Banking Corruption Favourites

Bank Stress Tests Are No Such Thing

What’s this about stress tests in the banks?

What stress tests?

Are they going to physically pick up a bank and shake it?  No, they’re not.

Are they going to set fire to it?  No.

Are they going to bash it with a big lump hammer?  They are not.

Will they pile big weights on top of it until it squashes?  Of course they won’t.

So what exactly do they mean by stress test?  Well, as I pointed out before, people in the banking world like to use terms from technology, engineering and science to lend a spurious credibility to what they do, and that’s what has happened with the term stress test.

In the real world, a stress test is something you might do to an aeroplane or a ship or a new engine design.  You run it to its limits to see how it behaves, what parts need to be strengthened and what works well, but before you do that, you run a simulation.  You set up a mathematical model, including as many parameters as you can manage, and you assess as best you can how it might behave before you send a test pilot up in it to risk his life.

That’s what they’re doing with the banks: a simulation.  Not a stress test.

Now, it seems to me that the most important thing they need to get from this process is the truth.  Finally, they need to get honest answers from the bankers instead of the lies they’ve been spinning for the last three years, and that’s where I think a real stress test might be useful.

Everything has its place in this world, including waterboarding.  I see no harm in rounding up the whole lot of them and subjecting them to a series of tortures until they spill the beans.  The Rack, the Iron Maiden, the Boot : all have a distinguished history, and it would be a shame, in my opinion, to let these traditions die out completely.  Bring back the Head Crusher, the Cat’s Paw, the Knee Splitter and of course, most appropriately, the Scavenger’s Daughter.

By Jesus, they won’t be long finding out the real facts about these banks once they start the real stress tests.




More Bank Stress-Tests

Question: when is a stress test not a stress test?

Answer: when it’s a review.

How many times have I said this now? In order to stress test something, you have to put it under load and see how it behaves.  The language is from the world of technology, not finance, and it means something real, unlike finance.  You stress test an aeroplane wing by bending it until  it breaks.  You stress test a sample of concrete by crushing it.

Alternatively, in medical parlance, a stress test involves getting a patient to run on a treadmill to see how his heart is doing.

You do not stress test something by studying it carefully and working out what you think its behaviour is likely to be.  That’s called analysis, and it’s quite a different thing to stress testing.

Unfortunately, the people who think of themselves as finance professionals have also deluded themselves that their line of business is pure science instead of pure nonsense, and thus we have yet another stress test of the Irish banks.

It’s depressing.  Michael Noonan came back from his meeting with Trichet telling us that the ten billion set aside in the EU/IMF deal won’t be enough to recapitalise the Irish banks, even after all the money we’ve poured into them.  They might need a further fifteen billion on top of that.  Not much, when you say it quickly.

Back in 2008, the Irish banks were subjected to a stress test.  Do you remember that?

We heard the head of the central bank, John Hurley, telling us that he’d stress tested the banks and it was all fine.  This was the test that allowed the banking regulator to claim that everything was hunky dory with his golfing buddies in Bank of Ireland, AIB and Anglo.

Even if we disregard the spurious use of the term stress test in the technological sense, perhaps we might choose to interpret it in a more colloquial way.  Maybe they mean it in a Pulp Fiction sort of way, where investigators go into the bank executives’ offices and get medieval on their ass.

Well, it didn’t work.

The bank executives lied to Hurley.  They lied to Cowen.  They lied to Lenihan. Even after the State had taken a huge share of their problems and injected ruinous amounts of cash, they continued to lie.

If the plan was to stress them, it didn’t work.  They lied and they lied and they lied.  They continue to lie, as Michael Noonan confirmed today.  Their nature is to lie, and they possess no sense of right and wrong.  This might be a small backwater, but our local boys sure as hell bought into the international banking culture.  Take all you can.  Keep lying.  Don’t blink.

These are the people who hold Irish families in a grip of terror.  These are the people refusing credit to small businesses, despite pleas from the government which continues to fund them.

Isn’t it about time we, their paymasters, imposed a new ethos on them whether they like it or not?


McWilliams thinks we have no choice but to default on the bank portion of our national debt.  Tell me where he’s wrong.


European Bank Stress Tests

Stress tests?

Did someone say stress tests of banks?

Where did I hear that before?

Oh wait. Now I remember. Wasn’t it back in September 2008 when they were telling us about stress-testing the Irish banks?  What a success that was!

Now here they come again, using spurious terminology that they don’t understand, pretending to be doing something real and meaningful, adopting the language of science and engineering for something intangible, something based on lies, deceit and fear.

This is not a stress test of the banks. It’s just modelling. A stress test is something very real, hard and visible.

A stress test is something that finds out if the wing of your plane will break off or stay on.

A stress test is a way of seeing if that bridge will fall down or carry you safely across the water.

A stress test is a method of finding out if your submarine’s hull will collapse like a cheap Easter egg.

