Advertisement
If you have a new account but are having problems posting or verifying your account, please email us on hello@boards.ie for help. Thanks :)
Hello all! Please ensure that you are posting a new thread or question in the appropriate forum. The Feedback forum is overwhelmed with questions that are having to be moved elsewhere. If you need help to verify your account contact hello@boards.ie

Should we save Anglo?

Options
2

Comments

  • Options
    #32
    Villain
    Registered Users Posts: 15,946 ✭✭✭✭Villain


    El Stuntman wrote: »
    that's a 10% drop! :pac:

    Yes but the same Volume earlier in the week saw a 60% drop :confused:


  • Options
    #33
    Frankie Lee
    Registered Users Posts: 3,285 ✭✭✭Frankie Lee


    From October 2nd 2008:
    http://www.independent.ie/business/commercial-property/bank-backing-may-also-rescue-foolish-developers-1487168.html
    PROPERTY developers in danger of defaulting on multi-million euro loans will benefit from the Government's €400bn bank guarantee, according to a leading economist.
    Colm McCarthy, of UCD's School of Economics, said the guarantee effectively bails out developers who borrowed large sums for "foolish property projects."
    He said that although the Government package would not directly fund cash-strapped developers, it would give them more leeway to settle their debts or refinance loans -- something they would be unable to do if the banks went into liquidation. "If a bank went bust, the liquidator would have been chasing the developer for the money they owed," he told the Irish Independent.
    "But now they will have banks to deal with instead of liquidators and the banks will be much more amenable to them."
    Mr McCarthy criticised the high concentration of lending in mortgages, the construction sector and property and said there had been a failure of oversight and scrutiny by financial regulators. The Construction Industry Federation (CIF) would not be drawn on Mr McCarthy's comments.
    However, the CIF denied any foreknowledge of the Government plan despite the fact its chief executive Tom Parlon met with Finance Minister Brian Lenihan on Monday.
    "The meeting was purely to discuss our pre-budget submission. We had no idea what was coming," said CIF director of communications Martin Whelan.
    With Irish banks having loaned up to €120bn, around 60pc of all loans, to property developers and builders, some economists warned yesterday that up to €20bn could end up being written off as bad debt.
    According to Fine Gael TD Olivia Mitchell, a risk assessment carried out by an international investment bank on Bank of Ireland and AIB found that half of all loans for commercial development were given to just 40 borrowers.
    The assessment found that 60pc of AIB's total loan book was concentrated in the property sector, either in residential mortgage lending or construction and property lending. In the case of Bank of Ireland, the figure was 70pc.
    A UCD economist, Prof Morgan Kelly, said foreign banks were afraid to lend money to Irish banks because they had too many bad debts from loans to developers and builders.

    I'd be very worried.


  • Options
    #34
    OhNoYouDidn't
    Closed Accounts Posts: 6,934 ✭✭✭OhNoYouDidn't


    The Corinthian wrote: »
    Are you suggesting that because the 'The Exchequer' is screwed, it's all right to add oil on the fire?

    My take on the present policy is that it is an unattractive one. However, it is also the least unattractive one presently available. To prop up the banks is bad, not to is worse.

    So far, outside of moralizing over the principle of the policy, I've noticed a distinct lack of discussion on the real economic implications it represents, or the opportunity costs of not applying it.

    Ok,

    there is a clear reason to protect the retail bank sector because simply there would be chaos if they collapsed. Lets take that as a given. Ango is not a retail bank.

    There will be no overall macroeconomic effect if Ango collapsed. None. Nada. Zilch. Some property developers would have to negotiate with asset recovery agencies, but thats their problem.

    In fact other banks share price (if you think it matters) of the rest of the Irish banking sector will rise because the market will have actually have confidence that the state will be able to step in to defend them.


  • Options
    #35
    El Stuntman
    Closed Accounts Posts: 4,720 ✭✭✭El Stuntman


    The Corinthian wrote: »
    My take on the present policy is that it is an unattractive one. However, it is also the least unattractive one presently available. To prop up the banks is bad, not to is worse.

    I'm saying prop up the two that are essential to the running of the ecomony and let the rest go bust


  • Options
    #36
    themont85
    Registered Users Posts: 2,608 ✭✭✭themont85


    LoveDucati2 wrote: »
    No more talking, meetings or the inability to take any kind of action. This shower are completely incapable, if you think this year is gonna be bad, wait for the next couple. Mass mortgage defaults, credit card debt, no employment, I will be starting a seperate thread on this.

