Who exactly is being bailed out in Ireland? Or is this just the banksters going with their hand out to another country, threatening to blow everything up? Can someone explain what exactly is the problem in Ireland?
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Comrade Jake
All I know is that God invented alcohol to prevent the Irish from taking over the Earth.
Ross Hershberger
Yup. If they’re smart they’ll do as well as the Texas S&L operators back during the previous Republican financial crisis.
Shalimar
That is the way I have read it. It’s not so much that they need to be bailed out, which they clearly do. It is that they insist that nothing can be changed about the environment that led up to all this shit in the first place or you might hurt their feelings.
cyd
Mostly, banks in the rest of the EU that have lent to Ireland. See this infographic, which was making the rounds a few months ago, showing who owes who how much.
Poibar
John: It’s the normal transfer of funds from the taxpayer to the financial markets. The one paragraph explanation:
Bankers were chasing bigger and bigger bonuses based on underwriting bigger and bigger loans based on the property market. People suddenly couldn’t get money so they couldn’t purchase the buildings that developers had borrowed money to build. Banks suddenly noticed that they had no money, but not to worry uncle Brian turned up and underwrote all their losses. Now the Irish taxpayer has guaranteed somewhere in the region of €100B (with a population of 4.5 million) to prevent the Irish banks going bankrupt and causing problems for the banks in the rest of Europe & the US.
Basically the capitalist dream is here: Heads we win, tails you lose. The banks should have been allowed go bankrupt and Ireland would have been fine. Our national debt was something like 35% of GDP two years ago, now it’s something like 125% and growing. This “bailout” is actually just a loan that we will be paying back for generations. The best part is, more than likely we will default eventually, as the loan @5% means that the interest payments will be bigger every year and we’ll never get out from under it.
I’m guessing you can tell that I’m angry and waiting for the next election.
BR
@cyd:
Yup, German, French, etc. banks that hold Irish debt. Also add to that that Ireland’s banks have lost at least 20% of their deposits in the last month or so. (People are withdrawing money.) So they need an infusion to keep functioning. A bigger part of the problem that’s unspoken is that this is Greece all over again – Greece was supposed to meet certain budget cuts, and they didn’t, and they aren’t growing their economy fast enough (or at all), so they won’t be able to pay the absurd interest rates they had to issue bonds at. They’ll default at some point as a result. And the rest of the EU will probably take Austria’s lead in not giving Greece any more money.
As I mentioned last night, I’m wondering what’s going to happen before or on the December 7th bank mutiny day. Partly because I don’t like the idea of my money in a TBTF bank any more (seeing Inside Job punched my ticket), I’ve been withdrawing a few hundred bucks every couple of days, so I’ll be cashed out by early December – just holding it as cash for now, until I find a credit union I like.
JPL
Wasn’t it just yesterday that Ireland’s economy was touted as the best in the world because of the low corporate tax and lack of regulation? Where’s our resident libertarian to explain to us what happened?
WyldPirate
Damnation, Cole. That is one fucking efficient post you made.
Ask the question in the first sentence and answer it in the second.
Francis
As I understand it:
step 1. Money flows into Ireland because it creates a funky corporate tax code.
step 2. Housing prices skyrocket.
step 3. Irish banks make enormous number of loans, such that the private debt of Irish banks is larger than the government can handle.
step 4. International recession. Money leaves Ireland. Housing prices plummet. Irish banks stuffed with bad loans. Irish banks on verge of default.
step 5. Irish government agrees to honor debts of Irish banks.
step 6. Irish government (and rest of world) recognize this was a hugely dumb idea (but for some reason cannot be undone) because now Irish taxpayer is up to eyeballs in debt that cannot possibly be repaid. Interest rates on Irish government debt soar. Note that Irish government debt held by big European banks.
step 7. Moneymen arrive.
Ongoing mystery — why Iceland and Irish governments decided to back private banks.
Answer — because bankers (and their bondholders and shareholders) really do run the world. Having banks fail is bad for business. Much better that the taxpayer take it in the shorts.
StonyPillow
Efficiently puts the lie to the canard, “We’ll only rape you if you’ve been bad.” They won’t stop until they’ve screwed everybody or we stop them. Choose wisely.
