February 27, 2012

The land of the financially blind

Posted in Sunday Business Post · 206 comments ·

In the land of the blind, the one-eyed man is king.” So said Erasmus – and who are we to argue with the great man? Erasmus spent his life following his own independent path, eschewing the easy life of the tenured academic herd. Instead, he constantly questioned his own Church at a time when questioning the Church was a very dangerous thing to do.

Sometimes it feels like Ireland is the land of the blind, particularly when it comes to finance – although it has been a long time since questioning the finance industry was a dangerous thing to do. It is worth scrutinising the banks, particularly as they are being drip-fed huge quantities of cash by the ECB, yet precious little is reaching the real economy.

One of the pieces of accepted wisdom in Ireland these days is that, because Bank of Ireland is the least worst bank in Ireland, it is therefore the best.

Last week, it announced atrocious results, but the spin – accepted by the main media organs (from what I heard, but I am open to being corrected) – was that these were the smallest losses in a few years and therefore they were good results. Quite the leap, don’t you think?

The really useful thing about a bank report is that it gives you a snapshot of where we are. Let’s have a look at what they didn’t tell us in the press release.
Over 55 per cent of Bank of Ireland’s total mortgages are in negative equity. Instead of using the term billions, let’s describe the amount in millions of euro. Bank of Ireland’s mortgage lending book is €27 thousand million. This means that Bank of Ireland has lent out €27 thousand million to people to buy houses.

Of this figure, €15,384 million euro of loans are in negative equity. Take that in for a second.
It’s also revealing to examine the loan-to-value ratio of each mortgage. If, for example, the loan-to-value is less than 50 per cent, that is good. It means that the loan outstanding is less than 50 per cent. So if a house is worth €200,000, the loan is under €100,000.

The report shows that only 14 per cent of Bank of Ireland’s total owner-occupier mortgage book is in such a healthy situation. When we examine its buy-to-let portfolio, we see that only 6 per cent of these mortgages are in such a healthy situation. In total, 12 per cent of mortgage holders have a ratio of less than 50 per cent.

In all, just half of the Bank of Ireland’s residential owner-occupier mortgages are solvent. By solvent, I mean that the equity in the house covers the loans.
When you look at its buy-to-let book, only 31 per cent are solvent. So, taken together, if Bank of Ireland were to sell this stuff today, only 45 per cent of its total loan book or €12,470 million of loans, would be solvent.

Now, let’s look at the huge number of mortgages in negative equity. According to these results, 50 per cent of all houses are in negative equity – some worse than others.
For example, 11 per cent of all of the Bank of Ireland’s owner-occupied homes are worth less than half what people paid for them.

When it comes to buy-to-let, one in five properties are worth less than half what their “investors” paid for them. In total, just shy of 70 per cent of all buy-to-let mortgages are under water. This is extraordinary. This bank is insolvent. Yet its share price has trebled in the past few months.
If its share price has gone up, then the conclusion must be that, bad and all as the situation is, the bank must have made ample provisions to cover all these losses just in case.

After all, isn’t that why they were recapitalised with our money?
Then tucked away at the back of the report, hidden behind all the glossy bits, are the really scary details about just how exposed the bank is.
The table shows the provisions that the bank’s management has made against these huge potential losses on their mortgage book – half of which is technically insolvent.

The management of Bank of Ireland has set aside €1,000 million on a loan book where €15,384 million of the loans are in negative equity. The bank’s management must be working on the basis of a gradual fall in the number of people in arrears and a quick and dramatic rise in the price of houses.
But the opposite is the case.

The latest data on arrears shows an increasing number of people falling behind in their payments.
We also know that the pace of house price falls accelerated in the last few months of 2011. So if we stand back, we have the bank, which is being touted as the best of a bad lot, presiding over a loan book where 55 per cent of all mortgages are under water and it believes that only one in 15, or 6 per cent, of all of these will actually default. And this is the best of them.
The land of the blind indeed.

  1. Adam Byrne


  2. The Irish – IMF-EU-ECB Placeholder’s – Government’s ‘Pathways to Work’ Policy from 23/02/2012 – Applied Neo Feudalism

    The Irish government shows a total disconnect from the people of this nation, they do not represent their best interest but that of banksters, plutonomists and their international mafia organizations.

    Four signatures grace the document that signifies a major turning point for the future of Ireland, Enda Kenny, Eamon Gilmore, Joan Burton and Ruairi Quinn.

    The signatures are very interesting from the aspect of being a psychological calling card. If you want, you can look it up for yourself here:


    The signature that Kenny produces comes as no surprise to me. Psychological analysis of signatures is no voodoo or esoteric nonsense. When the last name is so significantly isolated by a wider than usual space from the first name it is a clear indicator that the writer is distancing oneself.

    That of course is just a personal observation.

    In April 2008, the British department for work and pensions published a document, and yeah, it was called “Pathways to Work”, no surprise here, really not.

    It is ironic that Kenny describes this policy as based on “Best-Practice”, but he is right, German policy makers are doing precisely this since a couple of years, creating a second labor market, slave labor market to be precise, on purpose of course to create deceptive statistics on poverty, unemployment and job poverty.

    x x x x

    I pick up the phone and call 01-7043000, Government Department of Social Protection in Dublin, because the Information that I seek I can’t find on the official web site.

    The news report yesterday stated that the Unemployed will be required to sign a contract with the department before they can claim entitlements. – Oh, really? –

    This caused some significant red flags to pop up, so I was looking for this contract and could not find it anywhere. The friendly woman on the phone asked me for my phone number instead of pointing me to the document, but promised that someone would call back. Two minutes later I get a call back, and Noeleen informs me that the contract is not finished yet, but is expected to go life in May. She also suggested to send an email, so they could return a little piece on it already, so I did.

    There are some very serious implications concerning the change of our social protection landscape with this demand to sign a contract, and I do have very specific assumptions, but I refrain on commenting or better speculating for the moment, I wait with that until we have access to the full contract.

    x x x x

    There are new business opportunities on the horizon for the many feckless Gombeens who are seeking to make a killing.

    It is the business with job poverty, and the ‘Best Practice” that Enda Kenny referred to, well it is no secret at all.

    A few months ago here on this blog, I pointed to the German Polit-Magazine Panorama that broadcasted a jaw dropping report on precisely this phenomenon and I wrote up some examples. It is just another scam on enormous proportions and one of the many results of the unhealthy dominance of the right wing EPP, European Peoples Party in all the major European Institutions top down.


    The email just came back from the press office desk.

    Press Office

    Department of Social Protection

    Ph – 7043184

    The new contract is being developed in the pilot offices to go live in May.  It is not yet finalised but will include a statement of the services and standards to be provided by the Department of Social Protection and the commitment that is expected, in return, from the customer.


    Department of Social Protection
    24th February 2012


    When I wrote here about that Panorama report, I also pointed to an extensive longterm study of the largest German trade union confederation that was undertaken with reference to unemployment and “Enda’s Best Practice”.

    The results of this study were indisputable, people who had fallen into this second slave labor market will never make it back into to the first labor market, they are trapped into an impoverished life, second class slave labor citizens.

    The initiatives they were forced to take up ranged from utterly useless to humiliating, the entire spectrum really. An overwhelming technocrats control system was put in place to get the people of the register, this was the main goal of course, and nothing else. The majority of people find themselves in training programs that just defied belief, serve no purpose but labor exploitation, and certainly do not provide them to find a suitable longterm employment.

    You really have to consider the changes in higher education in many countries at the same time to fully appreciate the consequences. The 2011 London Student protests against the enormous increase of tuition fees were long over due. The desperate youth unemployment numbers In Spain are answered by police brutality.

    A large number of Gombeens popped up like mushrooms in Germany that sucked taxpayers money from the government to start up training facilities, some of which were so blatantly risible, that you wonder how they got the permission and the subsidies in the first place and they were no exception. Yes, that is in Merkel’s Germany today, coming soon to a place near you! The unemployed were forced to go to these trainings, a case officer is assigned, he has the authority to tell you where you spend your next three to six months, and that’s it. The rate of people who went back to a somewhat normal employment, insignificant, and of course they were the exclusive reports the controlled media outlets would broadcast for a long time.

    What you witness here is the implementation of a new social reality, the direct results of social engineering.

    This week, in Valencia-Spain, the police declared school children and their parents protesting against Austerity as enemies, and children as well as parents and other protestors were brutally attacked by them, it went through the media. I am sure you heard about it.

    The delusional mindset that these technocrats are operating from is truly astonishing. Desperate to keep this kleptocracy alive under all circumstances, they spare no collateral damage. Astonishing, because they probably believe what they are doing is righteous, and of course, ‘The only way’. How often did we hear that in the past four years from politicos of all the allegedly different political fractions?

    Goebbels believed in his righteous cause as well, so did the Tyrant Francisco Franco in Spain. The few hundred young students in Valencia that were brutalized last week, demonstrated against Austerity and the power of the ultra right wing Vatican cult Opus-Dei that has an iron grip on the majority of private catholic schools in Spain. The parents and children demanded to set free the school system from this sickening influence. To no surprise, the new right wing Government in Spain has quite some numbers of such ultra fundamentalists in it’s ranks now.

    Many of the teachers and parents that were beaten up on this demonstration were witness to the terror of the Franco Dictatorship. However, Spain is not Ireland, and if they thought they can suffocate these protests by Franco methods, they were very mistaken! Following the few hundred that were beaten up, thousands came to the streets, armed with books!

