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

All the lads at the top are stuffing the readies under their mattresses as we sit here.

It seems that Germany has guaranteed personal but not corporate deposits.

Quote :

Britain, Germany, Italy and France all agreed to work together to support financial institutions - but stopped short of agreeing US-style bank bail-out plan.
They decided instead to seek a relaxation of the EU rules governing the amount of money individual states can borrow.

This would allow Ireland to borrow enough to bail the whole lot out eh?

Our great grandchildren would be paying this back.

You seem transfixed on the notion that the Government is going to have to pay up on the entire guarantee of 500 billion cactus. Essentially that every single Irish bank is going to collapse and that in all cases their assets will be worthless as against their liabilities.

If an institution were to go bust tomorrow with value A of assets and value B of liabilities. In the first instance a liquidator would be appointed to sell off the assets at the best possible price. It is quite possible, although unlikely that upon total realisation of the asset base that A would in fact outstrip B in which case there would be a return to shareholders. This is of course extremely unlikely but it is possible in the situation where there is a run on a solvent bank. In the other scenario you have the realisation of A which pays off a percentage of B leaving you with a deficit of C. It is C which the Irish government will have to pay up on, not B.

There is also the suggestion that the banks will be paying 600 million each a year for this privelege which is a total payment into the premium of 3.6 bn x 2 = 7.2 bn based on 6 Irish institutions. In that circumstance the value of C would have to be above 7.2 billion before the tax payer would directly foot the bill. Of course the banking customer will have to foot the bill as it will all be built into banking fees and presumably indirectly into mortgage rates.

johnfás wrote:

You seem transfixed on the notion that the Government is going to have to pay up on the entire guarantee of 500 billion cactus. Essentially that every single Irish bank is going to collapse and that in all cases their assets will be worthless as against their liabilities.

If an institution were to go bust tomorrow with value A of assets and value B of liabilities. In the first instance a liquidator would be appointed to sell off the assets at the best possible price. It is quite possible, although unlikely that upon total realisation of the asset base that A would in fact outstrip B in which case there would be a return to shareholders. This is of course extremely unlikely but it is possible in the situation where there is a run on a solvent bank. In the other scenario you have the realisation of A which pays off a percentage of B leaving you with a deficit of C. It is C which the Irish government will have to pay up on, not B.

There is also the suggestion that the banks will be paying 600 million each a year for this privelege which is a total payment into the premium of 3.6 bn based on 6 Irish institutions. In that circumstance the value of C would have to be above 3.6 billion before the tax payer would directly foot the bill. Of course the banking customer will have to foot the bill as it will all be built into banking fees and presumably indirectly into mortgage rates.

No johnfas, that is not what I am saying. I've been posting on the banks on the other "Economic Crisis" thread. Did you watch this yet?

http://www.cnbc.com/id/26986243


The idea that the banks are full of spare hundreds of millions a year to pay to anyone is way off the mark. The Guarantee has pushed the cost of borrowing by Irish Government through the roof. We are going to struggle to make the budget finding 8 billion cuts - how are we going to pay for bank defaults on top of this ? The guarantee has done nothing to recapitalise the banks and it is only a matter of time before one or more of them calls on the Guarantee. There is no Tooth Fairy coming along. This is very serious.

Underneath this, the bottom line is that there is no way that the US and Europe can compete with the productivity of China and India and oil is never going to be cheap again. The money men have just squeezed the last out of us. Its a New World Disorder.

Don't get downcast Cactus. We have to get to the population reduction before the real craic starts.

youngdan wrote:

Don't get downcast Cactus. We have to get to the population reduction before the real craic starts.

Don't. If you start that they'll all arrive.

youngdan wrote:

Don't get downcast Cactus. We have to get to the population reduction before the real craic starts.

The population is still growing at a rate of knots youngdan. I much doubt that it will want to reduce to oblige the Lizard Men. There may be a few lampposts out there waiting for them, rather than the plush pad on Mars of their imagination. The British Commander says today that there is no chance of winning in Afghanistan and they had better make a deal with the Taliban. This is because the local people are heartily sick of both the Brits and the Taliban and look like taking the whole thing into their own hands.

That was always the hope, cactus .

cactus flower wrote:

The idea that the banks are full of spare hundreds of millions a year to pay to anyone is way off the mark. The Guarantee has pushed the cost of borrowing by Irish Government through the roof. We are going to struggle to make the budget finding 8 billion cuts - how are we going to pay for bank defaults on top of this ? The guarantee has done nothing to recapitalise the banks and it is only a matter of time before one or more of them calls on the Guarantee. There is no Tooth Fairy coming along. This is very serious.

Underneath this, the bottom line is that there is no way that the US and Europe can compete with the productivity of China and India and oil is never going to be cheap again. The money men have just squeezed the last out of us. Its a New World Disorder.

So Germany are guaranteeing as well now eh? Artistic Accounting in the West gets bailed out by creative central banking....

This is from the BBC link johnfás posted -

Quote :

They decided instead to seek a relaxation of the EU rules governing the amount of money individual states can borrow.

