Anglo Irish Bank...?

Tangatagamadda Chaddabinga Bonga Bungo

Why did it get so many billions in tax payer money when it was just a commercial bank? Why did Merrill Lynch, after receiving a fee of over $11 million, say that the bank was financially sound, 11 days before nationalisation?

Excuse my naivety but I just don't really understand. Can anyone explain this concisely?

jimgoose

They were only supposed to blow the bladdy doors orf, innit??

KomradeBishop

In the former case, massive FF incompetence (at best). In the latter case: Banks/financial-institutions tend to shop around for appraisers who will give them a 'financially sound' rating, regardless of whether they are financially sound.

Why? Long-story short, maximizing short-term profits (even at the expense of long-term survivability), is a great way for people to enrich themselves in a fairly short amount of time, through the various ways in which these short-term profits allow them to personally financially benefit. When it all blows up, they can just walk away from the wreckage with their gains intact - hell, they'll even get the public to bail them out and mire the government in debt for decades, with pretty much no consequences for themselves.

Tangatagamadda Chaddabinga Bonga Bungo

Tangatagamadda Chaddabinga Bonga Bungo wrote: »

Why did it get so many billions in tax payer money when it was just a commercial bank?

The feeling was that Ireland is a tiny island in the eyes of investors and financial institutions, and that any bank failure would have a contagious effect on the entire system.

The options were between winding up Anglo and burning investors, or bluffing the market. Ireland went with the latter, and personally, I'm skeptical as to whether it made any difference.

Ireland was already in a kayak heading assuredly and inescapably for a lethal waterfall. Whether Ireland attempted to stay quiet and paddle backwards, or utter a shrill scream, probably made no difference.

NIMAN

OP,

You must hate logging into this site. Must take you a full minute to enter your username.

Mr. Incognito

Because all the developers who had finna fail in their pocket banked there.

They were afraid if the bank collapsed all hell would break loose, bank runs etc.

They nationalised it out of fear. Only after when they audited the loan book they realised how dodgy its practices were.

And we still have no binding banking lending regulation only guidelines from the central bank which means it will inevitably happen again.

Tangatagamadda Chaddabinga Bonga Bungo

NIMAN wrote: »

OP,

You must hate logging into this site. Must take you a full minute to enter your username.

Google chrome knows.

Solid answers so far in fairness. Still don't fully understand though.

20Cent

Tangatagamadda Chaddabinga Bonga Bungo wrote: »

Why did it get so many billions in tax payer money when it was just a commercial bank? Why did Merrill Lynch, after receiving a fee of over $11 million, say that the bank was financially sound, 11 days before nationalisation?

Excuse my naivety but I just don't really understand. Can anyone explain this concisely?

Because they owed billions to German and French banks so The ecb made bailing out Anglo a condition of Ireland getting continued funding.

ted1

Tangatagamadda Chaddabinga Bonga Bungo wrote: »

Why did it get so many billions in tax payer money when it was just a commercial bank? Why did Merrill Lynch, after receiving a fee of over $11 million, say that the bank was financially sound, 11 days before nationalisation?

Excuse my naivety but I just don't really understand. Can anyone explain this concisely?

When your knee deep in **** and need to keep whatever investments you have, you then lie your ass off.

Then as the story reveals itself and you need to keep investment in the country the only way to retain faith and cash is to tell the lenders that their money is safe.

Don't forget that Germant needed low interest rates so that the Irish would contiinue to buy German cars, we needed interest rates to be higher to control property prices but Germany wouldn't allow it.

KingBrian2

Short termism, it worked but only temporarily as in the long term it would be much more costly.

Sir Osis of Liver.

The Anglos,a great bunch of lads.

dxhound2005

Sir Osis of Liver. wrote: »

The Anglos,a great bunch of lads.

Shane Ross certainly thought they were back in the day when he was a financial journalist. He was their biggest fanboy and derided the old style banks for not employing the Anglo model. He tends not to mention it much nowadays.

