53 thoughts on “President Signs Bank Stabilisation Bill Into Law”

  1. Do you really think they are competent enough to make an informed decision? Wit GF banging on about how not to scare te horses, did you expect anyting else? The interests of the elite win over those of the population at large every time.

  2. And is anyone surprised?
    Enabling acts are in my view incompatible with democracy. David Gwynne-Morgan, emeritus Pofessor of Law UCC noted yesterday that one provison repeated several times is “any other enactment”, i.e the act superscedes all other acts; anyone can be prescribed (proscribed?) as being a relevant instituton and the minister can direct that person/institution as to what to do to whom when etc.
    Its a rotten and overblown rushed and sweeping act. It bears all the hallmarks of panic and “bounced”. Again.

  3. I think they made a mistake. *even if* it is constitutional, surely someone will chance a case now and just introduce the instability later in the process? Still the Supreme Court can be relied upon to make politically judicious decisions too…..

  4. The EC slapped Minister Lenihan’s wrists twice this year for having provided written undertakings to INBS and Anglo on 22nd December, 2009 (yes exactly a year ago today) – in plain terms the Minister broke the law by providing State-aid without EU approval beforehand (in fairness he consulted the EU but seems to have been bounced into providing written undertakings by events unfolding at INBS and Anglo).

    I honestly can’t see how AIB could keep its banking licence on Monday, two days ago, when it transferred such a large minitranche to NAMA at a 59% discount, crystallising a huge loss which will have hit its capital. Did Minister Lenihan break EU law again by providing an undertaking on Monday which was only approved by the EU yesterday? It has all the hallmarks of being bounced into sub-optimal action (again)

    As regards the Bill (now Act) I wonder if AIB’s many subbies or indeed the €300m-odd of non-State shareholders will test the Act’s constitutionality. And what about the same groups in BoI?

  5. If the legislation is challenged and deemed unconstitutional, does that mean the whole bill is scrapped? Does that mean we would have to repay bondholders, but that we wouldn’t have to repay bondholders if the legislation was done correctly? Can anyone challenge this law, or just someone with an ‘interest’?

    Can any lawyers answer these questions?

    I’ve been critical of have a lawyer as minister for finance, but in fairness to Lenny writing laws is something I think he is competent at. That said, I would much prefer if it had not been rushed through the Dáil, and instead take a week off the Christmas holidays or something to deal with it.

  6. Hopefully the Shinners will hold the balance of power next time round 🙂 it would be wonderfully ironic if the powers given were used against those who drafted them.

  7. The EU seems determined to ring-fence the problem sovereigns and prevent the spread of contagion, but I expect the Eurocrats, despite not always being very tender of property rights, are probably taken aback a tad by the extent to which the Government is prepared to trample on them.
    prrpessing to force the EU to close the gap between its fantasy that EZ banks are sufficiently well capitalised if their exposures can be ‘warehoused’ or imposed on the peripheral sovereigns and the reality that many (both within and outside the EZ) – and particularly those exposed to peripheral sovereign and bank investments – will require deep restructuring and, most likely, recap support form the public purse.

    The next round of bank stress tests in the spring should reveal a lot – as it will require the application of somethig more abrasive than the feather-duster that was applied the last time.

  8. It was obviously a charade. But so too is all this pallaver about the Presi passes the laws or appoints the government or that the Queen of England holds final say. I never understood why mature democracies maintain these monarchial but totally vacuous backstops.

  9. Under an Article 26 reference, the bill is deemed unconstitutional – it is also possible for the Court to indicate which part of the bill is unconstitutional – if it feels like it. In any case, the bill is sent back for the legislature to do whatever it wants with it (i.e. amend or drop).

    One of the big disadvantages (or advantages depending on your perspective) of the 26 reference, and the thing that Gwynn Morgan was getting het up about is that once something has been declared constitutional, that’s it – it is permanently constitutional and can never be challenged again. When dealing with complex bits of legislation trying to work out all possible angles to the interaction of that piece of legislation with every conceivable constitutional right can be tricky. Given the time limits (60 days IIRC), it is quite possible that they don’t catch every angle – and something unconstitutional is thereby deemed constitutional.

    IMO, not using the 26 reference is a better way of ensuring that any constitutional issues are appropriately dealt with.

