December 15, 2008

Lenihan must take responsibility

Posted in Banks · 168 comments ·
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Has anyone broken the news to finance minister Brian Lenihan that he owns the banks? So far, this fact appears to be unclear to the minister and his civil servants.

What did they think they were doing when they signed the guarantee? Lenihan not the washed-up boards of the banks is the boss. The buck stops with him, not the squirming chief executives who are in the unedifying and entirely self-absorbed business of holding onto their jobs. There are signs of discussions now under way, though it remains to be seen what emerges.

Given that the management of the banks is in self-preservation mode, any meaningful bid that comes in now will be hostile, not to the institutions, but to the individuals who ran these companies into the ground. Therefore, in the interests of the state, the minister has to act against the interests of the individuals who run the companies. Things couldn’t be clearer. If the minister wants any progress on the banks and, by extension, the economy, he will have simply to go over to the banks, put a friendly arm around the shoulders of the current bosses and usher them out the door. If not quite out the door, at least in the direction of the foyer, explaining firmly but sensitively that they are part of the problem.

If they play ball they might have a chance; if not, they are out. In short, Brian Lenihan is the don and he has to accept this. Any minister for finance who guarantees his banks is the last man. He makes the decisions. If this inconvenient truth hasn’t sunk in at the department, itmost certainly is clear to the financial markets. As far the rest of the world is concerned, ever since the guarantee was issued on October 1, the state more or less owns the banks to the extent that, if the banks collapse, the state picks up the tab.

If you doubt this, look at the simple chart below. This is a chart of what is called the credit default swaps for our country and our banks. A credit default swap measures the risk of default. It is the price you have to pay to insure against the bank or the country defaulting. Obviously, the higher that price is, the more likely the market believes that the institution or the state will default. Check out the chart. Before the guarantee, the market was progressively coming to the view that the Irish banks were moving into default territory. In contrast, during the summer months, despite the banks’ deterioration, no one was attaching any significance to the state defaulting. However, the minute the guarantee was signed, everything changed. The market moved immediately to the view that Lenihan was the boss and that he was responsible.

As you can see, in the past two months, the market’s perception of a sovereign default by Ireland has increased twenty-fold, while the banks individually have seen their default risk collapse. So, rather than the sovereign state bolstering the credibility of the banks, the banks have contaminated the creditworthiness of the sovereign! Had Lenihan moved quickly to recapitalise and had he swiftly fired the culpable, this might not have happened. Because we dithered, the market now sees that the guarantee was nothing more than an underwriting of bad bank behaviour and has reacted by transferring the liability of the banks onto the state.

Make no mistake about it; this trend is going to get worse, not better. If the minister prevaricates, he will simply undermine the ability of the state to borrow for hospitals, because he is trying to protect the banks’ boards and senior management most of whom are millionaires. The reason, I believe, that he is protecting the fat cats and not the small shareholders and pensioners who sadly trusted the banks with their pensions, is that the boards and the management have already destroyed the wealth of the shareholders. By presiding over a 90-95 per cent fall in their share prices, the bosses of the banks not Lenihan have torched the shareholders already.

When I hear the same individuals now pontificating as I did last week about their need to represent shareholders, it makes me feel sick. Worse still, when we see them trying to plunder their own pension funds our money to save their hides, Geldof’s angry ‘‘Banana Republic’’ rings in my ears. Someone needs to clean out this system of ours, because if the banks with new management and boards are not put up for sale at any price, the entire Irish financial system will not might implode.

With every passing day, this Armageddon gets closer. Someone had better tell Lenihan that, if he does not do something quickly, we will some day soon see Ireland’s Bear Stearns and once one goes, more will be threatened. By this, I mean that, one weekend, there will be a knock on the minister’s door and a group of well-dressed but desperate bankers will tell him it is all over.

They’ll do what hundreds of ordinary people will also do, they will hand back the keys and say to Lenihan: ‘‘Sorry Brian, it’s your problem now. We can’t cover our bad loans. We are out of capital. The world won’t lend to us at any price. Because we destroyed our investors’ funds last year and tried to bluff our way out, we have no credibility.” What is the minister going to do then? He’s going to have to write an enormous cheque to keep these places open but he doesn’t have the money. That’s when the financial markets start selling Irish sovereign bonds en masse.

The speculation will be that Ireland will not be able to pay its way and we will see the price we have to pay for credit explode. No one will want to touch us and we’ll move from Celtic to Septic tiger in the space of a year. This is now the most likely course of events. Just as 24 months ago, those who claimed house prices would collapse were smeared as being mavericks, the same applies today. You probably don’t believe the above scenario could happen. What if I were to tell you that it will happen unless the minister moves?

What can he do? He can tell the management of the banks at any price that they have a set time to sell their banks, otherwise they are out. If the buyer is right and by this I mean a large, solvent, Continental solvent bank they might have to think the unthinkable and practically give them away at this stage. If he doesn’t do this, he has potentially, not one, but six Bear Stearns on his hands.


  1. Ruairí

    Well said and yet obvious to all here at the same time : – “Has anyone broken the news to finance minister Brian Lenihan that he owns the banks? So far, this fact appears to be unclear to the minister and his civil servants.”

    Has anyone broken the news to the government of the last 20+ years (since Lemass) that they are answerable to the Irish people? Mary Harney spouted on tonight on The Week in Politics about her brain fart moment ‘Boston or Berlin?’. I suggest that our government would do well to look at the Scandinavian governments for guidance as to how to safeguard a people’s future by retaining control over their natural resources.

    We have enough oil, gas and fish stocks to buy and sell our way out of any property bubble. But not when we have given it away. And then sweep such giveaways under the mat.

    The clock is ticking Minister.

  2. Ruairí

    “Worse still, when we see them trying to plunder their own pension funds our money to save their hides, Geldof’s angry ‘‘Banana Republic’’ rings in my ears. Someone needs to clean out this system of ours, because if the banks with new management and boards are not put up for sale at any price, the entire Irish financial system will not might implode”

    This is what spooked the markets about Argentina only a short time ago? And now its become so much a part of concensus thinking (suggested stateside too) that its almost de rigeur to look around to see what other stash can be looted to stuff in the big moneypit. More of the herd-think eh?

    What makes these guys think they are any smarter than the big buffoons of the 80′s? In fact, they’re so cossetted and removed from economic fundamentals that your doomsday scenario of the same bankers exhausting the remaining shareholder’s funds is highly likely.

    The government must lay the groundwork for a new hungry society, hungry to innovate and achieve on the world scene; or we are walking dead. The stamp duty favour to half-built developments, that will have zero footfall, should be axed.

    A week of wasted time saving pigfarmers from their industrial greed when the cabinet should have been out culling the real Orwellian pigs that are making a bags of the next decade for the rest of us.

    Isn’t it time to stop suppressing the rebel Pigs before its too late to stop every last bit of collective domeciled wealth being destroyed FF?

  3. sue

    I have a big check for the banks ….who is first in line?

  4. DarraghD

    No matter what happens here, recapitalisation or no recapitalisation, and it has just been announced this evening that the government has made available 10 billion Euro to recapitalise the banks, but it is now up to the banks to come looking for it on the governments terms, it is clear to any small business that it is a complete waste of money recapitalising these banks at the moment, because they are not lending to businesses.

    It is very obvious that banks are not able to distuinguish between solvent and non solvent businesses anymore and not able to identify businesses that are at imminent risk of closure and those that are not, especially businesses that are relatively new or not long out of start-up.

    The best thing the government could do now is take 1 billion of that 10 billion they have made available to the banks and lend it out to small businesses directly on the basis of the loan being personally guaranteed by the promoter and engaging comprehensively with a newly created small business government support unit, put the remaining 9 billion back onto the Pension Reserve Fund and let the banks sort themselves out like the rest of us have to.

    The IDA and government departments around the country must have hundreds if not thousands of warehouses and offices lying idle, why not set aside capital for entrepreneurs to start up new businesses and provide incubation support for a 1-2 year period by using vacant government office space around the country to allow entrepreneurs get started up while keeping overheads low and managable.

    There is no point whatsoever in supporting a banking system that has for all intents & purposes, shut up shop. What bank board in any event is going to take seriously a solicitor and a barrister to resolve the economic dilema we are in, two professions that couldn’t understand the concept of value for money if their existance depended on it???

    First thing we need is a change of government, we are going absolutely nowhere with this crowd, it’s like watching an overweight dog stuck in quicksand, the more he strugges, the bigger the problem he is in.

    • Woodsey

      @DarraghD

      The most sensible suggestion I’ve read or heard so far.

      Mind you, I’d have sent the CAB in last Sept, when the banks first showed up at Government buildings, to secure depositors’ assets and return them to them. These private companies that are the banks could then have sold off all their expensive loans for 1 – 10% of their value and gone hang. I’d then use DarraghD’s suggestion to keep small business afloat.

      The way we’re going at the moment is ‘slow train crash’ territory!

