January 13, 2010

We're being robbed by our supposed protectors

Posted in Banks · 389 comments ·
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Our politicians are putting bondholders before the Irish people they are meant to represent.

Go to any dole office in the country this week. Just have a look. You will see young people. Our fittest and best able have become the number one victims of the recession. Given that this recession was almost entirely based on home-grown economic mistakes, the real victims of the back-slapping Celtic Tiger years were the very people who were supposed to inherit it.

Youth unemployment in Ireland has risen 170pc in the past two years. There are more than 85,000 people under the age of 25 on the dole. These idle youngsters are the ‘outsiders’ who don’t have a stake in the society, or who don’t have the ‘pull’ to get a cushy gig during the slump.

Do you remember only a few years ago all the blather about how our young people and our superior demographics would ensure that Ireland achieved a soft landing? Do you remember government ministers urging people giddily to get “on the ladder”? Holding the ladder was usually a builder or auctioneer, who was making a fortune, and some bank manager who threw borrowed money at these first-time buyers like confetti.

The bank manager’s Christmas bonus was based on how much money he stuffed into the pockets of the first-time buyer which went straight to the builder, who in many cases wrote cheques for cabinet ministers in corporate donations to a party the builders knew would support them all the way.

And who paid? Well, the young of course. They paid by buying over-expensive shoe boxes and they are paying even more via unemployment. This unemployment ensures that the demand for the extra thousands of shoeboxes that were built in the boom will not be there. Therefore, the negative equity many are suffering will simply get worse as house prices continue to plummet in 2010.

The boom years involved a massive transfer of wealth from the young to their parents’ generation. This was the first transfer, which although disastrous for the young, had at least the benefit that the money was staying in the country as their parents’ houses increased in value. But here is the snag. The money that was increasing the value of the parents’ properties, increasing the debts of the young buyers and being skimmed off by the banker/developer cabal with the full support of the Government, wasn’t our money. But whose money was it?

To find out, you have to look at the banks’ balance sheets. Once you do this, it will dawn on you just how criminal the financial situation in Ireland really is — because the bank bailouts ensure that even those young people who didn’t believe the hype and didn’t buy houses will pay for the housing slump by increases in taxation to pay foreign bondholders.

Let’s examine how much money we are talking about. The two big banks in Ireland have deposits of €175bn. But against this deposit base they lent €376bn. They borrowed the difference between what they lent out and what they had on deposit. It’s an enormous figure of close to €200bn — or more than 150pc of our total GDP. If we take out shareholders’ capital — the amount shareholders own — which is only about €17bn between the two, we are left with a huge figure, most of which is being financed on a weekly basis by the European Central Bank (ECB). The ECB is protecting us from ourselves, but it is doing us no favours because the borrowed money has to be paid back and withdrawn from our economy.

This is where the young come in, because due to the Government’s obsession with paying back all the speculators who took a punt on the Irish banking system, our politicians are putting bondholders before the Irish people who they are meant to represent.

When the guarantee was originally conceived, it was supposed to be temporary in order to avoid complete banking meltdown — the Government would then call in the bondholders to negotiate a settlement. The final settlement between the banks and the bondholders brokered by the State should instead see the bondholders lose significantly — as any investor would if he took imprudent decisions.

This is normal capitalist practice and is termed “co-responsibility”, whereby the people who lent money to the banks are as responsible as the people who borrowed money from the banks. However, the Government has decided that the people who lent money to the banks bear no responsibility. So whatever they made in the boom they could keep and in the bust we, the people they lent to irrationally in the upswing, should pay them for all their troubles. How does that make you feel?

The ‘insiders’ within the system in Ireland decided that the young people of Ireland were less important than their bondholders. As a result, the Government has deemed that our workers will pay the bill. In short, we are in the process of being robbed by the people who are supposed to protect us.

The Government sees only two solutions to this banking disaster. One is the NAMA solution, which is based on a hope that the bad assets on the banks’ balance sheets will turn good through another land boom. So not only will the banks get away with it, but another land boom will be stoked up by the same management who just got out of jail. As a result, the next generation of young workers will pay.

The second solution is that if there is no reflation of land prices, the banks’ balance sheets will then have to be sorted out by writing off all the property loans and the bill is given to the taxpayer. Once again the young people of Ireland pay for the mistakes of the ‘insiders’.

The figures are astounding for this catastrophe. In the extreme, if the loans didn’t perform at all (which is unlikely) the taxpayer would have to pay. Every worker in this country would pay €94,736 just to bail out the two big banks.

We can’t pay this. So we should stop the pretence and let the guarantee lapse as was originally envisaged. We should do a deal with the creditors, paying them back 10pc of their cash along the lines of normal capitalist business.

If we don’t do a deal, the cost of bailing out the banks will be felt in every hospital and school in the country, for years. The choice is ours. Either we side with the people or the bondholders. Either we believe in “co-responsibility” or we give the bondholders a one-way bet.

Unless the Government comes to its senses, the cost of the mess it caused will be felt by the young of our country in higher unemployment. Could things be any clearer?


  1. So what’s the optimum solution we can all rally behind?
    1. Let the markets decide, and the banks go bust. Share and bond holders (including pensioners) get burned, but that’s the game).
    2. For day to day banking functions, credit and mortgages, who do we use? An Post? Why not?

    Possible counter arguments:
    A. “No one will lend to us again if we let the banks go bust” — we know this is hog wash. The Markets are clever, but very very shortsighted. They’ll be back.
    B. “Without the banks, we’ll grind to a halt” — It’ll be a challenge to have banking infrastructure in place, but it’ll cost only a fraction of NAMA.

    What do you guys think? Could we have a unified proposal, in layman’s terms, to our situation? The government aren’t (all) idiots — some of them know that what they’re doing isn’t really in the national interest. But unless a better solution can be easily explained to Joe Public, Joe Public will remain like a confused rabbit in NAMA’s headlights.

    • Fuck the share and bonder holders. They knew they were taking a risk when committing to an investment. Tough shit and I don’t see why the rest of the country has to pay for it. If they made a profit do you think they will be complaining and saying they made too much money and they should share it amount the rest of the nation? Nope

      As for day to day banking functions have you ever heard of paypal?

      If we let the banks go bust far more investors will lend to us because they will see we will leave space for the competent to grow and be successful by letting the incompetent fail. This is called capitalism and investors love it, the alternative is socialism, communism, fascism, whatever name you may like to call it, take you pick. Regardless, none of those systems work. Capitalism isn’t perfect, but it is by far the best solution.

      What’s the point in having zombie banks? We’d be far better off in the long run letting them fail, let them go into liquidation and leave the door wide open for competent banks to fill the gap in the market.

      The government are clueless! They are getting terrible advice from voodoo witches that go by the name of Keynesian economists. If you want to know the best solution I suggest you listen to Peter Schiff, Marc Faber and Jim Rogers.

      I think the public are purposely confused by the government owned media (RTE) and they are clueless themselves to the solutions to the predicament we are in and don’t full understand the severity of the situation. Otherwise they would have averted the danger many years ago.

      I think Austrian economics is the solution, because throughout history it is the only economic model that has gotten it right.

      Don’t believe me?

      Go on youtube and type in ‘peter schiff was right’ and let me know what you think afterwards.

      • Deco

        Apply the Austrian School of economics approach. When the rich fail, the state does absolutely nothing to help them.

        Concerning RTE, I observed something over the course of the boom years. If anybody made a statement that was sceptical about the economy, it was covered in a very clever manner. (and the EU Commision, the OECD, David McW, Shane Ross, and others often said things that were critical of the long term implications of the borrowing binge). Basically RTE News got Fergal Bowers to go to some health emergency a health conference, a meeting, a report being commented upon or some local group. And for the first 15 minutes of the Six O’Clock News, RTE would talk about health. For people below the age of 30 this was irrelevant. Basically they felt healthy. In many cases their parents were in their 60s and still felt healthy. It was sufficient to get them to go and switch off the news. After all, involved in binge drinking, fast fooding, and often sedentary lifestyles, they did not want to know. This tactic effectively smothered the news that the Ditherer did not want you to hear about the economy. It was very effective.

        Which is why we need to get people to know that they were fooled. So that they will not be fooled by this sort of distortion in future.

      • jimmy25

        @ sean kelly …. Like your post and the fact that you credit Peter Schiff, Jim Rogers & Faber for your views but you seem to have forgotten to credit Gerlad Celente for some of your opinions too ?? Fair is fair, give credit where credit is due … As for your view on silver I think you may be buying silver as a substitute for gold … Silver is accessible to the many because of its price,is that the reason you are backing silver over gold ???

        • @jimmy25: Yeah, I do listen to Celente, but he comes across as a bit of a crook himself to be honest.

          As for silver, it has far more potential than gold. Silver is radiculously cheap right now and it’ll never be this low in price again. Its becoming extremely rare, its already far rarer than gold because its both an industrial and precious metal.

          Its used in practically everything. Its price is manipulated by JP Morgan. They are going to go bankrupt and have GATA keeping heat on them. All the paper that has a claim on silver is owned by multiple owners. So, when panic sets in and there is a currency crisis later this decade the price of silver has to shoot to the moon. The American National Geological Society stated that silver is the first chemical on the periodic table in danger of going extinct. Of course that will not happen, but it’ll become far more precious and valuable. Happy days for anybody with some.

          Something similar happened to rhodium, but silver has potential to go far higher. Its almost laughable what goes on in this world concerning the financial system.

          I’ve decided to reject it as much as possible and be as truely independent upon myself and not depend on the government as much as others. Those people are pretty pathetic really and need to learn to stand on their own two feet.

  2. Here, here!!

    I have graduated from college, total crap education at that. I’m now 27 years of age and aiming to becoming a 3d artist. Look at my website (www.kelly3d.com) and the government talk about a knowledge economy. What a joke! There is no course in the land that can teach anything near the level required to get hired in this global industry that is now bigger than the film industry and still not taken seriously by our incompetent, corrupt, idiotic, excuse for a government. The opposition are even more hopeless. Where is Libertas when we need them? Oh yeah, that’s right! Not enough people had the intelligence to vote for them.

    I know the housing market was a bubble and I know I’m going to be robbed by taxation and stealthy inflation. But I can always wimp it out and leave to another country that appreciates skilled workers who produce products and bring an income to their economy. What a concept! Brian Cowman should read this blog, he might learn a thing or two. Then again, why should I be forced to leave? This is my country.

    I know for certainty that the whole arse is going to fall out of the housing market like every other bubble in history. If they prop it up they will only make the bubble bigger and the fall greater. Thankfully, our government don’t have any money and the bond market is another bubble that will burst in the near future. I’m using my dole money savings and converting the fiat Euro junk into real money aka silver and waiting for the day when the silver bubble peaks to the moon and the housing market hits rock bottom. Then I’m going to buy a house outright, with no mortgage which would be like sticking one finger up at the banks.

    Another finger to the banks is leaving the bare minimum amount of fiat in my BOI bank account. I suggest every patriotic citizen of Ireland does likewise to bankrupt the banks. I’m leaving some of my savings in the credit union because it actually helps the local economy and by helping the local economy it ultimately benefits me.

    The same goes for not spending money on junk I don’t need, especially products imported. I try to buy Irish whenever I can, but at the right price of course.

    This country needs to wake up, grow some balls, get educated and take action. We have to bring these crooks to justice. Anyone who doesn’t at least try cannot seriously look themselves in the mirror and call themselves a true Irishperson.

    • G

      Some valid points, especially on the Credit Unions, which may surpass the banks (not a customer but a member!)……..I believe back in the day T. K. Whitaker rejected the Credit Union movement, maybe someone can back this claim up, would be appreciated).

      Your comments also make more sense of the calls I and others have received from bank officials saying they needed to see real savings in our accounts, obviously the banks need such resources for their dodgy dealings. One of my friends, an lecturer from Africa met his bank manager after such a call and enquired why she needed to see him saving. She gave the banking line about a possible mortgage and the rainy day. My friend explained that a substantial portion of his salary goes back to his village in Nigeria, it feeds some elderly people and keeps 21 children in school, if he saves he said, people would die and the children would stop receiving education. The Bank Manager had the dignity to apologise and subsequently they became friends (working from within the system :-)

      Those on the Boards of the banks do a real disservice to good people working within the banking system, they are not all fascists.

      But transferring your money out may hasten the day of nationalisation.

      Despite the efforts of gov. to inflate the property market, (I too suspect a complete property collapse), especially if the unemployment numbers keep rising (as forecast)!

      Neither lender nor borrower be! The Vatican had some interesting comments on usury and financially skull-duggery in Caritas en Veritas, worth checking out.

      * “weakest members of society should be helped to defend themselves against usury”

      * Corruption and illegality are unfortunately evident in the conduct of the economic and political class in rich countries, both old and new, as well as in poor ones. Among those who sometimes fail to respect the human rights of workers are large multinational companies as well as local producers. International aid has often been diverted from its proper ends, through irresponsible actions both within the chain of donors and within that of the beneficiaries.

      * . On the part of rich countries there is excessive zeal for protecting knowledge through an unduly rigid assertion of the right to intellectual property, especially in the field of health care.

      * Yet it should be stressed that progress of a merely economic and technological kind is insufficient. Development needs above all to be true and integral.

      * The repeated calls……..for the promotion of workers’ associations that can defend their rights must therefore be honoured today even more than in the past………….

      http://www.vatican.va/holy_father/benedict_xvi/encyclicals/documents/hf_ben-xvi_enc_20090629_caritas-in-veritate_en.html

    • Malcolm McClure

      Sean Kelly: I had a quick tour of your website and was impressed by the careful 2d rendering of your models. I was unable to do any rotations, perhaps because I don’t have the right graphics card, software drivers etc. Do you prefer Windows platforms to Macs? Next generation OSs will probably use 3D capabilities for desktop navigation, so your skills will soon be in demand from many applications besides computer games.
      Good luck, but make sure you are familiar with the 3D heavy lifter apps used on both PCs and Macs.

      • We are still a few years away from realtime rotation of 3d renders, especially online. However, you are right in regards to the internet. 3d will become very important in the future, more so than it is now.

        • Malcolm McClure

          I’d go with Autocad (on a PC) and Vectorworks or Swift-3D (Electric Rain) on a Mac as industry standards for modelling anything.
          Flash and Flex can do basic 3D renders online now but programming is clunky compared with C and requires heavyweight machines both ends.

  3. Well said David McWilliams, Foolish Penny and Sean Kelly!

    Ireland’s current situation presages what we ‘head-in-the-clouds’ Australians have in store for ourselves. I hope we’ll get onto our hind legs and become angry, too!

    Socialism for the banks is just so much rubbish. Too big to fail – bunkum! Where’s the risk for institutions that bleed us dry both on the upside and downside?

    Hopefully we’ll put an end to all this craziness sometime soon. More power to your pen, David McW!

  4. Bamboo

    Fair play to you Sean Kelly, good luck with zbrush or whatever you use for 3D.

