Postbank and Anglo Not Comparable

There are many aspects of the government’s handling of the Anglo Irish Bank fiasco that are open to criticism. However, this doesn’t mean that every Anglo-related criticism of the government is accurate. Today’s Irish Times column by Fintan O’Toole has an appealingly simple argument that I suspect will get repeated a lot in the coming weeks:

Yesterday, Postbank, jointly owned by An Post and BNP Paribas, stopped taking new business. It will close by the end of the year. Its name would suggest that Postbank is actually a bank, but this must be an illusion.

If it were a bank, Postbank would not be allowed to fail. And Brian Lenihan’s reaction to its closure was merely to say that he is “disappointed [his favourite word] but not surprised”.Why does the closure of Postbank get a c’est la vie shrug of the shoulders while the closure of Anglo is so unthinkable that at least €30 billion of public money is being used to keep it, if not actually alive, then apparently undead?

The answer Brian Lenihan would give is that Anglo is of “systemic importance” to the Irish economy, while Postbank is not.

O’Toole then correctly points out that Postbank has lots of branches and customers.

The problem with this argument is that it is based on a confusion of the meaning of the words “close” and “fail” in the context of the banking sector. Postbank is a subsidiary of BNP Paribas Fortis and that bank is not going out of business. Every one of Postbank’s depositors will get their money back and BNP’s withdrawal from Ireland has no implications for its bondholders.

In contrast, when we discuss letting Anglo fail, we aren’t talking about shutting down its nonexistent branch network. What we mean is acknowledging that the bank is insolvent (and Fintan is correct that claims in January 2009 that Anglo was solvent were indeed ludicrous) and then having it declare bankruptcy. Normally, such a decision would lead to Anglo’s creditors not getting all their money back. However, if we did that now, we would face the problem that the Irish government has guaranteed essentially all of Anglo’s liabilities, so no money would be saved for the taxpayer.

My point here isn’t to defend the scale of the September 2008 guarantee or its extension to Anglo but merely to acknowledge that the issues related to Anglo are completely different to those related to Postbank.

Elaine Byrne’s column today also focuses on Anglo with reference to Iceland! She discusses whether, if the Iceland!ic referendum passes, we should follow suit and not pay off Anglo debts. There will be more discussion of this question in the coming months.

There are major decisions still to be taken in relation to reducing the costs to the taxpayer of resolving Anglo and other banks that appear to be only NAMA over-payment away from insolvency. We could decide to just remove the guarantee and let all the banks declare bankruptcy. But this would have, let’s say, some short- to medium-term implications for the functioning the Irish banking sector.

With the September 2008 guarantee set to expire later this year, there is the opportunity in the coming months to arrive at an orderly resolution process in which insolvency is recognised, bad property assets are cleared off the bank balance sheets, providers of risk capital lose money in a way the reduces cost for the taxpayer, and the banks are placed back on a sound footing.

These are very important decisions and the sooner our more influential journalists recognise what the real issues are, the better the public debate will be.

72 replies on “Postbank and Anglo Not Comparable”

Was Postbank covered by the guarantee? (not that they needed it as you point out).

I think An Post accounts were always covered…what was the status of Postbank accounts?

your right but he’s not really suggesting postbank is systematic he’s asking if anglo was

The big mistake that was made was guaranteeing all liabilities on that fateful September 2008 night.

Newspaper columns can be used for advocating leaving the euro or now telling the Anglo bondholders to take a hike, without having to consider the pros and cons. Quoting a columnist in another newspaper is not what I have in mind.

As Karl points out, the guarantee expires in less than 7 months and given the way the Obama administration forced GM bondholders to accept a deal where they took steep haircuts, it is useful to view it as a precedent.

Some of the bondholders likely have operations at the IFSC, which is has been the bright star of the foreign -owned sector in the past decade.

Iceland is a small country of 320,000 people and its fisheries and geothermal energy industries provide it with most of its export earnings.

Ireland is overwhelmingly dependent on foreign-owned firms for its exports. Apart from our membership of the EU and Eurozone, we should keep this in mind when making proposals.

I’m starting to cool on the idea of negotiating with the bondholders. The precedents are in non-banking industries….

@ Sarah

There are bank-related precedents. Here’s one close to home. Subordinated bondholders in Bradford and Bingley, nationalised in the UK, are not getting their money. And no negotiations either. They’re just not getting their money back.

More generally, it’s not such a strange idea. When businesses of any sort are insolvent, subordinated bondholders are near the back of the queue for being paid back. Why should banking be any different?