    Its alright folks, LoveDucati2 means business here, the economy is going to be saved.

    This could be like the moment in all the Hollywood movie, one poster decides enough is enough and single handedly comes up with a solution to all our problems with the aid of their keyboard when it seems all hope is lost(with dramatic music obviousely). Give Spielberg a call, we still have that that tax exception for movies don't we?


  • Advertisement
  • Options
    #37
    Talisman
    Registered Users Posts: 6,194 ✭✭✭Talisman


    OhNoYouDidn't wrote: »
    Apologies on the link - here it is http://www.irishtimes.com/newspaper/opinion/2009/0120/1232059661333.html

    With respect, you are the one taking the minister at face value, yet I am naive? Anglo were well known in banking circles for being, ahem, moody, and their risk rating even in the good times reflected that.

    Read the above article, I would be interested to see what you think.
    According to a source of mine very familiar with what happened at the meeting, extending the liability guarantee to Anglo Irish and Irish Nationwide was strongly opposed by representatives of the Central Bank and the Department of Finance (who reportedly came into the meeting with a draft Bill to rescue only four institutions). However, I am told they were overruled by the Taoiseach and the Minister for Finance, who were supported by the Financial Regulator and the Governor of the Central Bank on the grounds that a sudden liquidation of Anglo’s assets would not be in the national interest.
    Brian Lenihan denies that that happened, however in light of the revelations about the carry on at the IFSRA with regards to Anglo Irish and the concealed director loans then the role of the Financial Regulator would have come under severe scrutiny if the guarantee was to exclude Anglo Irish.


  • Options
    #38
    The Corinthian
    Closed Accounts Posts: 19,777 ✭✭✭✭The Corinthian


    OhNoYouDidn't wrote: »
    Ango is not a retail bank.
    It is. Not it's primary focus, but it is also a retail bank.

    It's main focus in with commercial banking, and there are a fair number of companies, of various sizes, that bank with or have loans with Anglo. Most of these have nothing to do with property development.
    There will be no overall macroeconomic effect if Ango collapsed. None. Nada. Zilch. Some property developers would have to negotiate with asset recovery agencies, but thats their problem.
    Except for those retail customers who have accounts with Anglo. And businesses who have accounts with Anglo. And those who have loans with Anglo. Let's not forget that the collapse of a major bank in Ireland would have an impact on confidence on the Irish banking.

    But if you ignore all that, you're quite right. There will be no overall macroeconomic effect if Anglo collapsed.


  • Options
    #39
    Talisman
    Registered Users Posts: 6,194 ✭✭✭Talisman


    themont85 wrote: »
    Its alright folks, LoveDucati2 means business here, the economy is going to be saved.

    This could be like the moment in all the Hollywood movie, one poster decides enough is enough and single handedly comes up with a solution to all our problems with the aid of their keyboard when it seems all hope is lost(with dramatic music obviousely). Give Spielberg a call, we still have that that tax exception for movies don't we?
    Interesting that you mention Spielberg, I immediately thought of the scene in Schindler's List where the Nazi's line the Jews up and shoot them with a single bullet. It works on so many levels.


  • Options
    #40
    Raiser
    Registered Users Posts: 4,929 ✭✭✭Raiser


    Please let them die in abject, miserable shame......but only after prosecuting every last profiteering, crooked, miserable WBanker.....


  • Options
    #41
    The Corinthian
    Closed Accounts Posts: 19,777 ✭✭✭✭The Corinthian


    El Stuntman wrote: »
    I'm saying prop up the two that are essential to the running of the ecomony and let the rest go bust
    Do you know what the cost and effect of that scenario is against the cost and effect of propping up banks such as Anglo?


  • Advertisement
  • Options
    #42
    oscarBravo
    Technology & Internet Moderators Posts: 28,804 Mod ✭✭✭✭oscarBravo


    Frankie Lee wrote: »
    From October 2nd 2008:
    Please attribute that quote, thanks. I can see it's from the Independent, but including a link is only polite.


  • Options
    #43
    OhNoYouDidn't
    Closed Accounts Posts: 6,934 ✭✭✭OhNoYouDidn't


    The Corinthian wrote: »
    It is. Not it's primary focus, but it is also a retail bank.

