In simple terms...what happened? How bad is it?

maninasia

swampgas wrote: »

I would have to say wait a while. If you can afford to rent somewhere (even for more than 700) you will avoid over-committing yourself. Job / income security should be a major concern in the current circumstances. Do you really want to be tied to a mortgage on a potentially unsellable house if you need to move to find work?

You'd want to use your own brain and figure it by common sense to be honest.

a5y

Would leaving the Euro & returning to a sovereign currency (one not tied in value to another currency), which is allowed to devalue and reduce the cost of living here - reduce the economic recovery time and quickly restore Ireland's competitiveness?

(I'm sorry if this is too hypothetical, but its as specific as I can make it)

If this were to happen would Ireland be accepted like Britain & Sweden are - EU members holding off / plain not interested on joining the Euro?

a5y

Kintarō Hattori wrote: »

So after all that has happened is it still a wise decision to want to buy a house? I know I've asked the question already but I'm sure there are plenty others like me in this position.

I don't think it'll be wise to buy a house for some time to come - with an overabundance of property built and not selling and even if emigration was low it would still be a favourable market to rent.

Also, there isn't any word whatsoever on new legislation to prevent another property bubble - unless I missed something. If that happens in 10 years time you could wind up in negative equity as badly as a lot of people are today.

swampgas

maninasia wrote: »

You'd want to use your own brain and figure it by common sense to be honest.

Fair point in any case. But he asked, I'm just giving my opinion here.

I understand that someone might think "property prices seem to be at an all time low - maybe I'll buy now". However it all depends on your circumstances.

A cash buyer can do what they like.

Someone looking for a mortgage has to be much more careful - even with a "safe" job in the PS, there are uncertain times ahead. Neither employment nor income levels are predictable.

Now if mortgages were secured on the asset, and bankruptcy laws were reformed, I think taking out a mortgage today would be worth considering - maybe. But given the current state of the country, surely waiting until at least April/May next year is sane advice.

Bruce7

In response to the original post, here's a simple guide to what happened:

1. We all started paying more and more for stuff.

2. People who sell stuff (including banks, who sell financial products such as loans and mortgages) made more and more money and sold us more and more stuff and kept putting up their prices.

3. We started paying each other more so that we could continue to buy more stuff at higher and higher prices.

4. People who sell stuff started borrowing like mad so that they could continue selling us more and more stuff at higher and higher prices

5. We began borrowing like mad so that we could continue to pay more and more for stuff.

6. The people who lend to the people who sell stuff to us ran out of money and stopped lending to them. This meant that we could no longer keep borrowing, or keep buying stuff.

7. The people who had been making loads of money selling stuff at higher and higher prices suddenly found that nobody had any money to buy their stuff any more. Prices stopped going up and started going down.

8. The people who lend to the people who sell stuff started looking for their money back.

9. But it was all gone, and the stuff if had been spent on wasn't worth nearly as much as the money that had been borrowed to buy it.

10. But it still has to be paid back. And the only way to pay it back is to borrow even more, from somebody else.

Should the government have prevented this happening? Sure.

Was this ever a realistic expectation? No.

Would another set of Irish politicians have prevented this happening? No.

Who is at fault? Everyone in Ireland.

Who should have to pay the price? The people who took the risks.

Who is that? All of us.

Why? Just like ignorance of the law is no defence, unawareness of risk is no protection from it. Democracy has its consequences.

What? We're just simple Paddies. We had no hand, act or part in this! Bejaysus, we want a bogeyman to blame... Ok, it was all the banks, the developers, and their cronies in the Fianna Fail tent with their expense accounts .... zzzzzz.....

funboy2007

And that is the point - everyone abdicating responsibility again.

Who voted in Beverly Cooper Flynn? A TD who assited people in evading tax? The irish public did
Who voted in Michael Lowry - a man who accepted money for his house from Ben Dunne & was found by the McCracken tribunal to have evaded tax? The Irish public did.
Who voted in Jackie Healy Rae - the biggest proponent of Me Fein politics this country has ever seen - the irish public did.

We have the government and political parties we deserve

mad m

So in simple terms would it be wise if you had a X amount in savings in different irish banks to put it off your mortage. If the country defaults and we might go back to the punt, then that X savings is worthless just sitting in the bank when it could of went off my mortage...

I've looked into putting it into a bank that is situated here but covered by UK. But from what I've read its the same as being in an Irish bank as its regulated by the Irish regulator.

Hayte

a5y wrote: »

Would leaving the Euro & returning to a sovereign currency (one not tied in value to another currency), which is allowed to devalue and reduce the cost of living here - reduce the economic recovery time and quickly restore Ireland's competitiveness?

(I'm sorry if this is too hypothetical, but its as specific as I can make it)

If this were to happen would Ireland be accepted like Britain & Sweden are - EU members holding off / plain not interested on joining the Euro?

The question makes more sense when you ask 'how do we leave the euro?' as opposed to 'should we leave the euro?'

First things first. You have to change all notes and coins and exchange them with Punts at a fixed rate on a certain date. Investors and businesses won't just wait for that to happen. They will try to work out the best way to keep the most value for money. i.e. keep their savings/investments in euros or some other more stable currency like US dollars and see how many punts you can get for your euro. Then wait it out and watch the currency fluctuate. Basically, on the onset of a shift to a whole new currency, everyone with lots of euros will be trying to game the system to get the most punts they can for their euros.

You can realistically expect massive capital flight during a currency shift like this. Now our banking system is already in tatters. Our banks already have cashflow problems so massive capital flight can be thought of as the final nail in the coffin.

The uncertainty we express about leaving the euro, about defaulting on our investors, about saving our own skin first and f*** anyone who put money in our financial system makes us look averse to an investor's interests. Would you loan money to a guy who has a track record of taking money off you and never giving it back? Foreign companies would be mad to invest in us if we showed ourselves like that, at least in the short term.

