LATEAUTUMN2008
IMPORTANT
COMMENT and facts ON THE BAILOUT
- to be updated
If the state decides to recapitalise
the banking system using its own money, it needs to exact
a very heavy price from the banks. Despite having saved
the banks, history suggests that banks ‘‘don’t
do grateful’’ - so the minister will have to
force their hands on the terms of any recapitalisation.
Expect sparks to fly in the weeks ahead, but the minister
should realise that he is in the driving seat.
Lenihan has demonstrated courage. There were many options
on the table last Monday night, but he took the best one.
To get the full benefit of this move, he will need to
wrest control of the banking system from those who nearly
wrecked it. In this endeavour, he should be supported by
every patriot in the country and all of us who are
concerned about our future.
www.davidmcwilliams.ie
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We’ll be up the
creek if this one goes wrong
Sunday, October 05, 2008 By Vincent Browne Sunday
Business Post
According to the report of proceedings on the Oireachtas
website, the Dáil met last Wednesday and
‘‘Chuaigh an Ceann Comhairle i gceannas ar 10.30am’’.There
was then the Paidir, followed by leaders’ questions.
Tánaiste Mary Coughlan was leader for the day, as Brian
Cowen was in Paris meeting Nicolas Sarkozy.
Fine Gael leader Enda Kenny asked whether outflows of
finance from financial institutions were regulated in
this country. Mary Coughlan replied: ‘‘There
will be facilitation in the event of any competitive
distortions’’ - whatever that meant.
She went on to say: ‘‘The Financial Regulator
is monitoring the balance of f lows between institutions,
and his job is to maintain a stable banking environment.”
There was another question from Kenny and then a question
from Labour Party leader Eamon Gilmore, which was pretty
straightforward: how much was the Irish state being asked
to guarantee by way of the government scheme?
Coughlan replied: ‘‘On the specific issues
raised, as the Deputy is aware, this is broad enabling
legislation . . .We are facilitating a guarantee that we
hope will never have to be called in. That is the
aspiration of all of us in the House . . .This is broad
enabling legislation to provide a legislative framework
to a principled decision made by the government yesterday.”
Up to this point, one would have assumed that the evasion
of questions was just the usual pitter-patter that passes
for accountability in our parliament. But then something
else happened.
Gilmore repeated: ‘‘What are we being asked to
guarantee?”
Coughlan replied, again without answering the question,
but nonetheless her answer was revealing. ‘‘We
would have found ourselves in a different set of
circumstances if we had not brought in this legislation,”
she said. ‘‘We would have undermined the system
of banking and it would have totally collapsed.”
Now either Coughlan did not know what she was talking
about (and the earlier exchanges suggested that this is
likely), or she did know what she was talking about and
blundered into a revelation that is truly astonishing. It
was not just a question of one or two banks going to the
wall last Tuesday morning, but the whole financial system
here. If the position was as precarious as she said, then
the risk to society by guaranteeing all the deposits and
loans to financial institutions is indeed very high.
Why would the whole caboodle have collapsed unless all
the banks were in deep trouble? We are now all in big
trouble - or potentially in big trouble - trouble that
could cause, not just the financial system to collapse,
but the whole economy to collapse, maybe irretrievably.
Certainly that would be the case if, for instance, the
state had to pay out, say, €200 billion under the
guarantees.
But I don’t think the whole system was in danger of
financial collapse, which means (if I am right) that
Coughlan was talking through her hat. Normally, a
minister talking through his or her hat (if they have
hats) is hardly worthy of comment, for it is so
commonplace.
But in this instance, here was the deputy head of
government telling us that the whole financial system was
in danger of collapse last Monday night. If she knew what
she was talking about, we are in big trouble. If she did
not know what she was talking about, we are also in big
trouble. Almost certainly the big trouble we are in is
that the deputy head of government, the person in charge
while the head boy was away, did not have a clue about
the nature of the financial crisis endangering our
society.
Unfortunately, the anxiety does not end there. Last
Tuesday morning, Lenihan announced a scheme of guarantee
that would apply to loans and deposits made to six
financial institutions, all with headquarters in Ireland.
To someone with just a smattering of acquaintance with EU
law, this seemed dodgy. How can an EU member state give
preferential support to domestic financial institutions
without being in breach of regulations governing state
aid or EU competition law? All the more so, since such a
measure would have an impact outside the jurisdiction
concerned, as is obvious from the reaction of British
financial institutions.