Karl, while your criticisms of the post are correct in that Postbank has not failed, I think Fintan is trying to highlight something else. That huge amounts of taxpayer money is going into Anglo which is of very dubious systemic importance while Postbank is being allowed to close its doors resulting in a loss of jobs and more importantly poorer access to banking facilities for many customers around the country. Postbank is arguably of grater importance to the economy and the people and even a small fraction of what is being poured into Anglo could be used to keep Postbank open. If the government were really serious about “keeping credit flowing”, Postbank would be the one to “save”, not Anglo. His point is a purely political one that Anglo is being saved because it has the right connections.

Of course, the original sin was the guarantee and lot of the misery for the taxpayer since then is a direct result of it.

I discussed this with someone high up in Postbank a few weeks ago. They are withdrawing commercial reasons: There is no money to be made in banking in Ireland in the foreseeable future.

Postbank follows Halifax, not Anglo-Irish. How long will Rabo and NIB stay?

@ Karl/Sarah

obviously it would be remiss of me if i didn’t point out that B&B only made up around 1-2% of the entire UK banking sector, and there was also a very strong and safe set of hands to hand over their “good” assets to in the shape of Santander, which allowed for the situation where the subordinated debtholders got little or nothing back.

What this country has been missing has been a bank that wasn’t really affected by the crisis, had a decent market share, and would have the management and expertise capable of taking over smaller struggling insitutions. Im thinking Santander in both the UK and Spain, BNP in Benelux, Danske/Nordea in the Nordic areas and even Intesa Sanpaolo in Italy. Our problem is that ALL of our banks got into trouble, and none of the foreign ones operating here at the time were interested in taking them on when they got in trouble (for lots of different reasons). As such, there was no sturdy ship to try and keep the system together, and so in stepped the government.

On the main point of this thread, this will not be the first, or the last, time that Fintan gets some of the finer details completely wrong about the actual situation and problems being encountered by our banking system…

@Sarah Carey
Why would banks issue subordinated bonds at very high interest rates if they are not available to absorb losses when the time comes?

This is an extraordinary slap in the face to those who seem to think that we can afford as many banks as we wish.

A possibly profitable operation is closing. Because the parent must realize the capital employed HOWEVER SMALL! and cut costs.

Capital everywhere is in very short supply. It is being squandered in Ireland because of economic ignorance and stupidity. NAMA is clearly not going to de what the pollies wanted it to be. So the banks that remain in this country must now cut staff costs. And branch costs. Not using cash would mean pure internet banking and branches could be halved in number. I predict that this is happening in Ireland and elsewhere in Europe. The productivity gains available from the internet are still unrealized. Mass unemployment beckons.

DEPRESSION thinking now will save money for us all.

“With the September 2008 guarantee set to expire later this year, there is the opportunity in the coming months to arrive at an orderly resolution process in which insolvency is recognised, bad property assets are cleared off the bank balance sheets, providers of risk capital lose money in a way the reduces cost for the taxpayer, and the banks are placed back on a sound footing. ”
or not. as the case may be. going forward.
Look – AIB reported today in newspeak. Thats the only conclusion I can take of a abank that at one and the same time says that it expects to have a 32% discount on NAMA and then provisions only 14%….and they expect us to believe this?
Meanwhile AIB tells uas that they will dispose of their profitable assets to prop up the unprofitable bits, allowing a) the state to keep provate, weak banks rather than b) having to invest to make (temporarily) public, stronger banks which of course might not have c) entrenched management.
Give me strength….

Well said Karl. Would it be possible for you to publish something like this in the Irish Times by way of clarity on the issue? I think it is fundamental that people understand why Anglo is being kept alive – ie that it is not possible to let it go because of the guarantee and not because the Govt./Brian Lenihan loves Anglo. Maybe the guarantee was a mistake, but as you rightly said, by not having it, there would have been fundamental problems in the banking sector. Now we have to deal with the problem we have. The next opportunity is when the guarantee expires. The object of dealing with Anglo is to bury the bad stuff with the least hit to the taxpayer. The media seems to spin it in a way that makes it sound like the Govt just loves this bank so much that it doesn’t want to see it go, it is repeated in almost every article you read about it.

The real meat I think of Karls point is not that we cant now let Anglo go (altho that is a point for discussion). Its what do we do with the guarantee ; extend in full, to all banks and products? in part? to which parts/products/banks?


I also think that the role of the EU is being seriously underplayed. The line that its FF supporting its mates is being overdone, rather than the EU insisting on its “no bank left behind” policy.

@ Dreaded Estate

I don’t know! I’m intensively studying all these factors at the moment. (Thank you to Karl for the tutorials!) I’ve a banking column in tomorrow and am preparing another one for the next week. Stay tuned 🙂


Does Eoin have a point?

