The Irish Banking Bother: /Anglo 10 /Gardaí raid Anglo offices/ AIB '08 results 2nd March

Indeed and it is a good point. These investors, though no doubt knowing why it was being done, were offered a very good investment deal... why would they say no? If they were involved in the creation of the scheme that is a different matter but there is no evidence that they were thus far, all we know is that they bought into it.

eoinmn wrote:

Lads and ladies, I'm not well up on this financial stuff.
So I've a stupid question to ask.
What did the golden circle of 10 do that was wrong or immoral?

I can see that the management of Anglo were wrong to ask investors to shore up the bank's price, and to take shares in itself as collateral. But what did the investors do wrong?

Maybe they were shorting themselves ? Insider trading?

My theoretical bank is going to go bust but I know the Govt. of my country will guarantee all deposits in my bank and more stupidly they will guarantee all my bad debts and bad debtors.

I know my bank is going bust, my share price is tanking so I get a loan from my own bank, buy my shares and temporarily drive the price up. I get a 'free bet'. I sell those driven-up shares and take the bit of profit because I know that's the last I'm going to get.

I know I'll lose my 300 million but that's ok - the Govt. will supply the money.

Maybe I did this a few times as the share price was slipping before hand and I knew very well what was going on - the Wall was getting closer and closer as my bank sped towards it.

I don't know - could this happen in a bank ? I'm not saying it happened in Anglo now, mind - it might happen in someplace like the corrupt African nation of Angbabwe.

He is correct there. All the gains losses being made at the moment, by everyone, can be set off against future capital gains. Consequently the Government won't see any CGT returns for quite a period of time... which kind of negates the nonsense of them raising CGT in the last budget.

Does that not only apply to companies, and not to indviduals?

No it applies to individuals as well, capital losses can be set against future gains until they are fully offset. Unless there was a change in the most recent Finance Act, which I don't think there was, there is no time limit and it isn't specific to a class of asset. That is, you can offset a loss on, for example, shares against a gain on, for example, properties. There are very few people who will be paying any Capital Gains Tax for a long time under the current rules.

You do have to sell to realise the loss though so I don't know what that means in the context of nationalisation where it is seized and compensated rather than sold. I presume it is treated like a sale but I really don't know. It would be an unusual circumstance and might not even be legislated for.

Auditor #9 wrote:

xman wrote:

Very good point been raised by nuj on Politics.ie

The €300 million capital loss on the Anglo shares is an asset for CGT purposes in that it can be offset against any future capital gains made by the ten "investors".

They invested Anglo's money in Anglo. When they lost it all the taxpayer got to pay for it because of the nationalisation, and the GC come out of it with a €30 million tax write off worth €6.6 million each. BD

Ah shure tis a great country for d'aul entrepeneurs.

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No quite as great a little country as that, you can't get a tax write off if you didn't make a loss and if they made a loss, what are we all talking about.

Yes but you can make a significant loss without paying much for it when you provided an undervalued security which in this case seems to have been the value of the shares.

johnfás wrote:

Yes but you can make a significant loss without paying much for it when you provided an undervalued security which in this case seems to have been the value of the shares.

No you can't, you can only lose at maximum what you paid for the asset, if you are not out of pocket there is no loss. No loss, no tax write off.

In this case:

1) You pay 30 million for an asset.
2) That asset declines in price.
3) That asset is sold (or in this case nationalised which makes it unclear) and therefore the value is either worthless or significantly reduced.
4) You made a capital loss of 30 million, or if some compensation is paid say 29 million.
5) You can set that loss against future capital gains.

In the present situation however:

1) You borrowed 30 million to buy that asset.
2) You provided security in case you fail to repay that loan.
3) You fail to repay that loan.
4) The asset is seized and sold.

In the present situation however:

1) The security was the value of the loan itself.
2) The bank can then seize the shares, or presumably the compensation paid on the shares in order to satisfy the loan.
3) The value of the shares has fallen to the point that they do not satisfy the initial loan amount. So the bank has to write off the debt.

Therefore:

1) You have made a 29 million capital loss.
2) The bank stated these were non recourse loans so they can't chase against your other assets.

Whether you have had a loss if you don't repay the loan is an interesting question which I am unsure has ever come before the courts, so couldn't definitively say without reference to a case. However, I think it is likely that the receipt of a payment of compensation owing to nationalisation would likely constitute the requisite loss. Thus they would basically get 30 million minus whatever the compensation is to set against any future capital gain for a cost to them personally of nothing, the only people out of pocket are the bank who manage to claim back the value of the compensation and nothing more.

