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It's really the German banks that are getting this bailout, why aren't they paying?
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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.
IMO people will swallow what ever they are told by RTE and the other FF media cheerleaders until such time as it really starts to effect them. We would be in a recession either way at the moment due to external factors but not nearly as bad as the mire we are currently in. I blame the government and lack of regulation solely for this...
Due the attitude of "ah sur, twill be grand.." of the Irish people it will go one of two ways:
1. This depression deepens and it really starts to hit the majority of the population badly in the pocket (IMO this has not happened yet)… People will then see the larger picture and start to seriously demand changes…
2. Things start to pick back up, empty promises of reform by electioneering politicians are not delivered, the gravy starts to flow again, people’s memory’s laps and in 25 years time we are back to square one.
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(Regarding the Irish regulator's role in German banks lending recklessly to Irish banks ...)
Interesting. Point taken.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?
( ... snip ... )0 -
IMO people will swallow what ever they are told by RTE and the other FF media cheerleaders until such time as it really starts to effect them. We would be in a recession either way at the moment due to external factors but not nearly as bad as the mire we are currently in. I blame the government and lack of regulation solely for this...
Due the attitude of "ah sur, twill be grand.." of the Irish people it will go one of two ways:
1. This depression deepens and it really starts to hit the majority of the population badly in the pocket (IMO this has not happened yet)… People will then see the larger picture and start to seriously demand changes…
2. Things start to pick back up, empty promises of reform by electioneering politicians are not delivered, the gravy starts to flow again, people’s memory’s laps and in 25 years time we are back to square one.
I almost - but not quite - hope that things really do get bad, for long enough that reform is demanded and implemented. However even if the general public start to feel real pain, there is a risk that our flawed political system will deter our politicians from implementing any real reforms. There seems to be a notable lack of national government in this country.0 -
Removal of regulation could happen when the system is corrupt beyond saving but wouldn't be a first port of call in a developed country. Our regulatory system was incompetent rather than corrupt etc.
This doesn't make sense for two reasons:- This is like saying you should remove any police force if the police are corrupt, or that serial killers shouldn't be subject to laws.
- Our system is massively corrupt
Eh, not really. Completely something decided on a case by case basis.
Yes - I thought my edit already indicated that.0 -
RTE lunchtime radio news reports today (Nov 25) that Mohammed El-Arian of Pimco and the Financial Times agree that senior bondholders will have to share in the losses.
Pimco are the world's leading experts on bond markets and have assets of US$1.3 trillion under management. It's fair to say that they know what they're talking about.0 -
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Do they mean "will have to" in the sense that this is what is going to happen, or "will have to" in the sense that this is what should happen?RTE lunchtime radio news reports today (Nov 25) that Mohammed El-Arian of Pimco and the Financial Times agree that senior bondholders will have to share in the losses.
Pimco are the world's leading experts on bond markets and have assets of US$1.3 trillion under management. It's fair to say that they know what they're talking about.0 -
We can, however, require them to take responsibility for the risks they voluntarily assumed.
I agree with this, and this: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.
But the problem is that it's not just a case of foreign banks taking the hit. The Germans have already bailed out their banks to the tune of c. €50bn with German taxpayers' money - same for the British, the French, the US. In some cases, those bailouts happened because of Irish debt - Hypo Real Estate was bailed out (and bought) by the German government because of problems with Depfa, its Dublin subsidiary. Our bank regulator was supposed to be regulating Depfa, not the German regulator.
We've been operating for the last x many years as what has been described as a "semi tax haven", with loose regulation and guaranteed opacity plus the use of interesting tax structures. Because we're in the EU, the other countries cannot prevent their banks lending to us, or setting up subsidiaries here - but because at the end of the day we're sovereign nations, and the EU has no power to make our internal workings visible, none of the other EU countries had the right to see how our regulatory regime was working - the most they could do was to ask the government whether everything was OK. Our government, as we know, assured everyone that everything was just peachy.
So the argument that the German (etc) taxpayer should pay to bail out the banks that lent to ours misses out the fundamental fact that the due diligence available to those banks consisted of being lied to by our government - and we, the Irish electorate, are collectively responsible for the actions of the Irish government.
Further, not all foreign exposure to Ireland is in the form of loans to our banks - even the estimate by the Bank of International Settlements, which puts a figure on German exposure to Ireland as €150bn and that of UK banks at slightly more, has more than half of that exposure as loans to the Irish private sector rather than the banks or the government. They're holding loans to Irish companies and Irish mortgages.