Also, the UK tried to export its way out of recession this year and with pound sterling being so incredibly weak the logic went that UK exports should look like a good deal. But for whatever reason, everyone else didn't really buy British. Ireland is smalltime compared to the UK even and furthermore, a huge huge proportion of what we export are office productivity and computer software products from mega multinational companies who are only here because of our 12.5% corporate tax rate (half as much as the UK and about 3 times less than the US). Now, ask yourself this - if we leave the Euro and go back to the Punt which will be extremely unstable for a time because everyone is trying to game it, why on earth would foreign companies want to stay here? Why would they want to trade in unstable Punts instead of safe US dollars or safe Euros?

I'm not saying all these things will happen at the same time but they are all possibilities. Furthermore, they don't all need to happen - Investors and savers only need to believe that it will happen and then they pull out their savings and investments. When all of our beneficiaries pull out en masse because the common perception is that we can't manage our own affairs, because confidence is so low in our ability to honour our debts then you have to ask ourselves - Whats left? What do we produce ourselves that our neighbors and trade partners can't do better and cheaper?

At some point everyone is just going to have to come to terms with the fact that the Euro has been good to us but we haven't been good in return. We can keep going with this "f*** you, I got mine" attitude but the buck has to stop somewhere. If it doesn't stop with us now, then I wonder what kind of country we are prepared to leave for our children.

dan_d

In answer to your last question - what about the country we are creating for our current children?My sister's friend left yesterday for NZ. In bits. As was her mother, who now has 3 kids over there. There are no jobs here for them.It's not going away to find themselves for a year - it's going away because they've just graduated and were offered good jobs over there (physiotherapists), and there's no future for them here.

This isn't a sob story about graduates wanting more money, it's a story about grads just wanting jobs to get experience.

Whatever about our future children, we're already screwing the ones that are here now.

snausbaby

Very simply - we all forgot that €250,000 = quarter of a million.

"The things that will destroy America are prosperity-at-any-price, peace-at-any-price, safety-first instead of duty-first, the love of soft living, and the get-rich-quick theory of life."

Theodore Roosevelt

dan_d

In short? Greed and selfishness.

later12

snausbaby wrote: »

"The things that will destroy America are prosperity-at-any-price, peace-at-any-price, safety-first instead of duty-first, the love of soft living, and the get-rich-quick theory of life."

Theodore Roosevelt

And the things that will make America are prosperity-at-any-price in Europe, the love of soft living in PIGS, and the get-rich-quick theory of life in Europe.

Later10

Fluorescence

Well, in the interest of making things simple... This is how I see it:

We all know that over the last decade or so, a lot of reckless lending was going on. The ECB lent massive amounts of money to Irish banks, who went out to the street advertising 100% mortgages to anyone who could fill in a form. A chain of lending formed, which was obviously a massive risk. There was a chance the bankers could make massive profits and become ridiculously wealthy. There was also a pretty good chance that the whole thing could go down the ****ter and they'd take some huge hits. Well, live is a game so they took the gamble and for a while things were looking pretty damn sweet. :cool:

Let's roll back now to 2008. Recession hits and the ECB get very anxious after it becomes clear there's no way they'll get any of their money back. Irish banks are on the brink of collapse. German finance minister calls up Lenihan and says, "Yo, Bri. You must save yer banks, no matter the cost." He agrees and gives a blanket guarantee on them, without even checking what the full extent of the damage is. German bankers are jumping for joy - the clueless Irish taxpayer will pay for all their mistakes and they won't have to lift a finger. Result.

Fast forward to a few weeks ago: Ireland just about has enough funds to keep on truckin'. Euro-zone countries, particularly France and Germany (who have the most to lose) start getting a bit unsettled. Greece has already been bailed out at this point. Ireland is pouring money into the black hole that is the banks, and is beginning to run dry. The EU decides to start putting pressure on Irish government to seek a similar bail-out. If Ireland defaults on bank debt, the ECB isn't happy and the Euro will sink much faster. Irish government denies vehemently that we will need a bail-out, until last week when they give in to pressure and beg the EU for help. German bankers jump for joy again - their fears that they'd have to pay for the massive gamble they took over the last decade are now alleviated again. After some talks with some incompetent Irish gombeens who know nothing about economics, they even manage to also eek a profit out of it - 6.7% interest on a €80 billion loan. Talk about a bitter cherry on top of a massive turd. Britain is pissed off because it's not even in the Euro-zone (read: has nothing to lose when the Euro falls) and is now basically throwing it's money away by lending to us when we haven't a hope in hell of repaying.

Have I got the gist of it? :pac:

MarkD.

Question- whats all this chit chat about pension reserve fund? Why do we have to dig into it? what are the benefits and the downsides of eating into this fund..

An eager for an answer boards member

Scofflaw

fluorescence wrote: »

Well, in the interest of making things simple... This is how I see it:

We all know that over the last decade or so, a lot of reckless lending was going on. The ECB lent massive amounts of money to Irish banks, who went out to the street advertising 100% mortgages to anyone who could fill in a form. A chain of lending formed, which was obviously a massive risk. There was a chance the bankers could make massive profits and become ridiculously wealthy. There was also a pretty good chance that the whole thing could go down the ****ter and they'd take some huge hits. Well, live is a game so they took the gamble and for a while things were looking pretty damn sweet. :cool:

Let's roll back now to 2008. Recession hits and the ECB get very anxious after it becomes clear there's no way they'll get any of their money back. Irish banks are on the brink of collapse. German finance minister calls up Lenihan and says, "Yo, Bri. You must save yer banks, no matter the cost." He agrees and gives a blanket guarantee on them, without even checking what the full extent of the damage is. German bankers are jumping for joy - the clueless Irish taxpayer will pay for all their mistakes and they won't have to lift a finger. Result.

Fast forward to a few weeks ago: Ireland just about has enough funds to keep on truckin'. Euro-zone countries, particularly France and Germany (who have the most to lose) start getting a bit unsettled. Greece has already been bailed out at this point. Ireland is pouring money into the black hole that is the banks, and is beginning to run dry. The EU decides to start putting pressure on Irish government to seek a similar bail-out. If Ireland defaults on bank debt, the ECB isn't happy and the Euro will sink much faster. Irish government denies vehemently that we will need a bail-out, until last week when they give in to pressure and beg the EU for help. German bankers jump for joy again - their fears that they'd have to pay for the massive gamble they took over the last decade are now alleviated again. After some talks with some incompetent Irish gombeens who know nothing about economics, they even manage to also eek a profit out of it - 6.7% interest on a €80 billion loan. Talk about a bitter cherry on top of a massive turd. Britain is pissed off because it's not even in the Euro-zone (read: has nothing to lose when the Euro falls) and is now basically throwing it's money away by lending to us when we haven't a hope in hell of repaying.

