If someone founded a new lending bank, would you support it

[Sunny]

Its not about "would anyone put deposits into or lend to a bank with €5m of share capital".

Quite the contrary.

We need a bank that can lend and this is the minimum amount you need to set up a bank, according to a link I visited last night.

Feel free to contradict this figure, but its lending from I'm talking about, not depositing in or lending to it.

Apart from the initial capitalisation, of course.



ONQ

And where do you get the money to lend? You might want to read up more on how banks work. Banks are leveraged institutions and you wouldn't get the leverage on €5m share capital to make it work. Halifax and Postbank were too small to make it work during this crisis and they had a lot than €5m.

By the way I know one person who looked into getting a banking licence during the crisis and he had a lot more than €5m. It was a non-runner for numerous reasons.

 

[Brendan Burgess]

Being dismissive of any enterprise is not appropriate at this time.

Hi Onq

You asked a question and we tried to answer it.

You were told to go off and set up a bank by Brian Lucey. But you don't want deposits? I would prefer to deposit in it than invest in it.

I understand that you are trying genuinely to help. Rather than trying to set up a bank, could you get involved in your local Credit Union and push their commercial lending?

Brendan

 

[onq]

I am suggesting (badly) that lending to sme's is suffering because the overall risk of lending into this country, regardless of sector, is now high (mainly caused by reckless lending, not necessarily to the SME sector) and until this stabalises I cant see a new or existing institution starting to lend to any significant extent unless it is government funded.

I accept that it was badly written and open to misinterpretation.

And I apparently misinterpreted it...

Thanks for clarifying.

I was interested in the idea, last year, of a gov sme bond, set up along the lines of the ssia's where Joe Average could save in a fixed rate fixed period bond and the money would be loaned to the sme sector through the Credit Union system. A 1 billion fund for sme's administered via the cu set up. Could this not have the same effect as what you are suggesting but not have the same issues of ratio attached.

Let's leave it a 1 billion fund for SME's with the initial money put in by the govenment.

I don't see this as being enough, but you offer a starving man sustenance, not rich food.

Thanks for the suggestion.

ONQ.

 

[onq]

Hi Onq

You asked a question and we tried to answer it.

You were told to go off and set up a bank by Brian Lucey. But you don't want deposits? I would prefer to deposit in it than invest in it.

I understand that you are trying genuinely to help. Rather than trying to set up a bank, could you get involved in your local Credit Union and push their commercial lending?

Brendan

The function of the bank would be to lend money to businesses to allow them to continue to trade where they are viable.
That was my stated intent and I also intended to make money on the loans and the transactions, but leave the deposits in other banks alone because they still haven't reached their capital lending ratio requirements and I understand that money on deposit affects this.

Credit Unions may be the way forward for all of us and the pressure to led may in fact turn them into large banking institutions in time.
At the moment their ability to lend is very limited accordingly to Lucey.
But again according to my own logic, anything is better than nothing so I will pursue this option. Thanks for suggesting it, Brendan.

People with money might prefer to deposit in the proposed bank, but I get the feeling that people looking to deposit money are in short supply nationwide right now.

It would be useful of course if we had a census done showing the numbers of people in difficulty and due to what reasons so we could have an informed debate ant not one that relies totally on anecdotal evidence, whether from accountants or RTE researchers or the apparent lack of rebuttal from government spokespersons.

People whose businesses are going under because they are owned money yet cannot take people to court to get it - even when they aren't dealing with straw men - I think they'd like a loan.

ONQ.

 

[Sunny]

The function of the bank would be to lend money to businesses to allow them to continue to trade where they are viable.
That was my stated intent and I also intended to make money on the loans and the transactions, but leave the deposits in other banks alone because they still haven't reached their capital lending ratio requirements and I understand that money on deposit affects this.

Credit Unions may be the way forward for all of us and the pressure to led may in fact turn them into large banking institutions in time.
At the moment their ability to lend is very limited accordingly to Lucey.
But again according to my own logic, anything is better than nothing so I will pursue this option. Thanks for suggesting it, Brendan.

People with money might prefer to deposit in the proposed bank, but I get the feeling that people looking to deposit money are in short supply nationwide right now.

It would be useful of course if we had a census done showing the numbers of people in difficulty and due to what reasons so we could have an informed debate ant not one that relies totally on anecdotal evidence, whether from accountants or RTE researchers or the apparent lack of rebuttal from government spokespersons.

People whose businesses are going under because they are owned money yet cannot take people to court to get it - even when they aren't dealing with straw men - I think they'd like a loan.

ONQ.

But where do you find the money to lend? Sorry, but I am really confused! You want to lend but you don't want to borrow?

Setting up a bank to help SME's to the extent that you are suggesting would require billions of euro of shareholders equity.