PurpleGirl
Just think, Ireland has already done the austerity thing and the banksters weren’t pleased and the government is going to do another round of program cuts and raise taxes/fees I believe. Krugman has written quite a bit on Ireland and the austerity fetish. Yesterday the NY Times had an article about the people who are emigrating from Ireland because the economic problems. The first waves have been Eastern Europeans returning home but now Irish nationals are looking to moving to the US, Canada, Australia and New Zealand.
cathyx
@Francis: Just substitute Irish for American, and you explained the problem here too.
Mudge
I read the other day that the banks will not allow the corporate tax to be increased, which means the payback is squarely on the backs of the average Irish family. Somehow.
cathyx
@Mudge: First of all, why do the banks get to decide who’s taxes get raised, and secondly, are they giving a tax cut to the top earners?
BR
BTW, the Irish banksters have been reported to have engaged in as much debaucherous behavior as our Wall Streeters (sex, drugs, and debt and roll).
Corner Stone
My question regarding both Greece and Ireland is that the money went somewhere. Even though the loans may have been bad or fraudulent, someone made a ton of money off them.
Why can’t that money be confiscated or repatriated to pay off these “debts”?
I know it’s a silly pipedream.
jayackroyd
atrios has already pointed out that the people being bailed out are the holders of Ireland paper.
Sirkowski
They’re Papists, that’s what.
PeakVT
Ireland had a massive property bubble, and when the banks started collapsing, the Irish government guaranteed basically all of the banks obligations (“all deposits (retail, commercial, institutional and interbank), covered bonds, senior debt and dated subordinated debt”). But the losses will amount to over 50% of Irish GDP. There is just no way the country can cover them, especially since it is in the midst of a depression. GDP has fallen by over 15% since the peak.
Hawes
The problem is ninja leprechauns.
I thought everyone knew this.
BR
@PeakVT:
And their property bubble is likely to deflate even more if the reports of young Irish professionals fleeing the country are right.
GregB
OT. Bobby Fucking Jindal is saying that the administration has to stop being politically correct and needs to start profiling terrorist suspects.
I hope he’s planning on getting pulled out of line and stopped wherever he goes.
Hawes
Actually, aside from the ninja leprechauns, I think the basic failing we have is that of the low tax, finance friendly economic system that typifies place like Ireland, Iceland and the US.
By turning their banking system into a casino (like we did) they created a massive bubble, watched it crash and are now holding the country and the continent hostage.
Corner Stone
Speaking of conspiracy theories, I have one to flesh out a little.
What if one of the planned side benefits to all this worldwide kerfluffle was to destroy the euro currency?
I think we’re seeing the fallacy of a united currency now, but not too long ago several ME states were mumbling about a challenge to the US Dollar as world reserve. IIRC Iran even started pricing it’s oil in the euro.
Ah, here that is.
Iran turns from dollar to euro in oil sales
Crazy thought, but what if a piece of all this was a way to destroy that challenge? We knew the US had the staying power to take a hit but maintain economic supremacy when the dust settled.
Taylor
You have to understand that Ireland is just like the US. It has the same set of characters.
The Irish bankers had lots of easy money, most of it from UK and German banks.
The property developers invested that easy money in a real estate bubble.
When the bubble burst, the politicians made the taxpayers liable for all of the bankers’ bad loans. That made the country almost immediately insolvent.
It’s just taken a couple of years for reality to catch up with the Irish government, and their banker buddies. Remember when Newsweek was touting Cowen as one of the greatest world leaders? What did you think that was about?
As with the US, the big question on the minds of Irish taxpayers is: Why aren’t any bankers going to jail?
For any of our US viewers, don’t worry. The US has all of this to look forward to. The fecklessness of the bankers, and the bipartisan cravenness and corruption in DC, guarantees it.
AuldBlackJack
@cyd: Exactly. So no one is really bailing out “Ireland” or the Irish populace.
Quite the opposite, the Irish populace will be on the hook for the funds being ‘lent’ to bail out UK, German, French, and US banks.
Ireland is the new Argentina.
cyd
@JPL:
Low corporate taxes are actually a viable strategy for small economies (lack of regulation, not so much). Remember that the original tiger economies went through a similar crisis in the late 1990s. Despite much Western schadenfreude at the time (*), they ended up bouncing back very vigorously. In South Korea and Singapore, for instance, GDP has almost doubled since that crisis.
One difference, of course, is that the Asian Tigers were able to export their way to recovery thanks to significant currency depreciations, whereas Ireland is stuck in the Eurozone. Also, some of the Tigers were helped along by robust Keynesian recovery programs, and it’s unlikely that Ireland has the leeway to do something like that.
