Ratings Agencies make FF Pay for their failure to be upfront

Sponge Bob

We are borrowing for two things.

1. To 'rescue' banks we do not need. Anglo and INBS are toxic turds that should be shut down. Logically if we rescued all our banks they would resume lending 'as before' and would need rescuing again in a few years. More of our 'foreign' banks will inevitably bugger off like Lloyds Bank of Scotland intend. They will wind down because nobody will buy their books other than vulture funds at 5c on the €

2. We are borrowing to plug the hole in the public finances, around €20bn a year. The government pulls in around €27bn in income ...and that is stabilising...but spends €47bn. As the €27bn will not rise because tax increases are lergely counterproductive the €47bn has to drop instead.

It has been pointed out that the NTMA has a cash buffer but that will be required to implement the restructuring itself and at the end of that restructuring we hope that confidence will return to the bond markets BEFORE we run out of cash.

Any news on Alan Ahearne anybody ???

amacca

donegalfella wrote: »

This post has been deleted.

Its already collapsed and its going to get worse social justice and fairness or not.

why cant the inevitable clean up include these things - why not top down - why not punish proportionally where possible - why not alter legislation to take back some of what has been given to some of these people - even if it doesnt raise a red cent (costs to do it) I still think its a necessary exercise. there should be no incentive to engage in recklessness/profiteering etc to the detriment of those doing the sensible thing.


the only problem with social justice and fairness as I see it is that every tom dick and harry will jump on the bandwagon when it comes to handouts (not many of those left if any) or more importantly and more likely where the cuts will be made

hobochris

hobochris wrote: »

The stench from Anglo is only getting stronger.

I wonder when we will find out the full story behind why FF are so intent on not letting this bank go to the wall like it should.

not only that but alot of the people working now in NAMA are former Anglo employees. Hope the media expose that one. If Anglo is wound up the boys will still be sorted

Laminations

donegalfella wrote: »

This post has been deleted.

Firstly I'm not denying cuts are needed, nor am I proposing an attack on the private sector, I'm simply saying fairness is needed for any cuts to be palatable. Stories of Sarah fitzpatricks round the world largesse will not bring the masses towards accepting cuts. Fitzpatrick in jail and his family in a council house (with similar treatment for the other 2000 elite) will whet the publics appetite for cuts, and the government cracking down on waste and expenses abuse as well as taking a pay cut will show the public that the government are serious, then you can cut en masse

MrDarcy

S & P should have downgraded our credit rating to "Junk" status the minute the government came out and announced that they had agreed to not further cut or interfere with public sector pay rates as part of the next budgetary process.

doc_17

It's funny that the government are complaining about S&P ignoring the "assets" that NAMA have and not taking them into account when calculating the debt. Didn't the government try a similiar stunt with the EU when they were trying to keep the money pumped into Anglo off the books so thatthe debt picture woould look a wee bit better?

MrDarcy

doc_17 wrote: »

It's funny that the government are complaining about S&P ignoring the "assets" that NAMA have and not taking them into account when calculating the debt. Didn't the government try a similiar stunt with the EU when they were trying to keep the money pumped into Anglo off the books so thatthe debt picture woould look a wee bit better?

It looks to me like the reason that S & P are ignoring the value of the NAMA assets is because they know that even if they did put some value on those assets, the number of loans being moved into NAMA is still unknown and the amount that NAMA will pay the banks for the loans that are yet to be bought by NAMA is still a mystery. S & P know full well that there are simply too many "unknown unknowns" when it comes to NAMA so the way they seem to be viewing it is very much as a worse case scenario, and also a scenario that is continuing to worsen as time goes by, which is prudent enough in my opinion given that every month now we seem to be STILL ploughing in billions into either Anglo, INBS, BOI or AIB.

The government crying foul at all of this is laughable.

Sponge Bob

We will probably ( 80% probable) need to pump more money into AIB (and possibly) BoI before year end and if we do we will probably end up owning all of AIB by February 2011 which is when the next dividend on the €3.5bn of preference shares we hold in each of them is due.

We got shares instead of cash dividends in Feb 2010 which is how we ended up with shares in them in the first place. These shares we 'acquired' in Feb 2010 go into the general float this week or next.

Today AIB is worth €700m and owes €280m in dividends in Feb 2011. 40% shareholding on top of what we already own at that rate. Bank of Ireland is worth €3.9bn and also owes €280m in Divvys in Feb 2011 although we will likely not get more than 10% of that bank if they fail to make a dividend.

How do we 'account' for €3.5bn of preference shares in AIB when it is only worth €700m, eh ???

