Irish Citizens Sold Down the River in “Firepower of Stupidity”
by ilene - November 21st, 2010 11:14 pm
Mish writes about how Irish Citizens Sold Down the River in "Firepower of Stupidity" - Ilene
Courtesy of Mish
Today the Irish Government sold its citizens into debt slavery by agreeing to guarantee stupid loans made by German, British, and US banks. Those loans fueled one of the biggest property bubbles in the world. Ireland has since crashed.
Ireland Agree To Bailout
Please consider Ireland Seeks Bailout as ‘Outsized’ Problem Overwhelms Nation
Ireland applied for a bailout to help fund itself and save its banks, becoming the second euro member to seek a rescue from the European Union and the International Monetary Fund.
Irish Prime Minister Brian Cowen said he expects talks on the package to be completed in the “next few weeks.” Finance Minister Brian Lenihan said the loan will be less than 100 billion euros ($137 billion), though he refused to give any further details at a press conference in Dublin today.
“A small sovereign like Ireland faced with an outsized problem that we have in our banking sector, cannot on its own address all those problems,” Lenihan said. Ireland may not draw down on the entire loan, he said.
While Ireland may not fully use any cash it gets from the EU and IMF, Lenihan said the size of the package “is important to demonstrate” the “firepower that stands behind the banking system.”
The Irish turmoil has also reopened tensions about the governance of the euro region after German Chancellor Angela Merkel last month called for bondholders to foot more of the bill of European bailouts. Her stance, criticized European Central Bank President Jean-Claude Trichet, sparked a bond market selloff.
Bondholders Should Foot Entire Bill
Trichet is pissed about common sense statement by German Chancellor Angela Merkel about who should foot the bill. Actually, Merkel did not go far enough. When you make stupid loans you pay the price. Or at least you should.
But no! Trichet as well as the Irish Prime Minister seem to think that Irish taxpayers should bail out the Irish banks (which is in reality a bailout of German, and UK banks that made piss poor loans to Ireland).
Why the average Irish citizen should have to bail out foreign bondholders is beyond me, but I do note that the same happened in the US with taxpayers footing an enormous bill for Fannie Mae, Freddie Mac, and…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
BlinkBits
BlinkList
Hooray, ECB Saves Eurozone 2nd Time; Allied Irish Bonds Bid at 45% of Face Value, Anglo Irish SubDebt has 99.99% Default Odds;Irish Citizens “Namatized”
by ilene - November 19th, 2010 6:49 am
Hooray, ECB Saves Eurozone 2nd Time; Allied Irish Bonds Bid at 45% of Face Value, Anglo Irish SubDebt has 99.99% Default Odds;Irish Citizens "Namatized"
Courtesy of Mish
Market participants are giddy today on the great news that Ireland will go deeper in debt in a foolish attempt to bail out the German and UK bondholders who were in turn foolish enough to lend ridiculous amounts of money to Irish banks in various real estate schemes.
The Irish government was of course foolish enough to guarantee all of this foolishness which means that Irish citizens many of whom were sucked into buying property at foolish prices are now on the hook to bail out the bondholders, rubbing salt into the wounds of Irish taxpayers, not all of whom were foolish enough to freely participate in the general foolishness.
Got that?
Here is a short video from the Wall Street Journal that explains why the bailout will not work.
Ireland Nears Bailout
Now let’s consider details of this foolishness in greater detail, starting with Crude Oil Rises From Four-Week Low as Ireland Nears Bailout
Crude oil increased from a four-week low as Ireland moved closer to a European Union-led financial bailout, strengthening the euro and boosting commodities.
Irish Central Bank Governor Patrick Honohan said in an interview with state broadcaster RTE today he expects the country to ask the EU and the International Monetary Fund for “tens of billions” of euros to rescue its banks.
Desirable Outcome
“If these talks were to result in a substantial contingency capital funding” pool that didn’t need to be drawn down, that “would be a very desirable outcome,” Finance Minister Brian Lenihan said in the Irish parliament in Dublin today. He said no agreement has yet been reached.
Fairy Tale Nonsense
Check out that fairy tale silliness from Finance Minister Brian Lenihan, then answer this question: What are the odds that a "substantial contingency capital funding” would not be drawn down?
