42% of entire Euro zone crisis paid for by Ireland according to Eurostat

dvpower

Ush1 wrote: »

Systemic in what way?

We need banks to have a financial system; money circulation, lending, savings - that kind of thing.

Ush1 wrote: »

If they were essential why were they privately owned rather than being controlled by the government themselves?

One doesn't follow from the other. There are lots of services that are essential that aren't in full state ownership.

Ush1 wrote: »

Banks are businesses like any other and can fold like any other, if they were controlled by the state surely the profits would go back into the state?

They weren't controlled by the state (they weren't even properly regulated by the state)

Poster Boy

Spindle wrote: »

2. Why can't people see that everyone that took part in the "good times" is to blame in this mess. Irish citizens had there hands out grabbing as much money as they could in the form of borrowed money and cheap credit. This then resulted in over inflation of property values leading to a bubble. The wealth that was in the Country was wealth on paper linked to property, we didn't do much to generate real wealth in the form of exports of goods, inventions/ideas etc etc. If people had stood back and refrained from the "property ladder" this mess would not be half as bad.

A considered post, thank you Spindle. It's too long for me to take apart individually, besides which I have already answered most aspects in previous posts.

I simply want to deal with the above part as priority. You see, we are back to this 'We' people business again. I know its very hard to keep it in check, but really it keeps popping up more than Dr. Strangelove's salute-giving arm in that film.

Here's the issue: in 5 out of 6 cases, people who bought houses are continuing to pay the loan even though it was over inflated at time of purchase. They did not get "cheap credit". They actually got credit that is turning out to be incredibly expensive, as they are paying far more than their home or other property will ever be worth.

Please add the misnomer "cheap credit" into the category of other misleading concepts such as, "ATMs will run out", "We decided", and "free money". Such terms may be of some benefit for purposes of social control of the masses by a state that has failed and wants to keep them in check, but regrettably these terms do little to further an informed debate.

Equally, in the most instances people wished to buy houses as homes during the bubble. Largely, such acquisitions were not acquired by most Irish people as investments out of choice, but as a roof over their head. In contrast, stupid investors invested money into banks. I include both myself and my larger European "friends" in this. Those investments went bad; my tough luck, and I find it repugnant that any other investing party now gets special treatment at a collective cost to the Irish people.

dvpower

Ush1 wrote: »

If banks close here can't new banks open in their place?

And in the meantime? Everyone has lost their deposits? Nobody can get paid anymore. Business can't operate. The economy collapses. Game over.

Ush1

Fratton Fred wrote: »

As I've pointed out before, when a company goes bust, the people it owes money to come looking for it back. They do this by appointing a liquidator who sells off the company's assets and gives the money to the creditors. In the case of a bank, its assets would include any property that has a loan secured against it.

In short, if you have a mortgage with a bank that goes bust, you could be forced to repay your mortgage immediately or have your house repossessed.

I see.

Could the existing loans not be bought by another bank? That way the lender still gets his money back but just via a different bank.

gallag

Fratton Fred wrote: »

As I've pointed out before, when a company goes bust, the people it owes money to come looking for it back. They do this by appointing a liquidator who sells off the company's assets and gives the money to the creditors. In the case of a bank, its assets would include any property that has a loan secured against it.

In short, if you have a mortgage with a bank that goes bust, you could be forced to repay your mortgage immediately or have your house repossessed.

Does it work that way? Does it say in my contract that my house can be reposed if I am up to date with payments? Does mony lending not carry an inherent risk? Is that not how high intrest is justified?

dvpower

Ush1 wrote: »

I see.

Could the existing loans not be bought by another bank? That way the lender still gets his money back but just via a different bank.

You wanted to let the banks fail, but offload their assets first, without regard to their creditors? :eek:

davet82

dvpower wrote: »

And in the meantime? Everyone has lost their deposits? Nobody can get paid anymore. Business can't operate. The economy collapses. Game over.

government guarantees deposits not the loans maybe, deposits get transfered to the new bank, economy continues?