@ Sarah

Eoin always has a point, no matter what the issue!

I think the particular comments above are a bit off base. AIB and BoI aren’t “struggling institutions” — they’re bust. As Greg Connor put very well on The Frontline last night, nobody wants to invest in a bank with negative net worth. Some resolution of that situation is required to get private capital interested. And that’s true in our case as well.

Even if we had a perfectly clean First Bank of Hibernia sitting on our doorsteps, they’d still be waiting for the situation to be resolved. And we don’t need FBH — the government should be looking already to find suitable foreign buyers for the substantial state stake that seems to be an inevitable part of the clean-up operation. I’ve no problem with fordeners owning our banking system.

@ Karl

“AIB and BoI aren’t “struggling institutions” — they’re bust”

Does my account still work? Does the payment system still work? Is my house still fully insured? While understanding that credit is quite constrained in many cases, does my credit card and overdraft still work? My custody account and my savings accounts – do i still have, and have i always had, total and unrestricted access to them? For “bust” institutions they appear to be working very well for most people! 😀

While of course simply having FBH (whose name i am about to steal!) there for us wouldn’t have solved all the problems, it would have created a far far far simpler and seamless process of splitting up a good/bad bank without creating chaos in the payments and funding systems. As we have discussed before, there was never any resolution process in place to deal with a systematic crisis like this (and still isn’t) – even in the UK the process has only been used on smaller less systematic banks (kinda my point above). In particular it hasn’t been used on RBS or HBOS, whose subordinated bondholders are in pretty much the same situation as AIB or BoI’s, even though RBS/HBoS were both probably insolvent or “bust” by most metrics as well.

“Does my account still work? Does the payment system still work? Is my house still fully insured? While understanding that credit is quite constrained in many cases, does my credit card and overdraft still work? My custody account and my savings accounts – do i still have, and have i always had, total and unrestricted access to them? For “bust” institutions they appear to be working very well for most people!”

zombies shuffle around, make noise, eat etc…..We dont have First Bank of Hibernia, we have George Romero et cie Bankers at Large


🙂 Hey, you were very funny last night sitting beside Darragh O’Brian shaking your head in despair.

Was Greg Connor the slightly elderly gentlemen who proposed The Third Way?

@Sarah Carey

Beware the ideological hopping balls from the ‘blind faith in the mawrkett fraternity’ on the idea of a foreign white knight in shining armour aka GoldenSacks and co. riding in to sweep the distressed Hibernian_Bank_Colleen off her insolvent feet and into the romantic Crusader sunset of an abundance for all in the ‘fullness of time’, to quote the oft cited FinneFerengi concept of time.

This is a distraction right now – and no case has been made here – will come into equation later – humbly suggest you don’t buy the ideological pup or a well spun pig_in_a_poke. These are the ideological idiots who got us into this mess in the first place …de fader, de son, de spirit an de mawrkett .. and then when their equations don’t work out they cry-baby to the Mammy to be bailed out; and then grab all the fruits of the freedom loving ‘mawrkett’ for themselves as their equations once again balance out.

‘zombies shuffle around, make noise, eat etc…..We dont have First Bank of Hibernia, we have George Romero et cie Bankers at Large’

Zombie Banker Blues: The true adventures of ‘Brains’ and ‘Fingers’: Guaranteed truer by the month since March 09.

Post floods and blizzards sequel now in production.


Right. Gotcha. I think.

(you’re against paying the bondholders, right?)

I’m really disappointed at the closure of Postbank. I was thrilled when it opened and opened my own account on the very first day of operation. In fact, I have recently requested my employer to pay my wages directly into this account -but now I will have to cancel that order.

Postbank had a branch in every village in ireland, had no bank fees and provided low-cost, easy access banking, 6 days a week to people who otherwise had limited access to banks.

It was one of the most enlightened initiatives of this Government, and I’m extremely disappointed to see it being withdrawn. I would have hoped the Govt. would seek another partner for the venture now that Fortis has to withdraw, but I guess they’re too busy propping up loans on development lands to provide low cost banking services to the Hoi paloi.

I think both Karl and Fintan are missing the obvious…

Postbank is giving up on Ireland

So why are they shutting up shop and walking away? Possibilities…
1) They or their owners are in trouble and need to consolidate…
2) They no longer believe the market is worth pursuing.
3) They cannot compete in the market.

so for 1) we havent heard anything… if for example AIB were pulling out of Poland that could be used.

2) This is very ominous. Banks don’t enter or pull out of countries on a whim. Such decisions are not made on the basis of a projection showing a few bad years. If they saw a decade or so of decline that would make them stop and think.

