Financial Crisis

[kingdom hoop]

renumeration.

Hmm, I spy, with my little eye, something beginning with C. It's a......... Curiously Appropriate Malapropism!
It's actually extraordinarily appropriate in the current circumstance if you think of reNUMeration as perhaps meaning something like "putting a new figure upon," which is pretty much what you intended I think. Wow. What a rare and wonderful occurrence! Hurray! :)



My idea for a step to help this economy in an admittedly tiny way -

Require all purchasers to pay a 50-cent deposit on every glass bottle of alcohol sold anywhere in the country. The deposit can be recovered in full at certain centres / shops.

The positives are that a certain percent of the bottles will never be returned, and the money earned by the government will be millions, I'd imagine (easily enough to run the scheme and have a lot left over). Added positive is a reduction in the amount of broken beer bottles littering our streets every day of the year.

A drop in the ocean I know, but I think it is a decent idea.


Fair play Osarusan, great to see a bit of imagination. Just like questions, I don't think there's any such thing as a stupid idea. Though I'll hold off on voting Yay until due consideration has been afforded to the idea!

One issue on the implementation side of things that strikes me: I think the levy must correspond, be indexed, to the purchase price. So for example, 50 cent on a €1 bottle of beer is crazy (and would only make more people Go North), but it's not so crazy on an €80 bottle of champagne. So I'd suggest an increasing rate to the levy, maybe along the lines of 10 cent per bottle for anything under a fiver; 20 cent for between a fiver and twenty; 50 cent for between 20 and 50; and if anyone is buying something for more than €50, well, in that case, an alarm should sound, precipitating the deployment of an expert pick-pocketer to commandeer what he can from the wallet of the purchaser.

One further thought on the levy levels. Setting a fairly low amount may lead to a perverse but pleasing conclusion, in that the lower the levy the less incentive the purchaser has to return the bottle, meaning more of the tax can be withheld. Although in practice, one imagines there will be a high Return Level. On that point (returning), I learned from a preemptory junket that the Glass Holder needs his purchase receipt to reclaim the levy, which is redeemable at the shop where he bought the glass. Perhaps to ensure that eventually all glasses get recycled, a reward of say maximum 5cent a bottle can be given (it can't be too high or we may end up losing money if scavengers locate millions of long-lost bottles or the price of producing glass plummets to below the rate we offer!).


I hopefully suggest an incidental benefit may arise in the form of a sense of responsibility being engendered by the scheme. Making people aware of the rubbish they produce. In fairness I think most people are fairly good with regard to glass, less so in general.

One limitation to the usage of the levy that must be thought about - ie how can we get around it. Restaurants and bars. A potentially lucrative area that misses out under your scheme as even though you could charge them the levy, they will almost certainly return the glasses given the large amount they will collect.
Overall then, I am beginning to wonder whether the whole thing is worth the effort in the form you initially propose. It needs to be imagined a little further maybe. I excitedly await the thoughts from the prime minister of Osaru-sania. :)



A couple of other related thoughts I've just had that I feel compelled to record:
1. I have a suspicion your idea was conceived in the Text Tax thread. In that thread I think I briefly touched upon the success of the Plastic Bag Levy. Just thinking about it now again, it really is the paragon of these kind of levies. As such, it should offer a template and set the standard by which we adjudge the merits of other levies. There are practically no defects to it. It's a win-win-win-win tax! It raises a reasonable bit of cash; it's easy to implement; there are no victims (except maybe the plastic bag producers, but they're evil anyway); and lastly, it is very good for the natural landscape. Which leads me to my last point.
2. ****ing plastic! One of the great curses of our time. As a waste, it is immeasurably more of an issue than glass. I feel particularly strongly about it as there is a miles-long stretch of it along my local beach. It's absolutely horrible. Glorious expanse of sand, imposing dunes, a puppy chasing a tennis ball, brooding ocean, crashing waves, imperious mountain, and then a sideways glance and you're confronted with a technicolour display of assorted plastic waste settled on the sand until God knows when. Frrrrrraaaghhhhhhhhhhhhh.
So while I've given some consideration to your glass idea, I'll give a hell of a lot more to any ideas you have for constraining the disgusting, insidious spread of plastic!

