Employ the hardest liquidator in town to do the negotiations — then move on and learn from this disaster
BACK in 2006, I first wrote about ‘ghost estates’ after driving back to Dublin from Westport. The description seemed to stick because it was simply putting a name on something that we were all aware of, as estate after estate sprouted up all over the country. It seemed logical to argue — even then — that these places would become the ghettos of the future. And so it has come to pass.
Yesterday, the head of NAMA, Brendan McDonagh, admitted that many of these developments would have to be knocked down in the years ahead. Extraordinary.
In fact, over the past couple of days, ghosts, ghouls and zombies have come to dominate the financial background noise. Last night, it was bulldozed ghost estates and the day before the ‘zombie’ bank Anglo nursing the sick company Quinn back to life. Where is it all going to end?
When I first saw George Romero’s 1968 classic ‘Night of the Living Dead’, I was transfixed. One of the lads on our road got it on VCR when we were about 12 or 13 and it gave me nightmares. The idea that dead zombies would eat the living freaked me out completely.
Worse still, that the dead zombies would band together to kill more living people and turn them into zombies seemed to me grotesquely believable. But of course it was just a movie, right? Clearly, the dead couldn’t eat up the living, no matter how sick they were?
When I see the zombie Anglo Irish Bank — clearly a dead company — taking over the sick but living Quinn Group, my boyhood nightmares come flooding back. When I see that it is taking over this company with my money, the nightmare is compounded. Here, we have the spectacle of the dead company nursing the sick company back to health. Bizarre.
The only reason we have this sick spectacle is because the State is choosing to keep Anglo open. This means your taxes will go into this black hole to reassure the creditors of the Quinn Group, which will allow Quinn to stay open and some day, maybe, Quinn will pay the money back to Anglo.
So again, the State has used the Irish people to bail out creditors. These creditors took a reckless gamble, whether they are bondholders in the Quinn Group or the bondholders and other creditors of Anglo. Why are we doing this?
Let us examine how the Irish Government managed to get things so back to front. The simple thing to do with Anglo would be to wait until the government guarantee lapses in October and then appoint a decent examiner who has 100 days to find a buyer.
If there is a good business there, someone will buy it. If it is rotten to the core, simply pay the depositors with what assets are there and see what is left for the other creditors.
No Anglo, no problem.
That is the simple tried and tested method that is used hundreds of times a day all over the capitalist world. There is a straight line from A to B.
All creditors — bar depositors — are investors one way or another and as investors they are big boys and realise that with every investment there comes a risk that unforeseen events might result in you losing your money.
So in the case of Anglo, it has liabilities of some €80bn, including €27bn of deposits. Let’s refer to the depositors as ‘trust creditors’ because they trusted the Financial Regulator who oversaw Anglo when they put their cash on deposits.
THESE people and companies have to be paid, no matter what. For the rest, it is a matter of where they come in the queue. The other creditors include the Irish Central Bank with €11bn and the ECB with €12bn. Then there are some €15bn in debt instruments, €9bn in other bank loans to Anglo and €2bn of the now infamous subordinated debts.
Simply put, all the non-depositors can get what the liquidator decides they get. They do a deal and lick their wounds and either they get back into the game or they don’t.
That’s the straight, simple way to deal with Anglo and, most importantly, it will cost the taxpayer nothing more at all.
When Brian Cowen says Anglo will cost €100bn to shut down, you know he is making it up because there are only maximum liabilities in Anglo of €80bn-odd. Likewise, when the Finance Minister plucks a figure like €30bn, where does his figure come from? This can all be done for zero cost to the taxpayer.
The spin that the markets would penalise us for operating the normal rules of capitalism is farcical.
Markets want to invest in the real potential of Ireland that is in our people, in our brains, in our education system. They want growth opportunities, not some fanatical debt-management agency, which insists on raising future taxes to pay for historical mistakes.
Now contrast this logical administrator route with the nonsense of the dead company nursing the sick company back to health.
Quinn owes Anglo a fortune, somewhere in the region of €2.6bn. If the Quinn Group goes into administration, as the new regulator wants, a new buyer wouldn’t touch these debts. They will have to be written off and therefore Anglo loses. So if we keep Anglo open, we, the taxpayers, lose.
