Enda, begorrah, we need Pecora !
February 28, 2011
“Of the events of the war I have not ventured to speak from any chance information, nor according to any notion of my own; I have described nothing but what I either saw myself, or learned from others of whom I made the most careful and particular inquiry. The task was a laborious one, because eyewitnesses of the same occurrences gave different accounts of them, as they remembered or were [partial to] one side or the other. And very likely the strictly historical character of my narrative may be disappointing to the ear. But if he who desires to have before his eyes a true picture of the events which have happened, and of the like events which may be expected to happen hereafter in the order of human things shall pronounce what I have written to be useful, then I shall be satisfied. My history is an everlasting possession, not a prize composition which is heard and forgotten.” Thucydides
http://www.historyguide.org/ancient/thucydides.html
SO Martin Mansergh says it wasn’t a wipeout.
Lets see, perhaps the only group one could think of that gave the FF quislings a vote, was the older generation, who voted for FF out of gratitude for their pensions, medical cards and nostalgia for the past.
Good to see the Irish electorate restore the dignity of Irish citizenry.
So, it was a complete wipeout. Enjoy!
Its better to look ahead. Enda Kenny during the election campaign was insistent that we should get to the bottom of what happened in the banks that gave rise to their demise.
Consider the following: (p73, Restoring Stability After The Great Depression, ‘The Corruption of Capitalism’, Richard Duncan)
“In March 1932, The US Senate Committee on Banking and Currency convened what came to be known as Pecora Committee Investigation, named for committee counsel Ferdinand Pecora. The committee was authorized:
…to make a thorough and complete investigation of the operation by any person, firm, co-partnership, company, association, corporation, or other entity of the business of banking, financing, and extending credit; and the business of issuing, offering, or selling securities…
For the next two years, counsel Pecora summoned and interrogated the high and mighty of the US financial industry. Among the corporations investigated were National City Bank (which later became Citibank); J.P. Morgan & Co; Chase National Bank; and Dillon Read & Co. Those subpoenaed included Richard Whitney, president of the New York Stock Exchange, who was later jailed for embezzlement, and JP Morgan, Jr. himself.
The country was mesmerized by the hearings, which was widely covered in newspapers and radio. Under close questioning, many of the country’s most powerful bankers and financiers were revealed to be unscrupulous, foolish or both. Pecora uncovered widespread conflicts of interest and other unethical practices throughout the indudtry, particularly related to securities underwriting.
The banking committee compiled more than 12,000 printed pages and received 1,000 exhibits in evidence. Its report concluded:
“The cost of the investigation has been approximately $250,000. The expenditures, however, have been justified manyfold by the incalculable benefits flowing to the American people from the hearings in the form of enlightenment as to the practices which cost them so dearly in the past and in the form of remedial measures designed to prevent such practices for all time in the future. The Federal Government has been or will be reimbursed many times over by the receipt of additional income and penalties imposed on the basis of testimony developed at the hearings. To date (June 6, 1934) assessments and deficiencies and penalties have been levied by the Bureau of internal Revenue in a sum exceeding €2,000,000 as a direct result of the revelations before the subcommittee.”
The outcome of the Pecora hearings was a wave of legislation designed to bring the financial industry under much tighter government control.”
Shortly after the Securities Act of 1933 was set up to ensure investors received ‘adequate and truthful information’ regarding the securities sold. Securities and Exchange Commission (SEC) was established the following year.
The Glass-Steagall Act (officially the banking Act of 1933) was instituted with measures such as the extension of federal oversight to all commercial banks, the separation of investment banking from commercial banking, a bank could do one or other but not both. Investment banks would not be allowed speculate with customers deposits. The FDIC (Federal Deposit Insurance Corporation) was set up to ensure depositors against loss. Ceilings on interest rates were put in place and certain types of deposits, interest on demand, were done away with.
