What is truth?

Posts tagged ‘Irish Banks’

What Brian Lenihan and Cowen doesn’t want you to know?

Cropped picture of Vincent Browne from Flickr

Image via Wikipedia

Anybody who didn’t see tonight with Vincent Browne should take the time and look at the show now

Want to know how much? Want to know the real figure? Want to know what Brian Lenihan doesn’t want you to Know?

Anybody who didn’t see tonight with Vincent Browne should take the time and look at the show now

link http://www.tv3.ie/shows.php?request=tonightwithvincentbrowne&tv3_preview=&video=29656

The crisis comes to pass

Posted: By Gavin Sheridan

of  www.thestory.ie 

We have warned time and time again that Ireland was facing a massive fiscal crisis, both on here and on Twitter. We took a look back through the archives to see what we might have called right over the last number of months:
September 11, 2009: ‘A floor in the market’
We questioned just how much nonsense Finance Minister Brian Lenihan spoke in September 2009, where he argued that Ireland had neared the floor in the housing market. Of course, NAMA set its floor in November 2009, and prices have fallen ever since – leading to yet more losses for the taxpayer. We quoted him:
“If a flood of property is dumped on the market, it will be utterly unsustainable. That is one of the reasons we must establish NAMA and try to establish a floor in the market. We are very near it on the basis of the figures and data we have about the yield from property. The yield is at an all time high relative to the assets, which is a clear objective economic indicator that we are approaching the trough. We must banish our devils, the suggestion that we have further to go. That is part of the problem and the reason for the illiquidity in the housing market.”
There is no doubt that everything said there was a fiction, and it was patently obvious at the time.
December 24, 2009: Morgan Kelly on how we got here
Morgan Kelly published a paper at Christmas 2009, in which he outlined the looming bank crisis and the coming massive mortgage crisis. It was universally ignored. We highlighted it at the time:
I can’t really add much to Mr Kelly’s excellent analysis. What it says to me is that the next 12 to 18 months are going to be among the most difficult, if not the most difficult, time this country has faced. I encourage everyone to read the entire document.
I will emphasise his conclusion:
Despite having pushed the Irish state close to, and quite possibly beyond, the limits ofits fiscal capacity with the NAMA scheme, the Irish banks remain as zombies whose only priority is to reduce their debt, and who face complete destruction from mortgage losses. The issue therefore is not whether the Irish bank bailout will restore the Irish banks sothat they can function as independent commercial entities: it cannot. Rather it is whether the Irish government’s commitments to bank bond holders when added to its existing spend-ing commitments, will overwhelm the fiscal capacity of the Irish state, forcing outside entities such as the IMF and EU to intervene and impose a resolution on the Irish banking system.
February 4, 2010: The Coming Crisis?
It might be news to some people, but the purchasing of Irish bonds by Irish banks was highlighted a long time ago. We highlighted along with many others that Irish banks were buying Irish sovereign bonds and using them as collateral at the ECB. We also emphasised that Ireland was in as worse, if not a worse state than Greece – just that the markets had yet to pay attention to Ireland:
If you thought all of the problems had been sorted, then think again. There are really big problems coming down the road, and very few people seem to be talking about them. So let’s look a little closer at the potential fiscal problems Ireland, and our banks, face.
Everyone is talking about Greece right now, but to me Ireland is no different. It is probably worse. So with these deadlines looming, what is happening? Over the past number of weeks you might have noticed various headlines to do with NAMA delays. Why is this important? Could it be that unless the banks can transfer these junk ‘assets’ from their books, they could face funding difficulties on non-ECB markets?
I could well be wrong, or even cynical, but my feeling is that banks are desperate to get this stuff off their books, in order to be better able to fund themselves after the ECB shuts the discount window. If they don’t get them off their books, and onto the backs of the taxpayer, the banks could simply end up going to the wall, or simply being nationalised.
If you’ve read Morgan Kelly’s excellent analysis of the Irish credit bubble you will be aware of the Irish banking system’s over reliance on international money markets for funding. When the financial crisis hit in September 2008, these money markets froze and Irish banks struggled to get day to day funding. This is what ultimately led to the bank guarantee, and to the opening of what’s called the ECB discount window.
Banks all over Europe were struggling with funding, so the ECB essentially enacted emergency measures to help fund the banks. Irish banks were one of the biggest beneficiaries of the discount (the interest rate charged by the ECB is sometimes called the discount or repo rate). Ireland’s banks have effectively been kept on life support by the ECB since 2008, as McWilliams also noted last year. Essentially Irish banks were buying NTMA-issued sovereign bonds with short-term lending, presenting that as collateral to the ECB and then borrowing cheaply from the ECB. Summed up here – 25% of our deficit in most of 2009 was indirectly funded by the ECB.
When you combine the shutting of the discount window, with the delays in NAMA transfers and ultimately our own State borrowing (indeed we have already borrowed €6.5bn so far this year – 33% of our bond issuance for this year was done in January) and with the likely writedowns of not 30% but 50% on the loanbooks, we are facing a serious crisis. And of course the other factor is the ECB raising interest rates at a time we need them to stay low.
My questions is this: how are we going to pay for all of this?
February 22, 2010: Delay and Pray
This actually sums up how the Irish banks, especially Anglo, have been dealing with our property developers. Rolling over interest, not writing down the loans, not crystalising the losses, doing repayment deals with developers – to drag it out – extending and pretending.
Here it is in a nutshell: NAMA is one massive “Delay and Pray”.
Given that our banks are insolvent, that they are facing massive liquidity issues with the imminent closure of the ECB discount window, they cannot keep the pretence of extending and pretending up forever – and NAMA is, or was supposed to be, the answer to their prayers. You could also argue that Bank of Ireland recently changing its fiscal year was part of this tactic.
The Government would take the crappy loans from the banks (rather a lot), and through some financial voodoo, the losses would still not be crystalised, and rather ingeniously – the debt would not appear as sovereign debt for Ireland, or as debt for the banks, but would instead be dumped into this NAMA bad bank.
And NAMA has one sole purpose – keep the pretence going that someday, somehow, the value of the underlying assets will return to peak prices. Delay and pray. Do not write down the loans. Do not accept the reality of the losses. Do not pass go.
Not only is it unlikely that this will happen, it is almost impossible. Morgan Kelly wrote in December that it could take 50 years for the underlying assets to return to 2006 prices. Last week, in the High Court, we saw development lands being written down by 60% to 98% (in terms of valuation, not borrowing). These figures are the reality of the lands that NAMA is taking charge of. And we are overpaying already. How long do you think it will take rezoned agricultural land bought for €13m at peak, revalued at €600,000 in 2010, to return to €13m? The answer is: it won’t. So much land was rezoned that there is no necessity for rezoning for a further 70 years in many counties. Add to that the 300,000 vacant properties. Add to that little demand. Add to that zombie banks unable or unwilling to lend.
This is the reality of NAMA. Delay and pray.
It logically follows that where the banks lent money with no obvious collateral to back the loan, and where the supposed value of derivative is now zero, the bank sustains a massive capital loss.
However the banks are simply delaying and praying until NAMA takes over the loans, and then NAMA continues the praying.
We are in for one hell of a fiscal mess.
If you hear spin that no one saw this coming, don’t listen. There were plenty of commentators and plenty of warning signs. Unfortunately many people chose not to listen.

