Ireland Goes Bust

[Magda Hassan]

Ireland Goes Bust
By: Mike_Whitney

There was a bank run in Ireland on Wednesday. LCH Clearnet, a London based clearinghouse, surprised the markets by announcing it would increase margin requirements on Irish debt by 15 percent. That’s all it took to send investors fleeing for the exits. Yields on Irish bonds spiked sharply as banks tried to close positions or raise the capital needed to meet the new requirements. The Irish 10-year bond soared to 8.9 percent by day’s end, more than 6 percentage points higher than “risk free” German sovereign debt. The ECB will have to intervene. Ireland is on its way to default.

This is what a 21st century bank run looks like. Terms suddenly change in the repo market, where banks get their funding, and the whole system begins to teeter. It’s a structural problem in the so-called shadow banking system for which there’s no remedy. Conventional banks exchange bonds with shadow banks for short-term loans agreeing to repurchase (repo) them at a later date. But when investors get nervous about the solvency of the bank, the collateral gets a haircut which makes it more expensive to fund operations. That sends bond yields skyrocketing increasing the liklihood of default. In this case, the debt-overhang from a burst development bubble is bearing down on the Irish government threatening to bankrupt the country. Ireland is in dire straights. Here’s an excerpt from an article in this week’s Irish Times which sums it up:
“Until September, Ireland had the legal option of terminating the bank guarantee on the grounds that three of the guaranteed banks had withheld material information about their solvency, in direct breach of the 1971 Central Bank Act. The way would then have been open to pass legislation along the lines of the UK’s Bank Resolution Regime, to turn the roughly €75 billion of outstanding bank debt into shares in those banks, and so end the banking crisis at a stroke.
With the €55 billion repaid, the possibility of resolving the bank crisis by sharing costs with the bondholders is now water under the bridge. Instead of the unpleasant showdown with the European Central Bank that a bank resolution would have entailed, everyone is a winner. Or everyone who matters, at least.” (“If you thought the bank bailout was bad, wait until the mortgage defaults hit home”, Morgan Kelley, Irish Times)
So, the Irish government could have let the bankers and bondholders suffer the losses, but decided to bail them out and pass the debts along to the taxpayers instead. Sound familiar? Only, in this case, the obligations exceed the country’s ability to pay. Austerity measures alone will not fix the problem. Eventually, the debt will have to be restructured and the losses written down. Here’s another clip from Kelly’s article:
“As a taxpayer, what does a bailout bill of €70 billion mean? It means that every cent of income tax that you pay for the next two to three years will go to repay Anglo’s (bank) losses, every cent for the following two years will go on AIB, and every cent for the next year and a half on the others. In other words, the Irish State is insolvent: its liabilities far exceed any realistic means of repaying them….
Two things have delayed Ireland’s funeral. First, in anticipation of being booted out of bond markets, the Government built up a large pile of cash a few months ago, so that it can keep going until the New Year before it runs out of money. Although insolvent, Ireland is still liquid, for now.
Secondly, not wanting another Greek-style mess, the ECB has intervened to fund the Irish banks. Not only have Irish banks had to repay their maturing bonds, but they have been hemorrhaging funds in the inter-bank market, and the ECB has quietly stepped in with emergency funding to keep them going until it can make up its mind what to do.”
Ireland has enough cash to get through the middle of next year, but then what? The bad news has rekindled fears of contagion among the PIIGS. Greece is a basketcase and Portugal’s bond yields have spiked in recent weeks. Portugal’s 10-year bond hit 7.33% by Wednesday’s close. The euro plunged to $1.37 even though the Fed is trying to weaken the dollar by pumping another $600 billion into the financial system. Troubles on the periphery are escalating quickly dragging the 16-nation union into another crisis. This is from the Wall Street Journal:
“For a decade, Ireland was the EU’s superstar. A skilled work force, high productivity and low corporate taxes drew foreign investment. The Irish, once the poor of Europe, became richer than everyone but the Luxemburgers. Fatefully, they put their newfound wealth in property.
As the European Central Bank held interest rates low, Ireland saw easy credit for construction loans and mortgages. Developers turned docklands into office towers and sheep pastures into subdivisions. In 2006, builders put up 93,419 homes, three times the rate a decade earlier….
The party ended in 2008, when the property bubble popped and the global economy tipped into recession…by September, Irish banks were struggling to borrow quick cash for daily expenses. The government thought they faced a classic liquidity squeeze. Ireland—whose hands-off regulator had assigned just three examiners to two major banks—didn’t recognize the deeper problem: Banks had made too many bad loans, whose defaults would leave the lenders insolvent.” (“Ireland’s Fate Tied to Doomed Banks”, Charles Forelle and David Enrich, Wall Street Journal)
The Irish government hurriedly put together a new agency, the National Asset Management Agency (NAMA), to buy to toxic bank loans at steep discounts., but the banks books were in much worse condition than anyone realized, more than €70 billion in bad loans altogether. By absorbing the debts, the government is condemning its people to a decade of grinding poverty and a deficit that’s 32% of GDP, a record for any country in the EU.
On Thursday, at the G-20 conference in Seoul, European Commission President José Manuel Barroso, said that he was following developments in Ireland closely and that he would be ready to act if necessary. The EU has set up a €440bn bail-out fund (The European Financial Stability Fund) that can be activated in the event of an emergency, although critics say that the fund is more aspirational than a reality. The crisis in Ireland will test whether the countries that made commitments to the fund will keep-up their end of the bargain or not. If they refuse, the EU project will begin to splinter and break apart.
Ireland will surely need a bailout, although not just yet. For a while the ECB can maintain the illusion of solvency by funneling liquidity to banks via its emergency facilities. That way, bondholders in Germany and France get their pound of flesh before the ship begins to take on water. All the risk-takers and speculators will be “made whole” again before the full-force before the debts are shifted onto Irish workers. Here’s how Kelly sums it up:
“Ireland faced a painful choice between imposing a resolution on banks that were too big to save or becoming insolvent, and, for whatever reason, chose the latter. Sovereign nations get to make policy choices, and we are no longer a sovereign nation in any meaningful sense of that term.”
By Mike Whitney

