Exactly why are investors abandoning the banks?

smiley said:
i dont think theres any case for libel here at all. Morgan kelly is just doing what any journalist would do.
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In the Dail today, Lenihan denied that they ignored the Dept of Finance's recommendation as stated in Morgan Kelly's article. He even specifically made reference to the very article! Someone is telling lies here.

smiley said:
Some said dont nationalise anglo others said do. I dont think you are ever going to have full agreement ever on a issue like this. The taoiseach is the boss at the end of the day.
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Yes, and as the boss you have to wonder why he would overrule the advice of the resident experts. The article says that both the economists in the Dept of Finance and their counterparts in the Central Bank were against including Anglo Irish and Irish Nationwide. It's very clear now that these two entities should not have been included. Why were the experts ignored? Cowen owes the nation an explanation at the very least.
 
Its absolutly ridiculous, this government do not have a clue.

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

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

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

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

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


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

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

Primary residence only for obvious reasons?
 
Padraigb said:
The continuation of your post suggests to me that you don't have any more clue than the government.
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The frightening thing is that it sounds to me that he has more of a clue than our government do and however dramatic it may seem we are not a million miles away from this posibility !!
 
I agree with almost all of Morgan Kelly's analysis in his IT article. I think he is wrong however in thinking that the state as shareholder will have to stand over all Anglo's liabilities, including those to bond-holders. The rules of limited liability still apply even when the bank is nationalised. To the best of my recollection, when the UK government took over Northern Rock, they defaulted on some of the bond liabilities. That would change some of his conclusions.
 
Duke of Marmalade said:
Yep, I was a bit shocked, but surely this isn't true. I still believe that the 2 Brians are doing what they see as best for the country without hidden agendas.
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I hope that you are right for the economy sake. Brian said in the dail today that all of the advice that he received is that Anglo Irish should be nationalised. So either he is lying or Morgan Kelly is lying. Even though i think FF is very culpable (for the lack of bank regulation, property bubble etc) and hope that they suffer because of this come election-time, i hope MK is lying cos the alternative is quite frightening.
 

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

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

But who actually knows what the best course of action is? If we look over the various discussions in this group, we will find a number of people making confident pronouncements and others being more cautious or reserved in expressing views. It looks to me as if those who make the confident assertions usually have less insight than those who are cautious.
 
The British government did not guarantee the debts of Northern Rock though before they nationalized it. Defaulting on Anglo's bond liabilities would break the guarantee that the Irish government has set so is probably not an option.

On a slightly different point, maybe there are some legal eagles that know the answer to this one... Does Lenihan's speech in the Dail today, where he denied the allegations made by Morgan Kelly, now mean that he has Dail immunity from ever being questioned on it again?
 
Afuera said:
... Defaulting on Anglo's bond liabilities would break the guarantee that the Irish government has set so is probably not an option...
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Might that not depend on when the bonds fall due? I think I read that there is a large tranche which does not fall due until after the period of the guarantee.
 

Mk said that department of finance and central bank originally only proposed 4 banks not 6 for the liability guarantee. Seemingly, lenihan denied this explicitly in the dail but i cannot confirm this. All i heard on the rte news was that he said all of the advice he received was to nationalise which may be technically true as this advice may have been given after he extended the liability guarantee to anglo and irish nationwide.
There was another economist disagreeing with the nationalisation last nite - mcarthy i think ....
It seems like the problem was the original decision to extend the liability guarantee to anglo. Once that was given, they had little room for maneuver as backing out would also not instill confidence in the guarantee for the other banks...
 
Padraigb said:
Might that not depend on when the bonds fall due? I think I read that there is a large tranche which does not fall due until after the period of the guarantee.
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Possibly. I think the point may be moot however as personally I think the Irish government will have to renege on their guarantee anyway. There is no way they can cover all of the debts that are likely to happen over the next two years.
 
Far be from me to defend the Government but there is alot of tripe being thrown around the place. I read Morgan Kellys article. It was the usual mixture between the insightful economic analysis and pure rubbish. He should come out now and name this source of his. I don't pretend to know the ins and outs of political life but I am willing to bet that no politican would be brave enough to ignore the advice of all their advisors and the Central Bank on an issue like this. And his comments on Credit Default Swaps was nonsence.

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

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

There should be greater transparancy in what has happened and what the risks are. Lenihans argument about commercial sensitivity is rubbish but like some other people, I have to believe that Lenihan and Cowan are acting in what they believe to be the best interests of the Country.
 
Not a legal eagle, but my understanding of Dail privilege is that you can't be sued for any allegations you make, not that it confers some sort of infallability to your answer!

I think the opposition have been itching to get into the Dail and say a few things, as per the debate yesterday, to get them out in the open. The media can now carefully report on the issues based on the reported remarks by TD x in the Dail record.
 
Duke of Marmalade said:
Yep, I was a bit shocked, but surely this isn't true. I still believe that the 2 Brians are doing what they see as best for the country without hidden agendas.
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I like to think you are right. I do worry that the advice they are getting is where the danger lies. Even assuming there was some debate about the course of action to take at the time of the guarantee in the Department of Finance with the departments economists being over-ruled internally, it is not clear to me that the disputed nature of the recommedations would have been presented to the minister. The bolsheviks present their solution as the only one, leaving the mensheviks out in the cold.

This leaves both Mr. Kelly and Mr. Lenihan correct in what they are saying:
- there was a dispute in the Dept. of Finance
- the minister was presented with only one choice
 
Sunny said:
And his comments on Credit Default Swaps was nonsence.
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Can you expand on this a bit? Is it because much of the actual debt is not covered?

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

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

I just didn't understand what Morgan Kelly was trying to say about bondholders and credit default swaps and why he brought CDS at all into the argument.
 
The capitulation of the Irish property market begins in earnest when the first bank falls.
If all the banks have loans with the same developers / or even if those developers owe money to other industries, then there will be a panic charge by all creditors to get their money back once the receiver of a bankrupt bank starts to call in bad loans or try sell good debt on.

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

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

What do you mean when you say they have guaranteed the bad debts?
 
Heard an interesting thing about Anglo this morning. They told the market that they intend to keep servicing their Tier 1 Debt Instruments as normal and they also still intend to call their Lower Tier 2 debt as planned (But that may change with new management).

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