Financial Crisis

[Dodge]

People were encouraged to understate their monthly committments. We were told it was "a pity that your credit union appears on your payslip as we have to ask about that now".

In fairness our bank weren't like that at all. Pretty helpful but not to that point

[mypost]

http://www.guardian.co.uk/business/feedarticle/7845410

"The European Union's competition chief said on Monday Irish proposals to guarantee bank deposits could be tweaked to make them acceptable, while similar plans by Germany appeared to pose few problems."

Why is that I wonder?? :confused::rolleyes:

[OneRedArmy]

http://www.guardian.co.uk/business/feedarticle/7845410

"The European Union's competition chief said on Monday Irish proposals to guarantee bank deposits could be tweaked to make them acceptable, while similar plans by Germany appeared to pose few problems."

Why is that I wonder?? :confused::rolleyes:Its clearly because its because we are a small country and Europe is being mean to us and nothing to do with the detail of the proposals, which nobody, not least you, has read in any case...

If only life was as simple as in Mypost-world.

[pete]

http://www.guardian.co.uk/business/feedarticle/7845410

"The European Union's competition chief said on Monday Irish proposals to guarantee bank deposits could be tweaked to make them acceptable, while similar plans by Germany appeared to pose few problems."

Why is that I wonder?? :confused::rolleyes:

I am open to correction but I believe they want Ireland to scale back from unlimited deposit guarantee. Back to maybe 250k. Again not certain but I think Germany are only guaranteeing deposits & not Bank loans.

Seems clear that some bank staff (e.g. Irish Nationwide) too keen to shove the guarantees in the face of European competitors to realise what a sweet deal they got. A couple of small worst performing banks going to the wall or forced to merge with someone else may not be a bad thing.

[geysir]

Fianna Fail are the government funded by developers and builders and are duty bound to offer up honest taxpayers money to prevent them from having to sell off any of their assets.
Maybe the Germans have not exactly got the same priorities.

Icesave in England has closed its internet till.
150k savers there, totalling about £4bn, cannot withdraw their money
The parent bank, Landsbanki, has to pay out about €700m servicing in the next 12 months. But has liquid assets of £7bn in GB.
The liquid assets by banking standards are good quality. I don't know how much they can get for those assets in a sell off or firesale.

[Bald Student]

Its clearly because its because we are a small country and Europe is being mean to us and nothing to do with the detail of the proposals, which nobody, not least you, has read in any case...

If only life was as simple as in Mypost-world.To me it looks more like some other countries got caught out by the two Brians. They're probably being asked at home why their plans don't look as good as ours. They're talking their way out of the hole by saying we're breaking european rules, while they draw up laws to copy us behind the scenes. Saying that the Irish laws need a few tweaks then helps to explain away the contradiction.

We need to remember that foreign countries are run by politicians as well.

[pete]

To me it looks more like some other countries got caught out by the two Brians. They're probably being asked at home why their plans don't look as good as ours..

I think its more a case of foreign banks moaning that they have a competitive disadvantage. With a state guarantee Irish banks can get loans from any one they wish.

I think I heard that Irish Banks are supposed to have 80 billion greater assets than liabilities. Not sure if that is the face value of those assets or discounted.

[Dodge]

I think its more a case of foreign banks moaning that they have a competitive disadvantage.

Had a competitive advantage. Most european countries have now gone with similar plans to us, to the point that we're not seen as trying to get one over on them now.

The actual details are irrelevant

[Reality Bites]

I am outraged that more people are not out on the streets calling for the heads of these major banks for overseeing the shoddy lending practices that have contributed to the mess we're in! Think of it this way they are to blame for the pain you are all going to feel in next weeks budget and guess what when rates go down they ain't going to pass it on to you no they are going to charge you for the Bailout ,Injustice? you betcha so grab your hurley shovel or even better a scythe and look for Drumm, Goggin etc.. there heads should be made to roll...

[Dodge]

I am outraged that more people are not out on the streets calling for the heads of these major banks

Where you protesting? I might join

[John83]

I am outraged that more people are not out on the streets calling for the heads of these major banks for overseeing the shoddy lending practices that have contributed to the mess we're in! Think of it this way they are to blame for the pain you are all going to feel in next weeks budget and guess what when rates go down they ain't going to pass it on to you no they are going to charge you for the Bailout ,Injustice? you betcha so grab your hurley shovel or even better a scythe and look for Drumm, Goggin etc.. there heads should be made to roll...
Why? There's no indication that any Irish banks are in any real danger. The problem is public perception and panic. A run on any of them is likely to be very serious, but that's not their fault, any more than it's their fault that international lending 'as joined the choir invisible.

