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Lenihan: Anglo failure would 'bring down' Ireland


borntorum

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The lead article in tomorrow's FT is an interview with Brian Lenihan in which he states that the failure of Anglo Irish Bank would "bring down" Ireland.

He states that, "It is systematically important not because of any intrinsic merit in the bank. But because of its size relative to the national balance sheet. No country could contemplate the failure of such an institution."

The article also states that the markets may be about the target AIB, and that in response the government is about to announce a further injection of €2-3billion.

Article here, registration required

Edit: There is an article here on the Irish Times website that summarises the main points of the FT's piece
 

He3

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Anglo failed.
 

spidermom

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MPB

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The lead article in tomorrow's FT is an interview with Brian Lenihan in which he states that the failure of Anglo Irish Bank would "bring down" Ireland.

He states that, "It is systematically important not because of any intrinsic merit in the bank. But because of its size relative to the national balance sheet. No country could contemplate the failure of such an institution."

The article also states that the markets may be about the target AIB, and that in response the government is about to announce a further injection of €2-3billion.

Article here, registration required

Edit: There is an article here on the Irish Times website that summarises the main points of the FT's piece
It is precisely because of its size relative to the National balance sheet that it should be allowed to fail.

We cannot afford to save it.

This man is starting to stray into dangerous territory. Nobody bar his own acolytes and those with a vested interest believe this nonsense.
 

Simbo67

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It is precisely because of its size relative to the National balance sheet that it should be allowed to fail.

We cannot afford to save it.

This man is starting to stray into dangerous territory. Nobody bar his own acolytes and those with a vested interest believe this nonsense.
Does it also preclude the Irish government from other options apart from pumping in 3 billion into AIB? A billion here, a billion there...
 

adamirer

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It is now.. it wasnt in 2008/09. He's made it our problem. And then theres NIB... was that systematic too...?? bull...
 

dent

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It is precisely because of its size relative to the National balance sheet that it should be allowed to fail.

We cannot afford to save it.

This man is starting to stray into dangerous territory. Nobody bar his own acolytes and those with a vested interest believe this nonsense.
I don't know what Ned O'Keefe's angle is (probably to save his seat) but at least one FFer has at last called Lenihan for being the spoofer that he is. Old Brian Lenihan senior would be sitting pretty in his grave if he knew his boy could swear black is white, just like his dear old pa.
 
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Clearly, Lennie is soft-soaping us (in the FT of all places, he was lambasting it last week) to take the Regulator's announcement that Anglo is going to cost us 30+bn euro, more than 15 times the amount of his original assessment, When a prediction turns out to be that wide of the mark, there can't be any credibility to anything he says
 

grafter1

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Well if the government are planning on only putting 2-3Bn more into AIB they are making a huge mistake. AIB needs at least 15Bn - 7.6Bn if they can raise the 7.4Bn Elderfield wants raised by 31 December.

It will be an interesting day tomorrow. Just how the markets react to it all is going to be fascinating.
 

Canon

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When did we the Irish people agree to mortgage our children's future to the markets .The same markets are telling us through their bond rates that our present government strategy is to put it mildly less than successful.
 

Simbo67

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Well if the government are planning on only putting 2-3Bn more into AIB they are making a huge mistake. AIB needs at least 15Bn - 7.6Bn if they can raise the 7.4Bn Elderfield wants raised by 31 December.

It will be an interesting day tomorrow. Just how the markets react to it all is going to be fascinating.
Which effectively means the n word.
 

borntorum

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Like everyone else I'd like Anglo to just disappear off the surface of the earth. But this post two days ago from Robert Preston of the BBC gives serious pause for thought:

But here's why for Lenihan, Sutherland and Ireland's mainstream political class it is heresy to adopt a policy of caveat emptor (or buyer beware) to the distribution of banking losses: Ireland's dependence on credit from abroad is so great that the economic consequences of that credit being withdrawn would be catastrophic.

Take a look at the latest figures from the central bankers' bank, the Bank for International Settlements, on just the exposure of overseas banks to Ireland (in other words, credit provided by pension funds, hedge funds and wealthy individuals would be on top of this).

Total foreign bank exposure to Ireland's economy is $844bn, or five times the value of Ireland's GDP or economic output. Of that, German and UK banks are Ireland's biggest creditors, with €206bn and €224bn of exposure respectively.

