December 31, 2008

Nationalisation of Anglo could actually be a help

Posted in Banks · 34 comments ·
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The risk now is reputational risk. Credible institutions will simply not want to be associated with an outfit like Anglo Irish Bank

About a year and a half ago in ‘The Generation Game’, I wrote that “one of the big Irish banks is simply a leveraged hedge fund betting its own and its clients’ money on overvalued property” and “normally when the property market collapses, these type of outfits go bust”.

For legal reasons my publisher advised that we couldn’t print the name of the bank — Anglo Irish Bank — in yet another Irish example of stupid law protecting stupid people to the detriment of the majority. But what was right then is still right now, despite capital injections and much hot air about the “culture of Anglo”, the bank will still go bust and will be nationalised. This is likely to happen in the next few weeks.

This event will make Anglo Irish Bank the first bank in financial history to go bust with a government guarantee. This moment will be discussed for years to come.

In fact many professionals working in Ireland who up until recently parroted the idea that the banks were well capitalised or who argued that ‘property collapses don’t necessarily lead to bank failures’ will write brilliant ‘after the event’ analysis of what happened. They will muse as to why depositors did not consider the government guarantee sufficient when they decided to withdraw money en masse from the bank?

To save you listening to this hindsight in February; here’s a bit of foresight and this is what is likely to happen in the next few weeks. Corporate depositors — institutions that had kept large deposits with Anglo — will in the New Year decide that there is no point in keeping money with this bank when they can just as easily, keep their cash with one of the two big banks. The question they’ll ask themselves is ‘why should I keep my cash in Anglo?’. They are not being paid for specific Anglo risk.

But what, you might ask, is the financial risk now, if the Government is standing behind all the deposits whether they be in Anglo, AIB or Bank of Ireland?

The risk now is reputational risk. Credible institutions will simply not want to be associated with an outfit like Anglo. Reputation is about the most difficult attribute for any business to build and about the easiest to blow. Anglo has blown it.

People will shun the bank and take their deposits and business elsewhere. This is a tragic end to a business that many thought at one stage was mould breaking, but that’s the harsh way economic cycles administer justice.

Over the next few weeks this reputational stain will become more evident as horrendous news emerges from the bank in terms of bad debts and the extent to which the loan book was a one-way leveraged punt.

The capital flight from the bank will cause a massive funding problem as its loan to deposit ratio plummets further and its e80bn loan book smothers the bank in the financial excrement that the once “brilliant” bankers of the property boom misdiagnosed as assets.

Eventually, with its share price as zero, Minister Lenihan will have to nationalise the thing fully. This means that the national debt of the country will rise by e80bn (Anglo’s loan book) without a red cent having been spent on health, education or social welfare.

This will push credit spreads for Ireland out further as foreign investors will realise that they are also buying the hazardous waste of Anglo when they think about lending to the Irish sovereign.

The Minister will now face another dilemma, what does he do with Anglo? The thing is now a State liability full of loans to bankrupt developers for half-built developments all around Ireland. It will also be home to a few hundred knackered employees who have seen their dreams and, in many cases, their family’s futures implode. None of this is pretty and for most of these middle-ranking victims, none of this is deserved.

But the same process will happen all over the country as unemployment soars. One of the main reasons unemployment will soar is because of this banking phenomenon called ‘deleveraging’. While deleveraging will cause Anglo to go bust, it will have a vicious impact on credit in our country. The term is one of those horribly grainy expressions that make their way into economics. It means that the Irish banks who have presided over a most ludicrous expansion of their loan books by borrowing abroad, will have to lend considerably less in the years ahead and take in considerably more deposits to bring this ratio down to the European average.

The main Irish banks have a loan to deposit ratio of over 160. They will have to bring this figure down to between 80 and 100 in the next few years. This implies a massive contraction of credit, retail sales, tax revenue and cash in the economy. So what are we to do?

Well ironically, if we put our thinking cap on, this is where the coming nationalisation of Anglo might help the nation.

