We will only get one chance to recapitalise our banks. Our banks have insufficient capital to cover their losses on their loan books and they have a drastic funding shortage. Without the government guarantee, most of them would surely be bust, because no one would lend to them. Without a properly functioning banking system, the economy will continue to contract.
This week, three separate businesspeople told me they were going out of business. They do not have sufficient cash flow and are beginning to renege on debts. Last night, a friend indicated that he would simply have to default on his rent payments because the landlord of his premises was insisting on rent covenants signed last year which he couldn’t pay because business has dried up. Apparently, last year’s business plan now reads like Alice in Wonderland.
In a similar vein, a liquidator friend – a man who likened his position to ‘‘an undertaker waiting for the plague’’ – summed up the banks’ position in a simple story.
A desperate man arrived in his office this week with property debts of €48 million for which he had put up a total of €400,000 cash. Each property, all in mid Munster, was cross-collateralised against others. There were six separate banks involved. All the loans had been taken out in the past three years and covered commercial property, residential property and development land, as well as the ubiquitous second apartment.
Obviously, the man was broke and couldn’t meet any of his repayments. The ‘assets’ were now worth a fraction of the borrowings and there was no way the banks would ever get their money back. Nor should they have ever lent this money to this character, but they did and now we are being asked to cough up to cover the obvious bad debts associated with thousands of ‘entrepreneurs’ like this.
Out in the rest of the country, the unemployment figures announced this week are not only a personal tragedy for thousands of families but, for the banks, rising unemployment means rising mortgage default. These defaults will also have to be covered by the recapitalisation.
So you can see a huge amount rests on the recapitalisation of the banks. If it is not successful, the banks will sink under the weight of bad debts. When the government makes its decision this week, it has to fix the problem. If it fails, the money will be wasted, and the banks will burn through the new capital as they try to maintain their capital adequacy ratios in the face of a meltdown of their loan books.
Let’s cut to the chase: the proposed recapitalisation will fail. There’s little point pussy-footing about: €7 billion of your cash is about to be blown this week on our dysfunctional banks. The reason for using the term ‘‘blown’’ is that the money will be wasted and we will be back at square one by summer, with a larger hole in the balance sheets.
Remember that this deal to be announced, probably on Tuesday, is likely to be a worse deal than the nonsense that was proposed a few days before Christmas. The Irish banking system faces two disasters and one problem is driving the other.
The first disaster is a funding disaster, where the average loan-to-deposit ratio of Irish banks is between 150 and 160 per cent. For the likes of Irish Life & Permanent, it is no less than 260 per cent. For the big two, this ratio is about 160 per cent. This ratio means that for every €160 the Irish banks lent out, they only had €100 in deposits. So they borrowed €60 from the wholesale money markets – which are now shut.
As long as the money markets are shut, the banks are being kept on a life support machine by the state’s guarantee. The strategy to borrow for growth was implemented by the managements of our banks who – amazingly – are still drawing hefty salaries. Without the state guarantee, the banks would have to pay so much for funding that most of them would be likely to go under.
Even with the guarantee, the banks will have to get the loan-to-deposit ratios down to somewhere around 80-100 per cent. This is a process called ‘‘deleveraging’’ and can only be achieved by increasing deposits and reducing lending.
This contraction of credit will have a monumental knock-on effect on the second big problem for the banks: bad loans. At the moment, Irish banks are telling half-truths about their bad loans and, given that the management of Ireland’s banks has got nothing right in the past two years, it is difficult to believe them now.
To get a better idea of what is likely here, we can examine the experience of other countries. Switzerland and Sweden both suffered a banking crisis following a property bust in the early 1990s. In both cases, the banks had to write off close to 8 per cent of their loan books. This was traumatic and the banks lost fortunes, but they recovered.
Given that the Irish loan book is more than €400 billion, a similar write down would reveal a black hole in the Irish banks of about €33 billion. As Bank of Ireland and Allied Irish Bank account for the lion’s share of the market, we can guarantee that their bad loans will be considerably greater than the €8 billion recapitalisation expected to be announced for the two big banks this week.
Take Bank of Ireland alone. Its loan book rocketed from €80 billion at the start of 2005 to a whopping €145 billion by the middle of last year. An enormous 26 per cent of the total loan book (or €38 billion) has been lent to the property sector.
If I can figure this out, what of investors who are being asked to buy into the government’s plans? Brian Lenihan should understand that investors will only come back to Ireland if we make it attractive for them. This means the Irish state has to take a bigger risk in the deal than they do. Given the basic mathematics of why €8 billion will not be enough, don’t be surprised if the shares of Irish banks fall and fall again on the news that this botched recapitalisation has been announced and Ireland has used up all its ammunition.
If you want to recapitalise, you need a much bigger state package that cleans up the banks and gives potential new investors the comfort that they are buying a clean bank If they suspect that this will not be enough to pay for the sins of fellows like our friend with 40 properties in Munster, they’ll wait on the sidelines until all Lenihan’s cash is gone and then snap up the good parts of the Irish banks for free.
Dr Nightdub said:
Sweet jesus, do these people even TALK to each other? Why are we in the grip of a bunch of compulsive u-turners?
“This place would be a paradise tomorrow if every department had a supervisor with a sub-machine gun” – Alabama 3
Reminds me of a story a friend of mine in Salzburg told me last year when we were touring the “Konigsee” area where Adolf bought a large tract of land from the local farmers and built his famous “Eagles Nest” (Kehlstein haus) in Berchtesgaren ( as a summer home/ holiday retreat.)
Seems one of the farmers refused to sell his land, and Adolf lost patience with him.The SS called to his home and said he had two options: sell or become a guest of the state.. (i.e.-in a concentration camp).
He sold.
I cannot see any of the political wafflers who bought their third term in office with the peoples own money (which is now all gone) turning into a monster like Adolf- but would it not be wonderful if the two Brians donned black uniforms and became sort of “benign” autocrats and opened a few friendly internment camps for their erstwhile social partners such as the trucelent David Begg types now threatening to unleash all Hell ,on the beleaguered boyos in their bunkers in Dail Eireann..?
Eaten bread is soon forgotten.Would the greedy Soldiers of Destiny want a fourth term in office anyway.
Will Ireland be a colony/protectorate administered by the Germany Reich (and their bankers) in 2012?
Let’s face it, the game is up, whether there is bad bank and redeemed banks. The time is now for bankruptcy, and liquidation of assets, with the state buying land and housing at 25cent in the the euro. The state simply does not have the money to cover the debts, and will never have the money. In the meantime, the public service is to be flayed relentlessly as a sacrifice to the enterprise culture and belief in competitiveness. The rich have been excused by the mantra that the top 6% pay 50% of the income tax, but how much are they earning and how much are they worth, and what do they pay in VAT as a percentage of their income? This government must be brought down, now, by lawful means of general strike and peaceful demonstration.
