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

Does anyone really think that this action was taken to save Mr Average? No debate, and what a liability. This will increase the cost of government borrowings and many totally unconnected are going to suffer.

The good news is that the DOW is up without a deal and that makes it so much harder to twist a few arms in a re vote.

Some posts moved from ISEQ thread from this point

Auditor #9 wrote:
True for johnfás - real savings and wealth could be destroyed. However, those depositors have the freedom to move their savings and indeed invested pensions should possibly be protected if they weren't invested on the stock market. To cactus - was there the time for debate? And ... Was it anti competitive?

EU executive to study Irish bank account guarantee
BRUSSELS, Sept 30 (Reuters) - The European Commission said on Tuesday it would study details of Ireland's decision to guarantee all bank deposits to see whether the move complied with European Union competition rules. "We have been in close touch with the Irish authorities. If there is any state aid involved we will look at it as a matter of urgency. We expect the details to be notified to the Commission very shortly," a Commission spokesman said.


The question of whether the ECB would allow or support bail outs of Irish banks by Government has been raised here by myself and other posters on P.ie. over the past while.

This again brings home the desperation of the measure and that it was left way, way too late. They have not even discussed it with the ECB ? As someone here said earlier, why wouldn't every depositor in Europe move their funds into the Irish banks? Of course it is anti-competitive. They should be working on Plan B: salvage of bankrupt banks, right now (think Sweden, not McWilliams).

Audi - the debate could have been held any time over the past year. Government has been in hiding and has refused to debate. No State of the Nation speech, no nothing.

Most pensions are invested in the stock market, and people paying into pensions don't control what is bought or not bought by the fund managers.

McWilliams in my view is a clown. If they are taking his advice, we are all in trouble.

Jaysus Audi, you gave me a fright - I thought I'd lost your post.

In fairness, if the government had been talking publicly about possible bank bailouts prior to this point then the whole thing would have frozen much earlier. You can't publicly debate what you are going to do in case one of your banks goes bust and expect other banks to lend to them in the meantime. It is quite possible that they have had a contingency plan for some time or that a couple of weeks of work has gone into this. It just isn't something that can be debated in public.

There's plenty of room within the EC Treaty to derogate from most provisions anyway. I really do not see a situation where this will be reversed by virtue of EU Law.

All the better if we get lots of deposits from overseas, it will improve liquidity of our institutions.

The more likely outcome is a proper guarantee from the ECB which will render Irish protections redundant.

Zhou_Enlai wrote:

In fairness, if the government had been talking publicly about possible bank bailouts prior to this point then the whole thing would have frozen much earlier. You can't publicly debate what you are going to do in case one of your banks goes bust and expect other banks to lend to them in the meantime. It is quite possible that they have had a contingency plan for some time or that a couple of weeks of work has gone into this. It just isn't something that can be debated in public.

I do see the difficulty Zhou and we have probably all been treading warily. I hope I'm wrong about it being a panic last minute reaction We will just have to wait and see if it works now. The boat has been pushed out.

What's happening with the credit unions?

AFAIK the credit unions don't buy credit on the international credit markets so it is unlikely that they are in danger of a liquidity crisis.

Libero provided these two links in the other place.

http://www.ise.ie/app/announcementDetails.asp?ID=1967287
http://www.ise.ie/app/announcementDetails.asp?ID=1967246

I am always cheered to see that good fortune has smiled on some.

This is from the second one. Are these the people who have been bailed out of this one?

I would really like to see the contents of those terms and conditions. The way I see it, there is no incentive now for any wayward institutions to revamp their risk management since the Government is underwriting anything and everything.

A move was necessary, there can be no argument there. But a move that essentially forgives bad practices is undesirable.

Nietzsche'sposterchild wrote:

I would really like to see the contents of those terms and conditions. The way I see it, there is no incentive now for any wayward institutions to revamp their risk management since the Government is underwriting anything and everything.

A move was necessary, there can be no argument there. But a move that essentially forgives bad practices is undesirable.

So Fine Gael are positive about this move and Labour are doubtful? Any other significant voices around on this? Lenihan believes the share price is a reflection of the bad lending practice - is it??

I am still in shock.

