Black Thursday 30/09/2010 Ireland Inc

September 30, 2010

Welcome to Black Thursday, 30/09/10

(Additional content added 01/10/2010)

Using the Anglo preso available at link Anglo as at 31 March 2008, here’s a bit Math to measure against the Anglo results to be posted tomorrow:

Anglo gave total loans 31 March 2008 as at Total loans – €bn 69.0


diversification of loan assets : Europe 7%

USA 13%

UK 36%

Ireland 44%

Assume a 50% drop in the value of Anglo assets to account for a marginally higher than 50% drop in the value of loan assets in Ireland and a less than 50% drop across the board outside Ireland, could that make Anglo final losses at €bn 34.5 or up to 50% of that loan book above? But that’s assuming Anglo accounting above is above board, why wouldn’t we assume that?

Here’s the secret of the Anglo ponzi scam: Average LTV 73%, where value is current market value!

Notice no LTEV’s there to claw back house prices/loans.

Taxpayers were screwed by banks and government by forcing the bubble having to pay huge prices for loans/property

Now, on the way down, taxpayers get screwed to bail out bankers and government who got screwed screwing taxpayers. Could you make it up!

Pure gombeen mismanagement and incompetence by government, DoF, Regulator and Ponzi bankers

This was an obscene way to run a country and a bank!

Two years of procrastination, obfuscation, deliberate ‘constructive ambiguity’, plain old lies, the government now agree with this approximate figure ‘approximately’.

Today our government, Santa Clause, opened the parcel to tell us what present they are giving us for Christmas.

You better like it. Brian (Baby Lenihan) has even reprimanded Pravda RTE for allowing all this talk go on about default for the past 2 years. So, no more of that! Reminds me of Mugabe’s quote ‘Some people are contriving ways and means of making us collapse.’

Baby Lenihan has told us the story of the bank manager who is told the lender may default before the lender asks for money. But he has not told us the story of the bank manager who has squandered depositors money,that was borrowed irresponsibly and also lost.

Should the bank manager be dug out with taxpayers money and allowed to lend again! Markets understand bad banks and know how they should be dealt with! Supporting them with taxpayers money is a ‘no’, ‘no’

EMU are delighted the Rescue fund doesn’t have to be tapped to support the borrowings of Ireland Inc.

Stooge Honan Central bank plan is to purge taxpayers in the coming budget; if he could get government to agree, he would like to layout a plan for a three year purge stall!

Baby Lenihan is treating Irish taxpayers the same way Robert Mugabe treats white farmers. The cess pit of Anglo filled with the slurry of FF developers money, protected with chinese walls, its depositor money would if compromised ‘damage the Irish economy’.

The arsonist that burnt the Irish economy, Anglo, must be protected at all costs by Ireland Inc’s very own Sheriff of Nottingham, Brian Lenihan. The senior bondholders who irresponsibly with no fiduciary responsibility fed the flames of Anglo should be protected also.

Poor wee Brian, what should be done with him. Obviously he needs to be replaced immediately and told to go take care of his health. He is being totally irresponsible with that as well!

Brian would be more suited to one of those small USSR states that existed prior to the Berlin Wall coming down. No criminal investigations into Anglo, no proper banking commission?

Today is Black Thursday, not because of the ’sofar’ losses at Anglo of €34 bn, but because taxpayers and Irish citizens, disenfranchised white farmers of Ireland Inc, are now hijacked by Baby Brian Lenihan, to pony up for the hidden depositor, bondholder debts of Anglo.

Baby Brian milks Irish taxpayers for the losses of depositors in Anglo. How many of these are developers with dirty money ready to flow again to scrape bargains off the floor of the wreckage of Ireland Inc.

As well as being very immature, I suspect our ‘Baby Brian’ really is not that very bright!

Black Thursday saw ‘democracy’ go away in Ireland Inc! Welcome to bankocracy!

“Meantime we shall express our darker purpose.”
– William Shakespeare, King Lear, 1.1.36

Could it possibly happen that Baby Brian and fellow stooges will purge €3 – €4 bn from Irish taxpayers next December from the budget, then go to international markets, say: look at us, we are great boyos, taxpayers love us for cutting their heads off and markets will respond by lowering bond spreads to around 4.4% ?

Nah, Baby Brian, in spite of all your whining and whinging at your critics, it won’t happen like that.

Its time for us all to say no to this pig slurry being heaped in Irish taxpayers by the three stooges, Silas MArner Honahan, KOwing the Unknowing and Baba Lenihan the Whine!

Lets all try to get our democracy back!

A word about Ponzi Property Schemes:

“Lay was so impressed with Skilling’s genius that he created a new division in 1990 called Enron Finance Corp. and hired Skilling to run it. Under Skilling’s leadership, Enron Finance Corp. soon dominated the market for natural gas contracts, with more contacts, more access to supplies and more customers than any of its competitors. With its market power, Enron could predict future prices with great accuracy, thereby guaranteeing superior profits.”

