Cyprus bailout deal #2

djpbarry · 19-03-2013 03:32PM

hatrickpatrick wrote: »

So when was the last time you saw one of their incompetent managers queuing up for the dole having lost everything?

I've never seen such a thing.

Does that mean that banks have not incurred losses?

hatrickpatrick · 19-03-2013 08:31PM

djpbarry wrote: »

I've never seen such a thing.

Does that mean that banks have not incurred losses?

Of course not, it means that the people responsible for f*cking them up have been protected when they shouldn't have been.
Drumm has been declared bankrupt. In the entire 2007 and onwards banking collapse, he's possibly the only high-up in any failed bank I can think of who has actually been screwed over by the mess he helped to create.
EDIT: What a coincidence. This just popped up on my Google News homepage:
http://www.independent.ie/irish-news/843k-euro-for-bailedout-bank-chief-29141273.html

A week after the Government warned banks to slash pay bills by up to 10%, Bank of Ireland revealed chief executive Richie Boucher earned a salary of 690,000 euro in 2012. He was paid an additional 34,000 euro in other remuneration costs, which includes car costs and benefits in kind, and a further 186,000 euro in pension contributions.

That's close to a million quid. A million quid from the taxpayer to someone working in a private business which if any of the alleged "capitalist" ideals touted by the defenders of the establishment's behavior had been followed, would not exist today.

Happyman42 · 19-03-2013 10:27PM

How is this one gonna play out? How long can the banks stay closed?

A Dub in Glasgo · 19-03-2013 10:34PM

As long as democracy gets the right answer!

hatrickpatrick · 20-03-2013 03:26AM

A Dub in Glasgo wrote: »

As long as democracy gets the right answer!

Technocratic government in 5, 4, 3........

jimmycrackcorm · 20-03-2013 03:44AM

Can someone explain the difference between the IMF insisting on Cypriots paying a tax on their deposits to get a bailout, and them insisting on us having to pay a property tax to have our bailout?

nesf · 20-03-2013 10:30AM

jimmycrackcorm wrote: »

Can someone explain the difference between the IMF insisting on Cypriots paying a tax on their deposits to get a bailout, and them insisting on us having to pay a property tax to have our bailout?

The former is proportional to your liquid wealth, the latter is not.

InchicoreDude · 20-03-2013 10:59AM

jimmycrackcorm wrote: »

Can someone explain the difference between the IMF insisting on Cypriots paying a tax on their deposits to get a bailout, and them insisting on us having to pay a property tax to have our bailout?

But how do you know Cyprus will not have to pay a property tax?

Have we actually seen full terms of their bailout?

nesf · 20-03-2013 11:09AM

InchicoreDude wrote: »

But how do you know Cyprus will not have to pay a property tax?

Have we actually seen full terms of their bailout?

You miss his point. If we have to raise X billion, is it different if we do it through a property tax or a deposit levy and if it is, which is preferable from a fairness point of view?

djpbarry · 20-03-2013 11:55AM

hatrickpatrick wrote: »

That's close to a million quid. A million quid from the taxpayer to someone working in a private business which if any of the alleged "capitalist" ideals touted by the defenders of the establishment's behavior had been followed, would not exist today.

How much would the CEO of BOI be earning if the banking collapse did not occur?

nesf · 20-03-2013 12:00PM

djpbarry wrote: »

How much would the CEO of BOI be earning if the banking collapse did not occur?

Brian Goggin, the old CEO pre-bust was on around €4 million I think.

mike65 · 20-03-2013 02:33PM

Is Cyprus about to become a de-facto client state of Russia?

hatrickpatrick · 20-03-2013 02:55PM

djpbarry wrote: »

How much would the CEO of BOI be earning if the banking collapse did not occur?

How is that relevant?
800 grand from the taxpayer to pay wages in a failed private company is too much no matter what the circumstances are.

djpbarry · 20-03-2013 03:22PM

hatrickpatrick wrote: »

How is that relevant?

I had a hunch that was a pretty low salary for the CEO of a large bank.

hatrickpatrick · 20-03-2013 03:27PM

djpbarry wrote: »

I had a hunch that was a pretty low salary for the CEO of a large bank.

It's 800 grand more than the salary of the CEO in an insolvent, bankrupt private company. The taxpayer should not be paying this amount of money to failed private companies (and I don't just apply this to banks, I would argue the same if the government had bailed out any other company).