Mr.Micro

Sponge Bob wrote: »

We will probably ( 80% probable) need to pump more money into AIB (and possibly) BoI before year end and if we do we will probably end up owning all of AIB by February 2011 which is when the next dividend on the €3.5bn of preference shares we hold in each of them is due.

We got shares instead of cash dividends in Feb 2010 which is how we ended up with shares in them in the first place. These shares we 'acquired' in Feb 2010 go into the general float this week or next.

Today AIB is worth €700m and owes €280m in dividends in Feb 2011. 40% shareholding on top of what we already own at that rate. Bank of Ireland is worth €3.9bn and also owes €280m in Divvys in Feb 2011 although we will likely not get more than 10% of that bank if they fail to make a dividend.

How do we 'account' for €3.5bn of preference shares in AIB when it is only worth €700m, eh ???

Biffo and Co might fool many people in Ireland and Newsweek magazine but the money people such as the Credit ratings agencies will see through all the BS. As each month goes by it looks like there is no limit to the amount of money that will be needed to keep AIB, ANGLO and the rest afloat? All this money borrowed by the Government will have to be paid back at ever increasing punitive rates and how?

MrDarcy

Mr.Micro wrote: »

Biffo and Co might fool many people in Ireland and Newsweek magazine but the money people such as the Credit ratings agencies will see through all the BS. As each month goes by it looks like there is no limit to the amount of money that will be needed to keep AIB, ANGLO and the rest afloat? All this money borrowed by the Government will have to be paid back at ever increasing punitive rates and how?

The ratings agencies have copped the game here, which is a bit of, "ah sure whatever you're having yourself", when it comes to the banks. It's paddywhackery gombeen economics that's now being tolerated by an Irish constituency of citizens who have now become so used to bending over, that they have forgotten how to stand up straight.

As Fintan O' Toole of the Irish Times asks, in relation to the banks, "how much is too much???"... It's like watching some poor c*nt playing poker who landed at the table after a long stint in the pub, and his drunken strategy is to call every bet even when he has jack sh*t and then when he has no more chips before him, he get's up for a rebuy. Then other players will cop that he will call any bet 'cos he is either drunk or stupid and they raise him and take his trousers down, this is what the markets are doing to us at the moment.

Sponge Bob

The only stat that nobody has run is the Debt-GNP ratio. Once a rating agency notices that ratio they will double notch us down overnight. But they run all their models off Debt-GDP and have not spotted that glaring anomaly...yet.

The current national debt of €90bn + €20bn a year rolling deficit + another €30-40bn guaranteed to FFs friends in the banks + the NAMA Scrip/IOU/YO Me tranche swap paper means that We will owe 100% of GNP in February 2011 and 100% of GDP by end 2011 not that the latter figure matters as much as the first to my mind.

We are basically up sh1te creek when the debt hits 100% of GNP and cannot hang around until it hits 100% of GDP later next year.

GNP is around €142bn and it is still falling hard right now. It will probably be as low as €125bn-€130bn by the end of next year. whether the IMF comes in or not.

The IMF is inevitable as is snow on Errigal this winter, all we can squabble about in here is the when. I trend towards February 2011 or so. It would be a shaggin disaster were we to hold out until well into 2011. In February we can pretend we have a plan and let the IMF disabuse Jack O Connor and the lads of their Croke Park deal. By year end 2011 we will have no input at all. A February date will leave us with a figleaf of sovereignty.

For many people their abiding memory of the World Cup this summer was the Vuvuzela, in my case it was this Apres Match sketch which is all too close to how the Dept of Finance and FF and their Banker mates and the Opposition operate . The game is up lads.

https://www.youtube.com/watch?v=K-qGxjI2arY

Colonel Sanders

Couple of choice comments over on the Irish Economy blog

Jagdip Singh wrote: »

I don’t blame S&P at all for reclassifying NAMA debt. Whilst no-one is saying that NAMA will lose €40bn, the NAMA business plan gives its audiences a giant F-you. If audiences cannot form a view on the assumptions and mechanics of NAMA then why blame S&P for saying the max expsoure is the value of the debt issued. Indeed if derivatives are as toxic as some believe then forget about vanilla loan defaults and a failure of property markets to recover, derivative losses alone could wipe out €40bn - unlikely but NAMA has no-one but itself to blame for the consequences of their North Korean approach to transparency.

