April 5, 2010

Anglo armageddon is a myth

Posted in Banks · 82 comments ·

The reason Anglo Irish Bank should be let go is simple: defaulting now will make no difference whatsoever to Ireland’s economic performance in the future. In contrast, keeping it on life support will cost us dearly. So shut it down and repudiate the debts.

The reason I am so sure that this will work is that, unlike most people making the decisions in Ireland, I worked in the defaulted debt market in the 1990s. I was the economist in a trading team at French bank BNP, which restructured defaulted debts, found new buyers for these debts and, in so doing, opened the door to those defaulting countries so they could come back into the international fold.

As far as I am aware, none of the people who are maintaining that we cannot default and must write a cheque to pay for Anglo’s misadventure have any such experience of working in defaulted debt markets.

The lesson is that the financial markets always forgive countries that default. There is always a deal to be done and, while it is not pleasant and negotiations can get heated, deals are done.

I worked in what was called the Brady bond market, which was a scheme hatched by US treasury secretary Nicholas Brady.

The Brady bond market was an enormous multibillion dollar market which financed and nursed back to health countries that defaulted in the 1980s and 1990s.This market flowed from deals done by defaulting debtors and their creditors.

For all the warnings of disaster, the banks realised that it was not in their interest to shut out Russia, Brazil and Mexico indefinitely. Banks always finance opportunity, so while they might not like being defaulted on, they see this as part and parcel of the game of capitalism.

This is why the idea of co-responsibility is so fundamental to a market, the lenders are as culpable as the borrowers and the taxpayer has no business getting involved.

This is why we should let the guarantee lapse and do a deal with all the creditors of AIB and, in the case of Anglo, simply default and force the creditors to come up with a ‘take it or leave it’ deal. We can also sell the deposits of Anglo to one of the bigger banks to protect depositors.

If you are worried about such a course of action and are persuaded by the rhetoric of the government, let me show you how debt default is not the end of the world. Let me show you how things can change and how yesterday’s defaulter becomes tomorrow’s star.

Goldman Sachs – the most powerful bank in the world – says that four countries will dominate the next 20 years: Brazil, Russia, India and China. Known as the BRICs, they are the stars of tomorrow. This is now received wisdom in much of the financial markets. But it wasn’t always like that.

Ten years ago ,two of these countries were regarded as basket cases that would never fulfil their potential after they defaulted. Brazil and Russia were regarded momentarily as pariahs. What if I told you that just over a decade ago, the team I worked with bought Russian bonds that were trading at 7 cents on the dollar.

What if I told you that we traded Brazilian bonds at less than 30 cents in the dollar? What if I told you that within four years these bonds had been redeemed at par?

All this happened and no one thought of what was said before or during the defaulting crisis when prices started to rise again.

Before the default prices collapsed but once the countries actually defaulted, the markets concluded that phase was over.

The ‘event’ had happened and then money flowed back into the countries enabling the countries to recover.

Now, ten years later, these two former pariahs are stars and destined to inherit the future. And what happened to the investors who lost money in Russia and Brazil? Many of them licked their wounds, wrote off the losses and got back in for the new ride, hoping to make money in the upswing to cancel out the losses they made in the downturn. That’s how capitalism works.

Financial markets are forward-looking. For the investor, it is always about tomorrow and there is always new money for the right investment. The idea that the world will shut the door on a country in trouble is so false as to be laughable. This is not how the financial markets work. Unfortunately, the people warning us of armageddon if we let Anglo go have no experience of the defaulted debt markets and, thus, really don’t know what they are talking about.

What is particularly galling is that in many cases the people saying there is no alternative to bailing out Anglo are the same establishment and financial markets figures who reassured us that the property market would achieve a soft landing and that the Irish banks had been ‘stress tested’ against a property collapse anyway.

They hadn’t a clue then and it would be the height of stupidity to believe them now.

When President Franklin Delano Roosevelt, in the middle of the Great Depression, took the US off the gold standard and defaulted, the warnings were that this would bring the entire American economy down. Roosevelt was aware of the arguments, but defaulted anyway. By taking the US off gold, he was saying to the creditors: ‘‘you will no longer be paid in gold but in dollars.”

At the time, the lawyers, civil servants and bankers forecast chaos and mass panic in the US. In the event, the opposite happened. The day the US default was made legal, the financial markets rallied, the Dow soared and the bond market rallied.

Why did this happen? It happened because forward-looking investors realised that the US would be bankrupt if it tried to pay all the bad loans on the banks’ balance sheet and therefore, it was better for everyone that it took the pain now and lived to fight another day. Guess what? The US recovered and no one mentioned the default again.

The same will happen here. The financial markets want to see that Ireland is going to grow again. They want to invest in us, in our real abilities, the abilities of the people. Therefore, they want to see a strategy for growth. What they are seeing now is an illegitimate strategy, with no public support, which will turn Ireland into a large debt-servicing agency.

The problem with this is that so much debt undermines the potential of the people and risks yet another debt crisis. As a result, the money that could be invested in Ireland will stay away because the risk in Ireland has been heightened – not reduced – by Nama and the government’s banking policy.

The markets want to see the government giving the people of Ireland a chance. If that chance is facilitated by a default, the markets will support us. Investing is, like a second marriage ‘‘the triumph of hope over experience’’; we quickly forget the messy divorce and move on, armed with the hope that next time it will be better.

The history of bank defaults, repudiation and renegotiation reveals that human nature doesn’t really change. We march into the future full of confidence despite recent experience, because that is what humans do.

  1. Alan42

    If I had never read one of David’s articles or read his books or even heard of him . I could read this article and say ‘ here is an economist who has worked in the defaulted bond market so he must have some idea of what he is talking about ‘
    So my question is . ‘ Why are they taking this action ? ‘
    Don’t say its all based on a myth . It must be something more than that .

    • —- POLITICS OF FEAR or —-
      Deliberate disinformation terrifies into compliance

      David is “wrong”, this is a not a myth, mythology is not concerned with truth or falsity, and in this case it is deliberately spread disinformation, it is a deliberate lie to create fear.