Once the taxpayer has bailed out the company, it should be the taxpayer who makes the rules. The idea that the government has pulled these banks back from the abyss at a massive loss to everyone else and then can't do something like setting pay caps in them is just ridiculous.

Scofflaw · 20-03-2013 03:32PM

Cough...Cyprus bailout deal...or does this thread need to be closed/merged?

moderately,
Scofflaw

KyussBishop · 20-03-2013 05:54PM

Another good Golem XIV post, on how this is likely to affect Europe in the future, and noting other countries already considering deposit levies:
http://www.golemxiv.co.uk/2013/03/plunderball-the-new-euro-banking-game/

jmayo · 20-03-2013 06:48PM

hatrickpatrick wrote: »

Of course not, it means that the people responsible for f*cking them up have been protected when they shouldn't have been.
Drumm has been declared bankrupt. In the entire 2007 and onwards banking collapse, he's possibly the only high-up in any failed bank I can think of who has actually been screwed over by the mess he helped to create.
EDIT: What a coincidence. This just popped up on my Google News homepage:
http://www.independent.ie/irish-news/843k-euro-for-bailedout-bank-chief-29141273.html

That's close to a million quid. A million quid from the taxpayer to someone working in a private business which if any of the alleged "capitalist" ideals touted by the defenders of the establishment's behavior had been followed, would not exist today.

And something that should also be mentioned re mr boucher was that he was employed within the retail lending function of the bank, an area that helped drive the bank to destruction.
So he was rewarded for helping shove the bank into insolvency by being promoted to CEO.
Typical Irish insider deals.

Also remember this was the idiot that thought sean dunne's Ballsbridge plans were a good idea and lodged a letter of recommendation with Dublin City Planning dept stating such.
Oh and he addressed said letter as CEO of Retail Finances BOI.

It is idiots like him that have indeed cost us dear and yet he is promoted and rewarded.

djpbarry wrote: »

I had a hunch that was a pretty low salary for the CEO of a large bank.

You mean a large formerly insolvent bank that only exists thanks to the good graces of the Irish taxpayer ?

I cannot for the life of me see how people around here and indeed some so called experts in the media see the merit in putting a tax or levy on peoples' actual savings.

The idea has affectively undermined Europe's banking system.
What message is this sending out to the rest of Europe, especially the members of the PIIGS club.
Watch a run on banks the next time one of these looks like it needs a new bailout or a renegotiation.
The troika/IMF/EU/ECB have crossed a line and told both ordinary and high end depositors you may be fair game for a sizable precentage of your savings to be hit if they so chose.

Oh and if anyone thinks it is just Russian money in Cyprus then they are deluded.

podgeandrodge · 20-03-2013 09:08PM

My worry is that, regardless of promises from politicians, is that I can no longer confidentally believe that they will never attempt to steal them.

Can I ask therefore, and maybe someone legally minded might comment, if it would be reasonable to ask for an amendment to the constitution - to protect the deposits of depositors from removal by the State -

If this were possible, it would be clear enough that the amendment would be passed by a majority, and also clear enough that a removal of this protection would never be!

Phoebas · 20-03-2013 09:41PM

podgeandrodge wrote: »

My worry is that, regardless of promises from politicians, is that I can no longer confidentally believe that they will never attempt to steal them.

Can I ask therefore, and maybe someone legally minded might comment, if it would be reasonable to ask for an amendment to the constitution - to protect the deposits of depositors from removal by the State -

If this were possible, it would be clear enough that the amendment would be passed by a majority, and also clear enough that a removal of this protection would never be!

I don't think an amendment like that would make any difference. If the money is gone, its gone. Whether they call it a tax, or a bail on or a write down, the end result would be the same - less money in your deposit account.

I suppose we could pass laws that prevented banks from lending out what they received in deposits, but I guess they would just stop accepting deposits.

KyussBishop · 21-03-2013 12:10AM

An amendment like that would only be possible, if we had control over our own currency (i.e. if we had monetary sovereignty), which we don't; if we need help from Europe again, they can force whatever terms they like on us, just like they did with Cyprus; it will be "do what we say or jump off the cliff", the cliff being a banking system collapse and probable exit.

Arguably, as this crisis shows, there isn't much real sovereignty for a country without monetary sovereignty, and the disregard/incompetence the EU is showing with its dealings towards many of its member states, is increasingly scary; I doubt there is any hope now of Germany coming around, to agreeing towards implementing any kind of recovery policies (not even after their elections in September), so I think the EU is fúcked now and it's probably only a matter of time before the single currency breaks up.

