Still plenty of ifs and buts in determining final cost to taxpayer - The Irish Times - Wed, Sep 01, 2010
Simon Carswell notes that €19bn of the €23bn committed to Anglo is in the form of promissory notes (IOUs) rather than cash up front. He also notes the following:
"It is also notable that Anglo used some of the €10.3 billion in promissory notes it held at the end of June as collateral to draw funding of €11.6 billion from the Central Bank on a special loan."
My read on this is that Anglo borrowed money from the Central Bank (ie the State) and used an IOU from the Government (the State) as security.
As such, if Anglo defaulted on its loan from the Central Bank (and use the money to pay off some of its debts), the Government (the State) would owe the Central Bank (the State) €10.3bn.
Given that one arm of the State is lending to t'other, why not just call it quits?
I'm guessing that the Central Bank has to meet its liabilities, but where does the Central Bank get its funds from? It doesn't have depositors, or bondholders. Did the money it gave to Anglo just come from its reserves?