Who gave Anglo the money to lend?

O

Odea

Registered User
Messages
610
Was it overseas banks, individuals, governments, savers?

I don't understand why this bank cannot be wound down just like any other business. The creditors then receive 20c, 30c in the Euro and lose the rest. Just like the suppliers to any other business that goes in to liquidation.

Then we as taxpayers don't have to pour dead money in to this black hole that could otherwise be used for the benefit of the Irish people.

I am certain that just as Anglo were wining and dining the builders they were also wining and dining the fatcats that were very eager to lend them the money to lend on.

They were playing both sides.

Is this too simple a plan?
 
Most of the creditors (including depositors)of Anglo are 100% guaranteed by the government so would have to be paid in full.

This would amount to much more than the re-capitalisation that is being done now.
 

Many people agree with you, but it is not as simple as that.

Anglo borrowed from overseas banks and investment companies, as do all Irish banks. They can't survive without these borrowings.

Of the money that they lend out, Irish banks only have a small percentage on deposit, most of what they lend out, they borrow, so are completely dependent on the international money markets just to stay in business and the international money markets have no sympathy when things go wrong. They are ruthless.

The government claim that if they allowed this to happen, then the financial world markets would see the entire Irish banking sector as a basket case and pull out all funding to all Irish banks, and the rest of the banking sector in Irelans woudl grind to a halt.

( BTW, I am not saying that I agree with what is happening, just explaining to the OP why it's not as simple as any other business going bust).
 

The issue is whether this is a valid claim.

Realistically, would the world financial markets refuse to deal with Irish banks? Might they not just attach a premium to take account of what they regard as increased risk? Would this higher premium not be better value?

I think the problem with the current arrangment is that it gives carte blanche to banks to act as they please in the almost certain knowledge that their existence will forever be protected.
 
International bond holders can take the hit once the guarantee ends if the Government chooses. That's not the problem. The problem is that none of us know for sure who the bondholders are. There are probably a lot of credit unions, insurance companies, pension funds etc who invested in the bonds, not just big ugly international investment banks.
The other problem is the deposits. Senior bondholders rank the same as depositors when it comes to claims on the assets upon liquidation. People say we should guarantee the retail deposits but what about the non-retail sector who have lent Anglo billions as well through deposits. These include SME's, charities, local authorities, credit unions etc. Should we guarantee them as well because suddenly the taxpayer is on the hook for a significant sum. Then we turn around to the bondholders and say, hey guys, we are changing the law so you don't get seniority in the capital structure anymore. Sorry about that but that's life. Bondholders in other Irish banks then go 'hang on a second, my investment is no longer the same risk that I thought'. Not only am I going to offload my positions but I ain't lending money to any Irish bank because the Irish Government have changed the game. So all the other banks find their access to capital markets shut off and the Government is left with the option of funding the banks or pulling the plug on the system.

And finally, does anyone really want to turn around to the ECB and tell them they are not getting their money back??
 
Is it too much to ask that the government give us a breakdown of who lent money to Anglo?
Up until recently the Building Societies could only lend a percentage of what they held on deposit, they couldn't borrow internationally.

Maybe if we scaled down our banks? Is it possible to survive?
 

Of course it is possible to survive with scaled down banks. If we had more tightly regulated the banks in the first place, we wouldn't be in this mess, but we didn;t and we are in this mess, which is going to cost us, no matter which solution is chosen.
 
Realistically, would the world financial markets refuse to deal with Irish banks? Might they not just attach a premium to take account of what they regard as increased risk? Would this higher premium not be better value?
Click to expand...

The international markets have no sentiment. They will view each investment in each individual company (i.e. bank) on its merits. If investing in an Irish bank is profitable, they will do it, if it is not, they will not. The failure of Anglo will have no impact on their decisions.

In fact, it could be said that the proping up of Anglo is having a negative impact on investments in the other banks. If the Government didnt have to put so much money into Anglo, then it would be a lot easier to recapitalised the other banks thus making them more attractive prospects for investment.


