Normally when a person is approached to take over a business, the usual criteria would be Trading and Profit and Loss accounts for the past three years and also a look at the realisable Debtors and payable Creditors and most important would be the realisable Assets and the Current Liabilities and future Liabilities. At the present point in time, we are being dripfed with problems within Anglo and we are not talking about 200K we could be talking about billions - does anyone know exactly what is owed by Anglo and who owes this money. Where do the firm of accountants stand in all of this. Are the accounts that were produced by them over the last number of years a load of rubbish - if so, what is the position of the Institute of Chartered Accountants with regard to sanctions against this firm? Where is the accountability in any of this sorry affair.

As for Mr Fitzpatrick, who owes Anglo €106m and apparently has €23m on deposit, which we have been informed, cannot be touched. Mr Fitzpatrick is guilty of “conduct unbecoming ” and as such should loose any entitlement to any monies held in Anglo. The Government should seize any property that was reputed to have been purchased with this money and Mr Fitzpatrick himself should be brought to justice. Again where is the accountability.

We have read about the senior staff who borrowed money from Anglo which they then found they were unable to repay. What does Anglo do in this event - they write it off - if anyone else owed money to Anglo or any other bank they would hound you to hell and back and your credit rating would be completely destroyed. Not so for any of the senior staff.

As far as I can make out, there is most certainly one law for the bankers and a different set of laws for everyone else.

The saying used to be “people in high places with low morals” - nowadays is could be “people in hugh places with no morals”

We have to have complete transparancy in this issue and once we know what the real figures, only then can we realistically set about correcting the problem. The persons who were involved in allowing this massive unsubstantiated borrowing need to be brought face to face with the reality of the result of their actions.

Anglo Irish Bank was a beacon in the earlier years and was instrumental in aiding the growth of the economy. Where are the people who helped to make it so wrong.

I could imagine all sorts of ways that borrowers from Anglo could be systemic in having business interests outside of Anglo (e.g. Accountants involved in land or shares speculation) but I would prefer to wait for Ala Dukes’s comments to go up on the PAC transcripts website.

@Karl W

It may be a political necessity not to have nationalised banks because either
(a) the bank will be subject to political pressure and will act imprudently and will possibly treat customers unfairly according to their political pull causing further damage to our international reputation, or
(b) the banks will act perfectly fairly and prudently and everybody will blame the Govt for stopping their overdraft and bouncing their cheques.

I think those are both very distasteful scenarios when the country needs the workforce’s and all tax payers’ full support.

[I also think that there is a major incentivisation and motivation issues with nationalisation but that is another year's work!]

Thanks for the info on the piece in the Indo. To be honest, though, I don’t think the EU stuff matters much.

The state aid laws are there to stop some government-supported banks crowding out foreign-owned competitors. Anglo is barely making loans, so there’s no worries about it grabbing market share based on state support. The government will tell the EU what it’s currenty saying. Namely, that its plan for viability is to ship most of the loans into NAMA, gradually pay off most of the liabilities and then turn the remaining small bank into a specialised operation of some form.

The EU, unconcerned about the competition implications, will then say, that’s grand, off you go. So I don’t see this as a constraint on the government, nor do I reckon do they.

And as for nationalised banks and political necessities, that works both ways. The motivations behind keeping the two main banks out of nationalisation could also be characterised as largely political.

Karl D, I’m interested in minimizing the cost to the taxpayer. Nationalising ticks a number of boxes. The FG proposal seems to have merit - at the very least, it appears to buy time while getting the price discovery process moving. NAMA is a mystery. It forces an immediate guess at “long term economic value” with little prospect of future redress. There’s also the inclusion of “good loans” which is unsettling*. If NAMA resulted in the state owning 95+% of the banks, I’d be satisfied.

*For example BOI’s 2009 annual report, pg214:
“Financial assets renegotiated that would otherwise be past due or impaired

Renegotiated loans are those facilities at 31 March 2009 which if not renegotiated would have been ‘Impaired loans’ or ‘Past due but
not impaired loans’. The quantum of these loans at 31 March 2009 is €5,661 million (31 March 2008: nil) and represents borrowers
whose loan terms and conditions have been amended in recognition of a change in the borrowers’ circumstances. Amendments would
include, for example, situations where anticipated repayment through refinance or asset disposal on the original loan terms is not
achievable at this time having regard to illiquid markets. Loans under this disclosure requirement are primarily included in the
‘Acceptable quality’ and ‘Lower quality but not past due nor impaired’ classifications and are not deemed to represent a risk of loss at
this time.”

