“If the Taoiseach’s Government knew Ango Irish Bank was insolvent and he asked the Irish taxpayer to bail it out and to pay the cost we are now paying for it, that was and is economic treason. I stand over that.” Eamon Gilmore speaking in the Dail in January 2011
Unfortunately Eamon Gilmore’s position has shifted over the past 12 months. What was “treason” in January 2011 – Eamon accused Brian Cowen of what “was and is economic treason” – has undergone a 180-degree about-turn and is now the preferred and adopted position of the Government in which Eamon’s party is a vital coalition partner, in which Eamon is Tanaiste (deputy prime minister) and which has a grandly-titled “Economic Management Council” consisting of Eamon, Minister Noonan, Minister Howlin and An Taoiseach Enda Kenny.
Tomorrow on 25th January, 2012 Anglo – a bank that is insolvent save for IOUs signed by former Minister for Finance, the late Brian Lenihan and accompanied by some murky “letters of comfort”, none of which was brought before the Oireachtas, the parliament of the country, for oversight – will pay €1,250m of our money to bondholders who are unsecured (that is, they don’t have any charge over any specific asset in Anglo) and unguaranteed (that is, not benefiting from the September 2008 guarantee that has expired). Anglo is a defunct bank, that doesn’t take deposits – having sold the majority of its deposits to AIB last year, retaining only modest sums that are connected with legacy loans – or advance new lending. It exists to wind down and work out its legacy loans which were not transferred to NAMA and its bonds are now, according to Minister Noonan, “what has become speculative investment”.
Now Eamon might have been able to dismiss the infamous “it’s Frankfurt’s way or Labour’s way” as pre-election “chapel gate rhetoric” but surely he would accept that he is, by his own measure, a traitor to Ireland and its people; or if not that, a rank hypocrite. Of course, the Dail’s “Salient Rulings from the Chair” forbid one deputy from referring to another deputy as a “hypocrite” – there’s no such ban on “traitor” or “treason” though.
“THIS BLOG IS DEDICATED TO NAMA – the NATIONAL ASSET MANAGEMENT AGENCY, part of the REPUBLIC OF IRELAND’S RESPONSE TO THE 2008 BANKING CRISIS AND THE IMPLOSION OF THE IRISH PROPERTY BUBBLE.”
I am a subscriber to this blog and used to find it very useful. However, recently the incessant focus on the Anglo debt and the repayment of the bonds has really frustrated me. We have debated this ad nauseam – I have posted in the past that although not ideal, I agree to the payment of the ANGIRI bonds. And frankly the terms of the money we have received from the EU and IMF dictated as so. I am not inclined to repeat the arguments, but rather would wish that you return the focus of this blog to that of NAMA.
I support you in your good work on this, but frankly the rhetoric about the ANGIRI bonds is growing very old. I am not looking for a debate on the issue – just sharing my views.
Best
Nama and the Irish banking system are inextricably linked. Indeed, Nama is little more than a failed attempt at a “bad bank” for the Irish property sector. What happens to the Irish banking sector, and the Irish public finances, has a direct effect on Nama and the property sector in this country.
It works both ways. Nama’s actions also impact the banks, and the national debt. It must also be remembered that Nama has cost almost as much as Anglo-Irish bank already, and most of the Nama loans involve Anglo/INBS loans.You cannot separate talk of a default on Anglo bonds from Nama as part of the entire reason for Nama was to avoid such a default.
It is both appropriate and informative for this blog to discuss Irish banks, Irish state finances, elements of Irish and foreign property markets, ICB and ECB policies, as well as certain political issues as all of these in one way or another will have an impact on Nama–the largest asset management company in the world. It also makes for a fare good read, so carry on NWL!
@jj Without Anglo, there would be no NAMA. It’s was the devil that spawned the Damien. It’s bonds are relevant.
I had to laugh at the An post “It is time to rise up and take control of your bills” ad right underneath the posting!
Hardly fair to compare a Government decision to underwrite the private and reckless borrowing and loss of billions of Euro, and the issuing of promissory notes to guarantee this private debt, with a decision to then honour this commitment made to private and unsecured bondholders. The promotion of lax regulation that allowed this to happen was economic treason. The making of millions of taxpayers hostages to this repayment for many years to come was the economic treason. The honouring of these commitments by the subsequent Government may be considered excessive caution of Ireland’s future financial standing, but it is a gross injustice to call it treason.
@Jose, then-Deputy Gilmore claimed in January 2011 that it was *and is* treason. Given that the guarantee and promissory notes had already been issued then he was referring to the ongoing bailout of Anglo. If it was lawful last summer to not pay these senior bonds when Minister Noonan spoke in Washington, it is presumably lawful today, and accordingly it is treason in the terms that Eamon Gilmore used last year.
