Morgan Kelly is one of the best economics experts we have in Ireland. In today's Irish Times he describes what the rescue of Anglo Irish will do to our ecnomy and is making an urgent call on all TDs and Senators to stop this lunatic plan from going ahead. Emm enners who value their jobs - public or private sector ought to get on the blower to their local TDs and urge them not to vote for the bill:

http://www.irishtimes.com/newspaper/opinion/2009/0120/1232059661333.html

If this bill goes through there SHOULD be rioting in the streets.

There is a debate tonight in the Dáil - watch it here live on Dáil TV !

Jesus we were given a whole heap of time to debate and consider this anyway before I get on the phone to Tony and Timmy and Pat and Joe - not

I think the Opposition were even taken by storm when the Guarantee was announced and simply went with the flow of the tide of sheer panic. The Irish people should be give at least two weeks if not a month to see what the taxpayer is taking on.

Quote :

Government needs to perform a ruthless triage. The worthwhile banks need to be maintained by any means necessary, including nationalisation, while Anglo Irish and Irish Nationwide must be allowed to collapse.

What began as farce has turned swiftly to catastrophe. Last September the Government casually decided to give a small dig-out to some developer pals by guaranteeing the liabilities of Anglo Irish Bank. This spiralled into a proposed nationalisation that would saddle Irish taxpayers with Anglo’s bad debts, which could easily exceed €20,000 per household, and starve the other, worthwhile, banks of the capital they need to survive.

I think this is it - let the developers fail and it will be like putting them in a jail where they won't be allowed to do further damage but this way we will be supporting them for the foreseeable future - I believe around ten years - before our economy gets into some sort of decent shape again.

Because when you're just constantly paying off a debt you can do little about paying anything else. It's just not right though when that debt is not yours and even worse when you railed against it as it was being mounted up ..

If what Kelly is saying about the bonds is true and it must be assumed that it is then 2 things are obvious and 1 hidden.

It is clear that Cowen has committed Treason by overruling those consided to be the experts who advised a different approach.

It is clear that Cowen does not understand the details of bond markets and CDSs.

It is hidden but clear to be that Cowen is obeying his masters and does not have the well-being of the Irish people foremost


Anyway over yonder I have predicted that Ireland is about to default so much excitment is in store. This may even be enough to crash the euro so now I feel that the terminal dollar will actually outlive the euro.

Kelly obviously knows a lot more than he is letting on. There's a real stink from all of this. Cowen and Lenihan are obviously terrified of something that they are willing to go to such an appalling extreme to bail these buggers out. Do the developers have megatons of dirt on the politicians, or what? I'm not saying Cowen and Lenihan have necessarily anything to hide themselves personally but Fianna Fail have been in bed with these crooks for so long. The thing is incomprehensible. Who else might have been benefitting from hidden Anglo Irish 'loans', I wonder. Weren't we hearing something about that sort of carry on in the recent past?

This is the Kelly bit from the Times which youngdan is referring to. Immediately before it Morgan Kelly says he got info last September that 4 banks were advised to be Guaranteed not the 6 that were however, the Taoiseach overruled these advisors. Possibly for good reason at the time if not out of pure confusion but then again is it another case of not listening to professionals who bloody well know that this was a dying animal anyway?

This is the bond stuff youngdan was talking about. Essentially they bet on the horses each way but the horse comes in third yet they demand their money in some way anyway. To the tune of €20 flaming billion ...

Quote :

Developers would have gone bust and commercial property would have become more or less worthless, but that is going to happen anyway, with or without Anglo Irish. Depositors of Anglo Irish would have been paid off in full, and the hit would have been taken by the international financial institutions that hold around €22 billion of its bonds.

These bondholders are professional institutional investors who signed up for higher returns on Anglo debt in the knowledge that they were facing higher risks. They are, moreover, insured against their losses through insurance contracts called Credit Default Swaps.

This is the central point about the bailout of Anglo Irish, and one that has not received any attention: the only effect of a bailout is that the Irish taxpayer will make up the losses of Anglo Irish’s bondholders instead of the insurers who had already been paid to underwrite the risk.

Aragon wrote:

Kelly obviously knows a lot more than he is letting on. There's a real stink from all of this. Cowen and Lenihan are obviously terrified of something that they are willing to go to such an appalling extreme to bail these buggers out. Do the developers have megatons of dirt on the politicians, or what? I'm not saying Cowen and Lenihan have necessarily anything to hide themselves personally but Fianna Fail have been in bed with these crooks for so long. The thing is incomprehensible. Who else might have been benefitting from hidden Anglo Irish 'loans', I wonder. Weren't we hearing something about that sort of carry on in the recent past?

Indeed.

youngdan wrote:

If what Kelly is saying about the bonds is true and it must be assumed that it is then 2 things are obvious and 1 hidden.

