# Exactly why are investors abandoning the banks?



## sfag (20 Jan 2009)

... and how much debt can the government take on before a country like ours becomes 'bust' like Argentina?


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## lemur (20 Jan 2009)

Probably need the ECB to bail us out. 

Govt income is currently euro 37b.


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## Sunny (20 Jan 2009)

They are leaving because they fear nationalisation.

As for the debt figure, the market will decide how much we can raise. Italy has a debt to GDP ratio of over 100% and they can still raise money easily enough so we have plenty of leg room. It will obviously get expensive though and obviously interest payments become a burden. Being members of the Eurozone offers Ireland protection that Countries like Argentina didn't have so we are long way off even thinking of defaulting.


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## rustyjack (20 Jan 2009)

They dont trust the government when they say they will re-capitalise the banks. They said the same about Anglo-Irish and last minute they decide to nationalise. Investors fear the same will happen with the other banks..

Did anyone see Morgan Kelly's article in the irish times today?
He states that he has it on good authority that the economists in the central bank and the financial department did not want to extend the liability guarantee to Anglo and irish nationwide at the original meeting in September.  Cowen and Lenihan supported by central bank governor and financial regulator disagreed and said that it was imperative that they were supported to protect the overall banking system....

His article makes for very interesting reading and if true should see the end of ff government for trying to bail out their banker and property tycoon buddies...

At the very least, Brian Lenihan's flipflopping about recapitalisation and nationalisation of Anglo Irish has caused the current banking meltdown and hopefully will result in FF out of office before year's end. Need a whole new approach with new people at the head of banks and running the economy.


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## PaddyW (20 Jan 2009)

`Link to article as per rustyjack

[broken link removed]


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## PaddyW (20 Jan 2009)

Further to this, should Anglo be allowed to collapse?


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## PaddyW (20 Jan 2009)

"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"

If this is true, then why the hell are we guaranteeing Anglo?


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## Sunny (20 Jan 2009)

PaddyW said:


> "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"
> 
> If this is true, then why the hell are we guaranteeing Anglo?


 
Can't read the article but I am going to hazard a guess that this is Morgan Kelly? Don't know what he is talking about. Is he talking about credit default swaps or something?


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## PaddyW (20 Jan 2009)