      Such is the politics of this in pubs educated government for a long time now, one only needs to look back at the Lisbon Campaign to find more evidence.

      We need to liaise closer with our Neighbors in Iceland and listen to their story, and learn from their actions.

      Iceland was targeted by an economic hit man, and soon they hopefully will be able to put some meat to the bone of this allegation.

      While all of you posters here are probably aware about it, not every reader will have heard it. iceland was put on the Terrorist list in the UK under their terrorist act after they learned that they consider not to pay back the british and dutch banks, causing even more problems for the wonderful people of this island already on their knees.

      You have to digest that. They were put right beside Al Quaeda, a country with no military and no armed police force, however strategically important they are.

      The banks wanted to make more profits from the downfall of Iceland. Their answer was, you can have the banks and their “assets” but we refuse to pay interests. Now you have to put this into the irish context. We already overpaid the banks in only the first tranch that was transferred last week by 1,2 – 3,1 billion euro. Paying them additional profits for a fraud they committed on the irish Nation.


      We do not need to be targeted by an economic hit man anymore, we allowed our very finance minister to do that job for him.


      Ireland needs a soft revolution, a lot of noise needs to be performed in front of banks and government buildings, day in day out, until they leave this government and we can stop this insanity to continue.

      You have to ask yourself, let aside fear of change and fears injected by the media and this bankrupt government, what do we have to loose?

      I tell you, nothing, we have everything to win!

      Please do consider your moral support for the fine people of Iceland and sign this petition:


      • ps200306

        In fairness, the UK did not really consider Icelanders to be terrorists — it just that terror laws were the only mechanism by which they could threaten to freeze Icelandic assets in the UK. Icelanders are right to be incensed that the UK would stoop so low.

      • paulmcd

        Thank you Laughingbear for highlighting the plight of the people of Iceland in your comments on page 3 of David’s last article. If I may paraphrase Ms Jonsdottir:

        Icelandic bankers who are responsible for their crisis are living in London, the city which is the number 5 tax haven in the world. They should be extradited back to Iceland under anti-terrorism laws, but Brown and Cabinet would be reluctant to classify corrupt bankers as “terrorists”. If they were to do so, they might be obliged to hold their own ex-banker and banker elite accountable for their misdeeds. The Icelandic private banks were allowed to operate in the British economy without sufficient supervision or regulation and it is unjust to hold the Icelandic people 100% accountable for the debts of private institutions. Officially, the standard compensation for an individual saver in the case of the bankruptcy of a financial institution in the UK is £27,000 and no more.


    • paulmcd

      The Fianna Fáil Party leadership and their allies do not care about such niceties as FAIRNESS or TRUTH. They do not want us to know the ultimate beneficiaries of bail-out monies. Their primary concern today is the DIG-OUT for their friends at the expense of society at large. The Cowen/Lenihan/Green axis of inanity and greed is the dysfunctional Godfather at work in Irish society making us all an OFFER we supposedly cannot refuse.

  2. So True David!
    It would be better for the Irish Public / Taxpayer- for them to fold the bank, and hold ALL present management & past responsible for the mess. Many have been over paid for bad advice /service – & money should be retrieved through all necessary actions whether it is chasing all the Seans ! Michaels , Declans . Paddys! etc etc etc etc etc

  3. Incident

    There is no doubt that the only correct course to take is as suggested above by DmcW.

    However we are not the masters of the course currently chosen but puppets to our true masters in Europe.
    Nobody outside of here would give a shit if the punt was our currency.
    This direction has been forced on us by Europe out of a deep fear that the Euro could be seriously undermined by a collapse of one or all of the PIIGS.

    This statement is in no way attempting to support our government but I believe we have been coralled by both the ECB and to an extent by the IMF into being their “guinea pig” for the rescue and salvation of the Euro and the European project.

    Default, repudiate, renegotiate and the sooner the better for Ireland Inc.!

    A change of government will address the cronyism issue to a very large extent.

    The combination of both courses of action will send us back onto a positive footing but there is still a long way to go.

    • suonish

      Tony O’Reilly has some experience of this too – why isn’t he shouting about it I wonder? I’m hazy on the details, but isn’t this more or less how he got Independent News and Media out of a hole last year? He basically told his bondholders: “Haven’t got the cash lads, but it’s a good business. No need to ruin it. So let’s do a deal.” And the bondholders took equity etc.

      Why isn’t the Irish Indo banging this drum? Does anyone else remember a rumour that Lenihan and Cowen were seen going into O’Reilly’s Filzwilliam Square townhouse at the height of the 2008 crisis? Am I off base there? Getting too paranoid?

      Or is that the government are well aware that cutting a deal with the bondholders is the best option for the taxpayer, but what they are doing now is the best option for Fianna Fail and their cronies?

      I heard it said (and DMcW obviously has first hand experience of this) that markets and bondholders were unwilling to lend to Yeltsin’s Russia, so they had to defaut and collapsed. There were throwing money at Putin’s Russia less than a year, (after he showed he wasn’t a drunken buffon throwing the country to the oligarchs, presumably). Now, I wonder why FF aren’t in favour of this route? Who does Yeltsin remind you of?

  4. suonish

    Also it’s probably worth repeating: defaulting on Anglo debt is not a sovereign default, whether it’s nationalised or not. The markets will see it for what it is. I’d see Ireland as a more attractive investment if Anglo had nothing to do with the state balance sheet. I mean is this not obvious? When Lenny says ‘the markets will be shut to is if we let Anglo go’, surely this is naked scaremongering? Wouldn’t the markets be shut to Anglo, but sovereign borrowing should actually get easier, as there isn’t that bloody millstone hanging about!

    There is no reason I can see taxpayers should be on the hook for this.

  5. David, using your experience which as you say is probably thin on the ground at decision making level (though I don’t believe for a moment that Brian Lenihan didn’t at least consult senior current debt expertise across a wide spectrum), what would you estimate the cost to Irish banking in particular and the Irish economy more generally if we let Anglo go bust? Nil? €10bn over 5 years? What?

