The Truth Behind the Bailout

 

1

Virtually, all financial scandals follow the same pattern. First, there is the initial revealing of wrongdoing, then denial, next comes the mitigating claim that it was common practice and everyone was up to it. Finally, it emerges that the authorities knew all along but failed to act. The taxpayer generally ends up paying for such scandals, and nobody goes to jail. The financial institutions of today have become the tsunamis of fiscal catastrophe for all but the inner circle. These Draculas of pecuniary are the epicenter of greed and corruption and appear to have the freedom to bleed, people, banks and nation-states of their wealth.

The Irish debt crisis did not come about by government profligacy, but by the state vouching for the banks that financed the property developers.

Ireland could have guaranteed bank deposits and let private bondholders who invested in the banks take the losses. Instead, the government borrowed money from the ECB and the IMF to pay the bondholders, moving the losses and debt to its taxpayers.

11

Why did this happen?

The overriding reason is Europe’s biggest financial players held much of Ireland’s bank debt. These banks had written credit default swaps on Irish liabilities, which were draining them of ready money. Ultimately, other banks would not lend currency in exchange for Irish debt as collateral, except at steep discounts consequently a credit crunch resulting in a Bailout. The Irish bailout is not a sovereign bailout but a straightforward bank bailout, which has now become part of the sovereign indebtedness.

Mr. Lehnihan’s comment at the time was telling: Ireland’s bail out was a concession to its European Union friends. “The European Central Bank appeared to have arrived at a view that Ireland needed to be totally nailed down.” When asked if the ECB bounced Ireland into a bailout, Mr. Lenihan responds: “I would say that, yes.”

The ECB informed the government that we must not permit an Irish bank to go bankrupt (Read into this Anglo). What this means, in reality, is the bailout is a get out of jail card for Ireland’s banking counterparties. By this, I mean a backdoor bailout of invisible financial players who failed to manage their exposure to a shaky borrower (Anglo)

So who are these invisible financial players?

In the main, these were German banks (See Bond holders list below)

How strange that these staid and conservative bankers should lend to a crowd of shysters. One again one must ask why.

In the German domestic market, the banks behaved impeccably. However, the external dealings of these banks came from either a financial asylum or a home for retards. Whatever the case may be; they showered foreigners with cash. Their exposure to Ireland, Iceland and US sub prime market is in the region of 140billion euro. Their exposure at this stage to Greece, Italy, Spain, and Portugal remains unknown. Result German banks are sitting on nasty loss’s all over the place bar Germany.

111

Why did the Germans do this?

Let us just say the wide boys in Wall Street duped the Germans.

For example, Morgan Stanley designed highly convoluted credit-default swaps, all but certain to fail, so that their own proprietary dealers could bet against them. The main investors were the German finance houses.

When Goldman Sachs helped the New York hedge-fund manager John Paulson, design a bond to bet against—a bond that Paulson hoped would fail. The buyer on the other side was a German bank called IKB. IKB, along with another famous chump at the Wall Street casino called WestLB, a Dusseldorf based bank. The comment from Wall Street at the time as to who was buying all this crap was, “stupid Germans in Dusseldorf”

How honest and ethical is designing and marketing bonds to someone else that you yourself are going to bet against. In short, these people sold the Germans crap, and the Germans thought they were making lots of money.

Let us say we now have an understanding of why the Germans needed their money back.

No doubt, other people with vested interests also saw the Irish situation as an opportunity to milk cash out of the system.

1V

Let us take a quick look at the credit rating’s agencies.

World Economy Credit ratings help determines what banks/ countries must pay to borrow money on international markets. The lower the rating, the higher the interest rates they pay, and the more collateral they must offer. Those who benefit the most are investment management organizations for example, Goldman Sachs.

The relationship between the rating’s agencies and the banks is just too close for, example; the list of major shareholders in Standard and Poors reads as follows.

City group

Wells Fargo bank

Bank of America

JP Morgan Chase

Goldman Sachs

All the above can benefit from downgrades due to the higher interest rates they can charge.

How ethical is that the above should be major shareholders in a rating’s agency?

How much inside knowledge, do they get?

For instance, how many products did the likes of Goldman Sachs sell with high ratings, which were in fact utter rubbish?

The Johnnie Citizens of this world end up paying for this, and they should be furious.

V

Let us revert to the Irish situation and the role of government.