Hello Squire want to act as guarantor for me. Don't need to know for how much, or what my liabilities are or even consider what I may get up to, it's just for 2 years. Time flies. Bit pinched at the minute could you just sign here.

Unbelievable.

Squire wrote:

I am still in shock.

Hello Squire want to act as guarantor for me. Don't need to know for how much, or what my liabilities are or even consider what I may get up to, it's just for 2 years. Time flies. Bit pinched at the minute could you just sign here.

Unbelievable.

The one consolation: Bank collapse = Fianna Fáil collapse.

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.

Johnny Keogh wrote:

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.

Someone on Prime Time - Morgan Kelly? of UCD said that all the ghost estates we see around the place - that's the capital of the Irish banks.

James Joyce said "An Irishman's house is his coffin"

Auditor #9 wrote:

Squire wrote:

I am still in shock.

Hello Squire want to act as guarantor for me. Don't need to know for how much, or what my liabilities are or even consider what I may get up to, it's just for 2 years. Time flies. Bit pinched at the minute could you just sign here.

Unbelievable.

The one consolation: Bank collapse = Fianna Fáil collapse.

The pointlessness, the dismal small mindedness of that post is beyond my understanding of political argument or opinion.

tonys wrote:

Auditor #9 wrote:

Squire wrote:

I am still in shock.

Hello Squire want to act as guarantor for me. Don't need to know for how much, or what my liabilities are or even consider what I may get up to, it's just for 2 years. Time flies. Bit pinched at the minute could you just sign here.

Unbelievable.

The one consolation: Bank collapse = Fianna Fáil collapse.

The pointlessness, the dismal small mindedness of that post is beyond my understanding of political argument or opinion.

Don't you think there are a lot of bitter people around the place now or going to be? Sorry to be partisan but I can't help it - I think my discomfort with FF is congenital.

When houses went up in price by 100 percent over a hop skip and jump of a matter of months at the end of one century and the beginnings of another I was wondering what our Government was doing to try to stabilise this. No one seemed to even mention that such a ballooning of prices could be wrong, dangerous or even inconvenient. They prices kept going up and still not a peep.

Now it's crashing half a dozen years later. Sorry but FF were in power but they did little or nothing and now there's a bit of a precipice out there that the country is standing on ... and it's due to that bubble which was permitted if not fuelled...

tonys wrote:

Auditor #9 wrote:

Squire wrote:

I am still in shock.

Hello Squire want to act as guarantor for me. Don't need to know for how much, or what my liabilities are or even consider what I may get up to, it's just for 2 years. Time flies. Bit pinched at the minute could you just sign here.

Unbelievable.

The one consolation: Bank collapse = Fianna Fáil collapse.

The pointlessness, the dismal small mindedness of that post is beyond my understanding of political argument or opinion.

Please don't tell me that you consider writing a blank cheque to cover an unknown risk, based on questionable assets to be prudent?

If one of these institutions go down have you any idea the likely consequence of such a promise?

There is already a growing hole in the governments finances, at the very least this measure will increase the cost of borrowing.

Auditor #9 wrote:

tonys wrote:

Auditor #9 wrote:

Squire wrote:

I am still in shock.

Hello Squire want to act as guarantor for me. Don't need to know for how much, or what my liabilities are or even consider what I may get up to, it's just for 2 years. Time flies. Bit pinched at the minute could you just sign here.

Unbelievable.

The one consolation: Bank collapse = Fianna Fáil collapse.

The pointlessness, the dismal small mindedness of that post is beyond my understanding of political argument or opinion.

Don't you think there are a lot of bitter people around the place now or going to be? Sorry to be partisan but I can't help it - I think my discomfort with FF is congenital.

When houses went up in price by 100 percent over a hop skip and jump of a matter of months at the end of one century and the beginnings of another I was wondering what our Government was doing to try to stabilise this. No one seemed to even mention that such a ballooning of prices could be wrong, dangerous or even inconvenient. They prices kept going up and still not a peep.

Now it's crashing half a dozen years later. Sorry but FF were in power but they did little or nothing and now there's a bit of a precipice out there that the country is standing on ... and it's due to that bubble which was permitted if not fuelled...