    Secondly we have already spent €12.3bn on Anglo – the shareholder funds last Thursday after paying in the latest €8.3bn were at €4bn so we’ve lost most of it already and many people were saying the Anglo assets look vulnerable so even the €4bn shareholder funds might be at risk. The point is that the money spent is largely dead money. So what’s the decision on Anglo – to buy their NAMA assets at a fair price (though probably paying the best part of €3bn in LEV) and then there’s the question of another €10bn which BL said was at the upper end. And if we liquidate Anglo how many Joe Averages will lose deposits or how many credit unions will lose funds they lent to Anglo or how many pension funds will not get money to fund pensions to Joe averahe back -this last bit might be just emotional but some account should be taken surely?

    Starting from where we are today having already sunk 12.3bn into Anglo which is largely dead money, is is better to continue on and pay another €10bn plus say €3bn of NAMA LEV than to liquidate Anglo with a cost of X to our economy?

    • @Namawinelake,

      Fair question there. Answer to is a moving target depending on different factors and who gives the figures.

      Wind down costs I’ve seen go from €30 billion from Dukes, to €70 billion from Lenihan to €100 billion from Cowen.

      The figures vary according to different parameters applied to different wind down scenarios eg immediate wind down or over 10 yrs, other parameters being whether all debt is written down, or merely subordinate debt, or Senior bond holder debt, all depositor money secured, or combinations of these and so forth.

      The propaganda war such as it is, the figure most bandied out is the cost to pay off all Anglo’s debt, then the figures above get thrown at you.

      Which one you believe, is up to you. I wouldn’t believe any of them!

      When winding down Anglo is spoken of, the term negotiate or renegotiate debt is used.

      This does not mean defaulting on all debt is not on the table, it does mean however there is a willingness to sit down to barter on figures such as 30c in the € depending on the status of each category of debt on the table. Other avenues to be explored could be debt for equity swaps, renegotiate loans already advanced to Anglo, borrowings from the ECB.

      The approach above is already accepted European Commission method for dealing with such crises, dealing with critical banks on a case by case basis with the view to wind down if required.

      I agree we need hard figures to base our negotiations upon. Again, to distract us away from pursuing this line of inquiry, such figures are hard to get.

      So we need the audited figures of KPMG to build a solid picture from which to build a negotiation platform.

      Anglo needs to be wound down. Even if you believe it ought not to be, do you not agree it is grossly unfair that alternatives to a wind down are still the subject of requests for information such as yours and are not part of the general public knowledge.

      Keep asking those questions on the cost of Anglo wind down!

      • @cbweb

        Yes there are some direct costs of winding down Anglo. If it was free would everyone be seriously talking about the billions to keep it afloat or to liquidate it.

        However I would be more interested to hear estimates of what liquidating Anglo would do to other Irish banks (“contagion”) or to the wider Irish economy. David says above in relation to the US move away from the gold standard “it was better for everyone that it took the pain now and lived to fight another day”. The impression that many might take from the above piece is that there is no cost (or pain) whatsoever in liquidating Anglo. Whilst Brian Lenihan might be over-egging it, I don’t think you can dismiss completely his assertion that repudiation of debt would come at a hige price to the State’s ability to borrow and service debt. Anyone got an idea of what this cost might be – nil? €10bn? €100bn? Surely it must come into any discussion of liquidating Anglo.

        Given the sums being discussed for Anglo which have gone €5bn to €9bn to €18.3bn in a matter of weeks, surely there is some point at which liquidation is the best option but if the cost to Ireland’s economy is less than €10bn, then there is really is a basis for demanding it be shut down now.

        • @namawinelake,

          Agree with you there. But if i don’t want you to consider winding down Anglo, why should I bother to give you any figures? Plus, if i really don’t want you to think about it, why shouldn’t I give you an inflated figure of say €100 billion as Biffo has done to scare you off.

          Its a common political device in dealing with difficult questions to give as your answer, an answer to another question that was never asked.

          So answers based on the total cost of a wind down assume everybody gets paid in full. Whereas the cost of a negotiated wind down is difficult to give exactly as it demands decisions being made on e.g. all depositors getting paid, whether senior bondholders get paid in full, etc.

          The argument put forward here is that this negotiated approach is far less damaging for taxpayers than the way of the guarantee, raising dead Anglo and turning it into a Frankenstein that will suck us dry.

          Wind down effect on other banks? Personally, I’d advocate an extended guarantee for those banks to offset any collateral damage. Plus Anglo depositor money transferred to them , but I’m no expert.

          We need negotiator experts who’ve worked similar wind downs in the past to work Anglo on the principle as D says ‘co- responsibility’ of depositors/creditors for an orderly wind down.

          The crazy, ludicrous, corrupt, enraging idea proposed by Biffo and Co that taxpayers are responsible alone for Anglo junk and should bailout out Seanie/Drumm et al because somehow sovereign debt is at stake, such idiotic,corrupt, lies and pillaging of the taxpayer have to be exposed for what they are.

          Anglo delende est :)

          • @cbweb,

            You may be right and given the track record of our politicians then of course we’d be suspicious that they have had work undertaken on the liquidation cost but for political or nefarious reasons they are keeping that information under wraps.

            However that doesn’t mean that our “independent” economists couldn’t take a shot at it – we know our State borrowings, we have a fair idea of our deficits going forward and we should be able to run scenarios to see what would happen with higher risk premium rates of interest. We’re allowing a nationalised bank to go bust and there must be precedent for that elsewhere – in the US apparently large numbers of banks fail. As to the “contagion” cost to other Irish banks and the economy generally surely again our independent economists could have a shot at speccing that cost.

            To be honest, I don’t think Brian Lenihan and co put their political capital ahead of a bill to the State and its citizens in the magnitudes being discussed but given the suspicion that abounds, I would like to see the alternative costings.

  6. [...] So all eyes will be on NAMA as the first Anglo tranche is crystallised. There are widespread calls for at least full disclosure of information on the liquidation option at Anglo if not summary calls to liquidate now, as for example by David McWilliams today. [...]