(*) Funny how the phrase “crony capitalism” hasn’t made a comeback, now that the phenomenon is to blame for a crisis in the West rather than in far-away Asia.
Taylor
@Corner Stone: Much of the money has disappeared into Swiss bank accounts.
Or into housing estates that are ghost towns (no-one can afford to buy houses) and will likely have to be demolished.
Linda Featheringill
Definitely it is a bank problem.
The outflow of the younger and more energetic people will further drag Ireland down. But what can Ireland do about that? Build a wall, shut down airports, and patrol the coasts?
The E-Union is willing to help the banks out, but that just spreads the debt around. UK has offered a bunch of money to help, although UK already has austerity measures in place plus inflation of 6+ percent and growing unemployment. I don’t know how much Irish debt the UK can carry.
And we haven’t even talked about Portugal.
I suppose all of that is Obama’s fault. Somehow.
Linda Featheringill
Austerity programs:
I don’t see much evidence that austerity works. Am I wrong?
Jay in Oregon
@Hawes:
Have you been reading Gold Digger by Fred Perry?
media.comicvine.com/uploads/4/47520/1096819-gold_digger_070_super.jpg
jack
@Linda Featheringill:
That’s because they’re not using enough willpower, and if they just tried harder for longer the recovery will appear.
It’s the Green Lantern theory of economics.
PeakVT
@Corner Stone: While some people got fabulously wealthy, their net worth is just a fraction of the total amount owed. And any net borrowing from foreign countries has already been recycled back to those countries to pay for imports. That’s because any current account deficit must be balanced by capital inflows (borrowing).
The problem with the Eurozone is that it is an area with a unified currency, but not a unified taxing and spending authority. A lot of countries joined the union with their currency overvalued. That made their citizens feel rich, but left their businesses uncompetitive. America has a similar problem wrt. China.
Alex S.
@Sirkowski:
On the contrary, the Catholic Church is despised since the sexual abuse scandal there.
Nick
@GregB:
Only an ignorant idiot thinks we should “profile” Muslims. How do you do “profile” a religion that cuts across every demographic?
Violet
@GregB:
No, not him. His wife and kids. Every fucking time. No special exceptions for being the family of a government official. Let him see what it feels like watch your family be humiliated by the TSA, just as so many others have done. If he’s going to call for profiling, he should be ready to subject his family to it.
frosty
@Corner Stone: Where did the money go? In the immortal words of Robber Baron James Fisk:
A little research shows that people used to plant sweet-smelling woodbine (honeysuckle) around their outhouses. So, to put it bluntly: the money has gone down the shitter.
Violet
@Nick:
Everyone knows Muslins are brown, or even worse, black. They’re easy to profile. Duh.
/depressingly accurate teabagger impersonation
Rick Taylor
Atrios put it succinctly: “It cannot be said enough that bailing out “Ireland” is really about bailing out its creditors.” It was the same with bailing out AIG.
Judas Escargot
@Linda Featheringill:
I don’t see much evidence that austerity works. Am I wrong?
Of course you’re wrong: John Meynard Keynes was fat, and possibly even English.
jcricket
@Linda Featheringill:
If by working you mean destroying the already battered economies of the countries enacting austerity, yes, they’re working fine. If by working you mean “resulting in the elimination of debt and getting the country’s fiscal house in order and the economy back on track”, then no.
Greece has entered what’s probably a death spiral. 70% unemployment in some places, round and round after budget cuts with no end in sight, and they’ll still probably be unable to pay back all the loans. All this so that the fools (banks) who made too risky loans and took on too much leverage, don’t have to give up their ill-gotten gains.
I’m not anti-bank, per se. I understand how access to capital and leverage (when contained) has actually fueled economic growth quite effectively. But I see no reason why allowing banks to leverage themselves 50-to-1 and eliminate under-writing standards should be followed by a guarantee of that money being repaid on the backs of entire countries. Let’s bring back the 10-1 leverage limits, split the banks apart from the investment arms, and if a bank requires a bailout, the gov’t doing the bailing gets all the profits during that time (i.e. the Swedish model in reaction to their bank panic of the early 90s).
At least the EU is insisting Ireland reverse some of their massive corporate tax cuts and so-forth that gutted their tax base and quite possibly led to the worsening of the current situation.
