Why did we not just let BOI/Anglo/AIB sink?

BluntGuy

MaceFace wrote: »

So again, to recap, if the Anglo was allowed to fail or the guarantee was not put in place, there is a high probability that BOI and AIB would have followed. That would also have resulted in EBS, Nationwide and probably PTSB to follow (as none of them would have been able to source money from the internation market).

This is incorrect.

You seem to have followed Lennie's "systemic importance" crap.

Pumping money into Anglo is simply doing more and more damage of "the system". It is a sinking ship, an unviable bank that will never be viable again.

At least BOI and AIB have some hints of viability in them and can be salvaged. We could've more easily given capital and assistance to help these banks work through their Anglo loans, rather than attempt to prop up an entire failed bank. In fact, our approach to dealing with Anglo is now starving the other banks of valuable, scarce resources - the zombified mess of an organisation getting priority every step of the way.

Anglo should've been allowed fail.

Many economists take this view.

The rest of your post is irrelevant.

Perhaps Lenihan thought he was doing the right thing, but we can see how bad Anglo's situation is now. We need to stop shovelling cash into that disaster of a bank and focus on the other more viable financial institutions. He is simply wasting more money.

opinion guy

congo_90 wrote: »

Right now I know a certain friend of a developer using money to get a tax relief. It seems to fall down to the builder being good friends with polititions.

So report them. This kind of crap being allowed happen in the first place is the cause of the problem.

ei.sdraob wrote: »

ah bejesus

we keep hearing that Anglo would have brought down other banks

but absolutely no figures or facts to back up this statement from anyone

youve been sold a dud, face it

I agree. Also why could NAMA not just have covered Anglo instead of all of the banks ?

BluntGuy wrote: »

Who in their right mind is going to invest in a new bank in Ireland now?

Since it is evident that the government will not allow its banks of choice to fail, and thus hands them an unfair advantage, there would be little point in trying to compete in this economic environment.

+1. This move of propping up all the banks is very anti-competitive imo. They are essentially artificially resuscitating a cartel. It's insanity.

Anglo should be have been let go to the wall with others nationalised if necessary. If anglo collapsing was such a threat to the others, NAMA'ing up Anglo's debts only would have protected the others.

MaceFace

BluntGuy wrote: »

This is incorrect.

You seem to have followed Lennie's "systemic importance" crap.

Pumping money into Anglo is simply doing more and more damage of "the system". It is a sinking ship, an unviable bank that will never be viable again.

At least BOI and AIB have some hints of viability in them and can be salvaged. We could've more easily given capital and assistance to help these banks work through their Anglo loans, rather than attempt to prop up an entire failed bank. In fact, our approach to dealing with Anglo is now starving the other banks of valuable, scarce resources - the zombified mess of an organisation getting priority every step of the way.

Anglo should've been allowed fail.

Many economists take this view.

The rest of your post is irrelevant.

Perhaps Lenihan thought he was doing the right thing, but we can see how bad Anglo's situation is now. We need to stop shovelling cash into that disaster of a bank and focus on the other more viable financial institutions. He is simply wasting more money.

Maybe you can expalin why you think I am incorrect in my assumption that the collapse of Anglo would not have resulted in a run on BOI or AIB?
Is this just your opinion, or do you have something to back it up by?

BluntGuy

MaceFace wrote: »

Maybe you can expalin why you think I am incorrect in my assumption that the collapse of Anglo would not have resulted in a run on BOI or AIB?
Is this just your opinion, or do you have something to back it up by?

Likewise, can I ask you to back up your assumption that the other banks would sink?

So again, to recap, if the Anglo was allowed to fail or the guarantee was not put in place, there is a high probability that BOI and AIB would have followed. That would also have resulted in EBS, Nationwide and probably PTSB to follow (as none of them would have been able to source money from the internation market).

I am assuming myself, that your assumption is based on the fallacy that Anglo is of systemic importance.

It is not. It is a business bank, with a very focused market. A market which is dried up and will be for the foreseeable future. This is not of systemic value.

I shall not elaborate any further until you spell out exactly why you believe Anglo should not be allowed sink.

dragonbet

Liam Byrne wrote: »

What business knowingly gives someone something that they know that person can't pay for ?

