Economy Rigging 1

BSK log, 31.10.10 October 31, 2010

Filed under: Uncategorized — bashstreetkidjailbreak @ 2:32 pm

MAIN ITEM: Gene Kerrigan: The State wagons form a perfect circle – Gene Kerrigan, Columnists – Independent.ie

By Kerrigan in Sunday independent, a bulletin point dismantling of the Insider / elites agenda in controlling Irelands economy.

#conversation being conductd almost exclusively among ppl who will hardly b touched by recession.’ ~kerrigan

#The excuse is that “there is no alternative”, but there is. It would require an aggressive response that is beyond the imagining of the establishment. They literally cannot envisage a response that does not preserve the structural inequalities they enjoy. Or one that might require an aggressive response to those they supinely venerate, in the EU and the bond markets

#It is not in the interests of the money markets that a country that owes them money should go bankrupt — but that’s the risk the establishment is taking. And it’s why the cost of Irish Government borrowing keeps rising

#The supposed cure for the State deficit is killing the real economy

#Mr Lenihan’s banking strategy turned a real but manageable problem — the State deficit — into a severe and worsening crisis. A State deficit can almost always be managed — it rests on something recoverable — an economy, a workforce, a market. But that economy has been saddled with the insane bank bailout costs. And what the Farmleigh farce revealed was that it remains saddled with the continuing cost of the massive salaries and obscene privileges of the golden circles and their servants.

ITEM 1;

BY IRISH EXAMINER ~ FORCED CLOSURE OF THE *CENTER OF PUBLIC INQUIRY* : Ireland’s property crash could have been avoided | Irish News | IrishCentral

ITEM 2:

BY FT ~ IRELAND GOV AND ANGLO PRESS ON BONDHOLDERS

Over the course of the financial crisis, the Irish government’s policy towards the banks has swung from deftness to debility. Its push for a showdown with junior bondholders in Anglo Irish Bank shows Dublin is on the offensive again.

Not before time, it has dawned on the government that the Irish people should not spare Anglo’s creditors the cost of the foolish eagerness with which they funded the bank’s real estate punts. After burning €29bn of taxpayer money Dublin has found the gumption to let Anglo pick a fight with investors one rank up from the already-wiped-out private shareholders.

This shows a degree of diabolical genius that had so far eluded this government. The plan is to pit junior creditors against each other the better to wrestle them into submission. They may swap subordinated debt for government-guaranteed paper at 20 per cent of par value (5 per cent for undated debt) but only if bondholders as a class agree to write untendered bonds down to just one cent in €1,000. Those who decline the offer, which comes in just under market value, risk that 75 per cent of their co-creditors approve the writedown, leaving hold-outs stripped to the bone.

Affected bondholders cry foul, but the terror tactic looks within the bounds of the law. Necessary to make it work, however, is Dublin’s new-found determination to enforce haircuts through mooted resolution legislation if the “voluntary” burden-sharing disappoints.

This is why, regrettably, we are unlikely to see similar “liability management” for senior debt. Ireland’s leaders remain convinced they cannot force a haircut on senior bank creditors any more than on depositors or holders of Irish sovereign debt. They are mistaken.

Senior debt ranks equal to deposits under insolvency rules. But a government can selectively bail out depositors of an insolvent bank in exchange for their pari passu claims on its estate, as the UK did with Icesave depositors. The equivalence of private and sovereign debt is a creature of Dublin’s imagination – though increasingly one of its making: the government has far too promiscuously expanded its legal guarantees of bank liabilities.

Markets are still uncertain how much of the Irish banking sector’s bloated balance sheets the government intends to stand behind – but they know it cannot stand behind it all. Speeding up promised legislation on special resolution authority would delimit Dublin’s contingent liabilities once and for all. It should do so – to safeguard its own creditworthiness and to show that indentured taxpayers can be freed.

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