Here it is in full Sunny

*ANALYSIS:* Anglo Irish is poisoning the banking system and is of no systemic importance. It must not be nationalised; it must be allowed to collapse and with it the developers at the heart of the problem, writes *Morgan Kelly* 
 YESTERDAY’S CATASTROPHIC collapse of Irish bank shares stems directly from the Government’s proposal to nationalise Anglo Irish Bank. With the Government’s finances already buckling under the collapse of our bubble economy, financial markets began to fear that with the added burden of Anglo’s debt, the Irish State cannot afford to finance itself, let alone support the remaining national banks.
 Facing the imminent collapse of the national financial system, the 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.
 At the original crisis meeting on September 29th, Brian Cowen claimed that the blanket guarantee to all six banks was given “on the basis of the advice from those who are competent to so advise the Government”.
 That does not appear to have been the case.
 According to a source of mine very familiar with what happened at the meeting, extending the liability guarantee to Anglo Irish and Irish Nationwide was strongly opposed by representatives of the Central Bank and the Department of Finance (who reportedly came into the meeting with a draft Bill to rescue only four institutions). However, I am told they were overruled by the Taoiseach and the Minister for Finance, who were supported by the Financial Regulator and the Governor of the Central Bank on the grounds that a sudden liquidation of Anglo’s assets would not be in the national interest.
 It is still worth asking what would have happened if Brian Cowen had listened to the Department of Finance and allowed Anglo Irish to sink? The answer is: very little.
 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.
 Why it is necessary to transfer Anglo’s losses from the writers of Credit Default Swaps to the Irish taxpayer is something that the Government has not thought to justify.
 Indeed, what has been disturbing about the entire Anglo affair is that at no stage has the Government felt it necessary to explain why any bailout was needed, beyond inchoate mutterings about the “systemic importance” of Anglo Irish.
 The reality is that Anglo has no importance in the Irish financial system. It existed purely as a vehicle for a few politically connected individuals to place reckless bets on the commercial property market. These property speculators may be of systemic importance to the finances of Fianna Fáil, but their significance ends there.
 In ordinary times, piling €30 billion of Anglo Irish losses on to the national debt would be painful and pointless but not impossible. These however are not ordinary times. International debt markets are flooded with governments trying to borrow. The other Irish banks are dangerously short of capital. Most importantly, the Irish economy and government finances are collapsing.
 Ireland’s growth during the last decade was largely illusory, generated by a property bubble fuelled by reckless bank lending. In 2007 an incredible 20 per cent of our national income and employment came from building houses and commercial property. Next year, the percentage will be approximately zero.
 The only industrialised economy that has endured a property and banking crash remotely comparable to what we are beginning to experience was Finland in 1991, where national income fell in total by 15 per cent and unemployment rose by 12 percentage points. As the private sector haemorrhages jobs it is hard to see how Irish national income will fall by less than 20 to 25 per cent in the next few years. Unemployment will easily reach 15 per cent by the end of the summer, and 20 per cent by next year, and will not start to fall until recovery in Britain and elsewhere permits mass emigration to resume. The economy will not begin to grow until real wages fall to competitive international levels, a process that will probably take a decade.
 In other words, the Irish economy is facing a decade of stagnation and mass unemployment of the same magnitude as the 1980s, with the difference that the unemployed now have mortgages, car loans and maxed-out credit cards. Faced with an irreversible contraction on this scale, the Government will have grave difficulty borrowing to fund its ordinary expenditure, even after draconian cuts in spending and increases in taxation. In the view of international investors, piling Anglo Irish’s gambling losses on top of a spiralling national debt could easily suffice to sink the Irish State into bankruptcy.
 In this national crisis, what should be done? The answer is simple. The State must do everything to rescue AIB, Bank of Ireland and Permanent TSB, and let Anglo Irish and Irish Nationwide sink.
 The Government must continue to guarantee all deposits at Anglo Irish while announcing that, in the light of continuing revelations of misconduct in the bank and shortcomings in its auditing procedures, it will enter into negotiations with senior and unsecured bondholders.
 The proposed Anglo nationalisation marks a decisive watershed in Irish democracy. With it, an Irish government has coolly looked its citizens in the eye and said: “Sorry, but your priorities are not ours.”
 It is to be hoped that the collapse of other bank shares will serve as a warning to deter the Government from this catastrophic course. I would therefore urge any TDs and Senators who still believe that the Irish State exists to act in the interests of its people to vote against the nationalisation of Anglo Irish and do everything to protect the other banks.


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## tiger (20 Jan 2009)

I think international investors are concerned about 2 main areas:
- information & trust. No one believes the banks or government when they say they don't need capital, they won't be nationalized, don't have bad debts etc.
- accountability. No one has taken the rap for anything that has gone wrong. All we have so far are a few early retirements. "Nothing illegal has happened".

Though I'm sure it will all come out in some tribunal in 5-10 years time.


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## Padraigb (20 Jan 2009)

rustyjack said:


> ...At the very least, Brian Lenihan's flipflopping about recapitalisation and nationalisation of Anglo Irish has caused the current banking meltdown and hopefully will result in FF out of office before year's end. Need a whole new approach with new people at the head of banks and running the economy.



I should preface my comment by saying that I blame FF, among others, for landing us in the mess in which we find ourselves.

But I think it is fair to say that nobody actually knows what to do, and Brian Lenihan's misfortune is that he is the one in the front line. 

There is also the concern that nobody even seems to know the scale and exact nature of the problem: the banks are not giving much information. That seems to be due to a combination of their not knowing the whole story, and being unwilling to report on what they do know.


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## redstar (20 Jan 2009)

tiger said:


> I think international investors are concerned about 2 main areas:
> - information & trust. No one believes the banks or government when they say they don't need capital, they won't be nationalized, don't have bad debts etc.
> - accountability. No one has taken the rap for anything that has gone wrong. All we have so far are a few early retirements. "Nothing illegal has happened".
> 
> Though I'm sure it will all come out in some tribunal in 5-10 years time.



I agree. 
Also, I think that international investors are looking at Ireland as a financial banana republic, with very lax corporate finance-crime laws.


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## rustyjack (20 Jan 2009)

fair comment padraig about people not knowing exactly what to do now with the mess we are in (economists are disagreeing) but i do think lenihan's approach of a)  nationalising Anglo and risking our national debt and b) saying that they would first recapitalise anglo  and then last minute nationalising has resulted in investors concluding that the the government now has huge liabilities and also cannot be trusted not to nationalise the other banks.   

