Saturday, August 29, 2009

Thursday, August 27, 2009

Tuesday, August 25, 2009

Irish Banks Have no Subprime Paper

Click on the Image for a sharper view

I seem to recall that Mr Cowen assured us that Irish banks were not exposed to any Subprime / toxic paper.Well the AIB 2009 Interim report would suggest otherwise.
I would really like to know what is buried in the nationalized Anglo Irish Bank

AIB Interim Report 2009
Warning this is a pdf file.

The details are on page 19.

Monday, August 24, 2009

Steve Keen

Saturday, August 22, 2009

Shadow Banking

Sunday, August 16, 2009

What is NAMA

Brian Carey in the Sunday times pretty much nails it on the head.

It is not available online so I am going to summarize it here.
NAMA is not a taxpayer bailout for the banks, or a Fianna Fail bailout for their builder buddies.

NAMA is the European Central Bank's carefully structured rescue of the Irish Economy.
The difference between Iceland and Ireland are four letters N.A.M.A.
This is Quantitative easing via the ECB.
When NAMA takes over the €90 billion of dud property loans from the banks. It will deposit in
return €60 billion of NAMA bonds with irish banks that can be exchanged in frankfurt for ECB funds. This is what bankers call liquidity. To us it is money injected into the economy.
Who will be the ultimate arbiter's of the pricing mechanism on the loans to be transferred to NAMA? Answer The ECB.

Saturday, August 15, 2009

A lesson from Iceland

Kaupthing's loan book, which was leaked on to the internet last week, shows that around one third, or €6bn (£5.1bn), of its €16bn corporate loan book was going to a small elite of men connected to the bank's owners and management.

Several investigations into Kaupthing centre on share ramping, where the bank would allegedly give loans with no interest or security in order to buy shares in that same bank – boosting the share price.

One particularly murky incident revolves around the acquisition of a 5pc stake in Kaupthing by a company called QFinance linked to Mohammed bin Khalifa Al-Thani, the Sheikh of Qatar. Several weeks before the banks collapsed, a press release stated that the transaction showed that "Kaupthing's position is strong and we believe in the bank's strategy and management."

Only after the bank collapsed several weeks later did it emerge that the Qatari investor "bought" the stake using a loan from Kaupthing itself and a holding company associated with one of its employees. The bank appears, in effect, to have been purchasing its own shares, which does not seem to be uncommon; investigators are also looking at a similar purchase of a 2.5pc stake in Kaupthing by London-based property entrepreneurs Moises and Mendi Gertner.

Officials have also questioned why loans to senior Kaupthing employees to buy shares in the bank were allegedly written off days before the collapse.

Companies connected to Exista, the Gudmundsson brothers' opaque investment vehicle that owned their stake in Kaupthing, received €1.86bn in loans. Their close business associate, Mr Tchenguiz, appears to have personally borrowed €1.74bn in loans to fund his private investments e_SEnD from stakes in Sainsburys to Mitchells & Butlers. Mr Tchenguiz is now being sued by Kaupthing's administration committee for the return of £643m.

Kevin Stanford, co-founder of the Karen Millen retail chain and one of Britain's wealthiest retailers, also got €519m in loans and was Kaupthing's fourth biggest shareholder. His company's purchase of credit default swaps in the bank is also under scrutiny, though there is no suggestion of wrongdoing his or his companies' part.

According to the leaked document, many of these loans carried little or no security and were listed as belonging to Kaupthing's "exception list" – seemingly those who received banking services on favourable terms.

The loan books of Landsbanki and Glitnir remain in the hands of their administration committees – to the frustration of many Icelanders who fear they may yield equally unusual surprises.


Friday, August 14, 2009

Easy Money

When the scheme faltered Law resorted to a number of rescue packages, many of which have their echoes 300 years later. One was for the bank to guarantee to buy shares in the Mississippi company at a set price (think of the various government asset-purchase schemes today). Then the company took over the bank (a rescue along the lines of Fannie Mae and Freddie Mac). Finally there were restrictions on the amount of gold and silver that could be owned (something America tried in the 1930s).

All these rules failed and the scheme collapsed. Law was exiled and died in poverty. The French state’s finances stayed weak, helping trigger the 1789 revolution. The idea of a “fiat” currency was perceived to be the essence of recklessness for another two centuries and the link between money and gold was not fully abandoned until the 1970s, when the Bretton Woods system expired.

