Is there a silver lining to Ireland's banking woes?

amandstu

Just thinking that , if we accept the point that Ireland has been "unfairly saddled" with the burden of the recent Banking meltdowns is there a silver lining? (I am just wondering ).

Because , if Ireland had not accepted the reponsibility for its share (someone said 42 %) of the damage would that have been the end of the Financial Service sector in Ireland?

As things have panned out Ireland can still remain a big(for its size) Financial Hub

Personally I would prefer its demise - but only if it had been phased out as I do see it as a business on the same kind of a level as the porn/drugs industries but I accept that that would not be a widely held view.

But just so that I don't come across as actually wishing for the Financial sector to flourish as it used to ( and quite probably will continue to)

So "Silver Lining" would be a moot point on another level (if I make any sense)

Scofflaw

It's hard to answer the question, really, because while the question has real merit, it starts from incorrect premises.

First, Ireland did not undertake its bank rescue in order to prevent European contagion - it undertook it to rescue its banks. That was what was very clearly stated at the time by a somewhat defensive Lenihan, and the fact that Ireland only very begrudgingly and minimally extended its guarantee to non-Irish banks here tells the same story.

Second, the idea that we paid 42% of Europe's bank rescue costs is complete codswallop. You have the figure right - it comes from a piece by Michael Taft - but Michael's figures weren't anything to do with the actual costs of bank rescues in Europe. Germany's bank rescue has so far cost them at least €290bn, so our bank rescue costs aren't even 42% of Germany's, never mind those of all of Europe. In fact, Europe's bank rescues have costs a total somewhere around €593bn, so our costs are somewhere around 10% of the total. Taft's analysis was based on the 'capital transfer' costs of the bank rescues - the majority of Europe used a different mechanism, classified differently as 'financial transactions', so Taft was using figures that inflated ours and massively undercosted everyone else's.

However, one could still claim that had Ireland been seen to default on any of its obligations, it would have thereby suffered reputational damage that might well have had an impact on its financial services industry - that is, I would imagine that the banks and other financial companies in the IFSC would feel less than comfortable with a government that had adopted the attitude of, say, Sinn Fein, to the bank debts.

As you say, though, is it a good thing overall to be seen as a good place for banks? Hard to say - they're not going to go out of existence if we don;t provide a home for them, and we're not going to be any less in hock to them just because they're not based in the IFSC, so there's something to be said for profiting from them.

On the flip side of that, can the IFSC really continue as it was? Our own bank regulation was lax, and our regulation of the IFSC even more so. The IFSC was the epicentre of other countries' bank bailouts - Depfa, WestLB, for example.

cordially,
Scofflaw

amandstu

Scofflaw wrote: »

It's hard to answer the question, really, because while the question has real merit, it starts from incorrect premises.

First, Ireland did not undertake its bank rescue in order to prevent European contagion - it undertook it to rescue its banks.

Is that a moot point or would it be by and largely accepted now?

Is there any serious school of thought that would say that Ireland "took one for the team" ?

Scofflaw

amandstu wrote: »

Is that a moot point or would it be by and largely accepted now?

Is there any serious school of thought that would say that Ireland "took one for the team" ?

I guess that depends on what you view as a "serious school of thought"! It's certainly going to run for a long time in some quarters - if you want to vote Fianna Fáil, for example, it's nice to be able to pretend that rather than bailing out our banks off our own bat for our own selfish purposes, we were really nobly stopping Europe collapsing, so no blame attaches to Fianna Fáil.

It has also been used by the current government, but are they actually serious in believing it? That I don't know. Does it actually impress anyone in Europe? Not at the level where I think people know full well that the Irish didn't bail their banks out to save Europe, but perhaps it plays well with the ordinary voter in other European countries - and it's certainly a better narrative for us than Lenihan's admission at the time that it was "economic nationalism".

As to the reality - the reality is that Lenihan stated at the time that we guaranteed our banks to save our banks, and that we did so without reference to Europe, and accepting that it was a solo run which would be unpopular in Europe, as it indeed was. So I think in terms of reality there's no question that in 2008 we weren't taking one for the team - in fact, given that our guarantee actually sucked deposits out of other people's troubled banks, giving them extra trouble, and then pushed other governments into following suit when they would have preferred not to, you could say that the team took one for us in 2008.

In 2010, you could say we took one for the team when the ECB insisted we didn't burn senior bondholders for fear of a market panic round the rest of the eurozone banking system - and a price on that has been put at about €6-12bn - but the clarity of that picture is rather muddied by the fact that the Irish negotiators apparently agreed with the ECB, and the fact that paying senior bonds in full had very much been the policy of the Irish government up to that moment. So it's quite possible that what really happened there was that the ECB refused to let us hide behind it and the IMF in order to burn bondholders while offloading the responsibility onto them - that is, they refused to again take one on our behalf.

So, again, there are several version of how we took one for the team, and one can say that the claim we took one for the team in 2008 by guaranteeing our banks, or in bailing out Anglo, is simply untrue, while the claim that we took one for the team in 2010 by honouring the last few billion in senior bonds is believable but somewhat questionable.

cordially,
Scofflaw

jmayo

I think lenny and clowen set out to save our banks and the buddies within the system, but they inadverently were actually saving others.