One poster even saying the bauld Frank Fahey made an appearance on Newstalk this lunchtime blaming the size of the NAMA discounts (off topic, why is this idiot always first in front of the camera? Is he the only member of the government who is bras necked and/or stupid enough to act as cannon fodder for the 2 Brians? Why the hell do people ask an idiot who didn't even know NAMA bonds pay coupons his opinion)

Pretty depressing analysis on The Pin also

Sponge Bob

Colonel Sanders wrote: »

(off topic, why is this idiot always first in front of the camera? Is he the only member of the government who is bras necked and/or stupid enough to act as cannon fodder for the 2 Brians? Why the hell do people ask an idiot who didn't even know NAMA bonds pay coupons his opinion)

Because his property portfolio was largely acquired at the peak ( 20 out of 40 properties ) and is underwater. Frankeen is worried that his bank manager will haul him in.

Barname

Sponge Bob wrote: »

We will probably ( 80% probable) need to pump more money into AIB (and possibly) BoI before year end and if we do we will probably end up owning all of AIB by February 2011 which is when the next dividend on the €3.5bn of preference shares we hold in each of them is due.

We got shares instead of cash dividends in Feb 2010 which is how we ended up with shares in them in the first place. These shares we 'acquired' in Feb 2010 go into the general float this week or next.

Today AIB is worth €700m and owes €280m in dividends in Feb 2011. 40% shareholding on top of what we already own at that rate. Bank of Ireland is worth €3.9bn and also owes €280m in Divvys in Feb 2011 although we will likely not get more than 10% of that bank if they fail to make a dividend.

How do we 'account' for €3.5bn of preference shares in AIB when it is only worth €700m, eh ???

You may have seen this already but thats small change as far as AIB is concerned, ultimately I believe that AIB will cost the Irish taxpayer €30 Billion

AIB, the Elephant in the corner.

MrDarcy

Sponge Bob wrote: »

We will probably ( 80% probable) need to pump more money into AIB (and possibly) BoI before year end and if we do we will probably end up owning all of AIB by February 2011 which is when the next dividend on the €3.5bn of preference shares we hold in each of them is due.

We got shares instead of cash dividends in Feb 2010 which is how we ended up with shares in them in the first place. These shares we 'acquired' in Feb 2010 go into the general float this week or next.

Today AIB is worth €700m and owes €280m in dividends in Feb 2011. 40% shareholding on top of what we already own at that rate. Bank of Ireland is worth €3.9bn and also owes €280m in Divvys in Feb 2011 although we will likely not get more than 10% of that bank if they fail to make a dividend.

How do we 'account' for €3.5bn of preference shares in AIB when it is only worth €700m, eh ???

You only have to look at the AIB share price to see the writing on the wall there. Closed at 77.5 Cents today, interesting to see what happens tomorrow...

Barname

OK, I have reviewed a lot of the defensive claptrap that was issued today. An example...

Corrigan NTMA: "To put this into perspective about 25 per cent of the underlying collateral in Nama relates to property in London. Is Standard & Poors seriously suggesting that such property is worth nothing?"

This only makes things worse for two reasons:

1. It lacks transparency and honesty
2. It is misleading

The key word that Corrigan used is 'underlying' note how he does not say 25% of the collateral, no, its 'underlying collateral' in other words the Banks dont have collateral for all the loans on their books

Remember the bit players Michael Lynn and Thomas Byrne and their multiple mortgages?

The big boys were doing the same, all the banks can chase now are signatures and bankrupts in the hope of garnishing €0

The scale of the Cross-collateralisation and multiple mortgages within the Irish banking system is the reason that Corrigan refers to 'underlying collateral'

The more this administration takes the peasants for fools the greater the backlash will be.

MrDarcy

S & P have it absolutely spot on. The collatoralised debt value of NAMA assets is worth absolutely jack sh*t compared to the cost's of NAMA buying the toxic loans from the banks, PLUS the costs of recapitalising the banks on what appears to be a monthly basis. These land assets have no value at all in the current market becasue there isn't a sinner who would buy them in the near term. The government objecting to this just makes us look like a nation of retards.

Mister men

MrDarcy wrote: »

S & P have it absolutely spot on. The collatoralised debt value of NAMA assets is worth absolutely jack sh*t compared to the cost's of NAMA buying the toxic loans from the banks, PLUS the costs of recapitalising the banks on what appears to be a monthly basis. These land assets have no value at all in the current market becasue there isn't a sinner who would buy them in the near term. The government objecting to this just makes us look like a nation of retards.

Well we are a nation of retards.

Brussels Sprout

Mister men wrote: »

Well we are a nation of retards.