[Macy]

Do you honestly think he wrote it or probably even knew about it. Waste of resources I would agree but not his time and energy.
No, it was probably some civil servant paid for by us. Talking of wasting resources, the number of civil servants employed to do party work for Ministers is a disgrace. Did I here right earlier in the week that Cowen has a team of 8 purely for his own use (not Government business)?

[osarusan]

One issue on the implementation side of things that strikes me: I think the levy must correspond, be indexed, to the purchase price.....

One further thought on the levy levels. Setting a fairly low amount may lead to a perverse but pleasing conclusion, in that the lower the levy the less incentive the purchaser has to return the bottle, meaning more of the tax can be withheld. Although in practice, one imagines there will be a high Return Level. On that point (returning), I learned from a preemptory junket that the Glass Holder needs his purchase receipt to reclaim the levy, which is redeemable at the shop where he bought the glass. Perhaps to ensure that eventually all glasses get recycled, a reward of say maximum 5cent a bottle can be given (it can't be too high or we may end up losing money if scavengers locate millions of long-lost bottles or the price of producing glass plummets to below the rate we offer!).

The primary aim of the scheme would be a reduction in the amount of glass not recycled, and instead left smashed on pavements and streets. The income derived from bottles not returned would be a by-product of the scheme.

While setting a low levy would lower the incentive to return bottles and thereby increase money gained, it would mean that the main aim of promoting recycling and cleaning our streets would be hindered.

I'd still be in favour of setting a standard 50-cent deposit (it is not a tax) so that the incentive to return the bottles remains high - high enough to make people smashing bottles against walls or on pavements think twice about doing so by realising that for every 2 or 3 bottles smashed, a new beer could have been bought.

On your point of having scavengers locating long-lost bottles for the 50-cent prize for each bottle - it would cost the state 5 million euros if scavengers retrieved 10 million bottles - a price I think is worth paying, as that money will certainly be recouped withing a few years of operating the scheme.

The possible problems with glass companies producing glass cheaply can be avoided by future changes in the price of the deposit. Another potential problem might be the importation of old glass bottles simply to get the 50-cent refund on each one.



2. ****ing plastic! One of the great curses of our time. As a waste, it is immeasurably more of an issue than glass.

I wouldn't disagree with anything you have written about plastic, but I'm coming from the perspective of a parent whose 2-year-old child loves to try and pick up shiny things wherever she goes, and is still liable to the occasional fall while walking. From this point of view, plastic is a far less serious concern.

EDIT : Maybe a mod wants to split this off from the "financial crisis" thread to a new "Recycling" thread?

[pete]

I suppose only a matter ofd time before Fingleton caused political strife.

Government try to get bonus back (http://www.irishtimes.com/newspaper/breaking/2009/0324/breaking3.htm)

Have to ask why they did not make executive pay a condition of the deposit guarantee but they didn't do that in the US either when gave AIG billions.

27 million is a staggering pension for an Executive in a Building Society. Given the pensions politicians get maybe they will be quieter on that topic...



Today’s Cabinet meeting comes after it was revealed that one Irish Nationwide’s own board members, Danny Kitchen, had agreed to replace Michael Fingleton as chief executive of the building society but he later declined the job after the Government capped the salary for the position at €360,000 a year.

Mr Kitchen, who is currently the Irish Stock Exchange’s nominated director on the Irish Takeover Panel, became a non-executive director of Irish Nationwide last October. He has experience in both finance and property.

Mr Kitchen declined to comment. Asked whether he would accept the job if the salary was increased to the Government’s higher cap of €500,000 for senior bankers, he said: “It is what it is.”

Is the 500k salary cap counter-productive? Will top candidates for bank jobs feel that is not enough for those jobs?

[Lionel Ritchie]

Is the 500k salary cap counter-productive? Will top candidates for bank jobs feel that is not enough for those jobs?

Depends on how you define a top candidate I suppose. My instinct is if they don't think 500k is enough ...**** 'em. Let them off to see what they can get elsewhere.

[OneRedArmy]

Depends on how you define a top candidate I suppose. My instinct is if they don't think 500k is enough ...**** 'em. Let them off to see what they can get elsewhere.

