Morgan Kelly - Bank guarantee likely to deal a crippling blow to the economy

tag: Our Zombie Nation and Zombie Banks


Zhou linked this piece by Morgan Kelly to another thread here. I think it deserves a thread.


Things are going to get much worse
'The liability guarantee leaves Irish banks in precisely the position of Fannie Mae before it was nationalised: alive but economically useless. In effect, the Government has chosen to inflict a Japanese-style lost decade on the Irish economy'ANALYSIS: This is the future: without immediate Government funding, bank lending will fall by three-quarters, driving most companies in Ireland out of existence, writes Morgan Kelly

BY SHOOTING itself in the other foot over the Budget, the Government has temporarily diverted attention from its botched bailout of the banks, but the problem has not gone away. While financial markets across Europe are beginning to stabilise, Irish banks continue to sink deeper beneath the waves and are starting to drag the rest of the economy under with them.

What makes bank crises economically catastrophic is that they cause credit squeezes which drive profitable firms out of business. Every company in Ireland relies on a credit line to pay wages and other expenses between payments from its customers.

Established firms (outside construction) rarely go out of business because they are unprofitable, but because they have problems with cash flow; and any firm that loses its bank credit line is effectively dead.

The amount that a bank is allowed to lend is proportional to its capital. When a bank loses capital through bad loans, as Irish banks have done spectacularly through their lending to builders and developers, it must reduce its lending. Already many smaller firms are finding it harder to get overdrafts, and the worst is yet to come.

If we suppose that the current stock market valuations of Irish banks are a rough indicator of the true book value of their capital, then in the next year we can expect banks to write off more three-quarters of their capital as bad debts. This means that without immediate Government action to recapitalise the banks, bank lending will fall by three-quarters, driving most companies in Ireland out of existence.

The Government claims that the merit of its scheme is that it costs nothing. Unfortunately, international experience shows that when banks get into trouble, the choice is not whether you spend money, but when. Either you pay the money up front to recapitalise banks; or you pay far more over the next decade in bankruptcies, unemployment and lost output.

It was knowing how credit contractions wreck economies that led the British government, followed by the French, Germans, Spanish, Swiss, Dutch, Swedes and Americans, to do the right thing and move swiftly to recapitalise their banks.

These measures appear, thankfully, to be working. The hope among economists here was that good policy would drive out bad, and that the Government would abandon its ill-conceived bailout and follow suit.

In the event, the Government chose to persevere with a scheme that serves only to keep zombie banks going while starving their customers of credit; and helps nobody apart from some developers and bankers.

Irish bank executives can continue to draw their pay and hope eventually to trade their way out of their problems.

In a few months, they assure us, people will again be flocking to buy in ghost estates, deserted office blocks will be thronged, and our troubles will be behind us.

It is worth recalling that the last time Ireland's wealthiest businessman and his dodgy personal bank got into financial difficulties - Patrick Gallagher and Merchant Banking Ltd in 1982 - both were allowed to go bankrupt. Gallagher eventually did two years for fraud in Crumlin Road Prison, Belfast.

I predicted early last year that falling sales and property prices would cause the building industry to collapse, which would in turn leave banks practically insolvent. However, I could not have conceived how, faced with a cancer of bad loans that had eaten through our financial infrastructure, the Government would slap on a band-aid of liability guarantees and walk away, leaving the Irish economy to its fate.

The liability guarantee leaves Irish banks in precisely the position of Fannie Mae before it was nationalised: alive but economically useless. In effect, the Government has chosen to inflict a Japanese-style lost decade on the Irish economy.

What the Government should have done was to offer substantial capital to the four worthwhile banks that Irish firms and households rely on for credit; and to close down the other two which were effectively conduits for real estate speculation with no role in the wider economy.

Instead, it guaranteed the liabilities of even the worst two "banks" without checking what, if anything, their assets are worth. By doing this, the Government has put the taxpayer at risk of substantial losses, and compromised its ability to provide adequate capital to the banks that need to be saved.

These points are so obvious that it is almost embarrassing to repeat them. Even with the strikingly poor quality of economic advice available to it, the Government knew what should be done, but decided to do otherwise. What impelled these politicians to make the worst economic decision of any Irish government in the last 30 years?

