“The [Anglo Irish] bank is now of course owned by the State.”

It looks like there could be a whole new story to tell about Sean Quinn and his stake in the now nationalised Anglo Irish Bank. The Irish Times reports that it understands the Irish Financial Regulator intervened last year when they discovered the Quinn family “had built up a stake [in Anglo Irish] of 25 per cent by way of contracts for difference” – a stake that, legally, they didn’t need to declare. The 15% stake they did eventually declare came after, the Irish Times understands, approximately 10% was bought by a group of wealthy individuals rather than the shares going on the open market. The regulator is now reported to be investigating just how that happened and whether loans from the Anglo Irish Bank were used in the purchase of those shares. In his analysis piece in the same paper Colm Keena sums up the situation

The owner of the State’s largest privately owned business was betting enormous sums on the share price of the State’s third biggest bank and using a method (contracts for difference) that meant the markets had no entitlement to know what he was up to.

Then, when the financial regulator somehow got wind of the size of Seán Quinn’s involvement in Anglo Irish Bank, the position was unwound in such a way that something in the region of 10 per cent of the bank’s shares changed hands without going on to the market.

Update From today’s RTÉ report

Taoiseach Brian Cowen has told the Dáil that matters surrounding Sean Quinn’s stake in Anglo Irish Bank may have to be investigated further by the Financial Regulator. He said that the Minister for Finance Brian Lenihan was aware over the course of the last year that a large overhang of shares in Anglo was held by a particular investor and related persons.

And [Colm Keena] has a few questions

Key questions arise from that fact. Who managed this process? To what extent, if any, did Anglo Irish Bank fund the purchasing of the shares by the persons who ended up owning them?

If the bank loaned the money to the purchasers, then did it know the background to the transactions?

Did the bank knowingly give money to business figures who were seeking to shore up the bank’s share price?

Was the market for the bank’s shares being manipulated with the aid of the bank’s money?

And it doesn’t stop there

The bank is now of course owned by the State. The financial regulator has known about Quinn’s involvement in Anglo since early to mid-2008, when pressure was put on him to reduce his involvement and declare his ownership.

On that basis one would think that the Department of Finance, Minister for Finance Brian Lenihan and Taoiseach Brian Cowen must have known about the matter when they were deciding on the fate of Anglo Irish Bank during the evening, night and morning of September 29th/ 30th last.

There was a Bill available on that night providing for the nationalisation of Anglo, but it was decided the inclusion of Anglo in a State deposit guarantee scheme for all the major banks was a better route to go down.

Mr Lenihan has said he did not know at the time about former Anglo chairman Seán FitzPatrick’s hidden loans from the bank.

Did he know the background to the Quinn saga?

, , , , ,

  • Dave

    Vincent Browne has a good article on this subject where he points out that 76% of retail despositers and 71% of corporate depositors with Anglo are foreign. In effect, Irish taxpayers were forced by the government to bail-out foreign investors.

    [i]It now emerges (again courtesy of Lenihan last Tuesday) that Anglo Irish Bank has 300,000 retail depositors, of whom only 72,000 are Irish.I n other words, the guarantee scheme has guaranteed 230,000 foreign retail depositors. The number of corporate depositors is 12,000, of whom only 3,500 are Irish.

    Why did the state guarantee the deposits of 8,500 foreign corporate depositors? Why were we not told at the time of the guarantee last September 30 that 228,000 foreign depositors in Anglo Irish were being guaranteed, as were 8,500 foreign corporate depositors?

    What was done on September 30 may turn out to be not merely a blunder, but a catastrophe. We have committed ourselves to guaranteeing the 228,000 foreign retail depositors and 8,500 foreign corporate depositors in Anglo Irish Bank, and it would surprise nobody if that undertaking cost us in the region of €10 to €20 billion, given the scale of the loans that Anglo Irish forked out to developers.

    It may cost the state another €10 to €20 billion on the basis of the guarantees given to the other financial institutions. If, say, a total of €30 billion transpires to be the scale of the bailout, this economy and this society is done for over a very long time.

    Is there reason for the slightest confidence in the assurances of Lenihan and the others on how unworried we should be? This, after all, is the guy who said the nationalisation of Anglo Irish would be ‘‘an awful risk with no return’’.[/i]

    Why did the Irish government bail-out foreign investors in a private business that is not of any strategic importance to the Irish economy? A sweetheart deal to protect Sean Quinn and property developers who fund FF? This deal is looking like a massive exercise in government corruption. We need to demand that the government reverse it urgently and that an immediate public enquiry is held to investigate all of the circumstances surrounding it. Irish people should not allow their government to give tens of billions of their money to private business (the vast bulk of whom are not Irish citizens or businesses) nor should they remain deluded enough to think that will not be the outcome of this government’s action.

  • Glencoppagagh

    Dave
    The figures you give from Browne’s piece don’t tell you the amounts involved. Anglo Irish offered very attractive savings rates in the UK and would have attracted a large number of small deposits so 71% of depositors doesn’t necessarily add up to 71% of deposits.
    Anyway, the whole point of the deposit guarantee was to reassure everyone that deposits with Irish banks were safe and avoid a run. Of course Anglo Irish could have been excluded but that would have finished it there and then.

  • Scaramoosh

    “The Quinn group and family are Anglo Irish Bank’s largest debtor”.

    Is this not the key point to be taken from the article. It is not that Quinn was merely betting on the future of Anglo Irish Bank, but that what he was actually doing was punting on the bank, in the hope that an increase in its share price, would have allowed him to cover his own debts to it. And, as we now know, it all went so badly wrong.

    “approximately 10% was bought by a group of wealthy individuals rather than the shares going on the open market.”

    It will be fascinating to see who this 10% are. Most certainly, it will begin to shine a light on the cosy coterie that make up Ireland’s financial and construction industries.

    As I have said before, the real story will break, when Anglo’s loan book is exposed, and when some of the larger loans on it are called in….or will it be the case that political sensitivity will mean that the government does not have the balls to do this? (Nationalisation allowing the government to put a smoke screen over the whole sad and sorry mess).

