Month: April 2010

This has always been one of the great mysteries of Irish banking since the bailout. Who are the bondholders? The lack of information is a gift to conspiracy theorists, but also poses questions around who exactly the Irish public guaranteed in September 2008.

It occurred to me that it might be worth looking through the archives in relation to bond issuance, and in relation to any property deals Anglo was involved in in the years prior to nationalisation, such as:

In 2006 it was reported that: “The group’s North American business, approaching its 10th year in operation, has originated loans in excess of $15 billion and at their last reporting date of March 31, 2006, had current outstanding commitments of $4.5 billion.”

Continue reading “Anglo bondholders”

Micheál Martin had an opinion piece in spanish newspaper, El Pais, last week. Translation here via Google Translate and the ‘Pin…

In Ireland, with the successful launch of the bank recapitalization plan, the publication of the Bill for the Reform of Central Bank and the agreement reached with public service unions, the Government has made significant progress this week on the road economic recovery.  We have a three-pronged strategy aimed at: to stabilize public finances to repair the banking system, and improve competitiveness and promote sustainable employment.

The agreement on the transformation of public service includes proposals on wages until 2014, a downsizing and restructuring of the service in order to reduce costs and maximize performance. The implementation of this agreement will contribute to a climate of industrial relations more stable the country out of the global economic downturn.

Sounds very confident that the agreement will actually be implemented. T’was published on the 11th.

Letter in today’s Irish Times…

Madam, – I was interested to see that Brian Lenihan apologised for his role in the catastrophe that has enveloped us (Newstalk interview with George Hook, reported in Home News, April 16th). This is in stark contrast to the attitude of Brian Cowen.

I am enraged, when I see Mr Cowen taking credit for standing firm against citizens in his direct employ, making them take some of our pain, so that we can continue to borrow at the catastrophic levels and cost to meet the liabilities he has engineered in a structural way into our system.

I wonder if any finance director, later CEO, of a private enterprise were in office when it delivered a financial return of (rising) liabilities of €57 billion and (declining) income of €32 billion, would there be any way that he could continue in office? If it merely happened on his watch, would he not feel compelled to resign in shame, before an immediate push achieved the same result?

Of course the degree to which it was Mr Cowen’s fault, either directly, personally or by virtue of his being the leader of a government which delivered the worst performance of any since Nero allowed Rome to burn, is debatable. But it is a ridiculous and dishonourable thing to blame Ireland’s woes on international turmoil, as Mr Cowen has done.

I am therefore furious that I still have to look at him, as he takes credit for our continued ability to borrow vast sums, as if that were his answer to the question he must be privately and should be publicly answering. I am also furious that, in decades to come, as patients still wait on trolleys in our hospital and those who work and pay tax now to correct his mistakes must live on much reduced pensions, he will still have multiple guaranteed and inflation and promotion benchmarked pensions to see him through a comfortable dotage denied the rest of us.

How does Mr Cowen face his people without shame? Why does he not do the honourable thing and resign and waive some of his pensions, which he clearly does not deserve? All I am able to do, to reflect my futile frustration, is affirm that, even when all of this is a distant memory, I will never vote for him or his party again. – Yours, etc,

JUSTIN McKENNA,

Ulster Terrace,

Blackrock, Co Dublin.

Strangely, according a press release today, Fine Gael seems to support the establishment of the Credit Review Office. I can’t fathom why, even Mark Fielding of ISME can’t see it overturning many refusals.

The process

The banks get into trouble after giving out big loans to customers who could never really afford to pay them. Banks go bust. Banks get re-capitalised. Banks begin to more carefully consider the viability of entities to which they loan. Banks realise that some entities to which they loan have no commercial future. Banks thus lend to less entities.

Concurrently; Government realises that simply recapitalising the banks through Nama won’t ‘get credit flowing’ to small businesses. Government realises that bailed-out banks not lending to small businesses won’t look good. Government devises a way to make it look like they’re doing something to pressure the banks. Government establishes the Credit Review Office. However, Government gives the Credit Review Office no statutory or regulatory powers and thus ensures it will be little more than an Missus Doyle to the Nama banks. Will you ever give them a bitta credit? Ah go on, go on… gwan gwan gwan gwan gwan. Government does so because everyone – even them! – knows banks being careful in choosing to who they loan is a good thing, banks doing the opposite is part of what has us here in the first place.

The real reason for establishing the Credit Review Office was to allow Government spokespeople, when questioned on how it is “getting credit flowing“, to say “we’ve done a lot to make absolutely sure this happens, we’ve set up the Credit Review Office which is ensuring that viable businesses get the credit they need to keep people in jobs”. Spokespeople will be able to say so in the knowledge that what they’re claiming is waffle of the highest order because if the businesses were viable the banks would want to lend to them to help improve their own balance sheets, thus the Credit Review Office would be irrelevant.

Therefore, isn’t the very existence of this Credit Review Office an admittance of sorts from Government that Nama and the bank recapitalisation wouldn’t get credit flowing? Not that that’s shock news to anyone, but it’s something Government finance spokespeople had been claiming for months.

If Nama was to get credit flowing, then why upon the estabishment of Nama did the Government see fit – in the same Act – to establish a quango responsible for reviewing circumstances in which banks weren’t allowing credit to ‘flow’.

Oh, and while on this sort of subject, the €3bn fund for businesses via Nama? Let’s see how the banks can work that one by reclassifying the terms of current clients’ loan facilities, over-lending to customers and generally doing what they do best. Forcing credit into the market can be a dangerous thing in itself.

Footnote: The best quote in the Indo article with that Fielding sound-bite is the one from John Trethowan, head of the Credit Review Office.

The former banker said both AIB and Bank of Ireland have been working to help set the independent Credit Review body up.

“So if the credit reviewers and myself come up with the opinion that a credit is safe, I am pretty sure that the banks will be minded to listen to what I’m saying,”

Er, but the thing is, Mr Trethowan is kinda unlikely to have a differing opinion. Under the set-up all applications must have gone through the full internal appeal process – up the chain of command – in the bank before it comes before the Credit Review Office. So the chances of the Office disagreeing with the banks’ decision is fairly low.

Plus, as a former President of the Institute of Bankers in Ireland, Chairman of the Bank’s Pension Scheme, Executive Director of National Irish Bank and former Executive Director of Nautilus Insurance Europe and Northern Bank, I’m not sure if Mr Trethowan would be the type to step on the toes of tight pocketed bankers.

Is that the sweet smell of a quango?… Maybe I’m just getting cynical in my old age.