    One overlloked detail about Anglo is that Sean F and co invested in projects in a private capacity and the resulting dividend from such projects accrues to individuals rather than Anglo.If a person leaves their car in to be serviced in a garage, it isn’t possible for the mechanic to do the work in a private capacity and pocket the proceeds!.

  8. poyais

    Here’s another historical example. Uruguay (sometimes referred to as the “Switzerland” of South America) experienced a severe banking crisis in 2002.
    They extracted themselves from this crisis in a way that has been described as
    “virtuous” and “orthodox” by The Economist [1]. It is often feted as an example of a
    country extracting itself from crisis in a “market friendly” manner.

    There were several steps taken to rescue the country’s economy, but the one I’d like
    to draw attention to here is their liquidation of four banks [2] which between them had 33 percent of total bank assets. The effect of this step — contrary to what our politicians seem to be currently
    implying — was to dramatically lower the rate at which the country could borrow[3].

    I know that David has visited Uruguay, in some ways I’m surprised that he hasn’t mentioned
    Uruguay’s handling of their crisis, especially considering how deep a hole they were in [4], the parallels in terms of the countries size and population, and how quickly they recovered. Personally I find it incredible that last year their government could borrow in Uruguayan pesos (hardly a reserve currency) at a lower rate than we, EU members, could borrow Euros.

    [1] “Profiting from Virtue”, The Economist, Feb 5th 2009
    [2] “This time is different”. Reinhart, Rogoff, p. 391
    [3] “An Analysis of the 2002 Uruguayan Banking Crisis”, World Bank report, http://www-wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2005/11/29/000016406_20051129163613/Rendered/PDF/wps3780.pdf, “Evolution of Sovereign Bond Spreads”, graph, page 19.
    [4] “Panic over, depression not”, The Economist, Sep 5th 2002

    • @poyais 7

      cool links thx, very interested from wordbank .pdf

      “Instead, by successfully restructuring the debt, the authorities eliminated any residual
      financial need until 2005 and, most importantly, enhanced the government’s ability to
      continue servicing its debt obligations. To improve confidence on the government’s broad
      restructuring efforts, the authorities designed the debt exchange plan to include the following innovative features that ensured the success of the exchange:
      - Consultation with Investors: A formal process of consultation with affected investors was established two months before the debt exchange took place, allowing for a
      negotiated solution and ultimately arriving at a debt exchange proposal that was agreeable to all the parties involved.
      - Maturity versus Liquidity Option: Investors were offered the choice of exchanging their old bonds for either a longer maturity bond or a more liquid, benchmark bond. This
      feature was designed to appeal to both buy-and-hold retail investors as well as to large institutional investors and index-tracking funds.
      - Collective Action Clauses (CACs): The new bonds, issued under New York law, allowed for aggregation clauses21 by which a potential future restructuring of these
      bonds will be facilitated in the future, should that become necessary. This was the first time that a sovereign issuer included such clauses, which are increasingly becoming
      standard for emerging market issuers.
      - Regulatory Incentives: A series of regulatory incentives were introduced to encourage
      domestic and foreign22 participation in the exchange. On the domestic front, the authorities announced preferential reserve requirements for the new bonds as well as
      the implicit subordination of the old bonds in case of a shortage in debt servicing funds in the future. These measures greatly contributed to ensuring the participation of
      domestic financial institutions, particularly domestic pension funds and insurance companies.”

      Some smart moves there!

      Unfortunately, for Ireland Inc we’re all stocked up with dumb ideas here!
      Wonder what future studies of our meltdown response will write? Won’t be nice!

  9. Malcolm McClure

    It;s good to see DMcW providing the basis for optimism. The article would be more hard hitting if it illustrated his argument with reference to the figures published in IT today:
    Payments to Date
    State investment
    €12,300,000,000 (investment in Anglo Irish to date)
    €3,500,000,000 (investment in AIB to date; more may be needed)
    €3,500,000,000 (investment in Bank of Ireland to date)
    €100,000,000 (investment in Irish Nationwide to date)
    €8,500,000,000 (Nama’s purchase of first loans)

    Probable future costs
    (up to) €10,000,000,000 (future Anglo costs)
    €2,600,000,000 (future Irish Nationwide costs)
    €875,000,000 (future EBS costs)
    (up to) €41,500,000,000(further projected upfront Nama spend)

    Grand total
    (up to) €82,875,000,000

    Ireland’s 2009 GDP was about €300,000,000,000, so the total cost isn’t much more than a quarter of the GDP.

    ‘Not to worry unduly’, the hare said to the tortoise as they started to cross the M5 at dead of night.

    • suonish

      Malcolm – a cheeky edit:

      “Ireland’s 2009 GDP was about €300,000,000,000, so the total cost of dealing with bad loans above a €5m value isn’t much more than a quarter of the GDP.”

      What about sub €5m debt? Mini-developers? All those ‘investment’ properties? Negative equity mortgage holders? Personal loans and credit cards? I wonder how big this sector is, how it’s bad debts will impact on banks capital ratios, and result in further capital injections on top of the figures above?

      • and don’t forget the loans held by approx 1500 businesses that closed last year expected to increase to 1900 business this year and numbers accelerating!!

    • Ireland’s GDP at €300bn in 2009? If only!
      According to the CSO our GDP was €171bn in 2009 and our GNP (which many believe is a better measure of the Irish economy because of the presence of MNCs who remit profits as dividends or management charges to outside our State) was €139bn.

      That’s from the CSO in March 2010 – here’s the link:


      • Malcolm McClure

        namawinelake: Fir comment. The CIA must be too busy in Afghanistan to keep their website updated.
        I love the spurious impression of precision that the CSO imparts by providing three significant figures. They must have some ex-rocket scientists working there.
        Suonish: Valid point you make but its impact depends on the continuing flow of interest and repayments devolving from those loans. A proportion will be in default but the majority were taken out before the culmination of the boom and may still be affordable, particularly by public servants.