3) If they cant compete, why not? One would have thought that the incumbents being insolvent would be great news for them. People don’t move banks easily but if you’re competitors are insolvent and starting to charge excessively and you have 1000 branches then you could expect to win over the long term.. Your competitors will be forced to shrink because of their results and will be caught in a vicious circle as they drive good business away trying to fund their bad business that they are stuck with.

My suspicion is 3) with some of 2).. They have came to realize that they cannot compete in the Irish market. Not because they don’t have the resources or because fundamentally the financial system in Ireland is controlled and rigged in favor of the incumbents.

NAMA being the case in point. A bank with 1000 branches leaving draws barely a comment while a bank with 1000 insiders who are in trouble results in the state mortgaging itself for generations to bail it out. And rigging the market to ensure the solvent pay. Fair play to you Willie indeed.

@ Garry

Postbank was a Jv between An Post and Fortis. Fortis has since essentially gone under and had to be bought/saved by BNP (hence my comment above). I’d imagine BNP are consolidating the worthwhile operations from the non-core ones, of which Ireland would now seem to represent. I don’t think there’s some mad conspiracy going on.


Main point is ‘the foreign buyer’ argument, places cart before horse – muddies the waters and distracts from the real issues of the moment – guarantee, and creeping nationalisation, and failure to act, and patent untruths from various ministers and senior bankers. On Frontline Brian made his case well – had we nationalised a la Sweden we could by now probably be looking to offload some shareholding – and spread the risk – I have no quibbles with a preferably major European Bank coming in here [we re only mid 50s in global economic size] – but Gregory Connor’s simplistic assertion that a white knight is/maybe available at the moment does not stand up – and he has yet to make the case on this blog – hence my inclination that this is merely ‘free mawrkett’ ideological spin …..[and i’m open to correction if and when a case is made]…… I’m not a Ferengi – I’d give the bond holders a few cents on the dollar. What bugs me is that these ‘freedom lovin ideological free_mawrkett_teers’ [both Ferengi and Academic, want to have it both ways ……. and, it looks they are succeeding. Qui bono? Who is suffering?

@Gregory Connor

Humbly request that you make the case for the white knight. I’ve made the case for ‘less than zero’ and I agree with your assertion that one needs to get them up to zero. Over to you.

I am disappointed that the closure of Postbank is receiving so little comment in your thread. Surely this banking outlet is vital in providing banking to the smaller punters like me who need to lodge weekly savings and to have access to an inexpensive debit card. I think that the Government should provide funds to an Post to keep it in business on a profitable [if small] basis now that Paribank have decided to leave the Irish market. Surely there is room for a Community bank to augment the Credit Unions.

“However, this doesn’t mean that every Anglo-related criticism of the government is accurate.”
Correct but much like the governments inaccuracies there can be political benifit in being inaccurate.
Both O’Toole and Byrnes Article’s have a common thread.
They are a call to action to a dossile electorite in the face of what David Mcwilliams has described as “Grand Larceny” that is NAMA in its current form.

Karl, the well founded accurite economic information and suggestions that you and other economists have been giving the government with regard to temporary nationalisation have fallen on deaf ears.

The Governments instinct is to protect the system and bondholders above the interests of the citizen.
The only prospect of the government putting the interest of the citizen before the intrests of Bonholders and others who benifit from the status quo is if the citizens kicks up enough of a fuss.
O’Toole commented a few months ago that if Nama goes ahead without the largest public protests in the history of the state then we deserve what we get. Protests of any credible size never happened.
Nor are they likely to happen but it is in OTooles nature to make a couple of last throws of the dice.

In short, calls for fair play, honourable though they may be, are misplaced when dealing a polotical issue of this magnatude.
Perception is reality.

re FO’T

Two weeks ago O’Toole decided that the Rossport objectors were essentially in the right because of a gasline explosion at a power plant in Connecticut; this week he draws a conclusion from the completely incorrect assertion that Postbank has failed.

Op-Ed journalists in respectable newspapers arguing by false analogy is becoming a curse. What’s the point in being on the right side of an argument if some of those on your side engage in fallacy at seemingly every opportunity?

Here we go again – FG policy is finally accepted.

Don’t hear too many people now saying that it would create zombie banks.
Government policy has already succeeded admirably in doing that.

We could probably never have stopped NAMA given the near dictatorial powers of our elected government but academic opinion could have made a better fight of it by supporting our approach 12 months ago when it might have counted.

@Sarah C
Yes, that was Greg – he aint elderly (no more than I am young) , its the hair!.

Its hard not to despair when one is faced with the same “trust me , NAMA will work” mantra made without anything to back it up.

