Financial Crisis

[Macy]

If they have to be recapitalised, then the tax payer gets a stake in return. By paying over the odds, the shareholders get a return, the tax payer gets vague promises about lending to SME's.

[OneRedArmy]

Irish bank shares up this morning, AIB up 27% so far. NCB has AIB and BoI as buys. But of course this is to the benefit to the ordinary citizen...Given the Government owns a stake in the two banks in question from the recapitalisation earlier in the year then, yes, this is to the financial benefit of the taxpayer.


If they have to be recapitalised, then the tax payer gets a stake in return. By paying over the odds, the shareholders get a return, the tax payer gets vague promises about lending to SME's.And vice versa if NAMA can recover more than the haircut value (per the Swedish example), the NAMA, and ultimately the taxpayer takes the difference.

[Macy]

And vice versa if NAMA can recover more than the haircut value (per the Swedish example), the NAMA, and ultimately the taxpayer takes the difference.
Did the Swedish haircut also include rolled up interest that accounts for 10% of the valuation? The actual haircut on the top whack prices is only 20%.

[OneRedArmy]

Did the Swedish haircut also include rolled up interest that accounts for 10% of the valuation? The actual haircut on the top whack prices is only 20%.The 30% is the difference between the current book value and the estimated, average haircut. You're forgetting the amount that the banks have already written down the loans by.

Also, the Minister was working with very broad estimates. The reality is the data collection is nowhere near completion.

[MariborKev]

Also, the Minister was working with very broad estimates. The reality is the data collection is nowhere near completion.

Thought he was less than convincing on RTE radio on this very subject this morning. If the data collection isn't complete, why even estimate the figures?

[OneRedArmy]

Thought he was less than convincing on RTE radio on this very subject this morning. If the data collection isn't complete, why even estimate the figures?To get the legislation passed...

[monutdfc]

Given the Government owns a stake in the two banks in question from the recapitalisation earlier in the year then, yes, this is to the financial benefit of the taxpayer.
The stake consists of preference shares with a a fixed coupon and a warrant that is very unlikely to be exercised - thus the value of the government stake benefits very little from the increase in the share price.

[OneRedArmy]

The stake consists of preference shares with a a fixed coupon and a warrant that is very unlikely to be exercised - thus the value of the government stake benefits very little from the increase in the share price.I'd say it's getting more likely by the day that the warrants will be exercised. I can't see where the private money for recap is going to come from, despite what AIB and BOI are saying.

Anyway the shares are way overvalued IMO, particularly with no good news on unemployment on the horizon. NAMA won't sort out the mortgage and personal debt losses which are starting to climb alarmingly.

[Macy]

"This is not a bailout of developers"....


He said that a close friend overheard a group of Irish developers and builders in a restaurant in Puerta Banus, near Marbella, earlier this month, singing about the National Asset Management Agency (NAMA) and toasting Finance Minister Brian Lenihan.

Read more: http://www.irishexaminer.com/ireland/mountcharles-developers-toasted-nama-rescue-in-spain-101459.html#ixzz0Rora1KRT

[OneRedArmy]

"This is not a bailout of developers"....



Read more: http://www.irishexaminer.com/ireland/mountcharles-developers-toasted-nama-rescue-in-spain-101459.html#ixzz0Rora1KRTHilarious.

But seriously, what does that prove?

Not one developer has been contacted by a bank about NAMA and legally, can't be until the legislation is passed (per AG advice). The loans haven't been valued. They can sing away but the proof of the pudding will be in the eating and we'll see in the New Year how it all plays out.

[Angus]

Did we all see Kenny's show ?

What do we think ? Do the government have the cojones to implement public pay cuts ?

Here is my prediction:

The greens will orchestrate a pull out from government and there will be an election. FG will win and will inherit the mess and will implement public sector pay cuts - and it will then be a race against time

A race between the subsequent election and the economy getting better by itself

[Macy]

Didn't watch it, as it just looked like a divide and conquer job pitching worker and against worker. Biggest problem is that so many people will fall into the trap - the politicians, developers, bankers and tax exiles must be sat at home laughing their ****** off.

[OneRedArmy]

Didn't watch it, as it just looked like a divide and conquer job pitching worker and against worker. Biggest problem is that so many people will fall into the trap - the politicians, developers, bankers and tax exiles must be sat at home laughing their ****** off.Macy, you're underestimating (either naively or wilfully) the strength of public feeling against the public sector which is very strong regardless of earning power.

