# Make the depositors who were bailed out contribute to the retrospective guarantee?



## Brendan Burgess

The people who benefited most from the extension of the deposit guarantee were the depositors in the guaranteed banks.

So charge all those depositors on the night of the guarantee 10% of their deposit in excess of €20,000.

Charge those in Anglo and Irish Nationwide an additional 40% as they would have lost everything. 

It wouldn't apply to deposits in Credit Unions, although Credit Union deposits in Irish banks would be subject to the same deduction.


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## Firefly

I think that would work in the first instance...the following day though I know I'd be at my bank making a withdrawal.


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## canicemcavoy

Best idea to create a run on banks I've ever heard. Rabobank couldn't come up with a better advert.


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## Square Mile

Morning

Small point.  A week before the general bank guarantee, the limit for the ordinary deposit guarantee was raised from 20k to 100k per depositor.  This was applied to 100% of each individual deposit in the banks covered by the scheme.

SM


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## Howitzer

Brendan Burgess said:


> The people who benefited most from the extension of the deposit guarantee were the depositors in the guaranteed banks.
> 
> So charge all those depositors on the night of the guarantee 10% of their deposit in excess of €20,000.
> 
> Charge those in Anglo and Irish Nationwide an additional 40% as they would have lost everything.
> 
> It wouldn't apply to deposits in Credit Unions, although Credit Union deposits in Irish banks would be subject to the same deduction.


Err, shouldn't you apply these haircuts to the bondholders of these institutes first before you apply them to the depositors? That's what would have happened if those banks had failed.

And, just for accuracy, at the time of the bank guarantee deposits were already guaranteed up to 100K per account per institute.


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## jpd

This sounds like confiscation or to put it bluntly, stealing by the state. 

And retrospectively, to boot!

Nowhere in the contract (ie terms & conditions) did it mention any of the above, so does this mean you are suggesting that these contracts should be deemed null and void - if so, why not mortgage contracts?


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## Chris

Yup, guaranteed bank run for all amounts over the €20k. This is certainly what I would do if I had any money left in the country.

But how about actually charging a rate for the deposit guarantee to banks, based on actuarial calculations. Get several insurance companies to make calculations what they would have to charge for such an insurance policy, then charge it to the banks. My prediction would be that the charge would be so high that banks would not be able to feasibly pay it and/or charge their customers for it, thereby exposing more of the need to let bankrupt organisations to be liquidated.


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## Odea

At first I thought that this was an April 1st joke but on second thoughts if the government were to deduct 1% as a charge from my deposit interest toward an insurance policy that would guarantee *all* of my savings then it might not be a bad idea.  Having said that, the next time I go abroad I am definitely making enquiries as to how I open a bank account.


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## Chris

Odea said:


> At first I thought that this was an April 1st joke but on second thoughts if the government were to deduct 1% as a charge from my deposit interest toward an insurance policy that would guarantee *all* of my savings then it might not be a bad idea.  Having said that, the next time I go abroad I am definitely making enquiries as to how I open a bank account.



I don't think the suggestion was to take a percentage of your interest, but a percentage of your capital. As already stated this would be legalised theft, but, in my opinion, nothing is beyond the realms of desparate politicians.


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## jpd

Chris said:


> .. legalised theft ..



just theft


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## noel_c

What would this do to loan-to-deposit ratios in Irish banks?

Wonder how all those pensioners would feel about paying for a guarantee that is basically meangingless and that the government can never deliver on. Would you choose to go with a health or car insurer if you knew that they could never pay out?

With speculation like this it's no wonder so many people are posting about moving their money anywhere but Ireland. Ironically this makes it more likely the guarantee will get invoked.


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## fender

Brendan, I always thoughts your posts had credibility - until now. You sound like Michael O'Leary trying to stir things up.

How did the depositors gain anything? The banks gained as the money remained in Ireland instead of moving abroad. Are you seriously trying to suggest if somebody had 50k in a bank that the Government can just take 3k? These are the people who did NOT borrow during the so called Celtic Tiger. Not everybody who have deposits gained through property price increases - some people were simply careful.

Am I missing something here? Please explain.


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## Gulliver

Brendan Burgess said:


> The people who benefited most from the extension of the deposit guarantee were the depositors in the guaranteed banks.


 
Brendan
In fact, so far, the people who benefitted most were the government, who charged the banks a levy for the guarantee.  I, as a depositor on a guaranteed bank have not benefitted in any way - except that without some guarantee, I might have required high doses of Vallium to get to sleep.


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## canicemcavoy

Yes, it's weird to be told by Brendan that I somehow "benefited" by, well, putting my money in a bank and expecting them to look after it. By the way, Brendan, you are the one who claimed in 2008 that banks were "well regulated and sound", and now 2 years later are suggesting that people pay up for this privilege. How about first of all taxing those who _did_ profit from the bubble and made fortune on property, before you start demanding that the ordinary saver is punished?


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## whizzbang

What a fantastically terrible idea! You've outdone yourself Brendan!


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## pascal12

[FONT=&quot]Already moving monies abroad, stupid ideas like that can only hasten the exit of badly needed capital for the banks that will then have to buy the money at higher interest rates from investors outside the state passing it to borrowers of course.[/FONT]


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## aristotle

Bank Guarantee extended to June 2011, so I guess that kills off this thread for now.


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## mmclo

But the bank gauruntee is pure fiction, where will the state get 10 or 20 bn in cash for depositors in a collapsed bank?


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## aristotle

No banks will collapse, thanks to EU\ECB. Without them the banks would have collapsed 2 years ago.


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## Chris

noel_c said:


> Wonder how all those pensioners would feel about paying for a guarantee that is basically meangingless and that the government can never deliver on. Would you choose to go with a health or car insurer if you knew that they could never pay out?


More importantly, an insurance company would not be allowed to operate if its actuarial calculations were off and reserves were too low. I fully agree with you, the guarantee could never actually be made, not even for some of the smaller banks.



Gulliver said:


> Brendan
> In fact, so far, the people who benefitted most were the government, who charged the banks a levy for the guarantee.  I, as a depositor on a guaranteed bank have not benefitted in any way - except that without some guarantee, I might have required high doses of Vallium to get to sleep.


You did benefit, as you would have had great difficulty getting your money. Saying that, I do not agree with the guarantee due to the moral hazard and the total and utter impossibility of it ever working. There is a reason why banks cannot borrow money on the open market despite the guarantee, nobody believes that it is worth the paper it is written on.


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## Brendan Burgess

Square Mile said:


> Morning
> 
> Small point.  A week before the general bank guarantee, the limit for the ordinary deposit guarantee was raised from 20k to 100k per depositor.  This was applied to 100% of each individual deposit in the banks covered by the scheme.
> 
> SM



Good point SM - but same principle 

Charge the tax on the date the ordinary deposit guarantee was increased. 

Same principle - those who benefited, should pay. 

Howitzer said



> Err, shouldn't you apply these haircuts to the bondholders of these  institutes first before you apply them to the depositors? That's what  would have happened if those banks had failed.



Agree. Charge the bondholders as well. 

In practice, I suspect it would have to be limited to Irish resident depositors and bondholders 

jpd and others said



> Yup, guaranteed bank run for all amounts over the €20k. This is  certainly what I would do if I had any money left in the country.



This is a retrospective charge on the amounts on deposit in September 2008. It would be charged whether you have money on deposit now or not. There would be no advantage in taking your money out now other than to evade your tax liability.


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## Brendan Burgess

fender said:


> Brendan, I always thoughts your posts had credibility - until now. You sound like Michael O'Leary trying to stir things up.
> 
> How did the depositors gain anything? The banks gained as the money remained in Ireland instead of moving abroad. Are you seriously trying to suggest if somebody had 50k in a bank that the Government can just take 3k? These are the people who did NOT borrow during the so called Celtic Tiger. Not everybody who have deposits gained through property price increases - some people were simply careful.
> 
> Am I missing something here? Please explain.



Hi Fender

Yes, you are missing a lot. But so have most commentators. If the government had not upped the €20k guarantee, those  who had money on deposit in September 2008 in Anglo and Irish Nationwide would have lost everything in excess of €20,000.  The other banks would have crashed too, but I suspect that there would have been something for the depositors eventually. 

People say we  "we bailed out the banks"  but this is a meaningless expression.  We bailed out the depositors and bondholders who would have lost out if there was no guaranteed. A lot of people are saying that we should not have bailed out the bondholders, but rarely say we should not have bailed out the depositors.


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## Ceist Beag

Removed comments - I've re-read what Brendan said in his original post and that coupled with his clarification above actually does make some sense to me now! I think it might be hard to actually put this into practice tho (applying a tax retrospectively).


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## Brendan Burgess

Hi Ceist

I am proposing that those who had their savings retrospectively guaranteed by the Irish government should contribute to the cost. 

At the moment, all taxpayers and citizens are paying for the cost of guaranteeing the amounts over €20,000. Most people who have in excess of €20,000 on deposit are better off. So you have the poor subsidising the rich. It's crazy.


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## aristotle

Its one thing to increase taxes but to take away a portion of peoples savings (which were already taxed when earned) would lead to riots.


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## aristotle

Brendan Burgess said:


> Hi Ceist
> 
> I am proposing that those who had their savings retrospectively guaranteed by the Irish government should contribute to the cost.
> 
> At the moment, all taxpayers and citizens are paying for the cost of guaranteeing the amounts over €20,000. Most people who have in excess of €20,000 on deposit are better off. So you have the poor subsidising the rich. It's crazy.


 
The poor subsidising the rich? Its not that simple, there are many people with 20k+ on deposit that also have huge negative equity and other big loans.


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## Firefly

Brendan Burgess said:


> If the government had not upped the €20k guarantee, those  who had money on deposit in September 2008 in Anglo and Irish Nationwide would have lost everything in excess of €20,000.



Brendan, By that rationale, as the guarantee is now 100k does this mean that those with deposits > 100k have lost everything > 100K?



Brendan Burgess said:


> People say we  "we bailed out the banks"  but this is a meaningless expression.  *We bailed out the depositors *and bondholders who would have lost out if there was no guaranteed. A lot of people are saying that we should not have bailed out the bondholders, but rarely say we should not have bailed out the depositors.



I made this point a few months ago and it was rubbished. I still think it's the case.


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## Brendan Burgess

Firefly said:


> Brendan, By that rationale, as the guarantee is now 100k does this mean that those with deposits > 100k have lost everything > 100K?



Hi Firefly

I am proposing that those with deposits/bonds in excess of €20k would lose half their investment in Anglo and Irish Nationwide. Not that they lose everything. If the 20k had not been increased to 100k, and then guaranteed, they would have lost everything. 




> I made this point a few months ago and it was rubbished. I still think it's the case.


I certainly hope that I did not rubbish this?  I have said it a lot, but people don't seem to want to face up to it. If you look at some of the earlier posts on this thread, two posters have seriously suggested that the guarantee hasn't benefited the depositors.  It's very strange. 

Fender:  How did the depositors gain anything? 

Gulliver: I, as a depositor on a guaranteed bank have not benefitted in any way


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## rekhib

The devil is in the detail here. The second the Irish government announces that all depositors will have to pay a percentage of their deposit to ensure their money is guaranteed, you should start writing the country's epitaph. I can't think of a quicker way to bleed the country dry. Ridiculous.

@Howitzer - Agreed, it's the bondholders who benefited most because they'd come before depositors when losses on defaults are being absorbed.

@Chris - The banks are already charged a rate for the deposit guarantee, i.e. CDS prices pushing up their borrowing rates. If CDS prices weren't being held because of EU/ECB funding for these banks (as aristotle said) you're right, they wouldn't be able to pay the rates that their actual position demands.

@Brendan - Do you think the deposit guarantee scheme would have more credibility or less if the government had access to 10% on >E20k? Aside from a run on deposits in anticipation of similar antics in the future or an increase in the percentage, the country's cost of borrowing would increase because it implies that the guarantee is worth(less). Taxing capital over income is very red.