In the last decade, Fianna Fáil came to see developers and the banks which funded them as the real heroes of the economic boom: the men whose drive and vision had given us an economy that was the envy of Europe. From bywords of ineptitude, Irish builders and bankers were transformed into masters of the universe. What was good for Anglo Irish Bank was good for Ireland.

Three weeks ago, bubble turned irrevocably into bust. Brian Lenihan was faced with a choice between rescuing two banks and the handful of developers through whom they placed real estate bets, or recapitalising the financial infrastructure on which the other four million of us depend.

He chose the former. The grave consequences of this extraordinary decision, both political and economic, will ensure that in the coming months we shall all get to live in interesting times."


A quick look at the Estimates shows some strange priorities spared the cuts (greyhound stadia, co-located hospitals), many of which include a large element of captial investment in construction, while soft "human capital" is heaped onto the pyre. Its an attempt at a builders' bail out and a builders' budget. Our grandchildren will be paying for it, and it won't even work.

Read this on friday and it is a shocking indictment on Cowen/Lenihans decision. I hope/wish the author is overstating the gravity of the situation but I dont think so.

I think we need to call someone here from FF-Greens to explain for this and the shoddy and speedy way that that bill was bulldozed through the Dail. It was an insult not just to the oppostion and democracy and the principals of fairness in the market, but also to the people of Ireland.
Then if gaining a new notoriety amongst our european colleagues wasnt enough, they, with this act condemned our grandchildren, and this nations future to paupery.

I've been reading Kelly's papers for a couple of years. He does a great job of making the texts accessible to the non-economist non-financially literate. (like myself)

He called this one over a year ago.

EvotingMachine0197 wrote:

I've been reading Kelly's papers for a couple of years. He does a great job of making the texts accessible to the non-economist non-financially literate. (like myself)

He called this one over a year ago.

That there would be a crisis? Or did he get specifics right that there would be bank bailouts?
There were many of us on politics.ie on the FG side that were predicting a catastrophic recession from 2006-7, but of course we were attacked for talking the economy down then.

The speculative picture of Horror Economics continues from Morgan Kelly in the Irish Times today. Lots of 'coulds' but coming on the back of revelations of more Seán Fitzpatrick money dealings, we might see those cockroaches coming out of the cupboards with heavy swagbags yet.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Bank guarantee likely to deal a crippling blow to the economy

BETWEEN COLLAPSING house prices, bankrupt banks and spiralling unemployment, you might be forgiven for thinking that fate has already dealt Ireland every misfortune in its hand. However, there may be one more unpleasant surprise in store for us, the prospect that international investors unexpectedly stop lending to the Government.

Economists call this a “sudden stop”. The original sudden stop occurred in 1998 when a default by Russia panicked lenders away from Latin America and plunged their economies into prolonged crisis.

...

In my view, the Government has made insufficient effort to estimate how much its banks have lost. We have therefore had the bizarre experience of nationalising Anglo Irish Bank and recapitalising Allied Irish Banks and Bank of Ireland without knowing precisely the extent of their bad debts.

The ability of the State to continue funding itself ultimately depends on the size of these bad debts. If they are of the order of €10–€20 billion, we will survive. If they are of the order of €50-€60 billion, we are sunk.

,,,

These are only guesses. However, the continuing stream of revelations from Anglo Irish – which bear out the old investment dictum that there is never just one cockroach in a kitchen – suggest that they could be optimistic guesses.

To see what would happen to Ireland if foreign lenders suddenly pull the plug, we only need to look at what happened in Latvia last December. We would be forced to seek an international bailout, with the International Monetary Fund and European Union playing bad cop and good cop. We could expect cuts of one-quarter to one-third in public sector wages and social welfare benefits, and draconian tax rises to bring the deficit back to around 5 per cent of national income in two years.

There is actually a worse scenario where international bond markets suffer a general panic, like 1998. Not only does Ireland gets torpedoed, but also Portugal, Italy, Greece, Spain and Austria. The IMF and EU simply would not have the resources to bail out so many economies and we would be entirely on our own.
....
>>>>>>>>
http://www.irishtimes.com/newspaper/opinion/2009/0217/1224241278003.html

Myles Dungan is trying to give us hope this morning. Anybody listening?

He had that Mark Fitzgerald on trying to talk up the property market. I don't think he believed half the stuff he was spouting.