It is clear that Cowen has committed Treason by overruling those consided to be the experts who advised a different approach.

It is clear that Cowen does not understand the details of bond markets and CDSs.

It is hidden but clear to be that Cowen is obeying his masters and does not have the well-being of the Irish people foremost


Anyway over yonder I have predicted that Ireland is about to default so much excitment is in store. This may even be enough to crash the euro so now I feel that the terminal dollar will actually outlive the euro.

Wel, Dan, we are in agreement

Anglo looks more and more like a slush fund and its nationalisation should be stopped. Failure to stop it should condemn the Greens to the same fate as the PDs. They MUST walk. If they don't, they will be ruthlessly punished at the ballot box. And rightly so.

Gene Kerrigan and the conniving little gougers:

http://www.independent.ie/opinion/columnists/gene-kerrigan/casino-where-the-gamblers-never-lose-1605855.html

Quote :

It is clear that Cowen has committed Treason by overruling those consided to be the experts who advised a different approach.

If we accept that Kelly’s informant from the meeting is to be trusted and who would not trust a rat, then we know that there were two “expert”, but opposing opinions offered.
So, a question for you, Youngdan, in the event of two or more “expert” opinions being offered, how do you propose that a Minister should be made aware of your preferred choice?

youngdan is big enough to answer this but I'd like to offer my bit of course.

I understand that Cowen was being baptised by fire coming back after the holidays as was Lenihan and Co. but ...

As much as they said they didn't know what the story was on Anglo's books, WE didn't know what was really in their minds nor do we yet.

Remember we were told that Anglo was solvent by Price Waterhouse Coopers and that if the guarantee was called in there were assets to cover the debts etc. etc. etc. hence we were comfortable with the Guarantee so it might look like one of the advisors got it wrong.

Then
after the revelations of Fitzpatrick's loans it all went very wrong. That's not as bad as the announcement of Anglo's profits in December - 650 million profit .... and 500 million to be put away for bad debt provision.

Still now we don't know or are not allowed to know what is really on Anglo's books so judgement is naturally cloudy but it would seem that the advisor who advised avoiding Anglo proved correct, although at the time advising against guaranteeing Anglo might have provoked an Anglo implosion anyway.

That didn't happen but was borne out by circumstances anyway. Anglo needs to be ditched - the bearish advisor had it right.

Brian Cowen's statement yesterday that the motivations and agenda behind the Government's actions should not be questioned should be seen in this context.

It is fairly difficult to judge the solvency of a business where its core assets are debt and the value of those assets against which the debt is secured is in freefall. The solvency of an institution declines on a daily basis in such a situation. Add into that the withdrawl of the deposits and you have a fairly toxic mix, to use a cliché.

Slim Buddha wrote:

Anglo looks more and more like a slush fund and its nationalisation should be stopped. Failure to stop it should condemn the Greens to the same fate as the PDs. They MUST walk. If they don't, they will be ruthlessly punished at the ballot box. And rightly so.

I agree with you.

The Greens have a natural stake in seeing this punished and the noises from John Gormley last night on the news were in that direction but it remains to be seen how they vote.

Voting "Yes" to nationalisation = "give all types of developers a blank cheque to develop economically unsustainable buildings and therefore probably environmentally unsustainable buildings. Plus, if those developments fail, punish the people, not the risk takers."

Two pillars of Green thinking get kicked in the face with a Yes vote. Enough is enough.

Slim Buddha wrote:

Anglo looks more and more like a slush fund and its nationalisation should be stopped. Failure to stop it should condemn the Greens to the same fate as the PDs. They MUST walk. If they don't, they will be ruthlessly punished at the ballot box. And rightly so.

According to Vincent O'Brien, on the night of the Bank Guarantees John Gormley was wakened in his bed by a Garda to attend the meeting and he refused to go.

According to Daniel McConnell in the Sunday Independent the Cabinet is split over this.

Quote :

There is deep unease within the Cabinet over last Thursday's nationalisation of Anglo Irish bank, with several ministers claiming this weekend they were railroaded into agreeing the move without discussion.

Despite the potential risk of exposure to the Irish taxpayer, it has emerged that Taoiseach Brian Cowen was not on the phone during the meeting when the decision to nationalise the failed bank was taken.

However, it is understood that Finance Minister Brian Lenihan, with agreement from the Taoiseach, issued his Cabinet colleagues with a fait accompli, to assume full control of the bank.

http://www.independent.ie/national-news/anger-in-cabinet-at-volte-face-on-anglo-1606051.html

Is there really going to be a Dail Protest today?

http://www.politics.ie/chat/40674-protest-outside-dail-today.html

Why the hell should we listen to calls for cuts in public sector pay - John Carr of INTO puts the figures in their true perspective:


16th January 2009

Untold billions for banks while vital funding cut from primary schools.

