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

[muppet]

http://www.davidmcwilliams.ie/2010/09/20/capital-punishment-for-all

McWilliams most recent piece. Have we anyone in power that has the balls to do what he says regarding Anglo?

Rossie11 posted the above from McWilliams a few weeks ago. It contained the following quote:

n other countries which have faced our type of crises, the state forced local pension funds to buy government bonds or else froze savings, reintroduced capital controls and tried to grab people's savings.

The same day the Indo had a report stating that both IBEC and ICTU wanted the pension rules changed so that Irish Pension funds could buy Irish Government Bonds. Is this the turkeys demanding christmas?

http://www.independent.ie/business/personal-finance/pensions/investment-ban-raises-fears-for-future-of-funds-2354143.html

The next day an article in the Indo quoted the 'The Society of Actuaries and the Irish Association of Pension Fund Managers' as proposing a number of measures to ease the funding requirements on Pension which they say are too restrictive. Our pensions' solvency is based on German Bonds interest rates and with very good reason. The above society thinks we should have our pensions calculate their solvency based on the current (record high) Irish Bonds interest rates. Of course this would require legislation to allow Irish Pensions buy Irish Government Bonds. More significantly the article states "However, pensions legislation would need to be rewritten to allow the life company providing the annuity to cut the pension payment if there was a default by the Irish State. This would in effect mean that the risk of default passes from the scheme to the pensioner".

In essence IBEC and ICTU want to save the pensions by having them gamble on Irish Government Bonds and have the burden of the risk of default on the pensioner.

http://www.independent.ie/business/irish/fund-managers-propose-solution-to-benefits-crisis-2355203.html

I am convinced that this is likely in the Budget. I think McWilliams is warning us extremely gently, to avoid accusations of causing national panic, but yet he will still be able to point back to that article next year and say 'I told you so'.

This being Ireland, my prediction is that the Government won't overtly force the pensions into this, they will merely get the social partners, IBEC and ICTU, (sworn enemies mar dhea) to propose it and then the Government will 'take it into consideration'. It will then appear in the Budget and will buy the Government more time next year. Meanwhile they will happily tell us that a bond auction was 'oversubscribed' which of course will have indicated that 'we have turned a corner' etc.

Incredible as it may seem, not merely content with gambling our economy and our sovereignty to bail out the banks, the Government may be hell bent on gambling our pensions as well. If they subsequently default they may end up having lost everything that we have, on our compliant little behalves.

If, and it is still an if, they are in fact at a stage whereby they are considering getting local pensions to invest in Irish Government Bonds, look at the first quote above to see what McWilliams says are alternatives.

[bcarrier]

Irish taxpayer to provide €1bn bail-out of FÁS and university pension funds

http://www.finfacts.ie/irishfinancenews/article_1020763.shtml

One for  "the things that make you go WTF " thread.

[whiskeysteve]

What are they trying to hide I wonder? deadly shower altogether!

http://www.independent.ie/national-news/fingleton-report-to-remain-secret-2374771.html

Fingleton report to remain secret

By Shane Phelan

Tuesday October 12 2010

THE Department of Finance is refusing to publish a report on payments to controversial former Irish Nationwide chief executive Michael Fingleton.

The stricken building society's public interest directors were requested by Finance Minister Brian Lenihan to investigate payments to Mr Fingleton, following revelations of a €1m 'bonus' as part of a €2.4m package for 2008.

The package included a salary of €893,000, benefits worth €70,000, and another payment of €450,000, most of which covered a massive backlog in untaken leave.

Mr Fingleton last night faced calls to return the €450,000 sum following revelations about it in yesterday's Irish Independent.

Mr Lenihan tasked directors Adrian Kearns and Rory O'Ferrall with examining salary, bonus, pension and other payments made to Mr Fingleton by the ailing lender.

However, officials are now refusing to publish the report or release it under Freedom of Information rules.

Following legal advice, the department claims the report cannot be published because it contains information received in confidence as well as commercially sensitive data.

The department has also refused to give a copy of the report to Mr Fingleton (72).

Reckless lending under Mr Fingleton's stewardship culminated in the institution recording losses of €2.5bn last year.

The losses were more than the building society ever made throughout its history and the cost of a state bailout is now expected to be €5.4bn.

Meanwhile, Fine Gael communications spokesman Leo Varadkar last night called on the former bank boss to give back the unpaid leave payment of close to €450,000.

"It beggars belief that anyone should be entitled to €450,000 worth of holiday pay," said Mr Varadkar.

"But it's even more astounding when that person turns out to be the former chief executive of a building society which has had to be bailed out by the taxpayer."

