What must the regulator have known about Anglo 2005-2007.


#1

To say that ‘they were asleep at the wheel’ is only cover-up, spin and white-wash. It is much more serious than that.

First, a quick discussion of what regulation is, and how simple it is to effect.

It is purely a monitoring of simple key variables and ratios that are very easily generated in the normal course of business. All that effective regulatory oversight requires is to ensure that these variables are kept within agreed limits.

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Now, the regulator would have access to much more frequent and detailed information that the general public.

But, here is some of the information we the general public DO have access to.

It is only yearly, and obviously, the annual reports are massaged. But still, here is what they show. (taken from Anglo bank balance sheets, rather than their consolidated balance sheets).

1. Customer loans and deposits
Massive ramp up becoming very obvious around 2005, and corresponding increasing gap between the amount out on loan and deposit.

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2. Interbank transfers
A very strange hicough around 2005, of the order of more than 5 billion euro.

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3. Debt securities
Again, what the hell was happening around 2005-2006

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4. Central bank cash and balances and financial derivatives
These only make an appearance on the balance sheets around 2005.

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5. Share prices
Some major hicoughs around 2005 and again in 2006, before it started its precipitious decline in early 2007.(Iit was 2006 we heard the first rumour in the general public from a Dublin broker that there was ‘a very large short position’ on Anglo).

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Anyway, I’ll come back to this post. It is critical to understand and grasp the implications of regulatory inaction, and the political impetus that engendered the situation.

The Indo is spinning like mad. They have to be pulled up on it.

The regulator and by implication the government must have known since 2005 of the serious problems building up in the system. They never acted to try and do something about it. They continually deny that they knew anything, which is patently false. We do not need a banking enquiry. - We need an inquiry into our government and key institutions, particularly the DOF, the regulator, the central bank, and the media.

So, to use the parlance of our government, what needs to be done is for the *‘frame of reference’ *for such an enquiry to be determined from a political impetus OUTSIDE the impetus that gave rise to the débâcle.

The most dangerous thing for the life of this country is to allow the government and media to set this ‘frame of reference’ for an enquiry. It will be a white-wash with a few sacrificial lambs. We can’t let that happen.


#2

The share price is an interesting one which perhaps weakens your point.

With hindsight the dip around 2006 looks like a signal, but if you crop the graph back, how would you project it out?

And if the other public indicators looked alarming from 2005, why did the share price keep going up until mid-2007?


#3

So what do we do?


#4

The ‘market’ by and large is not interested in long term viability or how the actions of the bank board and management affects overall long term growth and balance. Their outlook is short to medium term. Clearly around 2005 and 2006, the bank board took actions that played purely to this short term outlook. But the regulator concerned with overall growth and balance should categorically NOT have allowed such actions to be taken, in view of the likely affects on long term growth and balance. So in fact, I would say it very much strengthens my point.


#5

What is most important is to try and overcome the perpetuated political narrative that puts all blame on banks, and absolves government and regulator, and says we need a banking enquiry etc etc. I think that the alternative media needs to set its own strong and clear narrative in terms completely different to the narrative perpetuated by the establishment PR and media machine. It needs to set a tone, avoid shrill partisanship and me-feinism. It needs to develop a greater legitimacy than the establishment narrative. A much higher logos, ethos and pathos. That would be the essential first step imo. It is the key component in developing the necessary political consciousness capable of bringing about a change towards truth justice and decency in our society and its government and institutions.


#6

I’m saying that the share price is all noise and no signal, except with hindsight. Your analysis doesn’t need it - the other indicators are cleaner.


#7

Yes, that is probably true.

I think I included it in an emotional reaction to this article - independent.ie/irish-news/anglo-tapes-they-knew-for-a-year-that-bank-was-in-crisis-29416977.html. The time frame being talked about by the Indo hacks is when the point of no return had been definitively crossed - clearly indicated by the share-price. The dogs on the street knew it then. I find it criminal how the Indo are trying to spin it (under whatever impetus, which is what is really important here…).


#8

I think Nationwide is the more interesting case.