 

[onq]

And where do you get the money to lend? You might want to read up more on how banks work. Banks are leveraged institutions and you wouldn't get the leverage on €5m share capital to make it work. Halifax and Postbank were too small to make it work during this crisis and they had a lot than €5m.

By the way I know one person who looked into getting a banking licence during the crisis and he had a lot more than €5m. It was a non-runner for numerous reasons.

That's very interesting but it tells me nothing useful.
It would be great if you could offer some insight into the why's and wherefores.
But would people stop focussing on the €5M figure?
That was me just pointing out that I had done the level of research required to support the original post and concept.

With your other comments we go from the "too big to fail" concept to "too small to succeed".
The apparent failures of Halifax and Postbank could have been based on a judgement based on a lack of return, not imminent failure - greed suggested it wasn't profitable enough.
For all we know, they could have been pressured to leave the market to leave the banks in the effective monopoly position they currently enjoy to maximise their recovery by being the only place most Irish people could do business or keep deposits.

Did I forget to mention that my Bank didn't need to be outrageously profitable, just to fulfil a lending requirement for this country?

ONQ.

 

[jack2009]

from what you appear to be saying a bank is the wrong vehicle to be using.

Unfortunately, many companies failing is the harsh price that is being paid for a 'price correction' from salaries to cost of goods etc.

 

[onq]

But where do you find the money to lend? Sorry, but I am really confused! You want to lend but you don't want to borrow?

Setting up a bank to help SME's to the extent that you are suggesting would require billions of euro of shareholders equity.

I'm tot suggesting any "extent" - are you Brian Lucey in disguise?
Because I can't solve all the problems I should sit around and do nothing?

I'm trying to start some that can offer some bread to starving people, as many as I can.
I won't be able to feed them all, but I'll feed who I can.

And yes discernment will have to play a part in who to lend to.
The hard part will be deciding who to lend to.

As for the money, our government apears to have no problem making long term donations to institutions that anecdotally seem unable in many cases to provide short term loans.
They can donate a couple of billion to a business bank.
If they don't shortly we won't have a business sector.

ONQ.

 

[canicemcavoy]

You can refer to Brendan's reply above also, but the issue isn't what the extension is for.

Of course it is! Good lord, there is only so much credit to go around right now, and generating sustainable businesses should be the priority for banks loaning credit. Ireland is being charged for credit more than any other country bar Greece. And you want to borrow money at high cost in order to build extensions.

We've already had a bank which thought it could generate wealth by loaning for property. It's called Anglo Irish Bank.

 

[Sunny]

I'm tot suggesting any "extent" - are you Brian Lucey in disguide?
I'm offering some bread to starving people.
Iwon't be able to feed them all, but I'll feed who I can.
And yes discernment will have to play a part in who to lend to.

The hard part.

ONQ.

If you just want to lend money that you have to SME's, there is no need to set up bank.

 

[onq]

<snip>

There is huge oversupply in many industries - the legal profession, architecture, hotels etc. They have to be allowed to contract to a size appropriate to the economy. If the taxpayer props up the weaker ones, the whole sector is weakened. If they let them go, then the remaining ones will be more viable long-term.
<snip>

I love how you apply this Darwinian logic to everyone else but the banks.
You comments here - read as they are by thousand daily (!) will only serve to prove to laypeople that there is one rule for us and one rule for the Banks.
If you strictly applied this naturalist approach to businesses, the Irish Banks would be extinct and we would be waiting for new species to populate this island.
Some would say, you'd be waiting a long time, but at least a new bank wouldn't carry the stigma of potential defaulting on debt or mortgaging our future like we have done.
And there would be nothing to stop up prinitng our own money as Ellen Brown has suggested State Banks have done in the United States to fund local needs and growth while earning from our exports.

ONQ.

 

[sunrock]

We have had our boom when there was plenty of money around. Now there is less money because the banks are bankrupt and are much more careful with their lending and also because many people have lost their jobs and the government need to take in billions more in tax. So in reality everyone has less money to spend so alot of buisnesses won`t be able to survive.There is no point in interfering in this scenario or trying to prop up the struggling buisness. To do this would just penalise the buisness rival who got its house in order and could benefit with the shutting down of its competitor.
Why are architects any different from carpenters? They can hardly expect the same amount of work and remuneration now that the building boom is over. Some practises will go under, others will survive by offering a better service or price for what work is available.Granted it is not as easy for an architect to set up his own buisness as a carpenter , with issues like insurance,registration etc.The unemployed architects and many more leaving colleges every year will have to consider if there is a niche elsewhere for them.The legal system needs to be shaken up to allow more competition and to stop preventing qualified solicitors from getting the necessary experience to start practising.

 

[canicemcavoy]

I love how you apply this Darwinian logic to everyone else but the banks.
You comments here - read as they are by thousand daily (!) will only serve to prove to laypeople that there is one rule for us and one rule for the Banks..

