# Taoiseach Martin: "We did not bail out the banks!"



## Brendan Burgess (17 Dec 2020)

I have been saying for years that we bailed out the depositors and most bondholders and the staff but not the banks.   Shareholders lost most or all of their money.

The Taoiseach said this in the Dáil yesterday.










						State did not bail out banks during economic collapse, Taoiseach says
					

Micheál Martin says bank shareholders not bailed out but ‘State took equity’




					www.irishtimes.com
				





_Mr Martin said in response to People Before Profit TD Richard Boyd Barrett: “I’ll talk to you about the banks. The banks were not bailed out. Shareholders in the banks were not bailed out. The State took equity. The shareholders were not bailed out. That’s not a popular thing to say, but it is a fact”

But the Dun Laoghaire TD insisted “they were”._


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## Steven Barrett (17 Dec 2020)

It is a phrase that has been used for over a decade now. The banking system itself was bailed out. Martin sounded stupid shouting that in the Dail yesterday.


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## NoRegretsCoyote (17 Dec 2020)

There is nuance of course, but saying "the banks were not bailed out" is just false.

He should have said: "We bailed out nearly all depositors to preserve financial stability and to protect the real economy. The bank shareholders all lost their equity"


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## Brendan Burgess (17 Dec 2020)

No, the banks were not bailed out. And he is right to say it even if the public think it sounds stupid.

The main beneficiaries were the ordinary depositors, pensioners and credit unions.   

We should be highlighting this. 

Brendan


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## WolfeTone (17 Dec 2020)

Brendan Burgess said:


> The main beneficiaries were the ordinary depositors



If we are going to get technical about what was a bailout to fill a black hole of private debt then this narrative also needs to be called out. The banks 'ordinary' depositors were already covered under the Central Bank Deposit Guarantee Scheme to the tune of €100,000 per person, per institution. Depositors, the vast majority having nowhere near €100,000 on deposit, are insured under the scheme that is supposed to be funded by the very credit institutions that hold the deposits.
The fact that banks were facing an inability to pay deposits without the State cash injection means, the banking institutions were bailed out.


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## NoRegretsCoyote (17 Dec 2020)

With apologies to resorting to semantics, here is a definition of a bailout:



> the act of helping a person or *organization *that is in difficulty, usually by* giving or lending money*:



Of course the beneficiaries were the ordinary depositors, pensioners and credit unions, but the banks did receive a bailout.


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## RedOnion (17 Dec 2020)

WolfeTone said:


> The banks 'ordinary' depositors were already covered under the Central Bank Deposit Guarantee Scheme to the tune of €100,000 per person, per institution.


Prior to September 2008, the guarantee was only 20,000


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## Brendan Burgess (17 Dec 2020)

As Red says, the guarantee was only €20k.  And was it a separate fund?   Did the taxpayer have any obligation to top it up in the event of a shortfall? 

It was wrong to guarantee the deposits and bondholders at the expense of the taxpayer. 

Brendan


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## Brendan Burgess (17 Dec 2020)

NoRegretsCoyote said:


> With apologies to resorting to semantics,



It is pure semantics.  The media and politicians seem to insist that the banks in some way benefitted from the guarantee.  In fact, it was the ordinary depositors, pension funds, bond holders and credit unions who got the benefit.

I have heard the Credit Unions saying that they were never bailed out. They would have nearly all gone bust, if the government had not guaranteed their deposits in Anglo and the Irish Nationwide. 

What is galling about this is that the depositors in Anglo and Irish Nationwide got a higher rate of interest because of the perceived risk and yet the deposit was retrospectively guaranteed by the taxpayer.

Brendan


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## WolfeTone (17 Dec 2020)

RedOnion said:


> Prior to September 2008, the guarantee was only 20,000



True, and the more 'ordinary' you are, the more likely your deposits to be at, or below that level. In the main, the largest cohort of 'ordinary' depositors would have had deposits less than this amount and already covered. The banks were flagging an inability to insure these deposits, that they were supposed to fund, and in turn needed a bailout. 
So perhaps the correct terminology is the "banking _institutions _needed a bail out". If ordinary depositors lost their deposits, despite being supposedly insured up to €20,000, what future for any banking institution thereafter?


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## RedOnion (17 Dec 2020)

WolfeTone said:


> True, and the more 'ordinary' you are, the more likely your deposits to be at, or below that level


No. The typical 'deposit' account (as in a dedicated deposit account, separate to current account) was far in excess of 20,000 at the time. 
Remember, interest rates were 4% +. Pensioners in particular would have have large deposit balances, and using the interest to supplement their pensions.