Finally, the level of exposure is uncertain:In Germany, Axel A. Weber, president of the Bundesbank, said Monday in Munich that estimates for bank exposure to Ireland were “exaggerated.” Mr. Weber, who is also a member of the European Central Bank’s governing council, said that the statistics reflected Ireland’s status as a financial center: much of what is recorded as claims on Ireland is in fact money funneled through Irish subsidiaries of German banks, and ultimately bound for elsewhere, Mr. Weber said. He said total German exposure was closer to €22 billion.
Source
So the idea that the only real reason we owe money is because of reckless loans made by foreign banks to our banks misses out some rather vital points - that Ireland was deliberately operating in an opaque way, for starters, that we can't burn their banks without burning their taxpayers, who really haven't done anything to deserve it, that if we do burn their banks one of the major sufferers will be the Irish economy, and finally, that setting fire to banks all across Europe probably won't do us any good either.
Bear in mind that the Irish bargaining position consists of the ability to bring the euro down, and with it most of Europe's economies. While that's fun, it's probably not going to be a popular long-term move - any reconstruction is likely to involve rather more sanctions than any bailout. So, while I agree that banks that lent to our banks should take part of the hit, because risk is risk, they're already doing so, they're also socialising their losses onto their taxpayers, and the nest of worms that make up that exposure means that it's highly unlikely that it will be a pain-free exercise either.
cordially,
Scofflaw0 -
Iypo Real Estate was bailed out (and bought) by the German government because of problems with Depfa, its Dublin subsidiary. Our bank regulator was supposed to be regulating Depfa, not the German regulator.
you can just as easily say that problems at Hypo in Germany were responsability of German regulator, if it did not know what it was up to in other countries, it to had failed, in that a bank it regulated failed.
seems to me contagion is just another word for responsability at the moment. EU wants respoansability to stop in Ireland and Irish people carry the can0 -
Bob_Latchford wrote: »you can just as easily say that problems at Hypo in Germany were responsability of German regulator, if it did not know what it was up to in other countries, it to had failed, in that a bank it regulated failed.
Not really - the problem seems to be that a bank subsidiary being run in Ireland could be hidden from scrutiny by the parent banks regulators.
The IFSC seems to have been used to lure dodgy business to Ireland from other EU countries, hide the details of what went on, and take a cut of the profit.
Ireland really has been acting as a financial leech in some ways - we took billions in structural funds, then started operating as a quasi tax haven, undercutting our neighbours with a low corporate tax rate under the pretence of needing some kind of compensation for being a rock in the ocean.
The chickens are coming home to roost.0 -
Not really - the problem seems to be that a bank subsidiary being run in Ireland could be hidden from scrutiny by the parent banks regulators.
Again you could just say if the unregulated debts held by German bank subsiduary caused the regulated parent bank to fail. Then the German regulator failed in forcing the German banks regulated parent from disclosing what it was doing worldwide.
It might have needed German laws changing and EU laws implemented, but its German bank failed and the German/EU regulator failed and has some responsabilty
Its a failure of banks and regulation across the board, the responsabilty & solution should be across the board.
What proportions should they be is another question.0 -
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Not really - the problem seems to be that a bank subsidiary being run in Ireland could be hidden from scrutiny by the parent banks regulators.
The IFSC seems to have been used to lure dodgy business to Ireland from other EU countries, hide the details of what went on, and take a cut of the profit.
Ireland really has been acting as a financial leech in some ways - we took billions in structural funds, then started operating as a quasi tax haven, undercutting our neighbours with a low corporate tax rate under the pretence of needing some kind of compensation for being a rock in the ocean.
The chickens are coming home to roost.
True. Scofflaw brings up a good point though, us thus putting the onus on German taxpayers isn't a great solution either.Mad Men's Don Draper : What you call love was invented by guys like me, to sell nylons.
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Bob_Latchford wrote: »Again you could just say if the unregulated debts held by German bank subsiduary caused the regulated parent bank to fail. Then the German regulator failed in forcing the German banks regulated parent from disclosing what it was doing worldwide.
It might have needed German laws changing and EU laws implemented, but its German bank failed and the German/EU regulator failed and has some responsabilty
Its a failure of banks and regulation across the board, the responsabilty & solution should be across the board.
What proportions should they be is another question.
Agreed. A big criticism of the Euro when it was introduced was that it was a currency union without real political union. Ireland just happened to be one of the weak links that exposed this.