Sandmann
csper.org/renaissance-20.html
I’ve been sending this link around because IMO, it has the clearest explanation of our economic system…it lays it all out in black and white without the theatrics. This series of videos is separated into ‘lessons’ and assumes that you have a foundational understanding of how money operates in the fractional reserve banking system, but it’s not a prerequisite.
I’m the farthest thing from an economics wizard, so any comments regarding the accuracy of facts in these videos (good or bad) would be helpful.
salacious crumb
maybe this time around the image of good white Irish people getting screwed may actually cause some real anger at the bankers who put the world economy in a mess. Here it was the belief that it was the stinkin minorities who had misled the good small town bankers into creating the financial mess, because you know, they didnt wanna work hard and buy the home they deserved. they just wanted easy credit.
salacious crumb
@GregB: I really hope he does get profiled and gets cavity searched by our guys at TSA. who knows, he may actually enjoy it
Sly
This isn’t so much about Ireland’s financial sector. They’re passed that stage. Ireland issued a blanket guarantee back in 2008. The problem now is that its government is under a mountain of debt (largely from said guarantee) and owes ungodly sums of money to foreign creditors. The EU/IMF is basically going to bail out those creditors.
If you want a simple explanation, this one works just as well as any: The Germans are still pissed about the Treaty of Versailles.
@Linda Featheringill:
Spain may become a bigger problem than Ireland, Portugal, and Greece combined. The EU can at least keep the others afloat for a couple of years. Spain has the distinction of being too big to fail and too expensive to rescue if it does.
cork
Hello All,
if you want a good explanation, here’s todays editorial from the Guardian
guardian.co.uk/commentisfree/2010/nov/21/ireland-bailout-economy-imf-euro
hilzoy
Yeah — my understanding is that the crucial error was Ireland’s decision to guarantee bank debt. Guaranteeing deposits is one thing — people who put money in a checking account should not lose it, if possible — but guaranteeing bonds etc. is quite another. Different sort of investor, different expectations about expertise etc. Deciding to guarantee not just deposits but *all* bank debt seems to me to be a horrible mistake, given the banks in question.
Once the debts were guaranteed by the Irish government, it’s only a question of which taxpayers are going to be on the hook for the losses: Ireland’s alone, or Europe’s.
Admiral_Komack
@Hawes:
“Faith and begorrah!”
“I’ve got your pot of gold, laddie…and I’ll not be giving it back!”
mbss
one good place to look is @ Anglo Irish Bank and their ex-CEO David Drumm. you can actually find this nozzle hiding out in Mass. right now. investigators in Ireland are awaiting his “voluntary” return to answer questions, but for some reason i don’t think that’s gonna happen.
The Anglo Irish Bank hidden loans controversy (also known as the circular transactions controversy) began in Ireland in December 2008 when the chairman of Anglo Irish Bank, Ireland’s third largest bank, admitted he had hidden a total of €87 million in loans from the bank, triggering a series of incidents which led to the eventual nationalisation of Anglo on 21 January 2009. Sean FitzPatrick subsequently resigned his position and was followed within twenty-four hours by the bank’s non-executive director, Lar Bradshaw and chief executive, David Drumm.[1] A new chairman of Anglo, Donal O’Connor, was quickly appointed from the board, a move welcomed by the Irish Minister for Finance, Brian Lenihan. A number of investigations have been launched into the reasons behind the three resignations. The Financial Regulator is carrying out a review of the bank’s dealings, although the head of the Financial Regulator, Patrick Neary, has since resigned his position. So too have a number of other chairmen, directors and executives involved with Anglo, Irish Life and Permanent and Irish Nationwide.
Within days of the initial admission, an announcement was made that Anglo Irish Bank would be one of three (alongside Allied Irish Bank and Bank of Ireland) that would be recapitalised by the Irish government.[2] The recapitalisation of Anglo Irish Bank was expected to be effected in mid-January 2009,[3] following an Extraordinary General Meeting (EGM). Lenihan instead unexpectedly announced the nationalisation of Anglo Irish Bank the night before the EGM due to difficulties he encountered with the recapitalisation process. Recapitalisations of the other two banks mentioned are expected by the end of March 2009 but, according to Taoiseach Brian Cowen, is expected to be finalised in early February 2009 at a total of €7 billion.[4] The nationalisation of Anglo Irish Bank on 21 January 2009 followed two more resignations earlier that month. On 7 January 2009, another director, Willie McAteer resigned, becoming the fourth casualty of the controversy. Two days later the Financial Regulator Patrick Neary retired amidst much criticism over his handling of the affair. Post Anglo nationalisation, the Chairman of Irish Nationwide, Dr Michael Walsh, resigned on 17 February, one week to the day that government-appointed directors announced they were investigating a deposit of billions of euro by Irish Life and Permanent, placed in Anglo Irish Bank before the end of its financial year.[5]
Taoiseach Brian Cowen has denied claims that he is protecting a “Golden Circle” of wealthy financiers from being identified. This mysterious group of ten businessmen is said to have received loans from Anglo Irish Bank in return for buying shares, in a move designed to keep the bank afloat.
