What is truth?

Posts tagged ‘Hypo Real Estate’

“no-one outside the country is taking them seriously any more”.


Image via Wikipedia

by Adrian Kelleher

In the heady days of 2005 with the economy roaring along and homeowners basking in the glow of ever-rising house prices, one institution went against the current and sounded a note of caution. In its Medium Term Review No. 10, regarded as a landmark publication, the ESRI (Economic and Social Research Institute) warned that “there are considerable dangers in the current situation: in particular the very high level of dependence on the building industry”. Nor were the risks purely domestic. “Global economic imbalances that, if anything, are growing in magnitude” also threatened.

These statements would seem to bear out the claim by the ESRI’s Professor John FitzGerald that the subsequent crisis was “well flagged”. Upon examination, ESRI proves to have been anything but consistent in its warnings, however. Having started out with a clear perception of the dangers and articulating it plainly, by the time the next Review came out in May 2008 the ESRI had somehow reversed its position.

The 2008 Medium-Term Review (No 11), which FitzGerald co-wrote, exhibited even more hysteria than the most cynical of the vested interests that tacitly conspired to lead the country up the primrose path. Projecting GNP growth at “an average of around 3¾ a year” between 2008 and 2015, the authors claimed their “analysis suggests that, even if the current downturn were to be more severe than anticipated, the economy would eventually recover more vigorously to realise the medium-term growth rate”. The ESRI reassured the public that “the Irish economy is resilient” and “the fundamentals of the Irish economy are sound”.

Even if “a severe liquidity crisis in the US” occurred, it stated in the most pessimistic scenario examined, “the US recession would not do long-term damage to the Irish economy. In the medium term, when the global economy recovered, the rate of growth in Ireland would accelerate…” Average growth of at least 3% was predicted for the period.

The government seized on the review as proof that everything was fine. Brian Lenihan said that “in contrast to the prevailing mood of pessimism, the ESRI shares my view… The key message that we can take from the Review is that Ireland’s economy is flexible and resilient”.

Even Vincent Browne penned several columns, advocating generous public expenditure, based on this prognosis.  The vested interests of the property market were also enthusiastic. Dan McLaughlin of Bank of Ireland took the Review as evidence that 2008 represented what he called the bottom of the cycle. Marian Finnegan of Sherry FitzGerald called it “a very robust forecast by either historical or international standards”. By “taking the steps necessary to ensure that we reap rewards in the future”, she wrote in the Irish Times, home buyers could look forward to “an evolution to a mature, resolute economy with a dynamic housing market”. The number of people lured into the property market by the Review was probably substantial given the ESRI’s stature at the time.

One of the co-authors of the 2008 Review, Professor Richard Tol, has admitted the ESRI knew “that the financial regulator was asleep and that some banks were cooking the books”; he says that fear of legal repercussions caused it to keep these facts from the public. While legal action might have resulted from criticism of named banks, voicing concerns about the financial services regulator or about the sector generally would have had no such repercussions. According to Tol, the ESRI was “aware of some of the risks and constantly warned the relevant people — most of that was in private and, in public, in coded language”.

John FitzGerald also acknowledges “that very real concerns were being discussed in private” relating to the financial industry. Rather than legal concerns, he says that “it was felt to be difficult to air them in public without having undertaken the necessary background research”.

ESRI director, Professor Frances Ruane, denies the institute knew of wrongdoing, saying “there was never any formal discussion in the ESRI about the fact that the banks were cooking the books. We were concerned but I think John’s description of it is what we would have been discussing internally … In any country people would be more blunt speaking directly to officials than they would in public discourse. There’s nothing unusual about that”.

While accepting that the 2008 Review was “far too optimistic”, Ruane defends its assertion that Ireland had sound fundamentals, saying “there’s an awful lot of business in this country that’s going on very well at the moment and when you’re talking about the economic fundamentals that’s what you”re talking about”.

Given the warnings between 2005 and the summer of 2007, why did alarm fade out to be replaced by optimism? “The 2005 [Review] focused a lot on the construction bubble”, Ruane told Village, “and there’s a sense in which that was long recognised; and things don’t get repeated when they’re long recognised”.

