3.6 Billion or 7.2 Billion?

[Hardy]

WTF? I'm not trying to be confrontational. I'm just being a nerd. I thought you might be able to help. I wanted to find out how I'm misinterpreting the information. I'm not challenging your manhood, only asking you to help.

[stew]

Sure is Ireland not a nation that had a former minister of finance who did not have a bank account?

the south is run by gombeen's, gangsters and scumbags............................. a bit like the north really.

Nothing surprises me about Ireland anymore.

[Main Street]

WTF? I'm not trying to be confrontational. I'm just being a nerd. I thought you might be able to help. I wanted to find out how I'm misinterpreting the information. I'm not challenging your manhood, only asking you to help.

I didn't at all think you were being confrontational. I just replied matter of factly, after all this is an accounting question, how sexy can an answer be
I won't be reading your analogy because I have enough problems interpreting the accounting information as it is presented without trying to figure out where you go awry.

The 2 agencies use to have the one book, one agency NTMA  loaned the other (HFA) 3.6bn and entered it both as a loan given out and a loan liable to be repaid. But the other agency (HFA)  was now a separate agency with its own book and entered the loan as a debt to be paid.

The correct bookkeeping  procedure should have been, NTMA  enters ONLY that it gives out a loan of 3.6bn and the HFA enters that is has to pay back 3.6bn.
All imho.

[Hardy]

WTF? I'm not trying to be confrontational. I'm just being a nerd. I thought you might be able to help. I wanted to find out how I'm misinterpreting the information. I'm not challenging your manhood, only asking you to help.

I didn't at all think you were being confrontational. I just replied matter of factly, after all this is an accounting question, how sexy can an answer be
I won't be reading your analogy because I have enough problems interpreting the accounting information as it is presented without trying to figure out where you go awry.

OK, understood.

The 2 agencies use to have the one book ... But the other agency (HFA)  was now a separate agency with its own book and entered the loan as a debt to be paid.

Ah. That's it. I didn't know that bit.

Thanks.

[haze]

WTF? I'm not trying to be confrontational. I'm just being a nerd. I thought you might be able to help. I wanted to find out how I'm misinterpreting the information. I'm not challenging your manhood, only asking you to help.

I didn't at all think you were being confrontational. I just replied matter of factly, after all this is an accounting question, how sexy can an answer be
I won't be reading your analogy because I have enough problems interpreting the accounting
information as it is presented without trying to figure out where you go awry.

OK, understood.

The 2 agencies use to have the one book ... But the other agency (HFA)  was now a separate agency with its own book and entered the loan as a debt to be paid.

Ah. That's it. I didn't know that bit.

Thanks.

Http://www.thejournal.ie/state-no-better-or-worse-off-as-result-of-e3-6bn-accounting-error-says-cso-269157-Nov2011/

Read this. We are not better off at all it seems. They just reported the wrong numbers to Eurostat who calculate the govt/debt ratio

[Tony Baloney]

I thought this was simple til I opened this thread. 

[Main Street]

Http://www.thejournal.ie/state-no-better-or-worse-off-as-result-of-e3-6bn-accounting-error-says-cso-269157-Nov2011/

Read this. We are not better off at all it seems. They just reported the wrong numbers to Eurostat who calculate the govt/debt ratio

We are no better off, we just thought we were worse off.
I tried to explain this to my accountant, that there are 2 worlds, the accounting world and the real world. But he would just take offense.

In the accounting world we were more in debt. In the real world we were  just in debt -  the fantasy debt of 3.6bn would not have been paid.
' 

[muppet]

Http://www.thejournal.ie/state-no-better-or-worse-off-as-result-of-e3-6bn-accounting-error-says-cso-269157-Nov2011/

Read this. We are not better off at all it seems. They just reported the wrong numbers to Eurostat who calculate the govt/debt ratio

We are no better off, we just thought we were worse off.
I tried to explain this to my accountant, that there are 2 worlds, the accounting world and the real world. But he would just take offense.

In the accounting world we were more in debt. In the real world we were  just in debt -  the fantasy debt of 3.6bn would not have been paid.
'

We are better off than we thought we were though.

However this again highlights a real weakness in our system of Government. The administration of public service seems to be a completely chaotic dysfunctional shambles.

[Denn Forever]

From Aertel 104.