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## Coldwarrior (17 Dec 2020)

Brendan Burgess said:


> And he is right to say it even if the public think it sounds stupid.



Whether he's technically correct or not, it was the height of political stupidity and as Miriam Lord noted handed an early Christmas present to the opposition.


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## Brendan Burgess (17 Dec 2020)

Coldwarrior said:


> Whether he's technically correct or not, it was the height of political stupidity



There is nothing _technical _or _semantic _about it.

It's the reality. It's the truth.

Politicians should point out the truth  even if it's unpopular.

Brendan


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## WolfeTone (17 Dec 2020)

RedOnion said:


> The typical 'deposit' account (as in a dedicated deposit account, separate to current account) was far in excess of 20,000 at the time.



I will take your word for it. The core point im making is that €20,000 of all deposits were already protected under the Deposit Guarantee Scheme which was supposed to be funded by the credit institutions that held the deposits. 
The banks were signaling that they would not be able to cover these amounts under the Deposit Guarantee Scheme. They needed a bailout to do so. 

Had the banks not been able to guarantee these deposits then the consequences would have been drastic, not least the credibility of banking institutions themselves would have been in tatters.


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## Coldwarrior (17 Dec 2020)

Brendan Burgess said:


> There is nothing _technical _or _semantic _about it.
> 
> It's the reality. It's the truth.
> 
> ...



I disagree, as the only surviving minister of the Fianna Fail government from that terrible period in our country's history, he shouldn't go near the subject at all, he's guaranteed to take political damage for no benefit. He's only handing easy sound bites to Sinn Fein and PBP etc.


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## Sadim (17 Dec 2020)

Brendan Burgess said:


> I have been saying for years that we bailed out the depositors and most bondholders and the staff but not the banks.   Shareholders lost most or all of their money.
> 
> The Taoiseach said this in the Dáil yesterday.
> 
> ...



Very good distinction Brendan, it wasn't a unilateral bailout the way it is portrayed. And bailout suggests the govt got nothing in return but they actually own 15% of BOI and is it 99% of AIB. Sure, the realisable value of those holdings will never recover the money invested in full. In strategic terms though the govt had no choice but to invest to keep BOI/AIB afloat otherwise depositers and bondholders alike would have been burned. What basis do you have then to restart a retail banking sector if as a govt you show you are prepared to do that? What economy can survive with a retail banking sector?


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## RedOnion (17 Dec 2020)

WolfeTone said:


> The banks were signaling that they would not be able to cover these amounts under the Deposit Guarantee Scheme. They needed a bailout to do so.


The banks signalled that they couldn't cover the 20k?
That's news to me if I've understood what you're saying.


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## NoRegretsCoyote (17 Dec 2020)

Brendan Burgess said:


> The media and politicians s*eem to insist that the banks in some way benefitted from the guarantee.*  In fact, it was the ordinary depositors, pension funds, bond holders and credit unions who got the benefit.



No action by the government would probably have led to the entire Irish banking system going into ordinary insolvency*.

This would have been really bad for depositors of course, *but the bailout helped to keep the banks afloat as entities and their staff pretty much kept their pay and jobs* at a time when unemployment was rising 5pp in a year. A few of these corporate entities (Anglo, INBS) don't exist at all anymore but walk down a main street and you will still see AIB, ptsb, BoI branches, etc.

So saying "We did not bail out the banks" as MM did is just wrong.



*For the record this would have been a very bad policy indeed.


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## WolfeTone (17 Dec 2020)

Yeh, reports about no money in the ATM's on a Monday morning, all that stuff. But here is a report claiming that Micháel Martin referred to 'bailout' 57 times.

Taoiseach referenced bailout 57 times before 'bizarre' claim Irish banks 'were not bailed out' (irishexaminer.com)


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## WolfeTone (17 Dec 2020)

Journal.ie fact checker


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## moneymakeover (17 Dec 2020)

If the bondholders are bailed out then _technically_ it's a bailout even if the shareholders are not.

IMHO


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## UptheDeise (17 Dec 2020)

Does anyone know how much money was on deposit prior to the bail out?


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## AlbacoreA (17 Dec 2020)

Brendan Burgess said:


> It is pure semantics.  The media and politicians seem to insist that the banks in some way benefitted from the guarantee.  In fact, it was the ordinary depositors, pension funds, bond holders and credit unions who got the benefit.
> 
> I have heard the Credit Unions saying that they were never bailed out. They would have nearly all gone bust, if the government had not guaranteed their deposits in Anglo and the Irish Nationwide.
> 
> ...