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## Sunny

rekhib said:


> The devil is in the detail here. The second the Irish government announces that all depositors will have to pay a percentage of their deposit to ensure their money is guaranteed, you should start writing the country's epitaph. I can't think of a quicker way to bleed the country dry. Ridiculous.
> 
> @Howitzer - Agreed, it's the bondholders who benefited most because they'd come before depositors when losses on defaults are being absorbed.
> 
> @Chris - The banks are already charged a rate for the deposit guarantee, i.e. CDS prices pushing up their borrowing rates. If CDS prices weren't being held because of EU/ECB funding for these banks (as aristotle said) you're right, they wouldn't be able to pay the rates that their actual position demands.


 
Bondholders wouldn't come before depositors.

I don't understand your point about CDS prices.


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## canicemcavoy

Brendan Burgess said:


> Hi Ceist
> 
> I am proposing that those who had their savings retrospectively guaranteed by the Irish government should contribute to the cost.
> 
> At the moment, all taxpayers and citizens are paying for the cost of guaranteeing the amounts over €20,000. Most people who have in excess of €20,000 on deposit are better off.


 
I imagine many people like myself with deposits are those who didn't get involved in the property bubble frenzy. So you're basically saying that those who were wise and didn't buy should now pay for those who did. €20,000 on deposit isn't necessarily someone rich saving for a yacht - it might be the 20 year saving of those waiting to buy a house.

And leaving aside whether or not it's right or wrong - you do realise as soon as this is announced, such deposit would flee?


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## Firefly

Brendan Burgess said:


> I certainly hope that I did not rubbish this?



Not by you and perhaps "rubbished" was a bit strong, but it was certainly argued against a bit.


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## Gervan

I was horrified when I first read Brendan's suggestion, but now I see what he's getting at. 
As someone who went round in the months before the "unforeseeable" crash repositioning funds to take best advantage of the original guarantee I did feel a bit peeved that people who had not had that foresight were "rewarded".
But I am afraid to agree with this proposal in case the blow would fall on current deposits. Hang on a bit while I move some more offshore.


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## ontour

Is there not more benefit is encouraging people to put their savings in Irish banks at low interest rates rather than instilling fear that they could and should lose some or all of that money?

A run on deposits will either force the bank to borrow internationally at very high rates or collapse the bank.  The depositors are the people who were prudent but now it seems de rigeur to vilify anyone who has savings.

The banks won't collapse because of the depositors, they will collapse because of mortgage default.  

Do the opposite, introduce an 8 year SSIA underwritten by the state which gives a bonus interest of 8% at the end of 8 years.  The banks involved have to fund it but the state underwrites it and sure if all the banks go bust, the state probably will too so the underwriting is unlikely to cost anything.  Positive is a potential rush of funds in to Irish banks.


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## Brendan Burgess

canicemcavoy said:


> So you're basically saying that those who were wise and didn't buy should now pay for those who did.



That seems very convoluted.

You had money in an Irish bank. it was guaranteed up to €20,000. 

I don't want to pay for your guarantee and I have been forced to do so. 

You are not paying for those who did buy?  They have not only lost money on the value of their homes but now they have to subsidise you as well.


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## Howitzer

It was guaranteed up to 100K.


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## ontour

Brendan Burgess said:


> They have not only lost money on the value of their homes but now they have to subsidise you as well.



It is a matter of opinion, you see the mortgage holders as the victims, others see them as the idiots that caused this mess by spending more than they could afford on property with inflated prices.

Savers in credit unions are getting no dividend because of the actions of the borrowers.  Are those savers subsidising the borrowers?

Borrowers with tracker mortgages are paying less for their loans than it is costing the bank to fund the debt, if the banks do survive...(pause for air..) the gap will have to be filled somehow and lower deposit rates will form a part of that.  Depositors paying for the perks of the borrowers again.


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## Sarn

As pointed out above, the banks were already contributing to a guarantee  prior to the extension of the guarantee to all funds. I know that my deposits were spread around in order to be covered by various guarantees  (Irish, UK, Danish, Dutch). The thought of losing any of my hard earned  and saved money made me cautious.

However, can anyone see the government picking a particular date? In all probability they would simply look at the maximum funds held at  some point in time in an Irish financial institution, and apply it. The  extension to the guarantee (and higher rates of interest) encouraged me to move money back to Irish  banks/building societies which would have resulted in sums over €20,000  at particular stages.



Brendan Burgess said:


> Most people who have in excess of €20,000 on deposit are better off. So you have the poor subsidising the rich. It's crazy.



Yes, I might be better off, but I worked damn hard for that money and paid my fair share of tax on it. To retrospectively target people who were given no choice to opt in or out would be unfair. Also, people may have had in excess of €20k at some point, but due to changes in their circumstances that balance could now be nil or worse. Where would they get this 10% from? A lot can change in two years as we all have witnessed. If they want to introduce this tax going forward, fair enough. My money will not be here to be taxed further.


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## scrooge1

this wouldnt work as depositors would remove their money and there would be a run on the banks causing a total banking collapse.


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## Brendan Burgess

ontour said:


> It is a matter of opinion, you see the mortgage holders as the victims, others see them as the idiots that caused this mess by spending more than they could afford on property with inflated prices.



Hi ontour

Not at all. Canice raised the issue of mortgage holders and I responded to it. He seems to think that he is being asked to pay for the mortgage holders which I am not doing.

The people who had money on deposit got a retrospective guarantee which has cost the taxpayers a fortune. I am just saying that those who benefited, should contribute to the cost.


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## Brendan Burgess

Sarn said:



> Yes, I might be better off, but I worked damn hard for that money and paid my fair share of tax on it.



Yes, but the rest of the taxpayers worked hard for their money as well. Why should they have to pay more tax to bail you out?


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## ontour

Brendan Burgess said:


> I am just saying that those who benefited, should contribute to the cost.



But was the deposit guarantee not a means to an end to save the banks? The sole motivation was not the protection of the depositors, the primary motivation was to sustain a banking system.  The benefactors included borrowers, small business, medium business, large business, bondholders, credit unions etc. etc.

If you believe that the banks would not been severely negatively impacted by retaining a €20,000 guarantee, then it was the depositors that were the primary benefactors.


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## Duke of Marmalade

Brendan Burgess said:


> The people who had money on deposit got a retrospective guarantee which has cost the taxpayers a fortune. I am just saying that those who benefited, should contribute to the cost.


Ah _Boss_ gotta disagree with this. Depositors can withdraw their money at any time. What happened was that the government said "please, please, don't withdraw your deposits, look we'll guarantee them" and the depositors, like me, responded reluctantly "ok, ok". The depositors who stayed are the heroes here, the ones who prevented a complete collapse of our economy. I think a retrospective "thank you bonus" is in order.


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## Marietta

scrooge1 said:


> this wouldnt work as depositors would remove their money and there would be a run on the banks causing a total banking collapse.


 

There is billions and billions of euro held on deposit in this country sure no depositor will miss paying a bit more tax on it and as we are all aware the two Brian's are short of a few bob at the moment.


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## Brendan Burgess

Duke of Marmalade said:


> Depositors can withdraw their money at any time.



Normally, yes. But if the government had not guaranteed the deposits (and bonds), you would have gone down to your local branch of Irish Nationwide and found the doors shut on the Monday of the guarantee.


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## Sarn

Brendan Burgess said:


> Yes, but the rest of the taxpayers worked hard for their money as well. Why should they have to pay more tax to bail you out?



In my case they weren't bailing me out as my money was below the pre-existing €20k guarantee. The banks were already paying for the guarantee which they would have factored into their fees and charges payable by bank cutomers. My subsequent move back into Irish institutions was as a result of the extension to the Irish guarantee. As ontour said the primary motivation behind the guarantee was to sustain a banking system.

The other consideration is that banks have essentially been compelled by the government not to dramatically increase variable interest rates on mortgages. While increases have occurred and anyone paying a variable rate will argue that the increases have been large, they could have been far greater. The taxpayer is also subsidising this, but I understand the need for it. Maintaining the banks has allowed for flexibility to mortgage holders so they too are gaining from the guarantee. There are many aspects of the banking system that are being bailed out by taxpayers.


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## Duke of Marmalade

Brendan Burgess said:


> Normally, yes. But if the government had not guaranteed the deposits (and bonds), you would have gone down to your local branch of Irish Nationwide and found the doors shut on the Monday of the guarantee.


The point I am making is that it was not the government who made the concession it was the depositors. If the government thought that letting the banks go bust was in the national interest they would have done it. They did not guarantee depositors out of some moral sense of responsibility, they guaranteed them in the desperate hope that they would not desert the sinking ship. Any depositors that accepted this guarantee and kept the ship afloat are heroes, not villains to be retrospectively punished.


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## RMCF

Marietta said:


> There is billions and billions of euro held on deposit in this country sure no depositor will miss paying a bit more tax on it and as we are all aware the two Brian's are short of a few bob at the moment.



And the very reason that DIRT tax will more than likely increase in December.

If people are going to hoard their money and not spend it, then the Gov will get some money out of them somehow.


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## canicemcavoy

Brendan Burgess said:


> Normally, yes. But if the government had not guaranteed the deposits (and bonds), you would have gone down to your local branch of Irish Nationwide and found the doors shut on the Monday of the guarantee.


 
Brendan, are you saying that people at the time of the deposit guarantee were wrong to have left their money in the banks, and instead should have withdrawn it?


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## Brendan Burgess

canicemcavoy said:


> Brendan, are you saying that people at the time of the deposit guarantee were wrong to have left their money in the banks, and instead should have withdrawn it?



Where am I saying that? 

I am saying very clearly that people who had money on deposit would have lost some or all of their money  if the government had not guaranteed them retrospectively. 

I have pointed out before when comparing deposits to shares and property that deposits are not risk-free. Financial institutions can and do go bust. It's not a question of being "wrong". 

Lots of people had their money in An Post getting around 3% less than they could have got in Irish Nationwide or Anglo because it was government guaranteed. Those in Irish Nationwide and Anglo were taking higher risks. They should pay for the extra risk they took.


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## aristotle

Depositors weren't made aware of any risks when opening accounts? You can't retrospectively change it now.


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## shanegl

Brendan Burgess said:


> Where am I saying that?
> 
> I am saying very clearly that people who had money on deposit would have lost some or all of their money  if the government had not guaranteed them retrospectively.
> 
> I have pointed out before when comparing deposits to shares and property that deposits are not risk-free. Financial institutions can and do go bust. It's not a question of being "wrong".
> 
> Lots of people had their money in An Post getting around 3% less than they could have got in Irish Nationwide or Anglo because it was government guaranteed. Those in Irish Nationwide and Anglo were taking higher risks. They should pay for the extra risk they took.



Maybe if people like you didn't go on TV at the time telling everyone that the banking system was sound, they might have realised they were taking such risks?


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## Chris

Brendan Burgess said:


> People say we  "we bailed out the banks"  but this is a meaningless expression.  We bailed out the depositors and bondholders who would have lost out if there was no guaranteed. A lot of people are saying that we should not have bailed out the bondholders, but rarely say we should not have bailed out the depositors.


I for one would have preferred to see bond holders *and* depositors lose their money. As you said in a previous post, people have this false belief that their savings are a safe investment, when this is so obviously not true. A government guarantee, even for "only" €20k, only exacerbates this belief, in that people never thought that even savings above the guaranteed amount would not also be covered by government if a worst case scenario came true. 
My suggestion for charging for the guarantee still stands. Get actuaries to calculate what an insurance policy for such a guarantee would cost, then charge that amount to the bank and let the bank figure out who should be paying for it.



rekhib said:


> @Chris - The banks are already charged a rate for the deposit guarantee, i.e. CDS prices pushing up their borrowing rates. If CDS prices weren't being held because of EU/ECB funding for these banks (as aristotle said) you're right, they wouldn't be able to pay the rates that their actual position demands.


But the cost of a CDS does not benefit those making the guarantee, i.e. the taxpayer. While there is a charge to the banks for the guarantee, the amount and the whole set up of the guarantee is completely insufficient.



ontour said:


> Is there not more benefit is encouraging people to put their savings in Irish banks at low interest rates rather than instilling fear that they could and should lose some or all of that money?
> 
> ....
> 
> Do the opposite, introduce an 8 year SSIA underwritten by the state which gives a bonus interest of 8% at the end of 8 years.  The banks involved have to fund it but the state underwrites it and sure if all the banks go bust, the state probably will too so the underwriting is unlikely to cost anything.  Positive is a potential rush of funds in to Irish banks.