  5. Bamboo

    Great article David,
    I remember that, at the end of the boom, when banks was running out of options how to suck out the last drop of the young. Banks went mad with the old equity release scheme. I am sure we all remember that. Parents are put on the guilt trip. Seeing their children faced with not being able to get a mortgage or being stuck on expensive deals are acting to free up cash to give to them. That was a clear indication that there was no more to squeeze out of the young. What I understand is that banks will, no matter what happens, go after the money that is owed to them. It is not a matter of “When all options fail” anymore. They WILL go after parents and/or anybody else who may be able to help the young and to help these poor poor banks of course.

    • Deco

      Very true. There were advertisements that were laden with guilt seeking punchlines, asking old people to prop up the first time buyers market. Now the old people are often stuck with their own home being used as collateral for a mortgage deal that gave incentives to bank managers and other professionals. But which screws everybody at the other end ot the equation.

      In Ireland, people should know that things are never as they seem. That deceit in business is rampant. We need to keep saying this message as it will undermine the corrupt profiteering in Irish commercial life. Bring back Eddie Hobbs !!!

      It is a pity that we cannot see a re-run of the Rip-Off Republic series from 2003. Apart from the critique of Irish business interests, and the corrupt Family Firm Party, there were hilarious sneers madein the direction of the then Minister for Fun, “Johnny Cash”….

      • G

        Hobbs was taken out, unlikely you will see anything like that again, it broke through for a while, caused headaches and then was effectively neutralised.

        Don’t expect others to do the work, educate yourself to be as informed and ethical in your consumption as you can be, just takes a bit of looking into and lobby/agitate for change to how this country is run economically/politically.

    • brum mayo

      I can also remember although not the year,maybe 05,06 or 07,an RTE interview (puff piece) from the national ploughing championships with a delightful spin doctor from a major bank.She was on a lending drive urging irish farmers to free up the value in their land and allowing them to purchase a holiday home in places like Bulgaria!!!

      • Deco

        This would be part of the same banking sector that would not lend farmers money to buy equipment to increase production, but which was very eager to lend money to non-farmers to buy land for purposes of feeding the ponzi scheme valuation nonsense.

        David wrote an article in which he detailed how the property sector was sucking the rest of the economy of finance. Now the property sector has blown up. And the finance houses that created the blow up want a digout from what is left of the economy that they screwed into the ground. As the yanks say, Go Figure !!

      • Dilly

        Didn’t this happen back in either the 70′s or 80′s in the US, with banks throwing money at farmers. It ended in disaster.

        My experience from around 2003, I was encouraged by a so called “financial advisor” to “buy anywhere”, as I “couldnt lose” FFS !!.

        “never trust with your money anyone making a potential bonus”

        • Deco

          I can remember an argument with a socalled financial advisor attached to a bank who wanted to know why I was not buying property !!!!
          He informed me that he had bought, and that he could see things only going one way. That was in 2005. He was barely out of school, and he was already a wise guy. Told me that there was great value to be had in the property market (the Tom Parlon line). I sat there uninvolved.

          And as a follow up, he had the perfect investment scheme. The bank would provide security to a certain scale. He then had a brochure, and made the standard body language cues and presentation. I knew he was on a sales ploy. I got really annoyed. He kept making a sales pitch, when I threatened to walk out the door. And I could tell that he was trained to sell this bond junk, because he had a list of answers to deal with standard apprehensions. And he wanted to know why I would not get involved, because he had answers for each reason I gave.

          Never seen him after that. I knew well that he was on a bonus plan, because somebody in the insurance sector told me about these schemes. The banks were also on a big push to get innocent members of the public to buy bank shares. We know how that turned out. But these people were really pushy. And the older ones were far more suave and sinister and sophisticated than the apprentices.

          Incidentally never seen that brat since. It is like as if he missed his targets. Which in retrospect is good news for many innocent people out there….

    • G

      “Because when you start making it, so do we”

      Remember that line, parasites.

  6. liam

    David,

    Its always been the case for the last two years at least, since there has been a wider appreciation of the situation the country is in, that the course of corrective action is fairly clear. Its also been that case, that apart from the bank guarantee, none of the required action was taken. There is no motivation for the Government to act as you suggest I am afraid, unless there is the real and actual threat of a revolution, armed or otherwise. The entire political system is by design incapable of the transformative actions you frequently suggest.

    Its not a matter of the banking system, its the entire culture at work in business in Ireland. Innovation and entrepreneurship are crushed, capital is static, all pretence of dynamism in the employment market has been revealed to be mythological. Ireland is an inward-looking nation of salarymen and civil servants. Worse, people get in to a lather over the Iranian elections and do fuck-all about the criminals in Kildare Street. I suppose that is their idea of getting out and seeing the world. Madness

    I have pretty much given up hope for Ireland, and fully expect it to return to being a backwards third world economy who’s primary export is its people, what appears to be its natural state. I can find better ways to make a living elsewhere without all of this frustration. Anything beyond this is gravy.

    I haven’t live in Ireland for nearly 13 years and have no intention to return permanently now. This crisis was a lost opportunity to restore sanity, and I would have loved to be part of rebuilding the country, maybe finally setting or at least establishing a permanent base there. Probably there are other like me.

    Good luck to you all, your future is in your own hands. I am sorry to be so negative, this is just what I see.

    • @Liam – “the course of corrective action is fairly clear” – I don’t fully agree – even on this site, there are arguments and counterpoints. If I may bring it back to my original question: can we (DMcW readers) come up with a unified proposal that we could perhaps use to awaken our confused friends and family?
      We all know that the government stinks, but Brian and co. are whipping people like us with their spin and ‘noise’.
      We can try to out-spin them (too costly) or we can try to constantly rebuff their gibberish with a consise and consistent reply.

      • liam

        @Foolish Penny: Hi. Fair point, perhaps that’s too glib. Re finding a unified and detailed rebuttal to any of the nonsense the Government has concocted: if you have been reading for a while now you might remember the famous “5′s” that went around the houses here a few times last year. I think Tim has put them up online. Tim, linkage?

        Its good stuff but the readership here is limited and self selecting. How do we move this to the point of having real influence? The most interesting thing about the 5′s was the diversity of ideas people had, presumably reflecting their own personal situations. In stark contrast, what is actually going on in Ireland is utterly absurd. The idea that if only the Government would listen or if only the argument was presented in the right way to the people, is compelling but it’s a dead end. It assumes that the values of democracy, public service and fairness that the government preaches, as well as its supposed pro-business attitude are what it practises.

        Nobody in Government is going to volunteer for any of this stuff, they all have far too much to lose personally and professionally. You commented above about the Government not all being idiots. I think your missing the point: they know exactly what they are doing. Its the rest of us who are idiots for swallowing it without a fight. If you come up with a solution that deals with these problems and doesn’t involve blood on the streets, I’d like to hear it.

    • Bamboo

      Liam,
      Sounds you’re sitting high and dry. That is a nice position to be in and especially to read the situation we are in from your (I assume) comfortable home. The majority of us in Ireland are most likely sitting high and dry as well like you and including myself. Most of us (posters) do care though and are worried what the future is bringing us and are discussing the options for our future through this medium. We (posters) are very very angry and many of us are expressing their anger by pretending they are distancing themselves from Ireland and their own people. You do care, don’t you? Or have you genuinely “pretty much given up hope for Ireland”?

      • liam

        @Bamboo, Greetings. “Sitting high and dry in my comfortable home” is about as much the antithesis of my situation as it would be possible to produce. I’m sorry if my critique appears harsh, I tend to judge by actions rather than words and collectively the Irish are a disappointment. Notwithstanding some isolated and laudable efforts, it seems to be to be mostly hot air and muttering in to pints, as I’ve said in the past.

        Its not a matter of caring or not caring, of course I care. I grew up there. I have friends and family there, do you think I don’t care about them? Mine simply a pragmatic response to what is the most probable outcome for Ireland. Hope has its uses, but at some point one must concentrate on “filling the fridge”, as a one contributor here puts it.

  7. Deco

    Here we go again. More troubling revelations from ANIB.
    http://www.independent.ie/business/irish/how-anglo-bankrolled-highfliers-in-new-york-2011061.html

    Liam Griffin in Wexford was right. You get a measure of the character of these people by the company that they keep, and the events that bind them. Money. High life. Cliques.

    Did ANIB really have a business model ? It seems to me that ANIB was just plain loosing the polt. Becomming the vanguard of Irish Imperialistic ambitions and inflation of self importance. Don’t wind down ANIB. Just finish it immediately !!!! Flush ANIB down the drain. The bondholders are commercial investors who never paid due diligence for this farce.

    I do not consent to my PAYE, or my PRSI being used to prop up these failed finance houses !!! Does anybody on this board consent to this ? Then if nobody does, what is happening to our democracy ???

  8. Deco

    David you stated
    { The bank manager’s Christmas bonus was based on how much money he stuffed into the pockets of the first-time buyer which went straight to the builder, who in many cases wrote cheques for cabinet ministers in corporate donations to a party the builders knew would support them all the way. }

    In effect you are telling us that this was a ponzi scheme with incentives for all the ‘professionals’ and gate keepers who could direct the lemmings.

    Wills is 100% correct. Ireland became a Ponzi Republic.

  9. Deco

    David – this is an excellent article. A Wake up, switch off the remote control, get off the sofa and find out what is happening article. The working people of this country need to completely wake up and stop bailing out/carrying these IBEC vested interests.

    Nobody voted for IBEC, or ICTU. These are running the country thanks to De Ditherer. This model of running our so-called democracy needs to be binned. We need to post Ahern public policies. WE NEED REFORM !!!!

  10. Deco

    Perhaps we need the Iceland model of bank reform ?

    Let the banks fail, and bailout the human beings….

    • G

      let Anglo fail, nationalise the rest, no point pumping good money in to keep these criminal enterprises afloat so that can come back to bite the next generation of ‘believers’ in the ass!!!!!!!!!!!!

      • Deco

        Let INBS fail. Let Irish Life hold on to Permo – because the bosses of Irish Life want to release Permo before it becomes an Irish edition of Washington Mutual. Basically it is in the taxpayers interest that Irish Life never gets to throw Permo at the taxpayer. There are only two of systemic importance. They are not nationalized officially. It is just that the taxpayers owns something like 80% of them. As CJH once said, “an Irish solution to an Irish problem”….

  11. Foolish Penny led with way with her comment. She included “The government aren’t (all) idiots…” I’d like to see this argued out.

    I agree with her. I think the government has one interest : how to get reelected and continue to enjoy the trappings of power. That’s the nature of politics in Ireland today. The name of the current game.

    David’s piece is a clear as pure ice. But how to move on and bring change seems completely obscure. Vested interests are highly skilled and strategic in their moves to ensure bondholders come first. Their success so far is fabulous, and almost complete. Not a single political leader in Fine Gael or Labour has shown any talent for harnessing public loss, anger and confusion.

    Intellectually, it’s patently obvious who’s won the argument. David McWillams, Shane Ross and other thought leaders have wiped the floor with apologists for the status quo. Politically it’s patently obvious who’s still holding the levers of power and privilege.

    You’d think some people would have rebelled and burned out a few houses. You’d think the anger would have been translated into direct action. Instead we wait for the next general election, satisfy ourselves with feelings of intellectual superiority.

    Not a single thief has been assaulted in the street. We are too polite for revolution.

    Clever the way trade union leaders have been integrated into the state. Impressive the way they’ve been given positions of responsibility. That’s kept them from being irresponsible enough to bring the society to a stop. Remember Eastern Europe. There is a conspiracy to forget how the Iron Curtain fell.

    Of course we need our Irish Iron Curtain to be torn down. But the current crop of so-called leaders of the alternative to the government are all bought off – they hope to inherit what FF enjoys.

    Right now, I think we’re most likely to carry on, with bondholders etc in command. I see no prospect of a refusal to comply.

    Will someone please prove me wrong? I don’t think anyone is doing any more than talking.

    • G

      “Not a single political leader in Fine Gael or Labour has shown any talent for harnessing public loss, anger and confusion.”

      I am shocked at how badly the opposition have performed, a real opportunity lost, no wonder they are not in power, it is astonishing that Gilmore hasn’t gone around the country, astonishing!

      • tony_murphy

        Enda Kenny is probably busy playing golf at K club

        http://www.independent.ie/national-news/noonan-sold-anglo-shares-just-ahead-of-price-dive-1681342.html

        I have being reading a John Pilger book recently, Rulers of the New World, I’m only on page 64 – but if anyone has any doubt what rich people will do to stay rich, this book will tell you

        • G

          tony_murphy – the documentary of same on Youtube is most powerful.

          Part 1
          http://www.youtube.com/watch?v=8firb73r67g

          For you PhilRuss1………………

          Honest Work

          I’m not afraid to bend my back
          I’m not afraid of dirt
          But how I fear the things I do
          For lack of honest work.

          My family is lost to me
          They could not bear the hurt
          To see the state their boy is in
          For lack of honest work.

          I hold no blame for anyone
          ‘Twas I who did arrange
          To pay my union dues so
          I’d not have to learn or change.

          And when I was replaced, ’twas I
          Who started down the hill
          And drank away my savings ’til
          I couldn’t stop myself.

          The prophets of a brave new world
          Captains of industry
          Have visions grand and great design
          But none have room for me.

          They see a world where everyone
          Is rich and smart and young
          But if I live to see such things
          Too late for me they come.

          I know I’m not the only one
          To fall beneath the wheel
          Such company cannot assuage
          The loneliness I feel.

          So many are resigned to be
          Society’s debris
          But I will be remembered for
          The life life took from me.

          For I’m not afraid to bend my back
          I’m not afraid of dirt
          But how I fear the things I do
          For lack of honest work.

        • Dilly

          I watched the documentary last year, it is very interesting. What went on in Indonesia is quite shocking.

      • G

        Gilmore of the 38 leased acres, Fahy ’40 Gaff’s and Kenny of the K.

        And still the Irish take the lash.

      • coldblow

        On Irish Economy site poster E65Bn picked up on this:

        http://www.irisheconomy.ie/index.php/2010/01/04/insider-stories-from-iceland/

        post Jan 4 9:57 and following

    • paulmcd

      ACHIEVING REFORM AND PUSHING FURTHER FOR CHANGE

      I have previously suggested on this site that issuing new BONDS could, in fact, be part of the solution.

      We are in an EMERGENCY. The Unions will have to insist that we need legislation to protect the ordinary citizen from gross exploitation. Higher earners are more likely to have benefited from the boom years. Normally, they will be the people with the most to lose if the banking system were to collapse. However, the Government assures them that NAMA will be their salvation. They have even produced forecasts which predict a profit over the 10-year horizon which is proposed. Let the Government ask high earners to shoulder the burden of financing the rescue, and let Ministers lead by example themselves. All earnings in excess of 100,000 euros will be paid NET in the form of new NAMA bonds to be issued in 25,000 euro units (or fractions thereof where necessary) without a State guarantee.

      The changeover will happen IMMEDIATELY for senior civil servants and members of the Oireachtas. The expenses of TDs and senators will be paid ONLY in units or fractions of NAMA bonds.

      SOCIETY NEED TO SEE THAT THE GOVERNMENT AND CIVIL SERVICE MANDARINS BELIEVE IN THE RESCUE THEY HAVE DEVISED AND WILL PUT THEIR MONEY WHERE THEIR MOUTHS ARE.