Have I got the gist of it? :pac:

I'm afraid not. The ECB only started lending to Irish banks when the Irish banks were in trouble, and the exposure of German banks has been vastly overstated, according to the German banks. They claim that of the claimed €130bn "owed to German banks", €100bn is in fact owned by German bank subsidiaries in Ireland, who have it on loan to people outside Ireland - it's not on loan to our banks - while the remaining €30bn was largely hedged against already. On the other hand, the German taxpayer has bailed out a German bank because of its exposure to Irish debts - that is, mortgages and development loans run up by Irish customers. Similarly, the UK banks are mostly exposed to Irish businesses and customers - RBS has €68bn of exposure in Irish mortgages and property - again, not our banks - and has, as a result, been bailed out by the British taxpayer to the point of being 83% state-owned.

People want it to be about foreign banks "recklessly" lending to Irish banks, but it isn't. It makes a good story, because it allows us to take no responsibility, but it isn't factually accurate.

Nor is there an €80 bn loan. Or a rate of 6.7%. The headline rate of 5.83% undoubtedly contains some fudge, but the 6.7% figure was a rumour, probably put about for political advantage.

cordially,
Scofflaw

Fluorescence

But there is an €80billion loan...

A Reliable Source, I Swear wrote:

A fund of €85 billion of financial support is being made available to Ireland to “return our economy to sustainable growth and to ensure that we have a properly functioning banking system”.

€67.5 billion of the funding is being provided from Europe and the IMF, while €17.5 billion will be provided by Ireland itself.

Source

Ok some of it is coming from within Ireland, but it's still c€80 billion. I didn't hear any change about the 6.7%, so apologies about that.

But didn't Irish banks borrow massive amounts from German banks in order to lend that out again to the borrowers here? I could have sworn that was the whole reason that they were advertising 100% mortgages and all that jazz. If anyone has a history book handy it'd be much appreciated

You just had to go and ruin my penchant for simplicity, didn't you :P

colc1

liam365 wrote: »

Basically suffered from a combination of global recession, huge property bubble burst, incompetent government and now a MASSIVE bill to bail out the banks who lost all their money.

Greens have now stated they want a general election after the budget so Fianna Fáil forced to agree to general election after budget, being January or later.

That answer your question or did you want something more specific?

Secind and third items mentioned were closely linked with regular joe used as a pawn...no doubt bc a small section of ppl were getting very wealthy off the back of it.... The global recession is used too often in this context (usually by politicians seeking to take advantage of the ignorance of the Irish electorate) but it maybe made things come crashing down a bit sooner than otherwise...

In fairness to the greens at east they have some kind of ideology alas the other parties have none...debatably labour have but whether they'd have the guts to actually put it into practice nobody really knows they come out with all populist unsustainable crap thru the media tho...

colc1

bauderline wrote: »

I really do not understand why people keep saying that Irish people need to understand moderation and statements to similar effect, as far as I understand it the current debt crisis has been caused by commercial debt caused by wreckless lending policies in our banks and government debt caused by wreckless government spending.

I really don't think the Irish public should be footing the blame or the bill for this mess.

Yeah but the people didnt have to take the loans offered (the size of loans I mean to be more specific) but ppl got fooled into thinking it was a good thing for their property to be worth x amount and a quarter of a million was becoming 'cheap' for a 2 bed apartment for example...where else would you hear that?

The Irish public have to take more of the blame than anyone or as much anyway bc they borrowed the money and agreed to a consumerist society fuelled by cheap credit whether thru excessive credit card spending and the like and the over-borrowing for property (including their principal private residence I might add...being honest).

We also elected a crowd of absolute conmen to power...maybe partly thru blind loyalty in some ppl's cases...family tradition, etc. I wouldnt be a supporter of them myself but I dont think the alternatives are any different...fundamentally middle/upper class Del Boys basically with self-interest or their close relatives/friends self-interest at the root of all their decision-making as opposed to the good of society which is what should be the case in a decent society...but hey thats a reflection on modern Ireland...

Iwannahurl

With regard to that €130 billion the Irish banks have borrowed from the ECB, I find it simply impossible to comprehend (a) why they have to do so on such a massive scale, (b) how this can be tolerated or sustained, and (c) how the problem -- whatever it is -- can be solved.

How bad is this aspect of our economic nightmare? This quote helps to put it in perspective for someone like me:

Adjusted for size, this is roughly equivalent to US banks borrowing a few hundred trillion from the Fed, give or take a few trillion.

To put that in another perspective, as of November 7, 2010, the USA's "Total Public Debt Outstanding" was approximately 95% of annual GDP ($13.723 Trillion). That's regarded as quite a large sum in the US.

Sorry if this makes no sense. But then again, in this mess what does?

Yvonne79

Tomorrow (the 1st of December) there will be a meeting about the impact of the IMF and EU intervention on the Irish economy in the Central Hotel on Exchequer street. I think that might be interesting. I really need to learn more about what impact they can have on the Irish economical situation. It is sooo complex.
http://dublinopinion.com/2010/11/26/public-meeting-a-justice-response-to-the-imfecb-intervention-wed-1st-dec-630pm-central-hotel-dublin/

Scofflaw

fluorescence wrote: »

But there is an €80billion loan...



Source

Ok some of it is coming from within Ireland, but it's still c€80 billion. I didn't hear any change about the 6.7%, so apologies about that.

