# Morgan Kelly on Bank Robbers



## Carramore

Morgan Kelly's Opinion piece in today's IT would make your hair stand on end.  I was probably most frightened by the possibility he raised of employees looting a bank's assets by bringing personal guarantees home in their briefcases and negotiating their return to the borrowers, who presumably would be prepared to pay quite a few shekels to be rid of those nasty PG's.  Can any of our banking contributors allay my fears by assuring me that this form of bank robbery is impossible?


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## Brendan Burgess

I must say that it was a terrible piece of writing. 

He suggested that the government would be better off burning €1.5billion instead of putting it into Anglo Irish Bank.

And when someone makes a comment like that, it destroys their credibility. 

Nothing else in the article has any validity after a comment like that. 

I am surprised that the Irish Times published it.

Brendan


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## Sunny

I didn't read it but sounds like usual Morgan Kelly tripe. Is he really suggesting that all it takes is an employee to steal a bit of paper and personal guarantees on loans could be gotten rid of? Absurd


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## jpd

I thought he had a good point - as I understood him, putting € 1.5 billion into Anglo is just delaying the inevitable and prolonging the agony. Better to bite the bullet and accept the medicine as it will have to be taken in the end. 

He is one of the few economists who has correctly read the last few years, IMHO.

A lot of money has already been taken by the senior management  - in bonuses, loans. How much chance is there of Fitzpatrick's € 87 million being repaid ?


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## Towger

I can't find this story online. Have they pulled it?


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## rmelly

jpd said:


> A lot of money has already been taken by the senior management - in bonuses, loans. How much chance is there of Fitzpatrick's € 87 million being repaid ?


 
Sources close to Fitzpatrick have said he will have no problem repaying the loans in full.


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## Mpsox

Carramore said:


> Morgan Kelly's Opinion piece in today's IT would make your hair stand on end. I was probably most frightened by the possibility he raised of employees looting a bank's assets by bringing personal guarantees home in their briefcases and negotiating their return to the borrowers, who presumably would be prepared to pay quite a few shekels to be rid of those nasty PG's. Can any of our banking contributors allay my fears by assuring me that this form of bank robbery is impossible?


 
I would imagine that this would be a fraudulent act.  I'm no lawyer but if a court felt the customer was out to commit fraud be renegotiating the PG or if they felt that the customer should have known(reasonable person test) that this was a fraudulent act, then a court would rule in favour of the bank


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## Padraigb

rmelly said:


> Sources close to Fitzpatrick have said he will have no problem repaying the loans in full.



As, apparently, he has already done several times!


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## extopia

Towger said:


> I can't find this story online. Have they pulled it?



No.

[broken link removed]


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## webtax

Brendan said:


> He suggested that the government would be better off burning €1.5billion instead of putting it into Anglo Irish Bank.



I think that is a fair comment, as once the government starts pumping billions into Anglo it will be hard for them to admit they made a terrible mistake and they will throw more & more money at the problem. 

The €1.5bn will disappear down the drain in no time, but at least if it was burnt instead Anglo would no longer exist. Better to call a halt and start running the banks loan book down right now. Yes, we will take a hit with the guarantee but better not to squander even more scarce resources keeping a worthless bank on life support.


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## Brendan Burgess

Surely the €1.5 billion gets added to the assets of Anglo Irish and reduces the government's exposure under the guarantee? 

If the money was not put in, Anglo would probably become insolvent and the government is obliged to put it in anyway.

Brendan


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## GeneralZod

Giving the Government the benefit of the doubt maybe they want to keep Anglo's loan book alive for another two years until the state guarantee runs out in the hope that the world and Irish economy will be recovering by then. 

If that doesn't happen they could let the guarantee expire for Anglo to avoid paying out the remaining €13.5 billion guessed by Morgan Kelly as the potential final liability.


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## bankrupt

Brendan said:


> I must say that it was a terrible piece of writing.
> 
> He suggested that the government would be better off burning €1.5billion instead of putting it into Anglo Irish Bank.
> 
> And when someone makes a comment like that, it destroys their credibility.
> 
> Nothing else in the article has any validity after a comment like that.



What he actually wrote was "For all it will achieve, the money might as well be piled up in St. Stephen's Green and incinerated."  An over-enthusiastic sub-editor obviously provided the headline.  He never suggests that burning the money would be a better option, I don't think that his argument is weakened in any way by his supposition that the government is effectively "incinerating" our money.


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## Brendan Burgess

Does "incinerated" not mean burned? 

He suggested that there is no point in putting money into Anglo which is nonsense.


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## bankrupt

Brendan said:


> Does "incinerated" not mean burned?
> 
> He suggested that there is no point in putting money into Anglo which is nonsense.


 
I'm not clear on why you think that Anglo will not require yet more and more cash injections and may not eventually default on a much larger sum as Kelly suggests?


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## Brendan Burgess

You and Morgan miss the point completely. 

The government has given a commitment to meet the liabilities of Anglo. 

It does not matter if these liabilities are €3B or €20B - the government has to meet them.

The €1.5b is a downpayment. If you are committed to buying a new house for €200,000 which is bad value, you are still better paying the deposit than burning it. 

Brendan


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## tyoung

So why didn't they just buy Anglo outright and assume all the assets/liabilities?
No one knows what the losses will be but if they are spectacular as Kelly predicts, it may be politically and indeed financially impossible for the government to foot the bill. The current set up allows the government to withdraw and allow the bank to fail if the losses become extreme.


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## bankrupt

Brendan said:


> You and Morgan miss the point completely.
> 
> The government has given a commitment to meet the liabilities of Anglo.
> 
> It does not matter if these liabilities are €3B or €20B - the government has to meet them.
> 
> The €1.5b is a downpayment. If you are committed to buying a new house for €200,000 which is bad value, you are still better paying the deposit than burning it.



So, the Government has already agreed to throw good money after bad, and cannot row back on that decision, no matter what?  

Kelly never suggested that burning money was an option.


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## jhegarty

bankrupt said:


> So, the Government has already agreed to throw good money after bad, and cannot row back on that decision, no matter what?  .



Well yes, that's about it.


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## PatriciaFox

I agree with the article, although the headline is a bit sensational.

When a share in a bank is trading for less than the cost of a plastic shopping bag, something is seriously wrong.

However the Government will continue to prop them up, if they don't their blanket guarantee means nothing and panic could ensue.


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## Brendan Burgess

While I accept that he did not write the headline, this is the actual quotation taken from the article. As you see the headline reflects it accurately:



> With likely losses of this magnitude, the Government's proposed investment of €1.5 billion will vaporise in months, forcing it either to continue pouring good money after bad, or to repudiate Anglo Irish's liabilities. For all it will achieve, the money might as well be piled up in St Stephen's Green and incinerated.



The government cannot repudiate Anglo's liabilities. It's liabilities are its deposits and interbank loans which we have guaranteed. 

It is nonsense to write:

"the money might as well be ...incinerated"

As far as I am concerned, there is no point in listening to any arguments from someone who writes such rubbish.


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## smiley

Brendan said:


> I must say that it was a terrible piece of writing.
> I am surprised that the Irish Times published it.
> Brendan



I couldnt agree more. This is the sort of dribble that you would expect to see in the tabloid press---daily mirror, the star etc. I think Morgan is looking for his moment of fame. It must get kind of lonely been locked up in UCD.