I agree that people should get incentives to save, not spend. But more government guarantees are as meaningful as the deposit guarantee. Reduce DIRT and people will save more, but don't have more politicians and bureaucracts concoct fancy savings schemes guaranteed by the taxpayer.



aristotle said:


> Depositors weren't made aware of any risks when opening accounts? You can't retrospectively change it now.


They should not have lived in the false belief that savings are safe. If there were no guararntee then people would be forced to do some research before they deposit money.


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## ashambles

Look at Anglo, 50B+ in deposits. 

A large amount of those deposits will move as a reaction to a government deposit penalty. Absolutely guaranteed - trust will be broken and even if it's not you'll have people moving out of annoyance. 

To pay these depositors once the banks have worked through their own cash the government need to use the state borrowings intended to tide us over for the next few months. That's what a government guarantee means. 

The government needs the deposits more than the depositors need to invest in Irish government backed deposits. Annoying them wouldn't be wise.


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## canicemcavoy

Brendan Burgess said:


> Where am I saying that?


 
You're now saying that people who didn't withdraw their money from Irish banks in 2008, and decided not to create a run on them, should be penalised for this action. This is highly ironic considering your own statements in September 2008.


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## JoeB

Yes, the guarantee was to protect our banking system, as it seemed to be all intertwined, and all banks were of 'systemic' importance.

So what we need to do is not to allow private banks to become so large or important that they are of 'systemic' importance... as then we'll always have to bail them out.

So what steps have been taken to prevent  this from happening again?

None I'd suggest.


The government need to say that the guarantee will end at a certain time, and that after that date only deposits held in an Irish government owned bank are safe.. i.e the post office... and that all private banks are risky. Let people move their money into the post office, and let private banks fail if they go insolvent.


I think taxing deposits would be disastorous... for many reasons, most of them given above... but mainly the unfairness of it all. Savers shouldn't be punished while profilgate spenders aren't.

My money is already out of the Irish system and has been for many months. I reckon Ireland will definitely fail and our incompetent government doesn't reassure me.


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## aristotle

JoeBallantine, where have you put your money? Foreign bank in Ireland or bank in foreign country?


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## canicemcavoy

JoeBallantin said:


> My money is already out of the Irish system and has been for many months. I reckon Ireland will definitely fail and our incompetent government doesn't reassure me.


 
Whatever my thoughts were about the banks failing or at least a run on banks preventing you withdrawing money, even I didn't think that those advising the government would be seriously suggesting that part of people's deposits be seized in this manner.


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## JoeB

aristotle said:


> JoeBallantine, where have you put your money? Foreign bank in Ireland or bank in foreign country?



Well, my money isn't much, perhaps 25K or so. I've moved it into gold, through BullionVault. This also carries risk, but also potentially large gains, so I'm young and like the risk. I'm happy with that.


It all started with me when Bertie Ahern said that people who foresee a recession should just go off and commit suicide.. that was a disgusting comment.. and the fact that our taoiseach would say it is crazy. Our government must take us all for fools, and I for one don't appreciate it.

Waste of public money is also an issue... our government just wastes huge amounts of money.

Our government signing silly deals... thinking here of the oil and gas fields we gave away for free.. the IGB site where incompetence cost us a fortune.. things like massively increasing the numbers and pay of the public service.


Lack of regulation is a massive issue. It's not good enough that regulators don't do their job. COMREG for example state that they haven't done their job for eight years, in relation to ensuring complaince with the law... and this is ignored. It's not good enough,... clearly not... it should be criminal.

I think Fianna Fail, as an organisation, should be prosecuted with a crime relating to 'subverting' or attempting to destroy the Irish State, .. Berties comments would allow for such an interpretation.



I should add... lack of responsibility... who takes responsibility for mistakes?.. nobody. That's unacceptable, people should be fired and prosecuted with crimes. I'm thinking here of regulators, and the Minister for Health etc. It's not good enough that massive problems were nobodys fault... it's only when running a country that that seems to fly,.. it wouldn't be tolerated in private organisations or in any walk of like except running a country.


----------



## aristotle

JoeBallantin said:


> Well, my money isn't much, perhaps 25K or so. I've moved it into gold, through BullionVault. This also carries risk, but also potentially large gains, so I'm young and like the risk. I'm happy with that.


 
I'm no expert but you probably should consider putting 5-20k into other ETFs or funds for diversification. If the property collapse has teached us anything its that having all our eggs in one basket is too risky. But you seem to understand the risk so maybe its no concern.


----------



## Marietta

Brendan Burgess said:


> The people who benefited most from the extension of the deposit guarantee were the depositors in the guaranteed banks.
> 
> So charge all those depositors on the night of the guarantee 10% of their deposit in excess of €20,000.
> 
> Charge those in Anglo and Irish Nationwide an additional 40% as they would have lost everything.
> 
> It wouldn't apply to deposits in Credit Unions, although Credit Union deposits in Irish banks would be subject to the same deduction.


 

 I fear alot of people reading this post will begin a mass withdrawal of their savings from Irish banks before the upcoming draconian budget.


----------



## Brendan Burgess

Hi Marietta

This point has been made repeatedly and I have already dealt with it. But I will deal with it again. 

My proposal is that those who had deposits in September 2008 would have to contribute towards the cost of the benefit they receive.  They would owe this money whether or not they have money in an Irish bank account now. If they have money now, and take it out, they would still owe it. 

Compare this with what some other commentators have suggested. That we should renege on our guarantee. I am not suggesting that people who put fresh money on deposit during the period of the guarantee should have their guarantee withdrawn.  I am suggesting that we should honour the €20,000 "guarantee" which existed in Sept 2008 which was the the basis on which people put their money on deposit in the first place.

If my proposal was adopted, the government's borrowings would be substantially reduced and so the Irish government's guarantee would be more valuable, and not less valuable. 

Brendan


----------



## Marietta

and the ordinary depositor will end up paying for the mistakes of the government, financial regulator,bankers and developers??


----------



## canicemcavoy

> They would owe this money whether or not they have money in an Irish bank account now. If they have money now, and take it out, they would still owe it.


 
So if someone had a €100,000 for a house deposit in an Irish bank on September 2008, and used it to buy a house since, they now owe a lump sum of €10,000, even if they're currently unemployed and in negative equity. 

Are you really serious? Have you brought up this idea at the mortgage debt expert group?


----------



## aristotle

The idea itself is poorly thought out never mind completly wrong. It is a bit worrying if these are the types of ideas that are being discussed.

You have had Anglo and other Irish Banks advertising their deposit rates since the bank gaurantee in 2008 and now to potentially having depositors retrospectively pay for some sort of bank gaurantee is a ludicrous idea.


----------



## Marietta

If Brendan's proposals are acted upon, I am going to pack my bags for the second time in my life and get the hell out of this country, the ideas are getting more ludicous by the day.


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## belview

Depositors do already made a payment to the government if the form of DIRT tax. Why not increase the current DIRT Tax from 25% to 40%.


----------



## canicemcavoy

Marietta said:


> If Brendan's proposals are acted upon, I am going to pack my bags for the second time in my life and get the hell out of this country, the ideas are getting more ludicous by the day.


 
Presumably you would still owe the money, and you would be chased for this debt, while at the same time, we extend forgiveness to those in mortgage arrears. What a laugh, but then this country has exceeded all satirical expectations.


----------



## hopeless

Brendan,
What about the people who moved money into Irish banks since the introduction of the banking guarantee? However rightly or wrongly it now appears, at the time Irish banks suddenly became the safest place in the world and I have no doubt that many investors took advantage of the guarantee. I seem to remember European politicians complaining that they weren't told about the Irish guarantee and it threatened to create a run of their banks. Would these depositors also be charged?

Also, is there any precedent for retroactively applying taxes/charges/levies? What if the depositor can no longer pay the charge?


----------



## Berni

belview said:


> Depositors do already made a payment to the government if the form of DIRT tax. Why not increase the current DIRT Tax from 25% to 40%.


Ah, but that would only get you a share of the meagre interest being paid.

Brendan wants to grab a chunk of the money you shouldn't have had there anyway because it should have all been invested in property and bank shares.


----------



## JoeB

aristotle said:


> I'm no expert but you probably should consider putting 5-20k into other ETFs or funds for diversification. If the property collapse has teached us anything its that having all our eggs in one basket is too risky. But you seem to understand the risk so maybe its no concern.



Thanks for the advice.

I supose I have some small amounts elsewhere.. a few K in the credit union, and a little in a current account, non interest paying. I'm also exposed to Irish property through an inhertitance.


I agree that gold could halve in value, or double in value... with the risks go the rewards... so overall I am making a concious decision to take a risk. Gold was 24K a kilo back in Feb 2010 when I moved the money,.. it's now 33K a kilo, and could go to 10K / kilo, or 60K / kilo... who knows?

I think there's risks in Irish banks.. regardless of the guarantees. Not worth it for 3% or 3.5% in my view. Over 9%, like our bond yields, would be more like it....


Taxing deposits is a non runner in my view, and would likely be illegal. Canice raises great points, what about house deposits which are now spent? What about companies and charities, would these also be hit? What about people who had savings they no longer have? How would it even be determined how much money people had in Sept 2008?.. would it be self assessed?, God, it couldn't be, could it?


Why don't we just try to run our country like the Germans?.. .with no useless rhetoric or non-regulation.. just sound and safe policies with no cronyism or protected sectors.. no waste etc. But I do despair that that will ever happen.. I think our government is a joke, and they've done nothing to change that view. Has any politicion ever suggested that we have far too much representation in the Dail?, and to cut wages and benefits in half? If not then they're all useless.

And the whole pensions thing.. double pensions.. pensions paying while the person is 50 years old and currently in a job.. this is a complete joke. If that's what the government thinks of us then I have no problem stating that I think they're all idiots... (would use stronger words if allowed)


----------



## canicemcavoy

Well, every cloud has a silver lining, and the fact that ideas like these are now mainstream in government advice circles finally prompted me to get off my derriere and finally get all my deposits out of Irish banks. See, thanks I guess.


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## Kev

canicemcavoy said:


> Well, every cloud has a silver lining, and the fact that ideas like these are now mainstream in government advice circles finally prompted me to get off my derriere and finally get all my deposits out of Irish banks. See, thanks I guess.



I think lots people with deposits in irish bank will be follolwing you.....
What a crazy suggestion to put to posters.  He cannot be serious, can he???


----------



## rekhib

Brendan Burgess said:


> If my proposal was adopted, the government's borrowings would be substantially reduced and so the Irish government's guarantee would be more valuable, and not less valuable.


 
Can somebody confirm these figures, original guarantee was E400bn, 10% = E40bn which would be enough to tide the country over for a couple of years. Aside from ripping the banks' balance sheets apart, do you think the E40bn gained from the raid would outweigh what will be lost in credibility, stability and ultimately inflows into the country. Our company lost a contract this week over in Norway because they have no faith in the Irish banking system. Banking and politics (to a far lesser degree!) are based on trust (otherwise banks' liquidty ratios would be 100% not 7%), we have to start rebuilding that trust not annihilating it, as this move would.


----------



## galwegian44

Brendan Burgess said:


> So charge all those depositors on the night of the guarantee 10% of their deposit in excess of €20,000.
> 
> Charge those in Anglo and Irish Nationwide an additional 40% as they would have lost everything.


 
Absolutely ludicrous Brendan, even after digesting it for a few hours to see if there is any merit.

First of all the deposit guarantee that Brendan is saying should be levied retrospectively was a confidence trick. Who truly believes that the government would pay the guarantee if the banks failed and the country went bankrupt. It was a measure used to instil confidence and nothing else….I’m not prepared to pay for that as a depositor. At no point did I think I would get my deposit back, despite the government guarantee....and still don't!
 
Secondly, if indeed there was backing for the guarantee then if applied retrospectively there would be a run on the banks and a large portion of the deposits would be withdrawn...including mine - not workable.