Ush1

dvpower wrote: »

We need banks to have a financial system; money circulation, lending, savings - that kind of thing.


One doesn't follow from the other. There are lots of services that are essential that aren't in full state ownership.

Why aren't they in state ownership if essential? Surely if the state and government relies on something, they should control every aspect of that which they can?

dvpower

davet82 wrote: »

government guarantees deposits not the loans maybe, deposits get transfered to the new bank, economy continues?

A deposit is a loan I give to the bank.
That's what the Government did guarantee; loans to banks in the form of deposits and loans to banks in the form of bonds.

dlouth15

Vladimir Kurtains wrote: »

Sure. Details on equity provided to banks is here:

Nýi Kaupþing - ISK 75 billion
Nýi Glitnir - ISK 110 billion
NBI - ISK 200 billion
Total = 385 billion

Icelandic GDP was ISK 1,483 billion in 2008

That's roughly 26 per cent of 2008 GDP.

If Iceland loses the court case (judgement on which is due next week) it's liable for another ISK 695 billion to the British and Dutch governments, who had compensated savers in Icelandic banks after they went bust.

This bit of analysis is also worth a read. For example:

Thanks for those figures.

Had a look at that article and it seems to me that the real question is not so much how much as a proportion of GDP each country paid but rather how much each country paid as a proportion of the cost of the respective crisis.

From the article you linked to:

However, a major difference, in terms of costs to UK and Icelandic taxpayers is that foreign creditors carry the bulk of the cost of the Icelandic collapse – as the three big banks failed in October 2008 these creditors lost what amounts to 5 to 6 times the Icelandic GDP.

In other words, Icelandic citizens only paid about a fifth of the overall cost of their crisis, and the bit that they did pay largely went to protect Icelandic deposit holders.

Ireland on the other hand had a much smaller crisis yet ends up paying a much larger proportion of it, and much of the money immediately leaves the country.

Should the Icelanders be paying more? Possibly, and I believe they have started to pay some of the foreign deposit holders and that it a good thing. The Icelandic government did have a guarantee in place when those depositors lodged their money and so they have a right to have Iceland honour its commitments.

However they were quite right to let the foreign bond holders take their share of the responsibility for their unwise lending decisions. The same should have been the case here.

Irish banks did not have substantial foreign deposit holders to my knowledge. Most of the money lent was through sale of bonds to professional investers. The rule is caveat emptor. If you lend to businesses that are making unwise business decisions you must take the consequences if those businesses go under.

dvpower

Ush1 wrote: »

Why aren't they in state ownership if essential? Surely if the state and government relies on something, they should control every aspect of that which they can?

Maybe they should, but they typically don't.
Other essential services are electricity generation, water, transport, etc.
Many of these services used to be controlled by governments, but the trend is for privatisation.
Its a seperate topic tbh.

Poster Boy

dvpower wrote: »

I look forward to the outcome of the legal challenge.

I too look forward to the outcome of the current case, not that I hold my breath, as I appreciate that in Ireland judges are appointed by political nomination. Hence, with regret I largely do not have confidence in a system to correct the unconstitutional actions of their political masters. I hope I am proven wrong.

dvpower wrote: »

Not that it would change the 'facts on the ground'.

It is my understanding that if past or present actions are found to be unconstitutional and hence illegal, such actions should cease. If such is not the case, we no longer have law and are facing much more serious issues.

Fratton Fred

Ush1 wrote: »

I see.

Could the existing loans not be bought by another bank? That way the lender still gets his money back but just via a different bank.

Pretty much all Irish debt is bad. There are so many loans secured on property worth less than the loan value. No one in their right mind would buy it. Lehman Brothers went bust over pretty much this exact thing. http://en.wikipedia.org/wiki/Bankruptcy_of_Lehman_Brothers

gallag wrote: »

Does it work that way? Does it say in my contract that my house can be reposed if I am up to date with payments? Does mony lending not carry an inherent risk? Is that not how high interest is justified?