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## dewdrop

as  a retired and obviously naive bank official will someone explain to me what mr. kelly means when he speaks ab out Senior Managers looting the assets which find their way into their brief cases etc.


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## Carramore

dewdrop said:


> as a retired and obviously naive bank official will someone explain to me what mr. kelly means when he speaks ab out Senior Managers looting the assets which find their way into their brief cases etc.


 Thank you dewdrop.  That was my original question when I started this particular thread and no-one as yet has attempted to answer it.  

In fairness to Morgan Kelly, over a year ago he predicted much of what is now being played out.  At the time, I and most others thought that he was talking a load of rubbish.  Therefore, I'm not that inclined to dismiss his views now.


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## Slash

Whatever about the merits or otherwise of Mr. Kelly's suggestions, the most important sentence in the article is this:

"Anglo Irish funds developers, and developers fund Fianna Fáil."

This is what is driving the Government's decision making and it's about time someone said it. The Govt needs to start making decisions based on what is good for this country, not what is good for FF. It will make no difference, I guess, since this Govt has become so arrogant.


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## bankrupt

Brendan said:


> The government cannot repudiate Anglo's liabilities. It's liabilities are its deposits and interbank loans which we have guaranteed.
> 
> It is nonsense to write:
> 
> "the money might as well be ...incinerated"
> 
> As far as I am concerned, there is no point in listening to any arguments from someone who writes such rubbish.



I accept that it may not be possible to avoid it but is it really nonsense to suggest that this money will be wasted on Anglo?  Presumably you think otherwise?  Can you explain why?


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## conor_mc

Brendan said:


> While I accept that he did not write the headline, this is the actual quotation taken from the article. As you see the headline reflects it accurately:
> 
> 
> 
> The government cannot repudiate Anglo's liabilities. It's liabilities are its deposits and interbank loans which we have guaranteed.
> 
> It is nonsense to write:
> 
> "the money might as well be ...incinerated"
> 
> As far as I am concerned, there is no point in listening to any arguments from someone who writes such rubbish.


 
Giving them this money now allows them to continue as a bank and to continue to contribute further to the liabilities of the guarantee.

Better to wind them down in an orderly fashion starting immediately. That's the point of the "incineration" comment. Give them €1.5bn now and you effectively add €1.5bn-plus in terms of the eventual overall liability to the guarantee as it only allows Anglo to continue their policy of rolling up interest on non-performing loans.

The incineration comment is perfectly valid in this context. This bank should not be permitted to continue trading with it's reckless history.


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## charliemacck

I for one admire the chutzpah of those who were completely and catastrophically wrong about the property bubble airily dismissing the view of someone who has been proven right about it. I only wish I had testicles of such magnitude.


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## Simeon

Why do people believe something because it is in the IT? Most contempory banking stories should be taken 'cum granis'. Nobody has a clear idea of how things will pan out. This article (like any others) deserves to be analysed - even if it is a work of fiction (or faction). Believing that Goldenballs will be able to pay back the E87m is also an interesting aside ......... which makes me think that bankers are not the only ones living in a parallel universe. The idea of most banks being able to withstand a severe run is just a conceptual system. (All the above IMHO!)


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## Brendan Burgess

I have said it repeatedly on Askaboutmoney that the right strategy is to run down Anglo Irish Bank. It is not of systemic importance unless it is believed that it's demise would damage AIB and Bank of Ireland. 

I assume that the government is actually going to run down Anglo. 

But let's say that the government is not going to run down Anglo. That it will allow it lend again to new clients. Presumably it will not be new loans to new property developers. It is more likely to be some form of lending which takes the pressure off existing loans. 

This might not be a great use of €1.5 billion - but it's a far better use than burning it in St Stephen's Green. 

The fact that someone claimed that there would be a property crash does not mean that they are infallible. I agree that someone who gave a well argued analysis and prediction should be given more weight than someone who predicted that the boom would last forever. But if someone claims that it is better to incinerate cash in St Stephen's Green, then I am not going to read the article any further.

Brendan


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## Robin Banks

It's a total waste of money, but hopefully that €1.5 billion will be enough to see Anglo through the next 20 months when the government guarantee runs out. At that stage Anglo can go bust and private bondholders (like Mr S Fitzpatrick) and shareholders can wear it instead of the Irish taxpayer. 

I would support extending the government guarantee for depositors only.


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## Carramore

I'm loath to disagree with Brendan, but I think he's wrong in his assumptions about the €1.5 billion of government money being ploughed into Anglo.  One alternative was to leave the bank stew, to let it burn through shareholers' funds (which the balance sheet says amount to over €4 billion but which we all know are zero - or probably less - after we allow for the true incidence of bad loans), then to let it burn through the €4.9 billion of subordinated loans, which I understand are NOT covered by the government's guarantee scheme, and only then would the government have to put money in.  In this scenario, the government would have the consolation of having the shareholders and subordinated note/ bond holders taking the pain first, before it got caught on the hook.  As it is, it gives some protection to those holders of subordinated debt, which is completely unnecessary and a stupid waste of taxpayers' money. If the bank were by any change to survive untill after the expiry of the guarantee period, it could then let the holders of debt securities (over €17 billion of them) go down before putting any depositors at risk.  I realise that it might prove difficult in practice to let the latter group in particular be hit, but I can't see why we as taxpayers should come after them in the pecking order.


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## Simeon

I'm sure the 'incinerate bit on St Stephen's Green' was purely metaphorical. But if not, then he should have included "after first removing any plastic folders etc", so as not to excite the PC brigade.


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## Padraigb

Robin Banks said:


> It's a total waste of money, but hopefully that €1.5 billion will be enough to see Anglo through the next 20 months when the government guarantee runs out. At that stage Anglo can go bust and private bondholders (like Mr S Fitzpatrick) and shareholders can wear it instead of the Irish taxpayer.
> 
> I would support extending the government guarantee for depositors only.



The market has already judged that shareholders' funds are worth nothing. The action now is the protection of depositors' interests, which amount to tens of billions of euros. Let the bank collapse, and those funds will be in some jeopardy, and the knock-on effect would be very big.

The only things that are not fully obvious are 
- how much jeopardy depositors' funds are exposed to;
- what other institutions would be damaged by a collapse, and how severe the damage would be.


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## Brendan Burgess

Carramore said


> I'm loath to disagree with Brendan


Why?  I have no monopoly on the correct answers or opinions. Few others seem to be loath to disagree with me. 

Your post makes a huge amount of sense. 

I am trying to sort out the fact from the opinion in this thread 

Brendan


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## webtax

GeneralZod said:


> Giving the Government the benefit of the doubt maybe they want to keep Anglo's loan book alive for another two years until the state guarantee runs out in the hope that the world and Irish economy will be recovering by then.
> 
> If that doesn't happen they could let the guarantee expire for Anglo to avoid paying out the remaining €13.5 billion guessed by Morgan Kelly as the potential final liability.



