It's really the German banks that are getting this bailout, why aren't they paying?

deadduck

pwd wrote: »

How is Ireland more at fault than Germany, for bad loans from German banks to Irish ones?

I could be wrong here, but didn't some of said German banks set up shop in the IFSC for the very reason that is was known our banking regulation was minimal, and they'd be able to lend whatever they wanted to whoever they wanted because they were no longer subject to German regulation (at least not their Irish divisions)

Scofflaw

gizmo555 wrote: »

And the European banks didn't have to keep lending to the Irish banks - they were equally irresponsible. A better analogy would be the German and other European banks in the role of a barman who keeps serving pints to a customer who's already blind drunk.

Actually, a slightly more accurate analogy would be that Irish banks were in the position of the barman, with the foreign banks in the position of the bar's drink suppliers - except that not only were the customers drunk, but the barman was handing over drinks on credit. Our government was the purchasing agent who assured the drink suppliers that the bar's customers would be able to pay for plenty more drink and that their fundamentals were sound, because he made a commission on every order. So the drink suppliers kept sending in more drink, and the barman paid them in IOUs from his customers. The purchasing agent, who was also an alcoholic, spent most of his commission money in the bar, which meant that the drink suppliers got an occasional amount of cash rather than IOUs, even if it was largely their own cash.

Foreign banks (French, German, UK and US particularly) lent to Irish banks because Irish banks were good at lending out the money. In theory, the Irish banks were engaged in prudential lending, rather than pushing more drinks on blind drunk alcoholics in exchange for IOUs, which is where our bank regulation failures come in.

cordially,
Scofflaw

nesf

deadduck wrote: »

I could be wrong here, but didn't some of said German banks set up shop in the IFSC for the very reason that is was known our banking regulation was minimal, and they'd be able to lend whatever they wanted to whoever they wanted because they were no longer subject to German regulation (at least not their Irish divisions)

Regulation didn't play a huge rule for the IFSC I think, works in different markets and subject to regulation there. More Ireland's cushy tax regime that attracted them.

gizmo555

OK, well let's skip the analogies and get back to the point, which in my view is that professional bankers in Germany and elsewhere who are paid to understand the risks they are taking, knowingly took on a risk in lending to the Irish banks. The risk may have been slight, in their assessment, but it still existed. Now that the risk they knowingly took has gone against them, why should the state pick up the tab?

Even more importantly, how can the state pick up the tab?

We will reach the "can't pay, won't pay" point, of that there is no doubt in my mind.

nesf

gizmo555 wrote: »

OK, well let's skip the analogies and get back to the point, which in my view is that professional bankers in Germany and elsewhere who are paid to understand the risks they are taking, knowingly took on a risk in lending to the Irish banks.

Yeah, they assumed the Regulator was doing his job. :pac:

gizmo555

nesf wrote: »

Yeah, they assumed the Regulator was doing his job. :pac:

I would suggest if you are lending in excess of €110bn on behalf of your employers and shareholders, it behoves you to due some due diligence of your own, instead of outsourcing it.

nesf

gizmo555 wrote: »

I would suggest if you are lending in excess of €110bn on behalf of your employers and shareholders, it behoves you to due some due diligence of your own, instead of outsourcing it.

They can't. Foreign banks are almost completely reliant on the Regulator of the country of the bank they are lending to. Which makes cross border lending a bit dicey but very profitable. It's practically impossible for a German bank to know the quality of the loans being given out by an Irish bank.

gizmo555

nesf wrote: »

Which makes cross border lending a bit dicey but very profitable.

Precisely my point.

nesf wrote: »

It's practically impossible for a German bank to know the quality of the loans being given out by an Irish bank.

They may not have been willing or able to examine every individual loan, but it was perfectly possible for them to see the funds, in aggregate, were going mainly to fund an unsustainable property bubble which was bound to burst painfully at some point. This is not hindsight in any way, many people at the time were warning that this was what was happening.