Given the loss expectations at all the Irish banks over the next year or two they don't deserve to be paid anymore than CIROC is recommending. By all means pay them more, when
1)the institutions are profitable
2) Govt. investment is no longer required; and
3) performance has been demonstrated over a longer term than one year (deferred remuneration)

[Macy]

€500k is too much. It's just something else the state will have to cover when the inevitable nationalisations happen.

[OneRedArmy]

€500k is too much. It's just something else the state will have to cover when the inevitable nationalisations happen.

What's the going rate for the CEO of a semi-state? I'd assume it's around 350-500k? They(bank CEOs) certainly don't deserve more than that, particularly incumbents who contributed to the mess.

[Macy]

€222k is the top of the scale on the published list.

[pete]

What's the going rate for the CEO of a semi-state? I'd assume it's around 350-500k? They certainly don't deserve more than that, particularly incumbents who contributed to the mess.

IMO the incumbents should not be there especially for Anglo & IN. If you were to attract external experts would 500k be enough for them?

[dahamsta]

Poor lads, unable to scrape by on hundreds of thousands of euros a year. You can almost see the fingerless gloves on their grubby calloused hands, grasping a mouldy thin-breaded cheese sandwich, a faraway look on their faces as they contemplate the years and years of thankless hard labour they've completed on behalf of the nation, a tear in their eye at the thought of a job well...

...of a job...

...of...

Hmmm.

[Macy]

IMO the incumbents should not be there especially for Anglo & IN. If you were to attract external experts would 500k be enough for them?
Let the market decide when the banks are privatised again in a few years. There shouldn't be any contracts now - the banks aren't going to come through this as private companies. We should just accept the inevitable, do the deed and stop being distracted from this messing at the edges and get in and fix the system.

[pete]

This made be laugh.

Irish Times (http://www.irishtimes.com/newspaper/ireland/2009/0325/1224243368489.html)



Gormley goes green as McCaughey news leaks

MIRIAM LORD

DÁIL SKETCH: JOO DILIGENCE fell off the wagon yesterday afternoon.

As Brian Cowen spoke in the Dáil, a dull thud was heard from somewhere in the vicinity of the Government benches. It was the familiar sound of the bibulous Ms Diligence as she buckled, prior to being carried out yet again.

On this occasion, the Taoiseach abandoned his practice of announcing the latest distressing episode to the House, because by now, everyone is well used to Joo Diligence being carried out.

However, he revealed that the heavy-lifting duties are currently being shouldered by a couple of strong men – later identified as the “public interest” board members of the troubled Two Fingers Building Society.

For the next few weeks, they will be carrying out Ms Diligence at regular intervals until her brother, Due Process, comes to collect her.

The trigger for this relapse was news that Michael “Fingers” Fingleton, the boss of a minor financial institution, was paid a huge cash bonus by his company after it had to be bailed out by hard-pressed taxpayers.

And once they saved his bacon, Fingleton sank his snout straight back into the Two Fingers Building Society trough, trousering a highly undeserved million euro.

Because he’s worth it.

A bit like Gerry McCaughey, pillar of the timber-frame construction industry and the Green Party’s pet businessman. Only recently, Minister John Gormley appointed him chairman of the Dublin Docklands Development Authority (DDDA).

Gerry’s worth it too, even if he doesn’t have a nickname like Josef Locke lookalike Fingleton, or Seánie Fitzpatrick aka The Borrower. Gerry is part of the new breed of Irish business people. He appears on programmes like Questions and Answers. He’s the sort of bloke you would look up to. He certainly impressed his patron, Minister Gormley. “One of our most successful Green entrepreneurs, and in the past decade, he has shown clear leadership on issues including regulatory reform and sustainable practices.” That’s what the Green Party leader said when putting Gerry in charge of the DDDA, as Labour’s Eamon Gilmore cruelly reminded him yesterday.

But the man with no nickname, at least in Deputy Gilmore’s eyes, appears to be no different to Seánie and Fingers. He avoided paying over €4 million in tax to the Irish exchequer in 2005.

According to the leader of the Labour Party, Mr McCaughey “legally avoided the payment of Capital Gains tax by the convenient means of transferring the shares of his spouse, who then transferred herself to Italy for the best part of a year to qualify as a tax exile.” Mr McCaughey stepped down from his position yesterday evening.

In fairness, Gerry McCaughey did nothing illegal. He had made around €23 million when his company was sold. Had his missus not gone down the exiled for tax purposes route, he would have had to pay over €4 million to the taxman here.