    • People of Ireland

      I started this today and if you agree, I ask for your signature and help spreading this to as many people as you can as quickly as you can. This petition is time limited and runs until end of August 2010.

      I will personally print every 1,000 signatures and deliver them to the Minister for Finance in protest of his actions.

      Thank you for consideration.

      Best wishes
      Georg R. Baumann
      Irish Democratic Reform Movement

      • @laughingbear

        kudos to you, delighted to sign it!

        Hope everyone on our small island signs it!

        • It is my ethical god damn duty cbweb!

          I wrote to the editor of irish times, without having personal contacts, just by using the contact from their website and told him:

          I started this petition on the hour, and if you agree, I ask for your support. Any questions, call me anytime.

          • I also wrote to Stephen Kinsella and TASC asking for their support.

          • @David,

            it would be my hope that you might be willing to bring this petition into a highlighted position on your website.

            If you feel some changes or additions would be required, I am open to discuss this, drop me an email and I give you my phone number. But you should have it I think.


    • Bigger version of the picture I took this morning:


  11. Agree wholeheartedly with this well argued and well rounded article from D.

    I believe international markets want Anglo to go though we have not had full information published from KPMG and others auditors who, on face value, we have been told, advise the contrary.

    KPMG and the other auditors who’ve examined Anglo need to publish their findings so we can chart the best path to navigate through the wind down.

    Winding up Anglo would send a message to the international markets that badly run, corrupt banks such as Anglo, cannot be tolerated and won’t be saved, that we are serious about a clean up.

    Keeping it alive will only keep suspicions re Anglo alive and do us further damage.

    Propaganda stating its wind down cost exceeds that of keeping it alive, giving that keeping it on life support depends on another gamble on rigged property markets and our economy returning to growth with NAMA on its back, should be taken with a pinch of salt.

    Sean Quinn has been excised from the wreck of Anglo by the actions of the financial regulator. So he’s no longer a problem that needs to be dealt with, apart maybe a sojourn somewhere to deal with a solution to his addiction CDS (Credit Default Swap) , maybe gamblers anonymous might help.

    The wind down needs to look at the toxic nature of this bank and its illegal activities with a microscope over the next while.

    Its illegal dabbling in share support plus its management of advice and performance of the Quinn interest needs to be brought out and put under the microscope. The fact that Anglo is under Garda investigation for illegal share dealings plus the other scandalous shenanigans mean the bank is already a dead duck.

    Who would want to do business with wretched Anglo given its present state, except of course the Gardai.
    We need prosecutions and we need to know who took money and what they did with it.

    Our efforts to save Anglo are seen internationally and at home as nothing but the vain efforts of a corrupt government to protect its doomed dynasty.

    Its time to take out the trash and do a proper spring cleanup, restore some smart wisdom to our banking state of affairs, otherwise that lump of toxic crap will continue to grow until it chokes us all.

    In a falling economy, the Anglo hare debt will increase faster than the taxpayer tortoise debt can pay it over the next ten years.

    There’s no way the taxpayer tortoise can overtake and pay it back over that time unless another economic boom or property bubble puts that Anglo hare to sleep.

    Unfortunately, the tortoise in order to chase Anglo has sucked all the fuel needed to fire a boom out of the economy leaving only gas fumes.

    Those fumes are needed for tax breaks for the rich, maintaining the toxic NAMA dump, FF and their cronies who got us into the mess.

    Anglo is the flagship of the Ponzi Republic and it appears no cost will be too difficult to bear for the taxpayer to keep it alive, for the present incumbent, incompetents in our Government!

    Only thing this crowd can do about it is revise upward exponentially the cost of saving Anglo.

    Soon as you, taxpayers, think yu’r ready to close the gap, to pay it off, the bill goes up. The current answer to that dilemma is, welcome to forever debt, forever interest.

    Alternative is close Anglo now, or face the alternatives above, most of which they don’t want you to know about!

  12. wills

    Nailed it David.

    ’nuff said.

    Now, can anyone tell me why the ‘insiders’ are not carrying the above out and fixing the problem as outlined in D’s article?

  13. European Central Bank in Frankfurt.
    Their bondholder pals in Frankfurt.

    Any idea as to why they insist on Irish banks keeping repayments going to bondholders ;-)

  14. http://www.youtube.com/watch?v=PButumaug7w

    More food for thought.

    @David McWilliams: Can you please run for government!

  15. Alf

    Hi David,

    What you propose makes perfect sense to anyone with an ounce of experience in the markets. It is simply how things have always been done so why are we being lied to in this situation? I think we have to accept the true nature of the problem; It is that there are now vested interests who are opposed to and actively working against the truth. They are interests related to bondholders, creditors and shareholders. Some have even bought into the banks shares and bonds at very low bankruptcy price. All of them are willing to sacrifice the the Irish nation for their own greed. This is why the message has been and continues to be distorted.

    Sadly, the majority of Irish people are ignorant of such matters and therefore are ripe pickings for the greedy fear promoting liars.Look at any proponent of NAMA and you will not have to look far to see a selfish vested interest. This is the crux of the issue and it is why the truth is continuously sidelined.

  16. G

    This is not a purely economics decision.

    The decision on Anglo and the rest is a political decision – they have their reasons for what they do, just like they had their reasons for firing a major torpedo at Quinn.

    There is stuff going on that we have no idea about – these issues are determinants of policy, it is the only thing that ‘makes’ sense……….got to factor in the ‘politics’ and the agendas of which there are many.

  17. DarraghD

    David hits the nail on the head with this article… The only rule of capitalism that really matters is that failure is punished, success is rewarded. All capitalism depends upon it…

  18. I met up with Tim there this evening in Galway, just to put a face to a name. Nobody else came. Now we have 33 paltry responses to a good article where once the blog at this point would have run to 3 pages. Are we bored? Stale? Fed up of circular arguments? Dunno.
    Many asked about what we could practically do. We started a simple Facebook page to educate people and we’ve 700 joined up in just over a month.
    By all means, sit here and analyse Davids articles but getting off the proverbial might change something. Actually pinning colours to the mast could even be a liberating experience.
    Otherwise, just keep debating.
    You’ll get nowhere.

