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

[Lone Shark]

We are getting to a situation where we may need to consider a national government, at least temporarily. We could leave Cowan where he is but Kenny would replace Coughlan while Bruton would have to displace Lenihan. Any suggestions for Harney's desperately necessary successor? Dempsey and Hanafin should get their marching orders also. I don't like O'Keefe but at least he realises that this time its serious.

I don't like this national government idea at all. After all, we have a government who can take whatever decisions they want - they only reason they want FG on board is so that they don't have to take the heat for doing so. Well as far as I'm concerned, it was FF-led governments who got us into this mess, so they should either apologise and step aside, or else go about fixing it and take the responsibility for any loss in popularity. As we've seen from FF, they love nothing more than letting junior partners take the flak for their bad government, and we see that even now. How many senior FF TD's are putting their hand up to take Harney's job? They love having her there to take the blame.

If Bruton got given the finance ministry now, he'd make swinging cuts becuase that's what needs to be done - and FF would happily try to make FG out to be the bad guys for the next election. Let Lenihan and Cowen sort out their own mess.

[muppet]

We are getting to a situation where we may need to consider a national government, at least temporarily. We could leave Cowan where he is but Kenny would replace Coughlan while Bruton would have to displace Lenihan. Any suggestions for Harney's desperately necessary successor? Dempsey and Hanafin should get their marching orders also. I don't like O'Keefe but at least he realises that this time its serious.

I don't like this national government idea at all. After all, we have a government who can take whatever decisions they want - they only reason they want FG on board is so that they don't have to take the heat for doing so. Well as far as I'm concerned, it was FF-led governments who got us into this mess, so they should either apologise and step aside, or else go about fixing it and take the responsibility for any loss in popularity. As we've seen from FF, they love nothing more than letting junior partners take the flak for their bad government, and we see that even now. How many senior FF TD's are putting their hand up to take Harney's job? They love having her there to take the blame.

If Bruton got given the finance ministry now, he'd make swinging cuts becuase that's what needs to be done - and FF would happily try to make FG out to be the bad guys for the next election. Let Lenihan and Cowen sort out their own mess.

I should have added that things are so serious that we should set aside party politics temporaily for the benefit if the country. No single party has a strong enough line up to manage this crisis so let's pick the best of all of them.

What is becoming increasingly obvious is the Lenihan is hopelessly out of his depth. Even if he only stopped the leaks from his office that would help.

[Bogball XV]

Just a quick point - did I hear correctly that the PWC report on the banks will remain confidential?  If so, it would give me a bit more confidence if a select group from the opposition at least were allowed to study it, say Rabbitte and Bruton at the very least, not that I don't trust PWC and FF you know

[Lone Shark]

That would only work if FF themselves set party politics aside and actually took responsibility for where we are as a country. They won't do that, so why should FG be the good guys, only to be electorally punished for it?

In the long run, the country would be best served by the best politicians being rewarded at the ballot box, rather than the most self serving and conniving. Continually letting off the gombeen kleptomaniacs is not the answer at all, even if some short term pain is called for.


There was never any danger of the PWC report going public. I'd say they were told what was to go into it before they started.

[muppet]

As of today the market cap of these companies is:

AIB  2,025,520,452
BOI 1,154,822,801
Anglo 793,390,071
IL&P 390,263,115

Their total value is €4,263,996,429.

2 years ago today those figures were:

AIB 19,079,930,413
BOI 15,661,323,506
Anglo 10,352,078,333
IL&P 5,310,839,688

The total value then was €50,404,171,940

The writing is on the wall, floor and ceiling.

[muppet]

I don't particularly like McWilliams but it is hard to argue with his article yesterday:

http://www.independent.ie/opinion/analysis/act-now-minister-or-we-will-all-live-to-regret-it-1544060.html

[b]Act now, minister, or we will all live to regret it[/b]

Wednesday November 19 2008

We are now reaching the endgame. Few are in denial any more. The situation is dire and we need real leadership to get us out of this mess. Businesses across the country are going to the wall, unemployment is going through the roof and people who have been trading for years say this is much worse than the 1980s.

Cash, credit and demand have evaporated and the prospects look grim. This is a national emergency and we need a national plan.

The following is a six-point plan that would minimise the economic pain over the coming years, while at the same time ensure -- and this is crucial -- that Ireland can emerge from this chaos a considerably more profitable place to do business than it is at the moment.