Its nothing new either, its always been there, but the goings on of the last fews years have highlighted the two tiered structure in the country.

And tackling gross waste in the public sector isn't mutually exclusive from tackling the politicians, tax exiles and bankers. We can do both.

I also don't profess to understand what you mean by "a worker". Where is the line drawn? Is the baggage handler at Aer Lingus earning €110k a worker? What about the ESB worker in a decommissioned power station earning €100k, is he a worker? These are extreme examples, but they are not isolated. Its in the unions interest to portray neatly defined classes opposed to each other, but for the middle 80% the boundaries merged long ago.

At the end of the day, if the will of the people is strong enough, the Government of the day will eventually have to act. Regardless of whether or not its a good thing, the "have your cake and eat it" attitude that is prevalent in the public sector can't be afforded at present and in a small open economy the cost of the public sector has to be closely aligned with the economic performance of the wider economy. Thats why the first thing the IMF do when they come into a troubled economy is to cut public sector pay.

SIPTU have realised this is a line in the sand and they are bolstering the troops, as losing this battle will probably lose the war (I'd draw parallels with the miners strike in the UK).

[Macy]

I'm not underestimating the feeling that has been stirred up by vested interests. Public sector waste is to do with political decisions, and political will to change the way things are done. Attacking terms and conditions of workers is not taking the hard decisions - in the climate that has been whipped up by right wing economists, media and politicians it is actually the easy option not the hard one.

I have no problem with reducing pay at the higher levels, but frankly the lower grades simply can't take anymore and it'll just be feeding into the general problems of the economy - reduced consumers spending, more mortgage defaults, more black economy (child care, nixers etc). Workers from all sectors over paid for houses, are lumbered with massive mortgages stuck in negative equity.

btw ESB are not part of the public sector anymore - it operates as an independent company and is part of IBEC, it even paid the last National Wage Agreement in line with the time frames for the private sector.

[Macy]

Lets be clear about 1 thing - Strike by civil service = riots/possible army intervention.
Yeah, people won't take to the streets over mortgaging out grandchildrens future, or over health cuts that condemn girls to cancer, but the civil service strike and suddenly there'd be riots? I don't believe it for a second, but if it'd shake the whole feckin country out of their apathy i'd live with it!

[Macy]

You are so naive. Civil Service strike - dole payments don't get paid - scumbags smash the place up.
You're naive if you think it'd be all out indefinite to start with - dole payments might be a bit late - que calls to joe duffy rather than call to arms.

[dahamsta]

You are so naive. Civil Service strike - dole payments don't get paid - scumbags smash the place up.

Comprende?tipptops, you're not having a good start on Foot.ie. Lose the tone or I'll lose your account, understand?

[dahamsta]

Amn't I allowed to express my opinion?Not with that attitude, no. Use some civility, or find another forum to post on.

[KevB76]

.....

[Macy]

So, it looks like we're going to have our banking system nationalised anyway. http://www.thepost.ie/news/billions-extra-needed-to-bail-out-the-banks-48271.html

What have the last couple of years messing about and doing anything other than nationalising the banks done for the country except cost us more money (on the price of nationalisation if nothing else)? If people still seriously see Lenihan as the countries great white hope we are totally screwed.

[OneRedArmy]

So, it looks like we're going to have our banking system nationalised anyway. http://www.thepost.ie/news/billions-extra-needed-to-bail-out-the-banks-48271.html

What have the last couple of years messing about and doing anything other than nationalising the banks done for the country except cost us more money (on the price of nationalisation if nothing else)? If people still seriously see Lenihan as the countries great white hope we are totally screwed.Not sure the timing has/will cost the country any more money?

We are where we were a year ago. Nothing really has changed, other than some provisions crystallising into losses.

The die was cast when the Government guaranteed the deposits. The script was fixed at that stage. We're just entering a new act of the play.

[dahamsta]

Sad but true. My shares in AIB plummetted today, but you don't see me complaining... :)

[Macy]

Not sure the timing has/will cost the country any more money?

We are where we were a year ago. Nothing really has changed, other than some provisions crystallising into losses.
The oft promised "getting credit flowing" has been delayed - how many jobs has that cost? We've missed the opportunity to be on both sides of the NAMA equation. Now, I guess the prices paid by NAMA will be more realistic because of the continued delays, but that wouldn't have been an issue if we'd nationalised anyway. By my reckoning, the share price is still up compared to September 2008, isn't it? So we'll pay more, but at least the prominent share holders got a chance to recover some losses in the meantime.


