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

[muppet]

More raping of the ordinary taxpayer - Latest government announcement is a joke. Let's give the b**tards that got the banks into this mess more money. How long will people take this before taking to the streets?

The problem is if they let the banks go we will all have plenty of time to be on the streets.

But I agree we need a serious inquisition so lessons might actually be learned rather than promised and forgotten in the next boom.

[muppet]

The financial strangulator has resigned.

http://www.breakingnews.ie/ireland/mhsnmhidojgb/

[Shamrock Shore]

No muppet.

He has 'retired'

[orangeman]

No muppet.

He has 'retired'

Same effect !

[orangeman]

Good article from the BBC Business website :
Irish house of cards comes down 

By Ray Furlong
BBC News, Drogheda 



A drop in building work has meant fewer customers for Dave's cafe
As the bacon rind turns a crispy brown colour, Dave Jones gives it a generous extra splash of oil.

The food at the Smithstown Diner, a small roadside cafe near Drogheda, is high on grease - the builders who come here like it that way. But lately business has dropped.

"It used to be really hectic in here. Now look," he says, gesturing at rows of empty plastic seats.

The Smithstown is popular with what the Irish call "breakfast roll man," building workers in white vans. This morning, there are just two.

"Times are hard, a lot of boys are being let go," says 40-year-old Robert Daley, who runs an aluminium fitting business.

"We do mainly big projects - developments of shops, offices and flats," he says. "We're just finishing one, so we're busy at the moment but there's nothing else coming up."

His employee, Tony King, nods over his fried eggs and black pudding.

"We're really feeling the pinch for the first time, because you know there's nothing else out there.

"In the worst scenario I could go to England - but it's pretty quiet over there too."

Empty houses

Tony is not the only person in Drogheda talking about working abroad. A number of people mention Australia as a possible destination.


Giles Belton says house prices have fallen by about 30%
The Irish thought their Celtic Tiger economy had put an end to generations of emigration. It is not back yet, but the fact that people are talking about it again is a sign of how bad things have got.

Ireland is the first country in western Europe to officially fall into recession, defined as two consecutive quarters of negative economic growth.

Places like Drogheda, a commuter town near Dublin, have been particularly hit.

During the unprecedented boom years, the population here grew by a third. Now, it is an unemployment black-spot - ringed by new developments with empty, unsold houses.

Giles Belton has been an estate agent here for 20 years. He took me to the Termon Abbey estate to show me the problem.

"This is quite typical of any of the new estates that have been built in the Drogheda area," he says.

"At the height of the market these properties were selling exceptionally well. A lot of people were buying second, and third, and fourth houses. There were record breaking prices."

"Now, prices are down by about 30%."

The property collapse has combined with the global financial crisis to create what some see as a perfect storm hitting Ireland's banks - whose loan books are groaning with property-related debt.

Earlier in October, the government announced a scheme to guarantee deposits in the banks to prevent a run.

Pensioner protests

Now, Dublin is buzzing with speculation that this will not be enough - and that a British-style buy-out of top banks will be needed.

It is estimated that Irish banks need an additional 10 to 14bn euros and that some may have to merge.


Thousands of pensioners protested against plans to cut health spending
Shares in the top four banks have tumbled, but at a banking conference in Dublin this week Finance Minister Brian Lenihan insisted that buying stakes in the banks was "the last option".

The government would have trouble paying for it.

Last week it unveiled its biggest budget deficit in 20 years - despite the budget including tax rises and cuts in spending on education and health.

The latter included cuts in free health provision for the over 70s, and brought a huge revolt by backbench Fianna Fail MPs that led to a partial, but nonetheless humiliating, climb-down by the government.

Prime Minister Brian Cowen had his authority undermined - looking shocked and angry in parliamentary exchanges.

Taunted for being "cruel and callous" by the opposition, he shouted back: "You call me callous - call me any names you like. I'll continue to provide leadership in the solution of problems".

But the following day, despite the U-turn, 15,000 pensioners converged on parliament in a day of protest.

  Because our economy was so heavily dependent on building, we suffered

Dominic Hannagan, Labour MP
According to Ray Kinsella, professor of banking at University College Dublin, it shows that "the financial crisis can and does morph into an economic crisis".

"The ability to fund public services is undermined. The government have had to introduce a budget to cope with this astonishing turnaround, and we haven't had to do anything like this for a generation," he says.

"It's difficult, it's protracted, and it's painful."

The buskers in Drogheda know this. They line the high street, but do not have many coins in their hats.

Local senator Dominic Hannagan, from the opposition Labour Party, says the crisis does have international roots, but that the government is also to blame.

"The government relied far too heavily on the building trade. So when credit became difficult to get, when mortgage rates went up, that area suffered most. Because our economy was so heavily dependent on building, we suffered.

"We've been telling the government to diversify the economy for years. They didn't, and now we're suffering."

[passedit]

More bad news. UK accounts with Irish Banks are covered by the the Irish Guarantee* but not the UK one.

*I can guarantee that there is no money to cover this.

