Financial Crisis

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Originally Posted by OneRedArmy

Real situation. You've likely defaulted already. The banks are rolling up interest, may have been for a period of years and haven't done one thing to pursue you.

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The banks are rolling up the interest because of NAMA. Why foreclose when you can get the Government to overpay to protect you and your shareholders?

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Originally Posted by OneRedArmy

NAMA will actually lessen the chance of the developers being bailed out.

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Can't say I trust FF to put in place any organisation that puts the citizen ahead of the developer - no evidence they've ever done so in the past. They fuelled the boom, and therefore the (now offshore untouchable) profits for those self same developers that aren't getting bailed out by NAMA?

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Originally Posted by John83

I don't follow. You mean paid back? Some of it will, some of it won't, with the NAMA route.

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Whatever the haircut paid to the banks, the borrower still remains liable for the full amount borrowed, including rolled up interest. Nothing is being written off at this stage (Zoe will be the first big one). Whether its NAMA or the banks responsible, what you want to do is maximise how much of the borrowing that you can recover.

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Originally Posted by Macy

The banks are rolling up the interest because of NAMA. Why foreclose when you can get the Government to overpay to protect you and your shareholders?

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The banks have rolled up interest for years. The reason they won't foreclose is that a firesale of assets would crystalise immense losses by driving down values even further.

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Originally Posted by Macy

Can't say I trust FF to put in place any organisation that puts the citizen ahead of the developer - no evidence they've ever done so in the past. They fuelled the boom, and therefore the (now offshore untouchable) profits for those self same developers that aren't getting bailed out by NAMA?

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If I read you right Macy you seem to think that bailing the developers out and doing the best thing for the taxpayer are aligned. Nothing could be further from the truth.

If you want to give the developers what they deserve, you'd call all the loans now, force liquidation and call personal guarantees and sell the collateral (i.e. do what ACC are doing now). This firesale would bankrupt the developers (which they deserve) and because of the low values that would be recovered on the land and developments, almost certainly bankrupt the banks (which they also deserve). So you'd teach the developers and bankers a lesson, BUT at huge cost to the taxpayer.

The alternative is the NAMA approach, spread the asset sales over 5 or 10 years and get a better return and try to minimise the costs to the taxpayer(a la Sweden). But to do this you can't stick it to the developers and the banks.

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Originally Posted by OneRedArmy

But to do this you can't stick it to the developers and the banks.

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Of course you can. You pay the banks market value, and the recapitalise, or you nationalise first, then whatever's paid doesn't really matter as the tax payer is both sides of the equation. Either way, the banks take the hit and the tax payer has an upside.

Foreclosing on Developers doesn't necessarilty mean a firesale, especially with the land in state control. I don't expect NAMA to foreclose on any of the developers, or any personal guarantee's to be called in - it's not in FF's interest.

There's going to be a hit for the citizen, it's about making it the smallest hit possible. The way the bill is constructed, and the clear ideological position of Lenihan to keep as much of the banks in private control whatever the cost, is about giving as much as hit to the taxpayer as they can get away with...

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Originally Posted by Macy

Of course you can. You pay the banks market value, and the recapitalise, or you nationalise first, then whatever's paid doesn't really matter as the tax payer is both sides of the equation. Either way, the banks take the hit and the tax payer has an upside.

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This has a huge potential upfront cost to the taxpayer in terms of recapitalisation. This is Labour's proposed approach, and they can't even cost it to the nearest billion.

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Originally Posted by Macy

I don't expect NAMA to foreclose on any of the developers, or any personal guarantee's to be called in - it's not in FF's interest.

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I expect them to wind up companies and to the extent assets are personally guaranteed, pursue individuals. If its guaranteed, they will pursue, if it isn't they can't touch it. Surely you're not naive enough to expect them to seize assets outside of the powers contained in companies acts and bankruptcy laws that have evolved over centuries?

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Originally Posted by Macy

There's going to be a hit for the citizen, it's about making it the smallest hit possible. The way the bill is constructed, and the clear ideological position of Lenihan to keep as much of the banks in private control whatever the cost, is about giving as much as hit to the taxpayer as they can get away with...

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I agree that there is an ideological goal to keep the banks in private interests, I've given my views on the reasons for this in previous pages (so the Govt can place lots of soveriegn bonds in the Irish banks to fund the deficit that they otherwise couldn't sell to foreign banks). Linking this to maximising the hit to the taxpayer is a non-sequitur IMO.

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Originally Posted by OneRedArmy

This has a huge potential upfront cost to the taxpayer in terms of recapitalisation. This is Labour's proposed approach, and they can't even cost it to the nearest billion.

