Fintan O’Toole on Propping Up Anglo Irish

Fintan O’Toole is a thoughtful and eloquent commentator on arts and social trends, and sometimes he gets things right about economic issues too!  Today in the Irish Times he has a compelling piece on bank bailout policies toward Anglo Irish.

60 thoughts on “Fintan O’Toole on Propping Up Anglo Irish”

  1. I guess Mr O’Toole is suggesting that the banks should have all been left to go bust. The orthodox (including mine) response to that would have been: look what happened after lehman; you can let one bank go, perhaps, but not a systemic one; you can’t let the whole system go, look what you will end up with.

    Well, let’s think about that. Let the lot go, the guarantee is called. Ultimately, that will mean the ECB supplying he necessary liquiidity. A new entity will have to be cobbled together to manage this deposit taking/cleansing exercise. It will be be umbilically connected to the ECB. There will be no lending.

    What is different about that compared to what we observe today? O’Toole might suggest the main difference is 54billlion of cash that might usefully be deployed on a braodband network. Amongst other things.

    Just thinking out loud.

  2. @ simpleton

    The systemic risk argument is overblown in my opinion, the Lehman effect has been used in the pro-NAMA debate far too often. Comparing the global counterparty risk based fallout of one of the largest more aggressive investment bank and derivative providers in the world is light years away from the importance to the “system” of any of the irish banks.

    Allied Irish and Bank of Ireland have important clearing functions for the economy but does anyone think they cant be wound down in an orderly way whilst keeping this vital infrastructure in place. A new government would have the legitimacy to get rid of the guarantee, scrap NAMA and do just that. Then it could recapitalise the shell of one, perhaps get foreign interest in the shell of another and start again. No need for Anglo or Irish Nationwide to put taxpayers money at risk. It would have to be effectively communicated but it would be possible.

  3. There are two repeated issues in relation to propping up Anglo:

    1. Was it systemic? Should it have been guaranteed?

    Everybody has an opinion. None of them are definitive. The Minister said before that it was considered systemic but this was not proved. Alan Dukes has said it was systemic. The EU decided against the Lehmans approach as part of their emergency plans to deal with the crisis and we went a along with that at a time when co-ordination across the EU was needed.

    FOT says “The big lie in the entire Government response to the banking crisis is that we had to save Anglo Irish and Nationwide (which is to say, Seanie and Fingers) because they are of “systemic importance” to the Irish economy.” but the fact of the matter is that we are well past that point. That issue arose in September 2008.

    2. The second question addresses the issue after the guarantee was put in place. Once guaranteed, would it have cost a lot to wind Anglo up.

    We have had this debate already. The DoF and presumably the Central Bank reckon it would cost us a fortune as the bank would ose its licence and deposits would have to be refunded immediately. Brian Lucey has speculated that not all deposits would have to be paid immediately but admits that he is making an assumption about people’s behaviour.

    Brian Lenihan has said that NAMA paying money to Anglo is a mechanism to allow us to pay off the emergency funding Anglo has been getting from the ECB. This has been a temproary emergency mechanism and needs to be removed. Perhaps Brian Lucey thinks we don’t have to pay off the ECB for a long time?

    Anyway, those are the issues of contention as I see them.

    FOT raising this now is not moving the debate on. Rather he is muddying the waters by resurrecting the argument that surrounded the guarantee and is suggesting that it is a live issue again in terms of NAMA.

  4. @ Gregory

    “and sometimes he gets things right about economic issues too!”

    I think that some of the commentators on this site should be reminded that they too SOMETIMES get things right about economic issues but only sometimes!

  5. @ Zhou,

    Once the deposits are guaranteed, they can be transferred to a clean bank as liabilities without ever needing to be refunded.

    The problem with the BDS, of course, is that it covered a bunch of stuff it had no business covering (large deposits, bonds etc.)

    Unfortunately, the BDS is a live issue in relation to Nama, because it is blocking the alternative toxic asset management strategies and making sure Nama is TOSIT, (or TOGIT if you prefer games to shows).

