Financial Crisis

[OneRedArmy]

The problem with Fitzpatrick wasn't one of default risk, 87m wouldn't be anywhere near the top exposures (although I assume as it was a property loan it may not be in the best shape), the big problem is conflicts of interest and disclosure requirements.

Doesn't make it anymore right though.

[pete]

I was reading about the Dail Committee yesterday & seems the Fin Reg was getting a hammering from the politicos. While I am sure some of it was an effort to blame them for the entire property mess it seems they also basically said someone in the Fin reg was lying.

Best excuse about the loans was that they were too busy with the financial crash but of course they also said knew about the loans in 2007 so it does not add up.

Slightly off topic but I saw headline yesterday about case against the chemist for the blood transfusion service collapsing which reminded me that there is no accountability in this country. Politicians are the worst especially FF but I can't remember the last time someone resigned or was fired for incompetence. I don't include the Anglo board members as they should have been first/arrested.

[mypost]

Nobody was calling for his resignation last year or any other year (except Shane Ross maybe) when although obviously in trouble at least employment was still holding up and therefor the public opinion is more emotion than anything else.

Unemployment has been rising for the past couple of years, it didn't start last summer, it has merely increased in speed.

[pete]

Well it has finally happened as Anglo Irish have been nationalised.

Seems to be the correct decision but why did they not do this last month? The government really are making it up as they go along & if it was possible leads to even less convince they can make the correct decision.

:rolleyes:

[Stuttgart88]

Owners of capital will stimulate working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable.
The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and State will have to take the road which will eventually lead to communism.

— Karl Marx, 1867

[Macy]

Seems to be the correct decision but why did they not do this last month? The government really are making it up as they go along & if it was possible leads to even less convince they can make the correct decision.
According to Lenihan on Morning Ireland, this is "decisive action" :rolleyes: The financial system needs clear leadership and clear decisions. All we've had is bumbling and no full stop since the very start.


Owners of capital will stimulate working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable.
The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and State will have to take the road which will eventually lead to communism.

— Karl Marx, 1867

Or As the T Shirt I just ordered says, along side a painting of Marx - "I warned you this would happen".

[OneRedArmy]

They procrastinated until the very last minute, as they had to do it before todays EGM.

Then they bluffed that the banks funding position had become weaker which forced their hand.

I don't really believe that, nothing has changed in the last few weeks.

[NeilMcD]

[QUOTE=Stuttgart88;1087441]Owners of capital will stimulate working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable.
The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and State will have to take the road which will eventually lead to communism.

— Karl Marx, 1867[/QUOTE

Ah sure that was easy to say, the dogs on the street could see that :)))

[pete]

Seems the big problem is that even when they gave the banks bailout loans no one believes that will be the end of it. The banks also cannot be trusted as they told use a few months ago they did not need any cash. The Financial Regulator has also been discredited. Ultimately seems there is no one in power that is trustworthy.

I read that the state now guarantees something like 2billion in preferential shares/loans because of the Nationalisation? Seems bizarre that shareholders would be compensated at all. Would they have a case against the state for lapses in regulation?

[Stuttgart88]

I've just heard that the Marx quote is a fake anyway.

[Stuttgart88]

I read that the state now guarantees something like 2billion in preferential shares/loans because of the Nationalisation? Seems bizarre that shareholders would be compensated at all. Would they have a case against the state for lapses in regulation?

I presume this refers to Anglo's "subordinated debt" which sits between equity and senior debt in terms of seniority. I think if the state allowed this debt to default then every other class of debt would default too and they'd have to honour their guarantee on ALL Anglo's liabilities. Therefore it's cheaper to nationalise now, keep the debt outstanding because the amount of cash they'd require to stump up otherwise would be enormous. What's the figure - EUR 50 billion?

[Macy]

I've just heard that the Marx quote is a fake anyway.
The actual quote might be, but not the theory behind it.

[monutdfc]

I presume this refers to Anglo's "subordinated debt" which sits between equity and senior debt in terms of seniority. I think if the state allowed this debt to default then every other class of debt would default too and they'd have to honour their guarantee on ALL Anglo's liabilities. Therefore it's cheaper to nationalise now, keep the debt outstanding because the amount of cash they'd require to stump up otherwise would be enormous. What's the figure - EUR 50 billion?
That makes a lot of sense - moreso than some of the other conspiracy theories flying around.

[Macy]

That makes a lot of sense - moreso than some of the other conspiracy theories flying around.
I've been off line, but I presume the conspiracy theories revolve around the builders party bailing out the builders bank and therefore bailing out the builders? Interestingly, the Guardian (http://www.guardian.co.uk/business/2009/jan/15/irish-government-bank-takeover) said part of the reason was the threat to the Health insurance market. Who's a major shareholder in Anglo, which health insurer do they own, and in who's hotel did FF hold their conference a couple of years ago?