There was more than a failure to repeat prior warnings, however. Rather, the warnings were progressively replaced by reassurances. Instead of remaining silent on house prices, the 2008 Review forecast that price growth would average 3% per annum in the 2010-2015 period. Price growth for 2005-2010 was predicted to average 3.2% at a time when prices had already fallen by more than 10% from their peak.

Likewise, in January 2008, Ruane wrote that “to the extent that the recent changes in stamp duty are seen as reducing uncertainty, they should lead to increased confidence. Economic growth rates will be lower than in previous years but not low relative to the rest of the EU, and taken with the growth in the population seeking housing should have a positive effect on demand. […] The ESRI anticipates that house prices will stabilise during 2008”.

Regarding the financial crisis, Ruane says that “what [the 2008 review] did not do is connect the long-recognised construction bubble [and] a massive financial effect that would be massively damaging to the economy”. However the effects of the disappearance of hundreds of billions of euro of property wealth would not have disappeared even had they not struck the banks (or, ultimately, the state).  Someone would still have seen their wealth vanish. The international financial crisis was likewise largely a second-order effect of the US property crash, as well as those of Spain and Ireland etc., rather than a purely distinct phenomenon.

The failure to link the bubble to its financial effects was an international one, according to Ruane, one macroeconomists are striving to correct. The consequences of this oversight were nonetheless much greater in Ireland than elsewhere because the finance industry was vastly bigger here than almost anywhere else.

The figures are stupefying. Writing in the Irish Times, Jim Stewart of TCD reported that 2008 alone saw the eye-watering sum of €1,656Bn in foreign money flow into the IFSC alone. Many of the institutions involved generated no employment whatsoever:  the median employee total of 46 firms he studied was zero!

The political consequences of what Stewart refers to as “the several ‘tax-haven’- type features of the Irish economy” could not be avoided forever.  The crippling losses suffered by German banks operating in the IFSC  – including Depfa Bank of which Ruane was a director, until her appointment to the ESRI in Dec 2006, and which forced its German parent Hypo Real Estate into a €102bn German government bailout – poisoned public opinion there against Ireland.  The ultimate consequence of the perception of Ireland as a freebooting nation, siphoning wealth from the rest of the EU was the Deauville agreement between Angela Merkel and Nicolas Sarkozy about which Ireland was not consulted – which directly triggered the nation’s final collapse.

No less disturbing than the drift into boosterism in the ESRI’s forecasts are the political activities of Richard Tol in the climate field, activities that blur uncomfortably and insidiously into his research work.

Tol has engaged in a long-term collaboration with Bjørn Lomborg, himself the subject of a detailed critique by Howard Friel titled ‘The Lomborg Deception’ and categorised by its publisher, Yale University Press, under the subject-heading of “Fraud in Science”.

Lomborg operates the Copenhagen Consensus Center (CCC) which, in spite of its title, has served solely as a vehicle for the political views of its leader. The Copenhagen Consensus projects involve Lomborg hand-picking researchers, with Tol a favourite, to engage in rigged research projects which Lomborg further distorts beyond the point of fraud to oppose any reduction in fossil fuel use.

For the 2008 project, Tol co-wrote a paper along with Gary Yohe of Wesleyan University and two researchers from the Electric Power Research Institute, a US trade association. The two climate change proposals were ranked against numerous development and human welfare issues and came in 29th and 30th out of 30.

Long-term Lomborg critic Kåre Fog took Tol, whose FUND computer-model was the basis for the simulation, to task about the study. Tol admitted that the study used a discount rate that fell gradually from 5% whereas all the competing proposals used a 3% rate. Tol excused himself by saying that re-writing the model to use the 3% discount rate was too difficult and that the other proposals should have used his rate,  even though the project specifications dictated 3% and he has at other times successfully employed FUND with other rates. This inherent bias caused the bottom ranking.

Fog’s criticisms did not end there. Tol claims his research showed a net benefit from global warming until mid-century, after which the effects turn sharply negative. For this purpose, welfare effects were calculated in local economy terms, with deaths for example being costed at a certain multiple of local per-capita GDP. Thus a single European saved from winter influenza, probable – in actuarial terms – to be elderly and infirm, outweighed not one but many Africans dying – likely in the prime of life – due to global warming.