How is it done? Very simple. You pile more and more weight onto something until it breaks, and then you know how much punishment it can take. You do it again and again to make sure the first result wasn’t a fluke.

That’s stress testing, which is far more reassuring than all the mathematical predictions in the world. When you sit into the new Dreamliner, you can be sure that they confirmed the modelling and analysis by breaking things until they were satisfied with the strength of them.

That’s because the Airbus engineers know what they’re doing, unlike the bankers — the kind of people who lend spurious credibility to their dodgy number-juggling by misuse of solid industrial language.  The sort of people who call an insurance policy a product.

If anyone tries to persuade you that the Irish banks passed a stress test, tell them they’re talking nonsense.  The Irish banks passed no test, either in the abstract, theoretical world of financial modelling, or in real life.

The real stress test has already happened and we know how that went.


Ireland’s Finances

What’s the difference between the government wage-packet and one from a private employer?

Well, one big difference is this: the government immediately gets to take back half the wages it pays out, in tax and social insurance.  It then takes another 20% of every euro spent out of the remainder, and every time a euro of that money is further circulated, the government takes another bite.  In the end it all goes back into the pot.

On the other hand, when a private employer pays wages, the money is gone.  He has to make more profits to pay the workers next week.

Therefore, the effect of public sector pay is exaggerated in two directions.  On the one hand, it doesn’t cost the government anything like what it would cost a private company to employ someone, because the government immediately takes back most of the money and grabs the rest as it filters through the economy.  This is not something a private employer can do.

So the real public wage bill is less than half of what it appears to be, which you would imagine is a good thing, but there’s a downside.  When you cut the public wage bill, the savings are far less than you think.

Anyway, it’s all a bottle of smoke.  The recent pension levy on the salaries of public servants will have almost no effect on the public finances, because it’s such a tiny element of the problem.  It won’t save the €2 billion so much beloved of Biffo.  It might save about half of that, if the affected workers don’t stop spending what they have left, depriving the economy of VAT and downstream income tax.

Did you know that the national debt is about 3% of the total debt incurred by this country through private and commercial borrowing?  Government debt is about €50bn, but the total borrowings of this country are somewhere around €1500bn.

That’s right.  You read it correctly.

One thousand five hundred billion euros.


That’s what this country owes.

€400,000 for every man., woman and child.  If there are five people in your household, that’s €2 million of debt they can pin on you.

Now you have to ask yourself something: did you incur this debt?  Did you remortgage your house to buy an apartment in Bulgaria?  Did you buy into the delusion that the price of a house is the same thing as its value?  Did you borrow €600 million to build a gigantic apartment complex in Dublin 4, or a skyscraper in Chicago?

I know someone who bought a house in Dublin.  An ex-council, semi-detached house in a fairly basic area, and for that he paid nearly half a million euros.  To be more precise, I should say he borrowed half a million euros.  Some bank decided that his newly-acquired ex-council house was worth as much as a beachfront property in California with its own swimming pool, or a chateau in the South of France.  So here we had a situation where we convinced ourselves that we weren’t living in ratty old former council houses with some knacker riding a piebald up and down the footpath outside our door, but instead we were living an Elysian dream.  Half the country thought they were living on the Upper East Side of Manhattan, and kept the curtains closed in case they spotted the knacker on the piebald and the dream dissolved.

And in that delusion, the bankers collaborated.  As did the property programmes on television, and the empty-headed wafflers who presented them, and the celebrity architects, and the estate agents, and the builders and the government.

Now, I’m about to do something you haven’t seen before. I’m going to let the government off the hook, but only a little.  You see, I’ve been saying here for three years, since I started, that the whole thing was a crock of shit, and I’ve been pointing the finger at Fianna Fáil.  This is true.  The politicians rode the gravy train, along with the bankers and the builders.  Every one of them had their snouts in the trough, and every one of them spun us the same line of pseudo-technical nonsense to bamboozle us.

I thought they were cynical, and I was right.  The politicians, the bankers and the builders were as cynical as it gets.

I thought the politicians, bankers and builders were greedy and in that I was also right.

But I never for a minute grasped just how fucking stupid the politicians, bankers and builders were.

It’s only now beginning to dawn on me that none of them a had a clue what they were doing, and the government still doesn’t.  After all, we’ve had a succession of finance ministers with absolutely no knowledge whatever of finance.

We had Ahern, who was nothing more than a political corner-boy with no training, education or expertise, a self-serving, two-faced little toad who could barely write his own name.  He was followed by Charlie McCreevy, a glorified bookie and political chancer, who believed in spending every penny he got.  He was followed by Cowen, the current Taoiseach, a man of better intellect, but with a legal background, and he in turn was replaced by another lawyer, Brian Lenihan.

What’s missing from that list, apart from integrity?

That’s right: what’s missing is any knowledge whatever of anything practical.