  • Mack

    Dave

    A sweetheart deal to protect Sean Quinn and property developers who fund FF?

    Almost certainly. If people really understood what happened and why….

    Irish banks are insolvent, the money they have loaned to property developers – the same money that drove the property bubble that saddled a generation with a noose made from jumbo mortgages – will not be paid back. Not only did the banks gamble our money on deposit (which no longer exists as the loans made with that money won’t be repaid) they borrowed heavily on wholesale markets and made dodgy loans with that money too.

    The banks can repay none of this money. As of now, the tax payer is on the hook for the entirety of the banks liabilities – deposits, wholesale borrowings, bond issues etc.

    That these people who lived the good life & pocketed millions as they burned through our cash not only still walk the streets but continue to enjoy the high life while we the tax payer must pay for their mistakes.

    We have been robbed blind, and paid the thief a princely sum in the process. But are we angry? Will they go to jail? Have we even reported the crime?

  • Pete Baker

    Update From today’s RTÉ report

    Taoiseach Brian Cowen has told the Dáil that matters surrounding Sean Quinn’s stake in Anglo Irish Bank may have to be investigated further by the Financial Regulator.

    He said that the Minister for Finance Brian Lenihan was aware over the course of the last year that a large overhang of shares in Anglo was held by a particular investor and related persons.

  • Mack

    Glencoppagh

    The bank guarantee only made sense if the banks were solvent. It was a bold statement saying trust our banks. There was a deposit protection scheme in place (up to 20,000) which was then expanded up to 100,000. The markets did not trust the banks.

    The government told us they put in place the guarantee to shore up confidence in the banks. That is fair enough – if the market is wrong about the banks and just needs to reassured. If it turns out that the banks are effectively bankrupt, what the government has done is made us responsible for repaying the bad loans the banks made. By nationalising Anglo, the government has admitted it is insolvent. We the taxpayers should not be responsible for paying for bad decisions made by the Anglo management, but now unfortunately we are. Said management, by the way, on the very day they were let go, one of them was buying two new mansions in Cape Cod – while we pay for his mistakes!!

    —-

    Effectively the banks made huge loans with our money on deposit (and then some more from the wholesale market), ripped off young people looking to put a roof over their head then when the latest (and biggest) tranche of those loans went bad the government passed the bill back over to us. That is to say – we have to pay the government our own money back to fund our own deposits and the poor young first time buyer not only has to pay back at 500k mortgage for a non-descript 2 bed flat but has to contribute in higher taxes for the rest of their lives to the huge loan undertaken by their developer (and all developers) for the entire next phase of the scheme they bought in!

    This is daylight robbery!

  • lorna lancaster

    Dave:

    I am one of those foreign investors. I had shares in Anglo for many years which were worth over £80,000k for a while last year; they are now suspended and worth virtually nothing. I also have £50,000k in a l year bond which I won’t be able to remove for several months if Ireland doesn’t go bust in the meantime. If it does, I will lose that as well. I made these purchases and deposits on the recommendation of financial journalists who sang the praises of Anglo who always produced good results.

    Nobodycomplained when the English were lending Anglo their money to fund the development and business that was carried out when the Celtic Tiger was running fast. Perhaps you could explain in what way I, a 72 year old Englishwoman with no pension (apart from less than a full State pension) who relies on income from saving and investments to fund living expenses and (it had been hoped) care home fees not that far down the line, have been bailed out by Irish taxpayers. At best, I will get the closing price at suspension which will amount to peanuts.

    If your laws and your regulators allow the shenanigans which have taken place within Anglo, which English investors could not possibly be aware of but now it seems was common knowledge in Ireland, it is hardly our fault. Actually, at the time when the shares were flying high my son-in-law did tell me that there was a lot of shady dealing going on in Ireland (not specific to Anglo) and that I should sell them but I preferred to believe the assurances of Anglo’s management that they continued to do brilliantly, weren’t involved in sub-prime etc. Silly me! It’s time the Irish cleaned up its act – the more I read, the worse it gets – and if that means chucking out the present administration, so be it. It’s up to you; foreign investors can do nothing except withhold their cash in the future, the ones who have anything left that is. Without us mugs, your economy might fare even worse. I expect those who can get their deposits out now will be doing so as fast as they can, making it more difficult for Anglo to do any business.

    Bank directors should not be allowed to borrow from their banks to finance share purchases, secured on shares also, in ways which do not show up in the accounts. Not much hedging there and as much substance as a dandelion head. Your govt. would done themselves and us a favour if they had banned short selling. Several hedgefunds made a fortune by shorting Anglo; I’m just hoping some of them will have got their fingers burnt at the end of trading.

    What I’d like to know is what is going to happen to the perpetrators of the misdeeds, though if they weren’t actually illegal, just immoral, the answer will be nothing.

  • Mack

    Lorna

    Dave was refering to depositors, not shareholders. Specifically he was refering to depositors not covered by the already existing deposit guarantee scheme, which was funded by the banks and covered funds up to €20,000. The Irish tax payer via their government very generously increased the deposit protection up to €100k. All depositors were aware of the terms, it’s the risk you take with any bank.

    Investors who pumped money into Anglo Irish deserve nothing in return. Your shares are worthless, and rightly so. If you have invested in a bond from Anglo I don’t see why they Irish tax payer should refund you.

    Everyone and their dog knew there was a bubble in the Irish property market. As a shareholder you had a duty to investigate the practices of the company you owned. As such, you should take responsibility for the practices undertaken by the company you owned a share off. Immoral, but legal loans by directors are not the issue here. Huge loans to developers that fueled a bubble in house prices, that have saddled a generation with young Irish with a life time of debt – that makes your loss at 72 pale into insignifance. Young families are going to go bankrupt, saddled with loans of hundreds of thousands of Euros because of the activities of this bank – which you funded.

    Certainly I don’t like to see anyone lose money – but you are an adult, as our the aforementioned families. You invested in a company that ruined our economy, and passed on far bigger losses to Ireland’s young.

    If you want sympathy for loss, I suggest you look elsewhere. We (and you) would have been bettter off without your investment.