DRUG DEALERS...!!!!!!


EDIT........ sorry I mean bankers

woodseb

It seems a lot of people are using 'nationalisation' and 'letting the bank fail' as interchangable things....

Can some of you who are suggesting that we should have let all the banks 'fail' quantify how much the Irish government would have had to pay out to replace depositors money under the original guarantee?

ei.sdraob

woodseb wrote: »

It seems a lot of people are using 'nationalisation' and 'letting the bank fail' as interchangable things....

Can some of you who are suggesting that we should have let all the banks 'fail' quantify how much the Irish government would have had to pay out to replace depositors money under the original guarantee?

why dont you quantify how many more billions we will have to put into the banks

gandalf

woodseb wrote: »

It seems a lot of people are using 'nationalisation' and 'letting the bank fail' as interchangable things....

Can some of you who are suggesting that we should have let all the banks 'fail' quantify how much the Irish government would have had to pay out to replace depositors money under the original guarantee?

I have a feeling that the amount that would have to be paid out to depositors would be a lot less than is being poured into Anglo Irish now? I did have a quick search but couldn't find figures on their deposit account levels, anyone know where I could find this figure?

meditraitor

BluntGuy wrote: »

I am assuming myself, that your assumption is based on the fallacy that Anglo is of systemic importance.
.

Thats what it looks like, couldnt agree more

as for the reasons anglo was not let fail, mmmm

Who are the bondholders in this bank? Are they Irish or more importantly International.....

AIB and BoI needed to be nationalised and re-launched in about 5 years when some stabiltiy reached the market, then we might have seen some profit from our investment (taxpayer)

woodseb

ei.sdraob wrote: »

why dont you quantify how many more billions we will have to put into the banks

The thread is about 'why we didn't let all 3 banks fail' - quantifying the cost of letting the banks fail crucial to any sensible debate before we try to put a cost on the current plan.

I'll give you a start - AIB had customer deposits of EUR93bln at the end of 2008

woodseb

deadtiger wrote: »

I have a feeling that the amount that would have to be paid out to depositors would be a lot less than is being poured into Anglo Irish now? I did have a quick search but couldn't find figures on their deposit account levels, anyone know where I could find this figure?

I agree that letting anglo fail did warrant consideration.....

....Anglo had EUR19.2bln in retail deposits in Sept 2008

opinion guy

meditraitor wrote: »

Thats what it looks like, couldnt agree more

as for the reasons anglo was not let fail, mmmm

Who are the bondholders in this bank? Are they Irish or more importantly International.....

AIB and BoI needed to be nationalised,merged, streamlined and re-launched in about 5 years when some stabiltiy reached the market, then we might have seen some profit from our investment (taxpayer)

FYP

ei.sdraob

woodseb wrote: »

The thread is about 'why we didn't let all 3 banks fail' - quantifying the cost of letting the banks fail crucial to any sensible debate before we try to put a cost on the current plan.

I'll give you a start - AIB had customer deposits of EUR93bln at the end of 2008

and how many billions of bad assets do AIB have?

that 93billion in deposits can be transferred or sold to a good bank, theres plenty of banks who wouldn't mind 93 billion worth of customer accounts

gandalf

woodseb wrote: »

The thread is about 'why we didn't let all 3 banks fail' - quantifying the cost of letting the banks fail crucial to any sensible debate before we try to put a cost on the current plan.

I'll give you a start - AIB had customer deposits of EUR93bln at the end of 2008

Yes and people have already said that AIB and BoI should not have been allowed to fail because they have tentacles in all aspects of everyday life in this country.

Anglo Irish on the other hand did not. Therefore they should have been allowed to fail. Any ideas on how much they had on deposit compared to how much they had on loans. Also bear in mind that the guarantee only covered the first €100,000 on deposit.

ei.sdraob

woodseb wrote: »

....Anglo had EUR19.2bln in retail deposits in Sept 2008

please remind us again how many billions have been given to Anglo already

and how many more will be given in coming years?

gandalf

woodseb wrote: »

I agree that letting anglo fail did warrant consideration.....

....Anglo had EUR19.2bln in retail deposits in Sept 2008

Thanks for that (where did you find that figure?).