It’s going to get weirder,Irish sovereign debt will be restructured,simply too great a burden.There will be Irish politicians claiming credit for this,but hang on you overpaid.
The Greeks while no laughing matter are trying to get 30 year money at less than the US Govt. pays,source of much amusement.There is very little further flexibility on rate or terms,principal will have to be forgivin.
Basically,you will be “forgiven” money that should never have been paid.
JJ is totally wrong. This is not unrelated it is the very crux of the whole problem.
What was the Labour party told when they entered government that made them do this 180?
Labours economic policy was opposed to paying back the debts of the banks but Joan Burton seemed to hold a lot of weight in Brian Lenihan’s Piri Pasau argument.
Was it just senior public servants that convinced the Labour party or Fina Geal or were there other interested parties getting involved.
Surely there has been significant lobbying on behalf of the bondholders and European banks through the ECB and various other factions. yet we haven’t heard a word about it.
Perhaps the realised that the money that was lend to Ireland had specific terms (and the money extended to Irish banks via the ECB collateral program also).
We can’t just take the money and then decide we are going to change the terms under which we borrowed it (and I am taking about the bailout monies)., which frankly very little has yet been drawn down.
We might not like the terms – but we would have to find an awful lot of money elsewhere and the IMF, who are signatory to the agreement, are not capable of bailing out the Irish government on a stand alone basis.
These are the hard facts. The Irish state nor the Irish banks have been able to borrow from any other sources other than the EU and IMf (or indirectly via the ECB).
The About Tab says this website is about NAMA – all good and well to talk about ANGIRI but frankly it is been done to death. The arguments were had, and the present course of action taken.
@jj, sorry to hear you are frustrated, and you may continue to be frustrated over the next couple of days in particular, though even after that, there is the issue of the Anglo promissory notes.
“These are the hard facts”
“and then decide we are going to change the terms under which we borrowed it (and I am taking about the bailout monies)”
No, no, or at least An Taoiseach disagrees with you and has confirmed that it is NOT a term of the bailout Memorandum of Understanding that bondholders be repaid. You can confirm this for yourself, if you doubt An Taoiseach, as the MoU is a public document. For what it is worth, the IMF in general support burden-sharing with bondholders including senior bondholders.
” which frankly very little has yet been drawn down.”
Again, no, no. The latest Exchequer Statement for December 2011. http://finance.gov.ie/documents/exchequerstatements/2011/enddecexcheqstat.pdf shows that we have drawn down over €34bn of the €67.5bn external bailout. Not “very little” at all!
Seems that if the arguments have been done to death, the facts may have gone over your head. As I say, this issue will continue to be aired though the bondholder issue will become largely academic after tomorrow.
I didn’t think that much of the money was drawn – I stand corrected – about half is definitely more than “very little”.
The Irish banks are in receipts of significant amounts of cash via the ECB. And the terms of those monies are not public.
We rely on the ECB to keep the Irish banking system alive and although the flight of deposits has slowed down, there is a fear (genuine or not) that further talk of not paying senior bondholders will cause that to increase again.
I am at a mismatch of information – given you know who I am from my email address and I have no idea who you are. But I have shared my views, and I won’t say I am happy that ANGIRI bonds are been paid, but I do believe it is a necessary evil in order to maintain stability in the banking sector.
http://wp.me/p28tG9-2o
baidin fhilimi hits a promissory note
(3) persons of unsound mind – the original rule of law was that a contract with a person of unsound mind was void, because there could be no consensus ad idem. This was later qualified by a rule that a person could not plead his own unsoundness of mind to avoid a contract he had made. This in turn gave way to a further rule that such a plea was permissible if it could be shown that the other contracting party knew of the insanity (Hart v O’Connor [1985] AC 1000 at 1018–1019, [1985] 2 All ER 880 at 888, PC; Irvani v Irvani [2000] 1 Lloyd’s Rep 412, CA)
http://www.lawteacher.net/contract-law/cases/capacity-cases.php
Irish people have this deference,”oh don’t speak ill of the dead”,Lenihan was terminally ill.He was a barrister completly out his comfort zone in finance and dying.In private practice he would NOT have been allowed make these decisions,should have been pushed aside.
The contracts/agreements/letters/side deals/MOU’s are null and void Lenihan was of unsound mind.
Lenihan had the power of the Oireachtas – there was many votes of confidence in the government, and won, and unless you think those decisions were someone illegal, then please please stop harping on about the same issues.