      Such courageous action by our Government and leading civil servants would mean a ratings upgrade for Ireland and a corresponding reduction in the cost of servicing existing debt and the burden of tax on us all. Failure on their part will have corresponding long-term negative consequences. GO, BRIAN, GO . . . SHOW US YOUR LEADERSHIP!!!

      The Bonds will be used also to pay and INCENTIVISE our bankers. Banking executives, active or retired, would be remunerated in Bonds for amounts over 100,000 euros and would also receive bonus amounts in these bonds or fractions thereof. Legislation will be brought forward to ensure that executive bonus payments made in the past 6 years will be converted to Bonds and that pension “Honeypots” acquired by retired banking executives will be converted. Whether or not a market can be successfully established in the Bonds is a question which must be subordinated to the needs of the EMERGENCY.

      People will need to reflect also on the fact that, to date, every household in Ireland has contributed circa 11,000 euros for the bank bailout. There is a case for issuing bonds to all households for such magnanimous generosity. Another category of bonds would be issued to compensate householders and enable them to make certain restricted payments or part-payments with these category B gonds, eg, 50% settlement of fees for professional services, 50% of College fees, etc.

      A FREEZE ON UPWARD PRICE MOVEMENTS WILL OPERATE THROUGHOUT THE EMERGENCY

      High earners will hold on to their bonds till maturity in 10 years’ time with the coupons “rolling up” in the same way as the interest on property loans.

      Any flaws in the system will be resolved to the advantage of society at large and not for the benefit of a sectional interest.

      • paulmcd

        POINT TO PONDER

        DMITRY ORLOV: “Financial collapse is already quite far along, and is guaranteed to run its course. Bailouts can make insolvent institutions look solvent for a time by providing liquidity, but one thing they cannot provide is solvency. For instance, no matter how much we bail out the auto companies, making any more cars will still be a bad idea. Similarly, no matter how much money we give to banks, their loan portfolios, loaded down with houses built in places that are inaccessible except by car, will still end up being worthless. By continuously nationalizing bad debt, the country will make itself into a bad credit risk, and foreign lenders will walk away.”

  12. Some very interesting comments, but: ‘Given that this recession was almost entirely based on home-grown economic mistakes…’ – Really? You mean Ireland caused Lehman Bros to collapse? I didn’t know that!

    Seriously, your case is undermined when you over-state the extent to which we triggered the recession. We didn’t trigger it, but what was done here aggravated its effect.

    • silentobserver

      Poor financial sector governance, which appears to be at the root of Ireland’s financial crisis, as well as in the U.S., appears to be the key factor for our current recession. Whether or not Ireland’s woes would have happened without the global credit crisis, appears to me to be hard to prove one way or the other. It still doesn’t detract from the salient points of David’s article- ie why is the general public taking on the responsibility of private interests, and risk takers who lead both Ireland and the U.S. into the mess? I ask this question honestly, as I don’t work in finance, but like many have taken a keen interest in economic events in Ireland and internationally in the last few years. Do you have an answer to this key question Ferdinand, because to date, I haven’t found one that seems to make any sense, even from a purely capitalist viewpoint?

    • paulmcd

      The mismanagement of the Irish Economy and the scale of the losses and consequent recession are unprecedented in the Anglo-American world.

      In December the US Treasury Department estimated that the taxpayer loss from TARP could be about 141bn dollars. I am assuming that this figure represents the accumulated losses by end of 09. All the major US banks have now repaid TARP. I realise there are ongoing relief programs. However the loss to date of 141 bn dollars would convert to roughtly 470 dollars, c. 320 euros, per US citizen.

      In Ireland, Government interventions to date mean that the Irish taxpayer has handed over 10.5 billion euros to our 3 main financial institutions, over 2,500 euros for every Irish citizen and we are still in the early innings.

    • Colin_in_exile

      Ferdinand,

      “‘Given that this recession was almost entirely based on home-grown economic mistakes…’ — Really? You mean Ireland caused Lehman Bros to collapse? I didn’t know that!” – I think when David says “this recession” – he means the “Irish” variety of recession which we are experiencing at the moment with +14% unemployment and increasing, not the global variety such as what the USA economy is facing.

      We were in trouble as far back as May 2007, I know, I had to emigrate to find work, whereas Lehman Brothers crash and burn happened more than 1 year later on.

    • Deco

      Ferdinand – Welcome to this ‘room’ of bloggers.

      The best way I can look at this is to compare Ireland with another country that was similar in many respects in ten years ago, Denmark. Similar size, similar latitude, traditional dependence on agriculture and small industry, similar trading partners. Though the demographics are different as Denmark is an ‘older country’ and has more traditional wealth. And the Danes are not in Euro, though are aligned to the Euro.

      The bankers and property speculator class in Denmark were not allowed control the public discussion on property. The politicians in Denmark did not lose the run of themselves in trying to leverage the entire society with private sector debt, and then throw money into ‘quangos’ so as to preven the public sector being in any way effective.

      We have to accept responsibility for the mess. We failed to grapple with this issue at the intellectual level. There was no intellectual discussion about the debt accumulation. Instead the media defined it as “progress” and the government called it “success”. And Ahern said “long may it continue”. The Danish Financial Regulator was not laying golf with the Danish bankers. The Danish property developers were not loaning the use of their helicopters and their sports stadia corporate boxes to Danish loan executives. Did Denmark have a Seani Fitz or a David Drumm or a Michael Fingleton ? The evidence is that the Danes did not. With regard to finance the Danes were are very cautious and careful lot. There were less drunk Danes on stag weekends in Barcelona than drunk Irish youths. Or if there were drunki Danes they were a lot queiter, and barely drunk at all.

      It ended when AIG and Lehmans went to the wall. Banks would not lend to each other. It became evident that the Irish banking system and the Irish property market were nothing more than an leveraged ponzi scheme.

      Now we have to get very honest with ourselves. We behaved recklessly. For us to progress as a society we are going to have to develop a culture of greater self responsibility.

    • coldblow

      Ferdinand

      Good to see you dropping in.

      Lehman Bros. precipitated the worldwide credit crunch (of course) but there is little evidence that the underlying mess (the ‘fundamentals’ if you like) was down to anything other than home-grown property lending.

      You did service to the country in Nov 1986 when you put your signature to a letter to the newspapers from a group of concerned lawyers to the effect that Fitzgerald’s govt. was acting illegally in attempting to ratify the Single European Act without seeking prior approval from the people of Ireland. (Mary McAleese was one of the co-signatories.) You cited your concern “for the integrity of the Constitution, the rights of the Irish people and for the competence of the Houses of the Oireachtas”.

      I fully accept DMcW’s diagnosis of the situation as set out in the article above. So (and in the light of last week’s Iceland article) would you mind me asking you: Do we have any constitutional or legal avenues to redress this? Can the President be petitioned to convene the Council of State to address this emergency (in particular Nama)? Or are we at the mercy of the govt. to choose its own time in calling an election? Also, is Article 45 (I think) of the constitution of any practical use in this?

      I realize your official position might not allow you to get involved so just let on you didn’t see this if so! (Just thought I’d ask when I saw you there.)

  13. [...] response to David McWilliam’s latest brilliant piece of clarity, I’ve written this comment.  It’s the first comment on David’s ideas [...]

  14. Here’s the harsh reality, I’m in my twenties, as are most of my friends. One friend has never been “top of the game”. Always been a plumber with a very low cost of living because he lived at home. In 2010 he’s got €70k in his bank account, a staggering number for anyone in this country. Helped along by having no mortgage or large expenses. Now he’s unemployed – so what will he do? Go abroad, taking his massive savings with him.

    Myself, I will graduate this year with an undergraduate degree, and while I want a masters I’ve decided it’s too expensive to do in Ireland. I’m a part-time student who, in the last 6 months, has lost his job and cannot find work. So I’m going to go away. I’m determined to ensure the only amount of money I put into this economy, that failed me and my peers, is a one-way ticket to anywhere else.

    • Deco

      KevD.
      I had an option to do a Masters in the 1990s, but I opted for a training course that was more vocational in orientation. At the time nobody could walk out of college and get a real job. A lot of people were doing Masters, postgrad, or apprenticeships like becomming a trainee accountant or working for relatives. You will see an awful lot of nepotism. I know that I did. So you certainly will. But I never let that undermine my sense of hope. Eventually I got a start in a small engineering company living off IDA grants and battling hard for an existence. All you need is a start somwhere. And from there I kept going one step at a time. Do not let the cruelty thrown at you, and the insincerity in Irish business knock you back.

      But really it is a matter of making yourself useful. Now this is not the standard way Irish people think about it. Most are preoccupied with nepotism. But you must be meritocratic. Because in the long run you will learn better how to survive. Being meritocratic will make you a stronger person, a better citizen, and it will make you provide you with economic stability because you will know the value of money.

      Remember it is a skills market, and what matters is that you acquire skills. Companies that acquire relatives of existing staff, purely out of nepotism, eventually wither and die. And such organizations are stale and constitute unhealthy workplaces.

      And congratulations to that plumber chap. As long as he stays sober he will survive. And that is all that it is really about – survival. As a concept it is undervalued. Before long he will find that house prices will keep falling until people like him are prepared to buy houses. In effect he is master of the situation. Going abroad to accumulate more money makes sense in the short term for him. All he has to do is to continue ignoring the Dan McLaughlins and Tom “now is a great time to property” Parlons of this world. Tell him to listen to David McW concerning where the property market is going. I reckon that it will continuing downward. In the midlands there is enough surplus supply to take in the next five years demand. And that is in the region of the country that experienced the highest increase in demand in the last five years.

      It is an economics issue. Supply and demand. The individual just has to make sure he is the right side of the equation at the right time, which is the time that everybody else is the other side of the equation.

  15. econarchist

    I have a simple question: Who are the bondholders of the Irish banks? I can’t find this out on the internet. Maybe someone can provide this information.

    We know who the bosses of the banks are (nearly all the same ones who helped to cause the crisis). We know who a lot of the banks shareholders are (various investment and pension funds and small investors and also the Irish government) . We know who many of the builders and speculators are who are being bailed out by NAMA. We never read about the identities of the banks’ bondholders even though they are being bailed out just as much as all the other players in the scam. I assume that they are large foreign financial institutions, but which ones?

    • zynks

      Very good question. If we had a clear view of who are the likely losers if the banks were aloud to go down, these discussions would be more tangible.

    • Contrary Contrarian

      The man who ask sthe simple question tends to ask the most relevant question.

    • Contrary Contrarian

      Ok banks bonds are held by small, medium, large financial instutions, mutual funds, hedge funds, pensions funds, corporations and even retail clients…..sure you may be an indirect bondholder yourself………..David McWilliams fails to mention is that there are different classes of bondholders but the majority (80-90%) are senior unsecured…..Senior unsecured tend to more risk averse positions where losses only expected if bank goes under… they lend without taking any collateral and rank senior to the riskier positions such as hybrid or Tier 1 bonds holders…(these bondholders are speculative and have already taken the hits)……Senior Unsecured bondholders were only getting 10-15bps over Euribor for 5 year bonds at the peak of the boom so they were not exactly taking a speculative punt on the banks as many seem to think. ……basically if you screw Senior bondholders, international markets will shun you as these are the same guys financing our Govt debt….I am only saying it as I see it but many disagree and believe the bondholder should taken the pain……Kazakhstan and Iceland defaulted on their bondholders, can Ireland really gamble and afford to join that club.

      • Contrary Contrarian

        Just to clarify Kazakhstan and Iceland banks…….not sure of any other examples where Govt let a number of its biggest banks default on bonds in the current crisis. Perhaps Lehmans and Wash Mutual in USA however they were not the largest and I doubt they the US Govt would let them go under if they new the ramifications.

        • Deco

          Actually the US Government allowed both Lehmans and Washington Mutual (WaMu) to fail. Not a penny is support.

          But when American Insurance Group failed, that was the biggest insurance company in the US. In essense massive swathes of America lost it’s insurance cover overnight. It was a serious predicament for the entire society for private citizens, for local governments and for businesses. So AIG got bailed out. Basically modern society needs insurance more than it needs credit. It is an essential aspect to life, even more essential than banking. And personal advice to anybody concerning insurance. Insurance is not about the insurance premium that you get charged. Insurance is about the detail in the contract. Certain aggressive providers of health insurance in particular are to be treated sceptically in this regard !!!

          WaMu was America’s largest residential mortgage provider, and the largest “Savings & Loan” (Building society).

          WaMu crashed because of the crash in the US housing market. We have not even reached that stage of the Irish property crash. When that happens then Ireland will be in serious trouble. Much worse trouble than Iceland.

          • Contrary Contrarian

            Actually did I not just refer to Lehmans and Wash Mutual failures (I assumed it was obvious after I attached them to Kazakhstan ) however I was simply saying they were not the largest banks in the USA (when they failed) and it was not a Govt coordinated plan to let major banks go under as opposed to Kazakhstan and Iceland..It fact after the failures of Washmutual and Lehmans they committed $700Bn to banks via TARP…My overall point is why are so many people eager for us to pursue a policy, which has been avoided by all countries except Kazakh and Iceland above…..not sure where AIG fits into the bond question……and thank you I am well aware of who WaMu were…..

      • econarchist

        Thanks for the explanation. I had thought that the bondholders were a small number of big names in the financial world. You seem to be saying that they are the same kind of companies who also hold bank shares (but not the old codgers at the BOI egm mentioned in other posts on this page).

        I also take it that, in this wonderful world of deregulated markets, bonds can be easily bought and sold, so you cannot tell from one month (or even day) to the next who the bondholders are, even though the bonds might not mature until after many years.

        Whoever they are, those guys are not innocent small investors, so they must have known the risks of investing, indirectly, in a property bubble. So I wonder if the reason why some bondholders were prepared to accept the low premium that you mention was the knowledge that our “business-friendly” government would cover the risk, no matter what, just like Garret Fitzgerald bailed out the banks in the 1970s.

        The reason given by Cowen and Lenihan for the bailout is to avoid driving away investors. In my view it would actually be a good thing to drive bondholders away from failed banks, in order to make another property crash less likely in the future. Punishing them for having lent to the banks would be just a bonus :) I see what you are saying about not wanting to piss off the same people who finance government debt, but the market for Irish government bonds would not dry up completely. The worst thing that would happen would be that the government would have to pay a slightly higher interest rate.

        • Contrary Contrarian

          Old Codgers are exactly the kind of people who should have investment grade senior bonds (directly or indirectly) as they are deemed alot safer than shares…..basic investment theory but leave if for now………yes when they invest in banks (not just Irish), there is a STRONG implicit assumption that govt will bail them out due to systemic risk….(bigger ones anyway) .that why return for banks alot smaller than say corporates. This is not unique to Ireland and hence the govts in Belgium, Germany, Austria, UK, Spain have all bailed out major banks…..I ask you econarchist, if you dont know who even holds the bonds how can you say it is a good thing to drive them away…I think some of your comments are bit populist and misinformed but I appreciate where you coming from….You say, “The worst thing that would happen would be that the government would have to pay a slightly higher interest rate”….a slightly higher on €70Bn in debt is very material for the Taxpayer.

          • econarchist

            “I ask you econarchist, if you dont know who even holds the bonds how can you say it is a good thing to drive them away”

            It’s completely irrelevant who exactly they are. The important thing about them is, as I said, that must have known the risks of the property bubble. As professional investors, they had access to as much data about the banks as anyone else.