    If you are angy about the lending practices of the bank and feel these people should be prosecuted – then I wholeheartedly agree. But please don’t attack our country. You participated in it’s rape.

  • lorna lancaster

    Mack –

    Perhaps you hadn’t noticed but there has been a huge bubble in house prices all over the globe, fuelled not by the building but by the banks’ policy of lending to people who could not afford to buy at that price. If the lending had been restricted to sensible proportions of the price and sensible earnings multiples,with appropriate deposits, and the individuals had not been prepared to take on mortgages they couldn’t afford to finance, there would have been no price bubble. When I bought my first home, I had to put down a sizeable deposit and the mortgage I was allowed was manageable. I have never bought anything on credit and always lived within my means. I have not asked for sympathy for the loss of my shares, merely asked in what way I have been baled out. I doubt if Anglo alone is responsible for the state of the Irish economy; the global economy in recent years seems to have been based on excessive credit. If there were nobody like me who saved their pennies out of modest incomes and were prepared to lend their savings for a modest return there would be no development and no mortgages whatsoever.

    As regards my bond, which is actually a l yr fixed term deposit, not a corporate bond, at the time I put the money in, Anglo was covered by the UK compensation scheme up to the £50k I put in. Now that the Irish govt. has chosen to cover it, in theory, up to 100%, I am no longer covered by the UK scheme and am dependent on the stability of the Irish govt. I don’t see why you should think that if I am able to get my money back at the end of the year, it is the Irish taxpayer who will be baling me out. That assumes that Anglo’s assets are worthless. We have no idea what they are worth. I don’t know how you expect me to know precisely what Anglo did with the money lent to them by depositors. It is the directors who are responsible for placing the bank’s funds in a sensible and productive way. To lend very large sums to directors and others to buy shares in Anglo is not what the deposits are intended for and as I recall it is when the information that this had been happening and concealed came to public knowledge, though the Regulators had known about it from early last year, that the proverbial started to hit the fan. There is no way I would have put £50k on deposit with them had this information been available to me and I would have sold my shares. It is not realistic to expect small shareholders to be able to access the minutiae of what banks are doing with deposits, especially if the shares are held in an ISA as mine were; we have to rely on stockbrokers, analysts and the financial press (I follow the market as closely as possible) to provide information. However, if directors and regulators conceal the truth, the financial experts cannot do their jobs in any meaningful way.

    I am sure any other English investors/depositors reading this blog will have noted your comments and will make quite sure they don’t place their funds where they are not wanted in future. We can lose quite enough money in our own country where people are also losing houses they couldn’t afford to buy in the first place (our system was no better than yours) and most people are also saddled with large mortgages, all because I saved my money instead of buying designer clothes and gizmos in order to finance my old age and lent it to building societies etc. How very irresponsible of me! As soon as I have fully recovered from my total knee replacement I shall be out on a spending spree and booking cruises etc. till I have spent what’s left aftr all my losses and then the young taxpayers will have to pay my care home fees. That is what you want, isn’t it? It seems to be the logical conclusion from your comments.

  • Dave

    Lorna, it would be trite of me to say I sympathize with your predicament (and I do) when I will immediately follow it up by saying that you took a commercial risk for a private speculative profit in a private company and that it is not the responsibility of Irish taxpayers to underwrite your private investment – indeed, no underwriter would insure against a loss that has already occurred as the Irish government has now done. Why should people who were not party to the profits of private business transactions be forced to bail-out those investors and depositors when their investment returns a loss? You are, for example, asking a bus driver who earns a modest wage to pay higher taxes, having less disposable income to spend on his family, so that you will not lose money on an investment that he would not have gained a profit on under any circumstances. The vast bulk of us have lost money on our speculative investments in shares. Some of us, however, spread our risk rather than invested all in one fast-growing bank. I accept my losses, and I don’t want the Irish taxpayer to refund them to me.

  • Dave

    By the way, it remains the case that these debts were built up by private businesses. They should not be converted into sovereign debt. Your shares, as Mack has pointed out, are worthless. As for depositors, they are also commercial investors. They grant legal ownership of their money to the bank so that the bank can invest it and generate the revenue to pay the depositor a fee for his deposit. In other words, you lose legal title to your money and you become a creditor of the bank. That is private business, and it is not the responsibility of the state to underwrite it.

  • Mack

    Lorna

    I hope any investor reading this has the sense to realise that they have the responsibility, at a minimum to the health of their own wealth, to thoroughly research any company they invest in.

    Your deposit with Anglo Irish is covered by the government protection scheme so you can relax about that. It’s pity if it won’t be covered under the British protection scheme – as Anglo will have had to pay to be members of that scheme. I hope our government takes appropriate measures to reclaim cash from that scheme if possible.

    You seem to have some sense of entitlement, that we citizens of a country where you invested in a company that went bust owe you something. We do not. You are just the same as any other investor – be they Irish or British. You invested in a company with a deeply flawed business model, that wreaked devastation on our economy. Any cursory investigation (given what you say in your first paragraph) would have shown you that. But, I’m sure you were happy when the share price was surging and perhaps chose not to research why, and I doubt you are now feeling inclined to return your dividends.

    I get the impression you know very little about Anglo, or their role in the Irish bubble. They were most exposed player in the property market – described by one of our leading economic commentators as not a bank but a hedge fund making huge leveraged bets on property.

    I’ll end on a positive, your first paragraph was excellent – you spoke a lot of economic sense. Which really does beg a couple of questions

    1. Given your (correct) analysis – why did you invest in a bank?
    2. Why on earth did you invest in Anglo Irish Bank?

  • Mick Fealty

    Guys,

    It doesn’t look to me like Lorna needs a junior cert lecture on the risks of investors. And it’s clear she gets the nub of the problem highlighted by Pete above:

    “It is the directors who are responsible for placing the bank’s funds in a sensible and productive way. To lend very large sums to directors and others to buy shares in Anglo is not what the deposits are intended for and as I recall it is when the information that this had been happening and concealed came to public knowledge, though the Regulators had known about it from early last year, that the proverbial started to hit the fan. There is no way I would have put £50k on deposit with them had this information been available to me and I would have sold my shares.”

