February 22, 2009

My plan to save the country

Posted in Banks · 326 comments ·
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OK, screw this! Let’s solve the problem and stop blaming others (there’s plenty of time for that); we must not let the country sink.

We -that is, my generation – don’t want to be the first Irish people who have had to emigrate twice in their working lifetime. Those who were born in the mid1960s to mid-1970s face the very real prospect of having emigrated in the 1980s and early 1990s, coming back in the late 1990s and early ‘noughties’, and now having to go away again. Some might argue there is nowhere to go in a global depression, yet we all know someone who will take his or her chances in a bigger pond than be stuck here, ruled by people who don’t seem to know what they are doing. It is clear that the government is completely out of control. It is also clear that this country is far too important to be left to those with their fake patriotism, which simply masks endemic cronyism. It is not about them, their careers or their political parties any more. It is about us, our lives, our parents’ retirement and our children’s prospects. If these people’s grasp of basic economics is so pathetically challenged that they cannot govern, then they should just go. Leave us alone, please. In the name of Ireland, go.

We need to rebuild, and most of us do not care who the builders are, as long as they do the right thing. Whether it’s Fianna Fáil, Fine Gael, Labour, whether it’s Brian Cowen, Enda Kenny or Eamon Gilmore -w e don’t care. Just do something, draw up a plan, tell us what we have to do and we’ll all go to work. The only way out of this is hard work – from all of us. We need to get back to basic commerce and play the game as it should be played.

Whether we like it or not, the economic recovery plan must start in the banks. As this column has argued from the start, shoving capital into contaminated banks is not the answer. In November, this column suggested that a solution was to isolate a ‘bad’ bank which, in turn, would create clean, ‘good’ banks. This is still the way to go. If the government is thinking in this direction, it is about bloody time. Why did they waste so much time, pay so many second-rate advisers and, by prevaricating, directly cause the loss of jobs?

Let’s focus on the issues. In the madness of the past few days, AIB’s profit warning, which was announced last Thursday, went unnoticed. It was the most significant news of the week.

Granted, the ‘golden circle’ got more airtime, but the AIB warning told us something about today, not yesterday. AIB -a bank with a chairman and chief executive who are scandalously still drawing salaries -admitted that its loss charge (ie its bad debts) for 2008 was €1.8 billion -o r 1.37 per cent of its loan book. This is up from a figure of €950 million estimated three months ago. The ‘mistake’ -the difference between the original bluff figure and last Thursday’s new estimate – was €850 million. Just to remind you, this represents 24 per cent of the bank’s recapitalisation of €3.5 billion announced two weeks ago. That means 24 per cent of the money -our money – poured in by the government has gone already! (How many A&E wards could we staff, or how many special needs teachers could we fund for our national school pupils, with this money?)

At this rate, AIB will have burned through all our cash in a matter of months just by sticking to the current rate of adjustments to its estimated bad debts. A few months ago, this column said that the bad debts for the whole banking system were likely to be €40 billion. This is 25 per cent of our GDP -just as it was in Japan during its 1990s bust. So what are we going to do about it? Here is a five-point plan to get us out of this.

1. Create a ‘financial skip’ and throw all the bad debts of all the banks into it. This bank will be given the mandate to work out the bad debts over ten years. It should be staffed by the best liquidators and recovery experts in the country. These are people who know how to get value out of an asset. They know, not how to lend, but how to sell. Today, everyone is talking about debts, but there are real assets in this financial skip and, over time, these assets -if managed properly – will become valuable. In effect, the new bank will be the Irish property market. It will control the price and control development.

2.The skip has to buy the assets from the banks. It must do this at a deep, deep discount. In reality, this figure could be as low as 20 per cent of the original price. Let us assume the bad bank needs a huge whack of cash; where are we going to get the stuff? Where could we get €40 billion?

3. Here’s where we play the EMU card. We go to the European Central Bank (ECB) and say: ‘‘You lend us the cash. We, after all, gave up our interest rate and exchange rate policy to join the euro, now you have to help us out. You have to prove that the EU is a community of nations, in reality. Show us some practical solidarity.

Otherwise we default and undermine the euro.”

In addition, the ECB is already committed to the Irish financial system. It is drip-feeding money into our contaminated banks every day, keeping them alive. We should suggest they lend us the money at 4 per cent for ten years. This is money that the ECB is spending on the financing of our banks anyway as the lender of last resort, so it should not matter to it. In fact, lending to the solution should be much smarter than lending to the problem.

The ECB would be crazy not to go for this. We then have money for ten years at 4 per cent with which to work out bad loans.

4.The old banks are now clean. They are free of contamination and they can go about raising money from the market, such as our own pension funds, through the normal channels, like rights issues. This means that they can start lending again to good businesses.

The old banks pay the new bad bank a fee for managing their old debts and dealing with their old clients. If the new bank charges 7 per cent for the service, the old banks need to provision for this charge over the next ten years. This means that their profits will be affected, and they must adjust their costs at the beginning of every year to account for the charge. But 7 per cent of €40 billion is manageable. It could operate like a bank tax.

The state then makes money on this plan -a s it would be getting the difference between what the bad bank charges and what the old, forgiven banks pay. So it gets tax revenue of 3 per cent of €40 billion every year -or €1.2 billion. You can build a lot of schools with that sort of bread. 5. Obviously all senior management of the banks must be fired right now to facilitate this financial renaissance.

So let’s get on with it. Stop protecting your mates. Stop borrowing from tomorrow to pay for yesterday. The government has not only the power but, more important, the responsibility to do the right thing. And don’t give the new jobs to your political friends who turn up at your ard fheis masquerading as objective experts, when everyone knows it’s their proximity to the party that gets them the gigs. This plan could save the country. Over to you, Mr Lenihan.


  1. Zombie Banker Blues: Wallets Full Of Blood: Houses On The Moon

    A little film meditation on our present circumstances, set in a ghost estate, and starring Dennis Hopper as the voice of Brian ‘Brains’ Ahern.

    http://vimeo.com/3269259

  2. jay

    I would like my money back

  3. ste

    ‘Cronyism’ is the word of the day here. It should move hand in hand with ‘Celtic Tiger’ when the Irish example is discussed in the future.

    If the government do not begin the process of cleaning out the boards of all banking institutions over the next week or 2 then regardless of what they say it is a sign that they are protecting these individuals rather than the millions that they are elected to protect.

  4. Now that Irish bankers did their job ‘separating fools from their money’ the politicians feign moral outrage and the bankers feign

    contrition and the spectators feign to know what was going on and have a good time and Ulick Mc Ilvaddy just feigns because he

    courts publicity.History has shown that results is what is awaiting as happened to the heads of Louise VI and Mussolini, theirs

    were severed and subjected to atrocious and indecent gestures .We need lots more of heads to roll .

    Question we should ask ourselves : Why should profits be privatised and losses socialised ?

    Question 2 we should ask ourselves : Why should Irish Government wish to take on losses ? This answer is ‘Power’.

