Financial Crisis

[pete]

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.

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...

[OneRedArmy]

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".

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.

[pete]

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

Irish Times

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.

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.

[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.

[Fr Damo]

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...

[DeNiro]

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?

[pete]

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.

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

The key section:

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.

[OneRedArmy]

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....

[strangeirish]

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

[Fr Damo]

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

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?

[OneRedArmy]

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.

[drummerboy]

Lots more coming down the line real soon.

[Dodge]

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

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

[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 ( ) can be better spent like, oh i don't know, healthcare maybe? or education? crazy thought i know....

[Dodge]

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

[Dr. Ogba]

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

[NeilMcD]

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"

[OneRedArmy]

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 ( ) can be better spent like, oh i don't know, healthcare maybe? or education? crazy thought i know....

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.

[pete]

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

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

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.

[Dr. Ogba]

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.

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...