    The government sanctioned the police methods at first, but when the public sphere reacted, they changed their spin, and now admit that, ‘There might have been some excessive police force incidents’. – Yeah, right! -

    The Prime Minister’s, Mariano Rajoy’s peoples party PP never distanced themselves from the Franco tyranny that lasted until 1975. Rajoy himself was Minister under Franco. and the chief of police who publicly declared the children, teachers and parents as enemies, brings back very vivid memories to Spanish citizens.

    Since 2008, the Austerian’s tyranny commits social genocide throughout Europe, the occupied Republic of Ireland is no exception. The purpose is to create a new European order that serves the Plutonomists and forces a social acceptance of slave wage labor, amongst other things.


    • coldblow

      From the first page of the Da Vinci Code


      The Priory of Sion – a European secret society founded in 1099 – is a real organization…

      The Vatican prelature known as Opus Dei is a deeply devout Catholic sect that has been the topic of recent controversy due to reports of brain-washing, coercion and a dangerous practice known as ‘mortification’.”

      ‘The Vatican prelature known as Opus Dei’ – what a turn of phrase. It’s like “The Dublin secular corporate institution known as the FAI”.

      Otherwise known as bullsh*t.

      Actually, that is a pity as your point about compulsory training for the unemployed (also the subject of last night’s Frontline programme) I happen to agree with. What are Labour doing talking about unemployment as a lifestyle choice just when there aren’t any jobs (whatever about doing this a few years ago when we were importing foreign workers)? I am pleased I never voted for them. ‘Training’ me ar£e.

      • From the first page of the Da Vinci Code

        ….never bothered to read or watch it CB….. Saw a film from the same author however, I think with Tom Hanks, was called Angels and Demons…. and well…. I fell asleep, could not bothered with such stuff really not. -shrugs-

        I would recommend Elena Moya’s ‘The Olive Groves of Belchite’



        • coldblow

          I read the article and found it unremarkable. She went there because it was the top university and didn’t like its ethos, in particular the way s”x before marriage was not encouraged. There is also the routine insinuation that male students got preferential treatment. Her criticism of this ‘celice’ device is presumably on objective H&S grounds and offends her modern sensibilities as to what is natural and acceptable. What, one wonders, would she have made of compulsory Irish? (I presume she is in favour of compulsory Catalan?)

          Re your first post, I know very little about the Spanish Civil War but I doubt it was quite the black (Franco) and white (Reps.) affair you suggest.

          From Nick Cohen in Sunday’s Observer: “If an article, blogpost or broadcast solely tells you what you want to hear and reinforces your biases by reassuring you
          that your opponents are not just self-interested or mistaken, but actually wicked, then, dear reader, it is a lie.”


          • EMMETTOR

            @coldblow, re: your remarks about the Spanish Civil War. You claim to know very little about it, in fact you clearly know nothing, I’m just waiting for your re-assessment of the damage the Jews were doing to Germany and how Hitler had a point, while pondering what you’re on. Over and out.

  3. Stratfor’s use of insiders for intelligence soon turned into a money-making scheme of questionable legality. The emails show that in 2009 then-Goldman Sachs Managing Director Shea Morenz and Stratfor CEO George Friedman hatched an idea to “utilise the intelligence” it was pulling in from its insider network to start up a captive strategic investment fund. CEO George Friedman explained in a confidential August 2011 document, marked DO NOT SHARE OR DISCUSS : “What StratCap will do is use our Stratfor’s intelligence and analysis to trade in a range of geopolitical instruments, particularly government bonds, currencies and the like”. The emails show that in 2011 Goldman Sach’s Morenz invested “substantially” more than $4million and joined Stratfor’s board of directors. Throughout 2011, a complex offshore share structure extending as far as South Africa was erected, designed to make StratCap appear to be legally independent. But, confidentially, Friedman told StratFor staff : “Do not think of StratCap as an outside organisation. It will be integral… It will be useful to you if, for the sake of convenience, you think of it as another aspect of Stratfor and Shea as another executive in Stratfor… we are already working on mock portfolios and trades”. StratCap is due to launch in 2012.


    • Malcolm McClure

      Georg: I’ve been skimming through Stratfor’s geopolitical reviews for a couple of years, thanks to occasional links from John Mauldin. Based simply on general knowledge, they seem to be unobjectionable, factual accounts of global real-politic. George Friedman sometimes provides penetrating insight to key factors such as why USA has inherently better economic potential than China –simply due to its better geography.

      It seems to me that there is nothing inherently wrong about using this kind of intelligence to launch an investment fund. The GS connection raises eyebrows but confirms the value of their information.

      What better way to assess global reality? The wikileaks stuff, which I haven’t seen, is probably just left-wing scare-mongering.

  4. John Q. Public

    Bonkers. We brought on a lot of our own problems.

  5. The New Profits!
    The banks are far from blind – They left the cut and thrust of real commerce way back. They no longer need to work;
    Here’s a question…….
    What’s the difference between a bank that’s profitable through lending/making interest and a Bank that’s secured an endless supply of public money?
    Person A starts a business from scratch and grows it to a point where their labour is well rewarded.
    Person B unexpectedly inherits a multi-million sum and now runs a similar little business just to occupy their time.

    What do you think the cultural difference between the two businesses would be?

    Looks like we’re at a place where “smaller losses than we expected” is the new profitability!
    At this point lads it’s become a grotesque game…where our kids futures are the chips and our politicos are busy trying to spin an alternative explanation!

  6. Grey Fox

    So now the Irish Government is going to commercialise the unemployed, make them sign a legally binding contract whereby if they don’t engage with Dept of Soc protection and find a job (of which there are none!) the average Joe will be completely cut off over time thereby saving the Gov millions which they can then pass on to the Bankers in the name of servicing the national debt(which was private bank debt first, socialised) and also beat their chests about lowering the cost of the Dept of Soc Protection and bleating that the Austerity measures are working.
    The average joe who is cast aside will then also be removed from the official unemployment figures ‘cos he is “unemployable” and no longer on the “live register” and these figures will be then also be trotted out to the blinkered insulated “employed citizens” who will be encouraged to further demonise the “unemployable average joe” and vote the government back in for a second term.
    Ah.. but this plan is so fundamentally flawed it is laughable, or would be if it were not so serious, the average joe will not simply roll over and die! he will by hook or by crook feed his family! result= black economy and self defeating government policy or worse still crime, social destruction!
    Every day is a sadder day than the last, every day will see more and more real human casualties due to these policies and the casualties are our citizens, the citizens this government is sworn to protect.
    What a national shame!


      I’ve read the “Pathways…” document and as someone who’s dealt with the Dept for Social Protection (what a misnomer) I can’t see how they are going to implement 10% of what’s proposed. This department is entirely dysfunctional, my local dole office is run by a coven of overpaid, middle-class incompetents. As it was, Social Welfare were unable to institute a “Standard Procedure” protocol in their local offices, despite spending millions on training, even during the “boom years”. Indeed, during this period, Social Welfare was the one government department that kept growing their staff numbers while unemployment fell to structural levels. Then again, we must remind ourselves that the Civil Service is composed mostly of people who left school with a reasonable Leaving Cert, or less, and have never actually had a job.

  7. Reality Check

    David IMO the boost in BOI’s share price is correlated with (but not intrinsicly caused by)the bellweather of European Bank share price sentiment – The 10 Year Italian bond. Once the yield went below 6.25% this signalled a broad movement upwards in European financials. (Fear sentiment has died away). We all know now that the banks are addicted to the LTRO (what happens when the 3 year buzz is up rollover?) once the cracks appear again and the 10 year moves above the 6.25% mark (Fear sentiment is back!) – money can be made on the other side of the trade.
    i.e. short the S**t out of BOI and European financials.
    BOI’s share price has nothing to do with fundanmentals It’s all sentiment.
    Keep an eye on the 10 year Italian bond – it tells a lot!

    • Johno

      I think part of the jump in share price is to do with the Boi contract with the Post Office in the UK been renewed for another 10 years recently.

  8. Grey Fox

    Irish Constitution
    Article 45, Subsection 2, part 4
    4. That in what pertains to the control of credit the constant and predominant aim shall be the welfare of the people as a whole.
    How can the Socialization of private bank gambling debts be justified when it is in clear contravention of the above section of our Constitution?, why is this ignored in Ireland?
    The Banks are controlling credit to the detriment of the Irish people!
    The last Government committed Treason by guaranteeing the Banks, the current Government is an accessory after the fact and guilty also.
    The Banks don’t need us anymore, they just need the LTRO and complicit Governments and the profits just roll in, at the same time they can continue to seize assets public and private of the citizens to be monetized again at a favourable point in the future.

    • DarraghD

      Because it can be argued both ways, for instance you could argue that the welfare of the people is best served by keeping the banks open at all costs & the ATM’s working and handing out cash… I don’t agree that it is, like our host here, but that’s the spin that is obviously being put on the constitutional aspect of all of this by our overlords…

      • bonbon

        Let them “argue” on the dock. So far it is just eurobabble.

        Let’s set up a Pecora Commission, with televised hearings. That was the key step to bringing the split-banking Glass-Steagall legislation. Pecora was the son of an Italian immigrant and brought Wall Street to its knees.

    • bonbon

      That’s a reflection of Alexander Hamilton’s National Banking using credit issued only by the nation. In other words the FED is likely illegal, as is any “private” central bank pumping money.

