McWilliams, more populist crap

Sand

Most properly run businesses will have their cash distributed amongst accounts over several credit institutions to diversify their risk. If they dont....

As for the small deposit holders, speaking as someone with a bit in the bank Id rather take my medicine now and rebuild than have to pay off many times my deposit in additional taxes.

Also, given the Anglo balance sheet swaperoos with the assistance of the Financial Regulator, I really doubt anyone knows whats on an Irish banks balance sheet. Half those deposits could just be similar accounting tricks with no real substance.

And regardless, a bank failure need not affect the deposit holders in the "END OF THE WORLD!!!" fashion supposed - if it is properly managed. There will be costs, but youd want to be seriously, seriously, seriously loaded before the open ended commitment to ensure BoI and AIB *never* fail, at *any* cost makes much sense.

There is this assumption that the costs of a properly managed rationalisation of AIB or BoI > the cost of dont ever let AIB or BoI fail ever, regardless of cost!

This is the second time AIB has been bailed out of its disastrous stupidity. I absolutely guarantee either we or our children will be bailing them out again from an even bigger stupidity. The cost of the moral hazard we are piling into the banking system ought to be considered too.

At some point, there is a price that is too high to be worth paying for AIB and BoI. Surely?

ei.sdraob

Sand wrote: »

Most properly run businesses will have their cash distributed amongst accounts over several credit institutions to diversify their risk. If they dont....

small business dont have this privilege, especially considering multiple accounts with different banks means more charges, not to mention some banks like AIB have terrible business customer divisions (speaking from experience here)

Sand wrote: »

As for the small deposit holders, speaking as someone with a bit in the bank Id rather take my medicine now and rebuild than have to pay off many times my deposit in additional taxes.

excuse me, I and many other people were responsible and saved while everybody else was orgasming over property

why should sensible and responsible savers be punished for mistakes of opportunists, and have to give up anything

/

Sand

excuse me, I and many other people were responsible and saved while everybody else was orgasming over property

why should sensible and responsible savers be punished for mistakes of opportunists, and have to give up anything

Because you gave your money over to a bunch of cowboys for safekeeping? Im all for the hardknock life philosophy, but lets look at the people "orgasming over property". They have their own problems which they are dealing with. Or not. Youd understandably be annoyed for having to pay for their mistakes. I agree.

However, you give your money to criminally inept bankers, and expect the taxpayer (including the people "orgasming over property") to be thrown under a bus to rescue you from your decision to give your money over to criminally inept bankers.

I mean, Ive heard of a few people who've recounted how they wisely saved their money whilst banks, developers and borrowers went mad on a property bubble. A cunning plan mi'lud, except you are saving your money in the very same bank going mad on that property bubble.

Doh!

Like I said, I am all for the hardknock life philosophy, where people have to deal with their own mistakes and be held to account for them. Borrowers made their mistakes, deposit holders made theirs. Everyone has to deal with them on their own surely?

The government ought to look to protect deposit holders, for general economic reasons, but some open ended, at any cost policy? Nope. Sure deposit holders (myself amongst them) might lose our savings, but I'll rebuild them a lot more quickly than I'll pay the taxes to cover NAMA. So will the vast majority of people.

ei.sdraob

Sand wrote: »

The government ought to look to protect deposit holders, for general economic reasons, but some open ended, at any cost policy? Nope. Sure deposit holders (myself amongst them) might lose our savings, but I'll rebuild them a lot more quickly than I'll pay the taxes to cover NAMA. So will the vast majority of people.

the government did protect depositors up to about 20K

then they decided to cover EVERYTHING over a year ago, now that was a bad idea

as for handing money to criminals, excuse me if they were/are criminals then why is no one being jailed

anyways you have gone well offtopic by now

Sand

as for handing money to criminals, excuse me if they were/are criminals then why is no one being jailed

Thats a good question. Id assume its because the government is terrified of pressing the issue as it would be politically sensitive and they dont know who the casualties would be.

