Great shout was watching mr buy property Jim Power last night telling us what to do next ffs. What a horrible hypocritical cunt
It’s fucking galling listening to a Tory minister talking about the need to help Ireland. Was out of the country for a week and it was the first fucking thing I heard when I got back. What strings are going to be attached if those cunts get involved?
As one who could be fairly described as on the autistic spectrum in all matters financial, I tended to tune out when this whole mess kicked off. Not that I’m proud of that but it’s become something of a hot story lately so can someone explain (in English) who the fuck these ‘bondholders’ are exactly? I’ve a pain in me hoop hearing about these cunts and not a rashers who they are
Many thanks in advance
Vincent Browne and Peter Power having a good cut off each other here…
Bondholders are the people governments and banks borrow money off.
The Irish banks can’t afford to pay back their bondholders so the Irish government said they’d pay them instead.
The Irish government can’t afford to pay everyone back though so the new idea is to get a new loan to pay back the bondholders that the banks own and then use the budget to take everyone’s money so that the government can pay back the bondholders they borrowed from, or pay the interest at least. And then in a couple of years we won’t be able to pay back this loan and who knows how we’ll get out of the mess.
I’d been scouring the press all week for a chance to use thiis pun but Gareth didn’t oblige. It would have been most appropriate if he had missed a Champions League tie.
Would it really have taken until now for all the people who fought in 1916 to get pissed off? A few emails and texts along those lines on Vincent Browne. I reckon most of them would have been pretty pissed off years ago but that’s only an estimate as I wasn’t personal friends with any of them.
Bonds for dummies
A country usually gets part of the money to run its day to day affairs from bonds. That’s on top of taxes etc. Bonds are like a loan – bondholders are effectively loaning money to Ireland. Bondholders are supposed to get their money back after a specified period of time with interest on top of their investment. Major investors in bonds include banks, hedge funds and pension funds, it can be anybody really.
The bondholders now believe that Ireland is insolvent and fear a default – that they won’t get their money back. Thus the interest rate that Ireland has to pay to bondholders when the bond matures has gone progressively higher – too high. Ireland has not tried to raise money via a “bond auction” since early October as a result. It hopes that budget cuts will persuade potential bond investors that there will be less chance of a default, thus the borrowing rate will come down. That has not happened and the rate of interest on the “secondary market” for Irish bonds (where bonds are traded between investors) has rocketed up.
This indicates that Ireland will only be able to borrow at a prohibitively expensive rate if it tries to hold another bond auction. Thus the EU / IMF will likely arrange a medium term loan, for probably somewhere in the region of three years at a rate of something like 5% in return for making cuts to drastically reduce its budget deficit, and possibly abolish the low Corporation Tax that has attracted multi-nationals here. But as the Irish economy shrinks, the chances of paying back the debt get slimmer and slimmer, hence the prospect of a “debt restructuring” somewhere down the line.
Banks and other companies obtain money from bonds as well. When a company goes bust the bondholders lose part or all of their money. Irish banks are effectively insolvent – they are complete basket cases. The Government decided to save the Irish banks at all costs and gave a blanket guarantee to all depositors but also, crucially, bondholders. The Government have tried to claim that bondholders are equal in status under the law to depositors. Most clear thinking people think that this is unjust.
This means that it has committed the Irish state to paying back countless billions – nobody knows the final total as the banks are still losing money hand over fist - that could well bankrupt the state. The problem is that while Ireland’s situation now is largely its own fault, the constraints of the Euro and the EU mean it cannot take decisions to help itself which would have been available before the advent of the Euro, such as devaluation. Europe will be effectively running the country’s financial affairs from now on. But essentially the EU Financial system is fucked because it won’t have enough money to bail out Spain and Italy if and when they get into trouble.
There was a list put up here or maybe another forum of Anglos bondholders. A lot of French and German banks, pension funds, funds linked to Roman Abramovich. We could well have caused serious consternation in Europe if we had burned Anglo and INBS . But since it was in the interests of this country to do so Lenihan etc shouldn’t have given a fuck. Companies like bonds because they tend not to be as restrictive as loans and can be an easier way to raise finance. Let there be no bones about it from day one the EU countries don’t give a fuck about the likes of Ireland. They are trying to save their own pension funds and banking systems who made bad investments in the likes of Anglo. It is all linked they will be up to their eyeballs in RBS, Portugal, Italian banks etc too
What I’m struggling to understand though is that the interest rate on a bond tends to be fixed does it not? Did Anglo etc issue variable interest rate bonds or what?
So there rocko with your half arsed explanation.
It doesn’t matter whether Anglo’s bonds are fixed rate interest or not - the problem on the bank bonds issued is repaying them. The banks can’t afford to. I’d imagine they issued both fixed and floating rate bonds which would be standard.