Pretty sure they can. There is risk involved in lending money and that is reflected in the interest rates. The higher the risk, the higher the interest rate.

The banks are realising that risk now, as they seek to repossess properties they are owed money on, but have no chance of recouping the full amount they are owed.

davet82

dvpower wrote: »

A deposit is a loan I give to the bank.
That's what the Government did guarantee; loans to banks in the form of deposits and loans to banks in the form of bonds.

I know what you mean but thats not the way I ment it.

Whats done is done but that type of guarantee for everyone was the craziest thing ever done in finacial history and it stinks.

dvpower

davet82 wrote: »

Whats done is done but that type of guarantee for everyone was the craziest thing ever done in finacial history and it stinks.

Agreed. Certainly in the case of Anglo, I'm not too sure about AIB, BoI

Ush1

dvpower wrote: »

And in the meantime? Everyone has lost their deposits? Nobody can get paid anymore. Business can't operate. The economy collapses. Game over.

Could another bank not step in and take the assets?

gallag

Fratton Fred wrote: »

Pretty much all Irish debt is bad. There are so many loans secured on property worth less than the loan value. No one in their right mind would buy it. Lehman Brothers went bust over pretty much this exact thing. http://en.wikipedia.org/wiki/Bankruptcy_of_Lehman_Brothers



Pretty sure they can. There is risk involved in lending money and that is reflected in the interest rates. The higher the risk, the higher the interest rate.

The banks are realising that risk now, as they seek to repossess properties they are owed money on, but have no chance of recouping the full amount they are owed.

I am pretty sure that in my contract it lays out all aspects that could lead to the repossession of my house, in all cases it takes me to default on payment.

davet82

dvpower wrote: »

Agreed. Certainly in the case of Anglo, I'm not too sure about AIB, BoI

I'll concede BoI for sure, the jury is still out on AIB though

Ush1

dvpower wrote: »

You wanted to let the banks fail, but offload their assets first, without regard to their creditors? :eek:

Should I not do that no?:)

Fratton Fred

gallag wrote: »

I am pretty sure that in my contract it lays out all aspects that could lead to the repossession of my house, in all cases it takes me to default on payment.

if the bank goes bust, your contract is pretty much null and void.

TBH, the people with the most to lose would be those that aren't in negative equity. The banks have a better chance of getting their money back there so they are likely to go after those properties first.

It is all irrelevant though, because this is when governments step in and take over.

dvpower

Ush1 wrote: »

Could another bank not step in and take the assets?

The assets being largely property loans in the case of the Irish Banks.

So, I have a 300k mortgage with, say, BoI. My house is now worth 150k.
BoI goes out of business. No other bank would want to buy the loan for 300k, because the asset backing it has halved in value.

dvpower

Ush1 wrote: »

Should I not do that no?:)

Its easier if you first dress them up as evil German billionaires.

gallag

Spindle wrote: »

Interest rates are at an all time low now and also during the "good times", this is cheap credit . If interest rates where higher then people would not have been able to borrow as much they did, the boom would have died and people would have gone onto making real value and money.

The over inflation was caused by their want to buy a house so badly that they would over pay for it, never once considering houses can and will fall in value (just look at Ireland in the 70s). That is a decision that was made as part of the "joining the property ladder". Likewise these people then sold their houses on at even more inflated prices to obtain profit and their next level on the property ladder.

People went into this with their eyes wide opened, they thought they were great as property developers, they bought a house in the arse end of nowhere lived in it for a year or two then sell it for 50k profit after adding no value to it, how did anybody think this was going to keep going on????



Ever heard of renting and waiting until you can afford a property at a price that you know is a good value in an area you want to live in for 10+ years?? Wait I suppose your the rent is dead money brigade. I rent and have a roof over my head, the rental scene can sometimes be a hard, but I am not burdened with a debt to a bank, which brings me to my next point.