If the Euro is to survive there may need to be central (EU) control of the way the banks are run and regulated - i.e. further political union. I can't see that happening in a hurry though. To be honest I have no idea just how viable the Euro itself is from this point. Perhaps we will have crisis after crisis until it all just falls apart - who knows?0 -
Agreed. A big criticism of the Euro when it was introduced was that it was a currency union without real political union. Ireland just happened to be one of the weak links that exposed this.
If the Euro is to survive there may need to be central (EU) control of the way the banks are run and regulated - i.e. further political union. I can't see that happening in a hurry though. To be honest I have no idea just how viable the Euro itself is from this point. Perhaps we will have crisis after crisis until it all just falls apart - who knows?
Yes agree without each country feeling european and taking the responsabilty of each others debt like the Irish would take on Dublins or Donegals debt. I dont know how it goes forward.0 -
Some interesting points Scofflaw
A distinct lack of regulation in a lot of countries seems to be prevalent, from what I hear Canada have their banks pretty solid.
IMO bondholders should be and will be burned by Ireland, I simply believe we cannot afford the numbers that are being thrown about, especially with the four year plan reliant on growth and the possible crisis facing the euro zone, by how much they get burned is debatable. The majority of people in this country did not go nuts on credit, we all benefited in some respect so we will all have to muck in to sort the problems but why should people be shafted anymore than is absolutely necessary and fair...0 -
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Bob_Latchford wrote: »you can just as easily say that problems at Hypo in Germany were responsability of German regulator, if it did not know what it was up to in other countries, it to had failed, in that a bank it regulated failed.
Actually, you can't say that. There's nothing to stop a bank setting up a subsidiary in another EU country, and that subsidiary is then regulated under the laws of that country, by that country's regulator. They're nothing to do with the German regulator, except insofar as they appear on the German bank's accounts - and all that will appear there is a summary.Bob_Latchford wrote: »seems to me contagion is just another word for responsability at the moment. EU wants respoansability to stop in Ireland and Irish people carry the can
The other member states certainly don't want their taxpayers footing the bill for banks that we regulated, and whose profits we taxed. And other countries are slightly pissed off that having made a boom out of being a semi tax haven, we now need bailing out in case we take their banks - and economies - with us. That's the thing about being a "financial hub" - you need to be more prudent than your customers.
cordially,
Scofflaw0 -
Actually, you can't say that. There's nothing to stop a bank setting up a subsidiary in another EU country, and that subsidiary is then regulated under the laws of that country, by that country's regulator. They're nothing to do with the German regulator, except insofar as they appear on the German bank's accounts - and all that will appear there is a summary.
Its a failure of the regulator to understand that a summary in the accounts can contain a hole so big as to bring down the parent bank.
In my opinion, the laws regulation and scrutiny of that summary in Hypo parent accounts is the responsability of Germany.0 -
Dotsie~tmp wrote: »How about putting it on the private investors, bonholders, funds, shareholders where the bloody thing legally belongs.
As the EU Commissioner suggested today in relation to bondholders.Mad Men's Don Draper : What you call love was invented by guys like me, to sell nylons.
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The other member states certainly don't want their taxpayers footing the bill for banks that we regulated, and whose profits we taxed. And other countries are slightly pissed off that having made a boom out of being a semi tax haven, we now need bailing out in case we take their banks - and economies - with us. That's the thing about being a "financial hub" - you need to be more prudent than your customers.
thats the thing, many people in Ireland who didnt have a boom time partying it up are now expected to pay through tax and poor economy know exactly how the other countries feel. They are paying because they are Irish. (Suppose they could even be a German who moved here last week so maybe Irish resident would be better)
The tensions caused by the euro are also in this and are responsability of the whole of europe0 -
Bob_Latchford wrote: »Its a failure of the regulator to understand that a summary in the accounts can contain a hole so big as to bring down the parent bank.
In my opinion, the laws regulation and scrutiny of that summary in Hypo parent accounts is the responsability of Germany.
While I accept that in a practical sense this is true, the moral/ethical sense in which the Irish regulator and government knowingly allowed this to happen in their jurisdiction cannot be overlooked. And as Scofflaw pointed out, as the electors of the politicians who oversaw the Irish regulator and the IFSC, we are all culpable.