Gadfly55 states that “the rich have been excused by the mantra that the top 6% pay 50% of the income tax”. He put his finger on it. If we are all to share the pain let’s have the proof, and let’s have the price controls. Harris the other night was pointed about the professionals and the farmers (in an earlier Sindo article he had referred to the “strong farmers”, the only voice I heard mentioning them), who have been keeping the head down.
I know where that places me in the “windbags tilting a windmills” question, but as David says, “that’s just the way it is”!
Hi, does anyone know if there is any truth in this article.
Investors about to be cleaned out ?, banks to be saved ?.
http://www.businessspectator.com.au/bs.nsf/Article/A-tsunami-of-hope-or-terror-LHRJP?OpenDocument&src=sph
An interesting article…No idea if its all bollocks or plausible or even probable but its interesting…. I like that when the taxman is running around rummaging under other peoples sofas to find money to burn before the banking gods that someone somewhere is trying to figure out who the winners will be and who the losers will be and just WTF is going on…
And there will be winners and losers…
We were bounced into giving the bank guarantee. With hindsight the deposit guarantee was inspired, the guarantee of debts was stupid and the complete lack of followup suicidal. Given the recent confusion on the pensions levy arithmetic, I think the government are completely out of their depth, its men against boys in the negotiations with the banks
We are being bounced into recapitalisation which is insufficient but will draw us deeper into the quicksand… The banks want us in there as they plan keep their heads above ground by standing on us…. Fool me once, shame on you, fool me twice…
If I was dictator, my recapitalisation plan would be to send 1 billion to each of the banks in return for 50% shareholding along with a box. The box would contain a bottle of brandy and a revolver with instructions.for use should they trigger the state guarantee.
Lets all stand up and think for a minute and then sit down and feel the pain .
What I meant just now is that I’ve been waiting all along for them to actually say who they were for and now that they have I was half asleep.
Dilly, it’s an interesting idea. Trouble is, will there be enough investor’s money to cover these SPV’s? Maybe the banks windfall will not materialise. Too many credit lines going after smaller and smaller amounts of wealth.
I think Lorcan’s post does it for me. We are grossly overbanked. So is the UK and so was Iceland and anyone else that confused wealth with property (you need banks to pull off that little trick). I think we are indeed beyond saving banks because a) they represent too much of the economy and b) produce zero wealth.
Cash is the oil needed to run a day to day business. We need banks as the oil pump by offering loans to pressurise the economy and make money flow. That pump is not working and cash flow has stopped. The engine (economy) needs to be rolling before the pump runs to pressurise the system. Once the engine stops (due to lack of oil or pressure drop), the pump stops. Starting the pump cannot happen without starting the engine. We have such a big banking sector, we forgot there was an economy that drove it. We just need a new pump. It does not have to be big or indeed have that much cash. Pressuring the economy with cash can get it moving again and the pump sizing can be allowed to increase as the economy revs up. Of course, an engine needs fuel to do any work. We have lots of it – it’s called labour. And it makes wealth in the form of energy output. But Oil is needed to allow it to run smoothly – to avoid friction. That’s what cash is.
Too many confuse cash with wealth. It justs allows things to happen.
Right now, we are beyond the nonsense associated with “competition” and “having to cut costs” etc. The economy is on the verge of stalling becasue cash has dried up. If you went out and offered your services for half price, there would still be no buyers. The trick is to
1) Get people to feel secure in themselves and their future.
2) Get people working asap.
3) Get economic activity rolling again – export markets will become spotty. Supplies will become spotty. Control what you can domestically and try and get a full cross section of skillsets operational locally. There is lots to do.
4) Get a new bank operational to start pressuring the system with some form of legal tender…fixed rate t o the Euro…I do not know. This is an an organisational issue.
Right now, the new growth market is maintenance and repair….aka recycling. and Agri.
Very interesting article Dilly…
Maybe I should incorporate myself as an individual; it seems to be the only way the government will take you seriously these days.
Corporations have enormous ‘legal’ powers, maybe as a human being I could have the rights and privileges of a corporation, then I could claim back the tax on my car, fuel, insurance, food, clothes, children’s education and send any profits from my labour offshore and in the event I run up major debts say in doing something actually quite interesting like the casino’s in Monte Carlo then I’ll seek a bailout from the Minister of Finance, who will have spotted such debts on my yearly financial statements, debts missed incidentally by an international auditing company (men with nice suits and plain faces) and the national financial regulator.
After the dust settles and my family disown me, I would grant myself a pension of at least 500K per year; take myself off on a lovely holiday to one of my foreign properties and return like a King to setup office in Dublin and carry on as if nothing untoward had happened!
http://www.irishtimes.com/newspaper/frontpage/2009/0210/1233867929772.html?via=mr
And we’re negotiating with them because??? Seriously, if someone was begging you for money would you agree to a long list of their requirements for accepting the money you’re giving them with boundless munificence and even greater optimism?
A moratorium of 6 months on mortgage foreclosures in nothing when no reasonable person sees any improvement by the end of 2009.
Over every mountain there is a valley
Problem is John, across that valley sits another mountain that looks a bit like this one.
http://www.google.com/hostednews/ap/article/ALeqM5hcWJaxwgurm_TV9AVcObQBWbS25QD968EQCG5
Funds for the banks, is all very well. Suppose it works, what then. Will things revert to normal. I know the Gov and all the political parties think it will. And I think it absolutely will not.
The thing is The Bankers have figured this out. And they know you can pump as much money as you like into the system, they might as well be counting grains of sugar for each and every Euro. And much as Germany and the rest of the Euro zone believes it will by-pass them for being the Oh so perfect mod-dels. You only need to enter Ryanairs version of Brussels airport to see what is an economic desert and you realise economic advise for them is a bit tainted. For the entire north of Europe is fixed, just a little bit to notions of wealth which are a little bit moody.
Reganomics, much like the system before it, had had its day. And the full extent of this was the buying of that land for the prison in north co Dublin. When regardless of where and what and from whom, The State can without regard, remove all, from what it deems necessary. And it pays compo’ at its descrition.
For many globalism is here to stay, and shock of shocks it always was here. Why did the USA have such a problem with the british empire, because India on its own removed the economic clout from the states. Well, Iron & Steel is now exclusively produced by Mittel , and produced better. Where all over the world he did as he did for our dirty little blacksmiths yard down in Cork and closed the thing.