Thirdly, it's almost impossible to apply rules to this retrospectively; you mention Anglo and IN as the main culprits....AIB are fast on the way to joining them. Can we go back and squeeze another percentage out of AIB depositors next year when we get evidence that AIB were nearly as bad as Anglo et al?
Lastly, there was no opt-in/opt-out clause involved; the guarantee was given carte blanche regardless of the depositors choice. If it was an opt-out clause then I would have been covered as I wouldn't have bothered responding; for opt-in I wouldn't have been covered. The guarantee is worthless and I for one would have a major problem handing over money for such a worthless claim.

Outside of the possible merits that you see in such a suggestion, hasn't the ordinary punter been screwed enough already without such a draconian measure. Let's focus on the waste we have in this country and use our collective abilities to improve our situations without gouging the people who are holding this country together. Right now as we speak there are public year-end activities in full swing to ensure that all public budgets are consumed lest 2011 budgets are cut accordingly (notwithstanding the cuts from the depression). It won't be efficient and we will probably get little value from it but it's happening.

Good luck to the depositors who managed to save their money for a rainy day but beware the gougers who are trying to put their greasy mitts into your wallet!!


----------



## Duke of Marmalade

I presume this includes Sept '08 depositors who have long since withdrawn their deposits, foreign depositors, bondholders, both those who are still there and those who are no longer there and both domestic and foreign, interbank loans, ECB liqudity support etc. all of which arguably benefitted from the "blanket" guarantee.  

Hard to see this working in any practical or fair sense.


----------



## fobs

Seems a totally ridiculous ill-thought out idea. To avil of the guarantee depositors would have had to be advised in advance of the new charge and then decide if they wanted to pay/avail of it or not. No depositors were aware of the detail of the guarantee until it was fait acompli.


----------



## TurboTim

Pure and simple begrudgery Brendan. Nothing intellectual there at all. Your suggestion is offensive, and immoral. It encouarages begrudgery and this
incessant blame game, find a scapegoat mentality that pervades Irish society at the moment.

It is a bit encouraging to see that you get few if any replies supporting your idea. If you post it on Bock the Robber you might find a few people agreeing with you.

I am voting with my feet so you can take it that I am done with your site 
perhaps you could remove me from your list of subscribers.


----------



## IsleOfMan

Berni said:


> Brendan wants to grab a chunk of the money you shouldn't have had there anyway because it should have all been invested in property and bank shares.


 
......that has now been lost. So let's make everyone miserable.

The banks gave me 2% interest on my savings. Nobody was getting rich on 2%.They were effectively keeping my money for safekeeping in a shoebox in their safe as far as I was concerned. Nothing more. I didn't ask them to gamble my money.

If this idea were to take hold I will invest in a strong shoebox, drive to Switzerland or somewhere and rent space in a strongroom.


----------



## noel_c

Brendan Burgess said:


> This point has been made repeatedly and I have already dealt with it. But I will deal with it again.


I don't see how you've dealt with it. If the government retrospectively applies a tax to any subset of Irish deposit holders it will set a precedent. Who in their right mind would keep their money on deposit with BOI or AIB if there is a risk that in future the government will confiscate their savings? There would be a flight of capital by all Irish deposit holders, not only those in Anglo.

A call for a 5% tax on deposits was discussed on Vincent Browne on Monday. All the panelists agreed that it would be a disaster as there wouldn't be a cent left in Irish banks the day after it was introduced. The call itself was made by developer Niall Mellon whose assets went into NAMA early this year. Nice of him to tell taxpayers how they can fill the hole left by his mistakes.


----------



## canicemcavoy

Of all the people to make this argument, I'm still astonished that Brendan is doing so. On 16 Sep 2008 he went on RTE News to assure viewers that Irish banks are well-regulated and sound. He said on this site he did so because:



> People were beginning to withdraw their money from Irish banks. RTE News tried to get Patrick Neary or the Minister for Finance to comment but they were not available. So I commented in an effort to calm people down and stop a run on Irish banks.


 
http://www.askaboutmoney.com/showpost.php?p=1009250&postcount=22

So Brendan is effectively saying that those people who listened to his argument and accepted his advice and, perhaps for patriotic reasons, kept their money in Irish banks, should be punishing for doing so. Those who ignored him and instead, withdrew their money and perhaps put it abroad or into other safe investments, get away with it.


----------



## Firefly

canicemcavoy said:


> Of all the people to make this argument, I'm still astonished that Brendan is doing so. On 16 Sep 2008 he went on RTE News to assure viewers that Irish banks are well-regulated and sound. He said on this site he did so because:
> 
> 
> 
> http://www.askaboutmoney.com/showpost.php?p=1009250&postcount=22
> 
> So Brendan is effectively saying that those people who listened to his argument and accepted his advice and, perhaps for patriotic reasons, kept their money in Irish banks, should be punishing for doing so. Those who ignored him and instead, withdrew their money and perhaps put it abroad or into other safe investments, get away with it.




Canice, I think you're missing the point. The guarantee was increased since then from 20k to 100k. Brendan (I think) is arguing that those who have/had deposits > 20k should pay for that "insurance".

I don't personally agree with the prosposal, but I find some of the posts on this thread a bit harsh on Brendan. He is afterall providing this excellent forum for us all free of charge. Why can't people just say they don't agree and give the reasons?


----------



## canicemcavoy

Firefly said:


> He is afterall providing this excellent forum for us all free of charge. Why can't people just say they don't agree and give the reasons?


 
The reason I say I'm astonished is because I thought that Brendan would be the last person to want a run on banks. The upshot of this scheme - even the fear that it might happen - would be such a scenario. That would be worse than any money it might raise (not much in the scheme of things). It's quite likely that there is already capital flight at the moment, without even this fear.

There's also the issue of trust in our institutions, which has been broken in the last few years. Such a retroactive scheme would break that trust even more. People would fear that, no matter where they secured or invested their money from now on, the government can not only change the rules at any time, but _retroactively_ change them to seize it; it's like something out of a right-wing scaremongering view of a communist country. The point about the increase is irrelevant, since people didn't ask for this guarantee; it wasn't an optional add-on at my bank.


----------



## galwegian44

Firefly said:


> Canice, I think you're missing the point. The guarantee was increased since then from 20k to 100k. Brendan (I think) is arguing that those who have/had deposits > 20k should pay for that "insurance".


 
I don't agree that Canice is missing the point here. Let's take it to the extreme then, why shouldn't the depositors 'pay' for the luxury of the 20K insurance also, what makes this 'insurance' sacrosant? 

Anyone in the insurance industry will tell you that each contract has a clause which requires full disclosure of material facts between insured and insuree and any contravention here results in a voided contract. Does anyone think that the banks disclosed all material information to the government? Does anyone believe that the government couldn't renege on the guarantee? Does anyone really believe that their money was safe because of the guarantee and the government would honour their commitments? Would you really pay for this type of guarantee if it was optional and they asked you to pay a premium for it?



Firefly said:


> I don't personally agree with the prosposal, but I find some of the posts on this thread a bit harsh on Brendan. He is afterall providing this excellent forum for us all free of charge. Why can't people just say they don't agree and give the reasons?


 
Agreed that some of the posts seem to have a personal edge to them and I don't understand why, maybe I'm missing something here. But (and I hope that Brendan would agree) I don't believe that we should moderate our views because the suggestions are put forward by the person who is hosting the forum.


----------



## canicemcavoy

Indeed; it's a topsy-turvy country where, at the same time we're talking about seizing money from people who saved it away safely on deposits, "eminent" economists are saying we should bail out people who, as Primetime shows last night, invested (not saved, invested) in multiple properties in places like Dubai.


----------



## Firefly

Anarchy said:


> So he is allowed to make nonsensical suggestions without being told that? If he didn't own the site he would have really got told what people think.



Of course you're allowed to disagree with anything that anyone proposes on this site, but remarks such as 



What a fantastically terrible idea! You've outdone yourself Brendan!
Brendan, I always thoughts your posts had credibility - until now. You sound like Michael O'Leary trying to stir things up.
Pure and simple begrudgery Brendan. Nothing intellectual there at all. Your suggestion is offensive, and immoral.
are IMO a bit over the top. As I said, see post #2 on this thread, I think it's a bad idea.
[/QUOTE]


----------



## Marietta

exactly, i am glad so many posters are taking a stance on this. We also worked very hard for the what we have and never bought in to any of the celtic tiger hype. To even contemplate that small savers like us should end up paying for the likes of fitzpatrick and drumm is pretty soul destroying to say the least.


----------



## Kev

If this dreadful idea is not dealt with soon then there will certainly be a run on banks.  If it not has already happened. ...


----------



## Bcommercial

Firefly said:


> Of course you're allowed to disagree with anything that anyone proposes on this site, but remarks such as
> 
> 
> 
> What a fantastically terrible idea! You've outdone yourself Brendan!
> Brendan, I always thoughts your posts had credibility - until now. You sound like Michael O'Leary trying to stir things up.
> Pure and simple begrudgery Brendan. Nothing intellectual there at all. Your suggestion is offensive, and immoral.
> are IMO a bit over the top. As I said, see post #2 on this thread, I think it's a bad idea.


[/QUOTE]
Wow! How could anyone find such posts OTT or unfair to the OP, considering the outrageous proposition he proposes and continues to defend. They are on the contrary very moderated and any other poster would have been told so in no uncertain terms..Brendan's been getting the kid glove treatment here due to his position. He is adding further insult to injury and really helping this Govt twist the knife which is bleeding the citizens of our country dry by his proposal, especially considering his own partial culpability in reassuring depositors at the time. Is this some kite being flown to test the waters for the govt, or what in the name of god possessed him to float such an idea at all?
Yes, lots of "in the know" people like us who visit this site and others like it, had their savings parceled away in <20k lots before the guarantee, as lots of us have also long since moved our savings out of the country altogether. But most people didn't, and trusted our politicians, financial regulators and indeed the host of people including Brendan himself who the govt trundled out to "reassure" the public. And now he wants to do a smash & grab that would make any FF highwayman proud! Shame on you Brendan, but perhaps you've actually done some good by finally putting the skids under the undecided and convinced them finally to get their savings as far away from this basket place country as possible. 

@ Galwegian 44  Great post esp about the witholding of material facts from contract etc

@ Anarchy  Well done, I share your feelings absolutely

@ Canicemcavoy + 1


----------



## galwegian44

Anarchy said:


> What you are missing is this.
> 
> The guy is suggesting legalizing the theft of a large chunk of my savings.
> All of which I earned by working hard abroad in a civilized democratic society.
> 
> He is suggesting something that no where else in the civilized world would
> be even suggested. You have to come to Ireland to hear rubbish like this.
> 
> I take it personally when someone suggests that I should pay for the consequences of the reckless orgy of spending and debt
> accumulation engaged by people in the "Celtic Tiger" Ireland whilst I was away working hard to accumulate some savings.


 
On the proposal put forward by Brendan I'm totally in your camp as my replies in this thread have shown, I've called the proposal ludicrous!

However, this is, in essence, an online debate about the pros and cons of such a proposal and anyone who attacks the person rather than the proposal is missing the point of such a discussion. Lets focus on the that!


----------



## galwegian44

Anarchy said:


> In the name of God where have I attacked the person in this?
> 
> I said his IDEA is stupid irresponsible and wrong ! If you interpret that as me saying that he is Stupid then that's your business!


 
Anarchy, I'm not saying it was you that did this (and I don't feel it is my job to 'protect' Brendan as I'm sure he is well capable of that himself). I responded to your post because you had initially responded to me when I asked had I missed something about the personal nature of some of the posts. Anyway we're veering off the point here.

The proposal, on first read, sounded totally unfair and off the wall. After digesting it for a while I could see where Brendan was coming from with regard to levying a charge against a group of depositors who would have been worse off financially if the banks had fallen. However, this proposal is totally unfair in the environment we find ourselves in, and above all is totally unworkable. Having said that, I'm off to withdraw my money from the banks and buy some gold.....not gold shares, not ETF's etc but the real stuff. We're only half way down the slide and I still cannot see the bottom!


----------



## brigade

After reading this thread, I am definately moving my deposits offshore!


----------



## Kev

People who make suggestion like Brendan has made have their own wealth out of harms way somewhere off shore no doubt.


----------



## Marietta

Well I have emptied the contents of my current account today, the teller asked me if I wanted a bank draft, no, cash please I said.  I will sleep safer tonight knowing its under my mattress.