    Wrong. Simple as. They are a business bank that provide some high net worth work, but are unambigiously not a retail bank in terms of licence or in terms of what they do.
    The Corinthian wrote: »
    It's main focus in with commercial banking, and there are a fair number of companies, of various sizes, that bank with or have loans with Anglo. Most of these have nothing to do with property development.

    Actually most do.
    The Corinthian wrote: »
    Except for those retail customers who have accounts with Anglo. And businesses who have accounts with Anglo. And those who have loans with Anglo. Let's not forget that the collapse of a major bank in Ireland would have an impact on confidence on the Irish banking.

    There are no retail customers, but there are commercial ones, but those debts would be sold and deposits protected by law - no net economic effect save that some indebted commercial actors would have to deal with liquidators as opposed to a friendly bank. Thats a political issue, not an economic one.

    I would further argue that Ango collapsing will increase confidence in the retail sector because now the state can actually afford to save Bank and AIB if they need.
    The Corinthian wrote: »
    But if you ignore all that, you're quite right. There will be no overall macroeconomic effect if Anglo collapsed.

    Ignore what? You are simply incorrect, so your analysis collapses.


  • Options
    #44
    El Stuntman
    Closed Accounts Posts: 4,720 ✭✭✭El Stuntman


    The Corinthian wrote: »
    Do you know what the cost and effect of that scenario is against the cost and effect of propping up banks such as Anglo?

    the cost to the Exchequer of letting Anglo/INBS go bust?

    zero

    please don't now try to confuse the issue by asking what about depositors\businesses etc - they are private entities and I am talking about socialisation of losses.


  • Options
    #45
    Frankie Lee
    Registered Users Posts: 3,285 ✭✭✭Frankie Lee


    oscarBravo wrote: »
    Please attribute that quote, thanks. I can see it's from the Independent, but including a link is only polite.
    done


  • Options
    #46
    The Corinthian
    Closed Accounts Posts: 19,777 ✭✭✭✭The Corinthian


    OhNoYouDidn't wrote: »
    Wrong. Simple as. They are a business bank that provide some high net worth work, but are unambigiously not a retail bank in terms of licence or in terms of what they do.
    So the retail accounts that people have are imaginary?
    Actually most do.
    Source?
    There are no retail customers, but there are commercial ones, but those debts would be sold and deposits protected by law - no net economic effect save that some indebted commercial actors would have to deal with liquidators as opposed to a friendly bank. Thats a political issue, not an economic one.
    There are retail customers. Secondly, up until recently those deposits were not protected by anything. Thirdly, what is the cost of guaranteeing those deposits, versus nationalization?
    I would further argue that Ango collapsing will increase confidence in the retail sector because now the state can actually afford to save Bank and AIB if they need.
    Or not. That's the thing about confidence.
    Ignore what? You are simply incorrect, so your analysis collapses.
    The only fact you've contradicted is to do with their retail status. And in that you are incorrect.
    El Stuntman wrote: »
    the cost to the Exchequer of letting Anglo/INBS go bust?

    zero

    please don't now try to confuse the issue by asking what about depositors\businesses etc - they are private entities and I am talking about socialisation of losses.
    No I'm asking what the economic cost, and it's inevitable cost to the Exchequer would be. You say zero. I see.


  • Options
    #47
    OhNoYouDidn't
    Closed Accounts Posts: 6,934 ✭✭✭OhNoYouDidn't


    The Corinthian wrote: »
    So the retail accounts that people have are imaginary?

    Source?

    There are retail customers. Secondly, up until recently those deposits were not protected by anything. Thirdly, what is the cost of guaranteeing those deposits, versus nationalization?

    Or not. That's the thing about confidence.

    The only fact you've contradicted is to do with their retail status. And in that you are incorrect.

    No I'm asking what the economic cost, and it's inevitable cost to the Exchequer would be. You say zero. I see.


    Give it up Corinthian, you are wrong.

    http://howbankingworks.ie/index.php?option=com_content&task=view&id=10&Itemid=19


    There are 6 retail banks in Ireland:

    Corporate website - Retail Ireland
    Profiles of this bank
    Wikipedia profile

    (1) AIB plc
    Intertrade profile of AIB
    AIB

    (2) Bank of Ireland

    Bank of Ireland

    (3) Bank of Scotland (Ireland) Ltd aka Halifax

    Halifax(Ireland)

    (4) National Irish Bank Ltd

    National Irish Bank Ltd

    (5) permanent TSB

    permanent TSB

    (6) Ulster Bank (Ireland) Ltd
    Intertrade profile of Ulster Bank
    Ulster Bank (Ireland) Ltd

    and it goes on to say

    Of course, the banks above are not the only banks offering services in the retail market. No list would be complete without mentioning Anglo-Irish Bank which mainly offers services to the Business market, but offers attractive rates for large deposits from individuals.

