Misheard rumours on Allied Irish causes peak prices on Irish debt..

Scary stuff, but I guess it demonstrates just what a risk Brian Lenihan’s been running. It’s not great that the basket case bank, Anglo Irish Bank has the same acronym as more solid bank… Alphaville have the detail and the scary charts… H/T Niall…

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  • A.N.Other

    Just as interesting on the same subject: “Will the Irish start to hate the Germans” –

    http://url.ie/7l3u

  • A.N.Other

    And growth and recovery hopes now go out the window following an unexpcted fall in GDP:

    http://url.ie/7l41

  • Alias

    Subordinated loans are only at risk of default if Anglo goes into liquidation and there aren’t sufficient funds to meet its liabilities when all of its other creditors have been repaid. However, since the state is the sole shareholder in Anglo and has no plans to liquidate it, removing the subordinated loans from the guarantee scheme has no practical consequences for those lenders, so this is just cynical populism from the minister.

    For once I’m in agreement with Fintan O’Toole: “The choice is now stark: do we go on being “good Europeans” at the cost of destroying our own society or do we become “bad Europeans”, lose the trust of our European partners, but save ourselves?”

    “There comes a point of existential crisis when even the meekest of countries has to put its vital national interests (first). We are at that point now.”

    The government’s agenda is to implement the EU policy of containing eurosystem debts in the borrowing state rather than allow them to default to the lending state. This policy forces taxpayers in borrowing states to assume responsibility for the bad debts that properly belong to lending states such as Germany. While the government has devised NAMA as a means of removing all of Germany’s bad debts from eurosystem banks in Ireland and containing them within the state should any of the eurosystem banks in Ireland subsequently default, this must be reversed and all of those eurosystem banks must assume responsibility for their own reckless lending to each other. Likewise, the guarantee scheme must be terminated and the government must implement legislation that allows it to be a preferential creditor with the express purpose of reclaiming the billions of Irish taxpayers’ money that it has already given to eurosystem banks in Ireland who have passed it on to eurosystem banks in Germany and elsewhere in the eurosystem.

    Unfortunately, it will take a revolution to unseat these europhiles and achieve that…

  • Glencoppagagh

    Alias
    A failure by Anglo to repay its subordinated debt is of itself hardly likely to destabilise German banks.
    Your insistence on blaming European banks for the Irish debacle is less than convincing. As if no Irishman ever dreamt of speculating on property until the perfidious Hun began showering them with cash.
    You know it’s really an Irish problem to which ‘an Irish solution’ has yet to be found.

  • Alias

    It’s only an Irish problem because the EC made it an Irish problem by directing the government to extend systemic risk from eurosystem banks in Ireland to all eurosystem banks and that this concept should be implemented by containing eurosystem debts in the lending state rather than allow them to default to the borrowing state. That is why the state guaranteed the bondholders to the tune to circa 400 billion. Those debts do not belong to those who did not borrow that money (taxpayers) but to those who loaned it to those who couldn’t repay it (other eurosystem banks). The reality is that Irish banks had more than enough assets to repay all depositors before the government extended liabilities to eurosystem banks, so no Irish citizen would have lost a cent as a result of the reckless lending of eurosystem banks if the EU was not placed before the national interest as the government is constitutionally obligated to do under the Maastricht treaty (part of the Irish constitution since ratification). The president of the ECB directed Lenehan to save eurosytem banks in Ireland “at all costs” in order to protect the eurosystem and that is what those who are constitutionally servile to EU governance duly did. It isn’t just Irish bonds that jumped on the rumour of a default, German bonds jumped too.

  • Alias

    Typo: “…containing eurosystem debts in the borrowing state rather than allow them to default to the lending state. “

  • joeCanuck

    It must be getting very scary for the ordinary woman/man in the street. From what is a major story on BBC World News, the country may be about to follow Greece into a German (mainly) bail out and savage cuts.
    The German workers will not put up with continuing bailouts at their hardworking expense for too long. And why should they? The main bastwiches have already got their saviour.

  • aquifer

    ‘the EU policy of containing eurosystem debts in the borrowing state rather than allow them to default to the lending state’

    Ehh?

