Anglo Irish Banks - a new addition to Public Sector

Dob74

stepbar wrote: »

Fraud!!!! Lol are you for real :rolleyes:

Credit standards were perfectly fine (for some banks). However unless there was a bank employing "Mystic Meg" no one would have been able to predict (for argument sake) that a loan approved in 2005 would be in default in 2008.

Yes Fruad!!!! These lawsuits happen all the time in the states. Credit standards where not fine, if they where we would not be in this mess. Bankers played it fast and lose with our money now its time to eat our plate of sh;t.

Mr.Micro

A section of the RTE news story on the Anglo re the loans.

Hundreds of shareholders were told by chairman Donal O'Connor that the manner in which loans to Mr FitzPatrick were handled was wrong and unacceptable and he apologised.

He said there were €179m of loans to directors, including €84m to Mr FitzPatrick.

He told the meeting that Mr FitzPatrick's loans were at the normal commercial rate and in accordance with the bank's normal underwriting criteria.

Board resignations called for

He said the moving of the loan balance out of the bank prior to audits happened because the bank did not have a focus on such activity and failed to identify it as a risk area, he said that would not happen in the future.

He also said the auditors were not aware of the transactions that happened in the past, which was greeted by boos from the floor.

Auditors Ernst and Young said: 'All of the audits conducted for Anglo Irish Bank shareholders were undertaken in accordance with the appropriate auditing standards.'


http://www.rte.ie/news/2009/0116/banks.html

edanto

What is the political justification for nationalising Anglo?

Why didn't they just let the bank go bankrupt?

As I understand it Northern Rock and Anglo are roughly of a similar size (i.e. not orders of magnitude apart). Yet our national budget is roughly 10 times smaller than the UKs. And hence much more vulnerable to the bad debt we now own.

What is the point of discussing salary cuts and cost saving measures to balance the budget if with the stroke of Lenihans pen we now own a €60bn loan book, of which 20-40% may be bad? (20-40% is international experience in property crashed according to RTE radio this morning).

Has anybody heard the explanation for the nationalisation? Is it good?

mike65

*pedant hats on*

1/10th the size (can't be 10 times smaller),

*pedant hat off*

Nationalising only makes sense if something is done with it ie turn it into what McWilliams described as a "skip" for bad debt to be unloaded into from the likes of AIB, BOI, etc.

http://news.stv.tv/business/70278-economic-fears-stalk-irelands-anglo-takeover/

Lenihan also said the government may examine the possibility of creating a "bad bank" to park toxic assets now held on lenders' balance sheets.

One Dublin-based analyst said Anglo Irish would be a perfect vehicle for such a plan, which has been mooted by the head of the Federal Reserve as a way of retooling the U.S. bank sector.

"When we have severe economic downturns a lot of losses for banks come from the commercial property side of things and Anglo, given that is its speciality, is actually probably a very good vehicle," said the analyst.

professore

uberwolf wrote: »

Anti Money Laundering requirements allow little scope for maneuver. The borrower, the ultimate controlling entity and every step in between over 25% shareholding are fully documented with the directors for each required to provide d/l or pp, along with 2 forms of address verification.

I can't believe how naive you are.

stepbar

jmayo wrote: »

Yes but it looks like between the government, dept of finance, central bank and the gobsh*** that was regulator, the banks were allowed do what they liked. Did they never believe the gravy train was going to arrive at the final stop ?

Anglo looks like they were the worst culprit and now they are a taxpayer problem.
But I suppose it's either the fault of the American subprime market or the developers.
Bankers are no way at fault, am I right ? :rolleyes:

Sure the fundamentals are still sound :rolleyes:

Of course they were, If you had any clue what you were talking about you'd be a great man.

Mr.Micro wrote: »

What's your problem? I did not see much input from you on the issue apart from snipe. If I am so wrong in my opinion point it out or be quiet. Its an opinion forum not a court of law, lighten up. Ban me now if I am out of line for having AN OPINION.

How dare you make value judgments saying I know little, I had the courage to post my opinion based on what I have seen, experienced, more than you did. There are no financial experts if there were none of the global meltdown would have happened as they would have seen it coming. I still have my money, the banks don't have theirs, oh they do mine and every other taxpayers.

Mr.Micro wrote: »

Less of the sarcasm might serve you well IMO. I gave my opinion on this topic and I do not expect anybody or everybody to agree with it. As far as facts and figures go its been all over the news, media, the net it hardly needs spelling out by me, what would be the point as its all over in the Economics forum I guess.