When you say they would have all gone bust.
Would the banks not also have gone bust. Was it not a house of cards.
If the banks had gone bust would the banking system not have collapsed.
If all that happened wouldn't the tax payer also being paying for that also.

So bailing one , bailed out all.

While it certainly wasn't the only way to go (Iceland etc), has it worked out in the end?
Well other then the moral hazard of repeating the same thing over.


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## NiallSparky (17 Dec 2020)

moneymakeover said:


> If the bondholders are bailed out then _technically_ it's a bailout even if the shareholders are not.
> 
> IMHO



Possibly so.

I think there's a general misunderstanding of how creditor hierarchies and such work from the public. Lots of people seem to think "bailing out the banks" benefited "the banks", when in actual fact the owners of the banks were pretty much wiped out. The benefit was to certain creditors (depositors/bondholders), not really to the banks as such.


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## Brendan Burgess (17 Dec 2020)

Why are people obsessed with technicalities here? 

the question should be "Who benefited from the bailout?" 

And the answer is that it was the bondholders and ordinary depositors - The pensioners, the credit unions, the pension funds. 

That is really what matters. 

Shareholders lost their investment and rightly so. 

Most of the the top  executives and board members lost their jobs and rightly so.

But the ordinary staff didn't lose out at all. 

Brendan


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## AlbacoreA (17 Dec 2020)

Brendan Burgess said:


> Why are people obsessed with technicalities here?



Wasn't that the point of you starting the the thread Brendan?



Brendan Burgess said:


> the question should be "Who benefited from the bailout?"
> 
> And the answer is that it was the bondholders and ordinary depositors - The pensioners, the credit unions, the pension funds.
> 
> ...



I'm not convinced of the most.

Be that as it may. Lots of other people got out from lots and debt and start over, in other sectors.
The ordinary staff may not have lost out directly, but most of the banks have massive cuts to their head counts over the past few decade or so.
So I'm sure the semantics is a moot point.

I think the question is really could it happen again, has anything significantly changed it terms of oversight, and regulation, that would make a difference. Has anything changed in the political culture that no one is responsible for anything. Keeping everything at arms length etc. Martin seems to have forgotten that we haven't forgotten.


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## WolfeTone (17 Dec 2020)

Brendan Burgess said:


> and ordinary depositors



Ordinary depositors, with deposits to the tune of €20,000 or less, were already covered under the Deposit Guarantee Scheme. They were not bailed out.


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## Saavy99 (17 Dec 2020)

WolfeTone said:


> Ordinary depositors, with deposits to the tune of €20,000 or less, were already covered under the Deposit Guarantee Scheme. They were not bailed out.




Very true, it's unfair saying ordinary depositors were bailed out.


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## PMU (17 Dec 2020)

Brendan Burgess said:


> No, the banks were not bailed out. And he is right to say it even if the public think it sounds stupid. The main beneficiaries were the ordinary depositors, pensioners and credit unions.  We should be highlighting this. Brendan


 I'd say the main beneficiaries were the Irish people as the country couldn't have functioned without a working banking system.

In 2008 the Irish banks we unable to roll over their foreign borrowings so the Government ,issued a blanket guarantee of *all *liabilities of the banks (which included deposits) through the Credit Institutions Financial Support Scheme (CIFS).   This is an important point in this discussion.  The government did not 'bail out' the banks, i.e. give them liquidity or guarantee their shareholders.  It guaranteed their liabilities (which included deposits) for a short time.  Calling this 'bailing out' the banks is just plain wrong. 

(There had been a previous deposit guarantee scheme was set up in 1995, which implemented a 1994 EU directive and provided for holders of eligible deposits to be compensated for 90% of their deposits up to a maximum equivalent to ECU 15,000.)

In 2009 the Government removed the blanket guarantee  and reduced the cover of  the guarantee,  under the  Credit Institutions (Eligible Liabilities Guarantee) Scheme (ELG Scheme).   The ELG scheme was subsequently extended for all retail deposits until June 2012.  (Retail bank deposits are now guaranteed for a level of 100,000 euro under EU Directive 2014/49/EU, which was transposed into Irish law in 2015.)


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## SGWidow (17 Dec 2020)

Brendan Burgess said:


> It's the reality. It's the truth.



According to Paschal Donohoe (RTE News @ 1) - the Taoiseach has said that he misspoke yesterday.

