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

tonys wrote:

Squire wrote:

Your hypothesis is only valid if you believe in the domino theory.

In this case it isn’t a theory, it is the only result possible.
If you were an investor in Irish banks, be it AIB, BoI or any other and you seen the Irish Government were willing to let an Irish bank go down and their international investors go down with it, what would you do?.
I would suggest, you know damn well what you would do, you would take your investment in whatever Irish bank it was and hightail it away as fast as your little legs would carry you, which would result in the government having to take over what banks remained.

This whinging about what the Government has done without an alternative end product, is just exactly that, whinging without an end product, which is fine if that is what you people want to do, but lets not pretend it’s some higher intelligence or financial acumen at work, because without an end product, it isn’t, it’s just whinging.

No - us, well me, and fifty politicians in the Dáil and a few economistic advisors, and how many people around the country are asking today and were asking yesterday why the details of Anglo's loans weren't published in any form at all and debate extended.

Plus the market often likes blood. Shed a little now rather than a lot later ... ?

Auditor #9 wrote:

tonys wrote:

Squire wrote:

Your hypothesis is only valid if you believe in the domino theory.

In this case it isn’t a theory, it is the only result possible.
If you were an investor in Irish banks, be it AIB, BoI or any other and you seen the Irish Government were willing to let an Irish bank go down and their international investors go down with it, what would you do?.
I would suggest, you know damn well what you would do, you would take your investment in whatever Irish bank it was and hightail it away as fast as your little legs would carry you, which would result in the government having to take over what banks remained.

This whinging about what the Government has done without an alternative end product, is just exactly that, whinging without an end product, which is fine if that is what you people want to do, but lets not pretend it’s some higher intelligence or financial acumen at work, because without an end product, it isn’t, it’s just whinging.

No - us, well me, and fifty politicians in the Dáil and a few economistic advisors, and how many people around the country are asking today and were asking yesterday why the details of Anglo's loans weren't published in any form at all and debate extended.

Plus the market often likes blood. Shed a little now rather than a lot later ... ?

What would be the point of having figures without the details behind those figures? and because of customer confidentially the details can’t be given. The politicians yesterday who were asking for the figures were aware of that, but asked anyway, so they could get a public refusal and thereby get a blanket for their arse, which was yesterday as always of the utmost importance.

tonys wrote:

What would be the point of having figures without the details behind those figures? and because of customer confidentially the details can’t be given. The politicians yesterday who were asking for the figures were aware of that, but asked anyway, so they could get a public refusal and thereby get a blanket for their arse, which was yesterday as always of the utmost importance.

Figures without details .. ?

It's a matter of trust - banking and money are based on nothing more than trust/confidence. If you have nothing else, shouldn't you start building these things at least ? And can you say you understood the reasons for the rush yesterday - I heard it asked 100 times but I never deciphered the answer.

Interesting viewpoint from the Pin

podge wrote:

I sincerely hope that AIB and BOI are nationalised.

I believe that the taxpayer will be called in to cover some of the losses on Anglo after shareholders equity is exhausted by bad debts.
.
While this may be the case as well for AIB and BOI, over a five or seven year time scale they may begin to generate profits and might be sold to private investors to recoup prior losses.

The worst scenario is that we only nationalise Anglo.
We need any potential profit to government in the future from BOI and AIB nationalisation / resale to cross subsidise losses on Anglo.
http://www.thepropertypin.com/viewtopic.php?p=191666#p191666

tonys wrote:

Auditor #9 wrote:

tonys wrote:

Squire wrote:

Your hypothesis is only valid if you believe in the domino theory.

In this case it isn’t a theory, it is the only result possible.
If you were an investor in Irish banks, be it AIB, BoI or any other and you seen the Irish Government were willing to let an Irish bank go down and their international investors go down with it, what would you do?.
I would suggest, you know damn well what you would do, you would take your investment in whatever Irish bank it was and hightail it away as fast as your little legs would carry you, which would result in the government having to take over what banks remained.

This whinging about what the Government has done without an alternative end product, is just exactly that, whinging without an end product, which is fine if that is what you people want to do, but lets not pretend it’s some higher intelligence or financial acumen at work, because without an end product, it isn’t, it’s just whinging.