That would have left him with, oh, around €19 million. How could anyone be expected to live on that? Meanwhile, the case of Fingers Fingleton and his Two Fingers Building Society rumbles on. Enda Kenny demanded to know what the Government intends to do about getting back the million pound bonus paid to Two Fingers by his building society after it was bailed out.

It was at this stage that the familiar thud reverberated around the chamber. Joo Diligence, on the sauce again, about to be carried out.

Sure enough, the Taoiseach talked of how the issue would have to be thoroughly investigated.

There’s only so much people can put up with. At this stage, the Opposition is becoming sick and tired of the antics of Ms Diligence. How many times must the poor woman be carried out before the Government sees sense and starts acting decisively? The Fine Gael leader pointed out that the principal fact had been established beyond dispute – Two Fingers Fingleton was paid a million euro after the taxpayer saved his bacon.

What more is there to discover? He said his Government had the legal power to demand the return of the bonus. The Taoiseach talked about exploring all the options available. Furthermore, with the two “public interest” board members busy carrying out Joo Diligence, his Finance Minister “will ensure that he gets to the bottom of the issue.” This is a departure from traditional Fianna Fáil practice, which is to get to the top of every issue. Accordingly, where Two Fingers Fingleton is concerned, Minister Lenihan is not climbing every tree in the Two Fingers Building Society, rather, he is plumbing the depths in search of evidence.

Which appears to be in front of his nose. Going by what the Dáil is now hearing on a regular basis, there seems to have been a rottenness and rank hypocrisy underpinning the upper echelons of Irish business.

[OneRedArmy]

I see a retired shareholder threw an egg/eggs at the AIB chairman at today's AGM/EGM :)

Apparently he'd been wiped out by the banks share price fall.

Personally I have almost zero sympathy for people who invest all their money in a single equity or class of equities.

He's as greedy as the bankers he's protesting against.

[Macy]

Personally I have almost zero sympathy for people who invest all their money in a single equity or class of equities.
Depends on who was advising him. I've heard a few stories like that - what were the bank investment advisors, advising?

[pete]

Personally I have almost zero sympathy for people who invest all their money in a single equity or class of equities.

He's as greedy as the bankers he's protesting against.

I don't think that is fair. If you asked any one what the safest shares were 18 months ago they would have said banks. Sure we might have expected some sort of housing collapse but didn't hear any one predicting the banks would collapse so much.

Miriam Lords take on AGM season (http://www.irishtimes.com/newspaper/finance/2009/0513/1224246388524.html?via=rel)



Glorious for Fingers, that is, who left with a pension pot so large it would scarcely fit at the end of a rainbow.


I saw yesterday that INBS claimed the 27m pension fund for Fingers which was noted as employees was in fact a typo & should have been employee (singular). :rolleyes:

[dahamsta]

I don't think that is fair. If you asked any one what the safest shares were 18 months ago they would have said banks. Sure we might have expected some sort of hosuing collapse but didn't hear any one predicting the banks would collapse so much.Plural highlighted. Even if someone is stupid enough to put all their eggs in one basket - and it is very stupid - they could at least diversify within that basket. It remains stupid though, and Rule 1 of investing. Diversity is the key to wise investing.

Perhaps Rule 1 should be amended to: "If you're a moron, don't invest." Rule 2 could be: "If you're a moron, and you invested, don't whine about it afterwards."

[NeilMcD]

Basically its I want the rewards of capitalism but not the losses. Does he not realise that only works for the very top of the chain.

[OneRedArmy]

Depends on who was advising him. I've heard a few stories like that - what were the bank investment advisors, advising?

Not single equity investments for pensioners!

Anyone who wanted advice would be told to invest based on their risk appetite and time horizon. Broadly you reduce your equity holdings the closer you get to needing the money and reinvest in cash or near cash assets.

Are you saying that financial advisers were telling finacially unsophisticated people to reduce diversification and pile into bank shares?

[monutdfc]

Read the Financial Ombudsman's report - it's full of examples of terrible investment advice (although typically inappropriate products (with big commissions I'd expect) rather than recommendations to invest in individual shares):

http://www.financialombudsman.ie/news-updates/pr.asp?ID=59

EDIT:PS agree with ORA's general point about lack of diversification, but I still have some sympathy for some people who were naive

[Macy]

Are you saying that financial advisers were telling finacially unsophisticated people to reduce diversification and pile into bank shares?
Really just wondering, because I'm surprised so many seem to have taken a punt on just bank shares. Someone must have been advising them?