  6. @ CM

    “Allied Irish and Bank of Ireland have important clearing functions for the economy but does anyone think they cant be wound down in an orderly way whilst keeping this vital infrastructure in place. A new government would have the legitimacy to get rid of the guarantee, scrap NAMA and do just that. Then it could recapitalise the shell of one, perhaps get foreign interest in the shell of another and start again. No need for Anglo or Irish Nationwide to put taxpayers money at risk. It would have to be effectively communicated but it would be possible.”

    This right on the money.

    From the outset the government and it’s advisors lost sight of what was important here. The banking infrastructure and the workforce who run it. That was all that needed to be secured.

  7. One glib poitn about “systematic”.

    I am sure we all know of well known individuals in the Irish business firmament who, while not in the property business, are major debtors of Anglo (more than €1bn exposure).

    Those individuals would have had virtually no chance (and probably still don’t) of refinancing such a scale of concentrated debt had Anglo proceeded to be wound up.

  8. @GS

    I am not saying there is no debate to be had. The question is can we wind up Anglo without triggering a huge liability. As you say the BDS is an issue but it is not a live issue in that no serious commentator has suggested that we can withdraw it without serious consequences. If one were to suggest that it should be withdrawn before its expiry then I guess one could say it was a live issue.

    One suspects that the ECB would not be too happy with the emergency liquidity they are providing being switched to another institution while the original bank is let go bust. I can’t imagine this can be done without their agreement. Presumably deposits can be withdrawn on demand. ECB liquidity was provided as an emergency measure for specific reasons. To treat it as a no-strings-attached loan would be an affront that the ECB could not suffer while trying retain any credibility.

    There is also no guarantee that other depositors wn’t ask for their money back now that they have been transferred to an institution with no assets to back them other than the BDS. Anglo’s assets may be a bit stinky but they are assets.

  9. @Geckko

    If Anglo were wound up they wouldn’t have to refinance the entire debt. They would only have to buy out the loan at a price that the liquidator would accept. Developers could conceivably have bought their mortgages for 10% of their value. The Minister for Finance confirmed to the Finance Committee that various approaches had been made to Anglo to buy assets at distressed values but that the Govt had set their face against this.

  10. @Zou

    And they get the capital from where exactly? That is the point. There are some “whales” in the Irish business community who are, quite possibly, just as insolvent as the banks propping them up and these are not the debt being offloaded onto NAMA.

  11. There are two problems in the supposition that letting Anglo go would have had the equivalent of a Lehman effect on the Irish financial sector.

    1) Lehman was an unmanaged bankruptcy and today most people recognize that a pre-packaged, planned bankruptcy would have had less of an impact. There are many ways to let a bank go and it is wrong to suggest that a Lehman like approach to Anglo was the only option. Heck even a Bear Stearns type takeover would have been better.

    2) Lehman was huge. Anglo is about 10 times smaller by assets and its impact would have been similar to that of WaMu which incidentally was put into a managed bankruptcy the same month as Lehman.

  12. O’Toole’s opinion piece opens with

    “THE PURPOSE of Nama, we are repeatedly told, is to allow the banks to get back to lending money to the real Irish economy. This is unquestionably a vital aim.”

    This is incontrovertible.

    I have previously commented under “The Economist Conditionally Likes NAMA”

    “With (I think I’m right) €28Bn going to Anglo and €6Bn going to Nationwide the bulk of the bailout is going to banks that are patently insolvent.

    I don’t think anyone would seriously suggest that Anglo, with five branches in the State, will be lending to newsagents in Roscommon, fish & chips shops in Donegal or car mechanics in County Clare.”

    The basic premise for supporting NAMA is an outright lie. (And, yes I am ignoring the difficulties of throwing Anglo to the dogs).

    O’Toole says “There’s a huge con job going on here. (I don’t mean to suggest that members of the Government are deliberately misleading the public. Things are much worse than that – they actually believe this stuff.)”

    I disagree with O’Toole on this. How can Brian Lenihan possibly believe that the money going into Anglo will end up anywhere near the “real” economy?

    The fact is that money is heading right out of the country and Brian Lenihan knows it.

  13. @Greg

    just becaue the aim of NAMA is to clean up the banks so they can borrow and lend again does not mean that the Govt is saying that the money being put into NAMA will be available for lending. The goal is to clean up the banks so they can lend and nobody is saying the NAMA money is all going to be available for lending. It seems that both FOT and you are missing that basic point despite the fact that you both understand that the NAMA money cannot be available for lending.