Fitzpatrick has been through bankruptcy and has been granted legal aid for his upcoming court case next month. So the contention that there have been no consequences for the top brass at Anglo is not correct.

http://www.irishtimes.com/news/crime-and-law/former-anglo-chairman-sean-fitzpatrick-to-go-on-trial-1.2156598

Kermit.de.frog

Very simple OP. Had Anglo gone bust all your deposits and savings would have disappeared overnight as would everyone else's.

And if you don't understand why then you don't understand the market.

galljga1

Kermit.de.frog wrote: »

Very simple OP. Had Anglo gone bust all your deposits and savings would have disappeared overnight as would everyone else's.

And if you don't understand why then you don't understand the market.

Not many understand the market, not sure many in banking understand the market. George Soros has a good handle on it, if he could come on here, maybe he could clear things up.
Anglo and other banks borrowed huge amounts of money from various sources including other European banks and pension funds and handed this out to various speculators who bought up half of Europe (maybe a slight exaggeration). At the time, these institutions, particularly those in Germany were exposed to loses in America, Italy, Spain, Greece, Portugal to name but a few places. The Germans had been cutting back on spending and saving like hell for years so the German banks needed an outlet for their deposits. A lot of it came to Ireland and Paddy went a bit mad. If Anglo went under or Anglo and AIB went under it is possible that a number of other large European based financial institutions would have been put under major stress and followed suit. The entire Eurozone could have been plunged into a much more acute recession, the euro could have collapsed, we would have seen far more pain but maybe for a shorter period of time.

I cannot say how angry I was at the time of the bank guarantee/nationalisation/bailout. It was obvious that the bond holders included a lot of European banks. In my opinion we should have asked for a direct recapitalisation of the banks in trouble or simply wound up those that were not deemed systemic. A bail-in was another option. We had a brief window in which to play hardball but capitulated to Mr Trichet and co. If we had not, would we have been able to borrow money? Probably not.

Don't forget that our national debt was 35 - 40 billion in 2007. We put 60-65 billion into various banks. Current national debt is in the region of 210 billion. Effectively, this means we have borrowed in excess of 100 billion for the day to day running of the country regardless of the banking crisis. Not sure how we would have fared without the availability of this money at a relatively reasonable interest rate.

One last thing to illustrate the lack of understanding (at least mine) of all things financial: I worked for a major international bank (currently not so major). I queried why we were buying 10% of a 30 billion bond that Citi were offering while the US housing market was in freefall, what due diligence was carried out etc considering Fannie Mae and Freddie Mac were effectively bankrupt. The answer I got was "sure it's Citi'. Result: large haircut taken on the bond which was effectively a wrapper for housing related debt, a lot of which was sub prime..

tomwaterford

Kermit.de.frog wrote: »

Very simple OP. Had Anglo gone bust all your deposits and savings would have disappeared overnight as would everyone else's.

And if you don't understand why then you don't understand the market.

:pac:
Simply put wouldn't have cost me practically nothing so <e500

For Forks Sake

dxhound2005 wrote: »

Shane Ross certainly thought they were back in the day when he was a financial journalist. He was their biggest fanboy and derided the old style banks for not employing the Anglo model. He tends not to mention it much nowadays.

He was also championing Fitzpatrick to be head of the central bank back round 2005-06. Can you imagine how that could have gone? Unsurprisingly, all those writings appear to have been deleted.

Buford T. Justice XIX

galljga1 wrote: »

Not many understand the market, not sure many in banking understand the market. George Soros has a good handle on it, if he could come on here, maybe he could clear things up.
Anglo and other banks borrowed huge amounts of money from various sources including other European banks and pension funds and handed this out to various speculators who bought up half of Europe (maybe a slight exaggeration). At the time, these institutions, particularly those in Germany were exposed to loses in America, Italy, Spain, Greece, Portugal to name but a few places. The Germans had been cutting back on spending and saving like hell for years so the German banks needed an outlet for their deposits. A lot of it came to Ireland and Paddy went a bit mad. If Anglo went under or Anglo and AIB went under it is possible that a number of other large European based financial institutions would have been put under major stress and followed suit. The entire Eurozone could have been plunged into a much more acute recession, the euro could have collapsed, we would have seen far more pain but maybe for a shorter period of time.