All the cuffufal today would make you think of another group the Government is trying to appease with the NAMA rubbish, as opposed to other options that would hit shareholders...

[OneRedArmy]

Really just wondering, because I'm surprised so many seem to have taken a punt on just bank shares. Someone must have been advising them?

All the cuffufal today would make you think of another group the Government is trying to appease with the NAMA rubbish, as opposed to other options that would hit shareholders...I disagree that someone must be advising them.

Nobody advised the ten of thousands of people who became mini-property speculators over the last 10 years. They saw friends doing it and read it in the papers and did it out of greed. The same for banks shares. Equities can never be high growth and high yielding over the long-run, yet that's what these people expected.

I know your social and political views consistently lead you to the conclusion that a small cadre of connected individuals are almost totally responsible for our ills, but again, I'd spread the blame net a lot wider.

[Billsthoughts]

Nobody advised the ten of thousands of people who became mini-property speculators over the last 10 years. They saw friends doing it and read it in the papers and did it out of greed.


there should be a law against anyone using free markets to feed this "greed".
In relation to the guy who lost all the money on bank shares. so what? he is a shareholder and is entitled to vent is anger at the way his company is being run at its agm.

[Ringo]

there should be a law against anyone using free markets to feed this "greed".
In relation to the guy who lost all the money on bank shares. so what? he is a shareholder and is entitled to vent is anger at the way his company is being run at its agm.

Think he came across as a crackpot. Throwing eggs. One thing struck me yesterday. I'm sick of these people at these agms . They gambled they lost. welcome to the real world. We can’t cut old age medical cards, but we can close children’s wards in Crumlin. No blue rinse mark for the closed children’s wards.:mad:

[Macy]

I disagree that someone must be advising them.
I was asking a question not making a statement. I've never had an interest in investing in shares, and never had the money to need an investment advisor.

[Billsthoughts]

Think he came across as a crackpot

His "piano wire" comment would raise serious questions about his political leanings!:)

[Ringo]

He made the front page of the Sun:rolleyes:!! He's really made it!!:p

[Macy]

Anglo cost an extra €4bn first six months to the end of March. Just what did the Golden Circle have on FF, and who exactly are they? Why did Lenihan give the board indemnity when it was nationalised. Something feckin stinks about this - systemic importance me hole.

http://www.irishtimes.com/newspaper/breaking/2009/0529/breaking30.htm

[OneRedArmy]

Macy, I don't disagree with you. It should've been let fail. I've said that all along.

But the constant media references to "bailing out the developers" is infuriatingly inaccurate. The Government money is being pumped in to bail out the depositors (who at this stage are overwhelmingly individuals and SMEs, the interbank money is long gone). If Anglo was allowed to fail, it's the depositors that would lose. You'd actually increase the chance of the developers getting off unscathed.

On the Golden Circle, criminal charges HAVE to be coming. It's a clear case of share support and now the €300m has been written off these guys, along with Seanie, should be locked up. But given how long the DCC-Fyffes case took, I wouldn't hold my breath.

[pete]

4 billion lose of 6 months is a staggering number. Not convinced that winding it up is even an option because of the state guarantee. Would need to see the numbers involved before committing to that.

I see the Director of Corporate Enforcement says he will be in a position to talk to the DPP later this year. He needs to get the finger out as it is in the National interest that any prosecutions are done as quickly as possible.

If Developers cannot pay their loans the bank needs to look at recovering the assets. Seems like some developers are willing to sit on their assets & wait for prices to turn around. AT least byb recovering the assets the prices would drop & maybe be sold.

[Macy]

But the constant media references to "bailing out the developers" is infuriatingly inaccurate. The Government money is being pumped in to bail out the depositors (who at this stage are overwhelmingly individuals and SMEs, the interbank money is long gone). If Anglo was allowed to fail, it's the depositors that would lose. You'd actually increase the chance of the developers getting off unscathed.
I don't know, because for it to be racking up losses at such a rate, someone isn't paying. If the loans are written off, do we know that they'll go after the developers, given their clear links to FF. FFS, Peter Bacon, the Government "outside" specialist advice, works for a property developer into Anglo for millions.