            If they had been driven away from purchasing bank bonds by the risk of default, as would happen in a real free market without government intervention, then the banks would not have been able to lend so much money for overpriced property and inflate the bubble even more.

            “I think some of your comments are bit populist and misinformed”. If I have written something that is incorrect or not based on facts, feel free to correct me.

            “a slightly higher on €70Bn in debt is very material for the Taxpayer.” The total cost to the taxpayer of the entire bailout will come to a lot more than a slightly higher rate on €70Bn.

  16. To David McW

    This story has been released many times in various guises.

    I agree with David when he summarises the Government Guarantee was at the time an essential action – yes it was and it was an inspirational action at that moment – but it has had consequences.

    I have come in and out of this website 3 times over the last year – and the most frustrating thing I have found is that the majority of contributors (incl David) do not seem to accept the fact that there was a near fullblown melt-down way beyond anything that Ireland could cope with – however good or bad our finances; regulatory systems; budget controls – etc.

    I have 2 good pals working in London financial services – the weekend following the collapse of Lehman the word was that Morgan Stanley was to go on the following Monday (it was a given) and Goldman Sachs would soon follow. And that the Capitalism was entering uncharted waters without navigation equipment. These pals are Senior figures and they were scared sh*tless….

    The point being that a great deal of our current mess is attributable to events beyond our shores – and that has to be recognised.

    Bondholders – this message has been sent again and again. Who are the bondholder? Are they Wealth Funds; are they Governments; are they individuals?

    Where are they in the secured pecking order?

    Can the Banks deal directly with them? (Havn’t AIB being re-negotiating already).

    BTW according to my figures the capaital value (shareholders) of the banks is about 2.8 billion at todays prices and at NAV (say 1 euro for ease of calculation) comes out at about 1.8billion – not the 17 billion David mentions. In plain language that means that those who “invested” in the banks are effectively wiped out; those who “speculated” in bank shares in the last 12 months have probably done considerably better.

    Notwithstanding all that – it looks like the meltdown was averted (and we wont know for a number of years just how close we came) – therefore it is back to my message of having to get on with – NAMA and all.

    And a further postscript(s) 1) A contributor described Brian Lenihan as presentable but 2nd rate; 2) Somebody complained about somebody driving around in an SUV.

    1) The mere fact that Brian Lenihan is presentable makes him first rate
    2) If a person owning a SUV enables 10 people to own an ordinary car – is that good or bad?

    • SUVs make a bigger target, so that’s OK with me.

    • Lorcan

      “BTW according to my figures the capaital value (shareholders) of the banks is about 2.8 billion at todays prices and at NAV (say 1 euro for ease of calculation) comes out at about 1.8billion — not the 17 billion David mentions.”

      The banks equity capital (as it appears on the balance sheet) is not a refection of the current share price. It is made up of money raised from when the shares were originally issued, less credit writedowns.

      If the the bank sold €10bn worth of shares two years ago, they would still have the €10bn, even if the shares are now only worth €1bn on the market.

      The €17bn figure seems right, and probably includes retained earnings while being reduced by credit write-downs.

    • wills

      You talk of capitalist enterprise here, gold man sacks and the rest. What kind of society would we live in if every business which made a loss was bailed out by the taxpayer. Communism.

      Also, investment banking is the most capitalistic of all enterprises, so, by the standards they set they are judged by. You agree with this right.

      So, live by the sword, die by the sword.

      Funny how it is with theses banksters that they keep spoofing we are all going to die if they are not thrown our taxpayers monies.

      This is as a poster writes below a system held together by city of london, wall street, ecb and basel and it is foul and monopolistic and a killing machine destroying all threats to its existence.

      • wills

        and these threats are self sufficency, innovation, independance, hard work, grit and sweat.

        This banking takeover of society and government is all about debt, consumption, namby pambyism, dumbing down, political correctness, blurring of gender type, wishy washy arts movies and music.

        Whats going on is full scale looting of the states silver. One can package it into whatever double NAMA speak one may need to maintain the delusion of holier than thou but history will show that sections of the irish society turned on other sections and tried to put them all in the oven and have them for lunch dinner and tea.

        Get real.

    • Contrary Contrarian

      Very good piece, I have to say i am in agreement……..SUV example is very cleaver.

      • Ruairí

        Depending on one’s vantage point, alarmingly simple concepts can appear clever; or not.

        Pity about the accuracy of the numbers though; or rather the lack thereof. As Lorcan eminently points out……

        Deco has said it so often:- confidence in Ireland is on over-drive. The overt confidence of some posters here, in their financial prowess, is staggering. With David McWilliams having held senior merchant banking and central bank positions, your ardour seems all the more misplaced; and baseless. To argue over economic forecasts and direction is one thing; to construct inaccurate financial positions (and for others to cheerlead them as ‘cleaver’; probably a better word regarding banks, by the way) with basic banking 101 is a tad insulting to other posters.

        • Contrary Contrarian

          Ruairí, I notice from your comments that you seem to get a bit ratty when people take an alternative view to David McWilliams….if anything you appear to be the cheer leader and your comment above epitomises my point…. Interesting that you use his Senior banking experience to support your views.

          • Ruairí

            Actually, we’re first cousins……….no, he saved me from a burning ship………….no, he saved me tens of thousands of pounds and then euros………………..

            Yes, mea culpa. I am, in the main, a David McWilliams cheerleader. His voice rang out like a cry in the wilderness, and yours truly was in the matrix getting sick of all the tubes stuck into him. The years was 2000. As David knows well, we have disagreed vociferously on one or two points. But then, you may not have been reading this site for that long.
            It would seem though, that you are a champion of no-holds barred capitalism, in which case I denounce you BS about systemic risks re banking. Hundreds of banks will be allowed to go to the wall stateside. Check http://www.moneyandmarkets.com for the list of undercapitalised bansks at risk. Its a list that’s running for probably 18 months now.
            You are naother concensus cheerleader who believes that letting one of our two top banks and a number of smaller institutions go to the wall, in the Darwinian capitalist fashion, would cause systemic shock waves in Ireland. Not so . In fact, its the healthy alternative route that others are requesting here.
            Establish a good bank, with no interbank luggage and undercapitalisation. Even then, who would they loan to in our present export / currency perfect storm….

            “Interesting that you use his Senior banking experience to support your views.” How woolly-headed is that? My views? So Lorcan’s figures (facts) are wrong and PhilRuss1′s were right? He, like a gentleman, admitted so. Your stance is purile and casts doubt on other posts regarding bondholders which, at first sweep, seemed reasonably written and based on given facts.
            I cheerlead the truth. I wish you would give it a whirl. Sets you free.

            I have met someone more contrary (and ratty too pal) than me. As Spock was wont to say, “fascinating”.

        • Contrary Contrarian

          Yes I admit the financials are wrong but it does not take from my agreement on the overall stance….that is where I sit………I am glad David McW saved you, you were one of a few however I am in your boat but it was not down to D although I respect him for what he said and done……one of a very few….as everybody was milking the cow down to the last drop….unfortunately for a Senior banker, he appears to have limited understanding on how the bond markets really function and to be frank I believe his views are naive……Am I wrong to disagree…….I am new to this blog however I just wanted to add a bit more perspective from bonds side. I am not happy that we will pay for mistakes of others (I can say hand on heart that I could see this coming but nobody wanted to hear) but the costs in my view from walking away from bondholders are greater than the benefits….and yes I do believe the Top banks are systemically important….Why were RBS, HBOS, Bof America,, Citigroup, Commerzbank, Hypo, KBC, Dexia, Fortis etc bailed out aswell…..it all comes down to Systemic risk and the fear of the unknown…..(another Lehmans) that is one of the few areas where I fail to diverge from the consensus….we should ask how do these banks get so big that they effectively they can privatize their losses but socialize their losses……as for the 100’s of banks failing stateside, I am well aware of these institutions (140 were let fail in 2009)but they are not systemically important. .I do not want to engage in this bashing any more..I think we should agree to disagree and accept that we sit on different fences.

          • paddythepig

            Keep contributing CC, I think your posts are very interesting and valuable. Ditto PhilRuss1 and seaninog.

            Question(s) for you. Does the financial world truly understand systemic risk, and can anyone say what it actually is? What would be the impacts of a Goldman Sachs or a Citigroup going bust for example? How would it affect the life of the Ordinary Joe, living in Ireland?

            The corollary question is : Why is it good to preserve these financial institutions? Do they understand what they fear, or is it because they don’t understand that they are fearful?

            Paddy

          • Ruairí

            Agreed. Agree to differ. I have enjoyed some of your posts. Don’t get me wrong. I’m not a fundamentalist. Perhaps a bleedin mentalist though…..

          • Alf

            “.Why were RBS, HBOS, Bof America,, Citigroup, Commerzbank, Hypo, KBC, Dexia, Fortis etc bailed out aswell…..it all comes down to Systemic risk and the fear of the unknown…..”

            Fear of the unknown sums it up. It’s the same reason that the Irish government is bailing out Irish banks. But perhaps we shouldn’t let financially illiterate politicians continue to think they should save everyone from bad financial decisions.

            The mysterious unknown, lack of understanding, ignorance. Bondholders are in it for themselves and will judge any bond purely on its comparative premium and likelihood of payout. They are very much a forward looking, varied and independent bunch. They have no reason to pass up a good government bond deal just because some bondholder lost on a bad bank. Governments taking on more risk will lead to higher premiums on government bonds. Governments bailing out banks with tax payer money will lead to higher premiums etc.

            Governments have gotten caught up in the need to ‘save’ us at every chance. Perhaps its a vote winner but there is nothing uniquely Irish to this. Others have made similar mistakes as you have highlighted.

          • Contrary Contrarian

            Cheers Paddy, Ruairí, same to you also…..On a basic level it the risk to the economy posed by the collapse of a financial institution…..because banks are interconnected, the bigger the bank the greater the impact on other institutions……..if one bank fails it could have a domino effect and bring down other banks depending on its size, given our global markets a banking system collapse could spread like wildfire depending on the size….That the theory and I subscribe to but no I don’t think the Financial World know the true extent of the risk…. It must be noted that the Lehmans default losses were absorbed by markets fairly well (albeit a lot of pain) despite all their derivatives position and web of exposure, however the subsequent panic was mainly in my view attributed to the fact that the govt let a fairly sizeable bank go under…….(it was a cut throat investment bank nothing to do with joe public)………..markets were unable to absorb the fact that underlying assumption that the govt would not bailout a sizable institution (as was done with Bear Searns)………who was next….AIG, Citigroup, CIT, Bof America?????, this fear lent itself on to panic….. So even though Lehman might not be defined as systemic risk in the traditional sense due to size business etc, it actually posed a massive risk to the overall system……basically I am saying in around about way that it is almost impossible to say what the ramifications for Joe Public but following the Lehmans failure I don’t want see it tested again…. So the same could happen if Goldman went under and markets could only absorb a few Financial bankruptcies before the ripples become Tsunami …………………………………………………………………………………… AIB and BOI are systemic important but Anglo (can of worms opening) is very contentious…..If we let it go under perhaps markets would accept that it has no model, commercial orientated , no deposit or affiliation with the street and therefore they could accept begrudgingly and absorb it but unfortunately I fear panic and anger (especially after ECB support) would set in and a significant risk would be posed to the other institutions………sorry if I am all over the shop here but it very complicated issue………if banks are deemed systemic important or otherwise know as Too Big to Fail, then there are massive moral hazard issues at play.

          • Alf

            Contrary Contrarian.

            At the time of Lehman’s collapse there was a lot of fear about ‘systemic’ failure such that financially naive politicians were influenced into bailing out. Let’s look at this ‘systemic failure’, in the case of AIG it would have meant some pretty big European banks lost money (as they should have) and so on. But each and every knock on effect would have been calculable when each case was examined closely (by looking at the books etc). But because it was not immediately communicated how each was liable the fear was that the public would panic (withdraw savings) and thus led to the guarantee in Ireland. I don’t believe by itself the guarantee is wrong but that the chance is being wasted to deal with the banks in a capitalist way (as David has pointed out. i.e. a controlled bankruptcy.) To continue to think that a term like ‘systemic risk’ is mysterious and unknown forces fits here is a fallacy. The guarantee has bought time to look at the books, time for each and creditor to negotiate or realize their loss. There would be no fear of panic as each bank is dealt with. There is nothing new here. It’s just one more bankruptcy process for one more bank.

          • paddythepig

            Alf, Contrary Contrarian,

            How can we unravel this interdependent set of financial dominoes?

            What set of financial instruments connect these institutions, causing the failure of one to multiply into the potential failure of many. CDS’s? Derivatives? Or something else?

            Seems to me based on what you say Alf that if this interdependence was removed, and if institutions could communicate quickly if they are affected or not by the failure of another institution, that this could help dampen the panic. Or fear of a panic.

            Any suggestions yourselves? The financial architecture strikes me as being very poorly crafted, where a point of failure is not sufficiently isolated, resulting instead in systemic melt-down. Bad practice surely?

            Paddy

          • Alf

            Paddy,

            The banks know. They report quarterly, they are audited and they know who they loaned money to etc. The government and the regulator will know too.

            We let them away with vague ‘systemic failure’ and its just a fallacy. At the height of the frenzy there was a risk of the of the public panicking but the guarantee is in place now. The next step is to sort that out as David has pointed out. Its clear as crystal who loaned the banks money. Just as if you have a company you will know too. The government just needs to have the will to deal with it.

  17. SLICKMICK

    Yesterday’s EGM @ BOI was a very civilised affair.Only a few codgers bothered to show up and the whole thing was done and dusted with minimal fuss.No mention of how Dan MC Loughlin has managed to retain his cushy number or how many lending managers have been shown the door.Pat Farell from the Bankers Federation has managed to keep his past involvement as FF chairman downplayed in the past year, thanks to the usual impotent media .

    • Most of the codgers are too old to cope with the bad weather – and Molloy pushed on with the meeting regardless…….

      That is the biggest tragedy of the Banking Crisis I have witnessed – the old people crowding last years BofI EGM – with their retirements wiped out………

      • G

        I would hope if I get to that age that the last thing I would be doing is showing up as a disgruntled shareholder for a bloody bank! They play the game then they should be prepared for the consequences!

        • Thats too easy a swipe.

          Many of those investors put money in the Irish banks – because they were “venerable” insitiutions; and it would have been done with a great sense of loyalty to this country.

          A just in case there are any more smart arsed comments going around – those people would have been the ones who stuck it out through the hard times of the latter part of last century.

          But then if you like kicking the elderly………

          • paddythepig

            The shareholder’s main loyalty was to themselves, and making a profit.
            Who can blame them?

            Should we feel sympathy for everyone who loses money on a stock? I don’t think so. I’ve lost money on stocks before, and I’m not deserving of any sympathy for those losses, regardless of my age. I deserved to lose that money.

            Paddy

          • G

            @ PhilRussi1 – maybe you should have called yourself the contrary contrarian or maybe the opinionated opinion.

            I am not kicking the elderly but I am stating that those people who attended those bank meetings are a) beneficiaries of a cruel and unjust system and b) living in a parallel universe.

