Lucey in the Guardian

The Guardian has various live blogs: Twitter-like updates of the news as it develops. It has devoted one to Ireland’s debt crisis. It has all the latest about who is talking to our dear leaders and about what.

The Guardian also started a new blog on Ireland. Brian Lucey and Stephen Kinsella will contribute regularly. Here’s Lucey’s first.

245 replies on “Lucey in the Guardian”

many thanks for kicking this off. I was beginning to wonder about the silence of the principal contributors on what might be an auspicious day – while the rest of us were wittering on the tailend of another thread.

It would appear that Irish Central Bank and DoF spokespeople are declining to comment this afternoon. Not surprising given that Brian Cowen appears to be coming out of hiding to give this statement to the Dail at 1700.

Goose cooked?

@Paul Hunt:
“the silence of the principal contributors ….”

Has Karl Whelan been called up to the Irish team?

bjg

Brian, if you’re reading, think you might have have cocked-up the chart – have another look at the red line.

Agree with the two red lines (though not 100% sure what the second one means).

It is interesting that Lucey is at complete odds with his pal David McWilliams on the nature of our current options. Lucey believes that we have irredeemably bailed out bondholders. DMcW on the other hand sees us in a better place. We now owe 130Bn to the ECB and since that beast is only an experiment it should be far easier to default on it.

I actually agree with DMcW analysis. If massive national default is what we want then it is actually easier now and note that welching on the ECB would be a bank default not a sovereign default.

Where I disagree with both is that I do not think massive default is the correct option. Accept the bail out yes, I hope it is not national pride standing in the way.

Lucey portrays reasonably accurately the catastrophic collapse in our banking and fiscal position but his case that this can mostly be blamed on the blanket guarantee is good polemic but not at all convincing. Every step of the way into this morass the government has had little choice. Even Lucey admits that the Anglo choice was between nationalisation and a meltdown liquidation, it was no choice.

@Richard,

I fear the calibre of the IMF personnel is of little relevance; nobody throughout the EU wants them. The IMF tries to deliver solutions; the combined EU is looking for a holding job that might, just might, convince the markets to suspend judgement.

Austria is withholding €190m from Greece

What is quite alarming is what they say here
http://ftalphaville.ft.com/blog/2010/11/16/406251/greek-profligacy-vs-austrian-obstinacy/

“It is hard to predict what might happen to a still fragile global financial system were c.€300bn CDS to be triggered on the same day. It seems likely that the ripple would spread swiftly throughout the banking and even non-financial sectors and few parts of the world would emerge unscathed.”

Wasn’t it a smashing idea to leave the derivatives market to self regulate?

I read that Bolton/Jeanne paper that Ciarán O Hagan linked to last week.
One line jumped out : “While diversification generates risk diversification benefits exa ante it also increases the cost of contagion ex post”.

Is this where we are where we are ?

Hi guys. I didn’t get the call up. But I have been very busy (paper for the European Parliament due — will post fruits of my work later in the week).

And, to be honest, at this point I’d prefer to just wait and see what happens.

For now, let me just say that those interested in the government’s relationship with the ECB might want to revisit this post from last month.

http://www.irisheconomy.ie/index.php/2010/10/10/the-irish-banks-and-the-ecb/

Interesting comment from Olli Rehn :

“Irish sovereign debt is well funded until next year. The real problem is in the banking sector but you cannot separate the two. Ireland is very different to Spain and Portugal. This is not a matter of survival of the euro — this is a very serious problem for the bank sector in Ireland.”
http://www.guardian.co.uk/business/2010/nov/16/ireland-bailout-debt-crisis

It seems like only last week that Brian Lenihan was on Newsnight explaining that Ireland had put the banking problem to bed and that the issue was the deficit.

All of this “ze Germans” is a bit off. Firstly, it is “ze Chermans”.

I wonder are posters in Germany posting lots of bejaysuses about Ireland ? Or have they moved on?

There are a couple of notable omissions in Lucey’s piece. UK Guardian readers should be told about them.

(1) He is on public record as wanting the Irish economy to crash, in pusuance of his political agenda.

(2) He was predicting in 2006 that there would be a soft landing in the housing market.

The first relates to his morality.

The second relates to his competence.

@JtO

Would you consider yours an ad hominem remark?

@all
Did a draft copy get posted by accident?

“Even Bank of Ireland?” is like a reminder by the author to himself to elaborate a point and the graph is surely wrong.

@ Danny

“The new addition to today’s Dáil schedule will allow for ten-minute slots for Mr Cowen, and for Fine Gael, Labour and Sinn Féin.”

Sounding less formal now…

@seafoid

You write:

I wonder are posters in Germany posting lots of bejaysuses about Ireland ? Or have they moved on?

Indeed they are — I’ve just been reading thru the comments on the websites of the Frankfurter Allgemeine (centre) and Die Welt (centre right) — agin Ireland, agin their own government, want to scrap euro and return to the deutshcmark etc. More later if I find the time.

And no, they haven’t moved on.

Taoiseach Brian Cowen, along with the leaders of the Opposition, will make statements in the Dáil this evening on financial stability

from RTE website

Whatever deal emerges at 5.00, it could hardly be worse than current situation for Ireland. I reckon we its takes a deal or be cut adrift.

@bazza

Would you consider yours an ad hominem remark?

JTO again:

YES!

But also factual.

No one denies either of my comments is true.

Merely that they should not be made.

Richard Tol’s anger derives from my exposure, some 18 months ago, of his incompetence at analysing passenger movement statistics in order to calculate net migration flows.

@Seafoid
‘It seems like only last week that Brian Lenihan was on Newsnight explaining that Ireland had put the banking problem to bed and that the issue was the deficit.’

I’m trying to take a few steps back and figure out how we managed to turn a defecit crisis intoa full blown banking and euro crisis within a matter of weeks.

@Danny Haskins:
“RTE saying the Government AND leaders of the opposition parties to make statements at 5pm.”

I hope this isn’t going to be a case of wrapping the green flag around themselves, promising faithfully to implement FF’s budget after an election and assuming that the continentals will take that as a credible firm purpose of amendment, sufficient to allow loot to flow here.

bjg

Looks like that statement to the Dail will be useless. The are getiing ten minutes each.The title of the discussion is ‘Statements on financial stability development in Ireland and elsewhere’

Wow, we are sorting out the world.

@John Martin:

Ta, you mean-spirited muckraker.

Excerpt:

Lucey’s findings contradict the view of the European Central Bank (ECB), which last week* warned that the houses in Ireland were overvalued.

The bank said house price valuations in Ireland, France, Italy and Spain were above their historical averages and that recent house price rises might be unsustainable.

*i.e. early February 2006

There is a touch of the Derry siege about JTO’s hounding of Lucey, like he wants to turn him into some sort of bonfire hate figure for the rest of eternity.

Bloomberg is reporting “Allied Irish Must Pay $1.8 Billion of Bonds Early by Year End”.

I presume ‘Allied Irish’ is a variable name for the Irish taxpayer. Why on Earth isn’t this wreck of a bank fully nationalized by now?

Any chance of General Election please?

Better keep quiet. Dermot Ahern and now Olli Rehnsays we are scaring the horses.

‘Mr Rehn said: ‘I am concerned about the public debate that takes place in the Eurozone at the moment and I want to call on every responsible European to resist the centrifugal tendencies and existential alarmism.’

Love the centrifugal tendencies bit.

Olli forgot to tell Herman

‘“We are in a survival crisis,” EU President Herman Van Rompuy said at the European Policy Centre in Brussels today. “If we don’t survive with the euro zone, we will not survive with the European Union.”

seafoid

“It is hard to predict what might happen to a still fragile global financial system were c.€300bn CDS to be triggered on the same day. It seems likely that the ripple would spread swiftly throughout the banking and even non-financial sectors and few parts of the world would emerge unscathed.”

