So what if we had let the banks collapse......

Mike Hoch

With PTSB back in the news tis the season again for all sorts of ranting about the bastard banks and every scumbag who worked for one in each and all capacity from the cleaning ladies upwards.

The question around the much maligned bailout seems to be, what would have happened if we hadn't bailed them out?

Would anyone who took out a mortgage or loan from circa 2001 to late 2008 effectively have their debt wiped, or would it transfer to the foreign creditors who the Irish banks had borrowed from to fuel the boom?

What about those who had obtained a mortgage before the madness, when Irish banks were (I assume) largely lending out from their own reserves? Would they be left debt free with a half price house to show for it?

What of people's accounts? As has happened in various banana republics could personal savings have been plundered in an attempt to remain solvent?

It's a few points I've never once heard a burn the bondholders type ever attempt to explain clearly. Most of them are adamant that the only people we were doing a favour for was a handful of high level executives who got us into the mess. Is the truth a bit more complicated than that?

Sonics2k

The Dail and Bondholders pretty much would have said this.

https://www.youtube.com/watch?v=DMSHvgaUWc8

Atlantic Dawn

We only needed to let Anglo collapse, very few ordinary people had any money in it.

TheValeyard

I wonder will the truth ever come out of what happened that night. I still believe a lot has been left unsaid.

Donald Trump

Atlantic Dawn wrote: »

We only needed to let Anglo collapse, very few ordinary people had any money in it.

A lot more people would have had money in it than realize.


They might not have had an account with their name on it. But there's have been a lot of pensions funds and other investment vehicles with money parked or invested there


But they should have let it go under and maybe guaranteed the others. Nobody will ever know though whether that would have been a better strategy. But it would have been the free-market to let them go under


More than likely, capital controls would have had to be introduced. Access to capital would have completely dried up even more than did. It would have be an ever sharper correction to the markets and economy.

godtabh

If we let the banks collapse we wouldn’t be able to borrow at the levels we are now. Still to much borrowing but imagaine borrowing at 10-15% indefinitely

kaymin

Iceland allowed their banks to fail and their economy is thriving and they haven't added the bank debts to their national debt.

The irish politicians at the time argued the general populace would lose their savings if they let the banks go which was untrue as the first 100k at each bank was protected - the cost of this protection would have been far less than paying out to all the bond holders / large deposit holders.

The banks are still struggling from the hangover of the last crash. It would have been far better to allow the banks to go under and the state to buy the banking infrastructure from the failed banks and run them without the legacy problems. Our politicians have no guts though.

Wanderer78

Hard to say really, but it probably wouldn't have been good, it they were allowed to collapse, but has the way in which the bail outs occurred actually worked, or have we just kicked the cans further down the road?

kaymin

godtabh wrote: »

If we let the banks collapse we wouldn’t be able to borrow at the levels we are now. Still to much borrowing but imagaine borrowing at 10-15% indefinitely

Yet Iceland can now borrow at 5.5% over 10 years

Mike Hoch

kaymin wrote: »

Iceland allowed their banks to fail and their economy is thriving and they haven't added the bank debts to their national debt.

So what happened to Icelandic homeowners and their mortgage repayments? Presumably the bank collapsed from loaning money that was itself borrowed. Dd the mortgage debt transfer to international banks or are they all living mortgage free with a house they paid a few grand towards?

padd b1975

kaymin wrote: »

Yet Iceland can now borrow at 5.5% over 10 years

What's our rate for 10 year bonds?

smelly sock

Look what has hsppened in Greece.

Twenty Grand

kaymin wrote: »

Iceland allowed their banks to fail and their economy is thriving and they haven't added the bank debts to their national debt.

The irish politicians at the time argued the general populace would lose their savings if they let the banks go which was untrue as the first 100k at each bank was protected - the cost of this protection would have been far less than paying out to all the bond holders / large deposit holders.

The banks are still struggling from the hangover of the last crash. It would have been far better to allow the banks to go under and the state to buy the banking infrastructure from the failed banks and run them without the legacy problems. Our politicians have no guts though.

All that is far easier said than done.