So, what to do, without going back to some stoneage green party nirvana, when pecking spirals on stones controls the local economy and shipping porcelainite axe heads is the export. Or in other words shipping live cattle -in both the english and Irish version of the word- out of the Country.
What I’m saying is, and then what.
I’ll tell you what…
I was thinking of paying off the mortgage…but I figure I might need the cash in case I loose my job and have some aside for kids education – assuming schools still exist…
I was thinking of changing the car with 100K miles on it….Now I am going to try and get another 100K out of it.
I was looking at re-tiling the hall. I’ve decided to look at digging the garden and growing a few spuds.
The economy may not want my participation and so therefore I in return will not participate. Survival is paramount.
I predict a spuds bubble!
The seed potatoes are bought. A half acre between a couple of us, less work, the machinery is there even if some of it hasn’t been used in years.. We’re trying a few blight resistant ones see how they work out, if it works we’ll have the seed for next year if not, no worries.
Let’s take another tack on this completely and stand back a bit. Ireland is but a small part of a global financial infrastructure that’s falling to bits right now. It’s been clearly established that all who ran this together with government policy makers are a bunch of nitwits whose position was established by cronyism and nepotism.
In Ireland we are seeing what damage an excess of credit was doing. People relinquished their rights for a comfortable living, not realising that they were being screwed progressively by their own ignorance and the nitwits running the place. As this nonsense accelerated, not only was globalism exaserbating the unregulated nature of finance, but of long supply chains that kept westerners indebted and the impoverished workers in China, India etc working overtime to keep a few fat cats fat. Productivity was falling. Take supermarkets…the likes of Tesco who sell unbelievable crap you ingest with little hope of tracability. People are paying thro the nose for glossed up, nicely packaged garbage at ridiculous markups to the massive detriment of suppliers. The local butcher/ baker/ grocer has been replaced by a massive con job promoted by excess credit and the crowding out of little guys. These operators have also distorted the skillset requirements to keep an economy rolling by creating more job opening for wasteful logistics operations over local production. Manufacturing has been forced to scale up and standardise to cater the the huge maw of the these distributor outlets and again have distorted the skillset requirements to focus more on process than on specifics of the art of the original manufacturing. We have contract manufacturing, contract logistics and massive distributions chains owned by but a few people / “investors” who dominate the world with bland crap.
This credit crunch has demolished all of the above. You can expect that the volumes these operations needed to be profitable (volume is king – remember) has started to fall off dramatically. The property scam is now unravelling all the other scams that was financed by the pseudo credit which had property as its basis.
So now what? Well, China Inc is gone. Hopefully, it’ll have enough reserves to keep itself rolling. 20M made unemployed is just an example of the recent unravelling. My guess is that the government will need to desperately save face and blame the americans to try and keep riots under control. Good luck to them. They have been conned for sure…but not by americans. And so too have all the other long value chain distributers. People have simply stopped buying. Duh!?
So now what? We are going to discover we do not need as many physical imports. Local small scale manufacure will make more sense. Supermarkets should be limited to prevent supplier bullying. (The banks are only part of the problem). Ireland’s costs are to do with massive markups by distributors. The hike due to ESB higher prices, Slightly higher wages bills and so on is only about 5-15%…it leaves unexplained the other 50-100%.
So now what? We have the skillsets to do all we did a few years ago. We did make cars, tyres, utility vehicles etc. We can make all outr own food etc. The only thing we need in information on specifications etc. That’s now on the internet. We need to diversify dramatically. Do not be conned by economies of scale arguments. That’s not as true as it was years ago. Believe me, logistics and marketing more than make up for the scale losses. And tooling is smaller and more effective.
My guess is that many economies that were not entrepreneurially stable 20 years ago, will revert to their original state and Ireland will be back in line as a manufacturing base that the more traditional westerners can rely on. We have the climate, the political stability (i think) and the savoir faire. I give it 18 months – and I expect the IDA conditions to be arduous in the extreme.
I’m still waiting for the government to compel the executives from Anglo, AIB & Bank of Ireland to give evidence to a parliamentary committee as to how they operated…
I read this report in the FT today. Paul Moore, ex head of risk @ HBOS
““I certainly knew that the bank was going too fast (and told them), had a cultural indisposition to challenge (and told them) and was a serious risk to financial stability.
“I told the board they ought to slow down but was prevented from having this properly minuted by the CFO. I told them that their sales culture was significantly out of balance with their systems and controls.
“There must have been a very high risk if you lend money to people who have no jobs, no provable income and no assets. If you lend that money to buy an asset which is worth the same or even less than the amount of the loan …and assume that asset will always rise in value, you must be pretty much close to delusional?”
“I strongly believe that the real underlying cause of all the problems was simply this – a total failure of all key aspects of governance.”
I think it is sound to assume a similar culture existed in Irish banks. Anyone disagree?
This suggests that it would be unwise to leave this culture intact. Is there any way to undermine it without replacing a significant number of leaders. The honourable action would be for several of them to fall on their swords and resign – rather than push the government into a position of having to sack them. If the government has to sack them, it would suggest to external observers that there are no honourable men, and that there is reason to fear for the future leadership of financial institutions.
Perhaps the most effective face-saving measure would be for an agreement to be made privately that leaders will step down in return for a modest remuneration for a short period – thereby enabling disgraced but not absolutely disgraced financial leaders to retrain for future employment in an alternative occupation.
Anyone support this approach?
Today’s BBC report makes compulsive reading …
“The former bosses of the two biggest UK casualties of the banking crisis have apologised “profoundly and unreservedly” for their banks’ failure.
Former Royal Bank of Scotland chief executive Sir Fred Goodwin told MPs on the Treasury Committee he “could not be more sorry” for what had happened.
The former bank chiefs also said the bonus culture had contributed to the crisis and needed to be reviewed.
But Sir Fred said if bankers felt they were not paid enough, they would leave.
Sir Tom McKillop, former RBS chairman, also admitted that his bank’s much-criticised purchase of Dutch rival ABN Amro had been a “big mistake”.
See how much bank bosses earned in 2007
Personal gain
The former bosses, along with other bankers, have been criticised for taking huge bonuses from banks that later had to rely on taxpayer money to survive.
The MPs began by asking the former bosses about the bonuses they received in 2008.
Sir Fred Goodwin said he had taken no bonus that year, but that he had taken home a salary of £1.46m.
Paul O Mahony – you are well intentioned but your proposal does not go far enough – irish banks are seen to commit crime and we must seek real justice
There is more, equally riveting…
“Andy Hornby, former chief executive of HBOS, said he had also not taken a a bonus last year, and that he had never taken any bonus in the form of cash.