If you chip away at something, eventually you get an answer. That’s how the news business works. Here’s the top of Joe Brennan’s page lead in today’s Indo business section:

“The Government may have to show the EU that Anglo Irish Bank has a chance of becoming viable again, or else outline plans for an orderly wind-down, to get the nod from Brussels for its planned €4bn bailout of the embattled lender.

All EU banks receiving government assistance would come under new draft EU Commission guidelines which say governments must show how a bailed-out bank “will restore long-term viability without state aid as soon as possible, or if this cannot be achieved, how it will be wound up in an orderly fashion”.”

So while it may be an economic nonsense to frame the debate as going concern vs. wind-up, it appears to be a political necessity. But that’s what you get with a nationalised bank - political necessity trumps economic rationality - a point Karl D has been hammering on here for weeks.

I need to ask you with total sincerity if you believe that the performance of assets or institutions would be better under state control? Would it change the outcome?

What we can see thus far with Anglo’s nationalisation is that nobody has been let go, they company is only interested in deposit business yet they are haemorrhaging money despite offering some of the best deposit rates in the country! And the bill just keeps getting bigger, the biggest loss ever for an Irish company is now an accolade held by Anglo.

The ‘nationalisation/non-nationalisation & NAMA’ debate needs to end, let’s move on to getting NAMA up and running.

Anglo should have been wound down from the outset, but who was calling for that at the time?

Whatever the rights and wrongs for saving Anglo I’ve never really bought into the systemic importance of Anglo. Are they saying without Anglo no other banks would lend to the property/commercial market? I thought there were quite a few what you might call wholesale banks around - banks like KBC, ING etc. As far as I understand it Anglo has not been lending or in fact acting as a going concern for the last 6 months and is unlikely to do so in the near future.

Presumably you could package its good business and sell it off to another bank. Other banks will lend for good viable projects. Why do we need Anglo? In my opinion Anglo will cease to exist in the next 3-5 years and the country will survive quite happily therefore it is not of systemic importance.

The difference with AIB and BOI is their branch network and their retail operations. They are still in business and it would cause untold problems if they ceased.

Or do I misunderstand what systemic means?

Have pity on us lay-people. We have come to the holy city to learn If we were happy in our ignorance we’d be elsewhere

Yes, I expressed deliberate caution on the senior debt. But even so, why should it not be adopted?

@zhou_enlai

The terms and conditions relating to all deposits would not change. Depositors would also benefit from a new, more targeted Guarantee. Why would they walk away? Nothing has changed.

What would be the impact on our sovereign credit rating? Well, S&P just downgraded us again because of the likely cost to the taxpayer of bailing out Anglo under the current model. Things couldn’t get any worse.

We’ve been around the block before on whether bond investors are rational and future-profit-oriented; or vengeful of historic losses. It’s hard to tell, but I’d go with the former. These are private liabilities, not sovereign ones.

Do you envisage a situation where a depositor whoc omes in to make a withdrawal will be told: “Sorry, you can’t have your money until we wind down, but don’t worry because your money, which you can’t have right now, is guaranteed by the State, which can’t pay you right now.”

What will be the cost of funds to AIB/BoI in the meantime as their deposits are frozen pending the wind down?

What will be the effect on our Govt bonds in terms of interest payable and duration?

The assumption that depositors would not walk away (leaving aside the assumption that the ECB will allow the bnk to hold onto its licence to hold deposits straight away) to the tune of at least €25 Billion is a bit too pie in the sky for it to become Govt policy.

@kirghiz

There is no morality to the cash injection to Anglo. It is a financial measure to save money and to forestall economic meltdown. The only possible moral dimension is that people might act amorally in paint it as a moral issue.

There is a major moral issue in how we treat those who committed immoral acts which have damaged the nation. That is a different issue to the injection, which is a consequence of immoral actions rather than an immoral act of itself.

People can rest assure that we will be paying for this for generations to come. One is lebs likely to be afraid of something one knows is unavoidable. (Babyboomers beware of the backlash though!).