Edit - I should also point out, that whilst I did consider describing them as criminals, I settled for criminally inept as one is indisputable and the other depends on what you can prove.

the government did protect depositors up to about 20K

then they decided to cover EVERYTHING over a year ago, now that was a bad idea

Agreed.

anyways you have gone well offtopic by now

If the thread has gone off topic, its been offtopic for the past page or two at least.

ednwireland

ei.sdraob wrote: »

if you are a director and decided to give a PERSONAL guarantee on top of a business loan, then you should know better, since you are pissing away the protection afforded to you by having a LIMITED company

/

hmmm i've worked for small businesses in ireland since 1997 and all of the directors have had to give personal guarantees for development loans and buying computers etc. on finance.
where's mcwilliams been for 12 years ?

K-9

This personal guarantee thing became very common in the last few years, seen it being used for supplier credit accounts.

As for how valuable they are these days, I'm not sure. I suppose they could put a charge on land and property.

RodgerTheDoger

P. Breathnach wrote: »

I cannot think of a quicker or more devastating way to bring down an entire banking system than refusing me the right to have my money. I rather suspect that it would bring down the political and administrative systems also.

Well I think you are not looking at the bigger picture! I am not saying you do not have a right to your money - But we could not have a scenario like Northern Rock in the UK where people are lining the streets to take their cash out of the Bank - A system would need to be deployed to say that cannot happen - until the financial structure has been adjusted.

Like ei.sdraob said a Bank does not physically have the cash to cover everyones assets their business relies on the fact that people keep their cash in the Bank.

Even in a good banking system the idea that it is your money is actually yours is just an illusion! Even trying to take out large amounts of cash from the Bank you would need to make your branch aware of it ahead of time.

What we have done instead is said - OK keep the banks but everyone is going to pay us the cost of this over the next 20+ years, I am not sure of the figures but I think it was suggested 30K for everyone man woman and child....

Very short sighted.

RodgerTheDoger

ei.sdraob wrote: »

an orderly bank run yeh like that ever worked before

Look, what you are saying is as a nation we are actually too stupid and selfish to actually help ourselves?

ei.sdraob

RodgerTheDoger wrote: »

Look, what you are saying is as a nation we are actually too stupid and selfish to actually help ourselves?

not at all

but when it comes to the only money/savings that majority if people in this country have in the 2 main banks, there cant be an orderly "bank run", the moment theres a sniff of trouble its everyone for themselves

as for likes of Anglo they should have been let to fail, since they dont have "normal" customers, AIB and BOI on other hand are behind most of SME's in this country, what would happen to the economy if their cheques all bounce at same time, or customers do a Northern Rock on it and queue up to take their money out (which is not actually there), your average bank is only "meant" to have about 10% of the deposits just in case, god knows what the figure is with the big 2.

tho for the money given to AIB and BOI they should have been nationalized (for some time at least) and then dismembered into good and bad parts, but we "nation we are actually too stupid and selfish" to do that, same applies to our politicans and as we seen recently the financial regulator

/

RodgerTheDoger

ei.sdraob wrote: »

not at all

but when it comes to the only money/savings that majority if people in this country have in the 2 main banks, there cant be an orderly "bank run", the moment theres a sniff of trouble its everyone for themselves

as for likes of Anglo they should have been let to fail, since they dont have "normal" customers, AIB and BOI on other hand are behind most of SME's in this country, what would happen to the economy if their cheques all bounce at same time, or customers do a Northern Rock on it and queue up to take their money out (which is not actually there), your average bank is only "meant" to have about 10% of the deposits just in case, god knows what the figure is with the big 2.

tho for the money given to AIB and BOI they should have been nationalized (for some time at least) and then dismembered into good and bad parts, but we "nation we are actually too stupid and selfish" to do that, same applies to our politicans and as we seen recently the financial regulator