The secret of Enron was ‘mark to market’ being able to manipulate and predict market prices by cornering the supply and artificially creating bubbles.

This was not very different from Anglos LTV Loan to Value. Give enough loans out to enough people, they people compete and drive the price up. Property values would increase of their own accord.

Using a 73% LTV Anglo could justify giving out loans based on a rising market value of fields that by its own lending practices it had artificially enduced the value of.

The value of the field this year was € 1 ml, selling like hot cakes, next year worth €2 ml, because of how easy it was to get croney loans.

Anglo using LTV was prepared to lend €2 ml based on ‘Current’ Loan to Value of approx 75%, so if local auctioneer said it was worth, three quarters or €1.5, the requested €2 ml money handed over. We are not talking PH D economics here. This is simple common sense property scam arithmetic.

No brakes applied by government, foot on accelerator, ‘wee, wee all the way home’ tax incentive schemes.

This was purely property related as there was no surge in manufacturing, no surge due to discovery of commodity resources, such as oil or gas, multinational exports helping but not sufficient or near an explanation for soaring property prices.

We do need proper accountability and responsibility and a proper investigation into our banks. Anglo bondholders who facilitated this scam who did not exercise fiduciary responsibility should be burned, bankers should be punished as well, government should be sent into exile to some banana republic in Africa, suggest Uganda, where they would be a lot more at home.

Enlightened economies such as Belgium have conservative lending practices requiring 30/40% of the loan put down by the borrower on any purchase. We gave out 100% loans to developers on non existing ‘personal guarantees’. Other economies in Europe adopt safety valve cushions such as Denmarks
smart mortgaqe bonds with borrowings up to 80% LTV read here:

Anglo was a cess pool scam run by croney cowboys aided by an incompetent banana republic government!

Taxpayers should refuse to pay for it!

Lenihan on Primetime speaking to Miriam O Callaghan 30/09/10 said our response to the banking crisis was similar to Sweden’s. We were buying equity in the banks. After 2 years of scratching our heads we are finally coming up with a realistic approximate cost of our taxpayer losses in Anglo. Lenihan has this audacious tendency to get facts wrong none the least of his guesstimate ‘sofar”s for Anglo. Comaprison with Sweden wrong too. Sweden acted swiftly, auditors within the banks themselves were ordered quickly to write down losses. Management was replaced and previous mangement given ‘the pink slip’. A good bank/bad bank asset management model was adopted and banks were quickly recapitalised. The ‘bad bank’ within 3/5 years had firesaled toxic assets, Sweden’s scenario was managed quite differently to that of Ireland Inc, whose present fiscal problems dwarf triple fold the difficulties faced by Sweden in early 1990’2:

Our casino response to our banking meltdown has been to wait and wait for global recovery to lift all boats. Our response has been fitful and slow and uncertain and has shocked markets and much damage has been done. The question is whether our winding down through NAMA, nationalisation of Anglo and now through government majority shareholding of Allied Irish Bank, plus austerity measures, plus our commitment to protect bondholders to the tune of €35 bn in Anglo, in a world economy that is slowing and contracting. Will succeed? If it does, it will not be because of skill and craft, it will be because of luck, and the odds do not appear to be in our favour. What appears could very well be on the cards is, Ireland Inc becomes a vassal debt servicing agency for the eurozone, number one candidate for the European Emergency Rescue Fund, with more sacrificial cost to Irish taxpayers  obliged to pay even more  pecunious bailouts for the banks.

The Swedish Bank Support Authority had to choose between two alternative strategies. The first method involves deferring the reporting of losses for as long as is legally possible and using the bank’s current income for a gradual writedown of the loss making assets. One advantage of this method is that it helps to avoid the bank being forced to massive sales of assets at prices below long run market values. A serious disadvantage is that the method presupposes that the bank problems can be resolved relatively quickly; otherwise the difficulties compound, leading to much greater problems when they ultimately materialise. The handling of problems among savings and loan institution in the United States in the 1980s is a case in point. With the other method, an open account of all expected losses and writedowns is presented at an early stage. This clarifies the extent of the problems and the support that is required. Provided the authorities and the banks make it credible that no additional problems have been concealed, this procedure also promotes confidence. It entails a risk of creating an exaggerated perception of the magnitude of the problems, for instance if real estate that has been taken over at unduly cautiously estimated values in a market that is temporarily depressed. This can lead, for instance, to borrowers in temporary difficulties being forced to accept harsher terms, which in turn can result in payments being suspended.