The full facts of the bailout are not yet common knowledge, but I guess when the truth is outed, it will, in simple terms read, “Pay the Anglo debts, or else no credit is available to you.” This I believe was the message delivered by the Troika to the Irish by that I mean Lenihan and Cowan. The governmental lost, failed badly in their efforts at negotiation, and as previously stated the taxpayer must endure the burden.

If Anglo went, the way of Lehman’s the only losers would have been shareholders and bondholders.

Instead, the state stepped in and nationalized a bank run by villains lending to property speculators. The Irish budget went from a surplus in 2007 to a deficit of 32% GDP in 2010. I believe this collapse to be a world record. It is worth noting no Government agencies have produced a road map with a time line to a full recovery, when the people no longer have to accept the bank burden of debt. They will not tell you the truth as it is too depressing. Alternatively, they are just, so befuddled by the situation they have no idea of what is happening.

It appears the role of Government these days is to bail out financial institution. In the meantime, they inform Johnny Citizen” “in the long run it’s all for your own good trust us” we are acting in your best interest. In reality, the authorities are acting in the interest of market speculators. Be aware that the word speculator conforms to someone who risks insolvency for the possibility of considerable profit.  Well, bond holders now days are no longer the speculators of old. There are no risks for these boys, when governments guarantee their debt at your expense. The legacy of this millstone is every child born in Ireland, is now bequeathed a huge debt to protect bondholders.  Who cares for the unemployed, the pensioners, education, hospital services, and cancer victims? Not your Government for they are too busy propping up the IMF and the ECB.

Do politicians have the courage to place the risk burden on those who make money? The answer to the question would appear to be, “No.”

This is the key political problem that nobody in government addresses. The solving of this issue will not happen until the politicians jump from the well-lined pockets of the bankers, to legislate, control, and correct the creation, supply, and circulation of money. The matter will have to be resolved eventually. It will boil down to the Government controlling the banks or the people rising in defiance of the banks and government.

Now where did the IRA hide those Armalites?

V1

The raising of money and the cost of borrowing

In the case of Ireland, most of the loans came from the IMF and the ECB. These people in turn raise the loans through investment banking businesses like Goldman Sachs and Morgan Stanley. As long as the economies of national governments remain ruled by the totalitarian managers of funding organizations people will suffer. These fiends of finance need feeding, placating, cosseting, happiness, contentment, and above all bonuses. You can be sure about one thing they will not contribute to your well-being. The interest they accrue will disappear down the black hole of non-contributing wealth.

The initial interest rate agreed for the bailout was a penal 6.7% representing an annual interest rate of about 5 billion. That is €5 billion less to spend on health, education, etc., so that the banks can be sheltered from their criminal mistakes, and the speculators who invested in them escape the pain of an investment gone wrong.

The complete revenue estimate for 2012 is 35.8 billion leaving a deficit 18.9 billion. The bailout interest alone represents approx 14 % of the entire government revenue (at the 6.7 rate)

The interest rate on the loans has lowered to between 4% and 3.5%. The €22.5 billion loan from the European Financial Stability Mechanism is currently at 2.59 per cent.

The repayment time scale increased from seven to 15 years. The Government expects further reductions. These cuts will in no way significantly ease the burden for the average person. It appears that Mr. Johnnie Citizen has been reborn into the role of forelock-tugging peasant. Will he ever have the courage the face up to the monetary ghouls?

Do we need another 1916? I guess as a nation, we are well versed in memorials and corpses may be that is what we need to inspire us.

V11

Anglo Irish Bank (Irish Bank Resolution Corporation).

The fact that the vultures still circle can mean only one thing.

The remains retain money for extraction by roundabout methods.

Anglo Irish primarily traded in business and commercial banking.

The majority of the bank’s credit transactions were to local builders and property speculators within the state.

A time line of dishonesty, lies, skullduggery, and incompetence would read something like this.

January 2007 – Quinn group increased their share holding in the Anglo Irish Bank to approximately 5%, for an equivalent value of €570 million – financed through the group’s equity, and through a deal with the Swiss based giant Credit Suisse.

Throughout 2007/8 Quinn increased his family’s stake to 15% in Anglo Irish Bank all on the back of loans.

2007- Consultants Oliver Wyman named Anglo Irish Bank as the best bank in the world with a piece of research published to coincide with the World Economic Forum in Davos, Switzerland.