In what was a landmark reform at the time and one that has huge significance in relation to Ireland’s recent history, particularly the failure role of the Irish Central bank in its regulatory role in the Irish economy, “Two years later, the Banking Act of 1935 reorganized the structure of the central bank, concentrating power over the monetary system within the Board of Governors of the Central Reserve System and the Federal Open Market Committee in Washington at the expense of the 12 Federal Reserve Banks. The Act made the Federal Reserve Board’s power to alter the reserve requirements of banks permanent. When it was first granted, this power had been considered only a temporary emergency measure. The Act also changed the status of the FDIC from temporary to permanent. Finally, it granted the Federal Reserve the power to set margin requirements for securities lending.”
The above regulations lasted until 1970 in the USA when pressure was mounted to begin the process of deregulation that led to the systemic collapse of 2008.
Ireland can initiate its own hearings and begin to set its own house in order. A subset of the above regulations can immediately be developed to initiate greater regulatory control over the Irish banking industry.
At European level, there is an even more urgent need to duplicate the above regulations, to legislate specifically for banking within the Stability Pact. Any such reform, should incorporate wider membership among peripheral Central Banks operating at national level into a proportional membership of the governorship of the ECB.
This could extend control of oversight of national EZ Central banks into a regulatory structure under the ECB in a more democratic and better regulated banking structure, if only to avoid the repeat of regulatory failures similar to that of Irish Central Bank and the Irish Regulatory system in recent past.
Failure to impose such reforms that should be imposed upon the ECB and Irish Central Bank along with a burden sharing of bondholders and restructuring of Irish private banking debt, should see the immediate cessation of Ireland’s membership of the EZ.
End
The Default 111: The Final Phase
February 20, 2011
As we approach the day of the election of February 25, it’s hard not to to have the feeling of a build-up of irrelevance as regards our debt crisis.
This is sad and it also an inditement of our political leadership.
One would have hoped that the failure successive attempts to solve our banking and sovereign debt crisis would have led to a sharpening of the outlook on our way forward and the possibility of restart from a clean slate.
At first, there was the bank guarantee, this failed to reassure market fear of default for Ireland’s banks and a subsequent fear of sovereign default. Then we had the failure of NAMA. It was supposed to provide liquidity for the banks and restore trust in us from the markets, but it did not.
So then we had the EU/IMF/EFSF bailout for Ireland. Again, we were led to believe this would do it, financial stability, with austerity thrown in, would restore market place trust in us and get our economy going again. No, that didn’t work either. Instead, ballooning emigration, a declining tax base, increasing job losses, the threat of a growing personal debt crisis, rising local and european interest rates, further downgrade of Ireland by rating agencies, growing negative equity, and further doubts regarding the loan books of the banks, all conspire to give a gloomy outlook for Ireland. In 2011 many holding onto their businesses with their fingers, will be forced to let go.
Not to be outdone by this, politicians have managed in this election to put the question of Ireland’s default out of sight, out of the electorate’s mind. Instead we have illusory growth rate forecasting by the ESRI and Department of Finance built into the economic projections of our leading political parties, 3% annually between now and 2014.
Not only that but the public service is to be slashed by up to 30,000 jobs over the next three years! This will have an enormous deflationary effect on our economy. There is no limit to the optimism preached that sees the public service being slashed, taxes increased, cut backs to services introduced everywhere, and all this while achieving growth rates of 3% of GPD . Exports from the multinational sector and agri food related exports are doing very well, but both have spare capacity to grow exports with only a marginal increase in jobs to be hoped from those sectors.
The fact is, we are quickly running out of options. Default looms closer. The next government will have to cope with its inevitability.
We should have a strategy devised and ready to use to leave the EuroZone, if we are left to suffer as a vassal state with injurious and penal 5.8% interest debt bailout. The word bailout here as used is a misnomer. It is a ligature around the neck of the Irish economy that will see our economy destroyed in the coming years. This destruction comes at the expense of giving up our economic sovereignty witnessed by our so-called allies and friends in Europe. Meanwhile banks are rewarded for their contribution to the Irish economy with massive transfers of money from taxpayers to them in the guise of recapitalisation or pure funding through taxes securing repayments to bondholders who lent in an unregulated and toxic manner to our banks chief of whom was cuckoo Anglo.
