This shows why lending money that is not needed by countries is a good business. Too good to be voluntary!

Any resemblance between this and Nama is a pure coincidence ………

After the guarantee, Morgan Kelly said that on prime time the banks had loaned approx €110bn on property and that a typical crash in the USA gave rise to losses of about 20% meaning the banks were probably out about €10bn to €20bn (I know those figures don’t add up). Morgan Kelly dismissed Brendan Keenan’s point that the banks said it was about liquidity not bad loans. Morgan Kelly was, of course, right.

With that said, Morgan Kelly was still only predicting 20% losses on loans despite having previously predicted 50% to 80% drops in property values. With that noted, I find it strange that MK is so dismissive of NAMA which forces the banks to write down losses of in the region of 25% to 30% on a large portion fo their property loan book.

Interesting, hadn’t seen that article.

All this unemplyed mortgages, car loans, credit cards, etc. ….. when’s that likely to hit the fan then? With what consequences?

actually, when all of the tallies are done and dusted we should come back and see which was cheaper - the bank guarantee/NAMA or the spiralling deficit caused by continued public spending & borrowing, it think a 10yr tally will have the guarantee recapture that crown of looking cheap in comparison!

My anonymity certainly does not stem from a desire to cause mischief. I have a day job without tenure.

The panic, planning and trying to get a true picture all sound plausible but the alleged Cowen quote about Nationalisation is being peddled to paint a different picture (mixed metaphors or modern art?).

I think the senior debt problem will be resolved at an EU/ECB level. Hopefully pan European bank regulation will bring us down that road.

“…Moreover, the DOF plan on the night probably envisaged nationalising anglo and winding it down. We are told the other banks did too. The equity and subbies would have been wiped out on the spot and the good bits (if any) of the loan book transferred to AIB/BOI. There would still have been a cost to the exchequer but it would have been reduced to a large degree…”

It all sounds so neat. Are you saying Anglo should have defaulted on senior debt? If not, what would have been the immediate cost to the State to cough up Senior debt or a portion of the shortfall?

Leaving senior debt aside, should the State have left depositors to swing? If not, what would have been the immediate cost to the State to honour deposits?

What would the consequences for the other banks have been if the State allowed senior debt and some deposits in Anglo to fall given that everybody knows we could not honour the guarantee if called in?

Thanks for the info. It appears those ECB supports weren’t there until a week or two later. If Anglo had come clean earlier we might have been able to get the ECB onside rather than being railroaded. One wonders about the question posed by Michael Hennigan.

Guaranteeing BoI and AIB but not Anglo would have caused the quickest run on Anglo imaginable.

@simpleton

Anonymous sources provided by a pseudonym? I know I am one to talk about pseudonyms but I don’t start saying I have sources! I don’t think it makes sense.

In any event, I said that it was spurious to say that Cowen was a lone voice against Nationalisation because clearly there were many cons to Nationalisation to be weighed up and everybody present would have been involved in the debate.

You don’t make a decision to ring the Finance Ministers of the biggest countries in the EU in the dead of night without having a reasoned position. Painting a picture of Cowen not even considering nationalisation (which is clearly the spin intended by alleging the expletive quote) and railroading the other people there is obvious nonsense.

Even if the quote was accurate it could have come towards the end of the meeting when matters had been weighed up and Cowen was confident that Nationalisation was not a viable option on the night. It is clear that the legislation to nationalise was drafted up post haste thereafter.

Thanks for the link. Hadn’t seen it before.

Apart from the insight on the night of the guarantee there is something which I had thought of but never raised and which does not seem to have had much coverage.

“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.”

Were Anglo’s bonds covered by CDSs.?

Did Cowen or Lenihan determine if this was the case?

Are they covered as of now?

Is my mature recollection correct that Anglo’s Golden circle had their loans changed to non-recourse after this?

Fair enough.

