Yea but the value of the property today is only one variable. The loan doesn't become "bad" until you write off the repayment of whoever you lent the money to, it is at that stage that the value of the asset in question becomes key. Thus the ability to repay is as much a factor in these bad loans. Obviously the ability for people to repay is very bad at the moment but it seems we don't know precisely how bad. There are more variables than the value of the property.

Arguably alot of these loans, certainly the ones to some prominent developers, already are bad because according to some reports they have stopped paying them and the banks just aren't chasing them yet. However, there will also be huge swathes of the loan books which don't fit into that category and that is the stuff that is difficult to predict until things stabilise. If the bank was confident of what the worst case scenario was and that they could afford that scenario no doubt they would release it because it would bring stability to the market and certainty that the bank can survive. Problem is they probably wouldn't survive in the worst case scenario so there is no way that they would do that and understandably so.

tonys wrote:

johnfás wrote:

I think you are missing the point here, tonys. The issue is not whether or not the repayments to the Government are based on a fractional figure of the banks profits, I don't think anyone has suggested that.

The issue was whether or not the 8% interest on the 7bn loan will effect the financial figures released in early March. It is posited that it will not, at least not significantly, because the financing only came into effect at the very end of the year. It is further posited that it will effect the earnings of the bank going forward because it is a charge which must be serviced by the bank, just like their electricity bill.

"How much are we expected to get in return for the 7bn - 8% a year ? Is this fall in AIBs profits factored in"

I don't think I missed the point at all, I think that's something you might have a look at yourself.

Yes I was under the impression that it was linked to profits. The country has a massive shareholding in the bank so it stands to reason in my mind that there should be a dividend for the country - didn't I hear Brian Lenihan say there was a dividend ?

On johnfás point though - where does the bank get our 8% if its profits keep on falling and will we be reducing that 8% should they fall into trouble?

Don't worry... they're guaranteed by the Government .

johnfás wrote:

Yea but the value of the property today is only one variable. The loan doesn't become "bad" until you write off the repayment of whoever you lent the money to, it is at that stage that the value of the asset in question becomes key. Thus the ability to repay is as much a factor in these bad loans. Obviously the ability for people to repay is very bad at the moment but it seems we don't know precisely how bad. There are more variables than the value of the property.

Arguably alot of these loans, certainly the ones to some prominent developers, already are bad because according to some reports they have stopped paying them and the banks just aren't chasing them yet. However, there will also be huge swathes of the loan books which don't fit into that category and that is the stuff that is difficult to predict until things stabilise. If the bank was confident of what the worst case scenario was and that they could afford that scenario no doubt they would release it because it would bring stability to the market and certainty that the bank can survive. Problem is they probably wouldn't survive in the worst case scenario so there is no way that they would do that and understandably so.

The terms of the loan are the first thing to look at. Unfortunately it appears that in some cases since the Bank Guarantee the terms of the loans have been adjusted in favour of those who borrowed large sums from the Bank.

Another thing to look at is is the loan performing i.e. are the terms of the loan being met in terms of repayment. In many cases, loans have been rolled over and interest only or not even that is being paid. The Banks are hoping that the property market will resume and that in a few years the capital will be paid off. These loans are not in a healthy position at all.

In some cases firms are bankrupt and the Bank can only hope to get a portion of the loan back if the company had realisable assets. The Bank may or may not be able to hold on to land until its value recovers, if it ever does.

This is the picture of the contents of a zombie bank, in the state that the Japanese banks were in for over ten years. In the worst case, of course, the bank goes belly up.

Story in the Indo today and discussed on the Pin here. Doubts you might have had about buying or not buying AIB/BOI might be getting some revision from you now.

Maybe Reinhardt was right after all, after a fashion ...........



Up to €10 billion in funds is believed to have left Ireland in the last seven days as details of the Anglo Irish Bank scandal emerged.

According to financial sources, the significant movement of funds occurred ahead of the release of the Anglo-Irish Bank and the PricewaterhouseCoopers reports.

A spokesman for Finance Minister Brian Lenihan said the Minister was deeply concerned about the flow of money out of Ireland and it is time to put Ireland's reputation back on track.

"There is a lot of focus on Ireland right now, and people need to be responsible at the moment," said the spokesman, referring to media reports.

Labour's Finance spokesperson Joan Burton said yesterday that the events at Anglo and its impact on Ireland's banking reputation is bleeding the country of cash.

