S&P cuts Ireland outlook from stable to negative


#21

Agree with this.
The guarantee was, in my honest opinion, an enormous blunder.

It bears the hallmarks of a quick-fix solution with serious long-term consequences.
At the time they needed to move fast, they did, but in the wrong direction.
Its full implications were very obviously not considered.

The irony is, of course, the guarantee was put in place as an alternative to recapitalisation.
Unfortunately the market has taken the view that the govt cannot afford the guarantee should it be called upon.
This, in turn, leads to a further erosion of confidence in the banks, making recapitalisation unavoidable.

The problem is then compounded by the increased interest rate that the government has to pay on its bonds.

My solution would be for the government to rail back/abandon its guarantee scheme, opting instead for a comprehensive and well thought-out recapitalisation plan.

Markets hate uncertainty.
They are seeking certainty in terms of the costs of the bail-out.
The ultimate costs of the guarantee are unquantifyable.
A large recapitalisation provides a definitive figure that the markets are able to accept as the final cost.
Only then will a return to near-normality occur.


#22

give the banks two weeks to come clean to the new CEO of Anglo, which has been totally bought out by the state. Anglo takes all the crap, then the state washes its hands of the others. Only way forward.


#23

Just as an aside, to what extent did the other similar guarantees put in plce just after Irelands differ. Are these countries similarly boned or did they leave out certain elements of bank borrowings?


#24

Mostly they guaranteed deposits and new debt, but not existing debt.


#25

Oh, so they must be happy with job cuts if that’s the case. Makes sense, they don’t have to worry about ex-employees paying union dues.


#26

A paycut exposes benchmarking and other pay agreements as shams. They’ll be saying they were wrong all along.

Also it’s not easily reversible - it’ll be a long time before a government will even pay inflation matching rises let alone higher than inflation rises.

Job cuts are reversible, you actually do need some solid number of teachers, nurses and even civil servants. If job cuts push the numbers below what’s required to run the service then the numbers will be rehired again.

Also job cuts are easy to arrange since there’ll be plenty of close to retirement public servants who’ll volunteer, you’d easily get a 5% voluntary reduction in headcount with a 6 week per year deal (uncapped of course - so they’ll endup with around 200 weeks of pay) and they’ll be picking up the pension in a few years anyway.


#27

not everybody too enamoured with S&P
trueeconomics.blogspot.com/2009/ … eland.html


#28

What?! No room for Bertie? How quickly you forget the architect of our ‘Boom’.


#29

Can’t believe you left out “Slightly Bonkers”… Oh wait, no, my mistake… Coughlan is in there…


#30

If one were to short sell the Irish economy, how would one do it?


#31

Mr Tubridy, do something!

S+P might “talk us into a recession”!


#32

He did something. Years ago.

A full frontal lobotomy by the sounds of it…


#33

Completely agree. S&P could not be trusted to find Ireland on a map of western europe.
The rating agencies models have all been admitted as rubbish by themselves hence they should not be quoted anywhere.

The EU should be looking at jailing these types. If they were European and the result was sub prime dodgy assets flogged to US banks in the last couple of years then they would be doing time in US jails.

Furthermore any bank relying the their ratings should be nationalised.


#34

fucking hell,

S&P are right infront of the curve eh!!!

Most of us have been running around with our heads on fire for the last two years, and only now do S&P downgrade us to negative.

I downgraded Eire to “fucked” yonks ago…


#35

#36

"By 2006 MBIA had plunged into the much riskier business of guaranteeing collateralized debt obligations, or C.D.O.’s. But by then it had $7.2 billion in equity against an astounding $26.2 billion in debt. That is, even as it insured ever-greater risks in its business, it also took greater risks on its balance sheet.

Yet the rating agencies didn’t so much as blink. On Wall Street the problem was hardly a secret: many people understood that MBIA didn’t deserve to be rated triple-A. As far back as 2002, a hedge fund called Gotham Partners published a persuasive report, widely circulated, entitled: “Is MBIA Triple A?” (The answer was obviously no.)

At the same time, almost everyone believed that the rating agencies would never downgrade MBIA, because doing so was not in their short-term financial interest. A downgrade of MBIA would force the rating agencies to go through the costly and cumbersome process of re-rating tens of thousands of credits that bore triple-A ratings simply by virtue of MBIA’s guarantee. It would stick a wrench in the machine that enriched them. (In June, finally, the rating agencies downgraded MBIA, after MBIA’s failure became such an open secret that nobody any longer cared about its formal credit rating.)"

End the official status of the rating agencies. Given their performance it’s hard to believe credit rating agencies are still around. There’s no question that the world is worse off for the existence of companies like Moody’s and Standard & Poor’s. There should be a rule against issuers paying for ratings. Either investors should pay for them privately or, if public ratings are deemed essential, they should be publicly provided.

Lewis and Einhorn 3 january 2009, NYT


#37

Yes, yes, Tyler. That’s what makes the negative outlook for Ireland so damning. The ratings agencies are so far behind the curve that we are probably already looking like AA- (or some other makey up combination of the letters A & B, the number 1,2,3 and the symbold + and -, with our special guest John Denver accompanying Kermit on the flugelhorn) in the eyes of the markets.


#38

#39

#40

yay…
:neutral_face: