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

Well it is a particularly difficult thing to legislate on...

youngdan wrote:

Here is a bit of reality on Anglo. They have liabilities of 55 billion in deposits subject to immediate demand. They have about 29 billion in bonds outstanding due to future demand. They have liquid assets of whatever they have in cash immediately and whatever they are repaid on loans given out, in the future. This figure is a fraction of what is recognised.

In otherwords if there was a run tomorrow there would be a 50 billion euro gap which would force the country to default. The smart guys are withdrawing their cash

1. The bond holders, which I understood to be valued at 22 billion, are not covered by the state guarantee.

2. As to what fraction of the loans will be repaid in the future, that’s just guesswork and unlike PWC who do know and who came to a different conclusion, you don’t know the who’s or the how much’s of those loans, it has to be guesswork without any real basis.

While I know the banks are not the very picture of rosy financial health, PWC are at least an international firm, aren't they??? If they aren't screaming and running for the hills, we can possible assume our banks are not substantially worse than our nearest neighbours to the East and West.

That said, that ain't saying much.....

tonys wrote:

cactus flower wrote:

According to RTE we are now the second from highest State in the EU in terms of economic contraction, only Latvia (in the hands of the IMF) being worse, and the second from highest at risk of default, on Greece being at higher risk.

The risk of default is a measure of confidence from international investors, at best it is based on probability rather than on any known reality. To an extent you can understand why, we have been subject to some very negative publicity, mostly coming out of London, who largely never thought we were up to much to start with.
On the other hand so far we retain our AAA credit rating which is based on the actual reality of our low national debt to GDP ratio, which is one of the best in Europe, I don’t suppose RTE mentioned that …or did they?

How long will that AAA rating last though? We seem to be pushing very close to the limit according to the Cliff Taylor article in the SBP on Sunday last, 25th January

Quote :

Before the crisis started, the interest rate on Irish government bonds was just slightly higher than that of Germany, the eurozone benchmark. By last November, the rates on Irish bonds were 1 per cent above German levels - in other words, investors demanded a 1 per cent higher return to hold our debt. By mid January, the spread had risen to just under 2 per cent.

Last week, it again rose sharply to around 2.75 per cent on ten-year bonds, a higher premium than other eurozone countries were seeing. Another sign of increased nervousness are so-called credit default swaps. These are financial instruments used to insure against debt default.

While this market can be illiquid and rates can jump around a lot, they nonetheless give an indication of how the market is thinking. Last September, it would have taken an investor €30,000 to insure against default on a €10 million purchase of Irish bonds.

Ten days ago, it would have cost about €230,000. By last Friday, the cost had gone up to around €285,000 (read as 285 basis points on the accompanying graph) just below Poland and higher than any other AAA-rated eurozone country.

http://www.thepost.ie/post/pages/p/story.aspx-qqqt=NEWS+FEATURES-qqqm=nav-qqqid=39026-qqqx=1.asp

Yes, PWC are the largest accountancy firm in the world. The Irish partnership employs 1,600 people.

Auditor #9 wrote:

tonys wrote:

cactus flower wrote:

According to RTE we are now the second from highest State in the EU in terms of economic contraction, only Latvia (in the hands of the IMF) being worse, and the second from highest at risk of default, on Greece being at higher risk.

The risk of default is a measure of confidence from international investors, at best it is based on probability rather than on any known reality. To an extent you can understand why, we have been subject to some very negative publicity, mostly coming out of London, who largely never thought we were up to much to start with.
On the other hand so far we retain our AAA credit rating which is based on the actual reality of our low national debt to GDP ratio, which is one of the best in Europe, I don’t suppose RTE mentioned that …or did they?

How long will that AAA rating last though? We seem to be pushing very close to the limit according to the Cliff Taylor article in the SBP on Sunday last, 25th January

As I understand it the AAA rating and the interest rate on bonds are not directly related, in theory the AAA rating, which is based on known facts, could remain while the interest rate demanded, which is largely based on sentiment, could go through the roof.

tonys wrote:

Auditor #9 wrote:

tonys wrote:

cactus flower wrote:

According to RTE we are now the second from highest State in the EU in terms of economic contraction, only Latvia (in the hands of the IMF) being worse, and the second from highest at risk of default, on Greece being at higher risk.