There was an interesting interview with Simon Johnstone this morning - the man who said the G7 should prepare a bail out for Ireland, to avoid an Iceland style collapse.

As appeared from the article, Johnstone had done no homework whatsoever, and relied solely on the ferocious rise in Credit Default Swaps that took place after the latest of the Government "confidence restoring" measures. Ireland is now the worst positioned after Iceland. He said that he had been going to write the article about Greece, but then the figures changed.

GRAPH HERE

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aazwjUxtwAUQ

The question is then, what was the rise caused by and is it a real indication of our position. I assume it was a combination of the overall deterioration of the economic situation, in particular rising unemployment, and the revelations of the Anglo Irish /Irish Life and Permanent scams, some of which took place with the blessing of the "Regulator".

tonys and others have said that we should not worry too much about Anglo Irish's bad loans, because a lot of them are backed by property which has a long term value.

Now we its being confirmed that no such assumptions can be made. Its already apparent that in some cases both before and after the Guarantee terms of loans were changed, and shares or other paper replaced property as collateral. In the case of Fitzpatrick, a loan of over 20 million was taken on a "can't pay, won't have to pay" basis. The first thing to be done in the case of the the Guarantee and Nationalisation should have been to secure all guarantees and collateral under lock and key.

It also goes without saying these things should have been done without prior warning to the Banks.

This article on rgemonitor says that the worst fears about the Paulson Plan - that it was a gigantic theft and transfer of wealth from the average taxpayer and the poor to the wealthy, has proven correct.

http://www.rgemonitor.com/globalmacro-monitor/255562/update_yes_the_paulson_plan_was_just_theft

The Irish Bank Guarantee on over 400 billion euro, proportionately, was a much bigger one.

Daylight robbery.

Willem Buiter writing in his Maverecon blog in the FT on the 2nd Oct.

"Financial Crises may not be the best way to make friends and influence people but the Irish guarantee is the most "in-your-face" beggar-thy-neighbour provocation since medieval armies catapulted bubonic-plague-ridden corpses into the cities they were besieging."

Banksters
http://blogs.ft.com/maverecon/2008/10/the-irish-solution-unlawful-beggar-thy-neighbour-and-short-sighted-but-apart-from-that-ok/

powderfinger wrote:

Willem Buiter writing in his Maverecon blog in the FT on the 2nd Oct.

"Financial Crises may not be the best way to make friends and influence people but the Irish guarantee is the most "in-your-face" beggar-thy-neighbour provocation since medieval armies catapulted bubonic-plague-ridden corpses into the cities they were besieging."

Banksters
http://blogs.ft.com/maverecon/2008/10/the-irish-solution-unlawful-beggar-thy-neighbour-and-short-sighted-but-apart-from-that-ok/

Thanks for that, powderfinger:

Quote :

Guaranteeing the debt of the banks as well is plain silly, unless the guarantee had been accompanied by a haircut (charge) on the debt holders. Bank debt holders, along with equity holders, permitted the banks to engage in the reckless property- and construction-related lending that has blown such huge holes in their balance sheets. The debt holders earned risk premia while the going was good and should now be made to pay to discourage future similar reckless behaviour.

Only if punishing the debt holders were to endanger systemic stability would there be a reason for making the holders of the debt whole. Clearly, the debt does not create any problems until it matures. Since the Irish banks have to shrink their balance sheets quite significantly, problems with rolling over maturing debt should be manageable; at worst, it might require government guarantees on new debt issued to replace maturing debt (if debt matures at as rate faster than the desired rate of contraction of the Irish banks’ balance sheet).

Instead of having to fund a limited expansion of deposit insurance for its banks, which would have been enough to prevent bank runs, the Irish tax payer has socialised all the funding risk of the banks, except for the equity. There is no upside for the tax payer in this arrangement. The state gets no equity or warrants out of this scheme. It is a straight transfer from the Irish tax payer and the competitors of the Irish banking system, to the shareholders and other creditors of the Irish banks. They have now been rewarded for incompetence and recklessness. The example of the Irish Nationwide Building Society shows us how this inept bail-out will affect the Irish banks’ incentives for future reckless lending. I hope the Irish tax payers have deep pockets.

