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

[Declan]

David McWilliams: We're being robbed by our supposed protectors

Wednesday January 13 2010

Our politicians are putting bondholders before the Irish people they are meant to represent

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[Fear ón Srath Bán]

That's scary shit, really scary shit... It's an enormous figure of close to €200bn -- or more than 150pc of our total GDP

Not only is this (mis)government protecting the shareholders (FECKING SHAREHOLDERS!) at the expense of the ordinary tax paying joe, they're consigning a generation of youth to the employment scrapheap.

What a shower of incompetent and corrupt b*stards.

[Hardy]

What a shower of incompetent and corrupt b*stards.

Indeed. Iceland is having a referendum on whether taxpayers should compensate UK and Dutch interests for loan defaults by Icelandic banks that were in no way owned by the Icelandic people. Guess how the people will vote!

Needless to say, we'd vote the same way if NAMA was put to a referendum. The government cannot claim to have a mandate to put tens of billioins of the  people's money at risk to save the assets of speculators. Where was that in the election manifesto?

How did I become part owner of the banks' deficit? I'm damn sure I wasn't invited to be part owner of their massive profits in the gravy train days. We deserve all the screwing we're going to get as a people if we let them do this to us.

[Billys Boots]

There's no point us complaining about this unless we're prepared to use the only effective recourse we have - our vote.

[thebigfella]

There's no point us complaining about this unless we're prepared to use the only effective recourse we have - our vote.

Does anyone really give a fcuk? Seriously? I know I don't

[lynchbhoy]

There's no point us complaining about this unless we're prepared to use the only effective recourse we have - our vote.

which is what I'd do if say the labour party took it upon themselves to return back to being a labour party for the people and represent the people like the icelandic president is (now at least) doing.

I'd have no faith in fine gael, the other parties dont have enough power or support - so only Labour could fill this void imo.
We need a political alternative....

[muppet]

There's no point us complaining about this unless we're prepared to use the only effective recourse we have - our vote.

We could petition the President to exercise her veto.

[Billys Boots]

There's no point us complaining about this unless we're prepared to use the only effective recourse we have - our vote.

We could petition the President to exercise her veto.

On behalf of an immature/indecisive electorate??

[muppet]

There's no point us complaining about this unless we're prepared to use the only effective recourse we have - our vote.

We could petition the President to exercise her veto.

On behalf of an immature/indecisive electorate??

and..............maybe to force a referendum on NAMA.

[ludermor]

There's no point us complaining about this unless we're prepared to use the only effective recourse we have - our vote.

which is what I'd do if say the labour party took it upon themselves to return back to being a labour party for the people and represent the people like the icelandic president is (now at least) doing.

I'd have no faith in fine gael, the other parties dont have enough power or support - so only Labour could fill this void imo.
We need a political alternative....

There seems to be very mixed views from Iceland as to whether the President done the right thing or not. If they go for a referendum they are relying on lay people to make a very important economic decision, I'm not sure if i would be happy with that. I know its the basis of all referendums that the people vote but rightly or wrongly i would prefer the experts to make that decision ( i know i know... they got us into this mess etc etc)

[orangeman]

Irish glass bottle site bought for € 420m - worth €60m today.

[Declan]

Not strictly on topic but a little insight into how the people who matter view the rest of us

Top club operated under form of thieving -- judge
by Tim Healy

Thursday January 14 2010

EXCLUSIVE private members' club 'Residence' operated under "a form of thieving" in which employees' tax contributions were used to subsidise the business, a court heard yesterday.

Residence directors, the well-known restaurant owners Simon and Christian Stokes, are seeking a continuation of court protection because of its financial difficulties. Residence opened in May 2008 and is a favourite haunt of celebrities and Dublin socialites.

Mr Justice Peter Kelly said it was effectively subsidised by the "hard-pressed Irish taxpayer" through employees' tax deductions not been passed on to the Revenue Commissioners, who were owed €1.2m.

He said it was "a form of thieving" to use employees' money deducted for PAYE and PRSI contributions to subsidise a business.

The laws on examinership were not intended to provide "a form of absolution for recalcitrant directors", the judge added.

After being told by chartered accountant Paul Wyse that many companies were "regrettably" doing the same thing, the judge said the accountancy description of such tax money as "working capital" appeared "extraordinary" and gave "a form of respectability to money being improperly used" by a company. Mr Wyse agreed.

Earlier, counsel for the directors of Missford Ltd, the holding company for Residence, accepted they bore ultimate responsibility for the conduct of its business.

However, counsel said, they did not know the employee tax contributions had not been passed on to the Revenue until the Revenue itself initiated an audit after the company claimed a VAT refund. - 
Saying the case raised "very serious" issues, Mr Justice Kelly postponed to next Wednesday a decision on whether to continue court protection for Missford, which employs 58 people.