Clearly, someone realised these dangers some time last
Tuesday, so that, when the Credit Institutions (Financial
Support) Bill 2008 was published late last Tuesday night,
the specific reference to the six Irish financial
institutions, mentioned in Lenihan’s statement that
morning, was omitted.
Nevertheless, the impact of the scheme on financial
institutions - particularly in the North and Britain - is
obvious, and the dodgy nature of the scheme in relation
to EU law remains.
What if the EU Commission were to find that the scheme
was illegal under EU law? Where would that leave the
Irish financial and banking system?
There is a suspicion that the clever boys from AIB, Bank
of Ireland and some of the other financial institutions
steamrolled Coughlan and the others into a panic measure
that is so favourable to their interests as to be mind-blowing.
The guarantee scheme had the immediate effect of
enriching the shareholders of the financial institutions
concerned (share prices increased within minutes of the
Tuesday morning announcement), but that is small fry
compared with the real benefit.
Now, almost uniquely in Europe, depositors can lodge
money in Irish financial institutions with an assurance
of the safety of their deposits, an assurance that
applies to no other financial institution in Europe, with
the exception of Greece.
Money has cascaded into these institutions, hugely to the
benefit of the banks and building societies concerned,
and the only ones at risk are Irish citizens.
Yeah, yeah, the banks and building societies will have to
pay a commercial rate for this insurance. Well, if that
is so, why did they not go into the marketplace and buy
that insurance themselves?
And if it is true that they all would have collapsed last
Tuesday morning if the government had not intervened,
then let them pay the commercial value of rescue from
financial oblivion - all or most of the shareholding in
the institutions concerned.
Why should the Irish public give a lifeline to these
private institutions without taking them over - or at
least a majority shareholding, which could be sold off at
a handsome profit when the financial situation stabilises?
If this goes wrong, there will be hell to pay - with or
without the Paidir.
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Sunday October 05 2008Sunday Irish
Independent
Despite the near-collapse of the Irish banking system,
the Sunday Independent can today reveal that the bosses
of the Irish banks bailed out by the taxpayer last Monday
have received €100m in earnings over the past four
years. According to our figures, Brian
Goggin, Bank of Ireland chief executive, has made
almost €23.5m since he took up his position four
years ago, with his pay alone coming to €11.4m. This
is despite the bank cutting dividends in half and issuing
a profit warning. Anglo Irish
boss David
Drumm has received over €21m in remuneration,
including pay worth almost €9m since becoming boss
in 2005. AIB chief executive Eugene
Sheehy's earnings are set to exceed €11.4m since
he took over in 2005, despite the company's falling
profits and bad debt profile.The banks have also been
told by Mr Lenihan's
Finance Department officials that they will pay a
combined annual charge of €2bn if he goes ahead and
includes the non-Irish banks in the scheme. The banks are
looking for the annual charges to be set at about 0.1 per
cent of liabilities, for each of the two years the
guarantee extends to.The Government has decided to
initiate separate charge deals for each of the six banks
on foot of lobbying from less exposed institutions like
the EBS and Irish Life &
Permanent, who wanted their "prudent behaviour"
recognised. It was confirmed yesterday that, under the
terms of the controversial guarantee, if one of the banks
does go under, the cost will have to be met by the
remaining banks -- not by the tax-payer.
...................................................................................................
Troubled insurance company American International
Group is reportedly planning to sell some of its UK
operations in a bid to repay its debt to the US
Government.AIG, the world's largest insurer, was saved
from the brink of collapse by an 85 billion dollar loan
from the US government last month.The group has already
put three of its Japanese life insurance companies up for
sale to pay off the massive debt. It is now thought it
may sell off some of its UK operations as well.
..................................................................................................