There are aspects of this plan that need to be put in place immediately and others that could be carried out over time. Most of all we need to be decisive. While we hope for the best, we must prepare for the worst.

1. The minister has to make sure that the banking system does not implode in the coming weeks.

While the falling share price tells us that shareholders have given up on the present management, it also implies that bank funding is drying up, meaning that the liquidity benefit of the "guarantee" is at risk.

At this stage, without massive writedowns, it is unlikely that a private White Knight will emerge to buy the banks even at these prices, so some public recapitalisation is necessary. But this does not just mean State money from the pension fund.

There is a way that we, the public, can fund some of this, to the benefit of hundreds of thousands of ordinary savers. However, before a cent of State or public money goes in, the minister must demand that the board and management of the banks resign immediately. Hopefully, some of the management will resign as a matter of principle. After all, if you preside over a 95pc fall in your share price, it is time to go.

Whether this happens, or whether there is a coup at the top of the banks is immaterial, the point is the people who got us into this mess in the first place are not the people to get us out of it.

2. The recapitalisation should be democratic. By this I mean that the Irish people should be invited to participate.

There is plenty of money on deposit in Ireland -- more than enough to finance the hole in the banks' balance sheets. Therefore, the State could issue a convertible bond, which converts into equity in, let's say, five years.

This could be offered to us, the citizens of this country so that we -- not just some hedge fund from outside -- can profit from the Irish banks' recovery that will be based, after all, on the sweat of Irish workers in the future.

Any recapitalisation must also come with debt forgiveness for first-time buyers and the hundreds of thousands in negative equity.

There will be no recovery if an entire generation is burdened with enormous mortgage debts on houses that will not recover in value for years.

Many might argue that this penalises those who didn't get involved in the property madness. This is true, but there are things that we must do in emergencies, however unpalatable.

3. The new banks must be regulated more closely and instructed to limit property lending.

We have to make sure that we never again become beguiled by the idiocy that we can get rich by buying and selling overpriced houses to each other using other peoples' money. The recapitalised banks will finance proper businesses.

4. The Government must also avoid the trap being set by the bean counters in the Department of Finance. If the Government cuts everything now, slashing public spending across the board, the economy will shrink even more.

We must distinguish between good and bad public spending. At this stage, bad public spending is money spent now that doesn't make the economy more productive in the future. So wages and salaries need to be frozen, public sector employment reduced significantly, but infrastructure projects and investment in education have to be accelerated. We should borrow to do this. The State needs to stimulate the economy, not contract it and offer incentives for the private sector to invest, not save.

By reining in "bad" spending and accelerating "good" spending, the State can make the best out of a disastrous situation. Infrastructure spending and education investment increase the long-term productivity of a country.

5. We need to be smart in Europe. The beauty of EMU is that it allows us to borrow for the future, without the penalty of having your currency hammered. So we should try to co-opt some of our smaller neighbours who are having problems raising government bonds into a European EMU bond. This is where we lead the campaign for a EU sovereign bond market, whereby the combined Euro region issues debt together rather than as individual member states.

6. Ireland should borrow quickly and if we are to do it, we should make sure we raise enough money now so we don't have to go back to the market next year. The reason for acting swiftly is that if the global financial markets don't recover, there is a real danger that the world's bond markets won't finance us in the future.

All plans are inherently risky, but we are facing meltdown. Ireland needs strong decisive leadership now. To borrow the minister's phrase, it is his patriotic duty to act, not prevaricate. If he does so, we'll stand behind him. If not, he and his party will not recover.

[the Deel Rover]

surely heads should be rolling with all the major banks yet they seem to think that none of it was their fault and that its all a result of the American Sub Prime market. I was reading yesterday that 3 of the large banks are going to have to write off at least 20 billion that they gave to developers and the number of developers is not large so how in fcuk could they justifiy giving out such large loans , when i went for a mortgage they wanted to know what i had for breakfast and my income was stressed test for a 2 to 3 % rate increase yet the banks gave the developers  biliions on valuations of land which  they were going to purchase and which we all know now is worth a lot lot less .

[passedit]

They're clutching at straws now.

Consolidation an option in bank crisis
watch Thursday, 20 November 2008 21:01

The possibility of a major consolidation of Irish banks has emerged as a solution to the banking crisis.

