Ponzi Nation

Firefly said:
No - but does anyone know how much of the 70BN is made up of deposits > 100K? E
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Perhaps you should have asked this question before you came to your definitive conclusion that "would have resulted in 70bn being provided by the government immediately"?
 

That was my intended point.

The government stepping in to make the state shoulder the remainder of the losses after the shareholders have been hit, completely bypassing depositors and senior debtholders in the process, is grossly unfair.

I'm with Chris and Complainer here.

The same dopey logic that saw us give Roddy Molloy a golden Parachute (thinking we'd save money on a legal challenge) have resulted in us sustaining a €34bn loss on Anglo (to avoid having to pay a fraction of that in Deposit Guarantees).

Senior debt holders are more concerned about our future capacity to pay (which we've now severely curtailed) than our past record of paying. In any case, Ireland could surely have distanced itself from Anglo.

A €4bn cost of bailout scenario would have been justifiable in avoiding the remote scenario of bank runs or looking good for our banks not defaulting on bondholders.

Brian Lenihan made the decision when the potential losses were estimated as a fraction of what they are now. It would have been the right decision if the information was correct. It wasn't though, and I'd question anyone who says they'd take the same decision knowing what we know now.

If there's still anyway of hitting the depositors/senior bondholders for €5bn, €10bn or even more rather than the state taking on the full loss, the that is the reasonable course of action.

We somehow financed NAMA to the tune of €40-50bn up front. If we'd used a fraction of that to pay the deposit guarantees on Anglo we could have started the process of rebuilding by now.

Taking a certain €30-35bn loss onto the state balance sheet will paralyse the country more than letting Anglo go Bankrupt without state backing.
 
Complainer said:
Perhaps you should have asked this question before you came to your definitive conclusion that "would have resulted in 70bn being provided by the government immediately"?
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The vast majority os people would have deposits less than 100k. Those with more than 100k, I would imagine, have the necessary steps in place to protect their deposits.
 
Firefly said:
The vast majority os people would have deposits less than 100k.
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This is your guess -right? The really important question is not 'what proportion of Anglo depositors had less than €100k'. The really important question is 'What proportion of Anglo deposits was made up from depositors with less than €100k'?
 

I was thinking more of the deposits in the other banks, which IMO would have had queues out the door & around the corner if Anglo was left to fail.
 
It is of course a major source of public chatter these days how we should deal with Anglo, seniors, subbies etc. WADR aren't we all amateurs. Today Mathew Elderfield came out strongly against legislation to torch seniors. I think he is best placed to judge and I see no reason why he would have a hidden agenda.

Chris I was kinda joking when I said dumping Anglo would quickly lead us back to hunting rabbits but, following on the above point, those who are much more informed about these matters and actually have to make the decisions have always argued that Anglo is systemic and dumping it would have catastrophic ramifications for our banking system and our economy.

I accept their analysis, not because I too came to the same conclusion (I am not informed enough to be able to do that) but because they are the ones with the expertise, the inside knowledge and the profound desire to do what is right for Ireland. I certainly have no truck for the academic circus who have promoted themselves to rockstar status on the back of the country's misfortunes nor for opportunistic opposition politicians.
 
Complainer said:
Not if AIB & BOI were guaranteed - right?
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As per post #20

anyone with deposits even less than 100k would withdraw as they would fear that (a) the government wouldn't be able to guarantee their deplosits or (b) that the 100k would be reduced.
 

The point here is that we seem to need legislation to hit the bondholders whilst leaving depositors intact.

Why not have the depositors lose a percentage?

It would have been wrong to set such a precedent if the total losses were €4bn i.e. the cost of maintaining 100% confidence in the system would have been worth it.

Is it still wrong to contemplate burning depositors in the knowledge that the magnitude of the bailout is pushing the country close to bankruptcy?

Duke of Marmalade said:
those who are much more informed about these matters and actually have to make the decisions have always argued that Anglo is systemic and dumping it would have catastrophic ramifications for our banking system and our economy.
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The trouble is that decisions were originally made without anything like the required knowledge. I just wonder if these decisions are capable of being at least partially reversed to give some relief to the state.

Can we really believe that the people who took the decisions in the first place are capable of continuously reassessing the situation and reversing the decision, if appropriate, at the appropriate time?
 
Duke of Marmalade said:
Today Mathew Elderfield came out strongly against legislation to torch seniors. I think he is best placed to judge and I see no reason why he would have a hidden agenda.
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Seems like he hasn't ruled out negotiating with them though.



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Shawaddy, yes that was interesting. Seems a game of poker is being played here. We dare not actually press the button but we vaguely hint that we might do. Elderfields statement that Resolution legi could be passed but he was personally against it would put the fear of god in me if I was an Anglo senior.