Maybe the Taoiseach doesn't even believe what he said yesterday was the reality / the truth?


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## jpd (17 Dec 2020)

The average man in the street, and the average woman, does not have any inkling of how the banking system works in any great detail.

So while it is true that the banks ie the owners, the shareholders were not bailed out, this is not what they understand. Trying to explain the banks balance sheet and how it would have affected the economy if the government had not not stepped in, is a pointless task.

And the Taoiseach should be well aware of that and not have said what he said - it shows political incompetence of the highest order


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## DublinHead54 (17 Dec 2020)

AlbacoreA said:


> I think the question is really could it happen again, has anything significantly changed it terms of oversight, and regulation, that would make a difference. Has anything changed in the political culture that no one is responsible for anything. Keeping everything at arms length etc. Martin seems to have forgotten that we haven't forgotten.



Things have significantly changed through regulation, this is summarized as banks have restricted certain activity as it was either banned or capital rules made it unprofitable. Banks are very much now service providers to clients, any trading activity is done on behalf of clients, there is no longer any trading their own money.

The capital held is much more robust to withstand market shocks, stress testing etc. There has essentially been a huge investment in the last decade to improve the banking system. 

I think it has largely worked and the recent Covid pandemic has shown that banks are in a much better position to withstand large losses from loans.


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## NoRegretsCoyote (17 Dec 2020)

jpd said:


> So while it is true that the banks ie the owners, the shareholders were not bailed out, this is not what they understand.



A bank is not just a capital structure!

It has responsibilities to its shareholders, its customers, counterparties, and its staff.

Sure, of course the shareholders lost it all. But the customers, counterparties and staff were all bailed out to some extent. MM's claim that "We did not bail out the banks" is just wrong, even with his subsequent qualification.


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## Brendan Burgess (17 Dec 2020)

WolfeTone said:


> Ordinary depositors, with deposits to the tune of €20,000 or less, were already covered under the Deposit Guarantee Scheme. They were not bailed out.



All depositors were bailed out. Whether they had an existing guarantee in place or not.  

Let's be clear. I agree with paying 90% of deposits up to €20k.

But that still means that they were bailed out.

I very much doubt that there was enough in the fund to meet that guarantee.

I was bailed out as a depositor but not as a shareholder. 

Brendan


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## Itchy (17 Dec 2020)

First of all, what a hill to die on! And of all people to bring this up again, MM!



PMU said:


> In 2008 the Irish banks we unable to roll over their foreign borrowings so the Government ,issued a blanket guarantee of *all *liabilities of the banks (which included deposits) through the Credit Institutions Financial Support Scheme (CIFS).   This is an important point in this discussion.  *The government did not 'bail out' the banks, i.e. give them liquidity or guarantee their shareholders.* It guaranteed their liabilities (which included deposits) for a short time.  Calling this 'bailing out' the banks is just plain wrong.



For me, the question is were the banks in a position to be able to meet their obligations, as a going concern, without intervention by the state - self-evidently not. The state intervened to ensure viability of the institutions. The mechanism of intervention is irrelevant, who the actual beneficiaries were is irrelevant, the protection of the banking system is irrelevant, the States actions were not risk-free interventions. Obligations entered into, independent of the State, required the State to act so the obligations could be met -> they were bailed out.

To suggest that a 'bail out' is limited to a liquidity intervention or a shareholder value guarantee is very disingenuous in my view. Also remember that NAMA purchased bank owned assets, with public money, at the "long-term economic value" i.e. above market value. I cant see how that's not supplying liquidity.

Brendan McDonaghs opening statement to the Banking enquiry


> Ultimately, of the €31.8 billion that NAMA paid as consideration for the acquired loans, €5.6 billion was considered to be State Aid i.e. NAMA paid the financial institutions €5.6 billion more than the private sector market would have paid them at the time of acquisition....In addition, NAMA’s acquired loans were valued by reference to a property collateral valuation date of 30 November 2009 and, as a result, NAMA had to absorb losses arising from the impact of the 25%-30% decline in Irish property values which took place subsequently right up to the end of 2013... ; thus, if the participating institutions had to sell to private investors, I estimate that the acquisition price would have been reduced by another €4.5 billion. Essentially, therefore, *the institutions would have been paid about €22 billion by the market rather than the €32 billion that NAMA did pay for the loans*.


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## Purple (17 Dec 2020)

If a company goes bust and I buy it and its liabilities am I bailing it out?
The State bought AIB and guaranteed it's creditors... or am I missing something?  
It bought a chunk of BOI and did the same.