- Shane Phelan

Irish Independent

[Lone Shark]

http://www.davidmcwilliams.ie/2010/09/20/capital-punishment-for-all

McWilliams most recent piece. Have we anyone in power that has the balls to do what he says regarding Anglo?

Rossie11 posted the above from McWilliams a few weeks ago. It contained the following quote:

n other countries which have faced our type of crises, the state forced local pension funds to buy government bonds or else froze savings, reintroduced capital controls and tried to grab people's savings.

The same day the Indo had a report stating that both IBEC and ICTU wanted the pension rules changed so that Irish Pension funds could buy Irish Government Bonds. Is this the turkeys demanding christmas?

http://www.independent.ie/business/personal-finance/pensions/investment-ban-raises-fears-for-future-of-funds-2354143.html

The next day an article in the Indo quoted the 'The Society of Actuaries and the Irish Association of Pension Fund Managers' as proposing a number of measures to ease the funding requirements on Pension which they say are too restrictive. Our pensions' solvency is based on German Bonds interest rates and with very good reason. The above society thinks we should have our pensions calculate their solvency based on the current (record high) Irish Bonds interest rates. Of course this would require legislation to allow Irish Pensions buy Irish Government Bonds. More significantly the article states "However, pensions legislation would need to be rewritten to allow the life company providing the annuity to cut the pension payment if there was a default by the Irish State. This would in effect mean that the risk of default passes from the scheme to the pensioner".

In essence IBEC and ICTU want to save the pensions by having them gamble on Irish Government Bonds and have the burden of the risk of default on the pensioner.

http://www.independent.ie/business/irish/fund-managers-propose-solution-to-benefits-crisis-2355203.html

I am convinced that this is likely in the Budget. I think McWilliams is warning us extremely gently, to avoid accusations of causing national panic, but yet he will still be able to point back to that article next year and say 'I told you so'.

This being Ireland, my prediction is that the Government won't overtly force the pensions into this, they will merely get the social partners, IBEC and ICTU, (sworn enemies mar dhea) to propose it and then the Government will 'take it into consideration'. It will then appear in the Budget and will buy the Government more time next year. Meanwhile they will happily tell us that a bond auction was 'oversubscribed' which of course will have indicated that 'we have turned a corner' etc.

Incredible as it may seem, not merely content with gambling our economy and our sovereignty to bail out the banks, the Government may be hell bent on gambling our pensions as well. If they subsequently default they may end up having lost everything that we have, on our compliant little behalves.

If, and it is still an if, they are in fact at a stage whereby they are considering getting local pensions to invest in Irish Government Bonds, look at the first quote above to see what McWilliams says are alternatives.

This is huge news, but of course like everything else in this country, it'll only reach the national consciousness when it's too late. It's a win-win for everyone bar the pension holder.

From the Government's point of view, it's a source of borrowing at a time when those sources are drying up. For the pension fund managers, it's a great deal. Most pension schemes are underfunded, so this way they get to put the "safe" proportion of their fund into 6% return assets, and thus not have to put in more money to compensate for bad actuarial calculations up to this point. If the government defaults, the fund managers can turn around and blame the Irish state and thus escape culpability. If they are forced to continue investing in risk free bonds, such as German ones, then their schemes continue to be badly funded and the money has to come form somewhere else, which will often have the net effect of a disgruntled employer moving his fund elsewhere.

This is absolutely huge and everyone out there who has a private pension should be asking the tough questions of their HR departments right now to ensure that this gets flagged up.

[Rossie11]

Lone Shark
I am in a small pension scheme with no HR dept between me and the fund manager.
Is there an option for me to instruct them to move my pension to some other scheme/fund
to avoid this?
I wouldnt know a whole pile about pensions but to me this just looks like a huge govt gamble with our future savings

[Lone Shark]

Absolutely.

Contact your fund manager directly and ask him directly what way your fund is split. Don't get fobbed off with "20% Bonds, 15% cash and 65% equities" or any such nonsense - get an actual breakdown. It's a pain in the nads for him to do so you'll have to chase it, but they are obliged to give that information as far as I'm aware.

Most companies will allow you to self administer if needs be, but I'd be wary of going the whole hog like that - it should be possible to just move around into different funds if needs be.

[Bogball XV]

It's all over - time to close this thread and somebody can start a new one - "The recovery of Ireland and how she became the prize pig of the litter".  The new thread will undoubtedly be a mine of information and important chronological record for economists in years to come as they try and put together the story of the recovery.