Comment:

I too have been warning about this now for the last 20 months and it is  with great sadness that I now see come to pass, my worst fears although I believed we would have been past the worst by now the establishment of the greatest fraud in Irish history (NAMA) has in fact help postpone the worst effects of the now oncoming second phase of this financial disaster yet to be faced by Irish people.

The Current economic terrorists in the Department of Finance have successfully placed private debts of a Golden Circle on to the hard pressed shoulders of the Irish people and they have helped these same gangsters whisk away their ill-gotten gains all across the world .They have also compensated some of them by promising to pay them a salary of up to 200,000:00 Euros a year .This is sheer madness!

Why is nobody doing anything about this crazy stuff? Anywhere else in the world these gangsters would be in jail!

We the Irish people have seen out rights enshrined in the Constitution trampled all over because of political expediency, we have been lied to and robbed by people whose job was to protect the and uphold the constitutional rights of all the citizens of Ireland. Instead they have blatantly placed the financial welfare of a select few above the welfare of the nation and are in the truest sense traitors

They have betrayed the trust of people of Ireland and must be removed from office

A general election is desperately needed now and only candidates that promise to bring these traitors to justice should be voted into office.

Sadly the established political parties are remaining quite on this particular point and there are no calls coming from them to prosecute their colleagues in the Dail

Last night on Front line Pat Rabbet hinted that he would consider going into power with the Green Party

These are the same gutless gangsters that have sold out on every one of their own core values just to stay in power with the current government. Let this be a reminder why we need to have a complete change in the political system unfortunately none of the established political parties want to bring about this change, as it would be akin to asking Turkeys to vote for Christmas they are part of the dysfunctional political system we are saddled with and cant wait to get their hands on the lucrative perks and pensions heading there way by default  .