If you look at the vast majority of the posters here, they tend to agree with the same views – and that is the problem of blogging – “The problem with the internet is people flock together and have similar views, there’s no real dialogue between people who have different views” – I will venture the opposing views have got sickened by the continuous virtous circle.
I have no problem with your views,entitled and welcome to them.
There is no strategy for negotiating other than,look we have been so good,go on cut us a break,please please its pathetic .
The Irish people were horribly represented in this,incompetent politicans and advisors.
Simply saying we dont like the bill,won’t suffice.
We can never know, given the market moves on sentiment etc, but given the current rates on Irish government bonds, and the exchange from 2014 to 2015 of c. 30% of amount due in 2014 to 2015 at an additional cost of 115bps is exceptionally positve.
I would not try to link the ANGIRI repayment to be the only cause of the tighter spreads and risk appetite of Irish government bonds.
But I don’t accept that the payment of the ANGIRI bonds affect in anyway the cost cutting measures required to bring the state finances into line. We simply would have been lend less money.
meanwhile back in the real world…
none nama land…
none ecb/imf/cboi land …
none leinster house, jaesus aren’t we all important land…
http://www.independent.ie/national-news/almost-70000-have-sought-a-new-life-abroad-in-past-year-2973241.html
http://www.businessandleadership.com/business/item/33647-certus-to-help-aib-with-mor
http://www.irishtimes.com/newspaper/finance/2012/0124/1224310673754.html
@JJ. On this blog you’ll find anything but consensus and similar views! However, you’ll also find that NWL insists that we play the ball and not the man and it leads to open, lively debate – without rancour.
There is little doubt that Eamon Gilmore in particular has evolved into a shameless Quisling over the last 12 months. I was incensed by his recent “green jersey” comment, given just how much he has supported the undermining of Irish independence, and the emasculation of representative democracy here. He and his TDs are selling this country to the great powers of Europe, for nothing.
The Labout party will do anything, absolutely anything for power; and for anyone besides. Never mind FG–what will Labour do for their political masters in Europe when the time comes to trade yet more of our sovereignty for the next crate of €50 notes for the ATMs in the Dail bar?
People should really consider the record of the Government parties whenever they make statements on things like corporate taxation rates, distressed mortgages, and holding referenda. They don’t exactly have a lot of credibility.
Eamon Gilmore and the Labour party will never again see another vote from me. And if FG, with all their talk about not having “name of defaulter across our foreheads”, don’t start making decisions other than to shovel more public money into furnaces like Anglo-Irish bank, they won’t see one either. (Naturally, FF are permanently ruled out.) I hope the rest of the public feels the same way.
@All
I’d be interested in hearing the views of the contributors to this site if for some unbelievable reason Annsely rang the DoF tomorrow and said ‘lads I ain’t paying this one..’
Aside from the obvious ‘Mike, there’s the door..’ what else would actually happen.
@Yield
What would happen? Nothing. The reason is simple.
The State would not be defaulting on the PN. A inoperative bust State owned bank would be declaring that it was ‘seeking negotiations’ with creditors.
And bye the way, it would be up to Dukes to make the call. But, Dukes being a self declared Europhile, one wonders if he can be considered objective in distinguishing between Ireland’s interests and those of the ECB in this matter.
He may argue that he is a ‘policy taker not a policy maker’ but he has been strangely quiet on this matter.
At the end of the day Dukes is Chairman of the bank that is writing the cheques that are sinking Ireland.
That is what history will record.
But he too, like so many others, has failed to stand up for this country or the citizens of this country.
Article in today’s Irish Times which quotes Mr Gilmore http://www.irishtimes.com/newspaper/ireland/2012/0124/1224310672980.html
““Those who make the call for not repaying have never spelled out what those consequences are,” Mr Gilmore said in relation to the Anglo bonds.
Pointing to the gap between public expenditure of €52 billion and revenues of €33 billion, he said the question arose as to who would lend to the Government if it reneged on the bonds.
“If you don’t repay will people lend to you?
“If people don’t lend to us – …….. we can’t bridge the deficit that we have.”
Pardon my ignorance in these matters but is the Tánaiste suggesting here that we borrow more to bridge the deficit?
Mr Gilmore is further quoted as saying “What happens to public services? What happens in the hospitals? What happens in schools? What happens to the pay of teachers, nurses, guards? What happens to social welfare payments?” And the most important question … what indeed would happen to the pay of a Tánaiste?
One thing is certain – this government has not stood up for this country or it’s citizens. They were only ever interested in attaining and holding power.