It would be great if this were true, but I fear the reason that the govt don't want to foreclose on Anglo is because of the knock-on effect for the golden circle. If Developer A is forced into liquidation by an examiner appointed to Anglo, then all his assets will be sold off (at a loss) and the other banks who have also lent to him will be scrambling to recover some of their money. The other banks will then be forced to recognise their crystalised losses in their books, and the true reality of the damage to the banks' loan books will become clearer to the markets, pressuring them to liquidate other developers. I think this is what Lenihan means when he says Anglo is of systemic importance.

Anglo might become the new Waterford Wedgewood - continuously looking for more money to cover it's losses as it share price dwindles down to near zero. Except this time the government will be the owner...


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## Brendan Burgess

More sensational stuff from Morgan Kelly in yesterday's Irish Times:

[broken link removed]

Apparently we are going to be demolishing houses now instead of building them.

But I suppose it gets headlines.


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## Bronte

They demolish property in the US and rebuild continuously as far as I know. I believe a lot of the apartments built in the last 10 years are likely to be demolished and rebuilt. They were not built large enough for families and the future will be to demolish these and build with more thought as to storage, space and amenities. Maybe that sounds crazy but I believe it will happen. Also what is going to happen with the many estates that are semi finished. Eventually something will have to be done to them and probably the local councils will end up razing them to the ground. Why not it makes sense rather than letting people live on building sites for the next 20 years. Going back to the original query about the fact that a bank staffer could remove a piece of paper (personal guarantee), well if they have access to it and a developer offered 100k for it, mighty tempting in these difficult times for someone on 30k about to be made redundant. Also the latest article by Morgan wherein he says that property will drop 80%, why not, I've a property that went up 800% in the last 10 years or so , if I (or anyone) told someone 10 years ago that my property would go up 800% they would have been sectioned. So who's crazy.


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## shanegl

It wasn't so long ago that it was sensational to claim there would be a housing crash and a recession (as Kelly has been claiming for quite a while).
Now we have a housing crash and our Taoiseach talking about the IMF bailing us out.


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## webtax

Brendan said:


> More sensational stuff from Morgan Kelly in yesterday's Irish Times:



It's hard to argue with the susbtance of his article though:
_"Mr Kelly said Ireland’s “reputational capital” had been damaged by “chancers” such as ex-Anglo Irish Bank chairman Seán FitzPatrick, who had been abetted by “buffoons” such as former financial regulator Patrick Neary, Minister for Finance Brian Lenihan and the Taoiseach."
_How much harder will IDA's job be in trying to attract investment here when we are starting to look like a bankrupt banana republic?

_The global financial crisis may have been positive for the Irish economy as it “stopped us dragging ourselves even deeper into our hole,” he said. “If it had taken another year or two, we would have ended up in an Icelandic-shaped hole, which is not to say that we won’t end up in one.”_
And to think some in government & the media were calling for stamp duty cuts which would have led to an even bigger bubble busting. The only positive is that we are in the Eurozone, which has saved us from becoming the new Iceland.


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## foghorn

Brendan said:


> More sensational stuff from Morgan Kelly in yesterday's Irish Times:
> 
> [broken link removed]
> 
> Apparently we are going to be demolishing houses now instead of building them.
> 
> But I suppose it gets headlines.


 
Wouldn't you agree that on the housing bubble, he's been more right than you so far?


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## Raskolnikov

Brendan said:


> More sensational stuff from Morgan Kelly in yesterday's Irish Times:
> 
> [broken link removed]
> 
> Apparently we are going to be demolishing houses now instead of building them.
> 
> But I suppose it gets headlines.


There is an oversupply of property in some counties that may never be filled. Leitrim, for example, has 30% of the housing stock lying empty ([broken link removed]). 

Who is going to live in all these empty houses? Is it really so unrealistic to think that we could see some housing stock demolished?


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## z109

Look at all the houses in the countryside that are demolished every year as the site is more valuable than the house on it. Will it get to the stage that the agricultural land under rural housing estates is worth knocking the houses to access? I hope not. Will it get to the stage that the unsold houses are outdated (in insulation and heating terms) and that it would be cheaper to knock than retro-fit them? I don't see why not.

Unless there is a mass exodus to live in and estate rural Ireland, who is going to live in these houses?

Don't believe there are ghost estates? Have look here:
http://ghostestates.com/main.php?g2_view=map.ShowMap


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## charliemacck

Morgan Kelly predicted that Irish banks would require nationalisation back in March, something that Jim Power said was "ridiculous". So, yet another Kelly has been proven right about.


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## canicemcavoy

If only it was 1.5billion as Brendan suggested:


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## canicemcavoy

Brendan said:


> More sensational stuff from Morgan Kelly in yesterday's Irish Times:
> 
> [broken link removed]
> 
> Apparently we are going to be demolishing houses now instead of building them.
> 
> But I suppose it gets headlines.


 
*cough*

http://www.independent.ie/business/...pments-that-will-never-be-viable-2100082.html


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## Tyrone Laces

I visited a few of these ghost estates recently around Cork - scary places - like something from "Sean of the Dead".

perhaps OT - why are most of the posters on this thread "banned"? Did they upset someone? Morgan Kelly has been right, right and right again - simples!


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## ajapale

People are banned for persistent breaches of the Posting Guidelines. The  posts for which they are banned are deleted. The above posts do not  breach the Posting Guidelines.


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## sunrock

This idea of demolishing ghost estates ,I am totally against.
It seems to have more to do with reducing the housing stock and increasing the price of the remaining houses than anything else.
Take a ghost estate beside some village in rural ireland.Lets presume that the government throiugh  NAMA is now the owner of this ghost estate.
Agricultural land is now worth less than 10,000euros an acre so even if a house took up a single acre ,after demolition the agricultural value is less than 10k.
I am sure these houses could be sold as holiday homes for more money and it would be a great benefit/amenity to the family purchasing and also to the local community.
Of course there would have to be strict rules like only one holiday home per family already working/living in the country etc.The price would have to be very reasonable...definetly less than 50k.
Also the people on housing lists should be accomadated as well as encouragement for our poorer emigrants who were "persuaded" to leave in earlier generations to avail of cheap housing.
However I am not hopeful as it seems the only thing on the minds of the gov/bankers/developers  is how to get house prices high again.They are muddling thru`at the moment in a "suspended animation trance" until the world economy or something happens to lift all boats and increase house prices again.
My advise to them is not to wait for that solution but to effect an orderly disposal of the housing units that come into the governments hands.


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## gaius

sunrock said:


> I am sure these houses could be sold as holiday homes for more money and it would be a great benefit/amenity to the family purchasing and also to the local community.



Have you seen where some of these estates are? Nobody wants to "holiday" in a concrete jungle 10 miles outside Cavan town. The abandoned ghost estates will quickly become derelict and a magnet for anti-social behaviour as well as eyesores.



> Of course there would have to be strict rules like only one holiday home per family already working/living in the country etc.The price would have to be very reasonable...definetly less than 50k.


We got here thanks to market interference. The solution is not more market manipulation & price fixing.



> Also the people on housing lists should be accomadated as well as encouragement for our poorer emigrants who were "persuaded" to leave in earlier generations to avail of cheap housing.


Move people with no jobs and low prospects to areas where they have zero prospects?
Encouraging people to emigrate? Are you Brian Lenihan Snr?