Financial Stability Report by Brendan Keenan, excerpt:But the figure which really leaps out from the report is the one which states that 85 per cent of new bank lending to companies in 2007 was related to commercial property. This from a position where such borrowings were already among the highest in the world.Those loans, especially those in a couple of the smaller lenders, brought down the system. The government guarantees won't fix that. Loans which cannot be repaid must be called in, the land and buildings concerned seized by the banks, sold for what they will fetch, and the loss written off. Then, the banks which survive this process will probably need new capital to offset the losses, some of which may have to be invested by taxpayers.......................................................The international credit crisis is also much worse than any sane regulator would have put into a scenario. Not even the gloomiest Cassandra foresaw all five New York investment banks disappearing, and the US Treasury organising a bailout of at least $700bn.The fact is that regulators can only insist on banks curtailing their activities on the basis of what are seen as reasonable projections. Collapses, as distinct from credit shortages, occur when banks get overstretched and then a lot of different things go wrong at once. That is the excuse, but it goes without saying that more courage will have to be shown in fixing the mess than was displayed in trying to prevent it.- Brendan Keenan
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Let us suppose that, as you and the economists you
cite claim, the "bailout" will not improve the
lives of ordinary people. Let us suppose that
removing all limits from federal borrowing will not
<<straighten a system out of wack, create jobs,
restore capitalism and make it all ok again>>.
You know it, Ralph Nader knows it, and I know it.
How come Paulson, Bernanke, Obama, Pelosi, et. al. don't
know it? How is it that you and I and Ralph are so
much smarter than they are?
What if they do know it? What if they are as well
informed as we are? Then shouldn't we move on past
noting that the "bailout" will not accomplish
what its proponents tell us it will accomplish?
Should we not, then ask, "So, what will it
accomplish?" Perhaps the answer to that
question is the reason Paulson, Obama, Bernanke, Pelosi,
et. al., are shoving the "bailout" down our
throats. Perhaps they know as well as you and I and
Ralph what it will accomplish, and what it will
accomplish is something they want.
Best,JWG
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Once upon a time in a village, a man announced to the
villagers that he would buy monkeys for $10.
The villagers seeing there were many monkeys around,
went out to the forest and started catching them.
The man bought thousands at $10 and as supply
started to diminish, the villagers stopped their effort.
He further announced that he would now buy at $20. This
renewed the efforts of the villagers and they started
catching monkeys again.
Soon the supply diminished even further and people
started going back to their farms.
The offer rate increased to $25 and the supply of monkeys
became so little that it was an effort to
even see a monkey, let alone catch it!
The man now announced that he would buy monkeys at $50!
However, since he had to go to the city on some business,
his assistant would now buy on behalf of him.
In the absence of the man, the assistant told the
villagers.
Look at all these monkeys in the big cage that the man
has collected. I will sell them to you at $35 and when
the man returns from the city, you can sell to him for $50.'
The villagers squeezed up with all their savings and
bought all the monkeys.
Then they never saw the man nor his assistant, only
monkeys everywhere!! !
Welcome to the 'Stock' Market!!!!!
Cheers, Nachoua
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I was listening to coast to coast and they made
the announcement of the Simpson verdict. i looked at the
clock and it was 2am in the morning....my first thought
was huh? I was not surprised at the verdict,but Las Vegas
is 3-4 hours behind so that meant a verdict of armed
robbery was given at around 10 or 11 pm Friday night. is
that unusual for Las Vegas? I've been trying to find out.
As we all know, the bill for the 810 billion dollar
bailout was passed by the house, and signed by the bush
Friday afternoon. what would have been the most obvious
headline of the weekend is now pushed aside by the 10pm
Friday Simpson verdict. So an event that will have most
likely the most devastating effect on the American
economy may never have had a leading headline in this
country.
Its one hell of a coincidence, there are few things
that could have wiped the the bailout story off the
headlines, but the entire story of the mechanization
behind this bailout are epic;swelling a 3 page
legislation to over 450 pages in 3 days, adding 110
Billion dollars in bribes to the 700 billion dollar bill.
driving down the markets to scare people, keeping a cap
on the value of gold, among other things. most of us
already know black folks are going to be
scapegoating for America's economic problems, but i must
admit this was a brilliant and flagrant use of race
baiting and got me by surprise. Even one of the players
in the banking scheme, the entity of Goldman and Saks has
the same name as one of the victims, Ron Goldman. don't
think that the mainstream press and the ruling class don't
know how words get confused in people's mind, especially
when most Americans have the brains like "caribou
barbie"-Palin.
How one feels about OJ Simpson is NOT THE POINT. the real
point is a glaring and sad affirmation for many of us of
how black folks will be used to channel the anger of
Americans as their economy goes down the drain.
