that auditors,regulator
all acted in conjunction with the culture of the financial services.

As Black inferred,criminal behaviour,with no regard for consequence.

My angle is...

Introduce emergency legislation,and hold these people responsible.

Special powers Act.

andrew

gladrags wrote: »

You know, the terminology you use underestimates the gravity of the event.

And more than likely underestimates the simple conclusion,that auditors,regulator
all acted in conjunction with the culture of the financial services.

As Black inferred,criminal behaviour,with no regard for consequence.

My angle is...

Introduce emergency legislation,and hold these people responsible.

Special powers Act.

How is the conclusion that the regulator, the banks, and the auditors colluded in a criminal way, simpler than the conclusion that the regulator, the banks, and the auditors were as stupid and greedy and incompetent and willingly blind as everyone else?

worded

At the end of all this everyone gets away scot free and the bonuses are back

Bank parties were held behind closed door after the mess happened so as to not offend the public. Gauling.

Remember the recordings ..... Skin in the game. Took the figure out of my arse ....

They should be done for treason.

Desolation Of Smug

andrew wrote: »

How is the conclusion that the regulator, the banks, and the auditors colluded in a criminal way, simpler than the conclusion that the regulator, the banks, and the auditors were as stupid and greedy and incompetent and willingly blind as everyone else?

Professional duty, simple as. If a private person sells a crap car, they're innocent, they weren't expected to know. If a Car dealer sells a crap car, they're liable - they have a professional duty. Bankers had a professional duty. "Getting carried away" isn't a defence.

gladrags

andrew wrote: »

How is the conclusion that the regulator, the banks, and the auditors colluded in a criminal way, simpler than the conclusion that the regulator, the banks, and the auditors were as stupid and greedy and incompetent and willingly blind as everyone else?

If you leave out "willingly blind" I agree.

Willingly,but certainly not blind.

Culture has also a lot to do with it.

You buy in,and it is difficult to be the whistleblower.

There was no exscuse,not as if they did not know what they were up to.

And on top of that,they were not too concerned about consequences,for others,that is.

washman3

Godge wrote: »

Once we did the guarantee in September 2008, we had to pay the subordinated bondholders when the payments fell due. That is the point that was made today.

The FF decision in September 2008 tied the hands of the government for the next few years. That is why the FG/Labour government had to pay the bonddholders - there was a legal guarantee.

That FF mistake was the biggest disaster to hit the country. Ironically, the only party to oppose it was Labour, who have been decimated at the polls. Even Sinn Fein supported it at the time in a vote in the Dail.

Party political broadcast on behalf of Fine Gael..!!
FYI, Fine Gael totally agreed with Fianna Fail on the guarantee, as did Sinn Fein. Labour have been spouting for years that they 'opposed it'
Either they did this just to be different or more likely that they were all asleep on the night and deemed totally unimportant by the others, the latter would be my opinion.
Either way Labour simply didn't have a bulls notion what a bank guarantee entailed.

andrew

Desolation Of Smug wrote: »

Professional duty, simple as. If a private person sells a crap car, they're innocent, they weren't expected to know. If a Car dealer sells a crap car, they're liable - they have a professional duty. Bankers had a professional duty. "Getting carried away" isn't a defence.

It's a lot easier to tell whether a car is crap or not, than it is to predict whether an investment will go bad and a bubble will burst. Having a professorial duty doesn't give you any more intelligence or the power to predict what's going to happen. If the banks knew the bubble was going to burst, then why did they hold onto the loans they originated?

Desolation Of Smug

andrew wrote: »

It's a lot easier to tell whether a car is crap or not, than it is to predict whether an investment will go bad and a bubble will burst. Having a professorial duty doesn't give you any more intelligence or the power to predict what's going to happen. If the banks knew the bubble was going to burst, then why did they hold onto the loans they originated?

Because they knew they'd be bailed out. We always bailed them out in the past, why would it be different this time? And it wasn't. Go away, your points are invalid, disingenuous and manipulative.

andrew

Desolation Of Smug wrote: »

Professional duty, simple as. If a private person sells a crap car, they're innocent, they weren't expected to know. If a Car dealer sells a crap car, they're liable - they have a professional duty. Bankers had a professional duty. "Getting carried away" isn't a defence.

Desolation Of Smug wrote: »

Because they knew they'd be bailed out. We always bailed them out in the past, why would it be different this time?

Which past times are you referring to? It's not like it ever happened in Ireland before (well, PMPA and ICI maybe? Though they were very small scale in comparison.) There was no precedent for any of this, and the bailout was so costly for pretty much all involved (except bondholders) that I find it hard to believe that 'ah sure we'll get a bailout when this all goes under' was what was planned all along. I genuinely believe that everyone really was mostly just stupid and full of hubris.