Speak for yourself

Scarab80

Sponge Bob wrote: »

We will probably ( 80% probable) need to pump more money into AIB (and possibly) BoI before year end and if we do we will probably end up owning all of AIB by February 2011 which is when the next dividend on the €3.5bn of preference shares we hold in each of them is due.

It will be before the dividends are paid that we will own AIB, part of their restructuring plan is to hold a rights offer. As part of this the government will have to convert part of their preference shareholding into common stock, at current market prices we will probably own upwards of 75% of the bank, this is assuming that AIB are able to find anyone to underwrite their issue.

Sponge Bob wrote: »

We got shares instead of cash dividends in Feb 2010 which is how we ended up with shares in them in the first place. These shares we 'acquired' in Feb 2010 go into the general float this week or next.

Today AIB is worth €700m and owes €280m in dividends in Feb 2011. 40% shareholding on top of what we already own at that rate. Bank of Ireland is worth €3.9bn and also owes €280m in Divvys in Feb 2011 although we will likely not get more than 10% of that bank if they fail to make a dividend.

The reason we were paid shares instead of cash was because the EC has prohibited discretionary coupon payments while approval was ongoing for restucturing plans. BOI's restructuring plan has been approved and they can now pay cash dividends instead of shares. By the time the AIB dividend, which is actually due in May comes around they will either have completed their restructuring plan or be fully nationalised.

Also as part of the BOI rights issue we converted 1.6bn of our preference shares into common stock, at the same time a higher coupon of 10.25% was agreed on the remaining 1.8bn of preference shares.

Further AIB's market cap should take into account the current market price x the expanded number of shares following listing of the dividend shares, which would give them a market cap of 830m

Sponge Bob wrote: »

How do we 'account' for €3.5bn of preference shares in AIB when it is only worth €700m, eh ???

Because the valuation relates to ordinary stock holders, i.e. what is left over after everyone else is paid off, including preference stockholders.

Scarab80

MrDarcy wrote: »

S & P have it absolutely spot on. The collatoralised debt value of NAMA assets is worth absolutely jack sh*t compared to the cost's of NAMA buying the toxic loans from the banks, PLUS the costs of recapitalising the banks on what appears to be a monthly basis. These land assets have no value at all in the current market becasue there isn't a sinner who would buy them in the near term. The government objecting to this just makes us look like a nation of retards.

Actually only about 25% of the first 2 tranches relate to land and uncompleted developments. 49% relate to completed commercial property, 14% to completed residential property and 12% to Hotels.

Further 59% relate to Irish property, 36% relates to Britain. The remainder being NI, US/Canada and the rest of the world.

MrDarcy

Scarab80 wrote: »

Actually only about 25% of the first 2 tranches relate to land and uncompleted developments junk. 49% relate to completed commercial property empty industrial units generating no income, 14% to completed residential property zombie housing estates or houses that cannot be sold at the present and 12% to Hotels.

Further 59% relate to Irish property, 36% relates to Britain. The remainder being NI, US/Canada and the rest of the world.

Am I getting closer?!?

ROS123

mitresize5 wrote: »

they will still get 30% of the vote at the next election.

My take on it is that there isn't a huge conspiracy behind keeping Anglo & NIB afloat its just that to row back on it now would be to admit they were wrong to prop them up in the first place.

Admitting you were wrong is fundamentally against first principles for FF

Unfortunately that is probably true, even if we have a total meltdown, the 30% will still vote for who their families always have, FF. The excuse, what will the others do differently will be trotted out. In my opinion, absolutely no one can do worse, FF have absolutely ruined this country for generations. They should we wiped out completely, the term 'economic treason' resurfaces.

Sand

None of this is surprising. All the people who were praising the two Brians for the cunning NAMA scheme, kicking the can down the road, dealing with the problem, but dealing with it later...so clever.

Yeah, its worked a charm. The can has been kicked down the road, but were running out of road. The amusing thing is it doesnt make much difference if we burn the banks now or not. That should have been done back 2 years ago. All the investors (who deserved to be burnt) have got out. Thats where all the money sunk into Anglo and the rest has gone - helping the various investors get out with their cash intact. Its too late now to burn them. The can has well and truly been kicked down the road. Theres been a game of musical chairs played and its the taxpayers who have been left standing when the music stopped. We should have left the banks to burn back in 2008. We should have left them to burn back in 2009. But now? Now its too late.

So I amnt sure why people think Lennys plan has failed - he's bailed out the insiders, helped his mates abroad, the peasants get to carry the can, hell get a nice position on the board of AIB or Bank of Ireland. Failure? By whose standards?