I am sure a lot of the depositors in there went over the €100,000 threshold under the guarantee scheme so that would not have been the payout amount.

woodseb

ei.sdraob wrote: »

and how many billions of bad assets do AIB have?

that 93billion in deposits can be transferred or sold to a good bank, theres plenty of banks who wouldn't mind 93 billion worth of customer accounts

when you let a bank fail - it becomes a bumfight for the bondholders for the assets - it is likely the deposits would be sold - but it is not certain the full amount would be recovered and it would take an amount of time......in the meantime people would have no access to their savings and would be calling on the government to stump up

kmick

It may seem counter intuitve but they could not afford to. They would have been obliged to pay out to all depositors and ALSO all bond holders as these are preferential creditors i.e. they would be paid before depositors. They were guaranteeing the depositors but they were betting on the fact they would never have to pay out as they were propping up the banks.

Thats why the banks are now sticking up two fingers at the government over lending to smal businesses etc. While the deposit guaratntee is in place they will not be allowed to fail so why should they bother risking giving out any money.

woodseb

ei.sdraob wrote: »

please remind us again how many billions have been given to Anglo already

and how many more will be given in coming years?

i've already conceeded that Anglo may have been let fail :rolleyes:

deadtiger wrote: »

Thanks for that (where did you find that figure?).

I am sure a lot of the depositors in there went over the €100,000 threshold under the guarantee scheme so that would not have been the payout amount.

the figures are available on their annual accounts,

before the anglo nationalisation the guarantee actually was only 20k so the total figure would have been lower - though it doesn't take into account the economic chaos of the majority of the country's savings in the 3 banks being under threat/in limbo for a time when you are trying to set a template for economic recovery

BrownianMotion

woodseb wrote: »

The thread is about 'why we didn't let all 3 banks fail' - quantifying the cost of letting the banks fail crucial to any sensible debate before we try to put a cost on the current plan.

I'll give you a start - AIB had customer deposits of EUR93bln at the end of 2008

You stated original guarantee, that was 90% of deposit to a max of 20k. So that 93bn figure is irrelevant.

We have given Anglo 4bn so far with another 6bn on the way. So that's a 10bn fund to meet deposit guarantees straight away, not including what was given to BOI and AIB.

Have you any figures on numbers of accounts rather than the sum of the amounts held in the accounts as this is more relevant?

Btw I'm not arguing for letting all 3 banks fail here as I wouldn't agree with the logic for that, but it would be interesting to quantify the initial cost of such an action.

ei.sdraob

woodseb wrote: »

when you let a bank fail - it becomes a bumfight for the bondholders for the assets - it is likely the deposits would be sold - but it is not certain the full amount would be recovered and it would take an amount of time......in the meantime people would have no access to their savings and would be calling on the government to stump up

what was the the deposit protection limit back then? 20,000?? before it was raised to 100,000 and then shortly everything

heres what would have happened

people realizing that their money is lost, overthrow the government (who failed to monitor and regulate the banks)

and demand nationalization of the banks from the new government (and jailing of anyone responsible)

over the course of few years the balance sheets are repaired (which is whats happening now anyways) and eventually the banks are re-privatized

a message is send to the banks that ****ing up by taking crazy risks again in the future would mean their bank being taken away from them

during all this time the ECB also would have to step and provide help to ensure the euro doesn't get damaged (as is happening in Greece) too much

and there we have alternative history of Ireland that could have been, no its not a perfect solution and there would be loosers, but at least it would be the people who gambled most who loose most

gandalf

woodseb wrote: »

before the anglo nationalisation the guarantee actually was only 20k so the total figure would have been lower - though it doesn't take into account the economic chaos of the majority of the country's savings in the 3 banks being under threat/in limbo for a time when you are trying to set a template for economic recovery

Yes but I am presuming that Anglo only be let fail as the other two banks were tied into the economy closer and effected a lot more of the citizens every day life here. I would not have let AIB or BoI fail.