Once again, these are not laymen - they are professional bankers with access to the best economic and financial advice money can buy. They do not have the excuse of ignorance.

norrie rugger

nesf wrote: »

It's practically impossible for a German bank to know the quality of the loans being given out by an Irish bank.

That's the risk they take though.

ardmacha

They can't. Foreign banks are almost completely reliant on the Regulator of the country of the bank they are lending to. Which makes cross border lending a bit dicey but very profitable. It's practically impossible for a German bank to know the quality of the loans being given out by an Irish bank.

While this is true up to a point, did the ECB not have some role in setting minimum standards for all banks in the Eurozone? It seems to me that this is at the core of the present problems in the Eurozone. The common currency area makes it easy for banks in core countries get better returns in the periphery, leading to banks on the periphery sourcing their funds on the interbank market rather than from depositors and increasing lending far beyond normal levels. But the ECB did not place any limits on this on have other counter balancing requirements. The ECB is not fit for purpose.

Lemming

gizmo555 wrote: »

It's often been talked about over the last few weeks, but a picture's worth a thousand words

Has nobody else picked up on this (I've highlighted the relevant bit) from the cited Der Speigel article?

On Monday, Merkel defended her position behind closed doors to the parliamentary group of her conservative Christian Democratic Union (CDU) and its Bavarian sister party, the Christian Social Union (CSU). According to sources who took part in the meeting, she said that aid for Ireland was necessary, but had to be tied to conditions. It was important to atone for the sins of the past, she apparently said.

With the figures being thrown about recently, the level of debt being assumed is staggering beyond words, and the country has already been consigned to debt-servitude for a couple of decades, with an entire generation soon to know nothing but the "good old" 1980s. In short, we're being punished already as a nation for our stupidity - be it the voters who kept putting that f*ckwit BEEEEEEEEEEEEEEEEEEEEEERTIE and his band of corrupt clowns in government repeatedly, or the banker/developer who lost sight of any sense of ... well ... sense. Who are the Germans to decide what "punishment" is suitable, when they set the ECB interest rates to suit themselves and their banks were guilty of trying to cream money by engaged in reckless lending practices?

I have no problem in saying that the country collectively behaved in stupid fashion and that we deserve to face the music. But there's a difference between taking your medicine (however bad it tastes) and offering yourself up for flagilation, which is what the Germans seem to want to make us do, judging by Merkel's apparent words and the general sentiment that seems to be emanating from Germany.

I have two words for every German who wants to act like judge, jury, & executioner here: Versailles. Marshall.

Memnoch

Dr Galen wrote: »

I'm sorry but I have to take issue with this statement.

What Bertie, Cowen and their posse allowed was not true capitalism. They practically created their own system tbh, one of fcuked up monetary/financial policy, cronyism and nudge nudge wink wink nonsense. Their perversion of capitalism fanned the flames of the boom, did nothing to quell what was obviously an overheated situation.

I'm not near Donegalfella on the "let the markets rule" scale but I'd suggest that if Bertie and the Good Time Showband had kept their noses out of things and concentrated on providing proper regulation of banking activities, and ya know, like, been a proper government, allowing the capitialism that you appear to dislike run things as they should we'd be nowhere near this messy place we find ourselves in now.

Actually you're mistaken. Pure capitalism is ultimately self defeating precisely for this reason. The goal of capitalism is a single minded pursuit of profit. If this can be better achieved by subverting the principles of capitalism itself by corruption and the dismantling of regulatory mechanisms then that is what will and HAS happened.

When corporations / private interests become this powerful and wealthy they discover that they can make more money by subverting the principles of capitalism rather than adhering to them, but in reality they are staying true to the underlying spirit of capitalism which is to make more money for themselves by any and every means necessary.

nesf

ardmacha wrote: »

While this is true up to a point, did the ECB not have some role in setting minimum standards for all banks in the Eurozone? It seems to me that this is at the core of the present problems in the Eurozone. The common currency area makes it easy for banks in core countries get better returns in the periphery, leading to banks on the periphery sourcing their funds on the interbank market rather than from depositors and increasing lending far beyond normal levels. But the ECB did not place any limits on this on have other counter balancing requirements. The ECB is not fit for purpose.