Ah...actually, no, there isn't an €85bn loan either. There's €67bn in a facility which we can borrow from, much as we would have borrowed from the bond markets, but at much lower rates than the bond markets are currently offering. Within the facility, there are different rates for different periods - again, that's the same as the bond markets.

fluorescence wrote: »

But didn't Irish banks borrow massive amounts from German banks in order to lend that out again to the borrowers here? I could have sworn that was the whole reason that they were advertising 100% mortgages and all that jazz. If anyone has a history book handy it'd be much appreciated

The German banks say not - they're being used as a stick for Merkel to beat the German taxpayer with in order to get the German taxpayers to stump up for our bailout without too much grumbling, as far as I can see. The 100% mortgages were, I think, an RBS innovation in the Irish market - and RBS has had to be bailed out by the UK taxpayer because it has €68bn of exposure to the Irish market. Again, though, that's exposure to the Irish market - Irish businesses and mortgages - not the Irish banks.

fluorescence wrote: »

You just had to go and ruin my penchant for simplicity, didn't you :P

Alas, on these occasions there's always at least one or two nice simple stories that people can get their heads around. They're invariably wrong, and almost invariably the beneficiaries of the story are some group of politicians or another. In this case, the story that it's all about the banks allows Fianna Fáil to turn the spotlight away from their encouragement of the bubble and their disastrous election-buying based on moving the tax base from income to property transactions.

Similarly, the opposition parties are currently making political hay out of decrying the deal as a sellout and the rest, as if when they're in government they'll do something different. They won't, though, because there isn't another deal, and there aren't any other options for Ireland - we have to borrow the money to fund the government deficit from somewhere, and nobody is offering better terms. So they'll claim their hands are tied because of Fianna Fáil - which is, in one sense, true - not because of the terms of the deal, but because of the necessity for the deal in the first place, which is caused by the disastrous illusionary wealth fostered by government policies primarily from 1997-2007.

The problem with the simple stories is that we don't learn anything really useful from them. Animosity to the banks may give some political impetus to stonger bank regulation, but believing that our banks were somehow the victims of reckless foreign banks dilutes the responsibility of the government for the failures of bank regulation here and the responsibility of the Irish banks for extremely reckless lending in the Irish market. And let's face it - we want the banks to get lending again, so any proper prudential regulation is actually going to be unpopular.

cordially,
Scofflaw

T runner

Another piece of bad news form the FT today. It appears Irish banks have lent heavily to other peripheral Euro-zone nations and are thus heavily exposed should there be a default there..oooouuuucccchhhh (again)

Iwannahurl

T runner wrote: »

Another piece of bad news form the FT today. It appears Irish banks have lent heavily to other peripheral Euro-zone nations and are thus heavily exposed should there be a default there..oooouuuucccchhhh (again)

Can you provide a link? Thanks in advance.

Scofflaw

Iwannahurl wrote: »

Can you provide a link? Thanks in advance.

Here we go - from the FT:

Ireland’s banks are among the most exposed to some of the other weaker eurozone nations, in spite of the industry’s tiny network of foreign operations.

According to analysis of the most recent Bank for International Settlements data on overseas loan exposures, Irish banks together are the fifth-largest lender in the world to Italy, with total outstanding credit of $40.9bn.

Irish banks are also among the leading lenders to Portugal, Greece and Spain – ranking fifth, fifth and seventh – even though Ireland’s economy is only the 15th biggest in the European Union.

The data highlight concerns that the interrelationship between the troubled nations of Europe is more deep-seated than many have realised, suggesting that the risk of contagion is high. The figures cover the banks’ exposure to other countries through lending to banks, companies and governments.

The interconnectedness of Ireland’s banking system to other peripheral economies is exacerbated by some foreign banks’ use of Dublin’s financial centre as a low-tax conduit for business.

Depfa, the German bank that is now part of nationalised Hypo Real Estate, accounts for a large chunk of the credit flows between Germany, Ireland, Italy and Spain.

Mm. Hang on a moment...what, exactly, is an "Irish bank" in this context? Do they mean AIB, BOI, etc?

The inclusion of Depfa suggests not - since Depfa is, or was, an IFSC subsidiary of a German bank, and the article nods in the direction of what they're most likely talking about when they say that the "interconnectedness of Ireland’s banking system to other peripheral economies is exacerbated by some foreign banks’ use of Dublin’s financial centre as a low-tax conduit for business" - which is to say that their figures include those institutions.

We know from elsewhere that German bank subsidiaries have at least €100bn on loan from Ireland, and the biggest headline figure they could find there was €40bn on loan from banks in Ireland to Italy, whereas they simply cite the ranking in the other cases, which suggests those figures aren't dramatic enough to include.

Not a very compelling article, with a little scrutiny. Still, it conjures up the entertaining prospect of finding a Portugese equivalent of boards.ie full of people moaning that the evil Irish are forcing them to take a loan they don't need in order to bail out Irish banks, thereby forcing generations of Portugese into debt servitude...

amused,
Scofflaw

Iwannahurl

Scofflaw wrote: »

Mm. Hang on a moment...what, exactly, is an "Irish bank" in this context? Do they mean AIB, BOI, etc?

The inclusion of Depfa suggests not - since Depfa is, or was, an IFSC subsidiary of a German bank

amused,
Scofflaw

Yes, from the little I've read it seems there's a tendency abroad to use the loose term "Irish banks" for all such financial institutions based in Ireland, eg in the IFSC. Hence the IMF's reference to Irish Banks in this interesting IMF paper from 2007: External links and contagion risk in Irish banks.

Confused,
Iwannahurl

PS Was Depfa in the securitisation business, which seems to have been a big part of the overall problem?

Scofflaw

Iwannahurl wrote: »

Yes, from the little I've read it seems there's a tendency abroad to use the loose term "Irish banks" for all such financial institutions based in Ireland, eg in the IFSC. Hence the IMF's reference to Irish Banks in this interesting IMF paper from 2007: External links and contagion risk in Irish banks.

Confused,
Iwannahurl

Sure - on the other hand, there's a tendency here, for the moment at least, to assume that we're talking about the rather-fragile state-owned Irish banks. If German subsidiaries in the IFSC are exposed to Portugese debt, there's a definite so-what element.

Iwannahurl wrote: »

PS Was Depfa in the securitisation business, which seems to have been a big part of the overall problem?