WolfeTone said:


> Ordinary depositors, with deposits to the tune of €20,000 or less, were already covered under the Deposit Guarantee Scheme. They were not bailed out.


 How was that not a guarantee to bail out those depositors?


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## Purple (17 Dec 2020)

The real cost of the collapse in the banking sector goes way beyond the bailout/recapitalisation. Getting hung up on what the direct costs were (and now are net of sales of shares and loan books)  is to miss the bigger picture. We owe over €200 billion because of political, fiscal and monitory and central bank policy actions and failures. Those failures went back decades. If we want to avoid repeating those failures we need to avoid a narrative that suggests the Bank "Bailout" was the problem. No matter what the Government did we were screwed.


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## WolfeTone (17 Dec 2020)

Purple said:


> How was that not a guarantee to bail out those depositors?



Its like an insurance protection against dodgy banks. It builds confidence between depositors and banks holding those deposits. It is a good thing in general. 
The banks were not able to fulfill their obligations under the scheme , so they required a bailout from the government. Which is repayable by taxes.
So I suppose the taxpayer bailed out the State by taking on debt to bailout the banks who needed to protect the depositors who are the taxpayers to begin with.

What if you didn't have any money on deposit, but are a taxpayer?


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## Purple (17 Dec 2020)

WolfeTone said:


> Its like an insurance protection against dodgy banks. It builds confidence between depositors and banks holding those deposits. It is a good thing in general.
> The banks were not able to fulfill their obligations under the scheme , so they required a bailout from the government. Which is repayable by taxes.
> So I suppose the taxpayer bailed out the State by taking on debt to bailout the banks who needed to protect the depositors who are the taxpayers to begin with.


Yep, but it was a bailout either way.



WolfeTone said:


> What if you didn't have any money on deposit, but are a taxpayer?


 Then you are part of the group I'm in.


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## Brendan Burgess (17 Dec 2020)

The key question is "Who benefited?" 

And the answer is the depositors.  

Not the shareholders 
Not the borrowers 
Not the top executives or directors 

Anglo and INBS disappeared so they clearly did not benefit. 

Brendan


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## Allpartied (17 Dec 2020)

The entire banking system should have been nationalised in 2008.  There should be one state bank, offering loans and deposit arrangements for day to day banking, including mortgages.  Interest rates should be pegged to the rate at which govt can borrow.  
Default loans should be dealt with sympathetically, but defaulters can be dealt with by the revenue system, which can ensure that debts are repaid. 

Commercial loans could be similarly managed, though with a higher risk premium, the interest rates could be slightly higher. 

This is not really radical. At the moment the private banking companies, AIB and BoI are , effectively, nationalised and would sink tomorrow morning if the Govt Guarantee was withdrawn.


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## RedOnion (17 Dec 2020)

Allpartied said:


> and would sink tomorrow morning if the Govt Guarantee was withdrawn


What government guarantee?


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## Protocol (17 Dec 2020)

Allpartied said:


> This is not really radical. At the moment the private banking companies, AIB and BoI are , effectively, nationalised and would sink tomorrow morning if the Govt Guarantee was withdrawn.



AIB is no longer fully State-owned. The State sold some of their shares, and now own 71% of the bank.






						State's Shareholding in Banks
					

The Shareholding and Financial Advisory Division (SFAD) is responsible for monitoring the overall strategic direction of the banks, developing and executing plans to optimise the value of the State’s investments.




					www.gov.ie


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## Protocol (17 Dec 2020)

Allpartied said:


> This is not really radical. At the moment the private banking companies, AIB and BoI are , effectively, nationalised and would sink tomorrow morning if the Govt Guarantee was withdrawn.



BoI is no longer State-owned.

The State retains a 14% share.






						State's Shareholding in Banks
					

The Shareholding and Financial Advisory Division (SFAD) is responsible for monitoring the overall strategic direction of the banks, developing and executing plans to optimise the value of the State’s investments.




					www.gov.ie


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## SGWidow (17 Dec 2020)

Brendan Burgess said:


> The key question is "Who benefited?"
> 
> And the answer is...…..
> Not the top executives or directors



I don't think this is correct.

Taking IL&P as an example....

1. Wouldn't the DB pension scheme(s) not have had to be wound up insolvent if the bailout hadn't occurred? [The major beneficiaries of DB pension schemes are the long serving highly paid staff - the typical profile of the then Irish Life senior executive]

2. Wouldn't there not have been the money to finance Denis Casey's multi-million severance package if IL&P had failed?


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## Brendan Burgess (17 Dec 2020)

SGWidow said:


> Taking IL&P as an example....