To see why this might be, let’s switch the discussion to Argentina, Brazil and Mexico. These countries suffered terribly from defaults on sovereign debt in the early 1980s. They couldn’t pay back the cash they’d borrowed.

For an entire decade they were frozen out of the global financial markets because no one would lend to them until they figured out what to do with the old debts. The lending banks realised they’d never see their cash in full again but needed a mechanism whereby they could trade these debts and possibly, see some upside from a disasterous situation. So both borrower and lender needed a way out.

Up stepped Ronnie Reagan’s finance secretary Nicholas Brady. Brady hammered out an agreement whereby the countries would undertake to pay a fraction of what they owed to the banks and the banks were satisfied with that because they were getting nothing with the market frozen. Brady also got a concession out of the countries that another portion of the debts might be paid back as long as things were going well.

In all, the debt write offs amounted to between 50pc and 70pc of the principal. New bonds were issued to replace the old debt and thus began the era of “Brady Bonds” which heralded the beginning of the recovery of much of Latin America.

Think about this idea in the context of the Irish property market. Irish property loans issued in the past five years are about as valuable as Latin American debt in the 1980s. The cash will never be paid back, simple. So let’s accept that and get on with it.

If we took the nationalised Anglo and filled it with the toxic waste of the other banks and then started to trade these property loans as a deep discount, let’s say 20pc or 30pc of their face value, we could trade our way out of these problems. Clearly the banks would bear the brunt of the pain but it was their problem in the first place.

This is the only way out for us. And the bust, but nationalised, Anglo might just hold the key as a vehicle for the new defaulted-debt trading model. But to arrive at this conclusion we first have to get it into our heads that in 2009, Ireland is more South America than Western Europe.


  1. The effective use of a “Brady Bond” type mechanism would provide a vehicle for such an exit strategy and indeed allow a firmer footing to be brought back to the financial system. However int he short term should such a policy be mooted this would definitely have a detrimental effect on the price of Irish Bonds if indeed the Government has fully underwriten all bank debts as it would imply that the Irish Government is in fact going to default on the agreement already given.

    With all of the tax incentives for hotels (that are not used) and property that is not being sold (or even rented) and the expected mass exodus of foreign nationals it does seem a step backwards. We are already in a mess beyond expectations, though very much self inflicted. Is Ireland so up tight about gambling (taking into account of the financial loss on property, CFD’s and even pension fund losses) that the thought of an International Financial Services industry in the gambling industry is still a mortal sin?

    For instance Monaco is not exactly a poverty state, though I accept Las Vegas is no property investment heaven, the possibility that a nation that once thrived on tourism, hospitality and international services – with excess hotel capacity – seems like an opportunity worth exploring.

    It should be easier to accept a casino or two in your back yard rather than an incinerator.

  2. I am in favour of the Casinos as long as we can get the upside too!

    In other words, we should start to lobby the FIA for a Dublin, Cork, Galway or Limerick Formula 1 street circuit round of the Championship — imagine the tourist Euros that would bring in!

    It is obvious from the various articles that despite the large writing on the wall there is still a hesitation among the decision makers to accept what is inevitable; as if they are waiting for the inauguration of Barrack Obama or some other such event to radically change things.

    They should move now, not in 1 – 3 months and make dramatic, planned decisions – the sooner we try and affect some type of change the sooner we can expect to get out of this mire.

  3. John ALLEN

    shirly – most of us are on the the post ‘change’ log into that

  4. PaddyThePig

    David,

    Quote :
    If we took the nationalised Anglo and filled it with the toxic waste of the other banks and then started to trade these property loans as a deep discount, let’s say 20pc or 30pc of their face value, we could trade our way out of these problems. Clearly the banks would bear the brunt of the pain but it was their problem in the first place.

    Question(s) :
    Dunno if I am understanding this correctly. Based on the last sentence from the quoted section, presumably the banks would still have to absorb the write-downs from these discounted bonds? If so, what is stopping each bank doing this right away with it’s own individual toxic debt? (I would have thought nothing). Why the need to lump it into another institution? If the loss is still borne by the bank by proxy, surely it’s reputation would still suffer?