IIRC Sean FitzPatrick and Lar Bradshaw have already been investigated and found not culpable (HAH) and they were released.
Nick
@Violet:
Chechnya is in the Caucasian Mountains. That name is not a coincidence.
I really wish this argument worked on people, but often they just walk away pretending they didn’t hear it or call me some America-hating liberal.
burnspbesq
@Poibar:
You forgot to mention that the Government has (for the moment) ruled out increasing the 12.5 percent corporate income tax so beloved of American multinationals. I personally expect that when all of the details of the bailout are known, raising the rate to 20 percent or so is going to be a condition of getting the EU money, and that will kill off the Irish job-creation engine once and for all.
burnspbesq
@JPL:
The Irish real estate bubble was so extreme that at its height, Dubliners with money to invest were bargain-hunting in New York.
SBJules
@cyd:
Awesome graphic…er info graphic, Cyd.
Bill Murray
@Linda Featheringill: I think it depends on who you think austerity should be working for. It’s good for people holding the debt of others, but not for the debtor. It’s great for those who destroyed the financial system, but not for those get fewer services.
So the scorecard says rich and unethical come out well, others not so much
burnspbesq
@Taylor:
Don’t rule out the possibility that they haven’t committed any crimes. Irish law is similar to US law in that stupidity and greed are not, in and of themselves, crimes, and you have to have actual evidence that proves beyond a reasonable doubt that some actual crime was committed in order to send someone to jail. So far, evidence seems to be in short supply.
burnspbesq
@jcricket:
The only reason Ireland has an economy is the 12.5 percent corporate income tax base. US multinationals and the local businesses that service them were the only growth engine Ireland has ever had.
mbss
of course they’ve committed crimes. of course they have. that’s a given.
irish law does make it difficult to prosecute white collar criminals, though.
jcricket
@burnspbesq: So then I guess it’s damned if you do, damned if you don’t. If the only way to have an economy is to have one that only enriches the rich while setting off a time-bomb for everyone else (no tax base, rise in debt, high service requirements).
Good times.
burnspbesq
@jcricket:
It’s not quite true that Ireland doesn’t have a tax base. Individual income taxes are in line with what’s typical across Europe, and there is a 21 percent VAT. The Irish made a quite deliberate decision to make up the “shortfall” in corporate tax revenue from other sources.
jcricket
@burnspbesq: How come the focus on Irish corporate taxes being increased as a condition for the bailout now?
Left Coast Tom
@burnspbesq:
With respect to the US, let’s start with the robo-signers who, after all, signed affidavits claiming personal knowledge and possession of things they later testified having no knowledge or possession of.
I’m thinking the Justice Dept. could offer them a choice between facing charges themselves, versus turning over their managers. And if “titles” like “Limited Signing Officer” were approved by a Board of Directors, then how about charging the banks themselves?
burnspbesq
@jcricket:
It’s also worth noting that Ireland isn’t the only tax haven in Europe. The Swiss and Dutch statutory rates may be higher than the Irish statutory rate, but the tax authorities in those countries are more than happy to make deals to exclude large amounts of income from the tax base. It’s not hard to have a 2 percent Dutch effective tax rate.
WarMunchkin
can someone explain what happens if a country defaults on its debt? does it just go, “ha, sucks for you” and then that’s it? Or does someone actually have to take over that country?
jcricket
@burnspbesq: I fully believe that the entire host of western countries are right now totally “captured” by the rapacious capitalist-elite. We’ve all got stockholm syndrome when it comes to our corporate overlords.
Was just curious what about Ireland’s corporate taxes were making the rest of the EU stand up and take notice.
burnspbesq
@jcricket:
The countries leading the funding of the Irish bailout are Germany and France, relatively high-tax countries with expensive social safety nets that hate the low Irish corporate tax rate because they think Ireland “stole” jobs that would otherwise have ended up elsewhere.