“I have never received one single penny in cash bonus,” he said, referring to his time not only as boss of HBOS but also his time on the board.
Instead, he said, he had taken his bonuses in the form of shares.
“I have lost considerably more money than I have been paid,” he said, referring to falls in the value of shares that he had been given as bonuses.
Sir Fred Goodwin added he had lost around £5m on the value of his shares in 2007, although he stressed that he was not complaining.
Bonus culture
Mr Hornby conceded that the culture, where bankers can receive many times their salary in cash bonuses, did need to be looked at.
“The bonus system has proved to be wrong. Substantial cash bonuses do not reward the right kind of behaviour,” he said.
Sir Tom McKillop agreed that a fundamental review of remuneration was needed.
But when asked whether the bonus culture encouraged excessive risk taking and had exacerbated the banking crisis, Sir Fred Goodwin argued that traders had been trading within set limits, and had simply been doing “what they were authorised to do”.
It is “hard to say that remuneration was a cause [of the bank's problems],” he said.
Huge losses
Sir Fred oversaw a number of acquisitions that made Edinburgh-based RBS one of the world’s biggest banks.
But his £10bn deal to buy Dutch rival ABN Amro late in 2007 is now seen as ill-timed and a deal too far in light of RBS’s inability to survive the credit crunch without a massive injection of government funds.
Sir Tom admitted to the committee that the deal to buy ABN was “a big mistake”.
“We bought it at the top of the market and anything we paid was an error. We are sorry we bought ABN Amro,” he said.
Sir Fred said it was a “bad decision and certainly mistimed.”
He said the size of RBS, together with its lack of cash following the ABN Amro, made it particularly susceptible to the credit crunch.
RBS is now nearly 70%-owned by the taxpayer after a government rescue package was put in place at the end of last year.
No easy ride
The ex-bosses of HBOS also admitted mistakes.
When pushed, Lord Stevenson, former chairman of HBOS, said the mistake the bank made was a failure to predict the credit crunch, which effectively froze access to new funds.
“The fundamental mistake of HBOS was the failure to predict the wholesale collapse of the wholesale markets,” he said.
The MPs asked why a HBOS group risk manager was sacked in 2007 for raising questions about the levels of risk the bank was taking on. Lord Stevenson would not be drawn on the specifics of the sacking, simply saying that it had been subject to an independent investigation.
But Mr Hornby stressed that an over-reliance on wholesale capital markets for funding was indeed the root cause of the problem.
“We were over-exposed to wholesale funding,” he said.
Banks use the wholesale markets to raise cash – effectively borrowing money from other financial institutions. When this funding dried up as a result of the credit crunch, the bank was left high and dry, he and Lord Stevenson argued.
HBOS was rescued by Lloyds and the merged group is now more than 40%-owned by the government.
The bosses still in place at the helm of Britain’s leading banks will appear before the Treasury Committee on Wednesday. ”
Don’t we need this sort of public investigation in Ireland?
I watched most of this inquisition on BBC Parliament. between the members of the Treasury Committee they asked most of the relevant question but made clear that their purpose was to find out what went wrong with Corporate Governance so that they could devise regulations to prevent such a thing ever happening again. At one point, McKillop was asked ‘had the board ever discussed the possibility that they might find themselves accused of Criminal Negligence?’ He replied that they had not. Perhaps this question opened the door for a Civil action to be brought against the culpable board.
When the Committee Chairman raised the sacking of Paul Moore for raising questions about the bank’s risk management (almost the most unsavoury aspect of this whole debacle) it came as a bombshell to Stevenson and Hornby, who could be seen conferring. But it prompted their response that this had been done Sir James Crosby who was HBOS’ chief executive at the time and is now the deputy head of the UK Financial Services Authority. Making this poacher their gamekeeper is utterly damning for the integrity of New Labour, so I hope Cameron picks up on it at PMQs tomorrow.
Regarding your suggestion that we need this kind of parliamentary investigation in Ireland, I don’t think it would do any good. A few years ago I watched the entire televised Mini-CTC investigation with Rabbitt, Docherty, Currie et al. Compared with the UK Committee, they were totally out of their depth when confronted with the Denis O’Briens of this world.
These questions should not be asked by Dail Committees but by a properly constituted judicial Star Chamber with powers to subpoena witnesses and jail the recalcitrant. They would work closely with the CAB to recover the ill-gotten gains.
Malcolm, hear, hear! (btw, I hope you caught my final reply to your last question to me on the previous article’s page?)
Lorcan’s link to the Taleb/Roubini interview below is well worth a watch, if you have not seen it yet.
Nassim Taleb and Nouriel Roubini on CNBC. Entertaining, even if the interviewers are completely assinine.
http://www.cnbc.com/id/15840232?video=1027496846
Really good, Lorcan; thanks. What struck me as most interesting is that they are still not being listened to by the politicians (rather like the interviewers).
Recapitalisation will not work; Nationalise instead.
The system needs to be changed.
Stop trading in derivitives and CDOs.
Root-out and punish the guilty risk-takers; remove them from the system forever; take back the money, bonuses, loans they took.
Reduce our dependence on debt.
Put cash in people’s pockets and get them spending.
So, assuming that Taleb and Roubini are correct, our government is making all the WRONG moves by recapitalising out two big banks and removing money from the pockets of their own employees (357,000 workers who will spend less money in our economy next month than they are spending this month).
Lorcan, I cannot see how what our government is doing will help in any way, whatsoever.
Thanks for the link, Lorcan. I have been following these guys for a while and have found them convincing up to now. I may be wrong but I think they have missed a point. They were asked by one of the assinine interviewers the reasonable question ‘What parameter would they look to to define a turning point for the overall economy?’ They didn’t have a satisfactory answer.
In my humble opinion, in spite of all the deflationary noise that is being generated, the imminent danger is a burst of uncontrollable inflation. I can see signs of it already in the low prices offered for long-term high-yield government bonds. This doesn’t make any sense in a deflationary world, but a lot of sense if there will soon be inflation. If that happens, after a few months we’ll be paying 8 or 10% interest on mortgages again. Of course, the sale price of our houses will be restored to boom time levels, but a pound of butter will cost €15.00
I hope I am wrong on this, but I got this feeling.
In Roubini’s defence (I think the question was directed at him) I think he didn’t answer the question because there is no answer to the question. In CNBC world everything is either black or white, Roubini is smart enough to realise that we a very far into uncharted waters here and so everything is shades of grey.
He could have been trite and said “all will be well when the US has a balance of trade surplus”, or “when unemployment falls to 5%”, but Roubini knows that there is no one measure that equals recovery. What use is low unemployment if the wages of the employed are funded running huge fiscal deficits, or what use is a balance of trade surplus if the level of trade has fallen so low because of protectionist measures that it becomes a meaningless measure?