The die was cast when the Government guaranteed the deposits. The script was fixed at that stage. We're just entering a new act of the play.
Yeah - hasn't been often we agreed on this thread, but we are still paying for that crap decision. Lenihan walked us into this, and the FG fools gave them the out.

[Fr Damo]

Quinn Direct in "administration" today. Not to be confused with examinership though!
http://www.rte.ie/news/2010/0330/quinn.html

No doubt in my mind that the loss Quinn personally endured regarding anglo is tied to this and a reported depletion in slovency ratios for Quinn's Insurance Arm. This is serious Father.............. Famous phrase from Craggy Island!

What new business are they going to get in during this period? Zilch. Thus their revenue streams going forward are going to be hit further! They need an .........errrmmm AIG!

[OneRedArmy]

The oft promised "getting credit flowing" has been delayed - how many jobs has that cost? We've missed the opportunity to be on both sides of the NAMA equation. Now, I guess the prices paid by NAMA will be more realistic because of the continued delays, but that wouldn't have been an issue if we'd nationalised anyway. By my reckoning, the share price is still up compared to September 2008, isn't it? So we'll pay more, but at least the prominent share holders got a chance to recover some losses in the meantime.


Yeah - hasn't been often we agreed on this thread, but we are still paying for that crap decision. Lenihan walked us into this, and the FG fools gave them the out.I agree on providing credit, there is even less chance of that happening now with the increased capital levels being brought in today by the EU/FinReg. Lending more and holding more capital simply does not compute and the Government are being duplicitious in the extreme by not coming clean on this.

Allied to that, after losing their shirts (and the rest of their clothes!) and given the grim near term prospects for the country, should we really be surprised that banks won't lend to an inherently risky sector?!?

IMO, given the decision was taken to keep Anglo alive (wrongly IMO) that should have been the vehicle to provide new small business lending. Another opportunity missed.

On the nationalisation point, if the two big banks require €10bn upwards, their combined market value is only a fraction of this, so again, the timing isn't as big a deal as it's being made out.

I'm open to someone quantitaively explaining, with real numbers, that anything other than the Government guarantee has a material financial impact, but I haven't seen anyone do it yet, either here or in the media.

[OneRedArmy]

Anglo numbers staggering.

Nationwide to a lesser extent.

[osarusan]

Am I the only one who fails to see the point in NAMA getting a 50% "haircut" from Anglo when this just means that Anglo's valuation, based on a discount of 28%, means that further capitalisation will be needed further down the line?

[John83]

Am I the only one who fails to see the point in NAMA getting a 50% "haircut" from Anglo when this just means that Anglo's valuation, based on a discount of 28%, means that further capitalisation will be needed further down the line?
The whole thing is a giant shell game anyway. The country would be in deep(er) **** if the EU hadn't let us write off all this recapitalisation and NAMA money as a special investment vechicle that doesn't count towards our national debt.

[OneRedArmy]

http://www.rte.ie/news/2010/0421/banks.html

Here's the real FF letting the veil slip again.

I'm also lost for words, except I'm not. Why should we be surprised?

[John83]

http://www.rte.ie/news/2010/0421/banks.html

Here's the real FF letting the veil slip again.

I'm also lost for words, except I'm not. Why should we be surprised?
It's just O'Keeffe. The guy's like a shorthand for everything wrong with the country.

[Mr A]

Holy crap. That's a remarkable load of garbage even by that lunatic's standards!

Difficult to even know where to start...

[OneRedArmy]

It's just O'Keeffe. The guy's like a shorthand for everything wrong with the country.Except as someone pointed out before in relation to O'Keefe or one of his colleagues, they say what the rest of FF thinks.

[Mr A]

I wonder how many of those that voted for the various measures around the banking sector actually have shares in them? Clear conflict of interest if they did so, not that that seems in this country.

Edit: Stolen from politics.ie:


Deputy O'Keefe's substantial portfolio of shares includes, according to the register of members interests, investments in a large number of financial concerns, specifically Permanent TSB, A.I.B., Bank of Ireland, Lloyds TSB, Standard Life Plc, Experian, FBD Insurance, Royal Sun Alliance Plc, AIB European Commercial Property Fund Bond & Barrington Capital.
Register of Members Interests of Dáil Éireann 1 January 2007 - 31 December 2007 - Tithe an Oireachtais

O'Keefe is a one man advertisement for why we need the ability to recall politicians.