No - us, well me, and fifty politicians in the Dáil and a few economistic advisors, and how many people around the country are asking today and were asking yesterday why the details of Anglo's loans weren't published in any form at all and debate extended.

Plus the market often likes blood. Shed a little now rather than a lot later ... ?

What would be the point of having figures without the details behind those figures? and because of customer confidentially the details can’t be given. The politicians yesterday who were asking for the figures were aware of that, but asked anyway, so they could get a public refusal and thereby get a blanket for their arse, which was yesterday as always of the utmost importance.

Given that Enda Kenny repeatedly says he has no wish to govern the country at present, any kind of a blanket is handy for him.

I wouldn't only like to know the figures, but also what kind of personal guarantees there are on the assets said to be backing the loans. I'd like to know if anyone has even checked this.

I agree 100% with the guy on the Pin. At the moment, with the amount of international fear and loathing stalking the markets, if we let banks fail now, we will get a lot of flak, and will never be able to borrow again, banks, Government, whatever. The Americans barely got away with letting Lehman's go...and the consensus since seems to be that banks are better on life support than being allowed to die. Buck a frightened and angry consensus at your peril
Do you think foreign investors will be happy if Anglo's debts are not serviced?? We'd be dead in the water. Fitch has let us keep that AAA rating for now, let's try and keep the markets happier.

Sadly, I think Lenihan is right. We have to pay for the good times and that means stepping up to the plate and paying for our liabilities, no matter what that takes. It isn't going to be pretty, but if we default, we'll be hounded by the markets into international bankruptcy. All I can say is that at least Bert and Co paid the national debt right down in the boom... the Labour party were on at them as recently as 2007 to spend more. We as a country are considered small enough to fail; we must all play our part in ensuring that we don't

I share everyone's upset about what is hidden on bank balance sheets, but realistically, all we need is a few more good UK/US/German/French/Swiss/Belgian banking scandals and they'll all forget about us. I think we can pretty much guarantee we'll get that. I do think the smartest thing the Government can do right now is take all the banks in hand and look like they're going through the lot with a fine tooth comb. It will look like we are being decisive and getting to the bottom of the problem. More improtantly, it gives the vulture traders less to speculate on

More importantly, I suspect Barack Obama will have to do the same. And will then demand it of his trading partners. New broom sweeps clean...

Let's set an example. We don't need Government, realistically, to break the banking code and sell us customer info. We just need them to string up a few people and declare the books well fumigated.

I note with interest that Lenihan said he had some official prosecutorial type going through the Anglo stuff right now. I think we're all hoping for a jail term or three.

Tony. Why are you using Lehman as an example. It was allowed to fail and did the world end.

You do not seem to recognise that default is on the cards. If the government needs 50 billion you seem to think it can just write a cheque. Did Cowen do the right thing or not.

You are saying that he did the right thing. Well we shall see how it works out

I would say Cowen and Lenihan did the least wrong thing. Others will default, we may also. But the trick is not to be the first. Let the US and UK lead the way, I say!

There is only 2 choices so you say he did the best thing.

The choice was gaurantee or not.

Notice poor Papal has no opinion. A few weeks ago he said the gaurantee was right but now Enda the Eejit says it isn't so poor Papal is stuck. Or does the Eejit agree with the gaurantee, what is Enda saying.

My basis for saying he did the right thing is simply that had he let Anglo go to the wall and defaulted on the guarantee, there would have been a run on the other two banks and nothing but a miracle of God would have got us out of that one. Even if the worst case scenario is true about the bad debts of all the banks, nationalisation means they can be kept afloat for a while longer. If enough of the US/UK banks get into really bad trouble, we can THEN LATER maybe, get away with letting parts of the banks liabilities go and merge the bad debts into an "aggregator bank", maybe let that slide

The point about this crisis is that the ECB has been behind the curve the whole way. When the Germans run into serious trouble (and their banks aren't a picture of rosy health right now), the ECB will come up with a bailout plan of sorts which we can quietly apply for without raising heads above any parapets

Seems like the best plan to me...

A persuasive analysis Expat Girl.