[Reality Bites]

Why? There's no indication that any Irish banks are in any real danger. The problem is public perception and panic. A run on any of them is likely to be very serious, but that's not their fault, any more than it's their fault that international lending 'as joined the choir invisible.

John your first sentance is from cloud cuckoo land. Are you Brian Goggins Son? Do you not know realise that 2 of the six banks had loans to property developers on assets that were worth much less than loan value, a situation that could have led to insolvency if the Irish Government did not act.. And oh yeah a run on Irish Banks is Serious but its not their fault as you say John83 on the same scale that it wasn't their fault when they lend the guy on Social Welfare 20,000 euro , he splashed it all on a holiday - couldn't pay back the lending instituation, the Judge admonished the bank when they tried to sent a Sheriff to reclaim the debt because guess what the bloke on social welfare had no Assets - he lived in a council house his rent was subsidised by the state, Oh hold on a minute thaty got his raleigh bike from 1993 worth 20 euros his one and only asset! The loan could not be retrieved and became a bad debt but yeah It wasn't really the Banks Fault was it!
- I hope this little anecdote explains it to you John83

[Billsthoughts]

Why? There's no indication that any Irish banks are in any real danger. The problem is public perception and panic. A run on any of them is likely to be very serious, but that's not their fault, any more than it's their fault that international lending 'as joined the choir invisible.

All markets are influenced by perception and panic. Look at the share prices. The biggest indication that ALL banks were in trouble was that they collectively pushed for govt assistance.

[geysir]

Government providing tax payers money to the banks just so the Banks have money to lend to taxpayers and charge interest on it.
Sounds wonderful.

[Dodge]

has any tax payers money been used yet?

In realworld news, central banks around the world have cut interest rates by .5%

[pete]

I hope this little anecdote explains it to you John83

Given this is a Current Affairs forum can we stick to some level of facts instead of wild speculation?

Will be interesting to what level of interest rate cuts are passed on if any & which banks act.

[anto1208]

On Q&A monday david mcwilliams outlined a very good idea where the goverment gave the banks the garuntee but they went into to banks found exactly what there debts are , if a bank went under it would be bought out by the other banks not the tax payer , the goverment would take a % of the banks shares say 30 % so that when the good times return and the banks start making money it would be a constant source of real income to the goverment. with little cost/ risk to the taxpayer .

The FF guy scoffed and said we arent in the business of buying banks !:rolleyes:

[John83]

John your first sentance is from cloud cuckoo land. Are you Brian Goggins Son? Do you not know realise that 2 of the six banks had loans to property developers on assets that were worth much less than loan value, a situation that could have led to insolvency if the Irish Government did not act.. And oh yeah a run on Irish Banks is Serious but its not their fault as you say John83 on the same scale that it wasn't their fault when they lend the guy on Social Welfare 20,000 euro , he splashed it all on a holiday - couldn't pay back the lending instituation, the Judge admonished the bank when they tried to sent a Sheriff to reclaim the debt because guess what the bloke on social welfare had no Assets - he lived in a council house his rent was subsidised by the state, Oh hold on a minute thaty got his raleigh bike from 1993 worth 20 euros his one and only asset! The loan could not be retrieved and became a bad debt but yeah It wasn't really the Banks Fault was it!
- I hope this little anecdote explains it to you John83
You don't actually know what a run on a bank is, do you?

[Reality Bites]

Given this is a Current Affairs forum can we stick to some level of facts instead of wild speculation?

Will be interesting to what level of interest rate cuts are passed on if any & which banks act.

Pete -That Anecdote is true and actually occured in a midland town - so it is fact and not wild speculation!!!

[Reality Bites]

You don't actually know what a run on a bank is, do you?

John83 I shall ignore you - wind up artist I hope other than that your first e-mail is bordering on offensive to anyone that take umbrage to being screwed by the establishment - My initial sentance for the more lucid among us made it prefectly clear that if the government didn't back up the banks there would have been wholesale deposit withdrawals the day following insolvency of one or two banks or a RUN to spell it out to you!

