Financial Crisis

[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 !

[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

[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

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

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."

[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?