/

I actually agree with most of this - When I said the government should have stepped in, nationalising one or two banks would have been an option. But then we are relying on the government to actually run things efficently and correctly and it is not like the government to be wasting money!
I currently work for the Financial regulator, but do not hold that against me :eek:

K-9

ei.sdraob wrote: »

tho for the money given to AIB and BOI they should have been nationalized (for some time at least) and then dismembered into good and bad parts, but we "nation we are actually too stupid and selfish" to do that, same applies to our politicans and as we seen recently the financial regulator

/

We seem to be getting that situation with AIB and BOI, except in reverse!

seclachi

I think its fair to say that small businesses and start ups don't have the luxury of getting limited liablity loans, and its quite obvious why, they could just piss away the money and then decide to chuck the towel in. I think its naive to expect them to be able to get such a loan.

Maybe they could have gotten this loans during the boom, I`m no expert by any means, but I know if somebody has built up there own company they have a big responsibility to alot of people to keep it going.

-To themselves and there family for wages
-To there employees
-To there customers
-To there suppliers

They probably had to put in there own capital to get the company started in the first place, and in order to keep years of work going through a recession they may make a personal guarantee.

I think small businesses deserve and need support from the banks and the government, they give alot to society.

ei.sdraob

RodgerTheDoger wrote: »

I currently work for the Financial regulator, but do not hold that against me :eek:

just a question

if BOI and/or AIB were nationalized (could still happen)

who would be put in charge? and what theoretically would be the role of the regulator??



im really torn on this nationalization business

on one hand for the money given to these banks we the taxpayer should have more of a say

on the other hand anything the government touches seems to turn to (expensive) mess

RodgerTheDoger

ei.sdraob wrote: »

just a question

if BOI and/or AIB were nationalized (could still happen)

who would be put in charge? and what theoretically would be the role of the regulator??



im really torn on this nationalization business

on one hand for the money given to these banks we the taxpayer should have more of a say

on the other hand anything the government touches seems to turn to (expensive) mess

Find the most successful private sector company that are well experienced in dealing with financial business that are known for success and employ them to do it, at half the cost of paying people in the Central Bank!

As you say - The government have showen they cannot be trusted to run something economically and efficiently. In the past they have just thrown money at things - And work in the Public sector in my exerience runs easily at half the speed.

I think we do have people in the country that could do it, but the people in charge seem to want to continue flogging a dead horse!

parsi

RodgerTheDoger wrote: »

Find the most successful private sector company that are well experienced in dealing with financial business that are known for success and employ them to do it, at half the cost of paying people in the Central Bank!

But it's those self-same private banks that have caused the problems ?

RodgerTheDoger

parsi wrote: »

But it's those self-same private banks that have caused the problems ?

The most successful private sector company, known for sucess.

Any bank that was on the brink of collapse I do not think falls into this category!

The government and (lack) financial regulator had it's part to play in this also.

imme

I had to laugh at McWilliams 'column' in the Indo, I heard it referred to on the radio so went to Indo.ie.
From the first few lines of the article:
"The easy-credit drug was pushed from the top, right down to the poor debt junkies at the bottom
COULD Patrick Honohan be our Noel Browne? Could Honohan's inquiry into the fiasco of the banking mess be the 21st century equivalent of Browne's Mother and Child scheme"


Patrick Honohan is Patrick Honohan, he's NOT Noel Browne or anything approaching him, quite the rubbish McWilliams.


"In the case of the new Central Bank governor Patrick Honohan, he is equally threatening the power base of the country. He will be opposed by some senior politicians who are opposed to upsetting the status quo -- particularly when they are implicated in the affair.

But it goes much deeper than that. Honohan will also be violently opposed by certain senior people in the Central Bank and the Financial Regulator who now work in the same building as him. He is their boss but he is clean, whereas many of them are part of the problem. Could it be that some of the top brass in the Central Bank and the Financial Regulator, all from the same stable in Dame Street, might want to thwart the new boss in his drive for openness?"