From the Bluesheet

http://www.independent.ie/opinion/analysis/cold-facts-of-how-we-could-be-iceland-inside-the-euro-1600539.html

Cold facts of how we could be 'Iceland inside the euro'

Wednesday January 14 2009

Could the unthinkable come to pass here? Could Ireland default on its sovereign debt? The answer is yes. Such a disaster is now quite possible. In the same way as a family can end up losing the house, the car, everything, a country, too, can fail to make its repayments. At the moment, such thoughts are heresy; but so, too, was questioning the property boom a mere four or five years ago.

Back in 2003 or 2004 when people questioned the property boom and its driver, the debt splurge by the bankers, we were ridiculed and dismissed. We were labelled mavericks. We were told that it was "dangerous" to even suggest such things because we might "talk down the economy".

I remember being labelled "unpatriotic" by a politician in 2004 following an appearance on 'Prime Time' when I described the property market as a "scam" operated by "an unholy alliance of bankers and property developers".

We now know that this is exactly what it was, it was a scam perpetrated by a small minority who made fortunes, aided and abetted by a frenzied population caught in a mania and presided over by Fianna Fail. It is extraordinary that the party which lays claim to the Rising, could end up advocating property purchases in Bulgaria using borrowed money as the highest form of national patriotism, but that's where we got to!

So the moral of that tawdry story is that "thinking the unthinkable" while not popular, is necessary. If we are forewarned, we are forearmed. Make no mistake about it; it is entirely possible that Ireland will default on its sovereign debts. We are hurtling in that direction. Foreign investors are on notice and last week, they demanded a huge interest rate premium from Ireland before they gave us cash. We paid 4.7pc to borrow money on Thursday last. In contrast, Germany paid 3.2pc. This implies an Irish interest rate premium of over 40pc for two states that are in the same currency union. So lenders are worried that Ireland will not be able to pay its way.

Surely you will assert that there is a big difference between being worried and turning off the taps altogether? Well yes, you are right, but consider what has happened here. If you look at things objectively, Ireland should be in a much better position than practically any European country. Our national debt is extremely low, our budget deficit projections are very poor; but so, too, are many countries and in contrast to the rest of the EU, Ireland seems to be concerned about government spending and is talking about putting in place a series of cutbacks. So why, in the eyes of foreign lenders, should we be any more delinquent than the others?

The answer is that although the State behaved itself in the boom and did not borrow, the rest of us went mad. We borrowed for every hare-brained property scheme imaginable. Our banks and the bosses, who are still in their jobs, destroyed the national balance sheet by borrowing money abroad to fund this nonsense. We also decided to pay ourselves better than all our competitors, not because we were more productive but because we were more profligate. The geniuses at the Department of Finance creamed off tax revenues from the top of this frothy borrowed brew, mistaking an overdraft for a tax bonanza.

When this borrowing splurge stopped abruptly last year because the credit markets shut down, the Government was faced with the choice: does it allow the banks to collapse because they were so borrowed that they couldn't finance themselves or does it guarantee the banks, buy time and see whether it can put a plan B in place? Had the Government allowed banks to go bust in October, there would have been a run on the other banks, leading to a collapse of the system and we would have been "Iceland inside the euro".

But amazingly it didn't put plan B into action, it never came up with a plan B and now the banks are again in dire straits. Although the guarantee means that they might not default, their delinquency has contaminated the sovereign debt and now the market thinks that the banks will bring the State down with them.

Consider the position of Anglo. If Anglo goes bust, because people withdraw their deposits, the State will have to write a large cheque. That cheque could be as big as €30bn if the assets in the bank's balance sheet are as bad as many fear. Will Ireland be able to write this cheque? Will we be able, at short notice, to borrow that much cash? Furthermore, will Irish workers stick around to pay the tax associated with such a rise in our national debt?

After all, we the Irish citizens are volunteers, not prisoners and can emigrate to escape the pleasure of paying higher taxes for developers' greed. Therefore, it is not hard to envisage a situation where we default, particularly as we can't even finance day-to-day expenditure without borrowing for God's sake!

Bad and all as it might sound, if we were to default, we would not be unique. To see what can happen to delinquent borrowers in a monetary union, we have to turn the clocks back and re-read a bit of financial history.

It is 1975; flares, Richie Ryan, Eddie Gallagher and the Horslips are in the news. The US is in recession. The Detroit car industry, like today, is going to the wall. The oil price shock is still reverberating around the world and the ensuing recession has weakened the Ford administration more than Watergate.

More importantly, in light of Ireland's current predicament, New York City in 1975 was in crisis and on the verge of default.

Lenders simply stopped lending to the Big Apple. Years of profligacy, which were financed in good times, suddenly caused investors to panic. New York City was about to default on its bonds and Gerald Ford told the city to "drop dead" when it asked for a bailout. Ford argued that the US government would never contemplate bailing out New York, as it would undermine the credibility of the dollar. However, in a 'volte face' of epic proportions, Ford blinked first and the City was bailed out with a federal loan.

To avoid a similar situation threatening the euro, the Commission imposed the 3pc budget deficit rule on all euro countries so that no country could undermine the currency. What would happen if we were to test this? Would the EU bail us out rather than countenance a sovereign default that might destabilise the euro? Could we renegotiate Lisbon along such lines? Could we go to the ECB and look for a bailout?