The government bond interest rates are only relevant in the context of figuring out what it will cost the government to borrow the next time we need to do so. Other than that it’s only relevant for the secondary market who are buying and selling the bonds after they’ve been issued by the NTMA.
There is some evidence to suggest that the only people really buying Irish bonds in recent months is the ECB:
Good Explanation except for this bit Sid.
The Government is not trying to “claim” that all bondholders are in equal in status to Depositors. They are rightly saying that legally SENIOR bond holders are equal to depositors. Big difference there.
Senior Bond holders get less of a coupon for their security of being equal in law to deposit holders. If the government changed this law no Irish bank would ever be able to raise senior debt again. And since they already have fuck all chance of raising subordinated debt that would mean the banks couldn’t fund themselves ever.
As for most clear thinking people thinking this is unjust. These people do not see the reality of where we are. A default on senior debt would set the country back 20 years. I wonder do any of these people have money in a credit union?
yeah i understand about the national bonds - the hysteria about 9% is immaterial really at present - until we hold the next auction it doesnt really matter.
got sent on this list a while ago re anglo bondholders - http://order-order.com/2010/10/15/anglo-irish-bondholders-should-take-the-lossesis-the-ecb-forcing-ireland-to-protect-german-investments/ - only a fraction of the total number of bondholders if this list is to be believed
If Bertie had have stayed around we wouldn’t be in this mess 
I mean these pejorative terms really add nothing to the debate.
Data from Goonies would have this shit sorted out in no time.
Well our new IMF overlords have arrived.
Great metaphor already in the first photo:
I wonder if Farmer wrote the (rather good) Editorial in the Irish Times today:
[indent]Was it for this?
IT MAY seem strange to some that The Irish Times would ask whether this is what the men of 1916 died for: a bailout from the German chancellor with a few shillings of sympathy from the British chancellor on the side. There is the shame of it all. Having obtained our political independence from Britain to be the masters of our own affairs, we have now surrendered our sovereignty to the European Commission, the European Central Bank, and the International Monetary Fund. Their representatives ride into Merrion Street today.
Fianna Fáil has sometimes served Ireland very well, sometimes very badly. Even in its worst times, however, it retained some respect for its underlying commitment that the Irish should control their own destinies. It lists among its primary aims the commitment “to maintain the status of Ireland as a sovereign State”. Its founder, Eamon de Valera, in his inaugural address to his new party in 1926, spoke of “the inalienability of national sovereignty” as being fundamental to its beliefs. The Republican Party’s ideals are in tatters now.
The Irish people do not need to be told that, especially for small nations, there is no such thing as absolute sovereignty. We know very well that we have made our independence more meaningful by sharing it with our European neighbours. We are not naive enough to think that this State ever can, or ever could, take large decisions in isolation from the rest of the world. What we do expect, however, is that those decisions will still be our own. A nation’s independence is defined by the choices it can make for itself.
Irish history makes the loss of that sense of choice all the more shameful. The desire to be a sovereign people runs like a seam through all the struggles of the last 200 years. “Self-determination” is a phrase that echoes from the United Irishmen to the Belfast Agreement. It continues to have a genuine resonance for most Irish people today.
The true ignominy of our current situation is not that our sovereignty has been taken away from us, it is that we ourselves have squandered it. Let us not seek to assuage our sense of shame in the comforting illusion that powerful nations in Europe are conspiring to become our masters. We are, after all, no great prize for any would-be overlord now. No rational European would willingly take on the task of cleaning up the mess we have made. It is the incompetence of the governments we ourselves elected that has so deeply compromised our capacity to make our own decisions.
They did so, let us recall, from a period when Irish sovereignty had never been stronger. Our national debt was negligible. The mass emigration that had mocked our claims to be a people in control of our own destiny was reversed. A genuine act of national self-determination had occurred in 1998 when both parts of the island voted to accept the Belfast Agreement. The sense of failure and inferiority had been banished, we thought, for good.
To drag this State down from those heights and make it again subject to the decisions of others is an achievement that will not soon be forgiven. It must mark, surely, the ignominious end of a failed administration.
[/indent]
Eamonn Ryan pretty much admitted on the radio this morning that the Greens will look for an election in the new year.
And here’s a transcript of Patrick Hoolohan’s interview on Morning Ireland this morning which was a decent interview. Secrecy wasn’t high on his agenda.
[indent]Is a loan on its way to bail out the Irish banks?
If it’s agreed, of course yes… The expectation is that negotiations will be effective and a loan will be made available and drawn down as necessary.
The ECB would not send large teams if they didn’t believe first of all that this was someting they could agree to a package, that there is a programme that is fully acceptable to them that could be designed and that is likely to be accept to irish government and Irish people.
So it is your understanding that there will be a loan ?