€300bn???

Oh no. The Derivatives Death Star.

http://nirahlee.com/iswwr/evidence/DeathStar1.jpg

I’m surprised those ‘centrifugal tendencies’ aren’t getting more air time. Sarkozy and Merkel bear substantial responsibility, but efforts to exploit the crisis to force a favourable deal carry risks for the entire continent, not just Ireland.

While I usually agree with McWilliams, his nonsense about German savers triggering the crisis is preposterous. We have people now seriously suggesting that while Irish voters have no responsibility for the failure of Irish banks German voters do have responsibility because their banks lent money to Irish banks that failed.

Some financial stabilising entity is needed for the eurozone and the ECB’s remit is much too narrow. Still, the EU is routinely blamed for the collective failure of the constituent states. Also much of the economic criticism is way off-mark. The EU is as much of a liberalising force as a regulating one.

The disappearance of any idealism in European politics and it’s replacement with naked interest politics combined with the reform-suffocating quagmire that is the EU’s decision-making apparatus holds great risks.

People seem to think this is bottom. It isn’t. The countries of the developed world will miss an entire global economic cycle: by the time the next spike in commodity prices comes round, they’ll only just be recovering. Once that recession is over, demographics will hold Japan, Germany, the USA etc in a contractionary vice. Meanwhile, the impact of the crisis is not hitting people symmetrically.

The lack of vision or idealism at any level is appalling. This isn’t the politics-as-theatre of the Blair/Bush era. Real risks to peace exist in the coming decades.

There’s an idea around that democratic countries are too civilised for fascism or the like; there’s no evidence of this. This is a self-regarding conceit: that the likes of Putin etc are somehow defective, that if they’d only had a few more civics lessons they’d be different.

On the contrary, there are Putins or Francos in every society, it’s just that some political systems are better at preventing them from networking than others. It’s not a long shot that an acrimonious EU breakup could ultimately have catastrophic consequences. People with an ideological objection to it should bear that in mind and dream up constructive, well-intentioned methods of advancing their goals rather than cheering on it’s collapse.

AIB : This was one of the key institutions of respectable Ireland – “a job the bank”. Another one was the Church. Very respectable. And another was Fianna Fáil. They marginalised the Protestants and kept undesirables well away , mostly in England and America and sent troublemakers to Magdalen laundries, Letterfrack and Artane.

And now respectable Ireland is bust.

@ Carolus Galviensis

Me a mean spirited muckraker! Surely not!

At least I didn’t mention Lucey’s famous Deposit Selling Moment in which he suggested that Anglo Irish Bank’s problems could be solved by selling 28 billion of customer deposits (i.e. the bank’s liabilities) for 21 billion making a profit of 49 billion.

Discussion and references of this topic can be found on this thread beginning July 7, 2.08pm.

http://www.irisheconomy.ie/index.php/2010/07/06/nama-business-plan-2/

@Eoin,
This is a genuine question, not motivated by anything other than an attempt to learn something from recent events. I want to try and see how people who disagree about method might rescue something in terms of our common goal: to see us get out of this in as few pieces as possible, with a policy and governance structure that is superior to the one we left behind.
You were not an uncritical supporter of policies of the last two years, but I think it is fair to say that you thought aspects of the guarantee a good idea and NAMA an excellent idea. Is there anything about your broad support for the appraoch taken that you now, with the benefit of hindsight, regret? What key lessons would you distill from this debacle?
I have asked Zhou the same question, in the same spirit, and he reacted as if I was trying to point score, to say ‘I told you so’. Please accept my bona fides and that is not what I am trying to do here.
Specifically, one thing that you and Karl et al (and me) disagreed on back in the day, was NAMA vs nationalisation?

@JTO

I wish Lucey was our minister for Finance even if he got the house prices wrong in 2006, didn’t a lot of others.

What did you do that is so great. Support the flying PIIGS brigade, pigs can fly if we starve them, we are feeding them too much!

Cowen on CNBC Europe in debate for couple of minutes during which he appeared to claim the banks are fine really but Irish funding being undermined by market conditions around Europe.

Can you imagine the impression he’s just made on some of the most cynical people on the planet – who might not have left the office early enough to miss it?

Wall Street Journal sources story says European officials are weighing a E80bn-E100bn rescue plan for Ireland. Says officials were also discussing a smaller bailout plan for the Irish banking sector alone Says eurozone members want the UK to chip in also (Dow Jones)

Joseph Says:

“Uh-oh Ireland appears to be sitting right in the middle of the superlaser focus lens.”

Let’s hope the “ebbs & flows” put it’s aim off.

Guardian blog
4.54pm: It’s Rumour City. On the one screen, the Wall Street Journal is reporting that EU officials are considering a “€80bn to €100bn” bailout for Ireland, and a separate rescue package for the Irish banks.

And FT Alphaville editor Neil Hume has tweeted about speculation that the Irish austerity budget is about to be dragged forwards, to just two days time:

@humenm: New rumour : IRISH BUDGET MOVED FORWARD TO THIS THURSDAY FROM DEC 7TH

Pity about the commentors. Why don’t they send DMcW, Karl Whelan and Lucey to the Glenities Gulag. Now thats an idea.

I am abroad so no tv (I am also prentending to work) so appreciate the effort of others in informing what the great Biffo said.

Does this moron not realise the world is watching him at the moment and that some of them have an awful lot at stake and others scent blood?

I don’t see how this is going to do anything to reassure ‘the markets’.

Joseph Says:

“Does this moron not realise the world is watching him at the moment and that some of them have an awful lot at stake and others scent blood?”

If Fianna Fail attempt to stop funding coming from Europe because they don’t like the nomenclature it may be time to shift money to safe havens.

“Statements on the Financial Stability Development in Ireland & Elsewhere (to conclude by 5.41 pm)”

They better get to the point then.

By the way what does “the Financial Stability Development” mean?

This is a joke.

Don’t believe a word from Gilmore.

They don’t want the Government to resign until after the budget and bailout.

@Greg
‘This is a joke’
Wish it was. This will go down in history as the most incompetent and farcical response to a crisis.

ceteris paribus

Yeah.

Proof that they live on another planet.

They’re still on Planet Bertie.

The Grand Old Duke Of York
He had ten thousand men
He marched them up to the top of the hill
Then he marched them down again.

ceteris paribus

“Waffle waffle. Yis is all just a bunh of wafflers”.

Roars of applause from the Government benches.

My God we are soooooooooo stuffed.

@Joseph

What became of ‘whispers in the corridors that an election to be called’?

Yawn!

I count about 25 false rumours on this thread alone.

There ought to be a separate thread for Eoin on occasions like this, since he is invariably right about what is about to happen and everyone else is invariably wrong.

The same people on this and other sites work themselves into a frenzy of anticipation every time, then are completely deflated when it all comes to naught. Did anyone seriously think that Brian Cowen was going to make a resignation speech?

When the northern troubles started, I remember once Rev Ian Paisley, of whom I was no great fan, bellowing about journalists and media types spreading rumours and writing stories in a ‘haze of whisky’. It is 100 times worse in this internet age, and it is probably something stronger than whisky.

More pressure from Juergen Stark-
“The phasing out of our liquidity support measures will continue after the end of the current quarter,” Stark in a speech in Frankfurt today. “In my view, conditions in both money and financial markets have improved significantly over recent months, notwithstanding the most recent tensions in some segments of the European sovereign debt market.”

JohnTheOptimist

“There ought to be a separate thread for Eoin on occasions like this”

Good idea.

You and Eoin can have a nice little chat bwtween yourselves.

This is one hell of a game of chicken. We seem to be essentialy saying to Europe: ‘if you want our banks to pay its debts, you can have them!’.

One just hopes that we don’t have to go back for a 2nd bite of the cherry in the new year.