In an effort to get the money back, the Anglo board has suggested that the banks inject around €700m more of our money into Quinn now to keep it afloat and prevent it being sold off in administration. This will bring up the company’s capital to the level required by the regulations.
So can you see what the problem is in all this? It is not Quinn, it is Anglo and the legacy of the mad lending of the Anglo management a few years ago. The reason Quinn is not the problem is because in administration the Quinn Group will merely be sold to someone else and will stay open, once its balance sheet is patched up.
If there are bits that are bankrupt, they will not be bought, the going concerns will be snapped up cheaply — as is always the way in a downturn.
The insurance business is apparently profitable, so this will be sold first. Then, the only internal problem for employees is whether the new buyer changes the culture of the firm.
For the workers, I can understand that Mr Quinn is a significant employer in the border region and the fear for the workers is that any new owner would reduce the presence in that region.
However, when seen from a national perspective, this is an entirely separate issue and one that can’t be solved cheaply by one ‘catch-all’ solution which puts us on the hook for Mr Quinn’s gamble on Anglo stock in 2007.
Shut down Anglo. Employ the hardest liquidator in the town to do the negotiations, move on and learn from this disaster. That’s the solution. That’s what adults do. The other choice is to remain children cowering in ghost estates, terrified by zombies. It’s your country, your call!
David, This is beginning to resemble a pantomime with you as Cinderella and government policy as the Ugly Sisters. What you are saying is directly opposite to what the government are saying – you say wind up Anglo like any other insolvent business, negotiate the cent inthe euro settlement with the creditors, sell of the good parts and move on. The government say the creditors must be paid and there would be additional costs in contagion to other Irish banks and to the economy generally. If you were an Opposition politician trying to hold the government to account, what specific… Read more »
Very serious affair! This Bermuda regulator , who came home for less yes less money! is caught up in intriguing politics ? is he workign for Anglo? or for teh Government ‘s other interests? as Quinn has been put into an unreal spin? as for Anglo- of course it shoudl be liquiudated , and styop those who are currently lettign go assets to who, whether it is London or elsewhere ? accountability has gone out the window ofr the last 18 months ? next we will hear Bostonian money buys Anglo for a STEAL!! and then Irish are truly robbed… Read more »
Watch this “Wallets Full of Blood: Houses on the Moon” Amidst the collapse of the Irish economy, the inhabitants of a rural hinterland begin to feel the touch of the dead hand of the housing market. Set in the notorious ghost estates of post ‘celtic tiger’ Ireland, Wallets of Blood features Dennis Hopper as the voice of Brian (Brains) Ahern. http://vimeo.com/3269259 Pt 2 “Wallets Full of Blood: Zombie Banker Blues”. Scientists, troops and auditors arrive from abroad to investigate the total collapse of a small Republic. They’re looking for ‘Fingers’. His actions had hastened the spiral of the country into… Read more »
The Wrong Stuff! Look again at the start of this piece. There’s another issue, another article. I too had years of argument based on the evidence of my own eyes – evidence glaringly obvious on any drive west. Any average person could see the mad developments, the empty buildings and the furniture stores at every roundabout. Only a knave or a fool could have remained silent or optimistic in the face of the evidence. We have therefore a test. Anyone in public life or a position of authority who failed to speak up against the nonsense, should now retire, having… Read more »
David, what scares me is the admission this morning of what most of us believed – that a large percentage of the NAMA loans were not being paid off, not making interest – and the recipients of cronyism between themselves and the banks whereby the banks had no real choice but to tolerate a level of redicivism that it will not accept from smaller business or personal customers because of the fear of it reflecting back on the balance sheet. Now the issue is not just the true losses that NAMA will make, but how they cope in the taxpayers… Read more »
Hi David, DavidMcW> the head of NAMA, Brendan McDonagh, admitted that many of these developments would have to be knocked down in the years ahead. Extraordinary. I think it doesnt make sense for anyone or indeed business to spend money flattening partial developments. Better spend less money to make them secure. DavidMcW>So can you see what the problem is in all this? It is not Quinn, it is Anglo No, it is actually both. Anglo for lending Quinn (family) 2.8 billion and Quinn for taking it on. The problem with any group is that bad debts can bring good parts… Read more »
Quinn+Anglo = “Qu anglo” an Irish taxpayer funded entity that seems to grow exponentially, cost a fortune, and produe no accountability. What was taking shape last week was more evidence of the ‘escalation of commitment’ approach pioneered by Calamity Brown in Britain, and brought to a fine art by Calamity Clowen here. We need to be brutally honest at all levels of society here. There is something extremely flawed about many critical aspects of Irish society. The predominant concept of management has failed. The concept of authority has failed the accountability test. The concept of personal responsibility that predominates in… Read more »
Brendan McDonagh’s testimony yesterday asks some extremely hard questions of Irish bankers and the concept of due diligence.
