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Fine Gael Manifesto - Burn The Bank Bondholders

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http://ftalphaville.ft.com/blog/2011/02/04/479746/gaelic-talf-and-other-bizarre-irish-bank-fixes/

People on here looking for the next black swan event (though strickly it is not out of the blue) need look no further than here.

A populist manifesto to make those nasty Europeans take there losses from reckless lending to Irish banks instead of the Irish taxpayer. Interesting that the threat is those Irish Americans are now are bestest friends now, so we can burn your banks and uncle Ben will help us.

If they win power there will be ructions in the market.

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http://ftalphaville.ft.com/blog/2011/02/04/479746/gaelic-talf-and-other-bizarre-irish-bank-fixes/

People on here looking for the next black swan event (though strickly it is not out of the blue) need look no further than here.

A populist manifesto to make those nasty Europeans take there losses from reckless lending to Irish banks instead of the Irish taxpayer. Interesting that the threat is those Irish Americans are now are bestest friends now, so we can burn your banks and uncle Ben will help us.

If they win power there will be ructions in the market.

http://www.youtube.com/watch?v=ygc-8F4DqJI

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I say burn the bondholders as they were just dumb and greedy and then move on.

This is going to be interesting.

Surely the banks would have to fail then. Dont Bondholders come before shareholders in the event of corporate default?

Id be pretty pissed if the shareholders in Banks like Halifax got a payment yet as a bondholder i get no guarantee of anything, if i were a bondholder.

And what about depositors - they invested on assurance from the govt they were guaranteed. I even remember uber-free market proponent Karl denninger suggesting money should be printed to cover them.

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Surely the banks would have to fail then. Dont Bondholders come before shareholders in the event of corporate default?

Id be pretty pissed if the shareholders in Banks like Halifax got a payment yet as a bondholder i get no guarantee of anything, if i were a bondholder.

And what about depositors - they invested on assurance from the govt they were guaranteed. I even remember uber-free market proponent Karl denninger suggesting money should be printed to cover them.

Depositors were only guaranteed up to about £35grand before the credit crisis hit, but only about 90% of it, at least in the UK. The full state guarantee of deposits happened in Ireland, and caused a fury as it gave those banks a moral hazard advantage over other European banks when there was huge competition for funds. The stupidity of that guarantee has come back to haunt the Irish.

I cant remember what happened to the rules in the UK after that. I think that the government specifically guaranteed all deposits at the Northern Rock to halt the run. I also think that they changed the rules to guarantee up to £50grand in full. I think that rule might still apply.

Certainly anyone that thinks that banks are fully underwritten by the taxpayer are wrong.

I am not so sure what you say about Denninger. He may well have caused for the guarantee of deposits, but that is not uber-free market, as deposit guarantees create massive moral hazard. A fraudulent bank will use the highest rates of interest to attract deposits, and then steal that money. You will note a couple of years back, all the best rates were with Icelandic banks.

I sincerely hope that the government does not guarantee all deposits at UK banks, things are a bit stretched on the government borrowing figures as things stand. What worries me though, is why are the Post Office accounts with that Irish Bank included in the FSCS guarantee? What madness is that, using taxpayer guarantees to fund the business of a foreign bank that is beyond UK regulation, and the victim of the greatest run in modern times?

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Depositors were only guaranteed up to about £35grand before the credit crisis hit, but only about 90% of it, at least in the UK. The full state guarantee of deposits happened in Ireland, and caused a fury as it gave those banks a moral hazard advantage over other European banks when there was huge competition for funds. The stupidity of that guarantee has come back to haunt the Irish.

I cant remember what happened to the rules in the UK after that. I think that the government specifically guaranteed all deposits at the Northern Rock to halt the run. I also think that they changed the rules to guarantee up to £50grand in full. I think that rule might still apply.

Certainly anyone that thinks that banks are fully underwritten by the taxpayer are wrong.

I am not so sure what you say about Denninger. He may well have caused for the guarantee of deposits, but that is not uber-free market, as deposit guarantees create massive moral hazard. A fraudulent bank will use the highest rates of interest to attract deposits, and then steal that money. You will note a couple of years back, all the best rates were with Icelandic banks.

I sincerely hope that the government does not guarantee all deposits at UK banks, things are a bit stretched on the government borrowing figures as things stand. What worries me though, is why are the Post Office accounts with that Irish Bank included in the FSCS guarantee? What madness is that, using taxpayer guarantees to fund the business of a foreign bank that is beyond UK regulation, and the victim of the greatest run in modern times?

On the subject of the Irish bank and the Post Office. Certainly now any foreign bank operating in the UK has to have capital in sterling in its UK subsidiary to the UK rules and be regulated by the FSA. This is why we keep seeing the UK head of Santander in front of the MP's.