    In the bubble years , the bankers ripped off the public , pretending to make them rich , while

    the regulators looked the other way .Now, the government create a distraction , pretending to punish the bankers , while together

    they pick the public’s pocket for for trillions to recapitalisation of failed bad banks .The bankers maybe convicted in time , but the

    spectators ( taxpayers ) Hang.

    • JohnD15

      Your outburst is indicative of the bias of most in this country – sadly. You view the recapitalisation of the banks as a bail out of Fitzpatrick and his mates – not true. You believe we would be better off today if the banks were allowed collapse – not true. You were probably marching on Saturday? If we hadnt stepped in when we did Fitzpatrick’s bank would have already caused the collapse the country – at least now we have bought some time! We should focus on repairing the nation now and not get sidetracked by finding out what we already know about Angolia bank. Move on.

  5. My Lost Generation

    Very good ideas David, you have been saying this for quite a while and it never turned into reality.
    I really start to believe that we really need a change of government. This current government has built too many bridges over the past few years with bankers, property developers and the so called elite. We need new people,like when people think of bringing a new financial regulator from abroad… We would nearly need a new government from abroad!
    I think the size of Ireland is definitely linked to what is going on at the moment, too small, and it translates as a blatant lack of honesty, integrity and accountability and the next crowd will do the exact same as the previous one if we do not take very punitive measures towards the ones who did wrong.
    Most of the people at the top have no moral values or integrity and need to be punished if not the country will fail again.
    We need a new code of conduct.

  6. goinghome

    I nearly missed point five, threaded on unhighlighted, without which none of the other proposals would have been acceptable. Is it a possibility at all and who else would they bring down with them? That might be the fear in tackling them.

    Yesterday I watched an exquisite documentary film about everyday lay and monastic life in faraway Laos – http://www.todayisbetterthantwotomorrows.com – the name alone of which is so resonant with our current Western concerns.

  7. Malcolm McClure

    David: A plan needs to be based on intelligence, in the sense meaning the best concrete information available.
    Gathering economic information that changes daily requires an organization staffed by the brightest minds in the country. If the Department of Finance were up to this exacting job we should never have got in this mess in the first place. Perhaps they are worn out by having their warnings ignored by the government. Convention ensures that they might advise but it is the Minister who decides. Lenihan was thrown in at the deep end so he was entitled to make some mistakes initially. However he ought to have had a grip on the situation by November.

    Here we are three months later and there is still no clear plan from the government. This suggests that the Department still haven’t the slightest notion where vast sums of “Irish” money is actually deposited from one day to the next. Nor have they established the necessary controls to keep track of money flowing into and out of the jurisdiction from one day to the next. Nor do they know the extent of Foreign loans to Ireland or Irish loans to foreign entities. Nor do they know the nominal value of the security for these loans at the time they were placed.
    Nor do they know the total loans outstanding to Irish developers. Nor have they any idea of the value of CFDs, CDSs or other financial exotica traded daily on the Dublin Exchange. Nor do they know the daily total of tax benefitting MNC deposits in our banks.

    Light touch financial regulation is a massive understatement. This goes beyond mere negligence, it suggests culpable dereliction of duty. Lenihan bears ministerial responsibility for sorting this out. He cannot formulate even a ghost of a plan until he has reliable information about most of the factors above. He knows he doesn’t have time to establish these controls so he has to shoot from the hip.

    I’m afraid David, you too are shooting blind. Maybe you think any plan is better than no plan. Any alternative government is better than this lot. Maybe you are right.

    I think the next step could well be a temporary benevolent dictatorship, headed by some ‘reassuring’ figure like Ulick MacEvaddy. He could call together a council of top businessmen and sort this mess out in six months. Democracy has obviously failed ireland–Lets try something else. Erin Inc. go bragh.

  8. shtove

    Buying bad assets at 20% means the banks go bust. They won’t sell at that price. Nationalisation is the only way.

  9. Garry

    I’m reminded of your article after Lenihan gave the guarantee about sending in the untouchables to sort out the banks….. Well, now we all know why that didn’t happen…. the regulator was as deep in the fraud as the rest of them and would be standing trial if this was the UK, US or Germany.

    Remember the idealism, the volunteering to help, the reservoirs of good will that were there for someone to stop the open corruption and try to do the right thing??? That seems a long time ago..

    The solution is much simpler…. Beg Rabobank to set up a few ATM’s and restart ICC. Between that, the credit unions and the Post Office we’re sorted.

    As regards the Irish banks, central bank and regulator, a scorched earth policy is needed, that rats nest needs to be burned to the ground…. Amalgamate, put under control of someone outside the state…. with only 1 rule ……… Collect debts, the bottom 10% of debt collectors get made redundant with statuary redundancy each year…

    • JohnD15

      You are trapped by the media coverage of a complicated topic. You appear to think that Ireland was somehow on a great solo run and has for the last 20 years of our boom fooled the world with the conivance of the irish authorities. Well this is NOT the case and in fact most of what has been reported in relation to the Irish banks has precedent throughout the global banking system – does that make it right – No. Is it uniquely Irish – No. The British media (especially) is whipping up anti Irish sentiment throughout the world and it is feeding off our sensationalist coverage of our own troubles, which I am afraid to say have parallels throughout North America and Europe.

  10. We all know that Lenihan is Mr Prevaritique the Big CLown that is only good at ‘doing nothing’. After all , he is a Gemini , that’s what they are good at.

  11. Wow. Strong stuff. Remember folks that what David has said is commonplace on here but somewhat alien to the country at large. Encouraging to see he does dip in here. The article could have been written by any of the “heavyweights” here.
    If we had knighthoods, David could kiss his botty goodbye with this article.

    But is anyone listening at all? Lorcan and meself have quoted something akin to crisis apathy overtaking the country.
    One lad last night down the pub, swore blind that the banks were stuffed with money until I showed him the report this evening saying that 10bn had left the country in the last week. He went weak.

    120000 folks marched yesterday and no word from the Government today. Say nothing and they’ll forget about it?
    My Arse.

    On the first part of the article above, young McWilliams is the man to manage that process?? A 10 year damper plan. Don’t blame you for making a job for yourself David but I think the country needs more from you, like leader in an emergency coalition. Democracy has failed here. It doesn’t suit us because there are too many cute hoors. We need a social autocracy for about 5 – 7 years and then build a new constitutional model.

    I await the onslaught.
    F

  12. Furrylugs – have hope – the week end after next is astrologically well suited to show a Big Difference and Big Changes and will Open your eyes.

  13. Skin

    Certainly the plan above would be welcomed. However, my preference would be to start a new state bank altogether with a 10 billion capitalisation that would by-pass the credit crunch by lending to business with immediate effect.
    Private business is saved and the domestic economy is kick-started.

    The offset of this of course would be to watch all our commerical banks drown in their own toxic pool of debt. These banks after all are part of the free market, they espouse risk taking, they should be allowed to fall on their swords as much as they were allowed fatten their calves.
    As each bank collapses, the staff – up as far as management levels that could not have possibly been at fault for the current crisis – would be automatically hired by the new state bank operating out of the same premises which would now be taken over by the state. The state will protect deposit accounts of up to 100,000 euro and take on the mortgages of up to 500,000. After that, the rest will go into default and the architiects of this mess will be the ones to face into the abyss and not the state.