I don't think we can shout "caveat emptor" at the Germans and let ourselves off the hook. The Irish financial system seems to be rotten to the core, has allowed huge damage to occur to Europe, and the Irish people don't seem to be embarrassed in the slightest. Instead all I read is tripe about sticking two fingers up at the very people who provided us with structural funds for decades.0 -
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While I accept that in a practical sense this is true, the moral/ethical sense in which the Irish regulator and government knowingly allowed this to happen in their jurisdiction cannot be overlooked. And as Scofflaw pointed out, as the electors of the politicians who oversaw the Irish regulator and the IFSC, we are all culpable.
I don't think we can shout "caveat emptor" at the Germans and let ourselves off the hook. The Irish financial system seems to be rotten to the core, has allowed huge damage to occur to Europe, and the Irish people don't seem to be embarrassed in the slightest. Instead all I read is tripe about sticking two fingers up at the very people who funded us with structural funds for decades.
How are the Irish voters any more culpable parctically. They vote once every 4 or 5 years and then the government does what it likes. You could have voted against them and protested against them but you still have to pay because your Irish.
All I am saying the europeans have to take there responsability for there failing too and also because they are european. Irish are having their share I am sure of that.0 -
Bob_Latchford wrote: »How are the Irish voters any more culpable parctically. They vote once every 4 or 5 years and then the government does what it likes. You could have voted against them and protested against them but you still have to pay because your Irish.
All I am saying the europeans have to take there responsability for there failing too and also because they are european. Irish are having their share I am sure of that.
(rant)
I don't like it any more than you do. In fact, I am incandescent with rage at the way this fiasco has unfolded. The Irish voter was taken for a ride - now we have to take responsibility for the fact that the incompetents we elected have run up a huge debt that we all have to pay. And then we have to prosecute and lock up the criminals who sold us all out.
(end rant)0 -
Bob_Latchford wrote: »Its a failure of the regulator to understand that a summary in the accounts can contain a hole so big as to bring down the parent bank.
In my opinion, the laws regulation and scrutiny of that summary in Hypo parent accounts is the responsability of Germany.
If it were the case that the EU states could allow their regulators to look into the affairs of companies based in other EU states, that would be true. It isn't the case, though - all the German regulator can do is put a question mark over it.
I know that it sometimes seems that the EU extends into every corner of every activity in every member state, but it doesn't. The EU, by treaty, regulates competition law, and deals with things like state subsidies and tax concessions that introduce market distortions - it doesn't have the power to look into the internal affairs of a country or a company, and the fact that we're both in the EU gives the German regulator no more rights or powers over an Irish company than he'd have over a Chinese one. The German regulator cannot require an Irish company to open its books to him, even if it is the subsidiary of a German one, because the subsidiary is legally another company in another jurisdiction. Nor can he force the German parent to open the subsidiary's books to him, for the same reason.
I'll say it again - Ireland has run a quite deliberately lax and opaque regime for financial transactions for many years now. That's why we get referred to as a semi tax haven (see here, here) - because we have been operating as one. And that's where we got a lot of our employment and tax revenues. It's also why everything seems so murky. It's also why our tax laws are a red line for the government in bailout negotiations.
We like to claim, as Irish citizens, to be innocent of the whole thing - but it was only ignorance, not innocence, and the Germans are quite familiar with that defence. We didn't ask where the money came from for our boom - we assured ourselves that it was well deserved because we were just naturally more productive and better at things. It's worth taking a look back over the last decade in the light of the fact that the government - courtesy of CJH's brilliant scheme - has been operating a tax haven for banks and multinationals, and using the money from that to fund lower income taxes and higher social spending.
And it would have worked, too, if it hadn't been for those pesky kids.
cordially,
Scofflaw0 -
I might be seeing it simplistically but with so much international flows of money I would have thought the German regulator would have been wiser to fall for a "open a subsidiary in another country and bury the bodies there" ploy.
Especially a subsidiary lending to property in a country undergoing what many saw at the time to be a bubble
I hear what your saying though.0 -
We like to claim, as Irish citizens, to be innocent of the whole thing - but it was only ignorance, not innocence, and the Germans are quite familiar with that defence. We didn't ask where the money came from for our boom - we assured ourselves that it was well deserved because we were just naturally more productive and better at things. It's worth taking a look back over the last decade in the light of the fact that the government - courtesy of CJH's brilliant scheme - has been operating a tax haven for banks and multinationals, and using the money from that to fund lower income taxes and higher social spending.