Auditor #9 wrote:

The speculative picture of Horror Economics continues from Morgan Kelly in the Irish Times today. Lots of 'coulds' but coming on the back of revelations of more Seán Fitzpatrick money dealings, we might see those cockroaches coming out of the cupboards with heavy swagbags yet.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Bank guarantee likely to deal a crippling blow to the economy

BETWEEN COLLAPSING house prices, bankrupt banks and spiralling unemployment, you might be forgiven for thinking that fate has already dealt Ireland every misfortune in its hand. However, there may be one more unpleasant surprise in store for us, the prospect that international investors unexpectedly stop lending to the Government.

Economists call this a “sudden stop”. The original sudden stop occurred in 1998 when a default by Russia panicked lenders away from Latin America and plunged their economies into prolonged crisis.

...

In my view, the Government has made insufficient effort to estimate how much its banks have lost. We have therefore had the bizarre experience of nationalising Anglo Irish Bank and recapitalising Allied Irish Banks and Bank of Ireland without knowing precisely the extent of their bad debts.

The ability of the State to continue funding itself ultimately depends on the size of these bad debts. If they are of the order of €10–€20 billion, we will survive. If they are of the order of €50-€60 billion, we are sunk.

,,,

These are only guesses. However, the continuing stream of revelations from Anglo Irish – which bear out the old investment dictum that there is never just one cockroach in a kitchen – suggest that they could be optimistic guesses.

To see what would happen to Ireland if foreign lenders suddenly pull the plug, we only need to look at what happened in Latvia last December. We would be forced to seek an international bailout, with the International Monetary Fund and European Union playing bad cop and good cop. We could expect cuts of one-quarter to one-third in public sector wages and social welfare benefits, and draconian tax rises to bring the deficit back to around 5 per cent of national income in two years.

There is actually a worse scenario where international bond markets suffer a general panic, like 1998. Not only does Ireland gets torpedoed, but also Portugal, Italy, Greece, Spain and Austria. The IMF and EU simply would not have the resources to bail out so many economies and we would be entirely on our own.
....
>>>>>>>>
http://www.irishtimes.com/newspaper/opinion/2009/0217/1224241278003.html

Morgan Kelly has been keeping himself remarkably quiet since he made a right tit of himself over his “night of the bank guarantee” revelations.

What have we got this time? nothing really, except he’s managed to work out for himself how something “bad” MIGHT happen, without any real reason to believe it will.

He also failed to mention that if it did happen, unlike the examples he gave, we have all we need in the national pension management fund to keep ourselves going for this year with the further possibility of raising a national fund if necessary for everything we would need for next year, all the while continuing to correct our overspending. We would then find ourselves two years down the line in entirely different financial circumstances domestically and hopefully internationally before we would need to look to raise foreign investment. Now I can work that out and I know fuck all about finance or economics, so what’s wrong with Mr. Kelly?

BTW was there an apology from Morgan for getting it so wrong last time? Was there f..k.

At this stage in the proceedings, I am concerned that Kelly's only contribution is to scare the bejaysus out of the public with his damning prophesies. Whether he is right or wrong at this point is irrelevant. Scaring people is doing nobody any good.

In relation to Morgan Kelly's article, it is clear that MK is sticking to his own back of an envelope calculations and is ignoring the fact that the Government has taken steps to try to ascertain the state of the banks' loan books. It will be interesting to see how he reacts to the publication of the bones of the PWC report.

In the meantime, MK's personal tone in referring to "Brian/Brianie", his ignoring of any positive effects of steps taken by the government and his call for immediate action without specifying what such action might be, are turning him into a polemicist rather than an economist.

I still find MK hugely entertaining and hugely terrifying. If his message is accurate then he is doing himself and his analysis a disservice throught his style of delivery. Perhaps MK sees panic as being the only thing that can save us at this stage. It is hard to tell.

All this schadenfreude is a tad premature, guys. This mutha ain't over yet, ya know. And looking at the revelations emerging in todays papers it looks more and more like MK was right to be worried.

Surely be to God we are all grown up boys and girls, capable of handling the truth whatever it may be? I dont want to be patronised or to have gobshite politicians who have shown themselves incompetent/corrupt presuming to hold the news back when we all need to be fully aware of exactly what is going on so that we do not end up unemployed, hungry and/or homeless. We've put too much trust in them already. FF always wheel out the word scaremongering whenever they have something particularly bad to hide, it seems.

http://www.irishtimes.com/

EvotingMachine0197 wrote:

At this stage in the proceedings, I am concerned that Kelly's only contribution is to scare the bejaysus out of the public with his damning prophesies. Whether he is right or wrong at this point is irrelevant. Scaring people is doing nobody any good.

