Nationalisation Watch / Govt. rethinking 3.5 billion bailout for the banks?

Europe looks to new banking controls
10/01/2008 - 14:03:43

New banking rules to clamp down on the causes of the financial crisis were put forward by the EU today.
Among the demands from the European Commission was that sellers of risky loans be made to hang on to part of the investment and share the risk.
The Commission proposes that sellers should hold at least 5% of the investment when they sell loans repackaged as securities, one of several long-term changes to stabilise European banking and improve supervision for banks that operate across several nations.
"I'm really trying to row back ... what has been occurring," said EU financial services chief Charlie McCreevy.
"Less and less critical risk analysis is being done," he said of companies that irresponsibly sought out more mortgage loans - many of them to people with poor credit - to sell more asset-backed investments.
Complex investments based on the US subprime housing market triggered the current credit crisis because investors no longer accepted the face value of many securitised products - wiping billions of euro off balance sheets of banks across the world.
Mr McCreevy claimed this "investor-pay" credit model was "going to change the whole type of thinking in this area."
The European Commission warned that its proposals would not solve the current banking meltdown but should strengthen market confidence and banks' resilience when they come into effect in two years' time.
The new rules would restrict how much banks could lend to one borrower, give financial supervisors a clearer view of the business banks do across Europe and fix new rules to assess the risk complex securitized investments - such as those based on the US subprime housing market that triggered the current credit crisis.
During times of crisis, the EU executive wants to restrict lending between banks to limit the exposures that banks incur to other banks.
It would also try to strengthen savers' confidence in banks with new standards on how quickly banks would pay out savings in troubled times.
The EU would strengthen the powers national supervisors have - creating a complicated system where a "college" of national financial watchdogs would form to monitor each major banking group.
This changes the current patchwork system where supervisors only watch banks on their own turf. The new system would give a national authority more information on the business a bank headquartered on its home turf does abroad. That might also give banks more flexibility on how much money they need to put aside to cover liquidity and not risk running out of money.
However the proposed reform does not cover insurance companies where some insurers argued that a more diversified group working in different countries faced less risk - and should put aside less funds - than an insurer with all its eggs in one country.
The EU parliament and governments must approve the rules.
Mr McCreevy acknowledged that it had been "devilishly difficult" to get EU nations to agree how on the supervisory reform might work - and that he would have a tough time ahead to win their support for the changes.
At least 12 of the EU's 27 nations were originally opposed, he said.
"This is an area where it is very incremental steps that need to be taken," he told reporters.
"The reason that we haven't taken a bigger step forward is that we wouldn't get agreement."

ironic that mccreevy is moralising about reckless lending!!!!

one simple way to kill the subprime problem in one fell swoop is to enact a law/accounting standard that forces all siv's to be consolidated back into the bank's balance sheets. then the directors would start caring about the crap mortgages sold to the sivs and onto investors.

Quote :

Financial Advice

If you had purchased £1000 of Northern Rock shares one year ago it would now be worth £4.95,

with HBOS, earlier this week your £1000 would have been worth £16.50,

£1000 invested in XL Leisure would now be worth less than £5,


but if you bought £1000 worth of Tennents Lager one year ago, drank it all, then took the empty

cans to an aluminium re-cycling plant, you would get £214.


So based on the above statistics the best current investment advice is to drink heavily and re-cycle.

I got this in an email today and thought I'd share it with you all... sobering reading (ahem).

Kate P wrote:

Quote :

Financial Advice

If you had purchased £1000 of Northern Rock shares one year ago it would now be worth £4.95,

with HBOS, earlier this week your £1000 would have been worth £16.50,

£1000 invested in XL Leisure would now be worth less than £5,


but if you bought £1000 worth of Tennents Lager one year ago, drank it all, then took the empty

cans to an aluminium re-cycling plant, you would get £214.


So based on the above statistics the best current investment advice is to drink heavily and re-cycle.

I got this in an email today and thought I'd share it with you all... sobering reading (ahem).

I vividly remember the homeless people in New York during the 80's pushing shopping carts full of empty tins around the city. Just to think they would be called entrepenuers today given the amount they can collect as opposed to the value of some big name companies. Go figure.

you gotta love labour's amendment to the credit bill to cap bank execs pay at the minister for finance's level.
there must be a few grumpy chief execs in dublin 2 & 4 right now!!!

The same minute inconsequential rubbish that is being spun here. If they start talking about CAB being sent to confiscate assets let us know. Who is that rich guy with the big stake in Anglo, he is being saved and everything is being gambled on a bluff

youngdan wrote:

The same minute inconsequential rubbish that is being spun here. If they start talking about CAB being sent to confiscate assets let us know. Who is that rich guy with the big stake in Anglo, he is being saved and everything is being gambled on a bluff

did the govt guarantee equity in banks?