The leaders also issued a joint call for a G8 summit "as soon as possible" to review the rules governing financial markets.

i.e. print money o'clock is only hours away. Who the hell is going to crib and moan if Europe and the USA just print a couple of trillion dollars ? Magic Money from the printing presses. Who's going to complain? Who's going to sue the West? China?

People who picked up inflated mortgages will now get their repayments restructured and I'm guessing their interest payments will fall as well or be frozen for a while at least. We will see the like of this in the coming weeks or months I'd say. The freshly minted moolah will flow into the banks again but it will cause inflation but for how long? That's a gamble they're prepared to take but the immediate upshot will be a confidence hit.

Who's going to lose out? The generations to come will pay for our inflated consumption of oil is who; minting this moolah is spending future resources now. After all, what else is going to run those several thousand Avensis cars bought last year and those yet to be bought in the next?

I forgot to mention that the inflammation of money we saw over the last bubble went mostly into the pockets of property developers.. Even though they have erected a lot of stock that is not selling, it is doubtful that they did not gain big style from the loans they took out from banks ... Here's this from Fionnan Sheahan in the Indo yesterday....

Fionnan Sheahan wrote:

Among the numerous startling figures in the air this week, is the degree to which the country's major banks are out on a limb with property developers.

Half of all loans given out by the two main banks for commercial development were given to just 40 borrowers.

A risk assessment showed 60pc of AIB's total loans and 70pc of Bank of Ireland's were concentrated in the property sector, either in residential mortgage lending or construction and property.

The imbalance in the lending portfolios of the Irish banking system is being attributed, in large part, to the banking system's difficulties.

Respected economic commentators say the liquidity problem experienced by the Irish banks was prompted by this skewed range of loans.

Figures show State guarantee is bailout for builders

What is so irking looking at that is that comparatively so little was invested in things that apparently could not compete with the high rates of profit anticipated from property speculation - renewable technology, research and development and manufacturing and in agricultural development.

cactus flower wrote:

What is so irking looking at that is that comparatively so little was invested in things that apparently could not compete with the high rates of profit anticipated from property speculation - renewable technology, research and development and manufacturing and in agricultural development.

My hunch is that they'll stoke a Green Energy bubble next and they've already started it on the back of this bailout with solar in the U.S. If true then there must be school of neo-liberal boom economics that involves lurching from bubble to bubble on a grand scale hair-of-the-dog style just as one hangover sets in. Or maybe it's more of a cocaine buzz - I don't know that drug.

No chance we can build an economy on caffeine or has that already been done?

edit
quote from Milton Berle on gmail
"If opportunity doesn't knock, build a door."

Auditor #9 wrote:

cactus flower wrote:

What is so irking looking at that is that comparatively so little was invested in things that apparently could not compete with the high rates of profit anticipated from property speculation - renewable technology, research and development and manufacturing and in agricultural development.

My hunch is that they'll stoke a Green Energy bubble next and they've already started it on the back of this bailout with solar in the U.S. If true then there must be school of neo-liberal boom economics that involves lurching from bubble to bubble on a grand scale hair-of-the-dog style just as one hangover sets in. Or maybe it's more of a cocaine buzz - I don't know that drug.

No chance we can build an economy on caffeine or has that already been done?

Caffeine...not sure. Cocaine, yes. Repeatedly.

The advantage to a 'green energy' bubble would be that it would leave us with a load of both research and green energy sources available on the cheap afterwards - just as the dotcom bubble left us with loads of new technology, datacentres, and underground fibre.. That's the constructive side of a bubble - the railway bubble in the UK is what gave them a dense railway network that could be nationalised. It was constructed speculatively during the bubble by scores of companies that went bust, but the track was still there afterwards. The property bubble has left us, in exactly the same way, with a lot of property...which, unfortunately, is not particularly useful.

ibis wrote:

Auditor #9 wrote:

cactus flower wrote:

What is so irking looking at that is that comparatively so little was invested in things that apparently could not compete with the high rates of profit anticipated from property speculation - renewable technology, research and development and manufacturing and in agricultural development.

My hunch is that they'll stoke a Green Energy bubble next and they've already started it on the back of this bailout with solar in the U.S. If true then there must be school of neo-liberal boom economics that involves lurching from bubble to bubble on a grand scale hair-of-the-dog style just as one hangover sets in. Or maybe it's more of a cocaine buzz - I don't know that drug.

No chance we can build an economy on caffeine or has that already been done?

Caffeine...not sure. Cocaine, yes. Repeatedly.

The advantage to a 'green energy' bubble would be that it would leave us with a load of both research and green energy sources available on the cheap afterwards - just as the dotcom bubble left us with loads of new technology, datacentres, and underground fibre.. That's the constructive side of a bubble - the railway bubble in the UK is what gave them a dense railway network that could be nationalised. It was constructed speculatively during the bubble by scores of companies that went bust, but the track was still there afterwards. The property bubble has left us, in exactly the same way, with a lot of property...which, unfortunately, is not particularly useful.

