Tuesday, August 18, 2009

Irish Bankers seem to be up the proverbial Creek of Poo

We'd all like to see bankers squirm in a full public inquiry

Just when you think things couldn't get any worse at the banks, they do. With every day that passes, it is clear that the Irish-owned banks are even more bust than we thought they were.

Posted by vindicated @ 08:24 PM (1128 views)
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6 thoughts on “Irish Bankers seem to be up the proverbial Creek of Poo

  • Thanks TC but I can’t take the credit for that one. The only reason I know is because Liam Carroll held 30% equity in Greencore plc who currently employ my better half (hence our interest in the state of the banking system in Ireland and Liam Carroll’s shares!)

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  • Is NAMA the first example of a ‘bad bank’ being created to mop up the oxymoronic ‘toxic assets’?

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  • It does not suprise me. I lived in Ireland from 92-02. Property inflation was unbelieveable then and then they joined the EURO and interest rates went down. The Irish just thought they were so smart and their smartness had transformed a poor country to a rich one overnight. But in reality the new BMWs and Mecedes had to drive on roads full of pot holes whilst the government awarded public servents ever higher salary increases. A quick visit to Dublin and you would quickly realise that it WAS NOT Switzerland, despite having a similar GDP per head (officially!). And property being a one way bet became a national contagion. In 2006 20% of the country’s GDP was, you guessed it, building residential houses. Something like 40% of new builds and 15% of the total housing stock are empty. It was not a case of BTL, but buy to sell to the next sucker. There were no tenants to fill these empty homes. The banks were sucked in to give big developers any amount of money they wanted as housing was a one way bet. And finally, as the ruling party (Fiana Fail) is not the most honest outfit in the world, stepped into to bail the developers and the bankers with tax payers money. It looks like the Irish State has not enough money to bail out the sector, but have wasted huge amounts trying to. They should have let the banking sector go down with the construction sector two years ago. Then the Irish would have a nationalised banking sector (maybe on its way to reprivatisation) and stacks of cheap property being auctioned off and possibly lower taxes…..but that’s not socialism for bankers and developers…I told my Irish freinds many times that a meltdown was inevitable as their economy (post 2000) was built on sand…..

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  • 4. europeanbear said… They should have let the banking sector go down…

    An increasingly common refrain!

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  • devo

    – I think it may well be, I have not heard of another, that is if:
    1) by ” oxymoronic ‘toxic assets’ ” you mean the most recent set of troubled assets; and
    2) a ‘bad bank’ must be a separate entity from a state department ( whether or not state managed ).

    It is certainly not the first bad bank ever to have come into existence to manage troubled securities an example would be Sweden’s Securum which was created by segregation of assets from Nordbanken, a state owned behemoth – It was set up as an asset management company rather than a bank ( but a true ‘bad bank’ isn’t really a bank after all ).

    However, I have not heard of an example of a bad bank set up to purchase troubled securities
    – although the TARP programme in the U.S. is effectively a bad bank encapsulated within their Treasury department I think.

    My opinion is that the bad bank approach is wrong for the scenario we have been through, especially for the securities I believe NAMA is to manage. The fundamental issue is not the securities ( although I agree that some structures were implemented that would not make sense outside of the boom ) but rather the rate of change of system capital. The real way out for a bank that has loss making securities is to sell off good assets to cover it’s losses. Furthermore a bank will not willingly sell said securities at market value, only at a greater price, so the tax payer takes an immediate hit on purchasing a large portfolio which should only block-trade at a discount to market.

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  • @666

    Thanks for your detailed response.

    I thought I had read recently that our government was planning a similar toxic asset purchase scheme, but I may well be mistaken.

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