I used to think that about David McWilliams and the property market. The bottom line is that if something is unsound, it will sink with or without scary journalism and vice versa. Morgan Kelly has taken on a kind of vampyre economist role and appears to like the taste of blood. I was far more frightened by poor George Lee's "we're shagging done for", "we've been fleeced" and so on when he heard about the ILP AI loop. Did you hear him? All economic jargon and normal coherence deserted him for at least a day.

George Lee seems to me to be a decent man.

The jist of the article has been vindicated. After dithering, the govt has finally injected capital into the banks - albeit after nationalising one bank along a meadering path that stands for crisis management in Ireland.

As seems to be the wont of this govt and its cohorts that once they've finally made a decision that may have merit they want to backtrack and take posthumous credit. They seem to love nothing more than to indulge in a bit of retrospective history rewriting in order to rubbish their detractor's former analysis, even if its correct, and claim it as their own.

The most depressing aspect of world economic turmoil, due largely to but not solely to property bubbles, is the range of governments and organisations who refuse to reflect upon the fundamental problems underlying their economic model and, in most cases, who refuse to acknowledge the simplest of fundamental flaws. The best we mere mortals can hope for that some sort of recovery will take place and we can go back to playing beggar thy neighbor again in the hope that we make enough dosh to leave the never ending spinning wheel of the current rat race. Turn on the debt taps and all will be well. For awhile.

rockyracoon wrote:

The jist of the article has been vindicated. After dithering, the govt has finally injected capital into the banks - albeit after nationalising one bank along a meadering path that stands for crisis management in Ireland.

As seems to be the wont of this govt and its cohorts that once they've finally made a decision that may have merit they want to backtrack and take posthumous credit. They seem to love nothing more than to indulge in a bit of retrospective history rewriting in order to rubbish their detractor's former analysis, even if its correct, and claim it as their own.

The most depressing aspect of world economic turmoil, due largely to but not solely to property bubbles, is the range of governments and organisations who refuse to reflect upon the fundamental problems underlying their economic model and, in most cases, who refuse to acknowledge the simplest of fundamental flaws. The best we mere mortals can hope for that some sort of recovery will take place and we can go back to playing beggar thy neighbor again in the hope that we make enough dosh to leave the never ending spinning wheel of the current rat race. Turn on the debt taps and all will be well. For awhile.

You're not wrong, Mr Rackoon. The Irish Examiner is today heralding a great new plan from the banks. Guess what it is? A 2bn fund to aid 'first time buyers'. And so it begins all over again! Nothing learned! I hope and pray that the angels and saints in heaven (if any such exist) will intervene on behalf of any ordinary gullible people tempted by this offer of lower house prices and 12 month fixed interests. That said, I bet any amount it will primarily be property speculators who cream this fund off in the first instance, just as they have all the other money. Another little cushion for them disguised as a public service announcement from the banks! Just like most of the 'affordable houses' that were built were creamed off by landowners and developers.

http://www.irishexaminer.com/ireland/ideygbojey/

rockyracoon wrote:

The most depressing aspect of world economic turmoil, due largely to but not solely to property bubbles, i

But is it largely due to property bubbles? I think being leveraged up to 80:1 is asking for trouble. All it takes is 2 people in 80 (assuming all are equal) to default, on anything, and you are in trouble. No it was all the cleverness, parcelling junk and pretending it was an asset, and regulation avoidance that were, and are, the problem. I also think that lack of attention to money supply hasn't helped either. The property bubble is the symptom not the cause.

Add to that Aragon that a well know and much listened to national broadcaster has come out with a statement something along the lines of: "house prices are not going any lower, it's time to buy." Ireland AM also had some coverage with an EA on the show. (All this info comes from the property pin website under latest topics for those interested - esp those interested in the scathing commentary.

Just like old times. The govt, the banks, the EA's and the media simultaneously come to the same conclusion and with the same message. What uncanny timing these people have.