"Our reputation is mud, and we are being bled. Between the antics at Anglo and the failed Government strategy in dealing with the banks, huge damage is being done to this country."

http://www.independent.ie/national-news/scandal-sees-836410bn-flood-out-of-country-1649052.html

Audi it is much much more than that. Money has been leaking away for several years now. Why would anyone leave money in a state that may go bust? Frozen bank accounts etc a real possibility.

Remember all this was utter avoidable!

Squire wrote:

Audi it is much much more than that. Money has been leaking away for several years now. Why would anyone leave money in a state that may go bust? Frozen bank accounts etc a real possibility.

Remember all this was utter avoidable!

Would you expect to see the banks going for a burton tomorrow so or will a rake of shares which were probably bought last week be in some pipeline and boost it up - i don't know how real time it all is tobehonest.

Could we see a run on the banks this week or even tomorrow so ? Edo said it there a week ago - he has cleared out what savings he has ...

You kept saying over and over that it's confidence that's leaking which is as important as money. Do you think it should have been examinership or receivership for half of these banks last September then or just Anglo for a start ? McWilliams did say we needed to see everything on the books after the Guarantee was issued but of course it's way too late that they are being opened now probably.

You know I think receivership, much cleaner and avoids the possibility of nonsense. Also cheaper for the state.

With regards moving money out, I have an account in Allied Irish and transfer money in as necessary to pay bills etc. The rest well out and has been for a long time. I have a worse problem elsewhere, but principle is the same. Do not put your money in a country where accounts may be frozen. I have to think like this, I have people to pay. It would be irresponsible of me to ignore such potential problems. If someone does some work for you you cannot turn round and shrug your shoulders. People have families to feed and their own mortgages and bills.

I agree with Edo, I would get my money out or at the very least get some out and spread it elsewhere. Patriotism is another word for fool.

You need full disclosure and some candid proposals. Who is going to invest if they may be wiped out by a government proposal?

Spin will not cut it in circumstances like this. You are better coming out and saying we are in distress and frankly stating how much rather than have everyone assume. As for politicians who may have acted when they had a clear conflict of interests, they should resign immediately. No ifs No buts. You must improve standards of conduct, and because of former misconduct they need to be rigorous standards. That and proper regulation would do wonders to confidence. It really is simple all that is needed is the plain truth and openness. Get it over with. It is like at school if you did something wrong better to stand up and apologise rather than have everyone suffer. People will respect and trust you if you behave in that manner.

Squire wrote:

Patriotism is another word for fool.

or it can mean I did everything I could and if those that stay are going down, I'll go down with them, there'll be some honour and good company in that at least.

tonys wrote:

Squire wrote:

Patriotism is another word for fool.

or it can mean I did everything I could and if those that stay are going down, I'll go down with them, there'll be some honour and good company in that at least.

Are you serious, this is not the time for heroics as those leading have dubious standards.

Squire wrote:

You need full disclosure and some candid proposals. Who is going to invest if they may be wiped out by a government proposal?

They were really at sixes and sevens though it seems around the time of the Guarantee. No one seemed really to have a clue what was the proper course of action. Was it receivership? I heard on the radio an analyst saying Anglo had 80+% of its custom by 80% of its shareholders. Sorry for the lack of detail there but when does something become 'systemic' ? Was Anglo 'systemic' ?

Squire wrote:

tonys wrote:

Squire wrote:

Patriotism is another word for fool.

or it can mean I did everything I could and if those that stay are going down, I'll go down with them, there'll be some honour and good company in that at least.

Are you serious, this is not the time for heroics as those leading have dubious standards.

I'm very serious, It's a time for putting your money where your mouth is and I don't believe those leading (politically) have dubious standards, I don't believe that's true at all.

Oh well I am staying Yen and to a lesser extent Swiss, but here is someone to help. But apparently even tooth fairies have problems leaving the money.

https://www.youtube.com/watch?v=m72GNRrvc88

Squire wrote:

Oh well I am staying Yen and to a lesser extent Swiss, but here is someone to help. But apparently even tooth fairies have problems leaving the money.

I don't have any problem with what you do with your money, I don't see why what I do with mine should cause you any concern, but just for future reference if you want to smartarse someone I would prefer you try someone else, I don't take kindly to it. If you have something useful to say I'm listening but if the above is the best you can do I suggest before you post it you roll it up tightly into a narrow cone shape and you'll know yourself what you can do with that.

tony's

I truely hope it turns out well for you.