The minimum standards for banks comes from the BASEL agreements between the world's central banks. Additional controls are applied by the central banks of individual countries not the ECB. New regulations were/are being drawn up for the next set of BASEL requirements.

The main problem with your point is that the EU has as a basic tenet the free movement of capital between member states, so the ECB cannot require banks to stop lending to the periphery states.

gizmo555

nesf wrote: »

the ECB cannot require banks to stop lending to the periphery states.

We can, however, require them to take responsibility for the risks they voluntarily assumed.

Dublin_Gunner

Let the private banks go into administration.

Control where their profits go (paying off their debts) and remove the high paid execs from the boards.

Don't bail them out, don't buy them out, don't get ridiculous loans from from other governments/banks/ECB/IMF to bail us/the banks out when we cannot possibly pay it back.

The banks could still operate (albeit at a reduced capacity) until such a time as they're deemed to be in a position to take control of their own affairs again - or sold onto other banks at a vastly reduced costs, who can then take over their dealings.

The public being asked to pay for the cost of massive private debt is sickening.

Laois_Man

Sticky_Fingers wrote: »

If you don't protest it's your own fault for letting governments get away with whatever they want.

maninasia wrote: »

the electorate sleptwalked through this thing, no protests until it's shoved in their faces that they have pay for the whole thing!

How nieve!!
I've taken part in TWO protests since the collapse of Lehman Brothers in September 2008 and the shambolic guarantees that were put in place by the Irish Government a couple of weeks later. Would it have changed anything in the slightest if another 250,000 people, or a million, or 2 million people had showed up to these protests? Not on your nelly!!!

It's not protests that were required. It was an outright coup performed en masse!

Neddyusa

Scofflaw wrote: »

Actually, a slightly more accurate analogy would be that Irish banks were in the position of the barman, with the foreign banks in the position of the bar's drink suppliers - except that not only were the customers drunk, but the barman was handing over drinks on credit. Our government was the purchasing agent who assured the drink suppliers that the bar's customers would be able to pay for plenty more drink and that their fundamentals were sound, because he made a commission on every order. So the drink suppliers kept sending in more drink, and the barman paid them in IOUs from his customers. The purchasing agent, who was also an alcoholic, spent most of his commission money in the bar, which meant that the drink suppliers got an occasional amount of cash rather than IOUs, even if it was largely their own cash.

Foreign banks (French, German, UK and US particularly) lent to Irish banks because Irish banks were good at lending out the money. In theory, the Irish banks were engaged in prudential lending, rather than pushing more drinks on blind drunk alcoholics in exchange for IOUs, which is where our bank regulation failures come in.

cordially,
Scofflaw

So what do you make of the IMF/ECB proposal to 'cure' the 'blind drunk alcoholics' by putting pressure on them to accept €85,000,000,000 more beer on credit?

Over half of which is going straight into the black hole in the ground where the corpses of the barmen (the banks) are burried?

Is this the best cure for an alcoholic?

Dublin_Gunner

Neddyusa wrote: »

So what do you make of the IMF/ECB proposal to 'cure' the 'blind drunk alcoholics' by putting pressure on them to accept €85,000,000,000 more beer on credit?

Over half of which is going straight into the black hole in the ground where the corpses of the barmen (the banks) are burried?

Is this the best cure for an alcoholic?

Well, to keep the analogy going, it may work in a roundabout way. Get him to drink so much, and pay so much back that he will never go drinking again.

Lemming

Dublin_Gunner wrote: »

Well, to keep the analogy going, it may work in a roundabout way. Get him to drink so much, and pay so much back that he will never go drinking again.

