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Archive for February 23rd, 2013

It’s a real pity that junior minister at the Department of Public Expenditure and Reform, Brian Hayes’s opinion piece in  yesterday’s Evening Herald is not online. In it, he claims that what he calls “Chicken Licken types” and “failure addicts” do “drag people down and undermine our confidence and ability to deal with difficult and complex issues” Brian seems to have a bit of an obsession with “Chicken Licken” and although a Google search won’t return his Evening Herald article yesterday, you can find previous occasions which Brian deployed the fabled chicken to illustrate what he sees as unfounded hysteria.

Now, when referring to “Chicken Licken” and “failure addicts”, you might be thinking that the €130,042-a-year junior minister was indicating opponents in Fianna Fail or Sinn Fein, or perhaps economists like national treasure Dr Constantin Gurdgiev or Michael Taft or even the infernal meeja with its all pervasive negativity, but no, Brian tells us “some of the most prominent Chicken Lickens are on the backbenches of Dail Eireann where their message of doom would make a hell-fire preacher proud”.

So, who could Brian be referring to, at all, at all?  The Oireachtas website has a glossary of political terms and says “backbenches (backbenchers) – the backbenches are the seats where TDs or Senators sit if they are not Ministers or spokespersons for their party”.Given that all of the Opposition is on “the front bench”, that is, they are spokespersons for their parties or independents who speak for themselves, Brian can only be referring to those in Labour and Fine Gael. But who?

Of course the finger will inevitably be pointed at Deputy Peter Mathews – pictured above – who has crusaded since 2009 to warn of the cost of the banking crisis, and who, as recently as a month ago was repeating his message that the banks still hold hidden losses and that the cost of the bailout will increase. Deputy Mathews has also been critical of the decision to sell 35% of Bank of Ireland to a group of North American businesses.

For many, junior Minister Hayes is himself a Chicken Licken who has been warning the sky will fall in if there is any default on banking debt. And unfortunately for us, Foxy Loxy in the guise of the ECB has succeeded in luring Chicken Licken to its demise by getting it to convert flimsy and illegal promissory notes into sovereign debt.

You mightn’t be familiar with junior Minister Hayes, so this is a reminder via Japlandic, of the junior minister after he challenged us all to contribute ways in which we might solve the yawning budget deficit.

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Given the lack of sure-footedness about the liquidation of Irish Bank Resolution Corporation, you might be surprised to learn that discussions between the Department of Finance and KPMG had been ongoing for five months, when on the afternoon of 6th February 2013, the “well-planned” Project Red swung into action. IBRC mortgage customers are still awaiting new account details to pay their monthly mortgage, we found out via an obiter dictum in the NAMA chairman’s speech on Thursday that it had made available a €1bn credit line to IBRC as part of the liquidation and who knows if Judge Kelly has been finally provided with a copy of the IBRC Act.

This week in the Dail, the Fianna Fail finance spokesperson Michael McGrath asked Minister for Finance Michael Noonan some detailed questions about KPMG’s role as Special Liquidator. Most of the questions were stonewalled, but the Minister did say “the Department [of Finance] first communicated with KPMG on Friday the 12th October the possibility of their officials being appointed as Special Liquidator of IBRC”

Minister Noonan refused to provide the cost of the KPMG work, and bizarrely claimed that “rates” were “commensurate with those agreed following a tender process undertaken by” NAMA.  It is not clear if this refers to hourly “rates” per person employed or overall hourly rates or some different kind of “rates”.  Given KPMG is managing well in excess of €20bn of assets, hopefully the 1.5% per annum rule of thumb fee for receivers isn’t being applied – that would be €300m for one year or €150m for the six months during which IBRC is to be fully wound down.

The full parliamentary question and response are here.

Deputy Michael McGrath:  asked the date on which his Department first communicated with KPMG regarding the possibility of their being appointed as special liquidator of the Irish Bank Resolution Corporation; the procurement procedures that applied; the estimated value of the contract; and if he will make a statement on the matter.

Minister for Finance, Michael Noonan:  The Department first communicated with KPMG on Friday the 12th October the possibility of their officials being appointed as Special Liquidator of IBRC. I am sure the Deputy will understand that for commercial reasons the estimated cost of the contract cannot be disclosed. It is obvious that in the circumstances, a tender process could not have been entered into for the liquidation of IBRC due to the sensitivity of the matter. However, I can assure him that the rates that have been agreed are commensurate with those agreed following a tender process undertaken by the National Asset Management Agency.