Interesting points and possibly partly correct. 

Irish Life was always solvent and still is solvent. It was a separate asset of ptsb.  

Not sure what happened Anglo's and Irish Nationwide's pension schemes.  I would suspect that they were defined contribution. But I don't know.

I think that the main beneficiaries of the pension schemes were the staff.  Clearly the higher paid staff benefited more. 

I would guess that the executives got their contractual compensation?   The depositors got a retrospective guarantee which had not contractual obligation.

Brendan


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## NoRegretsCoyote (17 Dec 2020)

Brendan Burgess said:


> I think that the main beneficiaries of the pension schemes were the staff. Clearly the higher paid staff benefited more.



Also redundancy packages in subsequent years were more generous than they would have been in a disorderly wind-up .


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## WolfeTone (17 Dec 2020)

Michéal Martin, "I got it wrong yesterday... We make mistakes in the heat of the moment, and I certainly made one in that respect"


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## Brendan Burgess (17 Dec 2020)

NoRegretsCoyote said:


> Also redundancy packages in subsequent years were more generous than they would have been in a disorderly wind-up .



For staff at all levels.  Or was there a particular package for the top executives? 

Brendan


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## Saavy99 (17 Dec 2020)

Brendan Burgess said:


> The key question is "Who benefited?"
> 
> And the answer is the depositors.
> 
> ...




Why is this being discussed over ten years later.  Has it not been discussed to death at this stage. It's over and done with and the 'ordinary depositors' got to keep their few euros.


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## NoRegretsCoyote (18 Dec 2020)

Brendan Burgess said:


> For staff at all levels. Or was there a particular package for the top executives?


I don't know, but top executives leaned on to resign for their appalling lending and liquidity management decisions can be counted on two hands.

Otherwise, what happens if there is capital provided or lending by government into 100%-state-owned An Post?

By your definition this is not a bailout either because the state is the only shareholder and presumably you can't bail out yourself


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## Jim2007 (18 Dec 2020)

NoRegretsCoyote said:


> So saying "We did not bail out the banks" as MM did is just wrong.



Now you know very well that not a single shareholder received compensation as the result of the recapitalization of the banks and to claim otherwise is not just wrong, it’s a lie.  And on that basis there is no point in this conversation.


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## jpd (18 Dec 2020)

It all depends on how you define as "the banks" - this is a vague and undefined notion

You can use whatever definition you want in order to make your point or to refute another's


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## WolfeTone (18 Dec 2020)

The notion that depositors were bailed out is wrong. Deposits placed in banks are done so as a means of safe-keeping money. They are not loans, they are not investments, they are deposits - that is why they are called, deposits. 

The banks, traditionally, like to attract deposits by offering interest rates that in theory protects the purchasing power of the deposit. The bank _guarantees _safe keeping of these deposits. To reinforce that guarantee the State Central Bank in this country ran a deposit _guarantee_ scheme that guaranteed deposits up to €20,000 then increasing that to €100,000. 
It underpins the whole basis of placing trust in a bank to mind money rather than having to keep your cash under the mattress.

The only thing that was bailed out was the banking sector and its institutions to sustain that function of guaranteeing the deposit. 
Otherwise it risked ending the whole concept of assuring safe-keeping your money in a bank. They would be nothing more financial investment houses where your money is at risk.
The banking sector would have lost its function to _guarantee_ deposits and its reputation would lay in tatters.
The price the State paid to keep that function of the banking sector alive was €34bn. 

It was a bail-out of the banking sector to underpin its primary function and reputation to guarantee deposits.


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## Gordon Gekko (18 Dec 2020)

When you’re explaining, you’re losing.

Whilst what Micheal Martin said may be correct from a technical perspective, it was extraordinarily naive and a ‘free shot’ for the morons on the left.


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## NoRegretsCoyote (18 Dec 2020)

@WolfeTone 


Many deposits were well in excess of the guaranteed amounts of €20k then €100k.
I think Irish Nationwide depositors got off the best of all. As a member-led entity, depositors were _at least in a position to challenge _the decisions being taken by bank management. The vast majority of them did not, unquestioningly building up deposits in the hope of a payout in the event of a de-mutualisation that never happened.


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## 24601 (18 Dec 2020)

Jim2007 said:


> Now you know very well that not a single shareholder received compensation as the result of the recapitalization of the banks and to claim otherwise is not just wrong, it’s a lie.  And on that basis there is no point in this conversation.