  5. micheal

    >>>
    First thing we need is a change of government, we are going absolutely nowhere with this crowd
    >>>

    Welll duuuhhhh ;) same goes for the leadership of the banks as well. But that’s one thing about power and politics in Ireland, there’s nobody out there to enforce. I note that in the US they seem to have a great deal of special investigators whose job it is to take down corrupt politicians and business people (it’s a double edged sword of course, remember Kenneth Starr?). Here, guards who stop Minister’s cars from speeding are transferred from County Cork to Donegal (not the recent affair where not only was the car speeding, but it was used to take non Government people on a Sunday jolly – this one happened close to my house. The guard’s marriage broke up, he turned to drink, not pretty) and so forth.

    Anyway, DarraghD, I fully support your idea of a government backed lending institution, I have floated a similar idea here or elsewhere, even mailed various pols about the notion, will be interesting to see if the gumption exists anywhere as frankly, most politicians have learned “on the job” and have too many distracting interests to satisfy. Imagine if the head of a major financial institution used to be a farmer the previous year, and the doctor the one before that, and his major qualification was the fact that he squeezed a few hundred more votes out of a small village in Leitrim. i.e. the average Govt. Minister cycled through ministries. I know one or two finance entrepreneurs who have the vision, experience and know how to make this sort of thing happen. They’d be happy to work under Government observation, being ethical, smart people who know you don’t have to rip people off to make it big. One in particular who showed me the whole credit default swap picture several months ago and told me that he had restructured his business to avoid institutions whose reputation were tanking like theirs.

    I commented to one of the public servants (well, actually a semi-retired one) at the time that I was far less worried about Ireland nationalising banks than I was about JC Trichet nationalising Ireland. David’s simple association of the transfer of risk from banks to the nation underlines that neatly. Mind you, if I were JC I’d let Ireland slide. But a bit like the Black Hawk Down movie, where even though they lost more people trying to recover the captured soldiers than would have been saved, you have to show solidarity in times of crisis to keep the overall team together. So the EU won’t let us drift. But by golly we’d better be nice in September.

    Anyway.
    Let the banks die, they’re only businesses after all. SOMEONE in the commercial banking industry will buy them at a fire sale price if it’s right. [Great example of this was the telecom infrastructure in Europe in the early 90s, they borrowed huge, put in perfectly good optical cable, no money to pay it off so a canny Irish investor bought it all at cents on the dollar when they walked away.]

    Conditions of bank sale include renegotiation of mortgages (debt is bought at a firesale price, so firesale conditions to prevail) where people pay higher interest, but owe less principals, so they can work their way out of this if they really want.

    Place a corral on savings above a certain amount so the rich don’t move their money out of the country. (tough, sorry).

    Create a SIMPLE set of guidelines for small businesses to follow to make their businesses creditworthy.

    Certify SMEs as creditworthy and heaven help them if it turns out they lied.

    Tell the country that TEAMWORK will get us out of this, so cut your fellow certified Irish Entrepreneur some slack, barter if you have to.

    Create local industry cooperatives to help people buy local, and hire local.

    Stop going to New york shopping for fecks sake

    Let the banks die (have I said that already?) they are businesses like any other, and a REAL Government would entrepreneurially come up with a solution that tied together the right talent, interests and energy. It’s not rocket science. Just hard work.

    and ideally,
    Sell all government jets, trade down Govt motors
    send TDs to a business school boot camp where they are taught strategy, finance, and ethics.
    Do as Darragh says and promote entrepreneurship as a real, patriotic option. Here’s a great billboard tagline : ” I’m in an industry with 100% employment. It’s called Entrepreneurship”. Entrepreneurs are OK with living cheap for a few years, so they won’t mind the downturn so much. The alternative for smart skilled people is to leave the country and head to the Gulf or Asia where they are still hiring (though affected too of course). Leaving the hundreds of thousands of people on the dole to wait the downturn out at home til the next MNC comes looking for forklift drivers. Fantastic. To be an entrepreneur, you don’t have to have a “big idea”, you just need to find out what you are capable of doing, working hard at it, and being better than the rest. It could be education, foods, software development, Jayziz, it doesn’t matter. Start thinking out of the box.

    You know, taken well, this financial crisis could be a great chance to reboot the county, both financially and in terms of its values. As long as the leadership continues to act like the bluster that kept them in power all those years actually meant anything, it won’t be allowed to happen.

    Come on. Out with the old. In with the new. I don’t care if the financial crisis is not “Brian(s)’s fault”. The Brians simply have to move on. Get trained. Become qualified and able. Be back in 5 years’ time. It’s not a job for life you know. (funny, they used to say that about working in a bank….)

    blah blah etc etc

  6. Tom

    > We have enough oil, gas and fish stocks to buy and sell our way out of any property bubble.
    You need to look at the size of our oil and gas reserves. It’s very unlikely we could develop the knowledge to exploit the fields ourselves and break even. The Corrib field has an optimistic size of 1Trillion cubic field. Norway’s gas reserves are 84Tcf.

    • Ruairí

      Tom, those figures for oil and gas stocks can be hotly disputed. Its a question of what gets reported, depending on the fees attached to finds. We the people, don’t really know whats down there at all. I would doubt the breakeven point is as high as you imagine it to be.

  7. John ALLEN

    Lenin Ham – Do the honourable thing and …Resign NOW ….while you can . There are many far better people than you who have guts to make a Real Change and be successful .You are pear shaped and clueless .
    The House of Lords will in the coming weeks remove the letter ‘r’ in our country’s name because our nation lacks reason and replace it with ‘c’ not only to call us Iceland but rather to demonstrate that we are now ‘communist ‘.They will register their true patriotism with pride and dignity and show you up for aiding the Scam you are now a party to ,with The Roasters ( Irish BANKERS ), distroying all around you .They will remove The British Post Office as customers and depositors with The Bank of Ireland and re-classify Irish Banks under the anti terrorist legislation and allow the Irish Euro in the basket of currencies to become a shrapnel in the new free market …………….and DEVALUE ……by at least 50%.
    Mr Minister you have no leadership and the whole country knows that and neither does your partner in crime Cow .History is now re writing Abyss of Failed Logic orchestrated by ‘ a Hern a Cow and a Ham ‘ and the plunder carried out in those deceptive years of disgrace .
    Mr Minister you are the owner of all the banks in question and stop prevaricating and allying with those Fat Cats while they continue to torch the shareholders .Stand up and instruct the Criminal Assets Bureau to place these people under house arrest while you replace them with honourable qualified leaders and solve the problems now from the Top down and remove that stench of the Septic Tigers.
    Unless you do the honourable thing our small nation is heading to armageddon continuing the plundering of Pensions Funds , Shareholders Funds ,Nation’s Dignity …Confidence….Rights etc .
    Mr Minister I am not one of your salary paid ‘Yes Men’ and I believe I can best serve my duty to speak my own mind and the minds of the rest of the country when you cant.

  8. Joe Soap

    Hey Tom,

    Your spot on about the fish stock. Just look at all the Spanish / French boats in Irish waters. Billions and billions of Irish fish has been taken from the Irish market and economy from these 2 nations. Whatever the EU gave Ireland in terms of handouts, they got this back multiple times from exploiting these waters. The EU need us as much as we need them. Lets not forget that. They have decimated an industry that gave Ireland a competitive advantage over the rest of the EU (Fresh fish from clean waters that only inhabit the northern waters) and the Irish Government has encouraged them to do so. Why is Norway so reluctant to get involved with the EU? And Iceland??? Altrhough membership at this stage would have helped them, the reasons for their demise is independant of the aquaculture industry. This Government has squandered any wealth this country came into and only now is it starting to learn of the mistakes. Remembers Lenihans comments yesterday – they only saw the downturn coming in June….the indicators of which was obvious to everyone for thelast 2 years, with others shouting that this was going to go sour for the last 5 years, David McWilliams being the most noted

  9. Garry

    Has anyone broken the news to finance minister Brian Lenihan that he owns the banks?
    Good article David, I suspect that if you asked Brian Lenihan that last week, you would get some legal bullshit which illustrates the problem, he’s a lawyer, his approach is that of a lawyer.

    Now that the government have announced something, lets see what they actually do…. The guarantee scheme was announced and appeared genuinely innovative, but the lack of follow through and attention to detail screwed it up…. Its now a different beast to what was announced

    things I’m looking for on this latest scheme

    1) A salary cap at the banks…. The Germans did this in their rescue, they even made some of the executives hand back money as they had already been paid more that year than the salary cap.
    The banks executives are business failures, they are now living on state charity, and as a taxpayer I don’t want to pay taxes to give those fuckers millions every year.
    Apart from showing who’s boss (and that is needed even if only to get an attitude adjustment from them or hopefully to make some of them resign), 2009 will see cuts in public services to keep the country afloat. The government need to force executive pay cuts in the banks to have any authority to cut anywhere else. After all it’ll be hard to argue to freeze pay for some junior civil servant when there are other civil servants on millions a year whose sole contribution to the state has been to almost bankrupt it.

    2) Some sackings, preferable Patrick Neary, and the entire banks boards of directors. We need to get it into our heads they are failures, there’s plenty other talent that will jump at even the reduced salaries on offer and they cannot do any worse than the incumbents.