Tonight, the Minister For Finance is concluding a round of meetings at Farmleigh with executives from banks and building societies covered by the State guarantee scheme.

Their discussions have raised the possibility of a historic and radical overhaul of the banks.
Advertisement

The Government is understood to believe merging financial institutions is the best way forward.

After the meeting some participants believed only Bank of Ireland and AIB would remain after the shake up.

Nobody is commenting on the content of meetings tonight.

While uncertainty has reigned the bank share prices have been pushed up and down.

Investors remain in limbo as the future of shape of Irish banking remains unclear.

The one-to-one meetings come in the wake of the PricewaterhouseCooper report on the future debts and capital requirements for institutions covered.

There are six Irish financial institutions covered by the scheme, which was announced by the Government in September.

Speaking this afternoon, Minister Lenihan said he had spent the morning discussing the difficulties and the banks' plans to overcome those difficulties.

The Minister said the Government was determined to reform the banking sector and to ensure there was credit for those with small and medium sized businesses.

He would not comment on whether consolidation was on the agenda. The Minister is having further meetings on the subject this evening.

The meetings come as world markets have tumbled following sharp overnight losses on Wall Street prompted by a fresh wave of jobs cuts in the US and another gloomy economic outlook.

But Irish banks were among the few shares that rose.

That is mainly on expectations that the Government is edging closer to a refinancing deal for the institutions.

This morning the first of the lenders to meet with Minister Lenihan was the EBS.

Elsewhere, the International Monetary Fund has approved a loan of more than $2bn to Iceland to help it cope with what it has described as a banking crisis of extraordinary proportions.

Iceland asked the IMF for help after its banking system collapsed last month

[Bogball XV]

Just back from the beer I mentioned earlier.

Shouldn't have gone.

From what I hear Irish banking will not be the same by lunchtime today. Better stay in bed.

Beer on a Monday night is never a good thing unless you've just won the AI - In that instance, it's almost compulsory ! 

Good news for Irish banking ?

Will UK and other governments follow suit ?

I don't know the ins and outs of it yet, but it seems to be a massive piece of bluffing by lenno - if he were ever asked to pay up, he couldn't, i suppose it depends on how long it will be before the markets either test his promise or just decide to disbelieve him.  If he has to come up with the goods, it'll be a disaster for the taxpayer.  We're currently talking about the budget from hell coming up because tax revenues are short by 7bn on estimates (you have to wonder what idiot came up with the estimates), yet the minister finds it okay to guarantee over €400Bn of loans made by banks?  If 10% go bad (probably not an unreasonable assumption) that's €40 Bn, almost our total annual budget.
It would have been a better idea to force some mergers between the banks who appeared in serious bother yesterday and the ones who just appeared in bother.

So finally the penny drops with lenno, maybe he should become a gaa fan

Unfortunately it's maybe too late??

[Declan]

Lenihan is a gobshite of the highest order. 2 big banks only with "outside" private equity - Eircom anybody?

Whatever about forcing mergers between the idiots who landed us in this mess the fact that there is no upside for the taxpayer who is guaranteeing the deposits is lunacy. Also only one big insurance company as well???

Can you imagine how long the due diligence on this will take??? - Must get myself a consultancy role in that - happy days

[tieroan]

I have a bit of spare cash, just a few grand, at the minute. Would it be a good time to buy shares in AIB or BOI?

[Main Street]

I don't particularly like McWilliams but it is hard to argue with his article yesterday:

http://www.independent.ie/opinion/analysis/act-now-minister-or-we-will-all-live-to-regret-it-1544060.html

[b]Act now, minister, or we will all live to regret it[/b]

Wednesday November 19 2008

"Any recapitalisation must also come with debt forgiveness for first-time buyers and the hundreds of thousands in negative equity.

There will be no recovery if an entire generation is burdened with enormous mortgage debts on houses that will not recover in value for years.

Many might argue that this penalises those who didn't get involved in the property madness. This is true, but there are things that we must do in emergencies, however unpalatable"

I didn't expect McWilliams to come out with this proposal. i'd hope he gets on his soapbox and shouts it out.
Though it is not his own idea.
The anti deregulation economists have been crying out for this since Freddie May collapse, why write off Wall st debts with Bn's taxpayer money which has no effect on the people who are struggling?
Capital can be put into the banks from the bottom up and write off a portion of first time buyers overpriced mortgage.