In general, this was an accident waiting to happen and FF was in power during the period so they must take a good proportion of the blame. However, would another party have done differently? Would another party regulated the banks more, stopped the 100+ percent lending based on property? ... i dont know. To be honest, dont particularly trust any of the parties on that front. I think we need the best of the best from the private sector to govern the banks and also the department of finance. Which politican would you prefer to be at the helm?


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## Padraigb (20 Jan 2009)

rustyjack said:


> ... I think we need the best of the best from the private sector to govern the banks and also the department of finance.



Do bear in mind that it is not so long since many people would have regarded Sean FitzPatrick as the best of the best from the private sector.


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## rustyjack (20 Jan 2009)

Padraigb said:


> Do bear in mind that it is not so long since many people would have regarded Sean FitzPatrick as the best of the best from the private sector.



fair comment again!!!

How about a panel of the best of the best ( and bring them in from abroad? - dont know who but people who are outsiders and not part of the establishment...)


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## sfag (20 Jan 2009)

doesent matter what other parties might have done - the fact is the current government presided over everything.

You notice none of the guilty parties has started blaming the other yet. I wonder how long that will take to change. The only blame being apportioned by anyone in the Government was when the Lenahan blamed low euro interest rates for the mess.

I reckon the banks will sooner or later reveal that they were coaxed & faciliated  by the Government to extend the mad lending.

Perhaps that is why the authorities are so reculant to take Mr Fitxpatrick to court to see if a judge decides if fraud was involved. He might start singing like the spurned builders of a few years ago.


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## Duke of Marmalade (20 Jan 2009)

> These property speculators may be of systemic importance to the finances of Fianna Fáil, but their significance ends there.


In making outrageous accusations like this MK loses all credibility.  I haven't heard any opposition parties making these insinuations.


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## z109 (20 Jan 2009)

Duke of Marmalade said:


> In making outrageous accusations like this MK loses all credibility.  I haven't heard any opposition parties making these insinuations.


You obviously weren't listening to the Dail debates this afternoon then...


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## Afuera (20 Jan 2009)

rustyjack said:


> Did anyone see Morgan Kelly's article in the irish times today?
> He states that he has it on good authority that the economists in the central bank and the financial department did not want to extend the liability guarantee to Anglo and irish nationwide at the original meeting in September. Cowen and Lenihan supported by central bank governor and financial regulator disagreed and said that it was imperative that they were supported to protect the overall banking system....
> 
> His article makes for very interesting reading and if true should see the end of ff government for trying to bail out their banker and property tycoon buddies...


If true this is pretty damning stuff with regards to how Ireland's elite run the whole country. If Cowen doesn't take a libel case against the IT and Morgan Kelly for this then his career is effectively over.


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## smiley (20 Jan 2009)

Afuera said:


> If Cowen doesn't take a libel case against the IT and Morgan Kelly for this then his career is effectively over.



i dont think theres any case for libel here at all. Morgan kelly is just doing what any journalist would do.

Some said dont nationalise anglo others said do. I dont think you are ever going to have full agreement ever on a issue like this. The taoiseach is the boss at the end of the day. 

Morgan kelly is been way way too negative.

He is repeating the mistake that many people made during the boom: extrapolating current trends to make decisions about the future, failing to take into account how rapidly economic circumstances can change. 

As the economy goes down, he is overemphasizing the negative just as many people exaggerated the positive on the way up.

Im sure he has his book ready for the printing press also.


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## Afuera (20 Jan 2009)

smiley said:


> i dont think theres any case for libel here at all. Morgan kelly is just doing what any journalist would do.


In the Dail today, Lenihan denied that they ignored the Dept of Finance's recommendation as stated in Morgan Kelly's article. He even specifically made reference to the very article! Someone is telling lies here.



smiley said:


> Some said dont nationalise anglo others said do. I dont think you are ever going to have full agreement ever on a issue like this. The taoiseach is the boss at the end of the day.


Yes, and as the boss you have to wonder why he would overrule the advice of the resident experts. The article says that both the economists in the Dept of Finance and their counterparts in the Central Bank were against including Anglo Irish and Irish Nationwide. It's very clear now that these two entities should not have been included. Why were the experts ignored? Cowen owes the nation an explanation at  the very least.


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## ecstatic (20 Jan 2009)

Its absolutly ridiculous, this government do not have a clue.