All we can do at this point is default. Default on the NAMA bonds. Default on the famed promissory notes. And hope that we can persuade the markets that such a default is limited and deserved, and that it does not indicate an untrustworthiness with debt in general - just with debt which the government never sought a mandate to take on.

Solair

ROS123 wrote: »

Unfortunately that is probably true, even if we have a total meltdown, the 30% will still vote for who their families always have, FF. The excuse, what will the others do differently will be trotted out. In my opinion, absolutely no one can do worse, FF have absolutely ruined this country for generations. They should we wiped out completely, the term 'economic treason' resurfaces.

Well, I suppose they haven't accidentally nuked us yet although they have managed to poison quite a few of us by allowing a situation to occur where there was sewage in urban and rural water supplies! Not to mention the way they outsourced child care to pedophiles !!

Frankly, we'd probably do better by just running the country by rolling a dice to make all decisions at least it wouldn't be prone to corruption and it would probabaly randomly make better decisions than this crowd!!

Yes, we've turned a corner but thr problem is we don't know what's around that corner!!

Barname

Solair wrote: »

Frankly, we'd probably do better by just running the country by rolling a dice to make all decisions at least it wouldn't be prone to corruption and it would probabaly randomly make better decisions than this crowd!!

Yes, I think the same

We dont need an overpriced useless political system. We are bankrupt.

Irish Politicians have neither the capability or the will to do what has to be done.

Liam Byrne

It's the wrong thread title, though....

They're making us pay for FF not being honest.

jank

Barname wrote: »

You may have seen this already but thats small change as far as AIB is concerned, ultimately I believe that AIB will cost the Irish taxpayer €30 Billion

AIB, the Elephant in the corner.

Can anyone explain why AIB is going to be the next Anglo?

amacachi

donegalfella wrote: »

This post has been deleted.

What percentages would you propose to cut welfare and public sector wages by? I agree they have to come down but would be interested to see what you think. Off the top of my head a ~10% cut with 10% planned for the following year barring something massive changing would be a decent start. EDIT: Trouble is that plenty of the same people currently moaning will most likely either strike or protest about such cuts.
I also love how despite parts of the ESB making a more than healthy profit and being semi-state we're still facing energy price increases and a pensions shortfall within it.

ROS123

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100007444/it-pays-to-riot-in-europe/


It pays to riot in Europe

By Ambrose Evans-Pritchard Economics Last updated: August 25th, 2010

Ireland must now pay more than Greece to borrow.
Dublin has played by the book. It has taken pre-emptive steps to please the markets and the EU. It has done an IMF job without the IMF. Indeed, is has gone further than the IMF would have dared to go.
It has imposed draconian austerity measures. The solidarity of the country has been remarkable. There have no riots, and no terrorist threats.

Protesters attack riot police in Athens over harsh austerity measures
Yet as of today it is paying 5.48pc to borrow for ten years, or near 8pc in real terms once deflation is factored in. This is crippling and puts the country on an unsustainable debt trajectory if it lasts for long.
Yet Greece is able to borrow from the EU at 5pc and from the IMF at a staggered rate far below that (still too high for the policy to work, but that is another matter). These were the terms of the €110bn joint bail-out.
To add insult to injury Ireland is having SUBSIDIZE Greece to meet its share of the rescue fund.
I am sure you can all see the absurdity of this. It has moral hazard written all over it, and shows what happens once a dysfunctional system twists itself into ever greater knots rather confronting the core issue.
Yes, I know that the Irish and Greek maturities are different but the fact is that Greece has extracted better terms by letting matters get further out of hand.
George Papandreou’s PASOK has benefitted from dilly-dallying on the first set of austerity measures, and – not to be too diplomatic about it – by insulting the Germans with demands for war reparations. Hotheads also set fire to downtown Athens and Thessaloniki, improving the effect.
If I were Irish – (and I suppose in a sense I am: Sir John Parnell was my great, great, great grandfather) – I would be a little annoyed.

Laminations

amacachi wrote: »

What percentages would you propose to cut welfare and public sector wages by? I agree they have to come down but would be interested to see what you think. Off the top of my head a ~10% cut with 10% planned for the following year barring something massive changing would be a decent start. EDIT: Trouble is that plenty of the same people currently moaning will most likely either strike or protest about such cuts.
I also love how despite parts of the ESB making a more than healthy profit and being semi-state we're still facing energy price increases and a pensions shortfall within it.