    3) State gets a benefit in the upside commensurate with the risk the state is taking in the rescue.

    If they happen, I’ll be impressed…

    • Woodsey

      @Garry,

      ‘The guarantee scheme was announced and appeared genuinely innovative’?

      It’s most genuinely innovative element was where exactly a small island nation, with a population less than some capital cities, could possibly borrow €460 billion. Or who’d have the where with all to lend that amount to a Government who’s sole intention was to pump it into small broken private companies who’d competed with each other to over-lend to people who can’t afford to repay.

      It’s all ‘smoke and mirrors’ Garry, intended to keep you from mounting a ‘run’ on the banks. They do it all the time!

      But anyone who isn’t into their bank to withdraw their salary the day after their money is transferred in there by their employer, is taking a terrible risk.

  10. MK1

    Hi David,

    Back to the ‘usual ‘ topic ….. our banks.

    > finance minister Brian Lenihan … owns the banks

    Well, not quite true …. not yet anyway. He (or should I say we) are currently the underwriters of their risk, but we dont own them. We are their guarantors. In other words, we are the eejits!

    > the minister has to act against the interests of the individuals who run the companies.

    The bank recapitalisation programme if/when it happens, will be used to shore up the capital ratio’s of the balance sheets and to cover bad debts. It will likely protect/save those that have large loans taken out (=> developers!). Little of it will be used to keep SME’s going apart from token gestures, perhaps a few large theoretical funds that wont be drawn upon in the main.

    > Any minister for finance who guarantees his banks is the last man. He makes the decisions.

    He doesnt make the decisions. He is taking all the risk (well, we are but he is doing it on our behalf – thanks!). He is making none of the decisions – so, the worst case scenario possible for us.

    > it most certainly is clear to the financial markets.

    The markets are avoiding the Irish banks. No-one knows how much the bad debts in the future will actually be. Not investors, not our government, not the banks, not the people with the loans either, nor I nor you. All we can do is guesstimate. Banks always underestimate bad debts because it is in their best interests financially and ‘risk model’ wise to do so. In theory, 100% of loans could go bad before this recession plays out. Banks CANT survive that. 0.1% of bad loans, yes, no problem, 1%, most likely, 2-5%, some major stress, 6%-10% …. pain, pain, perhaps death 11%-50% … yikes.

    > ever since the guarantee was issued on October 1, the state more or less owns the banks to the extent that, if the banks collapse, the state picks up the tab. … Before the guarantee, the market was progressively coming to the view that the Irish banks were moving into default territory. In contrast, during the summer months, despite the banks’ deterioration, no one was attaching any significance to the state defaulting. However, the minute the guarantee was signed, everything changed. The market moved immediately to the view that Lenihan was the boss and that he was responsible.

    Hold on a second, isnt this what I and many people said would happen if the state guarantee came to pass?? ie: Risk cannot be ‘magicked’ away. All our state guarantee did was move the risk from the banks to us (the state). That meant overnight that our credit rating went down and that state borrowing would cost more. You will recall the Finance Minister was “pontificating” that the guarantee came at zero cost. But he either lied or didnt know that there was cost, and thats what the charts (although I cant see them here) are showing. The taxpayers are in effect shoring up banking jobs and keeping developers asses (no there is no missing t) above water. Thanks Brian! Not to mention the over-inflated public sector. And all this from a dwindling private sector. It cant and wont go on. Like a Madoff ponzi scheme, it will come down. Its a case of when rather than if.

    > Had Lenihan moved quickly to recapitalise and had he swiftly fired the culpable, this might not have happened. Because we dithered, the market now sees that the guarantee was nothing more than an underwriting of bad bank behaviour and has reacted by transferring the liability of the banks onto the state.

    I dont think so David. The market saw the transfer immeditaely for what it was. A transfer of risk. It wasnt hidden. Recapitalising would also be just seen as moving money from one entity in debt (Ireland) to other entities in debt (banks). It doesnt solve anything but it certainly helps bail out the banks and gives a lifeline to those with klarge loans taken out to the detriment of the taxpayers. Swifter action wouldnt have mae one iota of a difference. In hindsight, the smart move would have been to sell the banks to foriegn banks before the newsflow got bad, so back in Nov 2007.

    Another falicy I want to bang on the head is the idea that if we got rid of the few “fat cats” at the top of the banking echelons that all would be hunky-dory. Well, sorry to burst people’s bubbles on this but the poor performance of the banks is not down to the crud at the top alone but it is endemic within the banks. It is cultural. From the gal at the front desk to the funds administrator. Changing that culture is a big big job. It wont happen overnight. It may take a decade or a generation. In fact, the European Banking system is partially to blame. Its a cosy cartel (in each country) and the financial sector has many derogations that other businesses sectors dont get. It is a semi-protected system. Did any US/Asian or any bank ever come into any european country and try and compete from the ground up? Nope. Nor will they.

    > The reason, I believe, that he is protecting the fat cats … is that the boards and the management have already destroyed the wealth of the shareholders.

    Maybe. But I think it is more to do with protecting the entities that have taken out the bank loans (eg: some developers), not the banks per se, although saved bank jobs do help with votes perhaps, or may do.

    > it makes me feel sick

    There’s a lot of people who have felt ill about things for sometime.

    > Someone needs to clean out this system of ours, because if the banks with new management and boards are not put up for sale at any price, the entire Irish financial system will not might implode.

    It wont all go in one pop overnight, and now the guarantee has certainly muddied the waters and makes a collapse less likely. What happens if a large loan cant be paid off to a bank? Will the state pay it? This part of the guarantee has not been put into action, or called in by the banks yet. In the current model, are the banks now operating in a system where they will only go bust if Ireland goes bust. Perhaps. If so, no Bear Stearns scenario.

    > He’s going to have to write an enormous cheque to keep these places open but he doesn’t have the money. That’s when the financial markets start selling Irish sovereign bonds en masse.

    Yes, Ireland (we) could pay for this big time. As I said, there is no magic. The only thing that people can do to trade out of this quagmire is to work harder, and be more productive, and thats everyone. But start with the people that are not as productive as a collective (not individually) as they could/should be. Could we increase productivity in the Public Sector? Yes. In bureuacracy and process? Yes. In banks themselves? Yes. In the ‘professions’? Yes. In Domino’sMcDonalds on a busy Friday night at 6pm? No. They are sufficiently efficient and productive.

    > If the buyer is right and by this I mean a large, solvent, Continental solvent bank they might have to think the unthinkable and practically give them away at this stage. If he doesn’t do this, he has potentially, not one, but six Bear Stearns on his hands.

    More stable banks may come in and save some of ours. Europan banks would certainly come in and provide a banking function if our six did go crash bank wallop. So, if our government are mainly concerned about Ireland and Irish businesses and people having a banking function, then they should not fret. There will be EU/euro banks alive after “Irish” banks fail. But a solvent stable continental banks is not going to come in now and be a ‘white knight’. The total risks are unknown so it would be foolhardy to do so. Better let the dust settle on this storm.

    Again, I will repeat what I have said many times now. We DO NOT need to save these banks. Doing so will cost us collectively as a country. Long-term. Lance the boil ……

    MK1

    • Woodsey

      @MK1

      ‘Like a Madoff ponzi scheme, its a case of when rather than if.’

      There’s a strong case to be made that all banks, all economies and all monies will go ‘belly-up’ on a worldwide basis if the G20 don’t get their act together and come up with something innovative on this one.

      Trying to reflate economies is what got us here in the first place and Lenihan’s plans for cash ‘injections’ (regardless of where those ‘injections’ come from) into Irish banks will only save those banks for a little longer.

      Banks can’t sell cash if there’s no business being done to justify us buying it. It’s now, ‘Bye-bye to all the old ways!’

      Where’s the new?

  11. McGoo

    John,

    >allow the Irish Euro in the basket of currencies to become a shrapnel in the new free market …………….and DEVALUE ……by at least 50%.

    The “Irish Euro”??? There’s no “Irish Euro”, or “French Euro”, or “German Euro”, they’re all the same currency!!
    If they were seperate currencies, Ireland would be another Iceland by now.

    Actually, I’d be very interested in David’s views on where the Euro is headed agaist the dollar and sterling. Although I know currency markets are difficult to predict.

  12. McGoo

    David,

    I’ve been reading your articles for quite a few years now, and always been impressed (TV shows were awful – sorry), but Wow!: this is easily the hardest-hitting article I’ve seen yet.
    You’ve been a thorn in the side of the political/economic establishment for ages but this time you’re taking a chainsaw to them. I wonder how they’ll react? It’ll make interesting watching.

    To summarise the article: Give all the banks away to anyone who’ll have them, right now, or the country will go bust trying to meet the guarantee payments? Is that right?

    • Ruairí

      Hear, hear!!

      I thought Bernard Dunne was the great white hope for a long time but while we’re waiting for that star to re-ascend, who comes ding-donging out of the green, white and gold corner except the Red Renegade.

      KO please, we haven’t got time for 12 poncy (ponzi?) rounds. Clock is ticking.