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Looks like FG will be the senior partner in the next government, with a huge majority in coalition with Labour - so this probably isn't waffle for the benefit of the electorate. I wonder what Labour's contribution to this strategy is?

Not sure about the details, but they seem to be digging in their heels for a great tug of war with Germany.

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Surely the banks would have to fail then. Dont Bondholders come before shareholders in the event of corporate default?

Id be pretty pissed if the shareholders in Banks like Halifax got a payment yet as a bondholder i get no guarantee of anything, if i were a bondholder.

And what about depositors - they invested on assurance from the govt they were guaranteed. I even remember uber-free market proponent Karl denninger suggesting money should be printed to cover them.

That's the rub, when a bank is bust you burn all the investors equity holders, junior bondholders, senior bondholders, uber senior bondholders and ... depositors. I'm sure the depositors are pretty low in the pecking order. So you cant screw the bondholders and leave the depositors whole (government can promise compensation, as Ireland promised (o'muppets) but they don't have the money to cover it).

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Surely the banks would have to fail then. Dont Bondholders come before shareholders in the event of corporate default?

Id be pretty pissed if the shareholders in Banks like Halifax got a payment yet as a bondholder i get no guarantee of anything, if i were a bondholder.

And what about depositors - they invested on assurance from the govt they were guaranteed. I even remember uber-free market proponent Karl denninger suggesting money should be printed to cover them.

Bondholders and share holders were both stupid it was obvious what was going to happen.

Guarantee the savers and tell the shareholders and bondholders to go get lost or if they are allowed go after the employees and directors who created the mess.

Subsidising stupidity never works in the long run got to start to let people fail.

At the end of the day someone is going to get pissed off in this mess but someone has to lose if you bailout bondholders and shareholders your just sying its ok to make bad decisions as we'll never let you fail.

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I am not so sure what you say about Denninger. He may well have caused for the guarantee of deposits, but that is not uber-free market, as deposit guarantees create massive moral hazard. A fraudulent bank will use the highest rates of interest to attract deposits, and then steal that money. You will note a couple of years back, all the best rates were with Icelandic banks.

Thats what im saying, that even the 'free marketeers' want deposit protection!

Cant believe any politician of all people would have the balls to go through with it.

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Thats what im saying, that even the 'free marketeers' want deposit protection!

Cant believe any politician of all people would have the balls to go through with it.

I cant believe that he wants unlimited and full deposit protection?

If you want deposit protection, you cannot believe in a truly free market, the two are juxtaposed. I would call for deposit protection, but on the following terms.

Max £30grand insured.

UK Citizens only.

Only 1 account can be insured per citizen.

Only certain accounts can be insured, where the interest rates are 1% or less, or 1/2% below the BofE base rate, whichever is greater.

This would protect the least financially savvy people, those with more than £30 grand have to take their own risks. I wouldnt care about foreign nationals, they have their own government. And I would never expose deposit insurance to high interest rates, because then I will be insuring crooks, I wouldnt want that to happen.

You need to be careful with deposit insurance, limit it, and stick to the rules. Dont do a wobbly and bail people out when you discover NR is a bust bank. Do the right thing, close it down, and distribute assets accordingly.

If people took more responsibility for their own money, rather than trusting the taxpayer all the time, we would have a lot less problems.

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Bondholders and share holders were both stupid it was obvious what was going to happen.

Guarantee the savers and tell the shareholders and bondholders to go get lost or if they are allowed go after the employees and directors who created the mess.

Subsidising stupidity never works in the long run got to start to let people fail.

At the end of the day someone is going to get pissed off in this mess but someone has to lose if you bailout bondholders and shareholders your just sying its ok to make bad decisions as we'll never let you fail.

In economic terms, yes, but in political terms, i dont know.

While im doubtful that even HSBC or Lloyds would survive if they let the system collapse, should Lloyds shareholders suffer because of the Halifax balance sheet, given it was a Brownite political decision to screw them, not an economic one?

You can know everything there is to know about economics, but throw moronic politicians like Brown into the mix, and it doesnt matter if youre stupid or intelligent. They will likely take the easy political option, not the correct economic one, and youre responsible investment in a good bank or company suddenly becomes worthless not because the company itself is flawed, but because the govt changes the system.

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I cant believe that he wants unlimited and full deposit protection?

If you want deposit protection, you cannot believe in a truly free market, the two are juxtaposed. I would call for deposit protection, but on the following terms.

Max £30grand insured.

UK Citizens only.

Only 1 account can be insured per citizen.

Only certain accounts can be insured, where the interest rates are 1% or less, or 1/2% below the BofE base rate, whichever is greater.