Anglo will cost minimum 20-30 BILLION based on past default scenarios of 20% bad debt ratio.

The other banks are in the same position, we need to get over the property game default the developers (hiding out in anglo) and reset the market so a swift return occurs.

This is before AIB and BOI come to the table, why should the worst run bank (anglo) be first up for the medecine???

This is laughable its not of systematic importance. We need better economists running our country not the government.

The price of CDS for ALL irish compnies was affected badly by anglo been taken over cost went up 15% for insurance portion. Its like shooting yourself in the foot.


Why dont we take a leaf out of the state of OMAHA book during 1930's and provide mortgage moratarium to the masses?

We know the default is 20% why not wipe 20% off everyones mortgage instead?

Primary residence only for obvious reasons?


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## Padraigb (20 Jan 2009)

ecstatic said:


> Its absolutly ridiculous, this government do not have a clue...



The continuation of your post suggests to me that you don't have any more clue than the government.


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## Duke of Marmalade (20 Jan 2009)

yoganmahew said:


> You obviously weren't listening to the Dail debates this afternoon then...


 Yep, I was a bit shocked, but surely this isn't true.  I still believe that the 2 Brians are doing what they see as best for the country without hidden agendas.


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## beekeeper (20 Jan 2009)

Padraigb said:


> The continuation of your post suggests to me that you don't have any more clue than the government.


 
The frightening thing is that it sounds to me that he has more of a clue than our government do and however dramatic it may seem we are not a million miles away from this posibility !!


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## Carramore (20 Jan 2009)

I agree with almost all of Morgan Kelly's analysis in his IT article.  I think he is wrong however in thinking that the state as shareholder will have to stand over all Anglo's liabilities, including those to bond-holders.  The rules of limited liability still apply even when the bank is nationalised.  To the best of my recollection, when the UK government took over Northern Rock, they defaulted on some of the bond liabilities.  That would change some of his conclusions.


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## rustyjack (20 Jan 2009)

Duke of Marmalade said:


> Yep, I was a bit shocked, but surely this isn't true.  I still believe that the 2 Brians are doing what they see as best for the country without hidden agendas.



I hope that you are right for the economy sake. Brian said in the dail today that all of the advice that he received is that Anglo Irish should be nationalised. So either he is lying or Morgan Kelly is lying. Even though i think FF is very culpable (for the lack of bank regulation, property bubble etc) and hope that they suffer because of this come election-time, i hope MK is lying cos the alternative is quite frightening.


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## Padraigb (20 Jan 2009)

rustyjack said:


> I hope that you are right for the economy sake. Brian said in the dail today that all of the advice that he received is that Anglo Irish should be nationalised. So either he is lying or Morgan Kelly is lying. Even though i think FF is very culpable (for the lack of bank regulation, property bubble etc) and hope that they suffer because of this come election-time, i hope MK is lying cos the alternative is quite frightening.



It's not necessarily the case that anybody is lying. Perceptions of fact can differ.

I believe that the two Brians sincerely want to get things right. I believe also that they don't really know what the best course of action is, and are trying to weigh all the different, frequently conflicting, advice that they are getting, and make the best choices. I'm not so sure that they are well-equipped to judge the advice.

But who actually knows what the best course of action is? If we look over the various discussions in this group, we will find a number of people making confident pronouncements and others being more cautious or reserved in expressing views. It looks to me as if those who make the confident assertions usually have less insight than those who are cautious.


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## Afuera (20 Jan 2009)

Carramore said:


> I agree with almost all of Morgan Kelly's analysis in his IT article.  I think he is wrong however in thinking that the state as shareholder will have to stand over all Anglo's liabilities, including those to bond-holders.  The rules of limited liability still apply even when the bank is nationalised.  To the best of my recollection, when the UK government took over Northern Rock, they defaulted on some of the bond liabilities.  That would change some of his conclusions.


The British government did not guarantee the debts of Northern Rock though before they nationalized it. Defaulting on Anglo's bond liabilities would break the guarantee that the Irish government has set so is probably not an option.

On a slightly different point, maybe there are some legal eagles that know the answer to this one... Does Lenihan's speech in the Dail today, where he denied the allegations made by Morgan Kelly, now mean that he has Dail immunity from ever being questioned on it again?


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## Padraigb (20 Jan 2009)

Afuera said:


> ... Defaulting on Anglo's bond liabilities would break the guarantee that the Irish government has set so is probably not an option...