    And the current Minister of Finance knew a year ago!!!

    Lads, save your ire for someone who deserves it!

    Lorna,

    That’s a suitably stinging indictment of the Irish Banking system. A number of commentators had been warning about the low end of the business food chain that the Irish financial services were getting into, precisely because the banks and others were let get away with it. But when you have malfeasance to the degree that seems to have gone on at Anglo, it could be 15 or 20 years before overseas investors will regain confidence in Irish stocks.

    In other words, another generation. I’m going to quote you again just to re-iterate that point:

    “It’s up to you; foreign investors can do nothing except withhold their cash in the future, the ones who have anything left that is. Without us mugs, your economy might fare even worse. I expect those who can get their deposits out now will be doing so as fast as they can, making it more difficult for Anglo to do any business.”

    I’m not sure that has sunk into some of us quite yet… 🙂

    Thanks for a cracking contribution to the debate…

  • Comrade Stalin

    Lorna,

    I’m very sorry to hear about your unfortunate situation.

    I apologize in advance if I am being harsh here, but the unfortunate fact is that you committed a series of mistakes.

    – you invested your money in a share that you concede you knew next to nothing about, in a economy you’re not familiar with. In fact you did this twice over – putting money on deposit in the same institution.
    – you did not do your own research, instead relying on journalists
    – you invested all of your money in a single share
    – you put money that you could not afford to lose into stocks

    Any good beginner’s book on investing in shares will tell you to do your own research; and to spread your risk across various market sectors, to invest gradually over time, and not to invest money that you cannot afford to lose. To do investing properly, you need to have proper investment goals, and you need to spend a couple of hours a week researching the market and reviewing your holdings. Any other approach pretty much amounts to gambling.

    I am afraid Dave is right. You engaged in speculation in the hope of making a profit. There can be no bailout for investors who take unquantified risks.

  • Comrade Stalin

    Mick,

    Not putting all your eggs in one basket, especially when that money amounts to your life savings, is plain old common sense, and common sense seems to be something that goes out the window quickly when share prices are rising.

    Lorna is in no way the first person to do this. Anyone who put their money into RBS, HBOS or Northern Rock a couple of years ago would be barely any better off than Lorna is. These institutions have either failed or been substantially reduced in value. If Lorna had found out about Anglo Irish’s odd director dealings, would she have learned the lesson and spread her money across different sectors and shares ? Or would she have stuck it all in an apparently-profitable and very safe institution like Northern Rock ?

  • Mick Fealty

    CS,

    That’s not the point of the story at the top of the thread. Neither do I think Lorna is looking for sympathy. She’s just plain angry. And for a damned good reason.

    Investors have a right to the protection of the law where corporate malfeasance is concerned. If that national law is broad enough to allow the kinds of shenaghans that seem to gone on at the Anglo, then the buck will stop, one way or another, in Ireland.

    We may be inured to treating each other in this sh!tty way. But mess your foreign investors around like this and you are asking for big (LONG Term) trouble!

  • Mack

    Mick, Lorna

    Ok, I see your point – initially I thought Lorna had purchased a Corporate Bond in addition to shares (unfortunately this would have been guaranteed by the government).

    Dave is correct though, the government has a duty of care to it’s citizens. Lorna must have misread what he said, or perhaps misunderstood as she was protected by the protections in place before our governments extraordinary act of generosity.

    I do disgaree with this though

    We may be inured to treating each other in this sh!tty way. But mess your foreign investors around like this and you are asking for big (LONG Term) trouble!

    It is unacceptable to treat any investor like this. But this wasn’t the cause of Anglo’s collapse.

    Also this kind of malfeasance is far from being unique to Ireland (it was playground stuff compared to Enron, for example), not that that is any excuse mind.

  • lorna lancaster

    I’m glad that one or two of you can read and take in what people are saying. I have never said I expect the Irish taxpayer to pay for my share losses and I have said that there is no way that they will do so as I will never get the money back, apart from, perhaps the odd couple of hundred pounds and I can’t even be sure of that.

    As others have pointed out, the British govt. has baled out various banks and companies and since I am a British taxpayer, I shall be funding those. However, I don’t blame the innocent depositors, and the equally innocent shareholders have lost all their money (I haven’t heard anything about any compensation for them) so I feel sorry for them.

    I am not quite as clueless as several of you suppose. Who said I had put all my eggs in one basket? Not me. As it happens, I have a widely diversified portfolio of shares (and deposits in other organisations) and have been investing for over 40 years but in case you haven’t spent as much time looking at individual share prices as I have, may I point out that there are very few shares which are not substantially down at the moment. However, Anglo is the only one where there is now no hope of recovery, though I wouldn’t mind betting that a few years down the line, it will be refloated and the govt. will make a fair bit of dosh from the next lot of suckers. In most companies, I have quite small sums of money, as I originally did in Anglo (only £3k when I put my money in many years ago which had grown to over £80k recently). Why did I buy them? As I have said before, they were recommended by leading stockbrokers and up till very recently, the majority of brokers included in The Motley Fool’s forecasts were recommending them as a strong buy. Perhaps one of you experts could tell me how exactly one does one’s own research. I read annual reports, read the business section of newspapers, go to AGM’s where possible and ask leading questions (have been mentioned in the Press as a result on occasions). What else am I supposed to do? But if directors transfer their loans to another bank before the auditors come in (and this is not illegal) and if auditors can’t spot irregularities, and if CFDs don’t have to be declared etc. etc., what hope have I of spotting anything. As you say, it was a mistake to invest in Ireland and I won’t be the only one to have come to that conclusion. As a matter of fact, I have spent far too much of my time on attempting to keep track of the stockmarket and come to the conclusion that it’s not worth the candle. I intend to extricate myself as soon as the opportunity presents itself and get rid of most of my money one way or another. I have realised far too late in life that it’s only the crooks who make money this way. Unfortunately, I had to have 2 major operations just when things turned sour and also we learned that my husband’s cancer had returned – both after we had just moved house – so my eye was off the ball for a while. My mistake was not in buying but in not selling, but in any case, as I said, I have had enough of it. However, I would like to reiterate that it is not foreign investors/depositors who are to blame for Anglo’s demise. That’s ultimately down to the government that you chose to elect and the legal and regulatory regime they are responsible for. And it won’t cost the Irish taxpayer a penny more whether it’s foreign or Irish savers who have to be baled out if that should turn out to be the case, which would presumably that pretty well all the loans Anglo have made default. It also assumes that the Irish govt. won’t itself default before the savers who are locked in at present get their money back.

