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Posts tagged ‘Matthew Elderfield’

A cheeky offer on tracker mortgages from Permanent TSB

Sign of a mortgage centre in East London

Image via Wikipedia

By namawinelake 

source URL: http://wp.me/pNlCf-1iZ

I was surprised last year that our new Financial Regulator, Matthew Elderfield didn’t make a point of intervening in mortgage restructuring where banks were strong-arming distressed mortgage borrowers into giving up their tracker mortgages in return for the bank restructuring their mortgage loan – and to be clear, restructuring was not about debt forgiveness, it was about allowing a period of interest-only mortgage payments, or extending the term of the mortgage or giving a mortgage repayment holiday but adding the arrears and interest to the mortgage; there were no free lunches when Irish banks were restructuring mortgages. But what seemed heinous was the fact that banks were demanding that vulnerable borrowers cede their tracker mortgages as a condition of any restructure. This issue was examined in some detail in a post on here “Tiger Robbery versus the great Celtic robbery”. To the best of my knowledge neither the Financial Regulator nor the near-invisible, Financial Services Ombudsman, William Prasifka, confronted the issue.
Tracker mortgages, that is mortgages whose interest rate is set at a fixed margin above the main ECB lending rate and which represent some 400,000 of the 785,000 mortgages in Ireland are a headache for the banks. Even after the 0.25% increase in the main ECB rate two weeks ago, typically tracker mortgage holders are paying 2.25-2.5% per annum. On funds that cost banks in the order of 5% (that is an guesstimate, ECB funding is at 1%, CBI funding at 3%, deposits might pay 4% and the “market” is charging north of 6% and the banks are desperately trying to recoup losses), these 2.25% mortgages force the banks to make losses. Permanent TSB (PTSB) is understood to have approximately 30% of outstanding Irish mortgage debt and is regarded as having the largest stock of tracker mortgages. This morning it made its tracker mortgage borrowers an offer. A cheeky offer.
The offer as reported by RTE is that if tracker borrowers pay down €5,000 from their outstanding mortgage (or multiples of €5,000 – presumably that means €10k, €15k, €20k etc) then PTSB will give the borrower 10% of the payment. The table below shows the interest PTSB would receive on a mortgage whose interest was set at the bank’s standard variable rate of 5.19% and what the bank would receive on a tracker whose interest rate was set at 1% above the main ECB financing rate of 1.25%.

(Click to enlarge)
If your mortgage has less than 4 years to run, then the bank roughly breaks even on the deal announced this morning. If you only have a year to run on your mortgage for example, then the 10% of the €5,000 that PTSB will give you will be worth more than three times what the bank might expect to generate in profit. On the other hand if you have more than four years left on your mortgage then PTSB starts to profit. And at the extreme if you have 30 years outstanding on your mortgage, then PTSB could be expected to profit to the tune of €3,910 (€4,410 less the €500 they pay you) for every €5,000 you repay. Cheeky.
PTSB CEO David Guinane is reported by RTE to have said “’It’s in both parties interest to reduce the amount of outstanding balances on tracker mortgages” Well it might be in your interest if you have a tracker mortgage and are unable to get a better rate of interest on the €5,000 that you are being tempted to repay PTSB. You can get up to 4.2% from PTSB deposit accounts, 9.7% from 10-year Irish sovereign bonds, 9% from residential property. Yet PTSB is prepared to give you less than a measly 2% over a five year period on your €5,000 repayment.
I haven’t seen the letter that has apparently been sent to PTSB tracker mortgage borrowers so I don’t know what information has been provided or what the letter says about seeking independent financial advice. But if past experience is anything to go by, the Financial Regulator and Financial Services Ombudsman will sit on their hands whilst consumers of financial products potentially get fleeced. And lastly, given that borrowers with shorter remaining mortgage periods could benefit from this deal, I wonder what external oversight there will be to ensure PTSB don’t just accept applicants for the deal that have 4 years plus remaining on their mortgages.

competence of companies that provided information underpinning key policy decisions

Is it time to investigate the competence of companies that provided information underpinning key policy decisions in our financial crisis?