I didn't put my money into a mortgage on a house during the "good times", instead I saved up what I could, not much, but some of which was on deposit in the banks, this was to provide for any issues such as job loss etc. So if the banks were allowed fail and my deposits were wiped out, would that be fair??

As far as I see it I have had very little to play in the property bubble or crash, I did not enter it, even with banks trying to give me money, as I could see it was not value for money. But I am willing to pay for these mistakes just to keep the country moving, in the hope we (yes we are all in it together) will come out the other end intact. I could easily feck off, as I am not tied here, but I don't.

People who bought a house thinking they could sell it in a few years for profit and are now stuck in the arse end of nowhere in negative equity, just need to face up to their debt, they signed the papers and made the decision to buy at that price in that location. I know it is harsh but people need to own up that the mistakes started at the bottom and were exploited by the investors at the top.

You can't reap all the rewards of inflating wealth then try and pass the bill to someone else to pay.

99% of the people trying to be all high and mighty " I realised it was a bad time to buy" or "I am glad I descided to just save" tried but could not by chance of good fortune get on the property ladder.

noodler

Fratton Fred wrote: »

if the bank goes bust, your contract is pretty much null and void.

I am 99% that this is untrue.

Banks sell mortgage other other loan books to one another and various funds all the time.

Poster Boy

Spindle wrote: »

I didn't put my money into a mortgage on a house during the "good times", instead I saved up what I could, not much, but some of which was on deposit in the banks, this was to provide for any issues such as job loss etc. So if the banks were allowed fail and my deposits were wiped out, would that be fair??

As far as I see it I have had very little to play in the property bubble or crash, I did not enter it, even with banks trying to give me money, as I could see it was not value for money. But I am willing to pay for these mistakes just to keep the country moving, in the hope we (yes we are all in it together) will come out the other end intact. I could easily feck off, as I am not tied here, but I don't.

People who bought a house thinking they could sell it in a few years for profit and are now stuck in the arse end of nowhere in negative equity, just need to face up to their debt, they signed the papers and made the decision to buy at that price in that location. I know it is harsh but people need to own up that the mistakes started at the bottom and were exploited by the investors at the top.

Spindle, you and I share some similarities.

Like you, I did not buy during the bubble. However, that is not to say that I sneer at those who did. Certainly there were some who bought the clichéd "starter home", hoping to flip it and make a profit, but in the most instance, the primary reason people bought was to have a home.

The reasons that Irish people used to be attached to property are complex. However, as I'm sure you appreciate, in many cases new couples looking to settle down were socially expected to buy a home. You can disregard that as trite, yet the reality was that a young man would often have been frowned upon by his prospective partner's parents if he were not seen to be providing for his partner. I wasn't in that situation myself, but I see many who were.

Like you, I too "am willing to pay for these mistakes just to keep the country moving" so that we "all come out at the other end". I have written off bank shares and written down other investments.

However what I am not prepared to accept without a bloody awful fight is this:

1. To continue to pay money that is used to pay off other investors from beyond these shores who like me made bad investments.

2. To regard as legitimate the idea that the ECB/EU contrives a fix to pay our failed leaders well above the odds for not properly serving their people, failing to ensure accountability, with the bill then fixed on Irish citizens.

It seems apparent to me that the ECB is a predatory operator who have taken advantage of Ireland's difficulties in order to ditch their problems. Some friends. :rolleyes:

Fratton Fred

noodler wrote: »

I am 99% that this is untrue.

Banks sell mortgage other other loan books to one another and various funds all the time.

yes they do, but that is an agreement between two solvent banks that are on-gong concerns, not with a liquidator trying to wind up a company.

the truth is though, no one really knew what would happen, which was part of the problem. There are/were all sorts of doomsday scenarios that could have conceivably come true that included all ATMs running dry.