Your opinion? lol It's a pretty poor one at that.... I asked you to respond to post 47 & 49 and all you can do it a cop out.

Dob74 wrote: »

Yes Fruad!!!! These lawsuits happen all the time in the states. Credit standards where not fine, if they where we would not be in this mess. Bankers played it fast and lose with our money now its time to eat our plate of sh;t.

Please.

edanto wrote: »

What is the political justification for nationalising Anglo?

Why didn't they just let the bank go bankrupt?

As I understand it Northern Rock and Anglo are roughly of a similar size (i.e. not orders of magnitude apart). Yet our national budget is roughly 10 times smaller than the UKs. And hence much more vulnerable to the bad debt we now own.

What is the point of discussing salary cuts and cost saving measures to balance the budget if with the stroke of Lenihans pen we now own a €60bn loan book, of which 20-40% may be bad? (20-40% is international experience in property crashed according to RTE radio this morning).

Has anybody heard the explanation for the nationalisation? Is it good?

uberwolf wrote:

Well it's fairly clear that Anglo bank is systemic to the Irish banking system. To allow it to go under would be political correctness gone wrong.

Anti Money Laundering requirements allow little scope for maneuver. The borrower, the ultimate controlling entity and every step in between over 25% shareholding are fully documented with the directors for each required to provide d/l or pp, along with 2 forms of address verification.

professore wrote: »

I can't believe how naive you are.

Please substanciate that comment or retract it.

nesf

mike65 wrote: »

Nationalising only makes sense if something is done with it ie turn it into what McWilliams described as a "skip" for bad debt to be unloaded into from the likes of AIB, BOI, etc.

http://news.stv.tv/business/70278-economic-fears-stalk-irelands-anglo-takeover/

They were at least talking about doing something similar in the US, where they'd create some kind of public vehicle for the toxic debt and try to unwind it as best they can rather than allow it to further cripple liquidity and credit in the system.

I'm not sure whether they went through with doing it though.

nesf

edanto wrote: »

As I understand it Northern Rock and Anglo are roughly of a similar size (i.e. not orders of magnitude apart). Yet our national budget is roughly 10 times smaller than the UKs. And hence much more vulnerable to the bad debt we now own.

Follow the logic in the other direction. Our economy is also a lot smaller than the UK's so the impact of Anglo collapsing would be much bigger here relative to the collapse of Northern Rock in the UK. That the UK felt leaving Northern Rock collapse was too much of a risk should really give people pause before they suggest that Anglo should be left fold.

Oracle

Rebeller wrote: »

Now I wonder why such a provision should be inserted? Maybe to prevent the taxpayers, who now own the bank, from finding out the truth about the bank's current financial status.

Direct download of draft Bill from Dept. of Finance website here.

EDIT: Just to perhaps clarify the above quoted section. It seems to be suggesting that if the AG considers that a Ministerial Order (issued pursuant to the Bill) "contains matter that is commercially sensitive" then it does not need to be published with the result that the Minister can effectively act in secret!

Where's the public accountability in that?

I agree, not only that but the draft bill also sets out what is defined as commercially sensitive information:

“commercially sensitive information” means information the disclosure of which could reasonably be expected to—

(a) materially prejudice the commercial or industrial interests of a person or of a group or class of persons, or

(b) prejudice the competitive position of a person in the conduct of the person’s business, profession or occupation;

The term is so widely defined in the legislation, that the former and current directors and debtors of Anglo could easily hide behind the "commercial sensitive information" clause. It would also suggest the government has information about Anglo that it wants to keep secret.

The draft bill can be downloaded from the Department of Finance web site: http://www.finance.gov.ie/viewdoc.asp?DocID=5635 The link given above doesn't seem to work now.

The_Conductor

nesf wrote: »

They were at least talking about doing something similar in the US, where they'd create some kind of public vehicle for the toxic debt and try to unwind it as best they can rather than allow it to further cripple liquidity and credit in the system.

I'm not sure whether they went through with doing it though.

Its still on the cards- the current proposals are being evaluated to try to put a 'market value' on the toxic debt that is acceptable to all parties- but not seen as a reward for risky lending practices by the retail operations. Some estimates are as low as 15 to 20c in the dollar- which is a massive indictment of the financial institutions.......

An Irish solution would be to take them on at face value- though given what this would do our international ratings, its doubtful this is possible.......