            All is find and dandy when these banks engage in predatory lending, exploit the young, hammer the poor and engage in dodgy national and international practices (high profits, hig dividend – no noise then) however when the old dirty game goes bad (as it tends to do) these same people are ‘outraged’, ‘appalled’ and get all indignant!

            Maybe they should examine exactly what it is they are involved in, these are not charity enterprises, they are banks! Ruthless, financial enterprises, whose sole motive is P-R-O-F-I-T!

            You reap what you sow, these institutions sowed misery and continue to do so, the shareholders deserved what they got, they get to learn a late lesson.

            I hope 3 things happen in my life:

            1) That I am never a landlord
            2) That I am never a shareholder
            3) That I die having given all my money away to the real poor of the world who need it, like those in Haiti, I hope it all goes to orphans in Haiti!!!!

            Those shareholders are near the end, regrettably, but its a fact of life for all of us, I would hate to think that I would spend 5 minutes in a meeting like that arguing with the insane, like throwing a tennis ball against a haystack and expecting to come back. Just shows you, you don’t always get wisdom with age!

          • G

            There are many elderly being kicked out of nursing homes because the bank shares that were supposed to finance their bills have gone belly up.

            Haiti is appalling – but just think if you became a landowner and a shareholder – you might be able to do something for them…… Denis O’Brien.

            Paddy the Pig – the small shareholder and the Institutions are different animals. I have big issues with the Institutional Investors just as much as I do with the Regulators – both failed because they had the power to arrest our financial blowout.

          • G

            @ PhilRuss1 – about elderly people being kicked out of retirement homes – feel sorry for them, naturally, but my points stand, anyone who invests like that is part of a monstrously exploitative system.

            As for DO’B in the Caribbean, maybe you should do a bit more research before you accept the PR, again, he ain’t a charity nor there for the benefit of his health, there is ‘a bit more’ to it!

          • G

            PhilRuss1 – your logic would seem to indicate ‘become an exploiter so you can help the exploited’………..

          • G

            Isnt that the logic behind capitalism – you have to exploit to help the exploited. No other system works as well – communism; socialism; dicatorshops – they are failed mechanisms.

            “Exploit” has to be defined – and this is where Ireland has to exorcise its past and layout its blue-print and create our own definition of “exploitation”. Perhaps we can call it “Conscientious Explotation”

          • G

            Philruss1 – then you have me definitely confused with someone else, because I am certainly no capitalist nor do I seek to exploit the labour of others so that they can pay off the mortgage on an ‘investment property’ so I can retire in comfort, nor do I lease out land and live off the fat.

            What I have, I earned through my own labour and efforts and not through the efforts or labour of others.

            Define exploitation any way you want, but keep it out of my world.

          • G

            Then how do you figure the country is going to run itself. If there isnt incentive then the smart people will go to different pastures.

            But thats fine because if we are not able to generate wealth then people will die 10 to 20 years younger and that wont matter since they wont have been educated and therefore wont know any better. Grand job.

    • Deco

      SlickMick…..Well that link between the Bankers Federation and the party of perpetual government is interesting…and you are correct….the media never mention this either….can’t offend our advertising sponsors…it might impact media income….

  18. Art1980

    To foolish penny and others – there is a lot of talk of how we can rally the country to take action against the crooks on Kildare street. Bono’s wife Ali Hewson ran a great campaign against Seafield in which each household was issued (or perhaps was attached in each newspaper) with a postcard of protest to be sent to the English government. I remember also whole newspaper pages adverts were taken out in both Irish and English broadsheets highlighting this protest. It would be great to be able to finance a campaign like this directed towards Kildare Street. Could you imagine Michael O’Leary as Minister for Finance although ruthless the nation wouldn’t be in the billions of debt that is snow balling our way. Ireland needs a though leader and we are going to suffer badly if we rely on Cowan or Enda ( aka Seamus Bond). I also predict the property market to plummet further in 2010.

  19. jimmy25

    @ sean kelly …. Like your post and the fact that you credit Peter Schiff, Jim Rogers & Faber for your views but you seem to have forgotten to Gerlad Celente for some of your opinions too ?? Fair is fair, give credit where credit is due … As for your view on silver I think you may be buying silver as a substitute for gold … Silver is accessible to the many because of its price,is that the reason you are backing silver over gold ???

    • Ruairí

      Silver is much more volatile than gold. Unless you have quick access to liquidity (Bullionvault now give access to silver bullion), and hourly contact with pricing (www.kitco.com for your desktop) then I would personally be very wary with silver. Gold moved as much as $40-50 in one day recently. Not for the faint-hearted. Those wishing to plan their future, by all means buy into silver and gold, but be wary of trying to call tops n bottoms.

      Just think lads, the Brehon laws had interfering with a man’s silvermine covered to a tee. What the hell would they make of NAMA?

  20. jimmy25

    Rachman wrote in the Financial Times today “Sometimes, if a government is truly rotten — East Germany in 1989 or France in 1789 — it is a good thing if a fiscal crisis leads to political collapse. But for most normal countries, it is much better to get close to the edge of national bankruptcy than actually to go over the Niagara Falls of sovereign default. As Britain discovered in the 1970s and India found in 1991, looking over the edge can create the atmosphere of crisis that allows governments to win the arguments for economic reform. An actual sovereign default, however, can destroy confidence and trust among citizens and investors for years.” …… good stuff …

    • G

      very good, the former leads to change, the latter leads to shock doctrine, unpalatable policies rammed through, greater concentration of economic and political power in the hands of the few, growth in monopolistic capitalism to the detriment of the consumer and the worker/employee!

    • Ruairí

      Money Morning averred to this FT piece also. See http://www.moneyweek.com/news-and-charts/economics/why-another-big-crash-is-inevitable-00210.aspx

      “Every government, authoritarian or democratic, is terrified of growth slowing. Why? Because they’ll lose their jobs. Whether that’s at the end of a rope or more benignly at the ballot box doesn’t make any practical difference in economic terms. The fact is that the people in power will always do their damndest to keep a boom going for as long as possible. And that’s what ultimately does the economic damage.”

      Of course, we are well aware of that in the mother of all apers of British busts n booms

  21. IMO

    No need to re-create a banking system. The infrastructure will still be there.

  22. paddythepig

    Quote from Lenihan on the Frontline : ‘Defaulting on the bondholders would have a catastrophic impact on the funding of the state. I wouldn’t be able to pay social welfare, public service salaries …” and so on.

    Is letting the bondholders go swing all it’s cracked up to be, if the state’s neck is in a noose?

    Let’s put ourselves in Lenny’s shoes, what should he do? Is he actually doing the right thing?

    Paddy

    PS : Lenny also said, I forget when, that the banks are getting large write-downs of some of their debt, but not their ‘senior debt’. It seems there is a pecking order in the debt business, some you can renegotiate, some you can’t. Anyone got details about this?

    • Contrary Contrarian

      Hi Paddy left post above (14) that covers this in brief manner (hopefully)….It all depends on subordination of bonds….rank goes…Secured (covered bonds), Senior Unsecured, Lower Tier 2, Upper Tier 2 and Tier 1….. not possible to negotiate with Senior unsecured or that would constitute default…….(they were risk adverse investors and properly the same guys buying govt debt.The other bondholders have already taking hits and this helped boost AIB and BOI capitalisation.

      • Contrary Contrarian

        Albeit their capitalisation still very weak

        • paddythepig

          The obvious question which jumps out at me, and even more relevant now given David’s comment below is :

          Is funding the fiscal defecit hampering the bargaining chips for the Irish Government when renegotiating senior bank debt?

          David too, any comments?

          Paddy

  23. G

    Our revels now are ended. These our actors, As I foretold you, were all spirits, and Are melted into air, into thin air:
    The cloud-capp`d towers, the gorgeous palaces, The solemn temples, the great globe itself, Yea, all which it inherits, shall dissolve, And, like this unsubstantial pageant faded, Leave not a rack behind. We are such stuff As dreams are made on; and our little life Is rounded with a sleep.”
    Act iv. Sc.1. (The Tempest)

    BTW, Haiti, a country brutally exploited by both France and the the US, needs some serious help.

    The UN headquarters has been wiped out, maybe if people have a few quid, we could actually do something positive and give, best to all.

  24. wills

    David.

    More real information on the truth of the looting of Ireland by its own people.

    Disgusting Ingrates are robbing and stealing and pillaging and plundering and will stop at nothing to preserve their high life.

    And NAMA and its invention into reality is quite simply a scam for the rich to keep their stole plunder and the cost of their stolen plunder written off onto the taxpayer and you get NAMA.

    Its not rocket science.

    And of course anyone with any financial interest in NAMA happening are behind making sure it happens.

    Its not rocket science.

    Its the beano, dennis the menace shysters looting and storing and hiding the loot.

    • G

      Question is what do we do, we seem to be going around in circles of negativity and pie throwing.

      How do we become effectual, we could end up writing like this for the the whole year, maybe we need to change too

      • wills

        G -

        ‘What we do’, we call truth to power over and over again, which does not have to be negative.

        The ‘controlling interests’ hide behind obfuscation and mass dis information as Deco has consistently de constructed quite brilliantly in my estimations over my time here.

        David is spectacularly de fogging the untruths and well aimed controlling interests black propoganda covering up the truth, the actual plain brown bread truth, which David is onto big time. Hence why this blog on the frontline of restoring the truth back.

        Every time D puts his writings into the press it s alchemical effect dissolves the disinformation and repels the controlling interests agenda notch by notch. All of us on here add to the mix and the brain storming here feeds into D’s stuff and we keep at it as tim states over and over and keep de layering the hoax that is now upon us.

        The hoax- its a bank robbery by the insiders in the haze of look over there look over there, dennis the menace style.

        So, we are doing excellent stuff here blowing the whistle on what is precisely s bank job.

        Backing up D here is vital. We’re the back ground intel for him and he can measure based on our bloggin which way the winds are blowing on putting a stop on this giant money grab which is what it now is becoming.

        The ponzi scam is over and the NAMA scam is upon us and its all the same, money been stolen from us the taxpayer viz a viz bond issuance.

        • G

          We ‘are doing excellent stuff’ within our own bubble, on a blog, it’s going to take more than that to move things along.

          I appreciate the comments, learned a great deal, good diversity of people on this now, but it does seem a bit like a comfort zone, we need ‘to break out’ into the real world…….just a thought……….for the record, i would rather have this site than not have it, but we will have to consider crossing the rubicon otherwise its just more words……..

  25. David’s excellent article ends with the question, ‘Could things be any clearer?’

    YES THEY CAN!

    It seems to me that apart from some bright sparks in the academic world and the media, plus political opposition that is often lukewarm,, government propaganda is winning the war of words.

    Government blind rhetoric such as ‘green shoots’ or ‘NAMA will be tough with developers’ (DOH, developers will simply declare bankruptcy to avoid the NAMA idiots in pursuit), appears to be winning out.

    Even Shane Ross, who is totally against NAMA (Not another mess again), last Sundayk in the Indo was waxing lyrical about how Lenny won hands down against the opposition in the NAMA debates!!!

    (Wikipedia definition, ‘Propaganda is a form of communication aimed at influencing the attitude of a community toward some cause or position. As opposed to impartially providing information, propaganda in its most basic sense, presents information primarily to influence an audience. Propaganda often presents facts selectively (thus possibly lying by omission) to encourage a particular synthesis, or uses loaded messages to produce an emotional rather than rational response to the information presented. The desired result is a change of the attitude toward the subject in the target audience to further a political agenda’)

    The same propaganda is smothering calls for an Inquiry into the banking collapse.

    This propaganda is keen to exploit the fact that banking issues are found to be complex by most people and simple truths are easy to hide.

    Apart from some notable efforts to shine light into this area occasionally by RTE, public broadcasting coverage by RTE has been similar to neocon Fox News in the US.

    I hope another arm of democracy, our noble court system, will probe the developers ‘personal assets’ over the coming months with the forensic attention this requires.

    With enough of this court coverage, slowly, drip by drip, the truth will out and the general public will acquire the detailed knowledge, it needs to come out.

    We need an Inquiry into our financial mess to get this going!

    • wills

      Its all about finding the truth and putting it out into the open everywhere possible in its simplicity.

      Key points cbweb. Pull the truth from the mug and make it sparkle, which is what D is doing, using the truth in its facts to reveal the scam that is NAMA.

      A dennis the menace bank job.

      NAMA is a looting of the countries bond issuance.

      The monies from the ECB will be looted like the banks were looted.

      Its highway robbery, nothing else, not a hand out for us all to get credit flowing again, this is BS.

      NAMA is code for, more looting.

  26. David,

    I’m puzzled by this and I don’t wish to be negative for the sake of it, but when you termed the guarantee a “masterstroke” did you not know that bondholders would be guaranteed until September 2010?

    http://www.davidmcwilliams.ie/2008/10/01/lenihans-masterstroke-has-bought-us-time-to-sort-out-our-own-problems

    • Tim

      MH – Finfacts, an extension on that guarantee was sneaked through the Dáil in the run-up to Christmas (for all except subordinate bonds).

      • Deco

        Unbelievable.

        I know that the INBS bailout was sneaked in via the NAMA bill. I would have thought that bailing out a private enterprise that was technically insolvent would have required a seperate act of government in itself. This is the George W Bush method of passing legislation. All sorts of dirt gets bundled into legislation that is being sold as ‘patriotic’.

        Which means of course that McUseless had another reason to refer the NAMA bill to the Supreme Court. The first being NAMA being in contravention of Article 45. The second reason being the findings in the Carroll Case according to the Common Law interpretation of creditors having bankruptcy rights of an insolvent group of companies. But the Kildare Street Circus voted in favour of it. And then McUseless signed it into law. I just wonder if there was a legal challenge, would that result in McUseless being forced to resign. And not only that but Donie “protector of the Irish Constitution” Cassidy also voted in favour of it. Hypocrites the lot of them. We know that they know nothing about economics. When it suits them they can know nothing about the Constitution also. Scoundrels !!!

        • Tim

          Deco, I posted an explanation of that, as well as a link to the actual Dáil debate on it, a couple of articles-back.

          If you cannot find it, I will be happy to get it for you again.

          Just let me know.

        • LKSteve

          “Scoundrels !!!”. I really had to respond to this description of the ruling class of Ireland. I personally have never used the word “Scoundrels !!!” as the description has never been fashionable to those in my age group. I was born in 1965. I have heard the description used by older people who I admire & respect. I deserted Ireland many years ago. In the early 90′s in fact. I worked in the U.S. for a few years then in South Africa. I was back during the boom years, but only to recoup the taxes that I was raped of during the 80′s in the form of a subsidised third level education. I took the ‘back to education allowance’, the ‘grant’s’ from Brussels & worked part time to get my degree. I did OK, & then buggered off again in 2003 to New Zealand this time. I have always considered the Irish political elite to be Gombeen men, living in each others pockets & scratching each others backs to get what they want. Big business in Ireland has always understood this & that’s why they bought & sold politicians for years. It was just easier that way. The banks have always thieved. I tried explaining this to people years ago when they would be unsuspectingly charged extortionate fees for changing a few pounds into foreign currency for their holidays or whatever. I would ask to see their receipt & declare ‘you’ve been robbed!’. People thought I was mad. I always kept my Bank Of Ireland account open so that when I’d come home, I could lodge my money without a foreign exchange charge. They still tried to get it but I would query it. More than once I have been handed back a 5 punt note by a teller who would apologise snottily for the mistake & then call out ‘next’. I think they meant ‘next dummy’. I’ve never used the word scoundrels to describe the banks in Ireland. I’ve always just called them ‘thieves’. And I’ve never called the Gombeen men scoundrels, I’ve always just called them Gombeen’s. The current sutuation in Ireland is bad, especially for the young. If I was a young person again in Ireland, I would do exactly what I did in the early 90′s. I would leave. Nothing will change there. The corruption is too deep & it goes to the heart and soul of every small community served by a Gombeen County or city Councillor. David, your writings are powerful, defiant & exhilarating but fall on mostly ignorant deaf ears. People in Ireland only care about themselves, they couldn’t care less about the generations to follow. Steve.