[OneRedArmy]

Do you not know realise that 2 of the six banks had loans to property developers on assets that were worth much less than loan value, a situation that could have led to insolvency if the Irish Government did not act.. Care to reference this info?

Also, if I read you correctly, you're saying that two banks had loans that are secured on assets that are less than the value of the loan?

I don't know if you're being serious in your example, but given the fall in property and land valuations, that not only applies to most developers, it also applies to pretty much everyone thats bought a house in the last 3 years! So, I can guarantee EVERY bank has assets that aren't fully secured.

In financial terms, the bank estimates how much they will recover from the security (land, cash, guarantees etc.) and provide for the difference. Which hits your financial statements. Its all fairly transparent.

As John has said, the Government bailed the banks out because other banks wouldn't lend to them (Irish banks liquidity ratios weren't particularly strong, ie more loaned for every given euro deposit than competitors). The property issues will take a while to crystallise.

Also to take up your point that it would've been wholesale deposit withdraws that caused the banks to fail, it was actually other international banks failing to continue to re-finance existing funding commitments that caused the problem.

No offence, but you're way into Joe Duffy territory. If you are guessing about something, please say so.

[geysir]

has any tax payers money been used yet?

In Britain, is it not the plan to inject the taxpayers £50bn?

The last gasp fix. Will we be reading in 10 years time about "where did that £50bn actually go to" "How come it sank without having the slightest effect"?

[OneRedArmy]

In Britain, is it not the plan to inject the taxpayers £50bn?

The last gasp fix. Will we be reading in 10 years time about "where did that £50bn actually go to" "How come it sank without having the slightest effect"?No, its the creation of a fund that is available to be called on as required.

A better question is, where did the £50bn actually come from?

I've only read one commentator so far twig that the "E400bn" Irish package is nothing of the sort, if it ever gets halfway near that amount the state will be bankrupt and will be unable to pay.

Something to ponder.

Todays interest rate news is interesting as I can't see much of it being passed on to homeowners unless they are on a pure tracker rate. Spreads are still way out of line with euribor so funding costs probably won't be impacted.

[pete]

Todays interest rate news is interesting as I can't see much of it being passed on to homeowners unless they are on a pure tracker rate. Spreads are still way out of line with euribor so funding costs probably won't be impacted.

The way the different banks react to this will probably say a lot about their situation. Of course if none of them pass it on then thats tells us nothing.

I see Irish Nationwide got funded 50k for "that email" from CEOs son. I would expect he was sacked but would not be surprised if he wasn't. Can't think that CEO will be very popular with building society members at next AGM. Irish Times (http://www.irishtimes.com/newspaper/ireland/2008/1008/1223335464264.html)

[Reality Bites]

Care to reference this info?

Also, if I read you correctly, you're saying that two banks had loans that are secured on assets that are less than the value of the loan?

I don't know if you're being serious in your example, but given the fall in property and land valuations, that not only applies to most developers, it also applies to pretty much everyone thats bought a house in the last 3 years! So, I can guarantee EVERY bank has assets that aren't fully secured.

In financial terms, the bank estimates how much they will recover from the security (land, cash, guarantees etc.) and provide for the difference. Which hits your financial statements. Its all fairly transparent.

As John has said, the Government bailed the banks out because other banks wouldn't lend to them (Irish banks liquidity ratios weren't particularly strong, ie more loaned for every given euro deposit than competitors). The property issues will take a while to crystallise.

Also to take up your point that it would've been wholesale deposit withdraws that caused the banks to fail, it was actually other international banks failing to continue to re-finance existing funding commitments that caused the problem.

No offence, but you're way into Joe Duffy territory. If you are guessing about something, please say so.

The Irish Banks faced a liquidity crisis related to the credit crunch no doubt, but I loathe this line that is being fed recently that the Irish Banking crisis is in whole related to the global liquidity crisis, There is a vast amount of it due to bad debts associated with poor lending practice to property developers in this country- but speaking globally no matter how you dress it, the whole issue relates to shoddy lending which is in whole the fault of the lending institutes - Lets go back the old style victorian lending system whereby the Bank Manager assessed the customers ability to pay back and lent accordingly - this newfangled pass the parcel system of debt i.e selling debt from one bank to another is just capitalism gone septic, so please don't defend these Irish Banking guys they are part of a vicious circle that should be punished accordingly

[pete]

Lets go back the old style victorian lending system whereby the Bank Manager assessed the customers ability to pay back and lent accordingly - this newfangled pass the parcel system of debt i.e selling debt from one bank to another is just capitalism gone septic.