If you answered zero percent you are a winner, which makes the Irish taxpayer a loser.
Allied Irish Bonds Have Face Value Bid of 45 Percent
Bloomberg reports Allied Irish Bonds Fall on Concern IMF ‘Bad Guy’ to Impose Loss.
Allied Irish Banks Plc’s 12.5 percent subordinated bonds due 2019 were quoted at a bid price of about 45 percent of face value, according to Jefferies International in London, down
…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
BlinkBits
BlinkList
Ireland Brinksmanship with the EU: Slow Motion Bank Run May Be Giving Government Leverage
by ilene - November 19th, 2010 12:42 am
Ireland Brinksmanship with the EU: Slow Motion Bank Run May Be Giving Government Leverage
Courtesy of Yves Smith at Naked Capitalism
In negotiations, understanding where you have leverage relative to your counterpart is key. Ireland appears to be engaged in a quiet staredown with the EU, evidently with the objective of securing a rescue of its banks rather than its government.
In case you managed to miss it, Ireland is in the midst of a long running budgetary crisis that has reached an acute phase. The implosion of a real estate bubble has left the country with banks up to the gills in bad loans. The government set up a “bad bank” entity, and the commitments per taxpayer, which were over 25,000 euros per taxpayer as of July, just keep rising. Deep budget cuts to meet eurozone fiscal deficit targets have put the economy in freefall, with nominal GDP falling nearly 20% and unemployment at 13%.
The immediate trigger for panic over Ireland was Merkel’s announcement that bondholders would have to take their lumps in any Eurobailouts. That immediately put Irish and other periphery country bonds under pressure. And although Merkel was beaten a bit back into line (all bondholders will supposedly be protected through 2013), the damage was done. As Richard Smith noted two weeks ago:
Since the Irish budget is fully funded for a few more months (ex any revenue surprises, or God forbid, further bank loan writedowns), they can in principle trundle along like this until their date with destiny in Q2 2011, when they have to raise funds again. But somehow it’s hard to believe that that is going to be the way things go. We will see if the budget gets thrown out or not; or the government. It will be close, on either count. Either eventuality brings forward the timetable for the Irish crisis proper, but it’s coming, one way or the other…
The folk close to the action think
…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
BlinkBits
BlinkList
Thrilling Thursday – The Luck of the Irish
by Phil - November 18th, 2010 8:03 am
Yawn!
Yes, YAWN I say to a 1% bounce! I mean REALLY people, have we taught you nothing following our 5% Rule? This is a very basic part of it, you get a 20% reversal off of 5% moves and that is called a WEAK BOUNCE. Don’t blame me, I don’t make the rules… Oh wait, actually I did make this one. Anyway, don’t blame me, this is just a rule based on how the system works so let’s not get too excited about what basically amounts to physics.
It could have been Ireland (which we were expecting) or it could have been JPM bashing the dollar (they did) or it could have been Buffett saying "All is well" in the NYTimes (gotta get the liberal into the market too!) – it could have been anything but SOMETHING was going to give us a dead cat bounce.
Note the Nov 2nd levels on the chart. Here, if it helps I’ll do an impression of a TV analyst: "It is truly amazing to see how resilient our markets are making such a strong recovery and we project…" Oh, excuse me, I made myself sick… Come on people, we’re back to our Nov 2nd highs (if that) and, if we pull back to the "year to date" view, the song "I’m Always Chasing Rainbows" springs to mind (the Alice Cooper version):
.jpg)
So pretty, isn’t it? Maybe this time it will be different. I’m not saying we CAN’T go up – with the Fed pumping in cash at an annualized rate of $1.8Bn it would be pathetic if we DON’T go up but I am very skeptical until we do break over those April highs and hold them as a firm floor. I was skeptical about Monday’s bounce (from 11,200 on the Dow to 11,275 and from 1,200 on the S&P to 1,207) and that served us quite well so give me the benefit of the doubt on this one before you all go off chasing this rally. We have a weekend coming up (lots of things could go wrong) and then a short week into a holiday which just so happens to be the holiday after which we expected the market to fall off a cliff if it continues to follow April’s Beta 3 pattern (see Monday’s…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
BlinkBits
BlinkList
Could The Financial Crisis Erupting In Ireland, Portugal, Greece And Spain Lead To The End Of The Euro And The Break Up Of The European Union?
by ilene - November 18th, 2010 1:39 am
Could The Financial Crisis Erupting In Ireland, Portugal, Greece And Spain Lead To The End Of The Euro And The Break Up Of The European Union?