[David Guyatt]

The crisis in Ireland will test whether the countries that made commitments to the fund will keep-up their end of the bargain or not. If they refuse, the EU project will begin to splinter and break apart.

Mmmm.

[Jan Klimkowski]

Economic flight from the (so called) developed world....

Ireland's young flee abroad as economic meltdown looms

Many young people are seeking to emigrate rather than face a life of hardship as the republic lurches towards financial collapse

David Sharrock in Dublin The Observer, Sunday 14 November 2010

Student Niamh Buffini works hard and plays hard. As Ireland's No 1 taekwondo martial arts practitioner – she is rated 12th in the world – her ambitions include winning Olympic gold for Ireland.

But by the end of this month her future will have been decided by forces not just beyond her control but seemingly those of her government also. Ireland is on the cusp of insolvency. Some economists argue that it already is.

Buffini will soon learn if her fees at the Institute of Technology in Tallaght, south Dublin, have climbed beyond her means. Her father is a self-employed builder, which has recently become a euphemism for "unemployed".

"My class size will have dropped by 50% by next year," Buffini said. "Even lecturers took part in the recent student protests over fees because society here is going to be left with very few educated people. My best friends have already left – they're doing bar work in Spain and Australia."

Last week was not a good week for Ireland. Speculation about a European Union-backed bailout pushed its borrowing costs to unprecedented heights.

At Buffini's college on Friday, the day began with a protest by construction workers who were supposed to have been working on a new wing. Their paymaster Michael McNamara – the country's premier construction firm – had been put into receivership under the weight of debts of €1.5bn (£1.27bn), leaving them jobless and out of pocket for work they had already completed.

So far the workers' demonstrations have remained largely peaceful. Indeed, many Tallaght students seemed shocked by the violence they witnessed in TV reports from London involving their British counterparts. But that may change.

Economists are sought-after celebrities in Ireland at the moment and none is more famous than Morgan Kelly. His doom-laden words are lapped up by a nation addicted to Celtic melancholy.