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## Towger

From Joe Brennan in todays Indo : http://www.independent.ie/business/...osses-expected-to-reach-836414bn-2102830.html



> Bad loan losses at Anglo Irish Bank are now set to come in around the *€14bn* level, as the nationalised bank and its auditors fine-tune figures ahead of publication next week.


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## sunrock

gaius said:


> Have you seen where some of these estates are? Nobody wants to "holiday" in a concrete jungle 10 miles outside Cavan town. The abandoned ghost estates will quickly become derelict and a magnet for anti-social behaviour as well as eyesores.
> 
> We got here thanks to market interference. The solution is not more market manipulation & price fixing.
> 
> Move people with no jobs and low prospects to areas where they have zero prospects?
> Encouraging people to emigrate? Are you Brian Lenihan Snr?


 

Many of these "ghost estates" are located near scenic rural towns and villages etc and imo would appeal to people living in build up areas in cities and big towns.
Far from my suggestion of selling them for less than 50k being market interference,I think it is all these houses are worth in a real supply and demand situation. Of course there has to be rules , otherwise one person could buy up 100 houses.
As i said these houses in the ghost estates in rural ireland could be irish holiday homes for families living in dublin for example.They are not going to work in leitrim.
And whats wrong with offering one of these houses to a returning emigrant who now want to live out their days in Ireland?
The estates I am referring to are nice low density estates that are located in scenic rural areas..not concrete jungle type high density developement. 
Maybe it was a mistake to build these estates, but the fact is these houses have now been build and imo are worth more than the agricultural value of the land there are build on.These houses should be used for the benefit of the irish people who are paying tax to fund NAMA etc
The choice is not between bulldosing them or else charging exorbitant prices for them or even hanging onto them until things pick up in 10 years or whenever. 
Many irish people have holiday homes in the west of ireland that lie empty for most of the year and there is no problem with antisocial behaviour etc as crime is low and anti social behavior is very low.


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## TheRed

I agree with Sunrock. 

These houses have been constructed now. It does not make sense to knock them down, environmentally or in any other way. They will be sold if they are priced correctly. Lots of people would be willing to purchase houses in Leitrim or Longford as holiday homes if the price was right, the landscape may not be as dramatic as the west coast but it is nevertheless attractive. The hippy scene up in Leitrim of artists, playwrights etc started off in the 80s because house prices were very low compared to the rest of the country.

The are only a small number of cases where it would make sense to demolish, such as partically completed units that have been exposed to the elements over a significant period of time and are deteriorating.

As for the small size of the units, people don't seem to realise that housing isn't just for families. If the costs of property transactions became more reasonable we would have a lot more trading up and down, from flats to houses to flats. There may be a deficit of large family homes with decent gardens, but knocking down smaller units will not solve this.


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## agentino

Silence from Brendan is deafening. I suppouse he did have his TV appearance tonight to worry about.

Apology to Morgan Kelly due I feel. If some of the numpties in this Country started taking what he and the likes of David McWilliams say seriously then we might be able to begin putting some semblance of reality back into all our lives


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## Bronte

I don't know what planet some of you are on.  If I was given a free house in Leitrim, Cavan etc I wouldn't want it, if I could buy 100 of them for 5 Euro each I wouldn't want them, who would want them, that's the point.  You can't rent them, you don't want to holiday there, they are worthless so they may as well go back to agricultural land.  We are talking about houses in the middle of nowhere with no amenities, no reason to go to, no rental market, half finished unsightly estates.


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## Brendan Burgess

The issue of buring €1.5 billion has been discussed at length earlier in  this thread. My main point was that such comments damage the  credibility of the person making the comments. 

"IRELAND WILL see more demolition than  construction of houses over the  next decade..." The full article is no longer available online.

The discussion on Askaboutmoney after the above article was   interesting. 

 Bronte:


> They demolish property in the US and rebuild continuously as   far as I  know. I believe a lot of the apartments built in the last 10  years are  likely to be demolished and rebuilt. They were not built  large enough  for families and the future will be to demolish these and  build with  more thought as to storage, space and amenities. Maybe that  sounds crazy  but I believe it will happen.Also what is going to happen  with the many  estates that are semi  finished. Eventually something  will have to be done to them and probably  the local councils will end  up razing them to the ground.


 Yoganmayhew



> Look at all the houses in the countryside that are demolished   every year  as the site is more valuable than the house on it. Will it  get to the  stage that the agricultural land under rural housing estates  is worth  knocking the houses to access? I hope not. Will it get to the  stage that  the unsold houses are outdated (in insulation and heating  terms) and  that it would be cheaper to knock than retro-fit them? I  don't see why  not.


 Raskolnikov made the same point.

 Bronte, Yog and Raskolnikov make very valid points in moderate   language. I will pay much more attention to them than to someone who   appears to be sensationalist just for the sake of it. 

Morgan Kelly may well be right that we will demolish more houses than we  will build over the next decade. We won't know for ten years. 

There are ghost estates which will have to be demolished or abandoned. 

Will there be more houses demolished than built? I don't know the answer  to that. I have been through different booms and busts.  When things  are very gloomy, we feel that we will never recover. 

I am sure that we will recover. I have no idea how long it will take. 2  years? 5 years? 20 years? I do think that there is some risk this time, that the state could become insolvent, if the government does not keep its resolve to cut public expenditure.

In this thread, I have dealt with the issue of guys like  Kelly and McWilliams having interesting things to say but losing  credibility because of the language they use. And as I said in that thread, I am trying to overcome my reluctance to listen to them.


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## Bronte

Brendan said:


> In this thread, I have dealt with the issue of guys like Kelly and McWilliams having interesting things to say but losing credibility because of the language they use.


 
I don't get this point.  What difference does the language make if the point is correct?


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## sunrock

Bronte said:


> I don't know what planet some of you are on. If I was given a free house in Leitrim, Cavan etc I wouldn't want it, if I could buy 100 of them for 5 Euro each I wouldn't want them, who would want them, that's the point. You can't rent them, you don't want to holiday there, they are worthless so they may as well go back to agricultural land. We are talking about houses in the middle of nowhere with no amenities, no reason to go to, no rental market, half finished unsightly estates.


 

They are not worthless and they are worth more than the land they are built on . To say othwise is just silly talk.These houses are no doubt going into Nama at 200k each or whatever. Essentially these houses are now owned by the taxpayer as the government will own them. 
I say let families in dublin etc buy them for a discount..maybe 30k or 20 k or even5k . The agricultural land the houses were built on will be worth less plus the cost of demolition etc.
Of course the developers would love to demolish all the unsold houses , create a shortage and have another building boom, but thats no good for the taxpayer.


----------



## canicemcavoy

Bronte said:


> I don't get this point. What difference does the language make if the point is correct?


 
I must admit I don't understand why Brendan often makes this point either. Many many bulls talked ridiculous nonsense that was both off the top and factually incorrect, yet this is never used as a reason not to be bullish on property.

Bearish commentators were in the position of a person sitting in a room filled with smoke attempting to warn of a fire, while 19 other people comment that everything is fine. If they used strong language, there was good reason for it.


----------



## RIAD_BSC

canicemcavoy said:


> I must admit I don't understand why Brendan often makes this point either. Many many bulls talked ridiculous nonsense that was both off the top and factually incorrect, yet this is never used as a reason not to be bullish on property.
> 
> Bearish commentators were in the position of a person sitting in a room filled with smoke attempting to warn of a fire, while 19 other people comment that everything is fine. If they used strong language, there was good reason for it.