Which is silly, because there are actually other good reasons to be in Ireland. I was in a client’s factory in Ireland a few weeks ago, where they make complex chemical reagents used in test equipment, and they have production workers and QA inspectors with university degrees. A highly-educated, English-speaking labor pool in an EU member country is a pretty good enticement for multinationals doing high-tech manufacturing of products destined to be sold in the EU. The low tax rate makes it even better to be in Ireland.
cyd
@WarMunchkin:
The former. The price of default is, supposedly, higher borrowing costs in the future. In reality, investors have short memories, and are likely to forgive and forget if the economy recovers afterwards (see Argentina).
And defaults aren’t that uncommon, either. Greece, for instance, has actually defaulted three or four times in the last century, if memory serves (I can’t find a link at the moment, though).
PETER
Here is an excellent over-view from today’s Guardian:
guardian.co.uk/commentisfree/2010/nov/21/ireland-bailout-economy-imf-euro
Ann Rynd
Can someone explain exactly what the problem is with bigger bonuses?
David Blake
The problem is still with the banks. Their losses are so huge that the markiets have begun to suspect that the Irish government does not have enough money to bail them out and meet its (very stupid) pledge to guarantee all their debts. Because of this the banks have been unable to raise money in normal financial markets. that forced them to turn to the ECB, which allowed them to borrow against the collateral of bonds, many of them issued by the Irish government. In the past few weeks the ECB has started to get frightened, because it was owed about $130 bn and the value of the collateral started looking shakey. So the people being bailed out are bankers in other countrieswho made stupid loans to Irish banks so they could make stupider and often corrupt loans to developers and top executives. And the ECB, which not only stood by while all this was happening but is now telling the Irish government what to do. And guess what, they are telling the Irish government it has to make sure that all the bondholders get all their money and social services are cut to find the cash.
burnspbesq
@Ann Rynd:
It’s stealing. Those bonuses are coming out of profit that should be inuring to the benefit of the shareholders. You silly, stupid girl.
Corner Stone
@PETER: From the piece you cited:
Sounds familiar.
Jay in Oregon
@Nick:
Wasn’t it Tom Ridge who posited that a major terrorist attack could originate from Indonesia, which has an extremely large Muslim population? Last I checked, they weren’t all swarthy-looking.
Could this be the next suicide bomber?
daveNYC
Anyone stupid enough to guarantee every one of a bank’s liabilities is beyond hope. Deposits, sure, but making sure that bondholders are made wholer? Pure weapons grade stupid.
Suffern ACE
@burnspbesq: Actually, if the shareholders cared about that theft, they at least should have looked more carefully about the contracts that they had signed with their laborers.
We aren’t actually upset about “larger bonuses”, at least not in the beginning. Now it’s becoming generalized. What we were upset about initially was large bonuses given to the laborers of insolvent institutions (such as AIG), or ones that would have been insolvent were it not for infusions of taxpayer dollars. Until those funds were paid back to the treasury, it would have been prudent for those institutions to act as if they were insolvent and not pay bonus…but they couldn’t because…their labor contracts were unbelievably bad.
See, I got a bonus this year for the first time in three years but it was smaller than any of the bonuses in the three years prior to the crash. I could grouse about that, but my bonus is based on my performance and the overall performance of the company. I had a good year last year but it wasn’t as good as the year I had two years ago when no one got bonuses since the company did not make a profit. I could grouse about that, but then I understand how the bonus system works.
It appears to many people that Wall street “bonuses” aren’t actually bonuses at all, as the contracts were written with perverse incentives for short term gain, and no incentives for the long term stability of the companies. They also appear to have been written to increase no matter what the performance of the individual. That would appear to many of us to be a very stupid way to run a company. The stupidity appears to be industry-wide.
I also find it telling that certain people behave like apes over the contracts that auto companies signed with their employees and blame those contracts for the poor decisions of the management of those companies to focus on, say, SUVs instead of family cars…but honestly, the Bankers have the same problem with their compensation packages. Sure it can be hidden when expectations are that profits will go up and can only go up – but what happens when profits don’t appear and you still have to pay those bonuses?
Gatsby
The bailout only helps Ireland’s creditors, i.e., any bankster with a stake in Ireland’s assets.
