Financial Crisis

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Originally Posted by pete

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

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Whilst the banks have done a lot wrong (and heads must surely roll), I find the expectation of certainty that the opposition expect ridiculous.

The reason this recession/depression is so bad is because of its speed and scale, we haven't seen anything like this before.

Therefore if we ignore why we got into this situation for just a minute (and as I said, heads need to roll for this), if anyone does claim to know what lies ahead they are, frankly, talking through their holes. Nobody really knows how much money will be required. You can only react to what you know and can reasonably forsee.

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Originally Posted by OneRedArmy

Whilst the banks have done a lot wrong (and heads must surely roll), I find the expectation of certainty that the opposition expect ridiculous.

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Fine but going from no money required to billions in a few months is some change. AFAIK the banks haven't written off that many bad debts yet. From lay man point of view I don't see much difference in the recession in the last 3 months.

Got to laugh at the reason for giving bonuses in the UK - if they don't pay the "best" people they will work for someone else. I am sure many bonuses are based on X amount of new loans but surely someones bonus is dependent on % of bad debt?

Seems Brian Lenihan says recapitalisation scheme will be linked to pay cuts at the top. Maybe he has an a/c here...

Am I the only one who thinks today's "news" about Anglo & IL&P is much ado about nothing?

Not only is this widespread in banking and has been for eons, it's standard practice in almost every sector.

Find me a business that doesn't manipulate it's year end stock figure.

Unfortunately this poor journalism obscures the real criminality and shady practices (directors loans etc.).

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Originally Posted by OneRedArmy

Am I the only one who thinks today's "news" about Anglo & IL&P is much ado about nothing?

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Probably, but only because of what has been uncovered before. However the timing of it makes it look particularly bad in context of what has subsequently happened with Anglo

Just add it to the list of how crap the regulation was and how shady some of that sectors business practices were (are?).

The Financial Regulator were aware of these transactions and has only now decided to look into them. What a joke.

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Originally Posted by drummerboy

The Financial Regulator were aware of these transactions and has only now decided to look into them. What a joke.

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Indo

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FORMER Financial Regulator Pat Neary retired with a secret €630,000 payoff, the Irish Independent can reveal.
* He was on an annual salary of €285,341.
* He was paid an additional €202,000 handshake in return for his resignation -- equivalent to being paid for eight months.
* He was also paid a lump sum of €428,000.
* He will also receive an annual pension of €142,670.

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Three cheers for Incompetence! :rolleyes:

If that is standard practice in the Banks does it means they are all fradulant? By that logic a bank could get say a 50billion overnight loan & so they could show the markets they have massive deposits.

As I said, year-end stock manipulation happens in every line of business. It's not fraudulent.

My understanding was that the deposit was correctly recorded in the interbank line, therefore it wasn't mistrepresenting it as customer deposits as the news media have incorrectly stated.

This information is only really relevant to equity & bond investors and if they don't know about it, they shouldn't be in the investment game.

In the grand scale on what's gone on in the last fees years, this is way down at the bottom of the priority list.

What's really amusing me about this crisis is the capitalist government of Ireland denying that capitalism has failed in Ireland, insisting instead that capitalism has failed everywhere. What's less amusing is that they'll get re-elected on a capitalist platform.

[MOD EDIT: This is an op-ed from the IT: http://www.irishtimes.com/newspaper/...867931066.html --adam]

Thanks Adam

I just got it via email so didn't have the link

Fianna Fáil could send that out as campaign literature and still get elected. What the Irish people lack in brains and morals, they make up for in having no balls either.

Is Brian Lenihan under pressure to resign?

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Minister for Finance Brian Lenihan has said he has no plans to step down after coming under intense political pressure following his admission that he only learned about the transfer of €7 billion to Anglo Irish Bank last month, even though his department informed the Financial Regulator about the issue last October.

This morning Mr Lenihan said: “I wouldn’t fault my department for not telling me at that stage”.

“They did tell me subsequently when the matter came into sharper focus when a subsequent due-diligence exercise was analysing the deposit base of the bank," he told RTÉ's Morning Ireland . “I don’t believe my officials should be scapegoated on this matter.

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Whatever about forcing him to resign what hope can we have these people can solve the crisis? They really are just lurching from one crisis to another...

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Originally Posted by OneRedArmy

As I said, year-end stock manipulation happens in every line of business. It's not fraudulent.

My understanding was that the deposit was correctly recorded in the interbank line, therefore it wasn't mistrepresenting it as customer deposits as the news media have incorrectly stated.