  19. murray


  20. I am retiring from this site pour sejourn ~ conge sur soleil – I need a break from the negativity and apathy .I do not think DMc W can say anything more that he already has .I might bump into AMooney at the Casino .

  21. Troops, Comrades …

    Focus on the next battle, not the last one.

    The guarantee must lapse. (Anglo delenda est).

  22. @FurryLugs 17

    Cheer up FurryLugs, change may come slower than you wish, darkest time of night is just before the dawn and all that.

    Some journeys take longer than others, that’s life. We’re living in a time of profound change politically and every other way here in Ireland. And voices like yours are rare enough and need to be heard more.


    “And what rough beast, its hour come round at last,
    Slouches towards Bethlehem to be born? ”

    Have your say now. Doing something is better than nothing.

    Cronies of emperor Biffo and co still need to be told they’ve no clothes on.

    Have a great day.

  23. Philip

    I see where David is coming from and I can also see a major contagion of bankruptcy spreading throughout our elite and many of our TDs – which in turn would collapse the current government and indeed ban many from standing for re-election.

    Also, if we drop Anglo, do we not effectively hit the Sovereign Default button as well and in the process start the topple of the Euro project.

    2 major points of resistance to David’s article which are aided by very powerful forces both from inside and outside this little Island.

    A 3rd point is that we are a very dependant Island in terms of energy requirements (unlike Iceland). Going to sovereign default mode drives one of our key input costs thorugh the roof and could shut us down as a nation quite literally. Now this situation is not that disasterous and would make us alter our course towards renewables very rapidly. And the 5 years or so it’d take to dig ourselves to get back onto an even keel – could be very good (or bad) for the nation.

    I am for signing the petition, but make sure people know what they are signing up to. This is an economic fight that could have Euro wide ramifications. The big 3 in Europe might have other ideas…already I see our dear Garrett Fitzgearld is getting uncomfortable with European developments (see last Saturdays IT) and how we might find out corporate tax regime being pushed aside without our involvement. Rumblings for a future earthquake?

    • @Philip 22

      Sovereign default is scaremongering. “It is often feted as an example of a
      country extracting itself from crisis in a “market friendly” manner.”

      poyais at 7 is the type of negotiation we need in dealing with Anglo and the other banks.

      The irony is that it is the very response embarked on by Lenihan that takes us closer to eventual sovereign default, because of the pressures it puts on our economy plus taxpayers

    • ps200306

      See suonish @4 above … dropping Anglo is NOT sovereign default.


    A figure of 300 bill euro was quoted earlier in the comments as being Ireland’s GDP, the figure is about 160 bill euro and falling.

  25. wills

    Furrylugs .

    JohnALLEN turned up and saw nobody as arranged there.

    I never heard anything and I was on Skype and cell phone for two hours and 30 mins waiting for the phone to ring and it did not.

    Also, I do NOT consider my post paltry and you are WRONG to characterize it so.

    Expect an explanation from tim or you why my phone and skype was not followed through on like I was told it would be.

    • SlightlyBonkers

      Ah lads don’t turn on each other

      honestly if you want to be a team that seeks to change the country then you gotta rally better from a setback.

      how about “hey, yeah, we need to do better next time”, set up a conference call on phone and get the team spirit going.

      indeed, think about starting off with a reachable goal, i.e. somewhere you are all going to be able to be

      If you were going to be there on voiceconference well that’s not how revolutions start.

      I don’t mean to sound sarcastic, really, I honestly think you guys have bona fide intentions, but … I don’t smell teamwork.

      Are you all just strong personalities that want to express themselves, or do you all want to wear the same colours and build a team?

      Sooner or later, to build a team, you have to do things in a way that are inconvenient to the individual but better for the group as a whole.

      Cynically I might image the radisson blu was chosen cause Tim was there anyway with his family for a long weekend so it suited him just fine. wills said hey I’ll be reachable by phone which suits me just fine. Furrylugs looks like went out of his way and was the only one.

      give it another go, keep your spirits high. but don’t screw up again.

      • SlightlyBonkers

        actually, galway meet was timed to meet with teachers conference, right?

        guys… where is your focus?

        Tim, are you trying to play too many games here? how many hats are you wearing? how many pokers do you have in the fire?

        same for all the would be revolutionaries out there.

        look abck over all the psots on this site. everyone has an opinion on hwo the revolution should be waged, right down to which operating system of the copmputers you shoudl be using to mangae the vast numbers of bog rolls required to keep the troops pants poop free in the heat of battle

        Ok, I made that last one up. but … stand back… why is it noneof you are standing apart as a clear symbol to follow?

        and being “busy” with websites and posting ad nauseam on this blog… wher eis it goig to get you?

        Yeah, I know, any idiot can knock you, but I’m not knocing you… I’m saying jsut look at what you resources you have got, and use them.

        and ask yourself how many second chances you will get if you screw up a simple task like getting a meeting between 4 peopel organised

  26. paulmcd

    Death and rebirth are part of the cycle of life. Closing Anglo headquarters on Stephen’s Green for example could allow for its conversion into a suitable apartment complex for non-city resident TDs. The Norwegian Parliament has such a complex (140 apartments) for its MPs who are paid a standard 1.5 times the national average earnings (or 2 times for a minister) and do not need to claim the extraordinary living expenses of our TDs. Our most extravagant TDs are claiming up to 80,000 euros per annum tax free, on top of their salaries of over 90,000 euros.

