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 Post subject: Re: Government to guarantee bank deposits/debt
PostPosted: Fri Oct 03, 2008 10:20 am 
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CelloPoint wrote:
johnboy wrote:
Sept. 30 (Bloomberg) -- The perceived risk of a default by Ireland surged to a record after the government said it will
guarantee the deposits and borrowings of six lenders. Credit-default swaps on Ireland's government bonds rose 30.6
basis points to 63.5, according to CMA Datavision prices.


Unintended side-effect of Lenihan's move.
We need to borrow €7bn to €10bn this year just to balance the books. It will now be at much higher interest rates.

Fair play to Shane Ross for also highlighting this increase in costs of Govt borrowing because of the bailout in the Seanad during the debate... anyone know how he voted in the end.
What are Irish Gubberment bond credit-default swaps trading at now?
Given its far worse than was expected and sits at an 11.5 billion deficit whats the top up Seanie Taxpayer has to come up with.

Theres obviously other larger reasons but I think one of the reasons this legislation was rushed thru was cos the Govt. knew the disastrous deficit figures were
coming out later in the week.
'give me a blankety blank cheque for 400bn ' -> 'thanks' -> 'oh by the way im 11bn short for next year'
is alot better than
'im 11bn short for next year' -> ' any chance of signing off on 400bn blankety blank cheque book and pen'

Does anyone have access to HSE files, theyd never see if theres an MRI scan of Enda Kenny floating around and if so could they check if theres any sign
of a spine or vertebrae there. How does he sit upright without a backbone !

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 Post subject: Re: Government to guarantee bank deposits/debt
PostPosted: Sat Oct 04, 2008 11:18 am 
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By the way, it´s still not clear to me why Morgan Kelly´s doomsday prediction isn´t going to turn out correct: the banks will use this guarantee to sell off their toxic developer loans to foreigners under the cloak of the Irish guarantee. The loans will go bad, and the Irish taxpayer would get lumped with 75bn debt to foreigners.

If there is a mechanism to stop this happening, I´d be glad to have it pointed out to me for public inspection.


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 Post subject: Re: Government to guarantee bank deposits/debt
PostPosted: Sat Oct 04, 2008 4:35 pm 
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rock3r wrote:
By the way, it´s still not clear to me why Morgan Kelly´s doomsday prediction isn´t going to turn out correct: the banks will use this guarantee to sell off their toxic developer loans to foreigners under the cloak of the Irish guarantee. The loans will go bad, and the Irish taxpayer would get lumped with 75bn debt to foreigners.

If there is a mechanism to stop this happening, I´d be glad to have it pointed out to me for public inspection.


Well if they sell them to foreigners, how would it come back to haunt the taxpayer, as I've understood the banks have merely been offered the use of liquidity access that the government utilises, i.e. borrow from government at a premium. Whilst they can use this to underwrite the safety of the bank, though putting Ireland's credit rating at untold risk, I still don't understand why if they were to divest themselves of these assets / liabilities in a non-recourse manner where would the risk to the taxpayer be?

Can't see any appetite however for these assets/liabilities on today's market anyway though so this is a non issue, the banks would have been snapped up by other European banks already if there was any faith in the fundamentals, clearly, there wasn't.

Bigger risk is the ship continues to list badly and eventually we end up with a consolidation of Irish banks...

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 Post subject: Re: Government to guarantee bank deposits/debt
PostPosted: Sat Oct 04, 2008 5:06 pm 
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There is a thread about this on AAM....someone (who looks like he knows what he is talking about) believes that it will be possible to bundle up the toxic debt and sell it on with a guarantee......


http://www.askaboutmoney.com/showpost.php?p=717638&postcount=109


Quote:
Straight off the top of my head; say I'm an exec in one of the 6 banks with a bunch of sh*t loans that in reality are worth about 10% of their book given most of them are non-performing. Bundle 'em up wrapped as a zero coupon bond with as long a maturity date as you can get away with. Easy to sell these because even if you go bust or the assets behind aren't worth a penny, our government is guaranting that the purchaser will get every penny of the face amount at maturity. Bingo - toxic loans off the books (you don't even have to worry about trying to sort out the mess) and another bundle of cash to keep the bank going a bit longer even if it's losing money hand over fist.

It's a win-win for the teathering bank and the institutional purchaser. Tell me with a straight face deals like this aren't going to happen? If I was a bank exec why would I even try to do something difficult like struggle to turn around my profitability in a tough environment (e.g. by slashing costs, providing better services to REAL customers, making people redundant, etc.) or even do the brave thing like try to wind things up before things get worse knowing that no turn around was possible? Why attempt any of this when I could spend my days dreaming up deals like this to convert sh*t into gold?



the thread is here....
http://www.askaboutmoney.com/showthread.php?t=93289&page=6


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 Post subject: Re: Government to guarantee bank deposits/debt
PostPosted: Sat Oct 04, 2008 8:05 pm 
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Now we've gone and upset the French aswell. Do we have any friends left?
http://news.bbc.co.uk/1/hi/business/7648027.stm
Quote:
French Finance Minister Christine Lagarde has become the latest European politician to criticise the Republic of Ireland's bank guarantee move.