By Namawinelake

Looking back at the financial crisis over the past three years, it is striking that at practically all milestones the information upon which key decisions were made has turned out to substantially wrong, in particular the assessment of the problems in the banks and more specifically still, the losses on property loans.
If, back in September 2008, it was known that the banks’ assets were not worth €500bn as claimed but were worth substantially less, would the Government have campaigned to introduce a guarantee of bank liabilities then worth €440bn? If, at the start of 2009, the Minister for Finance knew of the likely losses in what would later become the five NAMA Participating Institutions, would he have started a recapitalisation programme that may see €80-90bn ultimately taken from State coffers (through borrowing) and shovelled into these black holes? If, at the start of 2009, when Dr Peter Bacon was reporting on the desirability of an asset management agency, he knew that the haircut to be applied to loans would be 60% rather than 30%, would NAMA ever have seen the light of day? It seems to me that these three key moments in our State’s economic history are characterised by the Government acting on poor information. Of course it is to be recognised that information can modify over time and there was a deterioration in the economic environment, both here and internationally, from 2008 which will have affected more up-to-date values. But even taking account of the passage of time, was the information produced by the institutions and external advisers, at such colossal cost to the State, so significantly inaccurate that it is time to investigate the competence of those companies that produced the information?
What prompts this entry is a letter dated 23rd December, 2010 from the current Financial Regulator, Matthew Elderfield, to the Committee of Public Accounts, which has just now been published, in which he encloses copies of the invoices paid in respect of advice received by the Financial Regulator in respect of the Bank Guarantee Scheme and “the discharge of other related supervisory duties”. The invoices are partly redacted by the Financial Regulator to remove the names of consultants and the companies’ banks details for payment of the invoices. The second redaction is understandable but isn’t the identity of the consultants that were seemingly paid substantial sums (€1,000-plus and expenses per day typically) of public interest?
I have extracted the invoices from Matthew Elderfield’s letter for ease of review and they are as follows (sorted by invoice date – click on the description for a copy of the invoice):
DateCompanyAmt (ex VAT)Description
27/11/2008PwC1,670,000Work on six State-gteed banks
31/01/2009PwC1,139,150Work on 5 NAMA banks and JLL fees
19/02/2009Deloitte95,720Review of directors loans
06/03/2009PwC23,415Secondment 11 days Feb 2009
03/04/2009E&Y16,667Secondment Feb 2009
03/04/2009E&Y16,667Secondment Mar 2009
03/04/2009E&Y16,667Secondment Dec 2008
03/04/2009E&Y16,667Secondment Jan 2009
28/04/2009KPMG1,034,080Investigations Mar/Apr 2009
23/06/2009PwC214,480Ref to “Engagement letter April 2009”
30/07/2009KPMG218,219Investigations and “potential ASPs” Apr-Jul 2009
21/09/2009PwC239,310Impairment provisioning INBS
30/10/2009PwC225,750Impairment provisioning EBS
06/01/2010Deloitte56,9992 secondments for 21 days
19/02/2010E&Y87,394″Professional services”
03/03/2010PwC464,500Due diligence
03/03/2010PwC483,100Due diligence
20/08/2010E&Y34,000″Professional services”

There are three invoices of particular interest and they are:
The PwC invoice from 31st January 2009 which includes a charge of €691,250 in respect of “Jones Lang Lasalle Valuations”. And this has continuing relevance for NAMA because JLL’s managing director at the time, John Mulcahy, is now NAMA’s Head of Portfolio Management and arguably NAMA’s most senior property man. It should be emphasised that it is not disclosed on the invoice the remit that JLL operated to when providing their services, so for example they may not have examined loan documentation which, following NAMA’s legal due diligence exercise, proved to be execrable. It should also be stressed that property values continued to drop in late 2008 and 2009.
The two PwC invoices dated 21st September, 2009 and 30th October, 2009 which relate to the impairment provisioning in INBS and EBS. Knowing that the last estimates (in October 2010 – yes, the NAMA CEO did indicate lower estimates last week at the CPA but those are on incomplete loan transfers) of final haircuts for INBS and EBS were 70% and 60% respectively, how competent was PwC’s work in 2009? NAMA’s valuation date is 30th November, 2009 so there may well have been some deterioration in values with the passage of time but November 2009 was only a matter of a few months after the reviews.
A notable omission from the invoices is work on impairment provisioning for AIB, BoI and particularly Anglo. Didn’t the acting Financial Regulator, Mary O’Dea,  think to commission such work? Though on the other hand, given how inaccurate the work appears to be for EBS and INBS in the context of present estimates, perhaps she saved us unnecessary fees.
With NAMA’s acquisition work coming to an end and with yet another review of loans by the troika of Barclays Capital, the Boston Consulting Group and Blackrock Solutions, is it not now time to review the competence of the work undertaken in 2008 and 2009?

source http://wp.me/pNlCf-Xp

Brendan McDonough keeping Lenihan’s secretes at NAMA

-Ireland final in buck-passing nears climax: NAMA CEO versus the Financial Regulator

namawinelake | January 9, 2011 at 3:32 pm | Categories: NAMA | URL: http://wp.me/pNlCf-Vb

