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

Lenihan rejected Anglo plan to merge with Nationwide

Minister for Finance Brian Lenihan has said he rejected a proposal from the former Anglo Irish Bank chairman Sean FitzPatrick to merge the lender with Irish Nationwide Building Society.


Good man Brian.

Zhou_Enlai wrote:

Lenihan rejected Anglo plan to merge with Nationwide

Minister for Finance Brian Lenihan has said he rejected a proposal from the former Anglo Irish Bank chairman Sean FitzPatrick to merge the lender with Irish Nationwide Building Society.


Good man Brian.

Now that would be a "bad bank"!

David Murphy on Morning Ireland saying the private equity lads Malabracka (?) were looking for a 5 billion stake in Anglo.

What would this mean - we need to know how systemic this bloody bank is - what are the assets of the bank - a rake of property up in Dublin's Docks that Dunne is contesting about ? Do they own the Dundrum shopping centre ? What do they own or are owed for ?

What would it mean if this consortium were to take over now ? I'd really love to know.

The oPINion on it at the moment over there:

Quote :

A consortium of Irish and foreign investors has been in discussions with Government and the National Treasury Management Agency about taking a majority shareholding in Anglo Irish Bank and investing €5bn in the financial institution.
http://www.rte.ie/news/2009/0227/anglo.html

markf909 wrote:

Sounds like we get a bunch of chancers to take on the good loans and leave us taxpyers with the derivatives and other shite.

Dreaded_Estate wrote:

Government takes the first €750million in losses and consortium the next €750million and the balance is split 50% each.
I can't imagine the government will let a private equity firm lose on their developer pals.

yoganmahew wrote:

They may not have much of a choice D_E, they need the money.

It will mean that due diligence will have to be carried out... if they walk away, it will confirm our worst suspicions about the Anglo book.

http://www.thepropertypin.com/viewtopic.php?f=46&t=19254

Dreaded_Estate wrote:

Zhou_Enlai wrote:

Lenihan rejected Anglo plan to merge with Nationwide

Minister for Finance Brian Lenihan has said he rejected a proposal from the former Anglo Irish Bank chairman Sean FitzPatrick to merge the lender with Irish Nationwide Building Society.


Good man Brian.

Now that would be a "bad bank"!

The end is nigh for AIB and BOI it seems.

AIB 38.5c
BOI 19.3c

The volumes traded look unprecedented. Recapitalisation has failed. What's plan B?

coc wrote:

The end is nigh for AIB and BOI it seems.

AIB 38.5c
BOI 19.3c

The volumes traded look unprecedented. Recapitalisation has failed. What's plan B?

42 million and 56 million shares traded on AIB, BOI .... don't tell me that's what they spent the 7bn on - oh jesus no no no

So where does the 7bn go now ? Eircom's Director is more expensive than Eircom - - so we are going to put 7bn in there now. What happens it ? It goes into the capital base of the bank so they can borrow on the international markets... ?

Lenihan on Ursula Hannigan.

Nationalisation of AIB/BOI "doesn't look likely".

Claims there's enough money in the NPRF to fund the bailout.

Apparently once the upturn in the global market comes, we're set to "take off" again.

Says the tax base is going to be broadened, that means more people on lower incomes being pulled into the tax bracket.

Refused to confirm that Metro North was going ahead.

http://www.thepropertypin.com/viewtopic.php?p=216740#p216740

Are the Government going to go back on their plan to buy 25% of AIB and BOI using the 3.5bn a piece?

http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=IRELAND-qqqm=nav-qqqid=40141-qqqx=1.asp

Quote :

The government is likely to be forced to reconsider its decision to invest €3.5 billion inpreference shares in AIB and Bank of Ireland following further declines in the banks’ share prices last week. The announcement of the plan last month has not succeeded in stabilising market confidence in the two banks, with shares in both institutions hitting historic lows last week.

Quote :

...investing €3.5 billion in preference equity is now unlikely to restore market confidence, with the government having a period of weeks before the egms to decide whether to adopt a new approach.

Quote :

The problem for the government, however, is that full nationalisation of the banks would make the exchequer responsible for ongoing financial support and funding, as is the case with Anglo Irish Bank.

However, last week a report from JP Morgan provided some positive news, saying that bad debts in the Irish banking system should not be higher than €26 billion.

JP Morgan Kelly by any chance

A. Bad Bank

I reckon it's bad bank time. I said some time ago that I thought that a bad bank was the only solution that had credibility in Ireland. I think the market is taking a similar view. Debt insurance won't do it as people don't believe we have the resources to back it up. If there is a bad bank then the lenders don't need to worry as much about sovereign default.

I previously said that we needed to wait until a solution gained international acceptance. It looks like the markets are suggesting that a bad bank is needed in Ireland. The concept is gaining traction so preparations must be intensified.

I think it will be difficult to create a bad bank if you completely nationalise the to main banks. The employees may be more concerned to hide their mistakes than rectify them if the State is footing the bill. They know the bank will value honesty in the long term whereas the state might feel the need to punish them. Perversely, it makes sense that people who had a key role in taking the bad decisions and who know where the bodies and bad debts are buried would be incentivised to get us out of this mess. For that reason, I think Lenihan is right.