  27. Comics
    Lets look at Personalities …..how about Desperate Dan? Or is it Dennis The Menace?Between Beanos and Dandys the Banks & FF had them all.
    Perhaps Hollywood might inspire us or Bollywood ….the stage is all around us .

  28. petercice

    i for one believe that we are not to late to stop this folly that is nama.
    if we want to the, people of the country could decide to start to withdraw all of there savings,cash ect from the banks this rush on the banks capital would in effect cause a further colapes of the share value of the main banks to a point were the government would have to take the step of nationalising to stop a complete colapes of the system to me this is the lesser of the 2 evils although i still would not trust them to handle this.
    the problem is that we as a nation have completely lost or bottle to stand up and defend ourselves and our future generations of this rape to the very country we live by the super rich and there political friends in the government.
    you can be sure which ever of the current parties get into power in the next election that the same people that supported FF for purely there own gain will switch there attentions to the new government to ensure that they have the handle of power beside them.
    in every other country that is going through this economic stage that new political parties are being formed to show the discontent of the people if only we could bring ourselves to do the same then we may have a chance of securing the future of this nation.
    http://newirish.blogspot.com/2010/01/politics-in-new-ireland.html

    • Tim

      petercice, I agree…. It is not too late.

      • Nationalising the banks is more or less a complete red herring – the debts still have to be dealt with – nationalised banks or no nationalised banks. NAV of banks is 1.8billion Euro which is a splash in the ocean.

        Dont lets re-hash this arguement again – 6 months time the Gov will largely own the banks unless private capital comes to the rescue.

        • Tim

          PhilRuss1, private capital will always come, as long as two thing occur together:

          1) It has a chance of making profit (and it always hedges that bet).

          and

          2) It knows that, if no.1 fails, the government will take the money from the taxpayers to pay for its losses. (but the private capital WOULD come for No.1 on its own).

          Go figure!

          Let’s keep at it!

          Ps.: David’s article is telling the truth. Spread it!

  29. Colin_in_exile

    Great Article David.

    Our rulers our economic perverts.

    “bank bailouts ensure that even those young people who didn’t believe the hype and didn’t buy houses will pay for the housing slump by increases in taxation to pay foreign bondholders.”

    The time for talking has passed. We need action!

  30. Hi Everyone, thanks for all the comments. There are many differing views on how this can play out but for me it is really straightforward; either the State does a deal with the bank creditors or we risk national bankruptcy. In this context of the amount of cash, Lenihan’s budget cuts are just a sideshow.

    I’d like specifically respond to M Henigan at Finfacts re the guranatee:

    Of course I was aware that the bondholders were covered and that was the whole point of my many discussions with Lenihan. The idea behind the 2-year guarantee was that we use this year (2010) having stemmed the crisis last year (2009) to negotiate with the creditors on the basis that today they get 100% next october they get 0. We could quarantine the amount that had maturities of less than one year ie the stuff we’d have to pay and then deal with the creditors who held paper with maturities of more than 2 years ie oct 2010 which was/is worthless. This is why the guarantee was supposed to be temporary. It is very simple and all doable. The negotiation stems from my years trading brady bonds where the creditors did a deal with the London Club of creditors and then, refloated the debt having taken huge haircuts. The point was to restructure based on the 190s/1990s emerging markets debt crisis but that plan was hijacked by people who have never traded a defaulted security in their lives and now we are where we are.

    The guarantee was aimed at stemming the crisis allowing us to deal with the underlying cause.

    best D

    • Deco

      That clarifies things a lot. But our problem is that the political establishment is not up task. And they should know, that we know this. Because then they might get their act together. The track record of the political establishment has been horrendous in this area to date. They have done very little right. Which points to one key objective REFORM.

      • Whats the likelihood Deco, that some of these various Tiers of Unsecured Bondholders (TUBS??) being the same NAMA beneficiaries now before the courts etc?
        A massive merry go round of indigenous debt. Maybe the international boys are substantially gone already? Have the Banks borrowed to lend to “Bondholders” who lent to the Government who are now investing in the Banks who are borrowing from the ECB on the strength of it to fund the “Bondholders” Carry Trade elsewhere?
        A kind of Circular Commerce epicentered in Straffan (though there’s probably a correct Economics term.)

        Have I hit the nail on the head or should I go back to me fridge?

        Many thanks for reminding people about the abuse of Article 45.

        • BTW, my gut feeling is that when B Linehan spoke to David the full depth of the collusion had been kept from him.
          When he started to kick in, he was let into a club that he had been excluded from previously hence the illogical actions since. He retains control of his department but not of the “Club”, methinks.

        • wills

          Furrylugs -

          How about the NAMA ECB cash for the banks.

          The banks loans going to NAMA constitute loans in credit / accrues into bank accounts of the banks loanees. A large % is digital money, yet, the banks loans to NAMA will be fully realized in freshly printed cash from ECB all the way.

          • Nãid ona Nãid a pioc –
            From nothing comes nothing.
            Nama is just an illusion based on the financial mechanisms that brought us here in the first place.

        • Deco

          The structure of Irish holding companies held by these developers is apparently a massive maze. I would not be surprise if the holders are companies that are held by individuals who are declaring bankruptcy in the Courts. All it takes is one accountant in the right circles in Dublin, to spill the beans. A bit like that lady who used to be in the meetings with Fingers and the INBS loan recipients, where Fingers would approve loans in an unusually short time frame. Then she went on Prime Time investigates. The public is now highly informed as aresult of her good citizenship.

          I was told a story by somebody who listens to Matt Cooper and Eamonn Keane as much as possible. Anyway this is his theory. The government takes money out of the national pension reserve fund. It is used to provide capital to the banks. And then the banks use it to buy Irish government bonds. And this is used to create downward pressure on the interest rates for Irish binds. Because the Irish government knows that it has to borrow. So effectively the money injectied into the banks is only be used to finance the day-to-day overborrowing. This is serious mismanagement of an economy. It is a circular movement designed to create the perception that everything is under control.

          As you say, it keeps the power centre in Straffan in control.

    • Ruairí

      Well rebutted.

      In fact, could the genesis and growth of your position in this regards have been any clearer? You have mentioned this ‘breathing space’ and re-negotiation strategy many times over a number of articles.

      I am surprised that Michael Hennigan of Finfacts missed this clear and congruent evolution of argument.

      Fantastic article David. As the end of January passes, the anger levels will lift in this country. I waited patiently behind a punter, whose credit card was not authorised, the other day. An awful situation that I was once in; before I succumbed to the Richest Man in Babylon. As those punters feel the comforting numbing arms of FF lose their safe grip, articles like yours will strike home hard.

      As they say about the teacher manifesting when the student is ready…..

      another poster earlier pointed to a cohesive, unbreakable “McWilliams doctrine” that we should all here develop. That should then be disseminated in a viral email, much like the nonsensical ones that people seem to send. The angel of good fortune and safe delivery from evil is here; and his name is David.

      Too venerational for you PhilRuss1? ;-)

    • Apologies David for casting doubt on your figures re share capital of the above.

      No doubt Ruairi will put it down to persecution complex of a down and out bank shareholder….

      Can we get more breakdown of 1) who are the bondholders 2) and which banks are indebted to them eg Irish NationWide?

      • Ruairí

        Pas du tout, mon amis. I think we share some common ground. But you should be ONLY seeking redress from those who give it and not those who had no skin in the game.

      • Deco

        Good question. Who are the beneficiaries of the 2 billion being thrown at the Irish Nepotists Building Society ? Are they the boys (and we are talking about an all male club) who will be in the Irish Property Speculation Exiles resort in Portugal drinking kegs of beer, and singing “NAMA, NAMA” and toasting the health of the Minister of Finance.

        I suppose now that INBS is part of the semi-state sector, will we now have to pay 1500 Euro to find out if it is making a profit ? One sure way to perform an effective cover-up is to shove a bankrupt bank into a state ownership. Just look at the Anglo saga. We don’t know the names of the bondholders there either.

        But folks we have been here before. Just look at the Larry Goodman episode. He controlled 12% of Irish GDP in a different age. He knew a fair bit about prices, oligopoly, and market riggng. The competition authority did nothing against him. In fact only a few random journalists, tried to expose him. (And we have to give Tintan credit here). And guess what, Goodman is doing very well know. The Party never forgets it’s relationship with it’s ‘friends’…..

        • But folks we have been here before. Just look at the Larry Goodman episode. He controlled 12% of Irish GDP in a different age. He knew a fair bit about prices, oligopoly, and market riggng. The competition authority did nothing against him. In fact only a few random journalists, tried to expose him. (And we have to give Tintan credit here). And guess what, Goodman is doing very well know. The Party never forgets it’s relationship with it’s ‘friends’…..
          Spot on Deco-if there is a way to resurrect McNamara,and the rest-Fianna Fail will find it..on the backs of the poorest citizens.

  31. Alf

    Hi Contrarian.

    Bond speculators and shareholders are in the game to make money. They should understand the risks and hedge appropriately. For a speculator to ‘expect’ a payout from the government that just so happens to be where a corporation resides is ridiculous. Sure they will take it if its given but they don’t expect it. Ideally they want to work with the government here as they are being protected from total loss. If you are a bondholder in this type of situation you know that the governments generally give the best deal. This would be usually in an effort to save viable industries (David makes the point that this is not the case here). To think that bond speculators would be dissuaded from a government bond because it handled this the capitalist way is a fallacy. In fact it would give more confidence that this government knows how to do business and is not foolish or wasteful.

    Banks can and do fail all the time. Most small banks in the US are being let fail. Once bankrupt, whatever is left is be sold off very quickly. Lehman Brothers was bought and reopened as Barclays bank within days of collapse. It is the norm in the US as you can see from the growing list of failed banks below.

    http://www.fdic.gov/bank/individual/failed/banklist.html

    • Lehman Brothers wasnt bought – that was the problem. Barclays were wide enough not to get pushed into buying Lehmans in its entirity (unlike Lloyds TSB).

      Barclays let Lehman “go bust” and then came in and cherry picked its best bits

      • Alf

        Hi Phil, it would not have made sense to acquire before bankruptcy.

        • Exactly Alf,

          Which makes me wonder what were Lloyds TSB thinking of when they took over HBOS

          BTW – I have shares in Lloyds as well as AIB; and B of Irl – for those who reckon you have to declare all your interests before posting….

          • Greed – is the answer to that one.

          • Colin_in_exile

            You’re a class act PhilRuss1.

          • wills

            If a person wishes to do greed fine do so, the point phil is that, those who try not to do greed or just dont do greed are not responsible for anothers gambling tab.

            its not complicated.

          • Wrong PhilRuss1 – greed is too easy a label. It was the ego of Victor Blank.

            And that ego trip extended to a whole raft of names such as Peter Sutherland; Fred Goodwin and closer to home Fingleton and FitzPatrick (and dont lets forget Gleeson trying to outshine Sutherland – the Barristers hall of fame…)

  32. Original-Ed

    How do these Senior Unsecured Bondholders decide what to invest in? do they just look up the rating agencies list or do the do some research on their own? It seems ridiculous that they can invest in any old rubbish and expect to be paid back.
    To me, whether they’re receiving a low return or not, they still took a punt and should have done their homework.
    Any analyst would have known that our banks were pushing the envelope and if they still invested knowing that, they should expect some loss.

  33. furrylugs – the beezer was too expensive I could have a beano and a dandy for the price of a beezer and anyway the Dells were better value when you trade in the B&D as secondhand. My bondholder was the comic secondhand shop and I did swop and trade ins to increase my value for the one price of a new price of a B&D .Like the comic secondhand shop the bondholders took risks and sometimes they ended up with stale old comics no one would buy

    • Like The Topper.
      But if you repackaged and bundled all The Toppers a la DMcW solution, 10 years down the line you may have had a collection worth something so long as the collection remained wrapped in swaddling clothes.
      Sell it on and on like fine wine until some clown of a fool opened it………

  34. Original-Ed

    The more I think about these secure bondholders, the more I wonder if they simply look at the Irish as being a proud soft touch people that would starve rather than default, irrespective of how crazy our banks/government behaved, as being the zero/low risk factor. They’ve got to invest in something somewhere and where better than a country with traits like ours – they may get a surprise!

  35. Tadhgd

    First time posting here guys but I’ve been following this site for a couple of years. What can I say it’s been an education. The calibre of comments often matches and on occasion surpasses el Maestro himself. What’s obvious to me now is that there is an opportunity here to start something. This energy must be be harnessed. Whatever guise this takes for example a new anti establishment website, a pressure group or a new party etc can be decided later but something must sprout out of the seeds of these discussions. As oft quoted it is not our words that define us but our actions. Most people on this forum are on the outside and in the most unparliamentary of terms pissing in. Gombeen man loves this, he counts on our inaction to keep him. safe. What are we waiting for ?

    • Ruairí

      Welcome Tadhgd, into the forest clearing, as it were!

      PhilRuss1 in an earlier post complained that many of us posting here are whingers and negative. Not so.

      There are many fine minds on this forum. Actually, I include pretty much any poster willing to follow David’s web link from the paper to here. That includes those I may have had a go at, yes, PhilRuss1. All of our opinions are valuable in seeking and outing the truth about where we find ourselves (and despite the admonitions of some here), who exactly got us here.

      You speak of action. Yes, when the nation sought ideas, and before other much-aired national platforms pushed Ideas-forums, David was at it here. Marshalled by Tim. That repository of future Irish wealth is being gatekept by Tim and others. A marvellous resource for any halfwit government man to take an afternoon, read and just like a new year’s resolution, just act on one issue, and my my, what sort of future might we have?