Kelly, of University College Dublin, was laughed at, scorned and even threatened when he correctly predicted, as long ago as 2007, that Ireland's property bubble was heading for a spectacular explosion.

Now he is forecasting mass mortgage defaults and an ugly popular uprising. The first stirrings are already visible, he says, with "anxiety giving way to the first upwellings of an inchoate rage and despair that will transform Irish politics along the lines of the Tea Party in America", giving rise to a new "hard-right, anti-Europe, anti-traveller party".

The fact that Kelly got it right last time means that his dire warnings are now being given serious consideration this time around, but so far there is no evidence that the Irish are turning into racist extremists.

Polish immigrants, whose arrival in Ireland less than a decade ago increased the workforce by an astonishing 20%, have left in orderly fashion and with no complaints about their treatment. More worrying is the trend for the young Irish to follow them abroad.

Mark Ward, president of Tallaght's student union, says that 1,250 students are leaving Ireland every month. One in five graduates is seeking work outside the country. The Union of Students in Ireland believes that 150,000 students will emigrate in the next five years.

Ward, a 26-year-old marketing graduate, said: "The government's to blame for bankrolling the banks who were lending to their property developer friends. They all thought the party would never end.

"Students shouldn't have to pay for the mistakes of the government and their developer pals. It's going to take years to sort this mess out and it won't be just my generation which will be blighted big time."

Is the social fabric of Ireland beginning to unravel? The Kingdom, one of the country's much-loved local papers, recently reported that nearly 200 Gaelic footballers and hurlers have left Kerry to play in Britain, Australia and the US in the first seven months of this year. The true figure is probably double that.

The charity Barnardo's said that children were asking it for food because there was not enough for them to eat at home. "Some of our services are being asked by children if they can take food home for later because there just isn't enough," said Carmel O'Donovan, a project co-ordinator with Barnardo's.

And it's not just the most vulnerable who are feeling the pinch. Greystones is a wealthy Wicklow seaside town whose most famous resident is Sean FitzPatrick, the former chairman of nationalised Anglo Irish Bank. Emer O'Brien, an interior designer, and her architect husband Killian are struggling to repay their mortgage.

"It is awful, a bit like waiting for a bomb to explode but simply not knowing when," she said. "I don't think anybody has any faith in any of the politicians to fix this problem. Over 70% of education and health spending goes on pay and pensions, so all the cuts in those departments are coming from front-line services.

"I hope I don't get sick in the coming months because there'll be nobody to tend to you in the hospitals. Of course, a lot of people would be heading across the Irish Sea or the Atlantic if only they could sell their houses, but we can't do that either. So basically we're stuck on the Titanic as it goes down."

Next month the government will deliver its latest austerity budget with the aim of slashing a further €15bn from public spending on top of the €14.5bn it has already been forced to cut. But Kelly has argued that the public sector cuts are "an exercise in futility" when compared with the €70bn bill for Ireland's bad banks. "What is the point of rearranging the spending deckchairs, when the iceberg of bank losses is going to sink us anyway?" he asked in the Irish Times last week.

Put at its starkest, for the next six to seven years, every cent of income tax paid by Irish citizens will go to cover the banks' losses.

At the Capuchin Friary in Smithfield sausage breakfasts are being served to Dublin's growing band of homeless and needy people. "There's new faces arriving every day. At first they're embarrassed to be here but we put them at their ease," one of the volunteers said.

Gerry Larkin, the drop-in centre's security manager, has noticed that occupants of the many neighbouring apartment blocks which were supposed to regenerate the city's down-at-heel north side are now taking their places in the queue for food parcels.

He said: "Some of them have got into trouble with their mortgages and they're asking me at the door: 'Any chance of coming in, can you give me even a bit of food for the kids?'

"We've gone from 150 breakfasts during the boom years to 450 now and another 700 coming in for lunch."

Five nights a week Niamh Buffini trains in her local martial arts club, nurturing her dream of winning gold for Ireland. "I'm always upbeat, but with my friends the chat about how bad things are is never ending.