    To my eye, this seems like trying to sell your house, and lumping all the crap into the spare room, hoping no-one will notice it. Then again, maybe I’m misunderstanding the idea. If anyone can further enlighten me on the merits of this, I’d be grateful.

    thanks,
    Paddy.

  5. anne-marie

    With job losses being announced nationally across a diversity of industries, I ask why there has been little or no mention of job cuts in two of the largest banks in the country. Surely, as any business in a failing economy, the day-to-day operational departments within the various banking divisions must be affected by the downturn. There is less borrowing, less spending, less growth and less money circulating then one would assume that the same demands would not be there as there have been in the past. Are the banks making provisions to reduce staff, cost cut or outsource? Are they waiting for something miraculous to happen that we don’t know about? Even Brian Cowen is now saying that it will take 4-5 years before the economy recovers. Well not even Brian Cowen can predict this fact given that 5 years ago the likes of David McWilliams and other economists tried to tell the government to pull in the reins and they were accused of ‘talking down the economy.’ In fact Bertie Ahern suggested to the few not suffering from impenetrable optimism, that they might be better of committing suicide. He made that comment in July 2007, only a year and a half years ago — what chance did any one have of trying to get the government to listen. I also recall Bertie making comments in the Dáil inferring that anyone who hadn’t managed to get on the property ladder by then was `mad’. Does that mean that people who bought in the latter end of a property bubble – and ended up with a hyper-inflated house price (and a mortgage over 35 years) just so that they could get on the property ladder (lest people think they are mad) are somewhat more sane?
    Some of these unfortunate property owners who believed in the fallacy of ‘no such thing as negative equity’ were conned into the dream by our government and now the builders don’t have to pay back loans to the banks they borrowed from. No house repossessions for these guys, it was only monopoly money to them but the ordinary tax payer must pay. Remember the overnight queues for house purchasing in commuter towns (not to mention no schools facilities in certain commuter towns!) but at the time the government did not want to `interfere’ with the property market. Maybe they didn’t want to upset their friends (bankers and builders) who were all having too much of a good time.
    This country needed badly the reality check that it is now facing. What goes up must come down and we must learn from our mistakes. Unfortunately it seems unlikely that the current government are up to making sound judgements on the recovery. For starters, a good leader will listen to the people and frankly it is obvious that anyone who tried to speak up in the past was shouted down. What plan does our government have? Our leaders are still on holiday from the Dáil. The whole country is on standstill until they come back at the end of January. They are not serious about running the country. And if you speak out you get shouted down with statistics and defensiveness by various ministers. Mary Harney is so out of touch with reality. she has retained 526 office workers in her department who apparently have nothing to do. At election time the FF voters said that they had no alternative to FF. What’s the alternative now?

    • Furrylugs

      What the banks have been doing Anne-Marie, is selling off local branches for cash and renting them back from their buddies they loaned money to in the first place.

  6. Furrylugs

    From our Finance Minister today;

    “… my department got its calculations and projections wrong three times last year and I had to make decisions on the basis of that.”
    “no one has been getting their forecasting right in the present climate”

    How’s that for reputational damage?
    If they had started reading this blog last September before the budget, the true forecasts were intelligently and dispassionately set out here by a combination of contributors. Not me, though I learned fast.

    DMcW and the Acolytes are becoming the alternative Dept of Finance, methinks.

  7. Malcolm McClure

    David: Your discussions go from strength to strength as you shed last years antlers and grow a new spread ready for rutts that could make you the dominant stag in Dublin this year. I’m sure that you’ll be gentle but firm in your approach to the banking hinds.
    Beware though; Anglo-Irish Bank could be the Irish Lehman Brothers, which started a domino effect series of bank collapses. The whole pack is interdependent and the trail of destruction could extend to other countries.

