The Big Bailout of the Eurozone (Another crisis coming? - Seriously)

[Zapatista]

Just let me know when it's time to go and get the tinned food and bottled water.

Ye can start with the water now. It will soon be cheaper than tapped water and if yer in Galway it won't kill ye.

Or invest in Hienz and Rockwell and then start a panic about doomsday.

[orangeman]

Just let me know when it's time to go and get the tinned food and bottled water.

Ye can start with the water now. It will soon be cheaper than tapped water and if yer in Galway it won't kill ye.

Or invest in Hienz and Rockwell and then start a panic about doomsday.

Rocwell shares would be well up this year !! 

[Donagh]

All the gains since Lenihan's gamble guarantee have now been wiped out. So much for all the backslapping in the media over the weekend. "Brian became a man" indeed 

[orangeman]

All the gains since Lenihan's gamble guarantee have now been wiped out. So much for all the backslapping in the media over the weekend. "Brian became a man" indeed 

Credit to him all the same for having the foresgight to make the first leap ! He'd have been laughed at and criticised had others not joined in.

[Donagh]

All the gains since Lenihan's gamble guarantee have now been wiped out. So much for all the backslapping in the media over the weekend. "Brian became a man" indeed 

Credit to him all the same for having the foresgight to make the first leap ! He'd have been laughed at and criticised had others not joined in.

Or he could just have bankrupted the country. ISEQ is down 10% to roughly where it was last week and Anglo Irish Bank has lost 25% of it's value. If it goes to the wall the Irish government will be liable for all it's deposits and loans. Pretty risky strategy in order to keep a few builders afloat.

[pintsofguinness]

All the gains since Lenihan's gamble guarantee have now been wiped out. So much for all the backslapping in the media over the weekend. "Brian became a man" indeed 

Credit to him all the same for having the foresgight to make the first leap ! He'd have been laughed at and criticised had others not joined in.

Or he could just have bankrupted the country. ISEQ is down 10% to roughly where it was last week and Anglo Irish Bank has lost 25% of it's value. If it goes to the wall the Irish government will be liable for all it's deposits and loans. Pretty risky strategy in order to keep a few builders afloat.

Explain?

How much would the Anglo Irish Bank cost if it goes down?
I meant to ask as well....would Bank of Irleand branches in the North be considered an Irish bank or a UK one?

[Donagh]

Explain?

How much would the Anglo Irish Bank cost if it goes down?
I meant to ask as well....would Bank of Irleand branches in the North be considered an Irish bank or a UK one?

80% of the Anglo Irish loans are reckoned to be to builders and developers sitting on land which is declining in value. Instead of calling the loans in to generate the cash they're so desperate for, they're rolling over the interest payments on the back of the government guarantee. So IMO, it's not the banks that Lenihan has bailed out but the builders again.

Think I read somewhere over the weekend that Anglo Irish has about E5 billion in loans it has no chance of recouping. 

[pintsofguinness]

80% of the Anglo Irish loans are reckoned to be to builders and developers sitting on land which is declining in value. Instead of calling the loans in to generate the cash they're so desperate for, they're rolling over the interest payments on the back of the government guarantee. So IMO, it's not the banks that Lenihan has bailed out but the builders again.

Ach people blame the builders for everything.  What's the point in demanding the loans when they can't be paid? So the banks can sit on land that's going down in value?

[Donagh]

Ach people blame the builders for everything.  What's the point in demanding the loans when they can't be paid? So the banks can sit on land that's going down in value?

Better to get some return now even if it means bankrupting the big builders in order to keep the bank (and Ireland Plc) afloat. 

[Bogball XV]

All the gains since Lenihan's gamble guarantee have now been wiped out. So much for all the backslapping in the media over the weekend. "Brian became a man" indeed 

Credit to him all the same for having the foresgight to make the first leap ! He'd have been laughed at and criticised had others not joined in.

Or he could just have bankrupted the country. ISEQ is down 10% to roughly where it was last week and Anglo Irish Bank has lost 25% of it's value. If it goes to the wall the Irish government will be liable for all it's deposits and loans. Pretty risky strategy in order to keep a few builders afloat.

Explain?

How much would the Anglo Irish Bank cost if it goes down?
I meant to ask as well....would Bank of Irleand branches in the North be considered an Irish bank or a UK one?

