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

I just went hunting for the link but couldnt find it for the life of me - though I know I posted it to another thread - but can't remember which one now. Sorry about that!

Despite the 'bank guarantee solution', our banks are failing to lend to small and medium-sized businesses and private borrowers according to the Sunday Business Post today and this to me shows that this 'solution' is fast becoming a pile indeed. People are not buying anything now, we spent all the shaggen dough on houses ... time to do the right thing and knock down a few banks, leave some half-decent ones, kick out the parasites who work in them and put good watchable money in there for whatever business community will be the inevitable blood flow left in this country while the crunch is crunching.

The article says the National Treasury Management Agency raised 4 billion in bond issues recently and now the figure for borrowing for next year is up to 18 billion... scary stuff if I got it right. But something will ultimately have to be done about that deficit in real economic terms because a country living on a deficit is in danger of going bust. That means financing any legitimate business that is out there instead of creating a market out of fresh air like the home choice loan nonsense.

If we start getting into a cycle like that then we'll end up in bigger doodoo as the Commission whacks credit tax on us or worse we truly end up being the new Iceland ("just replace one letter"). And unfortunately we don't have geothermal heating like Iceland, which saves them 10% on their new import bills per year.

My experience of Banks is that it is relatively easy to raise loans against property, or to purchase property but well nigh impossible to raise finance to invest in business unless you have an asset to borrow against. This of course leads to the situation where all loans are secured against property. I think we need to re-examine how Banks invest in business and consider the Islamic model. I think that instead of security based on possibly dubious assets they should also look at investment in the equity.

One point about all this borrowing, it is sucking money out of investment elsewhere just as the bailouts will result in tax liabilities and reduced disposable income.

Squire wrote:

My experience of Banks is that it is relatively easy to raise loans against property, or to purchase property but well nigh impossible to raise finance to invest in business unless you have an asset to borrow against. This of course leads to the situation where all loans are secured against property. I think we need to re-examine how Banks invest in business and consider the Islamic model. I think that instead of security based on possibly dubious assets they should also look at investment in the equity.

One point about all this borrowing, it is sucking money out of investment elsewhere just as the bailouts will result in tax liabilities and reduced disposable income.

That's an interesting point Squire: would you elaborate on it a bit? Doesn't it begin to look as though the Bank bail outs are exactly what it says on the tin? A bail out for the Banks that is not getting passed on to anyone else? Lenders are getting lower interest rates, and borrowers higher, irrespective of central bank rates. There will be a reversion to cash transactions, to try to avoid the squeeze.

From the look of the ISEQ, and the talk, we must be close to recapitalisation.

Well, the AIB mortgage rate is down 0.5%. Hope this is happy news for some of you.

What percentage is it above the ECB base rate in comparison to say a year ago? If that makes sense...

cactus flower wrote:

Squire wrote:

One point about all this borrowing, it is sucking money out of investment elsewhere just as the bailouts will result in tax liabilities and reduced disposable income.

That's an interesting point Squire: would you elaborate on it a bit? Doesn't it begin to look as though the Bank bail outs are exactly what it says on the tin? A bail out for the Banks that is not getting passed on to anyone else? Lenders are getting lower interest rates, and borrowers higher, irrespective of central bank rates. There will be a reversion to cash transactions, to try to avoid the squeeze.

If a government needs to raise money it sells bonds, notes etc. That sucks money out of circulation. If those investment opportunities were not there that money would look for other homes. So if it is borrowing up its limit to bail out the banks it is firstly taking money from other businesses, the money borrowed has to be repaid with interest and that will increase future tax liability and reduce disposable income. If instead it prints the money we know where that leads.

Was listen to Mr Darling earlier and am fit to start a revolution. He is going to give tax cuts to the poorest, OK I don't mind the poor getting help, but it was because this group would be most likely to go out and spend the money and thus allegedly reflate the economy. When are these idiots going to learn that buying Christmas tinsel, made in China is not solving this problem. They must have a death wish. There is a lot of real investment that is needed in the UK and it could be brought on stream very quickly. All they need is some legislation to fast track the planning process. Get the wind generators up, get the dams built, increase the rail network capacity etc. Real jobs and projects with long term benifit. Even buy up or build houses for social housing, do anything but don't blow it on wasteful consumerism. MAD!!

I've just returned from Belgium where there is quite a buzz about ethical banks at the moment. There is a chain email doing the rounds showing how normal banks are investing in arms, child labour and corrupt regimes by means of a tongue-in-cheek documentary- http://ie.youtube.com/watch?v=PzQWk9aRAyM&eurl=http://netwerkvlaanderen.be/en/index.php?option=com_content&task=view&id=287&Itemid=269

Here is an interesting site that details what the banks are investing in - http://www.bankgeheimen.be/bankgeheimen.html?lang=en

The email is advising people to take their savings out of these banks and put them into ethical banks such as this one - http://www.triodos.co.uk/uk/.

Are there any Irish ethical banks or foregn ones that are allowed to trade here? I notice on the Tridos site they say that people in Ireland can't have an account with them. Why?

Smile.co.uk is an internet bank owned by the Co-operative Bank which is an ethical bank. I am unsure if it is open to Irish savers.

johnfás wrote:

Smile.co.uk is an internet bank owned by the Co-operative Bank which is an ethical bank. I am unsure if it is open to Irish savers.

Unfortunately it's not -

Quote :

Disclaimer

smile the Internet bank from The Co-operative Bank p.l.c. (the 'Bank') is a United Kingdom bank and its products are only available in the United Kingdom (including the Channel Islands and the Isle of Man) to United Kingdom residents.

I have an account with them but it is a c/o address so they must accept those sort of addresses. I had the account in the CoOp prior to the launch of Smile though.