DerKaiser, deposits are guaranteed until 31st December. If the guarantee is not renewed the deposits will fly. Ergo deposits are now untorchable - unless one is suggesting welching on the guarantee itself.

My confidence has indeed been shaken by the catastrophic continual upward resizing of the problem. I still think they did the right thing given the knowledge they then had and that includes at present. One would have niggling fears that a reversal becomes unconscionable simply because it is a reversal or worse they dare not reveal the real scale of the problem and just hope something turns up. What scares me is that suppose they believed in their heart of hearts that non-NAMA loans were likely to bring down AIB and BoI they simply couldn't admit that - it would be an appalling vista. But if it was that bad one might as well tough it out - nothing to be gained by waving white flags.

These are scary times.
 
DerKaiser said:
We somehow financed NAMA to the tune of €40-50bn up front. If we'd used a fraction of that to pay the deposit guarantees on Anglo we could have started the process of rebuilding by now.
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This is a very key point. At the end of the day, the market will always get its way and bottom out. Anything done to fight the recession/depression is prolonging the bottom. The sooner you get to the bottom the sooner you can start over again from a cheaper cost basis.
Thank god Ireland cannot print money


I kind of thought that alright

As for Elderfield and his ability, expertise and knowledge, he is employed by politicians and therefor will not stray too far from what they want things to shape out like. Taking action against Quinn may well have been necessary from a solvency point of view, but it was more importantly a political move to show the public how "tough" the political elite has got.
Look at what happened to the McCarthy report, a report sanctioned by the government. Pretty much all the recommendations would have been very beneficial to the public finances, but would have been political suicide. So what did the government do? Everything to discredit the report and its author. I heard some time ago on the radio that less than 5% of McCarthy's recommendations have even been considered, let alone implemented.
 
Duke of Marmalade said:
DerKaiser, deposits are guaranteed until 31st December. If the guarantee is not renewed the deposits will fly. Ergo deposits are now untorchable - unless one is suggesting welching on the guarantee itself.
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Sure people would be too concerned with Christmas to check whether the Guarantee was rolled over, the banks would be closed in any case. Perfect time to do a bit of torching - if they're going to do it it's certainly unlikely to be flagged....
 
Firefly said:
As per post #20

anyone with deposits even less than 100k would withdraw as they would fear that (a) the government wouldn't be able to guarantee their deplosits or (b) that the 100k would be reduced.
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I don't remember any mad panic on other banks when NR was in trouble in the UK. There is no basis for assuming that problems in Anglo would cause widespread panic.
 
DerKaiser said:
if they're going to do it it's certainly unlikely to be flagged....
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It's not a question of flagging. If they have not extended the guarantee beyond 31st December all the deposits will have naturally left. Nobody is going to rollover a deposit unless it is guaranteed. Perhaps you are referring to a strategy which announces on Christmas Day that all deposits are frozen and then on New Year's Day announces they are no longer guaranteed. Pretty Armagedon stuff.
 

Wow, I thought I had some pretty bad scenarios in my head, but that one hadn't occurred to me yet. Armageddon indeed, but I wouldn't put it past them.
 
Chris, I don't think that armagedon ruse would work. People who had their deposits frozen could legitimately argue that they matured before 31st December, it was just that they were prevented from withdrawing.

The fact is that the government has flagged when the guarantee expires - it is 31st December. I think DerKaiser has in mind that the next guarantee will be of the form "guarantee continues until further notice". How many would roll-over into that sort of guarantee?
 

Yeah, that's the big question indeed. Not saying that this forum is anything to base an overall trend on, but there has been an increase in the number of people making enquiries about moving deposits abroad, and not only people with large amounts.
Personally I don't trust any bank, but least of all I trust the Irish ones and their "guarantees".
 
DerKaiser said:
The point here is that we seem to need legislation to hit the bondholders whilst leaving depositors intact.

Why not have the depositors lose a percentage?
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Do we really need new legislation? What was the legal - position prior to Sept 2008? Deposits were guaranteed, up to €100k. Is it the case that the State could not have paid out on this deposit guarantee without also paying out to senior bond holders? Surely not - that would defeat the whole point of the guarantee.
 
The guarantees operate post wind up. During the wind up process, depositors share equally the pain with the seniors, but post the wind up the State makes the depositors good.

What is being suggested is that legislation would be passed which would rank the depositors as senior during a wind up. Clearly then bondholders would suffer the lion's share of the pain of a wind up and the state guarantee to depositors post the wind up will be minimal, in fact zero if bondholders got anything back.
 
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