Imagine, not only would we have no money to buy food, but the supermarkets/manufacturers would have no banking facilities to purchase food in the first place, so supermarket shelves could empty.

none of this would have happened if Anglo was allowed to go to the wall though, there was no way that should have been saved. That was a political decision not a financial one.

dlouth15

Spindle wrote: »

Taking a rather simply explanation:

The Iceland and Irish banking collapses are different, in Iceland their issues were related to the amount of foreign debt they held and had bought up, not created themselves. They couldn't refinance this debt and had a liquidity problem.

In Ireland it was related to the amount of local debt that banks themselves were creating. Banks in Ireland were buying money though the interbank lending system cheaply, then lending this out in the form of debt to people in Ireland to create their profit. This whole system relied on the ability to get money on the interbank market to refinance what was due. With the credit crunch this market froze up leading to a liquidity problem as people sought to withdraw money.

Essentially the problems are the same even though the details are different. Both Icelandic and Irish banks made foolish business decisions. It doesn't really matter that Irish banks lent into an Irish property bubble; they could, like Iceland have engaged in unsustainable international activity.

The key thing is that if they fail then those that lent to them unwisely should pay their share of the price. That is simply the way it is with lending to businesses. The international lenders, together with the Irish banks entered into a private agreement among themselves. If mistakes are made then there should be consequences for those making the decisions.

All of this could have been okay, only for the fact that the assets that backed all the debt were now in free fall, meaning the banks faced in-solvency where they did not have enough money to cover all their liabilities. Hence the need to recapitalise them.

The problem however is that we did not do the minimum to ensure a viable banking system for Irish citizens, we also tried to ensure that only Irish people paid for it. This was wrong. It may have been the only practical way given our membership of the Euro and the fact that we had the ECB to deal with, but it is still unjust.

davet82

Spindle wrote: »

Yes Johnny should be made pay it all back, but Ireland as a country needs to foot the bill until he does.

If other countries want to burden share with us that is great, but why is it assumed that it is a given right that other countries should bail us out?

Countries should bail us out because we've bailed our banks, who in turn have bailed their banks. Why should we bail out some faceless forgien banker who gambled by lending cheap money to the idiots here and lost?

That isn't fair.

dlouth15

Spindle wrote: »

If other countries want to burden share with us that is great, but why is it assumed that it is a given right that other countries should bail us out??

It should never have been other countries bailing "us" out. It should have been private financial institutions being made to take responsibility for their decisions in lending to other private institutions.

Poster Boy

Spindle wrote: »

At the end of the day, we need to get on with creating jobs and real wealth to get us out of this hole.

We will NEVER climb out of this hole if we are fixed with such a large tab that it results in us having much larger overheads than our more centrally positioned and already competitively advantaged "European friends".

The effects of being fixed with the odious false charge is we are going to be economically creased out from being a viable part industrial and part services nation, to instead becoming once again a primarily pastoral economy. To my eye this process appears to already be well under way.

There is of course a precedent for this, with which informed Germans would be familiar, and that was called the Morgenthau Plan; http://en.wikipedia.org/wiki/Morgenthau_Plan

Initially it was being imposed on Germany after WW2, whereby the country was being deliberately de-industrialized by the western powers. However it was only when they realised that communism was becoming attractive to people in west Germany, that the allies did a complete u-turn and instigated the very successful Marshall Plan.

I want to be a capitalist. I used to be a capitalist. However it is clearly not capitalism that we are being subjected to, as the failed financial institutions were not be let held to account by the markets.

Equally I want to be a democrat. However yet again, with ECB/EU involvement, Irish citizens have had their constitutional rights obfuscated - and again we see effectively no accountability.

I am fortunate enough to be reasonably well educated, from a reasonably affluent background and not impaired by any substantial loans. The authorities should be very careful when people like me begin to believe that as long as they are in charge, it is no longer viable for one to be either a democrat or capitalist.

Our "EU friends" would do well to recall their history.

Spindle wrote: »

What makes me despairs me the most is the complete lack of change in Government and civil service.

Agreed 110%.