[OneRedArmy]

I don't know, because for it to be racking up losses at such a rate, someone isn't paying. If the loans are written off, do we know that they'll go after the developers, given their clear links to FF. FFS, Peter Bacon, the Government "outside" specialist advice, works for a property developer into Anglo for millions.1) The loans aren't being written off, provisions are being raised, which doesn't take away the ability and legal duty to recover
2) in any case it's somewhat academic as the collateral than can be seized from developers is only a fraction of the value of the loans.

Let's be clear Pete, NOT putting in place bad debt provisions is not an option. Accounting is about prudence, and at this stage it's highly
unlikely the full value of these loans will be recovered. That's not to say the banks will stop trying.

[Macy]

It might have been missed with the elections, but the bank that was nationalised because of it's "systemic" importance, has not lent any money since September. It's clear it should've been allowed fold. I ask again, just who are the Government protecting, as it clearly isn't the taxpayer.

http://www.independent.ie/business/irish/anglo-irish--the-bank-with-no-future-thats-too-expensive-to-kill-off-1761064.html

[pete]

I don't know what they should do but it seems 4 billion is only the start. All this talk of "only" another few billion required seems very optimistic.

The Anglo brand is toxic so it is only a case of closing it now or later. I doubt many of the retail branches would even be attractive to other banks.

:o

[OneRedArmy]

It might have been missed with the elections, but the bank that was nationalised because of it's "systemic" importance, has not lent any money since September. It's clear it should've been allowed fold. I ask again, just who are the Government protecting, as it clearly isn't the taxpayer.

http://www.independent.ie/business/irish/anglo-irish--the-bank-with-no-future-thats-too-expensive-to-kill-off-1761064.htmlAre you saying it should've folded outside the scope of the guarantee or inside the guarantee?

In the first scenario depositors lose out and the knock on effect would've created a huge run and killed all the other Irish banks within a couple of days. This is actually what happened last Sept.

I'm not sure as a country we can afford scenario 2 in one big hit. Death by a thousand cuts allows the Government to spread the hit over a much longer time period.

You might be right that bailing their mates out is a driver, but it's not the primary one IMO.

As today's S&P downgrade indicates the relative size of the banking industry is a huge millstone round the country's neck at the minute.

[Macy]

Inside or out, they should've let it fold. It appears it had little deposits to pay out even if it was folded within the guarantee. It is of so little systemic importance it wouldn't have mattered a jot to the rest of the world or the markets - I mean we're taking the hits being downgraded now regardless due to Anglo. The money wasted in Anglo could've been used to nationalise/capitalise the banks that actually are of systemic importance.

[pete]

I saw Richard Bruton was pushing the FG 'good bank' policy on TV yesyerday.

- Increasing lending with creation of new bank?
- Retail banks have until the end of the state guarantee to sort out their own problems.
- If banks cannot get themselves organised & safe they are Nationalised whenh state guarantee ends.
- Good Bank & Bad bank are create at that stage.

Seems a better plan than the governments are motivates the banks to sort themselves out. Nationalisation is almost delayed as a last resort & saves the tax payer money. Bond holders whose loans expire after the state guarantee get nothing.

Nationalising now doesn't seem to solve anything as seen with Anglo Irish as still pumping billions into them & they not even lending money. By delaying nationalisation the banks & long term debt holders are motivated to agree a deal.

I see international estimates of banking bailout now up to 20-25 billion.

[OneRedArmy]

If you stick it to the senior debt holders Ireland will be bankrupt within 12 months and will regress to a third world economy as there will be no buyers for our debt.

Hyperbole....maybe. Unfair....probably. Plausible....absolutely.

Nationalization has no material benefits at this stage, other than political posturing.

In relation to Anglo, the only noticeble impact of nationalization is that lots of employees are sitting around scratching who would otherwise be redundant and the annual results were leaked, two obvious civil service traits.

[pete]

If you stick it to the senior debt holders Ireland will be bankrupt within 12 months and will regress to a third world economy as there will be no buyers for our debt.

But surely if the long term debt is not due until past the state guarantee it is already virtually worthless? If someone lent Anglo Irish 1 billion due on say June 2011 how much cent on the Euro would they accept for it now?

