oh, by the way, just realised, the very first comment on this thread, right at the top, by “Eoin” is not actually by me, must be a different Eoin, only saw it now! Actually agree almost 100% with what he’s saying, but just want to clarify that that was not in fact posted by me! The rest were, but not that one…

The possibility that the crises were predictable with predictable and manipulable consequences may have occurred to more than me? Who is behind this matters nothing if there is no one. But if there isn’t? If it is economic warfare? There appear to be factions within the ranks of the ungodly.

Going by history, impoverishment of the soldiery helps increase recruitment success. A large enough threat to the EU would accelerate the creation of the EA, the European Armed forces. Even without conscription, recruitment from poorer areas of the EU will be high. Do the mouthpieces know what is coming? I doubt it. But they can be inspired by the cry of “security” of the status quo. So expect all manner of support for rubbish merely because there is a closing of ranks.

My point is that this is merely part of a process, one that may last two decades. For example, suppose that Islam spreads and threatens usury? Bankers, the sine qua non of all warfare, may feel threatened. I refer to those who actually own massive capital and have been bankers for generations. They have a legitimate right to respond as western success has been through their efforts, distasteful though they may be.

Just admit you made a mistake and let’s move on. Heck, even the pope of Rome apologises these days.

This is the public sphere, within which you are a not insignificant contributor; hence, I humbly suggest it wise to briefly respond to connected spinners, such as Mr O’Mahony et al, …. a paragraph on this blog should be sufficient.

Two-thirds of the first tranche of loans are not “cashflow producing”, he added.

http://www.irishtimes.com/newspaper/breaking/2010/0413/breaking54.html

This tragedy is only going in one direction … on first tranche …….. and lots of Anglo_Irish still to go in ………..

That’s 22.4 / 71 = 0.315.

So perhaps that’s the basis for McDonagh’s calculation also.

Should probably have just written a separate post on this.

The 40% is mentioned at para 29 of the latest Commission opinion. It does not say if it is by number or value but one assumes it is by value as by number would be meaningless. The fact that we do not know how much cash they are producing is unsatisfactory. If 40% cashflow producing was supposed to cover the interest on a 35% discounted loan book then 33% cashflow producing may cover the interest on a 50% discounted loan book. The amount of cash flow is a critical factor in determining the long term economic values of the loans.

Many thanks for the clarification. I am confident that considerable expertise is being applied to minimise the burden Anglo will impose on current and future taxpayers. However, I think you will concede that many of the people who were adamant that there was “no problem” as this false boom was being fuelled - I’m not including you personally - are now shouting TINA. So, having swallowed “the boom is getting boomier”, I suspect there is widespread public reluctance to swallow TINA and the tardy nature and lack of transparency of the bank resolution process doesn’t help.

Critiques and debate are vitally necessary and there is a requirement for much more transparency and open engagement on the goverment side. Pointing out an error in a critique should be an invitation to consider a revision; it should not be used (as some others are) to denigrate the person making the critique or as a means of seeking to eliminate the rationale for a critique.

using Brian Lucey’s own article and nothing else but a pen and post-it, i can draw up a basic balance sheet which should have quite clearly shown there is an enourmous and immediate capital hole left in the wake of an Anglo wind up. He can argue all he wants that investing in Anglo is a bad idea, but to claim that selling the deposit book allows for a cheap exit is an awful error to make in his calculations. It indicates a complete misunderstanding of just how one would go about winding up a large financial institution and again underscores the need for a resolution tool to go about this.

His time would have been better spent writing an article about that, rather than snippy one liners about how he teaches a class to first year business studies students called “Do you have a strategy” and how these lessons are easily available on the web. One can only assume that “bank balance sheet accounting” is not as easily found in his course notes.

“It’ll be some class of loaves and fishes act to turn that stuff into a cash-flow positive operation. NAMA, I suspect, may not have quite as clean a face as we were lead to believe.”

You may well be right on this.

“The original estimate was that 40 per cent of the loans being transferred to Nama would generate interest repayments.

…

Two-thirds of the first tranche of loans are not “cashflow producing”, he added.”

I hadn’t seen this 40% estimate before. I wonder if it’s 40% by number of loans or by value of loans. It’s hard to see how the interest received on 33% of loans is covering the interest paid on 100% of loans.

Only 33% of Nama loans being repaid

The National Asset Management Agency (Nama) has found up to 100 per cent speculative lending on agricultural land was “approved at all levels within the banks” and that only one-third of loans due to transfer to it are generating interest repayments.

http://www.irishtimes.com/newspaper/breaking/2010/0413/breaking54.html

I explained the Bradford and Bingley transaction in this article in the Indo.
http://www.askaboutmoney.com/showthread.php?t=135559&page=2

The deposit book and matching cash were sold to Santander.

The matching cash bit is what Brian Lucey missed. Without it, he managed to convert liabilities into assets. It wasn’t an unfortunate choice of words. It wasn’t a typo. So his suggestion that “Anglo can be wound up cheaply” is based on his failure to understand the difference between assets and liabilities.

or should that be “Bend over ….”?

