Banks, Bondholders and Bastards

When the rich need a rescue, the Irish government abandons its belief in the free market

When I was a kid, people like us didn’t make investments.  That was for the wealthy.

Occasionally, not often, you might hear of somebody coming into a bit of money, and that was when people started to mention investments.

There were two kinds of investments in the old days: wise and bad.  Everyone — even people such as ourselves who had little experience of money — understood that it was possible to lose everything if the bet went wrong, but that made sense, because it was also possible to make a fortune.

That’s the deal when you play in the free market, or at least, it was until recently.  Not too long ago, our government refused to intervene in a matter that threatened the well-being of the entire Mid-West region, when Aer Lingus decided to remove its Heathrow flights from Shannon Airport and relocate in Belfast.  Nothing could be done about this because it was a decision made by a private company, even though the government was a major shareholder.  The free market had to be allowed to operate as God intended.   Market forces could not be resisted.

Strangely, when the pendulum swung in the other direction and market forces started to threaten the profits of investors in the banks, everything became possible.

Not only could the government intervene in the free market, but it could mortgage the entire country to make sure that a bad investment didn’t cost the gamblers any money.  Suddenly, the free market was a thing of the past.

As Morgan Kelly pointed out last week, the option was available to cancel the bank guarantee because it was based on lies told by the bankers.  Kelly hasn’t been wrong about many things in predicting the course of our fiscal crisis, and when he estimates that the total bank bailout will cost €70 billion, I’m not going to disagree with him.

Of course, even the term “bank bailout” is a misnomer since it’s nothing of the sort.  It’s a bailout of investors.  One minister after another assured us that the bailout would get the banks lending again, even when the chief executive of AIB baldly informed a Dáil committee that it would not.

Now I see that the German Chancellor is saying it’s possible to make the investors carry some of the losses, but even more interestingly, the German finance minister is saying that banks should be allowed to collapse, and he sets out a method of forcing the bondholders to carry responsibility through a debt-for-equity swap.  I wrote about this a little while ago, after the Financial Times recommended the very same thing.

Of course, the FT’s suggestion was dismissed by one inflated Fianna Fáil buffoon after another, as they assured us it was impossible.  I wonder if the same FF stuffed-shirts will be phoning the German government to point out how mistaken they are? Hello.  Is that Angela?  Yeah, look, this is Willie.

Go back to that €70 billion for a second, the amount Kelly estimates the government will end up borrowing to save the investors from their responsibilities.  At present, interest rates for Irish borrowing are prohibitive, but let’s say they settle at 6%.  Interest repayments will therefore be about €4 billion every year, just to keep the bankers in comfort, before we spend a penny on anything else.

That means the bulk of budget cuts are not going to pay the public service wage bill, or healthcare or social welfare.  The bulk of budget cuts are being made so that the government can protect investors from the consequences of a failure in their gamble.

How about that?  Do you feel better now?

As I have said before, in my opinion that amounts to treason.  If you can think of a better word for it, I’d be interested to hear what it is.

26 thoughts on “Banks, Bondholders and Bastards

  1. I’ve always found this to be one of Ireland’s most quitesential qualities. No doubt these same shannanigns are happening all over yet in Ireland we all know. We know it’s a scam, we know we’re being rode to save “the boys”, we know or politicians are crooks, we know it’s treason, but as long as the talking heads in front of the tv camera says “No, no, this is all absolutely necessary” everybody will decide to believe the lie.

  2. Treason is the perfect word. They need to be behind bars for life for what they’ve done. If Roman Abramovich wants to reignite his interest in suing us, why don’t we just say, “Fire away, Roman – you dodgy Russian cocksucker – we’ve got fuck all. Sue away, you prick”.

  3. Overnight Ireland seems to have gathered a reputation as ” The unlancable boil on the arse of the Eurozone ”
    As Europe speculates, tweets and blogs spew forth on the ludicrous shenanigins of this ” Government ” The Irish are described in one tweet as suffering from ” Cognitive dissonance ” Who could argue.
    Rumours are rife, instability is inevitable.
    The UK, France and Germany do not want their taxpayers footing the bill for Irish Banks.
    Why is the ” Bank bailout ” the highest priority on Government agenda, Whats the cover up ?
    What are the details of Anglos ” Masterplan repurchase agreement ” ?
    Miguel Angel Fernandez Ordonez, ECB Council member has called on Ireland to ” make a decision ” Is that decision to rescue banks at the expense of default on Soverign debt ?
    Europe cannot be seen to countenance payment of funds directly toward Bank bailout, Will the Banks now fall ?
    Portugal has to-day made ” noises ” about leaving the Euro, Is it the case that Ireland which is app 1% population of EU is exposed to 25% of ECB lending ?
    In the 30 months since crisis was realised, not one step has been taken toward a resolution of orderly collapse of Banks, No plan B No plan.
    There is no other means to describe the current problem, It is Treason, Ireland has now invited hostility from its neighbours through the deviant actions of its Government.