  10. @JM

    One of the big disadvantages (or advantages depending on your perspective) of the 26 reference, and the thing that Gwynn Morgan was getting het up about is that once something has been declared constitutional, that’s it

    If one were at all cynical about de Valera, one could claim to see the hand of the master at work here. By deliberating on a bill and deciding to refer it to the Supreme Court, the President and his Council of State get to express appropriate concern for the grave matter of the supremacy of the Constitution – and then the Supreme Court will tidy everything up with its indelible rubber stamp, job done!

  11. If the ECB is so intent on being independent of the Governments of Member States, then it should be happy that Governments of Member States are similarly intent on being independent of the ECB!

  12. JM wrote

    “IMO, not using the 26 reference is a better way of ensuring that any constitutional issues are appropriately dealt with.”

    You are completely right.

    If the Bill withstood a S26 reference, it would be immune to constitutional challenge forever. That is not a happy situation given that unforseen injustices can always crop up.

    I would be astonished if that argument had not been advanced with some vigour by Chief Justice Murray at the meeting of the Council of State.

  13. The A26 reference would not have stopped people challenging the exercise of the discretion granted to the minister. Although a party could not have challenged the provisions of the Act they could still have challenged the application of the powers the Act grants. Therefore, the reference would not have solved the problem of litigation arising from the act

  14. Anyone with standing can challenge the Act – in general, a party can’t assert someone else’s rights – a subbies whose interest was affected could challenge it

    A more interesting and worrying question is whether a subbie who agrees to one of these buy backs could challenge how the government has dealt with these issues.

    Could they ground a claim for compensation based on interference with their property rights in circumstances where the state has essentially threatened to unconstitutionally expropriate their property if they don’t agree to these new terms?

    I’m trying to think what their cause of action would be. Maybe simply damages for breach of constitutional right (or legitimate expectation?) as there doesn’t seem to me to be another remedy

  15. I have been looking into sovereign debt dynamics formulae and have a question.

    The main inputs seem to be debt/GDP, primary surplus, real interest rate gamma and real GDP growth rate.

    How does one calculate the sovereign debt dynamics of a country with virtually unlimited exposure to the private debt of a bankrupt banking system ?

  16. How does one calculate the sovereign debt dynamics of a country with virtually unlimited exposure to the private debt of a bankrupt banking system?

    The best approach I can think of is to treat the state (including Nama of course) and the guaranteed banks as a single entity. Unfortunately that means that you have to form a view of the quality of the banks’ assets in order to determine whether the debt is sustainable. If anyone has made an effort along those lines I’d appreciate a pointer.

  17. Quick off the mark…

    *IRELAND SAID TO SEEK COURT PERMISSION ON AIB AS EARLY AS TODAY
    *IRELAND MAY SEEK COURT PERMISSION FOR AIB CAPITAL INJECTION

  18. Now that the Law to Remedy the Distress of the Banks, Bondholders and Government has been passed, taxpayers can sit back and wait for a whole raft of other authoritarian interventions to roll over them and retail shareholders are left gasping for breath. Wondering myself if Dublin airport might be best renamed Changi in keeping with changes in political pace.

  19. @Bond. Eoin Bond
    ”*IRELAND SAID TO SEEK COURT PERMISSION ON AIB AS EARLY AS TODAY’

    Any idea why they need Court permission?

  20. “Any idea why they need Court permission?”

    From a quick look at the Act, it’s the [High] Court which actually issues a Direction Order, on the application of the Minister.

  21. “Bank Stabilisation Bill” is a real joke considering what this act of pillage is, especially considering the rotten state of the banks.
    Let’s see if AIB and BoI make it through to the end of 2011 and if there is anything left to stabilise.

    Presumably “dead bank grip over the still barely breathing sovereign bill” would have been too close to the bone.

  22. No had chance to follow this stuff yet never mind read Act yet – must try harder!

    For the mo, can anyone advise on the spread of financial institutions that might be covered in respect of the minister’s new powers?

    I am thinking of Head Office in Irl. vs branch of overseas company, regulated by …etc. Is this for named institutions only, so far?

  23. @grumpy

    For the mo, can anyone advise on the spread of financial institutions that might be covered in respect of the minister’s new powers?

    Good question. Could Paddy Power be forced to merge with AIB? 🙂

  24. @Jm, Cormac

    Sorry – not hugely familiar with S26. Just to confirm them – are ye saying that perhaps the wisest move was NOT to refer it as the entire bill might erroneously (by accident or design) declared constitutional permanently, but that if a third party takes a challenge to a particular clause, then either
    a) it leaves open the possibility that other clauses, at a later stage, maybe separately challenged
    and/or
    b) the clause that is challenged by the 3rd party, and declared constitutional would not be PERMANENTLY constitutional in the same that a S26 reference would render it?