Debt is €3.6bn lower than thought 01 NOV 2011 19:22

The Department of Finance has confirmed that Ireland's debt is €3.6bn lower than previously thought due to an accounting error. 
-
Broadcaster TV3 earlier reported on the error, which saw a payment between State agencies being counted twice. 
-
A Department spokesman said that as a result of a "re-classification", the country's debt to GDP ratio would be 2.3% lower. 
-
It is understood the development occurred as result of double-counting. 
-
The Department said the NTMA recently made both the Dept and the CSO aware that there was a change in their relationship with the Housing Finance Agency (HFA) that has an impact on the accounts of the two entities. 
-
It said that previously the NTMA had acted as agents for the HFA. 
-
Since late 2010 the NTMA have loaned directly to the HFA and these loans appear as assets in the NTMA accounts and liabilities in the HFA accounts. 
-
"The liabilities of the HFA are included in general Government debt; the corresponding assets of the NTMA have been included in the 'liquid assets' of the NTMA, which are also part general Government debt - effectively a double count,'' the statement added. 
-
"Removing the impact of this double count reduces the estimate of 2010 general Government debt by €3.6bn or 2.3% of GDP," the statement concludes.

[Tony Baloney]

My understanding is that everything on a balance sheet has to be an asset or a liability. Nothing is neutral.

I presume it was an asset of NTMA, a liability of HFA and, since both organisations are part of the state, this balances to a zero sum for the state (by comparison to the situation pre the transfer when this may have been borrowed money, but is neither here nor there as regards the incremental effect that was mis-accounted in the transfer).

Hardy

There iare 1 billion dollars of real money leaving the State tomorrow to pay off in full unsecured Anglo bondholders who bought their bonds in the market at knock down prices. The accounting shenanigan is a nice distraction.

Why are the State paying anything back on unsecured bonds. Surely the fact that they were unsecured meant they were riskier but with a higher return if times were good but if things went tits up it was gone? Am I missing part of the puzzle or does it appear that investors were able to either make a killing or get their money back on unsecured loans?

Why isn't Enda telling them to f**k off?!

[trileacman]

My understanding is that everything on a balance sheet has to be an asset or a liability. Nothing is neutral.

I presume it was an asset of NTMA, a liability of HFA and, since both organisations are part of the state, this balances to a zero sum for the state (by comparison to the situation pre the transfer when this may have been borrowed money, but is neither here nor there as regards the incremental effect that was mis-accounted in the transfer).

Hardy

There iare 1 billion dollars of real money leaving the State tomorrow to pay off in full unsecured Anglo bondholders who bought their bonds in the market at knock down prices. The accounting shenanigan is a nice distraction.

Why are the State paying anything back on unsecured bonds. Surely the fact that they were unsecured meant they were riskier but with a higher return if times were good but if things went tits up it was gone? Am I missing part of the puzzle or does it appear that investors were able to either make a killing or get their money back on unsecured loans?

Why isn't Enda telling them to f**k off?!

Payment is a term of the EU-IMF deal. Europe said "dance, monkey" and Kenny obliged.

[Declan]

If he doesn't dance he has no money to run the country!

Bolliix - Just like the lie if we increase taxes there'll be a run on capital shite that was spouted in the late 80s - and we slag the yanks for not understanding getting the fact that they are being ridden by the 1%

[bcarrier]

Payment is a term of the EU-IMF deal. Europe said "dance, monkey" and Kenny obliged.


apparently not ...

http://businessetc.thejournal.ie/readme/column-3-reasons-why-we-shouldnt-pay-the-anglo-billion-dollar-bond/

TODAY, Wednesday, 2 November, our Government is due to oversee the payment of a billion-dollar bond by the Bank Formerly Known as Anglo.*

There are three reasons not to pay this bond:

    As Michael Noonan once argued – this is not our debt.
    It is not required by the EU/IMF agreement.
    The markets will punish us for making the payment, not reward us.

1. As Michael Noonan once argued – this is not our debt:

The billion-dollar bond due today is not our debt – it is debt from a bust bank to private bondholders, who knew the risks.

This is not an original argument – in fact, it was well made by Michael Noonan, in the Dáil, last December. This is what he said:

    What legal or moral compulsion is on Ireland, however, to honour in full debt incurred by Irish banks when there was no State involvement in the arrangements? These loans were entered into freely by willing lenders and borrowers with absolutely no State participation. ... It is obscene that liability for these loans is now being transferred to the Irish taxpayer, in many respects to the poorest of the Irish taxpayers.