The risk of default is a measure of confidence from international investors, at best it is based on probability rather than on any known reality. To an extent you can understand why, we have been subject to some very negative publicity, mostly coming out of London, who largely never thought we were up to much to start with.
On the other hand so far we retain our AAA credit rating which is based on the actual reality of our low national debt to GDP ratio, which is one of the best in Europe, I don’t suppose RTE mentioned that …or did they?

How long will that AAA rating last though? We seem to be pushing very close to the limit according to the Cliff Taylor article in the SBP on Sunday last, 25th January

As I understand it the AAA rating and the interest rate on bonds are not directly related, in theory the AAA rating, which is based on known facts, could remain while the interest rate demanded, which is largely based on sentiment, could go through the roof.

Do you know what the rating is based on ? Indebtedness and GDP you said before ... ? Our cost of borrowing has risen too to 6% - isn't that significant? The more we borrow, the more potentially indebted we become.

Doesn't it look like we'll have to borrow a heap of money now. Can you see us bridging the 15bn euro gap in 5 years?

Auditor #9 wrote:

Doesn't it look like we'll have to borrow a heap of money now. Can you see us bridging the 15bn euro gap in 5 years?

As I heard someone say recently, yes we can, but we are dependent on the world economy stabilising in 2010 and showing a small bit of growth thereafter, if that happens we’ll be OK, it’s not going to be pretty, but we'll survive that and who knows, in the long run it might even do us some good, we were losing the run of ourselves.

Doubtless PCW employ lots of capable people, but for some reason I do not have a high opinion of them. Probably totally irrational of me. Can never fathom why the likes of government bodies and councils employ them. I suppose there are times when a name can count and impress, so doubt is banished.

It is said of the legal profession that you get the opinion that you pay for, that is so unfair and couldn't possibly apply to any profession.

tonys wrote:

Auditor #9 wrote:

Doesn't it look like we'll have to borrow a heap of money now. Can you see us bridging the 15bn euro gap in 5 years?

As I heard someone say recently, yes we can, but we are dependent on the world economy stabilising in 2010 and showing a small bit of growth thereafter, if that happens we’ll be OK, it’s not going to be pretty, but we'll survive that and who knows, in the long run it might even do us some good, we were losing the run of ourselves.

I think we're half betting on it stabilising by 2010 which isn't a great position to be in, hence all the criticism of the government. I'm genuinely concerned it won't recover fully until 2013/14 - what then? I've a feeling there will only be movement of small cogs by next year and it will take a while after that to pick up momentum. An awful big system came suddenly to a grinding halt there last year and could still be coming to a halt.

But it's true, we went a bit mad for a while and it's no harm for us now to get back to basics for a little while. It might learn us yet.

There is not going to be a wide spread recovery in 2010 in the sense that everyone thinks. If someone decides to invest it will take several years for that to feed through to maximum employment. No in 2010 you will start to see the people who do the initial work picking up contracts. It will be 2011 or 2012 before that then feeds through to major employment.

Zhou_Enlai wrote:If you want a job done right...


S.I. No. 411 of 2008.
CREDIT INSTITUTIONS (FINANCIAL SUPPORT) SCHEME 2008
....
3.3 “covered liabilities” shall be construed in accordance with paragraph 10 of the Schedule; and
....
10. The covered liabilities are those liabilities existing from 30 September 2008 or at any time thereafter up to and including 29 September 2010, in respect of the following:

10.1 all retail and corporate deposits (to the extent not covered by existing deposit protection schemes in the State or any other jurisdiction);
10.2 interbank deposits;
10.3 senior unsecured debt;
10.4 asset covered securities; and
10.5 dated subordinated debt (Lower Tier 2),

excluding any intra-group borrowing and any debt due to the European Central Bank arising from Eurosystem monetary operations.
The Minister shall publish the total covered liabilities of the covered institutions in aggregate quarterly in Iris Oifigiuil.

11. The Minister shall impose specific restrictions on a covered institution in respect of dated subordinated debt (Lower Tier 2) covered by the guarantee, so as to prevent the unwarranted expansion of capital and lending activity during the guarantee period. Such restrictions shall include but not be limited to those set out at paragraphs 36 to 43.

