he is the architect of our current situation
[quote=“north county corncrake”]intel may be next to jump ship… rumours floating around that they made a loss this quarter - could they ditch Ireland
well done Bertie[/quote]
and a committed Nord-Sider like yerself.
Do ye have more than that in common Crankie?
he is north city-im north county
Piling Anglo losses on to national debt risks bankrupting the State A
NALYSIS: Anglo Irish is poisoning the banking system and is of no systemic importance. It must not be nationalised; it must be allowed to collapse and with it the developers at the heart of the problem, writes Morgan Kelly
YESTERDAY’S CATASTROPHIC collapse of Irish bank shares stems directly from the Government’s proposal to nationalise Anglo Irish Bank. With the Government’s finances already buckling under the collapse of our bubble economy, financial markets began to fear that with the added burden of Anglo’s debt, the Irish State cannot afford to finance itself, let alone support the remaining national banks.
Facing the imminent collapse of the national financial system, the Government needs to perform a ruthless triage. The worthwhile banks need to be maintained by any means necessary, including nationalisation, while Anglo Irish and Irish Nationwide must be allowed to collapse.
What began as farce has turned swiftly to catastrophe. Last September the Government casually decided to give a small dig-out to some developer pals by guaranteeing the liabilities of Anglo Irish Bank. This spiralled into a proposed nationalisation that would saddle Irish taxpayers with Anglo’s bad debts, which could easily exceed €20,000 per household, and starve the other, worthwhile, banks of the capital they need to survive.
At the original crisis meeting on September 29th, Brian Cowen claimed that the blanket guarantee to all six banks was given “on the basis of the advice from those who are competent to so advise the Government”.
That does not appear to have been the case.
According to a source of mine very familiar with what happened at the meeting, 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 on the grounds that a sudden liquidation of Anglo’s assets would not be in the national interest.
It is still worth asking what would have happened if Brian Cowen had listened to the Department of Finance and allowed Anglo Irish to sink? The answer is: very little.
Developers would have gone bust and commercial property would have become more or less worthless, but that is going to happen anyway, with or without Anglo Irish. Depositors of Anglo Irish would have been paid off in full, and the hit would have been taken by the international financial institutions that hold around €22 billion of its bonds.
These bondholders are professional institutional investors who signed up for higher returns on Anglo debt in the knowledge that they were facing higher risks. They are, moreover, insured against their losses through insurance contracts called Credit Default Swaps.
This is the central point about the bailout of Anglo Irish, and one that has not received any attention: the only effect of a bailout is that the Irish taxpayer will make up the losses of Anglo Irish’s bondholders instead of the insurers who had already been paid to underwrite the risk.
Why it is necessary to transfer Anglo’s losses from the writers of Credit Default Swaps to the Irish taxpayer is something that the Government has not thought to justify.
Indeed, what has been disturbing about the entire Anglo affair is that at no stage has the Government felt it necessary to explain why any bailout was needed, beyond inchoate mutterings about the “systemic importance” of Anglo Irish.
The reality is that Anglo has no importance in the Irish financial system. It existed purely as a vehicle for a few politically connected individuals to place reckless bets on the commercial property market. These property speculators may be of systemic importance to the finances of Fianna Fil, but their significance ends there.
In ordinary times, piling €30 billion of Anglo Irish losses on to the national debt would be painful and pointless but not impossible. These however are not ordinary times. International debt markets are flooded with governments trying to borrow. The other Irish banks are dangerously short of capital. Most importantly, the Irish economy and government finances are collapsing.
Ireland’s growth during the last decade was largely illusory, generated by a property bubble fuelled by reckless bank lending. In 2007 an incredible 20 per cent of our national income and employment came from building houses and commercial property. Next year, the percentage will be approximately zero.
The only industrialised economy that has endured a property and banking crash remotely comparable to what we are beginning to experience was Finland in 1991, where national income fell in total by 15 per cent and unemployment rose by 12 percentage points. As the private sector haemorrhages jobs it is hard to see how Irish national income will fall by less than 20 to 25 per cent in the next few years. Unemployment will easily reach 15 per cent by the end of the summer, and 20 per cent by next year, and will not start to fall until recovery in Britain and elsewhere permits mass emigration to resume. The economy will not begin to grow until real wages fall to competitive international levels, a process that will probably take a decade.
In other words, the Irish economy is facing a decade of stagnation and mass unemployment of the same magnitude as the 1980s, with the difference that the unemployed now have mortgages, car loans and maxed-out credit cards. Faced with an irreversible contraction on this scale, the Government will have grave difficulty borrowing to fund its ordinary expenditure, even after draconian cuts in spending and increases in taxation. In the view of international investors, piling Anglo Irish’s gambling losses on top of a spiralling national debt could easily suffice to sink the Irish State into bankruptcy.
In this national crisis, what should be done? The answer is simple. The State must do everything to rescue AIB, Bank of Ireland and Permanent TSB, and let Anglo Irish and Irish Nationwide sink.