I'll reserve judgement to see how much above the share price the investors get.

[NeilMcD]

I do believe at a time like this we can learn from Marx so in his own words

Wherever you go
Whatever you do
I will be right here waiting for you
Whatever it takes
Or how my heart breaks
I will be right here waiting for you

[monutdfc]

I've been off line, but I presume the conspiracy theories revolve around the builders party bailing out the builders bank and therefore bailing out the builders? Interestingly, the Guardian (http://www.guardian.co.uk/business/2009/jan/15/irish-government-bank-takeover) said part of the reason was the threat to the Health insurance market. Who's a major shareholder in Anglo, which health insurer do they own, and in who's hotel did FF hold their conference a couple of years ago?

I'll reserve judgement to see how much above the share price the investors get.
basically yes;
another theory (which compliments Stuttgart88's) was that it was triggered by wholesale deposit withdrawals (the conspiracy being that the timing was managed by FF for their friends in the know)

[Reality Bites]

Seanie Fitz the Anglo -Irish Headmeister *****ster should have been wheeled out to the masses/shareholder today to be given a medieval style Horse kicking - What a Crook I can't believe he has walked away from this with impunity:mad:

[OneRedArmy]

I just listened to that clown Eamonn Keane on Newstalk covering the EGM. He interviewed some woman shareholder coming out who demanded compensation as "the shares were 17 euro and if I'd known then what I know now I would've sold them immediately". Brilliant:D

Also lots of guff about pensioners losing money invested in shares. If a pensioner is heavily invested in equities either the advisor deserves to be locked up or if took the decision without advice they deserve to lose the money.

I'm not buying any of the conspiracy theory hoopla as it only seeks to legitimise erronous shareholder claims.

Here's the bottom line:
Anglo was, in my opinion, a glorified pyramid scheme, not a bank. FWIW I was told it didn't even have a collections team until recently!! Which, if true, shows that it wasn't a bank.

It focused solely on balance sheet growth, funded by the market with little regard to risk. This business model was unsustainable....live by the sword die by the sword.

And equity is there to take the first loss. To the shareholders, dry your eyes and remember next time that risk and return are always linked.

And spare a thought for the decent employees, although being a civil servant is probably the safest place to be at the minute.

[dahamsta]

I just listened to that clown Eamonn Keane on Newstalk covering the EGM. He interviewed some woman shareholder coming out who demanded compensation as "the shares were 17 euro and if I'd known then what I know now I would've sold them immediately". Brilliant:DROFL. She might as well just have walked outside and screamed "I'm a moron! I'm a moron!" at the top of her voice. Clueless bint.

[Stuttgart88]

Anglo was, in my opinion, a glorified pyramid schemeIn what sense? In that it needed new funding to redeem existing funding? Isn't that what all banks do?

I said earlier that I was amazed that Anglo survived so long after NRock went down in 2007.

In fact NRock's loan book was far superior to Anglo's, yet both had a reliance on "wholesale" funding albeit of different types.

[OneRedArmy]

In what sense? In that it needed new funding to redeem existing funding? Isn't that what all banks do?

I said earlier that I was amazed that Anglo survived so long after NRock went down in 2007.

In fact NRock's loan book was far superior to Anglo's, yet both had a reliance on "wholesale" funding albeit of different types.More the completely unsustainable level of balance sheet growth.

On the composition of the balance sheet, whilst the liabilities side was over-focused on short-term wholesale funding, I'd have more of a problem with the concentration on property financing on the asset side.

Actually "concentration" is too weak a word, IIRC about 80% of their loanbook was property related. Absolute madness. Collateral isn't worth tuppence when you have such high correlations between the assets and the security. Where was the diversification?!

[NeilMcD]

Lads is it true that David Bowies idea has a link to the Financial crisis. I heard that the other day. Not sure of the exact details.

http://www.exclaim.ca/articles/generalarticlesynopsfullart.aspx?csid1=128&csid2=844&fid1=35727


While its seems crazy for him to be blamed and only a fool would suggest that, was he the first to do such a thing and did the banks practice this before Bowie Bonds.

[John83]

Er, the article you link to actually states that the banks were doing this years before Bowie ya daft coot.

[NeilMcD]

Missed that bit at the end but also I am sure the article I reference is not the most reputable website or source anyway so just wondeirng out loud thats all

[pete]

It has now emerged that Fitzpatrick has E129m loans with Anglo Irish. Superb work by the Financial Regulator & Auditors (Ernst & Young) to spot this.