    If the Europeans are really about free markets in goods and services including bank lending, the free market in bank lending entails the transfer of risk, and therefore occassional defaults across borders.

    This is a tails we win heads you lose hoax promoted by nations with big balance sheets who had plenty of money already and can still borrow cheaper than small peripheral people.

  • joeCanuck

    Why did Ireland become a “tiger”? Where are the large industrial sites producing consumer white goods, transport lorries, locomotives etc? (A car assembly plant doesn’t count; making the engines and drive trains is where the money is).
    Instead, it all came, I think, from too clever by half property developers who now have many thousands of houses that can never be sold (All of the potential tenants from Poland etc have gone home?). And there is serious talk about demolishing brand new houses? And the enablers, the Banks, have got their bailouts.

  • Munsterview

    There may be more to this, far more than is apparent !

    Certain Fianna Fail business people banging the government door for finance have allegedly been told some weeks ago by a senior Fianna Fail minister that a major Irish bank sale was under advanced negotiation.

    The interested intending buyers are supposedly major transnational financial bankers to whom the Irish purchase price is, in relative terms, only loose pocket change. The pick of NAMA assets are also supposed to be part of the deal.

    This apparently also involves a substantial business transaction with Israeli interests and the Israeli state is involved in facilitating the negotiations with the multi national banking group concerned.

    For certain Fianna Fail interests this ticks off a number of boxes : first they get back a substantial tranche of money for government spending to get the cranes swinging to finish off some projects and the earth moving equipment going on with dozens of scattered road construction for the passing optics. It will also give the illusion that the country is moving, classical Finanna Fail stroke politics.

    It will be also be the new Transnational Financiers, the new bank owners, not the Irish government that will tell currently protected investors to get stuffed as per international best practice when a bank fails and is taken over.

    No problem for those guys to take such a reputation-al hit, they do it all the time and Ireland is left perhaps not quite squeaky clean but not the main culprit either! Once the ‘uncertainty’ in the Irish system is dealt with and some of the money is back, The Republic is well down the list in the leading financial basket cases of Europe

    If these rumors are floating around in Ireland, albeit in a tight circle, they have also come to the ear of International Financial Intelligence and while these transactions have not made mainstream media, they have circulated sufficiently in insider circles to have alarmed the market.

    This was supposed to be a very clean FF transition; Lenihan and allies led. The Lenihan clan have not forgotten or forgiven the shafting of the late Brian Senior Presidential bid or the way some politicians now at the top, looked the other way when the Late Brians liver fund was looted. No love lost in the top elections for quite some time now.

    Martin with his perceived anti- Israeli, pro Arab stand is out of the loop, Mary Hanafin is too close to the Dead Duck, Cowen. Ahern contrary to some media leadership speculation, is in the Lenihan camp. Hense the new Martin and Hannifan alignment.

    Brian C’s ‘ problem’ is common gossip in media, political and establishment circles for years, the only thing new is that it has now escaped from the ‘insiders circles’ journalists among them, who kept silent, into the open forum where it became a focus for public anger.

    Rumor has it that certain people normally at arms length were very convivial indeed with Brian C and he was not left short of a drink or jolly company the night before his ‘underperforming’ morning interview.

    Brian Lenihan is now the man in FF and Dermot Ahern, by default, if for any reason, he is not available!

    Big Boys Games, Big Boys Rules ! These International financial heavyweights want a financially and politically safe, stable, Ireland, hence a proper ‘Left v Right political divide. This was supposed to be achieved by two very Dublin 4 Coupe.

    Leader R Bruton and his new Blue Shirts, now complete with ties and and worn inside well tailored suits were supposed to be ready to move in a new political alignment with the Lenihan circle for a PD type mark two. Mick the Mouth got a whiff of that in the four-courts and started throwing shapes to let everyone know that ‘he had not gone away you know’ ! He even hinted at a new party of his own as a spoiler to ensure he could not be ignored when it came to diving up the expected goody bag.