If the coming European summit in March, does not address our imminent default and provide us with a viable way out to save us from default, its time for us to leave the EZ.
Let us look to another strategy to save our economy.
A report in the Sunday Independent by Ronan Quinlan, p8, ‘Bring back sterling if EU treats us badly – McEvaddy’ ascribes to businessman, Ulick McEvaddy, this view to leave the euro and for us to link to sterling. Such a strategy should be explored along with the return to a PuntNua, the sterling option would have some serious advantages for us compared to the PuntNUA option.
The QUESTION is becoming whether we wish to STAY in the EZ on life support in a form of quasi vassal state as a debt collection agency collecting debt reparations imposed on us to pay for senior bondholders of euro banks who’ve led us into the mess through poor regulation, just as much as local mismanagement on a political and banking level did the same; or whether we wish to LEAVE the EZ , which has become no longer viable as an economic entity for us.
Perhaps Republicans have to consider deeply the option of Sterling vs Puntnua as well leaving nationalist political considerations aside for the sake of a better future for Irish citizens. This question of leaving the EZ should have as much broad discussion as its corollary, whether we burn senior bondholders of Irish banks along similar lines as Amagerbanken bank, Denmark, has done in the past 2 weeks.
Next government will have to deal with default and there is no preparation evident for this eventuality other than a vague, we will negotiate!
Having just come from a viewing of the excellent ‘ Insider Job ‘ http://www.youtube.com/watch?v=X2DRm5ES-uA
I would like to ask the question whether political parties and individuals including their supporters by way of consultancy fees or any form of subvention eg corporate donations to his university, or personal investments, or other paid posts, if there are any possible conflicts of interest in regard to their views on senior bondholder debt?
In the USA postings to both Harvard and Columbia and corporate donations to both were seen as conflicts of interest in certain instances. In Ireland, names such as Sutherland, John Bruton, Dukes and an array of economists and personalities including up to a third of senior management and directors of Ireland’s toxic banks as well as members of the previous government, could be said to be leading an active campaign to keep the previous status quo who led our banks into pear shaped demise, are intent on keeping the previous show on the road.
Our coming default though much regreted will soon hopefully put an end to that. The serious question meanwhile is, are our figures being doctored? The banks have lied to us before.
http://www.bankpoll.net is now up and running and content will accrue and be of increasing value over time. Accompanying the site is its companion forum http://www.bankpoll.net/phpBB3 to which everyone is invited to contribute. The purpose of both sites is to gather a body of information and resources showing how our financial crisis in Ireland is being seen from abroad.
End.
The Default 11: Gombeen Enda to lead Zombie Economy !
February 8, 2011
Don’t look to any political changes to save us from default. Michael Noonan’s plan is to tune in to Europe’s cat and mouse begging bowl ‘negotiations’ looking for handouts: ‘http://www.euractiv.com/en/euro-finance/europe-may-hold-early-euro-summit-march-news-501728‘ a watery eyed approach similar to that of Fianna Fail who gave us the ‘fatal gift’ of 5.8% noose.
“Some analysts think Germany could compromise not only on strengthening the EFSF but also on having it charge lower rates to recipient countries or even buy their government bonds.”
Noonan does not accept the proposition of defaulting on the private debt of AIB, which has the potential of being twice the cost of Anglo, or Anglo. Nor, does it appear, Noonan has any intention of ending the deadly bank guarantee, which guarantees bondholders from the coffers of poor Irish taxpayers. Noonan is bereft of financial reforms within the banking system along the lines of Denmark’s ending of the bank guarantee and flag that bank losses will in future come from within the banking system itself:
http://scandiknavia.blogspot.com/2010/03/denmarks-bankpakke-iii-transfers-risk.html
Denmark ended its guarantee last September and we have the first casualty:
Amagerbanken senior bondholders take 41% hit:
“Denmark is dealing with Amagerbanken under regulations introduced in October designed to ensure taxpayers don’t have to meet the bill when lenders fail. The bank estimates its assets amount to about 59 percent of liabilities, meaning that creditors, including holders of senior unsecured bonds on which a government guarantee expired Sept. 30 and depositors with more than the insured maximum in their accounts, will face write-offs of about 41 percent.”