On the serious side if you have money in banks in Ireland, I would advise that you spread your money across a number of institutions and keep a reasonable amount in cash! If banks become insolvent you will need enough to pay your immediate bills. If one runs into difficulties there is a tendency for that to spread, rightly or wrongly people assume and panic sets in. You need to work out how much cash based on how long you may think such a problem will last and monthly out goings. They went through this in Argentina about 7 years ago and it was very difficult. Society adopts fairly quickly though, it has to.

I have people to pay and it would be irresponsible to leave other people's wages to chance.

Squire wrote:

tony's

I truely hope it turns out well for you.

On the serious side if you have money in banks in Ireland, I would advise that you spread your money across a number of institutions and keep a reasonable amount in cash! If banks become insolvent you will need enough to pay your immediate bills. If one runs into difficulties there is a tendency for that to spread, rightly or wrongly people assume and panic sets in. You need to work out how much cash based on how long you may think such a problem will last and monthly out goings. They went through this in Argentina about 7 years ago and it was very difficult. Society adopts fairly quickly though, it has to.

I have people to pay and it would be irresponsible to leave other people's wages to chance.

I have people to pay myself and that has been taken of, but I will not be moving my accounts away from the Government guaranteed banks. I make my living & profits from this community and I will not add to the bank problem we have by going elsewhere, not that I believe anywhere else to be 100% secure in any event.

Tony's

Fair enough position. I have no loyalty to countries, but do have to people who deal fairly with me. What is a country, what gives it value other than people? To me a person in one country is no different than one in another.

I have inherited interests in Argentina. Several generation of some families worked for my great uncle. They are more than workers the place is as much theirs as mine. Now Argentina is not Ireland, but the lesson to learn from there is that when things go wrong they happen very quickly and governments can not always be relied on to keep their promises. They may be made with good intention but sometimes cannot be honoured.

People (usually American) assume doom and gloom and a sort of Mad Max world, but crisis can bring out the good in many people. The problems are generally mundane, heating, power, boredom, lack of options, lack of food and a drop in living standards, but people adopt quickly. The elderly who are alone are most at risk.

If Ireland was outside the Euro zone it would have gone like Iceland by now. Being in the Euro zone limits the governments options but also makes it very difficult to anticipate how this could play. We could see a currency stronger than the local economy would find appropriate and years of stagnation.

If the situation worsens the government should realise that you only need 1 functioning bank and limited funds would be better concentrated.

If we last to the autumn the worst of the storm will have passed. We should have a much clearer picture by then.

George Lee and Brendan Keenan both very sullen on Morning Ireland this morning. Lee says the 451m would have been lost by Quinn if the taxpayer hadn't picked up the bill.
http://www.rte.ie/news/2009/0223/morningireland_av.html?2495766,null,209


HSE bill increases ...

Quote :

The deficit faced by the Health Service Executive (HSE) this year could be more than €1.1 billion, the head of the HSE Prof Brendan Drumm has said.

Speaking following a special meeting of the HSE board this afternoon to discuss the financial challenges now facing the executive as the economic downturn worsens he said it was very difficult to predict precisely what the deficit will be.

"Is it a €2 billion challenge, I don't think it is. But is it a €1.2 billion challenge as against a €1.3 or €1.4 billion challenge, then that becomes a very difficult prediction," he said.

He also said it was difficult to say at this stage that addressing the deficit would not impact on patient services but the HSE would try to minimise that.

http://www.irishtimes.com/newspaper/breaking/2009/0223/breaking17.htm

HSE article, Morning Ireland
http://www.rte.ie/news/2009/0223/morningireland_av.html?2495766,null,209

Sutherland's arguments are compelling.

An immediate announcement of substantial emergency tax increases taking effect immediately might save our financial system and might ironically assuage the social partners. The question is can the Dept of Finance, the Commission on Taxation and the Government get their colllective sh-t together to make this look like a credible well thought out move.

Quote :

At one level, it might seem far-fetched to believe Ireland may face a funding crisis. After all, Ireland entered this crisis with a low level of public debt, plus sizeable sovereign wealth in the form of the National Pension Reserve Fund. However, the very large Government deficits mean the ratio of debt to GDP is set to grow quickly: from 24.8 per cent of GDP at the end of 2007 to 68.2 per cent by the end of 2010.

Your post above Zhou - emergency tax implementation is in order in my view - you wrote here before about pretending that we were in a war situtation (before the storm clouds started to appear for everyone) and I think that's what we have to do.