And it wasn't. Go away, your points are invalid, disingenuous and manipulative.

Ha! My sincerest apologies for interrupting what I'm sure would have been a stunningly insightful circle-jerk.

jcon1913

andrew wrote: »

Correct - in hindsight houses were a crappy security for the loan. But auditors weren't in a position to know this - they could no more have forseen the bubble bursting than anyone else.

And even if magically they did know the future, what were they to do? It was the auditor's job to say that the houses were being valued at their market value - which they were. If the auditors thought that the bubble was going to pop, at most they could give some sort of 'opinion' along the lines of 'we think your assumption re. delinquencies is not conservative enough' which the Banks had no obligation to take on board.

Audit 101 - directors sign representations about the figures in the accounts. Directors of Anglo put a PERM TSB loan in as a normal deposit and signed representations saying that was the correct treatment when clearly it was not. Question did the auditors satisfy themselves as to yhe representations signed by the directors? Question can the directors be prosecuted for false representations?

Audit 102 Director of Anglo takes a loan from the bank and later in the year lodges enough money ( short term loan from his pal in Irish nationwide ) to hide his loan fromAnglo at the year end. False representations signed. See 101 above. Question did auditors check the assertions in the representations. In a very basic audit, transactions that took place before the year end and were reversed after the year end are automatically suspect.

Anyway AFAIK the auditors are in the firing line for their part in the mess. Someone somewhere is prosecuting them. The Chartered Accountants tried to haul them in but again only AFAIK the auditors gave them the 2 fingers ( legally of course and in a gentlemanly fashion ).

In conclusion no one will likely pay the price for their failures. Bankers keep their pay and bonuses from the boom years. Ditto Central Bank staff. Ditto auditors. Only the taxpayer gets shatfed when private losses get nationalised.

Desolation Of Smug

andrew wrote: »

Which past times are you referring to? It's not like it ever happened in Ireland before (well, PMPA and ICI maybe? Though they were very small scale in comparison.) There was no precedent for any of this, and the bailout was so costly for pretty much all involved (except bondholders) that I find it hard to believe that 'ah sure we'll get a bailout when this all goes under' was what was planned all along. I genuinely believe that everyone really was mostly just stupid and full of hubris.



Ha! My sincerest apologies for interrupting what I'm sure would have been a stunningly insightful circle-jerk.

Which, as the old adage goes, is pretty much the only meaningful output of economists.

andrew

jcon1913 wrote: »

Audit 101 - directors sign representations about the figures in the accounts. Directors of Anglo put a PERM TSB loan in as a normal deposit and signed representations saying that was the correct treatment when clearly it was not. Question did the auditors satisfy themselves as to yhe representations signed by the directors? Question can the directors be prosecuted for false representations?

Audit 102 Director of Anglo takes a loan from the bank and later in the year lodges enough money ( short term loan from his pal in Irish nationwide ) to hide his loan fromAnglo at the year end. False representations signed. See 101 above. Question did auditors check the assertions in the representations. In a very basic audit, transactions that took place before the year end and were reversed after the year end are automatically suspect.

Anyway AFAIK the auditors are in the firing line for their part in the mess. Someone somewhere is prosecuting them. The Chartered Accountants tried to haul them in but again only AFAIK the auditors gave them the 2 fingers ( legally of course and in a gentlemanly fashion ).

In conclusion no one will likely pay the price for their failures. Bankers keep their pay and bonuses from the boom years. Ditto Central Bank staff. Ditto auditors. Only the taxpayer gets shatfed when private losses get nationalised.

And did either of those transactions contribute in any meaningful way to the banking crisis or bailout? No. Look, I'm not saying auditors are by any means perfect. As you rightly point out, they're clearly willing to sign off on some dodgy shit. My point was/is just that blaming audit firms for the banking crisis, is silly. As far as I can tell, they had a minimal role, and I don't understand why Bill Black thinks they're major issue in this particular case. I'll leave it at that.

