Taoiseach Martin: "We did not bail out the banks!"

[WolfeTone]

I heard a guy on BBC Radio 4 referring to the bail out of the banking system. That is a much better description.

Ah! Brendan, you didn't have to go to BBC4 to get that description, it was already posted here on this thread

So perhaps the correct terminology is the "banking institutions needed a bail out"

I take the point about "...we did nothing for the ordinary people." But in fairness, to a lot of ordinary people whose jobs were lost or businesses that were closed, it would have felt that way.
Conversely, a lot of people and a lot of businesses were kept a float that would otherwise have gone under had the banking system been allowed to collapse.

 

[PMU]

The key question is "Who benefited?" And the answer is the depositors. Not the shareholders Not the borrowers Not the top executives or directors
Anglo and INBS disappeared so they clearly did not benefit. Brendan

You are correct. Deposits in 2008 were 173 billion or 46% of the banks' liabilities; senior debt was 124 billion or 33% of liabilities. So depositors were the main direct beneficiaries.
But the government didn't act to save the depositors. They acted to save the a banking system and also Irish society, because a modern economy requires banks. But the banks themselves did not significantly benefit. Two were liquidated. Others were merged, about 2,500 jobs we lost. The results of the 'bailout' were to reduce bank size and focus their activities on the domestic market. The remaining banks are going nowhere. (Or are unlikely to go anywhere.)

The notion that depositors were bailed out is wrong. Deposits placed in banks are done so as a means of safe-keeping money. They are not loans, they are not investments, they are deposits - that is why they are called, deposits.
The banks, traditionally, like to attract deposits by offering interest rates that in theory protects the purchasing power of the deposit. The bank guarantees safe keeping of these deposits. To reinforce that guarantee the State Central Bank in this country ran a deposit guarantee scheme that guaranteed deposits up to €20,000 then increasing that to €100,000.

This is totally incorrect. Retail depositors were the main direct beneficiaries. The deposit guarantees schemes came from the EU, i.e. pursuant to directives 1994/19/EU and 2014/49/EU, not from any initiative of the Irish government. Retail depositors benefited in the crisis as their deposits could not and were not separated from other liabilities covered by the government's blanket liabilities guarantee.

 

[WolfeTone]

The deposit guarantees schemes came from the EU, i.e. pursuant to directives 1994/19/EU

Yes, and the very basis of such directives was to establish freedom of trade while increasing the stability of the banking sector and protection for savers.
Consideration to be given to the situation which might arise if deposits became unavailable that such deposit protection is as essential as the prudential rules for completion of the single banking market. In the event of closure of an insolvent credit institution the depositors must be protected.

The State was legally obliged under EU law to protect depositors. In our scheme deposit guarantee scheme €20,000 then €100,000.
Depositors were already protected, under EU law since 1994 as you point out.

It is the basis of the banking system to provide guarantees to depositors. It is the way that such a system can only work. If depositors lost their money the entire concept of banking would be under threat.
It was a bail-out of the banking system and its institutions.

 

[galway_blow_in]

No, the banks were not bailed out. And he is right to say it even if the public think it sounds stupid.

The main beneficiaries were the ordinary depositors, pensioners and credit unions.

We should be highlighting this.

Brendan

it was an incredibly naive statement from a political standpoint

 

[jpd]

Once again, our "elite" show how removed they are from the ordinary people.

Is it any wonder Trump and Boris get elected using simplistic phrases and ideas - they strike a chord with the electorate, even though their ideas are completely off the wall and unworkable.

 

[Jim2007]

The notion that depositors were bailed out is wrong. Deposits placed in banks are done so as a means of safe-keeping money. They are not loans, they are not investments, they are deposits - that is why they are called, deposits.

In Germany, Switzerland, Austria, Italy etc... depositors have all lost there deposits in the past when banks went to the wall. So prior to the EU guarantee it was common. So yes depositors were most certainly covered.

 

[Conan]

And in Cyprus, depositors were bailed-in (partially). Can you image RBB’s reaction if that happened here because the Government did not “bail out the banks”?

 

[WolfeTone]

And in Cyprus, depositors were bailed-in (partially). Can you image RBB’s reaction if that happened here because the Government did not “bail out the banks”?

The bail-in involved a % of amounts greater than €100,000.
Amounts of €100,000 or less were protected.

 

[NoRegretsCoyote]

And in Cyprus, depositors were bailed-in (partially).

In Cyprus they bailed in large, mainly foreign, depositors.

But they were obliged to give equity stakes to bailed-in depositors as a result.

On the same lines we could have kept Anglo and INBS going, but it would've involved thousands of depositors becoming equity holders, and the same management and business model in place.

There were no easy policy choices.

 

[Duke of Marmalade]

Spotting this one late in the day.
It is true that MM made a political gaffe. But RBB's comparison of the treatment of the Debenham workers with the bail-out of the banks was way out of line, albeit that's what we expect from him.
RBB was painting an image of Bank Fat Cats and Bondholders getting preferential treatment.
The motivation for the "bank bailout" was to save this country from complete financial and consequential societal meltdown (I am not opening the debate as to whether it was necessary, just pointing out the motivation).
It isn't quite so populist to describe what happened in those terms.

 

[Purple]

Spotting this one late in the day.
It is true that MM made a political gaffe. But RBB's comparison of the treatment of the Debenham workers with the bail-out of the banks was way out of line, albeit that's what we expect from him.
RBB was painting an image of Bank Fat Cats and Bondholders getting preferential treatment.
The motivation for the "bank bailout" was to save this country from complete financial and consequential societal meltdown (I am not opening the debate as to whether it was necessary, just pointing out the motivation).
It isn't quite so populist to describe what happened in those terms.

The populists left never let the facts get in the way of a good emotive story.

 

[WolfeTone]

The populists left never let the facts get in the way of a good emotive story.

What are the facts?

As far as I understand it, the Debenhams workers are vying for fair and reasonable redundancy package that, to all intents and purposes, given Debenhams remaining capital stock, could be on the cards. Basically, they want a representative seat at the table when the remaining assets are divided up and sold off.
I cannot see but anything reasonable in their demands.
Instead, as far as I understand it, they are excluded from the negotiation of asset sales and expected to accept the bare minimum, or the crumbs from the top table.

 

[Purple]

What are the facts?

As far as I understand it, the Debenhams workers are vying for fair and reasonable redundancy package that, to all intents and purposes, given Debenhams remaining capital stock, could be on the cards. Basically, they want a representative seat at the table when the remaining assets are divided up and sold off.
I cannot see but anything reasonable in their demands.
Instead, as far as I understand it, they are excluded from the negotiation of asset sales and expected to accept the bare minimum, or the crumbs from the top table.

I was talking about the Bank recapitalisation. I agree that the Debenhams employees have been treated badly.