  8. Deco

    Some questions need to be answered before giving ANIB a penny.
    i) how much will it cost ?
    ii) will it be really worthwhile saving a bank that is concentrated in two sectors that are going to crater in any case ?
    iii) Will fixing ANIB really make any difference outside of the commercial property, and property development sectors ?
    iv) what is the real value of the ANIB asset book – when the properties against all those loans are placed on the market. The mark down is not what is mentioned in the PTSB house price survey, or the figures coming from Sherry Fitz.

    I think ANIB is unfixable. Sticking a diminishing pool of PAYE taxpayers with responsibility for carrying ANIB is stupid. We have to prioritise. Our export sector is more important than the property sector. Time to make a clean break. A new nationalized ANIB will be a bit like one of those companies that the state subsidized in the 1980s. Like Irish Steel, NET, P&T, and B&I. These were all in sectors where competition was the natural regulator. There was no need to public ownership, as their monopolistic position was ebbing, with EEC membership. They absorbed massive intakes of tax money. And in the end they were sold off because, broken up or privatized. And then they got efficient, the useless managers were tossed out, and prices they charged to the public customer were reduced. Only in this case ANIB has no strategic value. And it has no financial value whatsoever. ANIB tickets are lottery tickets on the 2% chance that ANIB would manage this on it’s own or with government assistance.

    The PAYE taxpayer money should be spent saving PAYE taxpayers and social requirements. And retraining unemployed workers. And introducing infrastructure to reduce the national economic cost base.

    ANIB is a capitalist enterprise that has failed. End of story. Waterford Crystal is of greater strategic importance. And Dell is definitely of greater importance. We are imitating that idiot Gordon Brown. It is a case of whatever blunders the British create, we have to go even further.
    Let ANIB fall – the depositors will have a run on the bank. and the government will provide the statutory protection. The deposits will be loaded into safer banks. And then it will become available to the market as loans, and will anchor more stable banks like AIB and Rabo. And we will reach the property market floor and concentrate on rebuilding the real economy.

    I think that we as a society have not got what it takes to admit that ANIB is a turkey. We are simply incapable of throwing our pride aside and being rational about our banks.

    ANIB is a waste of space. It would be a shame of ANIB was allowed to become a waste of PAYE tax money as well !!

  9. Deco

    Bailing out banks will not change the fundamentals of the credit crunch or the fundamentals of the fact that Ireland has a property bubble that has just burst.

  10. Johnny Dunne

    David, as the Government has now guaranteed ALL the liabilities (deposits and debts due to financial institutions) of the covered banks. If the banks write down their assets (mainly property backed loans) to ‘balance the books’ the shortfall will have to come from the taxpayer.

    “… the debt write offs amounted to between 50pc and 70pc of the principal. New bonds were issued to replace the old debt…” If this happened for the Irish banks then the Government would be left with the liability of the banks not covered transferring to the state. Say a 50% write-off then could amount to over €200 billion! The government is now ‘snookered’, it needs to ensure the bank’s assets are not written off (too much!) but they still need to lend to the ‘productive’ sectors of the economy.

    Therefore, they should be focusing all efforts (and methods) on the recovery of the Irish economy so these ‘assets’ (properties) can make ‘income’ (rents) again sufficient to cover the cost of the loans. Where a bank like ANIB is exposed in the US and UK market, the government hope the actions of these respective governments work to stimulate the economy and maintain values of the bank’s assets.

    Over time all the assets will be ‘marked to market value’, let’s hope within 2 years the additional liability accruing to the government will not be ‘huge’ as national debt doubles from €37 billion to about €70 billion from 2008 to 2009 with the borrowing to meet budget deficits.

  11. Deco

    I wonder what the Senior Economist at the Bank of Ireland would recommend for insolvent companies….Come on Dan…give us some advice….what is your mental model for this companies that cannot get their finances in order…

    http://www.tribune.ie/archive/article/2005/dec/04/dont-pay-the-ferrymen/

  12. MK1

    Hi David,

    I partially read the intro of this article in the paper version of the Independent over the holiday break and was wondering if you would have it placed on this site.