Why? Because his liver exploded and he died? Wow, great analogy.

Dublin_Gunner

Lemming wrote: »

Why? Because his liver exploded and he died? Wow, great analogy.

Well the idea would be that they will never be stupid enough to get themselves into that situation again.

I wasn't actually being serious, just entertaining the idea.

ardmacha

Additional controls are applied by the central banks of individual countries not the ECB. New regulations were/are being drawn up for the next set of BASEL requirements.

The main problem with your point is that the EU has as a basic tenet the free movement of capital between member states, so the ECB cannot require banks to stop lending to the periphery states.

While I am not expert in banking matters, it seems to me that the Euro might involve some coordination of central bank activity in each country, since those central banks no longer have many of the levers that they previously had.

The way forward from this is to learn the lessons and set up plausible financial arrangements that give markets some confidence that such Euro area imbalances are less likely in the future.

swampgas

(Regarding the German banks' responsibility for the risks they took lending to Irish banks)

gizmo555 wrote: »

We can, however, require them to take responsibility for the risks they voluntarily assumed.

And if their assessment of the risk was incorrect because of the false information fed to them by the Irish banks, overseen by an Irish regulator who appears to have been deliberately looking the other way at the behest of an Irish government that seemed to believe the world-view fed to them by their banker/developer cronies ... what level of responsibility should Ireland take?

Which isn't to say that the guys in the German banks shoving money into Anglo might not have been just as greedy or blinkered.

The blame game won't get us very far - but I think the Irish people as a whole have no idea just how corrupt and complicit the government, regulator and IFSC were.

Turnstyle

gizmo555 wrote: »

I would suggest if you are lending in excess of €110bn on behalf of your employers and shareholders, it behoves you to due some due diligence of your own, instead of outsourcing it.

+1, the bondholders that lent billions (IMO recklessly) to Irish banks had publicly available information that gave indications of the banks real health. They still lent them billions at rates of return no where near the risk involved… So in turn I feel they should get burned to some extent… The same way people who got in way over their head in Irelands property boom will suffer their negative equity, suck it up.
Its a bit like NAMA coming out last week and claiming that the big bad banks told us lies on the performance of loans transferred (the same banks that IMO told lies from day one, may be guilty of false accounting and knowingly overcharged people some years back on FX contracts and mortgages..) NAMA, a public body set up to take care of what must be one of the largest property portfolio's in the world at the cost of the taxpayer, nice.
Still, what a great selection of politicians we have to see us through this mess. This is where parochial politics, catholic school of thought and cronyism will get a country and the majority of its people... shafted!

Sticky_Fingers

Laois_Man wrote: »

How nieve!!
I've taken part in TWO protests since the collapse of Lehman Brothers in September 2008 and the shambolic guarantees that were put in place by the Irish Government a couple of weeks later. Would it have changed anything in the slightest if another 250,000 people, or a million, or 2 million people had showed up to these protests? Not on your nelly!!!

It's not protests that were required. It was an outright coup performed en masse!

Tell that to the pensioners who managed to get the government to do a U-turn regarding the medical card. Politicians only care about getting re-elected and they will move heaven and earth in order to ensure they get the votes to do that.

swampgas

Turnstyle wrote: »

+1, the bondholders that lent billions (IMO recklessly) to Irish banks had publicly available information that gave indications of the banks real health. They still lent them billions at rates of return no where near the risk involved… So in turn I feel they should get burned to some extent… The same way people who got in way over their head in Irelands property boom will suffer their negative equity, suck it up.
Its a bit like NAMA coming out last week and claiming that the big bad banks told us lies on the performance of loans transferred (the same banks that IMO told lies from day one, may be guilty of false accounting and knowingly overcharged people some years back on FX contracts and mortgages..) NAMA, a public body set up to take care of what must be one of the largest property portfolio's in the world at the cost of the taxpayer, nice.
Still, what a great selection of politicians we have to see us through this mess. This is where parochial politics, catholic school of thought and cronyism will get a country and the majority of its people... shafted!

