Yesterday saw the unedifying spectacle of Russian privatisation oligarch, owner of Chelsea football club and yacht-cruising, model-dating Roman Abramovich’s investment vehicle Millhouse LLC fire a shot across the bows of Ireland’s Department of Finance in respect of their holding in troubled Irish banks’ bonds – “we are fully prepared to vigorously defend our position using all possible legal means” acording to Reuters and Bloomberg. Roman Abramovich is of course no idiot despite the financial burden of supporting loss-making Chelsea. He is by all accounts a financially astute operator who learned the ropes of economic life the hard way on the streets of Moscow in the 1980s and during his campaign for control of Russian oil giant Sibneft. His managers at Millhouse are no doubt as astute. The fact that the funding of subordinated bondholder debt will come out of the pockets of Irish citizens does not and should not affect their judgement.
The disputed hullabaloo on Thursday when Minister for Finance Brian Lenihan was reportedly heckled by a bunch of balubas (no disrespect intended to the good people of central Africa, it’s just a known expression here after a politician used it in the 1960s) seemed to show that subordinated debt holders in troubled Irish banks were distinctly unhappy with the prospect of ceding value in their investments.
As for the Latin, you’re likely to hear a lot of the first term, pari passu, in the coming weeks and it means literally “equal footing” but is commonly seen in the expression “X ranks pari passu with Y”. In the case of Ireland, the expression will be seen in the context of our troubled banks’ creditors – depositors, subordinated (or tier 2 or junior) debt holders, senior bond holders and central banks’ funding. All four classes of creditors it is argued by the bondholders rank pari passu or equally with each other, so you can’t “burn” one without “burning” the other. So if the holders of subordinated debt (€3bn worth at face value in Anglo and INBS) don’t get their investment back then depositors should also be “burned”, so Granny O’Reilly should lose his life savings. Separately if the senior bondholders (not identified but supposedly includes your credit unions and pension funds as well as “foreign” investors) get burned, then Ireland must accept the ignominy of being labelled dead beat sovereign debt defaulters and consequently the government won’t be able to borrow.
Another Latin term is primus inter pares or “first amongst equals”. I don’t know of a country that does not, to some extent, guarantee deposits in its banks – the figuring is that the special guarantee of deposits avoids runs on the banks which is good for society.
And on this Sunday, there is an increasing clamour for the Minister for Finance to justify his position that subordinated debt bondholders will get paid anything and why he does just tell them to go sell their certificates on ebay (they might have value in the historical sense of being tied to the one of the world’s worst financial crises) because that’s the only way they’re going to get any return. On Friday last, our friends in Brussels gave the green light to Denmark for the orderly winding up of several failed banks and the approval distinctly stated “burden-sharing is ensured by excluding shareholders and subordinated debt holders of the failed bank from any benefit from the aid”. Now €3bn in subordinated debt may not be a great sum in the context of our bailout but now more than ever when such huge relative sums are being kicked about, must we be most alert to value for money. In a couple of months we will be risking civil unrest with a €3-4bn cut to our budgets – €3bn is a very significant sum.
And as for taking candy from a baby and tying the entry into NAMA : remember the Irish Glass Bottle factory site in Ringsend, the one we (through the Dublin Docklands Development Authority) together with a consortium of developers bought for €412m in 2006? The freeholder was also the State (Dublin Port Company) and yet the State has received €15m in net terms. And the lease? The lease was worth €20m in 2002 and yet the leaseholder walked away from the deal in 2006 with €274m. Why? The leaseholder controlled by Paul Coulson apparently recognized a deficiency in our leasehold law that allowed him to force the freeholder to sell the freehold to him for a relative pittance. Taking candy from a baby indeed.
NAMA Wine Lake 
If you are suggesting that we are run by a bunch of kindergarten pupils who are easy targets for any financially astute adult – then I agree. They left a loophole in the Landlord and Tenant (Grounds Rents) Act 1978 for nearly 30 years even though they employed a bunch of overpaid advisors and civil servants for the whole period.
Nothing has changed. They thought it was a smart assed move to ensure all the debts of our banks. Jesus wept! They then set up Nama which so far has not even got its finger out. And are now they going to either tax or cut €12 billion plus from the economy and they have not an iota of an idea, other than spin, how to encourage growth and employment.
We are still led by politicians and advisors who are ill-equipped with the commercial knowledge to lead us out of this morass. Taking Nama as an example, political considerations get in the way the financial (more of that later).
As we are a country without properly operating banks, the rebased values of our property loans have to be accepted and Nama truly needs to become a privatised commercial entity and raise capital to invest in the loans that it holds. It is only when those rebased values are fully accepted can we move forward and generate profits; until then Nama is merely supporting unsustainable price levels. Reality is still being denied.
Attracting funds from vulture capital entities just ensures that any future profits will accrue to the funds and not to the taxpayer.
Without this acceptance, Nama will continue to stagnate. No banks mean no credit to grow the economy. This crisis began in the property market, it will not end until it is fixed there and, as a result, we have a functioning market. Doing nothing except shuffling files from one building to another (and employing more civil servants to do it), will only ensure that the Nama loan values (which the citizens own) will continue to fall and economy will continue to deflate.
Nobody is talking growth. And without growth, we just ensure more deflation and more poverty.
I wonder what the Latin is for “taking the piss” out of taxpayers?
I wonder how frequently and what scale the “taking candy from a baby scenario” occurred.
I can’t imagine what data from prices of properties subject to this maneuver would do to graphs and overall trends. The word bubble comes to mind.
Finally.
as we are only a Latin thread
cogito ergo cogito….cogito….
no latin plain english
http://www.ft.com/cms/s/0/0aa07d78-cf1d-11df-9be2-00144feab49a.html