Scofflaw · 21-03-2013 12:22AM

Phoebas wrote: »

I don't think an amendment like that would make any difference. If the money is gone, its gone. Whether they call it a tax, or a bail on or a write down, the end result would be the same - less money in your deposit account.

I suppose we could pass laws that prevented banks from lending out what they received in deposits, but I guess they would just stop accepting deposits.

It would more or less prevent banking entirely, yes. Interestingly, it would prevent the useful bits of banking, without preventing any of the bits they get themselves into trouble with.

Our banks had problems partly as a result a result of using wholesale short term debt to fund long term loans, while the Cypriot banks used only deposits. Different paths, but the same result, which is that of the government decides to save the banks, someone has to pay, and the government only really has one source of funds, which is the public. And since the government is rescuing the banks for the greater good, the rights of individuals do take a back seat.

cordially,
Scofflaw

djpbarry · 21-03-2013 12:51AM

KyussBishop wrote: »

...I think the EU is fúcked now and it's probably only a matter of time before the single currency breaks up.

We've been hearing these predictions for about five years now - the wait goes on.

Scofflaw · 21-03-2013 01:11AM

KyussBishop wrote: »

An amendment like that would only be possible, if we had control over our own currency (i.e. if we had monetary sovereignty), which we don't; if we need help from Europe again, they can force whatever terms they like on us, just like they did with Cyprus; it will be "do what we say or jump off the cliff", the cliff being a banking system collapse and probable exit.

Arguably, as this crisis shows, there isn't much real sovereignty for a country without monetary sovereignty, and the disregard/incompetence the EU is showing with its dealings towards many of its member states, is increasingly scary; I doubt there is any hope now of Germany coming around, to agreeing towards implementing any kind of recovery policies (not even after their elections in September), so I think the EU is fúcked now and it's probably only a matter of time before the single currency breaks up.

I would have said it shows there's not much sovereignty for countries who get themselves into more bank trouble than they can afford to get themselves out of. It's surprisingly similar to what happens if you get into the same position as a company or individual - you need to borrow money, lenders set conditions.

Funny old world, eh?

cordially,
Scofflaw

KyussBishop · 21-03-2013 04:12AM

Scofflaw wrote: »

I would have said it shows there's not much sovereignty for countries who get themselves into more bank trouble than they can afford to get themselves out of. It's surprisingly similar to what happens if you get into the same position as a company or individual - you need to borrow money, lenders set conditions.

Funny old world, eh?

cordially,
Scofflaw

Ya but that's what monetary sovereignty changes; you don't need to borrow anything when you have that, and you can fulfill depositor insurance guarantees, and you don't need to go to the markets to achieve funding.
Think about it: Why borrow money and pay interest, when you can just create it and spend it, with the limit being the inflation target? (remember, the current systems restrictions against this are only political, not economic)

As I mentioned to someone in a different thread yesterday, macroeconomic accounting is not the same as household accounting, because of the ability to utilize money creation (among many other things which differ).

One of the most influential economic writers around, Martin Wolf (a leading editor and writer in the Financial Times) recognizes this too, albeit he is coming around to it only slowly:

Martin Wolf wrote:

Above all, it is not clear what a rating for a sovereign that borrows in its own fiat (government-made) money actually means. Unless it chooses to do so, such a sovereign cannot default on the debt denominated in its own currency.

http://www.ft.com/intl/cms/s/0/efcab958-7dd1-11e2-aff5-00144feabdc0.html#axzz2Ll2m2AFP

Martin Wolf wrote:

Mr Cameron argues that those who think the government can borrow more “think there’s some magic money tree. Well, let me tell you a plain truth: there isn’t.” This is quite wrong. First, there is a money tree, called the Bank of England, which has created £375bn to finance its asset purchases.

http://www.ft.com/intl/cms/s/0/1670a3d2-880f-11e2-8e3c-00144feabdc0.html#axzz2NQc3UkhI

This is not recognizing the full potential applicability of public money creation on his part, but it is a significant portion of the way there; these are views that are (achingly slowly) gaining wider mainstream attention, and warrant a very close look (current mainstream/neoclassical theory, actually ignores the role of debt, banks and money in its models/foundations, which is one of many reasons economic teaching is so messed up at the moment).