Today's Indo Front Page Headine:

Economy has 'turned corner' says top rating agency boss

Here's a link if anybody could be bothered reading such dross:

http://www.independent.ie/business/irish/economy-has-turned-corner-says-top-rating-agency-boss-2376296.html

[whiskeysteve]

It's all over - time to close this thread and somebody can start a new one - "The recovery of Ireland and how she became the prize pig of the litter".  The new thread will undoubtedly be a mine of information and important chronological record for economists in years to come as they try and put together the story of the recovery.

Today's Indo Front Page Headine:

Economy has 'turned corner' says top rating agency boss

Here's a link if anybody could be bothered reading such dross:

http://www.independent.ie/business/irish/economy-has-turned-corner-says-top-rating-agency-boss-2376296.html

Released 2 days after this article by mcwilliams 

http://www.davidmcwilliams.ie/2010/10/11/avoid-false-ratings-prophets

Avoid false ratings prophets
October 11, 2010

Posted in Articles | Sunday Business Post by David McWilliams 177 Comments
--------------------------------------------------------------------------------

The other night, I watched American Gangster, the marvellous film made about the life of Frank Lucas.

Lucas built a huge heroin dealing network, buying the heroin in Vietnam in bulk and then releasing it on to the streets of New York.

Apparently what distinguished his heroin from the competitors' heroin was the pureness of the drug.

Unlike his competitors, Lucas had such a good source that he could afford not to cut the drug up so much and therefore the quality of the heroin marked his product out. In an effort to brand his heroin to distinguish it from his competitors, Lucas marked all his heroin bags with the name ''Blue Magic''.

The Blue Magic mark attested to the premium quality of the drug.

However, to get the premium stamp, Lucas had to employ chemists who would check the quality. It wasn't good enough to employ addicts to verify, he had to get it properly assessed.

In the real drug world, the drug stamper is a crucial part of the drugs business.

For example, when cocaine comes into Spain from Latin America, Irish dealers, who are buying the drugs from bigger Latin American dealers, will get a ''chemist'' to verify that the drug is of a certain purity.

Once this quality has been established, the Irish drug dealers will set about moving the drugs from a warehouse in Spain to Ireland.

With the image of drug dealers in your heads, let's talk about the banking businesses and the various characters who play their role in the money chain.

After all, the credit business, like the drug business, is all about distribution.

The money – like the drugs from Latin America – comes in at the top when the local bank, say AIB, borrows in the money market. In a credit boom once it has the money secured at the top, a bank like AIB goes about pushing the credit through the system so that it can get to the credit junkies at the bottom who will use the credit to feed their consumption habit.

But, like the global drug dealer, the international banking system needs its stamper who attests to the quality of the money or the financial product that is being peddled.

This is where the so-called ''objective'' ratings agencies come in.

And this is why I get annoyed when I hear some suit from Fitch, Moody's or Standard & Poor's prattle on about our credit rating.

Do these people have any credibility?

Like the whole economics and finance industry, the acid test of credibility should be how they answer the simple question: ''Where were you in the boom?"

In Britain in the 1950s the question about personal character was always ''Daddy, where were you in the war?" Now it should be where were you in the boom, and if you were on the wrong side I can't take you seriously.

So where were the credit rating agencies in the boom? Were they on the right or the wrong side?

Let's stick with the drugs metaphor to explain where the rating agencies were and what they were doing.

Both investment bankers and drugs brokers need to know the quality of the product they are paying for.

The drugs broker has a chemist. The chemist rates the purity of the consignment, gives it a triple A stamp and takes his fee.

The investment banker's equivalent of the drugs broker's chemist is the rating agencies.

By rating companies, banks and countries, the rating agencies should give investors peace of mind – promising them that what they buy is of good quality, unlikely to default and so won't cause them any sleepless nights.

If the rating system fails or is compromised in any way, the foundation of every transaction collapses.

Consider the drugs world.

What would happen if the chemists were actually paid by the supplier to rate bad stuff as good stuff?

What might the drugs syndicate in Dublin do to a stamper who lied about the quality of the gear because he was in the pay of the supplier?

In the boom, this was not a concern in the banking world. Perhaps nobody ever watched a mafia movie like American Gangster. In the US sub-prime mortgage disaster, the rating agencies were paid by the banks to rate the junk they were selling as triple A.

In reality, some of the assets in this AAA toxic cocktail were worthless. Subprime debt, loans to people who had neither means nor intention of repaying money, were packaged with reliable securities, then given gilt-edged ratings by agencies in the pay of the banks. In the Irish case, our banks – just when they were blowing their balance sheets – were rated AAA by the same rating agencies who are now telling us they can rate us.

Credit was used to buy over-priced houses when there was little connection between the price of the house and its value.

But for this transaction to take place, we too needed a local stamper or verifier.

