The US HOR are big girls

[The Awesome Berbaslug!!!]

Commensurate with our status as the greatest country on Earth, the Irish Minister of Finance has decided to guarantee the deposits and debts of the Five irish owned banks (AIB, BOI, Anglo irish, Irish life and Permanent, and the EBS) to the value of €500,000,000,000. Which neatly brings us to the value of $700,000,000,000

WE ARE TITANS. TUG OUR TEABAGS AMERICA THIS IS THE SORT OF BRAVE RECKLESS FRONTIER SPIRIT THAT HAS MADE US A POWER TO BE FEARED. WHEN IRELAND SPEAKS THE WORLD QUAILS.

(if this goes wrong we will be in a lot of trouble.)

[anton pulisov]

The US HOR are big girls

They really don't know what they are doing.

Was there even a vote on this in the Dail?

Pity they couldn't do the same for the HSE. What a bunch of very unpleasant people.

[The Awesome Berbaslug!!!]

The US HOR are big girls

I've been reading a lot about this. The Financial regulator has been looking through the books of the banks and reckons that they are ok. Everyone else in the world though looks at them though and thinks the banks could be seriously discommoded.

The problem that the banks have is that no-one will lend them money over the short to medium term, so all the government is saying is "These banks are fundamentally sound, and we will guarantee money that you lend them"

The figures that are involved are so huge that I don't see the govt going ahead with them unless they were sure that the banks were actually fundamentally sound. (the liabilities we are guaranteeing are €400 billion, but the banks assets are €500 billion)

So this is either very clever and brave, or unspeakably stupid. They have totally mishandled the release of this info. A lot of people think this is a bailout of the banks etc, but pretty much the only thing that the govt isn't guaranteeing is the share price of the companies.

Also they haven't come out and explicitly said what the cost to the banks for this astonishing level of guarantee will be. They say that it will be set at commercial rates, but there isn't an insurance company in the world that would offer this.

It is crucial from the governments point of view that they crucify the banks for this. THey have said that the rate will be set by the central bank, and that the details will be worked out in association with the Central bank.

This is the actual statement.

They really need to get a good deal out of the banks, and not face a repeat of that rather scandalous bailout of AIB back in the 1980s.

[The Awesome Berbaslug!!!]

The US HOR are big girls

oh, and no more swearing, I'm behind a firewall here.

[ursus arctos]

The US HOR are big girls

I'm not aware of any other country in the world that has such a blanket guarantee on all deposits, regardless of amount or type.

[Ray de Galles]

The US HOR are big girls

PM for you, UA.

[ursus arctos]

The US HOR are big girls

Replied.

Is the nature of the firewall such that aiatl can't see any of his own thread?

It's almost as effective as an "Ignore Poster" function.

[Brandenburger Toro]

The US HOR are big girls

I am bursting with pride at this development.

Pride, and a little bit of apprehension at the notion that we'll all wake up some morning and find out we're now Swiss...

[Brandenburger Toro]

The US HOR are big girls

Does this mean AIATL can't see his own thread?

It's almost like having an "ignore poster" function.

[anton pulisov]

The US HOR are big girls

[qoute]The figures that are involved are so huge that I don't see the govt going ahead with them unless they were sure that the banks were actually fundamentally sound.[/quote]
In Holland they just dealt with the one bank that was on the brink (Fortis) when it happened.

In Ireland they're backing all the banks at once. It would suggest that all the banks in Ireland are screwed.

[anton pulisov]

The US HOR are big girls



Look at some of the names on this list.

I see Dexia at number 15. Fortis, Wachovia and HBOS are all on the list.

So if even the safe banks can fail, how safe is my Rabobank money? ("Luckily" for me, I own much less than the 20k euro deposit guarantee anyway.)

[anton pulisov]

The US HOR are big girls

Is it true that the head of the central bank phoned Biffo in the middle of the night to tell him that if he didn't back all the Irish banks by 9 am, that international creditors would come knocking at the doors of Irish banks, thus sending the Irish economy back to the stone age?