Yahoo!



Very neat where you can see the historical volumes of shares traded

Nice little jump there at the end of September too.

The terms of the purchase as I understand it was repayment of the "loan" or the shares given back. In this case the shares will be given back at no loss, so no tax write off.

Well there is a difference between that, which is an optional form of repayment, and the shares being security for the loan which is what has been reported on the media but perhaps you know something I haven't heard. It is also stated in the media that the investors offered 75 million euro in security... why they didn't take that I have no idea. Not the first time I've heard of it happening though, I was involved in a case about 18 months ago where a bank lost a few million owing to them not sorting security out properly, suited our client.

johnfás wrote:

Well there is a difference between that, which is an optional form of repayment, and the shares being security for the loan which is what has been reported on the media.

Even in that case if the shares are used in lieu of repayment of a loan for the same value as the original purchase, they would be deemed to still have the same value as the loan amount and so again no loss.

The terms of this arrangement were such that a loss could not be made, that was the whole point, in these circumstances it would be impossible to prove to the revenue that in fact you did make a loss on the transaction.

20th January in the Dail

http://web.oirarcone.heanet.ie/asx.aspx?Channel=Dail&Date=20090120&Start=07:11:51.000&Duration=00:00:00.000

Michael D.

Brian Cowen dines wth Anglo Irish Bank

http://www.independent.ie/national-news/cowen-dined-privately-with-anglo-bank-chiefs-1644942.html





Irish Life and Permanent refused the 4 billion loan to Anglo Irish Bank the day before the Guarantee and cleared it the day after

http://www.independent.ie/business/irish/anglo-got-83644bn-day-after-deposit-request-rejected-1643129.html

That story about him dining with Anglo Irish Bank is a complete red herring. He was the Minister for Finance for goodness sake, of course he had dinner with every back. Just like the Minister for Justice will have had dinner with the Law Society and the Bar Council.

Tis but does that mean the lads in the Dáil won't be going on about eating pork and Greens, buttering up, bread and other stuff I can't think of now.

It's a bit misleading alright. Enda Kenny seems like he is about to blurt out the fellas he thinks Cowen is protecting though. Phil Hogan is on Morning Ireland now saying just this.

Apparently Cowen knew the bank was in trouble at that time though - I think the point might be that

either he didn't ask the right questions
or he did and guaranteed the bank by the state with some knowledge of how bad it was ....



Willie O'Dea is on too ....

Dermot Ahern wants the 10 named .... O'Dea says the Office of Corporate Enforcement can't release the names because it might prejudice a future case and compromise possible potential future justice for the sake of satisfying curiosity now.

FG are saying if Cowen knew these people then the country should know so Cowen and the Govt. shouldn't be trusted and FG say they do know who these Golden friends are ...


O'Dea says Enda is impugning the intergrity of Cowen and O'Dea by insinuating that Govt. members colluded with Anglo's Golden Circle ....

cactus flower wrote:

Irish Life and Permanent refused the 4 billion loan to Anglo Irish Bank the day before the Guarantee and cleared it the day after

http://www.independent.ie/business/irish/anglo-got-83644bn-day-after-deposit-request-rejected-1643129.html

Kieran O'Donnell, TD, Limerick East in the Dail on 12 February on the "window dressing" 4bn repayment of an interbank deposit between IL&P and Anglo

http://web.oirarcone.heanet.ie/asx.aspx?Channel=Dail&Date=20090212&Start=02:42:30.000&Duration=00:00:00.000

As a matter of interest, can anyone explain why Anglo (at least) and probably also Irish Nationwide and IL&P aren't just put into examinership until such time as an examiner could make sense of their finances? Wasn't that the reason, that examinership was introduced in the first place - i.e. the Goodman empire?

Paul R wrote:

As a matter of interest, can anyone explain why Anglo (at least) and probably also Irish Nationwide and IL&P aren't just put into examinership until such time as an examiner could make sense of their finances? Wasn't that the reason, that examinership was introduced in the first place - i.e. the Goodman empire?

No examinership was introduced, at the time of the Goodman issues, to prevent the collapse of the Goodman Group. It exists to put a company which cannot pay its debts, but has a reasonable chance of survival if reordered, under the protection of the court. In other words you have to show the company is less than solvent, not simply an attempt to make sense of the company.

There was a guy form Irish Nationwide on the Radio this morning who had formerly held a high up position. He was saying that something akin to an inspector could be sent in straight away to take over. I presume this is because it is a building society which hadn't demutualised.

All eyes are turned to Irish Nationwide at this time.