On Reuters now AIB indicate “Asked again at a press conference if he would consider selling BZ WBK (the polish bank) — which the bank earlier said was essential as a source of deposits — Doherty added: “AIB has a whole series of valuable assets that are available to raise capital.” He did not elaborate.” This bank makes three times the return on assets (op profits before provisions) than the rest of the units. It may be salable for a billion or so but why? Why divest rpofitable assets to prop up others simply for ideology or agency entrenchment?


Honestly Maurice, you’ve got your timing wrong here.

Here’s the 20 guys piece, from April 17

This approach was pretty quickly endorsed by Labour.

Here’s my discussion of FG’s plan released May 14.

In terms of politics, it was FG’s decision not to have a united front.

In terms of the academics, we’d set out our opinion and it wouldn’t be in our nature to change it just because FG release a new plan of their own.

As for the zombie bank criticisms, they were and are valid. That the government’s approach is producing the same outcome doesn’t change this.

What is true is that as time moves on and the guarantee expiry date gets closer, the FG strategy of trying to get around the guarantee (that they voted for) becomes more relevant. If ever there was a case for “when the facts change, I change my mind” this is it.

But look, we are where we are and squabbling about who had the better alternative plan last year is a waste of time.

The Postbank business plan with Fortis was, from the start, an entry strategy, and a challenging one. Some people never fancied their chances, even if the macro-economy had gone fine. It was’nt terribly expensive, piggybacking on An Post’s network, a small bet on a promising long shot. Did’nt work, losses pretty small I imagine.

It’s difficult to build a retail banking business from scratch in a mature and well-supplied market. Cheaper way to try than BOSI, Danske, Rabo, and no room for conspiracy theories.

I opened a Postbank Everyday account last January because I fear that my AIB account may freeze either through their bankrupcy or industrial action as promised by their Bank Trade Union. I thought it prudent to have a backup for everyday transactions just in case. There will always be a Post Office, I like to think.
This blog is a lifeline to my sanity. The last 2 years have been a nightmare in terms of Govt. action over the big banks.
Thank God, all my kids live and work in Canada. I emigrated there in 1988 and came back to retire. I am scared for the future of Ireland and am going to re-emigrate again. I will not bear witness to the self destruction of the a proud and decent Irish Republic.
Keep fighting, dear bloggers. I ain’t taking it anymore!

Sweden nationalised 2 banks in the early 1990’s: Nordbanken (which was majority owned by Govt) purchased Gota Bank, effectively nationalising the smaller bank. Nordbanken had an asset base of 23% of GDP.

Ireland has natioanlised 1 bank. By nationalising it, the State has effectivley put a zombie bank on a respirator.

Norway nationalised three and Finland two in the early 90s.

Getting the strategy right appears to involve more than the ownership.

Zhou, Rabo paid €165m for ACC in 2002, wrote off €400m in H1 2009 alone, presumably more to go.


I am busy trying to persuade the owner of a J35 yacht on which I crew to sail to Quebec so as to get a decent price for it. [Yachts declined less than Bank shares]. Will that do? Bring wet weather gear instead of suitcase.
Am proposing an adventure-school weekend to toughten up academic economists in their TV debates with Govt spin-doctors [oops:ministers].
Am considering Willie O’Dea as a guest street fighter to lecture the guests on how to be a gurrier street fighter. Any takers?


Thanks for the reply and in particular that you do not regard me as a wind-up merchant (psychological not insolvency) even through I come from the political end of the spectrum.

As regards timing, the FG plan was regularly re-launched so the may date is hardly critical. In particular we proposed before Xmas 2008 that Anglo not be offered preference shares but that it be subject to an orderly wind-up. Subsequent statements were a development of the same line of thinking. Our policy of subordinated bond holders was already very clear by the time of Lenihan april budget.

The endorsement by Labour last year of ye’re proposals is not the type of endorsement that inspires confidence. Joan Burton is good on some detailed points such as the stamp duty avoidance through not transferring title. They have however a nationalisation fetish, that they can indulge in opposition, and the inclusion of the magic words would have to bring their acclaim. In government with FG, they have accepted privatisation as when Irish Steel was sold-off for £1 if memory serves me right by Richard Bruton.

FG are not afraid of nationalisation – it is just that we are more pragmatic in and mostly out of government about using it.

The famous letter made no reference to professional investors (FG speak for subbies) being burnt along with existing shareholders to defend taxpayer interest – the key point of FG post-guarantee (9/29 ?) thinking. The only way in which the owners of the nationalised equity could have the benefit of any eventual uplift was by pumping in wads of taxpayer money to settle the claim of our favourite subbies.

I am not aware of any great events in the last year that has changed the argument.

To me it is more a case of trying all wrongheaded options until only the right one is left.

But then I would say that wouldn’t I.