Not so, while ideally we could and probably should have taken the heat out of the property market, but lacking control of interest rates made that very difficult to do without sending millions if not billions into foreign property, as evidenced by the attempted implementation of the bacon report.
Even so, our own property crash we could handle standing on our collective head, but add in the American sub prime situation and the following international credit crunch and now our banks have a real problem, not by any means entirely of their own making, but a real problem nonetheless.

All today’s action by the Government has done is to recognise the reality that no Government can let a major retail bank go bust, it has to pick up the pieces, there is no choice in that. Much better to try to head off the possibility than to have to step in anyway in an emergency situation.

Maybe we should have a smaller public service or maybe we should be paying less for those we have, but as far as I know by international standards our public service is small and while not poorly paid they are largely not top of the tree either and anyway everyone wants more & better services, they just apparently don’t want to pay for them, who knew?

The point is to try to put the blame on one political party, which suggests there is some other political party who, against all our experience of them, could or would have done any better is just plain pointless, dismal and small minded, sorry for being partisan.

The lack of control of interest rates is a red herring - stamp duty served a similar purpose and you really wouldn't have to stretch yourself to dream up other constraints that could have been applied to either spending or price spirals or both that would have cooled the ballooning, swelling market - getting developers to pay for water infrastructure in Dublin for instance. Listening to planners and professionals and acting on their advice would have been another route. Forcing the integration of public transport coincident with development, building sustainability of all sorts into plans, keeping a watch on spiralling prices and bank leverage... It's unknown what's out there in the banks now ..

Maybe other parties would have done the same as FF, I don't know. I've expressed my opinion and it's very harsh and maybe digoutday and Co. would blush at it because of the gravity of it - if a bank goes down then really and truly will it be grave for the Government. And I'm really uncertain as to the use of this support Bill because Irish debt is one of the riskiest in the world after Spain and ahead of the UK and US - there could still be big liquidity problems. We got caught up in a lending and spending spree and we didn't have to. Sinn Fein were making the point that CEO's salaries should be frozen for the two years if not reduced; they shouldn't be allowed any bonuses etc. and there needs to be very strict provisions around this Deal that will see repossession-laws relaxed and people protected.

It will be a hard time ahead and maybe I should judge Fianna Fáil during and after it but I'm convinced we shouldn't have to be in this position in the first place and the lesson is one about greed and the dangers of it. Old Testament stuff as someone on Bloomberg said earlier.

Mick Wallace, builder and developer
http://www.rte.ie/tv/latelate/av_20070330.html?2237616,null,228

Auditor #9 wrote:

The lack of control of interest rates is a red herring - stamp duty served a similar purpose and you really wouldn't have to stretch yourself to dream up other constraints that could have been applied to either spending or price spirals or both that would have cooled the ballooning, swelling market - getting developers to pay for water infrastructure in Dublin for instance. Listening to planners and professionals and acting on their advice would have been another route. Forcing the integration of public transport coincident with development, building sustainability of all sorts into plans, keeping a watch on spiralling prices and bank leverage... It's unknown what's out there in the banks now ..

Maybe other parties would have done the same as FF, I don't know. I've expressed my opinion and it's very harsh and maybe digoutday and Co. would blush at it because of the gravity of it - if a bank goes down then really and truly will it be grave for the Government. And I'm really uncertain as to the use of this support Bill because Irish debt is one of the riskiest in the world after Spain and ahead of the UK and US - there could still be big liquidity problems. We got caught up in a lending and spending spree and we didn't have to. Sinn Fein were making the point that CEO's salaries should be frozen for the two years if not reduced; they shouldn't be allowed any bonuses etc. and there needs to be very strict provisions around this Deal that will see repossession-laws relaxed and people protected.

It will be a hard time ahead and maybe I should judge Fianna Fáil during and after it but I'm convinced we shouldn't have to be in this position in the first place and the lesson is one about greed and the dangers of it. Old Testament stuff as someone on Bloomberg said earlier.

Mick Wallace, builder and developer
]http://www.rte.ie/tv/latelate/av_20070330.html?2237616,null,228

Interest rate control is not a red herring, we the people had the money when no one else in Europe had any, we the people were going to buy property come hell or high water, if not here then elsewhere, the only thing that could stop that was to make the cost of borrowing anywhere in Europe prohibitive and that we couldn’t do.
I wouldn’t worry about anything “digoutday” has to say, he’s thick, you’re not, there is a difference.