    • Woodsey

      @McGoo

      ‘To summarise the article: Give all the banks away to anyone who’ll have them, right now, or the country will go bust trying to meet the guarantee payments? Is that right?’

      Seems dead right to me (if you’ll forgive the unintended pun?!)

  13. micheal

    >>>
    MK1 : Lance the boil ……
    >>>
    Yup. They’re only banks fer goodness’ sake. Plenty more where they came from. I laugh when people claim that the recent financial crisis spells the end of investment banking for example. Plenty small ones out there waiting for the dinosaurs to eat themselves out of house and home. And the whole cycle starts afresh.

    >>>
    MK1 : The only thing that people can do to trade out of this quagmire is to work harder, and be more productive, and thats everyone.
    >>>
    Yup. Sick of hearing the “spend our way out of a crisis” tagline. It’s WORK our way. Have you been reading my emails? :) Been saying that a lot lately, though usually either preaching to the choir or pissing in the wind. Now there’s a pair of analogies, what if I mixed them… Many people have borrowed big to sustain a certain lifestyle. They just have to give back now.

    Anyone seen Wall-e? Good for kids, but I think there’s an analogy between the bloated humans on board the starship ignoring the vast planet of opportunity on Earth while the Captain is asleep at the wheel, dozy with never having worked for anything with a mechanical advisor constantly keeping him from seeing reality as it is. Government spent ten coasting along and finally began to believe their own hype, developers patting them madly on the back. We have transcended work. Well we haven’t.

    Anyway, I agree with MK1 that the culture is endemic, BUUTT from my experience people are 95% followers, they’ll do whatever the leadership tells them. You need to set example at the top. And people follow suit. Just as they followed suit over the years with property, trips to NY and what have you. Sure, the guys at the top weren’t the only ones. But they were the important ones. So off with their heads. Thus, I’d be between MK and David on this one, the current decline in national bankability was not based on lack of disciplinary action at the right time, but lack of disciplinary action has essentially ensured that new funds to the banks is highly unlikely to go to quarters that will really deserve it. If you have a thirsty man, who has a history of lack of self control, you don’t put him in charge of the water supply to others.

    As a side note, I am frankly amazed that there aren’t smarter, more dynamic people in politics than the current shower. I am equally amazed that the system allows unqualified, unable people to attain such positions of astonishing importance to the public weal.

    It’s because politics is not professional, how many TDs have attended Kennedy school of government in their twenties, or made a success of themselves through hard work and entrepreneurship before signing up for the gravy train? And how many did it because they brought the family name with them? With a few notable exceptions, this reverence for ones forebears assures the gradual corruption of a system, a bit like recessive genes in inbreeding bring about the eventual demise of a group that refuses to bring in new people.

    The whole situation is much easier if we just think of the banks as bad service providers. Sure, the whole banking system worldwide is rotten to the core, but there’s a fair few less rotten. Analyse the balance sheets of the banks out there, find out which ones stayed away from debt, and give them a call.

    That said, though, massive opportunity for the Gov to get into banking, and thus into a sovereign wealth fund, and long term get away from borrowing. Believe it or NOT folks there ARE countries without oil and a few million people that have no debt and hundreds of billions of cash in the bank. I live in one (hint : It’s not Ireland)

  14. AndrewGMooney

    Last night’s announcement doesn‘t change or clarify very much. It’s just more ‘proposals‘ without any undue urgency to the timetable.

    In giving the State Guarantee, the Irish banking system may as well have been formally nationalised because, at that moment, all it’s liabilities were fully and unconditionally underwritten by the State. Including, in extremis, not only the assets of the State Pension Fund and the entire credit facility of the Irish State in the Bond Markets, but also the State’s necessity to seek an EMU/IMF bailout.

    Any and all Market Participants have since been operating on the basis of that changed terrain. The Banks and the Private Equity suitors now playing hardball with the Government all realised there was a Systemic Failure, normal rules no longer applied, and that a power struggle was taking place.

    As for Credit Default Swaps: You cannot interfere with The Market yet expect it to function as if nothing has really happened. You cannot hand State Power to Private Corporations and not expect that transferred Power to be used to pursue corporate profit. By giving the Guarantee, the Irish Government handed an enormous amount of soft and hard negotiating Power to already disreputable and discredited Bankers, who have abused it but will retain this power until The Market terminates it .

    It was incredibly naive to suggest that any or all actors in this power struggle would act with reference to some supposed ‘patriotic’ interest. Naked self-interest has been the response, as anyone would expect in a bare-knuckle bear market situation. Corporations (whether Irish, British, EU,US or FDI) do not bear allegiances to The Host State – no matter what emollient phrases they may utter under duress. I’ll send Lenihan a copy of ’The Prince’ for Xmas. And Darling.

    Most commentators applauded the initial move to offer an unlimited guarantee, and then further applauded the poker game over collapsing bank share values as evidence of ‘smarts’ by Government Officials. I had assumed from this that they were, to some degree, privy to privileged insider information regarding a coherent medium / long term Strategic Plan to rescue the Banking System and restore normal functioning to Irish businesses and consumers.

    But if this poker game was part of a strategic plan: How long was it envisaged to be allowed to continue before someone blinked, given the mounting losses reported in every sector of the Irish Economy? As for the State’s imputed savings / profit from not buying prematurely at ‘inflated’ bank share prices:
    How low were share prices to be allowed to deflate before there was a fair buy signal for the State to act to restore some confidence in future recovery? If not 1 euro, what? 1 cent? 0.01 cent? The trend is not always your friend, as the past few weeks have shown.

    Who’s been collating the collateral damage costs of this poker game? Who’s been costing the current and future costs of unemployment, business, pension fund and tax revenue collapse – whilst the Bankers and Politicians play macho? Who’s been costing the CDS/Bond Market attrition for future infrastructure costs?

    The same queries arose regarding the seemingly perverse decision to adopt negative-stimulus measures such as increasing VAT. How was that part of the ‘strategic plan’? Surely the possibility of a VAT cut by Britain was considered, given Britain‘s shared border and semi-detached position to EU policy frameworks? Or was the same ‘patriotic’ intent credulously vested in Irish Consumers as was given to Irish Banks? Was this a Germanic-style rejection of Keynesian measures and part of a coherent Monetarist Strategy? If so, then why wasn’t this made explicit instead of backing down to sundry ad-hoc protests? Is this Irish monetary policy tightening now to be reversed in the light of the 200 billion euro EU wide stimulus package? Probably, as the German dog is now wagging the tail again.

    So much for Peer Steinbrueck’s silly tantrum. Absolute Eejit. Angela Merkel blushed, blinked and signed on the dotted line as soon as Gordon Brown asked who, exactly, was supposed to be buying all these wonderful German cars if the profligate Anglo-Saxon economies adopted the German hair suit. Europe purports to be the World Leader-Pretend, but it doesn’t look that way to me.

    If it’s true that the most important condition for Markets to recover and function is credit (credere) trust and confidence, then this continuing paralysis has been an irrational extravagance for Irish businesses, external investors, homeowners and consumers. I doubt there ever was a strategic plan to this absurd poker game. I doubt there is now.

    Of course, there’s no guarantee that any specific remedial measures will work. It’s increasingly obvious, worldwide, that Politicians and their Economic Advisers really don’t have definitive answers to this unfolding crisis. The UK/US Keynesian Medicine may not be a strong enough dose or may not work at all. I’m not an economist, but I have a gut feeling that co-ordinated and resolute action is preferable to apparent paralysis then panic and fudge. Even if it is a bluff and a confidence trick. Confidence really IS that important to Markets. Perhaps Obama will restore order.

    With Ireland ‘going off on one’ with it’s guarantee, Iceland going bonkers by attempting to renege on EU/EEA minimum deposit guarantees, Germany lecturing all and sundry for using credit to buy it’s products whilst Gordo and Sarky jostle for the mantle of ‘saviour‘: Europe has hardly seemed a credible entity. Then there’s the nightmarish portent that is Greece.

    The unexploded Lisbon bomb that has landed right back in Dublin only adds to the apocalyptic potential of 2009. ‘How To Dismantle An Atomic Bomb’? This always was a MAD (Mutually Assured Destruction) covenant between the banks and the government. Lenihan has been ‘unclear’ from the start. Still is. All that surprises me is that it’s taken David so long to ‘go nuclear‘.

    Regards.

    • Ruairí

      Welcome back Andrew, hadn’t seen you for a while. Nice contributions. 2009 nightmare me thinks.

      Time for some light relief, Crash Gordon saviour moments: -

      http://www.youtube.com/watch?v=IcyJKuqnTRs

      http://www.youtube.com/watch?v=T0LcABKIl3Q

      Doesn’t that music bring back those halcyon Maggie and Charlie days?

      • AndrewGMooney

        Ruairí: Thanks for pointing me towards the disrespectful clips of Prime Minister Brown on ‘YouTube’. The culprits have been traced and neutralised with extreme prejudice. We rely on the help of our Irish colleagues in keeping a lid on current tendencies towards sedition. As our leading ‘sleeper’, you are critical to future plans. I’ve be revealing more on this secure, encrypted ‘spook’ channel in due course. Don’t worry: Only you and I can see this message. Over and out.

