Not quite as GOOD as Detroit, yet ….. time is passing.

Go easy on Jan - he appears still sane, sees the commonsensical pragmatic approach and has yet to realise that serfdom probably awaits - we need more of his sound ilk.

Read on Jan - you will find that ‘time’ is a central construction around here …

That’s exactly what’s likely to happen in 2010. There’s strong indication of devaluation of the $US this year. Many US states are like Ireland and worse. The US healthcare bill is cripplingly expensive, and the US is flooded with immigrants in the southern states (many of which are near bankruptcy already).The immigrants are entitled to health care. A devalued dollar (>40% devaluation is likely this year) would adversely effect OPEC countries as prices have to increase, and this is cyclical. There is a strong possibility of an OPEC country getting into significant economic difficulty like Dubai did. This can be exacerbated by it being an OPEC country that is vested in the credit farce. Saudi Arabia would be very problematic.

There should definitely be a strategic oil reserve as a necessity, at least for the short term, and only for emergencies.

“Why is it that other countries like Sweden managed to sort out their meltdowns in a much shorter timeframe than we can.”

Emm, though one that.

Maybe it’s because Fianna Fail don’t have a Cumann in Stockholm.

Could be wrong. Frequently am.

The list of categories to the right gives you access to archive threads.

http://www.irisheconomy.ie/index.php/category/banking-crisis/

You will see differing views and polite debate.

Haven’t read your entire comment, but I am definitely in the “liquidate” the subs camp. Actually that might be a camp of one.

I also would like to see Anglo Irish Bank euthanized before it gives birth to “Son Of Anglo”.

Things will get interesting as Anglo (finally) delivers a set of accounts and Brian Lenihan sets out his stall on recapitalisation. By mid April you will know just how much of a slave you have become in the bail out of your betters.

I don’t understand why insisting the bondholders absorb the losses will lead to contagion and systemic risk for the country. Anybody willing to rehash some argument from the past that illustrates the effects of such a move?

As for a mechanism: my thoughts would not be much different from what has already been put forward by various people.

When the guarantee is up, let the shareholders and bondholders absorb some of the losses. All the toxic loans should be put in a ‘bad’ bank or SPV. Sell(or give away) the banks to some relativly stable international banks(do we need national banks?), say HSBC or BNP Paribas. Senior bondholders could be offered equity in the the banks that are taking over. Any profits from the the ‘bad’ bank could be routed back to the Gov/bondholders. Banks would be ‘clean’ and could start lending again.

This would be quicker and cheaper than NAMA, which is, as seen from the discussions above, intransparent and doesn’t do what it says on the tin.

NAMA is not resolving the issue of banks being freed up to lend. More funds for recapitalisation will be needed. This drip feed approach, I fear, will lead a Japanese style lost decade where zombie banks are restricting growth, not to mention all the fees and costs involved in this approach.

Why is it that other countries like Sweden managed to sort out their meltdowns in a much shorter timeframe than we can.

Anyway, probably stuff that has been debated back and forth for ages on this site, so apologies if it is boring.

Why would the bond market get the jitters just because a bank cannot pay its creditors. Why is there such a systemic risk?

Maybe a naive question but I can’t still fathom why we are going down the NAMA road which will stultify growth for years. Why are we not going for a big bang solution where some deal is made with the bondholders so they absorb most/a good chunk of the losses.

It seems to me that the solution needs to be quick and clean so that we can get up and running again.

If you believe that chap from Friends First, prices have dropped 50% from peak and there’s another 10% to go, so that 4-bed in Navan that cost €550k (!) is worth €275k and is likely to be worth €220k at the bottom (assuming the 10% is off the peak).

http://www.irishtimes.com/newspaper/breaking/2010/0323/breaking20.html?via=mr

http://designcomment.blogspot.com/2010/03/construction-famine.html

BOH.

Turn off the lights on the way out - the most recent ‘well bought’ GP directive. Enjoy the ‘enjoyment’ - the other recent FF directive.

@All ‘Left’
Pls don’t come back - today’s FF/GP directive.

@The Minister
.

given that JTO has flagged to everyone that he’ll be in sunny California for the next 6 months, and not commenting on this website, im not entirely sure if it’s fair to have a sarccy go at him when he’s not around to defend himself.

Agreed.

I intend to make the break myself this week, as other stuff demanding of my attention comes on stream. I would definitely like to think the IE community treats those who have left, accordingly. BOH.

… and as mentioned on the Congratulatory thread on Karl’s election to the RIA (Royal Irish Academy) - and we were looking for mere logic ……… and somebody mentioned Schrodinger as a member of the RIA … and the penny dropped ……. any Quantum Physicists around?

Speaking of Schrodinger, methinks Karl’s favourite - The Minister - could be next in line for elevation to the RIA: It appears that Schrodinger’s cat is simultaneoulsy both still alive and still dead within The Minister’s unopeable NAMA Box_bank, for which The Minister has the only availabe unusable key, a key which changes its shape each time he observes it. Surely The Breakthrough Cute-Heuristic Equation in Quantum Finance of the Century deserves to be honoured?

The equity component of their investment would be negligible at this stage as the total market cap is only about €2bn.

