FEBRUARY 2009
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Anglo Irish Bank Nationalised Taoiseach Launches
DUBLIN - The Irish government stepped in to take full ownership of Anglo Irish Bank on January 15 to prevent the collapse of the country's third biggest lender, as nationalisation fears increased throughout the banking sector.
The republic's government made its move to stop runs on the bank's deposits and shares that could have caused it to implode.
Confidence in Anglo Irish has collapsed since the resignations in December of its chairman, Sean FitzPatrick, and chief executive, David Drumm, after it revealed that FitzPatrick had concealed FU87 million of loans from the bank.
Brian Lenihan, Ireland's Irish Finance Minister,denied that there had been a run on the bank and insisted that it was solvent but "in a fragile position." He indicated that the legislation will provide for the appointment of an assessor who will put a value on the bank which will determine if the shareholders receive any compensation.
If Anglo Irish had been declared insolvent, the Government would have been left responsible for about FU100 billion of liabilities after guaranteeing all deposits in Irish banks last year.
Anglo Irish shares fell 10.8 percent to FU0.20, from ahigh of more than EU17 in May 2007.
The government's reluctant nationalisation of Anglo Irish is a major blow to the republic, the self-styled Celtic tiger whose rapid economic growth was heavily dependent on rising property prices.
Anglo Irish was for a long time one of the darlings of the banking sector but confidence in the company collapsed on fears about its heavy exposure to commercial property and precarious wholesale market funding.
The bank had planned to hold a shareholder meeting to approve a FU1.5 billion recapitalisation which would have given the government 75 percent voting control in the form of preference shares. But Anglo Irish's shattered reputation forced the government to nationalise the bank.
Shortly before Christmas the Government committed to recapitalising Anglo Irish by making FU1.5 billion available to it at a rate of 10 percent per annum in return for controlling 75 percent of the bank.
That was a week after it had announced in principle that it was making FU10 billion available to Irish banks, but in that week it emerged that secret loans had been made to former chairman and CFO Sean FitzPatrick. According to Lenihan these loans "caused serious reputational damage" to the bank, prompting the Government's latest intervention.
There seems to be a general acceptance that the Government has done the right thing but the timing and the next moves are under scrutiny.
There is also a demand for more information about the bank's financial situation, mostly coming from journalists and economists who argue that, as taxpayers' money is at risk, taxpayers are entitled to the details.
The same journalists and economists repeatedly claim that
THE IRISH GOVERNMENT has stepped in to take full ownership of Anglo Irish Bank on January 15 to prevent the collapse of the country's third biggest lender.
its loan book default and remain solvent. If the Government makes available the FU1.5 billion it had offered this rises to 8.3 percent.
The bank had loans totalling FU73.2 billion with clients as of September 30, 2008. It has net assets of FU4.1 billion and has set aside FU500 million to cover unforeseen bad debts.
The board and the Government appear to be confident that the security on outstanding loans is solid enough that the bank can come through the current crisis.
Many economists and other observers, who don't have access to the loan book, seem to take great pleasure in telling the nation that this isn't the case and that the bank is doomed.
The bank's biggest shareholder was the family of Sean Quinn, one of the country's most successful businessmen. If the assessor decides that the bank is no longer worth anything, the family's paper losses are estimated at over FU1.22 billion in the past year.
The 1,500 staff at the bank will continue in their jobs unless something else unforeseen occurs. The board will, however, be replaced.
SEAN FITZPATRICK the former chairman and CEO of Anglo Irish Bank.
Anglo Irish is doomed as a result of its bad debt situation. Lenihan believes such talk is highly dangerous; he also argues that publishing the sensitive data demanded would be commercially damaging.
In normal times Anglo Irish Bank would look quite healthy. It could afford to have up to 6.3 percent of
Recovery Plan
DUBLIN - Taoiseach Brian Cowen called a press conference at Dublin Castle on December 18 to launch the Government's plans for rebuilding the economy.
The document, entitled "Building Ireland's Smart Economy: A Framework for Sustainable Economic Renewal," presented a vision of what is believed to be achievable, but critics slammed it for failing to propose any actions to ease the immediate pressures on the economy.