Subsequently, Lomborg and Yohe had a spectacular falling out. In a bruising exchange in the pages of the Guardian, Yohe accused Lomborg of “misrepresenting our findings thanks to a highly selective memory”. The exchange was temporarily concluded by a joint article where Lomborg and Yohe agreed that the reason CCC climate proposals “failed the cost-benefit test … could be traced to faulty design”. Given that the designs were Lomborg’s own, this was a humiliating admission.

Tol, who refers to those concerned about what he calls the “new religion of climate change” with labels like “fanatics” and “adherents of the Church of Gaia”, was not only conspicuous by his silence during the exchange, unlike Yohe he went back to Copenhagen for more in 2009. Lomborg and Tol continue to make media appearances together and Lomborg cites Tol’s work in every article he writes.

When controversies about the Climate Research Unit and IPCC head Rajendra Pachauri’s TERI foundation arose in the media, Tol was quick to paint each in the darkest terms on the scantiest of evidence.

While empirically-based criticism is central to science, Tol has shown no zeal in his dealings with Lomborg or with Ian Plimer, another scientific fraud alongside whom Tol acts as scientific advisor for the Global Warming Policy Foundation, a secretive pressure group opposed to fossil-fuel restrictions. Plimer often simply reverses the conclusions of papers cited when it suits his purposes, a fact he didn’t deny when it was put to him three times on ABC television. Astrophysicist Michael Ashley described his book Heaven and Earth as “scientifically worthless” in The Australian.

“I think Richard expresses his own views on climate change”, Frances Ruane says of these activities, which she doesn’t regard as incompatible with his role at ESRI. “The researchers within the institute are responsible for the intellectual and academic integrity of what they say and produce”.

The ESRI’s aggressive lobbying in favour of the Poolbeg incinerator, in spite of Covanta’s contract with Dublin City Council remaining secret from democratic oversight and High Court criticism of DCC’s attempted destruction of the private waste-collection industry, nonetheless takes on a new light in the face of these facts, as does Tol’s opposition to the promotion of wind energy.  Tol’s ready facilitation of Lomborg’s systematic falsification of science cannot but draw the ESRI into disrepute. Academic freedom grants him licence but doesn’t explain the decision to recruit him in the first place.

The ESRI’s uncomfortable position between government and industry, both of which it relies upon for funding, leave its environmental studies particularly vulnerable to bias. In each narrow case examined, the costs to business will be direct and obvious but the benefits, which accrue more broadly to society, will be difficult to assess. ESRI cannot integrate the environmental with the ‘Economic and Social’ of its title while it continues to serve two masters – business and government.

Given the fact that ESRI continued to predict  there would be no recession even after it had started, particularly baffling is the finding of a recent ‘National and International’ Peer Review 2010, commissioned by ESRI itself, that “stakeholders” regard it as achieving “a gold standard” in its research.

At a time when colossal risks were being taken in the IFSC and by Irish banks, the ESRI’s concerns were for labour-market reforms and privatisation – breaking rightwards ideologically on each issue. Both the institute and its peer reviewers are prisoners of the same theories in this regard, and shared preconceptions are unlikely to lead to new insights. Privatisation of public utilities and financial-market liberalisation have theoretical advantages from a neo-liberal perspective. Not so neat theoretically but certainly real, as the financial crash, the Eircom privatisation and the Enron-driven US energy market fiasco demonstrated, are the severe practical problems each entails.

The neo-liberal consensus that dominates policy-making globally and of which the ESRI is part, has simply waved away fears that the financial collapse may signify a fundamental problem. By contrast in the wake of the Wall Street crash, between Roosevelt’s election in 1932 and Reagan’s in 1980, both right and left shared a perception that markets were potentially dangerous to economic welfare if allowed free rein. In basing its forecasts on the wildly inaccurate consensus view of the world economy ESRI drew on exactly the same narrow segment of opinion it occupies itself, just as it did when choosing the peer review that endorsed it.