@Tommy T – “It (Postbank) was one of the most enlightened initiatives of this Government”

…or, the government knew even back then that there were problems coming with Anglo/AIB/BOI and they thought it might be prudent to ensure there was something solvent and relatively within their control around so that at least people could still be paid and pay their bills?


@Sarah Carey
The good yacht “JOYRIDER” sails out of Foynes every weekend from late April. If Willy O’Dea accepts a fee to lecture the timid economists on board; there is an unwritten rule. Unruly guest speakers can be put ashore by a straw poll vote taken by other crew members. There are a few uninhabited islands on the West coast!
FF shouting down polite academic economists on TV has got to be dealt with somehow. Reason must emerge from the murky debts [sic] of Irish public debate. Market prices prevail for berths. Terry Prone may have tunnel vision. We take any cash we can get.

Last time I was on TV with Willie, i think its fair to say he didnt get the better of me. As for Darragh last night on Frontline…dont bring a knife to a gunfight …..
For the most part FF backbenchers, frontbenchers and crossbenchers have avoided like the plague getting into the detail with the academics. For good reason too.

Just watched you on Frontline. You wiped the floor with him. Very impressive performance. I’m sure everyone watching was sold.

Karl Whelan says: “These are very important decisions and the sooner our more influential journalists recognise what the real issues are, the better the public debate will be.”

You see Karl, you can run this through the parliment house again, and again, but what hasn’t happened yet, is a cultural change within Dail Eireann. You have to step back and look at this in the broader historical context. Refer to The Week in Politics episode of February 28th 2010. Noel Whelan commented recently on the cabinet re-shuffle – why is it the case, that only the minister for finance, is the only person allowed to talk about finance and economics for – the – government. If anyone from the Greens are listening, wake up! That includes the Greens also, you are not only an appendage. Why the minister for finance is the only minister allowed talk about economics, is a legacy from the days of Charlie Haughey. Because Haughey’s right hand didn’t know what his left hand was doing, he had to centralised all speaking to do with finance and economics in one person – the minister for finance. Most of the time, I would argue, the minister for finance doesn’t even know the whole picture. S/he is merely handed down something from above, and asked to sign it through. This procedural system was still very much in evidence by 2006, the height of the boom, when present Taoiseach Cowen and former Taoiseach Ahern were working it together, authorising loan extensions for the Dublin Docklands Development Authority – which had effectively become a branch of Anglo. Heck, why would Anglo even bother to develop a branch network, when former Taoiseach Ahern could hand the city to them on a plate. This is the same former Taoiseach Ahern, btw, that we soon hope to elect as Mayor of the capital city. Minister Gormley of the Green party has a great article about that in today’s paper also, I urge all to read it. Former Taoiseach Ahern will make an extremely popular Mayor of Dublin city, and I wish him all the best. (You have hopefully identified my sarcasm by now)

But I don’t think Dr. Michael Mulreany, assistant director of the IPA, in his points about change management really understands the full picture. In other to get that ‘better public debate’ that Karl Whelan craves so much, requires the entire culture in the Dail and throughout the permanent government to radically alter. Otherwise, we will continue to have major mess-ups like the Irish Glass Bottle site, and other failures. Because the economics discussion is not happening right across all divisions between individual department silos. If the economic debate could occur, across those divisions, then we would not have statements like former minister for environment, Dick Roche made in late 2006, after the government had purchased the Ringsend land, from itself effectively, at a cost of hundreds of millions. Refer to Elaine Byrne’s IT piece, Not level playing field when it comes to new Gaelscoil, for a more typical parish pump everyday man’s example, of the state renting/buying property from itself at enormous excess cost. Smart economy how are ye? The point is really, the structures and procedures are in a mess – not wholly through the fault of Cowen, Ahern, Cullen, Roche etc. The structures are what they inherited from a legacy regime of Charles J. Haughey, which was all about corruption. He was the master. This is why a pick axe has to be wielded at those structures today. I hope everyone is on board with that. BOH.

@ All,

Robert Browne made a significant contribution to the last thread on NAMA being approved. He said:

“While they waffle on about LTEV they will be milking NAMA for every cent they have and I believe they have already exceeded their legal bill for all of 2010 and we are only into March. Surprise, surprise.”

It seems that a lot of the front bench in FF, derive from the legal background, and one wonders how can we benefit from a broader cross section of opinion? The front bench of government has recently been labelled as being ‘stale’. Could some of the stale-ness derive from a lack of diversity of views? I mean, minister Martin gets criticism for being an ex. school teacher, but at least, a school teacher is on average more likely to be receptive to input from younger folk. BOH.