  9. MIT

    Hi David,

    Fully agree, BOI Retail are in big trouble.
    However, the whole BOI Group have total assests of 155 billion (page 7 of their preliminary statement 2012) – therefore, doesn’t this mean that they are still solvent as a group? I’m just asking because I’m a complete novice about balance sheets! Thank you.

  10. Reality Check

    @MIT, solvency = ability to pay short term debt. The 155 Billion in assets is moot as you would have to assess the income generating capacity of those assets to pay for the short term debts.

    The other point is how the 155 Billion figure is arrived at – four years on from the bailout & Nama/scama there isn’t any true price discovery going on at all.

    Bank share price is all sentiment, the most basic of human emotions – Fear & Greed as David has pointed out in other articles.
    One Giant casino, how much LTRO crack-cocaine is left?

    • MIT

      @Reality Check, thank you for the insights, much appreciated.

    • redriversix

      Thanks for that Reality Check

      N.A.M.A will not release any true price figures at all.I wonder what they are afraid of ? [we probably know already]



      All share pricing is mostly sentiment, or a herd mentality, if you wish to be more scathing. The Bigger Fool is the one who drives this game of pass-the-parcel until the parcel explodes in the hands of the Biggest Fool. Any analysis of earnings to share price ratios reveals this, better earning shares languish, while the flavour-of-the-month skyrockets, inexplicably. If you approach share price as a rational human being you’ll go broke, pretty quickly.

  11. Grey Fox

    The central bank will offer banks the chance to grab another tranche of the ultra-cheap, 3-year money on Wednesday.

    The median expectation in a Reuters poll of 60 economists showed that the ECB will allot 492 billion euros at 1 percent. Forecasts ranged from 200 billion to 1 trillion euros.

    It remains to be seen whether the second injection of ECB 3-year loans will open up lending channels to companies again.

    NOT A CHANCE! this next tranche will be used to but up more toxic Government bonds within the Eurozone thus ensuring it follows the last tranche straight down the plughole… and again the citizens will have the privilege of making up the 5% difference in interest to fund the 2012 Banker’s Bonuses

  12. [...] David McWilliams is out of the blocks describing the latest report from Bank of Ireland in less than stellar terms: The report shows that only 14 per cent of Bank of Ireland’s total owner-occupier mortgage book is in such a healthy situation. When we examine its buy-to-let portfolio, we see that only 6 per cent of these mortgages are in such a healthy situation. In total, 12 per cent of mortgage holders have a ratio of less than 50 per cent. Seamus Coffey has a longer study of the report. From his piece: In total, the loan-to-value of BOI’s owner-occupied loan book is estimated to be a rather convenient looking 100%.  The negative equity of the €10,567 million of loans with LTVs of greater than 100% is estimated to be €2,474 million.  The aggregate loan-to-value of the loans in negative equity is 131%.  On the other hand the aggregate loan-to-value of loans not in negative equity is 81%.  Finally, here is the spread of arrears and impairment across the different LTVs. [...]

  13. Juanjo R

    Good straight talking article!

    I posted this below two weeks ago but its of interest here so I’ll post it again ’cause its of more direct relevance;

    …Namawinelake’s got a good little analysis piece on that 9% of all mortgage in more than 90 days of arrears statistic in the papers at the moment.


    Theres avery interesting comparision with UK figures there too.

    I did my own tables ( for a project I was engaged in ) on mortgage info here a few years ago and what figures I came up with suggested that it was speculative mortgages, not so much homeowners, could be the ones in greatest difficulty now.

    The information I worked off, A UCD working paper, is now nearly 3 years but it proved to be precisent at the time in its predictions of the current state of affairs. I think it was mocked and indirectly attacked at the time, if my memory serves me right. It is called;

    Managing an Unstable Housing Market and it is by
    Brendan Williams, Brian Hughes, Declan Redmond
    It is available at;


    Its figures would confirm the analysis in Davids piece I believe and would suggest that that situation exists across the board.

    • Juanjo R

      Speaking of the financialy blind – headline from the IT today.

      “Over 100,000 face higher bills for not using enough electricity”

      And from the piece.

      However, an ESB spokesman said the increase was “really aimed at vacant dwellings and premises, or holiday homes that are vacant most of the year”. The average daily use over the billing period would be measured, he said.


      It is ridculous or what? You can get charged for saving money!

      God help someone who actually built a passive house which uses very little energy. You now get charged for being green, smart and efficent too!

      • redriversix

        Juanjo R,Good Afternoon

        This ESB story is just that , a STORY.It is using the Media to let potential buyers know where their is scope for more profits.


        • Juanjo R

          A few companies were mentioned in the article rr6.

          • redriversix

            Juanjo R ,Hi

            24 hours later , its all ESB in Irish papers.


          • Juanjo R

            oops I didn’t realise ESB = Electric Ireland.
            I remembered Bord gais / Airtricity were mentioned too, but not what they had said.Thanks for picking up on that irrelevancy. A good days work for you!

            ESBs domestic market share is now less han 60% they are reducing their payroll and looking to charge low users more, via increased standing charge or a disconnection charge if you go.

            Another group of low users are pensioners who get a unit allowance. They will be affected by this.

            By the way, given that you want to ignore the main point be petty, pedantic and annoy me I’m going to counter with an inaccuracy of your own; your miltary reporting of the US anti syrian/iranian gulf miltary build up before you talked about US marine corps “apaches and chinooks” being deployed

            They have nethier, and never have had had.


            You made other errors too. What to hear about them all or do you prefer ignore pedantic irrelevancies to debate the main points you made at the time – which I did do?

            Want keep this stupidity up?



      • EMMETTOR

        Remember that ESB were forced by the EU to keep their prices 10% higher than they needed to be, in order that Bord Gais, Airtricity and the like could come in at 10% less, therefore fulfilling the EU’s demand for “competition” in the electricity retail market. Insane!

  14. DarraghD

    Jasus I’m nearly falling off my chair laughing at that David, excellent bit of analysis, love the last bit: “And this is the best of them?!?”

    Says it all really about where we are at, and today we hear that there is a new “entrepreneur creation” scheme being launched, as if you can’t be an entrepreneur unless you go on a government training program. I can’t imagine anything less likely to turn out an entrepreneur than anything backed by the Irish civil service & it’s governing minnions, it’s an awful pity Dermot Morgan isn’t around to do proper justice to the set up that this country has become.


    Bank staff are playing musical chairs . A leaves bank x and joins bank y. B leaves y and joins x. Restructuring Irish style !

  16. Dorothy Jones

    David, what about the ‘watch this space’ pillock bank AIB? What’s the skinny on that one? D

    • Malcolm McClure

      Dorothy Jones: Interview on Newstalk this morning said that the previously announced 2000 job cuts in AIB is probably too low. By comparison with Ulster bank job cuts it could be 50% higher. Delay in implementation is due to government nixing excessive redundancy payments. Apparently they are much higher than equivalent HSE payments. As AIB is now state owned entity, what is sauce for the goose is sauce for the gander.

  17. redriversix

    Morning All

    BOI is now a shameless front Company for Organised crime.Their persecution of citizens of this State for monies owed while the same people have suffered the most austere cuts in history is shameful.What is more shameful is the fact that a Large Financial Corporation like BOI can benefit from a criminal bailout and yet the citizens get nothing.

    BOI and Mr Boucher state that they are only interested in loaning / supporting business that is viable while their own Company is in shreds and being run in to the ground

    Is a Banking corporation worth more than a family ? I think not…….How many people went to this Bank for advice during the boom ? people who were led to believe through generations of teachings that “Banks know best” have no recourse or no bailout,yet they are chased and harassed on a weekly basis !

    This, and in fact all our Banks have operated with fraudulent disregard for this State,but that’s okay because when their”winning” they keep the profits and when their losing they run to Government for Money which they receive while producing dubious accounts.

    Who can the people turn to for help…?

    Fainna Fail bailed out the Banks,but Fine Gael is continuing their perverse support while sacrificing the most vulnerable in society.
    Today,their is no justice………..

    The recent Jobs plan , “Pathways to work” is nothing more than a slick P.R driven spin, Propaganda if you will. Georg R Baumann’s interpretation of this scheme is , I believe, Correct.

    It is the discrimination of the unemployed , underemployed and the enslaving of a class of people to a 21st Century poverty trap which will ensnare generations. It is deliberate and premeditated targeting of the weakest in our society and the creation of a sub standard class of people who are to be frowned upon and whispered about.

    This is to improve Government figure’s and to put a positive spin on their destruction of this Country in favour of the top 10%.If you are on a training course,you are not “unemployed” thereby Government Live register numbers can fall and they will say we are working as a Nation and are “turning the corner”.

    If you have any money to invest or you are one of the top 10%, I suggest you talk to your local TD about setting up Bogus training Companies for the less well off in our Society and “get in on this new opportunity” !

    I predict it will be very profitable for those in the “know”

    Finally,their is a meeting at 8.00 tomorrow Tuesday 28 Feb 2012 in the Royal Marine Hotel in Dun Laoghaire about non-payment or registration of the property tax and on Wed the 29 at 8.00 their is a “not-our-debt” meeting in the Red Cow Hotel,Dublin.

    This meeting has been called following the success of the you tube video highlighting the failed eviction last Monday in Laois.I urge all who are interested to attend.


