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blade
Joined: 30 Jun 2007
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 Posted: Thu Apr 01, 2010 3:19 am Post subject: Should Ireland cut it's loses or is it too late? |
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I honestly don't see how letting Anglo go under could be any worse than keep bailing out it's bond holders. Am I wrong? This guy seems to think that it but somehow I doubt his motives.
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Emmet Oliver: Anglo the destroyer can't be killed off as it devours wealth
IT'S finally official -- Anglo Irish Bank has destroyed more wealth than any other company in Irish history. Its record loss of �12.7bn is unlikely to be matched by another Irish company for decades, if ever.
Flicking through the annual report and accounts, one can find all sorts of gruesome records set by the bank.
Write-offs on loans given to directors past and present, for example, are likely to set another record of �108m. The losses on Anglo's property loan book, including NAMA, meanwhile, come to a staggering �15.1bn -- another likely record.
But instead of being an Irish record breaker, Anglo is more akin to a national financial tragedy.
While the taxpayer must pay the price for these astonishing figures, it appears there is no way to kill off the institution and staunch the flow of red ink from its balance sheet.
This week, Finance Minister Brian Lenihan, in a moment he hardly enjoyed, ordered that the bank would receive another �8.3bn in capital from the State, with another �10bn likely to be needed to absorb more further property-loan losses. It is a bitter financial pill for taxpayers to swallow.
http://www.independent.ie/opinion/analysis/emmet-oliver-anglo-the-destroyer-cant-be-killed-off-as-it-devours-wealth-2120301.html |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Thu Apr 01, 2010 6:21 am Post subject: |
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http://www.bloomberg.com/apps/news?pid=20601087&sid=aiI8N1UP2rFM&pos=1
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March 31 (Bloomberg) -- Ireland�s banks need $43 billion in new capital after �appalling� lending decisions left the country�s financial system on the brink of collapse.
The fund-raising requirement was announced after the National Asset Management Agency said it will apply an average discount of 47 percent on the first block of loans it is buying from lenders as part of a plan to revive the financial system. The central bank set new capital buffers for Allied Irish Banks Plc and Bank of Ireland Plc and gave them 30 days to say how they will raise the funds.
�Our worst fears have been surpassed,� Finance Minister Brian Lenihan said in the parliament in Dublin yesterday. �Irish banking made appalling lending decisions that will cost the taxpayer dearly for years to come.�
Dublin-based Allied Irish needs to raise 7.4 billion euros to meet the capital targets, while cross-town rival Bank of Ireland will need 2.66 billion euros. Anglo Irish Bank Corp., nationalized last year, may need as much 18.3 billion euros. Customer-owned lenders Irish Nationwide and EBS will need 2.6 billion euros and 875 million euros, respectively.
�Truly Shocking�
The asset agency aims to cleanse banks of toxic loans, the legacy of plunging real-estate prices and the country�s deepest recession. In all, it will buy loans with a book value of 80 billion euros ($107 billion), about half the size of the economy. Lenihan said the information from NAMA on the banks was �truly shocking.�
�The regulator is taking the bank system by the scruff of the neck,� said James Forbes, senior equity strategist at Irish Life Investment Managers in Dublin. �Allied Irish has a lot of work to do to avoid majority state ownership, Bank of Ireland less so.�
Allied Irish rose 10 percent to 1.37 euros as of 9:06 a.m. in Dublin. Bank of Ireland surged 26 percent to 1.62 euros. Credit-default swaps insuring both banks� debts declined.
Allied Irish will sell its stakes in banks in the U.S. and Poland and said late yesterday this will meet a �substantial part� of its capital needs. It also plans a share sale.
Bank of Ireland said today it�s working to fill the capital deficit after posting a net loss of 1.46 billion euros in the nine months through December 2009. The lender expects to be able to raise most of the new capital privately, Chief Executive Officer Richie Boucher said.
Capital Target
Lenders must have an 8 percent core Tier 1 capital ratio, a key measure of financial strength, by the end of the year, according to the regulator. The equity core Tier 1 capital must increase to 7 percent.
AIB�s equity core tier 1 ratio stood at 5 percent at the end of 2009 and Bank of Ireland�s at 5.3 percent. Those ratios exclude a government investment of 3.5 billion euros in each bank, made at the start of 2009.
�The banks are undergoing major surgery via NAMA,� financial regulator Matthew Elderfield said at a press conference in Dublin. �They need a transfusion now to speed their recovery and that of the economy.�
Credit-default swaps insuring Allied Irish Bank�s debt against default fell 6.5 basis points to 195.5, according to CMA DataVision prices at 8:45 a.m. Contracts protecting Bank of Ireland�s debt fell 7 basis points to 191 and swaps linked to Anglo Irish Bank�s bonds were down 3.5 basis points at 347.5.
Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. A decline signals improving perceptions of credit quality.
State Aid
If Allied Irish can�t raise enough funds privately, the state will step in with aid, Lenihan said. It is �probable� the government will then end up with a majority stake, he said.
The banks �are in a better position today, but we also have to be cautious about thinking we are done and dusted here,� Forbes said.