This information is only really relevant to equity & bond investors and if they don't know about it, they shouldn't be in the investment game.

In the grand scale on what's gone on in the last fees years, this is way down at the bottom of the priority list.

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More info in today's papers about the IL&P "loan" to Anglo.

Turns out it was a back-to-back transaction, but IL&P routed it via IL Investment Managers so that it would be recorded as a customer deposit rather than interbank (and therefore viewed as more long-term).

This makes IL&P look awful and they have indicated they did it with implicit Government approval based on prompts to help out other Irish banks "for the good of the green jersey".

Certainly changes the complexion of the issue, particularly the alleged Government involvement.

Meanwhile, instead of pursuing this, Labour are trying to cost the taxpayer even more money by effectively pushing a mortgage amnesty.

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Originally Posted by OneRedArmy

Turns out it was a back-to-back transaction, but IL&P routed it via IL Investment Managers so that it would be recorded as a customer deposit rather than interbank (and therefore viewed as more long-term).

This makes IL&P look awful and they have indicated they did it with implicit Government approval based on prompts to help out other Irish banks "for the good of the green jersey".

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It is very relevant that it was IL&P given there already declared involvement in the Fitzpatrick loans.

We all know this won't be the last story about those Banks. If BOI & AIB get infected by it directly will be carnage in the markets.

Maybe the government should just give the money to the citizens of the state. Any one with debts arrears will probably pay off that & others woll likely save it for rainy day so the banks will get a lot of the money anyway.

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Meanwhile, instead of pursuing this, Labour are trying to cost the taxpayer even more money by effectively pushing a mortgage amnesty.

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Agree that this is going to cost (the banks and by default the Government) but as it is there will be a people putting the keys back through their closed door with the negitive equity situation never mind the stress of a court hearing and a repossison order so at least the latter might be postponed for 12 months.

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Originally Posted by Fr Damo

Agree that this is going to cost (the banks and by default the Government) but as it is there will be a people putting the keys back through their closed door with the negitive equity situation never mind the stress of a court hearing and a repossison order so at least the latter might be postponed for 12 months.

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Unfortunately that part of the Govt plan was just for show.

None of the mainstream lenders have ever sought to repossess a primary dwelling within 12 months of arrears.

The sub-prime lenders who adopt this approach aren't covered by the scheme.

Pure Government spin.

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Originally Posted by OneRedArmy

None of the mainstream lenders have ever sought to repossess a primary dwelling within 12 months of arrears.

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So how will Labour's plans cost tax payer money (genuine question haven't researched it)

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Originally Posted by Dodge

So how will Labour's plans cost tax payer money (genuine question haven't researched it)

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Labour want a guarantee that no houses will be repossessed. That would encourage more people to stop paying mortgage (no moral hazard). Mortgage arrears increase. Banks report worse financial performance as losses increase. Capital decreases. Market reacts by increasing cost of debt. Liquidity and funding clobbered. Spiral of doom. Government end up fully nationalising sector.

Which is right up Labour's street....

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Originally Posted by OneRedArmy

Labour want a guarantee that no houses will be repossessed. That would encourage more people to stop paying mortgage (no moral hazard).

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12 months seems a reasonable time to protect people from repossession orders but as you say not often down in Ireland anyway. I am sure the banks don't want property & would prefer lower payments over longer term.

I hear because of the way the US government is buying up bad debt it has not stopped the practice of loaning money to people who cannot pay it back.

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Originally Posted by pete

It is very relevant that it was IL&P given there already declared involvement in the Fitzpatrick loans.

We all know this won't be the last story about those Banks. If BOI & AIB get infected by it directly will be carnage in the markets.

Maybe the government should just give the money to the citizens of the state. Any one with debts arrears will probably pay off that & others woll likely save it for rainy day so the banks will get a lot of the money anyway.

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IL&P had no involvement in Fitzpatrick's loans, that was Irish nationwide. also, by the shabby standards of anglo, BOi and AIB - IL&P were the most restrained of lenders and do have an adequate capital base to not require governoment injections. No significant commercial or developement finance on the books. And whie IL&P did allow 100% mortgages, overall the book is about 88% residential property with an average loan to value in the region of 65-70% despite the tumbling house prices of late.

As an employee of IL&P I am extremely disappointed with how the hierarchy of the group behaved during this matter. They have said themselves it was wrong and the group chief executive, along with two other senior executives have resigned.

As I said before, IL&P are sound in comparison. Beyond the government guarantee (which was offered rather than sought) we should be in a position to ride this out independently which is more than can be said for the "Big 2".