The INTO said today that the government’s decision to take Anglo Irish Bank into public ownership at an unknown cost and risk had to be seen against savage budget cutbacks on primary education and threatened cuts to teachers’ pay and pensions.

The union’s general secretary John Carr said the bailout would stiffen the resolve of public sector workers to resist being scapegoated in forthcoming national partnership talks. He said it would also mean opposition to the education cutbacks would continue.

“For months, teachers and parents listened to the Minister for Education and Science defending cutbacks in education,” said Carr. He said last year schools were told by the Minister the public finances were so bad that teaching jobs had to be axed, books had to be taken from poor children and computers couldn’t be bought for schools.

“Now his government with the stroke of a pen can find billions to bail out a failed bank. Some of this bail out money is education funding that the Education Minister took out of cash-strapped primary schools,” said Carr.

According to Carr, the potential savings to government from the education cutbacks were in the region of 70 million euro. “That is less than the secret loan of more than 80 million held by one director of Anglo Irish Bank.” Mr Carr said the penny pinching of the government when it came to funding primary education stood in stark contrast to the “largesse available to the golden circle”.

He said the public will not forget the ease with which Anglo Irish Bank was bailed out with tax payers’ money compared to dogged government opposition to protests against the education cuts. “People are not fools,” he said. “They will not accept that special needs children, Travellers and children with no English will have to pay the price for bank bail outs.”

“Neither will hardworking public servants like teachers accept one law for a rich and powerful elite and another for everyone else,” said Carr. “Those on modest incomes will not accept pay cuts and attacks on their pensions to pick up the tab for banks that were little more than badly run casinos.”

ENDS.

I'm not sure that Morgan Kelly's analysis holds water. The bond insurers and credit default swaps markets are under severe stress. The effects of the Government effectively breaking its guarantee is not something that should be taken lightly unless the Government can nationalise the clearing banks, and even if it does, having let Anglo go, there may still be huge issues with interbank/ECB loans for the others. Then we are really screwed. Youngdan himself has argued that it is not a good idea to mess with the bond markets; why are we now arguing that this is a better option?? We are an international minnow, and, unlike the US or even the UK, we can be punished for making people pay up on insurance claims

Meanwhile, is it not possible that the tangible assets Anglo's money was borrowed to pay for might be worth a lot in a few years time, should the state manage to hold onto them?? Doubt the government would have to build social housing for decades and if they repo the land banks.... that would have considerable commercial value in the event of an uptick.

I would have to agree however, that we are damned if we do, and damned if we don't

could be worse. RBS alone has a balance sheet of TWO TRILLION (finfacts this am). As a % GDP, the liabilities of the UK banks are twice those of ours. And, marked to market, they are all technically insolvent, they think. Gordon's 200bn is p!ssing into the prevailing wind. On the other hand, they can print money to bail them out....UK inflation might help us, but only if we can last that long....

Errr, UK inflation? The UK inflation rate is set to half this week from circa 4.5% to 2.5.

The assets against which the loans are secured may be worth money in future years. But you may be waiting a long time when sites were being bought at 60 million an acre. Furthermore, Anglo will have international obligations arising from the loans it has taken out to feed the developers. These loans have to be serviced as well which adds another dimension. Finally, something like half the property that the loan book of Anglo is secured against are overseas. We're talking developments in Bulgaria here - they could take a well over a decade to normalise.

Point taken, but I still don't think it's smart to p!ss off the bond markets. This may be the least worse option. Re UK inflation, I meant after they've printed the banks out of trouble, bought all the toxic debt and once hyperinflation sets in. A few years from now, perhaps, if both our wee islands haven't been declared insolvent first.

expat girl wrote:

I'm not sure that Morgan Kelly's analysis holds water. The bond insurers and credit default swaps markets are under severe stress. The effects of the Government effectively breaking its guarantee is not something that should be taken lightly unless the Government can nationalise the clearing banks, and even if it does, having let Anglo go, there may still be huge issues with interbank/ECB loans for the others.

Morgan Kelly wrote:

These bondholders are professional institutional investors who signed up for higher returns on Anglo debt in the knowledge that they were facing higher risks. They are, moreover, insured against their losses through insurance contracts called Credit Default Swaps.

We are already paying 4.7% on issued bonds - it mightn't be any harm if we couldn't borrow at a higher price if that was one of the upshots of us 'defaulting' on this which is what we would be doing to some degree although those institutional investors should get some of their loss back from their bond insurer, no ?

As regards the uptick ... the price of the property on Anglo's books could very well be way too high and do we really want to be now buying a 1 million McMansion when we are expecting X% growth over Y years which might not service that property comfortably ?