Courtesy of Michael Snyder at Economic Collapse
The Irish banking system is melting down right in front of our eyes. Ireland, Portugal, Greece and Spain are all drowning in debt. It is becoming extremely expensive for all of those nations to issue new debt. Officials all over Europe are begging Ireland to accept a bailout. Portugal has already indicated that they will probably be next in line. Most economists are now acknowledging that without a new round of bailouts the dominoes could start to fall and we could see a wave of debt defaults by European governments. All of this is pushing the monetary union in Europe to its limits. In fact, some of Europe’s top politicians are now publicly warning that this crisis may not only mean the end of the euro, but also the end of the European Union itself.
Yes, things really are that serious in Europe right now. In order for the euro and the European Union to hold together, two things have got to happen. Number one, Germany and the other European nations that are in good financial condition have got to agree to keep bailing out nations such as Ireland, Portugal and Greece that are complete economic basket cases. Number two, the European nations receiving these bailouts have got to convince their citizens to comply with the very harsh austerity measures being imposed upon them by the EU and the IMF.
Those two things should not be taken for granted. In Germany, many taxpayers are already sick and tired of pouring hundreds of billions of euros into a black hole. The truth is that the Germans are not going to accept carrying weak sisters like Greece and Portugal on their backs indefinitely.
In addition, we have already seen the kinds of riots that have erupted in Greece over the austerity measures being implemented there. If there is an overwhelming backlash against austerity in some parts of Europe will some nations actually attempt to leave the EU?
Right now the focus is on Ireland. The Irish banking system is a basket case at the moment and the Irish government is drowning in red ink. European Union officials are urging Ireland to request a bailout, but so far…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
BlinkBits
BlinkList
Is Europe Coming Apart Faster Than Anticipated?
by ilene - November 17th, 2010 2:43 pm
Is Europe Coming Apart Faster Than Anticipated?
Courtesy of Gonzalo Lira
The sky is black with PIIGS coming home to roost: I was going to write my customary long and boring think piece—but the simmering crisis in the Eurozone just got the heat turned up: Things are boiling over there!
 |
| “Euro Dead” by Ryca. |
So let’s take a break from our regularly scheduled programming, and give you a run-down of this late-breaking news:
The bond markets have no faith in Ireland—Greece has been shown up as having liedagain about its atrocious fiscal situation—and now Portugal is teetering—
—in other words, the PIIGS are screwed. I would venture to guess that we are about to see this slow-boiling European crisis bubble over into a full blown meltdown over the next few days—and it’s going to get messy.
So to keep everything straight, let’s recap:
The spreads on Irish sovereign debt widened, and the Germans are pressing them to accept a bailout—despite the fact that the Irish government is fully funded until the middle of 2011. But it’s not the Irish fiscal situation that the bond markets or the Germans are worried about—it’s the Irish banking sector that is freaking everyone out.
After all, the Irish government fully—and very foolishly—backed the insolvent Irish banks back in 2008. And for unexplained reasons, the Irish government is committed to honoring Irish bank bonds fully—which the country simply cannot afford. However, German banks are heavily exposed to Irish banks, which explains why Berlin is so eager to have Ireland accept a bailout.
Right now, European Union, International Monetary Fund and European Central Bank officials are meeting with Irish representatives, putting together a bail-out package. The reason the Irish are so leery, of course, is that any bail-out would be accompanied by very severe austerity measures: In other words, the Irish people would suffer the consequences of shoring up the Irish banks—which is the same as saying the Irish people would suffer austerity measures in order to keep German banks from suffering losses. Also, the EU/IMF/ECB bail-out would probably also cost the Irish their precious 12.5% corporate tax rate—a key magnet for bringing capital to the Emerald Isle.
