Govt commits further €2bn to Anglo

turly · 31-05-2010 04:16PM #1

From http://www.rte.ie/news/2010/0531/anglo.html

The Government has committed another €2bn in funding to Anglo Irish Bank.

The move comes as Anglo's restructuring plan is being submitted to the European Commission today.

A statement from the Department of Finance said the bank needed new funds because of the losses it had taken on the loans transferred to the National Asset Management Agency and because of further losses on its remaining loans.

On 31 March, Minister for Finance Brian Lenihan provided €8.3bn to Anglo, on top of the €4bn the Government put into the bank last year.

At the time, the Minister indicated that the bank could need another €10bn. The €2bn announced today is part of that €10bn.

I believe the technical term is BOHICA.

North_West_Art · 31-05-2010 04:22PM

we will probably see the same headline again in six months, and then in another six months after that again. The government know damn well that Anglo will need another 10 billion, they are just drip-feeding the bad news to the public

edellc · 31-05-2010 04:27PM

shocking they can afford to bail out their mates and we the people who are now suffering with unemployment and mounting debts get nothing but cuts
when can we have a general election grrrrrrrrrr

ei.sdraob · 31-05-2010 04:32PM

now can then NAMA supporters who claimed in past threads that this ^^^ wouldnt happen please stand up :mad:
what's the point of NAMA discounts when we endup paying for the remainder anyways
ahhhhhhhhhhhhhhhhhh

thats

€14.3 billion

that the taxpayer will foot to date, not counting Anglo rubbish dumped into NAMA of course
madness

oppenheimer1 · 31-05-2010 04:35PM

Are we going to have a new thread everytime there is a well flagged in advance cash injection into a bank.

Actually this isn't a cash injection, but a promissory note, so it all doesn't have to be paid straight away, so it shouldn't add to our interest bill.

ei.sdraob · 31-05-2010 04:38PM

oppenheimer1 wrote: »

Are we going to have a new thread everytime there is a well flagged in advance cash injection into a bank.

Actually this isn't a cash injection, but a promissory note, so it all doesn't have to be paid straight away, so it shouldn't add to our interest bill.

ffs :rolleyes: here lookup Stockholm syndrome

it will have to be paid by the taxpayer at any point of time Anglo decides to "cash the cheque" sort of speak, and that's going to happen sooner rather than later (otherwise why bother with it now)

The official information by DofF claims that because the injection comes in a form of a promisory note, payable over 10-15 years, there will be lesser impact on the taxpayers today. However, although the official announcement does not say so, this term structure of payments means that our future deficits will be front loaded (pre-committed to the amount announced today), implying that for Ireland to reach required 3% deficit/GDP limit by 2015, we will have to face an increased funding requirement for Anglo over time.

This requirement must be provisioned today, since the notes work in the following way:
* At any point in time between today and 10-15 years from now, Anglo can waltz into DofF's offices and ask for any share - between 0.00001% and 100% of the amount issued on the promisory note.
* At that moment, the Government will have to come up with cash pronto, which means - no time to issue separate bonds.
* Which implies that the very second Mr Dukes asks for cash, our deficit goes up by that exact amount.
Now, prudentially, we should have set an escrow account and provided for this funding. In practice, as is clear from the DofF release, no provisions will be made. The entire, and I repeat, the entire risk of the drawdown therefore is leveled on the shoulders of taxpayers. The DofF in effect is praying to the forces of fortune that Anglo won't come in with a request for funds tomorrow, and/or that any request will not be for the entire sum of the promisiory note.

from here

RichardAnd · 31-05-2010 04:39PM

edellc wrote: »

shocking they can afford to bail out their mates and we the people who are now suffering with unemployment and mounting debts get nothing but cuts
when can we have a general election grrrrrrrrrr

Technically we can't afford to bail them out at all, we're borrowing that 2 billion. Also, a general election wouldn't solve anything because we'd still have the same problems.

turly · 31-05-2010 04:42PM

oppenheimer1 wrote: »

Are we going to have a new thread everytime there is a well flagged in advance cash injection into a bank.