  14. If you want proof that Lenihan knows that Anglo & Irish Nationwide will not use their bailout funds to provide credit to the “real” economy scroll to 0:50:34 on the link for Pat Kenny’s Front Line.

    http://www.rte.ie/player/#v=1055891

    This is what he said;

    “….Allied Irish Bank, Bank Of Ireland, EBS clearly will need that funding …. “

    He doesn’t mention Anglo or Nationwide.

    He knows that €32Bn of the €54Bn is headed straight out the barn door in fast pursuit of the bolted horse.

  15. zhou_enlai Says:
    September 22nd, 2009 at 2:03 pm

    “The goal is to clean up the banks so they can lend and nobody is saying the NAMA money is all going to be available for lending.”

    Come on zhou, pull the other one. It’s got bells on.

    “clean up the banks so they can lend”

    Anglo? 😯 What? 😯

  16. @ zhou

    Post NAMA (should it happen – and remember the legislation hasnt passed yet and i wish we’d stop speaking like it has) the loan deposit ratios of Allied and Bank fall to approximately 130%. This is still pretty high relative to European averages, 100-120% would be seen as a reasonable level. Simply put this means the Irish banks will still have to deleverage and wont have much firepower to lend to the SME sector. I’d love to see the government estimates of exactly how much money will be available to the economy post NAMA and where it will come from. The borrowing to lend game is well and truly over.

  17. It has been the position of most commentators here that we are already on the hook for the money going into Anglo. Anglo is totally reliant on liquidity funds from the ECB and other guaranteed funds. That is why the valuation of Anglo assets is not as important. Those funds have to be repaid to avoid a default on the guarantee.

    What we are doing is equivalent to taking out a longer term loan at a lower interest rate to repay an overdraft. Obviously this raises questions about how long these repo operations will be available for but that is the essence of it. Giving money to Anglo is not incurring new debt but is restructuring the debt we already owe on foot of the bank guarantee.

    Like you said your position is “ignoring the difficulties of throwing Anglo to the dogs”. Ignoring the costs and problems that may flow from the State’s actions is not a approach that any sane person would want the Minister to take.

  18. @CM

    That is certainly an issue that needs attention. How much they will be able to lend will depend on what recapitalisation can be required of the banks by the State, whether funded privately or from the public purse.

  19. @ Zhou

    the guarantee is the root of our problem, one I believe can be overturned with the legitimacy of a new government. and without risking €54bn. a new government + good communication + capitalism is a much cheaper way of getting credit flowing again than NAMA.

  20. zhou_enlai Says:
    September 22nd, 2009 at 2:28 pm

    “Like you said your position is “ignoring the difficulties of throwing Anglo to the dogs”. Ignoring the costs and problems that may flow from the State’s actions is not a approach that any sane person would want the Minister to take.”

    I was simply ignoring the difficulties for the sake of the argument.

    I take it you now accept that Anglo will not be lending to the “real” economy.

    The guarantee expires in about 12 months. Anglo should never have been covered by the guarantee. The Dail was misled.

    It’s time to take the gloves off and put the knuckle dusters on.

    The ECB and the EU know where they stand. If they do not provide funding for Ireland the Euro will implode. They have no choice but to be the lender of last resort. That, after all, is the “in extremis” purpose of a Central Bank. It is not for the ECB to “instruct” and Irish government to save Anglo Irish.

  21. @Zhou_enlai
    “What we are doing is equivalent to taking out a longer term loan at a lower interest rate to repay an overdraft.”

    We are not taking out a longer term loan at a lower rate of interest we are borrowing at the current short-term market rate.

  22. @CM & Greg

    I note you are both suggesting withdrawing the guarantee. Perhaps FOT should have clarified whether he advocates withdrawing the Gurantee now. I would suggest that if it were doneit would want to be done in the dead of night and not be a General Election promise like FGs famous staggered reductions in stamp duty.

    @Dreaded_Estate

    I presume that deposits are repayable on demand so the bonds are longer term (whether they be of long duration with 6 monthly interest resets or just 6 month bonds – we should know by now but we don’t).

  23. @Greg

    I should have said that I agree Anglo will not be lending to the real economy. I have always said that it is clear that the State is deleveraging and shrinking Anglo with an eye to a probable orderly winding up.