These were the inflated, self-aggrandising fools who preened themselves and felt gratified when a billionaire patted them on the head.  Good lads.

Peasants.  Plebs.  Out of their depth and holding on like grim death to the wads of cash.

I’m also letting the bankers off the hook, but only a little, because I think they may have believed their own bullshit.  How often in recent years have you heard an insurance policy, or a bank account described as a Product?  Not a service.  Not a deal.  Not an arrangement, but a Product.

This is self-delusion by bankers, aware of how insubstantial the thing is that they do, and so desperate to make it feel like a real activity that they adopted the language of hard industry.

Did you hear that fool John Hurley who runs the Central Bank last year assuring us that everything was all right? Do you remember him telling us that he’d stress-tested the banks?  More spurious theft of language from real, hard industry.

Will I tell Mr Hurley what a stress test is?  A stress test is where you take a piece of steel or concrete or laminated polycarbonate, and you twist it and stretch it and squash it and stamp on it and set fire to it until it fucking breaks!  And then you know how strong it is.

Hurley didn’t stress test the banks.  What he did was turn to his golfing partners some Saturday afternoon, and say, Eh, look, Fingers, Seánie, could I have a quick word?

And they said, Sure, Johnny.  What’s up?

Well, lads, I was just wondering if you were up to anything dodgy.  Everything ok?

No bother Johnny-boy.  Everythings’s laughin’

Oh all right.  That’s fine then.

Stress-test me bollix!

I’m even going to let the builders off the hook.  Not because I think they were less than greedy.  Not because I think they aren’t ignorant, illiterate gobshites.  Not because I think they’re honest.

No.  Just because they’re a crowd of pigs in the trough, and what would you expect from a pig but a grunt?


Previously on Bock:

Property Values in Ireland

House Prices

I Hate Duncan Stewart

Economic Mismanagement — The Irish Experience

Ireland second wealthiest country

Irish Government’s Budget Deficit


Banking Crisis, the Free Market and the Media

When Aer Lingus decided to pull out of the Shannon region, we in Limerick were treated to an array of patronising Dublin-based commentators explaining to us that something called the Free Market had dictated the move.

We were advised by the condescenti to get over it, to move with the times, and to get with the program.  The free market, and not the government, is what decides things in this brave new world, according to an assortment of overbearing fools in the mainstream media and on every second Irish political website.

Those of us who had the temerity to question this new religious dogma were dismissed as unlettered hicks unable to cope with reality, or at least we would have been if we’d allowed that to happen.

But that was in the days when the same idiot condescenti were busy persuading themselves that we were the richest country in the world, when in fact we were simply up to our necks in hock.  In other words, when sipping a languid ten-euro frappociappocino in some Blackrock bistro, these airheads were able to persuade each other that nothing could go wrong go wrong go wrong go wrong …

And since the same dopes are the ones who control RTÉ, they were able to put out the same vapid, cretinous message to the rest of the country’s wannabes: the free market is the fount of all wisdom and devil take the hindmost.

But nothing lasts, does it?  The heartless, patronising cant was fine until it threatened those who’d grown fat on the free market.  The banks and the biggest of businesses.

And then, all of a sudden, we heard nothing about the survival of the fittest, or market forces, or any of the other empty-headed catchphrases that pass for analytical thought among the South Dublin smuggorati.

Indeed not.

Now, all of a sudden, we see government leaders, including rock-solid ideologues like GW Bush, falling over themselves to pump hundreds of billions into the financial system, in case their banking buddies should feel the pinch.  Nobody’s talking Free Market anymore.

All in a blink, GW Bush has become a Socialist and nationalised America’s banking system.

Who’da thunk it?

So, the next time some arsehole company like Aer Lingus decides to ignore its broader responsibilities as a corporate citizen, let no condescending twat from UCD lecture me about market forces.

The market is not the universe.  It isn’t even a little sub-system.  It just happens that its behaviour can be approximated by some of the same equations that govern physical phenomena, and it’s a disastrous mistake to presume that the two are therefore identical. There’s only one force in any market and that force is greed.  It must be controlled if we want to live in a society instead of an economy.

The market is not a physical, natural phenomenon, except in the half-assed understanding of people who know nothing of the real world, or indeed of science or engineering, yet who use and misuse scientific concepts to lead and mislead the rest of us.  These are the people who will tell you that they’ve stress-tested the Irish banks and found them safe.

Stress-tested my arse!

These people, who have never wielded anything heavier than a pencil, and who have never studied anything more practical than a balance sheet, would have no idea what a stress test is, or how to validate it.

Remember, when you hear economists using this sort of language, you’re dealing with people who have acquired not one single useful skill in their entire lives, other than going on TV and talking sanctimonious and meaningless shit to their next-door neighbour who got them the gig on RTÉ in the first place and who’s now interviewing them.

This is what it means to have such a smug elite in such a small country: mediocrity, incompetence and corruption.