I agree about Nationalising Anglo. For a bank the state now controls it s behaviour hasn't changed at all. The talk about turning them into a small business lender is laughable.

[Macy]

It's clear Anglo should've been let fold, and not nationalised or guaranteed, so is it really an example of why not to nationalise the banks that are of systemic importance?

The remaining publicly quoted banks, which are at least clearing banks, are going to have significant state ownership anyway. We might as well get it over and done with now, and have the staff to deal with the loan book in place. Nationalisation would have the immediate material benefit of getting the banking system giving credit again, instead of them hoarding as they are now to try and maximise their capital to limit state involvement.

Two other recent developments...
1) NAMA is now going to bail out developers in banks not even covered by the guarantee :rolleyes: http://www.irishtimes.com/newspaper/finance/2009/0612/1224248688451.html

2) It appears contrary to the bull crap he's said over the last few months, that Lenihan and the Government still favour light touch regulation, as does the UK. Lenihan didn't even bother his hole turning up at a meeting of EU Finance Ministers to discuss banking regulation. http://www.independent.ie/business/irish/lenihan-misses-key-eu-talks-on-regulation-1770910.html

[OneRedArmy]

I disagree with your assumptions completely.

1) Let Anglo fail.

Fine. You're right thqt they have no future lending. But you still need to pay the depositors and bondholders. If you don't, the country (not just the banks) has no credibility in debt markets and can't raise money to fund the national debt. Result: Lender of last resort kicks in (ECB or IMF).

2. Nationalization will aid lending to small businesses. Complete fallacy. Hasn't happened in Anglo (and they are nationalised). The dirty little Government secret is that the new minimum capital adequacy levels don't allow banks to engage in high risk SME lending until the balance sheets are re-built. Whilst ISME wail about it SME lending is high risk and always has been. Ergo you hold more capital against it.

3. NAMA is somehow bailing people out. NAMA is only a structure. The amount that is written off doesn't relate to the structure. It is in the Government and Banks interest to recover as much as they can whilst providing prudently.

[Macy]

1) Let Anglo fail.

Fine. You're right thqt they have no future lending. But you still need to pay the depositors and bondholders. If you don't, the country (not just the banks) has no credibility in debt markets and can't raise money to fund the national debt. Result: Lender of last resort kicks in (ECB or IMF).

That ship has sailed, so in that respect you're right. However, I don't agree that the same consquence would've been there at the time of the guarantee. We'll never know whether that would be the consequence (and it still might even now it is such a basket case), but I'd trust Bruton and respected economists over Lenihan any day.


2. Nationalization will aid lending to small businesses. Complete fallacy. Hasn't happened in Anglo (and they are nationalised). The dirty little Government secret is that the new minimum capital adequacy levels don't allow banks to engage in high risk SME lending until the balance sheets are re-built. Whilst ISME wail about it SME lending is high risk and always has been. Ergo you hold more capital against it.
I'll repeat that I don't think that Anglo is a good example to use, as it clearly wasn't of systemic importance to the financial system. It seemed to be mainly a speculator's bank than a business one, but it's such a basket case I don't think you can assume a nationalised AIB or BoI would be the same. Most of their time must be spent dealing with the mess. The Governments policies are designed to prop up the banks as private institutions, they could be relaxed if they were nationalised.


3. NAMA is somehow bailing people out. NAMA is only a structure. The amount that is written off doesn't relate to the structure. It is in the Government and Banks interest to recover as much as they can whilst providing prudently.
We don't know what NAMA will pay, how hard it'll go after the money, whether it will have the staff to manage it properly. You might think it's in the Government and Banks interest, but I remain to be convinced. Who is advising Lenihan, and what conflict of interests might he have?

[pete]

I haven't seen anything which suggests AIB & BoI have to be nationalised. Surely the state taking 100% control of the banks should only be used as a last resort?

Nationalisation has not improved Anglo & if they are not loaning any money & presumably not receiving as much payments as they should have what do all the people who work there do every day? :confused:

[monutdfc]

Excellent analysis of the Irish banks here:
http://www.esr.ie/Vol40_2/Vol-40-2-Honohan.pdf

[pete]

EU Commission approves 4 billion for Anglo Irish (http://www.irishtimes.com/newspaper/breaking/2009/0626/breaking28.htm)


The Government has secured permission from the European Commission to carry out the €4 billion emergency recapitalisation of the nationalised Anglo Irish Bank.