There’s a producer in CNBC right now cursing our little island for giving him 15 mins of waffle there….

@ Simpleton

very basically, with all the hindsight in the world, we should quite clearly have not guaranteed Anglo Irish or INBS, but how we could have dealt with them in light of what had occurred with Lehman’s only two weeks before is highly debateable. The EU/ECB (and the BoE/Fed etc) would have told us (and they’d have been right) that there was no way we could just let them go to the wall, so some sort of orderly process would have been required. But even now, two years later, is anyone aware of exactly what process that is? Of course, bringing in a resolution process along the lines of the UK one would have helped matters, but it far from being a straight forward process, legally or practically, and has still not been tested properly in a moderately sized institution (relative to its market). However, knowing then what we know now, it’d be worth the risk, things couldn’t really be worse than they have turned out, right? We would always had to have gone in with a large backstop to AIB/BOI, and i still think inflicting losses up the chain to their seniors would have very very difficult, but a less generous guarantee would have at least seen subs more harshly dealt with, and seniors bought back with at least some level of haircutting. Regardless of whether Anglo was or wasn’t systemic, AIB quite clearly is, and there would always have been a large onus, in reality (ie forget the theory), on the government to support it directly via the taxpayer.

In terms of NAMA vs nationalisation, i dont really see how nationalisation would have been better, unless you’re suggesting something along the lines of the German idea of being far less transperent in terms of owning up to the level of losses in the banks? That is the only real difference between the two – look at Anglo: we nationalised and it didn’t help even one cent (although maybe it helped with NAMA in terms of information release, ie the two should have been seen as part of the same solution, rather than different solutions). Ditto INBS and EBS. Nationalisation was tagged as a silver bullett answer to our problems, but it would have been anything but. Equity has been wiped out to the tune of 99% in most of the banks, that 1% is probably about as much as we could have saved. NAMA will be seen as one of the following in 10yrs time – either far too honest (the upfront hit was too much to bare) or a brilliant way of cleansing the bank balance sheets (per the posting earlier on Alphaville if you saw it).

@ All

Merkel bitchslap alert: *ECB’S NOYER SAYS CALL FOR BONDHOLDER LOSSES HAS STOKED IRISH CRISIS

ceteris paribus

“Is that short rule still in place?”

I believe so.

Remember we’re still on the hook for a €5.4bn rights issue @50c per share.

‘Since summer, the amount of liquidity demanded in ECB refinancing operations has declined by about a third and, as a consequence, excess liquidity in the system has dropped by about 60 percent, Stark said. There has also been a “reactivation on the interbank money market,” where EONIA volume “has nearly doubled.”

“I would take this development as a positive sign that banks trust each other more,” he said.

The ECB has already had to delay its exit once when Greece’s fiscal crisis flared earlier this year. Now bond markets have been spooked again by Ireland’s predicament.’

So where is the problem?

Bond. Eoin Bond

“very basically, with all the hindsight in the world, we should quite clearly have not guaranteed Anglo Irish or INBS”

More than one person said that with foresight.

@Eoin
All very fair. Yes, nationalisation in one sense could have amounted to the ultimate can kick, the exact opposite of what we did, which was to recognise all the losses up front and get the state to pay for them, up front. If we had been able to predict all that, even the designers of NAMA may have baulked. We can rightly praise ourselves for our honesty but I guess we know where that has got us.
Just imagine this economy post a credible budget and possessing a couple of well-capitalised banks that can access funding….

Pretty typical of Ireland really. Our own news media is so inept that we once again have to rely on the British media to provide the coverage and analysis we actually need. I note here that the Anglo-Bond holder’s list was released by a UK blogger and three years into the crisis no Irish newspaper has so much as bared its teeth at the government.

There’s a real oligarchy in this country.

Greg

It doesn’t maher what price the AIB share thing is at. It’s all about the quantum of the injection innit.

seafoid Says:

“AFAIK Greg, Joan is Burton. Or has she been hit by the CDSs?”

Always get that wrong.

Flying CDS’s? Soon. Soon. Be paitent.

seafoid Says:

“It doesn’t maher what price the AIB share thing is at. It’s all about the quantum of the injection innit.”

I disagree.

We still have this government fiction that it is important to leave AIB with a stock market listing. “To make it easier to float off the government stake at a later date”.

Complete nonsense.

It should be nationalised and the senior bondholders should be made an offer.

Split it. And reflaot the good bit.

It’s too late to let it limp on.

@Jto – don’t blame the messenger. That was straight from the mouth of a well known opposition TD. Unreliable git! They thought Cowen was going to cop out rather than be fingered as the man who let Ireland go to the bailout on his watch.

Looks like a game of chicken. “We don’t want a bailout; you’ll have to force us into it.” Let’s see who blinks first.

Is it possible that Cowen had planned a speech to coincide with something that Lenihan might say to the Eurochaps, and that Lenihan’s lateness forced Cowen to use a load of waffle as a fallback speech instead? It seems extraordinary to schedule a statement at such a time and then to have nothing to say.

bjg

@seafoid

Thankas again for the RTE news streaming video link. Though I note they don’t broadcast the Angelus for international consumption. Instead we get what I believe is called ‘techno’ music until 6:01. Cool Ireland no wonder we’re done for.

Looks like Central Bank Governor Patrick Honohan isn’t the only person who thinks Ireland can manage its debts, and it looks like Alan Ahearne isn’t the only person who think s tackling our banking problem head on is the best policy.
http://ftalphaville.ft.com/blog/2010/11/16/406111/standing-up-for-ireland-%e2%99%a3/

Also, Ireland is unique in that it is cleaning up its banking bad assets by applying classic Scandinavian surgical methods. That takes the pain head on by writing down the bad assets and loans along with bank capital and putting the risks onto the sovereign balance sheet.

The result may be horrible budget and sovereign debt arithmetic for a while, along with falling asset prices (principally real estate) as the market adjusts to clearing prices and a huge fall in real GDP. But it will eventually leave Ireland with a reduced, but cleansed, financial system and no overhang of bad assets and loans from the bubble economy.

@ Brian Goggin.

I wondered about the wisdom of flagging a statement so widely and saying nothing when you stand up to deliver it?

A press statement due from Ecofin later?

There were a lot of FF TD’s texting in the background as Cowen spoke, but that may be normal, I dont watch Dail debates often enought to know?

@Jarlath

Actually I think Lynn’s kind words about Ireland (“Its government was never profligate“.) are about the only flaws in what is otherwise a very cogently argued case against the euro:

This crisis will keep moving from country to country. The only permanent fix is splitting up the euro into more manageable currency areas. Until the euro area’s leaders recognize that simple truth, every bailout they come up with is only going to shift the attacks elsewhere.

It’s all been said a thousand times of course you might as well be talking to the proverbial wall.

@Bond. Eoin Bond

“very basically, with all the hindsight in the world, we should quite clearly have not guaranteed Anglo Irish or INBS, but how we could have dealt with them in light of what had occurred with Lehman’s only two weeks before is highly debateable”

Stop it already.

Look, it was a bank run on Anglo. That means the deposits were off to pastures new. It actually started, slowly in summer 2008. A guarantee strategy was one option as the original deposit guarantee was woefully inadequate – allthough I seem to remember some motgage broker – might have been Karl Deeter but I might be doing him a disservice there as not sure – on RTE news saying there was no problem since anyone with [liquid]assets of 30Kish plus was seriously wealthy.

The not-sucked-in, who were not leveraged to the hilt in geered property assets as well as every competent treasury manager did not agree.

To stabilise the existing banks – if the chosen solution was to keep them – it would have been necessary to put the State behind the deposits. There was no piont in doing so for debt senior or sub, that had already been issued. That was literally pointless – a very expensive show of bravado. It might have proved necessary to guarantee subsequent, new issues of Irish corporate bank bonds though.