  25. @ Ceterus

    i believe the court order will get around the shareholder approval issue, ie no vote on it, so can be done ultra quick (note: year end was mentioned in the original legislation speech for AIB’s recap, not sure quite why this is an issue, but clearly Lenny wants to get this done by then).

  26. I see! How interesting!

    Of course, McAleese being a constitutional lawyer herself would understand this, which is why I think Presidents should be either former Taoisigh/senior politicians of vast experience OR constitutional lawyers, for that once in a term moment when their job is important.

    I think because our recent Presidents were women called Mary that people forgot they were both extremely well qualified for the job, hence the rush this time of do-gooders and mould changers eager to assume the role of National Opener of Things.

    But that’s an argument for another day….

  27. @grumpy
    Part 1 Section 2:
    ““relevant institution” means (subject to section 55)—
    (a) a body—
    (i) that has its registered office in the State,
    (ii) that is, or was on the date on which this Act came into operation, a bank licensed under section 9 of the Central Bank Act 1971, and
    (iii) to which financial support has been given or is to be given by the Minister,
    (b) a body that has its chief office in the State and is, or was on the date on which this Act came into operation, a building society within the meaning of the Building Societies Act 1989,
    (c) a body that has its chief office in the State and is, or was on the date on which this Act came into operation, a credit union within the meaning of the Credit Union Act 1997,
    (d) a person or body prescribed under section 3,
    (e) a subsidiary of a person or body referred to in any of paragraphs (a) to (d), and
    (f) a holding company of a person or body referred to in any
    of paragraphs (a) to (d);”
    So, I think no is the answer to your question, or yes. What was the question again?

  28. For once I find myself fully in agreement with BW II. The Article 26 procedure is of little practical value given the risk – identified by JM and Cormac Lucey – a potential infirmity in the legislation might be missed at the time of the Article 26 reference, with the result that an unsound Act is immune from constitutional challenge thereafter. This has the knock-on effect that the President’s principal constitutional role is largely meaningless. An Article 26 reference is only appropriate in cases of blatant constitutional invalidity; in any more nuanced case, it is better to allow the constitutionality to be tested in “real” litigation, brought by an affected party. The President role remains largely ceremonial.

    In response to Sarah Carey, no matter how good a lawyer Mary McAlleese is, she still only had a short number of days to consider the Bill, and it is difficult to see how she could realistically be expected to have examined what is a complicated legislation in such a short period. She may have decided to kick for touch: something a non-lawyer could have done as easily.

    Finally, for what it is worth, I think that the sweeping powers given to the Minister are in breach of Article 15 of the Constitution: such a standardless delegation of power to the Minister undermines Parliament’s role.

  29. @Eoin,

    Perhaps this has come up before but is there something special about paying subordinated bondholders 20c in the euro? Why not 25c or 5c or 1c or 0.001c? Is there some legal framework that marks out 20c in the euro or is it practice to include it in bond or bond insurance agreements to define a point for specified actions?

  30. @ Jagdip

    nope. Just a nice round number i think. Anglo subs were trading around 30 cents before the exchange offer, so it may have have been along the lines of “33% below current price” just in terms of the optics and the sentiment of bondholders being dealt with harshly.

  31. Minister in High Court this morning, media excluded.

    I suppose he is putting money in AIB without reference to shareholders?

    Excluding the media though, isnt this open to mis-understanding?
    Public might feel that cover-ups were underway?

    Or am I being too paranoid?

  32. If we take over AIB today and AIB controls 17% of the NAMA SPV does that mean that the State will now control 66% (the existing 49% and AIB’s 17%) of the NAMA SPV and that NAMA’s debt becomes official national debt adding 18.75-25% to the existing official debt:GDP%?

    @Eoin, thanks

  33. Interesting report in the Irish Times this morning. In-camera application to take control of another institution. Welcome to democracy in Ireland. Billions in taxpayers money put to the torch, put the same group denied the right of audience.
    Night and Fog laws to follow?

    And while I am at it why does the state require two SCs to plead its case? Anyone know where/when the fees for these actions are published?

  34. @highway 61

    I feel like I’ve been waiting in an airport for three years and the information boards (and the lights) have just gone down. The cold is creeping in.