Dukes said that Anglo are systemic because they are involved in projects and in employment across the country and because of the interconnectedness of our economy. It would be better if the picture were clearer but it appears that Anglo is indeed systemic, or at leastthat the State should treat it as systemic.

A possible scenario:

(1) the Board of Anglo Irish are “persuaded” to ask the Minister to withdraw Anglo from the Guarantee Scheme
(2) The Government agrees, and accounces an orderly wind-down of Anglo Irish Bank over the next 6-9 months, including break-up and asset sales to NAMA and others
(3) At the same time, the Government prevents a run on the bank by announcing a new Guarantee Scheme for Anglo covering existing short term liabilities (less than 90 days) (including the €30 billion in ECB and other inter-bank deposits and the €34 billion in customer deposits) and new funding coming to the bank
(4) Crucially, it does not renew the Guarantee for any longer-term liabilities that mature beyond September 2010 (certainly for the €5.0 billion in sub-debt, and possibly also for the €10.2 billion medium term bonds)
(5) the Government applies to the European Commission for an extension to the derogation from capital requirements during the wind-down period
(6) As the bank is wound down, and assets are sold or recovered, liabilities are paid off in the usual order of ranking - desposits and other guaranteed liabilities first, senior debt next, sub-debt after that and finally equity capital

This approach potentially provides an additional €15 billion protection for the taxpayer than the current approach.

On “That seems to present two exclusive options, no?” Well, actually no. Being against NAMA without nationalisation does not mean that one is against NAMA with nationalisation.

On the issue of snideness, I’ll leave it others to decide which of us is guilty of that charge.

Perhaps you forgot this?
“In introducing its proposals for the National Asset Management Agency (Nama), Government Ministers and Peter Bacon, the consultant who recommended this plan to the Government, have stressed that they see their current plan as likely to produce a superior outcome to nationalisation (though they concede that majority State ownership may be required).

We disagree strongly. We see nationalisation as being the inevitable consequence of a required recapitalisation of the banks done on terms that are fair for the taxpayer.”

That seems to present two exclusive options, no?

On the wind-up/going concern issue, surely you see the reason it is a discussion is because the exec chair of Anglo has presented a business plan to the minister which (so he says) makes the case for the bank continuing as a going concern. The media and opposition reaction to this has been “WTF? The choice is between quick wind up and gradual wind up. Which is it going to be? Oh, quick wind up would bring all the costs forward? Thanks, I’ll report that. BTW, why do we have to put in €4bn if this sucker’s going down eventually?” This stuff may be intuitively obvious to you, but readers want to see the gears turning. How the hell else can ordinary people hope to understand what’s going on? I just don’t get why you’re being snide about even having the conversation and going through the reasons why one thing is happening and not something else.

How enlightening. There is a moral dimension to this: people are justifiably afraid that we will be paying for this for generations to come. They are also reluctant to take the medicine from those who caused the mess in the first place.

And still we don’t know why Anglo is ’systemic’, or anything about their derivatives positions. So how highly leveraged are we at the moment?

As I wrote, there are good reasons to keep Anglo open as a bank for the moment (even one that doesn’t lend) including continued access to ECB lending facilities. If you put the bank into liquidation, then every liability has to paid back now, irrespective of when they mature (when a business goes into liquidation, the holder of a bond that matures in ten years time doesn’t wait around ten years after you’re gone.) And the current process is essentially effecting a gradual wind up. But look, if you want to frame the discussion as “wind up versus going concern” then fire ahead.

Have I forgotten something I wrote a couple of weeks ago? Well, um, no actually. That piece (and others that I have written on this topic) explicitly stated that nationalisation can work in conjunction with an asset management agency. To present these as straight alternatives rather than complements is misleading.

Important issues which KW and Brian Honan highlighted have remained unaddressed, viz.:
1. How losses are borne (particularly unguaranteed bonds but also possibly including matters such as the write off of the Quinn family loans);
2. The urgent need for Irish legislation to provide for the orderly winding up of banks.

The above replies from lay-men and women also largely ignore the regulatory role of the ECB and the co-operation and support we require from the ECB and our international partners.

We are lying in the back of an ambulance with a puntured lung and a fractured skull while the drivers argue over the best route to the hospital.

Economists don’t figure this in, illogical as it is, as it relates to tax evasion. Loan backing isn’t always “with recourse only” to the real estate. There maybe a heap of manure here!

Has anyone said NaMa will liaise with Revenue?