Yes - underwriting municipal bonds in the US.

cordially,
Scofflaw

Iwannahurl

What a tangled web we weave...

krd

Scofflaw wrote: »

Sure - on the other hand, there's a tendency here, for the moment at least, to assume that we're talking about the rather-fragile state-owned Irish banks. If German subsidiaries in the IFSC are exposed to Portugese debt, there's a definite so-what element.

I have a Portuguese friend who works for a bank - I'm not sure of the owner of the bank - but it's based in Dublin and they deal solely with the Portuguese market.

Anyway, he told me their loan book is toxic and most of it was in default. But somehow they'd managed to get their hands on US bailout money and were making payments on their delinquent loans as if the loans were still performing. I wouldn't be surprised if they've been using capital injections, to write bogus loans to themselves to keep the fiction going.

A reason foreign banks are operating in Ireland is there is virtually no regulation here. And I don't think it's a case of a few bad apples - the entire barrel may be rotten. English banks can sell products to the UK and escape FSA oversight. There is also the case of those German subsidiaries that were operating in Ireland that have cost the German taxpayer a few billion. I can't remember the name of the bank - but there was a whistle blower who notified the Irish regulator that the bank was breaking the rules and trading dangerously, and the Irish regulator didn't want to know about it.

There isn't really a so what to any of this. A single rotten subsidiary can take down a lot of banking. All the banks are exposed to each other.


And my Portuguese friend. The former director of his bank ran off - they think he stole millions. To maintain business confidence, banks often cover up fraud. I've seen it with my own eyes. He's apparently living in London now. Bought himself a mansion.

Scofflaw

krd wrote: »

I have a Portuguese friend who works for a bank - I'm not sure of the owner of the bank - but it's based in Dublin and they deal solely with the Portuguese market.

Anyway, he told me their loan book is toxic and most of it was in default. But somehow they'd managed to get their hands on US bailout money and were making payments on their delinquent loans as if the loans were still performing. I wouldn't be surprised if they've been using capital injections, to write bogus loans to themselves to keep the fiction going.

I was slightly surprised to learn that AIB received $27bn of Federal funding in the US bailout.

krd wrote: »

A reason foreign banks are operating in Ireland is there is virtually no regulation here. And I don't think it's a case of a few bad apples - the entire barrel may be rotten. English banks can sell products to the UK and escape FSA oversight. There is also the case of those German subsidiaries that were operating in Ireland that have cost the German taxpayer a few billion. I can't remember the name of the bank - but there was a whistle blower who notified the Irish regulator that the bank was breaking the rules and trading dangerously, and the Irish regulator didn't want to know about it.

Depfa, I suspect, owned by Hypo Real Estate, which is now owned by the German taxpayer.

krd wrote: »

There isn't really a so what to any of this. A single rotten subsidiary can take down a lot of banking. All the banks are exposed to each other.

A combination of cartel and carousel - a "caroutel", perhaps? You're quite right that it's not really a "so what" element, though - that's only in respect of Irish state bank funding as compared to the problem in the state owned banks.

krd wrote: »

And my Portuguese friend. The former director of his bank ran off - they think he stole millions. To maintain business confidence, banks often cover up fraud. I've seen it with my own eyes. He's apparently living in London now. Bought himself a mansion.

Sure - they cover up fraud for the same reason they cover up any other financial irregularity if they can. A financially irregular bank is an untrustworthy bank, and an untrustworthy bank is an uncreditworthy bank.

cordially,
Scofflaw

Chuchoter

How bad will this be by next year or 2012? Everything seems to be falling apart

krd

Scofflaw wrote: »

I was slightly surprised to learn that AIB received $27bn of Federal funding in the US bailout.

I think it's more than a little crazy. There's no way the Fed could have proper oversight on 21,000 transactions. Supposedly they've got a lot of that money back. I don't understand it. Not that I don't have a clue what happened. There was ,and seems to still be, a lot of deliberate confusion. My friend's bank was getting some of that money, not because of some interbank liquidity problem but because Portuguese businesses were not making repayments on credit deals for photo copiers that they were providing senior debt for. They were and are more likely than not - faking the health of their loan book. (And I'd have a suspicion those loans were covered by loan insurance - that doesn't pay out in the event of default - a financial innovation that hasn't been mentioned in the public domain yet, as far as I know) If you can eliminate risk through an insurance contract then you don't need to back the insurance contract because you have eliminated the risk.
I have seen one of these crazy set-ups. I have a feeling they could be widespread. It's not some new fangled derivative - it's more or less insurance cover on a loan that through one way or another, will just not pay out in the event of a default.

Depfa, I suspect, owned by Hypo Real Estate, which is now owned by the German taxpayer.

Yeah, it was Depfa. Cost the German taxpayer something like 8bn - which I think the "operation" has been wound down - so they'll never see that money again.

A combination of cartel and carousel - a "caroutel", perhaps? You're quite right that it's not really a "so what" element, though - that's only in respect of Irish state bank funding as compared to the problem in the state owned banks.

I'm not sure - I'm not sure what may happen. If Depfa happened in isolation of everything else that went on, the Germans may have turned on us and expected us to pay for it. Our financial regulator is meant to have oversight over foreign subsidiaries working here.

The Germans are already punishing us for serious lack of oversight - in what are now our state owned banks. Maybe the IFSC is a powder keg we're sitting on.

Sure - they cover up fraud for the same reason they cover up any other financial irregularity if they can. A financially irregular bank is an untrustworthy bank, and an untrustworthy bank is an uncreditworthy bank.

That's a very post modern approach. I think maybe it's fine for a teller who's been caught with their hands in the till but for irregularities involving tens of millions or more it might not be such a great way to do business. It's what you might call a moral hazard.

I've seen stuff where people should have gone to jail, and where senior managers should have at least been fired, completely covered up.

What I've witnessed, I have strong feeling wasn't an isolated event and that there have been many more instances of major fraud that have been covered up. Not to protect the banks but to protect senior executives - who really are not up to their jobs.

Julian Assange is threatening to release documents of a major US bank. I think if the same happens across the board we'll see more than just red faces.

