The ‘free market’ was manipulated by the global north to extract wealth from the global south and we have been happy to take part. I wonder where the ideological belief in the free market has gone? We took the gain now its time for the pain.

We should use this event to change the system so its fair to all of us because if we dont conservatives and elites (neocons, irish banks etc) will implement their reforms, disaster capitalism- and these will not help us.

Maybe BL is actually a contributor to this blog….

Unfortunately Brian Linehan is in the game of politics. Politically, after making such a bold move last week he, and the rest of the governement, must sit tight and make like everything is “cool and the gang”. It would be political suicide to start tearing strips off the banks, at least in public. The other issue is, similar to the US, the kinds of exotic SIV’s the bankers can come up with to flog will be way ahead of anything our government and idiot regulator can comprehend. If they dont comprehend it they cannot regulate it.

The banks know this and they will use whatever exotic SIV’s they can come up with to offload this developer debt to anyone who will have a punt (many will because of the sovereign guarantee so it is a no lose punt which is a very rare animal) as quickly as possible.

The bankers are in charge again. The uber cue hoors.

Ger

I still think that the banks will dump the developers like a ton of bricks. (No pun intended).

The banks have two years to sort this mess out. The property market is f__ked. Nothing will bring that beast back to life. We are in a Japan Secenario with respect to property, at best. Also they dont know what is coming down the line in the line of extra regulation from the EU. If I was them and I wanted to get rid of my problems I would repackage all those developer loans, sell them on as “new debt” and land the developer mess on the governments lap. Slam dunk! They would re-capitalize in the process and survive. If they hold the developer debt there is good chance that one or more of the banks will go down even with the guarantee and those boys know this. If they turn it into “new debt” and sell it on they have offloaded their risk.

Bankers are inherently risk adverse. I know the morons running Irish Banks over the past few years lost that trait but that was a cultural thing. The entire culture of Ireland got caught up in the “property monster”. In fairness it was hard not to. It became the national form of mental illness. The management at the Irish Banks should have known better and I am sure that they have seen the light now having nearly lost it all last week. I think they will dump the builders and land the problem in the governement’s (taxpayers) laps thereby removing all risk from themselves.

The only people they are ultimately answerable to are the Bank Shareholders. That I why I do believe that the governement should really have take substantial stakes in each of these banks as part of this guarantee. I think that ultimately in years to come Cowen and Linehan will be judged as having f__ked up majorly by guaranteeing all “newly issued” debt as well without having board level power/influence to put a stop to these kind of shenanigans.

Ger

One thing that has happened in Banking culture in the last 10years has been the over focus on gropwth rates, 10% was bottom of the league stuff – being risk adverse was very passé. The new acne faced MBA types who thought they knew it all were going after bigger game. They did not care what loans they sold and for what security, growth rate was trhe holy grail. It is a culture that has overtaken the whole industry.

Lenihan needs to start bringing back the traditional practices and getting rid of the old nonsense. Integrity is the only coinage we have left for play.

“The particular risk that the Government now faces is that Irish banks will package toxic loans as asset-backed securities and sell them off with a Government guarantee, passing on their losses to the Irish taxpayer.

Suppose that you are a bank that has lent €100 million each to 10 developers who are having problems meeting their repayments. What you do is bundle the loans into one asset and sell it, with Brian Lenihan’s signature on the bottom, on financial markets for €1 billion. When the borrowers default, the taxpayer will be left taking up the tab.”

I didnt see that potential consequence.]

Now that’s a good idea-for the bankers that is!!
The MD of Anglo irish-”The developers bank” was on RTE television this morning saying rosaries for the Minister for Hardship’s dig-out.
He also said that the banks will not now be pressurizing developers to offload their ridiculously stock in a bad market,although their liquidity door has presumably been opened by the government guarantee.
So, we see the banks and the developers closing ranks already.
If all banks adopt a similar stance-expect a Japanese style “Mexican standoff” between potential buyers and the builders, in Ireland, for the next 10 years or more..
That will hardly kick start Brian Lenehan’s “blank cheque guarantee scheme”?.

First, has the Irish government quantified the potentially huge liabilities it is taking on by guaranteeing sterling deposits in Britain, where household cash savings amount to £1.1 trillion?

Second, where will the Irish government obtain sufficient sterling to meet its liabilities if a bank fails? It cannot do so by printing more £1 notes or by raising taxes in the United Kingdom – both are the prerogatives of the British Government.

Savers should beware that, if they switch accounts to take up this guarantee, they are effectively betting on the Irish government’s ability to buy sufficient sterling in the foreign exchange markets. It is not at all clear to me that they have quantified the potential risks they are taking on here.

What the Irish government offers to Irish savers is entirely up to them but their offer is potentially destabilising to savings flows in the United Kingdom and savers ought to beware of the risk that the Irish government may not be able to pay.

At the very least, the British Government ought to be asking some searching questions of the Irish government about its ability to honour this guarantee.”

Quoted from Adrian Coles, the director general of the Building Societies Association (BSA)
=========================================================
The E.U cannot allow this situation to continue once Ireland’s application is formally received. Nor Greece’s.