    This does not change that one of the main goals of NAMA is to get AIB and BoI in a position where they can lend.

  24. zhou_enlai Says:
    September 22nd, 2009 at 3:31 pm

    @CM & Greg

    “Perhaps FOT should have clarified whether he advocates withdrawing the Gurantee now. I would suggest that if it were doneit would want to be done in the dead of night ….”

    It should not be done in “the dead of night”.

    There have been enough decisions made on our behalf that have taken place behind closed doors and at the dead of night. The original guarantee being the prime example. A disaster.

    It should be done in the cold light of day.

    A phone call to Mr Trichet “We’re going to let Anglo & Nationwide go to liquidation. We still need the support of OUR central bank. If you do not provide that support you can watch the Euro burn.”

    Plain and simple zhou.

    The ECB needs to stop behaving like the Bundesbank and start behaving like the Central Bank of ALL of the members of the Eurozone.

  25. @Greg

    I suggest that whoever makes that call should do it by video conference while wearing a stetson and chewing on a short cigar! Even with that, I don’t see why the ECB should support us if we are going to act against their plan for stabilising the Eurozone by defaulting on Senior Debt owed by Anglo.

    The ECB are not the only creditors though. Any other debt repayable on demand will be demanded within the Guarantee period unless the Guarantee is removed by surprise. If that happens then you pay up or you are in sovereign default. Also, even if you do all that and the ECB still supports you then you will have to repay all the ECB money to the ECB, just like the NAMA bonds!

  26. Why are the ECB so determined not to let any (even the the ones it would be far better off without) Banks fail?
    Anglo and Irish nationwide are example in Ireland but their are others in Europe too
    In America plenty of banks have failed this year. Why is it that the ECB is so determined not to to let any go.

    Could it be that the faceless ‘international investors’ and ‘large bond holders’ have the ECB doing their bidding?
    It is these financial investors that are gaining most from the quantitive easing/indebting of nation states.
    Their desire to return to the status quo of growth funded by increasing debt pre the credit crises can no longer be maintained by personal debt so they have turned to the last vestige capable of keeping the show on the road. i.e. increasing national debts and devaluing currency.
    Unless free marketeers on the right and socialists on the left can become unlikely allies against the pervayors of this state sponsored corporate capitalism (socialism for the chosen few), then the big crash is yet to come.

  27. @ zhou,

    So, giving Anglo & Nationwide cover under the guarantee was a complete disaster.

    That which was not sovereign debt became sovereign debt under the guarantee.

    I look forward to the day when a government (any government) guarantees the obligations of a failed bank at the $1.4 quadrillion derivates casino.

    When that happens you can add a six shooter to the Stetson and cigar.

    It is coming zhou.

  28. Amazed that Fintan O’Toole has now become the new Guru on Finance at Irish Times. This fella as far as I know writes about the Arts etc and how he (and his pal Dunphy on TV) can now be seen as knowing anything about Finance and that some people here think they do is just is so perplexing. On the TV last night I notice that Mr O’Toole went very quiet when he was taken to task by Brian Lenihan on various issues including Anglo. In the first half he was gung ho along with his pal but then they were not being challenged as the TV show had been set up that way. I would have to assume that Brian Lenihan is more conversant with the fallout of letting Anglo go to the wall than the Arts editor of the Irish Times .

    BTW I also notice that some of the contributors here are getting very fed up with the ECB – we will tell them where to go…….. I just wonder where that would get us ??? Did I hear the word IMF ?

  29. @Zhou
    “This does not change that one of the main goals of NAMA is to get AIB and BoI in a position where they can lend.”

    Following that logic the fiscal stimulus of the bail out is limited to what AIB and BOI do with the money they get which is less than half the total?

  30. Stuart Blythman Says:
    September 22nd, 2009 at 4:55 pm

    “Following that logic the fiscal stimulus of the bail out is limited to what AIB and BOI do with the money they get which is less than half the total?”

    And most of that will never see the light of day.

    The argument that NAMA will get credit flowing is utterly bogus.

    Shrinking bank balance sheets is the name of the game.

  31. Sadly we are crying over spilt milk.

    Once Lenihan declared he was going to rung Anglo as a going concern and the Dail passed the nationalisation of Anglo Irish Bank without the special resolution regime measures which the UK used on Bradford and Bingley.