For those that missed it. A picture that says everything.
http://www.thephoenix.ie/phoenix/welcome.do
A Celtic Wild Cat. And Tiger.
David – at last we seem to be getting to the meat of the crisis; and all is not gloom doom and bust. 1) Its not NAMA that is the problem (as I have often argued) – it is what happened in 2008; particularly on March 18th; and on September 30th with the State Bank guarantee (which from memory the only commentator to sound alarm bells was George Lee). NAMA is a mechanism to deal with the aftermath of this – so could posters please stop NAMA bashing. 2) When Ireland sold itself as an open economy at the turn… Read more »
AndrewGMooney gone. JohnAllen gone. Furrylugs gone. Tim and wills teetering on the brink. Ghostbusters all. Starting to look like the Zombies are winning. Reading even a back issue of Phoenix is too depressing for words. Dragon’s Den and Lotto bring hope to the poor and oppressed people of Ireland? Attic extensions are the next Big Thing?
Christ Almighty, what is happening here?
Despite my message board moniker I have no connection to the toxic bank. I absolutely agree that Anglo and that other failed property hedge fund, INBS, should be wound down promptly with only the deposits returned. NAMA is turning out to be an exercise in giving favoured non-value creating insiders (accountants, lawyers & auctioneers) an income through the next grim 5 years. Much better would have been a nationalisation followed by the sale of the detoxed major banks and the closure of the non-viable entities. This would have obviated the need for the whole exercise …. Cash flow is what… Read more »
Friendly reminder:
http://www.thepetitionsite.com/1/close-anglo-irish-bank-now–no-bank-guarantee-extension
ColdBlow – an election!!!! That is the most cuckoo thing I have heard for a long while. There would have only been one thing worse for this country over the last 10 years than a Fianna Fail Government – and that would have been a coalition Government of the rest…… And the buck stops with those who elect them – you and me; the taxpayer; the electorate – or however else we want to dress it up. Here is the solution: 1) This Government runs its full course and pushes through the medicine of regaining budgetary control. 2) Those interested… Read more »
I think it’s too simplistic to disentangle the situation with Anglo from the budget deficit. If we didn’t have such a large structural deficit, letting Anglo go to the wall would be fine. But if that happens, bond spreads will rocket, and all of a sudden we can’t pay public sector wages.
Much as I would love to let Anglo fend for itself I think that is something you don’t really address David.
