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

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.
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...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.
 
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.
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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.
 
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?
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I think that Brendan's point is that without the guarantee, they would have lost a lot more than €10k - Up to €80k.
 
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.
 
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 :)
 
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.
 
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.
 
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.
 
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
 
Brendan Burgess said:
It's easy to attack a suggestion. No one has come up with an alternative.
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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.
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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.
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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.
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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.
 
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
 
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.
 
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.
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+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.
 
"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.
 
"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?"
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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.
 
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 :rolleyes:
 
Brendan Burgess said:
Thanks Canice. That is the best endorsement of the idea I could possibly hope for.
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#

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