"I'm an optimist by nature and I hope we can get out of this. The best I could say is I couldn't see it getting any worse."

http://www.guardian.co.uk/world/2010/nov...mic-crisis

[Jan Klimkowski]

Ordinary Europeans (incl Brits) are on the hook for Ireland's banker slush fund:

Ireland bailout: UK taxpayers could face £7bn bill

Scale of eurozone crisis underlined as emergency bailout of Ireland appears increasingly likely and EU statistics body says Greek budget deficit was even larger than thought

Comments (331) Julia Kollewe guardian.co.uk, Monday 15 November 2010 15.31 GMT

An emergency bailout of Ireland, which is looking increasingly likely today, could cost Britain billions of pounds.

Although Ireland continues to deny that it has asked for help, many analysts believe the country will have to tap a €60bn (£50bn) rescue fund set up by the European Union in May.

Under the terms of a deal agreed by Alistair Darling, the UK is liable for 13.6% of this fund. This means taxpayers could contribute as much as €8bn, depending on how the rescue package was structured.

The UK government declined to say how much an Irish rescue package could cost British taxpayers. "There has been no application [from the Irish government for emergency funding] and we won't speculate on it," said a spokesman for the Treasury this morning.

Miguel Ángel Fernández Ordóñez, the governor of the Bank of Spain, piled fresh pressure on Dublin today. "The situation in the markets in recent weeks has been very negative due in some way to the lack of a final decision by Ireland," said Ordóñez, who is also a member of the European Central Bank governing council.

"It's not me who should take a decision about Ireland, it's Ireland that should take the right decision at the right moment," he added.

A spokesman for Fine Gael, the opposition party, claimed today that the European Union had already intervened in the crisis. He predicted that a bailout will be hammered out during meetings between EU finance ministers this week.

Amid the uncertainty, the euro traded close to a seven-week low of 84.5p struck on Friday and the yield on Irish 10-year government bonds remained at crisis levels, trading at about 8.1%.

Fears that the financial crisis is entering a new phase also hit UK government debt, with British gilt futures tumbling against German bunds. The December gilt future was 26 basis points down at 122.11 – about 10 points ahead of the equivalent bund.

The scale of the eurozone debt crisis was underlined today when the EU statistics body Eurostat warned that Greece's budget deficit was even larger than thought. Eurostat reported that the Greek deficit in 2009 was 15.4% of its GDP, up from a previous estimate of 13.6%.

Having revised several years of data, Eurostat also said that Greece's deficit for the current year would be equal to 9.4% of GDP, missing the government's target of 7.8% of GDP.

http://www.guardian.co.uk/business/2010/...to-britain

The Icelandic people revolted against banker rape (and Gordon Brown's shameful use of anti-terror legislation).

It's surely time for some fighting Irish spirit.

[David Guyatt]

Dominoes anyone?

http://www.bbc.co.uk/news/business-11782356

18 November 2010 Last updated at 11:41

Irish Republic to get bail-out loan, says central bank

International officials are meeting in Dublin to discuss the Irish debt crisis
Continue reading the main story
Global Economy

Irish Central Bank governor Patrick Honohan has said he expects the Irish Republic to accept a "very substantial loan" as part of an EU-backed bail-out.

Mr Honohan told RTE radio he expected the loan to amount to "tens of billions" of euros.

The final decision will be up to the Irish government, which has yet to comment.

Mr Honohan's comments come as a team of international officials meet in Dublin for further talks on the debt crisis.

Representatives from the International Monetary Fund, the European Central Bank and the EU will meet the Irish government, which has denied that it has asked for aid.

'Game over'
Mr Honahan said that any loan would be substantial.

"It'll be a large loan because the purpose of the amount to be advanced or to be made available to be borrowed is to show that Ireland has sufficient firepower to deal with any concerns of the market. That's the purpose of it," he told RTE.

They say governments in financial crises go through a process much like the stages of grief. This week Ireland's ministers have been going through them at record speed”
Stephanie Flanders
Economics editor, BBC News

An EU handout would be seen as a big loss of face for the Republic - essentially meaning that its survival and solvency was reliant on Brussels.