Its not the job of the Irish taxpayer to pay for the wrecklessness of people who gave loans to Anglo. The only thing we should protect is deposits up to a certain limit.

Bondholders in other Irish banks then go 'hang on a second, my investment is no longer the same risk that I thought'.
Click to expand...

There was no guarantee at all when they initially made their investment and the risk profile of the investment would have been on that basis.
 

So you want to lead to the possible collapse of the credit union movement in Ireland? There is speculation the default of one of the banks will lead to this as the movement had so much cash and invested alot of it in these instruments as they were seen as a secure investment.

It has nothing to do with a guarantee. Senior debt is priced higher than sub debt because it is higher on the capital structure in the event of liquidation. If you change the law to make bondholders subordinated to depositors, you are basically forcing holders of senior debt in every single Irish bank to take a writedown on their holdings because the risk profile has changed. Good luck going back to these same guys to fund your banks and the budget deficit.
 

What's this about changing the Law - the blanket bank guarantee expires in September. It was introduced as an emergency measure for a very limited time. Bondholder have no guarantee beyond September - I'd simply leave it that way - no change to risk profile as no change in law.

Are you saving that the credit union movement is an investor or lender (as opposed to a depositer) in Anglo? If so, then I fear for their future - with investment advice like that, they're bound to go out of business anyway regardless of the Anglo situation.

Remember there is a big difference between (i) investors i.e people taking a punt on Anglo hoping to profit, (ii) lenders i.e. people who loaned money to Anglo and are charging interest and (iii) depositors i.e. people who use Anglo as a place to keep/store their money.

I'm advocating protecting (iii) and treating (i) & (ii) as they would in any insolvency situation.

Bear in mind that it is much cheaper to give any banks who are down money a capital injection, in return for equity, if they have lost money loaned to Anglo than it is to pump the money directly into Anglo.
 

Has nothing to do with the guarantee. It has to do with insolvency law.

If you are not changing the law and you want Anglo to be liquidated, how are you going to protect the billions of euro of deposit? They will simply have to share the assets with the bondholders as they all rank pari passu. They would get nothing back.
 

Most depositors are protected by the guarantee that existed prior tot he blanket guarantee. Government could also allow the liquidation to proceed as normal and, consider requests for grants to replace any funds lost by any individuals/organisations on a case by case basis. As these grants would be outside of the insolvency proceedings and at the grace and favour of the Government, there would be no obligation to pay any bondholder.
 

Thats a €27 billion bill you have just the landed the taxpayer with because that it the amount of customer deposits.

Are you also going to tell the ECB they can't have their €20 billion odd back?

Actually looking at the accounts today, I can't understand all the fuss about bondholders. There is only €15 billion of debt outstanding. There is €27 billion of customer deposits and €32 billion of bank deposits.
 
Wouldnt the depositors get X in the euro for their deposits? Government would only make up the differenece and would only refund certain depositors - i.e. no overseas depositor or institution would get a cent. ECB would get nothing - heads need to roll there if they were stupid enough to loan to Anglo and €20bn is a drop in the ocean in ECB terms.
 

Again, why would they get X in the Euro and the bondholders and the ECB get nothing? And then you want to discriminate against foreign investors. That has worked well for Iceland. I can see our Euro partners reaction now. Do you want to hazard a guess at how much we be paying to fund our budget deficit if we could fund it at all?
 
Sunny said:
Actually looking at the accounts today, I can't understand all the fuss about bondholders. There is only €15 billion of debt outstanding. There is €27 billion of customer deposits and €32 billion of bank deposits.
Click to expand...

And the bank deposits will be pulled come September. That money flowed into Irish banks in the billions once the guarantee was put in place. It will be on its way back to New York just as fast come September 28.
 
You must log in or register to reply here.
Menu
Log in
Register