Are you suggesting banks can only lend money equal to their deposits like a credit union? I think they have to sell on mortgages to source more money. There is no real evidence that the financial products that hide junk sub prime mortgages was done in Europe. European banks that bought those US products are the hardest hit.

TBH I don't really understand the Irish situation as apparently the banks have the funds to pay debts. I would have thought state guarantee of deposits was enough to stop a run on banks so still not sure why guarantee of bank debts is needed if everything else grand.

AIG Party (http://primebuzz.kcstar.com/?q=node/14879)


Less than a week after the federal government had to bail out American International Group Inc., the company sent executives on a $440,000 retreat to a posh California resort, lawmakers investigating the company's meltdown said Tuesday.

Lehman Brothers CEO knocked out (http://www.irishtimes.com/newspaper/finance/2008/1008/1223335464396.html)


Vanity Fair journalist Vicki Ward this week told CNBC that "two very senior sources" confirmed to her that Mr Fuld was attacked in the gym by an angry employee shortly after the bank declared bankruptcy. "He was on a treadmill with a heart monitor on. Someone was in the corner, pumping iron, and he walked over and he knocked him out cold." :D :D :D

[Macy]

TBH I don't really understand the Irish situation as apparently the banks have the funds to pay debts.
They say they have assets to cover the debts, however, there also appears evidence of banks delaying the inevitable write down of the assets due to the property slump. The liquidity issue supposedly solved last week was only a symptom of the underlying lack of confidence in the Irish Banking System

[Reality Bites]

Slightly disappointed by the lack of Bellicose attitudes in this thread, I was apoplectic when I heard that these 6 bankers were paid a combined 13 million euro last year which included fat bonuses... for what!!! - I think its a case of the Lunatics running the Asylum - If you are not annoyed you should be!

[Bald Student]

They say they have assets to cover the debts, however, there also appears evidence of banks delaying the inevitable write down of the assets due to the property slump. The liquidity issue supposedly solved last week was only a symptom of the underlying lack of confidence in the Irish Banking System
I'd be certain that you're right but I don't think this is the best time to do those write downs. I'd say the banks would be much better off waiting six months or a year for everything to calm down before declaring their losses.

[Dodge]

Slightly disappointed by the lack of Bellicose attitudes in this thread, I was apoplectic !

I'll ask again, where is your protest?

[geysir]

No, its the creation of a fund that is available to be called on as required.

A better question is, where did the £50bn actually come from?

I've only read one commentator so far twig that the "E400bn" Irish package is nothing of the sort, if it ever gets halfway near that amount the state will be bankrupt and will be unable to pay.

Fair enough.

I have a question. If we had a separate currency
and the State needs €100m to pay salaries, hospital treatment, all gov funded services
but there is no cash in the account.
The State decides to print the money just to pay the salaries and services
The currency value then inflates by that proportion of the money printed.

Another alternative is the State borrows €100m on the foreign market to pay all those services.
Then the national debt increases - does the currency inflate in the same way to reflect the new value of our total debt

[OneRedArmy]

Slightly disappointed by the lack of Bellicose attitudes in this thread, !I'm slightly disappointed you continue to post when you patently don't understand whats going on.
I was apoplectic when I heard that these 6 bankers were paid a combined 13 million euro last year which included fat bonuses...!1) The shareholders approved it. 2) Its a drop in the pond compared to the earnings and wealth of the property developers who spend 7 figures on a party for their kids. Why aren't you complaining about them? Two wrongs don't make a right but I don't understand your obsession.


If you are not annoyed you should be!
Thanks for your advice but I think I've demonstrated in this thread that I'm more able to to take an informed view than you.

[OneRedArmy]

does the currency inflate in the same way to reflect the new value of our total debtwhats the effect on the interest rate?