But BBC business editor Robert Peston said that in terms of Irish resistance to a bail-out, this was "game over".

"The Irish government could not conceivably go against the advice of its [eurozone] partners and its central bank," he said.

Were it to do so, commercial customers of Irish banks would accelerate withdrawals which would be devastating, he said.

BBC Ireland correspondent Mark Simpson added that it could be "a fortnight until we see what these loans look like".

'Matter of sovereignty'
Meanwhile, French Finance Minister Christine Lagarde told the BBC it was for the Irish government to determine whether it needed a bail-out.

Ireland's Taoiseach and finance minister no longer have any room for manoeuvre (some would argue)”

"It's a matter of national sovereignty within a group that is clearly supportive, that has a joint common good which is our currency. I trust the Irish government to be extremely sensible," she told Radio 4's Today programme.

"The real issue is: will the economy stand on its feet? Will the euro stand under the current circumstances in Ireland? And that's what the Irish government really has to focus its attention on."

European stock markets rose in morning trading as investors' confidence grew that an Irish rescue package would emerge in the coming days.

Leading share indexes in London, Paris and Frankfurt were all up more than 1%.

Borrowing costs
Fears about the stability of Irish banks has led to a rise in the price the Irish government - which has pumped billions into its banks - pays to borrow money.

Other eurozone countries that are also perceived as weak are seeing their borrowing costs rise too.

[Magda Hassan]

Love how the UK government is wanting to spend billions in lending to Ireland (and bailing out Irish (foreign) banksters) despite the cuts going on at home. Now, why would they do that? And just how do the people feel about that when all their services are getting cut.

[David Guyatt]

Yep, my thoughts too.

And our Beloved Chancellor, Herr Osborne, has just turned down nearly £1.5 billion in additional tax revenue from the banking levy so as not to charge them more than £2.5 bn. Bless his cotton socks.

[Magda Hassan]

Yep, my thoughts too.

And our Beloved Chancellor, Herr Osborne, has just turned down nearly £1.5 billion in additional tax revenue from the banking levy so as not to charge them more than £2.5 bn. Bless his cotton socks.

To paraphrase Mandlescum "Haven't they suffered enough?" Poor banks.

[Keith Millea]

It's surely time for some fighting Irish spirit.

Mike Whitney thinks the same way.

It's time for Ireland to leave the EU and deliver a blow to the ill-conceived Uberstate. In fact, they should have left years ago.

November 18, 2010

When the Cure is Worse Than the Disease

Ireland's Suicide Pact with the EU

By MIKE WHITNEY
Ireland could be the next Lehman Brothers. That's what has the markets worried. If Irish leaders refuse to accept a bailout from the EU's new European Financial Stability Facility (EFSF), then bondholders will be forced to take haircuts on their investments which will leave banks in Germany and France short of capital. Bonds yields will rise sharply slowing activity in the credit markets. An Irish default will trigger hundreds of billions of dollars in credit default swaps (CDS), which will push weaker counterparties into bankruptcy and domino through the financial system. Contagion will spread to Portugal, Greece, Spain and Italy widening bond yields and forcing governments to increase their borrowing at the ECB. Business activity will sputter, unemployment will rise, and growth will shrink. It will be a second financial meltdown.

But no one believes that will happen. Most people think that Ireland will "take its medicine" and spare bondholders any losses. Irish leaders would rather accept a decade of EU-imposed austerity measures and the loss of sovereignty, then leave the euro and start fresh. It's disappointing. The euro is not designed to meet the needs of the smaller, less industrialized countries like Ireland. They need their own, flexible currency to ease the effects of cyclical downturns. But Irish leaders are still captivated by the idea of a united Europe. So they will cast aside the independence they earned through centuries of struggle for a pipedream and the elusive promise of prosperity.

