Can somebody with half a brain please explain to me exactly what the hell AIB were up to when they loaned this man over €500 million in [SIZE="3"]MARCH 2009[/SIZE] ?????
Maybe the knew SCAMA was coming ?
Judge shocked at AIB security when lending to Carroll firms - Courts, National News - Independent.ie
especially when you consider the comments from kelly regarding the security in place, a letter of undertaking from a solictors, there is something not right wrong about this banking / nama structure.Originally Posted by Digout
I don't think anyone outside AIB knows. Certainly it was stupidity of the highest order, possibly bordering on criminal (but thats for greater minds than mine to establish but thats my opinion).
As regards NAMA, clearly that doesn't make any sense - to guess they knew their share-price would bomb as a result of their loan-dealing, that AIB would shed over a thousand jobs, that the Irish financial system would almost collapse (except for Mssrs. Cowen & Lenihan, it would have) and that there was the political strength and will to push through a 'bad bank'.
Credit Default Swaps derivatives. For example Goldman Snakes could make more out of the bankruptcy of CIT Group from CDS than the 1 Billion they had actually invested. 21st century voodoo financing.
"No one rules if no one obeys" - Tao
CS, this doesn't make sense in the specific transaction mentioned here; there were no CDS on Carroll group companies (private companies after all)?
not sure what you are inferring or trying to drive at
“'retail deposit flight, I don't see that as a great danger. Ireland is an island” - Brian Lenihan - to hundreds of international investors
They would have got insured from some foreign sucker that didn't know the carnage ahead.CS, this doesn't make sense in the specific transaction mentioned here; there were no CDS on Carroll group companies (private companies after all)?
not sure what you are inferring or trying to drive at
A credit default swap (CDS) is a swap contract in which the buyer of the CDS makes a series of payments to the seller and, in exchange, receives a payoff if a credit instrument (typically a bond or loan) goes into default (fails to pay) [1]. Less commonly, the credit event that triggers the payoff can be a company undergoing restructuring, bankruptcy, or even just having its credit rating downgraded.
CDS contracts have been compared with insurance, because the buyer pays a premium and, in return, receives a sum of money if one of the events specified in the contract occurs. However, there are a number of differences between CDS and insurance, for example:
The buyer of a CDS does not need to own the underlying security or other form of credit exposure; in fact the buyer does not even have to suffer a loss from the default event.[2][3][4][5] In contrast, to purchase insurance, the insured is generally expected to have an insurable interest such as owning a debt obligation;
the seller need not be a regulated entity;
the seller is not required to maintain any reserves to pay off buyers, although major CDS dealers are subject to bank capital requirements;
insurers manage risk primarily by setting loss reserves based on the Law of large numbers, while dealers in CDS manage risk primarily by means of offsetting CDS (hedging) with other dealers and transactions in underlying bond markets;
in the United States CDS contracts are generally subject to mark to market accounting, introducing income statement and balance sheet volatility that would not be present in an insurance contract;
Hedge accounting may not be available under US Generally Accepted Accounting Principles (GAAP) unless the requirements of FAS 133 are met. In practice this rarely happens.
However the most important difference between CDS and Insurance is simply that an insurance contract provides an indemnity against the losses actually suffered by the policy holder, the CDS provides an equal payout to all holders, calculated using an agreed, market-wide method.
There are also important differences in the approaches used to pricing. The cost of insurance is based on actuarial analysis. CDSs are derivatives whose cost is determined using financial models and by arbitrage relationships with other credit market instruments such as loans and bonds from the same 'Reference Entity' to which the CDS contract refers.
Insurance contracts require the disclosure of all risks involved. CDSs have no such requirement, and, as we have seen in the recent past, many of the risks are unknown or unknowable. Most significantly, unlike insurance companies, sellers of CDSs are not required to maintain any capital reserves to guarantee payment of claims. In that respect, a CDS is insurance that insures nothing.
"No one rules if no one obeys" - Tao
I know what CDS are; we actively trade in them after all
There are and were no CDS on Carroll Group companies (or any other Irish developers). They are not PLCs.
“'retail deposit flight, I don't see that as a great danger. Ireland is an island” - Brian Lenihan - to hundreds of international investors
Kelly should be put in charge of the Banking inquiry. If he is not, its a cover up. He has a knowledge of what the Banks were up to already and will not have to learn on the job.
They would not dare
I don't trade in them. But they are used for commercial mortgaged backed securities such as the Zoe Group. I would have thought 500 Million Euro loan would have been too big and obvious for a CDO given that the loan was made over 6 months after the collapse of Lehman and Iceland.I know what CDS are; we actively trade in them after all
There are and were no CDS on Carroll Group companies (or any other Irish developers). They are not PLCs.
Why would AIB loan out 500 Million Euro without hedging it against a derivative? The dogs in the streets of Dublin at least knew the fate of Zoe group then. Goldman Snakes lent CIT Group 1 Billion knowing that they were f*cked but made over 1 Billion from the CDSs. It seemed logical to assume that was the method in AIB's madness. Why else?
Maybe they thought it would get into NAMA itself the worlds biggest CDO derivative, but was that not way too risky?
"No one rules if no one obeys" - Tao
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