This is an immense task that the Swedes took on. Their entire banking system was effectively insolvent. Yet, they were able to fashion a workout scheme that had bi-partisan political support, did not unfairly reward shareholders, dealt with moral hazard, separated regulatory and workout roles so as to reduce conflicts of interest, and that quickly wrote down valuations and liquidated the bad debts as opposed to dragging the process out. The Swedish authorities should be especially commended for dealing with the liquidity and solvency concerns simultaneously, while keeping moral hazard to a minimum.”

Mike Whitney considers the world trade background scenario for the US and implications for bondholders. His views should resonate against those delusional enough to believe in the short to medium term a surge in growth fed by the world economy will  be the answer to our problems. If anything, world trade over the next 5 – 10 years will contract:

“The collapse of securitization (the bundling of pools of loans into securities sold at market) has sucked more than $1.2 trillion from the credit markets and forced a cycle of deleveraging throughout the financial system. The idea that securities-based lending was viable was predicated on the Radian belief that self-interested speculators could sustain the flow of credit to the system. That notion turned out to be catastrophically wrong.

Not only did financial institutions increase their risk exposure by loading up on long-term illiquid assets, (MBS, CDOs, CDSs) they also borrowed heavily on those dodgy assets so they could skim the cream off the top and add to their 7-digit incomes and lavish bonuses. For the better part of a decade, the only things that worried the Wall Street oligarchs was whether the larder at the vacation bungalow on the French Riviera needed restocking or if their were any early morning tee times available at St Andrews. PIMCO’s Bill Gross gave an apt summary of shadow banking system in a newsletter to his investors last year:

“Our modern shadow banking system craftily dodges the reserve requirements of traditional institutions and promotes a chain letter, pyramid scheme of leverage, based in many cases on no reserve cushion whatsoever. Financial derivatives of all descriptions are involved but credit default swaps (CDS) are perhaps the most egregious offenders. While margin does flow periodically to balance both party’s accounts, the conduits that hold CDS contracts are in effect non-regulated banks, much like their hedge fund brethren, with no requirements to hold reserves against a significant “black swan” run that might break them. Jimmy Stewart—they hardly knew ye! According to the Bank for International Settlements (BIS), CDS totaling $43 trillion were outstanding at year end 2007, more than half the size of the entire asset base of the global banking system.

Total derivatives amount to over $500 trillion, many of them finding their way onto the balance sheets of SIVs, CDOs and other conduits of their ilk comprising the Frankensteinian levered body of shadow banks.

Pyramid schemes and chain letters collapse because there is no more credit to feed them. As the system of modern day levered shadow finance slows to a crawl, or even contracts at the edges, its ability to systemically fertilize economic growth must be called into question.”

“”The value of global financial assets including stocks, bonds and currencies probably fell by more than $50 trillion in 2008, equivalent to a year of world gross domestic product, according to an Asian Development Bank report.”…Blackstone’s CEO Stephen Schwarzman said on Tuesday that “Between 40 and 45 percent of the world’s wealth has been destroyed in little less than a year and a half. This is absolutely unprecedented in our lifetime.” ”

“”Americans may not realize it, but the biggest threat to economic stability is not falling home prices and retail spending but collapsing world trade. The value of global merchandise exports was down fully 45 percent in November 2008 from 12 months before. This is a terrifying number.

Nothing remotely comparable has ever happened before – not even in the Great Depression of the 1930s. ”

“The misguided policy response from Washington has focused almost exclusively on squandering public money and burdening our children with indebtedness in order to defend the bondholders of mismanaged financial institutions….

Make no mistake. Buying up “troubled assets” will not materially ease this crisis, nor will it even improve the capital position of financial institutions. Homeowners will continue to default because their payment obligations have not been restructured to any meaningful extent. We are simply protecting the bondholders of mismanaged financial institutions, even though that bondholder capital is more than sufficient to cover the losses without harm to customers. Institutions that cannot survive without continual provision of public funds should be taken into receivership, their assets should be restructured to better ensure repayment, their stockholders should be wiped out, bondholders should take a major haircut, customer assets should (and will) be fully protected, and these institutions should be re-issued to the markets when the economy stabilizes.” (John P. Hussman Ph.D., Hussman Funds, Buckle Up,

Bondholders own everything and they shouldn’t be trifled with. They represent foreign banks, governments, sovereign wealth funds, and industry giants. They can afford the losses better than the taxpayer, but they won’t be happy about it. There’s bound to be retaliation and gnashing of teeth. It will require a carefully executed strategy to avoid a bloodbath; a surprise incision with a razor-sharp scalpel followed by an Obama-led public relations campaign to placate the enraged bondholders. It won’t be easy, but it has to be done, and fast. Unfortunately, we are no where near the point where anyone at Treasury or the Fed will set aside the corporate agenda long enough to do the people’s work. That’s why Geithner will have to go. Bernanke, too.

By Mike Whitney”



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