June 23, 2011

AIB Default

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Interview from Monday’s Newstalk programme on the AIB default.


  1. Morning,

    Is this the real taste of scorn?

    AIB unveils managers to lead its new sectors
    Wednesday, May 18, 2011
    SIMON CARSWELL, Finance Correspondent

    Executive Chairman for AIB, David Hodgkinson, told the paper the bank would need to offer “a market-based compensation package” to appoint a new external Chief Executive, and said the bank wa working with the Department of Finance to pay a salary above the cap.

    I could not find a shop out let on DOF website sling T-Shorts yet, but it looks as if they did not loose their appetite:

    Financial Services Ireland Annual Members’ Lunch
    Thursday, 23 June 2011

    We remain committed however not to pursue burden sharing with the senior bond holders in the ‘going concern’ banks (the pillar banks AIB / EBS & BOI and IL&P) and all those bondholders will be repaid whether they are guaranteed or not.

    Starters on the menu:

    I note that in a recent report, conducted by Accenture and published in November last year for Financial Services Ireland that “the international financial services sector has over 500 firms employing 32,700 people with a payroll of €1.97bn. The export of financial services from companies based in the IFSC contributes €2.1bn in tax annually”. The report highlights that the IFSC employment is high-end and knowledge based. This is a great validation of an industry that continues to succeed internationally, despite the challenges of our economic situation.

    The continuing growth of the IFSC sector remains a key objective to which the Government is committed.

    The 7pc of private AIB shares closed yesterday at 16c each, before the announcement was made. Pillar banks? Pfff.

  2. [...] Balance of payments surplus last year AIB move triggers ‘failure to pay’ event David McWilliams: AIB default Anglo puts US loan book up for sale World’s wealthiest richer than before recession Greek [...]

  3. RapidEddie

    Why would AIB defaulting empty the AIB banklinks overnight? The hole is in the lender’s bank account, not the borrower’s.

  4. Juanjo R

    It was Einsten with that quote on insanity

    …and here are two more to utilise;

    “We cannot solve our problems with the same thinking we used when we created them”.

    “Any intelligent fool can make things bigger and more complex… It takes a touch of genius – and a lot of courage to move in the opposite direction”.

  5. Both DmcW and Noonan are both wrong.

    Noonan wishes to burn senior bondholders, but do this with delicacy and diplomacy based on persuasion, but only do this to ‘warehouse banks’ such as Anglo, maybe AIB and others? He’ll talk about this in the Autumn while Rome burns.

    DmcW, on the other hand, believes all odious banking debt should be renegotiated asap, as of now. He would I’m sure travel to Frankfurt tomorrow if doing so, could do this.

    The only way to do this is to recognise that you cannot negotiate this matter with the ECB, neither Noonan nor DmcW appear to be able to see this.

    This is something we can only do unilaterally. Read why below:)

    http://colmbrazel.wordpress.com/2011/06/26/the-way-forward/

    Enjoy the hols.

  6. There is an ad on news talk everyday that says the markets have returned to 80% of the value sense the “boom”. And the ad continues and explains, now is a good time to play the stock market because everything is on the up.
    So lets do the maths on this.
    b = bubble
    c = current market share
    o = outcome
    cr = crash

    We are saying b is the max the global bubble.
    50 trillion dollars has been wiped off the market by money sharing in the property market between the various global banks. This money has gone.

    We are saying c = 80% of this crazy investing is back in the game.

    We are o = the markets are going to rise.

    Wrong!
    b/o * c = CRASH.

    For all you investors out there my advise is do not invest your money in the stock market rather back that the fste, the dow the nasdaq are all going to fall.

  7. uchrisn

    Some words of encouragement from Paul Krugman – “here’s my advice to economists frustrated — as I am — by the inadequacy of policy responses and the intellectual regression of too much of our profession: Keep calm and carry on. History will vindicate your persistence”
    History has already vindicated David’s and some other Irish economists – Mainly Univesrity Lecturuers, persitence and according to Paul will continue to do so.

  8. uchrisn

    http://www.voxeu.org/index.php?q=node/6668
    Paul Krugmans rescent sppech in the U.K.

    • Thx uchrisn for great link.

      I’m a Keynesian as well and I’ve two comments to make about his lecture; the first is that I believe he’s been over complicated in his analysis and understanding of Keynes, but this may be a function partly of my own lack of more study of Keynes, so I won’t go there too much; the second point, is that we’ve a great deal to learn from Keynes, but we must recognise things have changed since 1936, there are similarities, but also great differences between then and now.

      So what are the differences? In my own mind there are two great differences and both are outcomes of a single event, the repeal of Glass Steagal Act of 1933 that occurred between the years 1987-1996

      http://www.pbs.org/wgbh/pages/frontline/shows/wallstreet/weill/demise.html

      Glass Steagal created the conditions for the economic mess we are in now. It permitted two things to happen to money and debt.

      Firstly, it channelled money into debt and investment and a vast brokerage and financial industry that could now use money and debt for financial gain and exploitation.

      For an example of how the Repeal of Glass Steagal effected the banking industry have a read of Elaine’s blog work here, in particular her observations on Citigroup

      http://elainemeinelsupkis.typepad.com/money_matters/2008/09/elaine-meinel-8.html

      Secondly, this is the most important point I’ve got to make here, the effect of Glass Steagal was to channel money and debt away from the population at large, the poor (for want of a better term) and the middle class upward to the wealthy speculators now facilitated with the means of increasing wealth through stocks and bonds, derivative CDO speculation and other means of financial manipulation.

      The trillion dollar bailouts of 2008 went to the banking industry who used the funds to continue their wayward speculative practices that led them into the mess. Similarly, in Ireland, the bailout of the banks was the refinancing of casino financial engineering of
      stocks, bonds, financial investment markets, not the reseeding of economic activity leading to jobs, credit, investment and spending.

      So I agree with the Keynesian\Krugman view that savings and debt both need to be released productively into the wider economy with eg spending programs on infrastructure that will get people back to work and prevent the loss of skill/craft/people from our construction industry; that such productive deficit spending rather than being wasted on banks as fuel for
      the unproductive financial industry that is sucking like a big vampire squid money upward out of the hands
      of those who would put it to productive use, instead should be wisely spent on productive use generating jobs in the wider economy.

      To put this at its simplest. Borrowing, deficit spending should be spent in the creation of jobs. This will stimulate an economy, create confidence. If the government spends, people will dip into their savings and spend also.

      On the wider stage, Glass Steagal needs to be brought back from the dead. Its led to the creation of vast hordes of Vampire Squids and Moby Dicks that have sucked the life from the US and EMU economies and made the coming conflagration of the dollar and the euro pretty much inevitable.

  9. DC

    At last!! – a concise set of actions needed to solve the problem.

    http://market-ticker.org/akcs-www?post=188789

    Will anyone listen ?

    • @DC
      Concise, reasonable, logical, requires an ability to put ordinary Irish People first and would be courageous!

      Just some of the reasons why our politicians could never go for it?

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