    FF has been a blinkered party since its foundation. In this regard, the Green party is a huge disappointment in failing to show some moral leadership. You would at least hope that the Greens would recognise the moral of David’s article. The Green Party in Government do not have absolute power but the have been corrupted absolutely. Éamon Ryan’s recent interviews fill me with dismay. Gene Kerrigan hits the nail on the head with regard to Ryan:


    In supporting NAMA, the Greens exhibit a profound disregard for the conservation of valuable resources, which might otherwise be deployed in developing alternative energy resources, promoting sustainable living with real investment projects, etc. The disingenuous nature of their actions can be seen in:

    1. Their willingness to accept the dumping of taxpayer billions into the toxic waste heaps of the systemically-important banks while these institutions retain their old management teams, and, even more seriously,

    2. Their sanctioning of acts of financial sabotage, to be committed today and in the future, through the Government’s guarantee to fuel the Anglo black-hole “incinerator” with countless thousands of millions of taxpayers’ euros, although the Greens now have FULL KNOWLEDGE AND UNDERSTANDING that this institution, is a SYSTEMICALLY-IRRELEVANT ONE, a zombie bank which has morphed into a financial Chernobyl.



    • @paulmed 25

      “Anglo headquarters on Stephen’s Green for example could allow for its conversion into a suitable apartment complex for non-city resident TDs”

      what a great idea, I think they may have the same in Sweden.

      But, hey, these are enlightened Nordic countries not namaLand (not another mess again Land)

      Anybody got a link for this? I recall Gormley last few weeks supporting the zoning for housing of a flood plain in taoiseach’s constituency near Tullamore. Government policy on incineration hasn’t stopped him trying every move in the book to get the one planned for his constituency and Poolbeg stopped.

      Gormley is one who knows well how to speak with forked tongue!

  27. DarraghD

    Folks, just read Fintan O’ Toole’s article in today’s Irish Times.


    The sad and unavoidable reality of the situation I believe is this… The government could come out and announce tomorrow that they are taking the deposits out of the banks, as what happened in Argentina. You go to take your cash out of your account and it isn’t there, you’re savings have been taken by the government.

    Even if that were to happen, people in this country would still not be motivated to do anything about it. They have already reached into the pocket of every citizen in the country, the same government that stood over the failed regulation, that legislated for property tax breaks that drove an unsustainable property boom, that told people who didn’t get behind this sheer madness that they should go off and commit suicide.

    The same people are still in power, a country that doesn’t down tools and take to the streets with a view to literally hopping off these people, I argue has something wrong with it’s soul.

  28. Folks,

    concerning the greens, and I fully agree on that part, conicidently, Deirdra de Burca has just signed the peition that I started yesterday. NICE!


    • I have hope that the words spread about this quickly, once the right people are set in motion, it might produce a considerable number of signatures in deed.

    • DarraghD

      The people running this country, they don’t give a fuck about the people living in our society, and they certainly don’t give the slightest fuck about you or your petition, well intentioned as it may very well be.

      If people want to get rid of this goverment then they are going to have to come up with a method of forcing them out of office, petitions, 2 hour protests, what good has any of that done??? There are ways and means of ejecting a government,, peaceful but dead serious protest a sustained “downing of tools” is one way of doing it, but look at those that are crying out the loudest about the unfairness of all of this, public sector unions… You’d have to ask what in all seriousness is going on there, if they really believed that this government was acting unfairly, you’d have to question why they are not campaigning for a general election??? Instead we get mischevious and prepubsecent “go slows” and nuiseance behaviour that is obviously designed to do nothing else than completely piss off the tormented citizen of Ireland at the present.

      • paulmcd

        My wife works in the private sector and I work in the public sector. The opposition parties are lacking in the courage or the leadership skills necessary to bring people on to the streets. I was opposed to my Union’s and the ICTU’s tactics last year but I am hoping for a total rejection of the so-called agreement and finally achieve the degree of disenchantment necessary to bring about an immediate election.

      • ….. There are ways and means of ejecting a government,, peaceful but dead serious protest a sustained “downing of tools” is one way of doing it….

        Then go and dot it!

  29. @namawinelake

    Agree with you there. Me too asked for similar alternative costings/scenarios to be published. The figures should be based on the audited KPMG accounts for Anglo, according to Dukes a number of companies were cross commissioned to work up figures. I don’t know if they are publicly available or can be got via Freedom of Information. I do agree with you it is very surprising economists especially, but also journalists e.g Times, Indo, have not made an attempt to flesh out some figures to give a general overview. The other thing is, if you show your hand before negotiating, you may not be doing yourself a favour.

    I’d like a small team led by someone like Stiglitz to work with those who worked the Swedish banking collapse and the Uruguayan banking collapse along with reps from Lagarde and Schauble to spend a day going over the KPMG figures. This would include a small team of Irish economists, say, Lucey, Whelan and McWilliams. On the second day, we should be provided with the alternative figures in an ideal world.

    I agree with you wholeheartedly on the fact its indeed a huge omission
    alternative costings of wind down are not out there in the media for us to read and compare.

    The fact is there’s huge secrecy out there. The facts that have emerged so far only stand up as a donkey’s dinner? We need to probe more!

    • Also recently heard Mary English of RTE put the question re costing of alternatives to Joan Burton. It was obvious from her answer that Joan couldn’t as she stated they had repeatedly asked for information….

      How can they get away with this?

      I believe the smokescreen of a public distaste for figures in general allows them to get away with any rubbish propaganda. Along with anything that smacks of words like ‘macro economics’ ‘bond holders’ ‘subordinate debt’ that make the public flounder.

      We need to keep asking for solid information either we or others more expert can interpret in an objective, empirical and scientific way using the benefit of experience and expertise.

      The present gang of DoF mandarins and FF cronies with the mess they’ve made and the bigger mess they are set about making know sweet – all about how to lead out of this mess, that’s for sure!

  30. MK1

    Hi David,

    Yup, I agree with you that winding down AnIB and having a partial and negotiated default is what is needed for Ireland Teo. I think the ‘powers that be’ are ctually afraid of the word default. As you correctly point out, they do not know anything about the subject matter, nor in many cases do their advisors. The blind leading the blind as it were.

    We are however at a distinct disadvantage as we do not have the details. Whats needed is a ‘crack team’ of ‘corporate dismantlers’ to forensically find out the status of every single scintilla of asset/debt/credit/deposit in AnIB. My understanding is that AnIB workers are doing this and the transfer to NAMA is part of that, but I dont bekieve they have the expertise NOR the motivation to uncover the ‘crap’ that has gone on, with cross collateralisations, rolled up interest written down as capital, phantom ‘equity’ put in, etc.