@ Colm McCarthy,

“It’s difficult to build a retail banking business from scratch in a mature and well-supplied market. Cheaper way to try than BOSI, Danske, Rabo, and no room for conspiracy theories.”

I have got one whopper of a conspiracy theory, that I made earlier. Green minister John Gormely will not publish the report(s) on the Dublin Docklands Development Authority, for fear it will damage former Taoiseach Mr. Ahern’s chances of becoming elected Mayor. S-t-o-p the night – mare! BOH.

@Brian O’Hanlon – “for fear it will damage former Taoiseach Mr. Ahern’s chances of becoming elected Mayor”

He won’t get it – he’s got me up against him.

Damn – can’t believe I missed BL on Frontline.

Some FF’er on RTE as we speak (a) claiming that BL is offering the government support (b) claiming that the NAMA strategy is the Swedish strategy.

@ All,

Guys, we owe it to BL to give a rigorous analysis of the performance I think, for the effort and work that BL, KW, PL etc have put in. (PL about Greece on The Late Debate, excellent btw) Look it, economists such as BL have their medium, they have their medium and it as simple as that. BL writes a devastating article in just 1000 words. He can pack more into 1000 words, with more punch, than anyone out there. Deputy Darragh O’Brien can never do that. But one ventures outside of their own medium at one’s own extreme peril in my opinion.

What you saw on The Frontline was a wrestler in the ring with a boxer. (I can’t think of a better analogy) But I will be up front and honest with BL, he didn’t run rings around anyone on The Frontline. In fact, he was lucky not to come away with any major self-inflicted wounds. Pat Kenny was careful to keep it an even debate, but that Darragh O’Brien fellow knew how to defend an in-defensible position, with some real skill. BL of all people should know that. Mark my word, when NAMA does fizzle out, two, three years from now, or whatever, no one will remember Pat Kenny or The Frontline, and sophisticated debate-r(s) such as Mr. O’Brien will be on shows, able to convince people blind, they were against NAMA all along, or the full facts were not revealed to them or something. Lets be straight about that, as difficult as it is for economists to admit to PR skills.

That is just what the PAC guy, Darragh O’Brien was waiting for, and ready to pounce on, any trip that BL or Pat Kenny made. In fact, it was so interesting, Pat Kenny himself had O’Brien on the ropes at one point. But Pat Kenny tripped himself up at the crucial moment. He inserted a word, ‘simple’ to describe NAMA, where he shouldn’t have, and deputy O’Brien saw that opening, and made the most of it. Mr. Kenny is used to dealing with slippery opponents all the time – it is his stock and trade – but make no mistake, deputy O’Brien was able for both Mr. Kenny and Mr. Lucey together. You have to remember, deputy O’Brien was so capable, he could defend the in-defensible. And Mr. Lucey with ‘x’ no. of years in studying economics didn’t land a glove. Sorry to be harsh about it. BTW, if you really want to witness a FF deputy defend the indefensible, check out my comment here:


Brian, am I La Cobra Ultimo or Brian “Five Bellies” Lucey, superheavyweight?
I thought my medium was B Ranked journals on gold, and that sorta stuff. Im glad you think Darragh was able for us. Im not sure I agree but hey.
That in 5 years he will be postfacto on whatever is then seen as the right side is to say he is a politician.
Night now!

Glad, you took the observations on board BL. The challenge for politicians, is not to spend half their lifes studying economics. But to take whatever merchandise is going and sell it on. That is the skill and that is the trill. Politicians are not wedded to any particular truth – the truth is whatever you can make it. If guys on IE blog can look at The Frontline and see some victory, or something, in that, good for them. Because we might see a crushing defeat of politics by economic logic – the politicians were only looking to stop the fort from being burned the ground by the Apache, and live another day. They accomplished that mission successfully. Live another day, in which anything and everything will happen. BOH.

Brian O Hanlon
Politicians do not sell merchandise, OK?
Your low expectations enable them to live down to it, Brian. You are the cause of their
venality. Expect more, OK? They may surprise you?

James McMahon
Well done! On getting them into Canada. The problems there are too few workers, given the extent of the land. We are a younger nation than you and try to avoid the mistakes made there. Any ideas on what those are except not digging a big ditch to the south, which we do not need!
donnellypu at
Ireland is doomed after so many good years and could have had a great future. I see no intent to change as the vested interests are unthreatened and unenlightened. Suits the anti-papists just fine as Ireland will never be a strategic threat to the UK. Their time may be over soon however. I expect there will be many migrants to Canada and Oz from there as it dawns on them. If they leave it too late, we may have closed our doors.

KW said: “If ever there was a case for “when the facts change, I change my mind” this is it.
But look, we are where we are and squabbling about who had the better alternative plan last year is a waste of time.