Isn't that the crunch of the whole thing. If they are nationalising the banks why are the shares not gone to zero.

Why don't you ask the question

did his equity stake rise in value ?.

What is the point in discussing this if you can't see that the shares were going to zero without the action taken.

greetings sage of Quincy,hope you find yourself as well insulated from the fuckwittery that is pervading around the Capital Markets as you can .Lenihan has been sold a pup from the aluminum siding merchants.imho it is an illusory bauble that he is attempting to protect.Perhaps Bunreacht na hEireann can halt the panicky haste that is being spun around this velvet stroke?

Johnny Keogh wrote:

rockyracoon wrote:

On the positive side, the govt has all but stopped at run on Irish banks.* While the govt doesn't have to stump up one penny, the gauantee on a vast majority of liquid assets like bonds will stem any uncertainty about their risk. If the banks take time during the next two years to clean up their balance sheets by writing off the property developement loans, etc., with some recapture of capital, this plan might just work.

On the downside. If the banks take this as a sign to begin doing business as usual while rolling-over their under-performing or non-performing developer loans in the hope that they can get the real estate juggernaut rolling again and so bail out the developers, all hope is lost. My greatest fear, that the govt would find a way to prop up our highly over-inflated property and economy, will have been realised.

Is it just me or does this whole deal stink to high heaven?

We (Ireland) promise to cover (insure) all loans, deposits etc etc for the following financial institutions.

Would you swallow this? Its like a taxi driver walking into the New york Stock exchange on Wall Street and saying "I personally garauntee all deals made by Lehman brothers"

We make about €100 billion a year in taxes. After we pay our public services we have diddly squat. How on earth are we gonna cover any losses if our word is called upon.

thats essentially whats we are doing; giving our word to pony up. We have'nt a cent to pony up anyways. It looks brave, bold and a touch swash-buckley (is that a real word/.) but it really a gigantic poker bluff.

Cowen says that the banks have assets worth 500 billion and liabilities worth 400 billion. thats lovely, they obviously opened their books to him....

They did open their books, yeah?????

And these assets worth 500 billion; they woul'nt include loans on aproperty by any chance, would they???

This is last gasp saloon stuff. It has probably saved IL&P and Anglo Irish from going under but I wonder have they shown Cowan all the toxic stuff on the books?

Have they opened their books to the government? Its the only way we could contemplate insuring them.

I wouldn't argue wth a word of that JohnnyK. The Brians have outpaulsoned paulson. They learned the lesson from the US and did it overnight and committed themselves and us before publishing a Bill or going to the Dail.

It is plain that more than one banks looked likely to go under. RTE is talking about a 1.8 billion debt to a German bank falling due and an Irish bank being unable to pay i.e. bust. I wonder what is happening to that loan.

powderfinger wrote:

greetings sage of Quincy,hope you find yourself as well insulated from the fuckwittery that is pervading around the Capital Markets as you can .Lenihan has been sold a pup from the aluminum siding merchants.imho it is an illusory bauble that he is attempting to protect.Perhaps Bunreacht na hEireann can halt the panicky haste that is being spun around this velvet stroke?

Greetings powderfinger and welcome. Are you saying there's provision in the Constitution against this raising of the stakes? In this game surely the banks have shown their hand but we'll know later - isn't there a committee stage to this bill yet whatever that means. Plenty of provision against predatory Hedge Funds who would be able to knock down a staggering bank or two...

cactus flower wrote:

I wouldn't argue wth a word of that JohnnyK. The Brians have outpaulsoned paulson. They learned the lesson from the US and did it overnight and committed themselves and us before publishing a Bill or going to the Dail.

It is plain that more than one banks looked likely to go under. RTE is talking about a 1.8 billion debt to a German bank falling due and an Irish bank being unable to pay i.e. bust. I wonder what is happening to that loan.

You know Cactus flower, we live in very interesting times.

I have seen the three greatest walls in the world fall over the last 15 years; the Berlin Wall, Wall Street and the Great Wall of China.

Capitalism and Communism as we have known it for the last 100 years is now extinct.

Maybe this is the New World Order that Bush Mk1 was talking about...

Auditor #9 wrote:

powderfinger wrote:

greetings sage of Quincy,hope you find yourself as well insulated from the fuckwittery that is pervading around the Capital Markets as you can .Lenihan has been sold a pup from the aluminum siding merchants.imho it is an illusory bauble that he is attempting to protect.Perhaps Bunreacht na hEireann can halt the panicky haste that is being spun around this velvet stroke?