 
+1

I don't understand Brendan's point either.


----------



## Brendan Burgess

canicemcavoy said:


> Many many bulls talked ridiculous nonsense  that was both off the top and factually incorrect, yet this is never  used as a reason not to be bullish on property.



Bronte


> I don't get this point.  What difference does the language make  if the  point is correct?


I pay little or no attention  to anyone who speaks or writes in a sensationalist manner. It doesn't  matter what they are saying. Whether they are bullish or bearish.  Whether they are suggesting building houses or knocking down houses.  Whether they are supporting  socialism or supporting capitalism. 

This thread started with Morgan Kelly making a suggestion that burning  €1.5 billion was as good as paying of the government's debts with it.  That was patent nonsense. Maybe it was just a mistake on his part, that  he had not realised that we had committed to paying the debts of Anglo. 

And this is a real problem.  If people have well constructed arguments,  they should be listened to. But I am put off by sensationalism and I  suspect many others are as well.


----------



## agentino

That is a fair Point Brendan but so is Canice's. 
You have no chance of getting a hearing in today's climate without being sensationalist.

Unfortunately that is the world we live in.

The analogy of setting fire to 1.5Billion is a good one I feel. Realistic or not that is what it feels like to most of us


----------



## Brendan Burgess

agentino said:


> The analogy of setting fire to 1.5 Billion is a good one I feel. Realistic or not that is what it feels like to most of us



But agentino

That is why it is so unhelpful. The masses are pleased because they can understand that burning money is wasting money. They like the analogy. It's very visual. They like the argument. The guy making the argument is popular. 

It's more difficult to explain and understand the arguments behind it.
We guaranteed the depositors' money in Anglo and all the other banks. This stops the pensionsers from losing all their savings. 
We subsequently nationalised Anglo and so we have given an undertaking to meet all the liabilities of Anglo. 
Paying in €1.5 billion is just part of that commitment. 

When Lehman Brothers had collapsed and the opposition were calling on the Government to increase the €20,000 limit on the deposit guarantee scheme, it would have been a good time to make this argument. But to argue it in sensationalist language afterwards, is unhelpful.

I argued at the time that the €20,000 limit should not be increased and that insolvent banks should be allowed to fail and their depositors would lose their deposits. I was thinking at the time of Anglo and Irish Nationwide. I did not appreciate that the systematically important banks were also in serious trouble.


----------



## Brendan Burgess

An interesting profile of Morgan Kelly in today's [broken link removed]

They list his quotes, but not the one about burning €1.5bn in St Stephen's Green.

Brendan


----------



## gaius

Brendan said:


> An interesting profile of Morgan Kelly in today's [broken link removed]
> 
> They list his quotes, but not the one about burning €1.5bn in St Stephen's Green.
> 
> Brendan


 Because you're the only one bothered by that comment?
Besides "corpulent tooth fairy" is much more soundbite friendly.


----------



## elcato

The only relevant quote afaics is the last in 2006. The others are within a year and are based over the next ten so have not been proved either way just yet.


----------



## crabbybear

Brendan said:


> An interesting profile of Morgan Kelly in today's [broken link removed]
> 
> They list his quotes, but not the one about burning €1.5bn in St Stephen's Green.
> 
> Brendan


 
What's it now 15 bn._ Anbody think we'll still have a soft landing?_


----------



## canicemcavoy

Banging on about a single quote of Kelly's seems rather petty at this stage, especially when the quote itself isn't correct (over the top, maybe, but not incorrect).

The NAMA CEO admitted today that they are going to consider demolishing unfinished developments; another thing that Kelly predicted and which was scoffed at.


----------



## shanegl

Well said Canice. Kelly's record stands up to far more scrutiny than that of most other public commentators.


----------



## kaplan

Interesting discussion here on Morgan Kelly (also includes references to David McWilliams as well). http://www.irisheconomy.ie/index.php/2010/04/13/profile-of-morgan-kelly/#comments

Maybe Brendan Burgess will rethink his critique and consider the true cost of the Anglo bill which will be many multiples of the €1.5bn already burned. 


Kaplan


----------



## Kemo_Sabe

I suspect if we were to look _objectively_ at people's analysis over the last 4 years or so and fact-check it for accuracy and perception, Prof Kelly would be No 1 on the list of commentators. Honourable mentions would go to David MacWilliams, Alan Aherne, Constantin Gurgdiev, Brian Lucey

The spoofers who insisted that Irish banks were well-capitalised and well-regulated, that the fundamentals of the economy were sound, and who roundly criticised Prof Kelly and his ilk were proved horribly incorrect.


----------



## Kemo_Sabe

Brendan said:


> More sensational stuff from Morgan Kelly in yesterday's Irish Times:
> 
> [broken link removed]
> 
> Apparently we are going to be demolishing houses now instead of building them.
> 
> But I suppose it gets headlines.


 
just to make my point:

the NAMA boss yesterday said that it was very likely that NAMA would demolish ghost estates. Story here.

any comment?


----------



## Sunny

Kemo_Sabe said:


> I suspect if we were to look _objectively_ at people's analysis over the last 4 years or so and fact-check it for accuracy and perception, Prof Kelly would be No 1 on the list of commentators. Honourable mentions would go to David MacWilliams, Alan Aherne, Constantin Gurgdiev, Brian Lucey
> 
> The spoofers who insisted that Irish banks were well-capitalised and well-regulated, that the fundamentals of the economy were sound, and who roundly criticised Prof Kelly and his ilk were proved horribly incorrect.


 
Really?

[broken link removed]


I am sure I could track down stories from the others if I had the time.

I also hate this 'I told you so attitude' and think it is pointless. Morgan Kelly might have been right about the property bubble. He could be completly wrong about NAMA and Anglo. Who knows. 
I know a fund manager who called the tech bubble correctly but was actually advising people to buy Lehman Brother shares a week before they collapsed.


----------



## Kemo_Sabe

Sunny said:


> Really?
> 
> [broken link removed]
> 
> I am sure I could track down stories from the others if I had the time.
> 
> I also hate this 'I told you so attitude' and think it is pointless. Morgan Kelly might have been right about the property bubble. He could be completly wrong about NAMA and Anglo. Who knows.
> I know a fund manager who called the tech bubble correctly but was actually advising people to buy Lehman Brother shares a week before they collapsed.


 
interesting that you link to an article where Lucey - shock, horror - admits he was wrong about something. Some other people could do with a dose of the same humility.

It's hardly 'pointless' to credit people for correct analysis and to discredit people for incorrect analysis - which group would you rather take advice from?


----------



## Sunny

Kemo_Sabe said:


> interesting that you link to an article where Lucey - shock, horror - admits he was wrong about something. Some other people could do with a dose of the same humility.
> 
> It's hardly 'pointless' to credit people for correct analysis and to discredit people for incorrect analysis - which group would you rather take advice from?


 
Not the only thing he has been wrong about if you have been reading him recently. Also, I can live with him or anyone else being wrong and making honest mistakes. However considering he said all that in a report for a sub prime lender, you would have to question his objectivity. 