I don't have anything in my possession now - but I've seen shocking stuff. And from rumours I've heard there's plenty more out there. It's like after Enron. The auditing firms instead of waking up and coping on, saw that way of doing business as a great way to make profits.

I can't see this stuff staying secret for long. And maybe there's nothing that can be done to stop a massive banking collapse. It might even not be so bad - as what we're faced with now.


There's also this weird thing in the corporate world. If you've been associated with some major business irregularity, you don't become a pariah. It's like you've proved you have hair on your chest.

krd

crayolastereo wrote: »

How bad will this be by next year or 2012? Everything seems to be falling apart

A plague of locust.

It all depends on lots of things. At the minute no one really knows. No one can get their figures straight. No one knows who's bluffing.

Things may be much clearer by the end of next year.

But it's not like they can repossess the country and kick us into the Atlantic - or maybe they can.

It depends on a lot of things - some people will come through this unscathed. Some people will be seriously scathed.

JabbaTheHut

It depends on a lot of things - some people will come through this unscathed. Some people will be seriously scathed.

Will those that come through this unscathed be the very ones that got us into this mess in the first place?

krd

JabbaTheHut wrote: »

Will those that come through this unscathed be the very ones that got us into this mess in the first place?

You are psychic.

From today's Irish Independent.

http://www.independent.ie/business/irish/everybody-to-blame-for-crisis-says-exregulator-2447919.html

Mr Patterson -- who led the regulator at a time when banks such as Anglo Irish and Allied Irish Banks were recklessly lending billions to builders -- made no reference to the role the failure of regulation had in the collapse of the economy.

He instead suggested that people who had bought houses or shares during that period were somehow responsible for what has happened.

"We were all responsible," he said several times in a speech

Everyone is apparently to blame.

Mr Patterson, who retired as chairman of the Financial Regulator back in 2008 when Patrick Neary was still chief executive, used a Christmas speech to Kilkenny Chamber of Commerce yesterday to criticise his former employer, the 'Irish Times', and several other news organisations for allegedly stoking gloom across the country.

He reserved particular criticism for UCD academic Morgan Kelly, who correctly predicted the collapse in house prices and, more recently, predicted that the number of people defaulting on mortgage payments will jump.

Patterson seems all mixed up in his mind. Morgan Kelly was not the banking regulator. Patterson was.


The current chairman of Vodafone Ireland added that he intends in future to avoid negativity, and no longer reads Morgan Kelly, no longer watches Vincent Browne, reads Shane Ross or listens to Joe Duffy.

Patterson you could say is getting away unscathed. He won't read Morgan Kelly (who only very rarely has anything published, but apparently two or three articles in handful of years was enough to pull the roof in) , or any other "negativity". You see, Joe Duffy and Vincent Browne caused the crisis and now they're trying to back track like it wasn't their fault.

Patterson is going to lead a "positive" life - in his well paid sinecure for Vodaphone. Every thing is OK - It was all our fault - no one is to blame.

ronanlyons

On OP's question, I've done up a blog post trying to set out on one page how Ireland got into a hole, how deep the hole is, and how to get out. It's meant to help sift through the waffle on economic policy and give people some ammunition for when politicians come knocking at your door with simplistic solutions in the run-up to the election. You can read it here:
Ireland's economic crisis: What sort of hole are we in and how do we get out?

In that regard, yesterday's Budget was, for all the pre-recorded bluster and rage, actually for the most part an important step in the right direction. (Mod, hopefully the self-linking in this case is OK!)

genekelly

All people talk about these days is how we're doomed and how hard things are going to get. The Irish have always been a nation of fighters who have built so many other counties so why are we lying down ... all up off your lazy arses and start doin' something about it..

KIERAN1

I've studied business studies at a certain college, but someone without having this educational background, should be able to understand how bad the situation in Ireland is, if they've any common sense! I personally having been saying the Banks were corrupt to my friends and close colleagues for years, because I understand the nature of what was happening inside the walls of many of these banking institutions. Why I am even writing this post, is that I am so tired and sick to death of this government as it now stands. Even now the whole cabinet is in denial, media personalties should' be holding or so-called elected officials to account more when doing interviews, but no there still being allowed to peddle the same old raffle, they'd spewed before previously, remember, government and bankers and we the citizen are to blame too for having brought this country to a position were had to beg for money 'honestly truly' to keep us afloat and keep the country running into the future. I know it hard to accept for some of us, but that is what basically happened!

Capitalism has failed the working men of Ireland and probably other citizens in other places in the coming future, and it amazes me governments in countries that suffered so badly after the crash of Lehman brothers and failure of the banking system globally would not sit back and ask themselves, is this system good for the old and ordinary working people of country? To understand why we are were we are, you have to understand the human species since the dawn of culture. The fact is we are divided society, it not that obvious unless your willing to go there in your thinking!

Scattered around the world we have a number of people 1per cent of the global population who control the most wealth, the other 99 per cent fight for the rest of the wealth, but how much wealth does one person need! Honestly what can of human being requires a billion to live or even a million?

Our failure can be traced to the United States, lot of people bought into lifestyle they saw in movies were is showed nice American families in nice fancy homes with a nice garden and nice car outside and nice gadgets inside the home. That is make believe people. What people in this country need to get into their heads, while it may seem to you thinking it. Finally I have made it I own my own home! The fact is however for large proportion of people who took out mortgages in the last ten years or more "You DON'T" own your home, the bank is the owner of that home. Until you pay that last installment on your mortgage your sitting in a rented house! People don't want to think like that, it more comfortably for them to hold onto their wishful thinking, but that is were troubles arise when you fail to listen to your inner thoughts about the situation you are in. Basically it boils down to that everything we do everyday is either about making money or spending it, but this is damaging for modern society long term which now we do see.

I could explain in more depth the problems, short of time hinders me here. But how bad will it get. It will only get better. If the system changes. And that is not going to happen since there is no willingness to even change the mindset or the policies as before. Why would Bankers change a system that rewards than punishes ill practices. Are we that stupid that we can't see that this is basically a white-collar robbery from the inside. They are gaining twice. Bankers around Europe, and elsewhere are passing off money as loans, and as bail-outs to governments, but in effect there only loaning to themselves and taking no hit on interest. We the ordinary-folk are paying the interest. There slapping us in the face twice with both hands. Just because there not holding us up with guns does not make any less a crime, but this guys are clever, there so embedded with everything. It hard to find prove, but the evidence is in action.