We seriously need to start making some preparations/decisions
to deal with this when it starts to play out. ANONYMOUS
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All the major private pension funds for public and
private employees, including TIAA CREF, CALPERS and labor
union pensions have lost anywhere between 23% to 30%
since January and show negative growth over the past 5
years. Clearly linking pension funds to the stock
market has severely reduced the living standards of
retirees, forcing many to remain in the labor force into
their seventies and beyond or to sink into poverty.
Pensions linked to publicly funded productive activity
would avoid the losses and risks embedded in investing in
the stock market.
The bipartisan strategic decisions to convert the US(AND
ALL OVER THE EU,JB,Editor)into a ‘service’
economy as opposed to an advanced and diversified
manufacturing economy is the root cause of the collapse
of the US financial system and the emerging long-term
recession......Trillion dollar military expenditures in
pursuit of prolonged, costly colonial wars (without end),
diverted funds from the application of technological
advances and high-end manufacturing......Social Security
still exists precisely because the US public rebelled and
defeated its proposed handover to Wall Street and it
remained a publicly run program. The financial
system collapsed because the US economy
‘specialized’ in a single crop – finance
– at the expanse of a diversified productive economy.
The political system is totally discredited because it is
run by a failed political elite which blatantly
represents and acts on behalf of a few thousand financial
oligarchs..........J.Petras
.READ MORE AT shamireaders@yahoogroups.com
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Europe Bids Adieu to Common Financial Crisis Approach
The idea of an EU rescue fund to address financial crisis symptoms in Europe is off the table. A summit meeting on Saturday of Europe's largest economies may end up being little more than a sharing of national strategies.........................
........Meantime, rumors raced that the Oracle of Omaha, Warren Buffett himself, had been calling lawmakers to urge passage. His $5 billion investment in Goldman Sachs and $3 billion investment in General Electic could run into big trouble if the package does not go forward. (Buffett's office declined to comment.) ..........................
Worried about their nest eggs in the global financial crisis, a growing number of investors are swapping cash for gold. Dealers of coins and gold bars are having trouble keeping up with demand. Robert Hartman sounds a bit breathless as he answers his phone. "This is already a state of emergency," the CEO of the Munich-based gold dealer Pro Aurum tells SPIEGEL ONLINE. For two weeks, he has been unable to fulfil all the gold orders his company has been receiving....more... De Spiegel News
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RTE, IRELAND: (NOT A WORD ABOUT THE
FACT THAT BRIAN COWEN COULD NOT HAVE TAKEN ACTION IF WE
HAD SIGNED LISBON TREATY)
Citigroup and Wells Fargo are battling
for control of sixth-largest US bank Wachovia, which has
been hit hard by bad mortgages but has a large network of
branches.The global credit crunch is forcing weaker
banks to sell themselves, sometimes at the urging of the
US government.Citigroup, the largest US bank, said
last Monday it had preliminarily agreed to buy Wachovia's
banking operations in a government-backed deal.That deal
did not include a signed merger agreement, but Wachovia
did sign an agreement to only negotiate with Citigroup
until 6 October.On Friday, Wells Fargo said it had signed
an agreement to buy the whole of Wachovia, including its
asset management unit and retail brokerage, for about $15bn.Some
lawyers believe that Citigroup could have a real case,
noting the exclusivity agreement and the fact that
Citigroup provided financial support to Wachovia last
week.
The chairman of Anglo Irish Bank Sean Fitzpatrick, has
admitted that the bank, like other financial institutions,
had made mistakes but that it had not been reckless.
Speaking in an RTE Radio interview today, Mr Fitzpatrick
also said he was grateful for the €400 billion
guarantee scheme introduced by the Government. He added
that banks would pay the full cost of the guarantee, and
the taxpayer would only be called on if all the banks
failed.
(why didn't RTE ask him about his purchase
of Ango-Irish shares directly Brian Cowen opened his
mouth that the Banks must be saved - he made 326,000E a
few hours later: the Irish Stock Exchange
investigating a number of share dealings... including
those by Sean Fitzpatrick...in the run-up to the
Government's decision. the shares were bought over a week
ago after talks had opened between banks, the Financial
Regulator, the Government and the Central Bank.. but
before the bailout was agreed Ailish O'Hora Irish
Independent Business News Editor)
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