It's not really a lie though, is it? It's just a difference of opinion if what is meant by "the banks". If you view "the banks" as purely the sum of the shareholders, then yes, there was no bailout. But I'd guess most people think and mean otherwise.


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## WolfeTone (18 Dec 2020)

@NoRegretsCoyote 

1. I know
2. (i) The entire banking sector, its primary function of guaranteeing the safety of deposits was on the line.
    (ii) Who was peddling the payout on demutualisation? The depositors or people charged with guaranteeing the safety of the deposits?
 It is simply not practical to expect depositors to have the intricate knowledge and detail of the affairs of the bank and as such challenge in any meaningful way the decisions being taken by the bank management.


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## NoRegretsCoyote (18 Dec 2020)

WolfeTone said:


> It is simply not practical to expect depositors to have the intricate knowledge and detail of the affairs of the bank and as such challenge in any meaningful way the decisions being taken by the bank management.


Indeed, but INBS depositors knew that what they had was something a little more than a deposit that could in due course produce a windfall. Greater reward usually means greater risk.

The Regulator was of course 10x more responsible than the INBS depositors all put together.


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## Brendan Burgess (18 Dec 2020)

I heard a guy on BBC Radio 4 referring to the bail out of the banking system.  That is a much better description.

But a lot of politicians and commentators say stuff like "We bailed out the big banks and the developers, but we did nothing for the ordinary people" 

In fact, it was primarily the ordinary people who benefitted.   And other ordinary people such as mortgage holders and taxpayers who have picked up the tab.

Brendan


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## WolfeTone (18 Dec 2020)

Brendan Burgess said:


> I heard a guy on BBC Radio 4 referring to the bail out of the banking system. That is a much better description.



Ah! Brendan, you didn't have to go to BBC4 to get that description, it was already posted here on this thread



WolfeTone said:


> So perhaps the correct terminology is the "banking _institutions _needed a bail out"





I take the point about "...we did nothing for the ordinary people." But in fairness, to a lot of ordinary people whose jobs were lost or businesses that were closed, it would have felt that way.
Conversely, a lot of people and a lot of businesses were kept a float that would otherwise have gone under had the banking system been allowed to collapse.


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## PMU (18 Dec 2020)

Brendan Burgess said:


> The key question is "Who benefited?" And the answer is the depositors. Not the shareholders Not the borrowers Not the top executives or directors
> Anglo and INBS disappeared so they clearly did not benefit. Brendan


You are correct. Deposits in 2008 were 173 billion or 46% of the banks' liabilities; senior debt was 124 billion or 33% of liabilities.  So  depositors were the main direct beneficiaries.
But the government didn't act to save the depositors.  They acted to save the a banking system and also Irish society, because a modern economy requires banks.  But the banks themselves did not significantly benefit.  Two were liquidated.  Others were merged, about 2,500 jobs we lost.  The results of the 'bailout' were to reduce bank size and focus their activities on the domestic market. The remaining banks are going nowhere.  (Or are unlikely to go anywhere.)



WolfeTone said:


> The notion that depositors were bailed out is wrong. Deposits placed in banks are done so as a means of safe-keeping money. They are not loans, they are not investments, they are deposits - that is why they are called, deposits.
> The banks, traditionally, like to attract deposits by offering interest rates that in theory protects the purchasing power of the deposit. The bank _guarantees _safe keeping of these deposits. To reinforce that guarantee the State Central Bank in this country ran a deposit _guarantee_ scheme that guaranteed deposits up to €20,000 then increasing that to €100,000.


This is totally incorrect.  Retail depositors were the main direct beneficiaries.  The deposit guarantees schemes came from the EU, i.e. pursuant to directives 1994/19/EU and 2014/49/EU, not from any initiative of the Irish government.  Retail depositors benefited in the crisis as their deposits could not and were not separated from other liabilities covered by the government's blanket liabilities guarantee.


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## WolfeTone (18 Dec 2020)

PMU said:


> The deposit guarantees schemes came from the EU, i.e. pursuant to directives 1994/19/EU



Yes, and the very basis of such directives was to establish freedom of trade while increasing the stability of the banking sector and _protection for savers. _
Consideration to be given to the situation which might arise if deposits became unavailable that such deposit protection is as essential as the prudential rules for completion of the single banking market. In the event of closure of an insolvent credit institution the depositors must be protected. 

The State was legally obliged under EU law to protect depositors. In our scheme deposit guarantee scheme €20,000 then €100,000. 
Depositors were already protected, under EU law since 1994 as you point out. 