Is it your supposition that an "aggregator bank" (aka the McWilliams Skip) necessarily involves defaulting on some debt or allowing a degree of default which could prejudice international sentiment if we went down that road now? What exactly is the nature of such default? Is it allowing borrowers to default and writing off the debt or default on bonds or default on international money market loans? It appears that the detail of the Guarantee excludes certain liabilities - are there the liabilities you are thinking of? I know there are a lot of question marks but it really is the same question posed four different ways!

I suspect they could do any or all of what you are suggesting, but they need to wait until one of the big economies has done it first. Or else the markets will punish us.

It is simple, we are a small country and people have lost a lot of money and are looking for scapegoats. On the other hand, if the US/UK/Germany/China start making tough decisions and letting things go, they have set an example, no one will mess with them because they will need to trade with them in the future (and anyway, 3/4 of the aforementioned are armed to the teeth). Once an example is set, no doubt the meedja, or even the US or EU, will be telling us all we need to follow the leader. Then we can set up our bad bank and dump whichever bad debts we can politically get away with, without further oppobrium.

Let us not also forget that the controversial guarantee lasts only 2 years. If they have any sense, they should get us to the end of the 2 years, and then reduce the number of the banks and the number of things covered by the guarantee, selectively, such that some losses CAN be written off, where legally and morally possible

As a nation, however, it is probably moral and ethical to cover as much of our obligations as we can. A good reputation is worth its weight in gold.

Your point is well made. It largely corresponds with my own amateur view that we need to stay afloat until the acceptable path reveals itself.

In this regard I think Noonan was wrong about positioning ourselves ahead of the curve. The cutting edge can be the bleeding edge too. Lenihan came across as a man who is dilligently planning and readying himself for all likely scenarios and eventualities. The statement that he was on the case from the end of August and that the Bank Nationalisation legislation was months in the making were the right kind of statements. Unlike Richie Bennis he has a plan B and a plan C. This gives me greater confidence than I had yesterday morning.

Barack says America is ready to lead. Go for it Barack - we're right there behind you.

I am talking about giving the gaurantee weeks ago. That was the mistake and he should have let them fold.

What are you talking about letting bank liabilities go. The liabilities are the banks problem. Best scenario Cowen wants the taxpayer to pay them and worst case the country goes broke.

The liabilities are the banks problem, indeed

The difficulty is that the banks are OUR problem

Therefore by extrapolation, the banks liabilities are our problem

Since we, Joe and Josephine Soap, fuelled the bubble as much as anyone else, there is some justice in that, I am afraid, although blame can be apportioned widely

We have made our bed of thorns, now the dacent thing to do is lie on it. Sorry folks!!

Why are the banks OUR problem. Start new banks.

Our problem is national default. Cowen will turn the country into a mixture of Bulgaria and Biafra.

Unless we plan to borrow NO money at all for the next ten years, that is a suicidal strategy.

Because if we let any of our banks default, no-one will lend to us.

And that, not Cowen's current strategy would turn us into a mixture of Bulgaria and Biafra

expat girl wrote:

Because if we let any of our banks default, no-one will lend to us.

People will lend if they think you can repay. Separate issue.

Yet another example of the failure to accept reality.

Did it ever occur to you that the days of borrowing is over. The welfare state is over. They must balance the budget.

The country is broke. Cowen is in fantasy land and I guess the people are too.

Youngdan I tend to agree.

How will Ireland fund expenditure? Will it go trotting along to Europe, or perhaps the IMF. What sort of reception will they get?

I can't see the Germans wanting to bail out Ireland and other profligate countries, why should they? The Euro is a great idea, but like all currencies it requires the various countries and states using it to act in a responsible manner.

Let's hope that this crisis surprises us all and bottoms out fast.

expat girl wrote:

The liabilities are the banks problem, indeed

The difficulty is that the banks are OUR problem

Therefore by extrapolation, the banks liabilities are our problem

Since we, Joe and Josephine Soap, fuelled the bubble as much as anyone else, there is some justice in that, I am afraid, although blame can be apportioned widely

We have made our bed of thorns, now the dacent thing to do is lie on it. Sorry folks!!