As is normal in liquidations of companies, all costs, charges and expenses properly incurred by the Special Liquidators in relation to the winding up of IBRC, including the Special Liquidators’ fees, will be paid out of the assets of IBRC in priority to all other claims.

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In Ireland, we have the so-called Big Four accounting firms, KPMG, Ernst and Young, Deloitte and Pricewaterhouse Coopers. You might think that the likely lads and lassies at these fine firms would bear some responsibility for the financial collapse of the private sector in this State, where these firms were to the fore of auditing accounts and providing very lucrative consultancy services.

But no, apart from two known cases – Quinn Insurance v PwC and IBRC v Ernst and Young – there appears to be no real pursuit of the Big Four. And the second of these two cases, IBRC’s High Court action against E&Y which was commenced last November 2012, has been thrown into doubt with the liquidation of IBRC.

During liquidations, it is generally the role of the liquidator to evaluate the prospects of any outstanding liquidation, to establish if the likely benefits are worth more than the likely costs. Liquidators tend to be conservative in their approach, they cannot afford to take gambles on the unknown using money that should be applied to the benefit of creditors.

E&Y was the auditor to Anglo during the period when Anglo was carouseling €8bn of loans with Permanent TSB at year end to window-dress the accounts and there are issues with the disclosure of director loans and the Maple 10 transaction where €450m was loaned to a group of 10 businessmen to buy Sean Quinn’s shares in Anglo. We don’t know the details of the application or the remedies sought by IBRC but we wouldn’t be surprised if there was a damages claim running into €100s of millions. E&Y denies wrong doing and said at the time last November 2012 that it would be defending itself.

But step back from this for a moment. You now have one of the Big Four, KPMG deciding if to pursue litigation against another one of the Big Four, E&Y, in a case which could potentially wipe out the latter firm even if it does have adequate professional indemnity insurance – after all, what state agency will ever again employ E&Y if a finding of substantial wrong-doing is established?

So, you might have thought there was some conflict of interest in KPMG making a decision on the litigation. “Not at all”  says Minister for Finance, Michael Noonan in the Dail this week in response to a parliamentary question from the Sinn Fein finance spokesperson Pearse Doherty. “The special liquidators do not believe that continuing litigation previously in process represents a conflict of interest. “ says Minister Noonan.

You really couldn’t make this stuff up.

The full parliamentary question and response are here.

Deputy Pearse Doherty: To ask the Minister for Finance his views on the potential conflict in the Special Liquidator of Irish Bank Resolution Corporation, KPMG being responsible for considering the feasibility of outstanding litigation against competing business and former auditor of Anglo Irish bank, Ernst and Young; if he will outline the safeguards that exists to prevent a conflict of interest in respect of consideration of this litigation..

Minister for Finance, Michael Noonan: IBRC’s claims against third parties are unaffected by the liquidation. The Special Liquidators will have the power to continue to manage any IBRC claims that currently exist and will have the ability to assert further claims where they arise. The special liquidators ensure that all potential conflicts of interest identified are fully considered.  The special liquidators do not believe that continuing litigation previously in process represents a conflict of interest.

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IBRCLogoAfter the announcement of the liquidation of Irish Bank Resolution Corporation on 6th February 2013, a key question for the holders of €1.8bn of mortgages outstanding with what was Irish Nationwide Building Society was whether or not, they could buy out their mortgages from the Special Liquidator and if so, what price should they offer. We don’t presently know how many mortgage borrowers are affected but if the average outstanding mortgage is €100,000 then we’re talking about 18,000 accounts.

Sadly, this week, Minister for Finance Michael Noonan has thrown a bucket of cold water over the notion that individual mortgage borrowers can “buy” their mortgages.  Minister Noonan said that whilst the Special Liquidator must seek the best price for IBRC’s assets which include mortgages, “it is unlikely that individual mortgage lots will be put up for sale as part of this process”. So it seems that defaulting debtors with large loans can buy their loans at a discount, but mortgage borrowers are excluded from this munificence.