I think it's fair enough, people bought house at overpriced values, this method would bring it down for first buyers to something more realistic.

[Lone Shark]

I don't particularly like McWilliams but it is hard to argue with his article yesterday:

http://www.independent.ie/opinion/analysis/act-now-minister-or-we-will-all-live-to-regret-it-1544060.html

[b]Act now, minister, or we will all live to regret it[/b]

Wednesday November 19 2008

"Any recapitalisation must also come with debt forgiveness for first-time buyers and the hundreds of thousands in negative equity.

There will be no recovery if an entire generation is burdened with enormous mortgage debts on houses that will not recover in value for years.

Many might argue that this penalises those who didn't get involved in the property madness. This is true, but there are things that we must do in emergencies, however unpalatable"

I didn't expect McWilliams to come out with this proposal. i'd hope he gets on his soapbox and shouts it out.
Though it is not his own idea.
The anti deregulation economists have been crying out for this since Freddie May collapse, why write off Wall st debts with Bn's taxpayer money which has no effect on the people who are struggling?
Capital can be put into the banks from the bottom up and write off a portion of first time buyers overpriced mortgage.

I think it's fair enough, people bought house at overpriced values, this method would bring it down for first buyers to something more realistic.

If they do that, there isn't a flight that would take me out of the country quick enough. I've paid taxes for all kinds of waste so far, but the idea of savings that I've worked hundreds of extra hours for being used to compensate people who bought houses they couldn't afford would be the final straw. Nobody forced anyone to buy a house in this country. Renting was extremely reasonable, there was no shortage of supply, some people just weren't able to resist buying their "dream home" despite the fact that it was way out of their price range.

I'd have nothing but sympathy for someone who borrowed within their means (a mortgage of no more than 3.5 times the first annual income not including overtime plus 1.5 times the second, having saved a deposit of at least 10% of the cost of the house plus the stamp) and has suddenly lost their job, but all these people who were working low paid jobs but still insisted on borrowing 300k or more, that was just lunacy. The fact that the bank gave it to them means that the banks officials should suffer, but not that the borrowers were blameless. My bank cold called me looking to sell me loans and mortgages several times, but I knew that I wasn't in a position to commit 50% of my wage to mortgage payment. I never begrudged all those who benefitted from their profligacy when house prices were going up, why should I then bail out the last layer of participants in the nationwide pyramid scheme when the arse finally fell out of it?

This country and all who sail in her can feck off if my they think that an appropriate reward for people who stood by and simply worked away, while countless others were looking for the quick buck that endless house prices rises appeared to offer, is a hand dipped into their pocket to keep everyone else in the lifestyle to which they've become accustomed. Now if you want to talk about penalising those who coined it on the way up, such as everyone who sold a house between 2003 and 2006, then by all means - but this is Ireland, the fair solution will never be taken when you can just penalise those who had sense. Equally, if you want to change the bankruptcy laws so that someone who can't pay the mortgage simply has to give up their house and savings but can then walk away and begin again renting like the rest of us, then that would be fine too. Not the rest of us continuing to leave in low grade rented accomodation, all because our taxes are high to subsidise those who bought nice places they couldn't afford.  

I'm sorry if this comes across as harsh or unfeeling, but anyone who did even a modicum of research on the way up should have known that some fall in house prices was possible. Those who could afford it anyway don't need help, and those who couldn't be bothered finding out that basic fact don't deserve it.  

[pintsofguinness]

"Any recapitalisation must also come with debt forgiveness for first-time buyers and the hundreds of thousands in negative equity.

There will be no recovery if an entire generation is burdened with enormous mortgage debts on houses that will not recover in value for years.

Many might argue that this penalises those who didn't get involved in the property madness. This is true, but there are things that we must do in emergencies, however unpalatable"

WHAT?!

WHAT!

Excellent rebuttal lone shark, I would have just said ARE THEY JOKING?!  They can go f**k themselves!

[ardal]

Listening to FG national conference on rte on line.

Fianna Gael are going to win the next election (apparently), because Fianna Fael have run the country into the grounds and caused the crisis. Is there much that FF could have done to soften the crisis blow (ignoring daft mortgage agreements)?