This would protect the least financially savvy people, those with more than £30 grand have to take their own risks. I wouldnt care about foreign nationals, they have their own government. And I would never expose deposit insurance to high interest rates, because then I will be insuring crooks, I wouldnt want that to happen.

You need to be careful with deposit insurance, limit it, and stick to the rules. Dont do a wobbly and bail people out when you discover NR is a bust bank. Do the right thing, close it down, and distribute assets accordingly.

If people took more responsibility for their own money, rather than trusting the taxpayer all the time, we would have a lot less problems.

Well, i think he also called for full reserve banking too. So i guess the likelihood of compensation schemes being actually used would be zero.

But i guess that wouldnt be strictly capitalist either. I guess maybe we're so used to Regulation, even marginally less regulation seems radical

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That's the rub, when a bank is bust you burn all the investors equity holders, junior bondholders, senior bondholders, uber senior bondholders and ... depositors. I'm sure the depositors are pretty low in the pecking order. So you cant screw the bondholders and leave the depositors whole (government can promise compensation, as Ireland promised (o'muppets) but they don't have the money to cover it).

Won't they simply pass a law to allow them to do this? Most depositors will have relatively small sums, so bailing them out would be less of a problem than making the bondholders whole.

Isn't the entire rationale behind bonds that you take a risk for a gain?- why is there this current fetish that the bondholder risk must be covered?

Sure you could argue that protecting deposits is also a moral hazard, but most depositors were not told they were lending the bank money in explicit terms.

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I cant believe that he wants unlimited and full deposit protection?

If you want deposit protection, you cannot believe in a truly free market, the two are juxtaposed. I would call for deposit protection, but on the following terms.

Max £30grand insured.

UK Citizens only.

Only 1 account can be insured per citizen.

Only certain accounts can be insured, where the interest rates are 1% or less, or 1/2% below the BofE base rate, whichever is greater.

This would protect the least financially savvy people, those with more than £30 grand have to take their own risks. I wouldnt care about foreign nationals, they have their own government. And I would never expose deposit insurance to high interest rates, because then I will be insuring crooks, I wouldnt want that to happen.

You need to be careful with deposit insurance, limit it, and stick to the rules. Dont do a wobbly and bail people out when you discover NR is a bust bank. Do the right thing, close it down, and distribute assets accordingly.

If people took more responsibility for their own money, rather than trusting the taxpayer all the time, we would have a lot less problems.

I'd rather the state provided a savings scheme which was guaranteed by tax payers and private banks were completely unregulated.

Couple of course with the state bank being the only one allowed to create credit/money and private banks having to borrow real money from the state bank.

The private banks would borrow from the state bank and allocate capital at their own risk.

Then capital could be allocated most effectively which after all is the point of banking and the prudent savers amongst us would be the people to benefit from new money being created.

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I'd rather the state provided a savings scheme which was guaranteed by tax payers and private banks were completely unregulated.

they could call it national insurance sounds a great idea,a perfect way to rinse the masses, i mean save money, i dont know why politicians have never thought of it... ohhh wait a minute

Edited by Tamara De Lempicka

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Wonderful Vanity Fair article on the Irish mess - will make you laugh and cry - I had one choice quote highlighted for pasting, but the whole thing is stuffed with insights and observations:

http://www.vanityfair.com/business/features/2011/03/michael-lewis-ireland-201103?currentPage=all

Only weakness is the writer's failure to address the Irish who made out like bandits on property AND got out before the bust. I know a couple and reckon people like them will have a strange influence on Irish politics for years to come.

Note also that the Labour politician shies away from the notion of default. Oh dear.

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Won't they simply pass a law to allow them to do this? Most depositors will have relatively small sums, so bailing them out would be less of a problem than making the bondholders whole.

Isn't the entire rationale behind bonds that you take a risk for a gain?- why is there this current fetish that the bondholder risk must be covered?

Sure you could argue that protecting deposits is also a moral hazard, but most depositors were not told they were lending the bank money in explicit terms.

rules are rules (its not Nam)

Giving your money to the bank makes you a creditor the fact that J6P doesn't understand the risks is a product of a weak political class. (short term interest over long term prosperity). Which mope would vote for a Govt that "stole granny's life savings" or was at least supine whilst the evil bankers gnawed on her rotting carcass.

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How many manifesto promises get kept?

Didn't the Lib Dems promise not to increase tuition fees?

It will be interesting to see what happens if they actually win a majority whether they go through with it. However judging by what's happened in Iceland it's probably the way forward, purge the system and get rid of the fraud.

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  • 312 Brexit, House prices and Summer 2020

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      • down 5% +
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