Shifting these liabilities, even for a nominal payment, to a well-capitalised bank would not reduce the extent of the Government’s guarantee, but it would significantly reduce the risk that it would be called on and dud assets of an equivalent value could be written off without requiring recap. But this would probably be in wind-up scenario.

Read the Davy piece earlier - the ’spin’ from a special interest group ’shouts’ from the page - at this stage I expect this ….. but still annoying.

Options on Anglo-Irish remain OPEN. Quinn cute-heuristic life-support (for Anglo-Irish) is a huge concern ….

Is there any evidence that this Admin is doing anything at all at all on Bank Resolution Mechanisms? Or is inept fear once again leading policy and crisis management - don’t scare the horses and let the rogue sovereign stallion cover everything as it crops up?…. until the sovereign stallion falls down from exhaustion, lack of resouces, and dies in the middle of the desert of the real ….

Suggest Brian Lucey go public if any ‘errors of judgment’ …. peer-review and academics well used to it - if not spinners will make use of it …………. to disparage the dissidents, malcontents, etc ………. a fairly orthodox bunch of generally conservative punters [ (-; ] who rightly question this ’socialism for the upper-echelons of this society’ and rightly question the unconscionable loading/socialization of ALL debt on the backs of present and future Irish serfs - strangely enough, has we a few enlightened Marxists around they would be in the same camp as the conservative orthodox in again rightly questioning this Banking Policy for Bankers, Developers, & the Well-Connected Upper-Echelons. The sovereign is now taking on so much unnecessary debt that it is placing future recovery in serious jeopardy ……. they appear to have no substantive medium term policies beyond ‘bail-out-all’ and fiscally ’slash-and-burn’ in a race to the bottom - which is the wrong race …

“That said, I’ve been pretty clear that, whatever was meant by it, “selling deposits” is an unfortunate phrase and that deposits are a liability.”

First of all, it is quite clear that you know what you are talking about, no quibble there, jayz one professor making such a howler is careless but I’m sure Oscar Wilde would have something to say about two.

You are too kind in allowing prof Lucey the out of an “unfortunate phrase”. He would have had that out if the the damage had been limited to the original Newstalk program but his article in the Independent makes it abundantly clear what he meant.

Let’s hope that when he returns to this space he will put this horse down once and for all because it is quite chilling how other influential commentators have run with this ball. (pardon the mixed metaphors)

I’ve largely left the “selling deposits” business alone on the grounds that Brian Lucey can defend himself, though he is away from work right now.

That said, I’ve been pretty clear that, whatever was meant by it, “selling deposits” is an unfortunate phrase and that deposits are a liability. Here’s a link to my position on this when asked directly what I thought:

http://www.irisheconomy.ie/index.php/2010/04/03/anglo-what-are-the-options/#comment-43916

Can we be certain that the ‘not past due/performing’ loans produce cashflow? It’s the old spectre of Interest roll-up I fear.

That said the lack of spread on the main NAMA bonds surprised me. As talk of higher discounts gained pace prior to the actual announcement, I thought higher spreads may be used to compensate the banks. I suspect EU involvement. As a taxpayer, this is something I welcome. I don’t think there’s any rollover risk as at maturity the bonds can be repaid with more bonds. The interest rate risk is there, but at least this isn’t a risk +50bps.

This zero spread over 6m euribor won’t help the banks’ net interest incomes, which are squeezed big time.

@All
He is entitled to have a go at Brian Lucey over the apparent mis-speak about selling the 28 billion Anglo deposit book for 21 billion. But he says nothing at all about Anglo, despite having access to all the information, assuming they were on a 30% discount until NAMA Twilight Tuesday (as in Gotterdammerung - Twilight of the Gods) dawned.

@Garo
The Morgan Kelly piece is wonderfully refreshing.
His dismissal of Minister Lenihan deserves to be written by some graffiti artist with a cherry picker on the front of Treasury House under the climbing figure.

To be fair to Gordon Brown next door, he does deserve credit for the way in which he tackled the recapitalisation of their banks. I don’t think the man is a genius - he is more Mr. Plod - but that prompt action combined with his giving interest rate decision powers to the BoE will always stand to his credit.

Give me Mr. Plod any day to smart-ass barrister with a genetic predisposition to outrageous non-sequiturs and conflation.

Amazing how people are quick to run to the newspapers to tell the public how wrong the Government etc is but when they publish factually incorrect information to support their argument, they are no-where to be seen when asked to explain. Karl talks about loaves to fishes in his article in relation to NAMA. Brian Lucey’s 49bn miracle was just as bad but I guess it is easier to save the criticism for the politicians and bankers for their rubbish.

Bankers don’t bite the hands that feed them. And the do like heaping platitudes on their clients.

Though, let me be balanced, I’m glad he highlighted that even learned people like Professor L can make mistakes: e.g. assets/liabilities…