This coming Thursday 14th January at 11.30am will see NAMA CEO, Brendan McDonagh returning to the Committee of Public Accounts (CPA) for an uncomfortable questioning session which will focus on the responses given by Brendan at the CPA hearing on 18th November 2010. In particular he is to be quizzed on his response to Deputy Michael McGrath’s series of questions on the quality of information provided to NAMA by the banks in 2009. There was an emerging controversy just before Christmas with the CPA seeming to claim that they felt they were misled by the NAMA CEO whose responses to the Committee in November seemed to confirm that there were machinations at the banks which deserved Garda investigation. The buck-passing referred to in the title refers to the subsequent efforts by Brendan and the Financial Regulator, Matthew Elderfield to dodge responsibility for progressing a new investigation into the banks’ provision of information to NAMA.

Here’s how the buck-passing early rounds played out:

2009 – Banks provide information to NAMA on loans which informs the NAMA draft Business Plan. Banks issue press releases on NAMA discounts – this is AIB’s which includes “Based on the Minister’s estimated average industry wide discount of 30% (which as we have already stated is expected to exceed the estimated maximum for AIB)” (AIB’s is now estimated at 60%) and Bank of Ireland’s on 17th September, 2009 has seemingly been removed from its press release website but is available elsewhere from their website here which says “On the basis of these positive variations, taking into account the extensive work that has been done internally over the past year, and the illustrative methodology set out in the Supplementary Documentation published by the Department of Finance, Bank of Ireland believes that the discount applicable to Bank of Ireland loans potentially transferring to NAMA could be significantly less than the estimated aggregate discount of 30%.”

July 2010 – NAMA produces second Business Plan which shows a substantial deterioration in outlook from a Net Present Value of €4.8bn to €1bn (though there were scenarios at minus €0.8bn to plus €3.8bn).

August 2010 – NAMA Chairman, Frank Daly, criticizes the information provided by the banks

18th November, 2010 – Brendan tells the CPA “The first port of call in terms of looking at that must be the Financial Regulator, who has responsibility for supervising and knowing what goes on within the banks. We will provide whatever assistance we can to anybody. I can assure the Deputy that we have established the facts and will make that information available to any regulatory authority, if appropriate. This is where we are now. Other people have questions to answer on what was done in the past.”

24th November, 2010 – CPA writes to Matthew apprising him of Committee proceedings and Brendan’s responses. This letter does not appear to be in the public domain.

26th November, 2010 – Matthew writes to the CPA acknowledging their letter and stating “My office expects that Mr McDonagh will contact the Central Bank with information which substantiates a claim that NAMA was provided with false or misleading information by the banks”

6th December, 2010 – Matthew writes to the CPA again and states “It is a matter for NAMA to determine, following a consideration of its obligations, both the requirement to report and the relevant authority to which the report is made..” The letter suggests that Matthew has not received information from NAMA on which he can act.

17th December, 2010 – Although not yet available on the CPA’s document website, there was a report in the Irish Times that Matthew wrote a third letter to the CPA which reportedly said “We received a response from Mr McDonagh this week. Nama’s letter does not refer any matter to us in respect of the conduct of any regulated entity,” and “Further, Nama’s letter informs us that it does not have a valid basis to suspect that there has been any criminal offence or other contravention of the Nama Act.”. The CPA felt they had been misled and have ordered the NAMA CEO back to their Committee lickety-split to answer for himself and that brings us to the session scheduled for this coming Thursday.

So who is responsible for investigating possible wrongdoing by the banks in 2009 in their provision of information to NAMA (and potentially their shareholders)? Here are some statistics which are far from vital:

So in the red shirt you have Brendan McDonagh, the 42-year old management accountant who has spent his career with the ESB and the NTMA and today is reported to earn €500,000 per annum as he directly manages 100 staff (with another 50 reportedly on the way) and an army of third party service providers. Whilst not a career civil servant, he is likely to be well-schooled in the art of passing the buck.

And in the blue shirt, you have Matthew Elderfield, the former chief executive of the Bermuda Monetary Authority (BMA – the financial authority for an island group with a population of 68,000 (less than the size of Galway) and with an annual GDP of €4bn). Matthew was famously reported to have taken an awful cut in salary when he took over as our Regulator on 4th January 2010 – Matthew was reportedly being paid €340,000 a year here in March 2010 and his Bermudan salary was put at US $730,000 (€540,000) – not bad for a man who, according to the 2008 and 2009 BMA accounts, was managing 130 staff whose annual payroll costs totalled USD $23m. A recent interview in the Independent claimed Matthew had taken a pay cut of 15% after he arrived which might place his salary today at €290,000 (just below Central Bank governor Honohan on €300,000 a year). Matthew’s previous career included 8 eight years at the UK’s Financial Services Authority where he was reportedly responsible for supervising Northern Rock before its bailout in 2007. His career would suggest he is the under-dog in this buck-passing competition.