    DMcW> If we took the nationalised Anglo and filled it with the toxic waste of the other banks and then started to trade these property loans as a deep discount, let’s say 20pc or 30pc of their face value, we could trade our way out of these problems. Clearly the banks would bear the brunt of the pain.

    This is your bad banks, good banks idea (as demonstated by Sweden). I agree with PaddyThePig, and was it BrendanW or someone else that also outlined on another article reponse that doing such a move wont change a jot in the financial situation. The “financial skip” idea CANT hide the loss in asset values. There is no magic. What you’re suggesting, shifting all the s_it to a government-owned Anglo would in fact let BOI and AIB and others off the hook. They (AIB/BOI) would be protected from the pain. Havent we saved them enough already pain already?

    I agree with Deco, we should not be saving our ailing banks, and pouring yet more good money after bad.

    The Government on our behalf (and cost) has guaranteed the banks deposits and loans. I dont think many people want to test the Irish Government on either side of that guarantee, especially the loan side. Anglo doesnt have the cash to return all its deposits. But then again, neither does any bank, hence bank runs. Are banks fundamentally much different than Madoff, apart form quantities and scale and ratios? Is the money that appears on our monthly/quarterly statements actually there, 100%, all of it? Well, if we all go in and withdraw, it isnt!

    We really need to think less about the banks, more on jobs, and use what little money we have (as a Government) to spend it wisely. Further capitalisation of banks would be a mis-use of money. As would the ‘financial skip’ idea. We need short-term job creating spending to take place. So new buildings in schools- nope, waste of money. Major infrastucture projects – nope, more waste. Long-term gain is short-term nothing. Not government jobs as we have too many of those already, but productive ones in the private sector. Maybe entice more FDI, promote entrepreneurship like never before across many different spheres. But hard work in all areas by everybody, yes, you too public sector workers(!), will certainly help!

    Yes, we do need credit for businesses, but not too much. Those that have over-leveraged in building their business also need to readjust, close if necessary. Bad business is just that, bad business, even if it supports jobs. Credit supported jobs are bad business. Businesses have been propped up by too-easy credit just as property has. So giving money to banks is pointless.

    Getting back to the other articles and responses, was it Paddy, DaraghD(?), Shane or Brendan said they would run for the next election? I think the time is right certainly for a new political direction. Independents that are there just as a protest and arent interested in really going for the Dail though wont get much support. Maybe a concerted effort in a new party would help. Or invigorate some of the current ones. A new party would certainly be a welcome development. Maybe one is already starting over at politics.ie …… maybe time to check.

    I am willing to help any independent/new party candidate who has a vision …… as I’m sure many are.

    MK1

  13. Deco

    Minister Lenihan moves slowly once again….he has an excuse lined up for doing nothing to prevent ANIB managers giving themselves bonuses before year end…he could not overrule a decision they already made to give themselves bonuses.

    http://www.independent.ie/business/irish/lenihan-pledges-to-control-bank-salaries-1593826.html
    Also can somebody please define the exact length of “couple of weeks” in ‘governmentspeak’.
    The government are not in control – the clowns who approved so many absurd loans are in control. We postponed the property crash, and the banks got hhit. Now we are postponing the banking crash, and the taxpayer is getting hit. Meanwhile the multinationals must surely be wondering whether this government regards exports as it’s priority, or the interests of the Ballybrit confederation (buliders, bankers, oligopolistists, construction materials suppliers, etc..).