With Ireland due to pass a law safeguarding all deposits in its six largest banks, Ms Lagarde said other nations should have had advance notice.
...
Ms Lagarde said "a measure decided in one [European Union] member state has to be shared in advance with other member states".

"Because when something happens in one member state it affects everybody else around, so there needs to be that level of cross-sharing of information," she added.


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 Post subject: Re: Government to guarantee bank deposits/debt
PostPosted: Sat Oct 04, 2008 8:24 pm 
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German Chancellor Angela Merkel - who said she was not happy with Ireland's action in guaranteeing bank deposits - said each country must act in "a balanced way" that did not cause harm to other EU member states.
"Each country must take its responsibilities at a national level," she said.

Europe agrees bank crisis action
http://news.bbc.co.uk/2/hi/europe/7648249.stm

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 Post subject: Re: Government to guarantee bank deposits/debt
PostPosted: Sun Oct 05, 2008 1:22 am 
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Financial crises may not be the best time to make friends and influence people, but the Irish guarantee is the most ‘in-your-face’ beggar-thy-neighbour provocation since medieval armies catapulted bubonic-plague-ridden corpses into the cities they were besieging. Between the attempt to favour Irish shareholders at the expense of foreign shareholders and the poaching of UK sterling deposits (and indeed euro deposits anywhere else in the euro area) through subsidy-fuelled interest rate offers, Ireland should not be surprised to encounter limited support and solidarity in the EU the next time the country is up against it, for whatever issue.

http://blogs.ft.com/maverecon/2008/10/t ... m-that-ok/

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 Post subject: Re: Government to guarantee bank deposits/debt
PostPosted: Sun Oct 05, 2008 1:53 am 
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Based on this column, Buiter is at best a hypocrite.


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 Post subject: Re: Government to guarantee bank deposits/debt
PostPosted: Sun Oct 05, 2008 10:16 am 
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The Unwelcome Guest wrote:

Well if they sell them to foreigners, how would it come back to haunt the taxpayer, as I've understood the banks have merely been offered the use of liquidity access that the government utilises, i.e. borrow from government at a premium. Whilst they can use this to underwrite the safety of the bank, though putting Ireland's credit rating at untold risk, I still don't understand why if they were to divest themselves of these assets / liabilities in a non-recourse manner where would the risk to the taxpayer be?

Can't see any appetite however for these assets/liabilities on today's market anyway though so this is a non issue, the banks would have been snapped up by other European banks already if there was any faith in the fundamentals, clearly, there wasn't.

Bigger risk is the ship continues to list badly and eventually we end up with a consolidation of Irish banks...


The bit which I have highlighted is what worries me, and presumably Mr Kelly.

What is to stop them selling the "assets" on in a NON-non-recourse manner, as it were?

As in, they sell it, but retain liability if it goes sour, meaning the Gov´t has to honour that liability.

And the guy that benji2006 has quoted above seems to be saying precisely that.

So I am not seeing how we have any protection from this. I think we should, in fact, be checking to see if this is going on as we speak.


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 Post subject: Re: Government to guarantee bank deposits/debt
PostPosted: Sun Oct 05, 2008 10:20 am 
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rock3r wrote:
The bit which I have highlighted is what worries me, and presumably Mr Kelly.

What is to stop them selling the "assets" on in a NON-non-recourse manner, as it were?

As in, they sell it, but retain liability if it goes sour, meaning the Gov´t has to honour that liability.

And I can't see any reason that they will not do that. Much of the European debt market is this way. Covered bonds work this way (that is why Roskilde were brought down) in that if the NAV drops below a level you can return them to the originator and get your money back.

It's either that or they will sell two year money backed by worthless (but state guaranteed) assets and then have another funding crisis in two years time when it all comes due.


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 Post subject: Re: Government to guarantee bank deposits/debt
PostPosted: Sun Oct 05, 2008 10:28 am 
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:shock: :shock:

frack.

This be doubleplusnotgood.

Somebody needs to get onto Finance right away and mention this in very urgent terms. We need to rapidly amend this bill to make such deals invalid in terms of the guarantee.

Can the Minister make a Ministerial Order refusing to honour the guarantee for such loans? Has the Minister the power to refuse guarantees on a case-by-case basis?

What is the legal situation? Presuming we have say 3 to 6 months before these loans go absolutely sour, can we simply change the law withdrawing the guarantees? Or are the purchasers entitled in law to the guarantees that existed when the transaction took place?