    One positive result of this would be the automatic removal of all the bank CEO’s and boards who are all in denial about the level of responibility they have an no more pandering by ministers, regulators or anyone else.
    The public would be re-assured, public servants facing on average a 7.5% levy would re-consider their current position as they watch how hemorrhage of private sectors jobs is stalled and reversed, and also how it this strategy is about protecting ordinary people and not the fat cats.

    There will be of course a ‘flight of capital’ – but let them flee, it was this capital that ultimately created the mess – there will be others, in time, who will come to Ireland, only this time they will know that they cannot f**k us around anymore.

  14. ambid

    We elected this government – with all their cronyism, incompetance and corruption.

    God forgive us.

  15. wills

    Dear David,

    Your article is predicated on a virtuous wish
    for human cooperation.

    Can you not see the bankers are the bankrobbers.

    The Bankers engineered the property bubble.

    Someone please explain to me what it is about
    understanding this fact that David keeps overlooking.

    David the banking system is the Death Star.

    Credit production in the hands of private interests
    leads to what we are now faced with.

    If you cannot see this you must.

    David, please, just even ponder it for a few minutes.

    The Bankers, the individuals running the banks
    are stealing all the dough. And they will steal the taxpayers
    dough too,.as they are doing in the u.s.a

    They all know the debt/money system os over and are
    plundering it while they wheel on their new sustem when
    the rest of us are discussing items off a list they slipped
    under your door.

    • JohnD15

      You are a like the little boy who spent all his time screaming at the ‘nasty man’ in the window only to find out it was his reflection in the mirror after all. Or better still, GW Bush with his ‘war on terror’ rethoric. Get real with your invisible enemy!

  16. Tim

    David, good; Let’s get tough. I have said this before, I will say it again here:

    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.

  17. wills

    Hi David.

    While i am on the subject, check out this.

    Anglo Irish Bank is a bridge head for the City of London”s
    investment bankers, this is where Anglo secured the Capital
    base to engineer the property bubble 14 years ago.

    This is what you would be best pondering,.. We are now
    under the monetisation next phase. And you David are
    still clinging to the old propaganda.

    Please David come on, remember the eighties and sense
    we had cos of u2 that we could really go somewhere,
    well here it is here is your chance.

    Just see that the bankers know exactly what they are
    doing, they are designing ti, they want people in debt
    and they are designing the next game play.

  18. Tim

    Oh, yeah, ….. how to “put cash in people’s pockets”?

    David’s skip/good banks (all nationalised) will allow the good banks to keep liquidity in business – let’s concentrate on indigenous enterprise, not just services.

    That will maintain jobs.

    Stop cutting salaries/imposing levies/stealth taxes/increasing VAT/ESB bills, etc..

    But, cap salaries at 100k.

    • JohnD15

      Good idea Tim. Cap salaries that will solve things alright – but only after every value adding high tech international job has left these shores to go to the UK, Holand etc. At that stage you wont need a cap no one will paying high salaries and all of sudden those (who currently bear the brunt of taxation) earning 60k+ will be gone – all apart from the politicians of course – leaving me and others to pick up the tab! No thanks.

  19. wills

    Hi David

    Ireland is in the iron fist grip of financial
    oligarchies operating through the City of London.

    Ireland was deliberately flooded with easy credit
    to destroy its unique independent ancient
    wild spirit.

    Ireland is been absorbed into
    a deeper narrative which is malevolence to
    a degree we need to wake up to.

    We must resist it by getting informed and getting
    the word out David, Trying to revitalize the
    banks is a distraction and time is of the
    essence.

  20. My Lost Generation

    It looks like we are going around in circles and nearly all the aspects of the problem has been dealt with, even David’s article as Furrylugs wrote it, does not contain anything anybody knew already.
    It feels like we, including David, are standing ready to get hit by something bigger than we had imagined and that will be what will make the country move forward and not any discussion or plans. Plans will start to be put in place when the situation will be at its worse and it will be the same who will suffer the consequences. So simple, so human.
    Scary times.

  21. My Lost Generation

    This tumultuous period we are going through is called the Decadence. It is also the name of a Heavy melodic thrash metal band from Sweden? http://www.decadence.se/index2.htm

  22. Tim

    My Lost Generation, you may be correct. Just a toxic debt cannot be fully quantified until the property market finally hits rock bottom, maybe we cannot start to build our society/communities until we hit bottom, too.

    Whatever else we do, though, we MUST start investing in legitimate trade/enterprise in Ireland and start doing TWO things with our brains: 1) Stop “cutting” them; we are doing this in two ways right now, by a) letting our educated people emigrate (like the “brain-drain” of the ’80s) and by b) cutting education; We MUST stop this and invest in the brains of our future. Do we really want a bunch of under-educated, disadvantaged kids today, to be responsible for working the economy that will maintain us in our pension years?

    2) Start USING our brains and learn that property sales does NOT equal productivity; an estate agent is not a businessman/entrpreneur; its just conveyancing. He produces nothing, contributes nothing, just facilitates a transfer of money. We must invest in production and brains. So, let’s consider using the recapitalisation funds to, instead, prop up the likes of Waterford Crystal and other indigenous enterprises that have something legitimate to sell to the world, instead of letting them get cut/fail/lay-off workers while saving banks; and invest in education instead of cutting it, too.

  23. Johnny Dunne

    David, we need your proposed solutions and ‘many, many more’ debated openly now, there is little solutions in the media or from the political leaders for example, definitive actions on job creation. I was born in 1970 and now with a young family I don’t want to emigrate out of necessarily again like many of my friends did in the early 90’s. Need changes !

    Since we have guaranteed all the ‘liabilities’ of the banks dumping the ‘toxic loans’ which are our assets (eg apartments, commercial property, land banks around Dublin etc) into a bad bank will just expedite the call on the government to pay back the liabilities of the banks to the deposit holders and bond holders. Unless, the EU come it to pay our bills as you suggest – not likely ?

    “It must do this at a deep, deep discount. In reality, this figure could be as low as 20 per cent of the original price.”

    If we had to do this with say just 20% of loans that could be writing off €70 billion!! (assuming €450 billion in loans out of the €520 billion in assets announced at the time of the ‘blanket’ guarantee at the end of September)

    I think it would be a better to concentrate efforts, energy of our ‘leaders’ on how we can rejuvenate the economy so these ‘assets’ maintain ‘reasonable’ valuations. Without a lot more export led economic activity business owners can’t and won’t start borrowing much to support local businesses providing good and services (as we are now oversupplied!)