The guarantee on the deposits could have been in effect a commitment to add additional funds as necessary from the state (outside bank assest) to provide 100% repayment of principal in all circumstances.

@Eoin

INBS for sure, never was systemic. But I wouldn’t concede that we made the wrong call on Anglo. The judgement was that it was systemic. If that judgement was correct then we had no choice but to see Anglo through all the way. Interesting to reflect exactly what would have happened if PWC in their notorious report of Dec 08 had reported a 35bn hole rather than saying that Anglo was essentially salvagable.

@Brian J Goggin – “Lenihan’s lateness forced Cowen to use a load of waffle as a fallback speech instead?”

That’s an interesting theory and I wouldn’t dismiss it. As Miyamoto Musashi used to say, “There is timing in everything.”

Mind you, there’s timing in comedy too.

Musashi also said, “Do nothing which is of no use.” Which is kind of the opposite of what Brian Cowen did in the Dail at 5pm…..

The standard of debate on the Guardian website seems to be a lot higher than here. First, lots of posters there are complaining that the chart, supposedly showing the ratio of house prices to incomes, has the incomes graph all wrong. It is flat, when incomes actually rose substantially between 1996 and 2006. On this site, no one would notice. Second, lots of posters there are having a go at poor old Lucey, pointing out his record of inaccuracy in making forecasts. On this site, they’d be called trolls. He should have stuck to this site, where people crave a voice of doom and will ignore the past record of anyone who gives them that.

Brian Woods II Says:

“Interesting to reflect exactly what would have happened if PWC in their notorious report of Dec 08 had reported a 35bn hole rather than saying that Anglo was essentially salvagable.”

Never mind “reflection”.

Interesting to note as a matter of fact that PwC got it so wrong.

Are they still getting state contracts?

@JTO

“The standard of debate on the Guardian website seems to be a lot higher than here. First, lots of posters there are complaining that the chart, supposedly showing the ratio of house prices to incomes, has the incomes graph all wrong. It is flat, when incomes actually rose substantially between 1996 and 2006. On this site, no one would notice.”

Try reading this thread, you dpon’t seem to have.

You will probably find that Brian Lucey was rushed doing his post and didn’t check it before sending, then the journalist didn’t notice.

@BWII, Simpleton, Eoin, Greg etc.

PWC did not have to identify a 35billion hole in Anglo. Read the docs dosclosed to the PAC. Dave Doyle SG of DOF refers in a meeting to 8bn losses in Anglo. We do not know if this was pre or post equity, but its pretty clear that they knew there was either a 4bn-8bn hole. Rumour abound that DOF has some kind of emergency legislation of the table to nationalise Anglo on the night-so much so that An T famously swore-“we are not ****ing nationalising Anglo”. Pat Leahy reported this in the SBP.

So there was a chance to avoid some of the costs. So Greg you are correct on this issue, some knew with foresight what we now know with hindsight. And they were in a position to act. Now I don’t think the seniors were ever going to be burned so the savings might have been in single figure billions.

Eoin, I agree with almost all of what you say re the past. The interesting thing is the now. Somewhere approaching 35% of our debt is held by the ECB and they provide 80bn of lquidity support. If we threatened to nationalise the banks, liqudate them, call in the bond holders and repudiated the sovereign debt, what would happen?

This ‘crisis’ of the last week is all about the Germans wanting to end the cheap ECB funding/quasi-QE and replace it with more expensive EFSF funding, but doing it outside the normal EU decision making framework. They probably don’t have the votes in the ECB to terminate the cheap money abruptly. The normal approach would have been to have an ECB transition exit strategy decided at their next meeting, where the ECB liquidity was provided only on the condition that countries are meeting the EU-specified deficit reduction targets, for example. This would have been too slow for Germany so they decided to further their aims using the media and convenient statements from PIGS ministers/bankers etc urging Ireland to “do the right thing”. The subversion of the normal process will be obvious to all involved, so it will be interesting to see what happens. Already it is obvious that the Finns, who share the same strategic goals as the Germans, are unhappy with the tactics.

@Adrian Kelleher

McWilliams certainly lays it on a bit thick, but what he’s saying is far from pure nonsense. Responsibility for losses in private firms must lie in the first place with their investors. It’s certainly fair to argue that the Irish taxpayer shouldn’t shrug all the burden after such a failure of banking regulation; but there’s not the slightest possibility of that by now, given all that the state has already paid out to make bondholders whole.

@ Tull

the EZ would essentially declare economic war on us. ATM machines would be empty around dinner time i suspect. And i reckon every foreign asset owned by an Irish citizen would be seized overnight. The UK and German banking sectors would be insolvent overnight, they wouldn’t have a choice. We’d be an economic wasteland for the next 20 years.

Now you can say that because of this we might have some leverage, but i dont think we could show them a hand quite that agressive. Simply saying we’re not too sure about why we should repay unguaranteed seniors and covered’s might be a bit more suggestible in theory, but its still undoable in reality.

@grumpy

You will probably find that Brian Lucey was rushed doing his post and didn’t check it before sending, then the journalist didn’t notice.

JTO:

So, academic economist, who has published on this site his wish that the Irish economy crash, puts up a very damaging chart that greatly exaggerates the problem, but only did so because he was rushed and didn’t check it before sending.

As I am invariably scornful of conspiracy theorists, grumpy, I find your explanation totally convincing and do not doubt for a moment that your explanation is one hundred per cent correct.

tull mcadoo

“Dave Doyle SG of DOF refers in a meeting to 8bn losses in Anglo.”

Yes. Forgot about that.

Now when you add in the fact that two years later we still have no resolution regime in place it begins to look worse than mere incompetence.

JohnTheOptimist

Seems someone has a reasonable explanation.

“begorrah
16 November 2010 8:09PM

@ dmmm

“That chart looks wrong. Surely the red P/E line should be rising too?”

I think it is the legend “Price/Earnings”.

It should, I think read “Earnings/Price”.

Though even at that it is difficult to read.

Two separate charts might have been better.”

http://www.guardian.co.uk/discussion/comment-permalink/8414065

JohnTheOptimist

“supposedly showing the ratio of house prices to incomes, has the incomes graph all wrong. It is flat, when incomes actually rose substantially between 1996 and 2006.”

You are misreading the graph. Both house prices and “Price/Earnings” are rebased at 100.

The only error is the legend “Price/Earnings” which should read “Earnings/Price”.

If price rises faster than earnings the rebased “Earnings/Price” line would fall. Which it does (though difficult to see by how much).

It is sloppy alright. But hardly a matter for crucifixion.

It is misleading.

I agree an expert like you could spot the error. But, the vast majority reading it won’t be expert. They’ll just look at the graphs and jump to conclusion. However, I allready said above that I agree it was just mistake through being rushed. But, unprofessional.

But, my main point was simply that Lucey was being given a much harder time on the Guardian site than he gets here. If anyone here posted some of the comments that are posted about him there, they’d be called a troll.

JohnTheOptimist

“However, I allready said above that I agree it was just mistake through being rushed. But, unprofessional.”

You did indeed.

I think the man needs to be cut some slack though. I doubt that one person in this three year debate has not made error. It is the course of the Nation we are dealing with. There isn’t time to check everything.

This thread is about the momentous understatement by Brian Cowen in the Dáil.

Which I think was an absolute disgrace.

He has brought further odium upon Ireland and its people.