I cannot say how angry I was at the time of the bank guarantee/nationalisation/bailout. It was obvious that the bond holders included a lot of European banks. In my opinion we should have asked for a direct recapitalisation of the banks in trouble or simply wound up those that were not deemed systemic. A bail-in was another option. We had a brief window in which to play hardball but capitulated to Mr Trichet and co. If we had not, would we have been able to borrow money? Probably not.

Don't forget that our national debt was 35 - 40 billion in 2007. We put 60-65 billion into various banks. Current national debt is in the region of 210 billion. Effectively, this means we have borrowed in excess of 100 billion for the day to day running of the country regardless of the banking crisis. Not sure how we would have fared without the availability of this money at a relatively reasonable interest rate.

One last thing to illustrate the lack of understanding (at least mine) of all things financial: I worked for a major international bank (currently not so major). I queried why we were buying 10% of a 30 billion bond that Citi were offering while the US housing market was in freefall, what due diligence was carried out etc considering Fannie Mae and Freddie Mac were effectively bankrupt. The answer I got was "sure it's Citi'. Result: large haircut taken on the bond which was effectively a wrapper for housing related debt, a lot of which was sub prime..

Good post. Thanks for that.

KingBrian2

galljga1 wrote: »

Not many understand the market, not sure many in banking understand the market. George Soros has a good handle on it, if he could come on here, maybe he could clear things up.
Anglo and other banks borrowed huge amounts of money from various sources including other European banks and pension funds and handed this out to various speculators who bought up half of Europe (maybe a slight exaggeration). At the time, these institutions, particularly those in Germany were exposed to loses in America, Italy, Spain, Greece, Portugal to name but a few places. The Germans had been cutting back on spending and saving like hell for years so the German banks needed an outlet for their deposits. A lot of it came to Ireland and Paddy went a bit mad. If Anglo went under or Anglo and AIB went under it is possible that a number of other large European based financial institutions would have been put under major stress and followed suit. The entire Eurozone could have been plunged into a much more acute recession, the euro could have collapsed, we would have seen far more pain but maybe for a shorter period of time.

I cannot say how angry I was at the time of the bank guarantee/nationalisation/bailout. It was obvious that the bond holders included a lot of European banks. In my opinion we should have asked for a direct recapitalisation of the banks in trouble or simply wound up those that were not deemed systemic. A bail-in was another option. We had a brief window in which to play hardball but capitulated to Mr Trichet and co. If we had not, would we have been able to borrow money? Probably not.

Don't forget that our national debt was 35 - 40 billion in 2007. We put 60-65 billion into various banks. Current national debt is in the region of 210 billion. Effectively, this means we have borrowed in excess of 100 billion for the day to day running of the country regardless of the banking crisis. Not sure how we would have fared without the availability of this money at a relatively reasonable interest rate.

One last thing to illustrate the lack of understanding (at least mine) of all things financial: I worked for a major international bank (currently not so major). I queried why we were buying 10% of a 30 billion bond that Citi were offering while the US housing market was in freefall, what due diligence was carried out etc considering Fannie Mae and Freddie Mac were effectively bankrupt. The answer I got was "sure it's Citi'. Result: large haircut taken on the bond which was effectively a wrapper for housing related debt, a lot of which was sub prime..

Don't forget it was Lehman Brothers that was not given enough time to be bought out by another bank as the Fed put on the pressure. If I remember correctly the market was destroying Lehman's $ share price while the American Treasury Secretary was determined to let the bank go bankrupt. We might have gone easy on the banks over there the Federal bank was the one that was causing all the problems.