The only situation wherein we have to pay out is when anglo defaults on repayments to other banks and its customers.  The guarantee was made in order that other banks would buy bonds issued by anglo and otherwise lend anglo money so that anglo could obtain financing to meet its ongoing obligations (being older loans/bonds with other banks).  The guarantee basically says that there's no problem in lending to anglo because we the irish govt are guaranteeing that you'll be paid back if anglo go bust.  Additionally the guarantee is supposed to ensure that customers leave their money in the bank as they know they'll get their life savings back whatever happens.
So, after all that nobody knows how much it would cost if they went down:
We'd have to pay the shortfall of the deposits, ie the amount of cash that wasn't there to be refunded to depositor.
We'd have to pay all their outstanding debt, this is probably somewhere around the value of their loan book ie circa 60bn.
We would however take over all the loans owed to anglo ie circa 60bn, and try and see what we could get for them, maybe 40bn - although Brian Lenihan and the dept are confident that we would be able to obtain more for the loan book than we would have to pay out - i don't believe that for a minute, I reckon we'd be out 10-15bn anyway.
Good job I like beans though, especially Hienz!!

[pintsofguinness]

bogball

The only situation wherein we have to pay out is when anglo defaults on repayments to other banks and its customers.  The guarantee was made in order that other banks would buy bonds issued by anglo and otherwise lend anglo money so that anglo could obtain financing to meet its ongoing obligations (being older loans/bonds with other banks).  The guarantee basically says that there's no problem in lending to anglo because we the irish govt are guaranteeing that you'll be paid back if anglo go bust.  Additionally the guarantee is supposed to ensure that customers leave their money in the bank as they know they'll get their life savings back whatever happens.
So, after all that nobody knows how much it would cost if they went down:
We'd have to pay the shortfall of the deposits, ie the amount of cash that wasn't there to be refunded to depositor.
We'd have to pay all their outstanding debt, this is probably somewhere around the value of their loan book ie circa 60bn.
We would however take over all the loans owed to anglo ie circa 60bn, and try and see what we could get for them, maybe 40bn - although Brian Lenihan and the dept are confident that we would be able to obtain more for the loan book than we would have to pay out - i don't believe that for a minute, I reckon we'd be out 10-15bn anyway.
Good job I like beans though, especially Hienz!!

In a word, f**k! 

Donagh

Better to get some return now even if it means bankrupting the big builders in order to keep the bank (and Ireland Plc) afloat.

Who's going to buy it though Donagh?  Look at all the people that would be out of work.  I see what you're saying and imo if you /your business or whatever get a loan you shuold be expected to pay it back without any favours however you can't blame the builders for this mess, the banks caused the mess.  It's the same with people who are defaulting on their mortgages - it makes more financial sense for banks to hang on and see if they will pay.
People are all to happy to put the boot in to the builders, I remember a few months ago gloating about the builders being paid off ffs.

[Donagh]

Not one of the big ten builders in the country have went to the wall despite all of the smaller builders and contractors being sent down. Now there will be no pressure on them to come up with the money but they can sit out the slump safe in the knowledge that the government will stump up the money they owe.

From yesterdays Tribune:
The golden triangle – FF, the builders and the banks
Justine McCarthy
Despite last week's bail-out, some of the country's most ambitious redevelopment plans are still in jeopardy
A word in your ear: Taoiseach Bertie Ahern with builder Bernard McNamara at the Galway Races in 2006

It was Fianna Fáil's best friend, Bob the Builder, who propelled the banks into the liquidity crisis and caused the historic post-midnight sitting of the Dáil. After a decade of swaggering around the corridors of power and inside the Fianna Fáil tent, many of those feted builders are now expected to put their most extravagant plans on ice and sit out the recession, cushioned by the citizens' guarantee to the financial institutions.

"We're not so much talking about a golden circle as the golden triangle – Fianna Fáil, the builders and the banks," says Labour's Joan Burton.

Irish banks are owed €110bn by the property and construction sector. It accounts for €60 of every €100 that residents have on deposit. As 28% of all borrowings, it is significantly greater than the 25% construction proportion of bank lending in Japan when the banks crashed there in 1989.

Question marks hang over two of the most ambitious redevelopment plans for Dublin. As An Bord Pleanála's hearing of Seán Dunne's planning appeal for his Ballsbridge proposal continued last week, speculation was rife that, even if permission is granted, it will not go ahead until the economy improves.

The old Doyle hotels site cost him €379m three years ago and, should he be permitted to build his entire proposal, construction would cost almost half a billion euro more. In the event that construction financing was available, the problem would be selling 98,000square metres of residential units in a slump. Ulster Bank, the non-Irish-owned bank specifically mentioned by the minister for finance when he discussed the extension of the bank guarantee, is believed to be the sole lender for the development.