Add to the Irish worry, Greece is once again wearing a bright red conical dunce cap: They’ve been shown up to have lied again about their fiscal situation. Three guesses what they lied about: If you guessed Greek deficit, you win—yesterday, the Greek government officially revised…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
BlinkBits
BlinkList
Paul Farrell Expects No Recovery Until The End Of Obama’s Second Term… IF He Gets Reelected
by ilene - August 31st, 2010 10:33 am
Paul Farrell Expects No Recovery Until The End Of Obama’s Second Term… IF He Gets Reelected
Courtesy of Tyler Durden
Paul Farrell’s take on Jeremy Grantham’s recent essay Seven Lean Years (previously posted on Zero Hedge) is amusing in that his conclusion is that should Obama get reelected, his entire tenure will have been occupied by fixing the problems of a 30 year credit bubble, and if anything end up with the worst rating of all time, as the citizens’ anger is focused on him as the one source of all evil. "Add seven years to the handoff from Bush to Obama in early 2009 and you get no recovery till 2016. Get it? No recovery till the end of Obama’s second term, assuming he’s reelected — a big if." Also, Farrell pisses all over the recent catastrophic Geithner NYT oped essay, which praised the imminent recovery which merely turned out to be the grand entrance into the double dip: "In his recent newsletter, "Seven Lean Years Revisited," Grantham tells us why expecting a summer of recovery was unrealistic, why America must prepare for a long recovery. Grantham details 10 reasons: "The negatives that are likely to hamper the global developed economy." Sorry, but this recovery will take till 2016."
For those who have not had a chance to read the original Grantham writings, here is Farrell’s attempt to convince you that Grantham is spot on:
But should you believe Grantham? Yes. First: Like Joseph, Grantham’s earlier forecasts were dead on. About two years before Wall Street’s 2008 meltdown Grantham saw: "The First Truly Global Bubble: From Indian antiquities to modern Chinese art; from land in Panama to Mayfair; from forestry, infrastructure, and the junkiest bonds to mundane blue chips; it’s bubble time. … The bursting of the bubble will be across all countries and all assets … no similar global event has occurred before."
Second: The Motley Fools’ Matt Argersinger went back to the dot-com crash of 2000: Grantham "looked out 10 years and predicted the S&P 500 would underperform cash." Bull’s-eye: The S&P 500 peaked at 11,722; it’s now around 10,000. Factor in inflation: Wall Street’s lost 20% of your retirement since 2000. Yes, Wall Street’s a big loser.
Third: What’s ahead for the seven lean years? Wall Street will keep losing. Argersinger: "Grantham predicts below-average economic growth, anemic corporate-profit margins, and other
…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
BlinkBits
BlinkList
Counterparty Risk Increasing
by ilene - May 20th, 2010 3:02 pm
Counterparty Risk Increasing
Courtesy of Rom Badilla, CFA – Bondsquawk.com
Due to the European debt crisis, counterparty risk is increasing as banks are reluctant to lend to each other, which is remiscient of the bank freeze at the beginning of the fiancial crisis of 2008. The LIBOR-OIS spread which is a gauge of banks willingness to lend, widened 2 basis points today to a spread of 26. Despite the unveiling of the near one trillion dollar Stabilization Fund last week, it continues to drift higher. The spread has now increased 20 basis points from the most recent low achieved on March 15.
As mentioned last week here at Bondsquawk, the spread inched higher from 13 basis points in late July 2007 to 19 basis points the following week. As market conditions deteriorated, the widening accelerated. By late August, the spread widened to 73 basis points and the route was on. During the height of the financial crisis which is marked by the fall of Lehman Brothers, the spread reached a high of 364 basis points by October of 2008. While it remains to be seen if this will turn into another credit crunch as we have warned several days ago and as Bank of America’s Jeff Rosenberg had suggested earlier today, today’s action is certainly a growing concern and deserves further monitoring.
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
BlinkBits
BlinkList
Irish Banks Need $43 Billion in New Capital as “Worst Fears Have Been Surpassed”
by ilene - March 31st, 2010 1:20 pm
Irish Banks Need $43 Billion in New Capital as "Worst Fears Have Been Surpassed”
Courtesy of Mish
Inquiring minds note Ireland’s finance minister is shocked to discover Irish Banks Need $43 Billion in New Capital on account of ‘Appalling’ Lending.