I don’t think anyone has ever suggested that the deposits and bonds should be totally burnt just that they should share some of the losses

Some more things which arise form their comments:
1. “Bail-out costs” were a very small proporation of the overall costs to the economy in cases of a banking crisis combined with a recession.
2. The 4 to 6 year period for property prices to bottom out generally related to post-war crises, although property prices didn’t fall hugely after the great depression. In postwar crises, which were not global, it generally took about 4 years for GDP per person to recover to pre crisis levels. In depression crises it generally took about 10 years to pre crisis levels.
3. Ireland’s property bubble from 2002 to 2006 is not unusual compared to other countries which had property bubbles in the same period.

The LTEV is calculated based on a 7 year period according to Mulcahy to the Dail Committee on 31/8/09. That seven year period presumably starts on the date of valuation. It might even assume the date of valuation to be the trough. This is all very questionable in light of Rogoff and Reinhart’s analysis.

Another day’s work: Is all this being done to support Irish private pensions (bank shares, bonds and deposits)? If Irish private pensions’ interests in Irish banks were totally burnt, what would be the consequences for the State long term? Have the Irish private pensions been wearing the Green Jersey and are we relying on them to continue to do so?

given that JTO has flagged to everyone that he’ll be in sunny California for the next 6 months, and not commenting on this website, im not entirely sure if it’s fair to have a sarccy go at him when he’s not around to defend himself.

My heart isn’t in it but sure I’ll have a go. Every economics blog should have an official optimist..

November 2009 was six months after the end of the recession (I should remind people JTO predicted this well before anyone else… why some of us had the gall to suggest this could possibly be a depression). Yet again Lenihan has outsmarted the naysayers by cleverly orchestrating delays in NAMA to buying at the very bottom of the market just in time for the recovery. In time this will be seen as a bold move striking just the right balance between saving the banks and getting a great deal for the taxpayer.

I nominate Pat Donnelly to deliver the next ray of sunshine. None of that depression talk. Down with that sort of thing.

Are the opposition all over it? I hope so but I doubt it.

I note that the Japan exception to the bounce “rule” got no comment even thogh Chow posted it twice! The only way to mark to maket is to sell some of the land. The sooner the better. I suggest that they will choose the most desirable plots, near the NIMBY areas, to try to force out capital from those who hath. To reassure us all on the valuations issue.

I for one am shocked….arent we glad that the crash is over? Who said legislative price fixing never worked. No, this is genius at work, the same logic as the Alabama State Legislature setting pi=3 for ease of calculations. Thankfully, that was soon exposed as an april fools joke but this time the joke is on us.

I am not actually that shocked at all. The irony hasn’t escaped me, of the fact I was transferring what few deposits I had saved into An Post savings accounts, while at the same time in employment for Zoe developments! But here is the thing okay, at the time I wasn’t able to connect one, my need to protect my own savings, with the other, the employer I was working for. Thankfully, with the assistance of some informed debate and discussion which this blog has provided - to simple people, such as myself - I am not a little bit wiser. Thanks all, and congrats again to Karl Whelan on his RIA appointment. BOH.

CAG Criticises Regulators

The Minister: “The financial regulatory reforms will address the problems identified by the Comptroller and Auditor General and respond as appropriate to his recommendations. This is an important element in a comprehensive programme to put in place a domestic regulatory framework for financial services that meets Government objectives for the maintenance of the stability of the financial system, provides for the effective and efficient supervision of financial institutions and markets and safeguards the interests of consumers and investors.”

http://www.irishtimes.com/newspaper/breaking/2010/0322/breaking25.html

Eh - Minister! No mention of Citizens here? 1st The Financial System, 2nd Financial Institutions a short head in front of The Mawrkett in 4th, the neo-liberal Consumers in 5th, and the Investors in 6th position. Er … do citizens not count in ‘financial services frameworks’? Have Irish Citizens been written out of all the cute-heuristic equations that you now have the power, via the NAMA Bill, to make up as you go along? Mirabile dictu! - perhaps the citizens of this state do not have to pay for all this - Oh Well done Minister.

Minor point: In my definition of a Repubic - the Citizenry comes first. Cicero does not approve of this carry-on!

Beyond a certain point pumping capital into the banks is a less than zero sum game. The banks will be beyond the position where they can ever pay this capital back. The EU has already says if this is the case the banks in question should be wound down. Only through some finessing can the EU be seen to allow the Irish banking system stay in Irish hands.

Returning to ‘regulatory capture’ - and translating to ‘legislatory capture’ - pause - how many legislators does one need to capture to bring this deeply flawed cute-heuristic agenda to a halt? IMHO - A handfull would do it. Can we find, convince, cajole a handful of patriotic legislators to act, IF ONCE, in the interests of Joe and Joan Citizen? If not, we are in even deeper trouble than yet contemplated and we deserve the serf_dom that this flawed administration is subjecting an entire generation to.

SHOUT STOP.

The transfer value of the loan is set using the LTEV and not the MV (remembering that the purpose of NAMA is to help the banks restructure) and this transfer value cannot be greater than the multiple of MV indicated in the valuation SI. So NAMA does not care about the current value (except in relation to not giving illegal state aid).

Given the delays 30th Nov doesn’t sound like a unreasonable date to have put the line in the sand.

It would be quite useful for NAMA to put a worked example on their website outlining all of the steps from initial loan value to MV to LTEV to Loan Transfer Value assuming say 2% p.a. increase in sales price/rental level etc.

Of more and upcoming importance will be the terms of any potential bank recapitalisation (which appears pretty certain) and how the State can structure the recapitalisation to get a return on that investment.

Inflation varied a good deal over the period, so it helps in interpreting it to deflate by some price index or other, if you have the energy to do so.