Patrick Honohan on Prime Time

His comments about the saving of Anglo benefitting all of Europe, and that this needed to be understood and recognised in dealing with Ireland now, were interesting to say the least. Is he about to tell the ECB that we need some reciprocity?

These are some of the screen headlines that I see
HONOHAN: INCREASED POTENTIAL FOR HOME LOAN LOSSES
MORTGAGE BOOKS BEING LOOKED AT
ASKED ALL BANKS FOR DELEVERAGING PLANS
BANK CAPITAL SHOULD BE PUT IN IN LIGHT OF STRESS TESTS
The initial 10bn euros earmarked for the banks may not be enough, though he didn’t place any “credence” in an estimate that the banks may need as much as 50bn { NSN LHEKGA6TTDS3 }

My comment:

Elites Utd. (of whatever hue) 1: Irish Citizen + Taxpayer Utd. 0.

Taxpayers, now who they would be? Oh yes, the dupes that will actually have to pay. Bondholders, now who would they be? Oh yes, those who must be ‘serviced’ or else they would never lend to Irl again.

Taxpayers were mentioned thrice – biblical? Be very careful for what you wish. When, not if, the Irish taxpayers and consumer citizens of this state legally withhold their taxes (by working less and consuming less). What do the non-citizen elites do then?

“What do you do when you are about to lose the debate?” You start cheating!” [Karl Denninger]

BpW

Mr Honohan is a man under pressure that much is obvious. Default is not an option for any part of Irish society was stated with more emotion than would indicate confidence in what he was saying. I would be extremely surprised if the September shoe dropping was the last such incident and poor Mr Honohan is steeling himself for more bad but not entirely unexpected results after the “stress” tests. In the fourth year of this debacle I see no willingness to deal with the harsh reality beyond going to Frankfurt cap in hand and as a result digging the hole deeper. The only solution is receivership for the banks, sovereign default for the nation. An up front offer of 33.33% for funds the sovereign backstopped and full repayment of what we owe ECB and IMF. An immediate sell off of all bank assets with what is realized being applied as a deduction to our 33.33% contribution. Enda is off in a few days to kiss Angela’s ring with the plan being as he does so Irish debt will vaporize and drift up to heaven as in a scene in a Wagnerian opera. Jonathan Swift, George Orwell or Franz Kafka would be well equipped to comment on what is now transpiring in Ireland.

ILPM released their 2010 results today

http://www.irishlifeandpermanent.ie/investor-relations.aspx

The crisis is written all over the numbers. “Impairments of €420 m driven by decline in property values”. NAMA failed.

“Significant increased reliance on ECB due to closure of debt markets”
32% of funding is ECB.

BoI and AIB must be even worse.

For a man described in the introduction as straight talking he was circumspect in many of his answers – perhaps because he was burnt once or twice previously for being too open. Especially on the question of why Anglo was included in the guarantee, I felt his answer “if what we know now was known then ..maybe things would have been done differently..”, only leads on to question – yet again – why a guarantee wasn’t put in place which would have automatically invalidated the cover for any institution which was found subsequently to be less than upfront about their material status. All insurance contracts include such a clause and to overlook it has always semed to me to be at least imprudent, and at worst criminal.

@all barby army

England 200 for 2; vs Ireland; 33 overs. Tuff but manageable (-;

@Colm Brazel,

Your view of Professor Honahan is simplistic and divorced from reality. Indeed the view of the banking crisis as it developed over the months leading to the bailout are often skewed with hindsight. Honahan took over a situation which was in constant flux. There was no solid ground under his feet. The situation in terms of bank loan books going through Nama took time to develop. And the international situation deteriorated unexpectedly. It is far too easy to say A or B should have been done with the benefit of hindsight.

Regarding the soft ride Honahan got on prime time – yes, perhaps. But I welcome the fact that agreed to make an appearance. Whether we like it or not, and for good reasons and bad, central bankers tend not to expose themselves to too much media examination. When they do they have to weigh their words very carefully. True, Professor Honahan presides over what is essentially a regional office of the real central bank the ECB, but for all that he our representative, and is on the ground so to speak, in the eye of the Irish storm.