    When the wheels fell off the’ Bruton for leader’ wagon Lenihan had to swiftly backpedal on his Leadership moves. Simon Covney apparently had been very helpful with arranging ‘the generous Beal Na Blath invitation’ to Lenihan, something the Enda camp did not overlook.

    Simon is still however very much a player in the new alignment and if Brian Cowans latest wound proves fatal, then Simon will be seen not to be that simple ! He will be seen to have done what the Mayo windbag failed to do. Even some dyed in the wool Fianna Failers will be thankful to him. He will be part of the new ‘untouched by scandal’ top guys in Irish politics!

    Meanwhile the plans of the International financiers who want an Irish bank and de facto control of the main financial transactions of this Island are on course. If the information is correct it may be close to the final stages. These guys are not the smash and grab hedge fund asset strippers, they are in for the long haul. Ownership is the objective !

    Those assets bought from NAMA for a fraction of their ‘good times’ cost and finished off will look very different in a decade or fifteen years time, these interests are on target, Irish politics are not as yet properly aligned but these guys get exactly what they need in every country and Ireland will be no different.

    It seems that we all on this Island may get to experience that old Chinese curse first hand….
    ‘ May you live in interesting times…..’

    We may be very well doing just that.

  • aquifer

    “making the engines and drive trains is where the money is” In the latest Beemers the electronics cost more, and the Irish can do electronics.

  • Mack

    Where are the large industrial sites producing consumer white goods, transport lorries, locomotives etc?

    Well, there was a large Dell manufacturing plant in Limerick. There still is a large Intel plant in Kildare. Most of the world’s Botox and Viagra is made in Ireland. Nearly all of the world’s major software houses / internet companies have significant bases here. If you want to attract workers from all over Europe – Dublin is one of the best locations. The International Financial Services Centre employs over 14,000 workers in sophisticated, smokless, well-paid jobs in Dublin’s inner city. Tourism, agriculture & food processing remain large industries in Ireland.

  • Mack

    In 2006, there were 83,400 people employed in the ICT industry in Ireland across 5,284 companies generating €52,829 (millions) in revenues. I would guess that has increased since then..

  • I doubt any of this is accidental. I think this a pre-amble to a run on various Irish government bonds and debts prior to the budget later in the autumn. As with Greece, we aren’t seeing some cycle-led organic process here but a premediated move by the ‘markets’ to try and achieve a signficant differential in various financial products before and after some shoring-up process (via the EU).
    The city boys can then flog on the bonds at a tidy profit once the EU or IMF or whoever has had to prop up the good European citizens of the Irish government.

  • Mack

    It a possibility, I guess. They’d be more likely to be selling bonds than buying them (I presume you mean a run from bonds i.e. a crash in price and spike in yield?). So to profit from a falling price they need to be on the sell side. The EU will lend to Ireland at a fix yield of 5% (i.e. they will purchase Irish bonds with a given coupon at a price that sets the yield at 5%). Not sure whether they’d purchase on the open market to give the hedge funds an out. No doubt there are people trying to make money out of this, no doubt we’re in pretty bad shape and reliant on the EU for protection either..

  • Mack

    Last part of that didn’t make much sense. Sorry. If they’re selling bonds, they just need to buy back in themselves at a lower price later. So they’re not dependent on the EU at all, as long as the prices continue to fall. Those types of rumours could backfire on them though, if the government and/ or the EU manages to restore confidence…

  • DK

    You obviously haven’t been to the IFSC recently!

  • I was thinking of a rough equivalent of short-selling – force the Irish government to buy at high rates (as it is now) then force the economy past the red and into complete meltdown to coincide with the budget – so there is absolutely no possibility of balancing the books within EU guidelines. This would mean some sort of external guarantee or whatever to prop up the economy and those that leant at 6-7% or whatever are guaranteed their return. All of it artificially stimulated by the ‘markets’ and showing up the limited sovereignty that passes for the state these days.

  • That is ‘buy’ as in buying in loans or borrowing.
    And ‘leant’ should be ‘lent’ … but is a bit Freudian.

  • Mack

    There might be slightly less employed today, you’d still be looking at well over 100k employed directly in ICT, Financial Services & Pharma, or more than 10% of the pre-tiger workforce…