The bailouts of both Northern Crock and Bradford & Bingo were both cleared with the E.U competition authorities. Northern Crock has now had to close access to some deposit accounts to remain within EU competition stipulations put in place at the time of it‘s bailout by H.M Govt. So the comparison between UK and Irish responses doesn’t hold up to much scrutiny – despite what some Irish politicians and commentators are claiming.

More disturbing is why the Irish Government has acted with such rash haste and lack of consultation with other European countries.

Nobody in Britain cares that the Alliance & Leicester and Bradford & Bingley are now owned by Banco Santander. So what? They made dumb choices, their business models collapsed. You are the weakest links: Goodbye. No saver has lost a penny. Panic quelled – until you lot re-ignited it.

It hardly represents a catastrophe. These failed banks do not indicate Britain is a ‘failed state’. Quite the opposite.

The best thing that could happen to Irish Banks would be to face the full force of market competition from all European banks to ferret out the truth. Then the toxic garbage can be isolated and dealt with transparently.

The Irish Government, by keeping zombie banks going, is simply forcing the Irish taxpayer to fund a semi-permanent firewall against competitive scrutiny.

Why? What’s being hidden? What’s on the balance sheet? And, more importantly: What’s off-balance sheet?

This ‘masterstroke’ raises serious concerns as to possible collusion between a banking / property cabal and the Irish Government: With the intention being to slice and dice the dodgy debt, then sell it and get ‘cash for trash’ under the guise of a ‘sovereign guarantee’. Many contributors to this thread quite correctly smell a rat.

There’s a lot at stake here. Never mind Ireland not being a ‘team player’ and sparking off a similar headless-chicken ‘masterstroke’ from another maverick, Greece:

It’s all about the reputation of Ireland. Reputation as a tradable asset.

The nonsense of Bertie and his interminable Tribunal was bad enough, but this could really cause problems. Long term irreparable image problems. When the going gets tough, Ireland covers it’s arse, and bollocks to anyone else?

The glee expressed by some contributors to this thread that this is ‘irksome’ to Britain is asinine. It’s hard to see how falling out with your largest trading partner is going to serve you in the lean times ahead, but I doubt that thought crossed anyone’s mind in the febrile atmosphere in which this decision took place.

As for Ireland’s AAA credit-rating: Anyone who’s followed the catastrophic events on Wall Street realised long ago that the rating agencies are clueless clowns, and need serious investigation for their incompetence.

There’s absolutely no reason why a previously trusted country can’t suddenly find itself eviscerated by a change of sentiment. Just ask Iceland. The fact that Ireland is ‘sheltered’ within the Euro is fine and dandy, but it’s not clear how this stunt does much more than seize short-term gain at other countries expense. Unlikely to be applauded this afternoon by The Big Four meeting in Paris, methinks.

I’ve yet to glean how this short-term advantage is going to be turned into a long-term solution to the Irish version of the Wolrd Economic Crisis. Have I missed something?

Oh, I forget myself: Irish banks will voluntarily ‘reform’ and atone for past misdemeanours having been ‘chastened’ by being made to sit on the stairs with a dunce’s hat on for a few hours.

More likely is they’ll start touting for more Capital for their next set of scams using the Irish Taxpayer/Sovereign Guarantee on their newly printed business cards/emails touting for other nation’s safe cash.

Kind regards

Why should we have any confidence that this necessary action will occur? Past behaviour would suggest they will continue to act in their own interest.

What is to stop the banks from continuing their reckless lending? Now that they have greater access to deposits and other sources of funding without risk, why wouldn’t they just lend greater amounts of money towards property?

I don’t see any provision in this bill to control the direction of the banks’ lending, or any reason for them to become more prudent. Indeed, much the opposite!

Alternative course of action needs to be considered or at least the downside covered before the scheme is introduced. The market capitalisation of the four publically quoted banks (AIB, BOI, ILP and Anglo) and the 2 building societies is less than €15 billion. The NTMA have assets of €20 billion which are declining in the current market. If the government ‘really’ thinks and is being advised the assets are greater than the liabilities for these 6 banks of €80 billion (€520 bn- €440 bn). Why don’t the Government use the NTMA funds to buy the banks (or an option) which could be sold at a profit later ? We’re already adding over €10 billion to national debt which will be double by 2010.

They say the banking system would have collapsed without the guarantee of financial support from the government. A takeover from the Irish Government of one or more banks would have been the only alternative to collapse, if all went ‘wrong’ afterwards then the ‘maximum’ the tax payer would be out for would be the equity investment in purchasing the shares of these banks which are valued on the market at well under the the value of NTMA assets.

The government could make a seperate commitment to compensate any deposits ‘ring fenced’ to ‘Irish’ resident customers & businesses only and not be exposed to the liabilities owned and held outside the state as proposed now.

Eitherway, there needs to be a return for the guarantee of the liabilities of banks which may produce a considerable return in the future if / when hopefully they succeed, this reward needs to be commensurate with the risks taken.

Lenihan should consider alternatives before signing up ALL the banks to this ’scheme’ without covering downside ?