@ Yields or Bust
If Aynsley rang the DoF tomorrow he would have earned his bonus :-)
@ NWL
“a grandly-titled “Economic Management Council” consisting of Eamon, Minister Noonan, Minister Howlin and An Taoiseach Enda Kenny.”
You might as well have the Teletubbies managing the economy.
Be aware of this exposure of the Bondholders. Feel free to spread this far and wide to increase the knowledge if you are happy to do so.
http://www.golemxiv.co.uk/2010/10/who-are-the-bond-holders-we-are-bailing-out/
@ Bolshevik
“One thing is certain – this government has not stood up for this country or it’s citizens. They were only ever interested in attaining and holding power.”
They’re politicians – that’s what they do, as well as take credit for the hard work of honest competent people…
Bailing out Anglo has been a series of incompetent decisions from the very beginning. It just continues, mainly because we have people running the country that are inexperienced and ill-equipped for the job they are doing. I know Eamon Gilmore. He is out of his depth.
@WSTT
Gilmore went for Foreign Affairs because he did not want to be in a department that would have to enforce cuts.
They don’t do cuts in Foreign Affairs. Other than the stupid Vatican cut where undoubtedly a few Italian clerical and cleaning staff will feel the pain.
Labour’s way or Frankfurt’s way, my ass.
To my mind, what Gilmore said a year ago about consciousness of solvency issues (as opposed to liquidity) and implications for treason, is important.
If one goes back and reads the quality business newspapers in the period leading up to the Lehman brothers collapse, it is incontrovertible that the situation was very clear with respect to whether the problem was liquidity or solvency. ie. there was a lot of copy related to how the problems stem from solvency. Go look, see.
In addition, one only had to look at what the markets were clearly saying about the banks at the time through the halving in the value of their shares, to realise that the problem was certainly not one of temporary liquidity issues.
But yet, the whole of the Irish establishment maintained that the issue was indeed liquidity! The government, the opposition, the Central Bank, the Financial Regulator, the NTMA, the legal and financial advisors…
If there had being some inkling at all that the problem was solvency, not liquidity, that would have put the writing on the wall that any and all money then thrown at the problem was like throwing money into a bottomless hole with no chance of the money thrown into it ever being recovered. A certainty.
Temporary liquidity issue. Really. No intelligent person I talked to at the time thought this.
So then we have to ask ourselves what was really going on. To commenters above, yes, it’s all related – Anglo and NAMA; The massive cross deposits in the banking system 2006-08 to cover Anglo, done with the full knowledge of the Central Bank, the Financial Regulator and the NTMA (Cowen asked the NTMA to ‘invest’ in Anglo); The idea for NAMA being originally flown by by the most politically connected banker I am aware of, Mike Soden (formerly of BOI, currently on the central bank committee). You can see the idea flown here in October 2008 in the Sindo, well before the Bacon report – http://www.independent.ie/opinion/analysis/merger-of-aib-and-boi-is-the-only-way-to-save-sector-1496537.html
And so on. In fact, look at all of it – all of the high salaries of the well connected, the property wealth, lucrative state awarded contracts, medical and legal cartels, and so on. It is all of the same phenomenon. Anglo is certainly one and the same phenomenon as NAMA. And at the root of it all is something that some day we will be clear sighted and brave enough to call as it is. ie. treason.
Hey, I see anonymous has hit some government websites last night. Good for them.
So is it worse to be insolvent or illiquid?? Youcan be hugely solvent but if you don’t have the cash to put bread on the table you’re going to go hungry. In the context of soverigns I don’t see solvency as being a primary issue. How do you define it? Practically the funds we are paying back today have been lent to us by the ECB etc. OK it all adds to the Sovereign debt, but whaats another 1.25B on top of the 65B Fund & rising that we are drawing down? We’re not going to be able to pay this money back anyway so it’s either going to be put on the long finger or be part of a negiotiated default.
A liquidity issue means that your balance sheet is essentially sound, and if you can cover the temporary cashflow problem… your business being sound, there will be no loss. You can get the money back.
Solvency on the other hand means that your assets are worth less than your liabilities. Thus, the money you throw at it will be used to pay off your liabilities, but your assets can never make up for it. So, the money is gone for good.
Claiming that the problem was only liquidity, implied that we could easily recover the money put in, in time.
Yes, there are some complex things you might say about the relation of solvency and liquidity. But what I have said above is the nub of the matter.
Also, the context is the original and subsequent decisions to “bail out” Anglo using taxpayer funds, which is what Gilmore’s quote at the top of this article refers to.
My point is that we are not using taxpayers funds to “bail out Anglo”. We are using liquid assets borrowed from the ECB (albeit indirectly). This is not necessarily a moot point as we currently have no recognised capacity to repay these borrowings. Hence the irrelevancy of solvency & the focus on liquidity.