I already said in another thread that Morgan Kelly and McWilliams deserves credit for calling it right but doesn't mean I am going to start worshiping them or any other so called guru including Rubini in the States. 

Both groups actually unless you are nieve enough to believe that just because they are right once, it means they are always going to be right and vice versa.


----------



## kaplan

*Brendan Burgess quotes: *

_“Irish banks are very well regulated. Irish banks are very sound…the risk to an Irish bank is some panic, if everybody felt that a particular bank was going to go and they all rushed down that would create a liquidity problem and you could have a very fine solid bank getting into difficulty just like Northern Rock which was a solvent bank but it had a liquidity problem…I think we are going to look back at Irish banks and the Irish stock exchange in a few years and say how did we not fill our shoes with those shares”_ RTE News 16th September 2008

_“The Financial Regulator supervises the solvency and liquidity of Irish financial institutions very well. Irish banks are conservative in their lending and none has been exposed directly to the subprime lending problems although all are suffering from the subsequent credit crunch. The Financial Regulator seems to have been well ahead of the game on liquidity reporting.”_ Joint Oireachtas committee June 2008


----------



## kaplan

Here’s Jim Power writing on Irish Economy Blog today: 

_“There are many things in my life that i regret. Spending 9 years with Bank of Ireland is one of them, but appearing on RTE’s Prime Time with Morgan Kelly early in 2007 is top of the pile. Despite my deep scepticism about Fianna Fail’s stewardship of the economy since 1997, I went on and argued that Morgan Kelly’s views on the housing market and the banking system were over the top. I was totally wrong and he was totally right. I haven’t met Morgan since, but when I do I will offer him my sincerest apologies for doubting his prescience. I now realise that I was totally duped by what the regulator and the banks themselves were telling us about the health of the banking system. I had no idea that the banks could possibly engage in the quality of lending that they did or indeed that they could possibly get away with the quality of guidance that they were providing up until very recently. I also realise that i need to educate myself on the workings of a bank balance sheet and the credit cycle. Contrary to what the IT said, Morgan is a past pupil of Templeogue College, of which I am now on the Board of Management. The College is quite proud of its former pupil, as indeed it should be. Fair play to you Morgan and have some sympathy for us lesser mortals who have to ply our trade in the awful financial services sector.” _


----------



## canicemcavoy

Fair play to Jim there.


----------



## Superman

I can't fully understand how one can feel that "better burning it" is over the top.

To me it simply expresses the idea of pouring good money after bad.  By putting money into Anglo, the government must keep to their plan - or else seem foolish. 

If one's opinion is that the hole in Anglo is large, then it is precisely correct to state that burning the 1.5Bn is a better use of the money - because that does not bring with it additional cost.


----------



## DerKaiser

This is all a bit silly, raking up quotes from the past to see who was right at a point in time.  

I will be impressed if Morgan Kelly tells us correctly when _is _a good time to buy a house.

He was right and many other were wrong, this doesn't mean he'll be always right and others will always be wrong.


----------



## canicemcavoy

DerKaiser said:


> He was right and many other were wrong, this doesn't mean he'll be always right and others will always be wrong.


 
How incredibly insightful. I don't recall anyone claiming Morgan Kelly was omniscient.


----------



## Brendan Burgess

Superman said:


> I can't fully understand how one can feel that "better burning it" is over the top.
> 
> To me it simply expresses the idea of pouring good money after bad.  By putting money into Anglo, the government must keep to their plan - or else seem foolish.
> 
> If one's opinion is that the hole in Anglo is large, then it is precisely correct to state that burning the 1.5Bn is a better use of the money - because that does not bring with it additional cost.



Again, and again, people miss the point on this. The decision to guarantee the liabilities of Anglo was wrong, in retrospect. But once the guarantee was made, the money had to follow. 

So if you sign a contract to buy a house for €100,000 you must buy the house for €100,000. Even if the house is worth only €50,000, it is better to pay a €10,000 deposit than to burn it. If you burn it, you owe €100,000. If you pay the deposit, you owe only €90,000. Morgan Kelly missed this vital point to get a wild headline.

And this is the problem with OTT, headline grabbing analysis. Rubbish like "it's better burning €1.5 bn than paying it into Anglo" was simply wrong and not based on the facts. 

I went on television when there was a run on the Irish banks. The run was a direct result of the credit crunch which was caused by the uncertainty in banks' balance sheets due to securitised sub-prime loans. Irish banks had no exposure to these, so I reckoned Irish banks were much more solvent. That was September 2008. I have never claimed an ability to predict house prices. I did not know then that Irish house prices would fall to the extent that they have since. I did not know the extent of lending to property developers. I was always under the impression that banks were cautious in their lending to property developers. I also assumed that the Banking Supervision staff in the Financial Regulator were doing their job. Banking supervision is done behind Section 33 AK of the Central Bank Act, so it's not open to public scrutiny.

The correct comprehensive personal advice would have been to say at the time
1) There is considerable uncertainty over all banks - Irish and overseas.
2) Irish banks are safe, but there is a big question mark, so take your money out
3) I don't know where you can put it though, because there is even bigger uncertainty over the non-Irish banks.

Of course,that could have contributed to the run which would have wiped out all Irish banks and their depositors.

You can read the entire interview which is here . Canice - I think you really should ask your friends on the property blog spot to quote this bit as well. 



> The Irish banking system adheres to the European minimum[deposit guarantee]. And my own  view, my personal view on it would be that this is the appropriate  amount.
> 
> There is no such thing as a free guarantee. If you raise the guarantee  to 50k which the Danes provide, in the end consumers are going to pay  for that. So all of the banks contribute to that fund.
> 
> Dobson: Is it not unthinkable  that an Irish government or any  government would allow a retail bank, a major retail bank with all these  branches and  with all these customers to go under?
> 
> Me: I don’t think it’s inconceivable at all. The Government regulates  Irish banks but the government does not and should not guarantee Irish  banks and that is a very , very important distinction.
> 
> If banks behave badly in their lending or if they  are reckless in their management or whatever, they should be allowed to  go to the wall and that is a fact of economic life.
> 
> It would have an effect on the economy but giving  some sort of soft guarantee to a badly managed banks would be  irresponsible and very bad news for the long term


If the Minister had listened to me instead of to the clamour of calls led by Joan Burton to increase the guarantee, then we would not have the current problems with Anglo and the other banks. However, and this is very important, we would have wiped out the savings of very many people. Most people think that we have bailed out the banks. We have bailed out the depositors in those banks. 


As chairman of the Consumer Panel of the Financial Regulator we published reviews of their performance which were balanced. They praised some aspects - the were very critical of other aspects. Here are samples from the Annual Reports and Performance Reviews written between 2005 and 2007. The FR was furious with me personally and regarded The Consumer Panel and me as a hostile force, which we weren't. I don't recall anyone else criticizing or questioning the performance of the Financial Regulator at that time. They got quite a good review from the Comptroller and Auditor General who would have had much more resources and time than the Consumer Panel had.