I recall a programme on the former bank hosted by Richard Curran, which highlighted Central bank concern at Irish Nationwide, but steps were taken to stop the Central bank from stepping in. Whoever did that seems to be the key culprit in our banking crisis. Once IN got the go ahead for recklessness the seeds were sown for the downfall of our economy.


#9

Good thread, roc.


#10

Come on without, come on within…


#11

That is one knock-out OP. :exclamation:


#12

Compared to the other data price does not seem that significant, but there is an interesting spike in volume in 2004, does anyone know what that was?


#13

CFDs were all the rage from 2005 to 2007


#14

The regulator formally changes in February 2006.

Sean FitzPatrick also changes roles in 2005 from CEO to chairman.

From August 2005

That period 2004 -2005 also saw the changing of the guard at the top in Irish banking, a fact that the regulator cannot have been unaware

David Went makes strong defence of Irish Banks -> permanenttsbgroup.ie/media-c … -2004.aspx

11 Oct 2004

There definitely were alarm bells going off at the top, the regulator cannot have been unaware of them at the time.


#15

Im not sure what the restriction on 2005 -2007 is. The banks were alowed to proceed with impunity long before then - pre 2000. Fingers is the prime example. But it was all about profit then not risk. Risk was ignored by all including the regulator/CB/media wankers incl Shane Ross etc etc


#16

rocs point which I partly agree with is the regulator had access to information on which it failed to act. The question I reckon he is asking is why did the dog not bark? Find out why and put the proper filters in place so that when tripped the correct actions are taken.

The people in the DoF/CB/IFRSA are not concerned with profit and loss since they get paid in either outcome, they are also blind to risk since they come up through a bureaucratic system that follows the logic of it’s own rules whether appropriate to the situation or not, none of them have market experience working as traders so they have no understanding of business cycles, what information is conveyed in prices or what the appropriate action to take is.

I put some quotes from some people involved in the market above who obviously understood what was happening and were probing and questioning and positioning themselves. Going by David Wents comments the smart investors were obviously asking hard questions, he chose to deflect from the issues they raised with a “don’t scare the horses” excuse while preparing his exit. Whatever circle McWilliams was moving in when he picked up on that bankers comment was fully cognisant of the situation and would have raised it with the top leaders at the time, they probably realised the situation and made good their exit also, some with better timing than others.


#17

Totally disagree.

It was not a question of lack of filters, or ‘failing to act’, or incompetence, or tactical and operational systems.

Neither do I believe they were under-trained, or under-resourced in understanding and managing risk or business-cycles, or that they were stuck in bureacratic modes of thinking that blinded them to what ‘prices’ were so clearly trying to tell them :unamused:, or incapable of understanding the actions to take etc.

My point, in the aspect you allude to, is that an endemic institutional corruption, engendered by an out-of-control free-market ideology, pervaded all aspects of governance, at all levels.

It wasn’t pure free market ideology, actually. While certainly, the unfettered free market aspect was to the fore in the period, however it was rolled up with the more traditional FF inspired rentier ideology, and the US/UK inspired FIRE impetus of the period, within a broad liberal consensus.

The rewards for buying into the ideology were high. Once you bought in (whether by buying a rapidly appreciating property or property portfolio, or taking advantage of the massively high paying jobs across all institutions, public and private, that partook in and benefited from the paradigm (and exceptions can be counted on one hand), and so on), you were bought and paid for. You were expected to be faithful to the ideology and the rewards that stemmed from it.

The guarantee and NAMA were the culmination of this institutional corruption. In their own way, they were the precisely same phenomenon as the regulator looking the other way in the name of ‘the lightest-touch regulation in the world’.

The DoF/CB/IFRSA were SOLELY concerned with profit and loss at this time. All of their other responsibilities to their society became subservient.

People like David Went are the high priests of the ideology. The FFers and Angloers and Developers were only the ignorant rabble, who took the high priests up on their offer of “heaven on earth”… But people like Went saw clearly what he hath wrought, and got out fairly quick, along with the majority of other wealthy business people who had a similar high intelligence.