The view on here is that NAMA has protesteth far too much at the quality of information provided to it in 2009. After all, it was NAMA’s business plan and they employed, at vast expense, experts to assist them in the early days which would realistically have involved testing the assumptions and information used in the business plan. NAMA got its operating costs spectacularly wrong by 40% (€2.6bn in 10-year NPV terms in 2009 and €1.6bn in the same terms in 2010). So NAMA might have dealt with its inaccurate draft business plan in a more responsible way – yes the information from the banks was wrong but the due diligence on that information at NAMA was grossly inadequate. And the owner of the business plan is not the banks, not the developers, not the third party service providers, not the Department of Finance – the owner is NAMA and the agency should accept its responsibilities.

On Thursday next we will get to observe what should be the final in the buck-passing championship as we should find out whether it is NAMA’s or the Financial Regulator’s responsibility to progress any new investigation into any misleading or false information provided by the banks to NAMA in 2009.

source : http://namawinelake.wordpress.com/2011/01/09/all-ireland-final-in-buck-passing-nears-climax-nama-ceo-versus-the-financial-regulator/

Comment :

We are not going to get any information from this current lot at NAMA they are been protected by Lenihan and as long as he is pulling the strings we will get nowhere.

The Guys are in the top jobs because Lenihan can rely on them to keep their mouths shut!

We will have to wait until we get a new government and hopefully we will have a group of independent TD’s  that will force all information out into the open and then we might get some accountability and some answers .

We are now a debt servicing nation for the super rich

By Laura Noonan

Tuesday December 28 2010

IN the world of film, epilogues rarely live up to the blockbuster that went before, but in the world of Irish banking, Part Deux of the collapse was even more explosive than the forerunner in 2008.

The element of surprise was the biggest twist in the 2010 blockbuster.

Heading into the year, we thought the worst was over. The old guard had been cleaned out of Anglo, and a new management team took the helm early in the year.

Amid reports that shutting down Anglo immediately would cost as much as €35bn, a plan was drawn up to split the bank into a “good” side that would run off healthy loans and continue lending and a “bad” side that would work out the rest.

The plan was duly dispatched to the European Commission for approval, and Ireland‘s most toxic bank was believed to be on its way to a tidy resolution.

Capital tests

Order seemed to be returning to the rest of the banking sector as well as newcomer Financial Regulator Matthew Elderfield kicked off the year by putting all institutions through tough new capital tests.

The result was higher capital demands across the board, as the regulator battled to restore international confidence in Ireland’s flattened institutions.

Bank of Ireland was told to raise €2.7bn of equity capital, and duly went about it by launching a rights issue, placing stock with investors, converting government preference shares and buying back debt at a steep discount.

AIB was ordered to find another €7.4bn by year-end, triggering the €3.1bn sale of Poland’s Bank Zachodni and the $2bn sale of AIB’s stake in US bank M&T.

Building society EBS was asked to raise an additional €875m and was duly put on the market by the Government, soliciting four competing bids, including one from Irish Life & Permanent. So far so good.

But then, as the first days of summer dawned, the mood music began to change and it became apparent that a plot twist was imminent.

First, two landmark reports into the financial crisis highlighted massive failings in Ireland’s regulatory system and in our financial institutions themselves.

The irresponsibility, greed and downright stupidity of Irish banks once again became front-page news across the globe and the recovery story became harder to sell.

As the summer rumbled on, it became obvious the Anglo problem was about to flare up again.

In late August, Standard & Poor’s dramatically predicted that the cost of winding down Anglo could be as much as €35bn, triggering a downgrade of the Irish sovereign’s credit rating. Meanwhile, Anglo’s split plan wasn’t going down well in Brussels.

The prospect of the “good” bank being allowed to compete against other institutions was unpalatable given the massive state aid Anglo had hoovered up and the political message — ‘screw up, be bailed out, carry on as before’ — went down like a lead balloon.

In early September, Brian Lenihan gave up the ghost and announced a new plan to split Anglo into a “savings” bank that would hold the deposits and an “asset recovery bank” that would run off all loans.

But by then, the focus had already shifted to the wider banking sector, which had €26bn of loans to refinance in September, a “funding cliff” that threatened to wreak havoc once more.