gladrags

"Last May, Christine Lagarde told a London conference that the behaviour of the financial sector hadn’t changed fundamentally since the crisis. “. . .The industry still prizes short-term profit over long-term prudence, today’s bonus over tomorrow’s relationship.”
Today, the Davos summit will welcome back many of the same movers and shakers whose reckless exuberance virtually destroyed lives and economies across the globe, in a week when an Oxfam statistic suggests that 80 people own as much wealth as half the world’s poorest. No doubt, there will be the usual pleas for everyone to move on. It’s four years after all since Jamie Dimon, chief executive of JPMorgan Chase complained, “I just think this constant refrain ‘bankers, bankers, bankers’ – it’s just a really unproductive and unfair way of treating people. And I just think people should just stop doing that”. That’s the same Jamie Dimon whose 2013 salary of $1.5 million was boosted with a bonus of $18.5 million in restricted stock options (up from $10 million the year before) – even as the bank’s profits fell, owing to the small matter of about $18 billion in fines for various transgressions such as mis-selling securities and manipulating key interest rates. The same Dimon who told an interviewer last week : “JPMorgan is the best thing I can do for country and humanity”."
Irish Times

So accordingly the culture and lack of regulation persists as far as lessons and safeguards are concerned.

Look at the recent attempt by going concerns,who tried to scupper Honahans attempt to impose regulation in the interests of the home buyers.

This included Noonan,and sections of the Irish media.

Godge

washman3 wrote: »

Party political broadcast on behalf of Fine Gael..!!
FYI, Fine Gael totally agreed with Fianna Fail on the guarantee, as did Sinn Fein. Labour have been spouting for years that they 'opposed it'
Either they did this just to be different or more likely that they were all asleep on the night and deemed totally unimportant by the others, the latter would be my opinion.
Either way Labour simply didn't have a bulls notion what a bank guarantee entailed.

You really had no comprehension of my post with your response. How can it be a party political broadcast on behalf of FG when I single out Labour as the only party to oppose the bank guarantee?

Dig out the Dail debate and the voting record if you want to understand it rather than making uninformed speculation.

Godge wrote: »

Once we did the guarantee in September 2008, we had to pay the subordinated bondholders when the payments fell due. That is the point that was made today.

The FF decision in September 2008 tied the hands of the government for the next few years. That is why the FG/Labour government had to pay the bonddholders - there was a legal guarantee.

That FF mistake was the biggest disaster to hit the country. Ironically, the only party to oppose it was Labour, who have been decimated at the polls. Even Sinn Fein supported it at the time in a vote in the Dail.

jcon1913

andrew wrote: »

And did either of those transactions contribute in any meaningful way to the banking crisis or bailout? No. Look, I'm not saying auditors are by any means perfect. As you rightly point out, they're clearly willing to sign off on some dodgy shit. My point was/is just that blaming audit firms for the banking crisis, is silly. As far as I can tell, they had a minimal role, and I don't understand why Bill Black thinks they're major issue in this particular case. I'll leave it at that.

Heres the circle

Govt - Banks - Central Bank - Estate Agents - Newspapers / property websites - Auditors - Developers - Builders - Mortgage Brokers - Architects - Solicitors - Engineers - Quantity Surveyors

Unfortunately no-one called stop except for the Prof of Economics from UCD and he was told to take a jump by the lovely Bertie Ahern.

''Soft Landing'' was the phrase of the day, and latterly it was ''we all partied''.

Well I didn't party and I'd bet most of the people on here didn't. But the list of people above had their snouts in the trough was long and none of the people who had a responsibility to call ''stop'' did so.

There was a feeling in the go-go banks that they were invincible and that nothing or nobody could stop them. Because everyone shook in their boots - crumbs from the kings table is what people were waiting for. And auditors along with everyone else played their part.

Even the second fiddle can contribute to the concert, eh?

gladrags

jcon1913 wrote: »

Heres the circle

Govt - Banks - Central Bank - Estate Agents - Newspapers / property websites - Auditors - Developers - Builders - Mortgage Brokers - Architects - Solicitors - Engineers - Quantity Surveyors

Unfortunately no-one called stop except for the Prof of Economics from UCD and he was told to take a jump by the lovely Bertie Ahern.

''Soft Landing'' was the phrase of the day, and latterly it was ''we all partied''.

Well I didn't party and I'd bet most of the people on here didn't. But the list of people above had their snouts in the trough was long and none of the people who had a responsibility to call ''stop'' did so.

There was a feeling in the go-go banks that they were invincible and that nothing or nobody could stop them. Because everyone shook in their boots - crumbs from the kings table is what people were waiting for. And auditors along with everyone else played their part.

Even the second fiddle can contribute to the concert, eh?

And a lot of that circle is still in place.

That's one of the main points made by Black.

If you look at the media/Govt/Banks/Estate agents response to Hounihans cap,you can see that.

To be fair,Hounihan did not back down.

OMD

Sheldons Brain wrote: »

In the 1990s the Irish banks were lending 80% / 3 times income on houses that were reasonably priced. A decade later those houses had vastly increased for no sustainable reason, and the bank was lending 100%/4.5 times income. The security of the loan was pretty good in the first instance and pretty dodgy in the second instance.