We needed someone to validate the price paid: ''This is correct.

This two bedroomed terraced house in Monkstown is indeed worth €1million.

Your money is safe here." This is where the estate agents came in.

They were responsible for valuing houses.

Bizarrely, these valuations were given credence even though, like the rating agencies, an estate agent's fee was directly related to the sale price.

So house price inflation was in the interests of the estate agents: higher prices meant higher fees.

The banks and the estate agents were hand in glove, working to hoodwink the punters.

Now the same estate agents are telling us that the property market has hit the bottom.

Meanwhile, they have Nama to pay them to value stuff they overvalued in the boom.

And what about the international ''stampers'', the rating agencies? These lads are the estate agents of the financial world.

They are now on Irish radio telling us how to run our country and what we should and should not do.

They are simply chasing the market. They are always last to know.

Now they are downgrading Irish risk when they should have been downgrading it before the end of the boom, not now when the dogs in the street know what is happening.

Most egregiously, they are given credence.

Next time a Fitch spokesperson downgrades Ireland, let's just ask him where he was in the boom and then show him the door.

There is one thing I can guarantee: when our fortunes turn, those lads will be the last to cop on.

[whiskeysteve]

Today's Indo Front Page Headine:

Economy has 'turned corner' says top rating agency boss

Stolen from politics.ie

[Bogball XV]

Today's Indo Front Page Headine:

Economy has 'turned corner' says top rating agency boss

Stolen from politics.ie

brilliant!

[muppet]

It's all over - time to close this thread and somebody can start a new one - "The recovery of Ireland and how she became the prize pig of the litter".  The new thread will undoubtedly be a mine of information and important chronological record for economists in years to come as they try and put together the story of the recovery.

Today's Indo Front Page Headine:

Economy has 'turned corner' says top rating agency boss

Here's a link if anybody could be bothered reading such dross:

http://www.independent.ie/business/irish/economy-has-turned-corner-says-top-rating-agency-boss-2376296.html

Here is how it has worked for the last few elections.

Indo slags off government month in month out with the occasional attack on FG leader and talking up of Labour leader.

Taoiseach has meeting with the Irish Murdock (which only emerges later).

Indo changes tack completely and supports Government. (Looks like what happened today)

Election announced by Indo of course (they had the exclusive scoop on Bertie going to the Aras last time).

Indo: FF great. FG rubbish (I think this time they will really savage Gilmore though).

FF win election again.

Gesture from Taoiseach to Indo (My money is on Brendan O'Conner to be the next EU commissioner or maybe Ruth Dudley Edwards)

[seafoid]

It's all over - time to close this thread and somebody can start a new one - "The recovery of Ireland and how she became the prize pig of the litter".  The new thread will undoubtedly be a mine of information and important chronological record for economists in years to come as they try and put together the story of the recovery.

Today's Indo Front Page Headine:

Economy has 'turned corner' says top rating agency boss

Here's a link if anybody could be bothered reading such dross:

http://www.independent.ie/business/irish/economy-has-turned-corner-says-top-rating-agency-boss-2376296.html

Here is how it has worked for the last few elections.

Indo slags off government month in month out with the occasional attack on FG leader and talking up of Labour leader.

Taoiseach has meeting with the Irish Murdock (which only emerges later).

Indo changes tack completely and supports Government. (Looks like what happened today)

Election announced by Indo of course (they had the exclusive scoop on Bertie going to the Aras last time).

Indo: FF great. FG rubbish (I think this time they will really savage Gilmore though).

FF win election again.

Gesture from Taoiseach to Indo (My money is on Brendan O'Conner to be the next EU commissioner or maybe Ruth Dudley Edwards)

As long as debt deflation sets in and house prices continue to tank, FF's goose is cooked. The Indo can't talk up the value of anyone's house or turn all the unemployed into workers.   FF have no hope of winning the election.  The Bertie wonder election winning machine needed 6 banks in working order, economic growth and plentiful credit. None of these circumstances apply today and the machine is banjaxed. 

[Hereiam]

So who will the people vote in. Enda would be just as bad. The greens are a waste of space.

[muppet]

So who will the people vote in. Enda would be just as bad. The greens are a waste of space.

Is that the Indo's front page for the election?

[Zapatista]

So who will the people vote in. Enda would be just as bad. The greens are a waste of space.

Atleast Kenny never stole from me.

It's widely accepted that the crash has involved three main groups at the top and that these groups are all linked through the same core group of people. The three are FF, Bankers and Big Builders. It's the holy Trinity 3in1. FG and Enda Kenny are not in this golden circle and so there is no reason to think that they will behave in any way like FF have.