    I would propose some easily implementable and ‘quick win changes’ to increase volume of businesses generating export revenue from Ireland and in turn economic activity producing additional tax revenue.
     Promote heavily the fact BES is now applicable to all SME’s in the EEA region with a qualifying Irish operation. Opportunity to attract innovative companies from all of Europe and the world to trade from Ireland.
     ‘Income’ Tax remission for ‘start-ups’ as well. Most would have a better chance of developing if did not have to pay income tax in early years as it built value and recurring profitable income from customers.
     ‘New Innovation fund’ for international businesses trading from Ireland. Opportunity to capitalise a fund servicing export businesses and become the leader worldwide in financing innovative companies. All the covered banks could have one of these and allocate at least say €500 million each ie best spent €3 billion ever as we would turn the tide to be a safe haven for businesses to trade from thereby creating 10’s thousands of jobs directly and 100’s indirectly as the economy recovers.

    My key point here is we need to do something ‘different’ to attract activity, not the same ‘game’ of lending for asset backed properties. There is little point in wasting time about witch-hunting people, the government should just change the focus of the banks — invest in productive businesses — then the right people will come forward to manage!

    The economy cannot recover magically by just waiting – does anyone know of someone promoting productive changes ?

    • JohnD15

      Johnny Dunne: I entirely agree with you. The toxic bank idea will not work AND they are just waking up to this in the US now. David’s proposal simply crystalises all future expected losses up front i.e. we pay the worst case scenario price (in full) today rather paying over time with some hope value that the worst case may not be so bad. Furthermore this would involve a unanimous vote from the European Council which I suspect would be rather unlikely – maybe with some stringent conditions the first of which would be to pass Lisbon!

      I think your points regarding fixing root causes and the economy is correct, then the dodgy loans may have some value north of 20% in the future. We also need to stop the harmful political bickering and form a national government or understanding. In addition we need a new regulator NOW and make sure he/she is German with absolutely no connections with any of our political elite whether that’s one of the Brians or Joan Burton or that Kenny fellow – A fresh start now!

  24. wills

    Hi Bloggers.

    There is only one productive change available.

    All Credit production by private interests must be returned to its utility function.

    Put back in the public domain under government authority available
    to all on an equal basis.

    Is this not obvious to you all…..!!!!!!!!!!!

    If this does not happen nothing will be fixed and we
    will continue to descend deeper into global enslavement.

  25. finbarr

    ‘If these people’s grasp of basic economics is so pathetically challenged that they cannot govern’

    But who can then?? We need an approach from someone with the acumen and the stomach for this. The unions are the only ones proactive with anything and it’s clear their path is self interested and will destroy the country even quicker.

    We need a group of experts from within and outside the country to at least offer advise to the government be it the confused Lenihan, the non itelligent Kenny or the please anyone who will vote for us labour party.

    Non of these have what it takes on their own and are corrupted by their own parties interest groups. Ordinary Irish people are willing to work hard but who/m will give the direction we as a country are currently CRYING out for??

  26. Tim

    wills, I agree; Nationalise all the banks asap. Let’s waste no more of ordinary decent workers’ money on recapitalisation.

    The “profits-up-wages-down” brigade is winning at the moment, I fear.

    • JohnD15

      This is not some ideological battle where one extreme will win over the other as you seem to suggest. If we dont fix the problem we all lose!

      Nationalisation is not the answer at this time and BTW if we have to nationalise at some point in the future we get this capital back – as it will take several years and very severe defaults before the banks start eating into tax payer’s capital!

  27. SamB

    Nice thought, David – and I wish that it could be made to happen.
    Unfortunately, as pointed out by shtove there is one fatal flaw – the banks cannot survive a hit of 80% on their toxic loans.

    If you assume that the overall bank lending is €500 billion (someone can enlighten me on this) and having some knowledge of what it has been lent against and the subsequent fall in property related values, on a conservative basis, 25% of it is “toxic” – it means that bad loans are a minimum of €125 billion. 20% of this is €25 billion – which would be paid by the “bad” bank, leaving a shortfall of €100 billion for AIB, BofI, Anglo, INBS etc to swallow. Not on.

    As I said; nice idea, but IMO it won’t fly, I’m afraid.

    Let’s face it, we’re Donald Ducked!

  28. Mise Eire

    David 28th Septermber:

    “If we take second-hand, discredited ideas from abroad, such as a toxic fund or, worse still, nationalising a bank, we will fail. If we fail, our banking system will be imperilled and a generation of Irish people will suffer. A failed banking system is equivalent to a failed state, and Ireland will become an international pariah. No politician can or should survive such a mistake.”

    Time moves on. Any ideas are welcome: This one is well worth a shot. And small can be beautiful, as our numbers should still be manageable in the ECB scheme of things.

    Cowen has enough of the benevolent dictator to put some of this through, and enough bitter experience of going head in hands to Brussels to explain a couple of directions this country has chosen, incomprehensible to other Community members, to shoulder this one too.

    The other advantage is that if he gets kicked out, the govt can then fall & Bruton or Burton can be the new kid on the block with a second chance to try a similar argument…

    So first things first… Change of government before June is unlikely.

    • Tim

      Mise Eire, end of October, I would say; after they qualify for the pensions after 2 and a 1/2 years as ministers.

      • G

        precisely, that is the thought I had while watching Eamon Ryan Sunday night, he seemed to be doing a mental calculation as to how long he has to hold out in order to secure his financial future while all the Joannnnnnnnnnn Burton was going on and on and on and on…………..

  29. wills

    Hi Tim,

    The ‘the profits-up-wages-down brigade’ is a supremely
    zen like description,. It seems like alot of fear is
    gluing up thinking on all of this which is not surprising
    really considering the scope of it all.

  30. SamB

    I wrote the above before reading Johnny Dunne’s contribution and I agree with his sentiments with a few caveats. There will be no recovery until the banks start to re-lend to businesses and consumers as normal. This has to include the housing market, as that is where the problem started – this point is widely recognised in the USA. (I carry no torch for the homeownwrs or builders – by the way).

    Any recovery needs to put people back to work. In order to do that we need creative thinking and also tax incentives for investors – not the removal of them. We have to recreate confidence and a “can do” attitude.

    For example (top of the head stuff), in the tourist area, I would:

    1: Ask local enterprises, businesses and partnerships to “Adopt a Road” or local highway, street etc. in return for discreet advertising of the fact. It would help beautify the local area and give civic pride and also create employment.

    2; In Dublin, cobble all the Georgian squares and remove traffic from them by creating underground car parks. Restore the look to the original period. All the central area of the city should be public transport by “Molly’s Trollies” of the Joycean period, bicycles, or tourist horse and trap only. The Georgian houses in the squares should receive tax breaks to return them to residential. We should be advertising a “Georgian Experience” abroad to encourage the tourists in.

    3. Engage with Ryanair (or Aer LIngus), and offer free flights to and from all the major cities in the USA to any tourist buying 14 night hotel or B&B accommodation in Ireland. This could be in part financed from contributions from the hoteliers and also the increased tax paid by the newly employed hotel workers taken off the dole.

    4. (Personal prejudice) Get rid of that God awful ugly office block that the Revenue inhabits and which is a carbuncle on Dublin Castle – which should be a real tourist museum destination, exhibiting the best and worst about 800 years of British rule in Ireland.

    P.S. Maybe we should hand the place back to them and apologise for its condition!

    Another late night bottle of cheap claret and I’ll sort the property market out too.