This is not quite true. I borrowed for my first house in 1994. 90% mortgages were the norm and is certainly what I got. Income multiples were used but 3.5-4 times a years income was the norm, not 3 times. A second income was normally allowed up to 1.5 times. So a couple, one earning 30K and the other earning 20k could borrow 135,000 on a property up to 150,000.

ardmacha

OMD wrote: »

This is not quite true. I borrowed for my first house in 1994.

Lucky you. You are probably in Oxfam's 1% by now!

90% mortgages were the norm and is certainly what I got. Income multiples were used but 3.5-4 times a years income was the norm, not 3 times. A second income was normally allowed up to 1.5 times. So a couple, one earning 30K and the other earning 20k could borrow 135,000 on a property up to 150,000.

The point is though that houses in 1994 were only likely to go up, prices were reasonable post currency crisis (I bought a house myself) and Ireland was heading into a period of strong growth. In 2007 houses were always more likely to go down than up, even if the decline was worse the we thought.

As to the overall point of the thread, the Bank Guarantee was indeed a spectacular own goal, but the real mistake was the game up to that point which brought the ball almost to the goal line. At that stage Ireland was like a driver on an icy road who goes into a skid, yes they might have steered differently in those 20 seconds, but above all they should have been driving more slowly all along.

Good loser

Desolation Of Smug wrote: »

Where's Scofflaw? At the time, I said it was madness paying the subordinated bondholders and was akin to robbery. He told me I was an eejit. He put it vaguely nicer, but that was basically his view - "It was essential". Yeah. Right. There will be a lot of quiet puppies/"I said this all along" types here now. At the time, I was ridiculed. Up yours.

If Scofflaw said you were an eejit, however nicely, I'm afraid in the context you were one.

Where is he now? Surely the wisest of all.

I thought Prof Black more than a little ropey in some of his views; in Ireland was he not playing to the gallery of public opinion just as he accused these bank consultants of being? Also just because Merill went broke doesn't mean their advice and proposals to our Govt were dodgy. Their client was the Irish State - not any of the banks.

Scofflaw was very down on opponents of the bank guarantee. I remember him emphasising that the Anglo Irish liquidity/solvency crisis was due to a run on the bank by their €70 billion depositors - their bondholders wern't a problem.

Dannyboy83

andrew wrote: »

Correct - in hindsight houses were a crappy security for the loan. But auditors weren't in a position to know this - they could no more have forseen the bubble bursting than anyone else.

And even if magically they did know the future, what were they to do? It was the auditor's job to say that the houses were being valued at their market value - which they were. If the auditors thought that the bubble was going to pop, at most they could give some sort of 'opinion' along the lines of 'we think your assumption re. delinquencies is not conservative enough' which the Banks had no obligation to take on board.

I'm not claiming to have a better understanding of this than anyone else, and I certainly didn't at the time, nor would I even begin to speculate about what should or shouldn't have happened.

But just adressing the issue of their 'ignorance', look at the following chart for example:

Figure 1. Bank lending to households and non-financial firms as a percentage of GDP (GNP for Ireland), 1997 and 2008.


As Figure 1 shows, back in 1997 when Ireland’s economy really was among the world’s best performing, Irish banks lent sparingly by international standards. Lending to the non-financial private sector was only 60% of GNP, compared with 80% in Britain and most Eurozone economies. The international credit boom saw these economies experience a rapid rise in bank lending, with loans increasing to 100% of GDP on average by 2008.

These rises were dwarfed, however, by Ireland, where bank lending grew to 200% of national income by 2008. Irish banks were lending 40% more in real terms to property developers alone in 2008 than they had been lending to everyone in Ireland in 2000, and 75% more to house buyers.

They didn't just wake up one morning with a tripling of credit relative to GNP...
It's very easy to believe that the ordinary citizen would have been unaware, but I just can't extend the benefit of the doubt to the professionals!

Desolation Of Smug

Good loser wrote: »

If Scofflaw said you were an eejit, however nicely, I'm afraid in the context you were one.

Where is he now? Surely the wisest of all.

I thought Prof Black more than a little ropey in some of his views; in Ireland was he not playing to the gallery of public opinion just as he accused these bank consultants of being? Also just because Merill went broke doesn't mean their advice and proposals to our Govt were dodgy. Their client was the Irish State - not any of the banks.

Scofflaw was very down on opponents of the bank guarantee. I remember him emphasising that the Anglo Irish liquidity/solvency crisis was due to a run on the bank by their €70 billion depositors - their bondholders wern't a problem.

