Make the depositors who were bailed out contribute to the retrospective guarantee?
- Thread starter Brendan Burgess
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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.
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.
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.
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
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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.
Brendan Burgess
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Hi Marietta
Posts which are in breach of the Posting Guidelines and those which quote them are deleted.
Brendan Burgess
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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.
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?
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
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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?
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?
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.
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.
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.
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.
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.
Not much incentive there for people who have moved their deposits outside the state to move them back again.
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.
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
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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
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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
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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.
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.