ERSI economist leaves and advises "Get out now"

lmimmfn

Taxi Drivers wrote: »

I think you're talking fairy tales there.

Sweden provided a blanket guarantee for all of its 114 banks. They nationalised two of them. They took some stakes in others but shareholders were not rendered null and void. No bondholders were burned.

Sweden told its banks to write down their losses promptly before coming to the state for recapitalization

WE must have missed that one.

Taxi Drivers wrote: »

You can be fairly sure that virtually all of the shareholders in Irish banks were extremely unhappy that we put money into them. None of this was to "keep investors and their shares happy". The State contribution hugely diluted the ownership of shareholders.

We took well over a year to take full control of the banks, the share prices kept fluctuating in that time and speculators made a fortune.

The swedish model:

Then came the imperative to bleed shareholders first. Mr. Lundgren recalls a conversation with Peter Wallenberg, at the time chairman of SEB, Sweden’s largest bank. Mr. Wallenberg, the scion of the country’s most famous family and steward of large chunks of its economy, heard that there would be no sacred cows.

The Wallenbergs turned around and arranged a recapitalization on their own, obviating the need for a bailout. SEB turned a profit the following year, 1993.

so basically private investors picked up the slack, we didnt have out banks write down their losses immediately and spread it over 12-18 months, after which only an idiot private investor would invest in them. Theres still a few quid to be made off them, just not for the forseeable future.

Taxi Drivers wrote: »

At the peak shares in the banks were worth a combined €60 billion. That is shareholders wealth that has been obliterated. Shareholders in IL&P were completely wiped out even though PTSB had no developer loan book and the €4 billion that the State has put in was not based on actual losses but on the projected losses from a consultancy report.

This injection was more than the market capitalisation of the group so the State nationalised the company. Shareholders were wiped out because the State put money in. It did not keep them happy.

The shareholders would have been far happier if the State had put nothing in and they had the chance to see what actual losses would accrue on the PTSB loan book. Remember the company also has the hugely profitable Irish Life insurance arm which would have generated profits to cover much of the losses. The shareholders would have been in a position to meet any shortfall and they would still have ownership of the group.

The State's insistence that the entire €4 billion had to be raised in 2011 meant the shareholders were wiped out. And as for your claims about Sweden...

There are several things wrong with that:
1. ILP did their very best to stay out of the state guarantee, yet the cost of their tracker mortgages was killing them, shareholders were burn before it was nationalised
2. AIB and BOI were bleeding money when the state intervened, the share price was also already worthless before state intervention.
3. ILP's Life Assurance arm couldnt even be sold there before Christmas to makeup the required recapitalisation of ILP, therefore we had to bail them out again.


Absolutely 0% of the swedish model has been implemented in the irish situation other than guaranteeing deposits and bondholders, from that point on it has been a lets wait and see attitude which has destroyed the country.
Not only that, total cost in Sweden of recapitalizing the banks was 2%, what are we now? 30%? 50?

quotes from - http://www.nytimes.com/2008/09/23/business/worldbusiness/23krona.html

Liam Byrne

Taxi Driver wrote:

Remember the company also has the hugely profitable Irish Life insurance arm which would have generated profits to cover much of the losses.

If my (now gladly former) dealings with Irish Life are anything to go by, their profits are based on severely unethical behaviour bordering on outright deceit.

It took me 6 months to get my own money from them because they said I couldn't withdraw it, neglecting to point out the subtly semantic fact that I could, by simply closing the account, which was done the day I found out about their sleight-of-hand.

Taxi Drivers

Sweden had 114 banks in 1992. You said "the swedish model grabbed all the banks into public ownership".

How many of the 114 banks were nationalised?

There is a big difference between speculators and buy-and-hold investors. I can assure you that there was very little money to be made by buying shares in the Irish banks from 2007 on. This is from the Nyberg Report:



The only money to be made was from shorting these stocks. Before the State started pouring money into the banks the shareholders owned 100% of the banks. Now only BOI remains out of State control.

PTSB may have been losing money on tracker mortgages but it did not need €4 billion to keep afloat. The €4 billion was based on a worst-case scenario from the stress tests. PTSB is making good money on its standard variable rate mortgages. Last July PTSB was the second highest capitalised bank in Europe. This money may be needed to cover losses but these losses have yet to materialise. If I was a shareholder (I am not and was not) I would have preferred the option to see what losses would occur and whether they could be covered by the bank or by capital injection from shareholders. This option was not available to shareholders.

The banks wrote down more than €40 billion of losses when their developer loan books were transferred to NAMA. This left a huge hole in their balance sheets and one that could only be filled by the State in a once-off manner.

I'm not quite sure what you want. You seem to want the banks to write down all their losses immediately but you also seem to want private sector investment in them. We got private sector investment in BOI and probably could have done the same for PTSB with a little more time. AIB was always going to end up in State-ownership because of the Anglo-like scale of the losses.

The cost of a bank bailout is largely based on the size of the losses incurred by the banks rather than the approach taken. The reason Sweden had to put 5% of GDP into its banks is because this was the size of the losses incurred. We have put €62 billion (40% of GDP) into our banks because they lost horrendous amounts of money. A different approach cannot change that.

Remember that just like Sweden we have wiped many shareholders out (more in fact) and just like Sweden we have repaid all senior bondholders. According to the Nyberg Report €25 billion of shareholder equity has been obliterated. Unlike Sweden we burned subordinated bondholders (they repaid all bondholders). We have taken subordinated debt-holders for an estimated €15 billion.

