Zombies

November 3, 2013

zombie

For balanced and critical reporting all shades of an argument should be put before the public for their evaluation in a balanced and fair reporting of current affairs. The Irish media should be acting in the role of the fourth pillar of our democracy.

In Ireland its simply failing in its duty. In its present guise it has a role more similar to the role of Vatican radio in relation to its controllers in the Vatican.

The following serves as an example of how media management and control is exerted in regard to breaking stories in the financial sector in Ireland.

This week we saw the following report from RTE Radio Telefis Eireann http://www.rte.ie/blogs/business/2013/10/31/another-bank-to-leave-irish-retail-banking/ David Murphy of RTE business affairs reports “Danske Bank Ireland is closing its personal and business banking only days after ACC announced it was handing back its banking licence.”

http://www.danskebank.ie/en-ie/Personal/Pages/personal.aspx

“Danske Bank Group on 31st October 2013 announced its intention to refocus its business in Ireland towards its Corporate & Institutional clients, where the Bank’s international reach, market leading technology and specialist advisory services gives Danske Bank a competitive edge.

Following a detailed review of the Irish operation, and with immediate effect, the sale of personal and business banking products to new customers will be discontinued.”

Danske bank was formerly NIB National Irish Bank, its Danish FSA and now leads a list of foreign banks closing down their operations in Ireland.

According to David, this reflects a deteriorating business environment for banks in Ireland. Its a vote of no confidence in the Irish economy.

“It leaves a diminishing number of existing players with Ulster Bank, AIB, Bank of Ireland and Permanent TSB still open for retail business.

Ulster Bank’s future remains unclear until the UK Chancellor George Osborne announces his intentions in relation to the good and bad bank split which is proposed for its parent group RBS.

UB is in as big a black hole as our zombie “pillar banks” currently in protracted and excruciating negotiation with their customers. Instead of debt write-down for borrowers, its debt write-up. Preferred resolution for those in default is to extend the mortgage with current ceiling for borrowers taking repayments into their seventies.

Each customer of the bank declaring a debt resolution issue will be a target for unrelenting victimisation masquerading as debt relief.

Its unclear if this elaborate fix will extend further to further generational owners of the same property. This extension represents further profit extraction for the banks with bigger interest to repeat from these extensions.

Another ploy is interest only mortgages again the pendulum swinging towards the banks because of terms that favour the bank more than the balance sheet of the borrower.

We don’t know how bankruptcy stats pitch in here as no such comprehensive data as yet is freely available.

The growing amount of outstanding interest on the property collapse in Ireland stores up future problems for the economy instead of dealing with them in the here and now. With unemployment and emigration and the drag of personal commercial and mortgage debt on the economy and banks at the throat of the economy, the pension sector is a tsunami ready to engulf all in the future.

But with such an economic profile of the Zombie kind, the dam is bound to burst. Clearly the exit of the Deutsche and ACC banks from the Irish economy is a signal of lack of confidence from the heart of the financial sector in this doomed ‘bailout’ Frankenstein dreamt up by the troika, in particular, the ECB.

But back to David. Its not what he writes but what he leaves out:

“Danske Bank’s financial results for Ireland said a lot. Despite years of restructuring it lost €33m in the first nine months of this year. Its decision showed it saw no light at the end of the tunnel for its own business.

The bank closed all its branches last year and replaced them with seven business centres which will  shut. Until now customers deposited money in An Post which provided a service for Danske Bank.

The bank has lost €3.3 billion in Ireland since 2008.”

€33m is a drop in the ocean compared to “€3.3 billion in Ireland since 2008”. One take on this is that this has been a major success and Danske is well on the way to improving its financial results.

One might argue for a little bit more financial ingenuity and the bank could be back in profit by 2015.

The decision to pull out of Ireland on the face of it seems reckless and the handing back of its banking license means it is certainly not hedging its bets.

Could there be a deeper reason behind the decision for Danske and ACC to hand bank banking licenses in Ireland?

The reader is cautioned that he/she is about to leave the closely guarded gatekeeper propaganda of RTE with the following speculation that is not allowed on RTE airwaves.

The real reason for the decision of Danske and ACC is that they see the writing on the wall for the Irish banking sector going deeper than lack of retail business. What these foreign banks see is the growing threat of collapse of the banking sector followed by bail in where their depositors assets are grabbed by the state to pay for the bailout loans; or, upon an exit of the euro by Ireland, a devaluation similarly effecting their customer deposits.