It’s my expectation that will happen, yes … absolutely.
How much will that loan be?
It will be a large loan because the purpose of the amount to be advanced or to be made available to be borrowed is to show Ireland has sufficient fire power to deal with any concerns of the markets, so it will be substantial for sure.
When you say tens of millions how much wll that be, €60bn to €70bn mabe?
Tens of billions, yes. I don’t know that any precision has been put on it yet.
And what will happen that money, will it all be going into the banks?
I don’t think there’s any question of it all going into the banks … It’s true that the banks need additional confidence … these huge sums of money that have been put in by the government to support the banks have not generated sufficient confidence yet.
The money is enough objectively but if the confidence isn’t there, and partly not here because investors are concerned about the government finances and the future prospects for growth and employment.
With the market uncertainty generally high for the last four or five months, effectively since the end of April, I think it is desirable that the government should have more capital, government capital ownership funds availale to show to the market – ‘look, this is beyond question’.
How much will they need in your assessment?
That’s actually one of the specific questions that technical work is going on at the moment, and there are different views.
I think maybe the best way to look at this is is that this is contingent funding. The capital is probably not required at all, but it can be made available in the form of contingent capital funding that can be shown but not used.
Are we now talking about a larger figure than that given by the government in September on the so-called Black Thursday?
Not really if you’re talking about net losses and what the overall ultimate cost to the taxpayer will be. This is money that is supposed to go in as capital, in other words something that goes in as a buffer and comes out again when it’s not needed.
The Americans did this in the autumn of 2008, they told all their banks, look ‘we know you thnk you don’t need capital’, but we think the market thinks you need capital so you have got to accept additional capital. A lot of investment was made by the American government into their banks and it was repaid very promptly in that case.
The FT is reporting there is concern about bank deposits here dwindling
Well, first of all I’m not going to talk about any banks, as you know I’m not meant to talk about specific banks.
There have been substantial outflows from the Irish banking system since April. That’s a matter of general knowledge and what’s happened is that very large investment firms, investment funds, financial institutions, largely abroad, invested and placed deposits in banks in good times as the ratings of the country fell then said well we don’t, as a matter of course, invest in less than triple-A and so forth … and so they just didn’t renew their deposits as they fell due.
But that was all replaced by borrowing from the European Central Bank facility that is available to all the banks. So that’s what’s been going on.
Is that situation continuing?
There has been a steady of drain of deposits, but as I say, this is something for which the banks have facilities and I, from the Irish central bank, I’m in a position to provide exceptional funding if it’s needed.
That was needed?
All I’ll say is there has been such a need, but I don’t want you to press me on these things, because I’m not allowed to talk about these things.
I’d have to make sure, just in case I sound as if I’m exceeding my powers, I would have to make sure that the other members of the ECB, the governors don’t object to making these loans because that’s always on a case by case basis. Of course if I ask them, they would not object.
Talking of technical matters, on the question of this loan, how and when will it be decided what rate of interest Ireland will be charged?
Yeah, that’s a curious thing. We know very, very clearly the IMF’s procedures for the rate of interst on their lending, and you can talk to someone else on thatbecause I’ll get it wrong and I’m standing here in Frankfurt.
The EFSF and the EFSM, theses European faclities’ exact rate of interest hasn’t as yet been agreed, but in broad terms, it’s expected to be roughly in the same territory as the IMF standard lending interest rates.
Is that likely to be around 5%?
In broad terms, it’s in that territory, but some of the lending is in the form of FDRs, some of it will be in the form of euros, so it gets a little bit complicated.
Just to confirm it is your understanding that we will be receiving a multibilion loan from the IMF and the EU?
It’s not my call. It’s the government’s decision at the end. It’s my expectation that this is definteily likely to happen. That’s why the large technical teams are sitting down discussing these mattes and I think this is the way forward. Market conditions have not allowed us to go ahead without seeking the support of our international collaborators and I think that is what’s ahead and I don’t see it as something really worrisome or should lead to a huge change in direction because as we know the fiscal discussions about €6bn in cuts, all of that is part and parcel of what an IMF team would ask for, would suggest if they came in in the absence of any such discussions.
I’m not saying they will rubber stamp it. I think they will not find all that much to disagree with.
[/indent]
The banks need to be wound up and new ones set up.
The Credit Union has said that it has 99 milion invested in Anglo bonds. It has also said Anglo should be wound up.
http://www.sbpost.ie/news/ireland/credit-union-body-angered-at-anglo-irish-link-48842.html
The reality is that these completely insolvent banks will probably never be able to raise senior debt again as it is. AIB for definite. That bank is finished, it’s a fucking vampire, and it needs to FOAD.
Ireland is being set back decades by the decisions FF have taken. This IS the worst case scenario.
And as long as we stay in the Euro, there is no future for this country.