  4. Am I alone in seeing the positives of being brought to the brink? We as a nation now have a chance to change Ireland for the better. Wipe out FF, get rid of Civil War politics, put a system in place that benefits the citizens not “the boys” in short start again with a blank canvas. Gerry Adama said on the radio this am that he and the Sinners would reduce TDs pay by 20% and Ministers by 40%, this he said would save €300m per year. I’m delighted a political leader has highlighted this, I’m disappointed itwas Adams. Here’s to the New Ireland, a country to be proud of, at last.

  5. No 8. I dont think you are alone with that thought, You are absolutly correct, The people of this Nation ( im avoiding the use of WE as I dont want Gary Irl to think im including fingers et al ) now have the greatest opportunity in history to charter a course of true equality and possibly even excellence.
    Its just that as we approach the ” brink ” there is nobody at the helm with a set of co ordinates, So the fear of entering even more turbulent waters which will result in needless pain and suffering is still very much a reality.
    We cannot take our eye off the bigger picture but we are not steering the ship, Im looking forward to the day that the ” Irish Empire ” as it was formerly thought of by its now non paid up members, will fall and fall hard, But that day requires a plan, As I see it now, There is not one party, maybe not even one member of present Dail fit for purpose to create a plan.
    Incidently, I would go so far as to cut TD’s and Ministers pay by 50% and scrap cars for all present and past and thats only for starters !
    It may well become a race for the bailout between Portugal, Spain and Ireland, possibly Italy a bit later, Dont forget the UK would have to underwrite a bailout and as they are not under the constraints of the Monetary union, What price will we pay ?

  6. Lie after lie after lie from FF. Oh and we must thank Willie for abstaining on the Shannon stopover vote. Thanks a bunch.

  7. I was bored and decided to come with a new national anthem for Ireland on my blog that would reflect our current climate, it’s no masterpiece, but it beats Ireland’s Balls!

    A SUCKERS’ SONG (to the tune of Amhrán na bhFiann)

    Suckers are we,
    whose lives are pledged to NAMA,
    We are screwed
    by banks beyond the law,
    Sworn to be safe,
    no more our Celtic Tiger,
    Shall shelter the public from the banks
    Tonight we suffer Fianna Fáil,
    In NAMA’s cause, oh fuck not me,
    Mid Biffo’s roar, and Anglo’s squeal,
    We’ll chant a sucker’s song

  8. Methinks we are now a province of Europe.
    I think we have for too long supped at the through of the workers of German and French working peoples taxes. Time to pay the piper. Which would lead me to think Karma is a bitch.

  9. This is getting interesting. I could sense from the beginning that the bank bailout would destroy Ireland, but now it looks like it’s endangering large parts of the Eurozone. It’s that bank debt that the ECB is concerned about, not the sovereign debt, because it holds a good deal of Irish Bank debt and because it realises that a goodly portion of the mortgages that constitute the Irish bank ‘assets’ will simply never accrue much interest, let alone be paid back.

    A government whose collective cranial cavity was not filled with raw sewage, would realise the game was up and negotiate the best possible interest payment while keeping the Eurozone centre happy. But no – FF/Greens are moving into phase three of their pathetic fantasy world having done ‘It was Lehmans wot done it’, and ‘We were all to blame’ – the brave boys ‘defending Ireland’s economic sovereignty’ (which is code for the tax avoidance scams that the part of the FF economy not bound up with property depends upon) will now put out the line that ‘the EU forced us into it.’

    The only good thing about this crisis is that it has been truly dis-illusioning – the veils are being ripped asunder.

  10. Like I wrote over in the Waffle post: Have them charged by the Hague for treasonous war crimes – against their own people.

    Maybe an external, conditioned bailout will help you get rid of some of these guys (and I see girls also).

    If there’s enough people like all of you Bockers out there, maybe there’s hope.

  11. Two things I learned from my father (among many others)

    – Investments are exactly that – they can fall as well as rise
    – Fianna Fail are a crowd of chancers and gombeen men

    He made the second statement way before the Haughey era, when you could say that with people like Lemass and Lynch they had at least a smidgeon of political vision. He had no political axe to grind nor was he particularly fond of the Blueshirst – just a believer in democracy …

  12. The idea of the IMF or any bank coming to the rescue of any people or their country is a foolish thought. Banks are in the business of making money and care nothing as to how they make a profit. This mess we are in was created by the Irish people as they watched our political criminals who were abetted by media elite. They too were in the business of profit, and cared little for the people they duped.
    The bankers of the world watched as we were lied to and sold away our country through referendums and mismanaged voting. Those bankers will not save this country or any other country as their business is profit. Your own local bank works in similar fashion. You buy a house, and you pay for three houses through the course of your life.

    A piece from The New Statesman in 2004.

    Zambia, with its copper wealth, was once one of the richest countries in Africa. Now it is one of the poorest. Its long association with the IMF began in the 1970s when, like many other developing countries, the double whammy of rapidly rising oil imports and equally rapidly falling commodity export prices required it to seek international help. By the early 1980s, Zambia’s debt had spiralled and it was unable to continue repayments.

    Enter, in 1985, the “structural adjustment loan”, intended in the case of Zambia to revive its agricultural sector and “reorientate” industry. The price for this loan was high. Zambia was obliged to cut government spending (including food and fertiliser subsidies); sacrifice control of foreign-exchange policy and interest rates; open its markets to cheap imports to compete with its own nascent industries; and abolish price controls.

    The political fallout was disastrous, with student and industrial uprisings and food riots in the copper belt (where wages had been frozen). Zambia reluctantly abandoned IMF support and tried its own new economic recovery programme. The Zambian government reactivated import controls, limited debt-service payments to 10 per cent of foreign-exchange earnings, reintroduced price controls and reintroduced fixed interest and foreign-exchange rates. The economy grew, first by 3.1 per cent in 1987 and the following year by 5.6 per cent.

    Regrettably, there is no happy ending to this attempt to win freedom. The rich aid donors of the Paris Club decided to back the IMF, threatening to withdraw all bilateral aid unless Zambia returned to an IMF-backed adjustment programme. Normal IMF conditions were reimposed: privatisations, further trade liberalisation and withdrawal of subsidies for agriculture.

  13. Hey MacClancy, in some other threads on Bock i have advised that people should read a book by Naomi Klein called The Shock Doctrine. It details almostly exactly what you have posted on here, about any country that has been ” touched ” as you describe.

    The first country that it was tried out in was Chile in the 1970s, by a group of economists called the ” Chicago Boys ” who had studied under Milton Friedman. They worked with Pinochet to establish a neolibral economy to be put in place as soon as the coup was over. They all, including Friedman, accepeted that the people of Chile would have to be terrorised into accepting massive changes to their lifestyle in order to enrich the few at the exspense of the many. Over 3,700 people were murdered and more than 200,000 fled the country. The rest is history as they say.

  14. Right Sodacake, I have been reading those people for a long time, which would have people regard me locally as a nutter as I think I know everything. This is why I linked the Zeitgeist Agenda in a previous post. Here is a site worth looking into as to the problems of Ireland and the solutions as Arthur Griffith’s thinking.
    Some good writing in here just needs a lot of reading.

    http://american_almanac.tripod.com/contents.htm

  15. A site I found lately with some information which could be used by people in debt. A site critical of our MSM media whore elite. Also some information on our buffoonery clown political hacks who are in the employ of big business and banking.

    http://www.wearechange.ie/

  16. The people who contribute to this site put a great deal of effort into bringing as much material as possible to the readers, and I don’t have much patience for people arriving out of nowhere without having read the thousands of posts in the archive, and telling me to wake up. I have enough to put up with and that kind of crap wastes everyone’s time.

  17. Thank you for the thought, which is a great improvement on Fuck off.

    And thank you Tim for the direction.

  18. Sometimes, I find Anglo-Saxon terminology very useful for focusing the mind when I don’t have time to explain the details.

  19. This is part of the reason we are in this shit.
    The Anglo Saxon has been polluted to not resemble its own anymore. I put this down to the Venetian connection which alive and kicking.

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