Breaking – note ‘collateral’ – important, could mean much cheaper rate

*KATAINEN SAYS IRELAND TO START CONSULTATIONS WITH EU, ECB
*KATAINEN SAYS EUROGROUP AGREES EU AID SHOULD INCLUDE GUARANTEES
*JUNCKER SAYS MINISTERS `WELCOME’ IRISH BUDGET CUT EFFORTS
*JUNCKER WELCOMES ‘FRONT-LOADING’ OF IRISH BUDGET CUTS
*EURO FINANCE MINISTERS HAVE CONFIDENCE IN IRISH EFFORTS
*IRELAND SHOULD RESUME `STRONG GROWTH,’ JUNCKER SAYS
*KATAINEN SAYS UNKNOWN IF IRELAND TALKS WILL LEAD TO AID REQUEST
*KATAINEN SAYS EU TO LOOK INTO POSSIBILITY OF LINKING COLLATERAL
*IRELAND TO DISCUSS BANKS WITH EU, ECB, IMF
*EURO AREA WELCOMES `SHORT, FOCUSED’ DISCUSSION ON IRISH BANKS

@Greg

“This thread is about the momentous understatement by Brian Cowen in the Dáil.”

Thread title is “Lucey in the guardian” .

The collateral thing is almost cerainly at the request of the Finns, evidently not totally isolated. They want to get paid back.

@ Grumpy

i heard (earlier today) potentially a 4% rate on the funds, which could be justified if it was collateral backed.

@Greg

I think the man needs to be cut some slack though. I doubt that one person in this three year debate has not made error. It is the course of the Nation we are dealing with. There isn’t time to check everything.

JTO:

Fair enough. I am not complaining about his error. Totally forgiveable. I make errors myself. Its his publicly-expressed wish to see the Irish economy crash that is unforgiveable.

@Greg

This thread is about the momentous understatement by Brian Cowen in the Dáil.

JTO:

No its not. Look at the thread title. Its called: “Lucey in the Guardian”

If the title is “Lucey in the Guardian”, I think it is perfectly reasonable to post a comment on what Lucey has wriiten and the charts he has displayed there.

Anyway, Eoin is posting about this press conference. So, I will forget about Lucey and read what Eoin says, as he is always reliable.

irishpancake

“This thread is about the momentous understatement by Brian Cowen in the Dáil.”

Thread title is “Lucey in the guardian” .

No that’s just plain picky. 😀

*REGLING SAYS ASIAN INVESTORS INTERESTED IN EFSF FUND-RAISING
*REGLING SAYS EFSF HAS SPOKEN TO CEN BNKS, SOV WEALTH FUNDS

Ok, did not see that coming. Are we about to find a vent for all those stored up Asian reserves we keep complaining about? China to the rescue?

*IRISH TALKS FOCUSING ON `RESTRUCTURING’ OF BANKS, REHN SAYS

Also, Merkel bitchslap update:

*JUNCKER SAYS MERKEL WAS MISUNDERSTOOD ON DEBT RESTRUCTURING

“The standard of debate on the Guardian website seems to be a lot higher than here.

The standard of spelling is higher here. The Grauniad was never known for its attention to detail.

@ Patrick

we would simply insert the EFSF in for the ECB – same collateral at stake. Would allow for some longer term tenor on the banks funding, and get the ECB out of the way (as it is clearly uncomfortable with continuing this level of liquidity to the Irish banks going forward – they want a permanent solution signed off by the political establishment).

Bond. Eoin Bond

“Ok, did not see that coming. Are we about to find a vent for all those stored up Asian reserves we keep complaining about? China to the rescue?”

Recycle dollars into Europe. German banks reliance on FED/ECB swaps decreases.

EU/China start making bilateral deals.

The possibilities are endless.

@JtO:
“Its his publicly-expressed wish to see the Irish economy crash that is unforgiveable.”

Why? It simply means that he is a Fianna Fail supporter. FF has made the economy crash; BL should perhaps have said that he wished to see them admit it.

But perhaps the first step is that they should recognise it.

bjg

So there will be a short and intensive “consultation” – no timescale and premature to discuss amounts of intervention.

If Ireland wants to access the funds then Ireland must make the request and the EFSF must deem any intervention necessary (should keep the Finns happy).

And Ireland has been engaging with the IMF “for some time” – seems that trip to Washington in October might have been more than just routine.

Anyway it seems the ball is back in our court to devise a credible 4-year plan and pass a 2011 Budget.

I wonder what the balance owing to the ECB will be by 7th Dec?

@Jagdip
\if what you say is correct then the balance is going to be substantially increased by 7th Dec.
fiddling and Rome comes to mind.

OK so the Finns/EU Commission have put their foot down on correct EU procedures being followed. A number of thinly-veiled criticisms of the recent German approach. A renegotiation of the EFSF being prepared so that it is less punitive and looks less like something that was thrown together at 4.00am in a state of panic. Or maybe just using the €60bn EFSM money. Getting the interest rate down to something reasonable will be key. Also maybe finding a buyer for AIB.

Someone in Brussels just said they are going to have to let one of the banks go.
And Dick Roche denies there is a need for a bailout.

John quite rightly telling RTE to back down on the “IMF boogeyman” meme. You’d swear the country was about to shut down if you went by what Miriam is trying to make out.

Joan Burton: “I’d be very scared. I lived in Tanzania, these people would take a hatchet to health, to services…”.

Jebus. Calm down. The IMF are not some sort of evil organisation. This is scaring the sh1t out of ordinary people out there.

*LENIHAN SAYS CONSULTATION PROCESS TO START LATER THIS WEEK
*LENIHAN:IRELAND ENTERED CONSULTATIONS BECAUSE OF MKT TURBULANCE
*LENIHAN: AID FOR IRELAND IS NOT INEVITABLE
*LENIHAN SAYS ECB HAS STOOD LOYALLY BY IRELAND
*LENIHAN SAYS HAVE TO ADDRESS STRUCTURAL PROBLEMS IN BANK SECTOR

Are we going to see a bond burning in a European retail bank at the behest of the EU. It would be one way of recapping AIB by giving it to the bondholders. Might be a bit tricky though as the market might go hunting for the next victim on the Iberian peninsula …clue not Portugal

@EB

Joan represents the Union workforce. They should be very afraid of the IMF…and you do not have to go to Tanzania-LAtvia will do-30% off salaries, numbers and transfers.

@Eoin
“John quite rightly telling RTE to back down on the “IMF boogeyman” meme. You’d swear the country was about to shut down if you went by what Miriam is trying to make out.”

Agree completely.

They will force us to very little that we don’t have to do anyway.

Its fairly instructive that one of the commenters on the Primetime feature had to point out to whoever was interviewing him that the IMF don’t have tanks. It does make you wonder what he had been asked beforehand to make him feel it was necessary to remind the interviewer of this.

Never mind Tull. The Irish State is fully funded until the middle of next year. Repeat 40 times and say a decade of the rosary and then repeat again until you feel ready to buy a few bonds.

Statement on Ireland’s Budget Plan, Banks From Eurogroup
2010-11-16 22:21:04.786 GMT

The Eurogroup welcomes the significant efforts of Ireland to
deal with the challenges it faces in the budgetary,
competitiveness and financial sector areas.

The Eurogroup welcomes in particular the announcement by the
Irish authorities that their four-year budgetary strategy will
be frontloaded by EU6 billion in 2011 on a total consideration
effort of EU15 billion.

We have full confidence that the four-year strategy to be
announced by the end of the month will be thorough and detailed
and will firmly anchor the 2014 target date for the correction
of the excessive deficit. This strategy will also ensure that
the public debt ratio will be put on a firm downward path.

Together with the structural reforms that will be announced in
the strategy, this budgetary adjustment should allow Ireland to
return to a strong and sustainable growth path while
safeguarding the economic and social position of its citizens.

We nevertheless invite the Irish authorities to include an
annual review in their strategy that will allow them to cope
with the implications of less favourable macro-economic
developments were they to arise.

We welcome the measures taken to date by Ireland to deal with
the issues in the banking sector, via guarantees,
recapitalisation and asset segregation. These measures have
helped to support the Irish banking sector at a time of great
dislocation. However, market conditions have not normalised and
pressures remain, giving rise to concerns that further reforms
and stabilisation measures may be appropriate.