B. Settlement with creditors

The second leg of preparation/investigation needs to be (i) dealing with a doomsday scenario and (ii) looking for ways to push losses onto imprudent lenders by making settlements with them.

I think we also have to have a plan ready to approach the inter bank/international bank creditors with in the event that debts become unmanageable. This not a strategy but a last gasp contingency. We may need to ask them to accept 35c in the Euro for their debts. If we can pay €10 Billion instead of €26 Billion then happy days. The bottom line for them now is that cash is king (assuming that the western world has not been subject to a conspiracy to destabilise western economies by funding imprudent lending!!).

In this regard, the Government needs to identify all the inter bank/international lenders and the extent to which each is exposed to taxic assets. One would hope that this secret work is already well in hand. In the event that these loans have been packaged into complex products then we also need to look at the legal structures to devise ways to circumvent the complexities. This is not hard but needs to be ready to roll when the sh_t starts hitting the fan.

I heard an economist (Anthony Feeney??) saying on Newstalk Business a couple of weeks ago that we simply don't have the money to pay off the debt via a bad bank. Bad debts were said yesterday to be

AIB 35 billion
BoI 15 billion

This doesn't include Anglo Irish - god knows what that is.

He was of the view that the Bank Guarantee was potentially catastrophic for the country and should be removed asap.

We are in imminent danger of being deemed uncreditworthy, while we need billions in loans to keep functioning.

Zhou, you seem to be suggesting some kind of partial default - would the creditors not turn to the Bank Guarantee?

The classic rouge's way out of this is to allow one company to go under and open the next day under a different name.

Goodbye Ireland, welcome to the federation of Munster Leinster and Connacht? Could even have a new brightly coloured flag and soldiers wearing decorative uniforms. Get a bit of colour into a dreary November day.



A bit more gold embroidery I think.

I think, to be honest, the solution entails persuading Joe and Josephine public to start buying houses again. Bad debts will then become better debts. In reality, our houses have lost 30-50% in value, depending on where they are. I live within 10 minutes walk of a Southside dart station and property values on our estate have shrunk by about 30%, comparing height of boom and current asking prices for the same size houses. This is likely to be an underestimate; in the boom, asking prices were usually well exceeded while now, people get offered 2/3-3/4 of what they ask if they are lucky. If this is the case near a southside dart station, may the Lord help those trying to sell a house beyond the M50.

Askin prices in commuter towns such as Swords, Lucan, Castleknock and other first time buyer strongholds are heading towards 3x the average wage of a typical couple, and the costs of such debt are currently low....and if the asking prices are heading that way, the chances are the purchase prices are already there. Mortgages are now cheaper than renting in many places.

What we have to do is to SOMEHOW restore some confidence both internally and externally and get moving again. There is no point in an ever decreasing spiral if a lot of it is simply (now) due to psychology.

There was an article in one of the Sundays about the european development bank... Government thinking of shifting capital costs of new infrastructure in that direction, meaning the costs would be removed from the exchequer deficit calculation, leaving us with a deficit of France sized proportions. If they have any sense, the Europeans should go for it, 'twill be cheaper than bailing us out.

Expat

It is starting to turn. Most people are better off with the current interest rates. The problem now in the housing market is the amount you need for deposit, but with time that will improve as people's savings increase. This will be a slow year, but it is turning. We are returning to personal finance based on reality. I for one am starting to gear back up and if others do the same we will be out of this late 2011 with start of general upturn a year ahead.

Watch Belfast, there is serious building still going on there. It will be very strongly placed to increase office related employment given the fall in Sterling and generally lower prices.

Clouds on the horizon, fuel prices and some would say inflation. Personally I would welcome inflation.

Squire wrote:

The classic rouge's way out of this is to allow one company to go under and open the next day under a different name.

Goodbye Ireland, welcome to the federation of Munster Leinster and Connacht? Could even have a new brightly coloured flag and soldiers wearing decorative uniforms. Get a bit of colour into a dreary November day.



A bit more gold embroidery I think.

Now this is creative thinking.

expat girl wrote:

I think, to be honest, the solution entails persuading Joe and Josephine public to start buying houses again. Bad debts will then become better debts. In reality, our houses have lost 30-50% in value, depending on where they are. I live within 10 minutes walk of a Southside dart station and property values on our estate have shrunk by about 30%, comparing height of boom and current asking prices for the same size houses. This is likely to be an underestimate; in the boom, asking prices were usually well exceeded while now, people get offered 2/3-3/4 of what they ask if they are lucky. If this is the case near a southside dart station, may the Lord help those trying to sell a house beyond the M50.

Askin prices in commuter towns such as Swords, Lucan, Castleknock and other first time buyer strongholds are heading towards 3x the average wage of a typical couple, and the costs of such debt are currently low....and if the asking prices are heading that way, the chances are the purchase prices are already there. Mortgages are now cheaper than renting in many places.