Just to play devils advocate, the ESB have closed their pension hole and the price increases are due to the energy regulator trying to encourage competition. There do need to be cuts in the PS wage bill and social welfare. Any cuts in PS wages should not be done as unfairly as before. The percentage cuts for the levy plateaued as wages got higher. The cuts should always come from the top, starting with government, if the country is in a state of emergency they should take emergency wages for the next 2 years, after all they were the ones at the helm.

RealityCheck

http://www.rte.ie/business/2010/0826/ntma.html

A bit of good news I suppose. Some good demand for short term debt.

wrote:

The yields, or the cost of borrowing the money, fell compared with an auction two weeks ago when more debt was offered.

wrote:

The offer was oversubscribed six times, indicating strong demand, and the interest rates that Ireland had to pay for the short-term debt were lower than they were two weeks ago. The average interest rate on the six-month bills was 1.978%, while it was 2.348% on the eight-month bills.

RealityCheck

RealityCheck wrote: »

http://www.rte.ie/business/2010/0826/ntma.html

A bit of good news I suppose. Some good demand for short term debt.

demand from who?? the same irish banks who have been hoovering up irish debt the last 2 years??

RealityCheck

Deleted User wrote: »

demand from who?? the same irish banks who have been hoovering up irish debt the last 2 years??

Ah yes the same banks that without us guaranteeing them would not exist.

More here from the NTMA
http://www.ntma.ie/Publications/2010/IrishTreasuryBillAuctionResults26August2010.pdf

Still very high rates to pay for very short term debt (less than a year) regardless of the demand.

rumour

amacachi wrote: »

What percentages would you propose to cut welfare and public sector wages by? I agree they have to come down but would be interested to see what you think. Off the top of my head a ~10% cut with 10% planned for the following year barring something massive changing would be a decent start. EDIT: Trouble is that plenty of the same people currently moaning will most likely either strike or protest about such cuts.
I also love how despite parts of the ESB making a more than healthy profit and being semi-state we're still facing energy price increases and a pensions shortfall within it.

A further 10% may be politically manageable, but

• we have 16bn of a deficit to get rid of this year.
• 35% of (current)expenditure is wages= 16bn -10% = 14.4bn
• Income = 31bn made up in taxes,

To balance the books with a 10% wage cut means:

• tax take needs to rise to 45.4 bn. or put another way
• increase tax revenue by 46%, or put another way,
• find 14.4bn in the private sector

How will we do that and keep the private sector open for business never mind the banking problems.

Cut backs and wage reductions on a much more significant scale are the only thing that will work.

Scarab80

Deleted User wrote: »

demand from who?? the same irish banks who have been hoovering up irish debt the last 2 years??

Irish banks have been buying up soverign debt?? I think you are confusing direct government injections of capital with participation in bond auctions.

RealityCheck

Scarab80 wrote: »

Irish banks have been buying up soverign debt?? I think you are confusing direct government injections of capital with participation in bond auctions.

No he's right. Here is an article from the Sunday Business Post from May last year. Around 1 third of Bonds sold were sold to Irish banks. This in turn allows the Banks to borrow from the ECB using the Government Bonds as collateral. I'm sure there would be some more recent data, but this confirms the presence of Irish Banks in buying up soveirgn debt.

http://www.thepost.ie/story/text/eykfqlojau/

The Post wrote:

Irish banks account for up to one-third of the buyers of Irish government bonds issued by the National Treasury Management Agency (NTMA) since last November, Central Bank figures show. But the banks in turn are using the bonds as collateral for borrowing from the ECB.

Figures provided by the Central Bank reveal that more than €5 billion of the €15 billion raised from government bond issues between November and March came from local institutions such as AIB and Bank of Ireland.

Also in a Bond auction recently it was reported that the ECB had stepped in directly to buy up treasuries from the NTMA. This was due to poor demand and high interest rates being demanded by the markets.

http://www.businessweek.com/news/2010-08-12/european-central-banks-said-to-be-buying-irish-bonds.html

Who knows maybe something similar occured today?

liammur

Liam Byrne wrote: »

It's the wrong thread title, though....

They're making us pay for FF not being honest.

Correct. I doubt the likes of bertie ahern & mccreevy are too concerned what austerity measures are imposed.

amacachi

Laminations wrote: »

Just to play devils advocate, the ESB have closed their pension hole and the price increases are due to the energy regulator trying to encourage competition. There do need to be cuts in the PS wage bill and social welfare. Any cuts in PS wages should not be done as unfairly as before. The percentage cuts for the levy plateaued as wages got higher. The cuts should always come from the top, starting with government, if the country is in a state of emergency they should take emergency wages for the next 2 years, after all they were the ones at the helm.

