• It has come to our attention that some users may have been "banned" when they tried to change their passwords after the site was hacked due to a glitch in the old vBulletin software. This would have occurred around the end of February and does not apply after the site was converted to Xenforo. If you believe you were affected by this, please contact a staff member or use the Contact us link at the bottom of any forum page.

Without State funds, banks will clam up, most businesses will fail: Kelly


He3

Moderator
Joined
Oct 1, 2008
Messages
17,094
Without immediate Government funding, bank lending will fall by three-quarters, driving most companies in Ireland out of existence, according to UCD Professor of Economics Morgan Kelly. Writing in the Irish Times today, he takes no prisoners in his analysis of the Government response to the banking crisis.

Full article

Adapting the old line about what's good for General Motors being good for America, he says the FF view that what was good for Anglo Irish Bank was good for Ireland has brought the country's banking system to its knees. The cure the Government has chosen will make things worse.

He says that without immediate Government funding, bank lending will fall by three-quarters, driving most companies in Ireland out of existence.

Instead of funding the four worthwhile banks that provide households and ordinary businesses with credit, he says 'the Government chose to persevere with a scheme that serves only to keep zombie banks going while starving their customers of credit; and helps nobody apart from some developers and bankers.'

He castigates the choice, saying that:

'... it guaranteed the liabilities of even the worst two "banks" without checking what, if anything, their assets are worth. By doing this, the Government has put the taxpayer at risk of substantial losses, and compromised its ability to provide adequate capital to the banks that need to be saved.

These points are so obvious that it is almost embarrassing to repeat them. Even with the strikingly poor quality of economic advice available to it, the Government knew what should be done, but decided to do otherwise.'


To see why they made this decision, click on the link.
 
Last edited:

kellsangel

Member
Joined
Oct 24, 2008
Messages
79
Am I correct in thinking that as time goes by

The losses to the taxpayer will increase by virtue of putting basket cases on life support, which will have the effect of increasing their losses the longer their lives are artificially preserved? If they are rolling over bad loans then the sooner the problem is addressed the cheaper it will be to fix.

There is no hope of a miracle recovery in property prices that will save the day.

It is a little like the gambling addict who gambled and lost the grocery money borrowing more to try and win it back on a fixed roulette wheel.
 

He3

Moderator
Joined
Oct 1, 2008
Messages
17,094

ManOfReason

Well-known member
Joined
May 24, 2007
Messages
4,328
I certainly have the impression that David McWilliams, who was given credit for the 'guarantee' idea, has being keeping a very low profile for the last couple of weeks. Could it be that he now realises what a terrible idea it was to guarantee ALL the banks and not let one or two of the 'bad' ones go under before guaranteeing the more financially secure ones?

If the Government now must recapitalize the banks, which it looks like they must do, they are stuck with recapitalizing them all. Madness. Say goodbye to the National Pension Reserve Fund as it will have to be used for the banks. By the way the NPRF gets smaller every week while the amount needed to recapitalizing the Banks increases every week.

We are all doooomed, doooomed I say.
 

coc

Member
Joined
Jun 29, 2006
Messages
78
McWilliams did not say guarantee all banks rubbish and walk away. He suggested guaranteeing the depositors as an initial step. To be followed by forcing the protected banks to declare their losses openly and cleaning up their books (causing massive losses for shareholders and causing builders to be ruined).

He hasn't been quiet - you obviously aren't reading the papers.

Prof. Morgan Kelly called this catastrophe two years ago so it would be wise to heed his advice carefully. Will Brian Lenihan?
 

wysiwyg

Well-known member
Joined
Jun 29, 2008
Messages
366
The reason the Government are shying away from re-capitalising the banks from the National Pension Fund, is because it is the nuclear option and would most likely result in FF electoral meltdown for years to come.

The fact is.. to dip into the fund.. and you'd have to more than dip, you'd practically have to empty it, the Government would need to go into the Dail and change legislation allowing them to get at it.

Given the current budgetary fiasco, and the increased feelings from a whole host of different sectors, how do you think people would accept the Government telling the country that there is no money for medical cards for old people, no money to decrease class sizes, no money for third level education, no money for a huge number of public services.. and that this is going to get even worse before it gets better...

And then hand the banks literally billions of euro to get them out of a mess caused by their own greed...

They'd be lynched ...