From the IT:



At an extraordinary general meeting today, current chairman, Donal O’Connor, revealed that in 2007, Mr FitzPatrick, owed a total of €129 million to the bank, but only €7 million of this was reported, as he repaid €122 million before the balance sheet date, before borrowing the cash again shortly afterwards.


:rolleyes:

[monutdfc]

AIB down 40% today, BOI something similar.
The State could (just about) afford to Nationalise Anglo, but not AIB or BOI. What will happen if AIB / BOI bondholders make a call on the Guarantee (as there will be a technical default very soon - there's probably a minimum market capitalisation clause in the bond terms, definitely there'll be a downgrade clause - which will allow all the bondholders to look for repayment under the guarantee)? I am afraid, very afraid.

[OneRedArmy]

Brian Goggin (BoI CEO) has announced he's going (but not retiring 'til the summer.....). Why wait 'til then?

[pete]

Brian Goggin (BoI CEO) has announced he's going (but not retiring 'til the summer.....). Why wait 'til then?

Victory lap?

Seems the markets have spoken & are showing their lack of confidence in the Irish government. In recent months the markets seem to have been generally correct like when they didn't believe the banks when they said they didn't need any cash a few months ago.

[Macy]

Seems the markets have spoken & are showing their lack of confidence in the Irish government. In recent months the markets seem to have been generally correct like when they didn't believe the banks when they said they didn't need any cash a few months ago.
An element of self fulfilling prophecy at work though as well I would've thought? Also tied in to the UK too. No one believes this is the final bail out plan.

We should just be proactive and nationalise all the banks now. Bond prices already reflect the exposure to bad debt due to the failed guarantee model, might as well have the benefits of the bank profits as well as the risk.

[OneRedArmy]

What bank profits? Those are long gone and paid out as dividends and won't be back for a long time :D

Agree that nationalisation looks more likely than not at this stage. As you say, the Government are already on the hook for the risk.

[osarusan]

Agree that nationalisation looks more likely than not at this stage. As you say, the Government are already on the hook for the risk.
This is what I've thought from the day the govt announced it would guarantee cash lent to Irish banks. If you are assuming the responsibility of the guarantee, why not nationalise them completely? I wonder why it hasn't been done sooner.

[Macy]

I wonder why it hasn't been done sooner.
Putting on my (even more) cynical hat - the big two know where too many FF bodies are buried.

[monutdfc]

From today's Irish Times:



... extending the liability guarantee to Anglo Irish and Irish Nationwide was strongly opposed by representatives of the Central Bank and the Department of Finance (who reportedly came into the meeting with a draft Bill to rescue only four institutions). However, I am told they were overruled by the Taoiseach and the Minister for Finance, who were supported by the Financial Regulator and the Governor of the Central Bank...

http://www.irishtimes.com/newspaper/opinion/2009/0120/1232059661333.html

[pete]

From today's Irish Times:

http://www.irishtimes.com/newspaper/opinion/2009/0120/1232059661333.html

A really grim prediction.

I think it will be very interesting to see what kind of guarantees if any the big developers provided to Anglo Irish. If they put up other property it won't be so bad as the state as owner of the bank can acquire these assets but if will be a disaster if as I read previously the guarantees amount to basic IOUs will be massive cost to the tax payer.

The state should have auditors & investigators inside Anglo Irish as we speak before they have a chance to get the shredder out.

[Macy]

A really grim prediction.
Explains Cowen's press release about it being against the national interest to question the Government on the banks. Getting his response in first, and trying to cut the opposition off at the pass.

[OneRedArmy]

A really grim prediction.

I think it will be very interesting to see what kind of guarantees if any the big developers provided to Anglo Irish. If they put up other property it won't be so bad as the state as owner of the bank can acquire these assets but if will be a disaster if as I read previously the guarantees amount to basic IOUs will be massive cost to the tax payer.

The state should have auditors & investigators inside Anglo Irish as we speak before they have a chance to get the shredder out.The collateral provided will be overwhelmingly property, with some shares and less cash. The problem is that the property collateral has reduced hugely in value leaving large uncollateralised portions of exposures which the State will never get back.


Explains Cowen's press release about it being against the national interest to question the Government on the banks. Getting his response in first, and trying to cut the opposition off at the pass.Absolutely pathetic attempt to quell unrest from Cowen. Next we'll be having a "Government of National Interest".

Would be interested for someone to define what "in the national interest" means? Seems to imply we all as Irish people share a set of homogenous interests. Other than a desire to see England humbled at pretty much every sport I'm not sure this is true. Its another one of those hackneyed phrases that people cling to when rationale argument has failed.

[strangeirish]

This is at the heart of the matter. Thank you Wall Street.