  14. anne-marie

    The government and the banks are in this together. We always knew the Dell’s of this country were short-lived in Ireland. When these companies came to Ireland we were a low cost economy, now we are not competitive enough. Next stop is Poland for as long as they remain competitive. This is capitalism. Now we all knew that it could not really last forever but we were tempted to live in denial. There are probably 100′s of Dell employees who currently have mortgages to the tune of 10 times the average industrial wage. The banks gave mortgages on the basis of medium-term job security.
    It was a false economy and it was bought into by the government and the banks. The government did not act like the good shepherd here and in David’s words this behaviour led to economic vandalism. Both the government and the bankers are out of touch with reality. Luckily emigration was a solution in the past. Unfortunately emigration is not a viable option for all of us at present due to the global economic crises. We have no idea how long economic recovery will take in Ireland and no amount of wishful thinking or impenetrable optimism will transform the economy overnight

  15. Deco

    I am including this link here – because this column from David is probably closer to the topic of the link
    http://www.marketwatch.com/news/story/Bank-Ireland-sharply-cut-UK/story.aspx?guid=%7BB2891B73%2D24B8%2D440A%2DBC39%2D7F94EE6B194A%7D

    BOI are retracting their GB mortgage lending. It would be good news, had they decided to do it 12 months ago. I am not sure if this occurring as a result of direction from the Minister/Dept of Finance/C Bank/Government. In any case it will provide capital for the bank, get away from a precarious situation, and help reduce the commitment from the taxpayer.

    It is a welcome step from BOI – they are starting to act responsibly. It would be even more welcome if they sold off all assets in foreign markets, and poured the money into recapitalization. Then, they can ask the taxpayer for assistance.

  16. Andreas

    I suppose nationalisation of anglo would be very beneficial for the contributors and supporters of FF. It is probably easier to give the government the run around, than new private and foreign investors, or whoever would have bought their debts , in the case of bankrupcy. They might actually be concerned about recovering some of the money lent out, and would probably not be satisfied with a round of golf and some excuse.

    I suppose with the bank guarantee , the bank cant really go bankrupt, as that would force the government to have to liquidate whatever assets the bank had and honor the banks debt

    Just feeling a bit of dismay over the corruption that seems to be everywhere. It seems like everything is run on a nod and a wink in this country

  17. John ALLEN

    Public Servants – the right to work must not be denied instead all their costs be adapted in tandem with ps costs of living thus upholding normality in our frailing decimating economics. A failure to achieve this will be the road to anarchy .Politics is for the people ,economics is about the people and proper Leadership is is a God given Right .Arise and follow MUNSTER .

  18. Deco

    David you might be interested in some of the suggestions in this link. Are these of any relevance to Ireland ??

    Another article from the DT – I am picking the opposition newspaper, because they are the most likely to provide critical veiws.

    http://www.telegraph.co.uk/finance/economics/4210925/Six-ways-to-get-the-economic-motor-running.html

    Some interesting remarks concerning regulation of the banks. And an admission, that cost reduction in banks, will be necesary. This means “Fire the leading managers”, and reduce executive pay. It also means less advertising, sponsorship, an end to junkets. And a complete end to prestige projects. An end to nonsense like AIB sending managers to the Ryder Cup, sposoring rugger just for bragging rights between competing egos in the banks etc…

    Two points get my attention.
    [ 3 Restoration of profitability to the banks. The higher the profits, the faster the writedowns can be achieved and the sooner the self-healing properties of markets can take over. Currently the authorities give support to the banks with one hand and seek to punish them with the other. This ambiguity needs to be removed to allow banks to rebuild their profitability.

    4 Redirection of banks' lending capacity towards non-financial companies and households.
    ]
    The problem now is that we have nobody sacked in ANIB. There are many people in ANIB who clearly are not up to the job. And that would include 80% plus of the bank management.

    In fact the same could be said of EBS, and INBS. And we should investigate the others as well.

  19. Deco

    Some good news. Goggin will step down from BOI.

    http://www.independent.ie/national-news/b-of-i-chief-goggin-to-quit-more-to-follow-1598237.html
    Now here is a real interesting bit of the article.
    [Senior bank sources have this weekend said that, at present, the big developers are failing even to make the interest repayments on their huge loans.

    However, critics of the banks have said that this move by the developers will force the banks to "get real" and abandon out-of-date valuations, which are showing a falsely positive position on their loan books. The banks intend to resist the examinership process vigorously.