FG/LB have failed to secure a backstop credit line from either the ECB or the IMF and their imminent exit from bailout and return to the markets is about to have the same likelihood of support for Ireland in the bond markets as both Danske and ACC have given Ireland.

While Danske and ACC may be acting out of self-interest wary of the public wrath or bad publicity of their customer deposits losing out badly in a failure of bailout, they are also acting in their customers own best interests by freeing them from such a threat under their international brand name.

Why is Ulster Bank choosing to stay? One could say Ulster Bank is hedging its bets awaiting further decision by Bank of England on its proposed bad bank model before deciding to leave later. One could also argue Ulster Bank is looking ahead to the possibility of an exit from the euro for Ireland and a future link for the ‘Irish euro UO’ with sterling?

Debate/discussion on the possibility of bailout failing in Ireland is off the table for RTE.

Its as off the table as the Celtic Tiger failing was off the table during the Bertie/Cowen years. Banks are now joining emigrants in voting with their feet. Banks join a long list of companies handing back their licenses in the IFSC.

Flight From the IFSC

Another story not covered by RTE in its off the table coverage of banking and Irish financial affairs is Flight from the IFSC.

http://www.irishtimes.com/business/sectors/financial-services/dismay-at-flight-from-ifsc-offers-timely-reminder-of-its-importance-to-economy-1.1385386

http://namawinelake.wordpress.com/2013/05/16/27-decline-in-ifsc-banking-licenses-since-2010/

The Need for Public Banking in Ireland

A vacuum in Irish banking has been created with the flight of these banks. Because of profligate and irresponsible lending policies Irish private banks with their historical role in the collapse of the Irish economy, should not be relied upon to be the foundation stone of Irish economic recovery.

One view would be that these banks in the absence of competition are now free to rapacious loot Irish depositors to bloat their future profits.

We need publicly accountable banks who will spend their profits into the Irish economy providing eg cheap student loans eg BND Bank of North Dakota http://mystudentloanonline.nd.gov/

“Here is a video that outlines the risk to taxpayer funds held by schools, universities, municipalities, counties etc if they are deposited in a large bank”

http://www.youtube.com/watch?v=jPsOopzp7e4

The reader may wish to study the following videos on the Public Bank Model:

http://www.youtube.com/user/publicbankingtv

Irish deposits are not safe in our so-called pillar banks. European policy of depositor bail in with coming stress tests on our pillar banks in early 2014 mean Irish deposits are not safe. Salaries, staffing levels, the bonus and management structure of Allied Irish Bank and Bank of Ireland and Permanent TSB represent a current business model and branch structure  relic of the Irish Celtic tiger.

They are not fit for purpose and are unsound hiding beneath the radar of a public banking inquiry that would reveal the rottenness that led to their debacle.

We need government and those with a say in large Irish private and public deposits to secure the future of these deposits for the Irish economy and Irish people.

Public banking can give renewed life to the Irish economy.

For an incredible look into the financial heart of BND to see what work it does in ND and to prove its transparency, read detailed information here:

http://banknd.nd.gov/financials_and_compliance/pdfs/06-13callreport.pdf

You won’t get that information from the one page accounts of our pillar banks.

What a public bank does is partner with local government to persuade it to invest its deposits with it instead of into a private commercial bank charging interest for shareholders, low returns due to high commissions, bonuses, salaries and infrastructure.

A Public bank then lends into eg local credit unions and other lending institutions with PB interest rates. For example, local chambers of commerce could decide on an infrastructural project to develop tourism and issue a bond to raise the finance for new infrastructure.

The PB bids down the interest on those bonds that would otherwise mean that project would fall foul of forbidding interest rates and commissions as the project becomes lunch for private, commercial financial interest  predators.

A series of city Public banks, one each for the major cities, with others mutual Public Banks serving a number of towns/villages could revitalise local government in Ireland and help restore our democracy to a state fitting for a celebration of 100th anniversary of 1916.

Public Banking is a model Ireland needs to help restore financial democracy to Ireland to end feasting upon its financial corpse by ZOMBIE banks.

End

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One Response to “Zombies”

  1. Great post, Colm. Finding appropriate people to back public banking in Ireland is the challenge.Perhaps some of our ex financial sector senior managers might be recruited/turned?

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