Very clever shenanigans I agree. Well, let’s see who ends up carrying the can in the end shall we? Certainly, if means can be found to spread the load out over time that makes for far greater political expediency (expedient in a certain viewpoint). ie. The taxpaying equivalent of the boomtime FTB paying over 35 years+. A boiling frog comes to mind.
[…] Bailing out Anglo Is Economic Treason Says An Tanaiste Eamon Gilmore (NamaWineLake) […]
Instructive reading this old article by Simon Johnson, ex chief economist of the IMF – http://www.theatlantic.com/magazine/archive/2009/05/the-quiet-coup/7364/
But I must tell you, to IMF officials, all of these crises looked depressingly similar. Each country, of course, needed a loan, but more than that, each needed to make big changes so that the loan could really work. Almost always, countries in crisis need to learn to live within their means after a period of excess—exports must be increased, and imports cut—and the goal is to do this without the most horrible of recessions. Naturally, the fund’s economists spend time figuring out the policies—budget, money supply, and the like—that make sense in this context. Yet the economic solution is seldom very hard to work out.
No, the real concern of the fund’s senior staff, and the biggest obstacle to recovery, is almost invariably the politics of countries in crisis.
Typically, these countries are in a desperate economic situation for one simple reason—the powerful elites within them overreached in good times and took too many risks. Emerging-market governments and their private-sector allies commonly form a tight-knit—and, most of the time, genteel—oligarchy, running the country rather like a profit-seeking company in which they are the controlling shareholders.
The reason the government are so intent on paying back these bondholders is so that they can return to the markets asap to get their funding, get rid of the external oversight, and return fully to their old gombeen ways. Not a million miles away from the reasoning underlying the decisions to bail out Anglo, introduce the all encompassing bank guarantee, set up Nama, and all the rest.
It’s so dis-spiriting that absolutely nothing has changed, notwithstanding the extent of the damage done by these gombeen ways so clearly brought to light these last three or four years. NWL was spot on in his previous post ‘ten reasons why…’
It’s interesting (although perhaps only to me) that when I was on the street this time last year saying things like “Well, it’s not obvious that it’ll be easy to get out from paying all these bills, but we should certainly try.” I was often accused of being equivocal and not having the country’s interests at heart. Labour and FG – I was told – had much clearer messages and policies. The famous Varadkar “Not another cent” and Gilmore’s “Labour’s way or Frankfurt’s way”
My reaction? That I didn’t believe the situation was as clear as they were claiming and that if we wanted to have this kind of flexibility we’d have to move fast to reduce our borrowing need.
This year? Well, if we’d moved as quickly as I think we could and should have moved, we MIGHT have had some negotiating position by now. And I mean MIGHT.
FG and Labour didn’t do anything much so it’s understandable how – from their point of view – we now have no choice but to pay.
This repayment is equivalent to less than a month of our 2011 borrowing/deficit. That borrowing is still going on. Every month. That’s the big issue really.
The Anglo 1.25 billion is a highly relevant battle, but not the war. We’re still not fighting the war properly, let alone this battle.
@HS Well said, Hugh. But exactly how would you fight this war?
Well, I can’t say EXACTLY since I don’t have insight into the actual negotiations and I haven’t kept sufficiently up on the numbers. At least last year there was a window of opportunity for a new govt to come in, see the numbers, decide a new course of action and be brave. Too late for that now – at least in the absence of another election.
I don’t think any solution is going to be pretty now. Perhaps fighting a war is the wrong metaphor. Dental or surgical metaphors about quick amputation or early extraction preventing gangrene or abscess may be more appropriate. The longer we wait the worse it’s going to be, but it’s not going to be pretty no matter what we do.
However, I’m told Stephen Donnelly said something recently that aligns with one of the things I think it more important than it might seem, i.e. that the IMF/EU guys come here and see how well paid parts of our public service and TDs are and they think we’re well off and don’t need too much sympathy. If you’ve ever studied cognitive biases and you appreciate how little of Ireland they see, this stuff matters a LOT.
Discussion of the €1.25 billion payout on this blog is welcome and informative.
It is also inextricably linked to the issue of NAMA and Anglo. Therefore those here who are frustrated by the discussion of these issues that are inextricably linked perhaps need to cease reading the content and comments on this site.
In respect of the entire strategy toward Anglo, I agree with those who have said that the government strategy from the outset was inept, misinformed and thoroughly reckless by FF/Greens and by extension FG/Lab.
And Gilmore? That emperor never had any clothes.