No fear of any burning of senior bondholders from our Irish political gombeens. They know less about banking than they do about economics. http://www.rte.ie/news/2011/0208/politics.html As if you didn’t need reinforcement of parish pump political gombeenism and cronyism, you got it here. Enda doesn’t like Vincent and Vincent gets the brunt of this dislike by this public dressing down. Its a boomerang bounce though as Irish citizens are being insulted by Enda choosing to speak to the town hall folk of Carrick On Shannon, Co Leitrim.
Pretty soon we’ll have a new government telling us of their junket to Frankfurt/Brussels to renegotiate our EU/IMF bailout. Chances are they’ll cut a deal forecast here for the first time of a rate cut from 5.8% to 4.55% and this will be announced in a blaze of glory. They wont know they’ve bought a pig in a poke if the ESRI are correct who forecast interest rate rises from the ECB from 1% to 2.25% between now and end 2012!
Its not that we wont be effected by such interest rate rises:
Our national debt is due to rise to €150 bn by 2014.
“More alarming is that between now and 2014, over €32bn in taxes will be spent merely on serving the interest on the country’s borrowings.”
So, here’s the deal: OUR DEFAULT IS INEVITABLE.
The combined weight of the EU/IMF bailout €67.5 bn bailout plus the €150 bn by 2014 total of approx €220 bn will make our borrowing costs unsustainable by 2013.
All respectable economists and international commentators including those who recently downgraded S&P Ireland know this. The EU/IMF bailout dealers know this as well. That’s why they were so diligent to demand that our monetary reserves plus our NPRF be spent on the banks before their funding went in, they know this money could be an escape fund and they would rather it not used in a way that would see us do a Denmark on them.
Solution is simple: senior bondholders of Anglo and AIB need to be burned and share the losses being born for them by Irish taxpayers. A debt for equity stake for AIB should be considered. Anglo senior bondholders should lose everything, they lost their bets. They should have insurance to cover their losses.
Lets end the pathetic debates re renegotiating bailout with IMF/EU. This nonsense is destroying our economy with its blindness to the real dangers explained above.
I have not even mentioned the fact of GNP deflation now beginning in the Irish economy which will compound with the proposed ECB interest rate increases; NAMA artificially inflating commercial rent with upward only rent review; increasing taxes; decline in tax base through emigration and close of business, declining vat.
We live in a zombie economy with its lifeblood being sucked away by senior bondholders of failed Irish banks, EU/IMF penal interest rates, ECB liquidity funding. The only thing is, matters have been made worse by the EU/IMF ‘bailout’. The bailout is our Ein Danaergeschenk (fatal gift) missile that will wreak our economy. Its not a bailout, but a time bomb.
Noonan and Enda instead of meeting with Barossa who wants his money back, should instead take a trip to Denmark. At least their leaders know how to take care of ‘something rotten in the state of Denmark’ . Post election Ireland it would appear a rag bag remnant of deluded FF will combine with their ghostly double in Fine Gael.
Things couldn’t get any worse, or could they?
Yes it could: http://www.independent.ie/business/irish/maeve-dineen-nervous-wait-for-banks-ahead-of-january-withdrawal-figures-2528144.html
“While most of us were worrying about snow and what to get aunty Mary for Christmas, large companies and many individuals were busy pulling billions out of the country — money that is not likely to return.
We have become used to big figures, but €40bn really is a staggering sum to lose in one month. It is almost equivalent to the value of all the companies listed on the ISEQ, for example.
It is more than the projected cost of rescuing Bank of Ireland and Allied Irish Banks and more than half the money we are getting from the IMF and Europe to shore up the banks.”