> The big failing of the Financial Regulator is the *slow speed* at which the Financial Regulator operates.
> 
> The Financial Regulator seems *indecisive*.
> 
> The Financial Regulator operates with *undue complexity* and formality.
> 
> The Financial Regulator adopts and *excessively legalistic* approach.
> 
> We have seen very little evidence that the Financial Regulator *has the resolve* to stand up to some institutions and individuals who are misbehaving. It seems that when challenged by misbehaving institutions, the Financial Regulator simply backs down.
> 
> The FR gives the impression that *if it can find a reason not to act; this will be the preferred outcome. *It appears to seek complexity and obstacles rather than to seek consumer oriented solutions to current and emerging problems.
> 
> The Financial Regulator *hides behind the confidentiality* clauses in the Central Bank Acts to avoid explaining its inaction
> 
> *Fitness and Probity is not about form-filling*.


I am using analysis based on the available published information.  Of  course, if this information is wrong, then the analysis is wrong. 

I was not seeking headlines and publicity based on incorrect analysis.


----------



## DerKaiser

canicemcavoy said:


> How incredibly insightful.


 
I think that comment would have been more appropriate reaction to Jim Power's admission that he was wrong 3 years after the market turned.

There's no point in the cheerleaders of the boom coming out with this repentence now.  All it is is a cynical move to try regain some credibility. 

There have always been economists who try to be sensationalist to go against the grain for publicity as opposed to having any firm convictions.  

If Morgan Kelly had genuine convictions, his sensationalist way of conveying them undermined his chances of being taken seriously


----------



## Brendan Burgess

DerKaiser said:


> There have always been economists who try to be sensationalist to go against the grain for publicity as opposed to having any firm convictions.
> 
> If Morgan Kelly had genuine convictions, his sensationalist way of conveying them undermined his chances of being taken seriously



This is my point although I don't see why you would question his convictions? 

It's hard to get the balance right.

If you do a Morgan Kelly on it, you will not be taken seriously. 

But most of us didn't pay too much attention to Alan Ahearne either who made the same points, but in a more professional manner. At least now, he is influencing policy because he has been taken seriously. 

Likewise, I doubt if anyone in authority will every ask David McWilliams for his opinion after his account of his meeting with Brian Lenihan. 

Lucey was gas on the radio. In the same interview where he turned liabilities into assets he complained that the government had never called him for advice.


----------



## kaplan

*Brendan *

You should get your storyline straight:

*"If the Minister had listened to me instead of to the clamour of calls led by Joan Bruton to increase the guarantee, then we would not have the current problems with Anglo and the other banks. "* 

The guarantee you write of was the Irish deposit guarantee scheme which on the 16th September 2008 provided coverage of a maximum of €20,000.

According to you the Minister should have left the deposit guarantee at €20,000 and left the rational run continue to develop as it did throughout the week of the 16th September 2008 and into the following week. During this time Irish banks and credit unions were experiencing siginficant unsophisticated depositor withdrawals. (A run) 

Your appearance on RTE New which you say you did, in loco parentis for the Governor and Financial Regulator, was to prevent a run on deposits. 

Joan Burton and others were right to call for an increase in the deposit guarantee limit. At first Lenihan demured and then announced the guarantee increase the following weekend. It had the effect of preventing a contagious run. The following weekend the bank guarantee was introduced. 

At the time the Irish deposit guaranatee was the lowest legally permissable under EU laws. 

Northern Rock had been established through HMG reports, including the Run on The Rock as a high risk operation and the Brits were talking about increasing their guarantee from 32.5k to 50k.

According to the then accepted norms - governments implicitly guaranteed banks and exlicitly provided for limited deposit insurance schemes. There were documented cases of governments stepping in to provide explicit blanket guarantees to banks and entire banking systems. (Northern Rock, Sweden and Norway being a few examples at the time). It appears from your comments at the time that you were unaware of the nature of deposit insurance and how it's designed to work within the financial safety net.


----------



## Brendan Burgess

I have discussed my record in depth on this thread and I won't be repopening it in this thread or elsewhere. 

I will deal with the issue raised by Kaplan, although it has been dealt with at length before. 

I am not sure why you think I did not understand the nature of the deposit guarantee scheme? I think I did and I do. 

My view on the scheme was that the guarantee should not be increased. I was against the taxpayer bailing out the depositors. 

I fully understand though that it was a very difficult situation, and I may well have been wrong. It really is hard to know. It makes no long term sense for the government to guarantee all deposits. Could the run on Anglo and Irish Nationwide have been stopped without the guarantee? 

Looking back on it now facing a €22bn euro bill for Anglo alone, maybe the government should have let it go. Maybe it should have guaranteed AIB and Bank of Ireland only, to retain the really systematically important banks. 

I argued against increasing the guarantee when it was €20,000.
When it was increased, I felt that maybe the government was right, because they had more information than I had. 
Now that it is costing us at least €24bn , I am not sure.

Brendan


----------



## Robin Banks

Brendan said:


> I must say that it was a terrible piece of writing.
> 
> He suggested that the government would be better off burning €1.5billion instead of putting it into Anglo Irish Bank.
> 
> And when someone makes a comment like that, it destroys their credibility.
> 
> Nothing else in the article has any validity after a comment like that.
> 
> I am surprised that the Irish Times published it.
> 
> Brendan


 
Yeah nice post. Makes sense. Morgan Kelly's credibility is destroyed.

He should have said burning €20 billion.


----------



## Complainer

Brendan said:


> If the Minister had listened to me instead of to the clamour of calls led by Joan Bruton to increase the guarantee, then we would not have the current problems with Anglo and the other banks. However, and this is very important, we would have wiped out the savings of very many people. Most people think that we have bailed out the banks. We have bailed out the depositors in those banks.


If the Minister had listened to Joan *Burton*, he would not have rushed into the guarantee at all, and would have excluded Anglo and INBS. This would leave the state about €30 billion better off today.


----------



## Brendan Burgess

Hi Complainer

Apologies to Joan Burton if I have misquoted her or quoted her out of context. I went back to the RTE News segment, but it is not playing for me at the moment. My recollection was that she called for the Deposit Insuance scheme to be increased from €20,000. I don't recall her saying that Anglo or the Irish Nationwide should be excluded. But maybe she did. 

The reality was that there was no simple solution. If Anglo and the Irish Nationwide had been excluded, then the government would face a huge legal suit from their shareholders and depositors claiming that the government's action had precipitated a run on those banks. 

As Kaplan pointed out, if they had not increased the guarantee, maybe all the banks would have crashed. 

It was a tough decision for the government to make. No matter what they did, they would be getting abuse for it today.


----------



## Gervan

Having made my preparations for a bank crash months beforehand, opening various €20,000 accounts in several banks to take maximum advantage of the guarantee that existed before 2008 ( and the AIB staff thinking I was like one of those mad "the End is Nigh" characters) I was very annoyed by the blanket guarantee.
Like the wise virgins, I had made good preparations, but ended up paying for those who hadn't bothered.


----------



## Complainer

Brendan Burgess said:


> Hi Complainer
> 
> Apologies to Joan Burton if I have misquoted her or quoted her out of context. I went back to the RTE News segment, but it is not playing for me at the moment. My recollection was that she called for the Deposit Insuance scheme to be increased from €20,000. I don't recall her saying that Anglo or the Irish Nationwide should be excluded. But maybe she did.