Ireland defaulting???

Ireland defaulting???

As I sit writing this I am getting news over the wires that the Irish government have asked the EU for emergency funds Ireland was in talks to receive emergency funding from the European Union, but Dow Jones Newswires reported the Irish Finance Ministry as stating it had not applied for EU emergency funding ,but sources within the department insist that talks are ongoing .Just on Bloomberg,  Ireland is being urged by European policy makers to take emergency aid to contain a debt crisis rattling their markets, according to a person briefed on the discussions.

video link http://uk.reuters.com/news/video?videoId=164092013&newsChannel=GCA-WeekendTopStoriesUK

In a conference call of European Central Bank officials Ireland was pressed to seek outside help within days, the person said on condition of anonymity. Separately, a European Union official said a request for assistance was likely even as Irish Finance Minister Brian Lenihan told RTE Radio that such a call “makes no sense” as the government is fully funded to mid-2011.Events are now been played out and lenihan is now been ignored and sidelined.

This means Ireland will be joining Greece with the begging bowl  and we are in effect defaulting .Lenihan and Cowen have lost all credibility  and the country should now have a general election in order to establish some sort of thrust from the markets

The current government is now dead in the water as nobody can believe a word they say.

TD’s unite to give themselves a pay rise

in case you missed this

By John Drennan

Sunday November 07 2010

As the country faces economic meltdown, TDs and senators are planning to improve their already plush terms and conditions.

An official estimate of the money required to run the Dail in 2011 ‘sneaked’ through the Dail last Thursday reveals that the recession stops at the gates of Leinster House.

Did you Know?

In a touching scene, deputies across all parties suspended hostilities and agreed to the estimates without a single objection.

The estimates reveal that the cost of a Dail which serves fewer people than the population of cities such as greater Manchester, will in 2011 come to €112,983,000 — which represents a drop of just €1.2m (or 1 per cent) on last year’s spending.

But expenditure on the perks and services enjoyed by our TDs and senators will actually increase in certain areas next year.

The cost of salaries for TDs, senators and secretarial assistants will increase, while salaries of staff like those in catering and behind the Dail bar will decrease.

The estimates for 2011 reveal that there will be an increase in the postal and telecommunications service, which allows TDs and senators to send out promotional literature to their constituents.

The budget for delegates to ‘other parliamentary assemblies‘ has increased by 50 per cent and the ‘grant in aid’ for ‘inter-parliamentary activities’ has also increased by a whopping 40 per cent.

Even this, however, is dwarfed by the increase in the budget for allowances in respect of former members of the houses of the Oireachtas, which has been increased from €49,000 to €149,000.

At a time when pensioners fear losing entitlements such as free travel, the estimates also contain an increase of the ‘grant in aid’ to parliamentary pensioners from from €10,084,000 to €10,562,000, indicating that Dail and Seanad pension recipients will be unique within the country in actually securing an increase next year. The estimates also reveal that there will be a substantial increase in the Budget for televising Dail and Seanad proceedings, which provides TDs and Senators with much-desired coverage.

Though some minimalistic cuts are revealed in the anticipated expenses of TDs and senators, one source noted that “when the increases are taken in the round, TDs and senators will not be losing a penny in salaries and expenses next year”.

– John Drennan

Sunday Independent

Comment

Here we have a perfect example of our public representatives sucking us dry  these blood suckers will still have a neck to come calling in the next few months to our doors our homes and tell us how hard things are going to get and they are the people to make the hard choices on our behalf  and we should vote them back into the Dail .

 Do not vote in any of the existing TD’s ever again  give them their P45 ASAP

He could be talking about Ireland

I agree we need to be concentrating of  industrious business ,why can’t I but Irish made shirts, shoes, Irish made bicycles, for god sake Irish made anything?

75% of our business here in Ireland is services, and we are now been forced to become debt servicing junkies by Cowen and his cronies.  

Unless we get up off our collective backsides we will be forced to vote in twiddle dummer when we get rid of twiddle Dee

http://www.youtube.com/watch?v=Kja5aCYuocU&feature=player_embedded

Ireland Plans More Budget Cuts to Reassure Bond Investors

Brian Cowen, the Taoiseach of Ireland.

Image via Wikipedia

By
LANDON THOMAS jr

The Irish government, in its latest step to salvage its fiscal credibility, said on Thursday that it would step up its program to cut the deficit by proposing 6 billion euros ($8.5 billion) in savings for its 2011 budget.