Interesting to note that half of bank jobs in 2008 have gone now.
https://www.google.ie/amp/s/www.irishtimes.com/business/financial-services/irish-banks-have-shed-50-of-staff-since-crash-1.3441938?mode=amp

Hitman3000

PTSB sold 1050 performing loans in the bundle. So the narrative that it's deflauters and chancers is b.s..

emo72

It's a great system. When the banks are making fortunes it's their money. When the banks lose money they take our money.

Why would this system ever need to change?

kaymin

Mike Hoch wrote: »

So what happened to Icelandic homeowners and their mortgage repayments? Presumably the bank collapsed from loaning money that was itself borrowed. Dd the mortgage debt transfer to international banks or are they all living mortgage free with a house they paid a few grand towards?

The banks went into receivership - so the debtholders recovered whatever they could from the remaining assets of the bank.

kaymin

Twenty Grand wrote: »

All that is far easier said than done.

Interesting to note that half of bank jobs in 2008 have gone now.
https://www.google.ie/amp/s/www.irishtimes.com/business/financial-services/irish-banks-have-shed-50-of-staff-since-crash-1.3441938%3fmode=amp

But done it was, in Iceland.

runawaybishop

kaymin wrote: »

But done it was, in Iceland.

Iceland were able to devalue their currency.

eagle eye

I think the ordinary man would be a lot better off now if we let the banks collapse. Ultimately the likes of the Deutschbank would have suffered most if we did.

Agricola

Everyone talks about Iceland, and why didnt we do the same. But surely it's apples and oranges comparing both countries. The size of their economy is a fraction of ours even. They aren't in the Euro. What levels of debt was the Icelandic state exposed to had they chose to nationalize?

We still would have had a lost decade of crippling austerity had we let them fail. The only question is would more private wealth have been lost in the process had that happened. Certainly it was all happening so fast back in '08 and the politicians had such little knowledge about the chicanery in the likes of Anglo, they chose what they believed to be the least worst option.

kaymin

padd b1975 wrote: »

What's our rate for 10 year bonds?

About 1%. We have 0 capacity to get out of the next recession because our national debt is so high now. The markets will respond to this quite quickly at the first sign of the next downturn.

kaymin

runawaybishop wrote: »

Iceland were able to devalue their currency.

Internal devaluation is just as effective though perhaps more painful - higher unemployment rates leads to lower salaries which leads to greater competitiveness

Twenty Grand

kaymin wrote: »

But done it was, in Iceland.

Iceland is not Ireland.

They're both islands but that's where the similiarity ends.

kaymin wrote: »

Internal devaluation is just as effective though perhaps more painful - higher unemployment rates leads to lower salaries which leads to greater competitiveness

Low salaries make countries competitive? News to me.

kaymin

Agricola wrote: »

We still would have had a lost decade of crippling austerity had we let them fail. The only question is would more private wealth have been lost in the process had that happened. Certainly it was all happening so fast back in '08 and the politicians had such little knowledge about the chicanery in the likes of Anglo, they chose what they believed to be the least worst option.

Iceland bounced back from recession within 2 years. The reason we had a lost decade was because the banks were hamstrung from legacy high debts. If we allowed banks to fail, the new banks to emerge would not have had that problem.

Hitman3000

Anyone ever identify the Maple 10?

kaymin

Twenty Grand wrote: »

Iceland is not Ireland.

They're both islands but that's where the similiarity ends.



Low salaries make countries competitive? News to me.

Also the EU made a ruling that debtholders would be on the hook in the event of another banking crisis - so why could it not be done in the last crisis?...it didn't suit the European and US banks at the time and besides it would be the populations of the PIGS that would suffer not German or French taxpayers. The rules of capitalism are that debtholders should suffer the losses, moral hazard etc - that has always been the case, not just since after the last banking crisis.

Phoebas

kaymin wrote: »

Also the EU made a ruling that debtholders would be on the hook in the event of another banking crisis - so why could it not be done in the last crisis?...it didn't suit the European and US banks at the time and besides it would be the populations of the PIGS that would suffer not German or French taxpayers. The rules of capitalism are that debtholders should suffer the losses, moral hazard etc - that has always been the case, not just since after the last banking crisis.