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 Post subject: Re: Government to guarantee bank deposits/debt
PostPosted: Sun Oct 05, 2008 1:00 pm 
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rock3r wrote:
:shock: :shock:

frack.

This be doubleplusnotgood.

Somebody needs to get onto Finance right away and mention this in very urgent terms. We need to rapidly amend this bill to make such deals invalid in terms of the guarantee.

Can the Minister make a Ministerial Order refusing to honour the guarantee for such loans? Has the Minister the power to refuse guarantees on a case-by-case basis?

What is the legal situation? Presuming we have say 3 to 6 months before these loans go absolutely sour, can we simply change the law withdrawing the guarantees? Or are the purchasers entitled in law to the guarantees that existed when the transaction took place?


Draft it up, put it in plain writing we'll get it to the Minister, McWilliams and whoever else will make a case.

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 Post subject: Re: Government to guarantee bank deposits/debt
PostPosted: Sun Oct 05, 2008 1:22 pm 
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Sorry, but I don´t even have access to the Irish Times, as I´m out of the country. So I´m not sufficiently informed.

Maybe somebody who´s actually on Irish soil better take the lead on this one.

Or maybe Ireland having to shut down all the hospitals to pay for a bust developer loan just isn´t that big of a deal, and I´m making too much of a fuss of it.


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 Post subject: Re: Government to guarantee bank deposits/debt
PostPosted: Sun Oct 05, 2008 4:08 pm 
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Ilargi on the automatic earth has an interesting point:
http://theautomaticearth.blogspot.com/2 ... -face.html
Quote:
The European Union, at least in its present shape, will fall apart, country by country. They forgot to write the treaties that could have prevented that. And now individual panicked governments, like the Irish, do crazy things, like guaranteeing all bank deposits, even though they could never pay.

Willem Buiter writes:

"The Irish guarantee is the most ‘in-your-face’ beggar-thy-neighbour provocation since medieval armies catapulted bubonic-plague-ridden corpses into the cities they were besieging."

Amen. The problem is that there are no other tools available; Europe never thought they’d be required. The first tool you need in a crisis is realism, knowing what you're up against. I see no such thing. What I see in Europe is a sense of entitlement that is way beyond any sort of proportion, and which risks pitting countries and individuals against each other instead of working together.

While I'm not convined by Mr. Buiter's argument, given that the UK allowing NR to continue to take deposits in the Republic effectively amounted to the same thing, I believe I agree with Ilargi's argument that there are no Europe-wide mechanisms or guidelines to cope with bank insolvency. In fact, given what has happened in the UK and the US, it is astonishing that no guidelines, however hasty, have been drawn up. This betokens the arrogance of not just the Anglo-Saxon governments, but the continentals aswell. It is a bizarre form of NIMBYism - it could never happen in my back yard.


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 Post subject: Re: Government to guarantee bank deposits/debt
PostPosted: Sun Oct 05, 2008 6:18 pm 
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http://www.tribune.ie/business/article/ ... -held-ban/

One in five TDs in favour of state rescue held bank shares
Ken Griffin
Richard Bruton: owned shares in Irish banks according to the last register of Dail member interests

Almost 20% of TDs who voted for the government's bank guarantee scheme, including Fine Gael TD Richard Bruton, recently held shares in Irish banks, according to the last Dáil register of members' interests.

The guarantee was supported by all the political parties apart from the Labour Party, handing the government an overwhelming majority.

In all, just one TD who owns bank shares, Labour's Willie Penrose, voted against the plan.

Between Monday's stock market crash and the guarantee becoming law on Thursday, Irish bank shares rose by an average of 65%, with Anglo Irish Bank shares more than doubling in value. Anyone owning these shares stood to make a large paper gain on the week, although even this rise failed to offset steep declines from earlier this year.

It is impossible to assess the individual gains as TDs are not required to disclose the size of their shareholdings, with prominent figures such as Fianna Fáil's Seán Haughey and Micheál Kitt, the Green Party's Mary White and Fine Gael's Alan Shatter and Michael Noonan declining to provide this information.

Just three TDs – Fine Gael's James Reilly and John Perry and Fianna Fáil's Michael Kennedy, disclosed the size of their modest bank holdings, all of which are worth under €10,000 even after this week's rally.

Irish politicians have been investing in bank shares for a long time.

There are also long-standing links between banks and Fianna Fáil.

The chief executive of the Irish Bankers' Federation, Pat Farrell, is a former general secretary of Fianna Fáil.

Fianna Fáil is also well known for its connections to property developers, who may end up being beneficiaries of last week's intervention.

This newspaper revealed in April that there was a record number of donations from property developers to Fianna Fáil TDs last year, with corporate donors including Glenkerrin Homes, PJ Walls and Ascon.

October 5, 2008


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