Morgan Kelly on Bank Robbers

Carramore

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Morgan Kelly's Opinion piece in today's IT would make your hair stand on end. I was probably most frightened by the possibility he raised of employees looting a bank's assets by bringing personal guarantees home in their briefcases and negotiating their return to the borrowers, who presumably would be prepared to pay quite a few shekels to be rid of those nasty PG's. Can any of our banking contributors allay my fears by assuring me that this form of bank robbery is impossible?
 
I must say that it was a terrible piece of writing.

He suggested that the government would be better off burning €1.5billion instead of putting it into Anglo Irish Bank.

And when someone makes a comment like that, it destroys their credibility.

Nothing else in the article has any validity after a comment like that.

I am surprised that the Irish Times published it.

Brendan
 
I didn't read it but sounds like usual Morgan Kelly tripe. Is he really suggesting that all it takes is an employee to steal a bit of paper and personal guarantees on loans could be gotten rid of? Absurd
 
I thought he had a good point - as I understood him, putting € 1.5 billion into Anglo is just delaying the inevitable and prolonging the agony. Better to bite the bullet and accept the medicine as it will have to be taken in the end.

He is one of the few economists who has correctly read the last few years, IMHO.

A lot of money has already been taken by the senior management - in bonuses, loans. How much chance is there of Fitzpatrick's € 87 million being repaid ?
 
A lot of money has already been taken by the senior management - in bonuses, loans. How much chance is there of Fitzpatrick's € 87 million being repaid ?

Sources close to Fitzpatrick have said he will have no problem repaying the loans in full.
 
Morgan Kelly's Opinion piece in today's IT would make your hair stand on end. I was probably most frightened by the possibility he raised of employees looting a bank's assets by bringing personal guarantees home in their briefcases and negotiating their return to the borrowers, who presumably would be prepared to pay quite a few shekels to be rid of those nasty PG's. Can any of our banking contributors allay my fears by assuring me that this form of bank robbery is impossible?

I would imagine that this would be a fraudulent act. I'm no lawyer but if a court felt the customer was out to commit fraud be renegotiating the PG or if they felt that the customer should have known(reasonable person test) that this was a fraudulent act, then a court would rule in favour of the bank
 
He suggested that the government would be better off burning €1.5billion instead of putting it into Anglo Irish Bank.

I think that is a fair comment, as once the government starts pumping billions into Anglo it will be hard for them to admit they made a terrible mistake and they will throw more & more money at the problem.

The €1.5bn will disappear down the drain in no time, but at least if it was burnt instead Anglo would no longer exist. Better to call a halt and start running the banks loan book down right now. Yes, we will take a hit with the guarantee but better not to squander even more scarce resources keeping a worthless bank on life support.
 
Surely the €1.5 billion gets added to the assets of Anglo Irish and reduces the government's exposure under the guarantee?

If the money was not put in, Anglo would probably become insolvent and the government is obliged to put it in anyway.

Brendan
 
Giving the Government the benefit of the doubt maybe they want to keep Anglo's loan book alive for another two years until the state guarantee runs out in the hope that the world and Irish economy will be recovering by then.

If that doesn't happen they could let the guarantee expire for Anglo to avoid paying out the remaining €13.5 billion guessed by Morgan Kelly as the potential final liability.
 
I must say that it was a terrible piece of writing.

He suggested that the government would be better off burning €1.5billion instead of putting it into Anglo Irish Bank.

And when someone makes a comment like that, it destroys their credibility.

Nothing else in the article has any validity after a comment like that.

What he actually wrote was "For all it will achieve, the money might as well be piled up in St. Stephen's Green and incinerated." An over-enthusiastic sub-editor obviously provided the headline. He never suggests that burning the money would be a better option, I don't think that his argument is weakened in any way by his supposition that the government is effectively "incinerating" our money.
 
Does "incinerated" not mean burned?

He suggested that there is no point in putting money into Anglo which is nonsense.
 
Does "incinerated" not mean burned?

He suggested that there is no point in putting money into Anglo which is nonsense.

I'm not clear on why you think that Anglo will not require yet more and more cash injections and may not eventually default on a much larger sum as Kelly suggests?
 
You and Morgan miss the point completely.

The government has given a commitment to meet the liabilities of Anglo.

It does not matter if these liabilities are €3B or €20B - the government has to meet them.

The €1.5b is a downpayment. If you are committed to buying a new house for €200,000 which is bad value, you are still better paying the deposit than burning it.

Brendan
 
So why didn't they just buy Anglo outright and assume all the assets/liabilities?
No one knows what the losses will be but if they are spectacular as Kelly predicts, it may be politically and indeed financially impossible for the government to foot the bill. The current set up allows the government to withdraw and allow the bank to fail if the losses become extreme.
 
You and Morgan miss the point completely.

The government has given a commitment to meet the liabilities of Anglo.

It does not matter if these liabilities are €3B or €20B - the government has to meet them.

The €1.5b is a downpayment. If you are committed to buying a new house for €200,000 which is bad value, you are still better paying the deposit than burning it.

So, the Government has already agreed to throw good money after bad, and cannot row back on that decision, no matter what?

Kelly never suggested that burning money was an option.
 
I agree with the article, although the headline is a bit sensational.

When a share in a bank is trading for less than the cost of a plastic shopping bag, something is seriously wrong.

However the Government will continue to prop them up, if they don't their blanket guarantee means nothing and panic could ensue.
 
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