Still though, despite what the Minister says, the Special Liquidator might be exposing himself to litigation if he were to ignore an offer for assets that exceeded alternative disposal prices. So, it might still be worth your while as an individual mortgage borrower to contact the Special Liquidator. As to what to offer, this blog can’t offer advice though when GE Money sold its sub-prime loanbook to Pepper Homes Loans, the price was understood to be around 40c in the euro. Presumably the valuation of any mortgage will depend on the amount, the status of the mortgage and whether it is in arrears, the security and the interest rate applicable to the mortgage.

This is the full parliamentary question and response with emphasis added.

Deputy Pearse Doherty: To ask the Minister for Finance if the Special Liquidator of Irish Bank Resolution Corporation will entertain approaches and offers from individual mortgage borrowers to buy out their outstanding loans; and the range of discounts on offer by the Special Liquidator to potential buyers of mortgage lending.

Minister for Finance, Michael Noonan: There is an obligation on the Special Liquidators to ensure that the assets of IBRC are sold at a price which maximises the overall return for its creditors.

As part of the role of the liquidators, the assets of IBRC will be valued independently before being sold. Any assets not sold to third parties (including loan counterparties and other financial institutions) at or above the valuation price will be sold to NAMA at the independent valuation. The Special Liquidators are still in the process of devising and implementing a sales process in respect of IBRC’s assets however it is unlikely that individual mortgage lots will be put up for sale as part of this process.

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Loose thread of the Week

“Deputy Pearse Doherty: To ask the Taoiseach if he will confirm the discussions he had at the recent Davos summit with respect to investment in Myanmar, Burma; the persons with whom he had discussions; the nature of these discussions; if he has committed to deliver any assistance to any party in respect of communications investment in Myanmar.

An Taoiseach: The opening up of Myanmar and prospects for development and investment there is an important global theme, which arose in various discussions in Davos.  It is also part of the Government’s ongoing consideration of international opportunities for trade and investment for Ireland.  Last year’s visit to Ireland by Aung San Suu Kyi was a signal of the important and positive reforms being made by the Myanmar government.  These reforms should be welcomed as key building blocks to improved international relations.

I did not make any commitment to deliver assistance to any party in respect of communications investment in Myanmar.”[ends]

This week in the Dail, An Taoiseach Enda Kenny was questioned about the nugget unearthed in his rambling answers the previous week, that he had discussions at the recent Davos summit about investment in Myanmar (Burma) where Denis O’Brien just happens to be presently pressing his efforts to get a slice of what should be an immensely lucrative mobile phone market. This week, Enda was specifically asked with whom he had discussions, and his response signally omits any names, he merely refers to “various discussions”. There is a reference to that nice lady, Daw Aung San Suu Kyi.  There is no reference to Denis O’Brien.

Mystery of the Week

“The Irish Times’ has readership of 321,000 as figures climb 4%” – Irish Times headline 14th February, 2013

“Sales of The Irish Times fell 8.1 per cent in July-December 2012 compared with the same period in 2011. The newspaper’s print circulation is 88,356, a drop of 7,794 copies.” – from an Irish Times article 22nd February, 2013

According to the Irish-based Joint National Readership Survey, readership of newspapers – and in this sense “newspapers” means actual newspapers and excludes online or iPads or suchlike – the readership of the Irish Times in 2012 was up a modest-yet-respectable 4%, compared with 2011.

According to the British-based newspaper sales audit company, ABC, sales ofIrish Times newspapers were down 8%. So what’s happening? Apparently, each newspaper is being read by 13% more people. Or the independent ABC group has gotten its figures wrong. Or the JNRS survey is bollocks.

Where’s the Beef of the Week

There appears to be almost a news blackout in Ireland – do we have the British equivalent on K-Notices in this State – on the horse meat scandal. Food giant, Birds Eye became the latest international company to “discover” horse meat in its products – note, the discovery was not by any food agency but by the company itself. Birds Eye has withdrawn a range of processed beef foods including chili con carne, pies and Bolognese “purely as a precaution”. The company claims that there is no health risk. In the UK, the boss at Iceland frozen goods stores , Malcolm Walker dismissed our food testing, saying “well, that’s the Irish, isn’t it”. Yesterday, a Tipperary firm was found exporting horse meat to the Czech Republic labeled as “hovezi” or beef in Czech.

At least it is now clear that it isn’t just the furriners who have been flogging horsemeat, and we the mystery of Ireland’s missing horses might be closer to being solved.