(apologies only did a quick google on the guarantee scheme so thats where I got the 100k figure, 20k makes it better and I would assume a lot of the developers would have had deposit accounts with Anglo as well)

woodseb

BrownianMotion wrote: »

You stated original guarantee, that was 90% of deposit to a max of 20k. So that 93bn figure is irrelevant
Have you any figures on numbers of accounts rather than the sum of the amounts held in the accounts as this is more relevant?.

woodseb wrote: »

before the anglo nationalisation the guarantee actually was only 20k so the total figure would have been lower

i realised the figure wouldn't be that full amount - though that was the amount at risk at being lost to the economy. I don't have the figure the the government would have been on the hook for - i suppose it was likely in the tens of billions

if anybody has it, it would aide the debate alright

woodseb

ei.sdraob wrote: »

and there we have alternative history of Ireland that could have been, no its not a perfect solution and there would be loosers, but at least it would be the people who gambled most who loose most

....and the depositors under your scenario

BrownianMotion

ei.sdraob wrote: »

and there we have alternative history of Ireland that could have been, no its not a perfect solution and there would be loosers, but at least it would be the people who gambled most who loose most

Hardly. The people who would lose most would be those who had their life savings on deposit in AIB/BOI, and there are a lot of those people around the country.

There is no way of prosecuting or even judging who is responsible for it, so they would most definitely not be the losers.

P.S. I didn't/don't have a large sum of money on deposit in either bank as I'm far too paranoid, so it's not out of self-interest.

faceman

I realise Im coming into the firing line for saying this and it pains me to say it, we were right to bail out Anglo at the time

In fact, I would go as far as to say, we had no choice. Ireland's economy is far too sensitive to foreign volatility. We dont have any indigenous sector to fall back on during a recession.

It was important that the government was seen to take action to try stabilise the banking sector. otherwise we risked being the first country in the EU to hit rock bottom (a position which has now, thankfully for ireland, been taken by Greece)

If Anglo failed at the time, the knock on effect for other banks and investor confidence in Ireland would have shattered even further than it is at.

The second piece of the pie, being NAMA, is a brave move to provide confidence to the investor community and international markets. However personally i believe that the government should have stepped in temporarily nationalised AIB and BOI. They would never have the cohones to do it though, because much of their shareholders are regular Joe Soaps and with FF/Greens already taking a hit on the polls, they wouldnt risk taking further hits for wiping out the investments of the common man.

It was good to see AIB annouce the loss last week, it seems that they have taken the hit and made the balance sheet adjustments necessary to start afresh. I would expect that this will start to instill confidence in AIB as a banking institution.

But anyway, getting back to the OP's point. The banking system is the back bone of any economy, whether we like it or not. Markets and investors can handle booms and busts, but its the lack of predicatabilty that drives them away. Hopefully the government will introduce far tougher and tighter legislation to avoid scenarios like this again and we return to the days of when banks were run by finance people as opposed to sales people.

jimmycrackcorm

MaceFace is correct in stating that the collapse of Anglo would have resulted in the subsequent collapse of BOI / AIB. The reason is that anyone who lent to AIB / BOI would have looked for their funds back by assuming, quite correctly, that they were in just a precarious position as Anglo was at the time. So the oft-quoted "Systemic importance" is simply investor / bond holder confidence and not the fact that Anglo was the developers bank per-se.

In any event a collapse would have left us in the same position as we are now but the money being paid out in deposit guarantees. A collapse of BOI/ AIB would have disastrous effects for the economy in every facet and so it could not be risked.

ei.sdraob

woodseb wrote: »

....and the depositors under your scenario

what happened to depositors in Iceland?

woodseb

ei.sdraob wrote: »

what happened to depositors in Iceland?

retail deposits in domestic iceland branches were guaranteed in full....

Now back to your original point and stop being evasive

Moral hazard enters when you talk about saving banks to save depositors.
Example: You end up taxing Mr A with say 0 euro of savings so that Mr B with 70,000 euro of savings can access his funds.

There are arguments for and against this based on confidence in the banking system and putting money under mattresses but either way there is no question that forcing someone with less money to pay for someone elses money is morally wrong.

Your simply preserving the status quo and having capitalism for the rich in the good times and socialism for the poor in the bad times.

Lets hoard the wealth and share the debts....F** Off will ya:mad:
The next generation havent a chance