In particular the Regulatory Authority shall require that where new dated subordinated debt is covered by the guarantee, the covered institution benefiting from such a financing will also maintain at least the solvency ratio initially obtained when this financing takes place during the whole duration of the guarantee period.

The details of the restrictions imposed by the Regulatory Authority on a covered institution benefiting from a guarantee on new subordinated debts will be transmitted each six months to the European Commission.
....

Tony you seem to be living in a world of your own. Zhou posted this the other day but maybe you consider him stupid and did not bother reading.

Now you are saying the bonds are not covered so is this document a load of bollix according to you.

10.3 Senior unsecured debt. This means the regular corporate bonds issued by Anglo which amount to 21 billion

10.4 Asset Covered Securities. This means bonds issued on the stenght of mortages written. A poster showed that the commercial mortage backed bonds were over 8 billion but I believe them now to be 6 billion


Now you say that PWC has a better idea of the default rate in the future than I. Believe that all you like. Lads like you bought the stock at 18 and lads like me sold it.

Those loans have as much chance of being repaid as I have of playing in the Superbowl next Sunday

youngdan wrote:

Zhou_Enlai wrote:If you want a job done right...


S.I. No. 411 of 2008.
CREDIT INSTITUTIONS (FINANCIAL SUPPORT) SCHEME 2008
....
3.3 “covered liabilities” shall be construed in accordance with paragraph 10 of the Schedule; and
....
10. The covered liabilities are those liabilities existing from 30 September 2008 or at any time thereafter up to and including 29 September 2010, in respect of the following:

10.1 all retail and corporate deposits (to the extent not covered by existing deposit protection schemes in the State or any other jurisdiction);
10.2 interbank deposits;
10.3 senior unsecured debt;
10.4 asset covered securities; and
10.5 dated subordinated debt (Lower Tier 2),

excluding any intra-group borrowing and any debt due to the European Central Bank arising from Eurosystem monetary operations.
The Minister shall publish the total covered liabilities of the covered institutions in aggregate quarterly in Iris Oifigiuil.

11. The Minister shall impose specific restrictions on a covered institution in respect of dated subordinated debt (Lower Tier 2) covered by the guarantee, so as to prevent the unwarranted expansion of capital and lending activity during the guarantee period. Such restrictions shall include but not be limited to those set out at paragraphs 36 to 43.

In particular the Regulatory Authority shall require that where new dated subordinated debt is covered by the guarantee, the covered institution benefiting from such a financing will also maintain at least the solvency ratio initially obtained when this financing takes place during the whole duration of the guarantee period.

The details of the restrictions imposed by the Regulatory Authority on a covered institution benefiting from a guarantee on new subordinated debts will be transmitted each six months to the European Commission.
....

Tony you seem to be living in a world of your own. Zhou posted this the other day but maybe you consider him stupid and did not bother reading.

Now you are saying the bonds are not covered so is this document a load of bollix according to you.

10.3 Senior unsecured debt. This means the regular corporate bonds issued by Anglo which amount to 21 billion

10.4 Asset Covered Securities. This means bonds issued on the stenght of mortages written. A poster showed that the commercial mortage backed bonds were over 8 billion but I believe them now to be 6 billion


Now you say that PWC has a better idea of the default rate in the future than I. Believe that all you like. Lads like you bought the stock at 18 and lads like me sold it.

Those loans have as much chance of being repaid as I have of playing in the Superbowl next Sunday

1. The Minister said in the Dail that the 22 billion of bond dept was not covered by the guarantee, my post was based on that. As I understand it not all bonds are “senior debt”, do you have information on whether the 22 billion issued by Anglo are “senior” or not?

2. You have no more idea what “lads like me” bought or didn’t buy than you have of what the future default rate will be on Anglo’s loans. I can’t give you a crystal ball for Anglo’s loans, you’ll have to continue using your own there, but I can tell you that “lads like me” don’t buy shares in other peoples companies.

Jim power on Tubridy this morning was answering questions sent in by text messge. One of those questions was "Do Anglo employees now get the same benefits as civil servants" - Good question Power hadn't a ready answer but someone surely must. He spoke about the contracts that employees had being different to civil servants contracts ...

Has the government done anything like this before? What are they going to do about the anglo employees? Which department will set this one up and which department they be paid from?