Ps- now looks like Fitzpatrick's Anglo Irish loans were actually EUR129m, not EUR84m as previously reported- and other directors owed another EUR50m....... fecking hell- Neary shouldn't have been allowed to resign- he should have been cornered and knee capped.......

stepbar

nesf wrote: »

They were at least talking about doing something similar in the US, where they'd create some kind of public vehicle for the toxic debt and try to unwind it as best they can rather than allow it to further cripple liquidity and credit in the system.

I'm not sure whether they went through with doing it though.

In theory it would be a good idea but doing same would effectively mean an orderly winding down of operations. I wouldn't be in support of thousand of people loosing their jobs.

nesf

smccarrick wrote: »

Ps- now looks like Fitzpatrick's Anglo Irish loans were actually EUR129m, not EUR84m as previously reported- and other directors owed another EUR50m....... fecking hell- Neary shouldn't have been allowed to resign- he should have been cornered and knee capped.......

Director loans are legal though. I'd really like to see legislation brought in that makes them illegal for banks, but with present law which it might be ethically grey it's legally fine.

nesf

stepbar wrote: »

In theory it would be a good idea but doing same would effectively mean an orderly winding down of operations. I wouldn't be in support of thousand of people loosing their jobs.

Well the situation here is very different. Irish banks aren't being crippled by the amount of toxic CDOs etc on their balance sheets. We don't have the same pressing need to get a certain form of debt out of the market. Also, thankfully, the sub-prime market in Ireland never really took off and while the banks are loaded down with mortgage debt, they at least don't have enormous amounts lent to people who managed to have bad credit records in boom times.

stepbar

smccarrick wrote: »

Its still on the cards- the current proposals are being evaluated to try to put a 'market value' on the toxic debt that is acceptable to all parties- but not seen as a reward for risky lending practices by the retail operations. Some estimates are as low as 15 to 20c in the dollar- which is a massive indictment of the financial institutions.......

An Irish solution would be to take them on at face value- though given what this would do our international ratings, its doubtful this is possible.......

Ps- now looks like Fitzpatrick's Anglo Irish loans were actually EUR129m, not EUR84m as previously reported- and other directors owed another EUR50m....... fecking hell- Neary shouldn't have been allowed to resign- he should have been cornered and knee capped.......

Interested in the €129mil figure. Have you a link?

Mr.Micro

Your opinion? lol It's a pretty poor one at that.... I asked you to respond to post 47 & 49 and all you can do it a cop out.

You are welcome to refute my poor opinion, if you can with your opinion or just show me none of what I posted happened? So far I have not seen your opinion on this thread. From your last post it appears you disagree with everyone so far, so I am not alone.

stepbar

nesf wrote: »

Director loans are legal though. I'd really like to see legislation brought in that makes them illegal for banks, but with present law which it might be ethically grey it's legally fine.

Best practice is that directors of banks seek lending facilities with other banks.

stepbar

Mr.Micro wrote: »

You are welcome to refute my poor opinion, if you can with your opinion or just show me none of what I posted happened? So far I have not seen your opinion on this thread. From your last post it appears you disagree with everyone so far, so I am not alone.

Have you not? Well let me point you to all my posts on this thread. You should have lots of pickings there. By all means quote them in a new post ans I'll happily go through each and every post.

nesf

stepbar wrote: »

Best practice is that directors of banks seek lending facilities with other banks.

Screw best practice, this should be a legal restriction tbh. I'm not condoning it by saying it was legal by the way, only noting that that they "officially" didn't do anything wrong, which to me suggests that it should made official that it's something that shouldn't be done.

Mr.Micro

stepbar wrote: »

Have you not? Well let me point you to all my posts on this thread. You should have lots of pickings there. By all means quote them in a new post ans I'll happily go through each and every post.

No just show me what I posted in my poor post has not happened.

stepbar

nesf wrote: »

Screw best practice, this should be a legal restriction tbh. I'm not condoning it by saying it was legal by the way, only noting that that they "officially" didn't do anything wrong, which to me suggests that it should made official that it's something that shouldn't be done.

Maybe, but there's nothing stopping the likes of myself getting a mortgage or other lending with my own bank. As with many employees of banks they would get preferential rates and as such it would be stupid not to avail of them. As with the vast majority of lending it's secured in some form or another. BTW I dont even bank with my own bank (because I had (and still have) a relationship with them before I joined the bank I work with).