    That is NOT retail banking. They are actually Treasury accounts.

    With that basic flaw in your arguement, what is the point of arguing the rest?


  • Options
    #48
    thebman
    Closed Accounts Posts: 10,012 ✭✭✭✭thebman


    The Corinthian wrote: »
    Do you know what the cost and effect of that scenario is against the cost and effect of propping up banks such as Anglo?

    I assume you do, please provide the figures.


  • Options
    #49
    Villain
    Registered Users Posts: 15,946 ✭✭✭✭Villain


    El Stuntman wrote: »
    the cost to the Exchequer of letting Anglo/INBS go bust?

    zero

    please don't now try to confuse the issue by asking what about depositors\businesses etc - they are private entities and I am talking about socialisation of losses.

    These figures are guesses and its a very basic analysis but lets say Anglo had Assets of 100 billion on their Balance Sheet

    Now lets say those assets in todays climate are worth 60 Billion

    Deposits at the bank are 80 billion

    So under the Guarantee scheme the Government i.e. the Exchequer is exposed to a loss of 20 billion?

    Is that not possible?


  • Options
    #50
    Villain
    Registered Users Posts: 15,946 ✭✭✭✭Villain


    Oh and the volume of AIB shares today is huge and they are up 23% on the day!


  • Options
    #51
    K-9
    Registered Users Posts: 43,311 ✭✭✭✭K-9


    Villain wrote: »
    These figures are guesses and its a very basic analysis but lets say Anglo had Assets of 100 billion on their Balance Sheet

    Now lets say those assets in todays climate are worth 60 Billion

    Deposits at the bank are 80 billion

    So under the Guarantee scheme the Government i.e. the Exchequer is exposed to a loss of 20 billion?

    Is that not possible?

    I can't see the zero figure either.

    Mad Men's Don Draper : What you call love was invented by guys like me, to sell nylons.



  • Advertisement
  • Options
    #52
    Leon08
    Closed Accounts Posts: 37 ✭Leon08


    All the above arguments, pro or against, are not going to change the fact that Anglo has now been nationalised, so letting it fail is out of the question.
    Lets look to the future.

    Since Anglo is now effectively under the control of the State, would it not be a good idea for the State to use it as a tool in the Economic recovery?

    - Start lending to SME's again, have reasonable rates of credit so that businesses dont go bust.

    - Take on a certain amount of the bad debt of the other banks so that they will perform better, in return for a decent stake in the bank, so that when the economy does recover that the tax payer will get the profits, not the fat cats.

    - Seize all the assets of property developers that arent paying up.

    Your thoughts?


  • Options
    #53
    dealhunter
    Closed Accounts Posts: 34 ✭dealhunter


    The Corinthian wrote: »
    Do you know what the cost and effect of that scenario is against the cost and effect of propping up banks such as Anglo?
    Lets assume that Anglo had not been bailed.

    Anglo would have closed the doors and the liquidators would have been called in.

    All customers with money on deposit would have been covered via the state guarantee.

    The banks "assets" would then have become a matter for the liquidator.

    The covenants of every loan would be exercised causing capital calls from developers to meet either LTV or income coverage tests. This would have surely brought down many developers from their ivory towers who would be facing bankruptcy due to the personal guarantees involved.

    The debt investors that financed Anglo's speculative nature through its bonds would be left nursing large losses. Some of investors would have mitigated the risk of default by purchasing CDS contracts to hedge some of that risk. Those that did not hedge were gamblers and would have lost.

    The Anglo equity investors lose either way so no difference there. What would the difference to the holders of equity in the other banks? I don't think it could have been any worse than it already has been for them this week.

    What about the sustainability of the other banks? They would have to mark-to-market the value of their own loan books given what the Anglo liquidator was doing. Without doubt this would have caused those banks to make substantial provisions against bad-loans. This is the situation that occurred after Lehman went down and at least in this instance we would be able to determine the strength of the other banks. Following this the Government would then be forced to inject capital into institutions with realistic balance sheets.