Greetings powderfinger and welcome. Are you saying there's provision in the Constitution against this raising of the stakes? In this game surely the banks have shown their hand but we'll know later - isn't there a committee stage to this bill yet whatever that means. Plenty of provision against predatory Hedge Funds who would be able to knock down a staggering bank or two...

Hello there Auditor No.9 and thankyou for your greeting.Remember those Mahon threads.Hi to all you other hardworking Machineheads.I am no lawyer but it appears that Lenihan is seeking a conferral of power that could possibly conflict with a number of Articles enshrined(sniffy sounding word) in the Constitution.He is doing this in the 'public interest'.Question is,how do you define the public interest.Articles 20,21, and 45 come to mind.Just a brief visit.Great Site.Some good clarity.

Those Mahon threads were classic - really good quality debate - Dave Cochrane should archive them, do a little editing, print them off and bind them if he's allowed. They will become the definitive history of that Tribunal I tell ya.

Stick around why don't you - we have a tea and coffee machine here and a bar I should have a look at those articles - I wonder are they debating it tonight and putting it to a vote .. ?

It now appears that we will have to indemnify the branches of British banks here too (seems perfectly reasonable and european to me).

http://www.rte.ie/news/2008/1001/economy.html

Does this mean we have bailed out Britain too?

Auditor #9 wrote:

Those Mahon threads were classic - really good quality debate - Dave Cochrane should archive them, do a little editing, print them off and bind them if he's allowed. They will become the definitive history of that Tribunal I tell ya.

Stick around why don't you - we have a tea and coffee machine here and a bar I should have a look at those articles - I wonder are they debating it tonight and putting it to a vote .. ?

They sure are - here

They're voting on amendment one now

Hi there Powder. What a welcome addition. I actually live in Dedham. If you passed through Quincy during the past 15 years you would know me though. Not too many bar owners to choose from.

It looks like the banking system was close to collapse the other night. What could they do but risk it for a biscuit I suppose. In the old days they could gaurantee and monetize but now it is a collosal bluff and hope for the best.

It is interesting that what are called normal statistics are pushed into the background but the economy grinds lower nonetheless. This talk of a 1.8 billion debt due will bring everyone to their senses. It is a small sum until you figure it to be 360 yo hoggets per head. So get ye'er cheque book out and for 1400 Euros if you have a wife and 2 kids

I've posted the Bill and proposed amendments on another thread - formatting a bit messy: apologies for that.

I'm tuned into Joan Burton at Committee Stage asking for ASBOS to be imposed on the heads of the banks - Anglo Irish guy on 3 million a year. She is rightly putting the finger on the bonus system in the banks.

cactus flower wrote:

I've posted the Bill and proposed amendments on another thread - formatting a bit messy: apologies for that.

I'm tuned into Joan Burton at Committee Stage asking for ASBOS to be imposed on the heads of the banks - Anglo Irish guy on 3 million a year. She is rightly putting the finger on the bonus system in the banks.

I've been quite impressed by Joan Burton tonight. She's speaking very fluidly. Normally she bores the tits off me

floatingingalway wrote:

cactus flower wrote:

I've posted the Bill and proposed amendments on another thread - formatting a bit messy: apologies for that.

I'm tuned into Joan Burton at Committee Stage asking for ASBOS to be imposed on the heads of the banks - Anglo Irish guy on 3 million a year. She is rightly putting the finger on the bonus system in the banks.

I've been quite impressed by Joan Burton tonight. She's speaking very fluidly. Normally she bores the tits off me

There has been a great deal of discussion of Ireland today across the globe. On Newsnight the French Finance Minister said that in her view the Bill is anti-comoetitive. According to Brian everything is fine with Sarkozy.

It is difficult to see how it can be sustained. If the bluff works and people think Ireland can secure the banks then the money will pour in from across the world and every Finance Minister in the EU will raise hell. If the bluff is called and people don't believe it, there could be a run on the banks.

floatingingalway wrote:

cactus flower wrote:

I've posted the Bill and proposed amendments on another thread - formatting a bit messy: apologies for that.

I'm tuned into Joan Burton at Committee Stage asking for ASBOS to be imposed on the heads of the banks - Anglo Irish guy on 3 million a year. She is rightly putting the finger on the bonus system in the banks.

I've been quite impressed by Joan Burton tonight. She's speaking very fluidly. Normally she bores the tits off me

She was great - indeed all the Labour TDs were very impressive on this and thanks for that link to the Dail tv.

cactus flower wrote:

floatingingalway wrote:

cactus flower wrote:

I've posted the Bill and proposed amendments on another thread - formatting a bit messy: apologies for that.