Andre
@GregB:
Yep, because this has been the end-game of the conservative objection to TSA screening right from the beginning. The objection is not “It’s not making us safer!”, it’s “There’s no point screening 3 year olds and grannies and pregnant women, the TSA should only screen swarthy men and we’ll all be safe!”
toujoursdan
@Jay in Oregon:
You don’t even have to go that far. You’ll find blonde/blue eyed Muslims in Bosnia and very white looking Muslims in Albania and Kosovo.
burnspbesq
@Suffern ACE:
Dude … recalibrate your snark detector.
Brachiator
I blame Fannie McMae and Freddie McMac. And as always, Bill Clinton.
More seriously, there is also the impact of the “Dutch Sandwich” gambit, which let google pay a tax rate of only 2.5 per cent on its Irish derived profits.
Shelton Lankford
@Poibar:
Yep, that’s the ticket. The next election will solve everything, just like the last election did.
We are going to get, again, a choice between two flavors of Corporation party.
daveNYC
@Brachiator: Don’t forget the Black Irish.
rickstersherpa
I have been regularly reading Calculated Risk and Naked Capitalism the last four years. I have recently also added EconoSpeak (or the economically incorrect) to my must read list.
Basically, although the N.Y. Times returns to the meme that Irish debt problems are about an over generous welfare state. Ireland had in fact run surpluses up until 2008, and was celebrated by conservatives and libertarians as the market “Celtic Tiger.” So it is of course all about the banks and the ‘we get the profits and you take the losses mentality of the Finance Interest (not just the banks, but the very wealthy who invest in hedge funds and use credit default swaps, etc.).’ Only are Galtian masters apparently are entitled to socialism.
Traditionally, people who have acquired great wealth are generally more into “capital preservation” rather than “capital appreciation.” They therefore tended to invest in bonds, and he highest quality bonds at that, those practically certain of repayment plus 3%. However, in the last 30 years, a group of people began to sell these folks on an “you can have your cake and eat it too” story that through creative financial engineering, they could get the high returns of more risky investments, but with the same surety of the high grade, low interest stuff. The key derivative in this scheme was the credit default swap, an “insurance policy” on a bond (and of course you then buy another insurance policy on the insurance policy, ad infinitum, with the bank/insurance company earning a big fee on each bet.) The Irish banks, as well and the Iceland banks, and like the mortgage mills like Countrywide, sought to fill the insatiable demand for more and more paper by making more and more dubious loans (besides Ireland’s own bubble, the Irish banks participated big time in the U.S. property bubble, primarily in the commercial real estate (all those fairly empty hotels, office buildings, and shopping malls you see around your neighborhood.) When Lehmann hit the fan in September 2008, no one wanted to loan any more to the Irish banks. They apparently told the Irish Government (who was pretty much in their pocket anyway) that it was only a liquidity crisis and a guarantee from the Irish Goverment to pay all their debts would make everything all right. Not so much. Ireland immediately went into austierity mode, a deep recession followed. Surprisingly, unemployed people can’t pay their debts, so more defaults rolled in, property values wend down, tax revenues fell, unemployment compensation increased, and the deficit got worse. Another round of austerity followed, and of course, both the banks and the Government situation got worse. So Ireland is about to get another round of austerity with this IMF/EMF bailout. Any bets on how this will work out? Ireland is literally being crucified on a cross of Euros now. Before the Euro, it could have simply devalued its currency (which also reduces its real wages across the board), and eventually export its way back to solvency. But being in the Euro zone now, the only thing it can do try to force down those sticky nominal wages by prolonged depression. Of course the young may be off to Australia and Canada rather than stick around for a generation of immiseration (something I recommend young Americans as well rather than putting oneself in debt peonage with the banks for student loans).
And who lent the Irish banks all this money, well, mostly German and French banks (who were also big counter-parties to AIG). So the Irish, Greek, Spainish, Portugese, Italian, British, and U.S. taxpayer should know that he is not only bailing out his own countries rentier class, but the rentier class of all of Europe and the middle east. Does that not give you a warm and fuzzy feeling! nakedcapitalism.com/2010/11/the-british-mess-ii.html
Mayur S
The real reason of Ireland’s rescue was more to do with Eurozone financial institutions holding Irish debts. Many European FIs had written credit default swaps on Irish debt, which were draining cash, creating a potential credit crunch. Its not so much bailout of Ireland – its a bailout of Ireland’s counterparties. This thing is far from over