  31. SamB

    By the way David, there would be no need to go to Brussels to get €40 billion to capitalise a “bad” bank at such a discount. The thing would be wildly profitable running off assets over 10 years. Any amount of vulture capitalists would put up the money.

    As I said, the problem lies with the shortfall that would be left with the existing banks – which they would be unable to cover.

  32. Thermus B. Airgetinin

    MEP’s able to “easily achieve” millionaire status over 5 year term on expense allowance scams… BoE given new powers to bail out banks in secret… Brown announces plans for a CIA type global financial watchdog.. who’s gonna control that puppy? Institutionalised fraud and corruption on our own doorstep. The perpetrator of the biggest financial fraud in human history under house arrest… in his own luxurious Manhatten penthouse. Stanford scarpers while depositors queue for their cash… eventually tracked down but not arrested. Bush, Blair and Bertie all out while the going was good… and then expecting us to believe they did’nt know this was coming, (how come, almost 2 years ago, you could read on the net about the powers that be, “making provision to deal with large scale civil unrest”) Golden circles, golden handshakes etc etc… can any of you obviously financially astute commentators explain to liddle ole wrong side of the tracks Thermos here, why the f**k should we worry about saving any of these despicable bankers and politicians…detailed explanations please (scribbled preferably on the back of £50 notes) and fowarded to: The Homeless Dumbo’s Campsite & Factory Gate Loiterers Co-op (unlimited) … coming to a town near you…soon… very soon!!

    • Dilly

      Yes, I watched the news, the new financial watchdog, I just laughed. It is all just lip service, all bollox, watching the leaders smiling for a photo shoot. Who are they kidding.

  33. Tim

    Folks, please don’t forget about “the lists of 5″ back on “crisis to opportunity”?

    I have just added DMcW’s 5 and SamB’s 4.5, just so we keep them all in the one place for easier scrutiny.

    Please, if ye can find the time, drop by and scrutinise.

    We need to get something moving here, and the ideas generated on this site are worth consideration.

    • Tim

      Oh, yeah, please don’t add comments into the middle of the lists, though, as that will make the lists impossible to keep together, thus negating the exercise of placing them together; add comments at the end, perhaps? Thanks, Tim.

  34. Fergal73

    “It is clear that the government is completely out of control. It is also clear that this country is far too important to be left to those with their fake patriotism, which simply masks endemic cronyism.”

    On the above I agree. The problem is of course that the stupid, the visionless and the parochial Irish electorate kept electing the same – the stupid, the visionless and the parochial, along with the amoral, power hungry and greedy. The Irish electorate are responsible for this. Every person who voted Fianna Fail from the Haughey era on is DIRECTLY reponsible. This government has already squandered the 7Bn. The money was invested without knowing the size of the toxic debt. This government is not for the people of the nation. It is for the developers and the senior bankers. Everyone else is a peon in their eyes. That is why we can say bye bye to the 7Bn. The Irish put the conman and cute hoor in charge.

    So now what?

    Financially:
    Let the banks fall. The new bank could start in the Post Office, there is already an infrastructure there. They don’t know much about lending, but we can hire new loan officers. Or start a brand new bank. The same rules apply. I’ll go with David on this.

    Salaries / Benchmarking
    The only way to prevent this type of disaster recurring is to break with the idea of share-price dictating senior executives’ renumeration. Benchmarking, pay rises based on percentages are a mistake. Flat rises would be far more equitable. (100K salary + 5% = 105K, 20K salary + 5% = 21K, the difference between the wealthy and the lower paid grows larger with every pay increase).

    Politically:
    The other thing to prevent recurrence is to never ever vote for a party with corruption at its core. Never vote Fianna Fail again. Never vote the parochial politics of the “independent” any more. No more Healy Rays and the “importance of South Kerry”. We need a new political system. The country is small enough for national elections, no need for local politicians at national level. We would need turkeys to vote for Christmas though.

    Enforcement
    Immediately – Allow the CAB in to freeze the assets of those they suspect to have committed criminal activity. If the assets are not frozen, they’ll be in Switzerland or Cayman before we can get to them (if not already there).

    Longer term – No more tribunals. Expand the power of the Garda Fraud Squad. A billion (we spent more on the ineffectual tribunals) would have bought a white collar investigative unit a lot of manpower to investigate and examine the corruption in planning that faciliated the entire property ponzi scheme.

    Alternatively, and I make no apologies for saying this – emigrate. Let the country wallow in it’s own excrement. Why work for a country that screwed you? I am not a patriot or a nationalist. I’m in it for me, and the greater good in that order. There’s no shame in emigrating a second time.

    • drick

      Emigrate?? yes I already have but its not proving easy even with over 15 years experience. There aren’t alot of options out there even for someone who is willing to travel to any part of the globe.

      “We need to rebuild, and most of us do not care who the builders are, as long as they do the right thing. Whether it’s Fianna Fáil, Fine Gael, Labour, whether it’s Brian Cowen, Enda Kenny or Eamon Gilmore -w e don’t care.” – davis says , actaully we do care, Brain Cowen & Brian Lenihan need to be removed in addition to the rest of FF. I come from a family of stauch ff supporters over the years. I can safely say that tradition is dead. The country is rotten to the core and there is clearly a massive cover up going on between developers bankers etc. Unitil FF are toppled this will not be exposed. Make no mistake they will cling to power for as long as they can (look at mugabe).

      FF are buying time with various smoke screens to allow their cohorts to position themselves, I wonder how much of the 10b euro that left the country is from that source. Fair play to those who protested on saturday, this needs to become a weekly or daily event until FF resign, note their silence yet again. They have been silent since last may at least while allowing their mates to plan their exit. They have no intrest in sorting this mess out. How dare they brand themselves “Fianna”.

      • Fergal73

        drick,

        It DOES matter who is in power. It matters because we have seen what having a corrupt party with people who are corrupt in power. And let’s face it, if you were in any way a senior FF member, then you either knew about the corruption or you actively turned a blind eye to it. FF must go the way of the dodo and the official Nazi party – extinction.

        Part of the problem are the thousands of families of “staunch FF’ supporters. Why were they staunch? Could they not read the newspaper, listen to the radio, see the TV news? Why didn’t the defect when they learned of Haughey’s inexplicable wealth? Or Bertie’s digouts? Blind faith, blind support are dangerous things, as the world learned when the German people put their faith in Hitler. FF are not in that league, but blind faith leads you to Anglo Irish Bank, in the same way that it led to the Crusades and the Spanish Inquisition.

        Ireland will never be free while FF even have a sniff at power. Do not be fooled by the FF TD’s claiming they will run as Independents! Remember Beverly Flynn! A more perfect example if this ploy would be hard to find.

        I’ve emigrated too – in 2002 when I saw the property bubble and smelled a rat. I didn’t realise it was a whole government full of rats and vermin.

        As one good deed before they die – set up a Good Bank, and in Bertie’s to paraphrase words “why don’t Fianna Fail go off and commit suicide.”