In a bid to diffuse the situation, Lenihan and Co convinced the European Central Bank to extend the bank guarantee scheme from the end of September to the end of December, so the banks could raise new loans.

The action was swiftly dismissed as “too little too late” by increasingly hostile international financial markets.


Much of the debt couldn’t be refinanced in the normal way and institutions were forced to turn to the ECB, and even the Irish Central Bank, as lender of last resort.

Corporate deposits began to flee the scene as well, baulking at a raft of downgrades in August/September and the uncertainty that prevailed in the run-up to the guarantee’s 11th-hour extension.

It quickly became evident that the Irish banks were in crisis again, but this time the crisis was so severe that the Irish sovereign was being taken down, too.

The premium investors demanded to hold Irish debt was lurching ever higher, driven up by uncertainty over the final cost of the bank bailout.

In a bid to restore calm, Lenihan and Co promised a “final” figure. At the end of September, those final figures were announced on a day that went down in the record books as Black Thursday.

After dismissing S&P’s €35bn estimates for Anglo as ridiculous, the Government admitted that Anglo’s bailout could actually cost between €29bn and €34bn.

But that news was eclipsed by an even juicier element of the new costings.

AIB, which had been insisting it could recapitalise itself without recourse to the State, now needed an extra €3bn and would effectively be nationalised.

The bank’s managing director Colm Doherty and executive chairman Donal O’Connor were quickly shown the door, and AIB became colloquially dubbed as “Anglo the Second”.

The seismic announcements of September 30 categorically failed to return Ireland to favour with international investors, and the sell-off of Irish government bonds continued enthusiastically.

Whispers about another “hole” in the banks began to circulate, and the prospect of a mass default on residential mortgages fanned the flames of discontent. Before long, the banking crisis was widely believed to be too big for the Irish Government to handle, and rumours of imminent intervention by the IMF were rampant.

The powers that be did their best to drown out the growing discontent, with the Government insisting that an international rescue was not on the cards and the Central Bank insisting there were no more gaping holes to be found in the banks.

By mid-November it became obvious that action was dem-anded and the Government began making noises about its latest wheeze to sort the banking sector’s woes — “overcapitalisation”, ploughing in so much money investors could have no reason to doubt the ability of Irish banks to repay their debt.

The obvious read across was that Ireland’s two non-state owned banks — Bank of Ireland and Irish Life & Permanent — could be forced to take state cash and would end up nationalised.

Bank shares

And so bank shares plummeted again, and the banks were on their knees by the time the rescue plan was revealed one Sunday night in late November.

By this stage, the Government had caved in to the inevitable and opened the doors to not only the IMF, but also to the ECB and European Commission — cue economic sovereignty exit stage left.

The result was a whopping €35bn bailout earmarked for the Irish banks, which could see the entire sector nationalised by the end of February unless individual institutions can raise money privately.

And the banks’ cash was just part of an €85bn bailout package that had largely been triggered because the calamities in the banks had locked the Irish sovereign out of the debt market.

The destruction of 2008 and 2009 was a hard act to follow. But the €85bn bailout, the loss of Ireland’s economic sovereignty, the nationalisation of AIB and the threats to nationalise the rest of the sector, have blitzed what went before into oblivion.

– Laura Noonan

Irish Independent


It’s good to be reminded once again of the total incompetence of the two Brian’s and we can at least  find some satisfaction knowing that we will be able to have our say early next year

But worrying enough , we are not hearing any noises from the established political parties about bringing these crooks to justice and worse we may very well see these two mafia stile politicians wade their way over to Europe to collect their reward for bringing the Irish people into the clutches of the money lenders for the next generation .Yes my friends we will be left paying the bills when these two have long gone and those that will replace them will turn out to be equally as corrupt and incompetent .

The political class will carry on looking after themselves and no top politicians, Bankers or developers   will ever have to pay for the financial meltdown.

No, that privilege will be left for you and me and our children to carry on our shoulders for the next 25 years at least.

Unless we the ordinary people decide to promise ourselves that we will vote differently and we will vote only for independent people that will commit and promise to change the political system and the culture of cronyism and to actively pursue the criminals that are responsible and ensure that these people will not benefit in any way including holding on to enormous pensions, Ministerial salaries , pensions or perks  Only then will we the citizens have some chance of getting back our country from the vested interests that have robbed it from us and have turned us into a debt servicing nation for the super rich like Roman Abramovich!   