Ireland may not be able to afford to pump more money into the banks. The budget deficit widened to 11.7 percent of gross domestic product last year, almost four times the European Union limit, and the government spent the past year trying to convince investors the state is in control of its finances.
The premium investors charge to hold Irish 10-year debt over the German equivalent was at 139 basis points today compared with 284 basis points in March 2009, a 16-year high.
Ireland�s debt agency said it doesn�t envisage additional borrowing this year related to the bank recapitalization. It is sticking to its 2010 bond issuance forecast of about 20 billion euros, head of funding Oliver Whelan said in an interview.
�The bank losses, awful as they are, represent a one-off hit. It�s water under the bridge,� said Ciaran O�Hagan, a Paris-based fixed-income strategist at Societe Generale SA. �What�s of more concern for investors in government bonds is the budget deficit. Slashing the chronic overspending and raising taxation by the Irish state is vital.� |
Lots of cash. Where are the perp walks. |
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ontheway
Joined: 24 Aug 2005
Location: Somewhere under the rainbow...
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| Posted: Thu Apr 01, 2010 7:50 am Post subject: |
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Banks failing in major countries around the world... why?
Socialism.
It is the collapse of the housing and other financial markets brought about by the continuing, downward spiral of the world fiat monetary system. Socialist governmental regulations and deposit insurance meant that bankers and the lenders to the banks (depositors) were lulled into a somma induced stupor: Imagine a casino where the value of the chips is steadily falling, big players have unlimited access to borrow more at rates lower than the rate of decline, and players are insured against losses at certain tables.
The answer is to go on a 100% gold standard, to repeal all regulation of banks and to abolish all government sponsored insurance programs for home loans, commercial loans, students loans, foreign loans, and for depositors - FDIC and FSLIC.
All government is socialism.
Socialism always fails. |
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blade
Joined: 30 Jun 2007
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| Posted: Tue Apr 06, 2010 4:28 am Post subject: |
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Anglo armageddon is a myth
The reason Anglo Irish Bank should be let go is simple: defaulting now will make no difference whatsoever to Ireland�s economic performance in the future. In contrast, keeping it on life support will cost us dearly. So shut it down and repudiate the debts.
The reason I am so sure that this will work is that, unlike most people making the decisions in Ireland, I worked in the defaulted debt market in the 1990s. I was the economist in a trading team at French bank BNP, which restructured defaulted debts, found new buyers for these debts and, in so doing, opened the door to those defaulting countries so they could come back into the international fold.
As far as I am aware, none of the people who are maintaining that we cannot default and must write a cheque to pay for Anglo�s misadventure have any such experience of working in defaulted debt markets.
The lesson is that the financial markets always forgive countries that default. There is always a deal to be done and, while it is not pleasant and negotiations can get heated, deals are done.
I worked in what was called the Brady bond market, which was a scheme hatched by US treasury secretary Nicholas Brady.
The Brady bond market was an enormous multibillion dollar market which financed and nursed back to health countries that defaulted in the 1980s and 1990s.This market flowed from deals done by defaulting debtors and their creditors. continued...
http://www.davidmcwilliams.ie/2010/04/05/anglo-armageddon-is-a-myth |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Tue Apr 06, 2010 4:33 am Post subject: |
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If the big banks are allowed to collapse the result will be immediate and short lived economic carnage. If you allow them to limp along with bailouts and accounting rule changes the carnage will be immediate and long lived.
I've used the band-aid analogy many times. Do you want it off fast or slow? Either way it is coming off and either way it is going to hurt. |
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blade
Joined: 30 Jun 2007
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| Posted: Tue Apr 06, 2010 4:40 am Post subject: |
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| mises wrote: |
If the big banks are allowed to collapse the result will be immediate and short lived economic carnage. If you allow them to limp along with bailouts and accounting rule changes the carnage will be immediate and long lived.
I've used the band-aid analogy many times. Do you want it off fast or slow? Either way it is coming off and either way it is going to hurt. |
Agreed, there might be an argument for not wanting the US banking system to collapse because of it's massive size and effect on the world's economy but in the case of small countries such as Ireland their default would have minimal impact for the rest of the world. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Tue Apr 06, 2010 4:54 am Post subject: |
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A government can reconcile a financial institute in a manner that minimizes the negative impact. Debts (bank assets) should be auctioned off at market clearing value and the debts then restructured to represent the market value.
But our governments seem unable to separate themselves from banking interests. Banks were allowed to blow up a credit bubble and then escape the aftermath while average people are kept in neofeudal debt bondage. |
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blade
Joined: 30 Jun 2007
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| Posted: Thu Apr 08, 2010 5:22 pm Post subject: |
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David McWilliams the writer of the article I posted above just posted this on Facebook and I thought I'd repost here on daves.
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| Greece moving rapidly to the endgame. Greece under the so-called "Protection of the Euro" (an expression favoured by our government) has bond yields of 7.5% while Iceland, the country everyone says is a basket case, awash outside the Euro and has defaulted, has bond yields of 6.7%! Interesting times. |
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The Happy Warrior
Joined: 10 Feb 2010
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| Posted: Thu Apr 08, 2010 6:19 pm Post subject: |
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| mises wrote: |
| while average people are kept in neofeudal debt bondage. |
This is a great phrase. |
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