      YOu speak of action. We do need a coherent battering ram. An unbreakable coherent stance. A symbol. An apex. A turning point. David’s articles, particularly this one as its a rallying call to the self-interest of hundreds of thousands (and self-interest is the nucleus of economics), can be virally emailed to everyone we know. Nipped and tucked and emailed to media outlets.
      But what we need, and we need to choose our battles carefully, as Brian Lenihan (with NAMA to protect) is a formidable operator as Shane Ross correctly analysed, is a valid, yet thunderous state-stopping protest something like this http://en.wikipedia.org/wiki/Salt_Satyagraha
      Now we could joke and say that we almost had that run-in with de Minister for Snow!
      But seriously, it is not possible for citizens to withold tax in an effective manner.
      It IS possible to decide that while companies you work for, or family / friends are being tortured by a particular bank, that you withdraw wholesale your funds from that bank and lodge them in your local credit union, which is also covered by the state guarantee.
      Until we strike hard at the base of our oppressors, there will be no change. The people have power. David says there are €170 odd billion on deposit. My figure could be misquoting but I’m not scrolling up because 1. I’m too lazy while enjoying my Wolf Blass and 2. it’s not relevant to the specific amount. Another poster earlier mentioned a plumber with 70k in the bank. If I were that young man, I would walk into the bank manager and tell him that because A, B or C company had been rackstretched by them, I was upping and leaving with my deposit. That’s power, that’s effective and that’s legal. Bring a local reporter along. Or blog it !!!
      On a daily basis, I send emails involving various parties (TDs etc), I tell the truth and I cause consternation and flame wars; plus backpeddling and apologies sometimes. Get busy fighting, people :-D

  36. Dells were American Investors while the B&D and Topper and Beezer were English Investors. I was the end user who wanted more so I traded and swapped . I traded with the Comic SH Shop ( my bondholder )and swapped with the other Merchants ( my friends) sometimes I received dividends when I had a rare Dell.- those were great days before TV arrived

  37. Having been on the road for much of the day I listened to both Eddie Hobbs on Derek Mooney and Bernard McNamara on 5Live.

    Eddie sounded very upbeat for the future of the country.

    Bernard McNamara – his point is that he provides(ed) a thousand jobs; has contributed 42million in direct tax; and has built quality award winning projects. Does this make him a bad guy?

    • Colin_in_exile

      Building 2 bed shoeboxes (no cat swingers need apply) and charging circa €400,000 for them…….I’ll let you work that one out for yourself PhilRuss1.

      Hitler gave millions of people in Germany employment, can he be all that bad as the history books seem to say?

    • wills

      Saw him too, and ive no sympathy for anyone responsible for glass bottle site POnzi smash and grab. Any idiot can spend money loaned from the bank.

  38. Phil – I listened to Mc N too and I thought his accent was east Clare yet he claims from west Clare.I think he spoke well and hope he finds a better life again.

  39. How about this for a share tip for Allied Irish Banks 31st July 2008.

    And this was from a reputable source – does this mean we do have be careful upon whose toes we tread?

    “Admittedly, the shares have slumped since our original buy tip (E21.1, 8 Dec 2006). But while trading is deteriorating, things aren’t disastrous and the bank looks well-placed for the longer term. Add that to the massive dividend yield, and the forward PE ratio of just four, and the derating looks over done. Good value.

    • Tim

      PhilRuss1,
      “reputable source”, like the “sources” who said, “soft-landing” and “the fundamentals are sound” and “over my dead body”?

      Is it?

      I am afraid that you have alot of research to do, Sir; much “back-reading” here.

      The people that you are being (in my opinion, TERRIBLY derogatory towards, have taught and helped me alot. You could benefit from reading, imho) so arrogant towards are good and helpful people. They do not deserve your ire. I have “sat-back and observed for a while and I find your posts interesting, but I think that you need to “catch-up” a little.

      Everybody here will help you.

      Just stop “fighting” with them.

      We are all here to learn, to help and, if we can, to improve the future of our, currently, doomed country.

      I wish you well, in sorting whatever your difficulties are and if I am ever in a position to help you, I will do so.

      Once I have met you in person and shaken your hand.

      Let’s keep at it!

      Ps.: Check-out this link and be patient and take your time, when you have it, to explore ALL of it (Please?)

      http://www.thestory.ie

    • StephenKenny

      One of the great things about the internet is that you can Google Mr R. Source, and get a list of his wisdom from recent years.
      When Ms R. Source tells me that it’s a good time to invest in property, I can Google her, and see that she’s been saying the same thing for years, and, in fact, is a director of a building supplies company.

  40. Philip

    We have all vented and ranted on this site and there is a sense of fatigue creeping through the commentary. We are all looking for change or an avenue of least resistance that will yield something a little better. But when I see DMcW using the words…Robbed…Hijacked etc. what he is saying is that the establishment has turned against the people.

    We have an elected group who are operating outside their original mandate. What can we do about it if they decide to give the people the 2 fingers? Revolt? Because we have learned from experience Рthe Irish are not rioters. They are 100% m̩ f̩iners.

    Revolt will not happen. The recession will take its toll and generations will not be taxed simply becasue they will take their business elsewhere. We are a more mobile workforce with no real loyalty to this mud hole – the skilled ones will walk. When things blow over as I believe they will in about 4-5 years, there will be a completely new setup here and a new elite from mainland europe etc who might come back if the weather gets better and they manage to fix water shortages in the most waterlogged country in the world. Those who fix it will not be Irish…just far too incompetent.

    • Philip

      Maybe walking away is too easy an option – the skilled work force needs to stay here and get over themselves……otherwise we will be left with the incompetants and bewildered.

      Eddie Hobbs summed it up pretty well when he said that people with skills associated with building may have to consider working abroad for a few years – because of the work imbalances of the last 10 years.

      But overall these should be exciting times – new enegies; new medicines; new foods; new Info technologies. If we get over these 2 years – and we can.

      Thats what piss*s me off about this site (and some of David McW themes) – too much doom, gloom, branding; chastising; criminalising. Olivia O’Leary summed up well on RTE last year “stop moaning and lets get on with it”

      • G

        fine and dandy for old Olivia…………she ain’t on welfare, she ain’t facing house repossession, she ain’t on the losing side……..comfortable in her little bubble……….

        We need to change the house and those who rule in it and that includes the media.

        • Eireannach

          @G

          You say about Olivia ‘she ain’t facing house repossession’. Well who is facing repossession?

          Isn’t everyone who IS facing repossession responsible for their own actions?

          Why complain if you’re facing house repossession? Who got you in debt – was it the man in the moon, was it the bogey man, or was it yourself?

      • Philip

        Phil, do you not get it? There is no interest in new anything! We seem to be too thick. The American chamber of commerce thinks our education system is rubbish and among all MNCs, the Irish are not regarded as innovators. We are great executors in need of competent management. To be innovators in this world you need good critical thinking at all levels – not there I am afraid. If you look at the leading labs here , few are populated by Irish people at the high levels.

        Just look: No National Emergency Agency – admission in the Indo today, No ability ot be proactive. No sense of the citizen being first. This is not gloom and doom. This is razor sharp in your face fact.

        I worked and work for Germans and French over the last few years. What a revelation and a pleasure. I encourage you all never to work for irish or english management for the next 10-20 years. We have a lot to learn. Get out there.

        • Philip

          Phil: If you happen to be myopic (like me), you need glasses which means eye tests. Take a walk into an opticians in Ireland vs France vs Germany. I still have yet to see the sophistication in Irish opticians come anywhere near what I have seen in France or Belgium 15 years ago. We are way behind in terms of selection of frames to lens options and turn around time….and the cost!!!! How come they are so expensive here!! Says it all. How about HiFi stores?? And it is nothing to do with markets…this is sophistication and knowledge about latest up to date technology. Mr Paddy is way behind, Why? How come? Reason?-> We are very poorly informed and could not be arsed becoming informed.

        • paddythepig

          I only partly agree with you there Philip. I too had experience in a MNC, and the worst excesses of the Irish – nepotism, parochialism, sycophantic behavior, lack of innovation, poor leadership, cynicism – all there.

          This despite the fact that there were some very intelligent and innovative people in the place. Trouble is, they don’t believe that innovation and risk-taking can take them anywhere in this country. Many give up.

          Now I’m in a place that is smaller, but very well run, highly skilled, best I’ve ever seen. And it’s all Irish. So the tide is turning, but we need to promote and help our true innovators far more, not suppress them.

          How do we make this more commonplace?

          Paddy

      • Dilly

        People are not moaning, they are pointing out everything that is wrong with this country, it is a failed and corrupt state. But we are so insular and set in our ways, that we don’t want to hear about the bad things. like Fianna Fail, many people on this Island will shout you down if you try to question how this country works, they call you a “whinger”or “moaner”, sometimes even “unpatriotic”. When I hear people saying “stop cribbing and moaning”, that for me translates into “shut up, lets carry on as we always did, because i have vested interests to protect”.

        Bertie Ahern would love if we all committed suicide, and Lenihen wants us all to emigrate.

      • I don’t know why these doom and gllomers don’t top themselves. Wait. I’ve heard that somewhere before…..?

  41. Colin_in_exile

    Did anyone see Manseragh on Tonight with Vincent Browne?

    In case you didn’t, Vincent put it to him that the government fcuked up by spending €3.5 bn on AIB shares, and only ended up with a value of €1.25 bn worth of shares – due to the EU poking their nose in, so that’s €2.25 bn of taxpayers money gone up in flames. You can’t make this sh1t up!

    • Ruairí

      Saw it, yes Colin. Mansergh got v uncomfortable. Vincent is like a jack Rusell at your trouser leg. Actually no, a Rottweiler clamping down on your arm, to be fair. You might leave the room without answering the question, but d’aul V is comin’ with ya until he gets an answer.

      Superb journalist who doesn’t give a fig about advisers and spin and Minsters and whether they’ll ever darken his door again. As amazing as the Robinson affair was last week, the tempest that erupted on Vincent Browne’s Tonight was nothing short of spectacular. I expected to see Mansergh on the ground, tapping his two fingers on Vincent’s headlocked arm, signalling complete and utter submission. Great tv!

      And that €2.25BN when, as Vincent pointed out, so much internal state aid was savaged. But what about external aid? You can safely say that such contributions to our banks (national self-interest according to Mansergh) are tantamount to our army going to Haiti (and other countries) and setting up a throat-slitting clinic for the locals. As G will point out much more evocatively than I ever could (I like Ché and Gandhi equally G, mea culpa for my violent streak), our foreign aid promises have been decimated by the same government who have now decimated us also.
      Mansergh finally pleaded that, although he was 2nd in command in Finance, he was actually in OPW, what did he know about the intricacies of relationships between DofF and other agencies like…………..NAMA!!!!!!!!!! Correctamondo>>>>>>You can’t make this sh1t up!

      • G

        @ Ruairi – you raise an important point, we as a country face financial difficulties, of that there is no doubt, but the consequences for people in developing countries are far more serious.

        In many cases it will mean a reduced Irish governmental presence on the ground, insecurity for Irish NGOs around planning for projetcs both ongoing and future ones, in some cases it may lead to a curtailment of medical projects or worse.

        The cutting of the Irish Aid buget is an issue that has been virtually overlooked entirely, thankfully, a report in today’s Irish Times seems to indicate that despite everything that has been thrown at the Irish, the mass of people still find it in their dwindling and threatened resources to give, in some respects this must rate as one of Ireland’s finest hours and is most uplifting.

        Irish Aid is fairly well regarded and has a spread of projects across the globe with particular focus on small and newly independent countries such as East Timor and Lesotho. This combined with the work of Irish NGOs and Church/Missionary work means once again that Ireland is punching above its weight, however, we could do a lot more.

        Our universities in particular could step up to the plate and offer medical and engineering scholarships to students from developing countries, Cuba, an impoverished country by Western standards, regularly trains thousands of such students for free, the only proviso is that they return to their impoverished home countries and use their skills for the benefit of their communities.

        It looks like Ireland won’t make its commitment of 0.7% of GDP by 2012 being spent on foreign assistance, which is extremely disappointing; currently it is at 0.48%. In a succession of cuts, the Irish Aid budget has been reduced by €222m this year. This is serious money when you consider that 80-90% of the population of Haiti live on 2 dollars a day, it’s worse in sub-saharan Africa.

        It makes me sick to think that the billionaries and other so called ‘high net worth individuals’ play their financial games where they win but more recenly lose billions of euros at the flick of a switch, imagine if they used just 5% of their resources on poverty alleviation. Sean Quinn was once estimated to have 7 billion or something absurd, one figure i heard quoted was the Haitian debt of $1.5 billion which sucks the life out of the poorest country in the Western Hemisphere, 9.3 million deeply impoverished people. So you could transform the lives of 9.3 million people with $1 billion or you can chose to amass a fortune of €6-€7 billion, free will indeed.

        The Cambodia Trust, a charity which works with those injured by landmines and other disabled runs several clinics and a School of Prosthetic and Orthodics, has provided 30,000 artificial limbs, its running costs are just over a million dollars a year, just for operations in Cambodia, just one million dollars.

        For more see this short clip (1m 38 sec): http://www.youtube.com/watch?v=VwxPxIklFAo

        And one legged farmer ploughing his field, I wish a Seanie F and others could see these:
        http://www.youtube.com/watch?v=CYekgCnNdwk

        Those who ruined this country’s economy have much to answer for.

  42. Philip

    Sorry for being a tad off topic. David is highlighting the ridiculous in the midst of terrible suffering in this country.

    • Tim

      Philip, I “hear ya, but I can’t see ya! as the Yanks say, because I am myopic as well!) (and I’m one, so I’m allowed to slagg myself, before any PC people jump on me, ok?).

      I felt drained, a month ago, posting here. I had lost my energy for it.

      I had to take a break, for family reasons, because, in fact, this is one of the most active blogs of it’s type on the internet (check-it!).

      The fact is that we are making progress, here, even if it does not readily appear so. We are also seeing new contributors who are “shaking-us-up” and challenging our thinking. That is a great thing.

      The voice of dissent (even at this very late stage – and maybe because of that – is the most important voice in the room), don’t forget.

      I remember when I started posting here and you, among many others, gave me a chance, by being patient with me, while I learned.

      Thank you.

      We must not become despondent. More people are awakening every day. More people are coming here. We must welcome them; they are adding information (ok, some adding links we have read ages ago…. but, they WANTED to offer the links, so that is good!)

      Let’s keep at it!

  43. mccool

    it a pity bernard mc namara did not read this article in 2006

    How the prophets of boom may pocket profits of doom
    In the early 1960s, the British establishment was rocked by a sex scandal involving the patrician, married, Minister for Defence John Profumo, and a young call girl, Mandy Rice Davis.

    When the story broke, a sceptical member of the Tory press accused Rice Davis of being a money-raking fantasist and backed up his attack on her by saying that John Profumo denied even knowing her, let alone sleeping with her. The call-girl quipped, “he would say that, wouldn’t he?”

    With one caustic, but self-evident remark, she condemned Profumo and made the journalist look like a bit of a naive eejit.

    When I hear one of the biggest money lenders in the country telling us that we are the second wealthiest country in the world, the call girl’s wisdom comes to mind.

    They would say that, wouldn’t they? Let’s look at motives for a second. If you are in the business of lending money, you might tell people that they are unfeasibly rich beyond their wildest dreams, mightn’t you? Could this be part of a sales pitch to make people feel better about borrowing yet more money to buy yet more assets and give the bank yet more fees?

    Could this be another example of the shameless cheerleading process which goes on in Ireland every day to keep the inflated property market buoyant?

    Let us consider that accusation for a moment.

    You don’t have to be a killjoy to suspect that across the board, from banks to estate agents, money brokers, advertising sales people and the biggest gainers of all — the Government — there might be a motive problem here. When we examine the incessant barrage of self-congratulatory financial muck bandied about, could it possibly be aimed at lining the pockets of the thousands of vested interests who make money from the property market?