Listen here for now
http://www.rte.ie/radio1/player_av.html?0,null,200,http://dynamic.rte.ie/quickaxs/209-rte-tts-thetubridyshow.smil

They don't get the same perks. The people working for Anglo Irish Bank are not civil servants, they are public servants. Their contracts of employment will remain the same even though the owner of the bank has changed.

Auditor #9 wrote:

]One of those questions was "Do Anglo employees now get the same benefits as civil servants"

Now they want jam on it. You get no thanks in this world.

tonys wrote:

youngdan wrote:

Zhou_Enlai wrote:If you want a job done right...


S.I. No. 411 of 2008.
CREDIT INSTITUTIONS (FINANCIAL SUPPORT) SCHEME 2008
....
3.3 “covered liabilities” shall be construed in accordance with paragraph 10 of the Schedule; and
....
10. The covered liabilities are those liabilities existing from 30 September 2008 or at any time thereafter up to and including 29 September 2010, in respect of the following:

10.1 all retail and corporate deposits (to the extent not covered by existing deposit protection schemes in the State or any other jurisdiction);
10.2 interbank deposits;
10.3 senior unsecured debt;
10.4 asset covered securities; and
10.5 dated subordinated debt (Lower Tier 2),

excluding any intra-group borrowing and any debt due to the European Central Bank arising from Eurosystem monetary operations.
The Minister shall publish the total covered liabilities of the covered institutions in aggregate quarterly in Iris Oifigiuil.

11. The Minister shall impose specific restrictions on a covered institution in respect of dated subordinated debt (Lower Tier 2) covered by the guarantee, so as to prevent the unwarranted expansion of capital and lending activity during the guarantee period. Such restrictions shall include but not be limited to those set out at paragraphs 36 to 43.

In particular the Regulatory Authority shall require that where new dated subordinated debt is covered by the guarantee, the covered institution benefiting from such a financing will also maintain at least the solvency ratio initially obtained when this financing takes place during the whole duration of the guarantee period.

The details of the restrictions imposed by the Regulatory Authority on a covered institution benefiting from a guarantee on new subordinated debts will be transmitted each six months to the European Commission.
....

Tony you seem to be living in a world of your own. Zhou posted this the other day but maybe you consider him stupid and did not bother reading.

Now you are saying the bonds are not covered so is this document a load of bollix according to you.

10.3 Senior unsecured debt. This means the regular corporate bonds issued by Anglo which amount to 21 billion

10.4 Asset Covered Securities. This means bonds issued on the stenght of mortages written. A poster showed that the commercial mortage backed bonds were over 8 billion but I believe them now to be 6 billion


Now you say that PWC has a better idea of the default rate in the future than I. Believe that all you like. Lads like you bought the stock at 18 and lads like me sold it.

Those loans have as much chance of being repaid as I have of playing in the Superbowl next Sunday

1. The Minister said in the Dail that the 22 billion of bond dept was not covered by the guarantee, my post was based on that. As I understand it not all bonds are “senior debt”, do you have information on whether the 22 billion issued by Anglo are “senior” or not?

2. You have no more idea what “lads like me” bought or didn’t buy than you have of what the future default rate will be on Anglo’s loans. I can’t give you a crystal ball for Anglo’s loans, you’ll have to continue using your own there, but I can tell you that “lads like me” don’t buy shares in other peoples companies.

It might be time to recognise that the minister does not know what he is talking about.

Not all debt is senior debt. Different grades of debt carry different interest rates in recognition of this. All of the debt should be defaulted on but unfortunately they,the government, gave it to the taxpayers and they will be unable to pay.

Anglo to me looks like it did like some banks here did. "It chased HOT MONEY"
As the Iceland banks it attracted foreign deposits to buid itself and now the mugs of taxpayersare handed the bag.

http://www.thepost.ie/post/pages/p/story.aspx-qqqt=VINCENT+BROWNE-qqqs=commentandanalysis-qqqid=38956-qqqx=1.asp

This Vincent Browne article from last Sunday explains.


You will see in the same paper where a large commercial property has been discounted 60%. PWC can spin all they like but believeyouir eyesand take a drive arround.


God help the people of Ireland for being so stupid that they elected buffoons

youngdan wrote:

PWC can spin all they like but believe youir eyes and take a drive around.