From Joan's speech on the Dail record; http://debates.oireachtas.ie/DDebate.aspx?F=DAL20080930.xml&Node=H13&Page=7


> *We also wish to know the limits of the guarantee schemes, so that they  do not apply*, for example, in cases of subsequent acquisitions by  institutions or *irresponsible lending*.



I really don't think it is reasonable to say 'sure it was a hard decision'. They made the wrong decision, and a generation or two of taxpayers will be footing the bill.  Meanwhile, the banking industry continues to laugh at the taxpayer's expense http://www.rte.ie/business/2010/0416/boi.html - while in other countries, the bankers find themselves facing legal charges from regulators; http://www.rte.ie/business/2010/0416/boi.html

Clowenomics.


----------



## Brendan Burgess

Gervan said:


> Having made my preparations for a bank crash months beforehand, opening various €20,000 accounts in several banks to take maximum advantage of the guarantee that existed before 2008 ( and the AIB staff thinking I was like one of those mad "the End is Nigh" characters) I was very annoyed by the blanket guarantee.
> Like the wise virgins, I had made good preparations, but ended up paying for those who hadn't bothered.



Hi Gervan

Not to mention those who saved at low rates with An Post, because they wanted the security of a government guarantee.

Brendan


----------



## canicemcavoy

Brendan Burgess said:


> I went on television when there was a run on the Irish banks. The run was a direct result of the credit crunch which was caused by the uncertainty in banks' balance sheets due to securitised sub-prime loans. Irish banks had no exposure to these, so I reckoned Irish banks were much more solvent. That was September 2008.


 
I believe your quote was that banks were "well-regulated". Not that banks were solvent. I'm currently reading this book about Irish banking scandals:

http://www.amazon.co.uk/Something-Rotten-Simon-Carswell/dp/0717139727

I'm not sure if you've read this, but even though it was published in 2006 --- so manages to miss out the past couple of years of banking --- it is still damning about Irish financial regulation. 

For example, it points out that of all the Irish frauds and scandals mentioned in the book, only 2 people had gone to prison - and none of those were in the Republic (one in Belfast, one in Baltimore USA). This despite the fact that in the first instance, the person commited the same fraud both in both jurisdictions - for more info, see http://archives.tcm.ie/businesspost/2006/03/19/story12705.asp).

The author Carswell also adds:

_One of the most striking features in the scandals of the last 30 years is the failure of the banking policeman, the Central Bank and later the lrish Financial Services Regulatory Authority (subsequently abbreviated to Financial Regulator) to patrol the industry adequately._

_[...]_

_Despite the fact that the Financial Regulator was set up in 2003 with a mandate for the strict policing of the financial sector, as of June 2006 *it had yet to impose punitive sanctions on any bank*, even though the industry had been rocked by major scandals in recent years._



> You can read the entire interview which is here . Canice - I think you really should ask your friends on the property blog spot to quote this bit as well.
> 
> "If banks behave badly in their lending or if they are reckless in their management or whatever, they should be allowed to go to the wall and that is a fact of economic life."


 
Brendan, imagine I say the following:

"Red Rum is going to win the 3pm race today. However, if you think it won't, you shouldn't bet on it."

I don't think the bold statement of fact in the first sentence is cancelled out by the condition in the latter sentence.



> If the Minister had listened to me instead of to the clamour of calls led by Joan Burton to increase the guarantee


 
Are Fianna Fail in the habit of listening to Labour frontbench spokespersons? I hadn't noticed.



> As chairman of the Consumer Panel of the Financial Regulator we published reviews of their performance which werep balanced.
> 
> [...]
> 
> We have seen very little evidence that the Financial Regulator has the resolve to stand up to some institutions and individuals who are misbehaving. It seems that when challenged by misbehaving institutions, the Financial Regulator simply backs down.


I'm glad you wrote such a report. I'm sure there were people who were far less critical of the FR. However, I cannot square that with your subsequent assertion that the banks were well-regulated.


----------



## desperatedan

If I could be allowed make a suggestion, regarding the now (in)famous [depending on your POV] article by Morgan Kelly.

It would be instructive to a actually quote the article correctly, instead of alleging sensationalism, in a headline which he probably didn't write himself, sub-editors job.

There is a link to the full text here:

[broken link removed]

Nowhere in the Article was the word "Burn" mentioned. The word was *incinerate*. Slightly longer word OK, but one which didn't convey the message the critics of MK wanted to give. 

Easier for the plebs to understand.

It does indeed bear re-reading,as it was written in December 2008, just after the Blanket Guarantee to Depositors, *Bond Holders and Subordinated Bond Holders* was announced by he Irish MoF in September of 2008.

MK's analysis is eerily on-the-button, like these:



> Then, given lending of about €80 billion to developers, it follows that Anglo Irish is facing losses on the order of €15 billion. The true figure could easily turn out to be twice as large.





> With likely losses of this magnitude, the Government's proposed investment of €1.5 billion will vaporise in months, forcing it either to continue pouring good money after bad, or to repudiate Anglo Irish's liabilities. For all it will achieve, the money might as well be piled up in St Stephen's Green and incinerated.





> Anglo Irish epitomised the Irish bubble economy. Its rise began a decade ago as the boom created a demand for houses and commercial property. As prices started to rise, banks made a miraculous discovery: the more they lent, the more prices rose; and the more prices rose, the more people wanted loans to get into the booming market. And the more loans that bankers made, the bigger the bonuses they could award themselves.
> 
> It was brilliant while it lasted. One of Bank of Ireland's stable of developers would buy an office block for €100 million, and sell it on a year later to one of Anglo's for €120 million, and so on: a process known to bankers as adding value.
> 
> Everyone was a genius and nobody could lose.





> So much for the future. Right now, in the "nothing in the last six months has really happened" world of the Government, the bailout of Anglo Irish follows a compelling political logic. Anglo Irish funds developers, and developers fund Fianna Fá¡l.





> By using taxpayers' money to acquire Anglo Irish's portfolio of dingy shopping centres and derelict development sites, the Government is squandering scarce resources that are needed elsewhere. Just as the State is putting too much money into Anglo Irish, it is putting in too little to recapitalise AIB and Bank of Ireland on which, whether you like it or not, large sectors of the Irish economy depend.
> 
> Governments tend to forget whose interests they are supposed to serve. Our Government was not elected to look after the managers, shareholders and bondholders of recklessly mismanaged banks.
> 
> Its sole duty is to Irish taxpayers: to ensure that banks that serve a useful economic purpose continue to operate, while those that serve none are swiftly closed down.



(Of course, we have not yet succeeded in finding out exactly who these mysterious Bond Holders are/were, those people to whom this Government has pawned the Nation, for God knows how far into the future, despite having the Duke of Moral Hazard in there as PID, before his elevation.)

Remember these were professional risk-takers, gamblers if you like, who took a punt, for a defined period, to make very good returns. 

Could this be why the Guarantee was essential first, for the FFG Government, before inevitable Nationalisation, to protect these peoples profits and names?

This also was before the Nationalisation announcement of Anglo in mid-January 2009.

This article also bears re-reading, as Michael Hennigan provides loads of links and data.


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## canicemcavoy

Well, the IMF are now here. I wonder if anyone, Brendan or otherwise, thinks that more attention should have been paid to Morgan Kelly's articles down the years.


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