And it would have worked, too, if it hadn't been for those pesky kids.
cordially,
Scofflaw
While i agree with most your comments I don not think its fair to claim everyone was/is in the one boat. A lot of Irish people are genuinely innocent. I am no financial whizz but I think it was extremely obvious back in 2006 what was going to happen in Ireland. No bungalow on the coast of Cork is worth 500k no matter how much cut stone is on the front of it but yet lending to Irish banks accelerated even further in 2007. Ireland had overly lax regulations, blindingly obvious corruption and banks involved in tax scams. People did blow whistles but they were either completely ignored or ridiculed. A lot of the people who are now claiming ignorance knew full well IMO, and I will not accept an argument otherwise. While the idea of Ireland as a semi tax haven was a great idea and should have worked, some people should spend some time in prison.
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If a bank is so disconnected from its parent that it's home country's national laws don't apply any more, then the debts of that subsidiary will rarely if ever have any effect on the parent company. Unless the parent company loaned unwisely to its subisidary, in which case the buck stops with Germany or whoever once again.Actually, you can't say that. There's nothing to stop a bank setting up a subsidiary in another EU country, and that subsidiary is then regulated under the laws of that country, by that country's regulator.
As a matter of interest, can you specify which of these self sustaining subsidiaries were set up in Ireland, and what excuse the German, French, or any financial system can give for lending to them if they weren't self sustaining? The cats and dogs in the street knew what was going on here, which is why there was basically no foreign investment in the property boom.
Another concept the Germans are quite familiar with is that of collective punishment, which is a war crime and one of the reasons they aren't allowed to sing their own national anthem anymore. One would have thought the lesson would have been learned by now, and not just by the Germans, but by anyone unwisely seeking to tar an entire nation with one brush.We like to claim, as Irish citizens, to be innocent of the whole thing - but it was only ignorance, not innocence, and the Germans are quite familiar with that defence.0 -
While acknowledging scofflaw's point about Irish responsibility, caveat emptor does in some measure apply. The IFSC was known as the Wild West in Frankfurt and elsewhere, and these people are bankers: they claim to be expert at managing risk. Everyone in the industry, certainly everyone doing business in the IFSC knew exactly the sort of situation they were dealing with, if not the magnitude of the deception. Saying "The Irish authorities told us everything was fine!" is a poor defence. You do not have to believe them, especially when the IFSC's reputation is questionable to begin with.
To play the analogy game, it's a bit like a punter (German bank) visiting a brothel that he knows to be dodgy (IFSC), and having his wallet emptied while he was there. Well, yes, it was wrong for someone to steal his money and the brothel needs to put its house in order, but he knew the risks when he walked in the door. So while this is primarily our mess, it is not solely our responsibility.0 -
While i agree with most your comments I don not think its fair to claim everyone was/is in the one boat. A lot of Irish people are genuinely innocent.
Our political and financial elite have dropped us all in it - innocent or not. But as the electorate, the buck stops with us. We elected them and didn't pay enough attention to what they were up to. Unfortunate but true.
We've had one hell of a wake-up call - we cannot go on blindly trusting our government to act in our best interests. We should be directing our energy at reforming our own institutions, and expecting a higher standard from those we elect. How some politicians can declare that they have nothing to be ashamed or embarrassed about is astonishing.0 -
While acknowledging scofflaw's point about Irish responsibility, caveat emptor does in some measure apply. The IFSC was known as the Wild West in Frankfurt and elsewhere, and these people are bankers: they claim to be expert at managing risk. Everyone in the industry, certainly everyone doing business in the IFSC knew exactly the sort of situation they were dealing with, if not the magnitude of the deception. Saying "The Irish authorities told us everything was fine!" is a poor defence. You do not have to believe them, especially when the IFSC's reputation is questionable to begin with.
I believe the German government were aware of this and tried to pressure the Irish government to do something about it, as part of trying to control the excesses of their own banks. Ireland refused to listen, we were making too much easy money. Certainly the German banks share some of the blame, but it looks like the German government were trying to do the right thing.
And now the German taxpayer is on the hook for some of those German bank losses. So it's not as easy as just saying "let the private banks take the hit".
I'm not for a second saying that the bond holders shouldn't take a big big hit.0 -
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It should be pointed out that the near collapse of the largest bank in Ireland - DefPa Bank - has already cost the tax-payers in Germany a small fortune.
Lest the name doesn't ring any bells, it operates out of the IFSC and was massively bigger than all other Irish banks put together. It is a name we should be familiar with though, as it had applied for a change of regulator from Germany to Ireland. If that had gone through, it would have been the tax-payer in Ireland who would have been picking up the tab for its near collapse...0
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