It is the basis of the banking system to provide guarantees to depositors. It is the way that such a system can only work. If depositors lost their money the entire concept of banking would be under threat. 
It was a bail-out of the banking system and its institutions.


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## galway_blow_in (18 Dec 2020)

Brendan Burgess said:


> No, the banks were not bailed out. And he is right to say it even if the public think it sounds stupid.
> 
> The main beneficiaries were the ordinary depositors, pensioners and credit unions.
> 
> ...



it was an incredibly naive statement from a political standpoint


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## jpd (18 Dec 2020)

Once again, our "elite" show how removed they are from the ordinary people. 

Is it any wonder Trump and Boris get elected using simplistic phrases and ideas - they strike a chord with the electorate, even though their ideas are completely off the wall and unworkable.


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## Jim2007 (18 Dec 2020)

WolfeTone said:


> The notion that depositors were bailed out is wrong. Deposits placed in banks are done so as a means of safe-keeping money. They are not loans, they are not investments, they are deposits - that is why they are called, deposits.



In Germany, Switzerland, Austria, Italy etc... depositors have all lost there deposits in the past when banks went to the wall.  So prior to the EU guarantee it was common.  So yes depositors were most certainly covered.


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## Conan (18 Dec 2020)

And in Cyprus, depositors were bailed-in (partially). Can you image RBB’s reaction if that happened here because the Government did not “bail out the banks”?


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## WolfeTone (18 Dec 2020)

Conan said:


> And in Cyprus, depositors were bailed-in (partially). Can you image RBB’s reaction if that happened here because the Government did not “bail out the banks”?



The bail-in involved a % of amounts greater than €100,000.
Amounts of €100,000 or less were protected.


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## NoRegretsCoyote (19 Dec 2020)

Conan said:


> And in Cyprus, depositors were bailed-in (partially).


In Cyprus they bailed in large, mainly foreign, depositors.

But they were obliged to give equity stakes to bailed-in depositors as a result.

On the same lines we could have kept Anglo and INBS going, but it would've involved thousands of depositors becoming equity holders, and the same management and business model in place.

There were no easy policy choices.


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## Duke of Marmalade (12 Jan 2021)

Spotting this one late in the day.
It is true that MM made a political gaffe.  But RBB's comparison of the treatment of the Debenham workers with the bail-out of the banks was way out of line, albeit that's what we expect from him.
RBB was painting an image of Bank Fat Cats and Bondholders getting preferential treatment.
The motivation for the "bank bailout" was to save this country from complete financial and consequential societal meltdown (I am not opening the debate as to whether it was necessary, just pointing out the motivation).
It isn't quite so populist to describe what happened in those terms.


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## Purple (12 Jan 2021)

Duke of Marmalade said:


> Spotting this one late in the day.
> It is true that MM made a political gaffe.  But RBB's comparison of the treatment of the Debenham workers with the bail-out of the banks was way out of line, albeit that's what we expect from him.
> RBB was painting an image of Bank Fat Cats and Bondholders getting preferential treatment.
> The motivation for the "bank bailout" was to save this country from complete financial and consequential societal meltdown (I am not opening the debate as to whether it was necessary, just pointing out the motivation).
> It isn't quite so populist to describe what happened in those terms.


The populists left never let the facts get in the way of a good emotive story.


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## WolfeTone (12 Jan 2021)

Purple said:


> The populists left never let the facts get in the way of a good emotive story.



What are the facts? 

As far as I understand it, the Debenhams workers are vying for fair and reasonable redundancy package that, to all intents and purposes, given Debenhams remaining capital stock, could be on the cards. Basically, they want a representative seat at the table when the remaining assets are divided up and sold off. 
I cannot see but anything reasonable in their demands. 
Instead, as far as I understand it, they are excluded from the negotiation of asset sales and expected to accept the bare minimum, or the crumbs from the top table.


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## Purple (12 Jan 2021)

WolfeTone said:


> What are the facts?
> 
> As far as I understand it, the Debenhams workers are vying for fair and reasonable redundancy package that, to all intents and purposes, given Debenhams remaining capital stock, could be on the cards. Basically, they want a representative seat at the table when the remaining assets are divided up and sold off.
> I cannot see but anything reasonable in their demands.
> Instead, as far as I understand it, they are excluded from the negotiation of asset sales and expected to accept the bare minimum, or the crumbs from the top table.


I was talking about the Bank recapitalisation. I agree that the Debenhams employees have been treated badly.


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