I personally believe very likely the Euro and Dollar will collapse at different stages in the next two years. You can't just pump money into a failed banking system, and expect it all to turn out well in the end. This money is money that is owned and if only been pocketed by bankers which by all means seems to be the case, what do people honestly expect a nice rose bowl of flowers at the end. Money backed by "NOTHING" is just paper at the end of the day. Eventually the markets will come calling again, and there be nothing in the treasury to hand-over next time round! It pretty much established governance is not about common sense, but who your friends are and who are your supporters are, your supporters interest will always come first in any Capitalist system, to the detriment of the population you claim your looking after been elected to government! Sorry if there is grammar problems spelling problems have to rush soon can't do some due-diligence.

bardcel

Sanjuro wrote: »

... can somebody please explain to me, or point me in the right direction, an explanation as to what's happening, what's the likely next move, and how screwed we all are with the current political environment.

I'm certainly no economist. I'm just a guy with a lower-end of the scale job. I have a mortgage I can manage, and a job that's as safe as any job can be at the moment. Private sector. But I am actually a bit concerned as to what's going on at the moment. It seems that all the talk that's going on, be it on the news or the political programs, or, god forbid, the pub is all doomsday frenzied talk. I just want to understand the situation a bit better.

I just need a black and white explanation without all the technical jargon that is just confusing me. I know we're in trouble, and it's something we're going to be dealing with for a long time. But I'm hazy on why we're here and what are the likely out comes of the upcoming budget, election and IMF intervention. I'd greatly appreciate a little help so I can get my head around it. I'm sure there are other people as confused as me.

Thanks in advance, and mods, if I'm in the wrong forum, please redirect.

[MOD]This thread has been stickied - feel free to ask questions & respond to them. Do not post clever one-liners, rants, or other rubbish, because it will earn you an instant ban.[/MOD]

I can tell you in my experience how bad it is without the technical jargon I had a job that's as safe as any job can be at the moment until this afternoon after six years on a low wage I was informed the company is no longer renewing my contract. I was only reading today about a protest march from Kilkenny to Dublin? We Irish really need to step outside ourselves and take a look at what is going on here. I lived in Africa years ago and learned about the "winds of change" sweeping that continent and how 99% of countries were taken over by initial governments that were all too corrupt and some still are...I actually cried for a minute in front of my boss I couldn't believe it.

I'm not ashamed to share my feelings and I really believe we as a nation need to take a very serious grip on our future and ensure we don't slip back into being mediocre ever again. The worst thing i have heard out of any politicians mouth sideways so far is that we somehow "deserved" this i.e. we did this to ourselves, etc. I never got the house, mortgage or new car but my lifestyle was improving and heading in a new healthier direction. I don't envy those who tried or scorn them I believe we were all looking at a better future for ourselves where we could hold our heads high finally after so many decades of independence. Anyone remember that feeling?

We had Irish programs on TV written by Irish and acted by Irish going around the world. We had Irish actors coming out of the woodwork and acting alongide famous Hollywood actors. We even had an Irish "James Bond" for kerist's sakes who would have thought of that one I certainly didn't? I hate poverty myself butI never believed in stepping over everyone else to get to the top of the heap and having my nose rubbed in it by irresponsible politicians really irks me...by their fruits you will know them!!!

Regardz

jimmyendless

FF, FG, and Labour are so happy for us to accept the debt of the banks and thats it, tough s**t. Unbelievable.

I know its old news but I still can't get over it. Banks that were making a killing for years, huge profits and I presume big dividends being sent out and then when it hits the fan, no saving, no plan B. Grand sure, thats capitalism, you win some, you lose some, we had a good run but we messed it up, we're bankrupt.

But no, some how Joe soap is getting the bill. Imagine someone bets his house on a horse and its turns out its donkey and DNF, well guess what?, we're taking your house too. WTF

Worztron

jimmyendless wrote: »

FF, FG, and Labour are so happy for us to accept the debt of the banks and thats it, tough s**t. Unbelievable.

I know its old news but I still can't get over it. Banks that were making a killing for years, huge profits and I presume big dividends being sent out and then when it hits the fan, no saving, no plan B. Grand sure, thats capitalism, you win some, you lose some, we had a good run but we messed it up, we're bankrupt.

But no, some how Joe soap is getting the bill. Imagine someone bets his house on a horse and its turns out its donkey and DNF, well guess what?, we're taking your house too. WTF

Basically capitalism is futile. It gurantees that the wealth of a country will never be spread equally.

JohnMc1

Worztron wrote: »

Basically capitalism is futile. It gurantees that the wealth of a country will never be spread equally.

You guys are delusional if you think we would be better off under a Socialist Communist or any other -ism system you can think off. Do you think the elites were waiting for hours on the bread lines with the lower classes under Communist Russia? You're naive to think so.

There is going to be corruption under any system as long as politicians are more interested in lining their own pockets.

hawk222

Sanjuro wrote: »

... can somebody please explain to me, or point me in the right direction, an explanation as to what's happening, what's the likely next move, and how screwed we all are with the current political environment.

I'm certainly no economist. I'm just a guy with a lower-end of the scale job. I have a mortgage I can manage, and a job that's as safe as any job can be at the moment. Private sector. But I am actually a bit concerned as to what's going on at the moment. It seems that all the talk that's going on, be it on the news or the political programs, or, god forbid, the pub is all doomsday frenzied talk. I just want to understand the situation a bit better.

I just need a black and white explanation without all the technical jargon that is just confusing me. I know we're in trouble, and it's something we're going to be dealing with for a long time. But I'm hazy on why we're here and what are the likely out comes of the upcoming budget, election and IMF intervention. I'd greatly appreciate a little help so I can get my head around it. I'm sure there are other people as confused as me.

Thanks in advance, and mods, if I'm in the wrong forum, please redirect.