We guaranteed the bondholders in a decision made by FF in government. We became the debtholders at that point.

It wasn't the EU or the US or anyone else that made that decision for us and the bailout was a direct consequence of our own decision, freely made. We even had the gall to tout for business based on the bank guarantee.

No point in trying to shift the blame when the whole thing went tits up.

Twenty Grand

Twenty Grand wrote: »

All that is far easier said than done.

Interesting to note that half of bank jobs in 2008 have gone now.
https://www.google.ie/amp/s/www.irishtimes.com/business/financial-services/irish-banks-have-shed-50-of-staff-since-crash-1.3441938%3fmode=amp

the bank redundancies would be more to do with automation though perhaps?




Regarding the Iceland issue, they still had their own currency and were not tied to the ECB, plus the Nordic countries did a whip-round for them when their banks went under over-night.

SEPT 23 1989

Hitman3000 wrote: »

Anyone ever identify the Maple 10?

Kermit
Gonzo
Fozzie Bear
Animal
Miss Piggy
Swedish Chef
Beaker
Dr Benson
Statler
Waldorf

Hitman3000

Phoebas wrote:

We guaranteed the bondholders in a decision made by FF in government. We became the debtholders at that point.

FG and Lab converted the promissory note into sovereign debt at a late night sitting in the Dail as a court case against it's legality was launched.

but lads but lads listen

iceland

end of m8

end of

Phoebas

Hitman3000 wrote: »

FG and Lab converted the promissory note into sovereign debt at a late night sitting in the Dail as a court case against it's legality was launched.

Yes. The court case was lost, the loss appealed and the appeal rejected.

We made out own poor decisions and we got to deal with their consequences.

Wanderer78

Phoebas wrote: »

Yes. The court case was lost, the loss appealed and the appeal rejected.

We made out own poor decisions and we got to deal with their consequences.

was there are any coercion from financial institutions in such a decision?

aido79

kaymin wrote: »

Iceland bounced back from recession within 2 years. The reason we had a lost decade was because the banks were hamstrung from legacy high debts. If we allowed banks to fail, the new banks to emerge would not have had that problem.

Iceland has the same population as Cork. They didn't have the same economy or level of debt. They had their own currency....
There is so many difference between the two situations that it is completely ridiculous to even put them in the same sentence for comparison when talking about letting banks fail.

Donald Trump

Hitman3000 wrote: »

PTSB sold 1050 performing loans in the bundle. So the narrative that it's deflauters and chancers is b.s..

So what?


If a borrower is fulfilling the terms of their contract, then the contract remains


It is likely that some borrowers had multiple loans where they were paying some and not the others and they all got packaged in together.


For example, a borrower might have strategically decided to stop paying the mortgage for their own home, knowing full well that they would be unlikely to be kicked out anytime soon by the bank, but had kept up repayments on their buy-to-let.



But if the loans were not contingent or linked to each other under PTSB, that remains the same with the new lender

aido79

Hitman3000 wrote: »

Anyone ever identify the Maple 10?

https://www.google.com.au/amp/s/amp.independent.ie/irish-news/courts/who-were-the-maple-10-30196885.html

What has that got to do with anything? Maybe have a look at the reason for the Maple 10...i.e. Sean Quinn.

runawaybishop

kaymin wrote: »

Iceland bounced back from recession within 2 years.

They did in their hoop. They went through severe austerity and ridiculous interest rates for years. You are just cherrypicking bits of what happened.

Hitman3000

aido79 wrote:

What has that got to do with anything? Maybe have a look at the reason for the Maple 10...i.e. Sean Quinn.

It was a question, you know people do ask them . It's how one finds out things.

Hitman3000

Donald Trump wrote:

So what?

Contradicts a few of the earlier posts on this thread.

Tow

Mike Hoch wrote: »

What of people's accounts? As has happened in various banana republics could personal savings have been plundered in an attempt to remain solvent?

They plundered our pension schemes. Only difference is people do not see it directly reflected in their statements.

Ipso

Wanderer78 wrote: »

was there are any coercion from financial institutions in such a decision?