You could be right about the nation gaining assets out of this but there should be a full disclosure of everything that is on Anglo's books so everyone can make a better judgement. Far as I know we don't have that.

expat girl wrote:

I'm not sure that Morgan Kelly's analysis holds water. The bond insurers and credit default swaps markets are under severe stress. The effects of the Government effectively breaking its guarantee is not something that should be taken lightly unless the Government can nationalise the clearing banks, and even if it does, having let Anglo go, there may still be huge issues with interbank/ECB loans for the others. Then we are really screwed. Youngdan himself has argued that it is not a good idea to mess with the bond markets; why are we now arguing that this is a better option?? We are an international minnow, and, unlike the US or even the UK, we can be punished for making people pay up on insurance claims

Meanwhile, is it not possible that the tangible assets Anglo's money was borrowed to pay for might be worth a lot in a few years time, should the state manage to hold onto them?? Doubt the government would have to build social housing for decades and if they repo the land banks.... that would have considerable commercial value in the event of an uptick.

I would have to agree however, that we are damned if we do, and damned if we don't

could be worse. RBS alone has a balance sheet of TWO TRILLION (finfacts this am). As a % GDP, the liabilities of the UK banks are twice those of ours. And, marked to market, they are all technically insolvent, they think. Gordon's 200bn is p!ssing into the prevailing wind. On the other hand, they can print money to bail them out....UK inflation might help us, but only if we can last that long....

I don't see how savig Anglo Irish at great expense will help other problems with the other banks. As I understand it, Kelly is recommending what he is because it leaves the liability lie where it can be best absorbed - with the very wealth risk takers who will have to take their chances on the markets on which they knew they were risking their money. Surely this is the better of the two courses of action - IF your priority is optimising things for the greatest number of people and avoiding throwing people out of work to save wealthy gamblers and speculators. All our billions are pissing into the prevailing wind, for that matter. This crazy plan is already hurting two other Irish banks because the money markets know Ireland is a crappy risk now and they see a near bankrupt country throwing good money after bad. Nobody wants to lend to us. Sure enough other governments are behaving just as stupidly in some respects - the whole crisis has revealed how impenetrably spell-bound they have become to free-market economics. They dont seem to have consciousness that there are other ways to respond to this. Even these so-called nationalisations are anything but. The 'gougers' are still all left with a free reign under the terms of the legislation.

Aragon wrote:

As I understand it, Kelly is recommending what he is because it leaves the liability lie where it can be best absorbed - with the very wealth[y] risk takers who will have to take their chances on the markets on which they knew they were risking their money.

It isn't quite as simple as this and I think the statement is a little naive. The average Irish investor is not very wealthy. The average Irish investor in banks is merely self employed, without the benefit of a company sponsored pension. Such people range yes from doctors and lawyers but also down to taxi drivers, plasterers and labourers. The average man on the street with an investment in an Irish bank is not wealthy and these investments were chosen on the basis that banks were the safest place to put your money. This was the advice given to people, up to now, by the brokers who people trusted encouraged by the Government. That aside, there are huge swathes of the self employed who are virtually reliant on stocks for their pensions. If you destroy their wealth, which is not great, you merely cause them to be more reliant on the State. For every action there is an equal and opposite reaction. It is not as simple as just turning our nose up at "wealthy" people, most of whom aren't particularly anyway.

If we default, we'll never be lent another penny again, and the government has social welfare bills and wages to pay. Defaulting is the short cut to national bankruptcy; nationalisation might give us more time.

Ourselves and our next door neighbours may well be joining Iceland in international pariah land fairly shortly, though, regardless

Yes, the wealthy speculators are vampires, but they have ways and means of punishing the State's ability to borrow tomorrow if we start defaulting on stuff. A pity the States let Lehman go, or we may have managed to avoid this.

johnfás wrote:

Aragon wrote:

As I understand it, Kelly is recommending what he is because it leaves the liability lie where it can be best absorbed - with the very wealth[y] risk takers who will have to take their chances on the markets on which they knew they were risking their money.

It isn't quite as simple as this and I think the statement is a little naive. The average Irish investor is not very wealthy. The average Irish investor in banks is merely self employed, without the benefit of a company sponsored pension. Such people range yes from doctors and lawyers but also down to taxi drivers, plasterers and labourers. The average man on the street with an investment in an Irish bank is not wealthy and these investments were chosen on the basis that banks were the safest place to put your money. This was the advice given to people, up to now, by the brokers who people trusted encouraged by the Government. That aside, there are huge swathes of the self employed who are virtually reliant on stocks for their pensions. If you destroy their wealth, which is not great, you merely cause them to be more reliant on the State. For every action there is an equal and opposite reaction. It is not as simple as just turning our nose up at "wealthy" people, most of whom aren't particularly anyway.

Not just individuals but pension funds. Few will have anything like the pension they envisaged when they were saving for it.