Really? Lol. I'd say you'd bail out his bank alright! Tool.

RomanKnows

Desolation Of Smug wrote: »

Where's Scofflaw? At the time, I said it was madness paying the subordinated bondholders and was akin to robbery. He told me I was an eejit. He put it vaguely nicer, but that was basically his view - "It was essential". Yeah. Right. There will be a lot of quiet puppies/"I said this all along" types here now. At the time, I was ridiculed. Up yours.

Do you have a link to the post? So the veracity and accuracy of your story can be proven? I can't help but notice from reading your posts that you seem like a lad who likes to indulge in hyperbole and the embellishment of stories.

This is mixed with a very thin skin, as can be seen in this thread with you calling someone a tool, and telling another poster 'up yours'. A rhetorical device first used by Cicero I believe.

4zn76tysfajdxp

RomanKnows wrote: »

This is mixed with a very thin skin, as can be seen in this thread with you calling someone a tool, and telling another poster 'up yours'. A rhetorical device first used by Cicero I believe.

Spooferus Maximus used to devastate his opponents in the Roman forums much the same way.

gladrags

RomanKnows wrote: »

Do you have a link to the post? So the veracity and accuracy of your story can be proven? I can't help but notice from reading your posts that you seem like a lad who likes to indulge in hyperbole and the embellishment of stories.

This is mixed with a very thin skin, as can be seen in this thread with you calling someone a tool, and telling another poster 'up yours'. A rhetorical device first used by Cicero I believe.

When in Rome...

andrew

Dannyboy83 wrote: »

It's very easy to believe that the ordinary citizen would have been unaware, but I just can't extend the benefit of the doubt to the professionals!

I was still in school when all this was going on, so I've no idea what the general sentiment among 'professionals' was, but the impression I get was that at the time, even professionals were willing to believe in a number of different reasons for this, or at worst believe that there'd be a soft landing.

gladrags

A bit rich ,the ESRI claiming they warned the CB of the imminent doom.

I don't recollect any indicators from ESRI talkshops of financial irregularites.

If they did it was low profile.

"My concern was that one Irish bank in particular had a major bank in Poland and that Ireland could be exposed unduly through this form of investment.
"So I wrote to the regulator about that."
Allied Irish Bank, which has since been taken over by the State, sold its 70% share in Poland's Bank Zachodni in 2010.
Under cross-examination from TDs and senators, Mr FitzGerald said he again contacted the Central Bank the following year over his worries about the vigour of stress tests on Irish banks.
The professor, who had responsibility for influential economic forecasts from the part publicly-funded institute, was working with banks in spring 2007 on tests designed to assess their ability to withstand financial shocks.
"I was concerned that the stress tests being undertaken by the Central Bank were not onerous enough; that they were looking at falling house prices but not taking account of the fact that a lot other things would happen at the same time," he told the hearing.
"They were not using a model to do this so I contacted the Central Bank about my concerns in that regard in 2007."
Asked if he got a satisfactory reply from the regulator on both occasions, Prof FitzGerald responded: "No"
At the time, Patrick Neary was the chief executive of Dublin's Financial Regulator.

realitykeeper

andrew wrote: »

I was still in school when all this was going on, so I've no idea what the general sentiment among 'professionals' was, but the impression I get was that at the time, even professionals were willing to believe in a number of different reasons for this, or at worst believe that there'd be a soft landing.

During the naughties, government revenues were at an all time high as was the overall prosperity in the economy. Despite this, the banks were borrowing cheap money from abroad to lend to anyone who wanted a loan. Common sense suggested (to me, at least) that the Irish economy should have been self financing at the time and reducing its national debt.

The fact that the economy was not self financing led me and many other ordinary folk to conclude it would end badly for the banks. What I did not know was the fact that the government were going to mug young people to bail out everyone else.

gladrags

jcon1913 wrote: »

Heres the circle

Govt - Banks - Central Bank - Estate Agents - Newspapers / property websites - Auditors - Developers - Builders - Mortgage Brokers - Architects - Solicitors - Engineers - Quantity Surveyors

Unfortunately no-one called stop except for the Prof of Economics from UCD and he was told to take a jump by the lovely Bertie Ahern.

We can add thr ESRI to the circle.

The mea culpa's reign supreme.

“We made a call that Ireland would probably escape it and we were totally wrong,” Mr FitzGerald said, adding that he made a “big mistake” by not spotting obvious difficulties on the balance sheets of Irish banks at the time.
Mr FitzGerald outlined tensions that existed between the ESRI and the Department of Finance. He said the department was “thoroughly grumpy” about some of the measures the ESRI called for in 2008."