[OneRedArmy]

I wonder how many of those that voted for the various measures around the banking sector actually have shares in them? Clear conflict of interest if they did so, not that that seems in this country.

Edit: Stolen from politics.ie:


O'Keefe is a one man advertisement for why we need the ability to recall politicians.This country is one large conflict of interest!

[pineapple stu]

The worst bit about the article is the way the comments aren't even challenged. Don't have to go into detailed analysis, but surely a two-line comment highlighting what's wrong with it is surely doable? Media shouldn't exist to make it seem like idiots actually have a point.

[Macy]

http://www.rte.ie/news/2010/0421/banks.html

Here's the real FF letting the veil slip again.

I'm also lost for words, except I'm not. Why should we be surprised?
We shouldn't be surprised - light touch regulation was and is FF policy since 1997. It's the rest of the Government benches that are contradicting their views, as borne out by how they did set regulation policy (no matter how much they try and hang it on the scapegoat). Sure as recently as this time last year Lenihan was standing with the UK in opposing the such strict regulation as the EU was proposing.

[Spudulika]

Is anyone surprised? TD gets a nudge from a lobbyist/party whip to ask a question, question asked, big fudge, and then we're all in the same mess again. What surprised me most this week has been the fact that this is supposed to be a good time to buy houses - despite the property market still overvalued and in need of deflation. Banks and Builders and those who hold lots of land rule.

[dahamsta]

David McWilliams doesn't agree (http://www.davidmcwilliams.ie/2010/04/21/the-great-property-scam-is-back-to-rip-us-off-again).

I don't think think houses will come down to the levels David mentions, and I don't think you can say that it's a bad time to buy a house across the board (I'm buying one myself at the moment), but there is still an awful lot of overpriced property out there. The affordable houses flooding onto the market will definitely bring the market down further though.

[Spudulika]

David McWilliams doesn't agree (http://www.davidmcwilliams.ie/2010/04/21/the-great-property-scam-is-back-to-rip-us-off-again).

I don't think think houses will come down to the levels David mentions, and I don't think you can say that it's a bad time to buy a house across the board (I'm buying one myself at the moment), but there is still an awful lot of overpriced property out there. The affordable houses flooding onto the market will definitely bring the market down further though.

Agreed, the government and their buddies won't let it bottom out, so we'll be stuck with overpriced junk for years to come. I wouldn't want to buy at the moment because of lots of reasons, however if you're getting a good discount on a property then why not.

[dahamsta]

It's worth noting too that David ignores the quality factor, building standards have improved substantially in the last 20 years.

I'm taking full advantage by buying from a liquidator. No builder's warranty, but sure what's that worth these days anyway...

[Spudulika]

It's worth noting too that David ignores the quality factor, building standards have improved substantially in the last 20 years.

I'm taking full advantage by buying from a liquidator. No builder's warranty, but sure what's that worth these days anyway...

You're right buying from that outlet, though I don't know if building standards have risen in any way - in fact in some cases it's even worse than back in the 60's and 70's. It can come down to the poor level of workmanship on some houses to wafer thin walls and shallow foundations. Also, and this is something that I still get cheesed off about, all the wonderful hard working east europeans who landed in to work on sites didn't help. I still remember a development in Blanchardstown where the contractor proudly told me - "We've got fellas with degrees and even a doctor working there, jaysus we've one fella who has a degree in nuclear physics working as a chippy." That degrees cost a little more to buy than bog roll in eastern europe (a Masters in English rubberstamped by a real university will set you back $100 at B.I. Lenin metro station) has nothing to do with being a capable worker on a building site. Which leads me back to what I mentioned, I've been to lots of new builds with my sister when she was looking for a place and in all but 2 in the Dublin and Dublin area (including one major spot in Lucan) the workmanship wasn't up to snuff.

[John83]

Older buildings do send to be a bit more solidly built, though that often covered for some shoddy worksmanship - wiring in particular can be in a state fit to make an electrician cry (with joy, as he tells the owner that he'll have to rip it all out and redo it all). Insulation was patchy too. Builders have always cut corners.

