Complainer
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A liquidation would cost the State between €27 billion and €35 billion, he said, while running it down over 10 years would cost between €18 billion and €22 billion.
Can anyone explain this to me in simple terms;
From [broken link removed]
How could a liquidation cost the state €27 billion? If the State stops giving Anglo any more money from today, where does the €27 billion cost come from?
This had me scratching my head as well, but I think Sunny gives the answer. We have guaranteed Anglo's deposits and bonds, so liquidating Anglo only moves these massive liabilities over to us. And think about it, there is no way off this hook for as soon as it is intimated that the guarantee will not be renewed there would be a massive run on Anglo triggering a liquidation triggering the guarantees.Can anyone explain this to me in simple terms;
How could a liquidation cost the state €27 billion? If the State stops giving Anglo any more money from today, where does the €27 billion cost come from?
I don't think either of these courses work. The only people enjoying the guarantee are those whose loans/deposits mature before the guarantee expires. When these loans/deposits do mature they will simply move if the guarantee is not renewed. Similarly if the deposit guarantee is reduced to 100K that can only be done once the unlimited guarantee expires and the excess 100K depositors will simply withdraw their excess. In other words there is no way to get those who are currently protected by the guarantee to bear any losses - they can simply walk when they see any signs that this is the plan.Time to cut the bondholders out of the guarantee now, and to restore the threshold that was in place for the the deposit guarantee (€100k, iirc).
I didn't understand that bit myself. All in all this was a very interesting interview but it just begs for explanations of the bland quantification of the other "worse scenarios".But I don't see how running it down will cost us that much? Presumably they should not make any new loans and over the coming years run down the loan book and repay the deposits.
Brendan
Can you explain what soverign debt means in this case? Is this money Anglo has borrowed from Irish govt, or other govts or what?The way it was explained on Prime Time last night was that the bulk of the money owed by Anglo was depositers (which no one is suggesting we renege on) and sovriegn debt (which if we defaulted on, we would not be able to borrow money).
We cannot just accept that 'we are stuck with them'. We were sold a pig in a poke. Isn't there a general legal principal that if one side to a contract is found to have bee untruthful, then all bets are off?I can see how the liquidation would be a disaster. We have guaranteed its liabilities, so we are stuck with them.
Can you explain what soverign debt means in this case? Is this money Anglo has borrowed from Irish govt, or other govts or what?
Sorry Complainer, a lot of it over my head. I got the impression it was other central banks and if we defaulted on it, it would be extremely difficult to go back to this source of borrowing in the future.
Even Joan Burton was not suggesting default on this type of debt but rather try renegotiate it but was not specific enough.
I think depositors made up 34 billion and soverign debt was 32 billion.
But, if Anglo were liquidated, then it will NEVER need to go back to the source of the borrowing as it would no longer exist. This argument has no merit.
And it's not the job of the Irish taxpayer to pay for the lack of due diligence of some foreign central bank who's invested in a house of cards.
But, if Anglo were liquidated, then it will NEVER need to go back to the source of the borrowing as it would no longer exist. This argument has no merit.
And it's not the job of the Irish taxpayer to pay for the lack of due diligence of some foreign central bank who's invested in a house of cards.
Anglo cannot default on the debt while the guarantee is in place because it will mean that Ireland as a Soverign has defaulted on it's obligations. It's just not an option and no-one from any political party is seriously suggesting that this should happen.
I still think taxpayers best chance of recouping money is for some sort of business to be salvaged from the mess. A liquidation will not achieve this. Do that and we might as well burn the €4 billion we have already given as Morgan Kelly might say.
It would make only slightly more sense to try to salvage a business from Anglo than it would have been for the US authorities to try to salvage a business from Bernard Madoff's operation. Anglo was a pure property bubble speculation play. It grew from insignificance on the back of the property bubble and has no expertise in lending to proper wealth-creating enterprises or supporting innovation. It has no retail or payments arms like AIB or BOI which provide unspectacular but steady profits. It issued bonds (not difficult before the global credit crunch) and took deposits and gave the money to property developers and investors, that is all.I still think taxpayers best chance of recouping money is for some sort of business to be salvaged from the mess. A liquidation will not achieve this. Do that and we might as well burn the €4 billion we have already given as Morgan Kelly might say.
It would make only slightly more sense to try to salvage a business from Anglo than it would have been for the US authorities to try to salvage a business from Bernard Madoff's operation. Anglo was a pure property bubble speculation play. It grew from insignificance on the back of the property bubble and has no expertise in lending to proper wealth-creating enterprises or supporting innovation. It has no retail or payments arms like AIB or BOI which provide unspectacular but steady profits. It issued bonds (not difficult before the global credit crunch) and took deposits and gave the money to property developers and investors, that is all.
Anglo is simply a massive government liability with no expertise outside of property speculation; it has zero goodwill value. Particularly it has NO future as a going concern. The sooner this is generally accepted, then the sooner plans for minimizing the burden on the state can be considered. Anything else is wishful thinking. The sooner it is liquidated the better for everybody.
We have ball park figures from their last published consolidated balance sheets but that's not the point. I was responding to your suggestion that there was value for the state in trying to maintain Anglo as a going concern. The ability to generate profit is a different and separate issue to the state of the balance sheet.Without the figures being published, everybody is whistling in the dark about what the best option is. They should publish the breakdown of the costs and the assumptions of the various options and let people see for themselves.
It would make only slightly more sense to try to salvage a business from Anglo than it would have been for the US authorities to try to salvage a business from Bernard Madoff's operation. Anglo was a pure property bubble speculation play. It grew from insignificance on the back of the property bubble and has no expertise in lending to proper wealth-creating enterprises or supporting innovation. It has no retail or payments arms like AIB or BOI which provide unspectacular but steady profits. It issued bonds (not difficult before the global credit crunch) and took deposits and gave the money to property developers and investors, that is all.
Anglo is simply a massive government liability with no expertise outside of property speculation; it has zero goodwill value. Particularly it has NO future as a going concern. The sooner this is generally accepted, then the sooner plans for minimizing the burden on the state can be considered. Anything else is wishful thinking. The sooner it is liquidated the better for everybody.
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