At present, the Irish government is underwriting the toxic debts of its main banks. Unfortunately, those debts far exceed the revenues of the state. According to BBC's Robert Peston, the liabilities are "equivalent to an oppressive 700% of GDP when banking, public sector and private sector debts are added together." So far, the ECB has helped to keep Irish banks operating by providing 130 billion euros of emergency liquidity. But the wholesale markets no longer accept Irish debt as collateral and bond yields are in nosebleed territory. Irish politicians still maintain they have sufficient funds to get through the middle of next year, but that does not include funding for the banks. In fact, if the ECB stopped lending to the banks today, the system would crash overnight.

So the situation is tense and getting tenser. Even so, everyone expects Ireland's Finance Minister Brian Lenihan to cave in and accept a bailout. That will shift all the losses onto Irish taxpayers.
But what would happen if Lenihan balked and decided to restructure the debt instead of borrowing the money from the EFSF?

Journalist Robert Peston mulls-over that posibility in a recent article for the BBC. Here's an excerpt:

"Anglo Irish Bank and Allied Irish Banks, would probably have to be declared insolvent. And...many billions of euros that Irish taxpayers have already pumped into these banks would have to be written off....
What would then be triggered would be enormous payments by underwriters of credit default swaps (CDSs), the debt insurance contracts taken out by lenders and speculators. These payments would generate enormous losses for the financial institutions, including banks, which provided the CDS cover....
Even without the CDS loss multiplier, the impact of debt haircuts would be painful for British and international banks. According to the Bank for International Settlements, total lending of non-Irish banks to Irish banks is around $170bn, of which British banks provided $42bn, German banks provided $46bn, US banks $25bn and French banks $21bn." ("Ireland: How much punishment for British and international banks?", Robert Peston, BBC)

If Ireland quits the euro, all hell will break loose. The government will have to issue a new currency knowing that their debts will still be denominated in the higher priced euro. That will increase their debt-load. And, they'll be blocked from the raising capital via the bond markets until they've settled old claims. At best, it would take decade or more to dig out and to reestablish their credibility with the markets. On the other hand, they would have shed the euro straitjacket and reestablished their sovereignty. That's got to be worth something, but how much is it really worth?
Journalist Peter Oborne takes a look at the sovereignty issue in a recent article in the Telegraph. Here's an excerpt:

"It cannot be denied that Ireland has lost its status as a sovereign nation. Thanks to its disastrous entanglement with the euro, it has lost any independence in domestic, foreign and above all economic policy. The Irish nation is the creature of Brussels and the European Central Bank. The Irish prime minister has effectively been turned into a pro-consul dispatched to Dublin from Brussels. Brian Lenihan, the finance minister, is like an overseas manager of a Brussels subsidiary. For those of us who love Ireland, this is miserable and demeaning – but it needs to be borne in mind that a similar fate awaits a number of other European countries. Greece already does what it is told by the IMF and the ECB; the same will shortly apply to Portugal and in due course Spain." ("Ireland has lost its sovereignty and is now the creature of Brussels – thanks to the euro", Peter Oborne, Telegraph)

Oborne is not alone in thinking that Ireland is making a mistake by staying in the EU. The Telegraph's Ed West sees things the same way, but describes the EU/Ireland alliance in even darker terms, as a "suicide pact":

"Ireland has a historical attachment to continental Europe, as liberator from British rule, but it perhaps goes even deeper than that, back to its monks’ preservation of Western civilization during the Dark Ages. Ireland, more than most countries, feels itself profoundly European and its Catholicism was always a part of that. It is not entirely a coincidence that as Christianity faded Ireland adopted a replacement ideology – the dream of Brussels. Or the world’s biggest suicide pact, as I think of it....
Why spend 800 years trying to overthrow the Brits just to come under the sway of the EU? Having said that, almost no one in Ireland goes anywhere as far as UKIP or many Tories in opposing the EU altogether....
The European Project was and is a Utopian idea, based not on practical logic but on an idealistic vision, and it has only one aim in mind – total political union. Along the way its architects have consistently lied to the public about its aims, especially so in the creation of a single currency, which logic suggests requires political unification." ("Ireland's smug, Euro-loving elite has led their country to ruins – 'Little Englanders' saved ours", Ed West, Telegraph)

The financial crisis has stripped away much of the pretense surrounding the 16-country EU. No one is blabbing about ending wars and shared prosperity anymore. The focus has shifted to belt tightening for workers and golden parachutes for bankers and bondholders. In other words, elites are waging the same relentless class war they always have, only this time it's behind the facade of European unity. Does Ireland really want to be a part of that charade?