David, I’m persuaded by the argument that Anglo should be shut down. However, what Iwould like to know is what happens in detail should that happen. Assuming every credit union and small firm with a few quid had put excess cash on deposit with Anglo what would the remifications have been if the plug was pulled overnight on Anglo? This is not a rhetorical question. I’d like some feedback as to how you or others think the fallout could be managed. Secondly, on the issue of bondholders being forward looking. Your bet is that they will forgive the debt, take… Read more »
Now that the head of NAMA, Brendan McDonagh, admitted that many of the developments NAMA has, will have to be knocked down in the years ahead and it has emerged that there is up to 15% extra payments been paid out to the banks on the notion that their toxic assets will have a value of sorts in the next 10 years how does these revelations now justify the proposed payouts to Anglo, Allied and Bank of Ireland
Europe must step in and stop this blatant robbery of the people of Ireland
Sign Anglo Irish Bank Closure Petition
If you think we should close Anglo Irish Bank, the developer’s bank then:
sign this petition
http://www.thepetitionsite.com/1/clo…ntee-extension
It is not the Irish government that is keeping Anglo alive it is the EU. They are our economic masters and they have decided to keep Anglo going for the medium term. In reality it is just a front both the Irish government and the EU know that the sovereign debt time bomb is about to explode. They are just treading water until default and collapse happens. The EU is putting up the money for NAMA , Anglo, NIBS, AIB and BoI they are in charge no Lenihan or Cowen. The IMF and the EU will be bailing out Ireland… Read more »
Am I the only one to find this strange? There’s David on Prime Time last night and he and Miriam are both quite polite and maybe a little bashful as if those things he said in his book hadn’t been said after all and if they had well it was all forgotten about now and she is quite sweet really and isn’t cross at all, not really, not even strict as usual she only interrupts him a few times and he’s even allowed to carry on talking in a quiet sort of way once she has, she doesn’t hit him… Read more »
There always has to be balance in rights. Right to work, Right to shelter, Right to Freedom at a global level. The harsh reality is that we live in a world where this is laughed at. Hence race to the bottom economics. Whether you like it or not, Irleand will never EVER be able to compete on the world stage and has lost its economy accordingly. This has been going on in Irleand since 1996. The above pretty well applies to all western economies. All shagged. How long this will remain to be the case will depend on how long… Read more »
€80 billion book loss 27 billion //less depositors ________________________ €53 €11 //less Irish Central Bank ______________________ €42 €12 // less ECB _________________________ €30 €15 //debt instruments _________________________ €15 €9 //other bank loans _________________________ €6 €2 // subordinated debts _______________________ leaves €4 bn unaccounted for, what would this be? Agree with D’s article. Its time to wind down Anglo. Hopefully FF who’ve banjaxed the opportunity to govern this island well can be voted out asap At least FF are not like the Russians back in the day 1812 setting fire to Moscow to prevent it falling into Napoleon’s hands. …Are they… Read more »
The simple tried and tested method used in the capitalist world gets an Irish twist: Instead of a straight line from A to B. Its a crooked line from A to Z, Anglo to Zombie. Its more like an episode of “Scooby Doo Where are You? than Night of the Living Dead. That said, did anyone see Lenihan last night? I know the guy is sick but, he’s like a Goth or someone from Eastenders with the dark circles under the eyes. Time to take retirement and get the treatment and heal up. If this is the result of the… Read more »
Evening,
I can hear the frustration in your comments and believe me, I feel it too, however, the only solution is the obvious one.
Let’s keep it up.
David
Wanna come back to Anglo, but just going a tad off-topic briefly to mention an item heard on this evening’s Drive Time on RTE Radio 1. It was an interview with Floyd Butterfield, a scientist behind E-Fuel and the “Microfueler”. It’s an ethanol fermenter that produces fuel from your waste — everything from gone-off wine to the half-eaten curry chips from last night. And they have just started marketing in Ireland. It reminded me — we are going to be seeing a busload of Green Tech hype over the coming years. It pays to have your sceptical hat on for… Read more »
@11: Malcolm McClure says ‘AndrewGMooney gone’. I’m still here! Reading, refining my views, enjoying the articles and comments. Actually, I’ve been busy organisign the ‘reception party’ for Pope BenedictXV1 if/ when he dare set foot on British soil, but that’s a whole other whirlwind… Ireland seems pretty crushed and demoralised. So, I don’t feel comfortable commenting because I don’t live there. I think there will be a complete implosion of the Eurozone. The important thing is that Ireland continues to avoid becoming the lightning rod for German fury at the delusional incompetence of monetary union without political union. The Greeks… Read more »
David. On Anglo, its deposit book is 27 billion. As we all know, Anglo is insolvent. So it lookslike the deposit piggybank is empty so Anglo is relying on gov bailouts to meet customer withdrawals. This is why anglo is been fed cash in the back door so it can meet its obligations for its depositors as they pull their deposits 27 billion worth. irish gov have decided that Anglo blowing up and NOT meeting customers obligations on deposits would be dire for Ireland credibility on the international money markets. One way or the other the taxpayer is going to… Read more »
From economy.ie; “Profile of Morgan Kelly By Karl Whelan April 13th, 2010 Today’s Irish Times has a profile of Morgan Kelly. As is appropriate for someone who was correct in predicting the house price crash and its consequences for our banking system, the article is very positive. The implicit comparison in the first sentence with Nouriel Roubini is interesting. My sense of Roubini is that while his predictions of doom were less accurate than Morgan’s (I seem to recall Roubini being very focused for a long time on a dollar crisis as the source of the impending doom) he gets… Read more »
David, if you are reading comments have a look @20.