    • molly66

      I hope this shower of misfits who are running the country look at your opening statement and somebody gets a branding iron and brands it into the governments heads.I was on last week about my 83 year old mother who was sent home after 9 hours in the A and E by the way the lourdes hospital now has 2 A and Es ,the HSE sent a sick woman home when her doctor clearly express in a 2page letter to the A and E that my mother should be an in patient ( with a chest infection,kidney in fection / pneumonia and to be put on a drip for 3/4 days and have further investigation for other on going problems .I contacted the HSE by email and the response I got two days later floored me would I like to take part in a survey well HSE stick your survey where the sun won’t shine,if I had brought her to the beacon ,the Mather private would they have sent her home I don’t think so ,so I should have brought her to the beacon and when the bill came pass it on to the HSE who have clearly failed my 83 year old mother ,sorry for the rant.

  18. DarraghD

    I said it before and sure I’ll say it again. What this country needs is for a few good people to set the wheels in motion for a brand new local banking network that will have only one mandate: to support new & existing Irish small businesses. Where will the money come from??? Small deposits from Irish people! Like a credit union for small businesses, up and down the country, imagine if you could invest in a new small business by buying shares in your local enterprise bank branch and taking say 50 or 100 Euro out of your AIB or BOI account and depositing it with this new “Enterprise Credit Union”. Then bring experienced business people from the community into a forum on a voluntary basis and set up local enterprise centres/hubs to support new businesses.

    That’s the way we will get jobs created in this country, by cutting AIB, BOI, The County Enterprise Boards and other such blubbering bullshitters, completely out of the loop and just going straight at it at parish level…

  19. Philip

    Yes yes yes…banks are in trouble, all loans are under water, there are no jobs, no wealth generation etc etc so we are in an economic spiral. We can keep issuing more cash for trash and still have an even bigger huge gap between what is set aside and what in reality will be paid back. We hear you David.

    And…Yes, yes yes… more and more people are unemployable and the value of their labours are less than what is was before becasue there are Indians and Brazilians and Chinese who are doing it for buttons and the tax take is not as flush as it once was and government services need to get more value and it looks like slave wages to counter social welfare expenditure. And when half the youth are not educated to do relevant work at a low enough price, we have a problem. We hear you George B.

    Now, we can go on slagging off bankers and politicians and public service and the inept european union bureaucrats and the french arse licking the germans and so on – fact remains, there is no clear way out of this mess. The Germans are trying to take some lead by federalising – others are saying – let the EU fall apart – but I wonder who of you remember what it was like pre-EU?

    We should not have austerity? We should spend our way out of this mess? What? Build more roads, railways you name it? Why? all to re-employ the same people with the same skills to be laid off a few years later? Anyway, there is little sign that anti-austerity is working in the US or Japan and as for Iceland, people fail to realise what an energy rich and self sufficient nation it actually is.

    Albert Einstein once said “The definition of insanity is doing the same thing over and over again and expecting different results” So far I see no one doing anything different. Everyone wants everthing as it was before, no one wants to change. Everyone thinks they can go one being as they were in the boom and they want everyone else to change to make it so. The bankers, the government and the bureaucrats down to you and I. The more powerful will get their way for a while..but that too will spin down becasue we have lost the plot – cash for trash can only go on for so long.

    So let’s see what austerity is really about? It is about change – either we do it or have it imposed. In the next few weeks I expect there will be a reality check. Either we find a way of working together or we have a police state – and the Irish will be watching on the sidewings to ensure we do not make too many enemies along the way.

    • DarraghD

      As for change, we are 3 years into this and we still have the highest paid, the most job secure, the most comfortable, yet the most indifferent, change resistant and intransigent public servants on earth. Yet we scratch our heads and wonder why nobody has a cent left to spend on anything at the end of the week?!?

  20. Deco

    From my previous understanding of the term, the phrase “In the land of the blind, the one-eyed man is king” is actually an ancient Irish proverb that is older than Erasmus.

    • Deco

      Actually, it is heavily ironic that this proverb is Irish, considering the blindness of the past twenty years, and the fact that the blind managed to shout down anybody with one eye open and who dared to declare what was happening…

    • bonbon

      Very interesting point – have you an Irish reference somewhere?

      I am shockingly reminded of the story of a one-eyed giant, Polyphem (Greek for he who eats everything including people), a Cyclops. Odysseus winked at his trapped fellow warriors who wanted to murder the drunken sleeping monster, saying who will open the massive cave door then? So they blinded the Cyclops, who stumbled to call for help from his big brothers(!) and opened the door letting the survivors out.

      People must be blind not to see we are being literally eaten alive – Cyclops have notoriously tunnel vision.

      • Malcolm McClure

        Sticking with the Irish dimension, Balor was the one-eyed giant of Tory Island, Donegal. He may have been the original of the Polyphem legend.

  21. DarraghD

    One thing is becoming clearer folks with every passing week in this country: We are at absolutely f*ck all as a country for as long as we are relying on the BOI’s and the AIB’s of this world to support job creation.

    Same can be said for the head wrecking spin that is presented to us every week about enterpreneuship programs (you’ll be a “qualified entrepreneur” in 6 months time or so it seems if you go on this new course!!!), we really need to start taking ownership of this problem ourselves & look at setting up a bank that has a mandate and that can meet its mandate, and starting to ask ourselves what we are doing to create jobs at local level…

  22. Deco

    There was a massive divergence between the results of RBOS, Llyods, Rabobank/ACC and NIB on the one hand – and the state owned Irish banks on the other.

    It defies belief. And the bailed out banks are all expecting NAMA to save them, and their careers.

  23. Colin

    Great article David.

    I wish you would cover Bank of Ireland staff salaries and conditions next time. We haven’t seen a 50% haircut in staff salaries yet, nor a 50% cut in the numbers working there. At least if that happened, we’d know they were attempting to start to look serious about their situation.

    But delusion continues to be the fashion these days.

    Looks like an 85% fall in house prices is on its way. The question will be ‘why would you want to buy a house and live in Ireland anyway?’

  24. Deco

    One of the pieces of accepted wisdom in Ireland these days is that, because Bank of Ireland is the least worst bank in Ireland, it is therefore the best.

    That’s the job of the media in this country – helping the people to find a way to trust the establishment, after every time that the establishment has scelped them.

    They get away with it, because the people trust them, every time.

  25. Deco

    Excellent article.

    I reckon Permo are in even worse shape, thanks to ther position as number 1 mortgage provider in the leafy suburbs, and in suburban Dublin. (where the price excess was at it’s most extreme, and where people believed the media hype most convincingly).

    And the we have AIB. Does anybody know what is going on inside the AIB mortgage book these days ? Will anybody tell us ?

    It makes me very suspicious.

  26. AnthonyL

    I have to admit that I am puzzled by the curiously modest provision of only Eur 1 billion for mortgage debt defualt. I don’t know the methodogy applied by the Bank of Ireland in arriving at this somewat “blue sky” assessment. A few aspects spring immediately to mind. First, has our esteemed regulator, the CBI, satisfied itself that this is an adequate provision? I expect that the CBI, in due exercise of its prudential role, will have throughly scrutinised this figure and satisfied itself that such an apparently optimistic figure is responsibly justified. Secondly, I assume that the auditors, acting on a “true and fair” basis, have “signed off” on this fugure? Perhaps that is an exercise to follow? Thirdly, even if all of the appropriate processes have been followed, does such a patently inadequate provision of €1 billion pass the test of simple common sense? It’s bad enough that Ireland has got itself into this dreadful mess, but if we don’t confront the essential nature of the problem, that is grossly over valued residential property purchase prices paid on the back of reckless lending, we will not find and apply an appropriate solution.

    David McWilliam has again done a signal service in drawing our attention to this issue. My own opinion, for what it is worth, is that mortgage default is the next big shockwave to hit the banks and to hit Irish Society. Regretfully, I think that Moody’s assessment in early February, concerning 25% of the total loan book being open to discount will prove closer to the mark but perhaps still inadequate. If one were doing a “due diligence” on Bank of Ireland with a view to purchase, the € 1 billion figure would be cast aside and replaced with a more realistic figure which would be many multiples of the €1 billion. It is high time we confronted reality. Cheap finance from incontinent and bonus driven bankers have driven us off the cliff. The unfortunate buyers who purchased from 2001 to early 2008 were the victims of a massive and scandalous rip off. We are still being sold the nonsense and poison of restoring the residential property market. We need a new land league movement. New Beginnings, FLAC and others are doing Trojan work but there needs to be a more assertive lobby for all victims, even for those who are still managing, barely so, to service their grossly excessive financial and parasitical burdens. Irish residential property values were driven by extravagent lending, not by supply and demand considerations. We were fooled. We don’t like to think that we were, but we were. Let’s confront reality. Will our much vaunted Financial Regulator bark? I will not be buying sahres in the Bank of Ireland or in any other Bank. I’m not that crazy.

    • Afternoon Anthony,

      The same initial thoughts went through my mind when I was writing the article about the Regulator etc.


    • Malcolm McClure

      My guess is that way back in 2005 the Regulator realised that the game was unsustainable and started using the ‘light touch’ vocabulary already in vogue in London.

      Guys in the know already knew that they were feeding a bubble and even some of the smarter dogs in the street were beginning to suspect as much.

      When DMcW offered his house for sale, in his famous debate with Dan McLaughlin, there was much examination of shirt-cuffs, an embarrassed silence, but no takers amongst the assembled bankers.

      David achieved heroic status at that moment, IMHO.