Might that not depend on when the bonds fall due? I think I read that there is a large tranche which does not fall due until after the period of the guarantee.


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## rustyjack (21 Jan 2009)

Padraigb said:


> It's not necessarily the case that anybody is lying. Perceptions of fact can differ.
> 
> I believe that the two Brians sincerely want to get things right. I believe also that they don't really know what the best course of action is, and are trying to weigh all the different, frequently conflicting, advice that they are getting, and make the best choices. I'm not so sure that they are well-equipped to judge the advice.
> 
> But who actually knows what the best course of action is? If we look over the various discussions in this group, we will find a number of people making confident pronouncements and others being more cautious or reserved in expressing views. It looks to me as if those who make the confident assertions usually have less insight than those who are cautious.



Mk said that department of finance and central bank originally only proposed 4 banks not 6 for the liability guarantee. Seemingly, lenihan denied this explicitly in the dail but i cannot confirm this. All i heard on the rte news was that he said all of the advice he received was to nationalise which may be technically true as this advice may have been given after he extended the liability guarantee to anglo and irish nationwide.
There was another economist disagreeing with the nationalisation last nite - mcarthy i think ....
It seems like the problem was the original decision to extend the liability guarantee to anglo. Once that was given, they had little room for maneuver as backing out would also not instill confidence in the guarantee for the other banks...


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## Afuera (21 Jan 2009)

Padraigb said:


> Might that not depend on when the bonds fall due? I think I read that there is a large tranche which does not fall due until after the period of the guarantee.


Possibly. I think the point may be moot however as personally I think the Irish government will have to renege on their guarantee anyway. There is no way they can cover all of the debts that are likely to happen over the next two years.


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## Sunny (21 Jan 2009)

Far be from me to defend the Government but there is alot of tripe being thrown around the place. I read Morgan Kellys article. It was the usual mixture between the insightful economic analysis and pure rubbish. He should come out now and name this source of his. I don't pretend to know the ins and outs of political life but I am willing to bet that no politican would be brave enough to ignore the advice of all their advisors and the Central Bank on an issue like this. And his comments on Credit Default Swaps was nonsence. 

For me the simple fact of the matter is that no-one knows what would have happened if the Government had let Anglo fail. The US let Lehman Brothers fail because they didn't see how it could cause systemic problems. Everyone including the FED now admit that this was a mistake as they didn't fully understand the relationship between Lehmans and the market and the loss of confidence in other financial names that came out of it. The same thing could have happened in Ireland. All confidence in AIB and BOI would have been lost. 

I also don't see how people can say this is bailout for developers. How does that work? 

There should be greater transparancy in what has happened and what the risks are. Lenihans argument about commercial sensitivity is rubbish but like some other people, I have to believe that Lenihan and Cowan are acting in what they believe to be the best interests of the Country.


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## z109 (21 Jan 2009)

Afuera said:


> On a slightly different point, maybe there are some legal eagles that know the answer to this one... Does Lenihan's speech in the Dail today, where he denied the allegations made by Morgan Kelly, now mean that he has Dail immunity from ever being questioned on it again?


Not a legal eagle, but my understanding of Dail privilege is that you can't be sued for any allegations you make, not that it confers some sort of infallability to your answer!

I think the opposition have been itching to get into the Dail and say a few things, as per the debate yesterday, to get them out in the open. The media can now carefully report on the issues based on the reported remarks by TD x in the Dail record.


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## z109 (21 Jan 2009)

Duke of Marmalade said:


> Yep, I was a bit shocked, but surely this isn't true.  I still believe that the 2 Brians are doing what they see as best for the country without hidden agendas.


I like to think you are right. I do worry that the advice they are getting is where the danger lies. Even assuming there was some debate about the course of action to take at the time of the guarantee in the Department of Finance with the departments economists being over-ruled internally, it is not clear to me that the disputed nature of the recommedations would have been presented to the minister. The bolsheviks present their solution as the only one, leaving the mensheviks out in the cold.

This leaves both Mr. Kelly and Mr. Lenihan correct in what they are saying:
- there was a dispute in the Dept. of Finance
- the minister was presented with only one choice


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## z109 (21 Jan 2009)

Sunny said:


> And his comments on Credit Default Swaps was nonsence.


Can you expand on this a bit? Is it because much of the actual debt is not covered?

Do you also have an opinion on whether the nationalisation constitutes a credit event so the CDS will be paid out anyway? I understand this was the case in Iceland, but was that only because the debt was repudiated?