Terribly sorry, I'll clear it with you next time.

edellc · 31-05-2010 04:43PM

i know a general election wont help i just find it mind boggling how the government let it get to this stage anyone with half a brain cell could see what was coming and that the housing bubble had to burst with dire consequences and the fact that these people are running our country makes me very nervous about our future

ei.sdraob · 31-05-2010 04:45PM

turly wrote: »

Terribly sorry, I'll clear it with you next time.

He is one of the people who was telling us

that NAMA would ensure that banks wont be nationalized (that ended up happening anyways for most part, and at great cost)
and there be no need to inject more money (what's this here)

maybe once he gets over the denial stage, he would realize that we as a nation were conned and were sold **** on a stick

mike65 · 31-05-2010 04:46PM

Can't Anglo just be let die? Who'll lose?

ei.sdraob · 31-05-2010 04:47PM

mike65 wrote: »

Can't Anglo just be let die? Who'll lose?

Its gonna end up like PPARS

but 100x worse

next they be telling us that they "invested" too much into it to let it sink

woodseb · 31-05-2010 05:59PM

North_West_Art wrote: »

we will probably see the same headline again in six months, and then in another six months after that again. The government know damn well that Anglo will need another 10 billion, they are just drip-feeding the bad news to the public

they are not drip feeding the news, we were told a few months ago that anglo would need 10bln - it's not the government's fault some people have a goldfish memory

ei.sdraob · 31-05-2010 06:04PM

woodseb wrote: »

they are not drip feeding the news, we were told a few months ago that anglo would need 10bln - it's not the government's fault some people have a goldfish memory

we were also told (and argued by yourself no less) before that

that NAMA will ensure that the banks are recapitalised and would not need more money

the fact that they need more money shows that the whole "discount" argument was nothing but a joke, with the government having to pick up the remainder

woodseb · 31-05-2010 06:07PM

ei.sdraob wrote: »

we were also told (and argued by yourself no less) before that

that NAMA will ensure that the banks are recapitalised and would not need more money

the fact that they need more money shows that the whole "discount" argument was nothing but a joke, with the government having to pick up the remainder

I said nothing of the sort - the scheme of NAMA was always that the capital would need to be replaced and the government would underwrite the rights issues

go on then, show where it was said otherwise.....

North_West_Art · 31-05-2010 06:10PM

woodseb wrote: »

they are not drip feeding the news, we were told a few months ago that anglo would need 10bln - it's not the government's fault some people have a goldfish memory

ok, go back to when it was disclosed to the public that Anglo was going to need to be bailed out, and it could cost 4bn, then a month later it became 7bn, then 9bn, 12bn, then 14bn, etc Does this look like drip feeding the details to you? A few months ago I was out of the country, can I be expected to keep abreast of the mire spouted by our toothless, and incompetent government and media?

ei.sdraob · 31-05-2010 06:11PM

woodseb wrote: »

I said nothing of the sort - the scheme of NAMA was always that the capital would need to be replaced and the government would underwrite the rights issues

go on then, show where it was said otherwise.....

whats the point of the whole discount crap then, if the government WE end up paying the difference anyways? :rolleyes:

* NAMA was supposed to ensure that banks are not nationalized (they are now more or less, and well overpaid for)
* NAMA was supposed to ensure the banks balance sheets are repaired and credit flows (my arse! the banks need even more money injected DIRECTLY)

Scarab80 · 31-05-2010 06:13PM

ei.sdraob wrote: »

whats the point of the whole discount crap then, if the government ends up paying the difference anyways? :rolleyes:

To decrease uncertainty.

ei.sdraob · 31-05-2010 06:16PM

Scarab80 wrote: »

To decrease uncertainty.

uncertainty over what exactly?

ei.sdraob · 31-05-2010 06:20PM

http://www.rte.ie/news/2010/0531/health.html

The Minister for Health has said that there will be cutbacks in the public health service next year.