    No one doubts the economic success of the past decade. Those of us forced to emigrate in the 1980s and early 1990s in particular have reason to celebrate; we returned to a much better country. However, a bit of perspective might help. We have seen this type of stuff before, in countries that have been much more successful for much longer than ourselves. For example, in the late 1980s, Japan — an economic powerhouse — experienced the most inflated property bubble of the 20th century. As a result of the lending boom, four Japanese banks dominated the top five banks in the world. (Today, no Japanese bank is in the top five and one of these original 1980s financial colossuses is bankrupt.) However, the most startling statistics of all were those about property values and implied wealth.

    A good example was the fact that in 1988 the land on which the Imperial Palace in central Tokyo sits was valued at more than the entire real estate of the State of California or Canada — the world’s second largest country. By that benchmark, Japan was indeed the wealthiest country in the world. Needless to say, it was all nonsense — not because the Japanese were not wealthy, they were; but the property bubble (which burst in 1990 with dire consequences) had overstated that wealth enormously. The Japanese had income which had been built up over generations from making stuff, but they were not as wealthy as they thought they were.

    Horse sense attests to Japanese income. Look around your kitchen, living room or front drive today and you will see where Japan’s undeniable income comes from. Even during the post-property crash domestic slump, Japan remained the world’s largest exporter and the globe’s most innovative economy. It still had the fastest growing consumer goods businesses with the best brand names like Sony, Toshiba, Honda, Canon and NEC. Japan’s car industry remained world beaters. The country continued to export more capital to the rest of the world than any other country and, as a result, its accumulated income was substantial.

    In short, Japan had a lot more things going for it than simply property and even still, property played havoc with Japanese balance sheets by making them feel richer than they were. Also — surprise, surprise — Japanese banks — that were making most out of lending to fuel the property speculation — continued to publish reports on the marvels of Japanese wealth right up until the eve of the crash.

    Now let’s look at this week’s Bank of Ireland Private Banking Report which says that we are the second richest people in the world after you know who. Wealth is a bizarre but fairly straightforward concept. Typically rich people, like countries have had substantial income for many years which has been invested over generations wisely so that their wealth overtakes their income.

    But there has to be evidence of income to substantiate opulence unless of course, it is inherited. All of us are suspicious of the Flash Harry who rocks up throwing cash around with no evidence of where it came from. Did he win the Lotto, rob the loot or maybe borrow it from someone in an effort to either impress or hoodwink us? Should we not be sceptical about countries that do likewise?

    If there is no evidence of income, wealth and the substance of public displays of money or claims about it, have to be questioned. With this in mind, one of the strangest aspects of the Bank of Ireland’s wealth assertions is the fact they claim that “Irish net wealth has increased by 350pc in the past ten years” and then says that our income has only gone up by 100pc in the same period. Both these figures are true, but did the fact that our wealth increased three and a half times quicker than income not make the Bank think for a minute?

    How could wealth increase three and a half times quicker than income in ten years, if not through incredibly astute investments? Ok, so from having never speculated before, is it conceivable that the entire nation — from my mother to the local postman — could have turned into financial gurus overnight? Do you believe that all of us have suddenly learned the financial acumen of Warren Buffet? Anyone who has ever worked in a market knows that not everyone can be a winner all the time. For every buyer there has to be a seller and for every buyer who thinks he has got a bargain, there has to be a seller who believes that he has just sold something which is about to lose value.

    That is how the system works, how it regulates itself and how it benchmarks value — unless, of course, we are in a frenzy. In a frenzy, everyone wants to be a buyer.

    Everyone rushes to get in and prices go through the roof.

    For a limited period, as the prices overshoot, the value of your wealth, as measured against the overvalued asset, can indeed exceed income — but this can’t go on forever.

    However, the frenzy confuses people and many think that this is a permanent state of affairs so they forecast wildly panglossian futures. This is why for example, during the tech bubble of the late 1990s, when the Dow Jones was rising past 10,000, the book called Dow 36,000 was on the US best sellers’ list for weeks.

    The Dow subsequently fell back below 7000 and is only now recovering to its previous levels. Incidentally, Japanese property has not recovered to its 1988 value, almost 20 years later.

    Typically at the head of this cheerleading are the people who are feeding off the effervescence and making cash — such as banks, estate agents, property advertisers and money lenders of all hues.

    They, in unison, project a bright future based on wildly optimistic values and nonsensical estimations of wealth. Nobody exercises their critical faculties.

    Everyone speaks the same positive language. Things have never been better, we have never been richer.

    The miracle continues.

    They would say that, wouldn’t they?

    Posted in Articles, Celtic Tiger, Irish Independent, Property.

    8 comments

    By David McWilliams — July 12, 2006

    • G

      we are not privy to all the facts on why McNamara was unable/unwilling to complete the regeneration projects, the waters have been sufficiently muddied, it was most unfortunate that this hadn’t been done, it could have been one of the few positive legacies of the Celtic Tiger.

      He seemed contrite on radio and TV but as Oscar Wilde once said: ‘let’s go to the theatre, acting, it;s so much more real than life’…………..they could use building expertise and builders out in Haiti.

  44. mccool

    Developers can’t be allowed to renege on partnership deals
    Never mind the tent at Galway Races, Cowen needs to deal robustly with builders who mess the state about.

    The Taoiseach’s decision to abandon the tent at the Galway Races means he can talk the talk of reforming the way we do our business in this country. That’s the easy part. The hard part is how he reacts to Bernard McNamara’s shock pullout from five public/private house building partnership projects.

    If the developer can walk away, and the state is left to pick up the tab for social housing, the true nature of the sorry Irish story of the past few years will become evident and Cowen’s PR stunt with the Galway Races tent will be shown as nothing more than a hypocritical stroke.

    This column has argued for years that much of the boom in Ireland was little more than a scam. Ireland was the victim of a financial coup d’etat whereby a cabal of the banks and developers, with the blessing of the government and cheer-led by various vested interests who were getting their grubby cut, took over our economy.

    They colluded in the farce that saw one of the least populated countries in Europe having the highest land prices and, in the process, terrified thousands of young workers into years of indentured commuterism.

    In the process, the psychology of the nation was altered, leaving us,140 years after the Land League, back where we started, owned by landlords. In the past ten years, land ownership — rather than enterprise, creativity and most importantly hard work — became the single biggest arbiter of wealth.

    This led to a culture of the fast buck, where the ‘flipped’ deal and the easy profit were lauded and difficult things like innovation, service and production were frowned on.

    So hotels and other businesses were closed down to make way for the property juggernaut, which was always based on the ‘greater fool’ theory, that there was always a bigger eejit that would buy the assets from you — until we eventually ran out of eejits.

    Now that we have run out of eejits, the main players in the coup d’etat are running for cover. The banks won’t lend to their erstwhile stars, the developers, and in turn the developers are reneging on deals they had signed with the state.

    Meanwhile, badly-off places like O’Devaney Gardens — which never got a look in — are left carrying the can. This reads like Dickensian fiction, but it is fact. The state can solve this problem. First, it needs to restore the credibility of the entire public private partnership (PPP) approach to public infrastructure.

    At the moment, voters would be right to conclude that PPP is too often a one way bet for developers. PPPs seem grand in a boom, but at the first sign of a downturn, are the developers to be allowed to walk away and the taxpayers to be left carrying the can?

    Bernard McNamara has argued that planning delays and changes have had a key impact and, of course, that the market has now changed. However, surely these risks should have been assessed when the deal was signed.

    For the future of social housing in Ireland, the impression that PPPs are a one-way bet has to change.

    Secondly, this government could send a signal that things are different now and that there is a penalty to be paid for messing the state about.

    Of the five projects, McNamara had signed contracts on two, while he was the preferred bidder on three others. This is over €800 million-worth of work, which in the current downturn would be welcomed by any developer, provided the terms were workable. It looks unlikely that the McNamara deal can be resurrected, so Dublin City Council should act swiftly and go to the under-bidders with offers immediately.

    If they are not prepared, for whatever reason, to move judiciously, Brian Cowen should take charge of this and do it. Obviously, given that apartment prices are dropping precipitously and the PPP was based on using the cash from the sale of private apartments to subsidise public housing, the numbers will have to be reworked. The state will have to accept fewer public houses and more private houses in the schemes. However, this should not be a deal breaker.

    No one expects a developer to build and lose money on the project, so both sides might need to lower their expectations. There need not be any panic now, just clear commercial decision making. If McNamara doesn’t want the business, someone else will. Just do it. Get the houses built.

    Thirdly, questions are being asked about whether it was wise to give one developer all five contracts. Was this the best way of getting value for the taxpayer?

    Junior Cert economics tell us that the state, acting on our behalf, would cut us a better deal by having several contractors competing with each other. The impression that a small number of builders have benefited from state business during the boom is overwhelming. This has to change. There is little point in abandoning the tent at the Galway Races if the philosophy that underpins it remains alive and well.

    The fourth issue at stake is Thornton Hall, another multi-million euro state contract to build a new prison. Apparently, McNamara is very close to signing this deal too.

    A prison deal is much less risky than a PPP to build social housing, which is dependent on the housing market cycle. In a prison deal, you simply build the prison for the state, get a stream of income and take no risk. This is a no-brainer for a developer.

    There is a strong argument that McNamara’s action in the past week, cherry-picking the PPPs he wants, should come into the equation when the government is deciding how to dole out this contract. If you mess with the government — taking projects when they suit you and abandoning them when they don’t — you should pay a penalty.

    Cowen is sending clear signals that he wants to break with the recent past. He talks about patriotism and duty, invoking images from the past like that of Sean Lemass (who, by the way, most people under 40 have never heard of). If he is sincere, he needs to stand up and be counted on this McNamara saga and, for once, do the right thing.

    Posted in Articles, Politics & Economics, Property.

    Tagged with bernard mcnamara, brian cowen, galway races, o’devaney gardens, property developers, public private partnerships, sean lemass.

    21 comments

    By David McWilliams — May 25, 2008

    as david mentioned Mc namara probably did get the big state jobs but i am a bit suprised by davids idea of the need for more housing let it be social or private as recently as may 2008.

    • Deco

      The entire BMcN business model is a load of nonsense. It is based on assumptions that profit flows from being well connected to the state. Effectively, this moverandshaker is what the Americans call a GSE (Government Sponsored Enterprise). Business is heavily dependent on government support. I suppose this is what is meant by Ahern Socialism. State contracts for well connected rich people. (who happened to fill the tent at Ballybrit when Ahern was Taoiseach).

      Why wasn’t Article 45 invoked against any of the property chancers in this country ?

    • G

      Why would these people go after McNamara if it was felt that there was a slim possibility that he could work things through with the projects you outlined previously? He was talking of new projects in Doha and Nigeria, will he simply start up again? Hard to know when you have nowhere near all the facts.

      To be honest, if we had a properly functioning state people like McNamara would never have been allowed to operate they way they did, let alone run up debts of 1.5 billion, his activities should have been monitored especially as now the taxpayer has to pick up the tab.

      The State could and should provide housing for its citizens, especially improve the lot of those in disadvantaged and historically neglected areas, the knock on social effects would be considerbale, instead Western societies refuse to tackle poverty alleviation, just like they refuse to invest in preventative medicine and ban a whole range of products which arguably greatly increase the risk of cancer.

      ‘Governments’ opt to ‘talk tough on crime’ and yet rarely if ever deal with the causes of crime, building prisons instead of building schools and clinics….they never break the cycle……crazy world.

    • McCool said:
      “For the future of social housing in Ireland, the impression that PPPs are a one-way bet has to change.

      Secondly, this government could send a signal that things are different now and that there is a penalty to be paid for messing the state about.”
      mcCool,You still dont understand the Broederhood of Fianna Fail and their Developer cronies, to make such outrageous suggestions..

  45. Great Article, cant wait for a general election, but currently no one worth voting for, Someone mentioned above about a new political party, well its needed as its the same geriatrics that are in Government the whole time….

  46. Deco

    Just a small note concerning the Newry price. One of the main reasons for the convoys to Newry is the considerable difference between North and South concerning the price of alcohol.
    http://www.telegraph.co.uk/health/healthnews/6983707/Cost-of-cheap-alcohol-will-double-to-curb-binge-drinking.html
    And the picture is nice also…We can expect that NI politicians will be strongly opposed to this. It seems that both the Labour Party (which the British Labour Party can call itself as it is the orginal of the species unlike the Irish one) and the Conservatives are both tending towards this. But it might be a relief to the Revenue here, it is goes ahead.

  47. Irish Constitution
    Article 45. 2.
    The State shall, in particular, direct its policy towards securing-

    ( iii) That, especially, the operation of free competition shall not be allowed so to develop as to result in the concentration of the ownership or control of essential commodities in a few individuals to the common detriment.
    (iv) That in what pertains to the control of credit the constant and predominant aim shall be the welfare of the people as a whole.

    Article 15 – 4.
    (i) The Oireachtas shall not enact any law which is in any respect repugnant to this Constitution or any provision thereof.
    (ii) Every law enacted by the Oireachtas which is in any respect repugnant to this Constitution or to any provision thereof, shall, but to the extent only of such repugnancy, be invalid.

    Definition of repugnant-
    incompatible, opposed, hostile, adverse, contradictory, inconsistent, averse, antagonistic, inimical, antipathetic
    “It is repugnant to the values of our society.”

    NAMA is a pretty repugnant piece of legislation by any stretch of the imagination.
    BTW, A45 can’t be interefered with by the courts but a morally responsible Oireachtas is so directed by the Constitution that they SHALL take all the A45 provisions into consideration when enacting laws. This was meant to ensure that we didn’t replace a foreign landlord class with an indigenous one.

    For those here looking for a way forward, read Davitts speech to an English special commission in defence of the Land league and the native people of ireland;

    http://ia341013.us.archive.org/3/items/3793085/3793085.pdf

    David is right and so are other contributors here. We all have some degree of “co-responsibility” but the elected Government have the most responsibility of all – to ensure the welfare of the Irish people is placed foremost in sorting out this cobweb of chicanery.
    F

  48. DH

    There are so many people with property and shares, people who are very worried – they cant see past the current crisis becuase the current crisis has already hit them and they dont want to get hit again. Thousands of ordinary people are hoping NAMA does something that gets them out of jail free, and they are too caught up in their own personal financial crises to think rationally about the future of this country or the impact NAMA will have on other people in years to come.

    Whatever about the elite, there are tens of thousands of ordinary people going along with NAMA and not protesting about it… Greed goes deep into our culture now.

  49. Original-Ed

    “the Irish are not regarded as innovators” so very true – look at RTE, they copy everything that the BBC does including their pay scales. – not an original thought in their big heads – it’s embarrassing and seriously bad example for our youth.
    Back in the old days there was an experimental culture here, but now life is all about money – innovation is too much trouble and best left to foreigners.
    The Danes were mentioned above – they’ve got some jewels like Bang & Olufsen, Lego, Vesta Wind Turbines (with almost 40,000 units installed) and a great number of high added value food products. They’re a protestant country with a great work ethic and no MNCs.
    They laugh at us with the number people in our industrial state agencies – 3,000+ in Enterprise Ireland – if these guys know so much about industry, why aren’t they out doing it themselves, they quip.

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