    The move toward examinership by the builders follows a recent High Court decision involving ACC Bank and Ocean Bar, in which the bank ended up taking a hit of €378,000 on a €1.37m loan because of a quirk in the law which allowed the premises to be re-valued at more realistic levels. ]

    Basically, the banks are bunched. Therefore we should back out of the gaurantee until we get honest answers on the contents of the loan books of the banks !!! It also indicates that the law is once again, fully favourable to the “Ballybrit brigade”, Tom Parlon and Freinds in the CIF.

  20. Deco

    More good news concerning public accountability and Irish Financial Instutitions.
    http://www.independent.ie/business/irish/retired-garda-hero-battles-for-ebs-board-seat-1598216.html

    The EBS are hopefully going to be opened up to it’s members. Hopefully they will get cleaned up, and the buffoons in charge will get undermined. Shane Ross wrote articles already pinpointing the deficiencies and deceit in the EBS.

    http://www.independent.ie/opinion/columnists/shane-ross/save-your-asses-not-your-assets-1550137.html

    Hopefully, we will know see one Irish financial institution get a clean up instead of a cover up :)))

  21. Tim

    Jim,
    “[assuming these defaulters had a clue when they were buying]” ??

    Look at where they are now ……

    But: “as long as the portfolio is managed properly” ………. if that is what the two Brians intend and are capable of, well, alot of people will have to EAT their predictions and we will all confess to being members of Fianna Fail in the morning. (which, I am, by the way – card-carrying and chairman of my Cumann).

  22. Tim

    I suppose it might be possible for a number of shareholders to join together in a class-action suit against Fitzy, or apply to the high court in the morning for emergency injunctive relief to prevent the adjournment of the meeting;

    Then, when the meeting opens, refuse to ratify standing orders for the meeting (thus, dumping the re-capitalisation plan); propose new standing orders to shift from the extant motion to a new one to hold a Q and A, and take things from there.

    How would the shareholders get together and “wake up a judge”?

    Shane Ross said tonight that 80% of them are small shareholders with 1,000 or 2,000. That’s a ready-made “divide and conquer” scenarion for the bosses, I’m afraid. They cannot move “as-one”.

  23. Patrick

    So just when the government were talking about slashing public sector jobs and salaries they suddenly take on another 1700 odd staff…ha ha now that’s Irish for you!

  24. Sam

    Anglo Irish is not the worst bank in terms of exposure to toxic property loans. That honour falls to Irish Nationwide. The bank that provided the “bed and breakfast” to Sean Fitzpatrick’s loans. A relevant question is “was the “B&B” recipricated?” Why is this a relevant question? Answer: Because the IN Chief Executive, Michael Fingleton also participates in the property market in partnership with bank customers and provides mezzanine finance to them on a large scale. Mezzanine finance, is of course, far riskier than normal lending as it provides funds for the equity that is at risk before the bank’s proportion is vulnerable. It is therefore the first money to be wiped out totally if there is any reduction at all in the sales price of the underlying property asset.

    Anglo Irish very rarely, if ever, participated in profit share deals with their customers and had the buffer of the equity injected by those customers plus the cross collateralisation of other assets including personal guarantees. Mezzanine finance provied in return for profit participation has no such buffer. There is worse out there than Anglo.

    • Deco

      Even before the credit crunch was accepted as ‘reality’ in this country INBS was a complete circus.

      http://www.politics.ie/economy/22870-irish-nationwide-michael-fingleton-could-go-bust-3.html

      INBS now are heading to being rated junk status by the international ratings agencies.

      So what is next in state policy in banking. INBS is apparently a fiefdom of one man. Even in 2007 the dogs on the street knew this. This corrupt institution will be next in line.

      Geldof was right – banana republic. If we let ANIB and INBS sink, then we would purge the system of these clowns. But this is Ireland, and punishing law breakers is just not acceptable. Bail them out with the taxpayers money, and make sure that they never ever change. Yes, state policy amounts to protecting Irish pride, sustaining denial, even if it bankrupts the country.