----------



## Grizzly

Most banks were only paying their "demand" deposit account holders .1 of 1%. So in effect, bank customers were only renting space in the bank's vault to keep their cash safe. If these people are charged 10% of their capital to rent space in a bank vault then it would make better sense for these depositors to get a big black refuse sack, dig a hole in their garden and hide their money for free.  After all they will only be losing .1 of 1%.


----------



## Kev

Bcommercial said:


> ... the ball being the OP's suggestion to confiscate a proportion of people's savings to fund the bank bailout, and which I for one, am about to kick forever into touch! Enough damage done, and the less said the better on this one I'd say.



 If this is the case then it is totally immoral and also theft to take people hard earned money that they put into a bank for safekeeping and in retune the bank keep a big chunk of it to make good their own greed.

If that happens then no one will ever trust Irish bank again.


----------



## Marietta

Kev said:


> If this is the case then it is totally immoral and also theft to take people hard earned money that they put into a bank for safekeeping and in retune the bank keep a big chunk of it to make good their own greed.
> 
> If that happens then no one will ever trust Irish bank again.


 

Why is Brendan advocating this idea and why does he want us savers to bail out the banks, does he know something we don't??????


----------



## Duke of Marmalade

Kev said:


> If that happens then no one will ever trust Irish bank again.


It will indeed be a very, very long time before anybody trusts an Irish bank again. That's why the guarantee keeps getting extended. People still trust the guarantee. I think the _Boss'_ suggestion would destroy even that trust.


----------



## Marietta

Thank you Anarchy, discussion closed


----------



## shnaek

I don't think we should get personal in here. It is as valid a suggestion as any other to make, though a suggestion I totally disagree with. The banks and the country would be in a lot more trouble without the deposits, and it should be seen as patriotic that people are leaving their money on deposit in Irish banks rather than transferring those deposits abroad.


----------



## Bcommercial

shnaek said:


> ...it should be seen as patriotic that people are leaving their money on deposit in Irish banks rather than transferring those deposits abroad.


 
...patriotic but also increasingly reckless. Wearing "the green jersey" (while also losing the game), doesn't seem to have had much adverse effect on those privileged few who got us into this mess, but could well damage the small guy's life savings before this game is eventually up.


----------



## WombleWilly

ontour said:


> Borrowers with tracker mortgages are paying less for their loans than it is costing the bank to fund the debt, if the banks do survive...(pause for air..) the gap will have to be filled somehow and lower deposit rates will form a part of that.  Depositors paying for the perks of the borrowers again.



That doesn't make any sense. If the banks need to borrow from the market at high interest rates to fund the debt, then it is in the interest of banks to offer higher rates to depositors to offset as much of that as possible. Banks that offer poor deposit rates will be forced to borrow at even higher rates from the market.

It's the banks that don't have tracker mortgages (and can borrow more cheaply from the market) who will be less inclined to offer higher rates. You can see this in the banks who are openly advertising themselves as "safe" who are offering some of the lowest deposit rates.


----------



## WombleWilly

canicemcavoy said:


> So if someone had a €100,000 for a house deposit in an Irish bank on September 2008, and used it to buy a house since, they now owe a lump sum of €10,000, even if they're currently unemployed and in negative equity.
> 
> Are you really serious? Have you brought up this idea at the mortgage debt expert group?



I think that Brendan's point is that without the guarantee, they would have lost a lot more than €10k - Up to €80k.


----------



## Knuttell

Thanks for this thread Brendan,I have been dithering for a wile about transferring a significant amt of money from several Irish banks to a Belgian bank (Keytrade),having read your comments,I will visit each of these Banks on Monday and empty every last cent and transfer it off shore.

Your bizarre suggestion,was the last five nails in the coffin for me,I only wished I had seen this thread earlier.

*FF are at best a week away from calling a general election,*God knows what final salvo of shot they will fire into the ungrateful electorate as they finalise drawing up the budget,tell you this for nowt,it wont be a seizure of my hard eared ducats though.


----------



## bpb52

Thanks Brendan.

You have made a strong case for buying German Govt Bonds !


----------



## magoko101

Great idea Brendan... but we shouldn't stop there. We should also go after all those people who got dividends on banks shares and take all that back too. The banks were clearly earning this based on reckless lending and since we are now collectively picking up the tab.... shouldn't the share holders of the past be forced to return their deposits.

In fact I think having a higher tax system for those who cheered the property boom might also be a good idea... anyone who is on record as ever saying "now" was a good time to buy, between 2001 and 2010 should be asked to contribute a higher tax rate in order to help support those who were duped into buying.

This thinking outside the box is great


----------



## FAUGH45568

At least now we know how they are going to fund all these loans.

I was worried we would not be able to pay the IMF loans. 
Thank God... I can sleep easy tonight.


----------



## grackal

The guarantee was a bluff. The government could not have possibly honoured all the deposits had the banks collapsed. The bluff/guarantee was not for depositors benefit, it was to placate the market.

There is just so much fail in this idea it might just work.


----------



## canicemcavoy

I'm just wondering how much money has been transferred from Irish banks as a result of this thread. I know it's at least six figures.


----------



## Brendan Burgess

It's easy to attack a suggestion. No one has come up with an alternative. 

 I thought it was obvious that there was little confidence in Irish banks or in the government guarantee. So suggesting that this would damage confidence is a false argument. As I have repeatedly said, it would bolster the position of the state's finances and should improve confidence in the Irish government's financial position. 

I don't suggest this easily. I don't like this medicine either. But the alternatives are all worse: 

1) Renege on the current guarantee.  If people bought Irish bank bonds or put money on deposit because they were guaranteed by the Irish government, it's far worse reneging on this than reneging on a retrospective guarantee which we could not afford.
2) Be rescued by the ECB/IMF. This is also worse than my proposal. 
3) Force the taxpayers generally to pay for the guarantees of a few who had money in excess of €20,000 on deposit. 

It's very hard to make a good decision when each of the options is frightening, but we do have to make that choice. I think we should make that choice proactively, rather than collapse through being afraid to make a decision, which, however unpleasant,  is the least worst.

As I said, I don't like my suggestion. It is changing the law retrospectively. It would be difficult to implement. It would be quite a blunt instrument. Some people would try to evade it.

It's unfair. But it's a lot fairer than the other suggestions. To summarise, I am saying that those who benefited from the retrospective guarantee should _contribute _to its cost.  The depositors in Anglo and Irish Nationwide got a risk premium. The interest rates were a lot higher than most other deposits. They did not have a government guarantee when they made those deposits. They should have lost all their money. I am suggesting that they should lose only half of it. 

*Someone has to pay for the retrospective guarantee.  *

Someone asked if the AIB dividends should be recalled? As a recipient of those dividends, I don't like the suggestion, but I think it deserves serious consideration. 

As I said in the opening line, no one has come up with an alternative suggestion. If someone does, I will certainly withdraw mine. 

Brendan


----------



## canicemcavoy

Brendan Burgess said:


> It's easy to attack a suggestion. No one has come up with an alternative.


 
Here's my alternative: my  alternative is not to retroactively levy people's deposits and therefore completely ruin the remaining credibility of Irish banking. Brendan, what do you think would happen to a government which simulteneously argued that (a) a deposit levy could be applied retroactively, but (b) laws related to economic treason and mismanagement shouldn't?



> I thought it was obvious that there was little confidence in Irish banks or in the government guarantee. So suggesting that this would damage confidence is a false argument.


 
I'm sorry, it's not a false argument to say this would move the situtation from little confidence to no confidence at all. This is up there with "sure, may as well be hung for a sheep as for a lamb".



> As I have repeatedly said, it would bolster the position of the state's finances and should improve confidence in the Irish government's financial position.


 
Brendan, at this point I consider you're just playing Devil Advocate, or looking for attention. The amount of money raised - if it could be raised at all, since how many people would still have their deposits in the banks if wind of this came out - would be dwarfed by protests and the capital flight of remaining deposits. There's any number of schemes that could raise the same money with a fraction of the controversy.



> 2) Be rescued by the ECB/IMF. This is also worse than my proposal.


 
We're already being rescued by them anyway. The IMF are here and they're not going away. According to one journalist, they're already examining past documentation from the Financial Regulator. I've no illusions about the IMF, but personally we'll finally get some justice from the economic class in the country who allows this situation to happen.


----------



## Brendan Burgess

Canice

Come up with an alternative suggestion to contributing to the solution. So far all you are doing is rejecting an idea. You have no solution. 

All the solutions I listed are unpalatable. I have picked the least unpalatable. 

Brendan


----------



## ontour

The alternative is to accept that the cost of past decisions will not be directly attributed to those that benefited, it will be shared across all of the people of this country that have means.  Deposit security is just one of the very expensive hangovers of the boom and bust.  Tracker mortgages, public sector pay levels, social welfare levels, low asset taxes and low income taxes are also decisions from the last decade that have benefited some individuals more than others.

I will let the government tax my deposits if I can get a tracker mortgage for the next 40 years but that is not the way the world works.

The cost will not be attributed fairly, those that took the least risk and have assets and income now will pay the most.  Those that took the greatest risks, and have nothing, will pay nothing now.  The decisions will be made based on where money can be found now.  As deposits are very mobile and we have ease of access to move them to other jurisdictions, it would become a zero sum game at best to target them.


----------



## canicemcavoy

> The cost will not be attributed fairly, those that took the least risk and have assets and income now will pay the most. Those that took the greatest risks, and have nothing, will pay nothing now.


 
+1.

Brendan, have you run this idea by any economists? Brian Lucey for one things it's a "stupid" idea. Are there any who support it?

Also, it's perfectly reasonable to criticise an idea without having to put forward any alternative. If someone suggested banning books in order to protect children, it's perfectly reasonable to simply argue against book-banning. There any many alternative ways to either cut costs or raise revenue.


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## monagt

"Brendan, have you run this idea by any economists? Brian Lucey for one things it's a "stupid" idea. Are there any who support it?"

Brain Lucey is correct - It's a stupid idea!
The future danger to society would be limitless, lack of investment, attacks on homes., movement of savings abroad, breaking of trust between the governed and their government and so forth.
The banking deposit system must be protected, not just for the sake of current depositors but future social reasons.


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## Duke of Marmalade

canicemcavoy said:


> Brian Lucey for one thinks it's a "stupid" idea.


 I didn't like the idea either, now I'm not so sure.


----------



## Brendan Burgess

> "Brendan, have you run this idea by any economists? Brian Lucey for one  things it's a "stupid" idea. Are there any who support it?"



Thanks Canice. That is the best endorsement of the idea I could possibly hope for.

It was Brian who suggested solving the Anglo problem by "selling the deposits".  I know we need radical new ideas, but...


That is the purpose of Askaboutmoney. Ideas are put forward. They are criticized. They are improved. Or alternatives are suggested. 

I am not acting as Devil's Advocate. But if the suggestion prompts a better one, I would be delighted. So far, a better alternative has not been suggested. I am still waiting.


----------



## noel_c

AIB lost nearly 20% of their deposit base since June. BOI and ILP lost 10% of theirs recently. An idea like this is going to cripple these banks even more and leave tax payers on the hook for a larger amount. But there's still no discussion here about the effects of a tax like this on the deposit base of the other Irish banks.

As said earlier this idea is being championed by Niall Mellon. Now there's a ringing endorsement of the idea


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## canicemcavoy

Brendan Burgess said:


> Thanks Canice. That is the best endorsement of the idea I could possibly hope for.


#

So Brendan, which economists do you actually recommend and which one(s) would you like to see endorse your idea?

Better ideas? An increase in corporation tax by a few percent. A narrowing of the tax bands. There you go. Neither of these will create an insane run on the banks.


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## canicemcavoy

noel_c said:


> As said earlier this idea is being championed by Niall Mellon. Now there's a ringing endorsement of the idea


 
A developer wants to penalise people who didn't get involved in the property bubble, but sat on their deposits and bided their time. What a surprise.


----------



## Bessa

A warning to all out there Hands off our deposits. We saved when others squandered, thats our crime.


----------



## shanegl

Brendan Burgess said:


> Canice
> 
> Come up with an alternative suggestion to contributing to the solution. So far all you are doing is rejecting an idea. You have no solution.
> 
> All the solutions I listed are unpalatable. I have picked the least unpalatable.
> 
> Brendan



A one-time levy on the owners of the banks.