  15. Malcolm McClure

    David said: “With every passing day, this Armageddon gets closer. Someone had better tell Lenihan that, if he does not do something quickly, …”

    Are you still gallivanting out in the middle of the Indian Ocean, David? That ‘Someone’ should have been you!!

    Lenihan did, in fact ‘do something’ last night, shortly after your advice was published. He announced that money from the National Pension Reserve Fund, private investors and existing shareholders amounting to €10 billion is to be made available for recapitalising banks and building societies. He will underwrite an issue of new shares by lenders or take shares in banks under the plan. The opposition said their parties would not oppose the necessary legislation required to allow the movement of money from the National Pension Reserve Fund to the banks.

    This morning, shares in Anglo Irish and Bank of Ireland initially gained around 25%, but later Anglo Irish was up just two cent to 40 cent and Bank of Ireland was ahead almost 15% at €1.01. AIB was up 5% to €2.08 and Irish Life & Permanent added 4.5% to €1.59.

    Anyone who buys ordinary shares in an Irish bank in present circumstances is a mug. They could be wiped out as a result of this bail-out, which (surely?) must result in the government having preference shares that virtually establish its 100% ownership of participating banks.

    Following Barclay’s example in UK, any bank that thinks it has a ghost of a chance of independent survival will refuse government help for that reason.

  16. Grimreaper

    Would Eugene Sheehy prefer a firing squad or lethal injection?.He said he would prefer to die than take Govt money!.Was he telling porkies?.Enjoy your short retirement!!.

  17. John ALLEN

    Mc Goo – well U see ….there is a basket of currencies where every country issues ‘their own ‘….should you check you can identify the Irish Euro with the letter ‘T’ ……those Euroes will Devalue if Ireland goes the way to amageddon……..and it will ………soon

  18. Philip

    David, Scariest article to date and after hearing yourself and Mr Kinsella on Morning Ireland today saying we need prayers to get thro’ 2009.. this is unprecedented stuff of living memory. Mind you I suppose the people who lived through the south seas bubble and the tulip mania felt exactly the same way.

    Maybe it is too early yet by a year or so…but is there anyone (country wise) out there making any headway through this financial storm?

    I think we need to get people angry or to develop some sense of outrage We are like sheep putting up with stupidly poor services (do not miss Primtime tonight on this matter!) and keeping the head down hoping this will all pass over without any impact. I totally agree with MK1′s assertion that Lenihan will only be looking to bail out the Developers and that it’s us the stupid taxpayers that’ll be carrying the can. Eejits indeed.

    I totally agree with the idea of letting the banks burn.

    The big big task is how do we activate the human capital in this country. Or do we give that away like the rest of the country’s assets??

  19. Philip

    Bank gains of 25% percent etc need to be put into perspective…They should only be referenced relative to their previous peak in furture bulletins.

    A 50% drop means a 100% recovery to get back. A 95% drop means a 20 fold increase to get back to square one. People need to see the reality. The obsfuscation used is dreadful and misleading.

  20. Garry

    Last night I heard the government were going to announce a recapitalization program before the stock markets opened today. I thought they were actually going to do something, it was reported as a major thing. I was half expecting to hear Bank X’ were nationalised…. Something important.

    Anyways with Lenihans announcement, this article should have been redundant. Whether the announcement was in line with David’s thinking or not, the decision should have been made. The government would have spoken and that would be it. A Pax Lenihan would have been imposed. God knows they have had enough time to figure it out.

    Instead the article is more relevant than ever because while an announcement has been made, we haven’t the foggiest what if anything it actually means. And that is a clear sign that Lenihan has not taken responsibility.

  21. John ALLEN

    New EXPRESS – the only capital expenditure you are witnessing at present in the remaining nation of ours is …………The Devaluation Express …..from The Pale to The Atlantis ……….and …stopping off deep down under in the middle where no man has gone B4……u can find its ticket with the directions on the back of your EURO ….when you read the ‘letter T’ ( Ireland )…..you qualify to ….disapear quickly ……anyone with other letters …try …………the PIIGS Station ….and you might end up in the mediterranean seas to occupy Pompeii or Egyptian Mythology ……..otherwise hold on to your U’s and X’s .( France & Germany )….they might survive ….and you might learn the art of Impressionist Painting ….with more Monet and Matise

  22. Joe Soap

    Bloody hell……would ye stop……..with all……the full stops……..

  23. McGoo

    John,

    OK, in my wallet I have two 10 euro notes.
    One has a serial number that begins with a “T”.
    One has a serial number that begins with an “X”.
    Are you seriously suggesting that they are , or will be, worth different amounts?
    Are you suggesting that, when I go to a shop and buy something, I will get different amounts of change depending which 10 euro note I pay with?
    That shops will list different prices on their goods for different euro note serial number prefixes?

    That does not happen, and never will. The euro is a single currency, and ALL euros are worth THE SAME.

  24. John ALLEN

    Mc Goo – finally the dawn of reality is arriving like a kick in the transom ….should Ireland ( The State ) be kicked out or opts out or ..leaves by another name those notes issued by our own government will become disenfranchised and are on their own…..in this case…those are marked ‘T ‘ the free market will prevail at the time of use by you and your ‘T’ notes will end up something like the Icelandic Kronas …at the moment all notes are Euros as you know it …………so read my first morning notes I wrote at 8.35 am approx and see do you now understand exactly what I did write …………….it’s a Nightmare …….now read the Euro Express …further on….and maybe you can understand better

  25. Una

    Instead of taking money out of the pension funds, why oh why have nt some of the smaller banks being forced into a merger with some of the others to recapitalise the banks. I live in the US and as scary as all of this was when the perverbial hit the fan a couple of months ago with the lame duck President that we still have, when any of the banks were going to the wall (hello Anglo Irish) the Federal govt i.e Treasury Secretary Paulson (Lenihan) organised a deal with one of the bigger banks to take them over. Can someone explain to me why the same can’t be done in Irelands case and make these idiots take responsibilty for the mess they have put the Irish economy in and take it off the ordinary taxpayer. It baffles me how the govt are stting idly by until the New Year before they do anything about the current situation their in. At least here Obama has a stimulus plan to try and kick start the economy by investing in the infrastructure. When he takes office, there is also a push to get more companies that have outsourced to countries such as India and Ireland back to the US. What is the Irish economy going to look like if US companies start pulling out??!!!

    • Woodsey

      @Una

      ‘Can someone explain to me why the same can’t be done in Ireland’s case and make these idiots take responsibility for the mess they have put the Irish economy in and take it off the ordinary taxpayer?’

      Because the banks own the ‘government’ who are ‘owned’ by the property developers who have borrowed all the cash from the banks that they can’t (or won’t?!) pay back?

  26. Deco

    David McW is correct. First the personnel that created need to be replaced with people who will be more accountable to the taxpayer. Basically the taxpayer is to determine what happens from now on.
    I am sceptical about Lenihan’s latest move. The only member of the Oireachtas who knows what has been going on in the Banks is Shane Ross. And he thinks they are five turkeys – with AIB still not completely safe either. So, I ask myself this question – what would Shane Ross do ? Well, based on his recent articles – I think he would let some of these banks be taken over, and give them none of the taxpayers money.

    On this basis, and the fact that the banking executives who have failed, are still running the banks, I am not happy that the PRSI money is being allocated for bank bailout part II. There has been no reform of the banking sector. Zero. We even have opposition politicians like Joan Burton and Joe Costelloe berating Lenihan for not ensuring that the banks start getting liberal with their loan policies again. It seems that Labour are desperate to get back to the Ahern style of dealing with economic problems – feeding them, and asking them to disappear for a while. This is exactly the type of nonsense that has to stop. The banks have to get out of the business of propping up unsustainable sections of the economy. That includes much of the services industry and retailing sector which prospered on the back of high pricing, and a market that was not price sensitive. Even without the thousands making the booze cruise to the North, we were going to get a crash in consumer spending as a result of the falling construction employment.

    The banks are not being reformed. That is what must be done. And that means banking practices must be reformed. We are goind through an adjustment process. When it is complete, Ireland will be a much more competitive place to do business. And that will be in everybody’s long term interest. In the meantime FAS need to start retraining people for the jobs that are coming onstream from the IDA. There is going to be rapid changes in the labour market. And we need to get that right also. Firing the entire board of FAS (including cronies from FF, the PDs and the Labour party) is also of critical importance.

    Either Lenihan sacks the directors of the banks, or the electors will sack this party councillors/MEPs in June. Lenihan’s career is on the line.

  27. Deco

    I suppose the question does need to be asked “Minister Lenihan, would you put 60% of your pension in Irish bank shares”. Our collective pensions are being sacrificed to save Dublin 4 bankers. But it seems that Mr. Ahern, and freinds will still get their state pensions. And so will all those FF councillors that will get booted out in the 2009 local elections.