The DoF must constantly re-assess progress and prognosis for the future in deciding whether to go for outright nationalisation and control.

Issues which bear consideration are as follows:
1. An updated estimate of the value of bank assets and bank security being taken into NAMA.
2. An updated estimate of the value of bank assets and bank security not being taken into NAMA. Such estimate might, in part, be based on the banks’ margin of error (if any 🙂 ) in relation to NAMA assets.
3. The amount of progress which has been made in implementing NAMA.
4. An empirical analysis of how successfully NAMA could be implemented by nationalised banks. In particular, we need to assess whether the transfer of assets would require less due diligence if all the banks were nationalised.
5. An updated analysis of whether the State could afford to nationalise the banks without having to default on domestic deposits.
6. A re-assessment of the liklihood of attracting private equity into the bank.
7. A cost/benefit analysis of nationalising the banks, having regard to the likely and possible time it would take to re-privatise the banks, versus keeping the banks in part privately owned and operated as private commercial enterprises.

Don’t get me wrong – I am still not sold on wholesale nationalisation and I do not subscribe to Brian Lucey’s analyses and views. However, we must continually assess where we stand and not be afraid to change course if it appears advisable. Some factors which may have changed:

a. It has taken longer than expected to complete the NAMA due diligence process.

b. The mechanisms for valuing loans and properties and carrying out due diligence have been set up and could be used with nationalisation (as has always been the stated intention in accordance with IMF and EU Commission advice).

c. Due Diligence may be proving more onerous and expensve than expected (I believe the banks are liable for this under the NAMA Act but it is money taken out of the system).

d. Our banks may have weakened substantially.

e. The property market continues to decline making NAMA more risky and more of a subsidy. The fou to six years for the playing out of a property crash as per Reinhart and Rogoff’s study is some way off (December 2010 at the shortest and December 2012 at the long side based on a start date of December 2006 [maybe October 2006 – don’t have the text to hand]). Further declines in house prices amplify possible losses based on Mulcahy’s 80% recovery rate.

f. Sovereign debt markets have been jittery (may be an argument against 100% nationalisation).

g. There may be doubts as to whether NAMA can retore credibility to the banks as the amount of loans transferred is reduced, as many development loans under €5m turn sour and as residential mortgage and private debt losses look likely to increase.

h. It has become more difficult to attract private equity to banks and companies generally.

Unfortunately, not all information on the extent of change in circumstances, particularly the variance between pre-NAMA estimates provided to the Minister by the banks and valuations arrived at by NAMA, is not available for public scrutiny.


Welcome back. Main benefits of N are direct, and if necessary dictatorial, access to Data, Information, and Time. Then one can Act.

@ Karl Whelan, Sarah Carey, David O’Donnell, Brian Lucey

Sorry about the slow response I was “off the grid” today in academic meetings (mostly about grading!). Rather than tag something on to the end of a long thread on this topic, I promise to open a new thread within a day or two giving my third way/white knight/ foreign capital proposal. Sharpen your proverbial pencils if you have opinions upon the subject. More later.

@Gregory Connor

No panic – the banks aren’t going anywhere at the mo (-;

The White Knight demands its own thread. We are interested.

@ Gregory Connor,

heard your contribution to The Frontline TV program. What I am saying to guys such as BL who walk onto that stage, is a general point. Respect your opponent at all costs. Or one can easily find oneself on the canvas like George ‘the mountain’ Foreman, in that famous battle. Or George Lee for that matter. Part of the psychology of politicians is to draw you in, to give away some minor skirmishes. A kind of rope-a-dope strategy. Don’t fall for it guys. Don’t fall for it.

There is one great scene in The Right Stuff, movie, where one of the astronauts has to abort his mission, ends up in the sea and returns to base. I don’t know, it was Apollo 5 or 6, or something. There was no fanfare when he got home, no presidential hand shake, for sticking his neck on the line. All he got was a motel room out in the sticks, and off the grid, so the press wouldn’t find him. His wife pointed out the obvious, and he protested to her, Look honey, we got a view of the ocean and a fridge full of beer. That is basically where we still are in the IE. Make no mistake, we are still in Syberia. BOH.

Canada’s not the worst place to be right now, but it depends on your industry. Banking is doing okay so far as one can tell, but manufacturing has taken a pounding from the tsunami in automotive, RIM is likely to come under pressure from Apple, Nortel is having its carcass picked apart and natural resources are all over the shop especially potash. Oil holding steady north of $70/bbl is the mainstay right now and given Chavez’ messing about the multinationals are pumping money back into tar sands projects in Alberta that were supposedly uneconomic last year.

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