    • StephenKenny

      The banks would be irretrievably insolvent were they to admit to the problem. Much in the same way that the FASB in the US has relaxed accounting rules to such an extent as to make valuations meaningless, the rules must have been changed to allow for these previously unthinkable situations.

  27. Grey Fox

    If we took DarraghD idea to the extreme, 1 single euro from every citizen, formed a community bank, leveraged the LTRO at 1% and bought out failing Home mortgages from the Dummy banks at a discount, refinanced the homeowners at 2% does anybody follow me… or am I mad?
    If I am mad I therefore must be a natural Banker!!
    Profits earmarked for community projects, or better still small business lending or both…

  28. piombo

    I looked at their preliminary results and noted that their total provisions on asset write downs amounts to €6400 million. This is a high provision in banking terms as it equates to over 4% of assets. As well, these are preliminary numbers and are not yet audited so things could change.
    That said, I agree with the DMW thesis of de facto insolvency. However, let us remember that Mario Draghi will not allow one bank to bankrupt itself on his watch. The banks know this and act accordingly.
    Bank of Ireland, despite it’s numbers, is safe as a house on fire due to the “Draghi doctrine” and as long as Ireland remains with the program and stays in the Euro.
    No use complaining about them, the local regulators, Central Bank, Auditors and Dail Eireann will do as they are instructed by Brussels, Berlin and Frankfurt.
    Things might change if Greece were to go nuclear in March and opt for a 100% debt write down and revert to the New Dracmha. Me thinks that Spain may actually be the powder keg followed by Italy. Monti is doing a great job here in Italy but the recession is really beginning to bite and his government is beginning to show signs of fatigue. Plus if anything, tax evasion is on the rise due to the natural Italian inclination to look after their own families first and then worry about the State. In fact, in 14 years here, I have never heard an Italian express worry about the state of the public finances….

    • bonbon

      Strange, did you get a chance to read Tremonti’s book? Or to have a look at Senator Peterlini’s Glass-Steagall bill, and a Chamber of Deputies bill now starting?

      And after all why is a Goldman-Sachs technocrat running Italy?

      DMcW here mentions blindness, but deafness seems more prevalent.

      • piombo

        I finally got round to buying it at the weekend. I intend to read it on when travelling on business in the coming weeks.
        Why is Italy being run by a GS technocrat? Easy, Monti is only guy with a semblance of street cred with the institutional buyers of Italian government bonds. Tremonti was and is credible but was handicapped by two majors factors:
        1) He had Silvio B as Prime Minister with no local political base worth talking about, but more importantly;
        2) He had the temerity to suggest publicly that certain “fraternities” were behind the entire ruse of the financial meltdown and added fuel to the fire by suggesting that an ethical foundation in part based on Benedict XVI’s writings be employed in an overall of the entire global financial system. I remember watching the press conference and thinking Tremonti must have had a death wish.
        In fact, his position assured his goose was cooked within the following ten days despite ensuring Italy ran a primary surplus without parallel except for the Netherlands since the inception of the financial crisis.

        • bonbon

          Is it a death-wish to tell the truth? I am not sure I get your point?

          President Wulff had the temerity to slam the illegality of the latest moves at Lindau last August.

          President Higgins had the temerity to propose Glass-Steagall, hit the Hayek hegemony hard, as well as the Communitarian, right in the den of thieves, the LSE.

          And the Pope Exposes the Financial-Media Complex that “Dominates the World” :

          Speaking to seminarians in Rome, Pope Benedict XVI blasted “the power of Evil in finance and in the media, two major powers which in themselves are good, but can be so abused as to become often the contrary of the real intentions.”

          “Surely we need information,” Ratzinger said, “but the power of appearance, an appearance that replaces reality itself, becomes more and more powerful, and man does not see reality any more.” At the end, “the virtual world becomes truer and stronger.” Instead, “we want no appearance, but truth, and this gives us real freedom.

          “Today we see how the world of finance can dominate man. Possessing and appearing dominate the world and enslave it.” This, because “the world of finance is no longer an instrument to promote the welfare and the life of man, but becomes a power that oppresses him, like worshipping in Mammon the false divinity that dominates the world.” The Pope said that Christians must be “non-conformist.”

          Observers describe the Pope’s statements as a reaction to recent media stories involving some Cardinals accusing other Cardinals of plotting to kill the Pope. If that is true, Ratzinger has raised the stakes in connecting evil media campaigns to the financial powers that are destroying the world, and implicitly calling for finance to become again “an instrument to promote the welfare and life of man.”

  29. AnthonyL

    @piombo, That’s a more dimensioned and broader view than mine. I think that we are not in disagreement on the fundamentals.

    Timing wise, when will the peak of personal loan default impact? I suppose that debt default will not all hit or accrue this year or even by next year. It’s a specualtive view but it may take three years or so before this default problem peaks. There may be a timing asepct in all of this. As you rightly point out these are not audited Financial Statements. Hopefully, the auditor will rigorously scrutinise the basis of bad debt provisioning when their annual statutory audit exercise commences.

    It may be simplistic but the way I see it is that plummeting asset values (not artifially reducing but adjusting to a more realistic level now that the powerful steroids of overlending have been removed), the dissipation of savings for those in default, the behind the curve nature of reporting of loan default, the expiry of family and other supports, declining incomes, increased taxes, including the imposition of property taxes, economic contraction and a host of other adverse factors will drive more and more borrowers into inevitable default. I hope that I’m wrong.

    Yes, we have the extended State Guarantee of the 29th September 2008, yes we have ECB support, yes, no European Bank can be allowed to fail but Canute was unable to hold back the tide. I accept that when the actual default figures start to exhibit in reality, there will be assiduous attempts to shore up the Banks, but how long is that sustainable for? We have to embrace an economy where property asset values are seen in more utilitarian terms, when we no longer have to defensively explain to foreign business intending to invest in Ireland that Irish salaries have to be very high so as to meet very high rents and mortgage commitments.

    Although a €6.4 billion write down (about 4%) looks very high, an adequate write down or provision has to be a meaningful assessment of what is anticipated to come. I am not an accountant and I don’t know the technical accounting basis of such provisions but I can foresee the debt default situation progressively and steadily deteriorating over a three year period before we reach the top of the default curve. Selling assets, restructuring, avoiding pension contributions, ekeing out savings and “doing without” are all short term in their mitigating effect. Eventually, the realisation of pumping in so much money into a wasting asset (declining in realisable value), the resentment of depriving the family of necessities, endurable only in the short term, the punishing effect (even if unintended) of property taxes, the desperation to maintain health insurance, the downward spiral of wages and salaries in the private sector as the effect of economic entropy takes more marked effect, the increasing voids or vacancies of buy to let properties (except for example in Goggle Ghetto) increasing emigration (reducing housing needs0, the burden on young and more financailly stretched families in paying for services, which were previously free, the end of inadequate mortgage and rent subsidies, the depletion of resources of charities such as St Vincent de Paul and others will all combine to create a one way road to increased personal debt default, especially mortgage debt default.

    The spectre of massive mortgage debt default is almost too large for us to get our heads around the scale of the looming crisis, it is perfectly natural that awareness lags behind reality but this problem is going to bite us all as a society and as individuals. I am not usually a prophet of doom but I can’t see any means of neat footwork and talking up the property market to avoid the consequences of hebephrenic bank lending on residential property for the decade leading up to 2008. Too many people, many or most on reducing incomes borrowed vastly too much money to buy vastly over valued assets. That reality will eventually have to be confronted and addressed.

    I remember seeing SME Directors restricted or disqualified as directors for imprudent, irresponsible or even dishonest exercise of their roles as directors. I suuppose (tongue in cheek) we can accept that Executive Directors of all banks at all times acted prudently, responsibly and honestly at all times.

    I think that at the moment it is more rational to be a pessimist than an optimistic. Underestimating the scale of the looming crisis may be an unwise strategy. I’m not directing this comment to ar at you but rather to the Government, the CBI and to the Banks but I think that they may well be deaf and blind to a different perspective.

    I would prescribe the reading of “Thinking Fast and Slow” to our policy makers and decision takers but they might not be receptive to it!

    • piombo

      Don’t get me wrong, I don’t believe Irish adults or most others for that matter in Europe are blind it is just that they are scared and have no one to look toward. Everyone is fed up with the diagnosis.
      I own and lead a medium-sized business and I see this agnst creeping into the behaviour of clients/customers/consultants not to mention the banks etc., This agnst is not over Greece nor the Euro (who really cares to be very honest), but for the viability of their erstwhile planned careers, investments, family homes, childrens education, health care etc.,
      In short, there is a creeping inarticulation on the part of the European middle classes over their future. This is new in post-WWII Europe although we Irish who grew up in the 80′s were well used to it.
      I imagine that once the French elections are sorted in April with Greece happily defaulted we will start to see some major EU-wide initatives designed to create growth. As I have said before, this period could be very dangerous for Ireland, but I have being shot down on this blog before for mentioning this.

      • Juanjo R

        I’m presuming I’m one of the alleged shooters from the ground. Here are two central points on your comments ( which I do find to be interesting ) but I will point out my aim is to debate;

        You refuse, at least in any comment I have seen you make, to acknowledge deflationary economics.

        1) You propose huge cuts to balance accounts but you don’t seem to follow the money and realise that the accounts will be messed up the following year too, in direct and substantial proportion to the cuts suggested. This balancing act will be one of momentary book keeping only.