It appears RTE (I think it was) were wrong about the pensions so. How high do you think the cuts should've been on higher earnings? There has to be a plateau at some point. Also I disagree somewhat about cuts having to start at the top where the least cost is, the lower paid make up the bulk of the bill.

rumour wrote: »

A further 10% may be politically manageable, but

• we have 16bn of a deficit to get rid of this year.
• 35% of (current)expenditure is wages= 16bn -10% = 14.4bn
• Income = 31bn made up in taxes,

To balance the books with a 10% wage cut means:

• tax take needs to rise to 45.4 bn. or put another way
• increase tax revenue by 46%, or put another way,
• find 14.4bn in the private sector

How will we do that and keep the private sector open for business never mind the banking problems.

Cut backs and wage reductions on a much more significant scale are the only thing that will work.

How significant though? I was talking purely in terms of pay cuts, I didn't mention cuts in services and numbers and privatization. :P

RealityCheck

Hypothetically speaking, with so much of our bonds being bought up by our very own banks and then considering the fact that our banks are partially owned and guaranteed by the Irish state. In the case of default by Ireland, are we effectively defaulting on ourselves? Is this money effectively being created out of thin air by the ECB (Remember this money is new printed money) simply for the sake of keeping this country afloat? I despair at the thought of the ECB turning off this supply (possibly sometime in 2011). Where would we be without this support?

Scarab80

RealityCheck wrote: »

No he's right. Here is an article from the Sunday Business Post from May last year. Around 1 third of Bonds sold were sold to Irish banks. This in turn allows the Banks to borrow from the ECB using the Government Bonds as collateral. I'm sure there would be some more recent data, but this confirms the presence of Irish Banks in buying up soveirgn debt.

http://www.thepost.ie/story/text/eykfqlojau/

Thanks for that, i hadn't really looked at those CB figures before. During the period covered by the report indeed there was 5bn purchased by Credit Institutions in Ireland, from March 2009 to June 2010 another 2bn has been purchased. The total amount of government debt held by Irish Banks at June 2010 was 8.4bn, that's about 9% of total issued government securities. Looking at BOI interim statements to June 2010 about 1.8bn of govt bonds is held on behalf of investors, i haven't really looked into the other banks.

RealityCheck wrote: »

Also in a Bond auction recently it was reported that the ECB had stepped in directly to buy up treasuries from the NTMA. This was due to poor demand and high interest rates being demanded by the markets.

http://www.businessweek.com/news/2010-08-12/european-central-banks-said-to-be-buying-irish-bonds.html

Who knows maybe something similar occured today?

The ECB is prohibited from directly supporting member states, so they can not partake in auctions. The article relates to purchases on the secondary market. Of course this is not to say that there couldn't be some agreement between say the banks and the ECB where the banks would purchase bonds at the auction and then dump them on the secondary market a couple of days later when the ECB would be allowed to buy them up. Don't know how likely this would be, it would seem to be bending the rules quite close to breaking point.

Scarab80

RealityCheck wrote: »

Hypothetically speaking, with so much of our bonds being bought up by our very own banks and then considering the fact that our banks are partially owned and guaranteed by the Irish state. In the case of default by Ireland, are we effectively defaulting on ourselves? Is this money effectively being created out of thin air by the ECB (Remember this money is new printed money) simply for the sake of keeping this country afloat? I despair at the thought of the ECB turning off this supply (possibly sometime in 2011). Where would we be without this support?

The funding for the Securities Markets Program is not created ex-nihlio, the liquidity is reabsorbed by the ECB.

RealityCheck

Scarab80 wrote: »

The funding for the Securities Markets Program is not created ex-nihlio, the liquidity is reabsorbed by the ECB.

Tis a financial merrygoround .

RealityCheck

The cost of 10 year Government Bonds are still on the rise. Up to 5.66% and rising.

http://www.bloomberg.com/apps/quote?ticker=GIGB10YR:IND

Laminations

Am I reading this last page right? We are buying up bank shares through our recapitalisation of the banks and the banks are buying up government bonds?

Sounds like robbing Peter to pay Paul, a big con job of moving money from one column to another. Its essentially the government buying their own government bonds, using the banks as SPVs?

RealityCheck

Laminations wrote: »

Am I reading this last page right? We are buying up bank shares through our recapitalisation of the banks and the banks are buying up government bonds?