So, at its simplest, Ireland Inc has a huge current account deficit it need to row back to manageable proportions by 2014, latest 2016.
Its frankly not possible to pay for the losses of senior bondholders of Irish banks at the same time. Savings of €29 bn could be made by bailing in the senior and subordinate bondholders of Irish banks in a restructuring of our bank debt. According to Louise McBride, Sunday Independent Business, Feb 6, 2011, if the bailout could be renegotiated down to 3% from 5.8%, savings of €1.9 bn interest per year, a massive €14.25 bn over the seven and a half years of the bailout.
New government must be prepared to do both, to default on the private debt of the banks, and negotiate downward the EU/IMF bailout.
If our eurozone partners are unwilling to support us in the above, we need to leave the euro. Doing this will save our dignity and restore our credibility internationally amongst the nordic countries and the rating agencies. Rating agencies will see the sense of this and we could quickly return to the markets and the real task of making jobs as opposed to making emigrants and losing jobs.
End
The Default! Our zombie economy.
February 6, 2011
The question is no longer whether Ireland will default, but when. In order to understand this better, its useful to understand why Ireland will default. In understanding why we’ll default, we may see remedies that need to be applied to avoid the inevitable.
Colm McCarthy in Sunday Independent, Feb 6, p 29, looking at our economy, makes the following observations:
a) IMF/EU will furnish Ireland with €67.5 bn over the next three years. ‘The amount offered will be just enough to finance the huge budget deficits planned under the FF four year plan, the recapitalisation of our bust banks and the refinancing of various debts as they fall due.
McCarthy has been outfoxed by the IMF/EU dealers. Contrary to what McCarthy implies, the bailout was less about financing our budget deficit, than it was about ‘recapitalisation of our bust banks and the refinancing of various debts as they fall due’ http://bit.ly/g5e3ks It’s our bailout trojan horse, money given to us to pay back German bondholders, not save the Irish economy!
Government here could have mounted a programme of default/restructuring based on burning senior bondholders, guaranteeing future bonds to help with the bringing down of the budget deficit while removing the state guarantee covering previous senior bondholder bonds. The bailout is our Ein Danaergeschenk (fatal gift) missile that will wreak our economy. Its not a bailout, but a time bomb.
Later McCarthy notes of ‘the €15bn left in the NPRF, €10 bn has been earmarked for bank recapitalisation.
McCarthy who was chair of ‘An Bord Snip Nua’ compares public sector rates of pay in Ireland 20 – 30% to equivalent rates in UK and Europe obviously takes the line that penal austerity for Ireland undertaken in as short a time frame as possible, is what Ireland requires to reset its economy. This along with paying down bank debt and IMF/EU interest rate expenditure.
The question is, is he right? He doesn’t challenge his own assumption that it is possible we will not default if we accept the EU/IMF bailout measures.
The problem with McCarthy’s analysis is that he fails to take account of the real problem facing Ireland, this is bank debt and its devastating effects on our economy.
At least among some members of FG and Labour and SF, there is agreement on the need to renegotiate our banking debt.
http://www.ft.com/cms/s/0/b803093e-2eba-11e0-9877-00144feabdc0.html#ixzz1DBsfTtRx
“Ireland has already imposed haircuts on subordinated debt holders at Irish banks. But Fine Gael and Labour want to impose losses on the estimated €18.5bn in senior bank debt not covered by a government guarantee. About €3.5bn of that matures in the first quarter of 2011, before any incoming government takes its place.
Bankers said any move that reduced the cost of the bank bail-out should take pressure off the sovereign rating, which S&P downgraded on Wednesday.
S&P cut Ireland’s sovereign debt rating from A/A-1 to A-/A-2, “reflecting our view of the uncertainties surrounding the size of Ireland’s additional capital needs for its largely state-owned financial sector”.”
Lets examine the argument reduction of the government deficit through a programme of fiscal austerity will allow us to pay back bank debt and jump start economic activity in Ireland.