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Originally Posted by pete

12 months seems a reasonable time to protect people from repossession orders but as you say not often down in Ireland anyway. I am sure the banks don't want property & would prefer lower payments over longer term.

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That's fine, unless you were one of the fools talked into 105% mortgage over 40 years - not too much extension left for most people in those circumstances.

Presumably you could put a process in place to show inability to pay? Wouldn't be that hard.

People should also be able to write down the amount if they can show they were encouraged to make false declarations and were missold products.

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Originally Posted by Macy

That's fine, unless you were one of the fools talked into 105% mortgage over 40 years - not too much extension left for most people in those circumstances.

Presumably you could put a process in place to show inability to pay? Wouldn't be that hard.

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Not sure how that would work in practice. Repossessions are bound to happen for some people who just can't afford the payments with or without a job. I don't see how could have a blanket ban on repossessions as would mean taxpayer subsidising one way or the other...

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Originally Posted by Saint Tom

IL&P had no involvement in Fitzpatrick's loans, that was Irish nationwide. also, by the shabby standards of anglo, BOi and AIB - IL&P were the most restrained of lenders and do have an adequate capital base to not require governoment injections. No significant commercial or developement finance on the books. And whie IL&P did allow 100% mortgages, overall the book is about 88% residential property with an average loan to value in the region of 65-70% despite the tumbling house prices of late.

As an employee of IL&P I am extremely disappointed with how the hierarchy of the group behaved during this matter. They have said themselves it was wrong and the group chief executive, along with two other senior executives have resigned.

As I said before, IL&P are sound in comparison. Beyond the government guarantee (which was offered rather than sought) we should be in a position to ride this out independently which is more than can be said for the "Big 2".

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IL&P have one of the highest loan to deposit ratios in the world (last year c280%), versus AIB & BoI at around 160%. and whilst you are not involved in property development, you are up to your neck in residential investment loans.

IL&P is in a better position than the other two because of Irish Life and the a-cyclical nature of insurance.

I incorrectly linked IL&P with the earlier loans - sure all banks look the same to me now. :o

Irish Times

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IRISH NATIONWIDE gave tens of millions worth of sterling and dollar loans to former Anglo Irish Bank chairman Seán FitzPatrick as part of his loan transfers between the two institutions to conceal up to €122 million in borrowings from Anglo Irish.

Irish Nationwide also lent the then Anglo Irish chairman $26 million on September 27th, 2006. This loan was secured with an undertaking from Anglo Irish, meaning that the bank would repay the loan if he could not. The £14 million personal loan was secured on properties and 4.5 million Anglo Irish shares, worth €55 million at the time.

International credit rating agency Moody’s also reduced Irish Nationwide’s rating to a level representing “modest” financial strength, “potentially requiring some outside support at times”. The agency said the outlook for the building society was “negative”, meaning it may downgrade the lender’s ratings again soon.

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With 10 billion in Commercial loans surely Irish Nationwide can't have any future? Crazy behaviour especially as it is a Building Society.

I suspect if Irish Nationwide chief executive Michael Fingleton can keep the staff happy he will survive as the ordinary members can't compete against those numbers at the AGM. Seen it myself with the EBS where the board probably less accountable than a public company.

This is possibly the scariest article I've read so far:
Bank guarantee likely to deal a crippling blow to the economy

It's by Morgan Kelly a professor of economics at University College Dublin, in the Irish Times.

The worst case scenario that he outlines is pretty horrific. Let's hope the banks aren't quite as screwed as it looks like.

Good reading, but didn't Lenihan rebuff Kelly's advice when they called for help? I wonder if he is putting the boot in a bit or is it really that bad...

Scary indeed. If the government could not guarantee public sector salaries that would effectively make 1/6 of the population 'unemployed'. If they cut them by a 1/2 or a 1/3 it would have similar effect on a smaller scale. Hard to know how they are going to work this out. It's a real catch 22. Are we another Argentina in the making?

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Originally Posted by passinginterest

This is possibly the scariest article I've read so far:
Bank guarantee likely to deal a crippling blow to the economy

It's by Morgan Kelly a professor of economics at University College Dublin, in the Irish Times.

The worst case scenario that he outlines is pretty horrific. Let's hope the banks aren't quite as screwed as it looks like.

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Just reading that at lunch. Clearly written so even Brian Lenihan should understand that.

The key section:

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The ability of the State to continue funding itself ultimately depends on the size of these bad debts. If they are of the order of €10–€20 billion, we will survive. If they are of the order of €50-€60 billion, we are sunk.