    I can’t help thinking that an awful lot of people will come to the same conclusion (that share buying is a mug’s game) when they see their shares and ISAs worth a lot less than when they invested the money years ago, and wondering what companies will do for capital in future. Taxpayers might find themselves funding businesses for many years to come.

  • Comrade Stalin

    Lorna,

    Sorry, I jumped the gun a bit, so thank you for explaining it more clearly.

    One point :

    However, I don’t blame the innocent depositors, and the equally innocent shareholders have lost all their money (I haven’t heard anything about any compensation for them) so I feel sorry for them.

    Shareholders are not innocent, they are people who take risk in anticipation either of reward, or going broke. They appoint the people they entrust to run the company they own part of; if the director turns out to be a scoundrel then it is their fault for appointing him. This fact must be clearly understood by anyone who wishes to buy shares.

    The regulatory regimes that exist are not there to protect shareholders; they are there to try to instil confidence in the market. But they make no guarantees or promises.

    What else am I supposed to do? But if directors transfer their loans to another bank before the auditors come in (and this is not illegal) and if auditors can’t spot irregularities, and if CFDs don’t have to be declared etc. etc., what hope have I of spotting anything. As you say, it was a mistake to invest in Ireland and I won’t be the only one to have come to that conclusion.

    I have no dispute with the fact that there is a dire need for the day of reckoning with the corrupt, inbred and self-serving Irish political and business class.

    But I think this is a side issue. We can simplify the problem into a director making a bad decision, which he arguably should have been prevented from doing by the regulatory regime.
    Directors also made bad decisions in several very large UK financial institutions; in Iceland, in the US, and so on. They were different bad decisions, but the outcome, namely lots of shareholders losing lots of money, was the same. None of them have been prosecuted or otherwise punished and the government even appears to be recruiting them in the fight to correct the problems they caused – problems which were apparently not anticipated by anyone.

    It’s likely that throughout the West we’ll see new regulations protecting deposits and restricting the activities that banks, particularly retail banks, can get involved in. At the same time I am sure that Ireland will patch up that hole in the rules, and we’ll continue where we left off.

    By the way, broker house recommendations are almost completely worthless. They talk shares up and down to suit their own purposes. They have been completely wrong in their predictions many, many times over.

    I’m sorry to hear about your bad luck on the health side. I wish you all the best.

  • Comrade Stalin

    Mick,

    I do see your point; that the fact that this was not illegal means that shareholders cannot have confidence that it will not be repeated in the future, and hence the Irish market’s reputation takes a battering.

    But I don’t think it’s that big a deal. The Irish government will almost certainly close this loop, and possibly go further. As in the US following Enron, the dent in confidence will not last long and when the profits to be made through taking risks and investment become clear again, as they have after every single crash their has been (including in the 1930s), we’ll forget all about all this again and gamble our money away.

  • Mick Fealty

    CS,

    I hope you are right. We need to hope that Anglo is an extreme outlier though. That the Minister knew about this Quinn business is the worrying thing. What other mess is being hidden? And from whom?

  • Mack

    Lorna, it sounds like you had a good understanding of what was going on in the general market (far better than the hordes of recent Irish property investors!), but unfortunately didn’t action it by selling some of your Anglo shares. I’m glad your hard loss was only £3k, hopefully the dividends earned covered this. You’ll get the money on fixed term deposit back, as morally you should as those terms were available when you entered into it.

    At £3k as part of a diversified portofolio, I think you can get away with taking some risks (not every stock purchase will work out) and not doing the level of research you might want to undertake if that was the bulk of your nest egg (as it first appeared to me).

    Those of us who live here, of home buying age, were probably more acutely aware than many people of just how unbalanced the market had become and piqued an instense interest in finding out what was behind it – water cooler discussions with collegues and pints in the pub with friends whose partners work in Irish banks / construction/ real estate / mortgage brokering / insurance / converyancing etc. can be very illuminating. Unfortunately those who don’t live here, or have those social connections would have to figure out another way to find out what was going on for themselves…

  • Pete Baker

    Lorna

    Thank you for your comments.

    I’d echo what Mick has said and add that you’ve illuminated both the personal and general cost of what happened within Anglo Irish.

    Comrade

    You don’t seem to have grasped the significance of what has been reported.

    That the Quinn family appear to have used “contracts for difference” [CFDs] to build up a 25% stake in Anglo Irish is one thing.

    That, whilst not technically illegal, was of concern enough for the intervention of the regulator – with the knowledge of the Irish Finance Minister.

    But it’s the subsequent off-loading by Sean Quinn of 10% of shares in Anglo Irish, allegedly using Anglo Irish loans to buy them back via selected businessmen, that is to be the subject of the further investigation by the regulator.

    All without the knowledge of the market or any investors in Anglo Irish.

  • lorna lancaster

    One has to laugh: I just clicked on to a Google alert re Anglo and read (in “Finance Markets”)that the Anglo Irish Bank share price went up 67% today. I wonder how that could be since they are nationalised and suspended. I suppose they were confusing it with Allied Irish Bank. I have to agree that one shouldn’t believe everything one reads in the Press.

    Incidentally, I forgot to mention that I have on occasion had telephone conversations and e-mail exchanges with Anglo executives, especially after the sub-prime explosion, and have been assured that they had no problems. I count that as doing my own research but fat lot of good it did me.