For me the most worrying part of the interview was that Honahan was not as categoric and clear about the managability of the Irish situation as he was before. I think it is very clear that he understands we are in a terribly difficult predicament and that it requires a great deal of dedicated, careful diplomacy and concentrated minds.

In that sense, the challenge for the new political leadership is to rapidly ramp down election rhetoric and to quickly develop a more sober and calcuated comprehension of where Ireland’s interests lie. It is this, more than anything, that makes me nervous.

@Tomaltach

Emperor Honahan as portrayed on RTE, has no clothes on.

He got his figures wrong about Anglo, by his own admission. He was wrong about the arrival of the IMF/EU. Figures show the inevitability of our default. His solution is to hope the ECB will manage this for us. This is absurd. I concur with others, he should be questioned more carefully. He doesn’t agree with Dukes the figures for Anglo will be as bad as Dukes believes they might be. But he doesn’t know until the stress tests are complete! This is absurd. Currently there is a run on the banks, mortgage default is getting worse. Deflation will make things a lot worse fast. But he hopes EZ will fix this for us sometime in the distant future! This ivory tower of jelly is no use in solving our problems, instead its part of the problem.

The CB today issued data on the bondholder debt situation of the Irish banks:

http://www.finfacts.ie/irishfinancenews/article_1021762.shtml

@Barmy Army

Ireland 102 for 2; 20 overs: vs England [328]

Does that central bank bond data that finfacts links to deserve a thread?

@all

Methinks The Governor needs to be congratulated!

I can’t get a bob – and he facilitates a flow of 100 + 50 + 60 … €210 billion Euro …. & No FireSales

Unlike Ireland vs England at the mo, looks like he is on 150 not out (-;

@Tomaltach,

Look, my Lord Cardigan analogy was well thought out. Look at the Primetime interview and listen carefully to what Professor Honahan is saying. If you listen carefully, you will see how absurd it is. He lectures us on how he thought our debt was manageable without external assistance. But the markets lost confidence in us. The result was the IMF/EU are here. The markets didn’t have confidence in him, why should you? But it gets more absurd, because he drags out the old canard of Ireland saving Europe by saving Anglo. When did I hear that argument before? Oh, it was during the negotiations on the bailout deal. But he acknowledges we got no concessions in that deal, so he’s hoping we’ll get concessions now in March.
After being shot down by the markets, he’s going to lead the Charge of the Light Brigade again:) Look at KW’s post on the agenda for March summit, no concessions there for us. Banks owe a €100 bn to ECB, €50bn to ICB and there’s €63 bn approx figure released today of bondholder exposure total of Irish banks and Honahan is worried burning bondholders will damage the Irish economy! We’re holed beneath the waterline. Even with burning bondholders, it will be difficult to get our economy on its feet again.
One other disastrous, I believe, view of his, is this resistance to a firesale of assets. This is not only absurd but its incredible. The global economy for the next ten years will have difficulty recovering from the shock of 2008, there will be a downturn, asset values will steadily decrease until things begin to pick up again. He should be flogging whatever assets the banks have asap and taking the advice of the europeans, but he’s against this, probably hoping for some LTEV to realise, or that he’ll wake some morning
and all our debt evaporated and our economy is back to growth at 6%. He had his chance, his approach lost, we need fresh thinking and a new mindset. Hope you wakeup soon:)

a great comment over at the grauniad

“Being a second generation plastic Paddy can be confusing at times,” says Lee Cashin. “Personally, I’d like to see an Ireland v England hurling match.” Especially if John Terry plays.”

@BARMY ARMY

IRELAND BEAT ENGLAND IN CRICKET WORLD CUP

Ireland 329 for 7

(-;

329-7? Jebus. That was a harsh but clearly manageable target. Perhaps FG should conscript the team into the DoF.

