BY Peter Mathews, Irish Times.
The Irish banking system is analogous to a household’s heating/plumbing system with inter-related boilers. The two big boilers are AIB and Bank of Ireland. There are other smaller boilers, including Anglo and Irish Nationwide, which got really badly damaged by using the wrong fuel and, as a result, they’re now broken beyond repair. The correct decision now is to “stop-cock” Anglo and Irish Nationwide out of the overall system, decommission them and wind them down, in an orderly way, over a period of five to seven years.
AIB and Bank of Ireland (BoI) are the economy’s two heavy duty “main boilers”. Both are now in highly unreliable condition, hissing and spluttering and stopping and starting unpredictably. Both need major refits and servicing. They are severely undercapitalised and poorly directed and managed. Yet both persist in pretending they’re in reasonable shape. They are not. And that’s absolutely the case for BoI, notwithstanding the insistent protests that it is okay because it has more or less raised the capital amount indicated as adequate last March.
But that was last March. And last March’s estimates for both AIB and BoI were not enough. BoI needs €6.5 billion, not €3.65 billion. And AIB needs €10 billion, not €7.4 billion.
The proof goes along the following lines. Gross loans in AIB listed for transfer to the National Asset Management Agency (Nama) totalled €24 billion. A (light) 40 per cent writedown on this figure amounts to €9.6 billion, which should be rounded at €10 billion. We note also that AIB will have to absorb large further losses on its mortgage loan book, its corporate loan book and its SME book and also on its personal lending portfolio. In addition, it may well have uncovered exposures on derivatives. For these reasons, and extensive relevant professional experience, I feel conscience bound to point out that AIB definitely needs recapitalisation now of not less than €10 billion. Furthermore, AIB should not be selling its stakes in Polish and US banks. They are the most profitable, cash-flowing parts of AIB. AIB is only doing this as a panic measure to try and plug its deepening capital shortfall.
BY Karl Whelan – ANGLO mutation
BY WILL HUTTON – SUPERCLASS
Every January, Zurich airport plays host to a peculiar migration when around 150 Gulfstream private jets touch down. The superclass is arriving for the annual World Economic Forum in Davos. If there were only a handful of rich who travelled this way a generation ago, now there are some 1,500 Gulfstreams in service, a symbol of the growth of this new international class of the powerful and rich.
A Gulfstream carries a mere eight passengers in extraordinary opulence; reclining leather armchairs, polished wood panelling and the latest high definition TV. They cost $45m each and $1.25m to service for each 500 hours in the air, so their buyers are, by definition, very rich. Over the past 20 years, Gulfstream sales have followed the booming fortunes of the superclass.
As former US deputy under-secretary of commerce for international trade David Rothkopf writes in his extraordinary new book Superclass, what matters most for these products of globalisation, who declare they have more in common with each other than the mortals 50,000 feet below, is time. They cannot afford, nor wish, to spend valuable hours in airport queues or planes held up by traffic control. The Gulfstream is the indispensable aid to moving around the world effortlessly and that movement, and the global access and influence that comes with it, is one of the characteristics of the members of the superclass .
Rothkopf counts 6,000 of them – CEOs of major corporations, partners in hedge fund and private equity companies, national and religious leaders, a sprinkling of global public intellectuals, military leaders and cultural figures. They control oil, money, intellectual property, technology and the media. Rupert Murdoch is a member, so is Edward Johnson who runs Fidelity Investments, the world’s largest mutual fund, as is Lakshmi Mittal who owns the world’s largest steel company.
BY VANITY FAIR – CREDIT BINGE ACROSS EUROPE