Probably. Bailingout Anglo was a combination of external pressure, Irish politicians being out of their depth and them probably not thinking things were as bad given they were all on the richest country in the world cult.
The three most powerful people in Ireland at the time were all children of former Ff politicians, just what you need in a crisis.
And Brian Lenihan got re-elected.

Phoebas

Wanderer78 wrote: »

was there are any coercion from financial institutions in such a decision?

Everything stems from the decision on the bank guarantee,and I'm not aware of any 'coercion' in that decision.
We made our own mistakes and we need to grow up and accept responsibility and stop trying to put it on other people.

We aren't children.

dxhound2005

Atlantic Dawn wrote: »

We only needed to let Anglo collapse, very few ordinary people had any money in it.

When AIB took over the debts there was €8.6 billion deposits belonging to 120,000 depositors. If they were all ordinary people that would be about €71,000 on average. If there was an elite with multi millions, then the rest must have been ordinary enough.

Donald Trump

Hitman3000 wrote: »

Contradicts a few of the earlier posts on this thread.

Maybe they were deleted..............

aido79

Hitman3000 wrote: »

It was a question, you know people do ask them . It's how one finds out things.

Ok. What was the reason for asking a question where the answer is common knowledge?

Hitman3000

aido79 wrote:

Ok. What was the reason for asking a question where the answer is common knowledge?

Obviously not common if I asked. Heard the Maple 10 mentioned multiple times but didn't know the identified.

Wanderer78

Phoebas wrote:

Everything stems from the decision on the bank guarantee,and I'm not aware of any 'coercion' in that decision. We made our own mistakes and we need to grow up and accept responsibility and stop trying to put it on other people.

Come on now, there's loads of writings now to confirm coercion from well established financial institutions, even the IMF is starting to say, imposing these bailouts, and as political scientist mark Blyth would say, the death nail policy of austerity on such nations is truly dreadful economic theory. It's time we put the financial sector back into its box, or god knows what will happen. We re effectively encouraged to make our own mistakes during the era of cheap credit

Phoebas

Wanderer78 wrote: »

Come on now, there's loads of writings now to confirm coercion from well established financial institutions, even the IMF is starting to say, imposing these bailouts, and as political scientist mark Blyth would say, the death nail policy of austerity on such nations is truly dreadful economic theory. It's time we put the financial sector back into its box, or god knows what will happen. We re effectively encouraged to make our own mistakes during the era of cheap credit

There may or not be 'loads of writings' saying all sorts of things.
Evidence on the other hand ...

We need to be responsible for our own poor decisions.

aido79

Hitman3000 wrote: »

Obviously not common if I asked. Heard the Maple 10 mentioned multiple times but didn't know the identified.

Ok. Do you understand anything of what they were about or why they were formed?

PeadarCo

Wanderer78 wrote:

Come on now, there's loads of writings now to confirm coercion from well established financial institutions, even the IMF is starting to say, imposing these bailouts, and as political scientist mark Blyth would say, the death nail policy of austerity on such nations is truly dreadful economic theory. It's time we put the financial sector back into its box, or god knows what will happen. We re effectively encouraged to make our own mistakes during the era of cheap credit

If the banks hadn't been bailed out unemployment would have been way way way higher. Any business that relied on Irish banks for working capital facilitates such as an overdraft would have gone bust overnight. Anyone with a deposit in an Irish bank would have lost their money overnight. The result of that would have been large amounts of people would have been unemployed suddenly overnight. The debt relating to the the money people borrowed would also would not have gone away. When you factor in the impact of that on government finances there would have been far far deeper cuts to the budget. That would caused massive social damage. No sane government would let that happen. You didn't need any external pressure to make the decision.

You can argue over the exact method and that's where there is an argument about external pressure. However the bank guarantee was an Irish decision. At one point it was called the cheapest bailout in history. The problem was it took too long for the Irish government to grasp the fact that the banks were insolvent. The only way the bank guarantee makes sense if you think the banks only had a temporary liquidity problem.

Wanderer78

Phoebas wrote:

We need to be responsible for our own poor decisions.

What part does critical sectors such as our financial sector play in creating such situations, and do we have the relevant regulations and regulatory bodies in place to control such sectors, and are such sectors truly democratic, and operate with the overall needs of society within their ethos?