If I was the Minister for Finance, or any FF elected rep... I'd be crapping it right now.. and I'd be makign serious noises about things like nationalising the Corrib field... desperate times call for desperate measures
 

coc

Member
Joined
Jun 29, 2006
Messages
78
Agreed. But not a penny for the the Builders Bank. Let it fail. It's going to anyway, so why throw good money after bad?

FF are banjaxed for years now whatever they do. It would be nice if some of them decided to take it like men. Act like statesmen for the year or two they have left. It would stand to them in the long run.
 
G

Gimpanzee

If I was the Minister for Finance, or any FF elected rep... I'd be crapping it right now.. and I'd be makign serious noises about things like nationalising the Corrib field... desperate times call for desperate measures
1) Right when oil and gas are plummeting?

2) you think FF councillors in Mayo want to be the ones to tell the locals that although they own it, they are going to do precisely the same thing as Shell?

3) You think stealing the assets of a major international company wouldn't send capital racing out of the country?

4) Any idea how much would need to be invested to get the gas ashore, and where exactly would we get this money?

5) Any idea how long it would be before the revenues start rolling in?

There's desperate and there is suicidal.
 

markeys

Active member
Joined
Feb 11, 2008
Messages
273
Tis pure madness for the taxpayer to be propping up banks that we have no need for. I can understand the case for the taxpayer bailing out an insolvent bank - it may be be necessary to ensure that some sort of financial system remains in place so that joe soap can still get at his dole cheque on Thursdays.
But propping up insolvent banks that bear no relevance to the wider economy??? Insane.
 

He3

Moderator
Joined
Oct 1, 2008
Messages
17,094
The reason the Government are shying away from re-capitalising the banks from the National Pension Fund, is because it is the nuclear option and would most likely result in FF electoral meltdown for years to come.

The fact is.. to dip into the fund.. and you'd have to more than dip, you'd practically have to empty it, the Government would need to go into the Dail and change legislation allowing them to get at it.

Given the current budgetary fiasco, and the increased feelings from a whole host of different sectors, how do you think people would accept the Government telling the country that there is no money for medical cards for old people, no money to decrease class sizes, no money for third level education, no money for a huge number of public services.. and that this is going to get even worse before it gets better...

And then hand the banks literally billions of euro to get them out of a mess caused by their own greed...

They'd be lynched ...

If I was the Minister for Finance, or any FF elected rep... I'd be crapping it right now.. and I'd be makign serious noises about things like nationalising the Corrib field... desperate times call for desperate measures
Taking the Medical Card from some pensioners has triggered convulsions. What would threatening their actual pensions trigger?

When they set up the National Pension Fund in 2001 they told us it would be legally protected from government's grasping hands and that it would be independently managed because it was needed to fund our old age pensions.
 

powderfinger

Well-known member
Joined
Jun 13, 2007
Messages
3,353
McWilliams did not say guarantee all banks rubbish and walk away. He suggested guaranteeing the depositors as an initial step. To be followed by forcing the protected banks to declare their losses openly and cleaning up their books (causing massive losses for shareholders and causing builders to be ruined).

He hasn't been quiet - you obviously aren't reading the papers.

Prof. Morgan Kelly called this catastrophe two years ago so it would be wise to heed his advice carefully. Will Brian Lenihan?
I would add the unquoted builder's society to that taxpayer exclusion zone mentioned in your post above coc.
 

Odyessus

Well-known member
Joined
May 16, 2007
Messages
12,987
The reason the Government are shying away from re-capitalising the banks from the National Pension Fund, is because it is the nuclear option and would most likely result in FF electoral meltdown for years to come.

The fact is.. to dip into the fund.. and you'd have to more than dip, you'd practically have to empty it, the Government would need to go into the Dail and change legislation allowing them to get at it.

Given the current budgetary fiasco, and the increased feelings from a whole host of different sectors, how do you think people would accept the Government telling the country that there is no money for medical cards for old people, no money to decrease class sizes, no money for third level education, no money for a huge number of public services.. and that this is going to get even worse before it gets better...

And then hand the banks literally billions of euro to get them out of a mess caused by their own greed...

They'd be lynched ...

If I was the Minister for Finance, or any FF elected rep... I'd be crapping it right now.. and I'd be makign serious noises about things like nationalising the Corrib field... desperate times call for desperate measures


In the scenario you outline, the government would not be "handing the banks literally billions of Euro", but would be in effect buying the banks, that is, nationalising them.
 

He3

Moderator
Joined
Oct 1, 2008
Messages
17,094
Yes Odyessus, and almost certainly using money they have no right to seize.