        • drick

          It does matter, I was quoting davids article. I agree with all of what you say. In relation to independents, if they go down this route it will just prove they will do anything to hang on to their position – self preservation to the extreme. It will be interesting to see who flies the coop.

          What they have been up to is simply treason, I notice Noel dempsey has used this term for anglo, more smoke screens to save themselves. i think the people have finally copped on. I firmly believe the economy will collapse & the bank guarantee wont be worth sh**e. Then the real fun will start!!

        • Fergal73

          Apologies – was late at night for me… missed the quotation marks.

          I do wonder about the bank guarantee, will the EU or the IMF bail us out? Can they? Moral hazard issues?

        • drick

          Even if the EU or IMF bail us out, any cash you have will be tied up by them for years, basically to keep money in the system as I understand it. I’m no authority on it though!!

          Watching this carry on from afar is painful to say the least. On a personal level I have a house over there that I cant sell because of an enurement clause (it difficult / impossible to pay mortage & rent here and my mortgage aint huge by irish standards)I emailed my local FF rep (for the craic) What was his response? like everthing else –silence!!! To be honest i’d rather not sell but we’ve got to get on with life as best we can cos those guys aint going to help any of us. I do believe this is why voilence occurs. Even the british didn’y behave in such a manner, at least they were honest about screwing us!!

  35. wills

    http://www.nytimes.com/2009/02/23/world/europe/23germany.html?hp

    Tim, first chance i get i will check that title
    out, much obliged.

    Bloggers,

    For anyone wondering about money running
    out for our gov to borrow to send us all deeper
    into debt do not fret. Above is a link to the
    unofficial announcement that the imf/ ruling
    elite front of house are bulking reserves up
    by an xtra 300 billion to help ailing economies
    in europe out.

    Question.. isnt it strange that imf are suddenly
    on the scene with all the help we all need which
    is more and more and more and more credit.

  36. Tim

    Folks, here is our “Lisbon Deal” (blackmail), from wills’ link, above:

    “If someone needs solidarity, they can count on their partners,” Mr. Sarkozy said at the conclusion of the economic summit meeting here. “Their partners also need to count on them to follow certain basic rules.”

    Please, everybody, read articles 113-118 of the Lisbon Treaty, before you sign away our rights and allow the failed global marketeers to take us over.

    • Malcolm McClure

      Tim: I just had a quick read of Articles 113 to 118; apart from my eyes glazing over from the effect of Eurocrat speak, I could find nothing especially objectionable in the text. Did you have a particular point to make or were you scaremongering?

  37. wills

    Hi tim,

    if im slow of the mark on my return postings
    it will be cos im watching oscars live on justin tv.com

    Okay, lets see, the imf is in it to drive a hidden
    agenda forward i would proposition,..

    Any takers… The Shadow banking system is in
    fact the real banking system it is all a misdirection trick.

    • Tim

      wills, or, the US needed to globalise the world before old Russia got a foot-hold and tried to annex Europe with articles 113-118 of Lisbon, but the bankers got greedy and screwed the plan up and, now, neither the US nor old Russia is the boss – it’s China. Ooops!

  38. Lorcan

    Firstly, seen as we’re on bad banks (personally I prefer ‘asset management agancy’) here’s a good look at the Swedish Model.

    http://mediaserver.fxstreet.com/Reports/2b2fca8a-cd03-42db-9b81-73755e12ead9/32184521-937c-4906-9726-c653787881f6.pdf

    You are very right, David to point out the AIB announcement during the week. A complete PR disaster.The investment newswires were having a good laugh at the incompetence of it all on Thursday. They look to what NIB (as part of Danskebank) wrote down and take that as the benchmark. They are just waiting for the rest of the banks to catch up. This also, of course, means that any observer knows that the recapitalisation will prove woefully inadequate.

    Anyway, on to your plan.

    I really feel you have to get away from calling the financial skip a financial skip, it’s not a good sales pitch. The Swedes called their skip ‘Retriva’, sounds much more positive. We’lll meet half-way and call ours a Structured Knockdown Investment Portfolio. Ref Mk1′s very valid PIGS v BRIC point previously.

    Yes on the deep deep discount. Time for the banks to face reality. A NPL is worthless to the bank, and ignoring its existance will help nobody and lead to more announcements like AIB’s this week.

    €40Bn seems like an arbitrary figure, and unfortunately it has to be, due to the hubris of the Irish banking sector. A 4% 10 year bond would be a good trick, if we could pull it off. Well worth a try though.

    ‘The old banks are now clean’ Yes, and can get back to business. But (and this is a Big one) will there be much business for them to get back to? In case anybody has forgotten this banking crisis was not started by the US sub-prime crisis, in spite of what you might read (Irish banks had little exposure to those toxic CDS), it started because the irish property market reached saturation, because Irish growth rates slowed and have now reversed.

    We are in a recession in the real economy. I have said this here before, but I do think we are over-banked for our current economy size. But, the quicker we get this banking distraction sorted, the quicker we can start addressing the real problem, stopping the collapse of Ireland Teo.

  39. Dr.Nightdub

    This should prompt a few sleepless nights in the corridors of political and financial power over the next week:

    http://www.whoarethegoldencircle.com/about/

    Could be a fun site to keep an eye on…

  40. Tim

    Dr.Nightdub, from that site, this:

    “The corruption that was and still is endemic in Irish Banks is a real threat to the Irish Republic, given that the Irish taxpayer is now liable for the losses resulting from the reckless and likely criminal lending practices of these Irish banks.

    In a fantastic development, The Sunday Times (Irish edition) has named four of the ten members of the Golden Circle who have gifted the Irish taxpayers with over €300 million in liabilities.

    The four are: Gerry Gannon, Joe O’Reilly, Seamus Ross and Jerry Conlon.”

    One problem, though: on the whois lookup, it appears that the owners of that site may have circumvented Networksolutions’ server policy by not disclosing their identities and, consequently, may be shut-down long before they reveal the names of the ten.

  41. jim

    41 comments to this point and 11 are from Tim.Your bargaining Tim which leaves just 2 stages of grieving left i.e depression and acceptance.I know you grieving for Ireland and Fianna Fail and the news from now on re. FF will depress you but if you accept the fact that FF is dead and you can just go to the wake(ard fheis next week)and say goodbye to your friends and console yourself with the fact that you tried to change FF from within but to no avail.You have shown over the last few weeks on this forum that you have energy and a willingness to grow as an individual,and what you lack in economic knowhow will come in time and Im sure any well meaning political party would welcome you as a member.This article of Davids is about to draw in the big guns on economics, now that he has nailed his colours to the mast.Sit back and watch the sparks fly.You might want to add wikipedia to your favs to keep abreast of some of the terminology.Interest rate swaps and over 200 billion in Anglo trades will be my opening salvo.So up with the sleeves and lets have the fu.k at it boys and girls.

  42. SamB

    Property (after another half bottle)……..

    1: Clear the Social and Affordable waiting list by offering the builders a deeply discounted purchase price on existing newly built first time buyer homes in selected areas. Get the newly funded banks to provide 100% mortgages on them to gardai, nurses, public sector employees as well as those on the S&A lists. This would clear the backlog of both the housing stock and the S&A waiting lists. It would also help the banks to clear their books of developer loans. The losses would in the main be carried by the builders (as they would have the top slice of equity in the completed houses).