    A seriously expensive mistake.
    They had about 6 billion in subordinated bonds all either undated or with maturity outside the guarantee period who should have lost everything.
    Who benefited?
    Certainly not the Irish state or taxpayer.
    But one retired gentleman popularly known as Seanie was/is a subordinated bondholder.

    BTW, does anyone know how to sell Anglo shares on the grey market?

  32. The NAMA project is not a fiscal stimulus. The NAMA project is about repairing something that is broken, it is about making banks’ balance sheets credible so that they can attract private equity and borrow on international markets.

    The low interest rates attaching to the NAMA bonds should mean that the banks would get a greater return on the bonds by repo’ing them and lending out the cash at a higher interest rate rather than just taking the interest on the bonds. That is not a fiscal stimulus. Also, whereas it is the intention it is not a guarantee of additional lending to business.

  33. TRP Says:
    September 22nd, 2009 at 4:49 pm

    “Did I hear the word IMF ?”

    What makes you think they’re not coming once the bond holders have been bailed out?

  34. @zhou
    Used the wrong word. But the story to the general public is €56b into banks means €56b into lending in simple terms which will generate activity again (which is a sort of stimulus). By the way the general public are more likely to listen to Fintan O’Toole and Eamonn Dunphy.

    You mentioned none of the Anglo money will make it out. Others have argued little of AIB or BOI will make it out. It will repair balance sheets so they can attract investment so we can lend one day maybe, some time, hopefully…..

  35. Stuart Blythman Says:
    September 22nd, 2009 at 6:07 pm

    @zhou

    “You mentioned none of the Anglo money will make it out. Others have argued little of AIB or BOI will make it out. It will repair balance sheets so they can attract investment so we can lend one day maybe, some time, hopefully…..”

    Stuart,

    Should NAMA succeed in making AIB & BOI attractive to the international market the very first thing they will do is raise €3.5Bn each and pay off the preference shares.

    If they can achieve this before the fifth anniversary of the issue of the preference shares the warrants expire (we don’t get our 25%) and they save a combined penalty of €1.75Bn.

    The warrants are designed to ensure, in so far as that is possible, that the citizen/taxpayer never gets a cent of ordinary equity.

    So, the first €7Bn in Tier 1 raised by these banks will not be used to expand their balance sheets and increase lending it will be used to undermine the real interests of the citizen/taxpayer.

  36. “But the story to the general public is €56b into banks means €56b into lending in simple terms which will generate activity again (which is a sort of stimulus).”

    I don’t think anyone has said this and I think that anybody who makes that assumption is making a huge error. We have been around the houses on this before on this site.

    Attacking the fact that €56b into banks does not mean €56b into lending is attacking something that nobody has ever said. A bit Kafka-esque, no? Is FOT exposing his own misunderstanding as false?

    The Minister for Finance answered FOT on TV last night when he said [I am paraphrasing here] that (i) Anglo was guaranteed because it was systemic and (ii) was kept as a going concern to prevent an immediate liability of €60 billion, and (iii) that it has to repay the emergency funding to the ECB.

    FOT’s article today ignores the Minister’s reply (presumably because it was written before the Minister spoke to him on TV) and confuses the issues rather than explaingint them IMHO.

  37. @TRP

    “This fella [Fintan O’Toole] as far as I know writes about the Arts etc and how he (and his pal Dunphy on TV) can now be seen as knowing anything about Finance and that some people here think they do is just is so perplexing.”

    Indeed.

    We don’t need know-it-all journalists. We need to put our trust in those with a depth of hands-on experience – bankers, economists, senior civil servants, the Taoiseach and his Ministers, entrepreneurs, people of substance with real track records.

    If we listen to hacks like O’Toole we’d be in real trouble before long.

  38. TRP Says:
    September 22nd, 2009 at 4:49 pm

    “On the TV last night I notice that Mr O’Toole went very quiet when he was taken to task by Brian Lenihan on various issues including Anglo. In the first half he was gung ho along with his pal but then they were not being challenged as the TV show had been set up that way. I would have to assume that Brian Lenihan is more conversant with the fallout of letting Anglo go to the wall than the Arts editor of the Irish Times .”

    TRP,

    “Mr O’Toole went very quiet when he was taken to task by Brian Lenihan”

    Did you see the same program as I.

    Fintan O’Toole’s second question (yes, towards the end of the program, at around 58 minutes, and no opportunity to counter) was;

    “Can I ask you the question that Niall Fitzgerald of Unilever…he was a director of Bank Of Ireland, (asked of other former banking directors) …

    “….You were either incompetent, in that you didn’t know what was going on, or, you were complicit in that you knew what was going on and you did nothing about it….

    Which were you Minister and which were Fianna Fail”?

    The thing is TRP, the Minister did not answer the question.

    Is that the same as “being taken to task”?

    TRP,

    You say,

    “I would have to assume that Brian Lenihan is more conversant with the fallout of letting Anglo go to the wall than the Arts editor of the Irish Times .”

    Can you provide any evidence to substantiate that assumption?

  39. @Zhou
    The Minister for Finance answered FOT on TV last night when he said [I am paraphrasing here] that (i) Anglo was guaranteed because it was systemic and (ii) was kept as a going concern to prevent an immediate liability of €60 billion, and (iii) that it has to repay the emergency funding to the ECB.

    I know you are only repeating Lenihan and that you do not necessarily agree.
    (1) Systemic is an assertion – there is no evidence that Anglo Irish bank is systemic to the productive part of the Irish economy. It was systemic to the bubble, the builders and the developers but that is hardly the same thing.
    (2) and (3) are temporary problems thrown in to frighten the children.
    Does he really mean us to understand that the state would have folded if we decided to close Anglo?

    The UK faced a similar problem with Bradford and Bingley in September 2008 but they did their homework after the collapse of Northern Rock. The retail savings were sold to Santander and loan book was kept by the state to be worked out gradually. You wont find the UK authorities loaning Bill Carroll another 68 million to build a new HQ for B&B.

    The EU authorities approved the plan in 24 hours.

    This was all completed a few days BEFORE the September 29th/30 th guarantee.

    Even in January, the government could have followed this approach.
    FG proposed it in December before Lenihan decided to invest €1,500,000,000.00 in preference shares in Anglo.
    But no.

    We continue to invest in Anglo.

  40. zhou_enlai Says:
    September 22nd, 2009 at 5:03 pm

    “The low interest rates attaching to the NAMA bonds should mean that the banks would get a greater return on the bonds by repo’ing them and lending out the cash at a higher interest rate rather than just taking the interest on the bonds.”

    A few things on the NAMA coupon, which I have no doubt you have already considered,

    Although the Minister (and others) keep emphasising the “lowness” of the coupon these are floating rate notes (in so far as the Minister has told us anything at all about the NAMA bonds)

    By highlighting the “lowness” of the coupon it makes clear, yet again, that the banks are getting another gift from the citizen/taxpayer.

  41. Oh, dear God!

    What I read today in the Irish Times was a political rant directed at motivating the Greens to vote against Nama. That’s grand as an op-ed position. But why is it taken seriously on this site?

    Fintan O’ Toole opinionating on the arts might be stimulating. On the economy – or the environment as I’ve witnessed prevously – he is a complete ignoramousm and I say this without any disrespect intended.

    I watched him last night on the ‘TV answer to Joe Duffy’s Show’, the Frontline Programme, and while he contributed greatly to the heat, along with Eamon Dunphy, another economics scholar no doubt, he did little to elucidate any facts or shed any light on the subject at issue. Arrogance, bullying and ignorance all combined for the most ephemeral of effects – a clap of rolling applause from the audience. Like the roll of thunder itself, it was ten miles off the point.

    I seem to remember Fintan O’ Toole coming out with some garbage about pensions a couple of months ago?

  42. Veronica Says:
    September 22nd, 2009 at 8:14 pm

    “Oh, dear God!”

    “he is a complete ignoramousm and I say this without any disrespect intended.”

    Isn’t that what is known as an ad hominem attack, or in sporting parlance, playing the man not the ball.

    Is there anything specific in O’Toole’s opinion piece that you specifically disagree with?

    How can you call someone a complete ignoramus and not intend disrespect?

  43. @Veronica

    Oh, come down off your high horse.