It just makes the whole thing more freighting to me. The thought that Cowen could overrule the DoF, Lenihan and the expectations of AIB & BOI leaves me cold.

Talk about unchartered waters.

Do you have any links for the story?

Fair enough.

It just makes the whole thing more freighting to me. The thought that Cowen could overrule the DoF, Lenihan and the expectations of AIB & BOI leaves me cold.

Talk about unchartered waters.

Do you have any links for the story?

You are right, we all know FF do not do resignations. Moreover, the DOF plan on the night probably envisaged nationalising anglo and winding it down. We are told the other banks did too. The equity and subbies would have been wiped out on the spot and the good bits (if any) of the loan book transferred to AIB/BOI. There would still have been a cost to the exchequer but it would have been reduced to a large degree.

Instead, the Taoiseach & the Cabinet bought the idea that it was still a going concern, injected money into it and allowed it plough on. The DOF is now admitting that this money is gone.

@ Greg,

You have to remember that Lenihan was an inexperienced Finance minister at the time while Cowen had held that portfolio since 2004 (?). If you were in MOF position you could be forgiven for not pushing too hard.
The account of these meetings is now in the public domain and has not been denied by anybody.

In time, when all the papers are revealed, the decision to let Anglo plough on will look foolish.

Perhaps it is just that I find it impossible to believe that this was the decision of one man, Cowen.

I too read the piece which suggested that the DoF had nationalisation of Anglo on the table.

Maybe you are right. In which case this just gets worse and worse.

When I said Lenihan could have walked I did not mean to imply that he would have.

The threat would have been sufficient to bring Cowen to his senses.

But, you have your sources.

Playing with ‘time’ is a large part of the response to financial crisis internationally. One TV commentator summed it up as ‘projecting today’s problems into the future so that we can somehow muddle through to its end’ ……….. Financial system losses, real or perceived, are socialised onto present and future citizen-taxpayes …. this is the ‘real moral hazard’. This time last year Lenihan was probably right - but serious error in following week in not nationalising, and gettting real information on, all Irish banks. Just what did the ECB advise at that time? As it looks as if Naa-Maa has sufficient political numbers - then more discussion here how to ‘tame’ this monster in ways that can find political support in the Dail - and more on how the credit union movement could be further supported so as to provide back-up to those everyday Joes and Joans who are taking everyday hits. & oversight, regulation and supervision etc

Anglo had a very clear motive to suggest it was in danger of collapsing.

IL&P produced the funds within hours of the guarantee being agreed.

Was the banking system about to collapse on the morning of Sept 30th without the guarantee of liabilities?

The midnight decision meant the option of consulting the ECB wasn’t presumably available.

had a look at the ecb annual report - looks like 8th of october was when they decided to narrow the bands to + - 50 basis points and give as much as was wanted at the weekly main refinancing rate. If Im reading it right, the next week they made the longer term refinaincing operations unlimited at fixed rate

You misquote our leader. I believe the exact words were “we are not “rhymes with ducking” nationalising Anglo”. So reports Pat Leahy in the SBP. Anglo was a systemically important bank with a viable future. 12 months later, it takes the EU to tell us th truth and recommend it be wound down/ That is after the government on our behalf have consigned 4billion to money heaven. It kind of puts the FAS embroglio in context. How many semi state CEOs could you pay off with 4 billion.

Would anglo not have had unlimited access to the ECB’s discount window in any event? (well up to their amount of eligible collateral)

Albeit this would have been at a higher rate. When did the ECB start accepting a wider range of collateral for their loans?

http://www.ecb.int/press/key/date/2009/html/sp090527_1.en.html

What do the experts on Irish economy think - I’m sure some will claim NAMA is already working its magic

Therefore, although the Govt has limited liability they would have had to guarantee debts if they wanted to keep Anglo as a going concern for themoment so it could be wound down in an orderly manner without spreading its problems to the other banks through systemic groups of borrowers (SGBs ).