Dec 2008 Chairman Sean Fitzpatrick, CEO David Drumm, and board member Lars Bradshaw, resign following the revelation of loan scandals.

2008-   Anglo Irish Bank dropped in value, and the bank had to find a buyer for Quinn’s shares. A group of clients known as the “Golden Circle” bought the shares, and, controversially, the bank lent them €451 million to buy them. As I understand it, the €451 million remains outstanding, and it may never be repaid. Consequently, the taxpayer picks up the tab.

2009 – Merrill Lynch, after receiving a fee of over US$11 million, stated that the bank was “financially sound. This statement came out exactly 11 days prior to nationalization.

13 January 2009, opposition party TD George Lee highlighted the potential exposure of the taxpayer to the failure of Education Media and Publishing Group (EMPG), the holding company of Houghton Mifflin Harcourt. Anglo Irish Bank lent the money to the shareholders of EMPG. Irish shareholders received zilch from their investments.

15 January 2009 the Irish government announced it had taken control of the bank.

16 January 2009, the Taoiseach Brian Cowen stated that it was “Business as usual” at Anglo Irish Bank and that the bank was solvent.

Nov 2009 Anglo Irish Bank and its Delaware subsidiary, Mainland Ventures Corporation sued by 21 Irish-based private investors for $23 million dollars. The investors are alleging fraudulent and/or reckless concealment and/or misrepresentation by the bank.

18 March 2010: Former Chairman Sean Fitzpatrick arrested for fraud but released.

30 March 2010- High court appointed provisional administrators to Quinn Insurance. At the time, Quinn had approximately 2.5 billion in loans from Anglo Irish.

Aug 2010: A letter, which the Central Bank of Ireland received concerning the legality of the loans by the Building Society to Sean Fitzpatrick, had gone missing.

March 2011: – For the year 2010, Anglo Irish Bank announced a €17.7 billion loss, breaking its own record for the highest corporate loss in Irish history.

October 2011 Anglo Irish Bank renamed as the Irish Bank Resolution Corporation

January 2012 The High Court discovered that only 11 Gardai are investigating the sinister goings-on at Anglo.

16th Jan 2012 Quinn declared bankrupt and may eventually face jail. The state are unlikely to get the money back owed to Anglo. You the Citizen will pay

How honest and well informed are the above people- judge for yourself.

V111

The Roll and the links to Goldman Sachs In relation to Ireland and Europe

Goldman Sachs Asset Management International, London, listed as a bondholder in Anglo Irish.

Goldman Sachs retained by the National Treasury Management Agency (Ntma)

Goldman Sachs appointed as an advisor to NAMA.

Written Answers: Consultancy Contracts Tuesday, 12 July 2011 Dáil Éireann Debate

Deputy Peter Mathews asked the Minister for Finance for details. The response…”The National Treasury Management Agency (NTMA) appointed Goldman Sachs International, following a competitive tender process involving a number of advisory firms, as advisors as part of its Banking Unit’s involvement in overseeing the capital raising exercise of the four financial institutions (Allied Irish Bank, Bank of Ireland, EBS and Irish Life and Permanent. Fees of up to € 7.8m may be payable to Goldman Sachs depending on completion of transactions and performance.”

In 2010-, NAMA appointed Mr. Emmett a former head of European property financing at Goldman Sachs. His role involved the provision of working capital and other loans to clients of Nama, primarily to complete viable projects.

The tentacles of Goldman Sachs really come to prominence in 2010. Whilst working on behalf of the Irish Government advising NAMA on its dealings with the Anglo Irish Bank which at that time was planning on buying the Quinn Insurance Group. Quinn owed Anglo Irish Bank €2.7 billion. Anglo Irish believed the acquisition of Quinn was the best way to recoup that cash. While all this was taking place unbelievably Goldman Sachs’ bond traders were actively buying up discounted Quinn Group bonds on behalf of its clients. (Perhaps knowing they would get full value)

A spokesperson: “All investment banks have Chinese’s walls in place to avoid and manage potential conflicts of interest [in general],” she added. “We are highly confident of the effectiveness of our Chinese walls.” The documented history of investment bankers telling outright lies is well known.

Talk about a conflict of interest and we, the people allow this to happen.

To summarize

Goldman Sachs are bondholders in Anglo Irish Bank.