#18

The free market is simply people voluntarily exchanging property rights with each other, it’s not a conspiracy or ideology, it just is. The rules are straightforward don’t steal or use intimidation to get want you want and it’s that voluntary exchange and respect for property rights that forms the bedrock of what we like to call society. The free market has been in operation probably since people discovered it’s better to co-operate with one another to achieve their desired objectives and it’s the very reason you exist today. The alternative to voluntary interaction is subjugation and theft, systems operating on that basis don’t last forever. Where is the Mongol empire today? the Roman empire? the British empire? and countless others that used violence to expand? Confined to history books is where. What about the socialist regimes of the twentieth century that were fundamentally built on imposition of violence through the control of property rights by a central committee? They were overcome peacefully by the people freely rejecting that ideology in favour of free markets.

Human nature being as it is for the past millennia, there is always some level of disharmony and societies have developed means to cope with that which is partly why government of various forms exists. There will never be any change to this unless human kind evolves and to date we are pretty much as we were then with the same emotions, same desires and same fears.

The banking and monetary system as it exists today is fundamentally corrupt, it continues to exist only because a central authority protects it though the use of violence (try not paying your taxes). When that protection is removed from the banking system the free market eventually eliminates the corruption and imposes losses. These losses are what the people who use the neo-liberal free-market ideology strawman argument fear. Their argument is an expression of their inability to control other people to achieve their desired outcome and the organised chaos that ensues from their attempts to do so. A well regulated banking system is just not possible based on the current fractional reserve/single central bank setting one interest rate model, it will always be an unstable configuration and as a result we have to adapt to the cycles that result as we go between one extreme and another.

You put up several graphs highlightling changes taking place in 2005, the regulator at the time was Liam O’Reilly, who holds a Ph.D. in econometrics from TCD. He quit at the end of 2005 and eventually went on to become chairman of the chartered accountants regulatory board and sit on the boards of banks he once regulated. His predecessors also sat on boards of banks they once regulated. O’Reilly would have access to the graphs you show and more besides and he should have had the skills to be able to know something was amiss. If so do you think he was going to hang around and take the rap for the impending Anglo and INBS failures?

Simon Carswell wrote a book prior to this most recent crisis called “Something Rotten” that pretty well covers Irish banking in relation to the business practices and scandals that have cropped up over the decades. The regulators believe they know which side their bread is buttered and they always act to protect the interests of the existing players of whichever industry they are regulating and by extension their own position, that’s human nature.

If you want to change the current banking system and reform it, then let “principles based regulation” run its course, stop the bailouts, liquidate the bad debts and impose the losses on the banks creditors (i.e savers and bond holders), otherwise they’ll be back for more bailouts in another decades time. The fact is every level of regulation both public and private failed to prevent the banking collapse, there has to be something rotten at the heart of the system for that to happen.


#19

At boyracer.

This
Fck


#20

Seriously. This nonsense is all from a parallel universe that doesn’t exist. It is beyond parody.

A ridiculous conflation. We are talking here about the self-regulating market. It is a very very different phenomenon to barter.

The (relatively recent) innovation of the institution of the self-regulating market necessarily destroyed the society that preceded it, and gave rise to a specific civilisation. - The liberal state itself was the product of the self-regulating market.

The society it displaced was based on economic units like family, tribe, community, etc, that did not rely much on money. The rights they had over their land and labour were of a very different type to what came after, when the market demanded that labour should be utterly dependent on money so it could be bought and sold on the open market for payment. And land could be similarly traded.

As time went on, it became clear that the institution of the self regulating market could not exist for any length of time without annihilating the human and natural substance of society; it would have physically destroyed man and turned his surroundings into a wilderness.

So inevitably, society took measures to protect itself, but whatever measures it took impaired the self-regulation of the market, disorganised industrial life, and thus endangered society in yet another way.

And we still see the same process. And the same calls to do it all over again and learn nothing…

I only read your first paragraph. To counter your supposed arguments requires going back to very elementary misunderstandings and working back from there. I really don’t have the time for it.

EDIT - Here’s an old post goes through more of it - viewtopic.php?f=19&t=56811&p=686841#p686841