Oct 012008
 

The Irish government wants to guarantee the entire liabilities of six banks in this country. Everything. Every single penny will be underwritten by your government, in your name, using your money.

Now. How do you feel about that? Good feeling, isn’t it, knowing that you own a bit of a bank?

Eh, no. Sorry. You own nothing. The banks still own the lot, except that, if it turns out they’ve been completely profligate, or even criminally irresponsible, it won’t matter. Our government, on your behalf, will put up however much money it takes to get them out of jail.

Now, the problem is this. Even though the Minister for Finance has announced to the world that he intends to use our country’s resources to defend the Irish banks to the last, he doesn’t seem to have asked for a look at their balance sheets. He doesn’t seem to know how much trouble they might be in. He doesn’t seem to care.

How do you like that for a bag of rusty ha’pennies? If the banks make a profit, it’s theirs. If they make a loss, it’s yours.

The government has extended a cast-iron guarantee to people who’ve been playing fast and loose with the regulator for years, who may well have all sorts of disastrous, uncollectable loans on their books, and who may well be about to go belly up at any moment. These loans might take the form of advances to property developers whose land-banks are now worthless. Such loans count as assets on the banks’ balance sheets. Assets! And I can tell you now, nobody has revalued them in light of the collapse in the property bubble.

Let me reduce this down to the sort of home-spun simplicities the condescenti detest.

Let’s say somebody in your family had a bad gambling problem, and the bank was about to evict them unless you put up a guarantee. What would you do first if the person with the gambling addiction came to you for help?

Would you agree instantly, and without question, to cover whatever gambling debts they’d run up, no matter how large.

Would you say to this compulsive gambling addict whose word isn’t worth tuppence, Certainly! Take whatever I have and use it for collateral. Take my house. Take my car. Take my children!

Or would you want to know how big these gambling debts were so you’d have some idea what you were getting yourself into?

Well?

Would you stake your house on the word of a compulsive addicted liar? That’s what our Minister for Finance is doing, except he isn’t staking the house. He’s betting the entire country.

How do you feel about that? The sweetest insurance deal ever offered.

Tell me this. Did you ever go looking for life insurance? And did the insurance company say to you Certainly! We’ll cover you for anything you like. No need to pay us a premium.

Well. Did they?

And furthermore, were you lucky to find an insurance company that didn’t care what state of health you were in, or whether you were a smoker, or whether you had recently been impaled by a crazed murderer and were about to expire at any minute?

Well, lucky you. You must be an Irish bank.

_______________________

Also on Bock:

Banking Bail-Out — Irish Government Signs Biggest IOU In History

  18 Responses to “Bankrolling a Bank. Ireland’s Government Guarantees Liabilities of Credit Institutions.”

Comments (18)
  1.  

    Problem, reaction, solution. We lose again. We’ve given them a blank cheque and the ability to amass even more bad debts. And everybody thinks it’s great. When will we learn

  2.  

    How do I feel about it, Bock?

    Surprisingly, unsurprised ! The banks have been screwing us since Uncle God was a boy, so why not continue shafting us to the bitter end of capitalism.

    Slowly but surely they are turning this country into an Atlantic version of Albania, but hey, who gives a fuck as long as no rogue developer, banker or crooked politician ever gets to serve a proper length of time in jail.

    Incidentally, anyone watch “Prime Time” last night. Four of us in a room watching it with varied degrees of interest. Then a bout of spontaneous laughter erupted….who do FF send out to speak about a financial crisis which threatens to bankrupt your children’s grandchildren ? ….well fuck me, if it’s Willie O’Dea !. Inspiring how that man can rattle on for ages without managing to put a coherent sentence together, although personally I still think he was sent out to buy kebabs & chips and was buttonholed by RTÉ.

  3.  

    did we not bail out the AIB bank before? remember hearing something about this in the 80’s. tax payers ended up with an increase of 2% on their tax rate to cover the cost. an increase which was never removed. don’t think we got a stake in the bank either.

  4.  

    Not for a second to defend the banks in any way, but you need to extend your analogy to include the fact that if you don’t pay your idiot gambler relative, his loan shark WILL come and burn your house down and shoot your dog.

    It doesn’t matter how much of our money the government could potentially lose with this scheme; doing nothing is worse. Probably. Or so I’ve been told.

  5.  

    The kind of under writing that the Government is doing is going to be commonplace throughout the world over the short term. I would reckon that very few financial institutions can survive this credit crunch without a deep pocket saviour in the background. A couple of interesting points to look out for in the coming days are the size of the government underwriting in comparision to the US, France and possibly Germany. Whilst a fraction of the size of these countries our banks appear to be just as inept as theres. Secondly, it will be interesting to see the effect of this action on the stock markets. If bank share prices can rise by a few points over the coming weeks then all may be rosy in the garden yet and Mr/ Mrs Irish tax payer may not be given a good screwing just yet. Next lets watch out for changes at the top in these banks. If this were soccer, there would be fans outside the HQ’s singing “Sack the Board”.
    And finally, to end on a cheery note. Will the Government’s knight in shining armour approach to banks and developers be continued to first time buyers etc once budget day comes around. Surely we can expect a financial package to help struggling (now unemployed) first time buyers sitting on 40 year mortgages with negative equity on their hands.

  6.  

    and of course it’s even worse than all that.
    The gov. tells us that the exposure is 400bn but with the expected influx of deposits from all over Europe due to our gov’s generosity in guaranteeing deposits who knows the full extent of our prospective liability. The country could sink under the weight of the debt.
    We all need to keep our passports up to date…

  7.  

    Nicky — We’ll probably never learn.

    Hoof — The main thing is to make sure that FF’s buddies don’t get screwed.

    Gerryo — Yes. The government put a 2% levy on everybody’s wage packet to bail out AIB after they made a stupid commercial decision. We didn’t get it back.

    Dave — I wouldn’t extend the analogy in thta direction. I was thinking more of a profligate relative in hock to the banks who might be looking for a guarantor.

    I certainly wouldn’t be giving any guarantees to a loan shark.

    PheasantFukker — Of course. From now on, the government is going to help everybody in trouble, no matter how stupid they’ve been.

    The Age of Consequences is dead.

    King’s Bard — That’s right. There’s no end to our exposure. This is one of those moments when I’m glad I have nothing.

  8.  

    I like a lot of others have lost my job, building poorly built houses in bad locations. because new building regulations were fought tooth and nail by the builders. not to mention rezoning of sites, I have worked on houses built in swamps. Mind you we did well for over 10 years,so I won’t complain.
    However now the developer I worked for is to be protected, while he sails his yacht around the world. I kid you not.
    what happened to the billions of profit declared by the banks and the builders over the last 15 years. It cant be all tied up in land?
    In ten years time we might have another tribunal and huge amounts will have to be accounted for. Men in suits will be telling us that we don’t understand high finance. I don’t believe for one second that these people haven’t vast amounts stashed away for themselves.

    Still fuck it I was given a ticket for Thomond park for the Glasgow match

  9.  

    That’s all right then. You might be out of work and the country might be at risk of bankruptcy, but at least you have a ticket for the match.

  10.  

    Well a ticket to the match is probably worth more than the country at the moment.

  11.  

    see it’s not all bad news,and my family shouldn’t go hungry until well into the new year.

  12.  

    Well that fucking does it !!!! That fucking takes the biscuit !! Just read this article from RTE’s website;

    http://www.rte.ie/news/2008/1001/markets.html

    That slimey, snivilling, sack of shit, Mr. Potatohead, fuckwit Cowen, went over to ask “backing”, also known as “permission”, from Nicolas Sarkozy to give all our money away. I don’t know how much you know about the little nasty facsist fuck who inspired my pseudo, but this is really the last straw for me.
    If there’s anyone I would bet on doing in France(or Europe) what the Bush administration has done to the US, then it’s Nicolas Sarkozy.
    Honestly, he’s like the love child of Charlie Haughey and knife-throwing fench miget.
    He’s just the type of guy who’d like to throw a big sack of cash to his rich business friends. Though I’ll say this for Nicolas Sarkozy, I don’t think even he would have the bearfaced cheek to try and cheat the french public out of €400 billion in one go !

  13.  

    When it comes to the blame game I agree with you, but faced with the present situation what would you have done.

    Unfortunately, meltdown extends the problem to the depositors.

    You want to hit the gobshites, then don’t guarantee the shares. The golden handshakes will evaporate. Unfortunately so will a lot of people’s pensions.

    This is a failure of global regulation which allowed bundles of shite to be parcelled up in glossy wrapping paper. Gordon Brown in right on this one.

    I’m staying tuned.

  14.  

    Well, since you ask, I might have tried to establish precisely what the banks’ exposure was before guaranteeing anything. I might have assessed which of them were worth saving based on that information and I might also have decided to take some equity in them. I don’t think I’d be guaranteeing their liabilities.

    Also, while there may well be a failure of global regulation, that’s not what caused the problem. The problem was caused by the greedy, crooked fuckers who run the banks.

  15.  

    Bock, I think you’re taking well deserved credit(pardon the pun) from the greedy, crooked fuckers who run the country. Let’s just say it was a team effort

  16.  

    The government didn’t want to look before they leaped! They knew what they’d see would be ‘rather unpleasant’ yet they still leaped ! Some kind of collective madness or what?

  17.  

    The lemmings have taken over Leinster House….em…I wonder would we get a better performance if we renamed it Munster House.

  18.  

    Ah! What a great idea. At least we’d see some passion and commitment.

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