It wasn't, however, intended to offer solutions to the current crisis as Cowen explained in his opening remarks, "If we have a clear vision of where we want to be after this period, it will guide our thinking and actions in the difficult period ahead."
The item in the plan which grabbed most attention was the Taoiseach's goal of making Ireland "the world's leading location for business innovation." A key part of this is the availability of FU500 million in research and development investment to start-up companies over the next 10 years.
When it was his turn to speak, Minister for Fnergy and Natural Resources Famon Ryan, of the Green Party, made it clear that much of the innovation will be centred on green energy.
The Government sees this approach contributing to three goals; creating wealth and employment, providing an affordable alternative to fossil fuel as it increases in price, and ensuring that Ireland meets its greenhouse gas emission targets.
As the Government seeks Irish and international investors in R&D projects it will limit the tax take to 15 percent when these investments bear fruit. This is the lowest in the FU and equals the rate applying in the U.S.
In the absence of action to alleviate the immediate problems, Cowen spoke of how he hoped to obtain consensus with the social partners. He said he would be meeting with employers, trade union leaders and others in January and hoped to reach agreement by the end of the month.
Cowen appears to be looking to the unions to act responsibly in relation to the public sector pay bill. It is unclear whether this means abandoning a wage deal which was unrealistic when it was agreed, or if he hopes to go further and seek pay cuts as recommended by the FSRI.
The Taoiseach finished his speech by saying, "I appeal to all those in positions of leadership, all those in a position of influence and, most importantly, ordinary decent people the length and breadth of the country, to join with me in a national effort, as we take the necessary difficult decisions that will lead us onto the path to economic renewal and to a prosperous future for ourselves and our children."
The business sector generally welcomed the plan. Trade unionists were, for the most part, noncommittal although ICTU general secretary David Begg thought it too business oriented, without explaining how else jobs and wealth are created.
Emotional Cowen Warns Irish Not to 'Wallow in a Sea of Doubt'
DUBLIN - An emotional Taoiseach Brian Cowen delivered one of his most powerful performances to date on February 5 when he issued a rallying call for the country to get back on its feet and not "wallow in a sea of doubt."
The Taoiseach said the Irish people were well capable of recovering from the current economic downturn.
"The one thing that characterises their success is their self-belief. If we decide to wallow in a sea of doubt, do not be surprised if we end (up) in the turbulent waters that we are in today," he said.
Confronting the doubts over his leadership which have been raised in recent times, Cowen powerfully appealed to the nation to trust him and work with him to get the country out of the current difficulties.
"So, okay, we're in this. It maybe difficult, it may even get more difficult, and there'll be people every day and every week saying isn't this terrible, isn't that terrible. Anditis."
TAOISEACH BRIAN COWEN
he said at the Dublin Chamber of Commerce annual dinner.
But he warned that without working together "we will not get through this such is the scale of the challenge we face."
Cowen got a standing ovation from the audience after speaking
passionately off the cuff for over 17 minutes, his voice at times almost cracking.
Farlier in the week, Cowen announced a pension levy for state employees as part of a two billion euro package of public sector cutbacks.
Cowen said there would also be cuts in expenditure on a number of services, including childcare and the National Development Plan.
His announcement to the Dail came after talks with unions and employers collapsed on the morning of February 3. Opposition politicians said they were disappointed with the move.
They earlier demanded a full debate on the government's economic proposals in the Dail, rather than the series of statements proposed by the taoiseach.
Cowen is anxious to persuade international bond markets that Ireland should retain its triple A rating and that the government is dealing with the country's financial
Taoiseach's EU160,000
Car Remains in Storage
It has emerged that the Department of Justice purchased a new EU160,000 S-Class Mercedes for use by Taoiseach Brian Cowen shortly after he took office in June.
Former Taoiseach Bertie Ahern retained his S-Class Mercedes when he left office. (All former Taoisigh are entitled to a State car and driver).
The new vehicle has remained in storage. Cowen refused to use it as it would be seen as giving the wrong message in difficult economic times.
Instead he asked that the car be returned but this hasn't happened as it would result in a substantial loss.
Cowen continues to be driven in the high mileage F-Class Mercedes which he had as Minister for Finance but is expected to accept the new car in the coming months.