Yes, thats pretty much correct. Other European Banks are doing likewise. I would say that much of our Bonds are being bought by European Banks. Its an indirect form of quantitative easing, as occured in the US and UK. The banks purchase the Bonds at a rate of 5% using short term financing, the banks in turn go to the ECB using the Bonds as collateral to borrow from the ECB at a rate of 1%. Hence the Banks can make a profit from it.

Laminations wrote: »

Sounds like robbing Peter to pay Paul, a big con job of moving money from one column to another. Its essentially the government buying their own government bonds, using the banks as SPVs?

I'm not sure whether the state ownership of banks would make this impossible under state aid rules. But it might indicate a reason why the Government have been slow to nationalise certain banks which we could have done, considering the amount of Recapitalisation money we gave them.

MrDarcy

If you were to look at all of this another way, you could argue that half the country has already defaulted. All the private sector businesses that have been forced to close, (I might add without the owners of same having any entitlement to social welfare), business insolvency with it's twin sister involuntary liquidation, those are just other words for default. The reason why I'd like to see a soverign default in this country is because from where I'm standing, default is happening in Ireland but just to one sector of the country.

All the people on the dole, leaving the country, they are all victims of an occurance of default. Why those in the public sector that are paid more than this country can afford to pay them or should ever pay them regardless of the state of the nation's finances, in a country that is experiencing deflation, are being artifically protected from all of this, to the cost of generations that are yet to even be born, is completely and utterly beyond me.

ei.sdraob

Gurdiev puts the cost of the government incompetence with regards to banks (lets ignore the welfare and PS problems...)

@ €62-74.6 billion ($79-95bn) in his last article


which is similar in size to US bailout as note by one of the commenter who runs the excellent namawinelake blog, except they have 100x the population of Ireland...

Gurdiev wrote:

As estimated by myself (comfortably within the S&P projections), Ireland will stand to lose net:
Nama - net loss of (mid-range) €12-19bn;
Banks - net losses are €50-55.6bn.
These are mid-range estimates.

My estimates translate into:
* Anglo Irish Bank expected supports are likely to exceed the overall decline in our GDP by a factor of more than 1.5 times (constant prices GDP fell €20.26bn between 2007-2009). Thus Anglo alone will cost Irish economy more than the entire Great Recession;

* The bailout will cost us €23,422-34,880 per each person in our labour force as of Q1 2010. Mid range estimate loss is €27,121. Note, labour force includes both employed and unemployed.

* The entire bailout of the banking system can end up costing Ireland in excess of x3 times the total economic loss incurred during this Great Recession.

* Anglo alone will cost us the equivalent of providing unemployment benefits for 2 years to over 1.25 million Irish workers.

* Anglo bailout would cover current Live Register costs for more than 6 years

* The banking bailout would have covered over one half of all outstanding mortgages in the nation once we adjust for interest accruals (a note to our FR: that's one hell of a real moral hazard, Mr Elderfield, much more real than any aid to mortgage holders you can ever fathom)

* The cost of bailout risks running at over €69,000 per family of 2 able-bodied adults either employed or unemployed

* 'Repairing' the banks Government-way can cost 35% of constant prices 2010 GDP or 43.2% of 2010 Gross Disposable National Income, using mid-range estimates for the expected bailout

ei.sdraob

Just finished reading the thread, its interesting how some of our regular posters here in favour of bailouts and stimulus's are finally coming about and realizing just how deep in poop the country is,

and there simply is no choice in how we can proceed from here on and can not continue to borrow at crazy rates, since we backed ourselves into a corner/dug a hole

welcome to the darkside

Sand

It is incredible just how badly thought through our banking/economic policy has been, contrasted with how Brian Lenihan is apparently credited by the media with some vague competence. We're talking about a guy who could confess he didnt even read relevant reports before making critical decisions...and yet hes the guy whose meant to be running the show.

The unfortunate problem is that whatever room for maneuvere we might have had in Sept 2008 has been squandered. The TINA crowd have tied an anchor around any regime that comes in.

The brave course of action would be to strategically default, slash social welfare and quangos dramatically (50% plus) and deal with the consequences. However, given the doom mongering from insiders who threaten the end of all things if we stop their gravy train, I expect any future Irish government wont have any more courage than Greena Fail have had. Labour in particular cant summon up the courage to even talk the talk, let alone walk the walk.

Theyll just muddle on, scraping from day to day, looting every little bit of cash they can from the taxpayer and passing it on to their friends in the unions and banks until:

• an economic miracle occurs,
• Germany decides "Shure **** it, heres some free money!"
• or more likely, the IMF arrive with a dose of reality.

Greena Fails strategy has been to pray for an economic miracle. Given that, Id start praying too.