You are right that inflation is the danger coming down the tracks, in fact I continue to be very surprised that it hasn’t arrived yet. But when it does come (neck on the block, but I’m 90% sure it will) it will come really really fast. I think the US will see inflation rates of 20%+ fairly soon, due to, if nothing else, the over-supply of dollars. But the trick for the US administration is to control it, stop it becoming hyper-inflation.
As has been outlined here before, debt destruction through inflation will be a hard temptation for the very heavily endebted US to resist, and they might just let the lead slip a small bit on that particular dog. Problem is, inflation is much harder to reel in that let let out, especially when the Fed funds rate is at 0%
Interesting. Nouriel Roubini advocates complete overhaul/restructuring of banks rather than just throwing more cash at them under the guise of recapitalising.
Nassim Taleb makes the point that the bonus structure in banks and financial services companies promotes wild risks with not enough accountability. His other point is that the deleveraging has only started. It’s going to be severe so horde cash. Basically if you’re taking on debt right now to buy anything then you’re probably mad. Take this to its logical conclusion and the retail sector will be destroyed within 12 months. It’s happening already. The concessions banks are making towards funding SME’s and delaying mortgage foreclosures aren’t nearly enough. There has to be a better solution to allow personal deleveraging.
Where do you start to fix this problem? Let’s look at the two issues affecting our economy: lack of competitiveness and over-priced property. Take the time to check out a website called payscale.com
Try comparing a few salaries for public service occupations in two similar economies: Ireland and the UK. A nurse earns around £19k in England, earning not much more than that throughout her career. In Ireland, she starts at around €31k going up to €42k and higher (as high as €58k). If you think that the UK is the exception, try comparing France, Germany, Spain. The exception is Ireland…
Apply this differential across a range of public service occupations and you arrive at the conclusion that we are paying probably 35% over the odds for our public services salaries. This is probably exaggerated further in the payments being made to sub-contractors of the HSE.
Our minimum wage is so high, it is a barrier to new employment, to maintaining existing employment, to achieving price equilibrium with other neighbouring economies, to being competitive in industry, tourism, services.
Our unemployment benefit is so high, it nearly equals the normal salary for working a full week in some developed European economies. The poverty trap is now being at work, rather than not working, with cars to keep, childcare, healthcare and the uncertainty which weighs on every job’s future…
If paying these wages and benefits was not compromising the economy’s ability to function effectively and competitively, I would be all in favour of paying decent wages and benefits.Unfortunately we live in a world where one country’s difficulty is another’s opportunity. Ireland’s jobs are headed elsewhere. To not change is to give our consent to this process continuing.
We are lucky just now. We have what will be a prolonged period of low interest rates. Now is the time to make the adjustments, plan for moving to long-term fixed rates (15 year plus) on mortgages, whenever interest rates bottom.A government programme to raise funding at a competitive price might help. In this climate, any move to a fixed rate mortgage must be beneficial to the mortgage holder, as the mortgage terms/ margins available now are not nearly as attractive as those available before January 2008.
Move to lower wages, hopefully higher numbers at work, something tangible to live and work for. If we ask the government to pick up the ticket for all our mistakes, eventually the government will ask us to pay. There is nobody else.
I would welcome Utopia, it would be a welcome alternative to what is our current reality. Unfortunately, over recent years, our government introduced Utopian-styled wages and benefits, all fully dependent on the property bubble continuing onwards and upwards.
We must accept that we now live in the real world, we must accept the constraints imposed upon us by current circumstances and set wages and benefits at a level which is sustainable going forward. The reason so many businesses are failing is because the current costs are unsustainable in an economy that is all spent-out.
About property prices, the benefits which accrue to efficiently arranged mortgages in the boom-time will reduce the repayment cost of the mortgage now in a low interest environment. Tracker mortgages efficiently arranged will lower the repayment costs , thus taking the edge of the possible negative-equity hangover. Any change from these tracker mortgages to long-term fixed rates must be done under careful responsible and impartial advice. By this, I mean, don’t ask a bank.
About the development and commercial property loans, we need to leave it to the banks and their many regulators to manage the way through that problem.There will be plenty of signposts as we travel through this storm. Davy private clients recently wrote down the value of a site by 60%.The EBS are writing down their development loan book heavily this year, as did National Irish Bank. ACCBANK went through examinership with a company on a revalued commercial lease. All these indicators are already in the public domain. AIB and BOI cannot behave in a radically different manner without having to answer ‘Why?’.
The obligation to lend to SME’s and restraint in relation to repossessions are included in this recapitalisation programme. They have €7 billion plus their annual profits/ provisions to assist in that process.Except for Anglo, I believe it is all do-able. Anglo just added 1% per annum to the cost for all new monies borrowed by the government and the banks under the government guarantee scheme.
If the banks need more capital, I’m sure it will be found for them. They will be paying for it for a very long time…
Is it not arguable that the directors of ANIB (in particular) were(certainly prior to the State loan guarantee)/are
guilty of(at the very least) reckless trading under company law?
anyway,nothing will happen.
i am struck by the similarities in this banking debacle to that of the ICI fiasco in the mid 1980′s.
In that debacle,AIB deliberately and cynically waited until the problem was so big that only the state could handle the poison chalice.
these guys knew the shit was about to hit the fan when they started the sale/leaseback of their hq/branches about 2 years ago .yet they carried on with their fantasy lending unabated in the same time period.they knew the state would roll over and bail them out. history does repeat itself.
antonius100, I agree. I also think (and correct me if I am wrong, please) that we are still paying for that ICI one, and a PMPA one from the ’80s.
From Yahoo Finance today, as referred to above also.
Doesn’t this sound horribly like the situation where the loans assessor dealing with solicitor Michael Lynn came under undue pressure from line management and deals were forced through. He was sacked or some such like eventually.
It is like some strange sort of dream that I’d like to wake up from. Shoulder to the wheel everyone! (oops, we can’t because we’re wearing lovely new suits. But we stand with you in spirit! You go on right ahead, pleb…..) That’s the response of those who PRECIPITATED this crisis. Its no use FF’s cabinet playing the pragmatic actor now ( ‘No use playing the blame game folks, we need to focus our efforts on making ourselves competitive’ etc). This is not a happyclappy therapy session. Someone is always to blame. What in God’s name do we have so many people working (someone please supply the figures for the public record) for the Central Bank and the Financial Regulator. Where were the whistleblowers, the sharp minds?