  25. simon McCarthy

    Dear Sir
    We now own the The Anglo Irish Bank. As I understand it the intention is to wind the bank down. Why wind it down, investors money is now safe. If Anglo Irish were to continue as a working bank I think a great deal of the Irish public might prefer it to AIB or Bank of Ireland neither of whom have shown any gratitude to the Irish taxpayer bailing them out.
    If Anglo Irish were to pass on in full the ECB rate reductions without delay, if it were to act honestly, morally, and ethically with its clients, then it could become the bank of chose. Anglo could set a new standard for banking in Ireland.

  26. DarraghD

    Jasus Lads, ye wouldn’t guess who has just emerged as the largest debtor of Anglo Irish Bank!?!?! None other than possibly the biggest Irish investment poser on record, Sean Quinn, the man who has lost his shirt in what sh*tty investment was it he made again, oh Jasus, that’s right, BUYING ANGLO SHARES!!!!

    It looks like slowly but surely, we are getting closer to the real reasons why Anglo haven’t a pot to p*ss into and Lenihan is handing over his rusted bedpan to them…

    http://www.irishtimes.com/newspaper/frontpage/2009/0117/1232059657234.html

    I’d still can’t work out why those shareholders at the Anglo EGM in the mansion house this morning weren’t firing those chairs up at the top table and seeing them bouncing off heads, instead of sitting on ‘em…

    You’d struggle to make this sh*t up!!!

  27. Deco

    The last annual report of INBS – should you chose to beleive the contents. The auditor is listed as KPMG on Page 10. Same auditors the year before.

    Therefore there was collusion to hide material information from the shareholders, that involved ANIB directors, ANIB head office officials, Ersnt&Young auditors, the bosses of the audit staff, IRSRA directors and officials, and possibly even staff in the Irish Central Bank. And now we know that KPMG were probably in the loop also.

    This means that the financial services industry is rotten with corruption. But this is not New York. We let our cowboys to continue as they wish. There will be no jail sentences for the creators of the “Irish Enron”. Authority in Ireland is a joke !

  28. Deco

    Sorry forgot the link of the INBS annual report. As if it can be believed in any case ?
    http://www.irish-nationwide.com/reports/inbs/INBS%20Annual%20Report%2007.pdf
    Page 10 – the auditor is listed.

  29. Deco

    And for those interested in ANIB (now taxpayer funded)….sounds really positive….as a taxpayer you have the right to demand results…like in the rest of the public sector….

    http://www.angloirishbank.com/Investors/Reports/Preliminary_Results_2008/Preliminary_Results_2008.pdf

  30. eddie

    Nobody in the PAYE or public sector is going to be willing to take the cuts required to fund a sensible economic plan involving the banks at this stage, It is just not politically possible. The time for listening to a sensible and scientific economist has past in many ways. The people who drank the least at the party are not going to suffer the hangover. Let the banks fail, hang fingleton et al. I could not care less, I will strike for a year if I am put upon for this mess. I will carry as heavy a burden as the this sham carried for me. I already work a 70hr week in a hospital, what do they want? I am quite happy to work 35 if additional tax is paying somebody elses gambling debts.
    If my house is worth nothing at the end I do not care. I will live in it as I always planned. This crazy game is all but over and the country has lost. Lets start a new game with different rules.
    If the likes of me are to be brought into a solution it requires an emotional response rather than a scientific of sensible one. I want blood for having to emigrate, work hard, pay tax etc etc etc etc while these mafia screwed my Republic. I had little stake in the celtic tigers upside, if they want a life jacket it better be good.
    Nationalise the lot of them now, get in there and sort out something along the lines of selling the debt at a realistic value as David suggest, we need to hit the bottom soon or we never will. The people who made mistakes can be forgiven, those who knew what they were bringing on us need pulling out of bed by the hair.
    I am ANGRY
    and i have a job

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