It’s therefore unsurprising the peer review offers no clue as to the origins of the grossly inaccurate MTR 2008-2015, instead congratulating the institute on its “enviable reputation”. TCD economist Kevin O’Rourke struck a different note when he wrote in the Sunday Business Post that “no-one outside the country is taking them seriously any more”.

source :http://www.villagemagazine.ie/index.php/2011/01/our-deluded-esri/

Krise bedroht deutsche Staatsbanken

Griechen-Krise bedroht deutsche Staatsbanken

Von Anne Seith, Frankfurt am Main


HRE-Zentrale: Die Krisenbank gehört zu den großen Gläubigern Griechenlands

Die Idee klingt so einfach wie verlockend: Weil Banken mit griechischen Anleihen gezockt haben, sollen sie sich an der Rettung des Pleitelands beteiligen, verlangen viele Politiker. Eine Milchmädchenrechnung – denn betroffen wären vor allem Institute, die ganz oder teilweise dem Staat gehören.

Es ist mittlerweile ein natürlicher Reflex: Wenn es um die finanziellen Folgen der Finanzkrise geht, rufen Politiker nach der Beteiligung der Finanzbranche. So auch in Sachen Griechenland: Da ist mittlerweile manch ein Volksvertreter der Meinung, der Krisenstaat könne nur noch via Umschuldung gerettet werden. Das würde bedeuten: Griechenland einigt sich mit seinen Gläubigern darauf, nur einen Teil der Kredite zurückzuzahlen.

Eine Umschuldung fordert auch der CSU-Finanzexperte Hans Michelbach, der großspurig eine internationale Gläubigerkonferenz einberufen möchte. Und in diesem Zusammenhang natürlich auch erwähnt, dass die Finanzbranche bei der Rettung des hellenischen Schuldenstaats ihren Beitrag leisten müsse. Auch der nordrhein-westfälische CDU-Ministerpräsident Jürgen Rüttgers findet, es müsse genau geschaut werden, “wer die Zeche bezahlt”. Er will die Banken ebenfalls für Griechenland zur Kasse bitten. Ein Wunsch, den trotz der anstehenden Landtagswahl selbst SPD-Chef Frank-Walter Steinmeier unterstützt.

Die Botschaft der Politiker ist klar: Diejenigen, die sich mit griechischen Staatsanleihen verzockt haben, sollen nun auch die Kosten tragen.

Doch dem wohlklingenden Appell liegt zumindest teilweise eine Milchmädchenrechnung zugrunde. Denn in Deutschland haben nach jetzigem Kenntnisstand ausgerechnet die Banken viele Griechenland-Papiere in ihren Büchern, die dem Staat ganz oder teilweise gehören: Die Hypo Real Estate (HRE) und die Commerzbank.

Die HRE – die mittlerweile Deutsche Pfandbriefbank heißt und mit rund 100 Milliarden Euro gestützt wird – kam zum 31.12.2009 auf ein Volumen von 7,9 Milliarden Euro an griechischen Staatsbonds. Bei der Commerzbank sind es etwa drei Milliarden. Auch einige Landesbanken sind betroffen. Bei der BayernLB etwa sprechen Finanzkreise von einem Engagement in Höhe von 300 Millionen Euro.

“Euphemistische Beschreibung eines Bankrotts”

Bankenprofessor Hans-Peter Burghof warnt deshalb: Wenn etwa die HRE oder die Commerzbank große Summen abschreiben müssen, geraten sie in neue Finanzprobleme. “Dann kommt man um eine Kapitalerhöhung nicht herum. Und da die Banken dem Staat gehören, muss der das bezahlen.” Sprich: Die Verluste aus den Griechenland-Geschäften würden sozialisiert, so oder so. Bei der HRE würden, je nach Wertberichtigungsbedarf, womöglich sogar neue Hilfen in Milliardenhöhe fällig, warnt Konrad Becker, Analyst von Merck Finck. Es könnte für die Regierung “billiger sein, Griechenland direkt zu helfen.”

Auch sonst ist das Risiko einer Umschuldung – die Bankenprofessor Burghof als “euphemistische Beschreibung eines Staatsbankrotts” charakterisiert – schwer zu kalkulieren. Viele deutsche Geldinstitute geben sich reichlich verschlossen, was ihr genaues Engagement in Griechenland betrifft. Bei der Landesbank Baden-Württemberg will man sich zu einzelnen Posten des Portfolios generell nicht äußern, bei der Hessischen Landesbank spricht man von einem “äußerst geringen” Betrag im mittleren zweistelligen Millionenbereich.