IMF/EU bailout vote in the dail


URL: http://wp.me/pNlCf-RV

Perhaps buoyed up by political support which has seen all votes on Budget 2011 thus far being won, perhaps fearful of the consequences of rumblings on Opposition seats about a constitutional challenge (and indeed an actual challenge by retired builder John Wolfe at the High Court), perhaps nudged by the IMF whose approach tends to involve securing national ownership of any bailout deal, perhaps acknowledging that the bailout may be what is most remembered of this Government’s legacy, perhaps wanting to challenge Opposition alternative solutions – whatever the reason, the Government has relented on its steadfast opposition to a vote on the IMF/EU deal and the stage is now set for a vote on Wednesday next 15th December, 2010 – a great day for democracy.

However, cast your minds back to the “debate” on the IMF/EU deal that took place in the Dail last Tuesday and Wednesday (30th November and 1st December). Having seen parts of the debate, I was struck by the open-mouthed gobdaw reaction from the Opposition seats when the Taoiseach correctly claimed that Greece was now seeking the same deal as Ireland. I was puzzled by the Government publishing the Memorandum of Understanding and some supporting documentation when the debate was practically concluded on the Wednesday – why was it not published two days beforehand so that the debate could at least be based on an actual agreement. The NTMA published the interest rates chargeable on the deal on the same Wednesday. I was suspicious when I read in the Irish Times that there was a secret side letter to the agreement which dealt specifically with the banks. I had the usual sick feeling in my stomach at the press release by the Financial Regulator which outlined with very little detail the latest additional injections into our banks. I was confused by RTE’s interview with Governor Honohan and his apparent opposition to the plans for the banks and wasn’t clear on what basis he had objected to the plan and what the alternatives were. And the previous week I was questioning in my own mind why Matthew Elderfield was only now talking about assessing non-NAMA loan losses on a granular basis and whether such analysis would lead to yet more creep in the final cost of the bailout. And I was confused as to why no-one had challenged Olli Rehn, who is adamant we return to a 3% deficit:GDP ratio % in 2014 but seems unconcerned about our debt:GDP spiralling well above the 60% ratio % allowed in the Stability and Growth Pact.  So the great concern is that the debate and vote on Wednesday next will be ill-informed and deputies will be deprived of the information they need to form their views, one way or the other, on the bailout deal. Having followed the proceedings closely over the past year, the following is what I would have said was needed:

(1) The secret side letter to the IMF/EU agreement which apparently deals with plans for the banks

(2) The identities and sums owing to owners of debt by the State-guaranteed banks. Senator David Norris began naming names in a Seanad Committee last week : he only got as far as Aberdeen Asset Management (London Ltd), AGICAM, Aktia Asset Management, Aletti Gestielle SGR and Alliance Bernstein (UK) Ltd before the chairman stopped his revelations. The great suspicion here is that the banks are being bailed out so that foreign financiers can be repaid loans they injudiciously provided during the boom years.

(3) The workings and research used to support estimates of future non-NAMA loan losses. Might we be looking at another €10bn or €50bn? Given the poor forecasting record thus far, how confident can we be in any predictions from the Department of Finance, Financial Regulator and indeed Central Bank Governor but they are the best we have and deputies should be able to form a view on the level of exposure.

(4) The workings and research used to examine the effects of deleveraging Irish banks of perhaps €90bn of lending in the next three years, in particular the effects on the national economy as well as ensuring the banks have adequate controls in place to ensure deleveraging doesn’t take place in such a manner that seems to be attracting those to our shores today who expect to “make out like bandits”.

(5) The workings and research used to examine alternatives to the bailout and in particularly default options.

(6) The position of the ECB with respect to short term liquidity assistance.

(7) A business plan for the banks including estimates of losses from existing loans and future operating profits. The current plan might see Ireland having a viable banking sector but banks might need to lend at ECB base rate plus 7% to be profitable. What sort of economy will we have with banks operating thus?

(8) The Bank of Ireland restructuring plan which was approved by the EU on 15th July, 2010 – yes nearly five months ago – which has still not been published.

Of course the above are the known unknowns. They may give rise to further unknowns which are relevant to any debate on the IMF/EU bailout. Some of the information above will have commercial sensitivities and will arguably touch on issues of national security and there exists a strong possibility that information will be leaked into the public domain. But I hope that those possibilities and consequent damage will be weighed against an informed debate and a way forward which will be owned by the nation, accepted on its behalf by democratically elected representatives.

Next Wednesday is likely to be one of the most momentous day in the Dail since the foundation of the State. The negotiators of the deal, Messrs Honohan, Elderfield and Corrigan and the relevant folks from the Department of Finance should be summoned to the chamber and given a few chairs beside the Ceann Comhairle so that they can be questioned or asked to contribute as needed. This debate should be akin to an extraordinary Committee hearing. The time for poker is over (if it was ever justified).