    AnIB is a house of cards that has come crashing down and like the bombing of the twin towers its a mess plus the debris is toxic.

    Putting in capital amounts of huge proportions in this debt-hole is a major waste of the precious resources we have left as our debt as measured as a percentage of GDP or GNP rises and rises.

    AnIB may be painful to wind down, but we only know the extent of the pain if the details are revealed, and you nor I have that nor was it explained in the recent financial accounts, from what I perused. I dont believe Dukes nor Lenihan has a handle on it either and are taking their course from advisor summary choices.

    Have you spoken to any expert employees that are still in AnIB or even those that have left?

    Btw, AnIB is still paying a high rate of interest on its deposits held but is not functioning as a proper bank. Its mortally wounded. Lets bury it with apporpriate formality and costings.


    ps: Furrylugs, people will follow what other protests are going on according to their indignation, and the causes outlined in the ‘protest’. I think there is an opportunity for a new political party that can catch the mood of the people. Dont blame the sheeple for being sheeple. Herd them. Not easy I realise.

  31. suonish

    An example of how Lenihans gross exaggerations and lack of definition and figures are going to get us into deeper trouble:

    ( last paragraph )


    Now we have the OPEC Secretary mixing up a banking problem with our sovereign debt. FFS!!

    • paulmcd

      Suonish, The article is from the Times of India. It seems alarmist and OTT because Greece and the Irish Republic together have a population of less than 20 millions, about the size of one major Indian city.

      • suonish

        The size of Ireland or Greece is irrelevant. How our financial problems is being referred to internationally is. Here’s hoping we don’t need India to buy our sovereign bonds, eh?

  32. Fergal73

    This is one of David’s clearer articles, and I notice that the number of respondents has gone down.
    Have people in Ireland just given up? Is NAMA unstoppable now? I’ve already emigrated (2004, priced out by the property bubble) and with NAMA have decided that returning is not a preferred option. NAMA will burden the Irish people for generations, not just because the taxpayer will have to pay it, but because of NAMA, growth will be limited.
    If NAMA can’t be stopped, get a passport and emigrate. Oh, are the Public Service “workers” still striking?

    • paulmcd

      I would normally be away in the week after Easter but my son is sitting his Leaving Certificate this year. My wife, who is not originally Irish, is despairing of the state of the nation. I think she secretly hopes that he will succeed well enough to eventually make a new life in Australia. I am secretly hoping that he will make his life in Canada.

      His generation who stay in Ireland will have a 50-year working lifespan, and, with the way things are going at the moment, 10 full years’ earnings will be required for paying down toxic debt, the interest thereon, and helping to replenish the NATIONAL PENSION RESERVE FUND – YES, INDEED, THANK YOU VERY MUCH THE 2 BRIANS, SEANNIE AND FINGERS.

      • paulmcd


        • paulmcd

          Unfortunately my son is not sufficiently thick to succeed in becoming a senior Irish banking executive and qualify to contribute the sum total of one-year’s bonus as a likely input to the national bail-out.

          • s1lverbullet

            David is right as usual, but unfortunately the designers of Nama are the same bondholders who would lose out so I’m afraid this bunch of corrupt politicians will never default and it seems we have to live with it!

          • s1lverbullet

            THERE IS AN ALTERNATIVE OF COURSE!! All it takes is that, as Laughingbear has already stated – we get up off our sorry arses and do something! I myself am in favour of bringing down this sham of a government as soon as possible, anyone willing to join me in a spot of anarchy?( peaceful of course!!)

          • s1lverbullet

            The problem we seem to have is that if we get rid of FF in the next gen election who takes over? FG, LABOUR….ha ha ha ha. We need a new party and I am currently talking to a few people who feel the same. Would you vote for a party with the following mandate: 1. Cut all TD’s pay to 65,000 with an extra 10% for ministers( 100,000 for Taoiseach)
            2. All expenses to be vouched with 20,000 limit – no food subsistence…you eat in the Dail for free
            3. No more state cars – but they get free Public Transport
            4. Lobbying Government made illegal – 5 years in prison
            5. Change laws so anyone found guilty of serious white collar( > 1 million) gets min 10 years, and any assets transferred to spouses seized
            6. serious sexual crimes against children min 15 years, repeat offenders chemical castration
            7. Irish Catholic Church break away from the Vatican and allow women priests and priests to marry
            8. Get rid of TV Licence fee & carbon tax
            9. Introduce emergency legislation to cut all private and commercial rents by at least 25%, while reducing gas and electricity costs by the same
            10. Use the 54 billion to build proper schools, roads, fibre-optic broadband infrastructure, and get some real patriots such as DmcW to come up with ideas to get the country going again
            How about these 10 titbits for starters?

  33. Blackpigsdyke

    Labour day (1st May) is Saturday this year.Surely this is the day for all the disenfrancised to congregate in Dublin to protest.

  34. —- Document Recommendation —-

    Most of us are in the constant quest of educating ourselves on matters concerning this mess. I take the liberty to post some documents once in while that I come across and find worth your time.

    Just in case it might have slipped under your Radar.


    • QUOTE: According to democratic principles those who are deeply affected by a policy should have a say in their formulation, and those who are responsible for massive failures and injury should be held accountable. ENDQUOTE

      • ….A future Ireland in my dreams, November 2010:

        Shhhh!….. ALL RISE…. Cae 18765249w_11-10 THE PEOPLE OF IRELAND AGAINST THE FOLLOWING INDIVIDUALS…. _____fill in long list…..

        I am calling Brian Cowen former Minister for Finance 2004 -2008 and former Taoiseach of the Irish Republic from 2008 to April 2010 to enter the witness stand….


        You know, as Ghandi said, first they ignore you, then they laugh at you, then they fight you, and then you win!


  35. [...] continues to question the sanity of the government’s approach to the banking crisis. His latest column, in yesterday’s Sunday Business Post, draws on his experience as a trader in the [...]

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