"Sorry, your nominal share capital wasn't enough, we need a further contribution to plug the hole that you created."

The last people you should be going near are the banks' _customers_. You know, the ones that the AIB and others consistently screwed over to turn out those wonderful dividends year after year? Well guess what, we need some of those dividends back.


----------



## Bessa

Its usually those who do not have X Y or Z, that want to take X Y and Z from others.


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## monagt

I think you are not looking at the segment of the population who have large cash deposits. 

These are pensioners, many of whom lost a lot on "safe" bank shares already, so throwing them on welfare will not save in the long run.

I don't have an answer but this suggestion is merely moving the problem around and only creates more fear and uncertainy.


----------



## Marietta

something strange going on with valid posts being deleted. This thread has been picked up by posters on thepropertypin.ie and there is a fair amount of angry over it. If the media pick up on this suggestion of brenden's it will cause untold damage to an already very fragile banking system.


----------



## PaddyBloggit

Marietta said:


> something strange going on with valid posts being deleted. This thread has been picked up by posters on thepropertypin.ie and there is a fair amount of angry over it. If the media pick up on this suggestion of brenden's it will cause untold damage to an already very fragile banking system.




The thread title:

*'Make the depositors contribute to the deposit guarantee?'*

has a question mark attached so to me the thread was to debate the suggestion rather than viewing it as a fait de complit.

No harm in having reasoned debate. I can't see how the banking system can be damaged any more than it is already.


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## Brendan Burgess

Marietta said:


> something strange going on with valid posts being deleted. This thread has been picked up by posters on thepropertypin.ie and there is a fair amount of angry over it. If the media pick up on this suggestion of brenden's it will cause untold damage to an already very fragile banking system.



Hi Marietta

Posts which are in breach of the Posting Guidelines and those which quote them are deleted.


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## Brendan Burgess

PaddyBloggit said:


> The thread title:
> 
> *'Make the depositors contribute to the deposit guarantee?'*



Hi Paddy

Thanks for reminding me of the thread title, which might have caused confusion. I have edited the title to reflect what I am actually suggesting.


----------



## rekhib

Brendan Burgess said:


> It's easy to attack a suggestion. No one has come up with an alternative.


 
I'm pretty sure that I came up with an alternative suggestion to raise the money but the post was deleted as it was 'off-topic'. Do alternative suggestions for saving the country need to be solely within the context of the banking system?



Brendan Burgess said:


> I thought it was obvious that there was little confidence in Irish banks or in the government guarantee. So suggesting that this would damage confidence is a false argument.


 
I don't think that is necessarily true. Sure, confidence is minimal but there must be a degree of confidence otherwise there would be literally 0 EUR deposits in the system. Yields bordering 10% are frightening but many OECD economies over the last 20 years have had double-digit bond yields, e.g. Italy, Norway, Spain, Portugal, Sweden, Australia, New Zealand. At the most basic level, if you assume that bond yields are inversely proportional to confidence and you use 1% as a 'maximum confidence' baseline, over the same data set, 9% is most certainly not 'no confidence'.


----------



## canicemcavoy

Brendan, you also never responded to my point. 

http://www.askaboutmoney.com/showthread.php?p=1103687#post1103687

You yourself went on RTE News to specifically reassure depositors and dissuade them withdrawing their money. You are now saying they were foolish to listen to this reassurance 2 years ago and should pay for the "privilege" of having left their money on deposit. Do you have any opinion about the current run on deposits?


----------



## Marietta

What happened to my last post here, it has disappeared, something strange going on in AAM


----------



## Marietta

Ah well this suggestion or statement of his is probably old news now, the IMF have given us a 'contingency fund' so you can all sleep well tonight, all your deposits are safe for the moment at least...........


----------



## Horatio

Brendan Burgess said:


> The people who benefited most from the extension of the deposit guarantee were the depositors in the guaranteed banks.
> 
> So charge all those depositors on the night of the guarantee 10% of their deposit in excess of €20,000.
> 
> Charge those in Anglo and Irish Nationwide an additional 40% as they would have lost everything.
> 
> It wouldn't apply to deposits in Credit Unions, although Credit Union deposits in Irish banks would be subject to the same deduction.



I've read your proposal initially with rage then it started to make a certain amount of sense as I made my way through the thread but ultimately this pig just won't fly.


----------



## Bronte

If a government were ever to do this nobody would ever save again in an Irish bank.  The idea is completely crazy as it penalises those who saved for saving, many will have in any case, since the guarantee was put in place, used their savings to live on due to loss of employment, others will have spent it on say a deposit for a property purchase and therefore no longer have the money to pay for it.

I don't think anyone would object to having to pay for a deposit guarantee going forward at say a percentage of the interest given and levied on everyone with savings.


----------



## irishmoss

I agree Bronte, a precentage of interest would be fine going forward too but I think Brendans suggestion of 10% of the deposit held in excess of 20,000 is outragious!

Also given Brendans statemnent at the time that deposits were safe "to calm a run on the banks" I think it would be a bit "Irish" to retrospectively charge people for the guarantee. In essence it is making fools of us first to say keep your money in the bank all is well, but then go back and take 10% of your deposit. It's deceitful, there is nothing democratic about that.


----------



## Firefly

Bronte said:


> I don't think anyone would object to having to pay for a deposit guarantee going forward at say a percentage of the interest given and levied on everyone with savings.



Not much incentive there for people who have moved their deposits outside the state to move them back again.


----------



## ontour

Make a deposit guarantee system optional for the bank to purchase.  If they want to offer a more secure product with a lower rate of return, they can do what Rabo do.  Another institution may decide not to invest in a government guarantee system but pay a higher interest and the savers accept the risk / return trade off.

The current crisis should remove that expectation by most people that their deposits are safe and that they do not have to think about where they put them or manage the risk. The current dispersal of savings to an array of institutions is the first step towards people accessing a broader array of financial service providers.  If this continues we, as consumers, can ensure that one bank can not bring down a country again.


----------



## canicemcavoy

Since it was nothing to do with either savers or savings that brought the banks down, savers changing their behaviour will do absolutely nothing to avoid any future crisis. It was a problem with propert loans and regulation.


----------



## Raskolnikov

Horatio said:


> I've read your proposal initially with rage then it started to make a certain amount of sense as I made my way through the thread but ultimately this pig just won't fly.


Those were my thoughts as well. I even read the topic on The Property Pin, where the howls of outrage were even more vociferous. One person did state that without the government propping Anglo up that ordinary deposit holders would have lost money had it been allowed to go bust. When you look at it that way, it's clear that even people with deposits at the banks are systematic. 

Government were always in a position where they were damned if they did, damned if they didn't.


----------



## Brendan Burgess

Folks, thank you all for your contributions. Many of the posts are repetitive, so I thought it would be useful to list out the arguments and my responses to them.


Just in case anyone has forgotten the original proposal: 

Those who benefitted from the retrospective guarantee of the Irish government should contribute to its cost. 


*It’s wrong for the government to introduce a retrospective law *
  This is the most valid objection. It’s hard to argue with, except that we are not living in normal times. We gave a retrospective guarantee which we find we cannot afford. 

  I would argue that if we were able to introduce a retrospective guarantee, we can introduce a retrospective tax. 

*There would be a loss of confidence in Irish banks and the Irish government*
  The only confidence in Irish banks was due to the guarantee. The international markets had spoken about their confidence in the Irish government by pushing up bond yields to above 8%. 

  Introducing a retrospective tax would be bad for confidence, but again, we are fighting for survival here. 

*I would have taken my money out if the guarantee had not been increased.*
  Some few people would have got their money out, but once the run had started, the banks would have closed and the vast majority would have lost their money.

*People would take their money out of Irish banks if this proposal was implemented*
  Again, I have made it very clear that my suggestion is that people would be taxed on their balances as of September 08, whether they have subsequently moved the money or not. 

*Depositors weren't made aware of any risks when opening accounts? You can't retrospectively change it now.*
  Depositors should have been well aware that Savings Certs were state guaranteed. They probably should have known that, in comparison, savings in banks did not have a government guarantee.

*Some people have spent the money and so could not pay the tax.*
  In any dramatic proposal, there will be difficulties implementing it for some people. That does not make the proposal itself invalid. A way has to be found to deal with this e.g. they could be exempt. 

*I already paid tax on  my savings. *
  Irrelevant. You would have lost all your savings if the government had not retrospectively guaranteed them. 

*I didn’t contribute to the property boom, so why should I be punished?*
  This is not about punishment.  You would have lost all your savings in Anglo or Irish Nationwide  if the government had not retrospectively guaranteed them. 

*the ordinary depositor will end up paying for the mistakes of the government, financial regulator,bankers and developers??*
  The ordinary depositor who benefited from a retrospective guarantee will contribute to its cost.  All taxpayers are paying for the mistakes made. And all taxpayers are paying in full for this very expensive guarantee. 

*The banks won't collapse because of the depositors, they will collapse because of mortgage default.*
  As of now, mortgage default is not having a serious impact on Irish lenders. The biggest cost has been Anglo, who did not do mortgages. But the cause of the collapse is irrelevant. If they had not been retrospectively guaranteed, the depositors would have lost their money, no matter how the bank had lost theirs. 

*Brendan has caused the run on Irish banks since this suggestion was first posted
*In one sense, I am flattered that I can move markets. But as I was singlehandedly responsible for the property boom in Ireland, causing a run on the banks is not much of a follow on. I am going to start manipulating the stockmarket next. 

*I, as a depositor on a guaranteed bank have not benefitted in any way*
  This is just extraordinary. If people had tried to withdraw their money, the banks would have just closed down.


----------



## Brendan Burgess

*Arguments with no logical validity *
I welcome the criticisms, challenges and refinements. 

Here are some of the arguments which make no sense at all and make no contribution to advancing the discussion.

I have left a sample of the abuse on the thread. I would have deleted it had it been said about any other poster. I have deleted the most offensive and posts containing bad language.

*Brendan said the banks were safe back in 2008 so he has to be wrong now *
  The fact that I have been wrong on some occasions in the past, does not mean that everything I say is wrong.  

*Brendan’s analysis in Sept 2008, was correct, so he must be correct again now. *
  People love quoting selectively from the interview where I said that  the banks were safe. They never quote the following bit. But because I  was right then, doesn’t mean I am right now.



> 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.
> 
> If an Irish bank goes to the wall , which is very unlikely, the rest  of the   Irish banks will bail them out and personally , I would be more  concerned   about someone with €10k on deposit than someone rich enough  to have €100k on   deposit.
> …
> 
> 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


 *Brian Lucey thinks it’s a stupid idea*
  The idea should be judged on its merits. Not on who proposed it. Not  on who opposed it. The fact that Brian Lucey forecast in 2006 that the [broken link removed]  or that he suggested selling the deposits of Anglo Irish Bank does not make all his analysis now wrong. 



*This is the most stupid idea I have ever heard. *
*What a fantastically terrible idea! You've outdone yourself Brendan!*
*The idea itself is poorly thought out never mind completly wrong.  It is a bit worrying if these are the types of ideas that are being  discussed.*
*Pure and simple begrudgery Brendan. Nothing intellectual there at  all. Your suggestion is offensive, and immoral. It encouarages  begrudgery and this incessant blame game, find a scapegoat mentality  that pervades Irish society at the moment.*

  Personal abuse doesn’t make the argument right or wrong

*you see the mortgage holders as the victims, others see them as the  idiots that caused this mess by spending more than they could afford on  property with inflated prices.*
  I have sympathy for the mortgage holders, but I don’t see them as victims. 

*I will leave the last word to Canice…*



> Indeed; it's a topsy-turvy country where,…"eminent" economists  are saying we should bail out people who, as Primetime shows last night,  invested (not saved, invested) in multiple properties in places like  Dubai.


  And just a few posts later



> Brendan, have you run this idea by any economists? Brian Lucey  for one things it's a "stupid" idea.


  Brian Lucey being the  prime “eminent” economist proposing mortgage debt forgiveness. Canice –  at last I agree with you. It’s indeed a topsy-turvy country when you can  damn Brian Lucey in one post and then use him to damn my proposal in  another.