I agree 100% that the bondholders should be burned. What bothers me is that people might pin all the blame on external factors such as this and ignore the crucial role in this disaster played by the government & regulator. If the public don't learn just how important the lack of regulation over the IFSC and banks has been, we run a greater risk of repeating similar mistakes in the future.

IMO the current farce should be written into our history books and taught in school.

gizmo555

swampgas wrote: »

And if their assessment of the risk was incorrect because of the false information fed to them by the Irish banks, overseen by an Irish regulator who appears to have been deliberately looking the other way at the behest of an Irish government that seemed to believe the world-view fed to them by their banker/developer cronies ... what level of responsibility should Ireland take?

They could have got all the information they needed just by reading the newspapers or turning on the TV. Anyway, as I said already, when you are lending €110bn, you need to to some serious due diligence of your own.

If, for example, Michael Somers and the NTMA weren't willing to deposit more than €40 million with Anglo Irish, solely on the basis of publicly available information, why were these guys in Frankfurt willing to shovel billions into them?

Somers said the NTMA had “swallowed hard” when putting €40m on deposit with Anglo Irish on a short-term basis, but added that this one of the lowest amounts that the agency would have put on deposit with any bank.

“It was only €40m and we reckoned they were a huge outfit and should be good for €40m,” he added.

Somers also said that although he had a “gut feeling” that something was amiss at Anglo, he had no knowledge other than what the market had and if he had said something about the bank “God knows what would have happened to me”.

shannonpowerlab

gizmo555 wrote: »

It's often been talked about over the last few weeks, but a picture's worth a thousand words . . .

The real recipients of the bailout are the German banks, who lent recklessly to ours. Why aren't they taking any pain? David McWilliams's debt-for-equity swap proposal seems fair to me - let's pay them back in AIB and Bank of Ireland shares.

Well...it was their money wasn't it after all...They made that money...they generously shared it with rest of the europe...Then little governments like this one was just sucking on it like a leech blowing out of all proportions into a fat ugly blob...Why should they give any more?

Laois_Man

Sticky_Fingers wrote: »

Tell that to the pensioners who managed to get the government to do a U-turn regarding the medical card. Politicians only care about getting re-elected and they will move heaven and earth in order to ensure they get the votes to do that.

Now don't be disingenuous! The so-called "U-Turn" that you refer to was when the medical card move was lessened BEFORE any protests took place ("lessened"...not reversed...it was never reversed). It was lessened because of uproar on the FF back-benches as well as the withdrawl of Government support by an Independent TD. Protests still went ahead against these lesser provisions, which still went ahead and still exist today!

Over 70s: Guidelines on income and capital

Between 2001 and 2008, everyone over aged 70 was entitled to a medical card without a means test. After that, a means test was introduced, with effect from January 2009.

Since January 2009 there are gross income limits of €700 per week for a single person and €1,400 per week for a married or cohabiting couple. There will be no standard deductions allowable (for example, for income tax).

a5y

Agreed. There campaigns were funded by enormous donations from property developers. It seems naive to think voting them in would have had a significantly different outcome.

professore

fontanalis wrote: »

In fairness it's up to the people receiving the loans to behave maturely.

Before I start let me say I have no mortgage and was very reasonable throughout the boom.

This is nonsense. I'm sick of hearing it.

The facts are less financially savvy (and many who should have known better) people were conned into these mortgages. That's what regulation is for. The regulation failed.

The banks knew full well that a lot of these people could never pay the loans they were being offered but didn't care as long as they got their commission from making the sale.

Taking this to it's logical conclusion, shops should be allowed to sell any old crap or even dangerous goods as it is up to the buyer to beware. So a shopkeeper knowingly selling a loaded gun to a certified serial killer has no liability.