    2: Provide vouchers of €2,000 each to the first time purchasers to be used at furniture stores in Ireland for the purchase of Irish made furnishings (may be politically incorrect from our Euro neighbours point of view – but we’re in a war here).

    3: Get rid of the S&A requirements in the planning laws. They are no longer necessary. It’s cheaper to buy on the open market.

    Farming:
    4: Provide incentives for the growing of sugarbeet, potatoes etc. for conversion into alcohol for biofuels.

    5: Provide a 25% bonus to the winning prize money of all Irish bred racehorses racing anywhere in the world provided that they were sired, bred and sold in within the Irish thoroughbred racehorse industry. (Only one in 10 horses win races and very few of them win more than €10,000. This incentive could be paid for by a levy of €500 for every foal born in Ireland.)

    Starting to od off and slur my urds. Time for bed……

  43. SamB

    P.S. If the builders don’t want to take the discounted price offered for the packaged Social and Affordable housing, they can be referred to the response in the case of Arkell v. Pressdram.

  44. Garry

    http://www.tribune.ie/article/2009/feb/22/among-the-new-revelations-and-claims-emerging-from/

    There will be a wave of litigation against the Irish state by investors who have been conned not just by corruption in Anglo but aided and abetted by the Irish state. If these claims are even 50% true, the investors have a cast iron case. The people mentioned in this article have destroyed the Irish banking system and Ireland’s reputation.

    Not happy with that, they then transferred liability for the entire stinking mess on the taxpayer, both by the guarantee and by the governments collusion in what can only be described as a fraud on bank shareholders. They should be tried for treason.

    Their actions have guaranteed the impoverishment of present and future generations here.

  45. Dilly

    How do you put a stop to 80 years of cronyism in a few short months ?, I cannot see this Irish leopard changing its spots. What I can see is, a large chunk of our money being siphoned off by the cronies, just as they did in the 80′s. These people do not care, and they have never cared about the nation as a whole. They will be hoping that their detractors emigrate, just as they did in the 50′s, 60′s, 70′s and 80′s. Just look at all the FAS money that has gone missing, and this is nothing new, that craic with FAS was going on even when it was called ANCo, and this is just one of many organisations that have their snouts in the trough . We have our monarchy in Ireland, and I would love to see them either go, or change their ways and start thinking about Ireland, and not their pockets. But, I am just and the end of my tether, and feel like leaving myself, for the second time in twenty years. Well anyway, I hope that this ‘good bank’ is taken on board, even though money will go missing (you can be guaranteed on that), if it is the best solution, then I hope the Irish monarchy take your advice and put the plan in motion.

    • G

      In agreement with you on this, i too am thinking of leaving, the old sneaky Irish trait of a few looking after themselves, the old wink and sure ‘aren’t you good for it’ bullshit has wrecked this country entirely, they’ve wrecked us now and they have wrecked future generations, most of them are at an age where they won’t see the consequences of what they have done. I’ve applied for the US and Australian visa’s but deep down a voice says to stand and fight and be part of the movement for change!! Time will tell.

  46. VincentH

    I’ve yet to hear exactly why your idea is a non runner from the Gov’. Have they not copped on that an answer is required.
    I know why nothing has happened over the last few months. It is the usual method, wait, it might sort itself out. Or wait, we will copy all the others.
    Bunch of gobshites, richarding around with ideologies, when survival is the issue.

  47. Musical Chairs – I agree that we are repeating ourselves what we have already been saying for the last few months and so are the newspaper articles by dmcw .The spin may be different but the music is the same .Maybe this might be a FF spin.
    Our contributions are becoming a ‘before time ie ‘wu’ ‘ moment .The problem with before time or discussing in hindsight is that the deeper we travel into this abyss the farther the eye from the storm will be .We need to affront the presence and be seen to be ahead of the pack of nonesense from the government propaganda .We most of all need to show our skills to be ‘after time ie ‘yu’ ‘ moments in this blog to show our leadership when our country has none left.Foresight.

  48. David

    Banks must cull the present managment as for example Anglo Irish have just promoted their London Manager to be COO – loco as he was instrumental through arogance and more in extendinging the loan book! so what is going on ? Anglo Irish must reveal the Golden 10 as these players haev such committments through corporate facilities etc that they have been the noose behind the neck of the bank! if we can try and stop the rot , thebad behaviour at Anglo we can then do AIB and Bank of Ireland but as Anglo was human creaed quicksand ! and far too connected to the present government – this must be attacked and solved forthwith!

    you are right a new coalitio government is called for ! a new Treasury secretary and new management teams at all the banks, and if this requires goiong outisde to find the talent so be it ! as we have to win at all costs but not at the taxpayers expense! this can be won if the right way is followed and the right decisions are taken , and eveil and greed is discouraged forthwith!

  49. [...] first published in the Sunday Business Post “Whether we like it or not, the economic recovery plan must start in the banks. As this column has argued from the start, shoving capital into contaminated banks is not the answer. In November, this column suggested that a solution was to isolate a ‘bad’ bank which, in turn, would create clean, ‘good’ banks. This is still the way to go. If the government is thinking in this direction, it is about bloody time. Why did they waste so much time, pay so many second-rate advisers and, by prevaricating, directly cause the loss of jobs?… 1. Create a ‘financial skip’ and throw all the bad debts of all the banks into it. This bank will be given the mandate to work out the bad debts over ten years. It should be staffed by the best liquidators and recovery experts in the country. These are people who know how to get value out of an asset. They know, not how to lend, but how to sell. Today, everyone is talking about debts, but there are real assets in this financial skip and, over time, these assets -if managed properly – will become valuable. In effect, the new bank will be the Irish property market. It will control the price and control development. 2.The skip has to buy the assets from the banks. It must do this at a deep, deep discount. In reality, this figure could be as low as 20 per cent of the original price. Let us assume the bad bank needs a huge whack of cash; where are we going to get the stuff? Where could we get €40 billion? 3. Here’s where we play the EMU card. We go to the European Central Bank (ECB) and say: ‘‘You lend us the cash. We, after all, gave up our interest rate and exchange rate policy to join the euro, now you have to help us out. You have to prove that the EU is a community of nations, in reality. Show us some practical solidarity. Otherwise we default and undermine the euro.” In addition, the ECB is already committed to the Irish financial system. It is drip-feeding money into our contaminated banks every day, keeping them alive. We should suggest they lend us the money at 4 per cent for ten years. This is money that the ECB is spending on the financing of our banks anyway as the lender of last resort, so it should not matter to it. In fact, lending to the solution should be much smarter than lending to the problem. The ECB would be crazy not to go for this. We then have money for ten years at 4 per cent with which to work out bad loans. 4.The old banks are now clean. They are free of contamination and they can go about raising money from the market, such as our own pension funds, through the normal channels, like rights issues. This means that they can start lending again to good businesses. The old banks pay the new bad bank a fee for managing their old debts and dealing with their old clients. If the new bank charges 7 per cent for the service, the old banks need to provision for this charge over the next ten years. This means that their profits will be affected, and they must adjust their costs at the beginning of every year to account for the charge. But 7 per cent of €40 billion is manageable. It could operate like a bank tax. The state then makes money on this plan -a s it would be getting the difference between what the bad bank charges and what the old, forgiven banks pay. So it gets tax revenue of 3 per cent of €40 billion every year -or €1.2 billion. You can build a lot of schools with that sort of bread. 5. Obviously all senior management of the banks must be fired right now to facilitate this financial renaissance.”…. Link to full article [...]