Thus far the debate has been presented in black-and-white terms – bailout versus default. There are greyer positions – the bailout terms might be revisited (interest rate, scheduling the use of our strategic financial reserves, stimulus packages), default might be partial, Ireland could seek to buy back its own bonds at a discount, burden-sharing with the ECB and other debt holders. The debate next Wednesday might result in a position not established today.

The Taoiseach has quite rightly challenged the Opposition to propose a better alternative. That’s fair enough and we have the right to see if the Opposition is advancing impractical or fantasy alternatives. But the Opposition must be given access to the information needed to have an informed debate. And as much as the Opposition will be put on the spot regarding alternatives, the Government should be forced to justify the deal, explain its impact on national life, explain the theoretical modifications that might have seen a better deal (and why we practically didn’t secure these modifications) and deal with the alternatives in a constructive and engaged manner.


The problem here is that this government has no credibility nobody in their right mind can trust anything these people say they have consistently lied to the Dail and the Irish people and with the real facts and all of the facts nobody really can bring any credible figures to any table all I can trust in is that this government have destroyed our country and brought in the IMF as a result of their incompetence they have been in power far too long and for the health of democracy we must ensure that they are removed from office

As a nonaligned person I am not sure that Fine Gail or Labor would be any better as I personally believe the biggest problem is the political system itself must be changed and these established political parties do not want to change anything that will make them more accountable to the electorate and such changes would impact on their perceived built up entitlements we the over burdened taxpayers keep hearing about .We also need to change the Constitution the very idea that the government believe that they can impose huge debts on every man woman and child in the state is just outrageous and totally undemocratic


Changing Anglo Irish Banks Name

Anglo Irish Bank Corporation (Anglo) is to change its name within weeks, pass its deposit book which was worth €33bn in June 2010 (or indeed sell? why not, after all if Anglo is paying depositors from 1.5% and given the cost and difficulties in accessing money market funding, the deposits might have some value) and will rebrand its €38bn residual loan book under a different name which according to Anglo Chairman, Alan Dukes speaking on RTE radio this morning, will be run down over a period of years.

It seems from Irish Times reporting that Anglo’s loanbook will “conceivably” be combined with INBS’s loanbook and that there is to be a v4.0 restructuring plan (v1.0 in November 2009 was rejected out of hand by the EC, v2.0 in May 2010 was rejected in early September 2010 despite Brian Lenihan making personal entreaties to Competition Commissioner Joaquin Almunia in Brussels and v3.0 was reportedly submitted to the EC “the last week of October 2010” – let’s hope v4.0 is a charmer!).

The media seemed obsessed yesterday with the change of name as if taking a sledgehammer to the signs on the bank building will obliterate the toxicity of the loans and derivatives that will remain in the rebranded bank (€38bn alone from Anglo).
Despite the flurry of activity with Anglo in the last couple of days, that bank did not feature in the awkwardly-worded release from the Central Bank on Sunday night which accompanied the announcement of the bailout. The press release dealt with Allied Irish Banks (AIB), Bank of Ireland (BoI), EBS and Irish Life and Permanent (ILP – parent to Permanent TSB) and announced a further €10bn injection into these four financial institutions – €8bn in capital injections and a further €2bn in “early measures to support deleveraging” – a total of €10bn. The wider bailout announcement made clear that another €25bn would be available as a contingency.
Of the €8bn in capital injections, €5.265bn is to go to AIB, €2.199bn to BoI, €0.438bn to EBS and €0.098bn to ILP which will lead to all four institutions having a Core Tier 1 capital cover of 12.5-14.0%. AIB, BoI and EBS have another three months to 28th February, 2011 and ILP has six months to 31st May, 2011, to put the additional capital in place. At this stage it is not clear to what extent the State will need make up to €8bn available and to what extent the capital can be raised privately through a rights issue or disposal of assets. There was no indication which banks would be the beneficiaries of the €2bn in “deleveraging support”
The announcement from the Central Bank was dreadful in that there was little information or rationale for the details in the announcement which also announced that AIB and BoI would now transfer €0-20bn land and development loan exposures to NAMA, a volteface on the decision announced on 30th September, 2010 to allow those two banks to keep €5-20m exposures because it was more “effective and efficient”. Why is AIB’s Core Tier 1 capital to go to 14%? How safe are credit unions in the State which are to be subjected to stricter rules in 2011 – “A significant strengthening of the regulation and stability of the credit union sector will be carried out by end-2011.” And in the interview with Governor of the Central Bank on RTE yesterday, of course no-one asked for a rationale though it seems that Patrick himself wasn’t in favour of the capital injections.