[MOD]This thread has been stickied - feel free to ask questions & respond to them. Do not post clever one-liners, rants, or other rubbish, because it will earn you an instant ban.[/MOD]

i am findin it cofusin to but i read [ Iceland shows how Ierland did wrong things on politico.ie now lot clearer hope this helps

RichardAnd

Worztron wrote: »

Basically capitalism is futile. It gurantees that the wealth of a country will never be spread equally.

I would ask the question of why wealth should be spread equally? Does the man who built a buisness from nothing and made himself a fortune not deserve his wealth? Should he be forced to share it with someone who never lifts a finger? I don't think so and I don't think you really do either.

Capitalism is the most natural way for a state to run. If you're wise, you go far but if you mess up, you fail. What we currently have is a form of bastardised socialism where governments continue to tinker with the economy which distorts and befuddles what should be a natural entity.

And also, don't mind what ardent socialists tell you, the bank bailout is not a capitalist act.

jammyhog

RichardAnd wrote: »

I would ask the question of why wealth should be spread equally? Does the man who built a buisness from nothing and made himself a fortune not deserve his wealth? Should he be forced to share it with someone who never lifts a finger? I don't think so and I don't think you really do either.

Capitalism is the most natural way for a state to run. If you're wise, you go far but if you mess up, you fail. What we currently have is a form of bastardised socialism where governments continue to tinker with the economy which distorts and befuddles what should be a natural entity.

And also, don't mind what ardent socialists tell you, the bank bailout is not a capitalist act.

your right it was a socialist act, it's a shame the same ideology has not been applied to the masses in negative equity or in default but hey the markets will sort it all out.....let them eat cake!

clouds

RichardAnd wrote: »

I would ask the question of why wealth should be spread equally? Does the man who built a buisness from nothing and made himself a fortune not deserve his wealth? Should he be forced to share it with someone who never lifts a finger? I don't think so and I don't think you really do either.

Capitalism is the most natural way for a state to run. If you're wise, you go far but if you mess up, you fail. What we currently have is a form of bastardised socialism where governments continue to tinker with the economy which distorts and befuddles what should be a natural entity.

And also, don't mind what ardent socialists tell you, the bank bailout is not a capitalist act.

I think you are being a bit naive to think that wealth is split between a) those who build businesses from nothing and lads who never get out of the bed. The vast majority of us work but we can't all be businessmen, society needs a wide range of skills. So while wealth creators are fundamental they shouldn't and can't be the only ones rewarded in society. So that's an argument for redistribution right there. It's not just between the wise and those who messed up. Civilization has moved on from starving hordes in the street, we don't allow taht anymore, aggravating as it is for chancers to be all take take take.

I don't know how you can say that it was governments tinkering with the market that caused all this -it was a failure of regulation, not regulation itself that brought us to where we are.

crx===

Capitalism,Socialism,Communism ..... in today's world what's the difference ?? Look at China , the once pinnacle idealist base on Soviet influence and now perfect capitalist buying up half the world reserves.
At the end of the day the lesson learned is that it amounts to combination of power and greed... nothing more. It is a primitive and basic sub-script of human behavior and as history has shown us will be repeated over and over until we have a renaissance of reasoning or we evolve enough to see our mistakes. God pray we have time.

crx===

clouds wrote: »

I think you are being a bit naive to think that wealth is split between a) those who build businesses from nothing and lads who never get out of the bed. The vast majority of us work but we can't all be businessmen, society needs a wide range of skills. So while wealth creators are fundamental they shouldn't and can't be the only ones rewarded in society. So that's an argument for redistribution right there. It's not just between the wise and those who messed up. Civilization has moved on from starving hordes in the street, we don't allow taht anymore, aggravating as it is for chancers to be all take take take.

I don't know how you can say that it was governments tinkering with the market that caused all this -it was a failure of regulation, not regulation itself that brought us to where we are.

I agree 100% , if those who control the wealth increase the cost of living for those who work by buying up the resources then as I have said it is not about wealth but only about power and greed.
Take for instance a billionaire who invests his fortunes in corn , given last years poor result in Russia and corn prices set to rise 93% he stands to control the market making the honest worker pay for his tinkering in the market which effects the most basic needs of us all. That is the problem all round us today .. capitalism reaching its conclusion.

Gain from hard work and perseverance a noble and past thing.

This is certainly not wisdom ... if you mess up then you become the victim....... as a reply RichardAnd : A very narrow and skewed vision of the world you live in I'm afraid.

mm_surf

How bad is it right now?

The money spent on the banks & NAMA - did we have the cash lying around somewhere or was it borrowed?
I'm assuming it's spent, gone, not to be seen again.

I'm also assuming its been borrowed. And someone will want it paid back!

If that's the case, how quickly is it going to be paid back? 'Cos its quite a few bob we owe, isn't it?

Money spent so far is of the order of €100 billion, give or take? (not including EU/IMF stuff yet to be drawn down, not including borrowing for the budget, the day to day stuff)

Are we to pay this back over the course of the "austerity period", i.e 5 or so years? Or is the plan to put it on the "never never" and hope to have it paid back over the next 30 or so years (fingers crossed that it'll be paid back before the next recession hits?)

Because this is a lot of money. €100 billion in a land of 4 million people is €25k each. €5k each over the next 5 years, or €1K each over the next 25.

Before interest?

Is it really that bad?

I'm assuming that the budget for running the country will have to balance out, one way or the other, as we can't borrow any more to do that. So the figures above would be to pay off the banking/property disaster.

Are my figures way off, or are we that screwed?

srsly78

Yes, not all of those 4 million people work.

mm_surf

srsly78 wrote: »

Yes, not all of those 4 million people work.

I didn't really want to use the nasty figures of who'll actually be paying for it.

Of those 4 million, 2 million are employed.

Of those 2 million, maybe half are net contributors? (i.e. pay more in tax than they receive through other breaks)

So if my figures are used for just the 1 million who'll actually be paying off that captial:

€20k a year over the 5 year period?
€4k a year over a 25 year period?

Kinda makes a joke of the various parties' claims that they are going to put up tax by less tham €1500 a year?

Or am I wrong? Is there any other way out?