Of course, the parallels with today are not exact. Law’s system took just four years to collapse; today’s fiat money regime has been running for nearly 40 years. The growth in money supply has been less excessive this time. Technological change and the entry of China into the world economy have generated growth rates beyond the dreams of 18th-century man. But one lesson from Law’s sorry tale endures: attempts to maintain asset prices above their fundamental value are eventually doomed to failure.

The Economist

Thursday, August 13, 2009

Wednesday, August 12, 2009

Monday, August 10, 2009

Saturday, August 8, 2009

Charlie's Holiday

As a crew of about a dozen young men tore away at the home, Radio Telefis Eireann reporter Charlie Bird marveled at the numerous vacant homes that dotted the neighborhood near Burgess and Pickford on the city's northwest side.
Bird and his crew are spending 2009 examining various issues affecting cities in America for a three-part documentary that will air in Ireland.
"It is unbelievable," Bird said as he surveyed the numerous burned and boarded up houses in the neighborhood. "I have never seen anything like this."
Motor City Blight Busters staff and volunteers were tearing down a house that caught fire recently and was too damaged to renovate, said the group's founder John George. The nonprofit has a $100,000 contract with the state to tear down 10 vacant buildings in the neighborhood. State housing department money is covering the work.
They have until the end of the year, but have razed nine buildings since June 1, George said. He expects to raze the last house by the end of the month.
Once the structures have been razed and hauled off, George said he plans to install a community garden and park in their place. This way the empty lots do not become a haven for illegal dumping or for stripping stolen cars, he said. Plans are still in flux.
"What it won't be is a magnet for crime," George said. "We are going to replace the negativity with something positive."
Bird said he hopes the images show his viewers what residents in the United States are up against and how they cope with such issues.
"We are telling people in Ireland what America in 2009 is all about," he said

Saturday, August 1, 2009

We are where we are

Well where exactly are we??

Nama is the new fantasy property game. Nearly all the usual players are rolling up their sleeves and joining in.
The pitch has been well watered to suit the establishment, not the taxpayer. It seems to have been seeded with magic mushrooms.
The mandarins of the Department of Finance love Nama; Brian Cowen loves it; the Financial Regulator loves it; the banks love it; accountants love it. They are all on the mushrooms.

And next month, the Nama game will be endorsed by the Dail and the Seanad. The majority of Ireland's oligarchs will line out to play the Nama fantasy game.
On Thursday evening -- as the Nama document was being launched -- all the interested parties were ecstatic. The mushrooms were working -- we will pay billions for assets which would fetch zero on the open market, assets that no one else wants.
Quite a mug's game, you might think. And you would be dead right.

It seems the Europeans never heard of the way we do these things in Ireland. We have invented a unique monopoly -- a fantasy monopoly, unheard of in the history of commerce. A monopoly that screws itself, not the customer; a monopoly that is programmed to make a loss. Our special monopoly pays too much, not too little.
Fine thoughts, but there is a small problem: there is no reason on God's earth for believing that property prices will rise even as high as the fantasy "long-term" prices to be paid by the taxpayer. They are equally likely to continue falling.

Not so, say the fantasists. The valuations will be "through the cycle" valuations, which is more mumbo-jumbo for pretending that prices will climb over time.
Every powerful property player was being swept along in the property fantasy game. All the banks were waiting for Nama to rescue them. They refused to force any developers to pay back any money. They failed to take them to court. Bankers and developers agreed a standoff. Bankers did not want their money back.
If the judge blinked at the plan he must have swallowed hard when he heard that part of Carroll's master strategy was to draw down an €8m loan from none other than Anglo Irish Bank. More fantastic still was the purpose of the loan: to complete the bankrupt bank's state-of-the-art new headquarters in Dublin's Docklands.

Activity at Anglo is at a standstill. Staff are twiddling their thumbs up at their Stephen's Green headquarters. In a short period of time the business of Anglo could be confined to the square footage of a telephone box.
Yet the men on the magic mushrooms are still pretending that a bankrupt bank should be lending millions to an insolvent builder for a headquarters they will never occupy.
On Friday afternoon Judge Peter Kelly refused the application for an examiner. The first sign of sanity was restored to the Nama game.

The Sindo