The roadblock for the develop­ers is that, because of the massive indebtedness, overseas banks are less forthcoming in lending to their Irish counterparts. This type of lending is usually extended for short periods of about three months and, since the start of this year, some of the overseas lenders had refused to renew the arrangements. In other words, the builders had become such financial parasites, they devoured their own lifeline.

A risk assessment conducted by an international investment bank of AIB and Bank of Ireland found half of all loans for development were given to just 40 borrowers. Some 60% of AIB's total loans were taken up by the property sector and 70% of Bank of Ireland's.

A second trophy development hanging in the balance is the 24.5-acre Irish Glass Bottle site in Ringsend. It too smashed Celtic Tiger price records when it was bought in November 2006 by a consortium involving builder Bernard McNamara, financier Derek Quinlan and private clients of Davy stockbrokers. Anglo Irish Bank, the country's third biggest bank, has lent €288m for the project which envisages 2,166 apartments. The auguries are not good. Another developer, Liam Carroll, applied for permission to convert his brand new apartment development at the old Gasworks into a hotel, just down the road from the IGB site, when he failed to offload the apartments. Davy's clients put up €52.25m of the purchase price with McNamara's company lending it €62.5m plus a personal loan of €101,000. The starting date for construction – which will cost as much again as the purchase price – is next April. Watch this space.

Of the six institutions rescued by the government's decision last Monday night, AIB has the biggest loan book for the construction and property sector, at €30bn. Bank of Ireland has about €14bn. Irish Nationwide has nearly €10bn. Probably the most vulnerable of all is Anglo Irish Bank, the third biggest Irish-owned bank which described itself as "a relationship bank" but is more popularly known as "the builders' bank" and "the bank for big fish."

It is exclusively engaged in commercial lending and, though it has just 30,000 customers, its loans, primarily to the property and construction sector, come to €70bn. It is no surprise Anglo Irish was the one said to be closest to the precipice of ruination last Monday when its share price plummeted by 47%. The country's richest person, Seán Quinn, owns 15% of the bank's shares, along with his family.

Among Anglo Irish's big-name borrowers are Liam Carroll for his vast Cherrywood site in south Dublin, Bernard McNamara for his purchase of the gigantic Elm Park in Booterstown, Seamus Ross's Menolly Properties and Treasury Holdings for the refinancing of the Ritz Carlton Hotel in Enniskerry. It is also the foremost lender to Pierse Construction.

[magpie seanie]

It absolutely galls me that the government are doing this but it is a necessary evil because we have gone so far down the road of corruption, greed and under handedness that we cannot turn away from it immediately without dire consequences. Joe Higgins' (someone I wouldn't be inclined to agree with all that often) piece earlier on this thread was hard to argue with. A touch exaggerated it could be argued in parts but a damning indictment on our so called democracy and economic philosophy. He is right that there is no opposition in the Dáil. There is very little difference between any of them.

If people are held to account for this mess then good but I won't be holding my breath.

[muppet]

It appears the reasson we can (and presumably the same goes for the Danes) give such a guarantee is that our national debt/GDP ratio is very good in comparision to say Britain who firstly have a much bigger banking industry and secondly have a far worse National Debt/GDP ratio. The same applies to the bigger Euro zone economies.

If the whole thing continues to tank we may escape with merely a massive national debt, and associated taxes. But then a lot of banks may have moved here in the meantime.

The EU would not be happy, but seeing as it takes forever for our unelected commissioners to decide, if they even have the authority to decide, to move towards a decision that will arrive long after the horse has bolted, their input wont matter.

BTW I agree that it is absolutely necessary. But when this mess is over heads should roll and I dont mean 12 year tribunals, I mean 12 years in jail.

[orangeman]

It appears the reasson we can (and presumably the same goes for the Danes) give such a guarantee is that our national debt/GDP ratio is very good in comparision to say Britain who firstly have a much bigger banking industry and secondly have a far worse National Debt/GDP ratio. The same applies to the bigger Euro zone economies.

If the whole thing continues to tank we may escape with merely a massive national debt, and associated taxes. But then a lot of banks may have moved here in the meantime.

The EU would not be happy, but seeing as it takes forever for our unelected commissioners to decide, if they even have the authority to decide, to move towards a decision that will arrive long after the horse has bolted, their input wont matter.

BTW I agree that it is absolutely necessary. But when this mess is over heads should roll and I dont mean 12 year tribunals, I mean 12 years in jail.

[/b][/i]


You're right but we all know this isn't going to happen.