The Irish Central Bank solo run?

Last week we showed how the most recent Irish Central Bank financial statement showed a large jump in the ‘other assets’ of the bank. We’ve been trying to figure out what exactly is going on. Over the weekend, Lorcan noticed that the data we used last week has since been updated to include the October data. It makes for eye-watering reading – hold onto your hats.

The ‘Other Assets’ of the Central Bank are now at €34.606bn, having jumped from €14.378bn in August and from the €21.195bn in September (which we reported last week). That’s a rise of over 140% from August to October. But what, on the face of it, is going on, and what does it mean?

Here is a chart of the ‘Other Assets’ of the Central Bank from the peak of the property bubble in September 2006 to October 2010:

Here is the table:

When previously contacted, the Central Bank of Ireland gave this description of what is captured by the ‘Other Assets’ column of the Irish Central bank balance sheet:

“The ‘Lending to euro area credit institutions in euro’ columns [including “main refinancing operations” and “longer term refinancing operations”] are Eurosystem operations.

Any other lending undertaken by the Central Bank is captured under the ‘Other Assets’ column, also in Table C2. It should be noted that this column is not exclusively lending, but also captures other certain assets of the Bank.

There is no further detailed information we can provide.

[The sheet being referred to is here, note the columns referred to (f) and (g), while other assets is column (r).]

So, what does this mean?

Well, the total amount of ‘assets’ in the Irish Central Bank has risen by a total of €55.3bn from August to October, from €130.310bn to €185.815bn . But only €35bn of that has been captured by the ECB-related columns in (f) and (g) referred to by the Central Bank above.

The other €20bn has been added to the ‘Other Assets’ column.

All of which seems to point to some euro quantitative easing happening on Dame Street in Dublin. How long will the ECB allow this situation continue?

The €7.9bn bond purchase

Last month Anglo confirmed that it had repaid €7.9bn in bonds at the end of September. According to the Irish Independent:

Banking sources yesterday stressed that there was never any question of Anglo not repaying the debt that fell due in September, since the bank is legally obliged to pay government-guaranteed debt.

The Department of Finance categorically rejected suggestions that it had been involved in any deal to refinance Anglo’s balance sheet, stressing that funding matters are handled by the bank.

The exact details of the September refinancing are unclear but it is understood that the bulk of the money came from the ECB, with Anglo pledging various securities as collateral.

Market sources stress that this is the normal way for Irish banks to refinance bonds that fall due, given the state of the international markets.

A spokesman for the Central Bank said “all of the guaranteed bonds issued by Irish banks have been repaid by the Irish banks as they fell due”.

Myself and Lorcan were chatting about this and Lorcan pointed to an interesting item on the Irish Central Bank’s recent data. Here is a spreadsheet from the CB. Look close at the ‘other assets’ and notice the jump from August to September. In August the other assets of our Central Bank amounted to €14,378 million. By the end of September, the figure had jumped to €21,195 million, a jump of €6.8bn. Historically, this is the biggest jump in other assets, excluding the period around Anglo nationalisation (Feb 2009) and the period around the Northern Rock crisis (September 2007). But what better illustrates this is a graph. So here is a timeline of ‘other assets’ of our Central Bank from 2003 to September 2010:

Here is the table:

So the question is: Where did Anglo Irish get €7.9bn to pay back bondholders, and did our Central Bank foot the bill? And how involved were the ECB in this transaction? If the CB did what it looks like they did, we essentially just transferred the ‘asset’ from one state agency to another.

A timeline

Something to muse on. Here is a timeline chart. I wonder what it represents…

Only in…

Most insightful press release of the day goes to… drumroll please… Shell to Sea.

Today marks the 4th year anniversary of the baton charge and violence by Gardaí against protestors opposed to the Corrib Gas Project.

The 10th of November 2006 was chosen by the Shell to Sea campaign, as a suitable day of action as it marked the anniversary of the hanging of Ken Saro Wiwa and 8 other Ogoni activists who opposed Shell. Over 200 Gardaí were drafted in under the direction of Superintendent Joe Gannon (then Superintendent in Belmullet).

Ironically Superintendent Joe Gannon is now Superintendent at Pearse Street Garda Station, which today will be the focus of a protest march in opposition to Garda brutality against protestors. This protest was called in light of the violence that was dealt out to students in Dublin last week. Supt. Joe Gannon was present and personally involved in the scene at the Dept of Finance when students were violently removed from the building.