If all our indigeneous banks had gone under the country would be in chaos which would have led to chaos in the Eurozone and indeed in Britain due to it's financial exposure, trading links and geographical and population closeness.
The knockon would have been felt throughout the world.

If, as most of us have always claimed, we only saved the truly sysemic banks and dumped the like of Anglo and INBS, the fallout would still have been collosal and there would have been a domino effect of some order.

We may not have set out to be the one throwing ourselves under the wagon wheel, but we did.
Did we save ourselves ?
Kinda, we might have made a better effort at it and decided to do a bit of battlefield triage and amputated a gangrenous limb or two to make us healthier in the long run.
Did we help save some others ?
Probably I would guess.

Sponge Bob

No silver lining yet. Lloyds ( Bank of Scotland) are offloading a more or less prime City CENTRE site in Galway for around €12m

http://www.galwaynews.ie/30258-deal-imminent-27-properties-eyre-square

It cost €130m

amandstu

Sponge Bob wrote: »

No silver lining yet. Lloyds ( Bank of Scotland) are offloading a more or less prime City CENTRE site in Galway for around €12m

http://www.galwaynews.ie/30258-deal-imminent-27-properties-eyre-square

It cost €130m

Can that bloke in Shop Street levitate his own crap (so he doesn't need to take toilet breaks)?

Also that is a pretty impressive knockdown on the property price.

jmayo

Sponge Bob wrote: »

No silver lining yet. Lloyds ( Bank of Scotland) are offloading a more or less prime City CENTRE site in Galway for around €12m

http://www.galwaynews.ie/30258-deal-imminent-27-properties-eyre-square

It cost €130m

The silver lining that should have come out of the banking woes and the meltdown of our economic system are the following:

• the electorate finally coppinig on, seeing ff and their cronies for what they have always been leading to the party being wiped out which would have sent a message to all politicans of every hue.
• the punishment of those responsible for reckless, incompetent and even criminal behaviour within the banking system
• the removal or confiscation of lump sum payments and pensions of all top management (banks, Fás, IFSRA, CB, Dept of Finance etc) and politicans in positions of power during the bubble and during the burst.
• the removal of all assets, bar basic family home, from all those who can not repay the massive property related development loans they had taken out with the now state owned banks and not some get out of jail clause where they can transfer assets to family members or declar bankruptcy in a foriegn state with easier terms.
• a complete overhaul of the pathetic regulatory authorities and corporate governance in this country.
• a complete removal of the top layer of civil servants and public sector bodies, to be replaced with cheaper reward driven outsiders
• a complete overhaul of the unimaginative intransigent infleixble public sector where employees can be moved between bodies and productivity is rewarded not stifled
• an overhaul of the political system in this country right from top to bottom. Cut the number of politicans and bring in ethical standards with breaches punishable by prison time and steep fines.
• an overhaul of our justice system both for white collar crime and serious criminal activity.

Now have any of these really happened ?
We have done a few cosmetic things like bring in new guys to head up IFSRA and CB, but can anyone truly state we have really changed the system ?

BTW any news on the proceedings against fitzpatrick et al ?

Jonti

The silver lining is: Emigration (if you're young enough)!

AlmightyCushion

jmayo wrote: »

If all our indigeneous banks had gone under the country would be in chaos which would have led to chaos in the Eurozone and indeed in Britain due to it's financial exposure, trading links and geographical and population closeness.
The knockon would have been felt throughout the world.

I imagine this is true. The collapse of our banking sector could have caused a lot of problems for other eurozone countries and the euro itself. Saying we saved the eurozone countries because we saved our banks is like saying you saved your neighbours house from burning down because you put out the house fire in your house.

Cookie_Monster

In the long term, probably not. It's hard to see that anyone (the banks, the gov, the ECB etc) have actually learned anything from the whole crises. There seems to be little or no interested in looking at the way banking or economies are running and actually change them for the better. We're already back tot he same old same old borrow from the markets kick the debt can down the road strategy that was in place beforehand.

Scofflaw

AlmightyCushion wrote: »

I imagine this is true. The collapse of our banking sector could have caused a lot of problems for other eurozone countries and the euro itself. Saying we saved the eurozone countries because we saved our banks is like saying you saved your neighbours house from burning down because you put out the house fire in your house.

I particularly like that analogy because depending on the amount of effort you had to put into your firefighting, and the level of damage to your neighbours' houses that your firefighting helped prevent, it illustrates that even though you were acting primarily for your own benefit, you can still have a claim on their gratitude.

Of course, the extent to which you were allowing any randomer to store barrels of gunpowder and boxes of non-safety matches in your house will also come into play.

cordially,
Scofflaw

Godge

Scofflaw wrote: »

I particularly like that analogy because depending on the amount of effort you had to put into your firefighting, and the level of damage to your neighbours' houses that your firefighting helped prevent, it illustrates that even though you were acting primarily for your own benefit, you can still have a claim on their gratitude.