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## Sunny (21 Jan 2009)

yoganmahew said:


> Can you expand on this a bit? Is it because much of the actual debt is not covered?
> 
> Do you also have an opinion on whether the nationalisation constitutes a credit event so the CDS will be paid out anyway? I understand this was the case in Iceland, but was that only because the debt was repudiated?


 
I agree with you. Nationalisation by itself is not an event of default under credit default swaps. I am imagining it will be more similar to Northern Rock than Iceland as the Government here has said all debt will be paid in full and on time while the Icelandic banks were placed into administration.

I just didn't understand what Morgan Kelly was trying to say about bondholders and credit default swaps and why he brought CDS at all into the argument.


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## sfag (21 Jan 2009)

The capitulation of the Irish property market begins in earnest when the first bank falls. 
If all the banks have loans with the same developers / or even if those developers owe money to other industries, then there will be a panic charge by all creditors to get their money back once the receiver of a bankrupt bank starts to call in bad loans or try sell good debt on. 

The dilema of the government is this. They have guarenteed the bad debts without any means to pay them if they ever got called. (Remember they even thought they might make a profit out of the thing). It must now do everything to stall that day of reckoning. 

Didnt a lot of comentators in the media and posters here say that the guarentee was a great idea without any real negatives at the time?.


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## Sunny (21 Jan 2009)

sfag said:


> The capitulation of the Irish property market begins in earnest when the first bank falls.
> If all the banks have loans with the same developers / or even if those developers owe money to other industries, then there will be a panic charge by all creditors to get their money back once the receiver of a bankrupt bank starts to call in bad loans or try sell good debt on.
> 
> The dilema of the government is this. They have guarenteed the bad debts without any means to pay them if they ever got called. (Remember they even thought they might make a profit out of the thing). It must now do everything to stall that day of reckoning.
> ...


 
What do you mean when you say they have guaranteed the bad debts?


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## Sunny (21 Jan 2009)

Heard an interesting thing about Anglo this morning. They told the market that they intend to keep servicing their Tier 1 Debt Instruments as normal and they also still intend to call their Lower Tier 2 debt as planned (But that may change with new management).

Question is why would they continue to pay interest on Tier 1 debt (is it allowed??) and also why would they call their Tier 2 debt and thereby reduce their capital position. Just thought they were strange comments for a Nationalised Bank to make.


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## z109 (21 Jan 2009)

Particularly in light of this:
[broken link removed]
(S&P downgrades Anglo Tier 1 debt on fear of non-payment of interest)
(Courtesy of Pill of the 'pin).


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## Sunny (21 Jan 2009)

yoganmahew said:


> Particularly in light of this:
> [broken link removed]
> (S&P downgrades Anglo Tier 1 debt on fear of non-payment of interest)
> (Courtesy of Pill of the 'pin).


 
See that makes sense so I am not sure what Anglo were talking about.


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## Cameo (21 Jan 2009)

here's my rant 

It was reasonably clear to a lot of peope in the fund management industry in Dublin that Nationwide and Anglo should not be included in the government guarantee at the time it was announced unless it was a condition that they'd be wound down if required, therefore MK's version of events sounds very plausible 

In the same way the clear solution now (and has been for some time depending on how close to the curve you are ) is:

Anglo should be wound down in an orderly fashion - it delusional to think its business as normal - it is a zombie bank that now serves no purpose
Nationwide as well - it is even less relevant

EBS - they should be told to find someone to merge with or we'll wind you down too

ILP and BOI should be merged  and ideally sold off to a private equity player (chance probably gone now) alternatively just consolidate them - needs to as needs must

AIB might just scrape through as private entity in current form - unless their development loan book is as bad as some fear - goverment could be imaginitive here and use nprf money to buy M&T or Polish bank from them - at least the taxpayer will get something for their money and easier to justify 

Government needs to get tough with banks and take whatever steps are necessary to reduce liability to  taxpayer and limit damage to economy 

Despite what Brian L said about two days ago, chances are that you will need to take bad loans from banks if it is your stated aim not to nationalise them and you want them to stay in business 

Otherwise underwrite losses, some type of insurance, keeping it simple is probably better though 

The brians need to pick up the pace here - they showed their willingness to take risks when they introduced the guarantee - however given the speed at which events change they need to make some more and make them quickly

The last thing this country need is more state owned companies


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