It is impossible to believe that nothing less than skullduggery is afoot in the bank recapitalisation and the nationalisation of ANIB. Any half-decent politician would have by now insisted on the removal of the many wrongfooted players. instead, we ask and suggest. And fly kites. Its an awful pity they wouldn’t have some of those bankers out flying kites with their kids to join the fathers that DMcW has seen playing in the snow with their kids.
On a final note, things are so rotten in the state of Denmark (Ireland in this case) that National irish Bank are saying irish banking’s reputation has been damaged!! The irony of it! And Beverley Cooper-Allowance Flynn is allowed to make comments on the 3.5% pay awards to banking staff. 1. She made front-page news for her allowance arrogance. 2. She got into a tiny bit of trouble as a bucaneering bank staffer herself!!! Its priceless. You could not make this SH1T up. God is having an aneurysm I suspect, or some version of Age of empires syndrome, the Tourettes uncut version. This stuff is manically funny. and bad news for satirists. There’s nothing to upstage the real thing!!!
In years to come, they’ll compare Dadaism to Dailism, an Irish version of a Dali-influenced cultural movement that destroyed a generation.
“Andy Hornby, former chief executive of HBOS and Lord Stevenson, ex-chairman of HBOS were questioned about how the UK’s biggest mortgage lender came close to collapse and had to be rescued by Lloyds last October. HBOS had to receive a further £11.5bn from the taxpayers before the deal went through.
The two HBOS executives were accused of having ignored warnings from a former risk director Paul Moore who was dismissed by the bank in 2005 after telling the board he believed the bank was expanding too quickly and had an aggressive “sales culture”.
Lord Stevenson said that these allegations had been taken “very seriously” and investigated by the bank in an independent review. “The fundamental mistake that HBOS made was it failed to predict wholesale collapse of wholesale markets.” he said.
However George Mudie, Labour MP for Leeds east, accused Mr Hornby and Lord Stevenson of exhibiting “shades of Applegarth [Adam Applegarth former chief executive of Northern Rock (LSE: GB0001452795.L - news) ] by blaming the closure of wholesale markets for the crisis”: “
@ Andrew Mooney & Malcolm McClure’s cabbage patch rebellion………
AndrewGMooney: Astrologers can’t even agree amongst themselves on house division, so how can they expect sensible people to render them the slightest grain of credibility? For the purposes of this blog, in my humble opinion, its is much better to identify and discuss key economic facts and the motives of those who deal with them.
I have just been watching the UK treasury committee tearing apart the directors of HBOS and RBS. Stevenson, Hornby, Goodwin and McKillop wriggled and prevaricated when questioned about their handling of their responsibiities, but no interest was expressed in whether they had consulted astrologers.
Apparently a company in Austria caused an uproar recently by only wanting to hire certain star signs http://www.foxnews.com/story/0,2933,488551,00.html
I know Cowen was January 10th so that’s him covered hopefully. explains the short temper and not taking fools lightly. Will anyone who is not those star signs please disembark from the forum now please as we’ve reached your stop :-)
Furrylugs > And I bloody wish I could find something more positive to say.
Two sodium atoms are walking along the street when one stops and says, “Oh my God, I think I’ve lost an electron!” “Are you sure?” asks the other sodium atom. “Yes,” replies the first sodium atom, “I’m positive.”
That’s me done.
Now, I’m not one for conspiracy theories, but I think there may be something to this. I’m sure most of us saw in the news this evening about the IL&P moving deposits into Anglo around annual report time. They then took them out in time for their own annual report. Which leads me to this question. (this BTW is my own conspiracy theory, so possible completely wrong)
Bit of a three-card-trick, but bear with me. In June 2008 IL&P had €26.4bn in customer accounts with a loan book of €43.4bn, loan to deposit ratio of about 170%. I can’t find figures for ANIB but lets assume they are about the same.
But, here’s the trick. Lets pretend for a minute that instead of IL&P and ANIB both having deposits of ~€25bn, they only had about €15bn each. They would move €10bn of the deposits between them, depending on when the auditors are in, allowing both to show €25bn on their balance sheets. So instead of between them having €50bn of deposits and €90bn of loans, they only have €30bn of deposits against the same loan level. A loan to deposit ratio of 300%.
Now, as I see it, the €25bn has ended up with IL&P, leaving Anglo with a mere €5bn, while still having the €45bn loan book, or a loan to deposit ratio of 900%!
Please note the figures above are for illustration purposes only. But you get the idea.
If I am even close to being right here (and again I say I’m probably not), there is a chance that Mr. Lenihan has bitten off a lot more than he (we) can chew by taking over ANIB. He just doesn’t know it yet.
On a more positive note, the Dow closed at 7888.88 today, and according to the Chinese 8 is a lucky number. Clutching at straws? Who, me?
@Lorcan, nice find.
With all due respect to our host, the problem with many of those that call themselves economists is typified by the repeated question posed by one of the interviewers: “what metric do we watch to get an indication of recovery?”. This is econometrics bullshit of the highest order: economics is not science. The problem cannot be begun to be tackled with graphs and stats (though this can give valuable insights in to how we got here). I’m not an economist (in fact that was a handle of mine here for a while) and I don’t believe that economics exists as a distinct discipline. It is inherently multi-disciplinary and requires an insight in to history, philosophy and psychology, in addition to a rigorous attitude towards the basic mathematics. McWilliams as well as Roubini and Taleb seem to possess these skills, as do many of the posters here, which I why I keep coming back.
For me, this piece serves to illustrate that (1) Ireland’s problems are not so unique and (2) we really need to focus on solutions, within the realm of the possible. One way to do this is might be a hybrid of solutions proposed on these pages in the past: leveraging the diaspora internationally, and revitalising politics locally.
As a member of the former, I can tell you that personally the idea of voluntary relocation to Ireland as things stand this evening, barring a lottery win, is completely out of the question. Though, and without getting a misty-eyed far-away and saccharine soaked sentimental expression on my face, it would be nice to know that if I chose to do so some time in the future, there would actually be a functioning country to return to. However that’s not the only way to use the diaspora. There are plenty of Irish with skills knowledge and experience they would never have acquired in Ireland had they not left, around the world. It is a significant knowledge base that could be called upon to provide insights and ideas that might not necessarily be found at home (one of the reasons, I would speculate, that McWilliams created this forum in the first place). I’m not for a minute suggesting that those of you still in Ireland are a bunch of thickos, but distance and immersion in different cultures, as well as first-hand knowledge of the successes and failures of others, can provide unique perspectives.
