Why are the government getting involved in Anglo's debts?

[anewbeginning]

I made a post in another thread, but I think it needs a discussion on a new thread and I'd be interested to hear people's opinions on it.

Anglo Irish borrowed money from private institutions. These private institutions took risks, and these risks did not pay off. Anglo owes private institutions lots of money, because of mistakes Anglo Irish made.

The real question is then, why are the government intervening and promising to pay back all the loans to private institutions who took risks and those risks didn't pay off? Those institutions made a gamble which turned sour. If you play roulette and the ball doesn't fall as you expected, in no casino will you get your losses back.

The government are acting stupidly by promising to pay back to Anglo's creditors money lent to Anglo.

As for people not lending to us again, sure the cost of borrowing would rise, but that would be a better case scenario than paying back billions in bad loans.

Anglo made mistakes, should have been allowed go under, deposits should have been garaunteed and Anglo's creditors should have been looked after through the court's system.

I have never seen a government bail out any company that goes bust and owes money to creditors.

And Lenihans suggestion that Anglo is of systematic importance is absolute nonsense and shows he doesn't have a clue about what he is doing.

He is committing the Irish taxpayer to paying back perhaps 60 billion of Anglo's loans because of mistakes made by the Anglo bankers. This is absolutely crazy!

We may end up paying out 60 billion to keep Anglo afloat. We should have let it sink and let the creditors get what they could. Instead we have rewarded all the dodgy developers who took out several loans on single properties and all the dodgy bankers who lent out massive amounts of money against worthless properties.

I also have a feeling that when Lenihan and Cowen on reflection see they have made a big mistake, a mistake which will end up costing the country billions, they won't change course because it would look bad on them and Fianna Fail and they might lose credibility. We have a minster for finance and a taoiseach who don't know what they are doing and their mistakes are costing us tens of billions.

[Swami]

I'm with you on the madness and plain "wrongness" of saving private investors from the consequences of their business decisions.

I can tell you what Brian Lenihan said about it on 'The Week in Politics' last Sunday (24/5/09). He told Richard Bruton that Ireland cannot allow the bond-holders of Anglo Irish Bank to take any of the pain of its collapse, because the same people also hold Irish Government bonds.

What does that mean? Basically, we have to pay out on a losing ticket on Anglo, just because the same punters have a winning ticket on Ireland. It's a form of madness.

For me, the other big unanswered question is: Who are these international bond-holders? They seem to have Ireland over a barrel to cover any investment losses they make. Who has the power to do that? Does anybody know?

[Skint]

Doesn't matter who the bondholders are, companies owened by a national government DO NOT default. If we didn't honor Anglo's debts it would be curtains for this country. Good luck when the NTMA tries to place the next round of bonds in that situation. Alot of people have questions to answer but they won't PAYE workers like me just have to suck it up and say wow that's a week's shoping money you have taxed me, hopefully after the next budget it's not two weeks...

[Swami]

Doesn't matter who the bondholders are...

I gotta tell you, it matters to me. My grandfather and my uncles fought and died so that we could own our own country. We've spent the last ninety and odd years working in it, and now it turns out we still don't own it. The international bond holders own it, and we're only paying rent to them. How did that happen?

[SamVimesBoots]

Anglo was the nexus of the FF/Builder corruption during the Ahern era.

If Anglo was allowed to go bust, then there would be a court-appointed reciever who would have the power to go through the books in detail.

Such an examination of Anglo's books would show exactly who was benefiting and how much money was really going to various connected FFers. We're talking billions here, many many billions.

So Anglo must be nationalised and the little people (the taxpayer) must pay to make up the hole in the balance sheet, and so we can keep all the real shenanigans out of the public eye and secret for another few decades.

It's as simple as that, and any other explanation is pure waffle. The State has been hijacked by a criminal cabal. It's all you need to know, and all you need to get your head around. Once you accept that ugly truth, everything else makes perfect sense.

[JCSkinner]

Mr Boots is on the money.
Whatever happened to the free market capitalism all these people espoused? Anglo, and probably AIB and ILP too, should have been let go to the wall if that's where they were going.
The golden circle have presented the taxpayer with their bill. We should refuse to pay - it's their bill not ours.

[seenitallb4]

Mr Boots is on the money.
Whatever happened to the free market capitalism all these people espoused? Anglo, and probably AIB and ILP too, should have been let go to the wall if that's where they were going.
The golden circle have presented the taxpayer with their bill. We should refuse to pay - it's their bill not ours.

Keynes is back, it would seem.

[SamVimesBoots]

Keynes is back, it would seem.

Nothing to do with Keynes - it's the old mantra of the rich and connected - "Privatise the profits, socialise the losses!"

Though the FF/PD governments of the last 12 years claimed to be "pro-enterprise" they were anything but. They wanted the State to rig the market - any market - in favour of the incumbants and in favour of the entrenched vested interests, in order to extract windfall profits at the expense of the citizen.

AAnd when it all goes wrong, who pays? Yup, us lowly peasants.

FF/PD ideology was never about enterprise or free markets. It was all about rigged markets, connected oligarchies, scamming, industrial and regulatory capture, and making sure the taxpayer picked up the tab for any losses.

If the Governments of Ahern had had the slightest interest in free enterprise and competition and entrepreneurialism then right now we'd have a strong effective indiginous export sector to help us through the recession. What do we really have? Cartels relying on State collusion to push up costs and profit margins in favour of the connected, and a vast FDI sector that relies on tax scams to survive.

Pro-enterprise me hole. FF/PD were all about State welfare - but welfare for the rich.

[goosebump]

I don't know why this banking lark is so hard to understand. This has nothing to do with 'loans to private institutions'.

The issue in all of these banks is the money that is on deposit ie if Joe and Josephine Public turn up in the morning and want to empty their account, Anglo must have the cash to fulfil this. The only way they can guarnatee this is to continue trading as a bank.

The alternative is that we allow Anglo to fail, wherein Joe and Josephine get shafted, wherein their is a run on every bank, wherein we all go down together.

[JCSkinner]

I don't know why this banking lark is so hard to understand. This has nothing to do with 'loans to private institutions'.

The issue in all of these banks is the money that is on deposit ie if Joe and Josephine Public turn up in the morning and want to empty their account, Anglo must have the cash to fulfil this. The only way they can guarnatee this is to continue trading as a bank.

The alternative is that we allow Anglo to fail, wherein Joe and Josephine get shafted, wherein their is a run on every bank, wherein we all go down together.

Like in Iceland, you mean? Only the people didn't go down there. They sacked the bankers, sacked the government.
Joe Soap doesn't have dealings with Anglo. It was a bank for the golden circle. I'm all for intervention in the case of BoI and maybe AIB too, up to and including nationalising.
But the Anglo deal was filthy, designed to protect those whose sharp practice would come to light in any other circumstances had it been allowed to go to the wall.
Instead it will bleed the state dry for years. We'll still all go down together, only in this scenario the golden circle get out alive, with their pensions and their dodgy cross-securitised loans and their nod-and-wink business practices.