Advisors to NAMA

Advisors to NTMA

Purchasers of Quinn’s bonds

There is a money sucking Dracula’s element to all of this, and your dear taxpayers pay for all of it.

1X

The Goldman Sachs old boy’s network

In 2010-, NAMA appointed Mr. Emmett a former head of European property financing at Goldman Sachs. His role involved the provision of working capital and other loans to clients of Nama, primarily to complete viable projects.

One wonders if this appointee passed on valuable information to old friends and acquaintances.

Mario Draghi: President of the European Central Bank Draghi was a former vice Chairman and Managing Director of Goldman Sachs International.

Whose interest did he represent when it came to dealing with Ireland?

Peter Sutherland: yes our very own, Chairman, Goldman Sachs International. He is also on the steering committee of the Bilderberg Group. What influence did he have a government level and the awarding of contracts?

Mario Monti Prime Minister of Italy prior to taking office was a senior international advisor* to Goldman Sachs and a prominent member of the Bilderberg group.

Antonio Borges: Between 2000 and 2008 serves as Vice Chairman of the Board of Directors of Goldman Sachs International in London. In 2010, Borges appointed Director of European Department of the International Monetary Fund. He recently resigned under strange circumstances.

Otmar Issing: a German economist, president of the Center for Financial Studies (Goethe University Frankfurt) and former member of the board of the Deutsche Bundesbank (1990–1998) and of the Executive Board of the European Central Bank (1998–2006). He acts as an advisor for Goldman Sachs.

Robert Bruce Zoellick: President of the World Bank July 1, 2007 to June 30, 2012.  Previously, Vice Chairman, International of the Goldman Sachs Group, and a Managing Director and Chairman of Goldman Sachs’ Board of International Advisors

Dr Lucas Papademos Prime Minister of Greece from 2011 to 2012 ran the central bank of Greece when controversial derivatives deals with Goldman Sachs enabled Greece to hide the size of its debt.

Petros Christodoulos is the person now responsible for managing Greek debt. He is an ex-Goldman Sachs’s trader.

The role of Goldman Sachs in Greek bonds is I believe under investigation.

To mind this all begins to look very dodgy.

Who holds the real power in Europe? Is it, the politicians or the financiers?

What we do know is the rabid forces of capitalism are bleeding the citizens dry. Their rapacious lust for profit has pillaged our nation, destroyed our lives, and laid low the life support machines of health and education. We are also familiar with the fact that we have…

Corrupt politicians

Corrupt bankers

Corrupt corporations

Corrupt regulators

Corrupt rating’s agencies

My gut feeling is to blow the lot of them up; now just where did the “IRA” hide that semtex. Maybe I am a tat factitious

For all the wrongs, scandals, criminal behavior listed above I can tell you one thing. Idealistic ideology is not the answer. All that is required is a little practical common sense in the form of legalization to control the finance houses and this is the least weshould be looking for.

*advisor to Goldman Sachs = two dozen-strong international advisers act as informal lobbyists for its interests with the politicians that regulate its work.

They have a team of about 24 prominent people acting as lobbyists to safeguard their interests. The investment bank’s alumni manipulate the corridors of power in almost every European nation since the current economic crises began. One may also say ditto for the USA.

List of Bond Holders

Sources of info

Guido Fawkes, Irish Times, Irish Independent,Matt Taibbi,RTE

 

  1. I saw no mention of FHA loans causing the housing market crash or how that caused banks to try and regain losses by selling government backed securities.

  2. Desmond O'Connor

    Is there any proof that the €9 billion the Pillar banks received from the taxpayer was to be specifically used for writing down mortgage debt?
    Were such media reports of this, at the time, wrong? Instead they seem prepared to use these funds to make provision for the losses that ensue from selling repossessed properties at knock-down prices to foreign investors.
    I as a taxpayer regard this as a misuse of my money, as in effect, they received an illegal subsidy which they have used to shore up their balance sheet, thereby giving themselves an unfair competitive advantage over foreign headquartered banks whose rapid exodus from Ireland means these Pillar banks have no fear of loosing market share,due to a cosy duopoly developing from this protectionism.
    Could the Irish State be liable for a punitive EU fine for distorting competition in the Irish banking market?

  3. Thanks, you’ve some interesting and thought provoking research there. Hope you do a follow up on the even more secretive NAMA.

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