[Reality Bites]

I'm slightly disappointed you continue to post when you patently don't understand whats going on. 1) The shareholders approved it. 2) Its a drop in the pond compared to the earnings and wealth of the property developers who spend 7 figures on a party for their kids. Why aren't you complaining about them? Two wrongs don't make a right but I don't understand your obsession.


Thanks for your advice but I think I've demonstrated in this thread that I'm more able to to take an informed view than you.

Terribly Obnoxious and Superior stuff. We all understand whats going on!

Three words!

Bad Lending Practice.

Dress it up what ever way you want but its quiet simple really and don't take such a patrionsing view with me again!

[OneRedArmy]

Terribly Obnoxious and Superior stuff. We all understand whats going on! You made a clearly ridiculous point on secured property assets on the last page and refused to quote your source into the bargain, which iirc is against the rules here.



Three words!

Bad Lending Practice.And? Banks are well capitalised to sustain large losses in property. Most banks in most economies survive most recessions. FACT.





Dress it up what ever way you want but its quiet simple really and don't take such a patrionsing view with me again!Get off your soapbox.

The complete shut down in global liquidity wasn't forseen by the vast, vast majority of bankers, investors and legislators around the globe. Its always been held that money was available at a price, and only the price varied. It is now not available at ANY PRICE. Did you forsee that?!?

If you ever finish pontificating you know where to come to discuss the detail.

[Billsthoughts]

And? Banks are well capitalised to sustain large losses in property. Most banks in most economies survive most recessions. FACT.



Kaupthing Singer & Friedlander gone bust today.

[Reality Bites]

You made a clearly ridiculous point on secured property assets on the last page and refused to quote your source into the bargain, which iirc is against the rules here.

And? Banks are well capitalised to sustain large losses in property. Most banks in most economies survive most recessions. FACT.



Get off your soapbox.

The complete shut down in global liquidity wasn't forseen by the vast, vast majority of bankers, investors and legislators around the globe. Its always been held that money was available at a price, and only the price varied. It is now not available at ANY PRICE. Did you forsee that?!?

If you ever finish pontificating you know where to come to discuss the detail.

Boulderdash -waste of time arguing with you.

[John83]

Kaupthing Singer & Friedlander gone bust today.
Really? Ouch. The investment banks are dropping like flies.

To be fair, we were discussing the likes of AIB and BoI, which are a different sort of beastie altogether.

[pete]

The State decides to print the money just to pay the salaries and services. The currency value then inflates by that proportion of the money printed.


Because are part of the Euro we could not do that ourselves. In the old punt days nothing stopping from printing new cash. I have heard suggestions that the US been printing new money for years so purchasing power of the dollar has plummeted.


Another alternative is the State borrows €100m on the foreign market to pay all those services. Then the national debt increases - does the currency inflate in the same way to reflect the new value of our total debt

Been a lot time since studied economics but I believe the value of our currency would decrease. I believe US dollar would be an example of this. I would guess value of each unit of currency is National worth divided by number of units in circulation? :confused:

Anglo Irish (http://www.ise.ie/app/equityDetails.asp?equity=28082) only has market capitalisation of 1.7billion. Maybe the state should have taken control (like Examinership) & sell it off bit by bit?

[OneRedArmy]

Kaupthing Singer & Friedlander gone bust today.Due to liquidity issues. Not credit losses AFAIK.

[pineapple stu]

They're in administration, not liquidation, yeah? Big difference (difference between, well, being bust and being in serious problems but not being bust).

[geysir]

Because are part of the Euro we could not do that ourselves. In the old punt days nothing stopping from printing new cash. I have heard suggestions that the US been printing new money for years so purchasing power of the dollar has plummeted.



Been a lot time since studied economics but I believe the value of our currency would decrease. I believe US dollar would be an example of this. I would guess value of each unit of currency is National worth divided by number of units in circulation? :confused:


I was thinking if we had our own currency and the Gov printing the equivalent value of €100m to pay bills at home in a cash flow crisis. That action would decrease the value of the currency.

Instead of printing, if the Gov decided to take a foreign loan the equivalent €100m to pay the bills, then not only will that devalue the currency but the loan would have to paid back with interest.

I was just wondering which of those two actions would be more negative in the long run.

[geysir]

They're in administration, not liquidation, yeah? Big difference (difference between, well, being bust and being in serious problems but not being bust).

