Pension Fund to be Raided to Bail out the Banks

cookiemonster wrote:

Auditor #9 wrote:

If you're watching the week in politics you'll see cullen howlin and varadkar discussing this. Varadkar and Howlin are comparing the Eircom venture capitalist buyout to a similar situation potentially befalling the banks. Such venture capitalists would have no interest in the development of the country but perhaps that's how it should be for a banking product ?

Now that the banks are cheap perhaps it's a good time for the country to take that stake in them, Otherwise we could see the option of doing our small and medium business through Credit Unions as being relatively competitive and efficient if the broadband analogy holds through.

You can't ignore the fact that plenty of TDs already have plenty of shares in those banks.

I don't see any link between the Eircom situation and the Bank situation. Firstly because Eircom was a state company, the Banks are not, they are privately owned by shareholders and stakeholders.
You second point (perhaps it was Varadkar's or Howlin's) that a VC boyout would have no interest in the development of the country, currently the banks as they are have no interest in the development of the country. Unless it's your (or theirs - I was off making a cup of tea) belief that banks should (but currently don't) have an interest in developing the country. In which case it's a different argument.

I've not looked at any numbers bit I'm not sure the Credit Unions are set up to fulfill the functions necessary to do the business required by SMEs.

Presumably a big fraction of the shareholders and stakeholders of the likes of BoI are Irish so they would surely have some responsibility to their country ... more at least than if BoI was owned by Babcock and Brown in Australia - I think this is the line that FG might be starting to take - it's not mine.

You'd assume that banks and bankers have at least a broad view, knowledge and opinion of the economy they are operating in, thus as a customer you extend some faith to them e.g. that your deposits are safe there, that you, as a small or medium-sized business customer can continue to use credit there, that they are liquid and certainly solvent. After all, there are 800,000 people employed in this country in SMEs thus their business itself supports the banks which you use.

If your bank is more interested however in derivatives in banks of other countries or god knows what products (that are potentially fraudulent) then that could be very much NOT in your favour ultimately as a SME businessperson.

Auditor #9 wrote:

Presumably a big fraction of the shareholders and stakeholders of the likes of BoI are Irish so they would surely have some responsibility to their country ... more at least than if BoI was owned by Babcock and Brown in Australia - I think this is the line that FG might be starting to take - it's not mine.

I don't know, I also don't know if such figures are available. It would be interesting. That said I am a shareholder in an Irish bank and also in a bank outside Ireland (can't sell them now!) and my effect on either and their methods and precedures and their impact on the countries in which they operate is almost nonexistant. If that is FG's argument then I don't view it as a very good one.

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You'd assume that banks and bankers have at least a broad view, knowledge and opinion of the economy they are operating in, thus as a customer you extend some faith to them e.g. that your deposits are safe there, that you, as a small or medium-sized business customer can continue to use credit there, that they are liquid and certainly solvent. After all, there are 800,000 people employed in this country in SMEs thus their business itself supports the banks which you use.

Much the same way any SME would have faith in it's suppilers to come though with the goods they need when they need them. But regardless of where those suppliers are based they (and in this case banks) have a duty to both their stakeholders to know the customer's business and the environment the customer is operating in while also having a duty to the shareholders to deliver profit or at least not deliver a loss which will then effect your customers aswell.

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If your bank is more interested however in derivatives in banks of other countries or god knows what products (that are potentially fraudulent) then that could be very much NOT in your favour ultimately as a SME businessperson.

True, but if your bank can, through legal and safe use of common derivatives offer you greater access to credit with which to grow your business you're going to take that, regardless of where it comes from. The nature of banking be it local or international isn't the issue here. The fact being that Irish banks were are careless (shock, horror) as everybody else and they are now tits up. They got there, is impacting all of us. They should learn from their mistakes but I don't believe they should be allowed make a whole load of new ones with the help of the government and billions of our money.

A very broad or basic rule of business or other systems is to deal with your immediate environment and stakeholders as responsibly and as sustainably as you can or know how. This means shareholders, customers, staff, other banks and institutions and so on until the influence and reach of the bank is most definitely felt in the broader society. Did our banks do all that responsibly and sustainably ? We are now in a situation here where loads of their customers (hitherto good consumers) are mortgaged to the back of the eyeballs, many of whom may have jobs with businesses that potentially depend on credit from the very banks they hold their mortgages with ... Thus it would seem that banks have at least an implicit responsibility to the immediate society they operate in. Should that bank be a bit more under the influence of the State it operates in ? We already have a Regulatory mechanism which in theory is a direct influence on banking why shouldn't the country take a stake in the houses of credit purveyance and take the Regulatory role a little bit further ? I'm sure shares can still trade while the Government has its claw in there at some level.