To put it another way, German and British banks on their own have each extended credit to Ireland greater than Irish GDP. Which doesn't sound altogether prudent, does it?

As for direct bank-to-bank lending, overseas banks have provided Ireland's banks with €169bn of loans, which is also greater than Irish GDP.

Here's the point: an economy as open and as dependent on foreign finance as Ireland's cannot afford to alienate its creditors. If those overseas lenders asked for their money back now, Ireland's recent fall back into a modest economic contraction could spiral into dark deep prolonged recession or even depression.

There are two big conclusions to be drawn. First Ireland's inability to let market forces take their course will be seen by many as another example of why the banking industry has lost any semblance of right to operate according to normal commercial freedoms.

Second, the Irish economy is hideously and perilously balanced between recovery and Armageddon.

The Irish government has extended till the end of the year its formal guarantees to protect from losses more than €400bn of retail and wholesale loans to Irish banks (banks' subordinated debt is excluded).

But, to state the obvious, those guarantees are only reassuring to creditors if the Irish government is perceived as able to honour its own debts.

The credit-worthiness of the Irish government is largely dependent on two related factors: the delivery of its promise to reduce the public-sector deficit from an unsustainable 14.3% of GDP in 2009 to less than 3% of GDP by the end of 2014; the stabilisation of losses at Irish banks that are being underwritten by the government.
BBC - Peston's Picks: Why Ireland can't afford to punish reckless lenders to its banks

What do those, like David McWilliams, who say "let the bondholders pay" make of that?
 

anewbeginning

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More emotional blackmail from Lenihan. No-one does emotional blackmail better than Lenihan. You almost sense he's going to cry, while at the same time telling you he's going to take all your money.

I'm waiting for him to tell us all that it hurts him more than it hurts the taxpayer to be doing this.

Just like his father and aunt with the faux sincerity and supposedly telling it as it is.
 

MattM

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I wonder will tomorrow be the day it all ends?

Methinks were just days away now:(

RIP a sovereign Ireland.
 

borntorum

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More emotional blackmail from Lenihan. No-one does emotional blackmail better than Lenihan. You almost sense he's going to cry, while at the same time telling you he's going to take all your money.

I'm waiting for him to tell us all that it hurts him more than it hurts the taxpayer to be doing this.

Just like his father and aunt with the faux sincerity and supposedly telling it as it is.
Whatever about emotional blackmail, if Robert Preston is right, Lenihan is telling the truth. It would bring down the country.
 

Boy M5

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I can't start new threads so I posted the FT story and link on the run on Ireland thread a few hours ago.

How will the financial markets see this measure? you can follow on the Alphaville blog on the FT - its free access & no doubt stories will appear on there tomorrow AM

FT Alphaville
 

MPB

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Like everyone else I'd like Anglo to just disappear off the surface of the earth. But this post two days ago from Robert Preston of the BBC gives serious pause for thought:



BBC - Peston's Picks: Why Ireland can't afford to punish reckless lenders to its banks

What do those, like David McWilliams, who say "let the bondholders pay" make of that?
Those figures include all the foreign Banks secluded in the IFSC.

Peter Matthews explained how bondholders would be dealt with under a new Banking arrangement. They would have to accept a portion of the losses, not all, in Anglo and INBS and would receive equity in the 2 main Banks.

The taxpayer would receive equity also and would recover 17 billion of its 40 billion share in the deal.

Lenihan originally said that he would save Anglo because it was systemic and affordable at 4 billion. That figure has grown now to 30 billion after him capping it at 12 billion and 22 billion at various junctures. Do not forget that we have also agreed to pay a further 20 billion for the largest toxic loans in Anglo, through the NAMA.

As Paul Sommerville said the markets have already decided that Anglo is old news. They are now looking at AIB. It is believed the Govt will effectively nationalise AIB tomorrow. This of course will be used to stop the flow of information, thus beginning all over again the same sort of bluff and obfuscation that existed for the last 2 years with Anglo.

Ireland will not be borrowing from the markets as long as the taxpayer is on the hook for almost 90 billion of somebody elses losses. Simple as.

Peston really thinks that the markets are going to buy Irish Bonds so that those who bought bonds in Anglo and INBS can get their money back.

Would you swap your money for somebody elses Anglo bonds?
 
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