        Governments in the core EU usually take 40 per cent in tax take of what’s spilling around in the economy. The most stable economies/societies seem to take the bigger shares.

        ( take take percentage by country is at https://www.cia.gov/library/publications/the-world-factbook/rankorder/2221rank.html?countryName=Ireland&countryCode=ei&regionCode=eur&rank=59#ei )

        So on average cut the amount of money spent by 2.5 billion and you cut the tax take for next year by 1 billion. Which will then necessitate further cuts unless you have sizeable growth which matches the cuts. We

        Actually a bigger share of poor peoples money will be taken as poor people have to spent a higher proportion of their income to get by and can’t save or invest so much. They contribute disproportionally to taxation. Progressive taxation policies acknowledge that reality and address it – but they aren’t occurring in Ireland at the minute with increases in VAT and universal charges.

        So to summarise, further indiscriminate ( non-progressive ) cutting as proposed by you on a few occasions here, seems to me to be short sighted and simplistic and not a real solution.

        2) You seemed to be making ( the rational ) assumption that default/bailout arguments are about the numbers involved when its pretty clear that its been ( more irrational ) political decision making that been key all along. Your comment above suggests a shift in that view you now think the French election will result in a political shift.

        There have been a few elections across the crisis – Spain, Portugal and Ireland come to mind – all have thrown the incumbents out yet nothing has changed or even looked like changing the economic prospects for these countries. Two supposedly democratic EU countries have unelected technocrats now in charge of them. So too, no change of leadership has affected the direction the EU is taking general in propping up its banks at huge societal cost.

        This is all in sharp contrast to the triumph of democracy in Iceland, their societal rejection of the banking/parliamentary elite, their PROSECUTION under Icelandic law now the low unemployment and general economic recovery.

        So on to a question for you why will the French election change things? Sarkozy to go? Why would the current opposition leaders in France not just choose fall into line as per virtually all other EU political parties?

        • bonbon

          Hollande says he will go for a split-banking system ala Glass-Steagall, grabbing the microphone from Cheminade. Merkel refused to meet him (diplomatic slurr), and the German SPD support him (which gives them a Glass-Steagall headache)!

  30. Philip

    Look guys, we know the banking system is broken. But looking for writedown of salaries of “elites” be they bankers, politicians etc is pointless and really does little to fix the problem. That very salient point about the lack of coverage for bad debt at the end of the article says it all. It smells of absolute fear – and it is everywhere thro’out the system.

    Also, If you want to start your own bank you will still need finciaers and networkers that will cost high 6 figure salaries to make them useful. It is a skill very much in demand and it is globally in demand. Guess what? You will be using the same people.

    We need to recognise we have a structural industrial problem where primary and secondary industries of nearly all sectors have been exported and have hollowed out 20th Century successful economies. It is the 21st Century and the most you can do today is open a coffee shop or a 3-5 main operation doing boutique biotech or hitech and it just is not employing enough people cos most of them come undereducated or plain stupid. Solve this problem and the rest will fix itself overnight.

    • Grey Fox

      You are assumming that a new bank needs these financiers and networkers to be successful, it doesn’t.
      The purpose of starting a new bank is to avoid the old mistakes and therefore the old boys are useless.
      I know the figure is irelevant but lets say for arguements sake 1 euro from every citizen every week for a year (lets say 3 million people) thats 156 million in one year, and that alone is 780 200k rescued/ distressed mortgages which could be spread over longer terms, maube intergenerational to ensure the repayments at a nominal low rate of say 2% is affordable for even social welfare recipients.
      And that is all after only one year.
      Great Oak trees grow from tiny acorns.
      Imagine a Bank with a Real Social Conscience, I know its hard, and I know there are qualified people out there who would successfully run such a bank for say a 75K salary, it makes them productive and in a social way, helping their fellow man, how better to destroy the cancer that is banking today than to show it can be done an infinitely better way.

      • bonbon

        Sounds Communitarian, Distributist to me….

        • Grey Fox

          Sorry Bon Bon that’s not my intention, any proposal would of course voluntary, it would be about removing the onerous, extortionate mortgages from the zombie banks and giving people a option to stay in their homes at an affordable cost, if a person decided to leave the bank after a period they of could do that and return to the mainstream banks at a higher interest rate, I guess it would be based on the credit union concept and the 1 euro a week is a deposit, but not maybe an interest bearing account but more of a citizens empowerment to take the control back from the banks.

          • bonbon

            My point is that just because foreign and domestic irrationality destroyed national banking, does not mean we drop it. On the contrary we enforce it. It is in the US and Irish Constitution.

  31. gizzy

    The advise the government is taking in regard to the Banking issue is from vested interests who are making a lot of money in managing the pillar banks and others. Ernst and Young are getting 500 euros an hour for one partner to run Newbridge Credit Union. That is 910,000 per year twice the cap of a bank ceo to run one credit union branch. Who would want to fix that lucrative mess quickly?

  32. gizzy

    The Banks cannot provision anymore for fear of eroding their capital bases again. The government will then have to stump up again which will hurt them in regard to justifying their flawed banking strategy. So the result will be drip fed provisioning and loan book management.

  33. C’mon lads it’s not all bad………

    I gazed into the mirror this morning and realised – “There’s the BOI and the AIB and they employed the so called elite, best of the best, private schooled, biggest brained, smartest, cleverest D4 people imaginable just to run them. Whatsmore they had to pay the most decadent salaries just to hold on to them!”

    …..And you Moriarty – You did it you oul devil. After all these years you finally did it!
    You are actually worth more than the AIB and BOI put together!
    Lads my ancestors would be so proud! (Particularly the ones that got evicted)
    So here I am….living the dream!

    And if I can do it…….so can you!

  34. wills


    Firstly, isn’t 101 with banks that their lending is completely separate to their deposits.

    The banks work of these two pools separately and these two pools never overlap.

    So banks lending is completely separate to deposits irrespective of ratios and BASEL II / III accords etc.

    My point.

    The banks lending is simply technically debt manufacture.

    So, the banks, technically are not making a loss of any kind because the money loaning out to customers is in fact debt manufactured money.

    So, the banks are merely playing a charade to the public that they are in the red like the way the public see been in the red, but, the red for the banks is simply an illusion of money that is not there except in the footprint of the debt which the banks can wipe away.

    • wills

      So the banks have Joe Public examining banks debt like Joe understands debt to be which is to OWE somebody money.

      BUT, in the banks case, the banks cannot OWE money because they MAKE the money into existence through the manufacture of DEBT.

      So, my point,

      The analysis of bank debt is a hall of mirrors and a misdirect.

      • gizzy

        The Banks need to fund their lending by having matching liabilities to their assets. Customer deposits are a key source of balance sheet funding.

        100m loans 50m customer deposits
        50m other funding eg inter bank, ECB
        and other instruments
        100m assets 100m liabilities

        They manufacture money as a multiple of their capital
        so 13m capital will allow them lend 100m but they must have funding in place for the 100m.

        • wills

          Precisely my point here Gizzy.

          The banks technically speaking, going beyond the jargon and the legalese and the verbiage, let us look and see without illusion.

          The banks do not FUND their lending.

          The banks lend.

          Look at that one.

          The banks in fact do NOT lend.

          The banks USE FRB to MAKE a DEBT.

          So, the banks lending is in FACT the banks DEBT MAKING.

          No customer No DEBT / No LENDING.

          The banks are pulling the wool over everyones eyes.

          They are using a hall of mirrors to HIDE the fact that they are NOT lending they are debt making.

        • wills

          Precisely my point here Gizzy.

          The banks technically speaking, going beyond the jargon and the legalese and the verbiage, let us look and see without illusion.

          The banks do not FUND their lending.

          The banks lend.

          Look at that one.

          The banks in fact do NOT lend.

          The banks USE FRB to MAKE a DEBT.

          So, the banks lending is in FACT the banks DEBT MAKING.

          No customer No DEBT / No LENDING.

          The banks are pulling the wool over everyones eyes.

          They are using a hall of mirrors to HIDE the fact that they are NOT lending they are debt making.

  35. AndrewGMooney

    This analysis by DMcW seems to show Morgan Kelly’s nightmare scenario is on schedule:


  36. AnthonyL

    It is fascinating to read “real thinking” on this site. It’s refreshing that people are thinking hard, originally and laterally. Possible solutions are starting to emerge. We are not all required to think as our Banking Lords and Political Masters require us to or would like us to.

    Incidentally, as an example of lateral thinking, go back to Solon the Law Giver of Archaic Athens. He introduced the shaking off of the burden of debt.

    Until 2008, I had not realised how infirm our international financial system is but I do realise that a period of mad expansion must be followed by severe adjustment. The victim generally pays for that severe adjustment.

    @ piombo

    Yes, I think that that you are right that many people, and I suspect that even many leaders, are scared. My worry is that they are scared into denial or minimisation of the gravity of the mortgage default problem. Anger is not a policy but neither is denial, however understandable.

    Leading even a successful medium sized enteprise in this time is like trench warfare. It’s ferociously tough. There is a miasma of denial, delusion, distraction and, yes, there is some despair as buinesses and families financially implode. You have hit it on the nail. The macro, global or geopolitical context is one thing but each of the family and personal interests which you have listed above are core, they are fundamental to the “coping classes”. These interests are the real elements of and are at the heart of a civilised and sustainable society. If you are like me, I took these factors or interests for granted. I was always highly sceptical about pensions and how they were designed but I bought into everything else except into the great mortgage scam. I could not understand why Irish residential property was so darn expensive. Then I realised that incontinent lending at cheap interest rates was producing asset bubble inflation.