Exactly.
Landsbanki, the 2nd biggest bank in Iceland is in liquidation.
But it's still operating, sort of. There is a €3k limit to withdrawls, money is circulating and it should get going a bit more.
Liquidation is a bigger problem when there is not enough liquid to sell or you don't get enough value for the liquid assets.
The latter is the problem with Landsbanki in these panicky times.

Some economists say the Gov should not have nationalised the 3rd Bank Glitner in the beginning, all those days ago. From my observations the State got a good deal and hammered the greedy obnoxious arrogant cold hearted picks who owned most of the shares but they say it was perceived as a desperate action and caused more panic worldwide causing Iceland to be frozened out.
The director and largest shareholder was on tv almost in tears at the loss of his fortune, $300m down to $75m, but said at least he has enough for his family. No heart, complete and utter lack of compassion for the suffering that has resulted as now hundreds of thousands of average honest savers face at a minimum some severe losses.

Next time you fly to Iceland, you may well be landing at Putinvik Airport:eek:

[pete]

qbq71ufvfDM

The ran out of room on the National debt clock as the US now owes 10 trillion!

[Billsthoughts]

They're in administration, not liquidation, yeah? Big difference (difference between, well, being bust and being in serious problems but not being bust).

Only because of UK Govt.

[Dodge]

I see Kaupthing has been nationalised by the Icelandic government today. not sure to which degree.

Bit on BBC news this morning listed several UK councils that had money in Icelandic banks. Can't remember the figures but I think Kent and barnet councils had the mnost at about £40-50 million each

http://www.guardian.co.uk/society/2008/oct/09/localgovernment.banks

Guardian article on this, with some actual figures

[geysir]

Kaupthing in Iceland has not been nationalised yet.
The Government has just taken control of the operations by appointing a Financial regulator.
I know :D
It sounds like a Father Ted 'the money was just temporarily parked in my account' type of thing.
Means that the Bank needs to be directly supervised and also are subservient to the supervising authority.
Which actually should be normal practice along with regulations to be followed and enforced.

Talking of which
Several notches up the reason to panic like mad richter scale was
something about something I heard on the radio this morning that the greatest buffoon in Irish Economics, the grinning puppet of the de-regulaters, Charlie McCreevy, is to be part of a top level 3 person EU committee to suggest fixes or decide on fixes.

[pete]

Reading about Iceland & seems like the government there used Interest rates to control inflation so had 15% rates. Seems like this caused a lot of speculation on their currency & lead to domestic businesses taking out loans in foreign currencies (I presume for lower interest rates). They have their own sources of energy which will protect in the long run but going to see very high inflation & reduction of incomes in the short term :eek:

[geysir]

It's bankrupt plain and simple.
Looking for a €4bn loan from the Russians.
Already bankrupt and looking for a loan 40% of the value of the GDP.

The big difference for the house "owner" in Iceland compared to elsewhere is all loans are tied to the inflation index.
It means that a house loan carries a normal 5% p/a interest and approx. you pay another 5% p/a to cover part of the inflation growth, while the unpaid part of the loan (the capital) grew in the background by about 10% p/a. Mostly that was doable, Icelanders are hardworking and resourceful.
That was then, this is now - in the last 6 months up to end of Sept. house loans (the capital) have risen by 10% with the index.
When I saw this happening 5 months ago, I withdrew savings and paid up 95% of the remaining value of the house loans, I know féck all about scales of economy but something smelt foul.

Add to the current woes, in the last 5 years people were offered and accepted more attractive 100% loans in foreign currency for cars, jeeps, houses. Imagine that one when the kronur is on the down part of the helter skelter.

So there is no short term for Iceland. Natural sourced heating and electricity is taken for granted but it can't be exchanged for anything.
But there is fish. One time in the late 70´s came a big slump, the herring stocks vanished, then there was a deal done with the USSR to save the economy. Thats why then 1/2 the cars were Ladas, Moskovitches from USSR, Wartburg and Trabants from East Germany, Skodas from Czech even the odd Yugo. About a 1/4 were huge fécking 8 and 12 cylinder american cars left over from the US base, they were called carpets as in flying carpets.

I suspect that Russia will want the Icelandic fish in exchange, hopefully to buy rather than the rights to trawl. Just like a family has to secure a food supply so does a country.

[pete]

Any particular reason why Iceland never joined the EU? Fish stocks?