    Fintan O’Toole, Eamon Dunphy, Gene Kerrigan and many other non-economists are just as qualified (if not more so) than many of the economist captured by the finance and stockbroker firms to comment on NAMA.

    The government’s NAMA proposal is highly debateable. And the debate isn’t just about figures or percentages. It’s also about fairness, transparency,mistrust of the financial players, deveopers and the present government and many other non-economic issues.

    As Mary Robinson suggested recently “the problems facing Ireland are too important to be left to economists.” I agree.

  44. Aidan C Says:
    September 22nd, 2009 at 8:50 pm

    Aidan,

    Agreed, and I would go further, it is also about morality.

    If (political) economy has lost its link to moral philosophy then economics no longer has value for society. It becomes another specialism that can be bought and sold.

  45. You can’t be serious ? As John Mc Enroe used to say on court. So the ignorant are now as qualified as the educated. Dunphyand O’Toole et al are just gallery players and Mr Kenny last night on the TV brought us to a new low on the NAMA debate.

  46. Ray Says:
    September 22nd, 2009 at 10:23 pm

    “You can’t be serious ? As John Mc Enroe used to say on court. So the ignorant are now as qualified as the educated. Dunphyand O’Toole et al are just gallery players and Mr Kenny last night on the TV brought us to a new low on the NAMA debate.”

    Ray,

    Not sure what you’re getting at here. After all there’s something like €100Bn about to be added to the National Debt.

    I think every citizen is entitled to a view.

    So,

    If “Dunphyand O’Toole” have provide a new low in the NAMA debate, what is your “high” in the debate.

    It’s your money Ray.

    Why are you happy that your money is being used to pay off the creditors of Anglo Irish Bank?

  47. Veronica Says:
    September 22nd, 2009 at 8:14 pm

    “I seem to remember Fintan O’ Toole coming out with some garbage about pensions a couple of months ago?”

    I seem to remember that also.

    Can’t remember exactly what garbage that was.

    I know this.

    There is no pension fund. Promises have been made by all parties that cannot be delivered.

    If you know where the money is coming from share the secret, we’ll both make a fortune.

    Because if we find it before Willie O’Dea we can front run the game.

  48. Ray Says:

    September 22nd, 2009 at 10:23 pm

    “So the ignorant are now as qualified as the educated.”

    Leaving aside the patronising tone of the remark, yes all citizens/taxpayers are qualified/entitled to express their views on NAMA.

    The banks and developers were very happy to take all the profits in the good years and we were told the fundamentals were sound (quite often by bank economists). Now they want bailouts and tell us that it is to save the country. Forgive the ignorant for smelling a rat.

  49. Geccko

    I agree! The problem with capitalism is not that it creates wealth but that those who have that wealth get so attached to it that mercantilism, cronyism, replaces capitalism. Instead of allowing the matter to resolve itself, pdq, the worthies have sunk the taxpayer by corrupt connections, in an attempt to retain malinvestments that will inevitably unwind. What is a matter of choice is who else share the grief and how long it goes on for!
    Ireland has to suffer far more for Nama!

  50. @Veronica
    “Although only a few may originate a policy, we are all able to judge it”
    Pericles of Athens

    “Providence never intended to make the management of public affairs a mystery to be comprehended by a few persons of sublime genius” Jonathan Swift

  51. @Greg,

    Mr. O’Toole’s argument may be summarised as follows:

    1. Anglo is not, and never has been, systemic to the Irish banking system or the economy.
    2. Anglo should be allowed to go to the wall
    3. The Greens should pull out of Government rather than allow Nama to take over Anglo’s toxic loans
    4. A national recovery bank should be set up to give money to SMEs and ‘smart economy’ business start-ups

    There was a very extensive debate on what should happen with Anglo when the Bill to nationalise it was going through the Dail several months ago, including on this website, focusing in particular on points 1 & 2 above. As I understand it from that debate, it is an unfortunate fact that, short of the State defaulting on substantial sovereign debt, the costs of letting Anglo go to the wall might be of the order of tens of billions, most of which would be immediately payable. Therefore, Anglo is systemic to the economy. Plus, we can’t afford to dump it in the nearest black hole, however much we might wish to. We’re all entitled to be angry about having to provide life-support for the likes of Anglo, but anger does not justify wilfully ignoring established facts.