  35. à la recherce du temps perdu :

    3.3.2009 , Irish Times

    AIB reported a 62 per cent fall in pretax profits for the overall group, which includes its operations in the UK and Poland, and its capital markets division. The group’s pretax profits fell to €1 billion in 2008 from €2.5 billion a year earlier as loan losses surged to €1.8 billion from just €106 million a year earlier. Eugene Sheehy, chief executive of AIB, described the results as “disappointing”. He said he would not be stepping down, and that he had not offered his resignation to the bank, nor had he considered it. “I have plans to run the bank and lead the bank through this crisis,” said Mr Sheehy.

    He said the bank had received €3.5 billion from the Government in the recapitalisation deal, under which the bank will pay 8 per cent interest a year and could give up a 25 per cent stake in the group to the taxpayer. “This could be a very good deal for the taxpayer. . . and I want to be leading the bank to make sure that happens,” he said.

    Mr Sheehy said that there was “no need” to nationalise AIB as even in its stress test the bank was “still adequately capitalised”. Describing the revelations emerging from Anglo Irish Bank as “very troubling”, Mr Sheehy said they had led to “an erosion of morale” within Irish banking.

    He said it had been “a very trying task” explaining developments to international investors.

  36. Big bang on the legislation from Lenny – AIB to be delisted!

    BN 12:04 *IRELAND SAYS AIB TO GET NET PAYMENT OF EU3.7 BLN FROM NPRFC
    BN 12:10 *IRISH FINANCE MINISTRY COMMENTS ON AIB DIRECTION ORDER IN EMAIL
    BN 12:09 *IRELAND: NPRFC TO CONVERT UP TO EU3.5B OF SHRS AT EU0.342/SHR
    BN 12:08 *IRELAND SAYS AIB REQUIRED TO RAISE FURTHER EU6.1B OF CORE TIER1
    BN 12:07 *IRELAND COURT DIRECTS AIB TO COMPLETE SALE OF POLISH INTERESTS
    BN 12:07 *ALLIED IRISH COURT DIRECTION TO CANCEL TRADING ON LSE :ALBK ID
    BN 12:06 *ALLIED IRISH TO CANCEL LISTING ON ISE, APPLY FOR ESM LISTING
    BN 12:04 *IRELAND SAYS AIB TO GET NET PAYMENT OF EU3.7 BLN FROM NPRFC
    BN 12:04 *IRELAND SAYS AIB TO GET NET PAYMENT OF EU3.7 BLN FROM NPRFC
    BN 12:04 *AIB TO BE DELISTED FROM MAIN IRISH STOCK EXCHANGE :ALBK ID
    BN 12:04 *AIB TO BE RELEGATED TO JUNIOR IRISH STOCK MARKET :ALBK ID
    BN 12:03 *IRISH STATE TO INCREASE AIB STAKE TO 92% :ALBK ID
    BN 12:03 *IRELAND SAYS HIGH COURT ISSUED AIB DIRECTION ORDER :ANGL LN
    BN 12:02 *IRISH STATE TO INJECT EU3.7 BILLION INTO AIB :ALBK ID
    BN 12:02 *IRISH STATE TO INJECT CAPITAL INTO ALLIED IRISH :ALBK ID

  37. *IRISH STATE TO INJECT CAPITAL INTO ALLIED IRISH :ALBK ID

    Injection implies a solid body rather than the watery mess that is AIB.

  38. AIB still has to raise €6.1bn by the end of February.

    Following the equity issue made pursuant to the Direction Order, AIB will be required to raise a further €6.1bn of core tier 1 capital prior to 28 February 2011 in order to comply with the revised regulatory capital requirements announced by the Central Bank on 28 November 2010. It is also anticipated that, prior to 28 February 2011, subject to receipt of appropriate authorities, the NPRFC will convert up to €3.5bn of its existing 2009 Preference Shares into Ordinary Shares or CNV Shares at a price of €0.342 per share.

  39. @ Jagdip

    AIB Investment Managers are the beneficial owners of the NAMA SPV stake correct? As such, its not AIB (and so the State) that owns it, but the investors in the IM part, i think?

  40. I had assumed all this has been rushed through for the AIB because deposits are leaving it quicker than the snow is melting and alarmingly so since the IMF etc. were in town.

    The cashpoint machines shutting down just after Christmas is hardly the best way to support retailer attempts to revive their flagging fortunes in the January sales.

    I think what worries me more is that what was going on in that court meets any definition of ‘public interest’ and all this secrecy seems to be a hallmark of this failed government.

    I’ve been away for a few days. Did I hear correctly that the Greens have decided to extend FF’s time in government so they can get more of their agenda on the books before they become toast? Can we not just kick these people out in January and try to start over?

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