Let’s ignore government propaganda that ‘corners are being turned’, exports are increasing. Re exports increasing these exports are in a large part due to multinational exports. Such exports provide little in the way of employment generation and arguably are composed of financial engineering for the purpose of Corporate Tax transfers that make such figures questionable. This is especially true in the light of recessionary pressures across the world especially in the US and Europe and Asia. But we’ll agree the agri sector is doing well.
Instead lets look at a true barometer of the economic health of Ireland, employment levels. If you disagree with this measure, reflect on the healthy exports from Ireland during the famine years from which the minority of rich benefited, compared to the devastation caused by the famine to the many. Similar to our situation of today when you take into account the contribution to our exports by the multinationals.
Rate of unemployment, 3rd quarter of 2007 to third quarter of 2010 has seen an unprecedented increase in unemployment in Ireland to levels, last experienced in third quarter of 2000.
And unemployment rates are increasing. With penal, austerity cutbacks now hitting pay packets, the retail sector and service industry in Ireland will be further hit.
So, as the impact of emigration, falling salaries, higher taxes, higher unemployment levels, meet with odious debt levels created by the banks, EU/IMF bailout costs, a tsunami of debt fueled deflation increasing pressure on citizens including a cohort of citizens on existing mortgage holders fighting personal debt and higher costs, the debt deflationary spiral of debt payback anorexia begins, with its effects eating into the muscle of the Irish economy.
The Irish economy has begun to eat itself. Business in the service industry and retail reduce their costs and jobs are lost and profit margins wither. Meanwhile the taxation burden on the remainder increase beyond the capacity of the burden to be endured..
At the other end of the scale, the costs of recapitalisation of the banks increases with outflows of savings and deposits. Much of the lending of the banks that is not considered toxic is based on property at cryogenically frozen values with ‘upward only rent reviews’ that further wither business and add to unemployment levels. The more the banks face up to the reality of their losses, the more those losses increase. So taxpayers are on the hook to maintain a fantasy economy
In an unprecedented way, a vampire octopus with tentacles reaching out from senior bondholders guaranteed profit and insurance from loss, developers with toxic loan portfolios funded by taxpayers through NAMA, government policy on the banks led by blindness and disarray, has pillaged the Irish economy and turned citizens into a state of bondage held in place by the ECB and government. The phrase ‘moral hazard’ has gone out of circulation.
Central to the Irish economy is the citizen, the centre under a structure of present banking policy protecting bankers and bondholders at the expense of citizens, cannot hold.
Default is inevitable. We must consider the closure of Irish banks as no longer an option, but a necessity, to avoid further damage.
There is some money left in the economy in the National Pension Reserve Fund. We can either squander this money on the banks pouring more money into the black hole, or we can use this money to buffer a structured default by closing our zombie banks, Anglo, Allied Irish Bank and possibly BOI, and negotiate a full default package with senior bondholders. We do not have to recapitalise banks with €10 bn from the NPRF as McCarthy suggests. The EU/IMF want them recapitalised in order that they be in a fit condition to pay back German senior bondholders. We should let them go.
The argument for this is that if we do not default now, this will inevitably happen in the future, but costs will be far higher.
The problem is our politicians have lost grip on the real economic realities of our current situation. Instead of cool headed leadership, we have instead a bunch of headless chickens spouting nonsense about generating sustainable employment, when the ship is sinking right before our very eyes.
Technically deflation is http://en.wikipedia.org/wiki/Deflation
“In economics, deflation is a decrease in the general price level of goods and services.[1] Deflation occurs when the annual inflation rate falls below 0% (a negative inflation rate). This should not be confused with disinflation, a slow-down in the inflation rate (i.e. when inflation declines to lower levels).[2] Inflation reduces the real value of money over time; conversely, deflation increases the real value of money – the currency of a national or regional economy. This allows one to buy more goods with the same amount of money over time.”
http://www.rte.ie/news/2011/0131/economy1.html
Central Bank says GNP is in the negative -0.3% This is deflation ready to spiral out of control.
We need to manage our default before it further destroys the economic base of our economy!
End
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