Irish banks could easily lose this much. If we suppose that most of the €20 billion lent to builders will not reappear this side of Judgment Day, along with 20 per cent of the €90 billion lent to developers, and 10 per cent of the €120 billion in mortgages, then we are already up to €50 billion.

These are only guesses. However, the continuing stream of revelations from Anglo Irish – which bear out the old investment dictum that there is never just one cockroach in a kitchen – suggest that they could be optimistic guesses.

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He's right, IMO, that the re-capitalisation won't work without the creation of a bad bank or some risk insurance scheme.

But, on paper, as a country we still have some headway with our overall borrowing level as we started from a lower base than most other countries.

The emerging problem is that as one negative media story follows the next, this moves beyond simply predicting loan losses and becomes a credibility issue. Right now, in international financial circles, Ireland has zero credibility because of the actions of Fitzpatrick, Sean Quinn, IL&P etc. and the inaction of the Financial Regulator and Government. There is effectively a "no Irish need apply" policy in place in the interbank funding markets, regardless of the government guarantee.

And if that continues, we haven't seen anything yet....

China’s giant $585 billion (4 trillion yuan) economic stimulus package is showing signs of taking effect. Economists now project that China will be the likely leader of an elusive worldwide economic recovery.

Chinese banks heeded the government’s call to extend more credit to support the economy as they issued $237 billion (1.62 trillion yuan) in new loans in January, up a whopping 101% year-over-year, the People’s Bank of China said. The surge provides evidence that state-owned banks are heeding the government’s call to extend more credit to support the economy.

Story

And a counterpoint

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And if that continues, we haven't seen anything yet....

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Whats the dooms day scenario so? Could "the viper" be asked to collect some German's debt? (By Viper I mean IMF!!) You seem to understand the markets, what has actually happened to or how has the crisis affected the average Mr &Mrs Guidjohnson in Iceland?

Rumour mill is spinning into overdrive about more damaging revelations in Anglo to be public by the end of the week.

Have even heard a few predictions the Government could be on the way out.

Lots more coming down the line real soon.

The name "Anglo Golden Circle" seems to be gaining momentum.

Been a long time since a government was toppled by a scandal...

to a legally retarded person like myself is there any way that the government can pull out of the Anglo nationalisation at this stage or is it all signed sealed and delivered?

I (and I would guess most others) was firmly against the nationalisation of the bank at the time and was hoping it would be left to rot as i'm sure there's plenty of ways 1.5 billion ( :eek: ) can be better spent like, oh i don't know, healthcare maybe? or education? crazy thought i know....

Its way, way more than €1.5 billion isn't it?

it will be but i think that 1.5 bill was the initial amount no? either way the amount is scandelous...

It all reminds me of the lyrics from U2's 11 O Clock Tick Tock

"We thought we had the answers but it was the questions we had wrong"

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Originally Posted by Dr. Ogba

to a legally retarded person like myself is there any way that the government can pull out of the Anglo nationalisation at this stage or is it all signed sealed and delivered?

I (and I would guess most others) was firmly against the nationalisation of the bank at the time and was hoping it would be left to rot as i'm sure there's plenty of ways 1.5 billion ( :eek: ) can be better spent like, oh i don't know, healthcare maybe? or education? crazy thought i know....

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Thats a good question.

They could wind it up and shut it, but having guaranteed all assets and liabilities the cost of that would be monumental and could bankrupt the country, as having paid all deposit and bond holders, you're left with c€100bn of property loans which are probably worth say €30bn now.

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Originally Posted by Dodge

The name "Anglo Golden Circle" seems to be gaining momentum.

Been a long time since a government was toppled by a scandal...

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Brian Cowan was very defensive about "knowing" people in the Circle. I suspect if any government Minister the government will collapse.

Have to wonder if yesterdays resignation is connected...

The drip feed of Anglo dirt is killing the country. Only a new government would be able to distance itself for it.

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Originally Posted by OneRedArmy

Thats a good question.

They could wind it up and shut it, but having guaranteed all assets and liabilities the cost of that would be monumental and could bankrupt the country, as having paid all deposit and bond holders, you're left with c€100bn of property loans which are probably worth say €30bn now.

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BUT (and again this would be to the lay person) - could the fact that Anglo seem to have hidden other dodgy dealings render the "contract" null and void and so could enable the government to pull out of it?
cause lets be honest here, even the government should be able to see at this stage that there is no future for Anglo in any way shape or form...