Auditor #9 wrote:

The lack of control of interest rates is a red herring - stamp duty served a similar purpose and you really wouldn't have to stretch yourself to dream up other constraints that could have been applied to either spending or price spirals or both that would have cooled the ballooning, swelling market - getting developers to pay for water infrastructure in Dublin for instance. Listening to planners and professionals and acting on their advice would have been another route. Forcing the integration of public transport coincident with development, building sustainability of all sorts into plans, keeping a watch on spiralling prices and bank leverage... It's unknown what's out there in the banks now ..

Maybe other parties would have done the same as FF, I don't know. I've expressed my opinion and it's very harsh and maybe digoutday and Co. would blush at it because of the gravity of it - if a bank goes down then really and truly will it be grave for the Government. And I'm really uncertain as to the use of this support Bill because Irish debt is one of the riskiest in the world after Spain and ahead of the UK and US - there could still be big liquidity problems.

I don't know whether that's really the case. Most of the Irish mortgage market isn't 'sub-prime' (ie dodgy) at all. The dodgy ones are loans to people who really have little capacity to pay, little intent to pay, and frequently a history of credit defaults. None of that characterises the Irish market - we're a good bet because even if the prices we paid for houses were ridiculous, we'll scrimp and save to pay them. Plus, even where Irish banks repossess, the usual practice is to rent the property to the tenants, which means that the bank is simply accepting a slightly lower payment rate on an asset they continue to hold.

Auditor #9 wrote:

We got caught up in a lending and spending spree and we didn't have to. Sinn Fein were making the point that CEO's salaries should be frozen for the two years if not reduced; they shouldn't be allowed any bonuses etc. and there needs to be very strict provisions around this Deal that will see repossession-laws relaxed and people protected.

That's simply a case, in the first part, of hitting the usual suspects. The people who borrowed madly in the boom - and who therefore share the fault - weren't CEO's and the traditional middle classes, all of whom saw their relative wealth decline in the boom. It was taxi-drivers and plumbers who were leveraged to the hilt on property, and who were largely the drivers of the property boom - CEO's weren't driving the prices of two-beds in Sallins through the roof.

Someone will take it apart one day but I beg to differ that our lack of control over interest rates had much of an effect. Controlling interest rates means restricting or increasing the flow of money in an economy, with an attendant impact on prices in a free-market style. The rates from the ECB were a rough European guideline but did stuff to in effect reduce those rates. We allowed 100% mortgages all of a sudden - big mistake. People thought they could get a Home on the never-never but perhaps this is the sourness it turned into now - bailing out a half dozen banks with a promisory note and the country teetering on an edge. I really don't think people are aware of the gravity of this Bill if it goes through and then the whole plan flops....

Here's the Property Pin account of the goings on in the Dáil tonight http://www.thepropertypin.com/viewtopic.php?f=19&t=13925 - it ends with Open Window saying this

Quote :

I'm well aware of the issues.
I do not live in a vacuum like some of our political leaders.

My point of view is this may be right for exaclty right now along the lines of teh McWilliams article but I could never never support FF or any crowd who essentially brought us to this very point of collapse.

They have failed.
They have created crisis and instability they are par to the problem.
They must go.

If this is their last act so be it.

ibis

"scrimp and save" you say - I think that's what's ahead for a lot of people now, unfortunately. You bought your 330k house, it's now valued at 230k or less but you still have to pay the difference and you might have to do this in a contracting economy where jobs are getting scarcer. The question is, how many of these houses are out there which have had 30% value drops, exist on the bank's books at the full value but in the real economy are worth a lot less. And how many people in those situations are facing unemployment tomorrow and will truly have to scrimp and save for making a big mistake. Let's blame nobody and consider it a problem we all got into; the first thing you do is pare the salaries back and give people a chance to pay those mortgages back. They may not all be bad but rakes of them are and how many people are in trouble and need a hand? There is 110 billion euros worth of mortgage debt on banks here ... if 95% of that is good enough then we could still be stuck with a 6 or 7 billion euro problem to manage. Might not be the worst thing in the world. More social housing eh?

Such provisions need to be built into this Bill if it goes through.