Of course, the extent to which you were allowing any randomer to store barrels of gunpowder and boxes of non-safety matches in your house will also come into play.

cordially,
Scofflaw

Using the same analogy, you could also say that if you were so incompetent at putting out your own fire that your house completely burned down and the neighbouring houses suffered smoke damage, that it would be a bit rich complaining that you saved your neighbours houses.

jmayo

AlmightyCushion wrote: »

I imagine this is true. The collapse of our banking sector could have caused a lot of problems for other eurozone countries and the euro itself. Saying we saved the eurozone countries because we saved our banks is like saying you saved your neighbours house from burning down because you put out the house fire in your house.

And to continue the analogy.

We did put out the fire in our own house, but the neighbours charged us and will continue to charge us handsomely for the water used to do so.
In fact they will make sure that not alone will we be paying for it for generations, but we will have shag all of it to drink in the meantime.

They also don't appear to notice that they had, through the policies suitable for their own dwellings, helped contribute to the flamable materials that were in our house in the first place.
And that is not excusing the fact we turned up the gas and played with the matches.

jmayo

Scofflaw wrote: »

I particularly like that analogy because depending on the amount of effort you had to put into your firefighting, and the level of damage to your neighbours' houses that your firefighting helped prevent, it illustrates that even though you were acting primarily for your own benefit, you can still have a claim on their gratitude.

Of course, the extent to which you were allowing any randomer to store barrels of gunpowder and boxes of non-safety matches in your house will also come into play.

cordially,
Scofflaw

And that leads to the question ...
Where the fook do you think we got the barrels of gunpowder in the first place ?

Oh and we have to replace and return all the gunpowder to it's owners, some of whom live in the those houses we helped save. :rolleyes:

Scofflaw

jmayo wrote: »

And that leads to the question ...
Where the fook do you think we got the barrels of gunpowder in the first place ?

Oh and we have to replace and return all the gunpowder to it's owners, some of whom live in the those houses we helped save. :rolleyes:

As far as I can tell from all the available evidence, we got the gunpowder from our regular business partners in the US and the UK. The UK, to be fair, has lent us some money in our bailout, although admittedly its rates are above those offered by the eurozone.

We have long since returned said gunpowder to the US and UK, largely by borrowing from the ECB and the eurozone.

cordially,
Scofflaw

jmayo

Scofflaw wrote: »

As far as I can tell from all the available evidence, we got the gunpowder from our regular business partners in the US and the UK. The UK, to be fair, has lent us some money in our bailout, although admittedly its rates are above those offered by the eurozone.

We have long since returned said gunpowder to the US and UK, largely by borrowing from the ECB and the eurozone.

cordially,
Scofflaw

I think we did get some gunpowder from other sources.
It didn't all come from US and UK.

You neglected to mention, by all accounts, our supposed friends in the US demanded that we return/replace all their gunpowder in full even though the fire brigade (IMF) thought we shouldn't.

BTW I have noticed that no one had bothered to comment on my post outlining how the one silver lining that could have come out of the whole banking mess should have been the complete overhaul of our corporate and regulatory authorities amongst some more broader issues ?

Has anything meaningful been done to change our system 4 years on ?
Or are share support schemes still basically alright if you are one of the boys much like insider trading, etc ?

I await the usual comments about how the DPP, DCE, AGS, etc are working on it. :rolleyes:

Scofflaw

jmayo wrote: »

I think we did get some gunpowder from other sources.
It didn't all come from US and UK.

Growth in funding sources (liabilities) of the Irish domestic banking sector Jan 2003 - August 2008:

Deposits Irish Banks|88|17.85%
Deposits Irish Govt|2|0.41%
Deposits Irish Private|80|16.23%
Deposits Eurozone|33|6.69%
Deposits ROW|162|32.86%
||
Irish Held Bonds|25|5.07%
Eurozone Held Bonds|17|3.45%
ROW Held Bonds|60|12.17%
||
Capital Resident|16|3.25%
Capital Non-Resident|10|2.03%
|€493|

So:

Ireland|161|37.18%
Eurozone|50|11.55%
ROW|222|51.27%

jmayo wrote: »

You neglected to mention, by all accounts, our supposed friends in the US demanded that we return/replace all their gunpowder in full even though the fire brigade (IMF) thought we shouldn't.

And didn't lend us any money either, but there we go.

jmayo wrote: »

BTW I have noticed that no one had bothered to comment on my post outlining how the one silver lining that could have come out of the whole banking mess should have been the complete overhaul of our corporate and regulatory authorities amongst some more broader issues ?

Has anything meaningful been done to change our system 4 years on ?
Or are share support schemes still basically alright if you are one of the boys much like insider trading, etc ?

I await the usual comments about how the DPP, DCE, AGS, etc are working on it. :rolleyes:

As far as I can see, the only movement that's taking place is at the EU level. Any domestic commitments, and progress on them, would presumably be in the troika reports, which I admit I haven't checked recently!

cordially,
Scofflaw