The existing Irish political duopoly is not interested in what we have to say, since we are for the most part neither voters nor taxpayers. A local (as in Irish) political movement of sufficient conviction with the will to try to influence the current system, hell maybe even get the ear of the leadership, might convince Irish abroad to consider participation, perhaps even convince some of our more committed Exiles to even consider returning IF they were able to have a positive influence. I know, that’s much easier said than done. I know also that’s a bit of a cop out at it puts the onus on the folks back home to get the ball rolling, but there you go. Still, based on some of the posts here people are willing to help it seems. Then again, I am assuming that our gracious host is not already doing this and intertwining the thoughts of Furrylugs, Deco (maybe even John ALLEN) etc et al in to his latest book…..
Of course there is the risk that instead we provide an avenue of escape for those who are already considering leaving, but the same people might be at least given the opportunity to make a contribution that they otherwise would not have received.
At the risk of waffling on some more, we also have to work within the confines of a political system that will not collapse overnight. FF will be around for a while and we do ourselves no favours by attacking Lenihan and Cowan etc, much as they may deserve it. They are the chaps at the helm and its folks like McWilliams who are in a position to directly influence them, not me nor I suspect most of the rest of us here. If you really want to make a difference, get active in you local party X at grass roots level. At the very least it might provide detailed insight in to the current inertia, at best you might even stimulate a constructive debate, whatever. Clearly the issues need to be discussed further outside the confines of this forum. Doing it individually is laudable, but doing it collectively, across party lines and with the support and input of some of the smarter folks than I here seems to be actually intelligent. Pressing forward as a movement rather than political party is also much less threatening to the orthodoxy, greatly improving the chances of a hearing.
This is just an embryo of an idea, and maybe it has even been tried before, but times everywhere are strange, so perhaps now is the time for unorthodox solutions. Somebody on these forums proposed a Facebook group to direct these ideas. Now while I agree the implementation proposed was totally inappropriate, the idea of directing all of this energy in a useful way is not.
> instead of IL&P and ANIB both having deposits of ~€25bn, they only had about €15bn each. They would move €10bn of the deposits between them, depending on when the auditors are in,
If AnIB and other banks have been ‘cooking their books’, and to such extents, we are really going over Niagra falls in a canoe without a paddle.
I looked back at some of my comments as far back as Mar 2008 predicting that some of this mess could happen, BUT I took it as a given that at least the banks were stating reasonably factually correct financial positions. If AnIB is a semi-mirage on top of our overall ponzi/credit bubble scheme, this is a double-whammy, and I too may now invest in those seed potatoes, stock up on pasta and cans of beans. Maybe SPAM has a use after all!
> depending on when the auditors are in
No, no, no, no and NO! I’ve worked for auditors. I’ve worked for companies that have been audited. They have access to ALL transactions, if they want to look at them. Thats the whole idea, nothing is hidden, and they can sample down to the lowest atomic level, follow tansactions end to end, third parties, counter-parties, follow the chain, etc. Of course, auditors can only audit the information IF it exists. If books are cooked and if transactions are hidden or obfuscated beyond comprehension or simple maths, or deleted from records, computer systems, stuck in hidden and non-existing accounts such as 888 that no-one has access to, phantom accounts, parallel books, etc, then they may avoid the cute-ist of auditor juniors and seniors. But, it is NEVER a case of ‘when’ the auditors are in that they could miss something. That is hogwash.
By the way, one company I worked ‘at’ (rather than for) had a full-time internal audit function the size of a mini-army that was trying to hide transactions and faults and mis-managed monies, even fraud. They have been operating for decades with these problems yet each year their auditors give them a clean bill of health. And surprise surprise, the auditors are retained each year and get hefty fees. Even a 2 year old can fathom that the system is open to abuse.
Does anyone think that Ireland is corrupt at many levels as we know yet someohow accounting and auditing are holier than Mother Teresa??? Am I dumb or somefink? Madofff did really happenm, didnt he. And how, because of crooked accounting/auditing.
David Mc, one area that needs to be cleaned up is Accounting/Audting, dont you agree? It is the treatment and ‘recognition’ of assets and money in the western world which has exacerbated the global credit bubble problem. Surely this function needs to be dragged over the coals too, just as it was with Enron, etc. I have a whip and flame thrower ready. If I oil my thompson gun I’m sure it could knock off a couple and act as a strong deterrent for the remainder to get their function in order.
Off balance sheet my arse! Even the term is an oxymoron.
MK1
IL&P make a statement, including this line:
“Irish Life & Permanent plc confirms that it provided exceptional support to Anglo Irish Bank during September 2008 and in particular on the 30th September 2008 following the introduction of the Government Guarantee Scheme.
During a period of unprecedented turmoil in global financial markets there was an acceptance that financial institutions would seek to provide each other with appropriate support where possible.”
So that’s all ok then. They were just looking out for their friends. Nothing to see here, please move on.
Although banks seeking “to provide each other with appropriate support where possible.” does sound a little bit like a cartel in operation. Lucky we have such strong regulators to make sure free and fair competition continues in the banking sector……
Whats scary is the amount. 4Billion…. yes 4,000,000,000.00 according to todays independent
Our entire recapitalisation plan is less than twice that…. does anyone seriously think that if ANIB needed that much to look like they werent f***ed that 7B will do the others………..what is it about these numbers that people cant get…………
Sure if they are able to prop themselves up like that we shouldn’t give them anything, Hire back Paddy Neary and tell him to keep up the good work :)
It’s more straightforward fraud. Seriously. There’s so much pussy footing around when describing the behavior of some of our senior bankers as they’re being so damn careful to describe their actions as technically legal. Technically the moon may have been made of cream cheese until we proved otherwise.
Shareholders in Anglo were lied to on multiple points as the bank willfully misrepresented its financial situation. They didn’t give a flying etc. about their shareholders or the fiduciary duty of company directors to provide bona fide statements which accurately depict the financial circumstances of their company. McWilliams is dead right. ANIB is Ireland’s Enron. A national(ised) disgrace.
Yet the more we learn about ANIB, the more the scandals implicate other banks. Irish Nationwide, now IL&P. Did anybody think of blowing a whistle. Of calling a halt to the lies and standing up for decency and reasonable corporate practices. It’s a microcosm of Irish society and particularly the strong cronyist element of Irish business.
Charles Haughey the principal architect of modern Irish society, after JR Ewing of course, might have explained the IL&P deposit as such.
It was a bizarre happening, an unprecedented situation, a grotesque situation, an almost unbelievable mischance.