… most successful run-chase in world cup history – ever.

Didn’t see the interview but I read this quote in the IT:

“He said he believed the €10 billion would be put into the banks, but that doing so after the election would ensure greater legimitacy and “buy-in” from the Irish public. His recommendation to the new government would be to do this before the end of the month and following the completion of stress tests on the banks.”

Is Team Ireland still playing like its amateur hour. The state’s own CB Govenor saying the new Irish government _should_ pony up €10 Bn for the banks by the end of this month – cutting the feet from under any attempt to negotiate any concession. Great teamwork kids (not).

Also unclear, how he thinks that the election conferred any “legitimacy” or “buy in” – Irish people gave 20 seats to the party that signed the guarantee/rescue/etc….and even FG said the deal needed to be renegotiated.

Methinks oblivion awaits Labour (especially) and (maybe) FG if more taxpayer money goes to bondholders, recaps, etc.

If we want to have some EZ public opinion on our side, NOW is the time to hang tough. Even if the plan is to eventually cave to the ECB, let us do so only in the face of _very public_ threats to destroy us/kick us out of the euro etc if we don’t use public monies to pay private debts/bondholders.

I hope someone in FG/LAB is working on plan B:
a. EZ exit
b. Rapid convergence to 0% current fiscal deficit
c. Banking Resolution scheme for depositors.

It would be tragic if he ends up as the Troika’s emissary in Ireland. He should certainly not dictate to a new government.

@Joseph Ryan

As I understand it, since Ireland is part of the Eurosystem the CBI is not a branch of Ireland’s public administration, but is a branch of the ESCB/ECB. Hence Honohan is not an Irish civil servant in the normal sense. As a member of the ECB Governing Council he is required by law not to seek or take advice from the Irish government (quote taken from EU website):

The ECB works in complete independence. Neither the ECB, the national central banks of the Eurosystem, nor any member of their decision-making bodies can ask for or accept instructions from any other body. The EU institutions and member state governments must respect this principle and must not seek to influence the ECB or the national central banks.

The ECB, working closely with the national central banks, prepares and implements the decisions taken by the Eurosystem’s decision-making bodies – the Governing Council, the Executive Board and the General Council.

The question has to be why was someone whose legal responsibilities and duties are to the ECB and the Euro, and not to the Irish taxpayer, such a prominent part of the bailout negotiation team? Would not a role as an advisor have been more appropriate than as a deal-maker?

If you strip away the differences in personality and manner of presentation, on matters of substance relevant to the Irish taxpayer, there is little difference between the good professor and bad-boy Bini.

@ Michael Hennigan

I found your article in finfacts interesting but I have one point.

Seamus Coffees research showing that about half the bond are irish owned could be used by many to argue against burning bond holders as it would be shooting ourselves in the foot.
2 points.
1. But How much of this Irish element is Irish IFSC holdings?
2. Some people argue that whether the bond holders are Irish is not that relevant because peoples objection is with regard to Private losses being socialised. That some of this private loss is Irish isn’t the point. lower and middle income earners subsidising Poor investment decisions of large institutions doesn’t seem very fair regardless of their nationality.

@Bryan G.

Thank you for the quote from the EU Website.

If the quote is an accurate statement of the ECB responsibilities then:

1. As the ICB is answerable only to the ECB, then the full, repeat, full, responsibility for the disastrous non regulation is the full responsibility of the ECB.

2. Barroso was talking through his **** when he said that it was the fault of Tthe Irish regulations. The Irish regulators, according to your quote above, responsible only to the ECB and therefore to be ‘supervised’ only by the ECB.

3 Your question is spot on regarding Honahan being on the Irish negotating team. It would appear that while he was on the Irish team, his legal duties were to the ECB team, and to get the best deal for the ECB.

4 Perhaps two psychiatrists both with a good knowledge of schizophrenia, should have been added to both the Irish and ECB teams.