A very small number of people have borrowed a very large amount of money from Anglo Irish Bank, in a very, very foolish way. The Bank was very, very foolish and greedy to lend it. Had they troubled themselves to ask me I would have told them not to do it. But now I have to chip in and bail the Bank out. The people, the way things are going, who it will hurt the most are people on low incomes or are unemployed who get benefits and services cut. And wasn't Sean Fitzpatrick who "borrowed" over 100 million from the kitty, last heard of in the Bahamas, on holiday, having told us recently that we need to cut old people's and children's benefits?

Pill from thepropertypin wrote:

wrote:

New crisis as S&P says Anglo bond risk
Wednesday, January 21 14:50:20
(BizWorld)
Global ratings agency, Standard and Poor's said today that there was a risk that payment on around USD2.5 billion (E1.93 billion) worth of perpetual hybrid bonds issued by Anglo Irish Bank would be deferred due to possible state-aid rules.
S and P lowered its rating on Anglo Irish's undated perpetual bonds on Friday by three notches to B.
That rating reflects its view that there is a greater probability of payment deferral following Anglo's nationalisation last week, it said.

"We consider that there is heightened payment deferral risk following the government's seizure of control of Anglo's stock," S and P said, despite the Irish government's statement that it would continue to service its obligations and repay Anglo Irish debts at maturity.
S and P said Anglo has five perpetual hybrid issues outstanding, including three sterling-denominated and two euro-denominated bonds, which in total amount to around USD2.5 billion.
The lowest ranking Tier 1, or hybrid, bank debt have perpetual or very long maturities and its holders are last to be paid out before shareholders in the case of bankruptcy. Tier 1 also have fewer rules on coupons, meaning that interest payments can be missed.
The European Commission could prohibit Anglo Irish from servicing its hybrid debt obligations if government support is in the future perceived as coming under state aid rules, the rating agency said in a note.
In a similar case, the European Commission told BayernLB in December not to pay out any interest on a Tier 1 bond as a condition for its approval of an E10 billion capital injection from the German State of Bavaria.
At the time, BayernLB said it was not clear yet whether it would pay out the next annual coupon payment on its Tier 1 bond - due May 31 2009. The Commission will only allow it to pay interest if it is contractually obliged to do so, it said.
The S and P action follows significant weakening in subordinated bond prices in recent days after Royal Bank of Scotland revealed the biggest loss in British corporate history and the UK government increased its stake in the bank to almost 70pc.
"There seems no reason in the world to favour subordinated financials over corporates in CDS or cash," ING credit strategists said in a note published today.
"Increased coupon deferral and extension risk continues to make us extremely cautious as to this component of the bank capital spectrum."
Tier 1 bonds of RBS fell to around 20pc of face value on Tuesday on fears that the bank will not pay interest payments on such debt.
In addition, S and P on Wednesday downgraded to default status the £300 million Tier 1 preference shares issued by Anglo Irish Bank that were included in the bank's nationalisation.
"Nationalisation of the preference shares means that the investors in the instruments suffer a loss of principal and all future coupons. They will receive compensation, but we expect this to be limited," S and P analysts said.

http://www.businessworld.ie/livenews.htm?a=2347124;s=rollingnews.htm

My read on this is that Tier 1 debt is largely unsecured debt which we may be able to delay or avoid coughing up for in terms of interest payments or redemptions. The plot thickens.

cactus flower wrote:

expat girl wrote:

The liabilities are the banks problem, indeed

The difficulty is that the banks are OUR problem

Therefore by extrapolation, the banks liabilities are our problem

Since we, Joe and Josephine Soap, fuelled the bubble as much as anyone else, there is some justice in that, I am afraid, although blame can be apportioned widely

We have made our bed of thorns, now the dacent thing to do is lie on it. Sorry folks!!

A very small number of people have borrowed a very large amount of money from Anglo Irish Bank, in a very, very foolish way. The Bank was very, very foolish and greedy to lend it. Had they troubled themselves to ask me I would have told them not to do it. But now I have to chip in and bail the Bank out. The people, the way things are going, who it will hurt the most are people on low incomes or are unemployed who get benefits and services cut. And wasn't Sean Fitzpatrick who "borrowed" over 100 million from the kitty, last heard of in the Bahamas, on holiday, having told us recently that we need to cut old people's and children's benefits?