It's a fair point. We're still propping up Anglo Irish Bank which has already swallowed €4 billion of our money and now still has a loss of €12 billion. The bank was nothing more than a piggy bank for politically-linked developers, and the wider world wouldn't give a toss it was shut down tomorrow.

 

[Brendan Burgess]

As Canice no doubt well remembers what I have already said on this topic on the RTE News to the astonishment of many:

Dobson: Is it not unthinkable that an Irish government or any government would allow a retail bank, a major retail bank with all these branches and with all these customers to go under?

Me: I don’t think it’s inconceivable at all. The Government regulates Irish banks but the government does not and should not guarantee Irish banks and that is a very , very important distinction.

If banks behave badly in their lending or if they are reckless in their management or whatever, they should be allowed to go to the wall and that is a fact of economic life.

It would have an effect on the economy but giving some sort of soft guarantee to a badly managed banks would be irresponsible and very bad news for the long term

http://www.askaboutmoney.com/showpost.php?p=1009452&postcount=15

I did think that Anglo and Irish Nationwide should have been allowed fail. The government argument was, I think, that they would also have brought down the entire banking system. Letting a lot of architects or solicitors go actually helps out the remaining ones.

So maybe it is one law for an industry with many independent suppliers and a different one for an industry with a few interdependent suppliers.

Brendan

 

[onq]

Re-reading this thread, the irony is that I once suggested that all the banks should be allowed to fail regardless but I've changed my position.

I then reviewed the matter anecdotally and formed the opinion that and there was so little competition, so little divergence of policies and situations between the main banks and so many investors, depositors and bondholders in the banks - who are still in position - that allowing them to fail would wipe out much of middle Ireland at a strike.

The destruction of the middle classes, the massive erosion of the professions and the destruction of their political power base is a prelude to destroying a society - look at the rise of the Khmer Rouge if you don't believe me.

Mind you, when I read of Enda "Pol Pot" Kenny today in the paper predicting people would take to the streets if Anglo was given any more Billions of Euros I finally understood where the first volley would be fired - Mayo!

ONQ.

 

[canicemcavoy]

As Canice no doubt well remembers what I have already said on this topic on the RTE News to the astonishment of many:

http://www.askaboutmoney.com/showpost.php?p=1009452&postcount=15

I did think that Anglo and Irish Nationwide should have been allowed fail.

I agree with you there. But at the time, were you talking about a hypothetical situation, rather than an imminent danger? We didn't quite how bad things in Anglo Irish were, and you yourself claimed that banks were very well regulated and sound - I presume you included Anglo and Fingerscorp in this category.

My personal belief is that the main two banks should have been nationalised, the rest allowed to go to the wall. You cannot have a situation where privately-run concerns are of so-called "systemic" importance. It's a recipe for recklessness, since the business can carry out a high-risk high-reward strategy (as Irish banks did for the last decade) with the reassurance that they will be bailed out if anything goes wrong. And not one law has yet to be passed to ensure that banks cannot go back to their old ways.

 

[onq]

It's a fair point. We're still propping up Anglo Irish Bank which has already swallowed €4 billion of our money and now still has a loss of €12 billion. The bank was nothing more than a piggy bank for politically-linked developers, and the wider world wouldn't give a toss it was shut down tomorrow.

I thought the point of transferring the debts to NAMA was to avoid bailing out the banks.

Are we paying for the debts through NAMA and ALSO bailing them out by pumping money in?

How does that work?

ONQ.

 

[onq]

<snip>You cannot have a situation where privately-run concerns are of so-called "systemic" importance.<snip>

Canice,

Can you point to a single western democracy where this does not occur with the banks?

Is their permanence and systemic pervasiveness not the product of the multi-generational corporate entity?

Is this not in and of itself proof that in these entities, to which we have given rights as a person, we have superseded ourselves?

Look at the rush to protect "dead" banks, re-invigorate them, restore them, all at the expense of the society they supposedly serve.

Everyone knows looking at this that there is something intrinsically wrong with the boom-and-bust free market capitalist system.

Capitalism is a way to create the most money - for whom?

The élite few - and the Banks.

ONQ.

"Serfs ye were and serfs ye remain."

 

[canicemcavoy]

Everyone knows looking at this that there is something intrinsically wrong with the boom-and-bust free market capitalist system.

Well, exactly. As a social democrat I appreciate that the capitalist system can work well in some circumstances to leverage the competitive spirit of humans as a great generator of wealth. In other circumstances, it simply leads to monopolies which are far worse than any state monopoly since theyare unrestrained by any sense of social responsibility.

 

[onq]

Simple answer .... if I needed a loan and the rates were good I'd take out the loan so in essence I'd be supporting a new lending bank.

My answer - yes I would.

Thanks Paddy.

One on board - two million to go!



ONQ