    Dave:

    I challenge your assertion that when I deposit cash in a savings account I grant legal ownership of my money to the bank. Like hell I do. I lend them my money in exchange for interest on it. This is not speculation. If the bank becomes insolvent, I obviously become a creditor and may or may not get paid out a percentage of my loan after the primary creditors (e.g.Inland Revenue, other banks, Liquidators) have been paid, depending on what if anything is left. If it is taken over or nationalised, the responsibility for repaying my loan, like it or not, lies with whoever now owns it. Anglo has not been declared insolvent. So far as I can gather, nobody knows exactly what its financial position is and I daresay it changes daily. The other banks, in the UK as well as Ireland, also shot up today. If Anglo had not been nationalised, it might well have done the same. The reason it was nationalised was that the English institutions had started withdrawing their money, probably as a result of the director loans and resignations, and because they feared there would be a run on the bank. I think I am right in saying that Northern Rock has already repaid a lot of the govt. money which is why its staff have just received 10% bonuses, however much of a non sequitur we may think that is.

  • Dave

    “I challenge your assertion that when I deposit cash in a savings account I grant legal ownership of my money to the bank. Like hell I do.” – Lorna

    Lorna, Mick has assured me that: “It doesn’t look to me like Lorna needs a junior cert lecture on the risks of investors.”

    I think you do. You surrender legal title to your money to the bank when you deposit it with the bank. That is the bank’s double entry accounting system with allows the bank to list your money as an asset of the bank. In return, you become a creditor of the bank.

    “I lend them my money in exchange for interest on it. This is not speculation.”

    It is you engaging in a commercial business transaction with a private business. You agree to give them legal title to your money in the knowledge that they will try to invest it in commercial ventures that generate a higher rate of return than they have agreed to pay you. If they lose your money, too bad. Unless, of course, you had the foresight to insure your deposit with an underwriter.

    In the case of Anglo Irish Bank, if you deposit money with that bank, then you invested your money in a business that invested it into property speculation. That was the source of the revenue that generated your interest.

    80% of Anglo Irish Bank’s €73 billion loans are related to property. Now, unless you were living in a bubble, you’d have been aware that a property bubble existed and that all bubbles burst in due course. Because Anglo was Europe’s fastest growing bank, people overlooked the risks and invested in its shares because they offered a greater gain that other shares. That is the risk they took.

    “If the bank becomes insolvent, I obviously become a creditor and may or may not get paid out a percentage of my loan after the primary creditors (e.g.Inland Revenue, other banks, Liquidators) have been paid, depending on what if anything is left.”

    Yes, but you become a creditor when you make the deposit. The risk exists at that point.

    “If it is taken over or nationalised, the responsibility for repaying my loan, like it or not, lies with whoever now owns it.”

    That is the position. However, as Vincent Browne pointed out, the decision to nationalise Anglo Irish Bank was taken without collective responsibility by the cabinet and may be unconstitutional. I sincerely hope that it is challenged – and reversed.

    “Anglo has not been declared insolvent.”

    It is insolvent. It has assets of €80 billion and liabilities of €100 billion. In addition, its commercial property assets are widely overvalued as they have not been subjected to write-downs in value since the property market collapsed. You could be looking at a correction of as much as 70% in value. No one knows how much money it is going to lose, but €50 billion plus the €25 billion in Anglo Irish Bank bonds that Irish taxpayers will now also be liable for gives figure of about €75 billion. Most conservative estimates place this figure at circa €20 billion and conveniently don’t bother to mention the bonds.

    “The reason it was nationalised was that the English institutions had started withdrawing their money, probably as a result of the director loans and resignations, and because they feared there would be a run on the bank.”

    Well, it doesn’t have any money. Banks, typically, have capital reserves of about 6 – 8%. That meant that Anglo could pay, maybe, 6% of depositors, so it would be a short run before the ‘Sorry, out of cash’ sign appeared on the door. After that, it’s a case of trying to call in loans from property developers who don’t have any money either. Then its a case of trying to sell an acre of prime land that the bank loaned €100m to buy for whatever you can get for it. Write it down by 70% and you still be lucky to get €30m for it – you’d probably get €5m (a write-down of 95%) if you’re very lucky. Sorry, but that’s the bleak reality of it.

    84% of Anglo Irish Bank was owned by foreign investors. The shareholders are responsible for who they elect to run the company and how it is run. I would recommend that Irish investors sue the foreign investors who had the majority voting rights. This quisling government, on the other hand, has its own agenda.

  • Dave

    “Investors have a right to the protection of the law where corporate malfeasance is concerned. If that national law is broad enough to allow the kinds of shenaghans that seem to gone on at the Anglo, then the buck will stop, one way or another, in Ireland. ” – Mick Fealty

    This kind of gibberish makes me grateful that you chose journalism over a career in politics. Illegality involves braeking a law that exists, and not in breaking some unspecified law that some jouno thinks ought to have existed.

    That has got to be the stupidest reason to give away tens of billions of taxpayers’ money to foreign investors that I have ever heard.

  • Dave

    By the way, if you could establish that Anglo’s woes are the result of corporate malfeasance by its board of directors, then the onus is on the company and its shareholders to compensate anyone who has suffered a direct loss as a result of that malfeasance. There is no onus on the State to do so.

    Who are those shareholders? 84% of Anglo’s shareholders are foreign investors. They are the ones who appointed that board of directors and who had the responsibility to ensure that they appointed responsible directors. Establishing that Anglo’s woes were the result of corporate malfeasance by its directors would establish that Anglo’s woes were the result of those who appointed those directors, i.e. foreign investors who hold the majority of voting rights.

    Ergo, since Anglo was controlled by foreign investors, it is the majority foreign investors who have caused said woe to Irish investors and who have the moral duty to compensate the minority Irish investors.

    Or, rather, that is how it should have been if this corrupt government did not make itself the sole shareholder in the bank in order to protect the property developers who formed the bulk of its borrowers. If corporate malfeasance can be established, it is then Irish taxpayers who will have to compensate the foreign investors who appointed the rogue board of directors. In effect, financial responsibility for the reckless actions of those foreign investors will fall on the lap of Irish taxpayers. And given the amount of ambulance chasers that have gotten the scent of a quick buck at the expense of those Irish taxpayers in relation to a plethora of issues, you can sit back and watch the Irish State running up a huge legal in the years ahead as a result of this nationalisation (not to mention running up the national debt).