The adjustment would be part of a package of 15 billion euros in spending cuts and tax increases aimed at bringing Ireland’s deficit — currently 32 percent of gross domestic product — down to the 3 percent level required by the European Union by 2014.

Already struggling to contain perhaps the largest bank bust in Europe, Ireland has found it increasingly difficult to persuade bond investors that it has the ability and gumption to push through such an ambitious deficit-cutting agenda.

In its statement, the government said that such a front-loading of savings — almost double its earlier plan — would bring the deficit down to 9.5 percent next year.

The gap between the yields of Irish 10-year bonds and their German counterparts widened on Thursday to 525 basis points, another record, as yields soared to 7.6 percent. Compounding investor uncertainty is the hard line that the government has been taking in pushing junior bondholders to take losses on their investments.

This has driven many investors to buy more credit-default insurance, pushing the price of insuring Irish debt to a record as well.

“This shows a very strong commitment to getting the deficit down,” said John Fitz Gerald, an economist at the Economic and Social Research Institute in Dublin. “The government wants to make sure and convince the outside world that they will get the deficit below 10 percent next year.”

But without more details on how it plans to make these savings, investors are likely to remain skeptical. Weighed down by three years of a shrinking economy, the government of Brian Cowen, the prime minister, has reached a political nadir, with many people expecting an early election — a process that further complicates the deficit-cutting agenda.

Ireland’s struggle has been mirrored in Greece and Portugal, where governments are facing increasing resistance from opposition parties to public sector wage cuts and tax increases.

Greece’s prime minister, George Papandreou, has threatened to call an early election to round up support for his deficit-cutting plan, and in Portugal the government has just barely succeeded in passing its own plan to bring the deficit down to 7 percent next year. Yields on 10-year bonds in those countries have been soaring this week as well.

Adding to the uncertainty has been tough talk from Chancellor Angela Merkel of Germany that bondholders take a loss on their sovereign holdings, a round of rhetoric that has accompanied attempts by Germany to install new rules and sanctions to ensure that nations that use the euro meet their fiscal benchmarks.

While Greece has already been bailed out, the surge in Irish and Portuguese bond yields has fanned fears that either one might be forced to seek its own rescue and tap into the European Financial Stability Facility to raise money at a more reasonable rate of interest.

Such a move would provide no easy break though, as it would come with harsh conditions that would impose further strictures on economies already deep in the midst of austerity programs.

source http://www.nytimes.com/2010/11/05/business/global/05punt.html?src=twrhp

Comment :

 Our political masters serves  the bond investors and pay lip service to their own people.

they have betrayed their duty to the Irish constitution and should be hounded out of office and brought before the courts for the devastation they have brought upon their own people.

Listening to Newstalk today at lunchtime the message comes over loud and clear our politicians are so out of touch with the ordinary people it has become very dangerous

when a Minster can get a pension worth nearly 6,800,000 Euro after 10 years of service an ordinary person working in the private sector to have the same pension it would have to put  35,000 Euro a month for the same pension

and yet this same minster wants to take 9 euro from an old age pensioner

or yesterday I heard of a driver for CIE paying into a pension fund for 40 years only to get 180 euros a week at the age of 66 years

This is totally wrong ,we must change this system that allows this kind of blatant robbery of the nation’s wealth for the chosen few

This must stop now>

Is it time to let AIB go?

Allied Irish Banks' crest

Image via Wikipedia

Is it time to let AIB go?

namawinelake | November 2, 2010 at 11:51 am | Categories: Irish economy, NAMA | URL: http://wp.me/pNlCf-Kw

It sounds like the kind of decision a family around the death bed of a loved one faces. Though perhaps the comparison isn’t in the best taste, the reality is that the venerable 185-year old bank is facing insolvency and it is only the dogmatic government strategy of maintaining a duopoly of “Irish” banks not to mention over €10bn of public funds and significant ECB funds that is keeping the bank afloat. This entry examines the status of AIB and the cost of keeping it alive.

Firstly for our international friends, AIB is Allied Irish Banks PLC – note the plural “Banks”. It has nothing to do with the biggest failure in Irish corporate history, Anglo Irish Bank which is referred to domestically simply as “Anglo”. AIB was conceived in 1825 with the opening of a bank called Provincial Bank and over the next century and a half merged with other domestic banks to give us the Allied Irish Banks that we know today. Alongside Bank of Ireland it is seen as the rock of Irish banking.