However on a further point, a pleb like myself would ony get preferential lending up to a certain point. Were I to become involved in a company I need to get approval by the CEO.

stepbar

Mr.Micro wrote: »

Might come in handy for a bit of money laundering. It should have been let go to the wall. Bailing it out and now owning it was done for who? Property developers or cronies or both? Will the IMF have to be called in to Ireland?

Mr.Micro wrote: »

That's what may well happen, all the toxic debt put in to the Anglo and no trace back to all the cronies.

Mr.Micro wrote: »

I will bet that all the toxic debt will be buried in the Anglo and then the Government will close the bank in a relatively short time, it will another bailout only in a different guise.

Mr.Micro wrote: »

There appears to have been absolutely no regulation up to now, which is why our financial system is in a very bad way. Most of the same people are still in the banking system, so I will not hold my breath as to regulations being adhered to, let alone applied. The public will never know the full extent of the crisis.

Mr.Micro wrote: »

Either way whoever, they were all asleep and a guy giving himself loans of 85 million and none of the watchdogs batted an eyelid.

Mr.Micro wrote: »

It will be true, as it is really the only way that the orther banks can start a clean slate. The IMF may be waiting to run the finances, that's how bad the situation may be.

Mr.Micro wrote: »

If regulation exists and it is not applied adequately and properly then it might as well not exist, thats my point.

Mr.Micro wrote: »

No, I am suggesting that the regulations were not always applied in the banking system over the last number of years. Proof of that is perhaps the financial mess that the banks are in at the minute. I quoted an example some way back of what the financial regulators office said at the Oireachtas the other day as a reason for not taking issue with the Anglo in 2007.

Mr.Micro wrote: »

Are you saying that the regulation has worked then? Also if a bank is required to put capital by for every loan it gives why then did all the banks need a bailout? We can blame the US all we like, we are supposed to regulate our own system, and if parts of a regulatory system do not work why keep them?

Mr.Micro wrote: »

"There appears to have been absolutely no regulation up to now[/QUOTE]

I used the word appears. On the news the other day about the Financial regulator knowing about the loans at Anglo and did nothing. He is leaving office on 31st Jan. Not before time IMO.[/QUOTE]

Mr.Micro wrote: »

Answer my questions first and I will answer yours.

Mr.Micro wrote: »

What are you going to do bore me to death, with your banking know how, and tell me all about interbank loans and how the greedy banks here are not to blame in handing out massive loans to all and sundry, borrowing from Japan at virtual zero interest rates and loaning out money here at higher rates, massive loans to developers with little or no collateral?....... and in the end its not their fault. Its the sub prime market imported from the US...... NO, failing banks means incompetent management and poor practices tolerated by poor regulation. Its happened, its not a hypothetical. Goodnight.

nesf wrote: »

Heaven forbid anyone actually start talking about what happened or the meat of the issues at hand rather than generalise broadly on topics they know little about.

There you go all the relivant posts..... Make it up as you go along eh?

Actually nesf has summerised it brilliantly there for me.

Mr.Micro

There you go all the relivant posts..... Make it up as you go along eh?

Actually nesf has summerised it brilliantly there for me.

Pity about that, no point in trying to debate the issue if you are not prepared to at least refute the points I made and explain to me, a non banking person where I am wrong to have drawn such conclusions.

stepbar

Mr.Micro wrote: »

Pity about that, no point in trying to debate the issue if you are not prepared to at least refute the points I made and explain to me, a non banking person where I am wrong to have drawn such conclusions.

Who said I wan't prepared "refute the points" you made? Where exactly did I say that? You base your info on conclusions not facts so be prepared for the backlash TBH.

Mr.Micro

stepbar wrote: »

Who said I wan't prepared "refute the points" you made? Where exactly did I say that? You base your info on conclusions not facts so be prepared for the backlash TBH.

Well put me right then if you please, as a banking person you know more than me about the financial world. What do you mean by backlash?

nesf

stepbar wrote: »

Maybe, but there's nothing stopping the likes of myself getting a mortgage or other lending with my own bank. As with many employees of banks they would get preferential rates and as such it would be stupid not to avail of them. As with the vast majority of lending it's secured in some form or another. BTW I dont even bank with my own bank (because I had (and still have) a relationship with them before I joined the bank I work with).

However on a further point, a pleb like myself would ony get preferential lending up to a certain point. Were I to become involved in a company I need to get approval by the CEO.