It's time for Ireland to leave the EU and deliver a blow to the ill-conceived Uberstate. In fact, they should have left years ago.

Mike Whitney lives in Washington state, He can be reached at fergiewhitney@msn.com

http://www.counterpunch.org/whitney11182010.html

[Magda Hassan]

• WhistleblowerIRL
  
  17 November 2010 9:06AM
  
  Ireland is having relinquish its hard-fought sovereignty as a result of a complete breakdown of banking law enforcement and repeated attempts to cover-up the ineptitude of the government and the regulator.
  I am the person referred to in Senator Norris' statement below. Norris is an independent senator with no party affiliation.
  I resigned from my position as the risk manager of a foreign bank operating in Dublin in 2007. We breached minimum liquidity requirement by BILLIONS of Euro on a regular basis. I made sure the Regulator was notified at least on one such occasion.
  <b>In his statement to the Irish Seanad (Senate) in February this year, Senator Norris concluded:
  "...I would like her [Deputy Brady] to take the message back to the Minister for Finance, Deputy Brian Lenihan, that there is ministerial responsibility in this matter.
  This is a grossly serious matter which has been reported to the Financial Regulator. A man has lost his job as a result. He honourably resigned. The degree of breach was 40 times the accepted margin. This is a disaster. If we are not prepared to face the issue and investigate it when it has been laid before the House, there is absolutely no hope for the financial system or its reputation worldwide.
  ... I have made very clear requests that this matter should be examined. How can the Financial Regulator investigate himself? He was in breach of his responsibility. That is the first point.... It is not too much to ask in this Parliament that this should happen. I want the process to start tonight.... ."
  </b>
  I have brought the matter to the attention of several senior TDs (MPs) and Senators at all the major political parties; alas, silence prevails.
  Whilst the catastrophic over-night breach that I had reported to the Regulator could have been theoretically remedied immediately, it is virtually impossible for it to have been a 'once-off' event, had we been abiding by the terms of our banking license. Chaos prevailed and by the time the Regulator's team arrived for a scheduled audit, they made sure that communication with the London consultancy whom I had brought-in to sort out the mess, was promptly cut-off. By then, I was no longer attending the office, but was on 'garden leave'.
  Although my position had been confirmed by the bank's board of directors only shortly before my resignation, and my resignation clearly stated that it was due to integrity issues at the bank, the Regulator's team made no attempt to contact me then, or at any time since then.
  The official protocol of Senator Norris' statement is available under 'Financial Regulation' (3rd from the end of the list) at:
  http://debates.oireachtas.ie/DDebate.asp...x=743#N743
  The workings of Ireland's Financial Regulator are best displayed in the following example from the actual regulation in relation to liquidity management. This is the link to the 2006 legislation that came into force in 2007, as seen in paragraph 9.4 Implementation (page 27 of pdf):
  http://www.financialregulator.ie/industr...20Risk.pdf
  
  Having failed completely at enforcing his own regulations, the Regulator then re-issued the above regulation in June 2009. Although the preamble refers to Banking Acts dating as far back as 1942, there is no reference to the fact that these liquidity requirements came into force in 2007. Here is the link to the 'new' regulation. The person who can find paragraph 9.4 in this document might also be able to find Ireland's missing billions (observe pages 28-29 of the pdf file):
  http://www.financialregulator.ie/industr...0Final.pdf
  Parag. 10 which stipulates possible imprisonment penalties for breach of liquidity regulations remains unchanged. Ireland is now on the verge of financial meltdown due the most severe liquidity crisis it has ever faced, yet not a single executive is in prison.
  The only specific response by official Dublin to Norris' allegations appeared in Ireland's Business Post:
  http://www.thepost.ie/story/eysncwauoj/
  The Regulator told the Post that his records differ; quelle surprise?
  PS to follow...
  