The empty property would be more useful if it was taken off the banks and given to the local authorities.

I've added a poll at the beginning of this thread to test reaction to the Irish Banks Guarantee.

cactus flower wrote:

This poll is to test reaction to the Irish Banks Guarantee.

Well you done it! Very pollarised options though

Triumph as long as they unleash a scourge of auditors, the cab and a new Regulator on them; Disaster if someone from outside our economic bloc comes looking for the dough - the taxpayers inside have already happily bent over.

cactus flower wrote:

I've added a poll at the beginning of this thread to test reaction to the Irish Banks Guarantee.

There ought to be an option for "can't say yet". If it comes off it will be a triumph, if it doesn't it will be a disaster.

ibis wrote:

cactus flower wrote:

I've added a poll at the beginning of this thread to test reaction to the Irish Banks Guarantee.

There ought to be an option for "can't say yet". If it comes off it will be a triumph, if it doesn't it will be a disaster.

Its a secret ballot Ibis - go with your instinct ...

cactus flower wrote:

ibis wrote:

cactus flower wrote:

I've added a poll at the beginning of this thread to test reaction to the Irish Banks Guarantee.

There ought to be an option for "can't say yet". If it comes off it will be a triumph, if it doesn't it will be a disaster.

Its a secret ballot Ibis - go with your instinct ...

No, really, I can't tell yet. If it comes off, if the guarantee isn't ever called in, then they've given the banks as measure of stability, and used them to cover a couple of billion of our budget hole for the pleasure - but it's a risk.

ibis wrote:

cactus flower wrote:

ibis wrote:

cactus flower wrote:

I've added a poll at the beginning of this thread to test reaction to the Irish Banks Guarantee.

There ought to be an option for "can't say yet". If it comes off it will be a triumph, if it doesn't it will be a disaster.

Its a secret ballot Ibis - go with your instinct ...

No, really, I can't tell yet. If it comes off, if the guarantee isn't ever called in, then they've given the banks as measure of stability, and used them to cover a couple of billion of our budget hole for the pleasure - but it's a risk.

You're the risk assessor - now go and put your money on it !

ibis wrote:

cactus flower wrote:

ibis wrote:

cactus flower wrote:

I've added a poll at the beginning of this thread to test reaction to the Irish Banks Guarantee.

There ought to be an option for "can't say yet". If it comes off it will be a triumph, if it doesn't it will be a disaster.

Its a secret ballot Ibis - go with your instinct ...

No, really, I can't tell yet. If it comes off, if the guarantee isn't ever called in, then they've given the banks as measure of stability, and used them to cover a couple of billion of our budget hole for the pleasure - but it's a risk.

There seems to be some sort of deal on Hypo - 50 billion bail out. There are banks on the brink everywhere in Europe. Iceland is looking at nationalising all their banks.

http://www.reuters.com/article/topNews/idUSTRE4932XM20081004?virtualBrandChannel=10338

It may be that Ireland will have bumped Europe into guaranteeing deposits.

Auditor #9 wrote:

ibis wrote:

cactus flower wrote:

ibis wrote:

cactus flower wrote:

I've added a poll at the beginning of this thread to test reaction to the Irish Banks Guarantee.

There ought to be an option for "can't say yet". If it comes off it will be a triumph, if it doesn't it will be a disaster.

Its a secret ballot Ibis - go with your instinct ...

No, really, I can't tell yet. If it comes off, if the guarantee isn't ever called in, then they've given the banks as measure of stability, and used them to cover a couple of billion of our budget hole for the pleasure - but it's a risk.

You're the risk assessor - now go and put your money on it !

I never gamble, I'm afraid. It's probably the only vice I have no time for whatsoever.

ibis wrote:

Auditor #9 wrote:

ibis wrote:

cactus flower wrote:

ibis wrote:

cactus flower wrote:

I've added a poll at the beginning of this thread to test reaction to the Irish Banks Guarantee.

There ought to be an option for "can't say yet". If it comes off it will be a triumph, if it doesn't it will be a disaster.

Its a secret ballot Ibis - go with your instinct ...

No, really, I can't tell yet. If it comes off, if the guarantee isn't ever called in, then they've given the banks as measure of stability, and used them to cover a couple of billion of our budget hole for the pleasure - but it's a risk.

You're the risk assessor - now go and put your money on it !

I never gamble, I'm afraid. It's probably the only vice I have no time for whatsoever.

You hardly need to, Ibis, when your elected representatives are prepared to do so so generously on your behalf.

The poll is a bit stupid, it's like asking if buying a few hundred lotto tickets is a Triumph or disaster before the numbers have been drawn.

cookiemonster wrote:

The poll is a bit stupid, it's like asking if buying a few hundred lotto tickets is a Triumph or disaster before the numbers have been drawn.

If it's your last 400/800 quid then it's a disaster mate

You're surely not saying that the financial system of Ireland has been subjected a long-shot gamble by Government? Even if it had, you might have a view on the probability of success or failure.