  • Harry Flashman

    Come, come now gentlemen, this will not do, it will not do at all.

    Lorna was not asking to be “bailed” out by anybody she was merely ruefully pointing out that she invested her hard earned money in a business which she was assured was well run in a nation which she had been led to believe was a modern, stable, mature democracy with a well functioning market, an inquiring and free press and overseen by intelligent and hard working regulators.

    She now sees the error of her ways. She now calmly accepts that in fact the Irish economy is a corrupt, incestuous sewer of shysters, conmen, spivs, back strokers, gombeen men, incompetents, crooks and fools. She gets it, she really does and she was merely pointing out that never again will she invest a brass farthing of her hard earned money in a nation which is little better than a banjaxed banana republic.

    For Irishmen to turn on her (and I suspect the reason for the vitriol thrown at her is due to her nationality, we never can quite rid ourselves of that chip on our shoulder can we?) and to ludicrously suggest that she should of course have known that Ireland is in fact a hopeless morass of corruption and ineptitude or furthermore that [b]she[/b] is in some way responsible for the appalling state of Irish society is so breathtaking, and requires such bare faced cheek, that only an Irishman could think he could pull it off.

  • Dave

    Harry, eat some beans and fart your bulbous head back out of your ass. No one here has mentioned Lorna’s nationality nor has anyone directed vitriol at her. That only exists in your own demented imagination. Do you have a chip on your shoulder, Harry? Does that explain your anti-Irish vitriol, you ridiculous little hypocrite?

    It may well be that Anglo was run by shysters, but it wasn’t Irish investors who appointed them. The board of directors is appointed by the company’s shareholders: 84% of whom were not Irish. Irish banks are covered by EU law and the Basel Accords. You don’t need more legislation: you need a higher calibre of directors. Again, that was the responsibility of the foreign shareholders of Anglo, idiot.

  • Harry Flashman

    Dave, I used to enjoy your posts, I think I’ll simply ignore you from now on, there really was no call for that.

    By the way if you think that the reason that Ireland is an economic cess pit is because of little old English ladies in Lancashire investing their pensions, you are a bigger fool than you have just proven yourself to be by the above post.

    Look to Ireland and the Irish for the causes of the mess in Ireland, stop blaming foreigners. You’re all supposed to be big boys now.

  • Dave

    I think there was a ‘call’ for that. I resent your obvious implication that I was abusive toward Lorna I was tactful and polite) and that I am anti-English. Will to now claim that you excluded me from your rant? I think not.

    By the way, I have no problem with your obvious hatred of Ireland (your post above is a blatant example of it) but your demented extrapolation from the actions of a foreign-appointed director of a majorly foreign-owned bank wherein you indict the entire business community in Ireland is just bizarre.

    In regard to what effect their actions had on share price: that is a red herring. The company’s business model, wherein it took deposits from investors and converted them into commercial property assets, was fundamentally unsound. Its share price collapsed because investors realised the game was up for the property bubble and that Anglo was the most exposed out of all of the banks. Those write-downs in the value of its assets, when they come, will be massive. The company is bankrupt, and its share price reflects that fact.

    Ignore me for two weeks and then we’ll kiss and make up.

  • Harry Flashman

    So an Irish bank managed, staffed and run by Irishmen in Ireland with Irish directors passing dodgy loans to other Irish directors and Irish property developers while being audited by Irish auditors and regulated by the Irish financial regulator and monitored by Irish government ministers and wrote about extensively by Irish journalists writing puff pieces in Irish newspapers in Ireland goes tits up and it’s the fault of “the foreigners”.

    I see.

    Take that one to Peoria and see how it plays.

  • Dave

    Harry, in case someone misses the obvious point in this (so obvious it wasn’t stated): a sovereign state should not commit its citizens to underwrite the debts of the citizens of another sovereign state. The other obvious point (although stated) is that the State should not commit its citizens to underwrite the debts of private business. This is what Ireland has done in underwriting Anglo. That has nothing to do with xenophobia and everything to do with concepts of sovereignty. You might have noticed that the EU insists that all national debts are sovereign in rejecting the absorption of those debts by the ECB. Are they xenophobic toward Europeans? And yes, in relation to Anglo: it is the shareholders who are charged with scrutinising the moral character of the directors that they appoint to run their business. I should point out that the director in question did nothing that was illegal under EU law, the Basel Accords or Irish law, and I’m not claiming that he did. You can’t apply laws retrospectively, so even if the law is changed, he’d still have done nothing wrong. You can’t regulate for every human action. If the human is morally corrupt, then there is nothing you can do to stop him from engaging in deception. Besides, after every crisis in a financial system, regulators always claim they need more regulation; and after every new regulation, a new crisis always emerges. And what new regulation is needed here? One that says directors must disclose all loans they hold? Fine, let the EU get off their arses and introduce it. It still wouldn’t have stopped Anglo’s share price from collapsing, would it? Nope, because that business is bankrupt.

    By the way, I apologise for the language above.

  • Dave

    How many of the banks’ 84% foreign shareholders objected to the way the bank was being run when they were making huge profits on their investment with dividends and share price increases? It was being run with the same flawed business model and by the same directors then as it is now, with those directors appointed by those shareholders and its business model approved by them. Why it is only after their flawed business model has finally failed that they become concerned about it? Did none of them grasp that property bubbles burst or was it that they knew that such bubbles burst but they didn’t think it would burst so suddenly, thinking there was another year or two of big profits to be made from the scam? They are responsible for their own fate. No one else, and on one else should bail them out.

  • Dave

    “And what new regulation is needed here? One that says directors must disclose all loans they hold?”

    As it turns out, that isn’t needed as it already exists under the Companies Act, 1990.