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Anything else than paying the realistic market price is a straight transfer of money from the state to shareholders of the banks. Some people may not have a problem with that, but pro the FF version of NAMA people should at least be honest about what it is.

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Originally Posted by OneRedArmy

I expect them to wind up companies and to the extent assets are personally guaranteed, pursue individuals. If its guaranteed, they will pursue, if it isn't they can't touch it. Surely you're not naive enough to expect them to seize assets outside of the powers contained in companies acts and bankruptcy laws that have evolved over centuries?

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Well there are in a position to seize assets - they could change the law afterall, but I have zero faith that it will even do the former. The policy will be to roll up the interest whilst they try and create another bubble.

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Originally Posted by OneRedArmy

I agree that there is an ideological goal to keep the banks in private interests, I've given my views on the reasons for this in previous pages (so the Govt can place lots of soveriegn bonds in the Irish banks to fund the deficit that they otherwise couldn't sell to foreign banks). Linking this to maximising the hit to the taxpayer is a non-sequitur IMO.

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They keep getting the bonds away, and surely they'd be downgraded significantly further if the only buyers were Irish Banks. But again, they should at least be honest if that is the logic. Given Lenihan's disinterest in proper regulation of the financial sector, I still think it's ideology ahead of citizen.

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Originally Posted by Macy

Anything else than paying the realistic market price is a straight transfer of money from the state to shareholders of the banks. Some people may not have a problem with that, but pro the FF version of NAMA people should at least be honest about what it is..

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Why have NAMA if you are going to pay market price? Its only an unnecessary middleman.

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Originally Posted by Macy

Well there are in a position to seize assets - they could change the law afterall, but I have zero faith that it will even do the former. The policy will be to roll up the interest whilst they try and create another bubble...

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No offence but this is pie in the sky. Retrospectively ending the concept of limited liability and the body corporate as a distinct legal person?! I'd say the Supreme Court might have something to say about it.

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Originally Posted by OneRedArmy

Why have NAMA if you are going to pay market price? Its only an unnecessary middleman.

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I agree, that's why it's the wrong approach.

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Originally Posted by OneRedArmy

No offence but this is pie in the sky. Retrospectively ending the concept of limited liability and the body corporate as a distinct legal person?! I'd say the Supreme Court might have something to say about it.

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I should've ignored you comment, as it distracts from the fact that I don't believe NAMA will even go after them to the extent current rules allow. I actually wouldn't be surprised if there's some loophole that will let developers completely off the hook tbh. We'll know if they ever try and foreclose, but don't be surprised if no developer has their personal garantee's called in and handed over.

Nama to buy €77bn in loans at 30% discount - Lenihan

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Originally Posted by Mr A

Nama to buy €77bn in loans at 30% discount - Lenihan

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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...

But surely the better the banks do the less they'll need in recapitalisation from the taxpayer?

At this stage whatever happens is going to be unpalatable one way or the other.

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.

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Originally Posted by Macy

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...

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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.

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Originally Posted by 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.

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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.

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Originally Posted by OneRedArmy

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.

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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%.

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Originally Posted by Macy

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%.

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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.

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Originally Posted by OneRedArmy

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

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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?

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Originally Posted by MariborKev

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?

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To get the legislation passed...

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Originally Posted by OneRedArmy

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.

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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.

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Originally Posted by monutdfc

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.

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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.

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

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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.

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Read more: http://www.irishexaminer.com/ireland...#ixzz0Rora1KRT

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Originally Posted by Macy

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



Read more: http://www.irishexaminer.com/ireland...#ixzz0Rora1KRT

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Hilarious.

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.

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

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.

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Originally Posted by 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.

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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).

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.

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Originally Posted by tipptops

Lets be clear about 1 thing - Strike by civil service = riots/possible army intervention.

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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!

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Originally Posted by tipptops

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

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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.

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Originally Posted by tipptops

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

Comprende?

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

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Originally Posted by tipptops

Amn't I allowed to express my opinion?

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Not with that attitude, no. Use some civility, or find another forum to post on.

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So, it looks like we're going to have our banking system nationalised anyway. http://www.thepost.ie/news/billions-...nks-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.

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Originally Posted by Macy

So, it looks like we're going to have our banking system nationalised anyway. http://www.thepost.ie/news/billions-...nks-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.

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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.

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

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Originally Posted by OneRedArmy

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.

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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.

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Originally Posted by OneRedArmy

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.

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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.

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!

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Originally Posted by Macy

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.

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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.

Anglo numbers staggering.

Nationwide to a lesser extent.

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?

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Originally Posted by 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?

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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.

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?

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Originally Posted by 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?

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It's just O'Keeffe. The guy's like a shorthand for everything wrong with the country.