This might be better for us and for the EU as a whole, however politically unethical it might seem. After all, do they want an "Iceland inside the euro"? That's what it looks like they are going to get! We've tested Europe's patience once, are we about to do it again in a much more dramatic fashion?

I am not suggesting that we should resort to political blackmail, but if you have ever seen a bankrupt man trying to save his skin, you know that he'll do, say or sell anything. Similarly, a country facing default will behave accordingly.

That's just the way it goes!

www.davidmcwilliams.ie dmcwilliams@independent.ie

[passedit]

http://www.rte.ie/news/2009/0115/banks.html


Govt to take control of Anglo Irish Bank
watch Thursday, 15 January 2009 22:51

The Government has announced plans to take complete control of Anglo Irish Bank, saying its previous plan to inject money into the bank is not the best way to secure its viability.

Anglo Irish Bank's chief executive David Drumm and chairman Sean FitzPatrick resigned last month in a controversy over secret loans to directors. Its finance director and chief risk officer Willie McAteer resigned last week.

The Government had planned to inject €1.5bn into the bank, taking 75% of the voting rights in the process.
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Since reaching a peak above €17 in mid-2007, shares in Anglo Irish have plummeted, and closed at just 22 cent in Dublin today.

A statement tonight said the bank would continue to trade normally and all its employees would stay with the company.

The Government said 'unacceptable practices' within the bank had caused it serious damage.

Finance Minister Brian Lenihan said: 'I would again stress that this Government decision safeguards the interest of the depositors of Anglo, and the stability of the economy, given the significance of Anglo in this regard, as already recognised by the European Commission.

'The bank will continue to operate as normal and depositors and creditors should continue to transact as normal.'

The Government has prepared legislation to give effect to the nationalisation, which will be presented to the Oireachtas on Tuesday.

Trading in the shares is expected to be suspended before the Irish stock market opens tomorrow.

The Government statement said shareholders' rights would be respected, and the legislation will outline plans for compensation.

A spokesman for the Taoiseach, who is in Japan on a trade mission, said Mr Cowen had been closely involved in the decision making process over Anglo Irish Bank.

It is understood that he was in touch with senior officials in his own department and with the Minister for Finance Brian Lenihan between his engagements, which included a meeting with the Japanese prime minister.

Questioned by journalists yesterday about the bank and Fine Gael's decision to resist recapitalisation Mr Cowen repeatedly referred to Anglo as a systemic bank within the Irish system.

meanwhile opposition parties have claimed the Government's banking policy is in ruins after tonight's announcement on Anglo-Irish Bank.

Fine Gael's Richard Bruton said the decision was correct, but that it was the latest in a long line of u-turns.

Deputy Bruton said Fine Gael had opposed recapitalisation when it was announced, because of the lack of trust and confidence in Anglo.

He said the handling of the issue confirmed once again that the Government are 'all at sea on economic policy and are lurching from one u-turn to the next'.

Labour's Joan Burton said the Government had gone to 'extraordinary lengths' to avoid nationalising the bank and that enormous damage had been done to Ireland's reputation in international markets.

She said an unknown quantity of bad debt, running to billions of Euro, has been taken on by the exchequer, with the potential to further increase the cost of Irish Government borrowing.

Deputy Burton said the sheer incompetence was breathtaking, and the damage to the exchequer unknown.

[muppet]

Any suggestions for what it's new name will be?

Ghetto Irish Bank

Gung-ho Irish Bank

[passedit]

Any suggestions for what it's new name will be?

Ghetto Irish Bank

Gung-ho Irish Bank

Craggy Island Bank

Motto: That money was only resting in my account

[stephenite]

I could understand the nationalisation of one of the bigger commercial banks, say AIB, Permanent TSB or BOI. But are Anglo Irish a bit different to them, aren't their clients mainly, well property developers? Isn't that the reason they're in the shit (massive loans to directors another reason of course)

If this institution were let slide wtithout government nationalisation, can anyone explain to me what the downside would be to Joe Public?

[ludermor]

I work for a builder and Anglo Irish are the financiers on the job. I want to know if im now self employed?

[passedit]

I work for a builder and Anglo Irish are the financiers on the job. I want to know if im now self employed?

No you are a civil servant

[Shamrock Shore]

The reported 87mill to Sean Fitz hardly is the issue. When the loans were fresh the bank was worth 200 billion or somesuch so that was a drop in the ocean. It was only wrong from a disclosure point of view and therefore a two fingers to the shareholder which is a shocking offence.

No - the issue is more than that and I look northwards, towards Fermanagh/Cavan, for my Dick Dastardly in this affair.

[PadraicHenryPearse]

what happens to shares that people have in Anglo? I think i may have a couple of hundred shares?

[Shamrock Shore]

Shares are now officially worthless until such time as an independent assessment is done as to the net value of the shares.

It's like the Gubbermint did a CPO on us and, under the constitution, we are entitled to fair compensation.

However I wouldn't hold my breath as this could take a few years and then we may get back only 5c per share.