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

[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?

 

[ontour]

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.

 

[Duke of Marmalade]

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.

 

[Marietta]

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.

 

[Brendan Burgess]

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.

 

[Sarn]

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.

 

[Duke of Marmalade]

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.

 

[RMCF]

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.

 

[canicemcavoy]

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?

 

[Brendan Burgess]

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.

 

[aristotle]

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

 

[shanegl]

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?

 

[Chris]

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.

@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.

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.

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.

 

[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.

 

[canicemcavoy]

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.

 

[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.

 

[aristotle]

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

 

[canicemcavoy]

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.

 

[JoeB]

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]

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.