Mary Harney said the Minister for Finance has made clear that the Government will be looking for €3bn in cuts from public expenditure.

excellent timing

woodseb · 31-05-2010 06:41PM

me wrote:

go on then, show where it was said otherwise.....

ei.sdraob wrote: »

whats the point of the whole discount crap then, if the government WE end up paying the difference anyways? :rolleyes:

* NAMA was supposed to ensure that banks are not nationalized (they are now more or less, and well overpaid for)
* NAMA was supposed to ensure the banks balance sheets are repaired and credit flows (my arse! the banks need even more money injected DIRECTLY)

it would be customary at this point to actually show where the opposite was said rather than going off in tangents:rolleyes:

- the discount was part of showing to the market and the general public what was being taken off the balance sheets, what was going into NAMA, and what needed to be replaced by government or through external means (ie BOI share issue, AIB unit sale). The 'discount' was integral to identifying this figure and formulating new capital requirements.
- NAMA prevented full nationalisation of the banks which is a good deal different from part-nationalisation

This is my last post on the matter, you're so entrenched in your position that you are unwilling to objectively look at the mechanics of what is happening and you continue to misrepresent other people and my views to further your point and then head off tangents. Reasonable debate isn't possible.

ei.sdraob · 31-05-2010 06:43PM

woodseb wrote: »

- NAMA prevented full nationalisation of the banks which is a good deal different from part-nationalisation

we paid 20x times over what these banks are worth
and we dont even have 100% ownership of some of them after all that
yes please carry on and do tell us thats a "good investment" :rolleyes:

woodseb wrote: »

This is my last post on the matter, you're so entrenched in your position that you are unwilling to objectively look at the mechanics of what is happening and you continue to misrepresent other people and my views to further your point and then head off tangents. Reasonable debate isn't possible.

whichever way you and Brians try to spin it
we the taxpayer are getting a rotten deal

@woodseb an analogy

would you pay 20x times what your car is worth in order to repair it
since your car is "of systematic importance" of getting you to work

or would you look into alternative options like getting a bus in

whichever way you look at it the government are digging a deeper grave for the mistakes they made (blanket guarantee and not letting anglo fail)

Scarab80 · 31-05-2010 06:55PM

ei.sdraob wrote: »

uncertainty over what exactly?

Uncertainty over what banks loan books are worth. That in turn means that their is uncertainty as to what capital is required to meet capital ratios.

Think of the alternative. All loans remain on the banks balance sheet, they go into arrears and into default over a number of years, meaning the government has to inject capital to maintain capital ratios or the banks have to try raise capital from the markets in drips and drabs - let's ignore wind up situations for the moment. The amount of recapitalisation needed will be the same in the long run (depending on how accurate NAMA discounts are) but without NAMA the process would be dragged out over years, making banks less likely to provide credit into the economy.

Yes, banks aren't providing much credit to the market at the moment but consider that bank of ireland are in the middle of their rights issue, AIB are trying to sell of assets etc. Nevertheless credit provision is moving in the right direction, see today's release from the central bank...

The pace of decline in NFC credit eased slightly in April, as the net flow of credit transactions during the month was minus €109 million, compared with minus €1.3 billion in March and minus €842 million in February.

I'm also surprised that there wasn't more than 2bn promised today given that it is the cut off date for their EU restructuring plan submission. They obviously think that they have a plan to wind up or do the good bank / bad bank thing with current capital levels.

oppenheimer1 · 31-05-2010 07:24PM

turly wrote: »

Terribly sorry, I'll clear it with you next time.

Good because there are a number of well flagged in advance payments going to be made to support our banks in the next few months/years.

These threads are all the same... blah blah... outrage... blah blah followed by a quote from Dr. Constantin Gurdgiev's blog.

turly · 31-05-2010 07:33PM

oppenheimer1 wrote: »

turly wrote:

Terribly sorry, I'll clear it with you next time.

