Tuesday, September 7, 2010

Ireland Ireland Ireland

Americans are far the most part clueless on anything other than what is going on in America. Below is one set of problems going on in Ireland.

From the Ireland Independent:

Anglo: a weapon of mass financial destruction

JUST how much worse can things get at Anglo? With the bank writing off a further €8.3bn of bad loans, it is hard to avoid thinking the nationalised lender is determined to single-handedly bankrupt the State.


If these sound like enormous numbers, it's because they are.

With Irish GNP, the only meaningful measure of our economic output, down to less than €130bn, a €35bn-€40bn tab for bailing out Anglo works out at between 27 per cent and 31 per cent of our total economic output. All this for just one rogue institution.

Mortgage Crises Gets Worse with 36,500 now in arrears

A sharp rise in the number of families unable to repay their mortgages was being seen last night as a sign the mortgage crisis is worsening.

The number of homeowners who are three months or more behind on their repayments surged to almost 36,500 in June.

Financial experts said the shocking figures showed that thousands of households were now stuck in a financial quagmire.


Financial adviser Karl Deeter, of Irish Mortgage Brokers, said: "The growth in arrears as well as the rate of growth in the arrears is heading only one way. Sadly, our only growth industry in 2010 is that of debt deterioration."

To default, or pay through the nose

Should Ireland let itself go bust? It's not the Green Jersey option, that's for sure. But national pride aside, is it time to think the unthinkable? Should we jump off the runaway debt-train and default?


The 'debt limit' catalysts for Ireland are racking up: historically high bond debt spreads; soaring Anglo losses; a plummeting tax take; Nama; a yawning budget deficit; rising GDP to debt ratio; credit rating downgrades and a battered domestic economy (GNP).

We have borrowings secured to last to the end of next year and we have enough reserves to pay our national bills for a while, but the threat of debt overwhelming us and pushing us into default down the tracks is very real.

If we are heading towards going bust anyway, or at least some dolled-up form of sovereign default like going to the EU Stability Fund support, should we do it now, while we still have some reserves and bargaining power?

Wind up toxic bank, urges Conor Lenihan

Scandal-ridden Anglo Irish Bank should be "decommissioned" as soon as possible, a government minister told the Irish Independent yesterday.

Although Innovation Minister Conor Lenihan would not be drawn on a timeframe for a wind-down of the now state-owned bank, the comments are further evidence that the Government is moving away from a 'good bank/bad bank' solution for the institution.

These aren't only Irish problems.

From The Baseline Scenario:

Irish Worries For The Global Economy

Ireland’s difficulties arose because of a massive property boom financed by cheap credit from Irish banks. Ireland’s three main banks built up loans and investments by 2008 that were three times the size of the national economy; these big banks (relative to the economy) pushed the frontier in terms of reckless lending. The banks got the upside, and then came the global crash in fall 2008: property prices fell more than 50 percent, construction and development stopped, and people stopped repaying loans. Today roughly one-third of the loans on the balance sheets of major banks are nonperforming or “under surveillance”; that’s an astonishing 100 percent of gross national product, in terms of potentially bad debts.

The government responded to this with what are currently regarded as “standard” policies in Europe and America. It guaranteed all the liabilities of banks and began injecting government funds to keep these financial institutions afloat. It bought the most worthless assets from banks, paying them government bonds in return. Ministers have promised to recapitalize banks that need more capital. Despite or perhaps because of this therapy, financial markets are beginning to see Ireland as Europe’s next Greece. In the last few weeks the perceived probability of default by Ireland (as traded in credit-default swap markets) has shot up, so that markets now price a 25 percent risk that Ireland will default within five years.

From Bloomberg:

Irish Ask How Much Is Too Much as Bank Rescue Trumps Austerity

It may just be a few billion euros too far for Ireland’s beleaguered taxpayers.

Anglo Irish Bank Corp. said Aug. 31 it needs about 25 billion euros ($32.1 billion) in state funding, equivalent to about two-thirds of this year’s tax revenue. Standard & Poor’s, which last week cut the country’s credit rating to AA-, said the state may have to inject as much as 35 billion euros.

and this is ridiculous...

“When you talk about letting a bank collapse or fail and imposing losses on the lenders, you would be imposing losses on depositors and imposing losses on the European Central Bank,” Alan Ahearne, an adviser to Lenihan, said in an interview. “It is unthinkable.”

Unthinkable???? Are you freaking kidding me?!?!?! A for profit institution where investors supposedly take risk - it is unthinkable for it to fail? That is just absurd thinking and why the world is in this mess. Talk about getting me angry!! It is unthinkable that it is assumed it can't fail. Instead the taxpayers can pay it. They can take the risk that investors and bank employees actually never took but just pretended they took.

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