The Government must continue to guarantee all deposits at Anglo Irish while announcing that, in the light of continuing revelations of misconduct in the bank and shortcomings in its auditing procedures, it will enter into negotiations with senior and unsecured bondholders.
The proposed Anglo nationalisation marks a decisive watershed in Irish democracy. With it, an Irish government has coolly looked its citizens in the eye and said: “Sorry, but your priorities are not ours.”
It is to be hoped that the collapse of other bank shares will serve as a warning to deter the Government from this catastrophic course. I would therefore urge any TDs and Senators who still believe that the Irish State exists to act in the interests of its people to vote against the nationalisation of Anglo Irish and do everything to protect the other banks.
Morgan Kelly is professor of economics at University College Dublin.
a bit slow with that article
Will Fianna Fail ever recover if they contrive to bankrupt the country?
Only getting around to my mail now, busy job I have.
Of course, they’re bulletproof and the alternatives are a shambles.
How can they be described as a shambles? FF have been in power since the economy started off good. They inherited that from the current opposition.
they have been in power too long now and there is truth in the saying that ‘power corrupts’.
Charlie was corrupt and the current shower are inept to boot.
If the central bank and professors of economics are saying ‘A’ and the government just do ‘B’ based on theiry own advisors then there are issues.
As far as I can see it, auditors are corrupt, the public service is corrupted and the government needs to be booted out.
As a society we need a change badly.
Yours etc,
GSH.
If they weren’t a shambles they would be able to oust a Govt thats been corrupt for the past 2 terms. They haven’t. You cant put it all down to the FF cumanns. People are sheep, but if the opposition cant give a decent alternative then can you blame them? Time to get Lowry back into FG.
Bertie stepped back and Cowen bullied the opposition off the ballpark, that’s pretty much how the last election was won. That doesn’t say a lot for either the opposition or the electorate, and we probably have the government we deserve.
But it was the people who elected them. The people want change but I’m sick of this whole “I want to have change but I don’t like Inda Kinny”.
Either have the balls to change the government or else vote FF in again and let them and their corrupt buddies screw the country.
FFs main goal is to remain in politics. FG and Labour told the country that we were being conned by FFail and FF spun the people a load of lies and peopel fell for it. What can the opposition do if people are retards and sheep?
Yours in being able to make up my own mind and not voting “cos we’ve always voted that way”,
GSH.
[quote=“Garda Sean Horgan”]How can they be described as a shambles? FF have been in power since the economy started off good. They inherited that from the current opposition.
they have been in power too long now and there is truth in the saying that ‘power corrupts’.
Charlie was corrupt and the current shower are inept to boot.
If the central bank and professors of economics are saying ‘A’ and the government just do ‘B’ based on theiry own advisors then there are issues.
As far as I can see it, auditors are corrupt, the public service is corrupted and the government needs to be booted out.
As a society we need a change badly.
Yours etc,
GSH.[/quote]
I think that’s the dangerous sort of generalisation that the government will love at this time.
How are the auditors corrupt? The system is probably corrupt and the legislation is shite and the regulation is worthless. An audit achieves fuck all comfort for the shareholders or the general public. But you can’t expect a team or firm of auditors to change that.
It’s the same with public services. You get time wasters but you get plenty of committed and important people too. So there are inefficiencies, but the blame for those again lies squarely at the system’s designers and guardians - i.e. the government again.
It suits FF just fine to have all this talk about the Financial Regulator and the auditors and whatever else. Those people are toothless because they were rendered toothless by a political system that has always rewarded cronyism and skullduggery.
Any rightminded person looking at our political system would say that there’s far too much central power. Politicians in the Dil spend half their time raising constituency issues becasue there’s fuck all local power. So this is their forum and accordingly votes are earned by Willie O’Dea and his likes by the odd bang on a door.
But what happens where you do have local government. You have voting pacts to share power between all the big parties. You have bribes, blackmail, abuse of planning laws and whatever the fuck else people fancy.
Local or national government in this country won’t work until people start standing up for themselves and voting for proper change - even if it’s just Labour.
first few posts on this thread are brilliant especially jugs
lads just on the question of shares…last august a mate told me to buy shares in tullow oil …i didn’t even know how to go about doing it…Is there any way to see how much they have increased since september to now?..
Ben Shermin called it spot on. I wish Puke hadn’t driven him from the internet.
big time - the intellectual chased away by the simpleton & we are all left to listen to pukeys ramblings ever since- we would be rich if Ben stayed
If you go here:
http://www.rte.ie/business/markets/iseq.html
You should be able to pick Tallow from the list and see how they performed over certain periods of time.
Ben Shermin, TFK’s retired economic expert. Tinnion was crediting some Prefessor in UCD for calling the problems last March in the Daily Telegraph and we had our very own Shermin telling us what was what this time last year. God speed you Ben Shermin.