Otherwise the paragraph above will become an aspiration - debt could well go higher than that. It simply needs massive emergency action now, pull out all the stops and stop the haemorrhaging now .... but at the same time create a background plan for intermediate recovery that won't be costly to implement. A temporary command economy of socialism for a year or two might be no harm - we could do worse than look at the Swedish situation and what they did. We really should be mining our student brains on this - literally this semester the business schools and economics classes all over the place need to be mined viciously by giving them Easter questions on the current situation and solutions to immediate and long term considerations. Could it be the time to create the new institution of the Young Economist of the Year ?

But can the unions and others really be handled ...? It might take a whole new governmental approach to deal with this now and that might involve someone fessing up that there was a bubble which was neglected - I heard Martin Cullen last night on Q&A mentioning he said this in 2003/4 - is this the beginning of revisionism on the part of the government ?

I think it needs a massive confession if not an apology first to be honest - how else do you think the unions, workers and everyone else can be convinced to make sacrifices ?

I think we need a plan more than an apology. Everybody is blaming everybody else to avoid responsibility. I have no doubt but that the Government are partly to blame for this but I don't think offering themselves up as a scapegoat is going to move us on and may just serve as justification for others not co-operating.

I have previously suggested that we need to try to keep afloat until a solution to the banking problem is shown to be effective and acceptable to the market. However, things have become dramatically more urgent now. I think that we need an announcement of tax increases and other measures which will inspire confidence. A high powered regulatory swat-team with emergency powers and a brand new council of economic advisors cold be announced at the same time to satisfy the populace's righteous blood lust.

I think we need to get ready to have to make the first move in relation to banks. Obama said a bad bank was not suitable for america as it was in Sweden because american banks are so much bigger and their financial dealing are so much more diverse and complex. The corollary of that is that small countries might seek solutions which differ from those implemented in bigger countries. We need to have a plan ready to roll in case of emergency. We need something that at least might convince the international markets to lend to the nation and to irish financial institutions.

I am worried that there could be a run on Irish banks soon. I have personally considered withdrawing savings. Taking a step back I look at my instinct and take it as a warning that others might be feeling the same. I am worried that this could occur as a result of failure of the Government to obtain loan funds or failure of an institution such as Irish Nationwide to roll over its debts.

I just think it's necessary to clear some air first and any crowd in power might get the confidence of the people because do you know what you're asking them to do for you?

Read the Ask About Money site and there may be others - people come there with financial problems that are pure horror. Employed families ('the working poor') left with €200 a month after bills are paid, their only luxury an ECB rate cut. Do you think these people do not exist but spam that forum with propaganda ?

I'd be concerned that there are a lot of these people out there literally struggling from week to week and month to month. These people will have to be dealt with in some way otherwise there will be dire consequences for a generation. The children in those homes are growing up in an atmosphere of mounting dread now - God knows what the parents are suffering through.

Something radical is going to have to happen. We will I'm sure get a bailout from the ECB but it will come with stringent conditions too. People in authority need to start making MASSIVE sacrifices because this and next year it's just going to get worse and worse and it will affect us all.

The working poor are real but others are trying to sneak in under their coat-tails. The higher paid will have to pay more tax but the lower paid will have to pay more too. The tax base is too narrow so many people have to be brought back into the tax net and many middle income families will take real and painful hits. The Government will be destroyed next time out no matter what. They might as well do the right thing.

I have heard rumours that many of the big ticket NDP items are very much "on hold" until more money comes in. I suspect the only work going on is with stuff that has already been started (the PortLaoise to Cullahill N7 motorway section, for example, or the Cherrywood Luas extension). So I suspect that part of Sutherland's wish list has been acted on. They probably are less than keen to announce this officially though.

The pensions levy comes in next month, I would agree that higher taxes for all would be the next step, along with significant cuts in services. It will be interesting to see what the figures are for months such as April (better weather leading to higher spending) with the pension levy already in place. I know the figures for January were incredibly dire, but it was a very cold month and people seemed to have been saving job cuts for after Christmas.

Steps for the Government: freeze all non-started NDP capital programmes, keep going with an Bord Snip, implement college fees, whack up taxes for the higher paid especially and wait to see what transpires?? I don't necessarily think eliminating the deficit entirely is the answer, we'd probably get away with 5-6%.

The unions will play ball, if, and only if, most of the pain appears to come from the better paid. Presumably this can be managed easily!

Given the drop in interest rates, perhaps they should scrap MIR?? After all, it's benefits for the middle classes