McWilliams bringing bank failures closer to home

David McWilliams writing in the Independent today about Fannie Mae and Freddie Mac and speculating will it happen here.

Simple leaving cert Economics here. McWilliams has a lot of credibility because he’s not in anybody’s pocket. The spin merchants must really hate him for shining a light through all their smoke!

This is very “dangerous talk” (to quote our Finance Minister) from Mr McWilliams.

Is thinking it also a sin?

He is a brave man though and fare play to him for being a realist and sticking his neck out for the benefit of those who have been blinded by all the positive spin the last few years.
I personally wouldnt have the courage to be as frank as he is in the mainstream media if I was a jounalist. If there ever was a bank run in Ireland I can just see people pointing at Mc Williams and saying he caused it by thrashing confidence etc.

We are polarised between realists like Mc williams and the participants with their own personal agenda to protect.

Hopefully though, he has enough impact to make sure the people who took the massive risks with other peoples money are the losers as the house of cards unfolds and that they wont get the opportunity they are looking for…namely, prop things up for just long enough to suck in enough blinded individuals such that they can offload their mistakes to those hard working poor souls who will pay off the mistakes of the last 5 years for the next 30 years of their working lives

It is dangerous. Though Mc did write something about the bailout years ago, and it involved a bank failue and nationalisation.

Mc is either correct and sees a bank failure coming down the shitpipe. He’s chancing his arm with full confidence that he was proven correct in regards to the housing crash and is out to make another prediction or he has some info in regards to what is happening. He knows that that the lads (builders as he calls them) arent paying back anything to the banks and he’s taking it from there.

He’s also been predicating the end of the property boom since 2000…even in his last book he admited that he gave up guessing when it was going to happen, considering he got it wrong so often he was damaging his credibility - answer was, about 6 months later! And he couldn’t see that coming? Humm!

So he’s just doing the same thing here, except with the banks this time…2 years is what he’s saying now. Watch this space…2010 the bank crash will be in another 2 years :unamused:

And as usual there’s no solution - a hint of what to do with your deposit would be nice, but he doesn’t want to start a bank run maybe.

Yes, McW isn’t a clairvoyant (but are any of us?). But I do think he deserves credit for taking a stand…

“If you can keep your head, when all about you are losing theirs, and blaming it on you…” .

Ok his style can be a bit irritating, and he doesn’t often provide the answers, but it is journalism after all - political and economic commentary, meant to provoke thought and debate, not prescribe policy.

He and Alan Aherne and Morgan Kelly were the only voices of sanity at the height of the bubble, and they got a lot of grief for daring to speak out against the consensus. Fair play to them.

Would you take a bet with me that at least one of the Irish banks will have a capital increase in the next 12 months. I’ll even give you odds.

since 2000 there was the massively reduced interest rates that sent house prices to the stratosphere and then there was the govt’s intervention to make it easier for amateur-investors get into the housing market. McW did say that rising house prices was unsustainable.

McWilliams is damned if he does and damned if he doesn’t on this one.

As I see it if a bank failure is to occur, the course is already set and there is nothing the Government or the Central Bank can do to change that.

It is within their power however to minimise the effects of such a failure by planning for the event and be ready to act quickly and decisively having learned from the mistakes made in the UK when NR failed.

If the Authorities are prepared for a bank failure or run and will act to fully guarantee depositors funds then there can be no justification for writing an article such as this, as the intended audience has nothing to lose, but unfortunately that’s unlikely to be the case.

McWilliams had made his point now, if people don’t take that on board then that’s their own fault now. The thing for him to do now is to let it lie, if he doesn’t then he will go down completely in my estimations.

Why should he let it lie? He sees the obvious danger and he won’t be shouted down by irrational blustering (appealing only to the nature of the mind, rather than the faculties of the mind) from increasingly panicked people in power.

Do you really think the “Authorities” (note the capital ‘A’) are in control of this situation? They’ve never encountered such a situation before and it’s time to initiate some fiscal experimentation with, you’ve guessed it, our tax money! Of course those making these decisions on our behalf will pass the proverbial ‘go’ and will pick up their pay/pension/expenses tab (think of all that overtime) regardless.

The gombeens will have their finest hour yet.

Well you said it yourself, what did you mean?

There’s been plenty of discussion on the radio this week about the possibility (or should that be probability) of an Irish bank failure.

Those who have ears to hear will have heard the message and those prudent enough to act upon it should be doing so. (Or have done so :wink: )

My point is that he has made his point now, I don’t believe that we will benefit from it being trotted out to us every other week until a bank failure occurs.

Personally I don’t have faith in either Brian Lenihan or John Hurley being able to handle a bank failure in the best possible manner and have made my own arrangements to safeguard my funds. But the point has been made to them as, all those management consultants will tell you, “fail to prepare and you can prepare to fail.”

It’s been said here many times that banking is all about confidence, and whilst I would never say that we can talk ourselves into a recession as Vincent Browne would have us believe, I do think we can talk ourselves into a bank run.

What possible benefit do you see in McWilliams labouring the point?

It’s often said in business, people don’t buy from companies, they buy from people.
By extension, people don’t have confidence in banks or governments, they have confidence in the individuals who run those banks or governments - directors and ministers.
The challenge now for those directors and ministers is to advance plausible arguments as to why we can still have full confidence in the banks - it’s no longer good enough just to trot out blather about ‘de fundamentals being sound’, ‘the economy being strong’ etc.
So the reason why McWilliams needs to keep making his point is because it’s clear that the message is not being taken on board (including by BrendanG above), and the time for him to stop is when either he has been proved wrong or he has been proved right (in which case to continue would only be gloating). By continuing to bang his drum, McWilliams is sending a clear and unambiguous message to the government, including Minister Lenihan: are you with the plain people of Ireland or are you against us?

Which point is it I’m not taking on board?

I think it’s plain to see from my posts that I believe that some of the Irish Banks have real troubles, I’ve moved my money to banks that are regulated by UK and Danish Central Banks as I have no faith in the Irish one. What more to I need to do?

Neither the UK nor the Danish banks are immune from this. Both are experiencing property crashes and both will have victims in the banking sector. Perhaps the best defensive position is to be alert on a daily basis and ready to move your cash at a moments notice. Or put it in An Post, and take the interest hit, but guarantee safety.

By suggesting An Post you are suggesting that the Irish Government guarantee is in some way superior to a UK Government guarantee, I’m not inclined to agree but I’m open to any argument you might have.

Any guarantee scheme has its limitations most notably how long will they take to pay out.

All my funds are in demand accounts so I’m ready to transfer them at short notice. By all means the UK and more so Denmark have their own property woes and I do keep a close eye on things. Having been able to release the equity from my house before the market could gobble it up in price falls I have no intention to lose it to the banking system.

In the event of a banking crisis could the Government implement currency controls to stop people taking money out of the country?

I don’t think so, as it would be against EU law on the free movement of goods and services, but I stand to be corrected on that!

Not at all BrendanG !! Royal Post Office would be safe too ! Take your pick …
But the Banks are a different matter entirely, in both jurisdictions save for the Rock of course - I wonder how long that guarantee will last - must be pissing the others off no end. Anyone know if the other banks are going legal on the grounds of unfair competition ?