  28. Deco

    Of course there is a danger that the government will now operate one of these banks like it operates the HSE, Department of Education, CIE, the ESB, etc…

    I really feel the only answer to the clowns in the “Kildare Street Circus” is to undermine their political bases in the local elections in June. And that goes for the full range of political parties that seem to think they can ‘instruct’ us into what is necesary for us. They spent the last fifteen years instructing us to ‘celebrate, our acheivements’ (that would be overspending, overdrinking, overborrowing, overconsuming, and behaving arrogantly, etc…) Now,they want to throw the rainy day fund at the banks. This is just perpetuating the delusional tendencies that created the problem.

    Folks. There is a problem and throwing money at it is not going to solve it. First, we need to sack loads of managers and directors.

    • Woodsey

      @Deco

      … and politicians and regulators and financial public servants and … and?

      But don’t worry Deco, as the money runs out (and it will!) we’ll all have to go!

  29. Malcolm McClure

    A few years ago, the EU gave Ireland just enough money to “Prime the Pump” that could be used by the government to flood the Irish economy with cash for the benefit of the people. For a while it seemed to be working.
    Now that infernal pump is being used by the government to suck the economy dry and flood the Banks with Irish people’s hard-earned cash.
    The whole machinery of government is like an antiquated steam engine that has lost its governor. Stand well clear of the resulting catastrophe.

  30. Furrylugs

    I just think is simply criminal what’s going on.
    Raiding the piggy bank so the big boys can still buy sweeties. And not a loaf of bread left in the house.
    A quick back of the fag packet (my last one) calculation based on the percentage error in forecasting since September gives us a 20bn deficit by Q3 2009 and no-one willing to lend us anymore. Trichet will be forced to do something akin to economically invading Ireland to save the precious Lisbon Treaty et al. Obama will convince politically high profile MNC’s to repatriate, which they will do willingly given the flux here and indigenous business will be strangled by unreformed beurocracy. Stats will be issued in early Summer massaging the increased death rates due to lack of primary care and class sizes will hit 1:35 or more.
    Our lot will still cling on to power on the basis that the devil you know etc.

    I’d like to see figures from Experian detailing the number of mortgages 3 – 6 months in arrears come next January. The credit card will make Christmas but the debt spike come February will soar.

    I apologise to the site for being really pessimistic but having reread David, Shane Ross and others this morning, it’s looking damn bleak.
    You just can’t get the message across that there’s no rabbit in the hat. Any decent leadership would have gone on a countrywide tour to reassure people at this stage and not pop up on friendly chat shows to spew more verbal patronising gibberish.
    But I’m not emigrating this time. No way. I’m waiting for my chance at the ballot box. and any other box that comes along. If I have to starve, I’m going to vote this shower out.
    End of rant.

    • Woodsey

      @Furrylugs,

      That’s not a rant. Neither is it pessimistic. That’s all perfectly logical but … why bother with the ballot-box for them?

      Why not have the people vote for you?

      • Furrylugs

        Woodsey,
        All the commentators on here know I have megalomanical tendencies. But I don’t like FF so that rules me out.
        Sorry Mate.

        • Woodsey

          Furrylugs,

          What the country needs is a half-decent meglomaniac with half-sensible ideas who’ll at least listen to our abuse.

          What we have at the mo’ are clear-cut meglomaniacs with standard Eff & Effer mafia tendencies, who’re deaf to anything that might result in their vote being cut by 1!.

          Need to give it a lash. I’ll give U 1 vote!

  31. roc

    I’m annoyed by the continuing bandying around of this euphemism, ‘re-capitalisation’.

    Let’s call a spade a spade… The money is going to help pay off the debt that other people and organisations won’t be able to re-pay. That is what happen in an economic crisis… debt is liquidated… full stop.

    And we have a long way to go. Apart from debt problems in real estate, we still have to see debt unwind fully in Emerging market loans, Commodity derivatives, Corporate bonds, Credit cards, FX derivatives, Credit defaults swaps, and God knows what else…

    “Banking was conceived in iniquity and born in sin. The bankers own the earth. Take it away from them – but leave them the power to create money and with the flick of a pen, they will create enough money to buy it all back again.”

  32. Lorcan

    Garry, agree with you fully. When I heard last night about the €10billion I too thought David’s article would loose it relevance. But then I read the statement – http://www.finance.gov.ie/viewdoc.asp?DocID=5604 – and quickly realised that the above article is more pertinent rather than less so today.

    Karl Marx ( a very astute, if misguided man ) once said that whenever the train of history went around a bend, all the intellectuals fall off. The financial world is certainly in the middle of a sharp turn at the moment and the problems caused are being exacerbated by the intellectual conservatism of many of the experts. The plan seems to be to restore the status quo, as the government statement says “to preserve stability and proper functioning of financial markets” This fails to acknowledge that there is little stability or function left to preserve. All that remains to preserve now are the institutions themselves. Their functions are retarded, the only stability they can claim is that they are consistantly unstable.

    So yes, fire the management, give them access to the Pension fund, do whatever is required to save the institutions. But do not allow yourself to be fooled into thinking that a rescued institution equals a rescued economy. The problem is much much bigger than that, and no cheque is big enough to restore the status quo because, as David pointed out on wednesday, the status quo was built on unsustainable credit supplied by non-functional institutions.

    MK, don’t worry about repeating yourself, especially when you could well be right.

    Just a quick calculation, if a bank has €10billion in capital and wishes to retain a generous tier 1 ratio of about 8%, it can then lend out €125billion. Wouldn’t that be a more effective shot in the arm to the economy than spending the money saving private institutions from their own mistakes?

    • Furrylugs

      “intellectual conservatism”
      Marvellous euphimism for Thick.

      • Woodsey

        @Furrylugs,

        Maybe need to soften the expression and speak metaphorically so as to substitute the code-word ‘euphemism’ for this ‘euphimism’?

    • Woodsey

      @Lorcan,

      Wow, ‘… there is little stability or function left to preserve. All that remains to preserve now are the institutions themselves. Their functions are retarded, the only stability they can claim is that they are consistently unstable.’?

      Kinda sums it all up in the proverbial ‘nutshell’. But why are we all standing idly by and allowing this to happens to our money?

  33. Garry

    You’re in top form today Furry

    • Furrylugs

      Sorry Garry et al.
      Just lashed out on heating oil, Christmas Shopping, phone bill and several direct debits.
      I’m on the happy pills now though. Future commentary will be of a lighter note.
      Good posts above btw.

  34. Una

    The lack of leadership from the current government beggars belief but the alternative is Dumbo Kenny – do people really think that him and his cronies provide a better option??!!! The only person that I’ve seen that has shown something that resembles leadership is Eamon Gilmore but Labour running the country is never going to happen!!

    Are people at home really getting to grips with how serious this potentially could be for the country and will Lisbon go through this time or have people still got there heads stuck in the sand and think that they can live without money from Europe???!!!! From the people I’ve spoken to and the amount of Irish tourists over here doing their Christmas shopping I’m going to go with No, unfortunately.

    Interesting documentary about the cause of the current meltdown in the US and similarities to the Great Depression on the History channel. Alot of economists point to the fact that the govt were slow to respond to Wall Street crashing and that was what caused the Depression. It does nt bode well for the 2 Brians in such an open economy if they don’t do something now. The US has the resources to weather this storm and will come out of it although there is a good chance that Wall Street won’t be the centre of the financial world anymore but what resources have Ireland got that won’t mean a return to the 80′s or worse????

    • Furrylugs

      “what resources have Ireland got that won’t mean a return to the 80’s or worse????”

      Eco-turf from sustainable bogs(Cut by hand in other words)
      Eco-transport (Donkeys, also known as Bog-Wagons -see above)
      Eco-clothing (Bainins and frocks knitted by hand)
      Streamlined local transport devices (Bicycle clips)
      Reserve funding (Pots of gold tended by little green men)(Not the Martians in Leeson St)
      And last but not least, an unshakeable belief that this is not happening to us. It’s a British thing that will go away once Christy Moore writes a new song.

      • Una

        That would be funny if it were nt so true…

        • Furrylugs

          C’mon now Una.
          We have to get back to basics like they’re all telling us; Patriotic like.
          Comely girleens dancing at the crossroads. D’ye not realise as a woman you shouldn’t be posting here without permission. This is an Ireland website after all. Them Muslims are too soft on their womenfolk.
          You should know your place. Good God Woman you don’t have a comment unless you’ve given birth to at leaaaast 10 sprogs and even then you must be married to a Guard.

          Celtic Tiger my arse.
          This place is bloody medieval.

    • the mediator

      Hi Una

      I’d be wary of getting economics lessons from the history channel – there’s a definite bias in the way they deal with certain items (An agenda if you will). Whats happening at the moment can’t be neatly defined. The “what?” can be identified but the “why?” – now there’s an interesting question…

      • Una

        Was nt implying that they were neatly defining how this all happened, just highlighting the fact matters were nt helped by Reagan deregulating Wall Street. Clinton and Bush pushing the whole “we want every American to be able to own their own house”; subprime mortgages offered to people who were nt legal in some cases, did nt have the financial means to own a shoebox let alone own their own home and in others sometimes dead. Wall Street has had a free reign for such along time and the only one that was trying to actually reel them in gets caught with his pants around his ankles with a hooker – Gov Spitzer. As far as why this whole thing happened – when I see Dick Fuld crying to congress about losing some of his wealth even though he’s still worth $400 million and others losing their jobs and 401k’s after his inept running of the now defunct Lehman Brothers and others like John Thain holding his hand out for his bonus even though he could nt maintain Merrill Lynch; Morgan Stanley setting aside $6.5 bilion for bonuses this Chrismas even though it was on the brink while the rest of us have had our pension funds reduced to pittance, one word comes to mind to describe why alot of this has happened – good old fashioned greed.