    In the budget the Minister for Finance reduced social welfare payments, punished the blind, disabled, widows, carers and the unemployed and he taxed the poorest at work, and for what? It was so that the taxpayer can take on liability for debts the country never incurred and arose from private arrangements between private institutions. What a disaster and an obscenity.

    The latest available bank data shows that Irish guaranteed bank debt has been sold on at a discount to hedge funds in the USA, the UK and Luxembourg, as well as to smaller speculative investors... The position has now become indefensible that the Irish taxpayer, even the poorest taxpayers, should be required to underpin the speculation of hedge fund investors. There must be transparent, open, negotiated burden sharing of bank debt.

All I can say is that I wholeheartedly agree.

2. It is not required by the EU/IMF agreement:

Although the requirements of the EU/IMF programme are onerous, and are imposing painful austerity on our economy, and on many people, protecting the Anglo bondholders is not amongst these requirements. There is no explicit deal under which we have committed to protect those bondholders.

According to the Minister for Finance, Michael Noonan (speaking earlier this year on RTE, and transcribed by the Nama Wine Lake blog), there has been no threat from the ECB to withdraw funding to Ireland if we burn bondholders.

However Michael Noonan did say of the ECB, "a nod is as good as a wink to a blind horse so we know what their negotiating position is."

Is this an adequate basis on which to decide to pay a billion-dollar bond?

3. The markets will punish us for making the payment, not reward us:

The markets believe we are heading for default. They believe our debt is unsustainable. The reason they won't lend to us is because they believe we can't possibly pay our present debts, let alone any new ones. They think our promise to pay back the banks' bondholders in full is unrealistic. Instead of gaining credit for paying back our debts, our efforts to do so make us less credible and more risky.

We have to set market expectations for burden sharing. It is regular business practice for senior bondholders to take haircuts when the bank they invest in goes bust. In the US in the last three years, 322 banks were wound up. In the vast majority of these cases, holders of senior debt in these banks took significant writedowns. Our problem is that we have set market expectations for a full repayment. Greece, on the other hand, set expectations for a default, and that encouraged the bondholders to come to the table and agree a haircut.

The Irish Government needs to start setting expectations that bondholders will not be repaid in full, and they need to start doing this tomorrow, by announcing that they are pausing the payment of this billion-dollar bond, pending negotiations with bondholders.

So what should the government do?

    Announce that they are "pausing" the payment of this bond.
    Invite bondholders to enter negotiations.
    When the ECB/Eurozone governments object, hold them to the letter of the agreements they signed.
    In negotiations with bondholders, seek a substantial "voluntary" haircut for this and future unsecured Anglo bonds.
    Proceed with other aspects of the EU/IMF programme to continue to tackle the deficit.

* Technically, Anglo on longer exists. Anglo Irish Bank Corporation Limited is now known as Irish Bank Resolution Corporation Limited.

[Hardy]

Why are the State paying anything back on unsecured bonds. Surely the fact that they were unsecured meant they were riskier but with a higher return if times were good but if things went tits up it was gone? Am I missing part of the puzzle or does it appear that investors were able to either make a killing or get their money back on unsecured loans?

Why isn't Enda telling them to f**k off?!

The bit you're missing is that these bonds became part of the sovereign debt the day they nationalised Anglo. That was the outrage that should never have been perpetrated, just as including Anglo's bond holders in the bank guarantee should never have happened on that September night in 2008. Anglo should have been told to shut its doors and f**k off - nothing to do with us.

We could still renege on these bonds, but that would now be defaulting on sovereign debt.

[Main Street]

The law in ireland gives equal priority to bondholders  and depositors.
Fine Gael actually knew full well in January 2011, before they were elected, that as the laws stand, this debt would have to be paid or face a cast iron legal challenge. Yet that did not stop them making false election promises of forcing junior bondholders (owners of preference shares, sub-ordinated debt and similar instruments)  to share in the cost of recapitalising troubled financial institutions.


'Fine Gael in Government is committed to forcing certain classes of bond-holders share in the cost of recapitalising troubled financial institutions. this can be done unilaterally for the most junior bondholders (owners of preference shares, sub-ordinated debt and similar instruments), but should be extended – ideally as part of a european-wide framework – for senior debt for institutions like Anglo irish and irish Nationwide that no longer have any systemic economic importance. Fears about the implications of bank debt restructuring for financial instability are over-cooked. A large proportion of the €25 billion in unsecured junior and senior irish bank debts have already been sold on – at significant haircuts – to private clients and hedge funds in London and elsewhere, which hope the irish state can be pressed into honouring these bank debts in full.'