To quote from an old Coen Brothers movie….”The matrix is everywhere. It is all around us. Even now, in this very room. You can see it when you look out your window or when you turn on your television. You can feel it when you go to work, when you go to church, when you pay your taxes. It is the world that has been pulled over your eyes, to blind you from the truth”, David You are the closest thing we have to a “Morpheus”, but where the heck is Neo!
Ok, so here’s the link again that I posted a couple of threads ago. (Apologies cbweb, didn’t notice your question on a subsequent thread where I alluded to this without reposting the link). http://www.irisheconomy.ie/index.php/2010/04/03/anglo-what-are-the-options/ Karl Whelan gives the best rundown of the options for Anglo, backed up by figures, that I’ve seen. There is considerable discussion in the comments below the article which are worth reading too. But in summary: 1) We’re stuck wtih Anglo for a couple of years at least 2) Then we can default on some subordinated debt 3) We shouldn’t mention this until after the guarantee… Read more »
Somebody posted a really good analysis of what happened during the 80’s regarding music or somesuch. Apologies. I’m shattered and can’t find it. Suffice it to say we could fund a new band called say, “The Zombie Gombeens”. Dressed up like Village People to represent the various Gombeen elements. First tune, a la Sawdoctors, “I have fallen for old NAMA cause the Land is in her name” and that sort of stuff. If there’s any entertainment types reading this, laughter is the best medicine and ridicule the most powerful weapon against Ego or Hubris. BTW, we’ve got up to 880… Read more »
It’s all starting to come out now in it’s entirety. All our cretins did was ape their betters, just like back in the good old Colonial days, except this time the doffing of the cap was fiscal rather than territorial. So widespread Treason and traitorous sellout. Anyone who has seen “The Wind That Shakes The Barley” knows the price paid for disloyalty. And to the (well known) man who scoffed at me in Galway about Cork shooting more of their own than the Enemy, I don’t recall much of an effort from Conamara in those days, if you’re reading this.… Read more »
—- Smell this? —– or, longterm cultural changes are required As of February 2009, the costs in T=Trillion USD, all adjusted for inflation paint an interesting picture. (Sources: Bloomberg,UN, BBC) The war in Iraq and Afghanistan since 2001 come in at 0,7 T. U.S. bailout packages and plans 9,7 T European bailout 1,4 T UK bailout 0,9 T The debt of the poorest countries stands at 0,5 T Total value of global companies wiped out so far 14,5 T, that is more than 1/3 of global companies in deed! Ok, let’s slip some historical perspective into this, the costs for… Read more »
Morning, Furrylugs I wouldn’t loose sleep about not being credited by academics for being the first to see this disaster brewing. My Dad used to say to me that one of the ways you could live a sane life in this country of ours was to learn to forgive people for what they say about you. So much nasty comment has been flung at me by all sorts of economists, journalists, opinion writers etc – people I have never met largely – that the only way to look at it is through the prism of forgiveness. Bear no grudges and… Read more »
—- LOOKING FORWARD —- or, systemic risk control, Karl Wheelan is right but… ‘In capitalist society health is the capability to earn, among the Greeks it was the capability to enjoy, and in the Middle Ages the capability to believe.’ – Ernst Bloch, The principle of hope – In one of Karl Wheelan’s articles he was questioning when the ESRB, European Systemic Risk board will be implemented. This board is supposed to work in from of a supervisory authority to avoid the magnitude of this disaster to ever happen again. ESRB, shiny shoes, and powerful words but haven’t we heard… Read more »
How has Fitz Junior managed to retain his cushy number @ Anglo?.