    • Nope dumbo isn’t the solution either. Only a revolution can save us now :)

  35. Ruairí

    @ Lorcan “Karl Marx ( a very astute, if misguided man ) once said that whenever the train of history went around a bend, all the intellectuals fall off.”

    Now we perhaps know where Pat Rabbitte’s legacy of drole witticisms began!

    If you can’t beat ‘em, laugh at ‘em!

  36. barry

    As the statutory non-economist, non (ex) public servant with a vested interest in the pension fund, non financial guru, non professional commentator, non knee-jerk reactor, on this blog I read David’s latest blast after I had heard him on the steam radio and had heard the mooings of the cash cow in Merrion St.
    So, I was mulling in my simple brain – what does it all mean – and have come to the conclusion that even David has run out of ideas.
    The Merrion St stuff is further filling until after Christmas, on the basis that the markets will be going on holidays soon and so will we (occupants of offices in Merrion St.). David talked this morning about the possible effect of the cash, none. He also talked about sacking the management, not going to happen, who makes that decision? the same people who put them there and lined their pockets with the short term proceeds. David said that it won’t work, he is right, many posters here have done the various calculations, there is a huge unfillable hole.
    So, we all know that, what can we actually do? David says the government is the owner, yes, technically, but who put the policies together which the banks used as a basis for borrowing for developers lending?
    If we changed the management, would we get any different policies? I mean either management, the banks or the gov? Be honest, nobody knows what to do. It is ok to say ‘give loans to SMEs’ but if the infrastructure of the country doesn’t allow for any business to develop properly what good is that?

    My conclusion? we need to sell the country, lock stock and barrel, to somebody who does know what to do. I am reading an interesting book on Ireland in the period 1939 and after and I came across a discussion of the Shannon scheme, done by Siemens. So, is Germany interested in a similar investment, on a wider scale? Not joking, a delegation to Berlin just now asking for their help in getting us back on an even keel would get a better reaction than going to Boston for the same reason, or Washington. After all we are going to be in hock for quite a while so why not in hock to someone who has a better than evens chance of getting it right. OK, so Germany is not perfect, but does anyone have a better suggestion?

  37. a flea on the elephant

    Most of the bankers that I worked for were neophytes in the industry who climbed very quickly through the ranks. Some deservedly attained their positions through hard work, while others had ‘connections’. Some of the connections were as a result of nepotism while others were connected through neighbourhoods, through friendship and through the sportsman ship of golf (my dad plays golf with so and so). Some were appointed as managers when it was obvious that there was a lack in management, leadership and people management skills. Can I blame the person appointed to this role for taking the opportunity – not really – its the culture. The inner circle almost always lived in a leafy suburb of south Dublin. If you came from here and you knew someone who knew someone then you were one of the pack.

    The reality is that at ground level the bank employs entry level/ graduates and rarely experienced people. They only promote from within. While doing this may have its advantages, it also means that you are setting yourself up for a herd mentality. Some enter during college and work for the summer and take up fulltime employment on graduating. Certain relatives of the ‘source’ (CEO status) had their names on summer jobs every year without fail. Their name was in the pot and there was always a summer job for there for them. I am sure they were only paid the cog in the wheel rate and it was all above board as the bank had some temporary status positions in which they could play around with and be flexible.

    There were obvious cases of nepotism that one wonders about but still…

    So apart from some temporary roles & high level executive roles the bank seems to rarely hire externally. What this means is that you end up with people at the top who have only ever worked in the bank and so can easily develop tunnel vision. As an entry level, within 5 years one is now part of the culture and 20 years on in the bank they ARE the culture. You have to ask why the banks don’t want an outsiders with a different skill set. Is it really a cost cutting technique or are they just afraid that any outsider would see immediately the waste, the incompetencies and the sheer lack of innovation. Projects running into millions of euros and taking years to complete run by insiders who were deemed the ‘best’ fit for the job who may not neccessarily have had the experience. A common term used in the bank if the the status quo was challenged – ‘this is the way we do things around here’ – the untouchables.

    I am not sterotyping everyone who works for the bank, there are always hardworking, conscientious employees everywhere who have to take stick for a few priviledge few. An inner circle close to the source who are a tribe of their own but unfortunately they are so immersed in this culture and are part of it that they are unaware. One needs to be an outsider to see it. This culture in the Irish Banking systems needs to end! It has not served the people well, yet it has served the insiders and their families well. They have been allowed to have privilege status and that is unfair.

    a flea that got away

  38. Furrylugs

    As far as I can recall Barry, our banks owe the German banks something like 400m or more. And young Merkel, that fine thing, doesn’t really like us anymore since we broke ranks and saved our banks at the expense of a couple of theirs.

    Bur since Reunion brought in a proper expert, we could ally ourselves to them. Nice spot for school exchange tours, hen nights and skinny dipping.#
    Ryan Lingus (no smutty jokes please) would accomodate the long haul.

  39. My Lost Generation

    I remembered last week asking you all about HOW bankers from Anglo-Irish (except the top executives) still manage to get a raise and a bonus. (Last Sunday lunch was quiet on both sides of the fence, banker’s side and my humble side and that is because we genuinely lost it now)
    Sorry for being so pessimistic but how could you for a second even imagine that this government is going to deal with this situation.
    How can we even discuss the idea at all?!
    Look at their management skills, are they going to hire banking consultants from abroad? This government is unable to deal with any situations in any areas Health, Education, Infrastructure…without paying huge amount to consultants. They are UNABLE to deal with the banking system and in fairness I doubt many people would.
    Anyway WHY would you actually NEED TO save the whole irish banking system for? You need a reason (beyond bankers parasiting on businesses.)
    What is (or will be) left of the irish economy that needs to be supported by this amount of lousy bankers? Why can’t we make redundant 2/3 of them and get the last remaining 1/3 to slave for us? They are parasiting and scamming the financial system and as any good parasites do, they will go and suck money somewhere else in Australia or Canada!
    Let some of these banks go to the wall and the rest of them merge and take it from there.
    We do not need all of these guys in the banks.
    Recapitalising the whole banking system will leave us with overcrowded banks and within them bankers who for the past year have been doing nothing. We’ll only create other useless state bodies-like banks, expanding the public service. Is that it? Get rid of them. There are no need for lots of them anylonger, speculation is over, we do not need people who know how to play with fictitious money anymore.
    Lenihan and the Clowns in charge of the banks using the Pension Fund to solve the situation.
    Could it get any worse?

    • the mediator

      My lost generation

      Yes I think it can get a lost worse – but if it will make it any easier, you could stop expecting the likes of Cowen
      and Lenihan to put the good of the people before their personal interests, I did so a few months back (stopped thinking they might actually put the good of the country first)- also, now I don’t think
      they actually have the education, open mindedness and most importantly wisdom to see that the game has changed, even if they had the will to try and get things moving they don’t have the know how.

      The question now is whats the next shock coming down the pipe?

      The other issue is what kind of medicine will be put forward by those in power who are
      ready willing and able to take advantage of the disorientation of the masses and
      implement a solution(s) that suits their agenda. What ever it is, it won’t be for the good of the masses.

  40. John ALLEN

    shocking news – down my way …..today i was shocked to watch so many ordinary people withdraw cash in large significant amounts …i am happy i did too

    • Colin

      So………………… Where,,,,,,,,,,,,,,,,,,, is;;;;;;;;;;;;;;;;;;;;;;;;; your:::::::::::::::::::::::::::way??????????????????

      Do””””””””””””’ you—————– live______________ in ~~~~~~~~~~ a========== keyboard?????????????

      • webmaster

        Colin… play the ball not the man…..

        :)

        • Furrylugs

          Ah c’mon Webmaster. We’re all here because of DMcW. It’s a way of letting off steam. And we do take the site seriously. John A has his way of putting things and we, generally speaking, tolerate that. Please understand the frustration at the staccato form.

  41. John ALLEN

    Moderator – I want to complain about wrongful impersonation by comment made at 18.11.56 as you know that was not written by me …..please amend the record

    • webmaster

      John, no, I didn’t know it wasn’t written by you since I cannot possibly read through each and every comment, let alone check them to verify who and where they originated from.

      I generally rely on a bit of maturity, sense of fair play and the more sensible readers to let me know when anything is a bit fishy.
      The best way to report inappropriate content is to email webmaster@davidmcwilliams.ie.

      I actually thought the post was pretty funny but since it was an impersonation of your unique self, I have removed it. It would do everyone a disservice if people started impersonating each other. I would hate to have to make registration compulsory before people could post comments in order to prevent this kind of thing.

