Irish Times - "Is it time to increase protection on savings?"

TomEdison said:
The whole point of incorporation is that a bank (or any other corporation) is a separate entity from its shareholders.

If the bank really means the shareholders, then the shareholders were bailed out; the massive, massive amounts which, as the bank, they owed to depositors, bondholders and other creditors were cleared by the taxpayer, without the shareholders having to put their hands in their pockets for the purpose.
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You take a completely legalistic point of view - "some separate legal entity was bailed out". It's meaningless from any practical point of view but it's legally correct.

Then you say that the " shareholders ... owed depositors".

You can't have it both ways. The shareholders owed nothing to depositors.

Shareholders lost all their money. The depositors lost nothing.

The state's intervention had no impact on the shareholders.
Without the state's intervention, the depositors would have lost some or most of their money.

So tell me again, whom did the state bail out?
 
Brendan Burgess said:
You can't have it both ways. The shareholders owed nothing to depositors.
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My point is that you can't have it both ways. If the shareholders owed nothing to the depositors then they are clearly not the bank — not in a "completely legalistic" sense but in a real, substantial, actual and very-important-to-the-shareholders-themselves sense.
Brendan Burgess said:
So tell me again, whom did the state bail out?
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Again, the banks. That's why they're still around.
 
OK Tom, let me frame it differently.

The "banks" whatever that means were bailed out by the taxpayers.

Who benefitted?
 
redstar said:
As many depositors were also taxpayers, didn't they bail themselves out..?
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I was not a depositor. I was a taxpayer. So I bailed out the depositors.

You had €200k on deposit. You paid €20k tax that year. Your tax was used for all your other services.
 
People in the know, How much was in deposit AIB Bank of Ireland TSB When the state bailed them out, Any idea how much on Deposit was held by People resident in Ireland,
Posters need to Quote figures for Irish resident held deposits in the bailed out Banks against the money put in by the state,
I find it hard to understand how any poster can argue weather a deposit holder or who weren't direct depositors Did not benefit from the Bank Bailout,
Brendan Burgess said:
Who benefitted?
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Direct depositors, taxpayers, and those who weren't direct depositors, all benefited by the bank bailout
The Bailout was to protect the financial system and the economy as a whole, everyone benefited even those who weren't directly involved in banking transactions.
In my own case If there were no bailout I am pretty sure I would be out of a job,
The bail out benefited my Wife and Children Who held no deposit in any of the bailed out Banks,
 
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The state was correct to bailout the depositors in Bank of Ireland and AIB. They are systemic banks. And it did not cost much at the end of the day.

The state was wrong to bail out Anglo and Irish Nationwide.

It was a closer call for ptsb and EBS
 
Brendan Burgess said:
The state was correct to bailout the depositors in Bank of Ireland and AIB. They are systemic banks. And it did not cost much at the end of the day.

The state was wrong to bail out Anglo and Irish Nationwide.

It was a closer call for ptsb and EBS
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Should retail investors have been expected to do their own risk assessment of the business models of deposit-taking institutions?

You or I might be qualified but 99% of people are not and never will be.
 
I suspect Anglo and Irish Nationwide problem started after AIB Bank of Ireland and PTSB over inflated House Prices by Giving people Loans For New homes Including Furnishing and in Quite a few cases 2 new cars in the Driveway all under a home loan Mortgage,
 
Dr Strangelove said:
Should retail investors have been expected to do their own risk assessment of the business models of deposit-taking institutions?

You or I might be qualified but 99% of people are not and never will be.
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People knew at the time that deposits had a guarantee up to €20,000.

Many people did not trust banks and put their money in the Post Office where the interest rate was a lot lower.

Some people put their money in Anglo and the Irish Nationwide because they were getting higher rates.

No need to do a risk assessment. It was factored into the price.
 
I know that Anglo and Irish Nationwide would not have lasted.
That is the point.
They should have been allowed to fail.
And the depositors should have been guaranteed up to €20,000
The depositors and the bondholders with anything in excess of that should have become creditors and would have lost a significant part of their money.

Taxpayers with big mortgages should not have been paying extra tax and higher interest rates for years so that depositors in Anglo and Irish Nationwide would not lose out.
 
Big and small Mortgages and everything in between was Depositors saving on loan to borrowers Which Mortgage holders were paying back to Depositors over Time,
Shareholders on the other hand contributed nothing to provide Mortgages,

It was easy led Irish Shareholders who were not watching what was going on in the banks who bought or held away over priced shares,

Problems in the banks was well known if shareholders were Listening before bank shares fell,

You can make some allowances for Shareholders not living in Ireland,

Shareholders lost nothing the just Bought/held overpriced shares on the blind and finished up getting there true market value at the time,
Bank shares were declining all trough 2008
on 20 sept 2008 the day the deposit guaranteed scheme was increased from 20,000 to 100,000 ,
AIB shares were 5.76
Bank of Ireland was 2.66
It wasn't for nothing it was increased from 20,000 to 100,000 It was to stop The ordinary Joe Soap from Withdrawing there savings,

any shareholders who still held Shares after 20 sept 2008 has no one to blame but themselves,
Shareholders who were still buying shares after 20 sept 2008 must be expecting the state to bail them out

They should have known as much if not more than the people who were withdrawing there savings and Putting it in the post office for a lower return in interest on there savings,
 
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Brendan Burgess said:
I know that Anglo and Irish Nationwide would not have lasted.
That is the point.
They should have been allowed to fail.
And the depositors should have been guaranteed up to €20,000
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While Anglo and NWBS might not but have been systemically important their failure might have had knock on consequences.

If they went to the wall quietly and the average depositor didn't bat an eyelid that would have been fine. But let's not forget the queues round the block for people trying to get their northern rock money back. A collapse of 2 not insignificant deposit takers could easily have lead to a wider run.

Also to clarify the DGS covered 90% of deposit balances up to a limit of €20k. So everyone had some skin in the game. We all faced a potential loss of at least 10% if our deposits had been in a soon-to-fail bank.

FAQ - Deposit Guarantee Schemes

The following Irish banks and building societies are covered by the Irish Deposit Guarantee Scheme: N.B. It appears that the government is guaranteeing 100% of all deposits in Irish banks up to €100k, so this thread will need to be updated. AIB Bank of Ireland Ulster Bank First Active EBS...
www.askaboutmoney.com
 
Brendan Burgess said:
Then they made it a blanket guarantee which was completely wrong.
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Blanket 100,000 guarantee save the state from having to put lots of extra money into TSB AIB bank of Ireland,
I suspect the state would have to put in lots of cash to replace the Money Depositors would have withdrawn if left at 20,000,
 
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skrooge said:
While Anglo and NWBS might not but have been systemically important their failure might have had knock on consequences.
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Agree but the state guarantee of AIB and BoI would have prevented them from collapsing.

The bail out of the depositors in Anglo and INBS had huge knock on consequences for all taxpayers.
 
Brendan Burgess said:
Agree but the state guarantee of AIB and BoI would have prevented them from collapsing.
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More than likely the state Bail out of AIB and BoI would be off the radar because the state if the wanted to save them would have to replace all of Depositors who would no longer trust AIb and BoI with there savings ,
Can you imagine the cost to the state trying to borrow and service the money required to replace depositors withdrawing there life savings,
We would still be in bailout territory in 2025,
That is what I would call huge consequences for all taxpayers, ,
 
You don't understand the point.
If the state guaranteed the deposits in AIB and BoI, there would not have been a need for anyone to take their money out.
 
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