Ireland’s banks need $43 billion in new capital after “appalling” lending decisions left the country’s financial system on the brink of collapse.
“Our worst fears have been surpassed,” Finance Minister Brian Lenihan said in the parliament in Dublin yesterday. “Irish banking made appalling lending decisions that will cost the taxpayer dearly for years to come.”
The agency aims to cleanse banks of toxic loans, the legacy of plunging real-estate prices and the country’s deepest ever recession. In all, it will buy loans with a book value of 80 billion euros ($107 billion), about half the size of the economy.
“The information that has emerged from the banks in the course of the NAMA process is truly shocking,” Lenihan said.
Dublin-based Allied Irish needs to raise 7.4 billion euros to meet the capital targets, while cross-town rival Bank of Ireland will need 2.66 billion euros. Anglo Irish Bank Corp., nationalized last year, may need as much 18.3 billion euros. Customer-owned lenders Irish Nationwide and EBS will need 2.6 billion euros and 875 million euros, respectively.
“The regulator is taking the bank system by the scruff of the neck,” said James Forbes, senior equity strategist at Irish Life Investment Managers in Dublin. “Allied Irish has a lot of work to do to avoid majority state ownership, Bank of Ireland less so.”
Ireland may not be able to afford to pump more money into the banks. The budget deficit widened to 11.7 percent of gross domestic product last year, almost four times the European Union limit, and the government spent the past year trying to convince investors the state is in control of its finances.
“The bank losses, awful as they are, represent a one-off hit. It’s water under the bridge,” said Ciaran O’Hagan, a Paris-based fixed-income strategist at Societe Generale SA. “What’s of more concern for investors in government bonds is the budget deficit. Slashing the chronic overspending and raising taxation by the Irish state is vital.”
Economic Hit Parade
US: States have $5.17 Trillion in Pension Obligations, Gap is $3.23 Trillion; State Debt as Share of GDP
China: 10 Signs of Speculative Mania
Spain, UK, Japan,…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
BlinkBits
BlinkList
Banks Come Back For Another Bailout in Ireland While the US ‘Manages Perceptions’
by ilene - March 30th, 2010 11:19 am
Another great introduction to news by Jesse. (I so often find myself in total agreement with Jesse on these matters!) – Ilene
Banks Come Back For Another Bailout in Ireland While the US ‘Manages Perceptions’
Courtesy of JESSE’S CAFÉ AMÉRICAIN
The whole notion of bank bailouts is a tremendous injustice when not accompanied by personal bankruptcy and civil and criminal prosecution for those banks managers who created them.
In addition, the owners of the banks, whether through debt or shares, should be wiped out and the bank place in a proper receivership while its books are sorted out.
The US is an accounting mirage. The notion that it will make money from its stake in Citi is a sleight of hand. The enormous subsidies to the banks both in terms of direct payments, indirect payments through entities like AIG, and subsidies such as the erosion of the currency and the deterioration of the real economy, will never be repaid.
The real model of how to handle a banking crisis is in the Scandinavian nationalization of the banks, or even better, the disposition of the Savings and Loans in the US.
This pragamatic approach, its cheaper just to pay them all off than to sort them out, is a child of the Rubinomics of mid 1990′s in the States, in which it was determined to be better to prop up the stock markets, often by buying the SP futures, than it was to allow the market to reach its level, and then deal with the financial carnage of a market crash. Here is a review of a paper by Rubin’s protege Larry Summers.
From the Horse’s Mouth: Lawrence Summers On Market Manipulation In Times of Crisis
The fourth position, which Summers calls pragmatic, in his own words, “is the one embraced implicitly, if not explicitly by policymakers in most major economies. It holds that central banks must always do whatever is necessary to preserve the integrity of the financial system regardless of whether those who receive support are solvent or can safely pay a penalty rate. This position concedes that some institutions may become too large to fail. While lender-of-last-resort insurance, like any other type of insurance, will have moral hazard effects, I argue that these may be small when contrasted with the benefits of protecting the real economy from financial
…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
BlinkBits
BlinkList
German
Spanish
French
Italian
Portuguese
Japanese
Korean
Russian
Chinese
Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
(