      Now let us get back to bashing Lenihan & the banks.

  42. I liked the Nash article. My suggestion to improve matters here is to make DMcW the CEO of one of the banks. Seriously! Give him a tonne of share options at the current prices to take on the role. If he says no then offer him more :) That would shake up the banking sector in this country overnight. Someone would get demoted or fired, the minister would exercise some terrifying power over the banks and DMcW would get a real challenge with the possibility of wild wealth and public acclaim if he pulled it off.

    Failing that, we’ll hand off responsibility to the economy to him when the junta takes over.

  43. John ALLEN

    webmaster – thanks for your prompt attention …impersonation would do too much harm

  44. Philip

    I am beginning to think that DMcW’s original idea to save the banks was a real bad one. It would not have worked anyway no matter how Lenihan acted. Throwing good money after bad merely because we want the institutions to survive to keep the economy rolling is really another recipe for preserving bad behavior. These systems of institutions need to be closed down – full stop. Just bankrupt them now!! And start new institutions from scratch.

    You could nationalize them (in the mistaken belief you skipped the bankruptcy part), but it will only preserve the culture referred to above and that just leads to the same end game.

    I believe this bankruptcy will happen anyway – except with the sovereignty of the state going with it. I think DMcW needs to demand a full reverse engines on his original idea. And then let him start up the DMcW bank – within weeks he’d attract 10s of bns simply because it has no dodgy loans. Now, putting a bit of NTMA into that would make better sense by far.

    You see, I think the economies are generally sound. The whole credit system went out of control. A few good embers is all that’s needed to fire it up. We need all the wet stuff and the ash cleaned out. Lighting a fire in that lot would just waste fuel. In the same way, throwing 10bn at a disfunctional organisation is complete lunacy.

    Also, the first bank that got it’s act together would be the leading world bank in no time at all…

  45. Mark Clifford

    If the government do not put a gun to the bankers heads and get them to lend as aggressively as last year we will be in serious trouble.

    The only way out is to inflate the monetary system somewhat with Keynes principles. Gordon Brown and Sarkozy are right to demand the banks lend at higher than last years amounts. If central governments are the main shareholders than they dictate policy.

    This is the policy that Ireland should be taking. I think people forget that all the mortgages etc within the system for new house developments can be estimated at 33% of the cost of a new property going to the government coffers. VAT/TAX/Council charges etc. These have all been financed by the banks should the banks stop financing as is occuring we are tightening the screws on the economy significantly.

    Mr McWilliams your over the top here and you the press must take responsibility for pushing this into hyperbolic overdrive.

    The last 7 recessions lasted in the UK for an average of 3 years a piece. Based on this we are already in year two.
    Lets be realistic i dont see us going into a worldwide depression no more than anyone else.

    Stocks are undervalued plenty of stocks have more cash in there bank account than there valuation the de-leveraging process is underway.

    If you continue to stoke the flames what you state and say will indeed become a self-fulfilling prophecy.

    Mr McWilliams perhaps you could come up with some solution’s for the government to get back on track. Perhaps through the media you can influence the policy makers up in leinster house.

  46. Lets get back to basics.The rot started with a rotten party.They still have lots of support.Many are still grateful for their largess (The pig farmers lately) landowners, developers, public servants,Etc.

    David had his finger on the essence of the problem here, when he spoke to “The Waffler”:

    http://ie.youtube.com/watch?v=jUrk5qPqt94

    Not sure they will get a nose bleed next June. Maybe if the young people (their main victims) come out and vote.
    Its a bit late anyway for bringing Kenny Lite into the picture. There is no credible opposition to these guys.God help Ireland.

  47. Deco

    I think we need some sort of tribunal for the banks. But this time no lawyers, just Department of Finance officials and a select committee of seasoned no-nonsense problem solvers from the private sector(Alan Sugar types).

    The reallocation of wealth that David talked about in his books/TV documentaries has taken place. This reallocation created a gap which was filled by the banks. And the banks did this exactly as David showed, by borrowing from German banks. Bertie Ahern, Mary McAleese, the Dail, Corporate Ireland, the trade unions and the media all declared that we had massive wealth, and that we should celebrate. And that we should not worry, because ‘everything would be fine’. And large sections of obedient stupid Irish people believed the entire scam. A scam that benefitted authority in Ireland. The Irish Times never said there would be an end to the property boom. The Irish Times talked about a soft landing, when it became clear that there would be a landing. But the IT clearly has not got a clue what it is on about. In fact the IT wrote glowing articles about all of the current lemons that constitute Irish banking. A month ago they had a special feature on the CEO of the Educ Building Soc. They painted him as yet another safe pair of hands in charge of another reliable Irish institution. And a week later in the Sunday Indo, Shane Ross ripped the same CEO apart, calling him a ‘clown’ on multiple occasions, and rating the EBS very badly. In the old days the EBS would have responded to Shane Ross. But nowadays, they stay silent, hoping that the criticism will be ignored. Can we conclude from this that they have nothing to stand on ? [apart from anything else this entire crisis as demonstrated The Irish Times as being the preferred news media for the Delusional, and naive in Irish society. Maybe the weeding out process occurring in many sectors of the Irish economy, might reach into, and 'improve' the news media sector also ?? ].

    For institutions facing massive losses, there has been no visible attempts by any of these institutions to reduce their costs. No doubt the IBOA are able to ensure that their contacts in FF, and the Labour Party will make this impossible. Well, for the sake of the rest of us taxpayers, it is absolutely necessary. Even in the context of declining business volumes, there has been no layoffs in any of these institutions. Is it because, the senior directors know that as soon as the layoffs start, that the secrets inside the bank will be circulated to the general public. And then the bank directors will have their careers terminated by public pressure, and irate callers to the Joe Duffy Show or George Hook ??

    If Brian Lenihan, or anybody in FF is reading this – please note. If you don’t clean out the wasters in the ANIB/BOI/ILP INBS/EBS you will be counting transfers from Joe Higgins’ first count romp home in the next general election, to see if Brian Lenihan has even the faintest hope of staying a TD, in the next general election. Nobody will remember you favourably if you save a shower of Dublin 4 bankers, and fail the Irish taxpayer. We need deflation to get our cost base down. Never mind the economic keynesians, like Bertie Ahern and Eamonn Gilmore who love inflationary policies. That was the policy framework that created the debt levels that are the source of our problem.

    [Brian Lenihan's remarks that the crime problem was exaggerated by the media form a very interesting backdrop to the robbery/holdup that occurred involving Dick Roche. Is the official government line still that crime is being exaggerated by the newspapers ?? This time we want serious problem solving, not excuses, not PR stunts, and no more sudden panic decisions which fail to fix the problem. For once a government minister was a victim of a crime-instead of a perpetrator].

    I also think that two banks are not fit to survive (regardless of the praise that The Irish Times gives them). They have already past their best before date, and will start to turn very sour very quickly. They should be got away as far as possible from the Irish Sovereign Debt, ASAP. They are a competely unacceptable risk.

    Problems in the UK could cause massive problems for a third. And that is the real problem for the long term sovereignty of the Irish nation. Lenihan needs to make hard decisions. Unfortunately the only member of the Oireachtas who is able capable of dealing with the problems of the Irish banking sector (Shane Ross) is completely marginalised by the dominant parties. But we still follow commentators like Ross, McWilliams,Alan Ahearne, Morgan Kelly, etc.. and support them. The parties get no loyalty, because that only encourages them to think they can do (even more) stupid things.

    • b

      Could the gang that held up the hotel in Wicklow please go back and this time do not leave without Roche.

    • Furrylugs

      “obedient stupid Irish people believed the entire scam”
      Deco,
      Unfair and shocking unfair.
      You know and I know the vast majority of the populace don’t know what we know. They’re out playing cards for turkeys and the snowball is coming.
      It has been my privilege to join this commentary where you and MK1, Lorcan, Barry, Soldier, Phillip, Shane D and all the other commentators going back to long go have taken the time to post well thought out dialogue.
      This site needs you and all the other intelligentsia within to post seasoned and balanced commentary.
      Without malice.
      Furry

  48. Re:
    http://www.fordham.edu/Campus_Resources/eNewsroom/Archives/2008/archive_1377.asp
    and a quote from the article:
    “A fixed-rate 30-year mortgage would be reasonable under the gold standard,” Nash said. “Now, there are variable rates, and adjustables, and convertibles, and it is very complicated” for homeowners to figure out what they are getting into. In fact, Nash said, nobody really knows the depth of the financial crisis.
    It was the USA that started the rot some 60 years ago.

    “The chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained the exchange rate of its currency within a fixed value–plus or minus one percent–in terms of gold and the ability of the IMF to bridge temporary imbalances of payments. In the face of increasing strain, the system collapsed in 1971, following the United States’ suspension of convertibility from dollars to gold. This created the unique situation whereby the United States dollar became the “reserve currency” for the states which had signed the agreement.”

  49. Deco

    soldiersofdestiny – When you talk about ‘waffler’, are you talking about the Drumcondra Ditherer ?

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