Here is the transcript of the Swedish Minister Bo Lundgren's (referenced in that NYT report) appearance at our own Dail finance committee. Interesting reading.

http://debates.oireachtas.ie/FIJ/2009/07/07/00003.asp

andrew

https://www.youtube.com/watch?v=THWbrFy5NWM

I've linked this before and I'll link it again. The ESRI, even when they have some out and criticised the government, have been completely ignored. Now, they can't speak out in the first place, while Ireland continues to lose excellent economists. It's all a bit crap really.

Park Royal

If I recall correctly pressure was also exerted by the EU on curbing the "overspending" by Irish Citizens.....which resulted in the Government introducing the SSIA's..... the next year......2001.....

Special Saving Incentive Accounts.......?

The interview with Tol was very good in my opinion, fairly dramatic to see

him pack the furniture lorry himself, RTE should do a more comprehensive

interview with him in a more suitable/ relaxed setting?.....

By comparison that wonderful EU member Jim Higgins came on local radio this morning ( mid west radio) with urgent announcement about imported second hand cars being "clocked" ......the EU and Ireland are going to hell in a hand cart and this "fat cat" can only prioritise "clocking" as his piece for the nation.....God help us all.

daltonmd

Nolanger wrote: »

Thought more people knew this already. Only fools think it wil be over in 2015.

You'd be surprised - the worrying thing for me with this issue is that it is not only unemployed highliy educated people that are leaving in droves, when a double income family, one with a secure job, decide to leave this country then you have to really wonder about the future.

When this bust took hold anyone with a job was told - "be lucky you have one" - now it seems to be, get out while you still can.

jmayo

bbam wrote: »

Bad news for those of us not in any position to move anywhere...
It's hard to know if one should knuckle down and try harder to keep afloat or just give up, sit back and see what happens...
Long hard hours away from the kids and then not knowing if it's going to be enough

But for my other half I would be out of here already.
I don't see a future for my kids in this country.
They will probably get substandard education, even though the hidden charges will mean it actual costs us a fair bit.
Thankfully they are healthy, but I pity any families whose kids are ill.
Perish the thought any of them would have Cystic Fibrosis.
My father who spent most of his life working abroad once advised me to "get to hell out of this sh**hole".
What is it they say about us never listening to our parents.

Irish Steve wrote: »

Having seen a brief clip of the individual concerned on one of the news programs, I'm not sure if we will even miss him. He looked as if he would be very comfortable working very closely with the rest of the "bearded wonders" from the Social compact Trade Union representatives. We've seen what they were capable of over the last while, and I've yet to be impressed by the pontification that comes out of the ESRI.

Any chance we could get him to take that gob***e peter bacon with him.
Not alone did one of his brainfarts help create NAMA, he was on radio yesterday claiming that house buyers should be enticed back into the market by the state insuring them against losses through negative equity.
And he also appears to think that house prices are ever so important to the economy.

THE state should cover the cost of any future drop in the value of new properties being purchased, a leading economist has said.

Peter Bacon, an adviser to NAMA and author of various housing reports, said this was the "only way" to encourage people who want to buy properties, but who fear prices will fall even further, back into the market.

Mr Bacon, said the Government had failed to take the necessary action to reduce the supply of housing, including the demolition of ghost estates.

He said he could see no price floor below which properties would not fall, unless the Government intervened, including by addressing the "fundamental problem" of a lack of credit by banks.

http://www.irishexaminer.com/ireland/state-should-cover-drop-in-property-prices-178981.html#ixzz1iUXEaVNI

When the fook are these morons going to cop on we need house prices to fall to a natural market determined level and not be artificalled kept on some taxpayer funded life support system ?

How exactly does one get an economics degree in this country ?
Do they only accept morons into their courses ?

Ulysses Gaze wrote: »

...
We're hamstrung by an obsession with property which means we won't remove rent reliefs and upward only rent reviews and a lack of cojones to take on the PS unions.
...

Well when one of the originators of NAMA is given airtime to spout utter drivel, and a TV program like Richard Currans latest Property Shock update is made nevermind aired, it goes to show how some people still think that high house prices are important to our economy.
We still have vested interests at play.

Taxi Drivers wrote: »

I have no idea where prices will go in the future (probably lower) but since McWilliams made his forecast of doom in 1999 house prices are 23% higher.

Not for long I am betting.
When did our property prices start increasing ?
Wasn't it about 96/97 ?
Don't most bubble bursts result in prices going back to a level before they started increasing?
So far our prices have gone back to 2000/2001.

waster81

Head The Wall wrote: »

Public transport that you can actually use and rely on. 5 minutes from a tube station with carriages coming every three minutes, buses every 6 minutes outside my door.

Proper infrastructure, internet, good customer service from the Jobcentre, DVLA, NHS.

yes and you paid 15% extra for those services - if you introduced these here you would have people up in arms

Head The Wall

Its worth it if you ask me. It would sicken me to be paying the guts of €60 for a monthly bus pass for Galway City especially considering the amount of buses that never arrive as the drivers never leave the depot.

Thats only one of many issues in Ireland at the moment.

femur61

Yahew wrote: »

McWilliams called the crash, years before the crash. He explained why too. He didn't just predict a recession, but the causes of it, and the trajectory of house prices. The problem isn't that he was a media whore but that nobody listened to him.

QUOTE]

I agree with you he was perfectly right. I was in London in the late 80s wheen they had a recession there one of the reasons ws people paying inflated prices for houses and 1 bedroom flats. Their wages based on their ovevtime which was cut and mass redundicies.

The phrase shoot the messanger comes to mind.