Bizarre and confused and doesn’t inspire confidence.
And speaking of inspiring confidence, it seems that after the Prudential Capital Assessment Review announced in March 2010 and updated in September 2010, there is to be another PCAR undertaken by 31st March 2011 and this time there will be a review of loan provisions by (a) the Central Bank and (b) an “independent third party”– you’d have to ask if that is to be the same unidentified “independent consultants” which informed the predicted loss levels on 30th September, 2010. It was disappointing in the extreme to hear the Financial Regulator, Matthew Elderfield, last week outline future examination of non-NAMA loans at the banks at a “granular level” – why the blazes has this not happened already? NAMA uncovered atrocious lending practices and documentation on a loan-by-loan basis, why has this regime of independently verifying non-NAMA loans not already taken place?

The Irish Times today reports that an “independent assessment of the new financial regulator will also take place to ensure that international best practice is being followed”.
The immediate reaction of the stock market to the announcement on Sunday night was very positive – shares in the three State-guaranteed banks not in 100% State-ownership recorded major gains yesterday with Allied Irish Banks up €0.02 (6%) to €0.362, Bank of Ireland up €0.05 (17%) to €0.31 and Irish Life and Permanent up €0.30 (58%) at €0.81. The markets seem to have formed the view that ILP will be able to raise its own capital by May 2011 without recourse to the State which might have brought that institution into majority State control.
So where does the announcement on Sunday leave the six State-guaranteed banks?
(1) AIB – still 18.6% State-owned today and likely to be 100% nationalised
(2) BoI – still 36.5% State-owned today and if the €2.199bn is to come from the State, the State will own over 70% of BoI. If the €214m preference share dividend due by BoI to the NPRF in February 2011 is paid in ordinary shares then the State share will increase to nearly 80%
(3) EBS – presently 100% owned by the State but offered for sale with two final bidders (a) ILP and (b) Cardinal Consortium with rumblings that ILP may have to drop out
(4) INBS – 100% state owned, deposits likely to move to new bank in association with Anglo, loans to be run down over time
(5) Anglo – 100% state owned, deposits likely to move to new bank in association with INBS, loans to be run down over time.

source http://namawinelake.wordpress.com/

Ireland Still Refuses To Contemplate Leaving the “Imperial” Euro and Joining a “Latin” Euro Zone.up-date

Ireland Still Refuses To Contemplate

Leaving the “Imperial” Euro and Joining a “Latin” Euro Zone.

Total Debts Estimated


 Christopher M. Quigley

 The crisis which brought the IMF to Ireland shows no signs of abating. As we speak the full extent of the problem has not been fully comprehended. There are in effect 6 levels to the “credit” fiasco in the Euro zone.  I reckon the cost to Ireland will be as follows. These calculations are based on the latest central statistics office reports, in particular the section on external borrowings by Irish financial institutions.

1.         Insolvent Property Development Lending  (Cost Est.: 70 Billion EU.)

2.         Unsustainable Annual Government Deficits (Cost Est: 60 Billion EU.)

3.         Sovereign Debt Credit Rating Collapse (Cost Est: 20 Billion EU.)

4.         Insolvent Consumer Debt Lending (Cost Est : 60 Billion EU.)

5.         Insolvent Mortgage Debt Lending (Cost Est: 100 BillionEU.)

6.         “Off Balance Sheet:   Mark To Market” Asset Value Collapse  

                       (Cost Est: 300 Billion EU.)

{Note: Total Cost to Ireland: When you add the sovereign borrowing of 80 Billion and add the cash line of 165 Billion in the banking system that currently cannot be funded independently (because the banks are bust) the total is 610+80+165= 855 Billion Euro. At an interest rate of 6% it would cost 51 Billion Euro per annum to service this debt. This will be the eventual cost that will be extracted from Ireland Inc. if Ireland does not default. Since these funds cannot be extracted through “taxes” the Imperial representatives will try to force state asset sales. This will be their endgame.}

All the above “problems” need a solution. The Euro is on the verge of collapse and we are still only half way through recognising the crisis, never mind solving it. As more and more countries become affected (as we move down the food chain of the “crisis” schedule above) the options open to the mandarins at the ECB/IMF will be fewer and fewer. Eventually it must be recognised that the only way to solve the banking crisis in each country is to find a way to restore growth. When the deflationary cul-de-sac of austerity is comprehended it will finally be accepted that the only real option left will be national currency devaluation. This measure would save the tourist industries in Spain, Greece and Portugal and return competitiveness to Italian and Irish manufacturing.

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