Good because there are a number of well flagged in advance payments going to be made to support our banks in the next few months/years.

I'll ask RTE and the print media to clear such stories with you beforehand as well, shall I?

Wouldn't want to risk you getting upset if you accidentally happen on such a story when you open a newspaper or turn on the telly, for example.

Liam Byrne · 31-05-2010 07:44PM

oppenheimer1 wrote: »

Are we going to have a new thread everytime there is a well flagged in advance cash injection into a bank.

Actually this isn't a cash injection, but a promissory note, so it all doesn't have to be paid straight away, so it shouldn't add to our interest bill.

Maybe if the rats throwing our money away like this had come out and been honest day one, there would have been only one sickening headline ?

They chose to lie and drip-feed the damage, so they can damn well take the PR opportunity that comes with every sickening revelation! :mad:

ei.sdraob · 31-05-2010 07:45PM

turly wrote: »

I'll ask RTE and the print media to clear such stories with you beforehand as well, shall I?

Wouldn't want to risk you getting upset if you accidentally happen on such a story when you open a newspaper or turn on the telly, for example.

how dare you talk down the economy with the courageous Brians at the helm everything will be rosy
the recovery is "locked in" after our "soft landing" and "national debt will be eliminated by 2012"
infacta "I don't know how people who engage in that don't commit suicide"

Stabshauptmann · 31-05-2010 08:22PM

ei.sdraob wrote: »

what's the point of NAMA discounts when we endup paying for the remainder anyways

In the simplest terms possible:
NAMA takes the uncertainty out of the banks balance sheets by pricing their toxic assets, and replacing them with AAA bonds.

This provides the clarity of information investors need.

That couldnt be any simpler!

The completely seperate issue of capital adequacy is as follows:
To protect customers (from the bank collapsing), the banks are required to hold certain amounts of capital reserves.
After NAMA readjusts the banks balance sheets they have ended up needed more capital.
This is another good thing that came about as a result of the clarity of information provided by NAMA.
It is a good thing because the bank's risks are now known, and priced, and we now know they need additional capital, and how much.

So to answer your question, what was the point of NAMA if the government are just going to pump in the capital anyway?

Well Anglo is a special case. It was nationalised before NAMA began. It is a mess, a costly mess, and it is proof if ever it was needed that Labour's aim to nationalise more banks is a very bad idea.

Could / should it have been just left out of NAMA?
Well, NAMA has provided clarity to Anglo's balance sheet. At least now the governement knows how much capital is needed. Without NAMA we'd probably have pumped in two or three times as much capital

And just to pre-empt the next set of points re: the other banks.

A) NAMA covers 5 banks. The government is not having to prop up all the banks. And where they are investing in the banks, they are being joined by private investors.

When the governement buys shares in a bank, it is buying an investment which it can sell on later.

Stabshauptmann · 31-05-2010 08:26PM

Liam Byrne wrote: »

Maybe if the rats throwing our money away like this had come out and been honest day one, there would have been only one sickening headline ?

They chose to lie and drip-feed the damage, so they can damn well take the PR opportunity that comes with every sickening revelation! :mad:

Tbh, the key recurring theme to the banking crisis, from the sub-prime bubble, to the liquidity crisis, to our own housing problem, to the capital problem now facing the banks is lack of information.

The problem, over the past 4 years now, is that nobody knew what the extent of the problem in their own balance sheets were.

Liam Byrne · 31-05-2010 08:29PM

Stabshauptmann wrote: »

The problem, over the past 4 years now, is that nobody knew what the extent of the problem in their own balance sheets were.

The problem is that Lenihan chose to bail out Anglo without knowing the extent of the "problem".

Anglo should have been let rot; they dug their own hole.

Having my taxes contribute to this cesspit is puke-inducing in the extreme........

Lenihan is a tool of the highest order for putting us into this mess.

Chris_5339762 · 31-05-2010 08:52PM

Thats about the cost for Metro North. Wonder which would benefit the public more?

Govt commits further €2bn to Anglo

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