    Now I see career, retirement, education , health, investment, the safety and security of the future in serious peril.

    “Creeping inarticulation” is a great and vivid description. This is combined with a sense of hopelessness and impotence. Our poliical masters are well paid serfs. We forfeited the right of autonomy over national economic policy but we elected those who destroyed our economy and now, unavoidably perhaps, are reluctantly destroying our society in the hope of salvaging something.

    I fervently hope that you are right and that the post Frebch election period will bring some much neeeded growth initiatives. JM Keynes does not have a monopoly of economic wisdom but I lean more towards Keynes than to Hayek. I’m unconvinced that at a time of crippling personal debt (as distinct from fiscal deficit)that really severe austerity works best. Pro cyclical policies always look seductive. Spend like there is no tomorrow when there is boom time and spend nothing when times are made is not a good approach. Each exacerbates the extremity of the situation. Austerity works best if personal debt is low. The fiscal deficit has to be addressed but Im not sure that doing so at a time of persistent recession is optimum.

    My increasing apprehension is that the Irish banks (the “covered institutions) are in an uncontrolled spiralling nose dive, they are spinning down, out of control and we don’t know how to regain control and pull out of this. Then I read John Reynolds of the IBF and I get really worried. That;s when I had the feeling that the pilot gets as the plane hit the mountain. I realised then how desperately bad the financial position of the Banks is and how blind the Banks are to the fixing of the problem. Banks seem unwilling to comprehend the notion of actual inability to repay.

    Gizzy said –

    - “The Banks cannot provision anymore for fear of eroding their capital bases again. The government will then have to stump up again which will hurt them in regard to justifying their flawed banking strategy. So the result will be drip fed provisioning and loan book management.” -

    – That makes really good sense to me. The Balance Sheets of the Banks have to be massaged to disguise the inevitable capital weakness of the banks as personal loan default impacts more and more severely. It works out much more expensively to continue to address the symptoms than the cause.

    I have to admit that I suffer from a profound lack of confidence in the CBI as the “Regulator”, in our Government, which is understandably floundering in trying to rescue the situation at a very late point, I despair of NAMA’s policies. It seems to think that the best antidote to toxicity is to administer a lower dose of poison. I despair of Colm McCarthy’s well intentioned but misconceived analysis of the curent situation. I despair of the ERSI analyses, whch seem aimed at trying to prevent panic than based on objective and detached economic analysis. I resent the self interest of the top echelon of civil servants, say the top 125 or so. Their policies seem more directed to maintaining the status quo than to finding new and innovative policy solutions. I worry that we seem to think that the markets are all powerful and must be paid sacrifice to at every opportunity.

    I feel profoundly pessimistic. Back in early 2008 , I was excoriated at a semi public meeting when I dared to suggest, quite tentatvely, that Irish residential property could only crash and that it would be a severe crash landig. I still remember one individual, a retired partner from a large Dublin estate agency who said “Are you for real or are you just pretending to be incredibly stupid?” I was sounding a note of amateur concern when it seemed blidingly obvious to me that we were in for a crash. Later I heard Brian Lenihan talking about restoring AIB to it former glory, NAMA reps talking about a property market recovery and in late 2008, property experts asserting that it might take until third or fourth quarter in 2011 for the property market to start a sustained recovery. There is an embedded capacity, which we have to guard against, for self delusion. It’s the hard wired optimism bias. Disasters are generally avoidable up to quite a late stage but they are often not avoided because of the feeling that “it cannot happen” or that “we are now through the worst of it at this point and we will soon be in recovery.”

    We are at crisis point and approaching the tipping point. The first step is to listen to the suggestion of David McWilliams which I interpret as “Take off the blind fold if you want to look for a solution”. On the other hand, there is a modicum of final comfort in “Wilful Blindness”. That suggests that in facing the worst, it is best not to see what is happening. I’d prefer us to open our eyes, confront reality and avoid fatalism or passivity. At the risk of being attacked again, I am not going to bet on the Irish residential property market recovering in the next 10 years and we can’t rely on property to get us out of the crisis. Continuing to administer heroin is a poor strategy for helping a heroin addict to recover from heroin addiction.

  37. AnthonyL

    A short comment this time!

    There is a very interesting book

    “Zombie Banks (How Broken Banks and Debtor Nations are crippling the Global Economy)” – by a highly respected and experienced financial journalist named Valman Onaraan, published 2012 by Bloomberg Press.

    In Chapter 5 of this Book is an insightful analysis on Ireland

    “Irish Zombies bring the House Down”.

    There is a rumour and I have to be highly responsible, because I can’t authenticate it, that one of the “covered institutions” will shortly report, at the next due date, a dire personal debt default situation and a marked, even dramatic, deterioration against previously reported figures. I doubt that I’m the only person on this discussion to have heard this rumour. I hope that it is totally spurious.


      It’s only a rumour but I’ve heard it too. The other one I’ve heard is about the state of the finances of our County, City & Urban District councils.

  38. Monetary Law

    This is the Law that determines how much your home mortgage is worth after default and if it is converted into the new national currency .In other words does default devalue your home mortgage given to you by an Irish bank for your Irish home signed in Ireland .And the answer is ‘Yes’ , you win , your loan is devalued .

    Here is something interesting to read :


  39. Deco

    We are instructed to be financially blind, as well as being blind in all the important ways.

    And we are instructed to know the trivial minutae about stuff that does not matter. We are driven to destroy our minds in mindless escapism, and to never endure the pain of staying true.


    I found the above link to be very relevant to what the West has become.

  40. Malcolm McClure

    It’s official. Bloomberg says:
    Wealthy More Likely To Lie, Cheat: Researchers

    “Maybe, as the novelist F. Scott Fitzgerald suggested, the rich really are different. They’re more likely to behave badly, according to seven experiments that weighed the ethics of hundreds of people.
    The “upper class,” as defined by the study, were more likely to break the law while driving, take candy from children, lie in negotiation, cheat to increase their odds of winning a prize and endorse unethical behavior at work, researchers reported today in the Proceedings of the National Academy of Sciences.
    Taken together, the experiments suggest at least some wealthier people “perceive greed as positive and beneficial,” probably as a result of education, personal independence and the resources they have to deal with potentially negative consequences, the authors wrote.”

    • bonbon

      I suggest having a look at the Lord Bertrand Russell post in the last thread, quoting 2 books “Impact of Science on Society”, and “The Scientific Outlook”. I quote, to show how the “rich” are to behave :

      “In like manner, the scientific rulers will provide one kind of education for ordinary men and women, and another for those who are to become holders of scientific power. Ordinary men and women will be expected to be docile, industrious, punctual, thoughtless, and contented. Of these qualities, probably contentment will be considered the most important. In order to produce it, all the researches of psycho-analysis, behaviourism, and biochemistry will be brought into play… All the boys and girls will learn from an early age to be what is called ‘cooperative,’ i.e., to do exactly what everybody is doing. Initiative will be discouraged in these children, and insubordination, without being punished, will be scientifically trained out of them.”

      “Except for the one matter of loyalty to the world State and to their own order,” Russell explained, “members of the governing class will be encouraged to be adventurous and full of initiative…”

      Russell issued a strong warning: “On those rare occasions, when a boy or girl who has passed the age at which it is usual to determine social status shows such marked ability as to seem the intellectual equal of the rulers, a difficult situation will arise, requiring serious consideration. If the youth is content to abandon his previous associates and to throw in his lot whole-heartedly with the rulers, he may, after suitable tests, be promoted, but if he shows any regrettable solidarity with his previous associates, the rulers will reluctantly conclude that there is nothing to be done with him except to send him to the lethal chamber before his ill-disciplined intelligence has had time to spread revolt. This will be a painful duty to the rulers, but I think they will not shrink from performing it.”

      This is very explicit, and many recent personalities come to mind, sent to the “lethal chamber” after showing some solidarity with ill-disciplined intelligence. Maybe they were not loyal to the World State?

      • coldblow


        Great quote. When did Russell write this? And was he advocating this or parodying? (Presumably the former.) It’s Huxley’s Brave New World where the different classes, all bred from testtubes, where established by chemical and other interventions during gestation.

        This brings to mind the abolition of selective education (grammar schools) in Britain. The reason given was that it would remove the sense of failure from those who failed their eleven plus (and there is much to this: mhy brother in law recently told him that he was devastated when he failed). On the other hand it has been persuasively argued that the maind drive for the move was class-based: middle class parents were shamed when their offspring were sent to rub shoulders with the lower orders in the local secondary modern. Andrew Neill made a good documnetary about this a couple of years ago, and Newsnight’s Paul Mason I think referrred to the absence of working class grammar school intellectuals in the current mix (I think this was mentioned in a recent link of mine). Modern comprehensive schools are selective in a different way: only children whose parents can afford to live in the better catchment areas attend the better schools, which is a perfect result: useful in practice and with all the required ideological purity. However, I think it is a topic that is not raised in polite society. It does not officially exist.

        By the way, while I went to a grammar school and speak with the local accent I wasn’t working class, being the son of small farming stock, like many another. I made a conscious decision as a teenager not to drop the accent. Within the British class structure this places me in the category ‘miscellaneous’. This was not a smart move economically or socially (I still believe that by and large all politics are class based and that much of the ideological/ pc BS is just a distraction from this) but am glad I did. For benefit of those unfamiliar with the concept, it is known as ‘authenticity’. By the way, Irish society strikes me as rather more class-ridden than British, just a litle less obvious.