Kelly's artlcle makes for shameful reading.
 

Catalpa

Well-known member
Joined
Jun 10, 2004
Messages
10,301
Without immediate Government funding, bank lending will fall by three-quarters, driving most companies in Ireland out of existence, according to UCD Professor of Economics Morgan Kelly. Writing in the Irish Times today, he takes no prisoners in his analysis of the Government response to the banking crisis.

Full article

Adapting the old line about what's good for General Motors being good for America, he says the FF view that what was good for Anglo Irish Bank was good for Ireland has brought the country's banking system to its knees. The cure the Government has chosen will make things worse.

He says that without immediate Government funding, bank lending will fall by three-quarters, driving most companies in Ireland out of existence.

Instead of funding the four worthwhile banks that provide households and ordinary businesses with credit, he says 'the Government chose to persevere with a scheme that serves only to keep zombie banks going while starving their customers of credit; and helps nobody apart from some developers and bankers.'

He castigates the choice, saying that:

'... it guaranteed the liabilities of even the worst two "banks" without checking what, if anything, their assets are worth. By doing this, the Government has put the taxpayer at risk of substantial losses, and compromised its ability to provide adequate capital to the banks that need to be saved.

These points are so obvious that it is almost embarrassing to repeat them. Even with the strikingly poor quality of economic advice available to it, the Government knew what should be done, but decided to do otherwise.'


To see why they made this decision, click on the link.
All due respect to Mr Kelly but I think what he's stating was/is pretty obvious to anyone who engage in basic calculations and has a working knowledge of human nature

- esp where money is involved.

The symbiotic relationship between business and politics in this State has dicatated the response of messers Biffo & Lenny to the mess their Party played a large part in creating.
 

He3

Moderator
Joined
Oct 1, 2008
Messages
17,094
He makes those very points himself Catalpa. They are so obvious, he says, it is almost embarrassing to repeat them.

Question on reading his article that will occur to self-employed people due to pay billions in income tax next week to this ''Government'': why give irresponsible and corrupt people that money, if it risks putting your business in jeopardy, at the mercy of banks that can no longer extend the basic overdraft facilities you need to smooth out your cash flow?
 
Last edited:

draiocht23

Well-known member
Joined
Aug 24, 2007
Messages
308
He makes that very point himself Catalpa. So obvious, he says, it is almost embarrassing to repeat them.

Q. on reading his article that will occur to self-employed people due to pay billions in income tax next week to this ''Government'': why give irresponsible and corrupt people the money, if it risks putting your business in jeopardy, at the mercy of banks that can no longer extend the basic overdraft facilities you need to smooth out your cash flow?
Which reminds me of an appearance by John Browne (former Jnr Minister who recently got €53,000 disappointment money when he got the boot) on SE radio on budget day.

When asked if he would be taking a 10% pay cut, and following the lead of the cabinet, he said no because he wouldn't trust the Department of Finance! Apparently, he gave €6,000 to local charity this year and that's a far better way to contribute...

If he wasn't such an archetypal gombeen plámasar, it'd be funny.
 

macdarawhitfield

Active member
Joined
May 8, 2008
Messages
193
According to the economists of the 'free market' school the government should just stop interfering and let the market return to equilibrium at its own pace.Thus bad,stupid,greedy incompetent bankers will,in time, be replaced by nice,honest ,intelligent ones.The 6 large banks will collapse,of course,but Adam Smith's 'hidden hand' will see new banks arise,led by demand.

In this way the Pension fund would remain sacrosanct.We just have to tough it out ,that's all.Hundreds of firms will fold but the survivors will emerge - leaner ,fitter ready to take on the world.Are ye with me lads?
 

SPN

Well-known member
Joined
Feb 2, 2004
Messages
16,866
There is something iffy about that article, but I haven't put my finger on it yet. Something just doesn't sit right.



McWilliams had a three part plan, and parts one and two have been executed - the guarantee, and the analysis of the Banks' loan books (which has been ongoing for the last couple of weeks).


The guarantee was critical at the time because it stopped the Hedge Funds dead in their tracks - they weren't expecting that.

The problem with recapitalisation is going to have to be addressed at some stage, and the way they Government did it allows them to do it slowly, measuredly, and in the most effective way.

If they had recapitalised that week the Irish economy would have been taken out in one fell swoop by the Hedge funds.


The results of the review of the loan books will come out shortly, and they will surprise you ;)


..
.
 
Top