    So, assuming a director violates it, what is the consequence? Well, oddly, enough it doesn’t declare that the citizens of the State then become responsible for all financial losses that may result to a company and its shareholders as a result of the violation by its director. It is a criminal offence that the director is accountable for, not other citizens. Neither the shareholders nor the directors have any claim against the State.

    Nor, indeed, if that law did not exist would they be able to claim that the State was negligent toward them because it failed to pass a law that a fraudster they hired didn’t have the opportunity to circumvent because the law didn’t exist. That’s like suing the State for damages to your shins because it didn’t pass a law that made it illegal for directors to kick other directors on the shins – amusing, but completely groundless.

    Let us not be fooled into thinking that this decision to underwrite private business at the direct expense of the taxpayers is pro-corporation and not pro-person (even if we conveniently have a nice pensioner here to propagate the alternate message). Let us also not be fooled into thinking that it is proper for a sovereign state to put the interests of foreign citizens before the interests of its own citizens, and to do so to the direct detriment of its own citizens.

  • Dave

    Typo: “…is pro-person and not pro-corporation…”

  • kensei

    Dave

    It is you engaging in a commercial business transaction with a private business. You agree to give them legal title to your money in the knowledge that they will try to invest it in commercial ventures that generate a higher rate of return than they have agreed to pay you. If they lose your money, too bad. Unless, of course, you had the foresight to insure your deposit with an underwriter.

    This is a bit disingenious. Yes, if you put money in an account you give them your money and become a creditor. But placing your money in a bank account is not speculating. The point at which you have to speculate on the risks of placing your money in a bank account is the point everything has got completely FUBAR. Hence the state guarantees, and the increase as soon as the shit hit the fan.

    And as Ireland is a small, open economy, it is almost completely screwed without foreign investors.

  • Mack

    Harry Flashman

    So an Irish bank managed, staffed and run by Irishmen in Ireland with Irish directors passing dodgy loans to other Irish directors and Irish property developers while being audited by Irish auditors and regulated by the Irish financial regulator and monitored by Irish government ministers and wrote about extensively by Irish journalists writing puff pieces in Irish newspapers in Ireland goes tits up and it’s the fault of “the foreigners”.

    No, it’s really got nothing to do with foreigners. Anglo (and others) loaned out billions that will not be repayed. The Irish tax payer should not be responsible for repaying this money. Anglo are a commercial entity, not a state entity.

    You might say it is one thing to give your citizens a little extra protection for their deposits above the existing scheme. It’s another thing entirely to expect the Irish taxpayer to insure the large deposits of millionaire foreigners. Unfortunately this is what our government has effectively done – by nationalisiing Anglo – and by their 24 month blanket guarantee.

    Let me assure you, I will not be sticking around to pay back my families “share” of this debt if the Irish tax payer is lumbered with it in the end…

  • Mack

    Kensei
    The point at which you have to speculate on the risks of placing your money in a bank account is the point everything has got completely FUBAR

    Well, yes. But welcome to Ireland and the UK for much of the last 6-7 years and certainly in the mainstream conciousness for the last 18 months!

    Pete, Mick

    You may have missed this. The CEO of failed Telecoms firm Smart Telecom, was pressured into taking out a multi-million Euro loan with Anglo to purchase shares in Smart (which was to be repayed by Smart at a later date).

    http://www.irishtimes.com/newspaper/frontpage/2009/0127/1232923367343.html?via=mr

  • Mack

    Lorna

    Anglo would have been completely unaffected by sub-prime. The specialised in providing large amounts of finance to a small number of large developers. It’s how a bank with 1 branch managed to grow at a clip of 30% p.a.

    http://www.angloirishbank.co.uk/Business_Banking/Commercial_Property_Finance/Commercial_Development/

    http://www.angloirishbank.co.uk/Business_Banking/Commercial_Property_Finance/Residential_Development/

  • lorna lancaster

    Goodness me. I thought abusive posts were pulled.

    Dave – shame on you. Little old ladies don’t expect to be confronted with obscenities when they are following a serious discussion. I begin to understand how the troubles arose. When people resort to violence and abuse, it usually means they have lost the argument. Why can’t we all discuss things in a friendly manner.

    There’s no way foreigners can hold 84% of the shares. Sean Quinn and family alone own l5%, then there are the directors and employees, the Irish institutions and ordinary Irish investors. In any case, my shares were in an ISA so I didn’t get chance to vote at all and I doubt if the ISA managers bother. I think you will find it was the Irish majority shareholders who elected the board. I suggest you wait till all the worms have crawled out of the woodwork before coming to any judgement as to who is to blame.

  • http://satisfactionsurveyquestions.org/ Satisfaction Survey Questions – Satisfaction Survey Questions Seven Secrets of a Successful Customer Satisfaction Questionnaire http://satisfactionsurveyquestions.org/ How Much Money Will You Earn Filling Out Surveys? In general, it depends on you and your effort. The more surveys you fill out, the more money you can be paid by marketing survey companies. The rewards vary, normally between $5 and $75, but on average you will be paid $25 per survey. (You may get hundreds of dollars if you are selected for a focus group.) If you treat this opportunity like a job and put in the effort, the rewards will come. Some real people make from $1,000 to $4,000 a month doing surveys. We don’t make such promises or guarantees, because, as a numbers game. It’s up to you and your effort. Just approach it as a business and it will give you rewards. tags:Survey Questions, survey questionnaire, survey questionnaires, survey form, sample survey, survey examples, satisfaction survey, customer survey, survey, market research survey, survey research, survey forms, survey template, customer service survey, customer satisfaction survey, evaluation survey, web survey, online survey, online survey software, customer satisfaction surveys, free survey, employee survey, employee satisfaction survey, surveys, web surveys, internet surveys, surveys online, free surveys, servey questions, survay questions, survey samples, survery questions, survey templates, employee survey form, free online surveys, sample survey questionnaire, sample employee survey, customer survey sample, customer questionnaire survey, customer survey example, customer survey template, staff satisfaction survey, customer satisfaction survey templates, customer satisfaction survey template, customer satisfaction survey sample, customer satisfaction survey questionnaire, customer satisfaction survey form, customer service satisfaction survey, sample surveys, s