[dahamsta]

And always will. But building regs are much stronger now. There'll always be shoddy estates, and houses, but generally speaking houses are safer and more energy-efficient now.

[Fr Damo]

Did anyone see the programme on Ghost Estates last night on RTE1?

It's mind numbing to think Leitrim does not need any new houses to be built for about nine years. Sure there are many more examples.
It's all very well blaming the planning Authorities, Government , banks etc but how on earth did builders think there was demand for houses in these god for saken farmer fields 100 miles from Dublin? I'm proabaly going to offend people now but I went o school with guys of "average" intellegence in the 90s who ten years later were driving X5s with speed boats behind them and 5 year on are back on the carrer path forecast at parent teacher meetings in the 90s......

A Good friend at the Bank last monday. Owns a three bed semi in a Midland town since 05. Probably in about 20% negitive equity. He and his missus want to trade up and out and build on a site (family plot but would need the pay off some family members). Bank Told him to go away and sell his own before they would give a 80% mortgage or if he wished he they bank would give 50% of the new build. This would amount to about 100k for a 200 k. BOI reckon they are granting 100 morgages a day, or 25,000 a year. Who are they Kidding?

Lucy thinks there is more to fall and prices to return to 2000 levels. 3 bed semis were £IR100k in 2000 in Athlone.

Property trap.

[dahamsta]

Apparently the 100 mortgages a day number is bull, the numbers relate to preapprovals.

[OneRedArmy]

Apparently the 100 mortgages a day number is bull, the numbers relate to preapprovals.Source?

[Macy]

It's all very well blaming the planning Authorities, Government , banks etc but how on earth did builders think there was demand for houses in these god for saken farmer fields 100 miles from Dublin?
The tax breaks made them viable. There were tax breaks for building, and substantial tax breaks for investors (i.e. none owner occupiers). As I understand it, even if they never rented the houses, the tax they could write off made them worthwhile. At the same time it acted as a disincentive to be owner occupiers. It was Government policy that created the "market" and ultimately lead to the ghost estates. To think that Cowen et al got their knickers in a twist over recent accusations in the dail!

It'll be interesting to watch the next few shows. A couple of things already bugged me even from last night, so god knows how I'll feel when the politicians get involved in the programmes - the "we are were we are, don't look back" is bull. The incumbents are the one's that created this mess. There should be no loss of focus on that this side of an election lest the many thick electorate forget. Sure, we need solutions, but those that lead us in must be punished at the ballot box for their incompetence (given they deny it was deliberate). There'll be the crap about no one seeing this coming as well from FF apologists - remember the complaints about the Futureshock programme that Curran did that FF lept on. His job was apparently under threat because of it - remember Bertie wondering why the naysayers didn't just go an committ suicide. They'll also try and hang the financial regulator - who it turns out Cowen only deemed necessary to meet twice in four years when he was Finance Minister. http://www.independent.ie/national-news/cowen-met-with-regulator-twice-in-four-years-2173983.html

[dahamsta]

Source?

Unfortunately I heard it on the radio during a debate several weeks ago. I guess "Newstalk" is the best I can do. :)

[OneRedArmy]

Unfortunately I heard it on the radio during a debate several weeks ago. I guess "Newstalk" is the best I can do. :)I doubted it as well, but I would've thought its more along the lines of, "you applied for (e.g.) €300k, we'll approve you for €200k". i.e. its a mortgage approval, but in reality feck all use to the applicant.

That said, I do feel there's an element of damned if you do, damned if you don't, in that people howled that the banks were lending too much and thats what got us into this mess (which is completely correct), now the banks are supposedly inhibiting the country getting back on its feet by coming over all sensible about lending money....

This country needs to get over its property ownership at all costs mentality IMO.

[Fr Damo]

The Guy I mentioned has decided to withdraw his savings from the Bank he was with and merge them with the wifes savings (they are recently married) in an otherbank. In doing so, they leave Mortgage A with Bank A and no savings.
Normally a bank view mortgages as an asset and a deposit as a liability but not any more! Bank B are more receptive to their application and they are on a second meeting.

Yes banks over shot on the way up but aren't helping themselves on the way down and you'd have to question their wisdom, they didn't do a good job managing the boom after all so why have faith in this more conservitive approach? & Why isn't salary a consideration (or to the point, why are they only considering loan to value?) i.e if a couple have combined income of 100k gross, it seems mad they can borrow only 200k for a 300 k house!