  50. MK1

    Hi David,

    > OK, screw this! Let’s solve the problem and stop blaming others. It is clear that the government is completely out of control. Leave us alone, please. In the name of Ireland, go.

    “God save Ireland say the heroes…..”
    I sense your frustration (again), and you are right to be pissed off. If, on this emotional rollercoaster, we could get everyone on the same stage of ‘emotional outrage’ then actions could be taken. It may require a million-person march or stoppage(s), or even as some have predicted, violence (on property?) which will get attention. Or maybe put pressure on the Greens.

    It will take the 40% or whatever it was that voted FF in the last election (and the one before) to look at THEMSELVES in the mirror and state “what have I done” and to repeat “I am not smarter than a 10-year old”. We get what we vote for and people have to realise they have voted for this.

    > shoving capital into contaminated banks is not the answer. In November, this column suggested that a solution was to isolate a ‘bad’ bank which, in turn, would create clean, ‘good’ banks. This is still the way to go. Create a ‘financial skip’.

    The problem we have is that the majority of our banks are very sick, in fact they are quasi-skips already. So its far cleaner and more effiicent and faster to create a new single Good Bank, and let the other (bad) banks be managed down in time. If we follow the Swedish 1992 banking crisis solution, our banks are rated C and are not worth saving (Thanks for that Danske link Lorcan, its a useful synopsis).

    The exercise of moving all of their toxicities, teasing the good from the bad, etc, is a non-trivial exercise and prone to major errors and quagmire. The cleaner, faster approach is to create a new Good Bank (or invite any clean good European banks in) and this speed is needed. I hear First Active branches may be going cheap. This is the LANCE THE BOIL solution which I have been proposing for many months now.

    Note that the Swedish solution in 1993 used 4% of GDP and returned only 2%. The Swedish state lost 2%. Our perhaps ‘bloated’ GDP is/(was) 220 billion euros approx, so 4% of that is 8.8 billion. We have nearly commited that much already. Please comprehend therefore that the Swedish problem they had is MUCH LESS than ours is and their solution was thus far less costly and easier to implement. Its therefore not just a case of us following the Swedish model.

    > AIBs bad debts for 2008 was €1.8 billion or 1.37 per cent of its loan book.

    Yes, and bad debts are likely to go up a fair whack on that. Soon, AnIB will be losing money, and the other banks even with their rip-off retail gouging prices may go that way too. Lets not forget that BOI/AIB run/ran a de-facto inefficient duopoly (which allowed AnIB to get in in certain areas) which has never done our economy any favours. In fact, their tendrils have kept our economy back. Now is a great time to rectify that.

    > We go to the European Central Bank (ECB) and say: ‘You lend us the cash’

    We are already doing that. An EU-wide solution will help and this should ecompass the ECB. The ECB can ‘inflate’ and supply virtual money. This will require a strategy change for the ECB goals but that’s doable as the political will is there. The EU countries as exemplified over the weekend may push it. But Trichet is right, there is no silver bullet. The ECB giving us and other countries cheap money may not solve our ills. And any solution put into action may have undesirable consequences. Its also worthy to note that state-run banks historically dont have a good performance record.

    > The state then makes money on this plan as it would be getting the difference between what the bad bank charges and what the old, forgiven banks pay. So it gets tax revenue of 3 per cent of €40 billion every year, or €1.2 billion.

    I dont think there is any room for the state making money. We will be lucky if we can come out of this with net spending/losses of 5% of GDP (11 billion) on the banks. I fear it could be much much worse. Nothing is definitive though or predictable at this point.

    Tim> But, cap salaries at 100k.

    Lets call it a high-income-tax of 100% on all amounts over 100k. Please ring Joe Duffy this week and ask him to do it and to call for it to be done on all in ar-tee-ee (or-tee-eee) and other PS areas. And why not the private sector too …… starting with the banks FIRST!

    finbarr> ‘If these people’s grasp of basic economics is so pathetically challenged that they cannot govern’. But who can then??

    Yes, a big problem. Because not only is the cronyism and nepotism endemic in FF, but it is also endemic in FG and Labour is not immune either. The Green party may have had ‘morals’, backbone and principles at one stage but they succumbed to the evil attraction of power and are in bed with their ‘devil’.

    David 28th Septermber> “If we take second-hand, discredited ideas from abroad, such as a toxic fund or, worse still, nationalising a bank, we will fail. If we fail, our banking system will be imperilled and a generation of Irish people will suffer. A failed banking system is equivalent to a failed state, and Ireland will become an international pariah. No politician can or should survive such a mistake.”

    Your words then are ringing true. Our nation is an international pariah. We are within PIIGS and not BRII(Ireland)C. Traders are making the simple call, avoid all PIIGS. If I was a pension fund manager in Germany, PIIGS would be off the menu.

    We, as a state, have “failed”. It may have been a minority of people that were the ’cause’, but they have done it under the eye of the majority. This, whether by ignorance or otherwise, has been allowed to happen by the majority. By all means NOT all, but by the majority all the same. Hands up anyone who voted FF or the PD’s since 2002?????? Dont be shy …..

    SamB> In Dublin, cobble all the Georgian squares

    That will only bring in a few 100 ‘eccentric’ tourists. If I was down a ‘Vic-like’ boozer in the UK, I dont think they would be thinking, “I hear Ireland has a Georgian steet area. Lets go”. I do think we can do more on tourism, but it wont be pretty. What do we have that sells, as Frank Kelly might have said in Fr Ted? “Drink”. So, lets go pro on it like the Germans do in the Oktoberfest. It brings in money. It will be nasty. People flying in from places courtesy of Ryanair. We need to bring the price (excuse duty) of drink down to do so. Once the youth of Europe know that Dublin/Ireland is the party city/country, it will create jobs here. It will be nasty. It will be unfavourable. But like it or not, it IS something we are good at and its something that can be done NOW and it will create many low-paid jobs. It will come at a cost to our society. Its not something I would advocate in normal circumstances. But these are not normal times.

    Dilly> How do you put a stop to 80 years of cronyism in a few short months ?

    Correct Dilly, we cant. We need a purge. We need to “vomit” our nation’s stomach contents on the street and see all the nasty bits that have accumulated inside. Better do it that way than wait for an autopsy.

    Marchers/Protesters, march/protest wisely …..
    and then after voting with your feet, vote with your conscience.

    I wish there were a new party that people could align with ……. dont you?

    MK1

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