[garcia]

The US HOR are big girls

lenihan's move has annoyed foreign-owned banks in ireland and even elsewhere in europe, who claim they are now forced to compete on an uneven playing field. is the consequence of this going to be that every government in europe is forced to issue similar guarantees to its banks?

[garcia]

The US HOR are big girls

some of the figures associated with the guarantee

this is all very confusing. is it a napoleonic flanking move that will spirit our system safely through the crisis? or a desperate, blundering gamble that will lead to the total depopulation of the island?

in the absence of any real knowledge of how the international financial system works, i retreat to a crude rule of thumb and look at the authors of the bill. the trembling form hunched in the economic cockpit appears to be fianna fail finance minister brian lenihan. looks like it's time to assume the crash position.

[ursus arctos]

The US HOR are big girls

My off the cuff guess is that the EC is going to save you by declaring it to be illegal state aid and therefore unenforceable as written.

[Ek weet nie]

The US HOR are big girls

Does the European Union allow the state to do this? Is it not a case of the state helping private industry that they usually frown upon? Or is the banking sector too interwined with the country's economy?

It's an uncharacteristically brave move by the Government. I hope they reached it through proper analysis and not just on the basis of how to help their "friends".

[Ek weet nie]

The US HOR are big girls

And ursus pops in with the answer whilst I was drafting the question.

[Ginger Yellow]

The US HOR are big girls

"In Ireland they're backing all the banks at once. It would suggest that all the banks in Ireland are screwed."

I don't think that's right, although they could all be screwed anyway. The experience of the last few weeks and months has shown that as soon as you sort out (or don't) one institution, people start looking for the next weakest one. I think Ireland looked at what's happened in the US and the UK and thought: "Fuck that. We're going to have to back them all eventually, we might as well do it now and avoid the runs in the first place." It could actually be quite a smart move. If you're going to be bailing out the banking system in the first place, the best way to save taxpayers money is by giving the banks the best possible access to wholesale funding and the best guarantee of deposit safety. Bailing out a bank after a run is much more costly than preventing one in the first place (in this sort of market), even if the total potential liability may be more.

[garcia]

The US HOR are big girls

i wonder at the possible political consequences of such a move, especially if it was followed by a series of irish banking collapses.

edit - to ursus, nil

[Ginger Yellow]

The US HOR are big girls

"My off the cuff guess is that the EC is going to save you by declaring it to be illegal state aid and therefore unenforceable as written."

As someone suggested to me, the Irish government can just have a quiet word in the EC's ear and say: "Look, do you want our vote for the constitution or not?"

[ursus arctos]

The US HOR are big girls

Sorry, but do you mean a state aid based invalidation?

I think the likely outcome would be a more limited increase in the protection available. Our earlier discussions on this point have highlighted how far behind the rest of Europe Ireland is in terms of deposit insurance; a plan that insured all accounts up to say 100,000 euro shouldn't have any state aid issues at all, while still preventing runs (at least classic runs by depositors).

[AMMS]

The US HOR are big girls

Seems pretty smart to me, at a stroke they've restored confidence in the local banks with 'small' investors. If it does go tits up the country was fecked anyway so what have they got to lose? The Irish treasury belongs to the Irish taxpayer so they are using their own money to protect their own investments. It's a gamble but not a huge one.
It also allows the Irish treasury to concentrate on 'big' investors, who are far more likely to cripple the country anyway.

[Brandenburger Toro]

The US HOR are big girls

ginger - That's garcia's point too, if I'm not mistaken...

[The Awesome Berbaslug!!!]

The US HOR are big girls

blast all of you and your swearing ways.

anyway, the three big irish banks hit their peak share levels in february 2007. In the 20 months between then and the arrival of the guarantee AIB lost 4/5ths of its value, Bank of Ireland lost 5/6ths of its value and Anglo irish have lost 6/7ths of their value. Isn't that a neat mathematical progression.

I wonder how far back you had to go to get an AIB share for €5 or £4

[Brandenburger Toro]

The US HOR are big girls

You mean you can see the new page as long as there's no flipping swearing on it?