We welcome the determination of the Irish government to engage
in a short an focussed consultation with the Commission, the ECB
and the IMF in order to determine the best way to provide any
necessary support to address market risks, especially as regard
the banking sector, in the context of the four-year budgetary
plan and the upcoming budget.

We confirm that we will take determined and coordinated action
to safeguard the financial stability of the euro area, if
needed, and that we have the means available to do so.

It has been the government itself, along with sympathetic commentators, that has been raising the spectre of the “IMF boogeyman” for weeks now, with all the talk of scary outcomes/loss of sovereignty etc. They were the ones that raised the temperature on this so they cannot be surprised if this leads to “when I was in Tanzania” stories now. If it had been presented as more of a funding support/credit line issue (e.g. using JMcH’s terms) made available from our EU friends showing solidarity etc, there would not be a need for all the backtracking now.

Still no one in authority has stated we can create debt free credit.
So sad to see a whole society from top to bottom, left and right be subservient to the money masters.

@Bond Eoin Bond
Thanks for post.

Critical bit=
However, market conditions have not normalised and
pressures remain, giving rise to concerns that further reforms
and stabilisation measures may be appropriate.

“We have full confidence that the four-year strategy to be
announced by the end of the month will be thorough and detailed
and will firmly anchor the 2014 target date for the correction
of the excessive deficit.”

Hail Mary, full of grace..

Joan Burton: “I’d be very scared. I lived in Tanzania, these people would take a hatchet to health, to services…”.

A hatchet is indeed what should be taken, since inter alia it is the country’s exploding health and social services costs that have helped push the country over the cliff.

A Trades Union shill if ever there was one.

OK my pet obsession:

Did anybody mention ‘Croke Park’ on RTE or anywhere else tonight?

Did anybody mention Article 28 of the CP Agreement?

The implementation of this Agreement is subject to no currently unforeseen budgetary deterioration

I’m very interested to see what they do on the question of the banks.AIB, the very polite neighbour, turns out to be a junkie/prostitute and nobody ever suspected anything.

A line has to be drawn in the sand, otherwise in 6 months’ time it’s going to be Spain.

A Chathail

Croke Park wasn’t just mentioned. It was SHOWN on one of the clips. I thought RTE did a good job. Fair play to Miriam.

@ Seafoid

Miriam clearly got to you with those eyes of hers. Another McWilliams warning we failed to heed…

@ All

also Eurogroup statements out on Greece and Portuguese budgets, but not gonna blanket this thread with them. Easy enough to find on Google if you are so inclined. Nothing too shocking in them.

@seafoid @all

“We have full confidence that the four-year strategy to be
announced by the end of the month will be thorough and detailed
and will firmly anchor the 2014 target date for the correction
of the excessive deficit.”

What about a foretaste? Doesn’t have to be thorough. Doesn’t have to be detailed. The ‘end of the month’ is a long time in politics.

Just a rough idea.

As Lenin quipped: Who? Whom?

Bryan G

“Also maybe finding a buyer for AIB”

I said it over a year ago.

Sell it to the Chinese.

It seems to me that nobody is addressing the franchise value of a banking license.

This State, in a competitive banking environment should be able to support two main banks and three smaller fully licensed.

Credit Unions and Post Office savings aside.

Ignoring, for the moment, the complete fiasco that Fianna Fail have created Ireland will survive.

It will have a competitive banking environment, as long as Fianna Fail stop using the banking system as a personal Fiefdom.

If you agree that you will agree that Ireland has the ability to provide banking profits of (say, argue if you wish) €4bn per annum.

Here’s a question.

We all know we need banks. We all know we want competition amongst banks.

Why is it that banks get licences without paying for them?

Is AIB is capable of producing €1bn in profits from ordinary business?

If so at 10 P/E (sorry JTO) it has a franchise value of €10,000,000,000.

Maybe we need to start thinking about Ireland 2020.

I have never understood why banks are subject to the same corporation tax rate as Intel, Google or Microsoft.

Why is it not possible to raise a licence fee on banks of (say) 1% of the balance sheet value?

The licence they have is a licence to print money out of nothing given by the State.

The licence fee should of course ignore bad debt write offs. That is after all a matter for the management of the banks and their auditors. The shareholders can sue if they wish.

In short.

Want to run a bank here.

Fine. The tax is 1% of your balance sheet. Now let the competition begin.

Round two in the morning then… or have they taken it offline, to be continued in Dublin?

Wtf was Cowen doing at 5pm today?

I wonder what ‘the markets’ will be doing when I log in tomorrow?

@Eoin

Ta re EuroGroup Speaks.

One needs to SEE it written! “… the [European] Commission, the ECB and the IMF” – what a front row!

@Greg
‘If you agree that you will agree that Ireland has the ability to provide banking profits of (say, argue if you wish) €4bn per annum.’

Don’t think so if the current funding (1%) has to be replaced with 5% money

@ Joseph

i reckon the word “intensify” means “give us til the weekend”. Reckon it might be enough to keep the markets only slightly weaker in the morning, but nothing too horrible.

seafoid

“John McHale is on Primetime”

I see that John McHale is no longer a fan of the word “bailout”.

He now properly refers to the “arrangement” as a “funding line”

“Greg Says:
November 14th, 2010 at 9:15 pm

John McHale

“The alternative of being forced to seek a bailout would involve at least as much austerity as our own adjustment and would do long-term reputational damage.”

There is no “bailout”. Greece did not get a “bailout”. They will owe every red cent plus interest when, if ever, they exit the EFSF.”

http://www.irisheconomy.ie/index.php/2010/11/14/a-bailout-worth-considering/#comment-92576

What is this I hear about FF accepting a bi-lateral lone from HMG. The return of land anuities to fund it? May I suggest a 5 year term with a May 2016 maturity date.

ceteris paribus

“Don’t think so if the current funding (1%) has to be replaced with 5% money”

One cannot disagree with that.

Nevertheless.

A licence to operate a bank should carry an annual licence fee.

And it should be substantial.

Would you agree?

When I say Ireland in 2020 I am being (God forgive me) optimistic.

No bank (money lender) should be allowed lend money without a tax on money lending.

Now let the IFSC do what it does. I do not care.

We should not be responsible as Citizens for what goes on there.

Make it a City State. Tax it. And put draw bridges around it.

The Regulator is incapable of policing the IFSC.

Let us not fool ourselves again.

@ Tull

Lagarde has mentioned “bilateral instruments” as well tonight. I think we could be in for a surprising few days, some countries may be willing to give us easier conditions to get a deal done?

@Bond. Eoin Bond

‘some countries may be willing to give us easier conditions to get a deal done?’

The kindness of strangers?

Greg,

the problem with your maths is that it is wrong. An irish retail bank will make about 1% return on its assets before tax on the other side of the crisis. Tax that at 12.5% and it makes 0.85% ROA. then knock 1% off for your putative licence fee and it makes a loss.

The Q will be very short.

@Tull and Eoin
Yes the FT had several articles Nov 16/17 which appear to be softening up UK opinion for a bilateral bail out. It might suit Tory strategic objectives to help us maintain some level of independence rather than allow the EU increase its power.

@All
‘Brian Lenihan is reported to have told his European counterparts at tonight’s meeting that he has no mandate to negotiate a financial bailout’

What are we to make of this?

Ceteris Paribus

Brian would want to be careful. The last leader to exceed his mandate ended up getting shot in West Cork by Alan Rickman.

Lagarde has mentioned “bilateral instruments” as well tonight. I think we could be in for a surprising few days, some countries may be willing to give us easier conditions to get a deal done?

So looks like it could be Greek Bailout v2.0, rather than EFSM or EFSF. Would have the advantage of no new avenues for legal challenges. Probably about €80bn for a 3-year deal.

Bryan

80billion from the EM/IMF/HMG? Nothing from the EFSF. Low coupon of 4-5%. This rumour was floating around last Tuesday. The actors were not known though.