Thanks johnfás, I'll look into that.

RaboDirect have ethical funds, I think.

You can open a RaboDirect account and then transfer it into such a fund. You might have to keep the money there for 5 years though.

In General, I think Rabo operates more ethically than the other banks. IFAIK, it also isn't in trouble right now, which is unusual!

RaboDirect btw is owned by RaboBank.
RaboBank is owned by a group of Dutch Credit Unions.
http://en.wikipedia.org/wiki/Rabobank

Thanks eoinm

I hadn't realised Rabo was owned by a conglomeration of Credit Unions.

johnfás wrote:

I hadn't realised Rabo was owned by a conglomeration of Credit Unions.

What a pity they don't want our banks.

I am bumping this thread because we are faced with a possible "asset strip" of the Irish Banks for peanuts and we have not been discussing it. In my view it would also be in effect an asset strip of the Irish economy and would lead to even more massive employment than we are already faced with. I am not talking about the thousands of bank jobs, but the thousands of companies that would go under as their credit lines are cut and fire sales of assets forced on them.

This seems to be the Government preference. Have I understood this wrong, and it here any way it can be stopped?

I posted this on another (ahem!) site - think it mighht be relevant here:

Quote :

An interesting programme on Radio 4 right now is explaining that hedge
funds are seeking to buy "toxic" debt from banks at large discount
(100m debt bought for 40m was quoted) .

It's worried that mass evictions could be on the way, as funds seek to
maximise profit by turning any defaulting borrowers out of their homes
as a FIRST resort. Selling the properties -even at knock down prices -
still delivers profit for the funds.

The UK governement has ordered banks not to evict homeowners except as
an absolute last resort, but this stricture will not apply to the hedge
funds and so called "vulture capitalists" that buy toxic debt.

Could a similar scenario unfold here?

the Programme is "File on 4"

David McWilliams, of whom I am not a fan, went on RTE news at One today and made a plea for nationalisation of the banks.

He said that the proposal to let the Banks go into the control of short term investors would be a disaster for the country.

For once, I think he's right. I know we are war weary and stunned, but this one probably is the biggest issue for Ireland so far this year.

All too Irish Banks
Bank of Oirland - Lamp in your crock of Gold with our Managers
Irish Life - Permanent & Penshionable
EBS - Excellent Bonus Society
Quanglo Irish Bank
Irish Nationwide Pay Deals

cactus flower wrote:

David McWilliams, of whom I am not a fan, went on RTE news at One today and made a plea for nationalisation of the banks. He said that the proposal to let the Banks go into the control of short term investors would be a disaster for the country.

He has an article here.
http://www.independent.ie/opinion/columnists/david-mcwilliams/nationalise-the-banks-but-dont-feed-them-to-vultures-1552678.html

Quote :

Although I never thought I would say so, it would be preferable for us to nationalise our banking system than to allow a private equity
consortium to own and control our major banks. Private equity firms are probably the worst possible owners of a strategic asset like the banking system.

eoinmn wrote:

cactus flower wrote:

David McWilliams, of whom I am not a fan, went on RTE news at One today and made a plea for nationalisation of the banks. He said that the proposal to let the Banks go into the control of short term investors would be a disaster for the country.

He has an article here.
http://www.independent.ie/opinion/columnists/david-mcwilliams/nationalise-the-banks-but-dont-feed-them-to-vultures-1552678.html

Quote :

Although I never thought I would say so, it would be preferable for us to nationalise our banking system than to allow a private equity
consortium to own and control our major banks. Private equity firms are probably the worst possible owners of a strategic asset like the banking system.

Thanks for that eoinmn -

Quote :

Although I never thought I would say so, it would be preferable for us to nationalise our banking system than to allow a private equity consortium to own and control our major banks.

Private equity firms are probably the worst possible owners of a strategic asset like the banking system. If Mr Lenihan sanctions, at these distressed prices, a takeover of the Irish banking system by a private equity consortium, he will have used the guarantee of the Irish taxpayer to subsidise the profits of a tiny few speculators for two years.
Before he announced the guarantee he could have argued that the ownership of the banks has nothing to do with the State because they are private firms.
However, by using the sovereign name to prop up the system, he has changed the game completely. This is also acknowledged in the legislation because the minister now has a veto over who will ultimately buy the Irish banks.
He will also signal chaos in the banking system because the strategy of a private equity fund is to sell. The minute these lads buy an asset the first and only thing on their minds is how to get out of this asset, making the most money by selling to the highest bidder.
What is a private equity fund? A private equity fund is a highly leveraged takeover machine.

Effectively, the banks and our local economy are tied together by an umbilical cord. If one goes, so does the other. Can someone call Brian Lenihan here and get him to explain himself?

Now for all my criticism of Lenihan over the last few weeks, if he does end up nationalising (or far more likely, part-nationalising) the banks, he will have done well to wait til the share price fell so low.

McWilliams is saying that it would be better for them to be nationalised than for them to fall into the hands of private equity funds. And he is correct. Handing control of Irish banking to short-termist profiteers and asset-strippers is one sure fire way to bugger your economy for decades to come. Trade unions in Britain have been on about this for years, and have been derided for stating what's as plain as day. Their track record is asset-stripping and selling off the skeleton for a quick buck, with thousands left unemployed and workable industries and businesses which actually produce things destroyed for ever. McWilliams points to the problems faced by investors who put their money in to PEFs but can't get it out for twelve years, often having to cash in for only a 50% return when they get into financial difficulties. Thus even the investors in PEFs are victims of the PEFs. Though I find it hard to summon up sympathy, given the lack of concern for morality shown by these people when they stick the money in. My inner Stalinist says re-open the gulags...