I know the initial response to this stuff is skepticism (and it doesn't help that there's a crowd that likes to pour scorn on it, rather than engage in argument), but if you give this stuff a good look, it's very intuitive and makes a lot of sense, once it 'clicks'.

jmayo · 21-03-2013 11:33AM

KyussBishop wrote: »

...
Arguably, as this crisis shows, there isn't much real sovereignty for a country without monetary sovereignty, and the disregard/incompetence the EU is showing with its dealings towards many of its member states, is increasingly scary; I doubt there is any hope now of Germany coming around, to agreeing towards implementing any kind of recovery policies (not even after their elections in September), so I think the EU is fúcked now and it's probably only a matter of time before the single currency breaks up.

djpbarry wrote: »

We've been hearing these predictions for about five years now - the wait goes on.

Just think of it being like the Irish housing bubble burst.
Some may try and convice you that a corner has been turned and everything will be hunky dory, but then more slippage continues.

Just be patient.

clairefontaine · 21-03-2013 02:26PM

KyussBishop wrote: »

An amendment like that would only be possible, if we had control over our own currency (i.e. if we had monetary sovereignty), which we don't; if we need help from Europe again, they can force whatever terms they like on us, just like they did with Cyprus; it will be "do what we say or jump off the cliff", the cliff being a banking system collapse and probable exit.

Arguably, as this crisis shows, there isn't much real sovereignty for a country without monetary sovereignty, and the disregard/incompetence the EU is showing with its dealings towards many of its member states, is increasingly scary; I doubt there is any hope now of Germany coming around, to agreeing towards implementing any kind of recovery policies (not even after their elections in September), so I think the EU is fúcked now and it's probably only a matter of time before the single currency breaks up.

How much time to you think it will take?

Right now it looks like Germany is the only country to have a decent economy but if there is no one in the Eurozone with money to buy their stuff and they are sustaining all these loans, how long can that last?

Scofflaw · 21-03-2013 02:40PM

Hmm. Russian banks don't want to buy Cypriot banks:

Russia's two largest state-owned banks have now both said they are uninterested in buying Cypriot banks, reports Howard Amos.

The island-state's banking assets were one of the bargaining chips Cypriot Finance Minister Michalis Sarris was hoping to be able to use to tempt the Kremlin into offering a rescue package.

“We don't, of course, have any plans of that sort,” said Andrei Kostin, the head of Russia's second biggest bank, VTB. “Our interests are that we are given the opportunity to carry out payments and access the accounts of our clients.” VTB has a subsidiary on Cyprus called Russian Commercial Bank which is at risk of losing “millions of euros” in a compulsory levy.

German Gref, the head of Russia's biggest bank, Sberbank, said last night that he had been approached about buying Cypriot banks, but had turned the offer down.

Cypriots don't even turn up for a eurogroup phone conference to discuss options:

In detailed notes of the call seen by Reuters, one official described emotions as running "very high", making it difficult to come up with rational solutions, and referred to "open talk in regards of (Cyprus) leaving the euro zone".

The call was among members of the Eurogroup Working Group, which consists of deputy finance ministers or senior treasury officials from the 17 euro zone countries as well as representatives from the European Central Bank and the European Commission. The group is chaired by Austria's Thomas Wieser.

Cyprus decided not to take part in the call, a decision that several participants described as troubling and reflecting the wider confusion surrounding the island's predicament.

"The (Cypriot) parliament is obviously too emotional and will not decide on anything, if Cyprus does not even feel that they can attend the call it is a big problem for us," the French representative said, according to the notes seen by Reuters. "We have never seen this."

They've known their banks were in trouble since late 2011, the previous government refused all bailout deals, and neither Russia nor the EU seems to be able to offer them what they want. Where do they go from here?

cordially,
Scofflaw

djpbarry · 21-03-2013 02:42PM

KyussBishop wrote: »

Think about it: Why borrow money and pay interest, when you can just create it and spend it, with the limit being the inflation target?

For one thing, the interest on your existing debts effectively increases.

KyussBishop wrote: »

As I mentioned to someone in a different thread yesterday, macroeconomic accounting is not the same as household accounting....

Well of course it's not exactly the same - every analogy breaks down at some point. But that doesn't make it an invalid comparison - the basic point still stands.

Oracle · 21-03-2013 06:31PM

Cyprus bailout deal exposes the real agenda; the EU wants to privatise the utilities, introduce universal stealth taxes for property and water, and levy after-tax savings and income.
The EU want citizens to pay income tax, pay for State and household services and pay tax again on their personal after-tax spending (VAT), savings and income.

Cyprus bailout deal #2

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