I doubt the Brits or the IMF are that exercised by Corpo Tax. Maybe we just agree to stop pinching their Corporate HQs.

What the Germans think
(miscellaneous comments from the left wing Die Zeit), normally squeaky-clean and goody-goody pro-Europe):

The euro will break down and the whole place will collapse mercilessly down around our ears …. In short: Abandon the euro, devalue the drachma and introduce and negotiate a settlement with creditors (Model Argentina) … The problem remains that so far, no creditor has lost a cent. Instead, the assets of the working population are being transferred to the creditors. … This affects the whole economic system, since the creditors are located abroad … This is certain death for any economy …But now, German taxpayers are suddenly asking why they have to pay for the largely home-grown problems of Greece and Ireland. Especially in Germany people saved hard for years, and yet in Greece they have things like 15 months’ salary for civil servants and Ireland has a minimum wage of 8.50 eur per hour? … How can we get workers who work for 6 EUR per hour as temps to understand that money must be paid by Germany to Ireland, although the country is much richer than Germany… .If the EU and the IMF intervene , then Ireland is looted. … It makes most sense simply to suspend debt payments for now … How come that the main beneficiary is the employee now that Germany has become a low-wage country in Western Europe? … Why provide benefits to someone who has to work for less money?… In Ireland and Spain the salaries have risen significantly since the introduction of the euro …. That means the people have also benefited as they could afford more. In Germany, wages are stagnating or have fallen …We are also talking not about the political fate of Mrs Merkel, but about the decision to transfer € billion over the years… Or we have the termination of the experiment in its present constellation, with all its predictable political and economic turmoil

Just a taste —

I’m not sure what the point of the trip to Dublin is about. It seems the timeline is extremely tight. Either these boyos are incredibly productive or it’s cosmetic.

The eurozone needs to enable the ecb to buy sov debt.

Statement from IMF

http://www.imf.org/external/np/sec/pr/2010/pr10441.htm

We welcome the intention of the Irish authorities to implement a decisive multi-year fiscal plan and measures to bolster and strengthen its financial sector.

“At the request of the Irish authorities, an IMF team will participate in a short and focused consultation, together with the European Commission, and the ECB, in order to determine the best way to provide any necessary support to address market risks.

Maybe the Brits will come in…Maybe we can do a deal to get our main banks covered by their insurance scheme, to some extent… (Our toxic debt wouild add little to the risks that scheme already holds)
What would be the political quid pro quo?…very interesting move bn the Brits, vis a vis the EuroZone…sterling bails the Euro, etc

@Frank Galton

So its official. We have called in the IMF.
Wonder where BL got the mandate he told the EU boys he didn’t have.

@Tull

I figure that the NTMA funding needs for the next 3 years are about €20bn a year or so; then throw in another €20bn for non-NAMA loans/further writedowns at AIB etc. and that brings you to €80bn and 2013. Better to have something left over at the end rather than go looking for more.

However in 2013 it then gets tough. Even if Ireland is on track, everything will still be very fragile. The markets will want a premium for lending to fragile countries if any new bailouts require ‘private investor participation’. If high rates for peripherals are institutionalized then it is likely that the debt/GDP ratios in those countries will never stabilize. At that point the Euro breaks up since it will be impossible to paper over the fact that the Eurozone economies are too diverse to form a solid currency area. Maybe there’s a ‘Euro Schengen’ with a smaller number of core countries.

tull

“the problem with your maths is that it is wrong. An irish retail bank will make about 1% return on its assets before tax on the other side of the crisis. Tax that at 12.5% and it makes 0.85% ROA. then knock 1% off for your putative licence fee and it makes a loss.”

There is no problem with my math.

I did say “(say, argue if you wish)”.

Just goin fishin.

So you say that the return on assets is 1%.

OK.

No point in taking everything is there.

So I’ll take 0.5% of the balance sheet.

Did the queue just get longer?

Tell you what. I’ll throw in a Zero% corporation tax with that?

Is that sweeter?

Let the competition begin.

Have you a problem with competition?

If the natural return on assets is 1%, all the State has to do is tax that return by balance sheet. If the heat is too much for our current bankers others will take their place.

I will ask again.

Why are Intel, Google & Microsoft taxed at the same rate as banks?

Why are Superquinn, Lidil, Aldi taxed at the same rate as banks?

Banks are in a unique position. They can create credit out of thin air.

We need to tax the air they breathe.

I can see many advantages for the State if banks were not the property of the body politic.

It’s called competition.

@cet. par.

Ah, but we haven’t requested assistance from them yet, see?

@Carolus Galviensis

It’s wonderful how

The problem remains that so far, no creditor has lost a cent. Instead, the assets of the working population are being transferred to the creditors. … This affects the whole economic system, since the creditors are located abroad … This is certain death for any economy

is followed by

But now, German taxpayers are suddenly asking why they have to pay for the largely home-grown problems of Greece and Ireland.

and yet the penny never drops. NAMA Wine Lake noted a similar case recently.

Thinking more about my comment at 12.07…
We couldn’t have a majority State-owned Irish bank protected by a UK insurance scheme, could we?
….Better if it was majority UK owned, then obviously subject to regulation by UK authorities, and then logically part of the UK Asset Protection Insurance Scheme…
…So, AIB would be the first to go…to the Governor’s delight of course… and maybe we can expect a HSBC takeover bid tomorrow? NAMA assets would be returned to them and then new owners also get deferred tax assets, and, with much reduced new capital requirement, thanks to the insurance policy, would truly buy AIB for a pittance
..ah, its only a late night thought

jc

“National humiliation.

The inevitable conclusion of electing semi-literate gombeens to run the country I suppose.”

Or perhaps the inevitable conclusion of a semi-literate gombeen electorate.

Brian O’Doherty

“We couldn’t have a majority State-owned Irish bank protected by a UK insurance scheme, could we?”

Brian.

Get off your knees.

You won’t be getting a knighthood any time soon.

@anonym
‘Ah, but we haven’t requested assistance from them yet, see?’

I know- they are only heading to Dublin for a few pints and a chat, probably in Dohenys.

The new headlines are ominous

‘European finance ministers started work on possible aid for Ireland’s debt-laden banks, stopping short of an immediate bailout package and risking a renewed convulsion on bond markets. ‘

Asian markets going south. We are having an effect.

@Greg

AFAICT, the deeper problem with bank taxes (at whatever rate) as a means of financial-sector reform is that they’re likely to be just as pro-cyclical as, say, stamp duty. (In political as well as accounting terms.) The notion is that the government will take the money and put it into a fund for bank rescues, but there are some glaring problems with that idea. Most obviously, it won’t. What would Bertie have done with the proceeds of a bank tax?

There’s surely an element of shill-bidding in those alternative bailout/credit offers, assuming they really exist.

anonym

I did not intend “bank taxes” as a means of financial-sector reform.

I consider the financial sector incapable of reform.

Of course a balance sheet tax would be pro-cyclical.

If the aggregate national bank balance sheet grows the revenue grows.

I did not suggest that the tax be used to “fund bank rescues”.

I don’t believe banks should be rescued.

I cannot stop venal politicians using revenue for their own ends.

Only Citizens can do that.

But as I responded to jc.

“the inevitable conclusion of a semi-literate gombeen electorate”

If that is what they want.

They just got it.

ceteris paribus

“What would Bertie have done with the proceeds of a bank tax?
Use it for digouts of course”

Agreed.

But that is not a problem of banking or the taxing of banking.

That is what the people want.

Now they have it.

Let’s see how they like it.

Greg

A UK “strategic investor”, holding more than 50%, would qualify AIB for regulation by the UK, and presumably eligibility to participate in the Financial Assets Protection Scheme…No??