I don't think it's equivalent to a regular employee getting a loan though. I'd have no problem with directors getting a regular loan from their bank, even at preferential rates, but director loans specifically are a very different matter. There doesn't have to be any security or anything provided and there is no real regulation on how much can be loaned to an individual with them.

stepbar

Mr.Micro wrote: »

Well put me right then if you please, as a banking person you know more than me about the financial world. What do you mean by backlash?

Well perhaps you are out of your depth here. Backlash - please refer to post 112 and backed up by post 114

stepbar

nesf wrote: »

I don't think it's equivalent to a regular employee getting a loan though. I'd have no problem with directors getting a regular loan from their bank, even at preferential rates, but director loans specifically are a very different matter. There doesn't have to be any security or anything provided and there is no real regulation on how much can be loaned to an individual with them.

I dont agree with the point you've made - "There doesn't have to be any security". That is just totally wrong TBH. I can't see how you could put a restriction of the amount of money a director can borrow if they have the assets to back same up.

Mr.Micro

stepbar wrote: »

Well perhaps you are out of your depth here. Backlash - please refer to post 112 and backed up by post 114

I will leave you to it stepbar, I am very disappointed that you could not explain your argument to refute my opinion. I will leave you with this from the BBC it may enlighten you on banking procedures.



Evan Davis explains securitisation

The rise and fall of the financial services industry in recent years is really a story of several appealing financial innovations falling into the hands of institutions ambitious to defy the natural gravity of their business and to push profits into the stratosphere.

The rocket scientists they employed were among the cleverest people on Earth, but their technology was complicated and fragile. It was bound to end in tears.

Tricky task

You can see this pattern in the world of hedge funds and derivatives, and perhaps even more plainly in banking and the rise of securitisation.

A bank is fundamentally a rather dull old business.

It keeps a small amount of its own money - capital - ready on stand-by should anything go wrong.

But on that modest base, it builds an enormous balance sheet of two huge towers of cash: one of money borrowed, and the other of money lent or invested.

It is hard to make serious money this way. The trick is somehow to charge more for the money the bank lends than it pays for the same money it borrows.

Bankers know how to drive that vehicle into modestly profitable terrain - you make it your business to borrow short-term and lend long-term. But it is still not a terribly exciting money-spinner.

Over the generations they have found there are ways to push profits higher, but experience suggests the higher they push them, the more vulnerable their institution.


FIND OUT MORE...
The City Uncovered
Wednesday, 14 January 2009
2100 GMT, BBC Two

For example, they can economise on capital on stand-by. But then they have less to protect them if things go wrong. Or they can lend at higher rates to riskier people. Again, they make more money but then they stand to lose more.

You can see how anyone with a bit of nous might want to smarten the business up and find a way to build a bank that is both more profitable and more secure.

Well, that is what the technology of securitisation promised.

It allowed banks to lend in copious quantities without carrying all the risks of their loans, which they could sell off as securities. It appeared to be a magic bullet, enabling them to shed risks and make some of their lending margin.

Suffice to say banks took the magic bullet and fired it upon themselves by allowing the quality of their loans to be absurdly degraded.

Plus to cap it all, they bought securities as well as selling them, so when the loan defaults came, it was the banks who were suffering from them. They had not got rid of risk after all.

It is every bit as silly as confusing metric and imperial units. But only bankers who could see beyond the pedestrian world in which they operated would have tripped up in these ways.

Essentially, it is just one example of the way our natural human instinct to be innovative has served us very badly in finance.

It is too easy to allow optimism and self-interest to cloud the judgement and to foster confusion between the very occasional genuine advance with the more common illusions that apparently allow profits to be conjured up from nowhere by disguising the risks that are being taken.

The answer is not to ban innovation, but to be wary of it.

Interestingly, some of the Wall Street rocket scientists behind securitisation were actually real rocket scientists, from the very lab in Pasadena which had managed the Mars Climate Orbiter project.

The real lesson is not that we need to find even cleverer people to take over the world of banking. It is that we would be more likely to avoid mistakes if we could breed them a little stupider.

http://news.bbc.co.uk/2/hi/business/7826431.stm

sceptre

stepbar @ Mr.Micro wrote: »

Well perhaps you are out of your depth here.

A bit more expansion on the points wouldn't go amiss to be honest, I'm sure people would appreciate it.

stepbar

lol that's all I have to say It's nice and easy to quote other people's opinion without actually providing your own.