What you seem to be saying is that Anglo were reckless and Sean FitzPatrick is a prick. Your points are valid but I don't see whay you are addressing them to expat girl. Anglo having given reckless loans doesn't change where we are or the accuracy of expat girl's analysis of the way out. I don't believe expat girl has addressed the issue of the regulatory approach to censuring Sean FitzPatrick. I haven't addressed it much either. We can deal with him later. Priority number one is staying alive. I am glad that is what Lenihan and Cowen are focussing on. If they were focussing on how to extract a pound of flesh from FitzPatrick in order to enhance their poll ratings then I would not be much impressed.

youngdan wrote:

Why are the banks OUR problem. Start new banks....

Why is the holocaust Germany's problem - let them re-arm themselves in full. Why are the Commonwealth's problem's England's problems? Keep the immigrants out. Why should the state compensate sex abuse victims? Let the priests pay. Why should I have to abide by my marriage vows? You grew old and put on weight. Why should I be concerned about the state of society? I am an individual who looks after himself. Why should I pay more income tax than a lower earner? If I don't get any more state benefits then I shouldn't pay any more.

Wrong. Reputation matters. The sins of the Father are visited upon the son. One is one's brother's keeper. Wishing it were otherwise because one was spoilt as a child won't make it otherwise.

Zhou_Enlai wrote:

cactus flower wrote:

expat girl wrote:

The liabilities are the banks problem, indeed

The difficulty is that the banks are OUR problem

Therefore by extrapolation, the banks liabilities are our problem

Since we, Joe and Josephine Soap, fuelled the bubble as much as anyone else, there is some justice in that, I am afraid, although blame can be apportioned widely

We have made our bed of thorns, now the dacent thing to do is lie on it. Sorry folks!!

A very small number of people have borrowed a very large amount of money from Anglo Irish Bank, in a very, very foolish way. The Bank was very, very foolish and greedy to lend it. Had they troubled themselves to ask me I would have told them not to do it. But now I have to chip in and bail the Bank out. The people, the way things are going, who it will hurt the most are people on low incomes or are unemployed who get benefits and services cut. And wasn't Sean Fitzpatrick who "borrowed" over 100 million from the kitty, last heard of in the Bahamas, on holiday, having told us recently that we need to cut old people's and children's benefits?

What you seem to be saying is that Anglo were reckless and Sean FitzPatrick is a prick. Your points are valid but I don't see whay you are addressing them to expat girl. Anglo having given reckless loans doesn't change where we are or the accuracy of expat girl's analysis of the way out. I don't believe expat girl has addressed the issue of the regulatory approach to censuring Sean FitzPatrick. I haven't addressed it much either. We can deal with him later. Priority number one is staying alive. I am glad that is what Lenihan and Cowen are focussing on. If they were focussing on how to extract a pound of flesh from FitzPatrick in order to enhance their poll ratings then I would not be much impressed.

I addressed the points to expatgirl as she suggested that joe and jill soap were as responsible for this situation as the big lenders and borrowers. I don't think that's the case. People who borrowed ten times their salary to buy a house were cracked in my view, but the Regulator and the Banks who approved these loans were far more guilty as they knew it was bad practice.
The reason why its important that he is held accountable to the law is that Ireland is now perceived as a very poorly regulated place to do business, and that is hurting us.

I'm acutely aware of the staying alive aspect. Lenihan rightly said yesterday that we have cash for a year. After that, the way things are, it could be a case of wholesale closure of services, no money to pay civil servants and grinding poverty. Eastern Europe and Iceland are indications of where we're heading at present progress.

Zhou_Enlai wrote:

My read on this is that Tier 1 debt is largely unsecured debt which we may be able to delay or avoid coughing up for in terms of interest payments or redemptions. The plot thickens.

I would read that as meaning that repayment of interest can be missed but that this does not mean that it is not due eventually and eventually the loans will have to be repaid.

Whilst agree with your point that we all do have responsibilities, sometimes that concept can be a shade too inclusive. Why should I or anyone else pay for someone else's gross financial errors? If they had made a fortune would the saying no no I don't deserve this I think that the elderly need this money? No! This really is not the problem of those who will end up with the liability.