The club has 1,450 members and its initial fees were €1,600 a year, plus a €250 joining fee.

Pending the court's decision, interim examiner Jim Stafford continues in place and the judge has also made orders for payment of wages. The application for protection was supported by all the creditors, including Zurich Bank -- owed more than €2.3m -- while the Revenue said it was "very guardedly neutral".

Rossa Fanning, for the bank, said Missford's directors had provided personal guarantees over loans and the bank also had charges over insurance policies.

Alison Keirse, for the Revenue, said it had "the gravest of concerns" about the ability of the management of Missford and had heard nothing in court to give it any comfort. There must be a change of management, she said. . Once again the people supposed to ne regulating this stuff show "concern". F**kers should in jail

Missford's directors had claimed the underpayments of tax were attributable to a previous financial controller, but the Revenue asserted the directors bore ultimate responsibility.

While a new financial controller had been put in place, the Revenue had difficulty seeing how the company could pay taxes as they fell due given it had never done so.

The Revenue was also concerned Missford had made no profit since it began operating in May 2008 and that the evidence to the court was all based on projections.

If court protection was granted, counsel said, the Revenue would expect the examiner to report back to the court within a very short time on his investigations into certain payments made about which the independent accountant had expressed concerns.

In seeking protection, Lyndon MacCann, for the company, said Mr Wyse, in his independent accountant's report, believed the company had a reasonable prospect of survival. . Unreal. Some bright spark. How do these guys get up in the morning and convince themselves the world is flat?

The club had gone against the industry trend by increasing its membership by 45pc to 1,450 in 2009 and there were no membership cancellations since the interim examiner was appointed. Both directors were also taking 33pc cent salary cuts, leaving them with salaries of €1,000 weekly in one case and €900 in the other.

Whatever "irregularities" predated this application could be dealt with in the scheme of arrangement, counsel added.

In evidence, Mr Wyse said the club was a "unique" venue, he believed the projected levels of growth were attainable and the business was viable. There were expressions of interest from four potential investors and some €1m in investment would be required, he said.

The court also heard Missford loaned €616,000 to related companies Mayfair Properties Ltd, which traded as Bang Cafe, and Auldcarn Ltd, a subsidiary of Mayfair, both of which were unable to repay the loan and were in liquidation.

[gerrykeegan]

Declan

Where did you get that article from?

[Main Street]

There seems to be very mixed views from Iceland as to whether the President done the right thing or not. If they go for a referendum they are relying on lay people to make a very important economic decision, I'm not sure if i would be happy with that. I know its the basis of all referendums that the people vote but rightly or wrongly i would prefer the experts to make that decision ( i know i know... they got us into this mess etc etc)

You prefer the experts to make the decisions to impose the burden of a bank failure on the citizens?
That sounds fair
At the very least, there should be a general election on this most serious issue.

There is no if about it, the Icelanders are going to referendum.
The ref. question is, do you agree to reject the parliamentary bill or not. Some 60% now agree to reject.

As simply as I can explain.
The significant point missed by everyone, is that there is already a bill passed into law where the Iceland state has agreed to pay what is known as the Icesave debt.
The Brits and Dutch rejected 2 of the terms contained in that bill and that's why there was another amended bill put before parliament, hotly debated for months before being passed and subsequently not signed  by the President (meaning it's sent for referendum).
The original bill is still law. The amended bill contains two clauses, imposed by the Brits and the Dutch, are regarded as particularly pernicious.

There is a significant difference to this Icesave debt and for example Nama. The Icesave debt relates to deposit accounts in an Iceland bank, operating in the UK and Holland. Such liquid assets generated by that  bank were used to acquire and invest in things like High Street businesses, also West Ham fc
That bank collapsed and the EEA (European Economic Area) posthumously interpret a vaguely worded rule that the  Iceland state is responsible for the first 20k of each deposit account. That amounts to Eur 5.5bn,  about 60% of the Iceland GDP.
That Icesave debt comes on top of a domestic currency/economic collapse, not too dissimilar in nature to Ireland.

The President participated with those Iceland bankers, travelling in their private jet to England and gave sponsored after dinner talks to promote this bank.
He now says he was wrong, he admits that he was led up the garden path by these bankers. The referendum is seen by some as his attempt to restore his cred. He is an old socialist, has an enormous ego and an excellent command of Oxford English. He was interviewed by Paxman on the BBC the other day and managed to 'out ego' Paxman and talk him down.

[Billys Boots]

He is an old socialist, has an enormous ego

I have to say my initial reaction to his referendum decision was that it was ambitious grandstanding.  I've yet to see anything that would convince me that it's not.

Michael Ring, eat your heart out.