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The nature of banking be it local or international isn't the issue here. The fact being that Irish banks were are careless (shock, horror) as everybody else and they are now tits up. They got there, is impacting all of us. They should learn from their mistakes but I don't believe they should be allowed make a whole load of new ones with the help of the government and billions of our money.

We'll no doubt see a lot of comparative case studies coming out of different societies now from all around the world where banks will be subject to different levels of involvement by government and by other means. It looks like Government is getting involved to a greater or lesser extent from England to Australia though and it'll be interesting to see what happens here.

It appears to me that forcing banks to lend to businesses under threat is simply not achievable. The banks will not throw money away no matter how culpable they have been in bringing the country to its knees.

We are in the bursting of a bubble and there is no way to avoid the pain.

It is imperative though to save the banks so that profitable and prudent lending can continue. If we get them to lend a bit extra then we will have to pay for the addtional risk. This may be worth it for the state as it wil ultimately pick up the tab for lost jobs. There is a risk assessment exercise to be carried out in this regard.

If we accept that the Government cannot force banks to lend through recapitalisation, then the argument for putting in public money ahead of private money is severely dented. The real cost of putting in public money is huge and is a gamble. Just because the Swedes did well does not mean the same will happen again.

For these reasons, I think that we should welcome foreign money into our banks. It might at least give a fillip to cautious Irish shareholders who have lost milions and millions on bank shares. The only issue is to avoid the guarantee being abused.

Beyond that, I think we need to look at getting the bad debts dealt with in a way that allows our economy to keep functioning. We need to fund write offs if necessary subject to taxpayers agreeing to pay big taxes on profits. We need to get the property market back to normal movement again. We need people to start investing again in start up businesses or otherwise to refinance their decimated pensions. To do this we must remove or restructure debt which cannot be realised by asset sales. We are learning from other countries all the time as this disaster progresses. We know we have to take the bull by the horns. If we can get private equity into our banks then the additional measures we can take are greatly expanded.

http://www.politics.ie/economy/38872-its-official-were-recapitalising-banks.html

http://www.irishtimes.com/newspaper/frontpage/2008/1213/1229035665748.html

Lefournier on Politics.ie has pointed out this Irish Times report which appears to confirm that legislation is being prepared to allow Government to use the Pension Reserve Fund to bail out one or more banks in Ireland.

After last week's withering of Anglo's shares, is this inevitable?

They may dip into the fund for the pork bailout while their at it.

After two months long drawn out agonising Brian Lenihan has announced that a recapitalisation fund of 10 billion euro will be put together "perhaps in part from the Pension Fund" to bail out the banks.

"There will be no exposure to the tax payer... no fresh expenditure" Lenihan just said on RTE news.

Are these people still drawing wages?

Mary Harney has announced that swinging cuts in Health Services are on the way.

The Tribune has been refused information on the Bank Guarantee under the FOI on National Interest grounds -

http://www.tribune.ie/business/news/article/2008/dec/14/details-of-bank-guarantee-could-cause-serious-adve/

cactus flower wrote:

After two months long drawn out agonising Brian Lenihan has announced that a recapitalisation fund of 10 billion euro will be put together "perhaps in part from the Pension Fund" to bail out the banks.

"There will be no exposure to the tax payer... no fresh expenditure" Lenihan just said on RTE news.

Are these people still drawing wages?

Mary Harney has announced that swinging cuts in Health Services are on the way.

Wasn't it also announced that pension increases will in future only be indexed to inflation, rather than linked wage deal increases as heretofore?
So, while gets rid of the pesky pensioners having to share in any possible future prosperity, at least their pension contributions have gone to a good cause, ie making sure the bankers and developers are ok.

I wouldn't mind health cuts if only the cut the damn middle management and kept on the actually necessity within the system. Problem is they'll take the easy option and just shut wards and stop hiring people which will drive alot of my friends overseas. A few of them have already gone. I have 3 friends practicing as physiotherapists in the UK now and none of them have any intention in coming back.

I'd say the idea is that Mary Harney destroys the Health Service and none of us lives long enough to claim a pension.