Shell to Sea spokesperson Terence Conway stated “In a investigation into Supt. Joe Gannon’s handling of a protest at Pollathomais Pier in which 20 people were injured, the Garda Ombudsman recommended to Garda Headquarters that disciplinary action be taken against him. However nothing happened and instead Supt Joe Gannon was promoted and has continued to police protests in the same manner that characterised his time down here in Mayo”.

Irish Times report on the Garda Siochana’s decision to reject the recommendation by the Garda Ombudsman is here.

Guess who's back, back again?

Shady’s back. Back again.

The gathering mortgage crisis puts Ireland on the cusp of a social conflict on the scale of the Land War, but with one crucial difference. Whereas the Land War faced tenant farmers against a relative handful of mostly foreign landlords, the looming Mortgage War will pit recent house buyers against the majority of families who feel they worked hard and made sacrifices to pay off their mortgages, or else decided not to buy during the bubble, and who think those with mortgages should be made to pay them off. Any relief to struggling mortgage-holders will come not out of bank profits – there is no longer any such thing – but from the pockets of other taxpayers.

The other crumbling dam against mass mortgage default is house prices. House prices are driven by the size of mortgages that banks give out. That is why, even though Irish banks face long-run funding costs of at least 8 per cent (if they could find anyone to lend to them), they are still giving out mortgages at 5 per cent, to maintain an artificial floor on house prices. Without this trickle of new mortgages, prices would collapse and mass defaults ensue.

However, once Irish banks pass under direct ECB control next year, they will be forced to stop lending in order to shrink their balance sheets back to a level that can be funded from customer deposits. With no new mortgage lending, the housing market will be driven by cash transactions, and prices will collapse accordingly.

Bertie Ahern's Cabinet briefing papers

As part of an ongoing process we are obtaining Cabinet records from 1998, 1999 and 2000. These records became available following the expiry of the 10 year rule under Section 19 of the FOI Act, as amended in 2003 (the amendment lengthened the time for release from 5 to 10 years, first making records available in 2008).

This record contains briefing papers for then Taoiseach Bertie Ahern from late May, June and July 1998. We currently have an appeal pending with the Information Commissioner in relation to how information from 12 years ago is redacted – and whether exemptions, such as commercial sensitivity, could still apply. We expect this decision in the near future.

It is also worth noting that prior to the FOI Act, the following papers would have only become available on January 1, 2029, as per the 30 year rule.


Previously:

Bertie Ahern briefing papers, April/May 1998

The Digest – New format

I’ve no time these days to publish ‘The Digest’ at a set time and day so I’m changing the delivery format. Instead of appearing in the subscriber feed every Sunday there’ll be a constantly updated list of links on the right side of the website. Note; if you subscribe by email or through a feed you won’t be alerted when these are updated, you’ll need to click through to the site here to view the list.

The new delivery is running off my Google Reader shared items RSS feed, which was pretty much where I picked most of my links from each Sunday anyway. Six links will be visible on the site at all times, to see older links click the little orange square beside the ‘The Digest’ heading in the right sidebar.

Shanahan on media priorities

Kate Shanahan, a TV and radio producer and lecturer in the DIT School of Media, has a piece in the ‘Think Tank’ slot on the [paywalled] Sunday Times opinion pages today. The headline is ‘Media can’t chase after squirrels’. The piece chastises the media for following the shiny stories from hour to hour instead of staying focused and providing depth on the important stories over long periods.

I largely agree with her until she begins her conclusion…

“In the Irish context, we may prioritise news values as they apply to the current crisis.

A story about Ivor Callely’s expense claims should not overshadow one about a semi-state that has squandered millions, such as Fas.”

Let’s not forget that the Ivor Callely story is not your average expenses story. It’s not about him being kicked out of the Seanad and going to the courts. It’s not about him claiming travel expenses from a house in Cork which wasn’t his principle residence.

It’s about him allegedly using forged documents to claim money from the taxpayer-funded parliament. That would be fraud.

That’s serious.

Dismiss your politicians’ apparent financial discrepancies as small-fry because it’s only a few quid here and there and watch it happen again and again. Then watch that attitude permeate through society and into – amongst other places – semi-state bodies. “Fair play to him, sure wouldn’t we all do it?”. Well, no.

When it comes to public representatives – those charged with giving direction and providing moral and political leadership – we shouldn’t care how many figures follow the currency symbol.

Ivor Callely isn’t a squirrel… he’s a… let’s not forget that.