        As for your final sentence, these would include the Roman tyrants/ tribunes of the first century bc roughly, such as Catiline, who sought popular support on the promise of debt cancellation.


        • bonbon

          Lord Bertrand Russell wrote this in 1931 ! This is not a commentary or a description, rather a recipe. It is what is going on. Ever notice how certain “fun-loving” billionaires are encouraged?
          Other writings are even more evil. He wanted a pre-emptive thermonuclear attack against the Soviets. I heard that JFK found out he was telegramming the US and Soviets to conflict and apparently there is a “back-off or else” telegram from JFK.
          Obama now wants to go after Russia, Bloomberg prints death warrants for Putin.
          Russell is the Mephistopheles of the 20th century.

          I wonder how many in the EC have sworn loyalty to the “world state”?

        • Juanjo R

          I am reminded of a true story;

          I went to vocational school and it still is one. Another student from there, a friend of mine – he’s from comfortable farming stock, went on to be a solicitor. After passing the law society stuff and with a very good degree he still found eyebrows being raised in job interviews because he had gone to a vocational school – so the vocational school let’s call it St.Y’s V.S. became St.Y’s College and no more eyebrows were raised.

  41. This is an example of the vision and leadership which we woefully lack in Ireland and Europe today;

    “The dogmas of the quiet past, are inadequate to the stormy present. The occasion is piled high with difficulty, and we must rise — with the occasion. As our case is new, so we must think anew, and act anew. We must disenthrall ourselves, and then we shall save our country.”
    –Abraham Lincoln, Annual message to Congress, Dec. 1, 1862

  42. Crystal

    Yes Deco, and this has been orchestrated by a secret elite ‘cabal’ for 300+ years controlling every aspect of society: education, ‘big’ healthcare, food, media, energy, pharma, entertainment, marketing, government, military/industrial complex, WHO & UN. Just follow the money…check out http://www.thrive.com We destroy our health with heavily advertised, processed junk food and then take pharmaceutical chemicals to try restore it! We give babies ‘healthy weaning’ yoghurts containing 5 teaspoons of sugar/fructose syrup- equivalent to 50teasps to a 10 st adult then wonder why we’re all addicted to sugary junk/alcohol/drugs by our teens!! 98% of Europeans have thankfully wised up to the fluoride scandal but guess what, we Irish are in the 2% who are been poisoned, passified & dumbed down with ‘Prozac-like’ fluorisicilic acid, the waste product of the(‘big’) fertiliser industry! This may explain the disappearance of the fighting Irish spirit mentioned in a previous post. See http://www.flouridealert.org/professorpaulconnett He has spent 25 years studying this, I met him last year & he was very concerned at our seeming lack of interest in this most fundamental of public health issues. We need to get the flouride out asap to restore optimum mental functioning, to help us WAKE UP!! In the meantime I’m getting a water filter system with a flouride filter having spent a fortune on glass bottled mineral water in the last year!

    For a little piece of good news re the arrest of a very prominent official in the US on 24/2, see http://www.benjaminfulford.net
    Also re changenation.org an article in Irish Times of 23/2 featured among others, Peter Eigan of Transparency International who ‘leads a global coalition to challenge corruption in more than 90 countries around the world’….

  43. redriversix

    Good Morning
    The 3.23 Billion euro payment we are receiving from the IMF this week……is that a new bail out or an old bail out continued…………….or is it a reward payment for austerity ?……….or is a new bail out spun as a old bail out,maybe its the final payment of the old bailout and we do not need a new bail out as stated by our dear leader.Wonder will the state “invest” any of this old/new/young.special/part-payment bailout in BOI.?

    All this talk of bail outs……maybe we should all get the fcuk out.!!!!!

    • Nah RR6 – You’re obviously not paying attention.

      This tranche is being giving to us so we can give it to the Central Bank so they can burn it!


      But fear not we’re still the best boys in the class and I believe at the next tranche they’re actually going to stick little stars on our foreheads!


      Well, the plan is that the final “tranche” to bail out Anglo Irish will be paid in 2025. Then we can all party like it’s 1999.

  44. redriversix

    S&P puts Greece in Selective default overnight..FT

    ECB temporarily suspends Greek collateral……….FT

  45. redriversix

    Will Greece even make it to the end of March……………..?

  46. Philip

    @ Deco, excellent link you gave there from Sheldon Wolin. We are indeed an open society…open and answerable to Europe and Global whims. No wonder our so called leaders just shrug their shoulders and say it’s not their fault…but they’ll help us cope with the perscribed way we should live our lives by enforcement and managing a media to keep our minds of the “little things” that matter.

    My only hope is that this comes to a head very very soon so we have a wake up call. We are in dire need of a catastrophic blowout that brings the issue home to one and all without equivocation because if it continues for much longer, the subsequnet disaster will be much worse.

  47. bonbon

    S&P this evening declared Greece’s long-term credit rating to “selective default” from CC, thus making Greece the first Eurozone member to be officially declared in default.

    Who’s next?

  48. AnthonyL

    Vincent O’Toole quotes TS Eliot in today’s Irish Times

    Humankind cannot bear very much reality.
    – T. S. Eliot

    Going back to David’s thesis, is it a case that the Banks, the Regulator, the permanent government, the elected Government, the experts and most of the media are unable or unwilling to confront the full reality of our predicament?

    I think that it is a reality that the personal debt default crisis will submerge the Irsh banks , the “covered instututions” unless we can effect a radical silution to get the monkey of personal debt, the yoke of bonded servitude off the backs of crippled borrowers who are on unsustainably high mortgages.

    Excessive level of mortgage and household debt in Ireland is a cancer in our society and it enfeebles our already weakened economy. Add the burden of public debt, largely although not entirely the socialised debt of the banks, and we are in a terrible state of impecuniosity.

    How do we now stave off the coming mortgage default shockwave?

    Any ideas?

    • Malcolm McClure

      AnthonyL: TSEliot hit the nail on the head:
      “Humankind cannot bear very much reality.”

      Shakespeare, of course, was well aware of people’s attachment to unreality:

      “The cloud-capp’d tow’rs, the gorgeous palaces,
      The solemn temples, the great globe itself,
      Yea, all which it inherit, shall dissolve,
      And, like this insubstantial 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.”

      Our real debts are those we owe our parents for life and nurture.
      The rest, merely part of an insubstantial pageant.

    • bonbon

      President Clinton cannot bear reality – he has been fully informed of the extreme danger Obama presents in the immediate future of pre-emptively attacking Russia, emptying the pacific sub fleet thermonuclear bowels. He instead endorses Obama (to protect the wife) putting the entire world in extreme danger. Russia’s Putin sees reality and are ready to respond.

      Enough reality?

  49. AnthonyL

    This is off-message but on the penalty system for people supposedly refusing offers of employment, I noticed on Frontline the absence of the following estimates or even guesstimates:

    1. The percentage of unemployed people who have declined real offers of employment.
    2. The basis for refusal of offers of employment. Theere may be valid reasons.
    3. What is the annual cost to the Exchequer caused by people who are voluntatarily and unncessarily unemployed?
    4. Overall, what is the true scale of the problem?

    It’s just a guess on my part but I suspect that the real problem is involuntary unemployment. I am unaware of any evidence based case that there is a widespread abuse of unemployment assistance by undeserving applicants. If there is , I’d like to see it. Why hss the Minister and her Department not disclosed this to the public?

    I am intrigued by the notion that retraining or reskilling the unemployed will lead to a substantial reduction of unemployment. Sure, if that’s the case, great! For a while there I was uncessarly worried that the recession was the cause of the increase in unemployment from 100k to 430k, ignoring the former self employed who are desperate for work and can’t get any.

    Should we prohibt emigration immediately so that our life style emigrants will be retrained to take up all of these available jobs?

    I know that Pat Rabitte will accuse me of “corrosive cynicism” if I question if we are inventing a trivial or non existent problem to fix while ignoring the more serious problem which we cannot fix.

    Is it like being admitted to A & E for a suspected heart attack to find Junor Hospital Doctor saying

    “Yes, let’s park the suspected heart attack for now, I don’t like the look of that toenail, it could beocme ingrown, and I’d like to address that first. We will look at the possible heart attack when we get that nasty toe of your’s nioely fixed up. That sound good to you?”

    It would be nice if our Minister could get real and if they could focus on the real crises.

    We don’t need €144k spent on ink catrtidges and we don’t need silly nonsense at the moment about trivial matters. Minister Burton could find better uses for her time and for her civil servants.

    • coldblow

      It’s like being scolded by the doctors for getting injured and for punishment you have to circumnavigate the hospital car park fifty times a day in your wheelchair and apply in writing for use of the toilet.

      • AnthonyL

        Laughing, too true!

        • Lord Jimbo

          Insiders and rugby boys who played at banking have been exposed, only took a few decades. Situation still playing out, handy for them they can turn to the government when their schemes collapse but banks go on bullying people. I have no loans, no mortgage, I hope to keep it like that. Neither lender nor borrower be.


      Nail head/hammer interface completed. It’s like the Evening Heggald in the 80′s ranting on about dole spongers and quietly ignoring the fact that it turned out that most welfare fraud was being perpetrated by civil servants, from within the relevant sections.

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