I don’t advocate it, but if it goes into State ownership ,then sooner or later AIB will become foreign owned. Many people don’t seem to have problems with that, although I do. But , if its going to happen, it might be better to do it now. Then the same for BOI.

Their assets are alreaady written down to realistic values, so they would not be much of an extra burden on the Assets Protection Scheme and the deferred tax assets, of some billions, would be of value to a private purchaser, not to the State as an owner.

Remind of a recent Dilber skit…..

BL (The real leader): The country is happy to announce that compared to revious years, we improved our rate of decline of revenue. We’ve been doing great since we redefined success as a slowing of failure. Moving on Who has a status report?

BC: I have improved my rate of doing nothing

Greg
Your idea needs much refining. As the country shares in the take, it also has some responsibility for the liabilities?

The problem with Ireland was that incompetent and corrupt people got to make the decisions. The process was clearly corrupted. Auditors did not refer to strange temporary deposits designed to make a BS look solvent. Regulator arranged these dodgy loans! Shows state knowledge of parlous situation and may have been a recurring situation, growing every quarter for SE purposes. When did it start? It should have been sorted out immediately.

The Government was again at fault for knowing that interest rates were going to halve, thereby doubling purchasing power.

The banks broke laws and lied about it, but they were lending in accordance with gov wishes. After all, had they stopped, the economy would have stalled, as it was being driven by credit availability. The government had no idea of what it was doing and those bankers who did spoke very softly.

Charging for this to happen again simply means that the end result might only be a debt of 80,000,000,000 Euro not 100,000,000,000!

Other reforms are necessary. Having people who know how to iterate might be useful?

Greg
Sorry, it seems your point was a little more subtle!!

Yes, Ireland got into this mess with no help from friends and lots of encouragement by enemies who have choked off all sovereignty.

Economic warfare. Ireland has suffered three or four major defeats and I have no faith in anyone involved. Very sad really.

Did anyone see Paul Somerville on Vincent Browne last night? He was excellent and seemed genuinely passionate that we now need to play hardball with the ECB? similar sentiments today in DMcW’s column in the Indo. Do we have the steel to call Trichet & Ollie’s bluff? And if so who do you think should we send in to the negotiating?

@Paddy Orwell

Somerville says that the ECB wants the government to borrow from EU and on-lend the money to AIB-BOI, rather than continue sending them to ECB for funding. But what he didn’t say–or forgets- is that the government is already guaranteeing their borrowings from ECB, via the guaranteed NAMA bonds. Not much risk difference, in theory.

But the reality is that that’s not enough for ECB. The guarantee of NAMA bonds is a guarantee of…what, exactly?… The bonds bear an incredible interest rate, and have short term maturities which the issuer can not support because the issuer has no capacity to repay at the short term expiry. Then, there is no actual redemption date of any sort, even years into the future. (Other than to be redeemed with more of the same bonds). So, like any half intelligent lender, this is not acceptable collateral. They look like a joke, a trick.

That’s the problem, and it undermines credibility. The Irish State took c. €40 bn. of property from these banks in exchange for 20bn. of worthless promises. That, more than any other factor, is bringing down our banking system. But the likes of Somerville can only see the banks as the baddies !

@Paddy Orwell – “And if so who do you think should we send in to the negotiating?”

How about that bolshy chap who runs Ryanair? I would supplement him with Dr. Gurdgiev. We would also need a good lawyer in the team.

Do they have to be Irish?

If it were a negotiating team of say 3-4, who would be your dream team?

@All – an amusing story. I was watching the 5pm non-event yesterday on my laptop when my 3-y-o daughter pointed at Cowen talking on the screen. Instead of saying, “Who is that man?”, she said, “Why is that man?”

I think that sums it up nicely for me.

@ Brian

Thanks for that. I wouldn’t for one minute suggest that the banks are the only ones culpable in this. The Government, the electorate, those who bought houses in recent years and the EU all have to share the blame. The Government will in all probability lose out at the next election, the house buyers are suffering as we speak as are the electorate and will continue to do so over the next 4 years. But the EU/ECB must also carry some of the can for the crazy single currency system. Threat of default and the reprecussions for the euro is our only card left and a legitimate one to play in this scenario. Delors et al knew that such a crisis would happen and they hoped it would lead to greater fiscal integration. They gambled with our economic soveriegnty and they should take a hit too.

@ Joseph
Both names crossed my mind. Having the Ryanair fella would be quite ironic given what he has achieved for european integration compared to the current disintegration caused by the euro project.

Grauniad http://www.guardian.co.uk/business/2010/nov/17/ireland-bailout-debt-crisis:

===begins=====
10.04am: Henry McDonald, our Ireland correspondent, has also been in touch with some worrying news. He’s hearing that the Irish banking sector might be in even worse shape than thought.

From Henry (left):

Irish government sources said today that the size of the rescue package for Ireland’s banking system has been underestimated because one of the Irish banks had undervalued the amount of money needed to save it.

They said the scale of the cash injection needed to shore up the Allied Irish Bank was even greater than what the financial institution had first told the government.

===ends=====

Well I never. You could have knocked me down with a feather. Quelle surprise. What a thing. Who could have thunk it?

Mr Lenihan was, I see, late for this morning’s meeting too.

bjg

@ paddy orwell

how are those who bought house’s in recent years to blame?
are you saying nobody should have bought a house in ireland in the last 3-4 years.

@ Jarlath.
Obviously on one level I sympathise with anyone who did buy in the latter half of the boom. There are alot human tragedies involved. Furthermore, alot of these people were misled by the cheerleaders, media, estate agents etc. That said, common sense in many cases played second fiddle to the desire to get on the property ladder when people were doing their sums (and in the case of investment properties greed was a big issue), given some of the prices that were paid and the risks that were taken. But to say that recent house buyers have no responsibility at all is to effectively label them eejits.

@ paddy orwell
I think eejits is a bit strong. recent house buyers are responsible for their own problems and whatever difficulties they are experiencing now, as a result, are through their own mistakes, but i do not think we can blame those people, who by and large would have bought out of necessity, for the current problems we are facing. when prices are going up, its reasonable for people to think they may buy now before they become unaffordable. people who bought houses as an investment are another issue entirely. i realise they have contributed to the mess as well, but those who bought from necessity and a lack of knowledge of how things would pan out are pretty much blameless as regards the national problems are concerned. i do not think you can expect ordinary citizens to have the prescience of a Morgan Kelly.

@ Jarlath.
Sorry I am not blaming for the problems we are facing. Rather I am only saying that they bear some of the responsibility (blame) for the problems they are facing. In retrospect I should have used the word responsibility not blame. Don’t agree however that there was a necessity to buy. Renting was nearly always an option.

@Paddy Orwell

Regarding the report from McDonald that AIB underestimated its losses…I wonder is that new news, or September news, when AIB was hit with a sudden and mysterious extra €3 bn. demand/ NAMA haircut…?

As for blaming the EU in part…yes, certainly…Fifteen years ago I coordinated a study for the Commission into new regional policy for peripheral Europe. Our recommendations were accepted and launched at a conference in Brussels, where thje President of the German Employers Federation complained about Ireland’s tax advantage. He ws told that it was the only conceivable relative advantage that Ireland could work on if it wanted to develop industry. When asked what industry he could imagine Ireland could develop without a tax advantage, he could only propose Tourism.
Beyond short term grants, the EU doesn’t have a proper Regional Policy. Also, its monetary policy does not take proper account of regional needs, etc, etc, as we all know. Now is probably the time to sort our some of these issues.

@ Paddy Orwell
ah right, i agree with you so.

ok, rent is always an option, but it’s never going to be the case where everybody starts renting and stops buying. no matter what the scenario is. there is always some needing to buy as the best option for them

Renting is fine for the short term but the lack of security of tenure and generally weak tenants rights pushes people into home ownership.

In other EU states, rent increases are restricted to the inflation rate

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