----------



## canicemcavoy

> Brendan said the banks were safe back in 2008 so he has to be wrong now


 
Brendan, that wasn't the point I was making. To reiterate; you yourself convinced depositors that their deposits were safe and they should not withdraw. You are now proposing that these people you convinced should be penalised. Do you feel no moral responsibility or shame over this?

I'm no Brian Lucey fanboy; he's been right sometimes, wrong others. He thought the property bubble would last, for one. And his debt forgiveness scheme is untenable - I agree with you on that point. 

My point is - does _any_ economist think this is a good idea?


----------



## JoeB

The argument that people would (may) have lost everything in the past  is not valid as an excuse for a retrospective tax now.

On those grounds a neighbour who prevented a breakin into your home would have a claim on all your possessions, 'as you'd have lost them anyway'.


There is no certainity that the banks would have failed, how can we be so certain? (although I would concede this point to a degree). But there can be no certainity.

'Not living in normal times' is not an excuse for state theft., .. unless we are entering into a totalatarian type regime. .. where confisacation of private property is the norm.


----------



## Duke of Marmalade

_Boss_ your argument seems to be that the retrospective nature of the gauarantee was a mistake and should now be reversed. So let us wind back to Sept '08. Let's say the government announces a guarantee on all *future* deposits but doesn't guarantee existing deposits. So what would happen next? Existing depositors would simply switch their deposits into new deposits. 

So nobody "gained" from the retrospective nature of the guarantee unless you are arguing that the right thing to do was to actually let the banks fail. For INBS/EBS maybe but not for any of the others. Ireland's economy, meaning us all, needed the systemic banks to be kept in business. Depositors, existing and new, were an essential contributor to that process.


----------



## Raskolnikov

Brendan, your proposal while well-intending, seems difficult to implement. Could we not make a case for allowing Anglo Irish Bank, and Irish Nationwide to fail? Someone on The Property Pin estimated the costs to depositors in Anglo Irish Bank as follows.


> If we had had a liquidation, or a wind down of Anglo without the  government guarantee, depositors would have lost money. I will outline  how using the 2007 annual report as a guide as it was the last report  issued before the Guarantee. [broken link removed]
> 
> Anglo  Irish losses are now expected to be in the order of €35 billion. If it  was not for government intervention, the Anglo Irish capital structure  would have had to take losses in this order.
> 
> 1. Shareholder equity - €4 billion - that's the shareholders getting wiped out
> 2. Debt securities -  €23.5 billion - that's ALL the debt/bond holders getting wiped out
> 3. Depositors - €7.5 billion - this is the hit depositors would have had to have taken
> 
> Given  that the Anglo had €46.7 billion on deposit, that means depositors  would have had to have taken a ~15% hit in the wind-down.


I do not have a detailed understanding of the figures, but is it too late to consider this measure at this stage?


----------



## Duke of Marmalade

_Rasko_ that is not how our liquidation laws work. Bondholders rank equally with depositors. That is why they were persuaded to take an interest rate slightly above deposits. If they knew that they would rank behind depositors they would be slipping into equity country rather than debt and would be demanding a much higher coupon.

Merkel and others want to change this state of affairs going forward but not retrospectively. The buzzword is a "resolution scheme". The problem is that if you weaken bondholders' ranking they will simply demand higher interest.

I support introducing a future resolution scheme (not a retrospective one). It will change the nature of banking and will severely limit the scope for countries like Ireland to leverage off foreign lenders. That would be a very good thing because it seems to me the real source of our problem is that we had access to cheap foreign funding to the point that we were grotesquely overweight with it. It was this cheap funding that fuelled the bubble.


----------



## Brendan Burgess

Hi Duke



> Let's say the government announces a guarantee on all *future* deposits but doesn't guarantee existing deposits.



I don't understand this. It could not be done without freezing the existing deposits. 



Duke of Marmalade said:


> So nobody "gained" from the retrospective nature of the guarantee unless  you are arguing that the right thing to do was to actually let the  banks fail. For INBS/EBS maybe but not for any of the others. Ireland's  economy, meaning us all, needed the systemic banks to be kept in  business. Depositors, existing and new, were an essential contributor to  that process.



It's hard to know what the "right" thing to do was. 
We did give a retrospective guarantee. The banking system has survived in some manner and we have gained from this. But at a huge cost. 

If the guarantee had not been raised, there would have been a run and the banks would have collapsed. So, whatever way one looks at it, the depositors who got a retrospective guarantee, have benefitted hugely.

This guarantee has weakened the "guarantees" to given in advance to others. Those who held savings certs or Irish government bonds. They have been hugely disadvantaged by the retrospective guarantee.


----------



## Bronte

Firefly said:


> Not much incentive there for people who have moved their deposits outside the state to move them back again.


 

Conversly those looking for a safe place to deposit their money would prefer a bank with an insurance guarantee on the savings even if the interest rate was slightly lower.


----------



## Bronte

canicemcavoy said:


> My point is - does _any_ economist think this is a good idea?


 
Does anyone actually care what any economist says.  For each one that says it's a good idea you'll get 10 saying it's not.  Economists differ all the time and no one economist has been right most of the time.  Personally it's pure luck when they get something right, usually after the fact.


----------



## Firefly

Bronte said:


> Conversly those looking for a safe place to deposit their money would prefer a bank with an insurance guarantee on the savings even if the interest rate was slightly lower.



Very true!


----------



## Duke of Marmalade

Brendan Burgess said:


> Hi Duke
> 
> I don't understand this. It could not be done without freezing the existing deposits.


 
Okay, technically possible if existing deposits were frozen but in a sense this is the same as a retrospective resolution scheme.

Prof Holohan, in his report, mildly rebuked the blanket guarantee for covering existing bondholders which in other jurisdictions had not been the case. But I don't think he was suggesting freezing existing bondholders; that would be, as I say above, a retro change to the legal basis on which the funds were lent.


----------



## canicemcavoy

> If the guarantee had not been raised, there would have been a run and the banks would have collapsed. So, whatever way one looks at it, the depositors who got a retrospective guarantee, have benefitted hugely.


 
You have this completely backwards. It was actually the banks who benefitted from the depositors who left their deposits there; the banks would have collapsed otherwise.

You're now proposing that the depositors be punished for preventing the banks collapsing.


----------



## Duke of Marmalade

The bottom line is that nobody has benefitted from the guarantee as it hasn't been invoked. Existing depositors and bondholders have benefitted not from the guarantee but by the fact that the banks were kept alive. They were kept alive by a variety of means, guaranteeing funding, namafying toxics and recaps. The retro nature of the guarantee is an irrelevant part of the mix and will only become relevant when a decision is made to withdraw the other life supports and let the banks die. Then maybe one could say "oops! never meant this guarantee to apply to pre '08ers gotta confiscate half of it back".

In effect, the _Boss_ is saying that if we knew then what we know now the correct announcement in Sept '08 was "we are going to keep these banks open come what may but to enable that we are applying a one off tax of 50% on existing deposits and bonds, to the extent that they are within our tax jurisdiction".


----------



## Raskolnikov

Duke of Marmalade said:


> _Rasko_ that is not how our liquidation laws work. *Bondholders rank equally with depositors.* That is why they were persuaded to take an interest rate slightly above deposits. If they knew that they would rank behind depositors they would be slipping into equity country rather than debt and would be demanding a much higher coupon.


Are you sure about that?  I have read that Irish Nationwide bondholders have been trying to persuade the UK courts that depositors ranked below bondholders as they were technically shareholders, but I have never heard of depositors ordinarily ranking with bondholders.


----------



## Raskolnikov

Duke of Marmalade said:


> The bottom line is that nobody has benefitted from the guarantee as it hasn't been invoked. Existing depositors and bondholders have benefitted not from the guarantee but by the fact that the banks were kept alive.


Are you sure? When David McWilliams met with Brian Lenihan on that famous, garlic-fueled night before the guarantee was instated, he found out that...


			
				David McWilliams said:
			
		

> *We had weeks at best, days at worst.* My own reckoning was that the banks  had a few weeks' financing. The minister indicated that the problem was  more acute. The most revealing thing about our conversation was that it  was AIB, not Anglo Irish, that had the most severe funding  problems.


After the guarantee was introduced, the markets calmed and the rot stopped, so that surely suggests the banks would have went bust otherwise?


----------



## Brendan Burgess

Raskolnikov said:


> Are you sure about that?  I have read that Irish Nationwide bondholders have been trying to persuade the UK courts that depositors ranked below bondholders as they were technically shareholders, but I have never heard of depositors ordinarily ranking with bondholders.



Hi Raskol

This is one of the problems with the discussion generally. 

There are two types of bondholders:

Senior bondholders are, in effect, depositors and they must be treated equally.

Subordinated bond holders are, in effect, shareholders, and they can be burnt. 

Sunny did an excellent Key Post on it here.

Brendan


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## Duke of Marmalade

Raskolnikov said:


> Are you sure about that?  I have read that Irish Nationwide bondholders have been trying to persuade the UK courts that depositors ranked below bondholders as they were technically shareholders, but I have never heard of depositors ordinarily ranking with bondholders.


_Rasko_ that is a different debate. Depositors as members of a mutual buidling society are indeed technically the "shareholders" of the society and indeed would and have benefitted from carpetbagging de-mutualisations. So yes I could see an argument that bondholders rank above share deposits, an interesting and perverse twist. I admit that I had a humble deposit in INBS in the hope of a windfall, seemed like a one way bet. I can see an argument that I lost my bet. Ironically this line of thought would "punish" the lower deposits disproportionately, the opposite of the _Boss'_ suggestion. 

In the case of Anglo, AIB, BoI this doesn't arise. Depoitors and senior bondholders are both creditors of the company and rank equally in a liquidation.


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## Duke of Marmalade

Raskolnikov said:


> Are you sure? When David McWilliams met with Brian Lenihan on that famous, garlic-fueled night before the guarantee was instated, he found out that...
> After the guarantee was introduced, the markets calmed and the rot stopped, so that surely suggests the banks would have went bust otherwise?


Not bust, illiquid. And this has happened big time despite the life support mechanisms. When a bank goes illiquid rather than bust the Central Bank provides liquidity of last resort. This is now happening to the massive tune of €130bn

Anglo would now actually be bust as opposed to merely needing ECB support if it were not for the support mechanisms. That is because it would have run out of elligible collateral to tap the lender of last resort.


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## canicemcavoy

canicemcavoy said:


> Do you feel no moral responsibility or shame over this?
> 
> [...]
> I
> My point is - does _any_ economist think this is a good idea?


 
Brendan, I'm wondering if you have any responses to these points?


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## Brendan Burgess

Hi Canice


> Do you feel no moral responsibility or shame over this?


You might have missed this post? where I dealt with the question. Whether I was right or wrong on any particular issue on previous occasions  neither adds nor detracts from the merits of the suggestion.  But to answer your specific question - I am very happy with my overall record of getting things right and I have no problem with getting things wrong. But please don't take this or any other thread off topic - stick to the issue.



> My point is - does _any_ economist think this is a good idea?


I don't really like seeing people +1'ng posts, but, I will  make an exception as I can't improve on Bronte's answer to you



> Does anyone actually care what any economist says.  For each one that  says it's a good idea you'll get 10 saying it's not.  Economists differ  all the time and no one economist has been right most of the time.   Personally it's pure luck when they get something right, usually after  the fact.


 +1


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## kdoc

Brendan two years ago I was diagnosed with a heart condition. At the same time, as luck would have it, an 'Early Leaving' leaving offer arose in my company. I availed of the offer and I deposited the lump sum in a number of different institutions on fixed terms that matured at various times. It's our only family income - I am not entitled to social welfare of any kind, and I'm not due a pension until next year.  I am already sick with worry wondering if the deposits are secure and how we will exist if the system collapses. I'm not in a position to assist with a bank bailout.


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## Bronte

kdoc said:


> . It's our only family income - I am not entitled to social welfare of any kind, and I'm not due a pension until next year. .


 
You would be entitled to social welfare if you have no money.  

While I don't agree with BB's idea of taxing depositors retrospectively, on your point about not being able to afford to pay out such a tax, you have to consider that you would have lost everything if the government didn't do the guarantee. Put it this way if you were given the choice of losing 20% of your deposits or losing them all what would you choose?  