    Even if one or two of the banks had to be nationalised these banks were not exposed as highly exposed to the developers as Anglo was. The debt that would have been assumed would be much more reflective of the nation. Our homes, cars, personal loans, credit cards and overdrafts would be what be going on the national debt.

    Instead we are now paying the price for the Anglo avarice. The national debt has now doubled and not with normal consumers debt but speculative property development and investment loans mainly in Ireland BUT we also are taking on the loans made in UK and the US.

    What has occurred is sickening to behold. The lack of transparency around the nationalisation and the going-ons at the bank is simply criminal. But we have been here before and next step will be another Tribunal will be setup with more lawyers and barristers earning a packet with no tangible benefits ever emerging. "Seanie" Fitz and his brass balls will walk scott free. The developers should have enough stashed away in trusts to see that retirement in Marbella or Barbados is not that uncomfortable. Meanwhile joe public will be paying for this for a generation. No school improvements, hospitals on IV drips themselves, a public service crumbling.

    Or am I being optimistic...?


  • Options
    #54
    dealhunter
    Closed Accounts Posts: 34 ✭dealhunter


    Villain wrote: »
    Oh and the volume of AIB shares today is huge and they are up 23% on the day!


    Perhaps a dead cat bounce...?


  • Options
    #55
    The Corinthian
    Closed Accounts Posts: 19,777 ✭✭✭✭The Corinthian


    Well, fair enough. When I'm wrong, I'm wrong. If a man can't admit that in a debate, then it stops being about arriving at the truth and becomes an ego thing. Well argued.


  • Options
    #56
    El Stuntman
    Closed Accounts Posts: 4,720 ✭✭✭El Stuntman


    unfortunately us having a minor disagreement on Boards pales into insignificance when placed against either (a) the monumental stupidity of socialising Anglo's losses or (b) the monumental corruption of that decision

    or (c) both

    that's the real scandal!


  • Options
    #57
    K-9
    Registered Users Posts: 43,311 ✭✭✭✭K-9


    Would it still cost zero to let them go though?

    Mad Men's Don Draper : What you call love was invented by guys like me, to sell nylons.



  • Options
    #58
    OhNoYouDidn't
    Closed Accounts Posts: 6,934 ✭✭✭OhNoYouDidn't


    Seanies32 wrote: »
    Would it still cost zero to let them go though?

    No. the state is still backing all deposits.


  • Options
    #59
    RecessionBuster
    Registered Users Posts: 10 ✭RecessionBuster


    In October 08 Anglo was attempting to merge with Irish Life & Permanent and im sure the two boards were well accquainted with eachother and the regulator even before any due diligence process. Now, as Anglo is mainly commercial not retail with little impact on general joe soap public overall and Irish Life/Permanent is hugely Retail and holds many of our pensions with huge impact on joe soaps- It seems to me that this new E7bn Anglo deposit is simply outrageous fraud. Seems like the gov has been blackmailed, Anglo going under wouldn't have been that big a deal if it wasn't for e7bn of Irish Life deposits on their accounts when gov saw them. The gov had no choice being threatened with ILP going down with Anglo,ILP pensions aren't covered by any guarantee are they? Where is the fraud squad? Our reputation is being destroyed globally.......Accountability is non-existant?
    Just wondering if anybody has any opinions on this?


  • Options
    #60
    murfie
    Registered Users Posts: 768 ✭✭✭murfie


    RecessionBuster wrote: »
    In October 08 Anglo was attempting to merge with Irish Life & Permanent and im sure the two boards were well accquainted with eachother and the regulator even before any due diligence process............

    Just wondering if anybody has any opinions on this?


    Am I right in thinking that this is a major scandal in the making or am I over blowing the situation. The government knew the deposits had been made, Anglo seems to have not included the deposits on there accounts until after the guarantee. I mean this sounds crazy, were Irish Permanent not included in the government guarantee? 7bn is a huge amount of money for our little country to guarantee on top of everything. Irish permanent didn't to anything technically wrong they were being clever, but this was not told to the Dail and members of the government new about it!


  • Advertisement
  • Options
    #61
    murfie
    Registered Users Posts: 768 ✭✭✭murfie


    I will correct myself, Irish permanent may have done something wrong. Legal proceedings if warranted could be taken if it is found that something went wrong. Cowen has also said he knew about these deposits, does that not make his position at risk?


This discussion has been closed.
Advertisement