Posters, thanks again for the informative links. They’ve interrupted my work schedule again, but I really appreciate them. So here’s a comment I left on the following link, you get the drift: http://www.irisheconomy.ie/index.php/2010/04/03/anglo-what-are-the-options/ Good to get some black and white figures. I believe a number of your assumptions re wind up of Anglo are fundamentally flawed. Lets take item 3 in your list: “The ECB loans will be collateralised by a selection of the bank’s better assets, meaning they can grab the underlying assets if they’re not paid back, so no gain there from a wind-up.” I’m reminded of a… Read more »
Our ECB, I do mean our own Central Bank..
I should say comments to the above quoted url post very interesting, particularly the following from Karl I take issue with above:
“3. I do favour winding down Anglo. I don’t favour the bank defaulting on its ECB loans. In any case, as I
pointed out in the post, they are over-collateralised loans, so they can just keep the collateral after a default. ”
Doesn’t appear to know much about bank bankruptcy or wind down if you ask me.
Really interesting Vid here between O’Neill of Goldman Sachs and Roubini debating Battleship economics;
http://www.ft.com/cms/885d7916-e3aa-11dc-8799-0000779fd2ac.html?_i_referralObject=15655107&fromSearch=n
@Furrylugs,
viewd that but found the following also listed at your link, from Stiglitz a lot more interesting:)
http://bit.ly/a8BcKR
Stiglitz complains of slow US reform
e.g …”Financial Product Safety Commission, we exempt a majority of the banks, we encourage move from derivative to exchanges ……problem the banks like non transparency…….Leaving everything to the discretion of the regulators means a recipe for the minimum regulation”
La H -Bomba Economics http://openlibrary.org/b/OL16835018M/H-Bomb_of_economics. Tuesday night I was invited to listen to the author of the above in Bay & Resort Hotel in Monaco and it was all in Italian . I wore ear muffs to listen to the interpretor while I watched many cartoons demonstrating his points .Those in attendance were bankers and maybe Gods Bankers too. This author is a philosopher and his mindset is worth digesting and perhaps might give us an insight from from out side the box. I am writing this too to mark my diary to ensure my professional body allows me the… Read more »
Afternoon, On Sunday I wrote about the Greek bailout and said – in direct contrast to the mainstream commentators who said on Morning Ireland etc that the bailout would work – the following; “I sense that smart bond investors will use any putative EU bailout as the last opportunity to sell. The clumsy ones will buy, believing the government and brokers’ spin. But as they realise that Greece’s problems haven’t gone away, the positive euphoria accompanying the EU bailout of Greece will dissipate” This afternoon, Greek bonds getting hammered trading at 7.5%. Markets as I expected have sold the bailout.… Read more »
The Gods are angry! John Allen and others, what do you make of this Icelandic volcano? I’m stranded in Liverpool, should be flying to Germany now, British airspace is closed, nothing going in or coming out. The cost will be high, natural justice perhaps? I’m getting the ferry back to Dublin tonight, better off at home, although a pint of ale here costs only £1.85. Thing is though everything is part of a chain, even in food and drink you can see how hierachial the Anglo style economy is. And despite the natural warmness of the people, there’s a menace… Read more »
Someone may be trying to re-invent ‘myhome.ie’ – ‘Green shoots as Spring buyers emerge’ apparently in the property market….
My kingdom for an independent media!!!!
http://www.irishtimes.com/newspaper/property/2010/0415/1224268365444.html
France & Germany are not agreeing on anything at the moment and ill feelings predominates between them . This very bad for the Euro and Greece and only makes matters worse.
time these two overpaid wasters resigned their seats and apologized for the wholescale incompetence.
http://www.independent.ie/opinion/letters/put-pressure-on-these-spineless-wonders-2138642.html
D’ye know. I really miss Lorcans input here, right at this juncture. And to those of you who are new, he was shit hot, to coin a phrase.
David,
Krugman describes you here.
http://krugman.blogs.nytimes.com/2010/04/15/geographical-me/?src=twt&twt=NytimesKrugman
Lest we forget an honourable man;
http://www.irishexaminer.com/breakingnews/ireland/leading-abuse-survivor-walks-out-of-meeting-with-taoiseach-454081.html