  

• WhistleblowerIRL
  
  17 November 2010 9:39AM
  
  PS to my comment above:
  1. In his reply to Senator Norris, Minister Lenihan referred to Ireland's reliance on ECB funding through-out the liquidity crisis, in return for which Ireland was offering full cooperation with Eurozone countries. However, although Minister Lenihan was provided by Senator Norris with the name of the offending bank, Minister Lenihan did not give any indication that the authorities in the central-European country in which the parent bank is domiciled were informed of this calamitous breach. Surely, had Minister Lenihan, or the Irish Regulator, informed their continental counterpart of this incident, they would have been eager to state that on record?
  Sachsen Landesbank and Hypo Real-Estate (Depfa) Bank both neared collapse on account of their mismanaged and poorly regulated Irish operations. LBBW Bank and the German taxpayer, respectively, will be paying for these fiascos for years to come. Would it not have been proper order for Minister Lenihan to ensure that the failings of this yet-to-be-named Dublin-domiciled bank, which is part of one of the largest banking groups in central Europe, to have been brought to the attention of its regulating authorities? Perhaps that would just have been too embarrassing; it was bad enough that an ex-governor of the Central Bank of Ireland sat on Depfa's board of directors when it was allegedly about to go under:
  http://www.irishtimes.com/newspaper/fina...27333.html
  <b>Derek Scally, The Irish Times correspondent to Berlin, wrote last August:
  "...as long as things weren’t broken, no one saw a need for a fix. An unholy trinity of events changed that, beginning in September 2007.
  After years of record returns, Saxony’s Sachsen LB state bank realised its Dublin-based subsidiaries had been gambling off the balance sheet and needed €17 billion overnight to save the entire group from collapse. A second pile of debts worth €600 million were subsequently uncovered
  .
  A whip-around from Germany’s banks saved the day, and a fellow state bank eventually bought the Saxon operation. But the near-disaster meant years of gossip about the IFSC [Irish Financial Services Centre, WhistleblowerIRL] in Germany turned into open speculation about the veracity of Dublin’s reputation as a serious financial marketplace.
  Then in June 2008 the Irish rejected the Lisbon Treaty, a document the average German had never read or heard of. No matter: the No was perceived here as a slap in the face from Irish ingrates to generous Germans, a view which, when fixed, was impossible to shift.
  Four months after Lisbon, Ireland was back in the German headlines after the IFSC-based Depfa bank, a subsidiary of Munich’s Hypo Real Estate (HRE) property lender, ran out of funding and required a package of emergency loans and guarantees that would eventually top €100 billion. Amid a huge political scandal in Germany, HRE was finally nationalised."
  </b>
  http://www.irishtimes.com/newspaper/fina...13254.html
  2. The Irish government has made sure that all of the so-called bank investigations, Regling & Honohan in the past, Nyberg in the present, will not go near the foreign banks operating in Dublin. These have been kept outside the remit of their mandates.
  Regling & Honohan did as they were told by Minister Lenihan and did not mention names of specific executives who drove the Irish banks into the ground. So you see, its no one's fault really.
  3. Minister Lenihan announced on RTE (the national tv station) that bankers were not being sent to prison because the Irish law does not provide for it. He rightfully counted on the fact that no one would remind him of paragraph 10 of the Liquidity Regulations (see my comment above). Where is the esteemed Law Society of Ireland? Why have the Law departments of Ireland's universities kept silent about this? could it be because they are all paid by the state?
  4. The only people who are paying the price for the crimes committed by bankers and the Regulator, with the blessing of the government, are my fellow Irish citizens - the young who are forced to leave the country by the thousands, the families who can not afford the next mortgage payment, and the elderly and infirm who await their misfortune with horror.
  
  5. A prominent member of one of the opposition parties recently said to me - "we can't afford the consequences of revealing this story, we already have enough to deal with if we come to power".
  
  Prime Minister Cowen was Minister of Finance when I resigned in 2007.
  Generations to come will judge our politicians harshly for allowing our country to be destroyed.
  
  

http://www.guardian.co.uk/business/2010/...ebt-crisis