During the property boom in the 2000s the bank was a late participant in the mania but there is evidence that once it arrived at the party it wasted no time in trying to catch up with the existing party-goers. The Minister for Finance estimates that the bank’s remaining NAMA loans are worth 40c in the euro (including long term economic value).

Its most recent set of accounts for the first six months of 2010 show that the bank had assets of €169bn, liabilities of €160bn and capital of €9bn. So it is a huge business in an Irish context but clearly solvent by reference to these results. Unfortunately the results don’t reflect the true condition of the loan assets. The cumulative provision for losses on NAMA loans in the interim results was 26% – that is, the loans were worth 74c in the euro. The most recent ministerial estimate is 40c in the euro. This should result in a further loss to AIB of €5.5bn. But NAMA loans form a small part of AIB’s total loanbook and the company will have some €81bn of non-NAMA loans (plus €4.5bn of €5-20m formerly NAMA loans) once NAMA has absorbed the poison. The cumulative provision on these loans in June 2010 was just €3bn (note 22 on page 83). Given that these loans include commercial property and business lending in a state which has suffered the greatest contraction in GDP amongst developed countries in modern times, I would suggest that provision is utter fantasy.

Like some shady cash-in-hand sole trader, AIB maintain a second set of books under the auspices of the Financial Regulator who in March this year set out the capital requirements for AIB and other banks (the Prudential Capital Assessment Review). In September using this second set of books, the Regulator announced that AIB needed raise €10.4bn by the end of this year. AIB’s strategy was to dispose of some assets and then to raise additional equity underwritten by the State. There is a detailed entry on these capital raising efforts here but in summary the bank disposed of its Polish operation (still subject to approvals) which yielded €2.5bn capital from the €3.1bn sale price and yesterday AIB held an EGM in which shareholders approved the sale of the bank’s stake in US bank M&T which should add €0.9bn to the capital coffers. The bank announced yesterday that it was placing the sale of the UK operation on hold (though there appears to be some back-pedalling on these comments this morning). Unless there is some dynamic between the UK sale and capital that means that the bank still needs €7bn in new capital in the next 60 days. And there is only sucker with that level of available funding that is willing to invest in what is likely to be an insolvent bank, and that’s the government who seem intent on placing just under one half of our National Pension Reserve Fund (that’s the €3.5bn invested in preference shares last year and the €7bn now needed as a proportion of the €24bn funds in the NPRF) in one basket (case) – AIB.

The government strategy seems chauvinistic (“we need a duopoly of Irish banks”), knee-jerked, immoral (not a word you’ll often see on here but taking money from the pension fund to prop up an insolvent bank is flagitious when there are other options to protect a functioning banking system), recklessly risky (one half of the pension fund is “invested” in one company in one sector). AIB should be taken into 100% state ownership immediately, the State should assess the value of any shareholdings in AIB (I expect they are worth nothing), negotiate with the €4bn+ of junior bondholders the company had at June 2010 and assess if senior bondholders might make a contribution to the insolvent bank. Only then should the State assess the systemic importance of AIB and should probably seek a buyer for the rump of that company. Even if the state is left with only one Irish bank so what? We have a Financial Regulator with 520 staff that should be able to regulate a restricted market to combat uncompetitive practices and when the Irish economy recovers other banks may see prospects here.

If on the other hand, we maintain the pretence that AIB is a viable bank then €7bn will need be found in the next 60 days. At the very best we are set to lose €1.8bn if we continue with the madness of the NPRF underwriting a share issue at €0.50 per share when the shares are presently trading at €0.35. With the healthiest Irish bank, Bank of Ireland, having to borrow 3-year funds at 5.875% last week (excluding costs) in a market where mortgages and commercial lending is still available at 3%, the prospects for profitability at AIB are slim in the context of the NPRF’s investment strategy which allows it invest in any market across the globe.

It is time to say our goodbyes and pull the plug.

source http://namawinelake.wordpress.com/2010/11/02/is-it-time-to-let-aib-go/

Comment:

Unfortunately this government is hell bent on holding on to this once trophy bank along with the top notch gangsters and X Politicians at the helm who will not vote themselves out of this sought after gig

Since the Minister of Finance himself says that the still remaindering loans are only worth 40c in the euro this alone tells me that the bank is gone beyond repair, as every one of his pronouncements on figures have been totally out.  I expect that you wouldn’t even get 10 cent on the euro The cost is irrelevant as the down trodden taxpayers are going to pay up.This Bank is dead and powering billions into it is tantamount to treason.

Shut this toxic toilet down now and save us the poor taxpayers a little bit of pain!

Thomas

Residents movement for political change

Tag Cloud