    The third point is political, which is fair enough – Green support for the Nama Bill is far from a done deal anyway. But the argument on which they are urged to withdraw their support is not valid.

    As for a national recovery bank to lend to SMEs, farmers and new businesses, the idea is superficially attractive. But unless we want to get right back into the situation we’re trying to get out of, there’d be a lot of very disappointed would-be loan customers of such an institution.

  52. @Veronica
    And hence the original sinin including Anglo and INBS in the guarantee scheme. Anglo was made systemically important only because of the guarantee. Agreed?

    And how is 4 going to get us back into the situation we are trying to get out of? I would have thought that giving money to bankers and builders created the problem in the first place.

  53. @ Ray

    IF Fintan O’ Toole decides to run for the Dail in the next general election, which hopefully, is not very far away, you will see how much of a “gallery player” he is. He would follow George Lee into the Dail with a huge vote!

    Mr. O Toole represents the views of hundreds of thousands of people on the island who intuitively understand crony capitalism having been exposed to it from the cradle to where we are now in 2009.

  54. @ Garo,
    No, not agreed. I think it was more complex that you’re making out. Further, I suspect that we don’t know the full story of that fateful night, nor are we likely to for some time, if ever.

    On your second question, the concern I would have is that a state-owned National Recovery Bank would be under a lot of political pressure to make bad loans, extend overdrafts to customers who shouldn’t have such facilities and provide some ropey business ideas with start-up funds. Maybe not on the scale of the banks making loans to developers who were in above their heads during the boom; but with potential to create a new ‘small enterprise’ or ‘smart enterprise’ bubble before too many years had passed.

    And before you start quoting the French experience to me, we’re not France, and what works within the French political and business culture will not necessarily apply in its Irish counterparts. There are lots of things I respect and admire about our political culture and about our business culture too, but they also have their limitations, as we are all only too well aware by now. But I’m open to persuasion because I like the idea of a National Recovery Agency, in principle anyway.

  55. Garo said:

    And hence the original sinin including Anglo and INBS in the guarantee scheme. Anglo was made systemically important only because of the guarantee. Agreed?

    Veronica replied:

    No, not agreed. I think it was more complex that you’re making out. Further, I suspect that we don’t know the full story of that fateful night, nor are we likely to for some time, if ever.

    What are the reasons for your disagreement with Garo’s statement?

    Simply saying “not agreed” without giving reasons isn’t much of an argument.

  56. @Irish Pancake:
    “Simply saying “not agreed” without giving reasons isn’t much of an argument.”
    If you read Veronicas post a lot of her statements are thrown out without any attempt at supporting arguments. Another example from the Oh dear God post above. This post was meant to somehow discredit FOT as a serious commentator, since he is not a qualified “economist”

    “I seem to remember Fintan O’ Toole coming out with some garbage about pensions a couple of months ago?”

    This came out of nowhere with no supporting arguments. As it happens I can remember one issue regarding pensions which Fintan talked about on radio and in his column. That was regarding AVCs and their usefulness in helping highly paid individuals to avoid paying income tax/PRSi.

    As it happens FOT was quite correct about this – but at the time he was attacked for suggesting it by Moore Mcdowell – who – correct me if I am wrong – is an economist. He went on air – I can’t remember which program – and said that this was not a means of avoiding tax – it was just deferring the tax.

    The “economist” is expected to know better but what Mcdowell said was nonsense. Of course AVCs are used as instruments for avoiding tax. They have no other real value.

    Sometimes common sense is more valuable than any qualification in economics – and that is also what separates the good ones from the bad.

  57. FOT & e dunphy should seriously consider fronting a strong political voice for the people.

    They should organise the march and promote to stop nama & all the other corrupt payments to politicians, bankers & builders.

  58. Sorry liam whatever about Fintan – no way would I follow Eamon anywhere – he changes his views almost as often as Eoghan Harris – maybe that’s not fair.

  59. @Peter Maguire
    “We need to put our trust in those with a depth of hands-on experience – bankers, economists, senior civil servants, the Taoiseach and his Ministers, entrepreneurs, people of substance with real track records.

    If we listen to hacks like O’Toole we’d be in real trouble before long.”

    “We can’t solve problems by using the same kind of thinking we used when we created them.” Einstein

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