But how long though before we accept that it isn’t just a “labeling” issue and that organized crime couldn’t give two hoots about using diseased, out-of-date horse meat stuffed to the gills with medicines like “bute” which are harmful to humans?

There should be a particularly heavy-handed response to the scandal in Ireland because it has damaged our world-leading reputation as a provider of foods, and particularly beef. And yet, our agriculture minister Simon Coveney blithely floats through the scandal, obsessively focused on maintaining consumer confidence at all costs.

A Man’s Home is his Castle of the Week

QuintinCastle

I wonder what property columnists did in medieval times – “Castle such-and-such boasts a top-notch dungeon for all your torturing needs as well as a couple of gravity dunnies”, perhaps – but these days, property columnists can get very bitchy indeed. Take NAMAed developer,  Paul Neil and NAMA’s sale of his Quintin Castle in county Down. Fionala Meredith in the Irish Times admits that it has “an impressive elongated frontage” but goes on to say “but is just rooms deep”. It must have been very disappointing to Fionala to discover “when you walk through the heavy oak double doors and discover something more akin to a holiday rental home with pretensions. Cheap, ugly fittings, grandiose modern features and a series of lurid paint-jobs (the oxblood-red billiard room is positively sinister) distract and diminish the place.And whoever decided it was a grand idea to render the seaward side of the castle, slapping a layer of weatherproof cement on the beautiful original stones, will surely have horrified the ancient ghost of John de Courcy.”

Bad enough to be in NAMA, worse to have your castle practically repossessed but now this…

New political party of the Week

“People for Profit”

Last weekend, an impressive “counter” summit was organized by a range of left wing parties in Dublin to discuss issues of the day. It was “counter” to the series of EU summits being hosted by Ireland during our six-month presidency. Poor Richard Boyd Barrett, the socialist TD for Dun Laoghaire who was formerly to the fore of “People before Profit” was labeled in the schedule as belonging to what must be a new party “People for Profit”. Now was this a genuine mistake, or is Richard no longer considered Left enough?

Media Winner of the Week

GerryAdams

The Independent group of newspapers was reported this week to be introducing a new grandly-titled “charter” which would put a stop to being beastly to certain individuals. Whilst many might have suspected that the new clause in the “charter” – shown here

“Sustained or repeated adversarial editorial material concerning individuals or organisations will only be maintained on the basis of justification in the public interest with the written approval of the managing editor”

- might have been for the benefit of a certain person against whom adverse findings were made in the Moriarty Tribunal, the more likely explanation must surely be the change in stance of the newspaper group towards Sinn Fein. Under the new “charter” we won’t be hearing any negative stories about Gerry and his Teddy and his tweets – shure, what public interest justification would there be in that? And nothing about his operations, his cottage, his mortgage or his family.

Economist of the Week

JimAllister 

“Our politically contrived links with the economic wasteland which is the Republic of Ireland is one of the primary reasons why we are lagging behind the UK.” Jim Allister in statement this week.

This was the week when unemployment in Northern Ireland edged up by 0.2% to 7.8%, still a considerable ways off the 14.6% that scourges us on this side of the Border. This was also the week when the Northern Ireland residential property crash was confirmed as the world’s worst (probably).

And who ya gonna blame?

Well, Jim Allister – pictured above – the leading light in Traditional Unionist Voice and sole TUV member of the 108 seat Stormont Assembly, blames us.

Christian name of the Week

Remember Mike Aynsley, the Aussie former CEO of Anglo/IBRC?

He oftentimes signs his name as AMR Aynsley.

And during the week, whilst sifting through company documents, I found out what “AMR” stands for

Arthur Michael Royal Aynsley

“Royal Aynsley”?

Yes, Royal Aynsley!

How on earth did we fail to discover this previously, and now that he has been set free after getting the boot from IBRC, will we ever be able to use it.

Old media death rattle of the Week

This was the week we learned that old media newspaper sales declined by nearly 10% in 2012.  As for new media, now we’re the “blog fog”, says the Irish Times editor Kevin O’Sullivan – actually he said it almost a year ago when the Irish Times introduced a new format – a new format in which there was not a screed of evidence that one extra cent had been sunk into improving the quality of the underlying news, comment or analysis but I only came across the term “blog fog” in this month’s edition of “Village” where journalist Gerard Cunningham reviews the state of the Irish Times.