0Y9A0C45KZI

[pete]

This is at the heart of the matter. Thank you Wall Street

Like one giant Pyramid scheme. As long as house prices go up doesn't really matter whether the person can pay back the mortgage.

[pete]

Regulator Investigates Quinn Anglo irish share holdings (http://www.irishtimes.com/newspaper/frontpage/2009/0127/1232923367348.html?via=mr)



THE FINANCIAL Regulator is investigating the circumstances in which businessman Seán Quinn and his family unwound an indirect 25 per cent interest in Anglo Irish Bank last year.

The regulator is looking at whether part of the Quinns’ stake – representing 10 per cent of the bank – was placed with new investors, instead of being sold through the stock market.


Quinns reputation is taking a battering in the last year. Don't think I would have any confidence in the Regulator now. In such a small country you would think difficult to hide such dealings. Looks like that office needs a complete overhaul. Maybe they should just merge back into the Central Bank. Is there a reason they are separate?

[NeilMcD]

http://www.irishtimes.com/newspaper/opinion/2009/0127/1232923367061.html

Very good piece today in the Times today I must say.

[OneRedArmy]

http://www.irishtimes.com/newspaper/opinion/2009/0127/1232923367061.html

Very good piece today in the Times today I must say.Good balanced article, but understates link between tax revenue and public expenditure. For every Euro required to be knocked off a budget deficit, broadly, you can either increase tax, reduce public expenditure, or combine the two.

The obvious option is to combine the two. Which is what's already happened (the income levy is a even cruder measure than an income tax increase as it comes off the top line).

So a bit of a BGO from Mr. Aherne...

[Newryrep]

So the talks have collasped and its time for Cowan to make a decision, still I dont think the people in the country(or a sizeable proportion) are aware/or give a **** on how bad it is/is going to get .

I happened to be listeneing to RTE Drive Time last nght on the way home and their contributor from the Daily Mail (yeah I know) was on about bargain breaks for valentines weekend . He said the days of flying over to Paris for lunch and flying back the same day were long over etc and that more and more people are staying at home. He then proposed a valentine break at some poxy hotel in Westport (the one that films The Restaurent), B&B and 2 evening meals for the bargain price of E490 pps. Nearly E1000 for a weekend and its a bargain ? - unbelievable. At least Dick Turpin wore a mask

[pete]

So the talks have collasped and its time for Cowan to make a decision, still I dont think the people in the country(or a sizeable proportion) are aware/or give a **** on how bad it is/is going to get .


That is true. My numbers might be a bit off but I believe the government take in something like 40 billion but are currently spending 56 billion. That makes the 2 billion public sector cuts a drop in the ocean & the figures are only going to get worse. Both spending cuts & tac rises are going to happen but if you use tax rises along it will strangle the country.

Hardly surprising with this government but it is unbelievable that they have left it to the last minute to "negotiate" that deal. I saw some of Q&A last night on TV & the political journalist was 100% correct in saying the government have been having talks about talks for the last 6 months. :rolleyes:

[Sheridan]

Interesting to see that one of the major stories of the week, the army representative body's statement that the defence force will not participate in strike-breaking, was largely suppressed by the national media.

[dahamsta]

Where can I read that Sheridan?

[Sheridan]

I came across it here, of all places (although it reproduces a piece from the IT.) http://socialistworld.net/eng/2009/02/0602.html

[dahamsta]

Thanks Sheridan. Important story and you're right, it seems to have been covered only by the Times and the Indo.

http://news.google.ie/news?hl=en&ned=en_ie&ie=UTF-8&ncl=1301061688

adam

[Newryrep]

We are now going to create 4000 jobs making houses that the developers threw up in some way energy efficient- this has been welcomed by the construction federation spokemans - no **** sherlock.

Why werent these houses built to the highest standards that other countries build to - minimum insulation requirements, rainwater harvesting etc- stuff that has been around for ages- I think Stephen Fry mentioned on Jonathon Ross that when somebody says 'Only in America' it is usually on a positive note whereas if somebody says 'Only in Britain' invarialbly it has negative conotations.

Well Only in Ireland can **** poor builders be given government money to rectify shoddy work

[Poor Student]

Interesting to see that one of the major stories of the week, the army representative body's statement that the defence force will not participate in strike-breaking, was largely suppressed by the national media.

The story seems to only say they would prefer not to rather than outright refusing to.

[pete]

I see the Greens want executive pay slashed in the Banks but hardly a whimper out of FF Ministers.

So we are now to give AIB & BOI 3.5 billion each @ 8% interest. Amazing turnaround when the same said Banks said in October that they did not need any money & the Financial Regulator (now retired & nice pension) said he agreed.

Does anyone really believe the Banks won't be back for more money soon?