In case you don't think you are able to assist in the bank bailout.  Who other than taxpayers, depositors et al are going to end up paying for this mess?  That said they're not going to bring in a retrospective tax on deposits.  I'm sure DIRT tax will go up when they may the announcements today and pensions will come down or be taxed more highly.


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## micmclo

Amazing that the site owner can't manage to quote or multi quote. It isn't difficult and makes posts easier to read. 

You'd almost think Rabobank paid to get this thread started, a bank run would automatically follow


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## derryman

Unbelieveable....... 

we really have gone through the looking glass

I am undecided whether this discussion is a prop to flag falling discussion participation in AAM or else bitter grapes at bank share losses by some?

I rarely contribute and sometimes these "long grass" views are prescient.

I removed myself from a mad property market when it was clear that all rational argument was being suffocated and disparaged all around me

I am content in my assets being offshore as the "final grab" takes place

signing off


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## Brendan Burgess

micmclo said:


> Amazing that the site owner can't manage to quote or multi quote. It isn't difficult and makes posts easier to read.
> 
> You'd almost think Rabobank paid to get this thread started, a bank run would automatically follow





derryman said:


> Unbelieveable.......
> 
> we really have gone through the looking glass
> 
> I am undecided whether this discussion is a prop to flag falling discussion participation in AAM or else bitter grapes at bank share losses by some?
> 
> I rarely contribute and sometimes these "long grass" views are prescient.
> 
> I removed myself from a mad property market when it was clear that all rational argument was being suffocated and disparaged all around me
> 
> I am content in my assets being offshore as the "final grab" takes place
> 
> signing off





Brendan Burgess said:


> *Arguments with no logical validity *
> I welcome the criticisms, challenges and refinements.
> 
> Here are some of the arguments which make no sense at all and make no contribution to advancing the discussion.
> 
> I have left a sample of the abuse on the thread. I would have deleted it had it been said about any other poster. I have deleted the most offensive and posts containing bad language.


 
  mic and derryman

Thanks for adding two more non arguments to the thread.


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## z107

The snag I see with this proposal is that the 'guarantee' does not really exist (or didn't exist) as such.
Could the government have afforded to pay out the vast sums required?
The 'guarantee' was simply a perception, used to increase confidence.
If I had to pay for it, I would have just taken my money out of Irish banks sooner.


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## scabbers

There's very few ways out of this mess we have been dropped into due to the government and banks.

This idea, while crazy, is of course an idea, and I suppose the OP deserves some sort of credit for 'out there' thinking.

An improvement may be that any money taken from depositors is paid back with 100% interest after 5-10 years (when apparently the crisis will be a distant memory and the 4 year plan will have succeeded). People won't be so worried about having their hard earned money stolen. 

or

Once the gaurantee lapses, ANY money left in Irish banks may be taken and used to service the debt. 


Two equally logical ideas, but equally as crazy as the first.


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## Brendan Burgess

Hi Scabbers 

That is an interesting concept. The 4 year time-frame is too short. But the principle is worth exploring. 

The retrospective guarantee saved the depositors from losing a lot of money and everything in the case of Anglo and Irish Nationwide. 
charge them 10% and 50% of their deposits as of Sept 08. 
But issue them with some new form of bond in their place. 

The problem is that the bond would still form part of the national debt.
So it would have to be a non interest-bearing bond. 
And there could not be a fixed redemption date. 

So it would be an open-ended, non-interest bearing bond. Effectively the government would be saying: "You have to contribute towards the cost of the guarantee and if we are in a position to refund this contribution at some time in the future, we will do so."


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## Brendan Burgess

umop3p!sdn said:


> If I had to pay for it, I would have just taken my money out of Irish banks sooner.



But if the guarantee had not been introduced retrospectively, the banks would have collapsed so you would not have got your money out.

of course, if you had taken your money out before the guarantee was increased, then this would not apply to you.

Brendan


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## bullworth

Retrospective taxes doesnt sound constitutional. Is it ? Can you give an example of such a tax which has been applied anywhere else or in this country ?  How can you tax someone on money they were free to spend before the tax came about ? E.g If they withdraw it before such a retrospective tax came into force then its as good as spent and untaxable isnt it ? You would expect them to then pay a tax on money they then dont have  and for which it was impossible to make a provision for ? 
Why dont we retrospectively take away/ punitively tax to 90% the pensions and golden parachutes of the financial regulator/bank and building society bosses etc and retrospectively give the government a big fat pay cut going back ten years making them to pay the money back ? We sure could do a lot of things ''retrospectively''' if the idea of taxing people ''retrospectively'' was valid. Or does your idea Brendan only apply to those with the misfortune of having left their money ''patriotically'' in the irish banks ?


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## noel_c

Retrospective taxation is a very slippery slope. It would finally erode what little trust remains in the institution of Irish government of any political hue.

Many say that introducing a property tax pre-2000 would have prevented the bubble. Should we retrospectively apply a site tax to owners for that period?

Once the notion of retrospective taxation is on the table, the fear is that anything like this is open for discussion. This idea would be the thin end of the wedge.


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## scabbers

Brendan Burgess said:


> Hi Scabbers
> 
> That is an interesting concept. The 4 year time-frame is too short. But the principle is worth exploring.
> 
> The retrospective guarantee saved the depositors from losing a lot of money and everything in the case of Anglo and Irish Nationwide.
> charge them 10% and 50% of their deposits as of Sept 08.
> 
> ..... and so on and so on



I'm afraid you took my comment the wrong way, which is not surprising. 

Before the gaurantee was put in place, numerous government and banking officials, as well as many so-called economics 'experts', were vocal in their support and faith of Irish banks, the banking system and ireland's ecomony in general (some even suggesting that it was a great time to buy bank shares/houses etc ....I'll mention no names). 

Retrospectively charging depositors is a sure fire way to cause civil unrest on a large scale. It's reckless in the extreme and it's not exactly encouraing to see someone in your position put the idea in the public domain.

If we're looking at retrospective charging, lets get CAB involved and see if they can 
- restrospectively take back any bonuses given to any high ranking bank official during the last 10 years 

- take back any profits made on Irish banking shares (as the share prices were not a true reflection of the stability of the banks)

- Take back any salary paid to an employee in the Financial Regulator and the Central bank over the past 10 years, as it has become obvious they were not doing their job.


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## kaplan

@brendan

have you thought through the economic implications for M2 - money supply?


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## Brendan Burgess

Hi Kaplan

No, I haven't. 

In my opinion, the primary focus now should be to get down the national debt to stop the country going bankrupt and to allow the state to honour the guarantees to people who lent us money in the light of those guarantees.

The issue is "Who pays?". I am suggesting that those who benefitted from a retrospective guarantee should contribut to the cost of that guarantee. Those who invested in the light of existing guarantees should not run the risk of the state defaulting on those guarantees. Additionally, the people who did  not directly benefit from those guarantees, should not have to bear the full cost of them which is crippling us. 

Brendan


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## kaplan

Brendan,

Well you probably need to consider money supply. What you suggest is a massive contraction in money supply using a process which apart from being inequitable and probably unconstitutional would destroy what's left of the banking system and economy. 

As this is hardly in the common good, you might like to consider suggesting (a) the suspension of habeus corpus and the constitution (b) repudiation of EU treaties (c) exit from the Euro and (d) establishment of our own currency.


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## dub_nerd

So, did the Cypriot government read this now seemingly prescient comment? ...



Brendan Burgess said:


> Hi Scabbers
> 
> That is an interesting concept. The 4 year time-frame is too short. But the principle is worth exploring.
> 
> The retrospective guarantee saved the depositors from losing a lot of money and everything in the case of Anglo and Irish Nationwide.
> charge them 10% and 50% of their deposits as of Sept 08.
> But issue them with some new form of bond in their place.
> 
> The problem is that the bond would still form part of the national debt.
> So it would have to be a non interest-bearing bond.
> And there could not be a fixed redemption date.
> 
> So it would be an open-ended, non-interest bearing bond. Effectively the government would be saying: "You have to contribute towards the cost of the guarantee and if we are in a position to refund this contribution at some time in the future, we will do so."


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## Brendan Burgess

dub_nerd said:


> so, did the cypriot government read this now seemingly prescient comment? ...




Ι έχουν ειδοποιηθεί σχετικά η Κυπριακή κυβέρνηση στο παρασκήνιο


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## dub_nerd

brendan burgess said:


> Ι έχουν ειδοποιηθεί σχετικά η Κυπριακή κυβέρνηση στο παρασκήνιο


 
έτσι είναι όλο το ελάττωμά σας, τότε


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## Brendan Burgess

It is, yes.


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## Bronte

cashier said:


> can we have a translation please, we are not all familiar with the Cyproit language if that is what you are typing!


 
I presumed it was Greek, is there a Cypriot language?

This old thread is quite amazing. The Cypriots would do well to read it. It was quite a hot thread, a lot of people very angry at that time in 2010 which appears to be the election time too, so the pinacle of anger at FF then and how amazing that only 3 years later 2013 that support for FF is back up again. 

It would be very interesting to see if people have changed their opinions on what they posted then.

We now have a concrete example of an actual tax on deposits in Cyprus. Looking back would that have been a good idea in Ireland? I've no idea. But I'd like to know. 

But this I know, 

1. If I were a depositer in Cyprus and the choice was lose 10% or lose it all I'd happily lose 10%. 

2. If I were a depoister in one single failed bank in Cyprus I'd prefer that everybody in all banks paid 10% so that I would not lose everything. And I'd be happy in Ireland for a government to do this if there was a failed bank. (the case we actually had)

3. Banks are not, and have never been a 100% safe place to deposit money. Thanks to Jim in Switzerland yesterday who pointed out that in Switzerland since he has been there, a country renowed for it's banking safety, that 3 banks have failed since his time there and the depositors lost everything.

4. I now also know that no government deposit guarantee scheme anywhere means anything.  I suspected as much as I'm too long around.  

5. Even though banks are private enterprises they do not follow the rules of a capitalist society. Meaning that governments will try and not let them fail, and that their failure costs all of taxpayers and that banks should be tightly regulated. And that basically if you let bankers act freely they are no better than those who daily go into Paddy Power.

6. If taxing depositors had been a better solution than what the government actually did, then I would be happy for the governents to take 10% rather than the mess we are in (and yes I have deposits in Irish banks).


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## jman0war

> 6. If taxing depositors had been a better solution than what the government actually did, then I would be happy for the governents to take 10% rather than the mess we are in (and yes I have deposits in Irish banks).


But why should anyone have confidence that 10% is the final amount and not just round 1?

In our scenario, the real amount we taxpayers were on the hook for, was wildly under estimated.


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## Chris

Bronte said:


> 5. Even though banks are private enterprises they do not follow the rules of a capitalist society. Meaning that governments will try and not let them fail, and that their failure costs all of taxpayers and that banks should be tightly regulated. And that basically if you let bankers act freely they are no better than those who daily go into Paddy Power.



I agree that the entire financial industry has nothing to do with capitalism. Capitalism is about profit AND loss, and when you take away the loss the cost to the taxpayer becomes ever larger. So you have a situation where banks behave in a certain way because they do have the same fear of losses as pretty much all other industries.
But the solution is not to add another wrong to the equation, but rather to remove the source of the problem, which is the protection from losses in the first place.


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## galwegian44

Shocked again to read the original post in this thread, especially in light of what's happened in Cyprus.

The issue that our government (or Europe) have not addressed is to put measures in place to ensure this never happens again. I never want to hear the expression "bank too big to fail" or "banking sector that dwarfs a country's GDP" again. But what is being done - nothing I fear.

We need to put regulations in place to diminish the size of the banks and to discourage growth beyond a certain size. Tie this into a Deposit Insurance scheme that should be set up (like FDIC in USA) where the banks would pay more deposit insurance to offset the implicit/non-voluntary guarantees they get from taxpayers (through the government) to cover losses beyond the ability of the scheme to cover.

Capital requirements for banks in Europe need to be increased also and as far as I'm aware this has not even been discussed in recent times. Whatever about paying for this crisis once, who wants to be in the hot seat again sometime in the future.


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