“The proposed measure is required as a matter of urgency to preserve the financial stability of the bank which is of systemic importance to the Irish financial markets," the 27-nation European Union's executive arm said in a statement.

"The aid is approved as a temporary rescue measure and Ireland has committed to submit a restructuring plan for the bank," the Commission said.

The Commission, which regulates state aid in the EU, said the measure was an adequate means to remedy a serious disturbance in the Irish economy while avoiding undue distortions of competition.

It added that the proposed recapitalisation was appropriate to remedy Anglo's solvency problems and maintain confidence in the Irish financial markets.

The proposed capital injection will help preserve an adequate level of core tier 1 capital even after further impairment, the Commission said.

There is a rescue plan in the pipeline for Anglo Irish? :eek:

[OneRedArmy]

This thread has gone a bit quiet so I thought I'd try and address two particular facets of the banking situation that the meedja and all knowing academics (rolly eyes) have either missed or decided not to probe.

1. The banks can't be nationalised.
The Government's public sector borrowing requirement has gone through the roof as a result of the fall in tax revenue and the investments in the banks. The NTMA raise finance through issuing sovereign bonds which are bought by pension funds and other banks around the world. However, as the risk of Ireland (the country) not repaying these bonds has gone up, along with the amount we need to raise, this has meant that the are proving harder to sell. Those newshounds amongst you will reply that thats is contrary to what the NTMA have been telling the media, that they have raised all the money needed for this year and are confident they'll get a fair chunk of next years away before the end of the year. Panic over. But who is buying our bonds if the rest of the world is fearful? Why the Irish banks of course, under implicit pressure from the Government. Holdings of Irish soverigns by the Irish banks has coincidentally gone through the roof in the last 6-9 months.
But this isn't necessarily a bad thing for the Irish banks, as there is another wheeze they can use to their advantage. The European Central Bank (ECB) has been providing liquidity support to all banks within the Euro area as interbank funding became increasingly inaccessible. So the Irish banks can take their Irish Government bonds (the purchase of which was indirectly funded by a preference share injection by.........the Irish Government), and pledge them to the ECB (repo) and receive cash in return from the ECB. If that sounds like one big Ponzi scheme to you, you would find a lot of people agree with you. If the banks were nationalised these kind of "arms length" transactions would become much more difficult and the charade would likely have to end.

2. The banks can't lend.
Of course the banks can't say this given the weight of public opinion, and the Government definitely can't endorse it, but it is a fact. The amount of reserves banks were required to hold by regulators to provide a buffer against their loans (capital ratio) has, with the benefit of hindsight, been proved to be much to low. Regulators and investors have required banks to improve this ratio. There are two main ways you can improve this ratio. Increase your reserves and/or reduce your loans. The former is almost impossible as wholesale funding (interbank lending) has all but disappeared. So if borrowings were left at the same level, capital ratios would actually worsen. Government has provided some investment (€3.5bn to BoI and AIB for example) but despite it seeming like a big number, its not nearly enough to allow maintaining loans at the current level. So the only option is to reduce loans.

[dahamsta]

Someone called Ireland "The NAMA Republic" the other day, it cracked me up.

(Sorry for the facetious post.)

adam

[John83]

(Sorry for the facetious post.)

adam
A professor once corrected me regarding that word. "Facetious means inappropriately jocular," he informed me, meaning that he was entirely justified in what he'd previously said (which I've forgotten), as it was appropriate. The same appears to apply here.

A professor of English, you say? No, an engineer. They're more pedantic.

(Now I have to apologise for the off topic post. Damn.)

[dahamsta]

Rather sadly, I actually looked it up (http://dictionary.reference.com/browse/facetious) before I posted. I knew it was wrong, but couldn't remember what they correct word was so said I'd chance it, cos, you know, I'm on Foot.ie.

It's not the first time that's happened and it probably won't be the last...

[tetsujin1979]

Friend of mine sent me this link - http://www.youtube.com/watch?v=5WBYQn1Fwgo - to explain what is actually going on (I'm not much with the financials, me)
Bit simplistic, but gets the message across