They are excellent at picking up the nuances of their clients wishes and constraints when they receive a commission! So read with that in mind.

Squire wrote:

youngdan wrote:

PWC can spin all they like but believe youir eyes and take a drive around.

They are excellent at picking up the nuances of their clients wishes and constraints when they receive a commission! So read with that in mind.

Given that they would have known that the Government were going to be making some serious decisions on the basis of their report and that it was publicly known what company was compiling the report for the Government, I don't think we need be too worried about their motivations.

youngdan wrote:

Not all debt is senior debt.

Dan, can I take it that by this you mean the 21 billion is not covered by the guarantee as the minister said.

tonys wrote:

Squire wrote:

youngdan wrote:

PWC can spin all they like but believe youir eyes and take a drive around.

They are excellent at picking up the nuances of their clients wishes and constraints when they receive a commission! So read with that in mind.

Given that they would have known that the Government were going to be making some serious decisions on the basis of their report and that it was publicly known what company was compiling the report for the Government, I don't think we need be too worried about their motivations.

Tonys

Ever wondered why the government(s) in general commission so many outside consultants to write reports and at considerable cost? Is it to get an objective answer or to get a document that could be read in a manner that supports their intended course? In a cynical mood tonight.

tonys wrote:

youngdan wrote:

Not all debt is senior debt.

Dan, can I take it that by this you mean the 21 billion is not covered by the guarantee as the minister said.

I have seen nothing whatsoever to suggest that the bonds are not covered by the guarantee. I personnelly do not think they should be but that is neither here nor there.

I do not know how far Zhou had to dig for that document but I assume he got it off a government site. If he would tell us where he got it it would help.

I did not hear what the minister said. I am going on the basis of the document but also on the basis that were Anglo/government defaulting or in danger of defaulting in the future on about 30 billion of bonds it would be a major news story.

Uproar today over the 300 million purchase of Anglo Irish shares to support the share price - and the fact that this liability seems now to have been landed in some way with the public. On Newstalk they are saying this was illegal.

Are the Gardai out there investigating this right now?

Quote :

Breaking News - Auditors Knew of Chairman's Loans .. Oireachtas Committee Grills Auditor

03/02/2009 - 19:43:50
Anglo Irish Bank’s chief internal auditor admitted tonight knowing ex-chairman Sean FitzPatrick had taken out loans from the lender but said he did not realise the extent of them until late last year.

The bank was nationalised last month after the €84m loans scandal became public in December.

Under questioning at an Oireachtas committee, Walter Tyrell claimed he knew of the scale of the borrowings only in late November.

But he later told Independent Senator Shane Ross he would have been aware at times.

“I knew Mr FitzPatrick was a borrower of the bank, yes,” Mr Tyrell said.

Mr Tyrell, who was appointed head of Anglo’s internal audit unit in 2005, was being grilled by TDs and Senators from the Economic and Regulatory Affairs Committee about the scandal-hit institution.

Mr Ross asked if the internal audit head would have known of the size of Mr FitzPatrick’s loans.

“I would have seen credit committee approvals going through for Mr FitzPatrick like I would for every other borrower of the bank,” Mr Tyrell said.

Mr Ross replied: “So the answer is yes?”

Mr Tyrell answered: “At any particular time, I would have, yes.”

The 12-year bank veteran claimed he never questioned Mr FitzPatrick’s borrowings until late November.

“Up until November/December 2008 there were no issues in relation to Mr FitzPatrick’s loans that were in my mind,” Mr Tyrell said.

“Mr FitzPatrick’s loans were in the loan book like all other loans, they went through the normal course of approval.”

http://www.breakingnews.ie/ireland/mhsnqlojcwcw/

As many assumed trying to bail out companies that you don't know much about, run by people of who created the mess is not a very clever thing to leap into.

Here is an interesting link.

http://ukhousebubble.blogspot.com/2009/02/unknown-circle.html



Basically it would seem that credit is increasing being extended to those beloved Banking off balance sheet vehicles, whilst it is being restricted for the average Joe who will end up paying for this. Oh and since the information is from the bank of England it is clear that, firstly they know all about it, and secondly all the political utterances about liquidity and credit to small business etc is either hogs wash or the utterances of fools.