So at the risk of being accused of displaying esprit de l’escalier, here’s the responding sum-up of the old print media – “Press mess”. They don’t know what their business model is – the Independent’s was supposed to maximize audience for advertisers but now their current stories won’t even be thrown up in a Google search. The Irish Times transferred their outstanding financial journalist Simon Carswell to the United States, AFTER the re-election of Barack Obama and there is atrocious non-Paper of Record coverage of a key phase in the Irish banking crisis where we’re flogging off expensively-bought assets. The Sunday Business Post gets lighter and lighter each week, and you can generally catch many of the stories on here, on CoStar or Property Week before you’ll read them in the Post. The Daily Business Post is actually quite good but what is it for? Journalists contributing their work to a free platform without advertising. The UK papers are doing better but is anyone fooled by their core of UK news with a few local Irish snippets tacked on as an afterthought around the edges. “Press mess” indeed.

Sorry of the Week

“It would be easy to explain away all that happened and all we did with those great moral and social salves of “the culture back then”, “the order of the day” and “the terrible times that were in it”By any standards it was a cruel, pitiless Ireland distinctly lacking in a quality of mercy That much is clear, both from the pages of the report, and from the stories of the women I met As I sat with these women as they told their stories it was clear that while every woman’s story was different each of them shared a particular experience of a particular Ireland that was judgmental, intolerant, petty and prim” An Taoiseach Enda Kenny fighting back tears in the Dail as he apologized to the victims of the Magdalen laundries. An expert report to examine recompense for the victims has been commissioned from retired High Court judge, John Quirke and his terms of reference are here.

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Cast your minds back to 29th March 2012 when Minister for Finance Michael Noonan did his three-card trick with paying the Anglo promissory note installment of €3.06bn. Remember he initially raided the NAMA piggy bank and NAMA gave a 3-month loan to Irish Bank Resolution Corporation, until June 2012 when Bank of Ireland took over the loan for a year. But Minister Noonan can’t just raid NAMA’s coffers whenever he likes, NAMA is notionally independent of government and it is on that basis that the European statistics agency, Eurostat allows us to keep NAMA’s €27bn of state-guaranteed bonds off the national debt. In order for Minister Noonan to get NAMA to do anything out of the ordinary, he has to issue a piece of paper called a “Direction”

A “Direction” is an order given by Minister Noonan or whoever the finance minister of the day is, to NAMA pursuant to Section 14 of the NAMA Act. This is the Direction given to NAMA on 29th March 2012.

NAMA published the Direction on its website on 30th March 2012 – the very next day.

So, where are the Directions – assuming plural but there might just be one – that were issued to NAMA in respect of the IBRC liquidation. We learned this week that NAMA has made a €1bn credit line available to IBRC as part of the liquidation, and NAMA has also issued bonds and has committed to take over any unsold loans. The IBRC liquidation might see the NAMA balance sheet swell by more than 50% said the NAMA chairman, Frank Daly in Dublin this week.

So where are the Directions?

Remember that Project Red, the name given to the planned liquidation of IBRC, had been planned for six months, that the IBRC Bill had been approved by the Attorney General Maire Whelan by the end of 2012. And despite the leaking of information on the afternoon of 6th February 2013, the Government merely put in place a well-thought out series of steps to smoothly liquidate IBRC. This involved NAMA right from the start, and NAMA has already undertaken significant financial transactions.

So where are the Directions?

In the Dail this week, the Sinn Fein finance spokesperson Pearse Doherty asked Minister Noonan to lay copies of the Directions before the Oireachtas and the Minister said he would by the end of the week. Friday came and went, and still nothing on either the Department of Finance or NAMA websites. NAMA was originally asked for a copy of the Directions by here on 12th February 2013, and there has still not been any constructive response. Do the Directions exist or is NAMA operating ultra vires?

So where are the Directions?

This is the full parliamentary question and response.

Deputy Pearse Doherty: To ask the Minister for Finance if he will lay before Dail Eireann copies of directions issued to the National Asset Management Agency pursuant to the NAMA Act and the liquidation of the Irish Bank Resolution Corporation..

Minister for Finance, Michael Noonan: I will lay the relevant directions to NAMA before Dail Eireann this week.

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