What we have to do is to SOMEHOW restore some confidence both internally and externally and get moving again. There is no point in an ever decreasing spiral if a lot of it is simply (now) due to psychology.

There was an article in one of the Sundays about the european development bank... Government thinking of shifting capital costs of new infrastructure in that direction, meaning the costs would be removed from the exchequer deficit calculation, leaving us with a deficit of France sized proportions. If they have any sense, the Europeans should go for it, 'twill be cheaper than bailing us out.

Yes - the EIB (european investment bank is hoped to take infrastructural spending 'off balance sheet' - I presume it's the National balance sheet. The EIB fund €50 bn worth of projects per year and Ireland relative to its size spends the most on infrastructure according to the Sunday Tribune (sorry no link)


On the housing - there are tons of free houses and it's a matter of getting these to people. The questions are: Will the banks lend? Are the prices still too high? Are jobs secure? What impact would it have on the economy if more houses were sold? (it might only be positive short term) What are your neighbours going to think who paid nearly twice as much as you for a house?

Couldn't those people who bought second and third homes and are now in trouble be asked to enter into some kind of scheme of rent-to-buy. Instead of taxing them on the wealth that is hanging around their neck could some of their burden not be removed by allowing some renter to buy it?

Auditor #9 wrote:

On the housing - there are tons of free houses and it's a matter of getting these to people. The questions are: Will the banks lend? Are the prices still too high? Are jobs secure?

Will the banks lend? - Yes.
Are jobs secure? - No.
Are prices still too high? - Yes!
There is still a lot of denial out there amongst sellers. People think that they can sell 20 or 30% less than the "boom" price.
They forget that not only was property massively overvalued during this period, but we weren't in a recession!
So in my view, prices need to adjust downwards by 50% to return to normal pre-boom prices, and then a further 10% to take into account that we are now in a recession.

cactus flower wrote:

Zhou, you seem to be suggesting some kind of partial default - would the creditors not turn to the Bank Guarantee?

What I am suggesting is preparing for a doomsday scenario where sovereign default looks imminent. If that is the case then the Guarantee will be worth nohing to these lenders.

We have been told that our options are sovereign default or bleed the tax payers. Well, if it comes to sovereign default then we better be ready for it. We will probably be left with two days to save our country. At that stage, we need to have all the phone numbers ready, all the figures in front of us and a refinancing package ready to roll.

The bad bank needs to buy loans at a discount or to negotiate settlement at a discount. It also needs to be set up and be operational prior to the guarantee ending. The guarantee could then be reduced (by lightning statutory instrument) to cover a portion only of the toxic loans, say 35c in the Euro. The lenders would be no worse off than in the case of sovereign default and we are better off because we will be able to honour the state's borrowings in full as opposed to honouring the banks borrowings.

If the inter-banks lenders want to make an example of us by opening up a can of whup-ass then they will be beggaring the whole eurozone which won't help anyone. There may come a time to look these money-lenders in the eye and to tell them we have fought greater threats to our economic freedom in the past and we are not afraid fight again. We should do it quietly though - soft words in hard arguments!

There could be some light at the end of the tunnel. Just talking to a work colleague who's looking for a house in the Dublin commuter belt, just on the Dublin Meath border. He's been watching the market and some of the houses in this area appear to be moving a lot faster than a few months ago... there are some he was looking at a few weeks ago that have now gone sale agreed..........rumours have it the FTB market is picking up.

AIB sold more mortgages in Jan than in the previous 3 months, admittedly at a very low level.

Twould be interesting to know what much lower sales prices, but a more normal and higher level of transactions, would do to help the Exchequer, the banks, and a few marooned developers.

Well it is the traditional selling season so it is not unual that activity is higher now than a few months ago. The relevant measure is this year's selling season versus last years and it is not good.

As someone who has an intimate knowledge of how bad the property market is, owing to my intimate involvement with the daughter of someone who is involved, there is very little good news to be had.

Nothing is going to look good in comparison to this time last year. However, if it looks better than Oct-Dec, any little something is a plus. Also, if and when news gets around that the situation is lifting a little, you can expect Oct-Dec this year to look positive in comparison with last year. Because I know 3-4 FTBs with a cash stash who are all waiting to jump......and I doubt if they're alone

I ain't looking for much. Just a bottom. Not a return to manic boom

But you would expect the new year to be better than December no matter how the market is doing, if you didn't get a bump in the Spring you might as well give up. People rarely move house in the run up to Christmas and that is always the case... that is why I'm saying I am unsure if it really is an accurate statistic to measure any real improvement in the market. Sales in the Spring were better than sales in the Autumn even in the boom years. It is a bit like saying sales of Turkeys are up in December in comparison to September... not quite as crude but you get the idea.

I think there is some distance to go before this bottoms out.

johnfás wrote:

I think there is some distance to go before this bottoms out.

I'd like property prices to bottom out faster.
I think an online public registry of property sales (including price) would help.
Such a thing exists in England, I'm told.

I think everyone except the Construction Industry Federation have stopped trying to hold out a pretence of propping it up... so it will probably follow whatever the natural path is at this stage.