I'm tuned into Joan Burton at Committee Stage asking for ASBOS to be imposed on the heads of the banks - Anglo Irish guy on 3 million a year. She is rightly putting the finger on the bonus system in the banks.

I've been quite impressed by Joan Burton tonight. She's speaking very fluidly. Normally she bores the tits off me

There has been a great deal of discussion of Ireland today across the globe. On Newsnight the French Finance Minister said that in her view the Bill is anti-comoetitive. According to Brian everything is fine with Sarkozy.

Once again Sarkozy and his ministers are reading from different sheets...still, that's mostly just a whinge.

cactus flower wrote:

It is difficult to see how it can be sustained. If the bluff works and people think Ireland can secure the banks then the money will pour in from across the world and every Finance Minister in the EU will raise hell. If the bluff is called and people don't believe it, there could be a run on the banks.

Possibly, but Irish mortgage debt really is a heck of a lot better than the toxic stuff that's been traded around. Even if our house prices are falling, the mortgages aren't, and the mortgages are the primary asset from the point of view of the banks. People here are not about to simply toss the keys in and walk away - partly, at least, because you'd have to give up any hope of ever owning property in Ireland again.

youngdan wrote:

It looks like the banking system was close to collapse the other night. What could they do but risk it for a biscuit I suppose. In the old days they could guarantee and monetize but now it is a collosal bluff and hope for the best.

It is interesting that what are called normal statistics are pushed into the background but the economy grinds lower nonetheless. This talk of a 1.8 billion debt due will bring everyone to their senses. It is a small sum until you figure it to be 360 yo hoggets per head. So get ye'er cheque book out and for 1400 Euros if you have a wife and 2 kids

I have never found that hoping for the best works, you need an abundance of luck, and in worsening economic conditions luck will be a scarce commodity, more scarce than gold coins.

The inclusion of other Banks with branches in Ireland, I would imagine raises all sorts of interesting prospects for the banks involved. I have had to pay attention to accountants from a very young age and whilst often not comprehending the subtlety of some (most) of their musings have a long respect for ingenuity.

IMO the Banking system was on the brink of imploding. Fortunately I can, and will, make very sure that I do not pick up the tab for any of this should it go wrong. That position sums up my thoughts on the matter.

ibis wrote:

cactus flower wrote:

floatingingalway wrote:

cactus flower wrote:

I've posted the Bill and proposed amendments on another thread - formatting a bit messy: apologies for that.

I'm tuned into Joan Burton at Committee Stage asking for ASBOS to be imposed on the heads of the banks - Anglo Irish guy on 3 million a year. She is rightly putting the finger on the bonus system in the banks.

I've been quite impressed by Joan Burton tonight. She's speaking very fluidly. Normally she bores the tits off me

There has been a great deal of discussion of Ireland today across the globe. On Newsnight the French Finance Minister said that in her view the Bill is anti-comoetitive. According to Brian everything is fine with Sarkozy.

Once again Sarkozy and his ministers are reading from different sheets...still, that's mostly just a whinge.

cactus flower wrote:

It is difficult to see how it can be sustained. If the bluff works and people think Ireland can secure the banks then the money will pour in from across the world and every Finance Minister in the EU will raise hell. If the bluff is called and people don't believe it, there could be a run on the banks.

Possibly, but Irish mortgage debt really is a heck of a lot better than the toxic stuff that's been traded around. Even if our house prices are falling, the mortgages aren't, and the mortgages are the primary asset from the point of view of the banks. People here are not about to simply toss the keys in and walk away - partly, at least, because you'd have to give up any hope of ever owning property in Ireland again.

This would be fine if the type of debt you describe was all we are talking about. Agreed - the family home borrower will hang on if humanly possible. It remains to be seen if the banks loaned to a lot of young people who will not be able to pay back. We saw the craziness of people putting 30,000 euro weddings and complete furnishing onto their mortgage. You are also leaving out people who have bought to let and are finding that the rent will not meet the mortgage repayments for the foreseeable future - rents are falling and interest rates are rising. You are also leaving out the enormous and inflated loans made for land purchase in the last three years.

Take on top of that unemployment that is going through the roof and that will turn your steady payer into a "delinquent" payer in a matter of weeks and you will start to have a more rounded picture.

Cactus Flower.

Believe unemployment up to 6.8%. Highest since 1998 and likely to increase.

UK Industrial production down.
http://www.ft.com/cms/s/0/2b4a3914-7ec6-11dd-b1af-000077b07658.html

This is despite sterling being weak and a narrowing trade deficit. It is recession!