OK Corral Hope Signs!

November 25, 2010

I caught some of Morning Ireland interview with Amadeo Altvatch(have I spelled correctly) who spoke on behalf of banking policy resolution for Ireland from EU perspective.

The news for once was very positive and gave me a little bit of optimism.

In early December, the EC will publish its findings.

Apparently negotiations are taking place day and night with Irish negotiators.

Amadeo delivered the message that a resolution of the Irish banking problem would be based on shared losses between bondholders and citizens. This echoes the position of Angela Merkel recently.

An article by Shane Ross and Nick Webb November 21, Business, Sunday Indepenent, noted AIB, BoI, IL&P, and the EBS are in the firing line for bank restructuring.

I would hope Anglo and INBS could both be wound up and allowed to fail with senior bondholders writing down losses. Only radical surgery of this kind can save Ireland and the eurofrom further contagion and default.

One of the obstacles for a resolution of the bank sector problems  is our negotiating team.

This morning more evidence of the obstacles we face in negotiators from a weak and incompetent Irish team came from Micheál Martin, who stated in debate with Richard Bruton, that EU policy was not to allow banks to fail, this implied senior bondholders would be protected in negotiations.

He said Angela Merkel’s recent comments that bondholders should be held accountable and required to share speculative losses in failed banks, was unhelpful. Instead of using such comments from Merkel, along with the damage of contagion from Ireland, as a bargaining chip to leverage savings for Irish taxpayers and citizens, croney Micheál sold out Irish citizens in those comments to the banks.  FF have brought us to the IMF through a failed banking policy and will make the mess bigger if they can.

In a fawning eulogy to Patrick Honahan in same paper above, Shane Ross couldn’t bow down further to “Patrick Honahan: Hero of the hour” for telling the Irish people we were going for bailout.

Honahan burst the bubble of fiction denial from FF the previous weekend.

Let’s get Honahan into perspective: Honahan has led NTMA support for the failed government policy on the banks and NAMA until this position was pulverised into defeat by the markets.

Honahan coming out holding a white flag telling us of the terms of defeat is not heroic, its made of more comical stuff!

This morning, Richard Bruton debating with Micheál Martin on Morning Ireland, clearly stated that both senior bondholders and subordinate bondholders would have to share the burden of loss, as part of a resolution tothe problems of the Irish banking sector

Micheál Martin was not telling the truth stating that banking policy driven by the ECB is based on the principle of not allowing banks to fail or default. Caja Sur in Spain is a recent example of a bank in europe allowed to fail. Merkels comments recently show this to be untrue also. Is this incompetence or deceit from Micheál Martin, take your pick!

The ECB Stability Pact needs to grasp the nettle of the banks and deal with a shared loss scenario across Europe from Greece to Ireland, Portugal and Spain. This policy will mean the euro will take a strategic loss in the short term. Counter intuitively, this would actually be good for our economy allowing the euro to fall against the dollar and it would help Ireland hugely.

In the longer term it can look forward to profiting from the spoils of an enhanced and strengthened Euro unfettered with risk of collapse.

How it deals with the banking crisis among the peripherals is crucial.

A slash and burn policy is required along with strengthened Basil 111 regulatory reform charged with effective management of the banking sector across Europe.

While there is positive news above, its sad for Ireland the wrong team is negotiating banking terms with europe.

We do have a professional and highly capable team of negotiators here in Ireland. However, because of local political contagion and incompetence, they will not be sitting at the table.

Given that agreements on the banking sector to be negotiated with Europe will be revisited by a new incoming government, perhaps it would make more sense to have a second negotiating team from Ireland representing other parties in the Dail , along with local and national expertise, consulted on the direction and content of any negotiations currently taking place.

Ideally, citizens should have a say by referendum or otherwise in the outcome of any such negotiations as well.

After all, our society is not based on Orwell’s ‘Big Brother’, or is it?

OK Corral decisive action from Europe on our banking sector expect around first week in December.

Fiction:

Wed, Dec 1, 2010

Brussels, Ollie Rehn, EC Commissioner for Economic Affairs:

“In a radical overhaul of the Irish banking sector, AIB, BoI, IL&P, and the EBS will undergo radical restructuring with mergers between AIB and BOI; IL&P and the EBS.

NAMA will undergo radical restructuring returning assets to the above banks following processing of its loan portfolio.

Those assets will be managed by the banking sector in a phased liquidation process within an agreed timeframe of not more than three years.

NAMA itself will merge with the Office of The Regulator and have its budget reduced from current €2.5 billion to €.5 billion. This will result in a reduction of staff with a new regulatory mandate TBA.

NAMA itself will continue to be overseen by the NTMA. It will be tasked with the wind down of Anglo Irish Bank and INBS.

Both of these private banks will be subject to a managed wind down with immediate effect. Both banks will be allowed to fail.

Senior bondholders will be invited to discussions on the terms of a wind down. These terms will match the current ‘hair cut’ applied to developer toxic lending at 58%.

Negotiations are at an advanced stage.

Extra:

Markets on hearing the above news saw shares rise in the nationalised/state majority owned new bank ABOI(Allied Bank of Ireland) and IPLEBS(Irish Permanent LIFE and Educational Building Society)

Meanwhile market spreads for Irish bonds dived from 9.8% in the morning to reach an astonishing 4.8% in early afternoon.

No doubt this was spurred on by the news of a major investment in the Irish banking sector by both Chinese and South Korean interests.

It is also believed both Sweden and UK have invested heavily in Ireland extending loans for infrastructural projects, light rail, broadband and further expansion of the Irish agri food sector.

Reality (Or truth is stranger than fiction:-) -):

Following the mismanagement of the Irish economy and their failure to resolve the banking crisis that led to the intervention of the IMF. FF turn their attention to international affairs:

Sarah Palin’s North Korean Allies

http://bit.ly/fBGi6K

North Korean ambassador visits Dail:

http://bit.ly/eVlcha

(Amadeo name/title to be edited later)

End.

 

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