"Violently opposed by certain senior people in the CB", what does he mean by this? Lenihan had the balls to appoint an 'outsider' as Governor, get over it McWilliams, Honohan has the political backing he needs, he's the Governor.


"In my book 'Follow the Money', I compare the entire financial scam in Ireland to a drugs cartel....."
*YAWNS*

Sand

Could be worse, he could have thought up some label for Honahan such as breakfast roll man. His determination to use analogies and labels when discussing even the simplest concepts has long passed the realm of satire.

McWilliams is a smart enough guy, but he long ago started on a different career path to the average economist - hes a writer trying to sell his opinions and throwing out "keee-razy" stuff now and again to get people talking about him is part of his gameplan.

im really torn on this nationalization business

on one hand for the money given to these banks we the taxpayer should have more of a say

on the other hand anything the government touches seems to turn to (expensive) mess

The main concern I would have is that if we nationalise then the banks liabilities are our liabilities, and their balance sheets are toxic. At least Lenihans stupid guarantee has a time limit, and NAMA has not actually taken on the toxic loans yet so there is still hope sanity may break out over in the Dept of Finance and they just scrap NAMA and the guarantee.

Over on Irisheconomy.ie theres a link to a piece by Morgan Kelly of Cassandra fame ( one of the economists who consistently called the bubble for what it was and got ignored) where he explores the Irish credit bubble.

Havent finished reading it yet, but two consistent points Ive seen so far:

1 - The property bubble was fuelled by banks out of control lending: their lending went from 80% of GNP (1997) to 200% (2008) of GNP in a few short years, flooding the market with money and thus inflating prices. By 2008, Irish banks were lending 40% more in real terms to developers alone, than they had lent to the *entire* economy in 1997

This percentage of lending was almost double what would be seen in other European economies - even the UK of Northern Rock fame was far less profligate. These figures underline how sleepy our Financial Regulator was.

2 - More worrisome, the problems of the banks extend beyond dodgy developer loans: far from being "too big to fail", the Irish banks may be "too big to save". NAMA is stretching the state to its limits and beyond, and there will be nothing left in the tank to save the banks from the wave of mortgage defaults coming down the tracks when interest rates go up as they certainly will do as France and Germany exit recession.

In short:

The banks are screwed, their stakeholders are screwed, and if the state persists trying to prop them up then we will all be screwed too when they fall over on top of us.

Its gone past the point where we can try to save the banks, we cant. They are in such trouble its beyond Irelands fiscal capabilities to run a massive deficit *and* underwrite the immense losses on Irish banks balance sheets.

So we return to the only alternative: forcing bank stakeholders to accept *their* losses: shareholders, debt holders, and yes, deposit holders to some degree. Govt policy ought to move to managing the inevitable as sensibly and pragmatically as can be done to minimise the losses for the smaller stakeholders.

BrownianMotion

Sand wrote: »

Over on Irisheconomy.ie theres a link to a piece by Morgan Kelly of Cassandra fame ( one of the economists who consistently called the bubble for what it was and got ignored) where he explores the Irish credit bubble.

....

In short:

The banks are screwed, their stakeholders are screwed, and if the state persists trying to prop them up then we will all be screwed too when they fall over on top of us.

Its gone past the point where we can try to save the banks, we cant. They are in such trouble its beyond Irelands fiscal capabilities to run a massive deficit *and* underwrite the immense losses on Irish banks balance sheets.

So we return to the only alternative: forcing bank stakeholders to accept *their* losses: shareholders, debt holders, and yes, deposit holders to some degree. Govt policy ought to move to managing the inevitable as sensibly and pragmatically as can be done to minimise the losses for the smaller stakeholders.

This paper is worth its own thread. I'd encourage everyone here to invest the time into reading it.

And if you couldn't be bothered reading it then at least let the above summary sink in. Very good post.

Sand

True, I'll transplant the relevant bits to a new thread...