Would Ernst&Young not have raised an eyebrow when auditing Anib accounts,to see such large deposits from IL&P appearing on the books and then dissappearing again.They surely asked how to assign the net cost of these transactions.Jasus man are we to get the ultimate Fr. Ted moment “the funds were merely resting in my account”.Here am I constantly barracking Trichet et al trying to fight Irelands case for assistance re sterling/anglo-american economic cycles/bond spreads /CDF’s……….OH GOD………..OH GOD ……….I cant believe what I’m reading.Our financial standing in the World will be in tatters.Somebody please clear the calender at the Special Criminal Court and the cells at Portlaoise Prison and lets get this over with.I cant believe its come to this.Treason.!!!!!!!!!!!!! The poor people of Ireland will become beggard wage slaves to pay for this.We cant become the next boat people.Tell CAB were at defcon 1 .
Unfortunately things are going to get a lot worse before they get better… I think I remember our “government” saying this already? I suspect there is a lot more to come out before we have a story that no one could have dreamed up. Isn’t it like a John Grisham novel?
I have great sympathy with the writer of this comment
“The system needs to be changed. Stop trading in derivitives and CDOs. Root-out and punish the guilty risk-takers; remove them from the system forever; take back the money, bonuses, loans they took. Reduce our dependence on debt. Put cash in people’s pockets and get them spending…”
I also like the way people are contributing humourous comments – what else protects us from feeling helpless in the face of daily revelations.
Perhaps this is where we are at
(1) We know enough to know things are really bad. We also know we have only seen the tip of the iceberg. We need to know all in order to educate ourselves and future generations.
(2) We feel so angry we even talk of stringing them up and locking them up. We also know enough to know that this is a cluster of feelings. We are entitled to express how we feel. We also also wise enough to know that beyond feelings there is thought and we do need to think our way through to whatever is on the other side.
(3) We know those who have been in charge have a track record of leading us into this situation. And we are sensible and experienced enough to know that we won’t trust them to get us out of the mess. New blood is needed throughout the entire establishment. But new blood with old values is no good. We need nothing less than a willingness to use different value as our guide to future action.
(4) We need to find a balance between the past and the present. We can’t change the past but we can learn from it. We need to more beyond recriminations and build an alliance for action. We need to invite new leaders to emerge fit for the most challenging circumstances imaginable… and we won’t know how difficult the ride will be until it’s over.
(5) We know we are a small bit player on the international stage but, for ourselves, we are a big player. We need to put some structure on the thinking in order to take experimental action. In other words, all our actions from now on could usefully be seen as experiments. We simply don’t know enough to be confident anything will work. But we can hold fast to our curiosity for action and reviewing the result. We can see the future as a learning opportunity… (pardon the cliche)
If anyone agrees with this approach, I trust you can write the rest without me having to do it. You can write the programme for action, the experiment in moving forward.
A mess is an opportunity for clarity.
[...] just begun my day with writing this over on David McWilliam’s blog where there is an important discussion going on… "Unfortunately things are going to get a lot worse before they get better… I think I [...]
Todays Indo:
“FORMER Financial Regulator Pat Neary retired with a secret €630,000 payoff, the Irish Independent can reveal.
He was given a special €202,000 payoff, plus a retirement lump sum of €428,000, according to terms disclosed by Finance Minister Brian Lenihan last night. ”
It must be galling for decent people to see a picture of a smiling Neary, who commented how proud he was to have served his political masters so well for the past 40 years!
Only in Ireland, do such people walk away ( Mr Fitzpatrick etc) into the sunset-not only scott free, but with enough money and index linked pension to live like kings for the rest of their lives.!!
As somebody commmented on a previous post “if Ireland were America these people would be in handcuffs”
Then again Neary was a product and a gilly for his developer sponsored, political bosses the so called “Soldiers of Destiny”. their philosophy while the money was rolling into the pockets of farmers,landowners,and big builders:
“Good regulation was no regulation”!
I have asked one of our Euro MP’s to enquire into the validity of Fianna Fail making irish citizens pay for the banks criminality every time one travels by air from Ireland to the rest of the EEU.
“Written question by Proinsias De Rossa MEP to the Commission
Subject: Airport departure tax
Could the Commission indicate whether in its belief the air departure tax introduced by the Irish Government in its October 2008 budget, namely a €2 tax on all flights of less than 300 kilometres and a €10 tax on flights of more than 300 kilometres is compatible with EU provisions on non-discrimination? Has the Commission raised these new taxes with the Irish authorities and if so what has been their response? What action will the Commission take if it comes to the conclusion that these taxes are incompatible with the EU Treaties and EU law?”
I am awaiting a response some months now (so is Mr De Rossa!)
David
A lot of mistakes have been made in the property market over the last number of years with crazy valuations to property in particular to sites , this has resulted in millions of euro of property and cash been accumulated by a number of (mostly lucky) people, these were unnaturally high profits and should never have been made in the first place in a properly working economy where the government regulated properly and truthfully kept it people informed .
To undo the harm this has done should the government have a special once off tax to try to undo some of the harm that is been done to the economy by having these individuals pay a once off tax or levy , where it can be demonstrated that they have been lucky enough to end up with a large property portfolios or large large amounts of cash far in excess of what they would ever need or should have got in the first place I am thinking of people with in excess of 5 million profit over the last number of years where such profits have been made from a unhealthy property boom ,a Tax or levy of 50% could be imposed on any assets generated in the last 6 years where such profits were generated from the property boom .This money could be used to recapitalize the banks and shares in the banks could be given in exchange for this money .There are several different ways this levy could be calculated .
David your comments would be welcome on this principle that the people who benefited unreasonably (with the benefit of hindsight) should now be asked to told to put a portion of there new found wealth back in to the economy to fund the banks and in return get shares in the banks .
The guys you are talking about are mostly in big trouble. Greed begot greed , and thinking the party would never end-they are seriously overstretched in Ireland.
If they are not paying the interest on their loans here they are certainly not amenable to a levy (chuckle, perish the thought) from the two Brians.!
Even their overseas empires in Moscow, Dubai, the Czech republic etc are now falling apart..it’s meltdown time all over.
I agree that banks would appear to be holed below the waterline and it will take several more months for this to become fully apparent. In the meantime viable businesses which are starved of vital working capital because the banks have turned off the taps will go to the wall. This will further exacerbate the situation. The country is in danger of going into a nose dive it can’t pull itself out of. One of the issues is that private banks have a monopoly on the creation of money. Banks have demonstrated once again that they are incapable of regulating themselves. In order to keep remaining businesses liquid the government should take back the creation of money. After all, one of the main functions of money is to provide a token of value that facilitates greater efficiency of economy and provides a far superior system of commerce to barter.
[...] double what it previously said. Ireland became a problem after it became clear that the government underestimated the problem by an order of magnitude last year. Today we happened upon an unconfirmed and apparently controversial report that alleges [...]