Und die Zahlen, die man bekommt, stimmen nicht unbedingt optimistisch. Insgesamt, so heißt es bei der Bank für internationalen Zahlungsausgleich, schuldet Griechenland deutschen Geldinstituten rund 43 Milliarden Euro. Die Allianz erklärt, die gesamte Gruppe habe mit Stichtag 31. Dezember etwa 3,5 Milliarden Euro an griechischen Staatsanleihen in den Büchern. Bei der Münchner Rück waren es Ende 2009 rund 2,2 Milliarden Euro.

Märkte rechnen mit Umschuldung

Wie viel von diesen Summen nun unter Umständen tatsächlich bedroht ist, weiß niemand. Die EU-Kommission ist sogar noch immer davon überzeugt, dass eine Umschuldung erst gar nicht nötig sein wird. Das Spar- und Reformprogramm, das die EU Anfang Mai vorlegen will, werde die grassierende Unsicherheit beenden, sagte der Generaldirektor für Wirtschaft und Finanzen, Marco Buti. Und er versucht zu beruhigen: “Um es sehr klar zu sagen – es wird keine Schulden-Restrukturierung als Teil des Programms geben.”

Die Veröffentlichung des “sehr, sehr ernsthaften” und glaubwürdigen Programms werde an den Finanzmärkten Vertrauen schaffen und die Zinsaufschläge bei griechischen Staatsanleihen reduzieren, ist Buti überzeugt. Das Programm werde über einen Zeitraum von drei Jahren Einsparungen und tiefgreifende Strukturreformen vorsehen.

Bankenprofessor Burghof allerdings findet, eine Umschuldung wäre trotz aller Risiken “ehrlicher”. Dort wo das Risiko eingegangen wurde, würde es auch abgeschrieben: in den Büchern der Banken.

Auch an den Märkten gehen die Anleger inzwischen davon aus, dass Griechenland seine Kredite nicht ganz wird zurückzahlen können. Finanzwerte sackten am Dienstag weltweit in den Keller. Zur Verunsicherung trugen noch die Aussagen deutscher Regierungspolitiker bei, die Zweifel am vereinbarten Hilfspaket aufkommen ließen. “Das ist ein sehr gefährliches Spiel, das hier gespielt wird. Eigentlich preist der Markt inzwischen schon einen Ausfall Griechenlands ein – zumindest teilweise”, sagte LBBW-Volkswirt Jens-Oliver Niklasch. “Da spielt auch die Bundesregierung mit ihrer Taktiererei mit dem Feuer. Die Märkte warten ja nur auf das grüne Licht aus Berlin.”

Deutsche Bank: Wir haben mit Griechenland nichts zu tun

Zu den stärksten Verlierern im Dax gehörte absurderweise die Deutsche Bank. Die Aktien von Deutschlands größtem Geldhaus verloren zeitweise um fast fünf Prozent an Wert – dabei hatte der Konzern am Dienstag glänzende Quartalszahlen vorgelegt. Doch die Börsianer störten sich nicht nur an einem ausgesprochen zurückhaltenden Ausblick von Finanzchef Stefan Krause – auch die Belastung durch die Übernahme von Sal. Oppenheim sorgt die Finanzexperten.

Denn durch die erstmalige Einbeziehung der Kölner Privatbank schmolz die Kernkapitalquote von Dezember bis Ende März von 12,6 auf 11,2 Prozent. Damit liege die Deutsche Bank am unteren Ende im Vergleich zu ihren Wettbewerbern, kritisierte Unicredit-Analyst Stefan Stalmann. Börsianer machen sich daher Sorgen, ob die Bank nicht doch mehr Kapital braucht.

Immerhin: In der Debatte um eine mögliche Griechenland-Pleite kann sich Deutsche-Bank-Chef Josef Ackermann, der sonst oft als Vorzeige-Buhmann der Bankenbranche herhalten muss, entspannt zurücklehnen. Sein Haus hat nach eigenen Aussagen mit der ganzen Sache wenig zu tun.

Natürlich sagen auch die Deutsch-Banker nicht genau, was in ihren Büchern an griechischen Anleihen steht. Aber auf Nachfrage in einem Analysten-Call konnte Finanzchef Stefan Krause zwei beruhigende Nachrichten in die Welt setzen. “Very limited”, sehr begrenzt, sei das Engagement des Hauses in Griechenland. “Wir sind nicht beunruhigt.”

Tag Cloud