Can anyone explain WHY the government has to save Anglo?

IrishTonyO wrote: »

It means you get your money no matter what happens, and the interest rates are good so why not get a higher rate with Anglo, when there is no risk

So now Anglo is a risk-free bank?? If things went sour the government could never cover the guaranteed deposits of our banks and even if they could it is you that is guaranteeing your own money

nesf wrote: »

Yeah but the Guarantee prevents a bank run, preventing the whole thing going sour, similar to Northern Rock in the UK.

Actually I get it now. Me guaranteeing my own money means if I attempt to take out that money, I'll collapse the bank which has my money and I'll have to pay to reimburse myself.

Lovely little chinese finger trap they have set up.

but why is Anglo able to offer 3.5%, while the other banks covered by the same guarantee are offering much lower deposit rates ?

Flamed Diving wrote: »

On what grounds are you seriously questioning this?

Based mostly on Brian Luceys arguments I have read or seen or listened to (like the one today on Newstalk). I dont need to be a professor of business to agree with the man. As well as that I just cant imagine anyone leaving money (35 billion) on deposit there, through all the stuff that has come out in the media. The large figure greatly strengthens the argument of the side which say we cannot let the bank fail, its odd that it is only these people who are making this argument that are privy to this figure. Brian Lucey himself has said he is not.

Flamed Diving wrote: »

Fair enough, but as esteemed an academic Brian Lucey is, do you not see any danger in drawing all your opinion from one source?

That said, for all I know he is completely correct. Then again, if they are offering the highest savings rates out there, with the fact that they are a nationalised bank... it wouldn't surprise me if I found that some people have transferred their savings there.

Have you? would you?
I draw my opinions from (discussions I have on here as well as from many economics commentators) but on this issue its mostly from the fact that in answer to those questions I've asked you, my response is:
I haven't and I wouldn't, even if they were giving out hand jobs

Flamed Diving wrote: »

No and no. I don't save with Irish banks because I don't like to reward stupidity.


But just because you and I wouldn't, doesn't mean the other 2,000,000 would follow us.

Maybe and obviously none of us know. But isn't this a reason why we, the owners of the bank, should be privy to this information?

My best guess is that not many people would put their money near that bank seeing as people are so infuriated they spit on people with Anglo umbrellas. Anything associated with Anglo is hated by the public hence I find the €35bn hard to believe

Laminations wrote: »

Maybe and obviously none of us know. But isn't this a reason why we, the owners of the bank, should be privy to this information?

My best guess is that not many people would put their money near that bank seeing as people are so infuriated they spit on people with Anglo umbrellas. Anything associated with Anglo is hated by the public hence I find the €35bn hard to believe

So if you had €10,000 to invest would you prefer to get €310 interest from Anglo or €1 from AIB? Especially when the government guarantees your money?

I've long been pondering the answer to this question and while I believe I see the reason why the Government has shovelled our money to keep Anglo on the road, it was because of the decisions they themselves took.

The root of the Anglo bailout is, IMO, to be seen in the introduction of the banking guarantee that not only guaranteed depositors, but other bank creditors such as bondholders. This guarantee was hastily drawn up and signed but was premised on the assumption that the banks were facing a liquidity crisis following the collapse of Lehmans', but that their core business model was essentially sound. We now know, of course, that this is untrue and that moreover, the Government should also have known that this was untrue, had they bothered to read the relevant reports.

However, I digress.

Following this Guarantee and as the state of Anglo began to emerge, the Government faced a dilemma. To wind up Anglo would cost the state a huge amount of money in order to reimburse the depositors and bondholders. The premise of NAMA is to move the toxic assets off the balance sheets and wind the remains of the bank down in an orderly manner. Also, as has been discussed we also need to consider who would be burned in this approach. Pension funds and bond market players invested in these bonds, and the knock on effects could affect the Irish pension market and raise the cost of financing the additional debt we would have to take on as a result in the deterioration in our public finances.

At the moment therefore, letting Anglo go bang is a very expensive proposition. The answer should have been to not include this financial institution in the banking guarantee, but since it has, we (and by we I of course mean the Government, a thought that depresses me greatly) need to decide what to do with it next.

I would be very interested to see if Anglo Irish's toxic assets get transferred to NAMA before the banking guarantee expires in September. If it doesn't, some interesting possibilities emerge. The one I would be in favour of, and have been in favour of since this crisis emerged, is to wind Anglo Irish up. Depositors would certainly need to be refunded, however, I would not consider this money all lost, because these deposits can then be placed with other financial institutions, meaning we can partially offset the recapitalisation cost of these other banks with the increase in deposit base taken from Anglo. The senior bondholders get most of their money back and the subordinated bondholders and shareholders swing.

The main difficulty of this approach would be to contain it in such a way that the malaise does not spread to any of the other banks, and possibly risk a run on all the Irish banks. This could be done through an extension of the Guarantee for the two main clearing banks, AIB and BoI, only. Whether this would be enough to save other Irish institutions is unclear. What is also unclear is whether the bond market would seek to punish Ireland through pushing the cost of seeking additional borrowings up. If that is the case then we would need to take even more austere measures in relation to public spending.

I do think this would be a risky strategy. Unfortunately Government policy has meant that there are no non-risky strategies remaining. This suggestion just happens to be one of the less expensive ones.

longhalloween wrote: »

I understand why banks in general need to be saved, but why this particular bank?

Because Anglo borrowed money from the same large International wholesale banks that lend the government money.

If the Irish Government allow Anglo to go to the wall and default, it would be a lot harder for them to borrow money internationally.

KerranJast wrote: »

The bank is guaranteed by the Government so technically is a solid place to deposit money (as is Northern Rock in the UK). They were also offering a good deposit rate. Every bank needs as much deposits as it can get.

then these people cannot be seen as retards as the above poster said, it was tlhe safest place for that reason,

ei.sdraob wrote: »

what will they do?
take to the streets and take down the government??
no harm in that! (and probably the reason why guarantee will be extended)


in the UK the government made all the depositors 30% poorer, not many realized they got screwed

how many people here realize that instead of measly 3.5% they could have been getting much higher interest directly from government skipping the dead horse, and the money could have been used to do some good like fund a stimulus program. The money going into Anglo will not be used to get credit going so is being effectively being sucked out of the system, think about that

/

You miss my point. If pain has to be taken by the likes of funds and pensions then this will negatively affect people's private sector pensions which as you probably know have taken a rather large hit over the past few years already. We can't just screw over the bondholders and the pain isn't felt by people in this country!