Squire wrote:

rockyracoon wrote:

The most depressing aspect of world economic turmoil, due largely to but not solely to property bubbles, i

But is it largely due to property bubbles? I think being leveraged up to 80:1 is asking for trouble. All it takes is 2 people in 80 (assuming all are equal) to default, on anything, and you are in trouble. No it was all the cleverness, parcelling junk and pretending it was an asset, and regulation avoidance that were, and are, the problem. I also think that lack of attention to money supply hasn't helped either. The property bubble is the symptom not the cause.

There reason I added the conditional clause is my own personnal belief that the property bubble is the most obvious ramification of a much larger underlying problem to do with debt creation; how we pursue so-called economic growth at all costs; and the general mindset of Westernised populations to wealth creation and retention.

Rocky

Fair enough, agree about the underlying problem and also have severe doubts about our concepts of growth. Wonder if more attention will be given to over all money supply in future?

rockyracoon wrote:

Add to that Aragon that a well know and much listened to national broadcaster has come out with a statement something along the lines of: "house prices are not going any lower, it's time to buy." Ireland AM also had some coverage with an EA on the show. (All this info comes from the property pin website under latest topics for those interested - esp those interested in the scathing commentary.

Just like old times. The govt, the banks, the EA's and the media simultaneously come to the same conclusion and with the same message. What uncanny timing these people have.

Here's a good article on the media and the property bubble which was published in the last issue of Village:

http://www.mediabite.org/article_The-Elephant-in-between-the-property-ads_665274077.html

Im off to the Pin right now to see if this 'first time buyer' idea is taking the kick in the seat of its pants that it deserves.

The current system depends on profit to oil the wheels. Without profit, everything grinds to a halt. Someone else's profits are loaned to you to start your firm. The built-in incentive is always to maximise profit, but costs always build up. If there are profits to be made you get competition. So you invest in better machines, staff, presentation and whatever to compete and so do your competitors. Then you get bigger to squeeze out the competitors and move to Taiwan and drive your profit up. You close down your competitors and your profits get bigger - then a new product comes out better and cheaper than yours and you have to retool. Your dividends are cut and business is making less. You invest your money in a high return financial product and in development land. But no one where you came from has work any more, or they are working in Dunkin Donuts and they cant afford to pay their mortgage. The financial package turns out to be a scam. Which brings us more or less to where we are now.

With profit, you get expansion, unless the money goes under the mattress. There is always going to be a point at which the bubble bursts.

I can scarcely believe what I saw on the Property Pin right now on this thread:

http://www.thepropertypin.com/viewtopic.php?f=4&t=18821&start=45

Gerry Ryan doing the most vomit-making presentation ever for a property development in Clontarf. Has to be seen to be believed. How in the name of God do RTE allow him to go on air making these pronouncements when he has such naked conflicts of interest? To think there may be people out there who believe him only makes his duplicity all the more disgusting.

http://money.uk.msn.com/investing/articles/nicklouth/article.aspx?cp-documentid=14285616

Darling says he'll do whatever it takes to prevent bank failures

So; what is the actual difference between this and the government guarantee??

It would be interesting in a few years time, to look back and see what difference the guarantee actually made....stopping the banks collapsing in Sept, I suppose... but the international consensus post-Lehman is to not let any banks fail; do we not have, here, a de facto world bank guarantee?? At least in the first world. Which leaves us with the question of what happens next, because asset prices are still going down everywhere, which makes all banks less secure.....I guess the UK/US can and will print before sinking, but what happens to Europe?? Including the east. Are the markets going to begin cheering the quantitative easing option and punishing the ECB for being the slowest off the blocks??

I'm no fan of the current Irish financial scandals, but is it not possible that we are being scapegoated a little by the foreign press?? Since the US automakers are looking for more money and another US billionaire is being done for an 8bn fraud, I don't think the rest of the Anglozone is looking squeaky clean either. I suspect we suffer because our press write in English and UK and US analysts therefore find us easier to interpret than many. As for HBOS, I would say sacking the risk analyst because he actually identified some risks is at least as dodgy as some of the stuff going on here. It also turns out that half of Wall St suspected Madoff of being up to no good, but no-one reported him

There is a vast difference... saying you will do whatever it takes does not create a legal obligation on which somebody who loses their money can sue. That is a huge difference.

I agree with you about the scapegoating though... look at Madoff, Stanford etc. Dublin may have been the Wild West of banking but the German Banks and the American Banks and the British Banks must have been cowboys if they decided to set up their salons here. Just a pity the Government turned out to be indians.