Irish banks may need life-support as property prices crash

The Irish banking system faces acute strains and may require a phase of temporary nationalisation as the property slump leads to a wave of defaults, according to a leading Irish economist.

Morgan Kelly, of University College Dublin, said the government is almost powerless to stop the downturn becoming a severe slump. "We're in a classic post-bubble recession, yet we can't do anything that a country would normally do in this situation because we're inside the eurozone," Prof Kelly said. "We can't cut interest rates, we can't devalue, and there is a lot less room for fiscal stimulus than people think. We're stuck.

"We have a domestic recession now colliding with a global recession. It is the state of the banking system that will determine how terrible this will be, and frankly that is looking very shaky."

Irish house prices fell 7pc last year. The pace of decline has accelerated so far this year. The damage is spreading to the broader economy. Unemployment jumped to an eight-year high of 5.2pc in February, from 5pc in January.

We are going to see banks on life-support with very big bail-outs. The precedent for this is what happened in the Nordic countries in the early 1990s when they had to take over the banks. We may have to do something similar," he said.

Twice the amount that it has invested in China and India - combined. This uses Ireland as a platform for export to Europe/EU (Ireland has record low corporate tax regime within EU).

(Whoever) is about as much use as a chocolate teapot..

Some of the same LBO (leveraged buy out) firms that generated the debt in the first place are raising funds to buy it back at reduced prices. Blackstone raised a $1.4 billion fund last November to buy bank loans, and Leon Black's Apollo has bought $1 billion of distressed loans and bonds....

In addition to the buyout firms, traditional loan investors and hedge funds are also buying the debt.

``... even as you read these words, derivatives are emerging as the new core of the crisis. And derivatives are definitely not limited to Bear Stearns. Among investment banks that do not report to the Fed, the biggest players are Lehman Brothers, Goldman Sachs, Morgan Stanley and Merrill Lynch. And among those who do report to the Fed, the five dominant players in derivatives that I mentioned a moment ago are Citibank, Bank of America, Wachovia, HSBC and the biggest of them all: JPMorgan Chase. We believe all are vulnerable, in varying degrees, to the kind of crisis that struck Bear Stearns last week. ''

'You know the reason they did it this way was because, if Bear Stearns had to declare bankruptcy, you'd realize that Bear Stearns paid out billions of dollars in bonuses in January - six weeks ago. If he let them go into bankruptcy, they all would have had to send back their bonuses. This is what they're doing, they're doing it so they don't have to give back their bonuses.'

Bear’s employees currently own about one-third of the firm’s stock. It was considered a point of pride among Bear employees to own stock in the firm, and selling that stock was considered bad form. Indeed, employees often received their annual bonuses in the form of stock. Bonuses received recently are now basically worthless.

Even the company’s top management was required to own significant stakes. Former Bear Chief Executive Jimmy Cayne’s was worth nearly $1 billion as recent as last year when the firm’s stock was at $170. That paper wealth has now evaporated.

The current problem is that asset prices are falling owing to lack of confidence, triggering margin calls on these non-bank lenders. That has compelled them to sell assets, further driving down prices and triggering further calls. Some lenders have been unable to meet these calls, threatening bankruptcy even though their underlying loans are still performing. That threatens a cascade of asset price collapse.

Mar. 14 - Japan, home to the Kyoto Protocol, will host green talks aimed at curbing carbon emissions and funding clean energy projects.

The push for joined-up government apparently has not reached the Civil Aviation Authority. The new pricing regime for users of Heathrow and Gatwick had airlines frothing yesterday of course, but the Bank of England cannot
have been too chuffed either. Heathrow has been given the green light to
increase the prices it charges airlines by 80 per cent over five years.

Every profession is a conspiracy against the public.

While the Bush administration aims to cut gasoline use by focusing on more ethanol and making cars more fuel efficient, it’s totally missing the train when it comes to public transportation...[PIRG's] "A Better Way to Go" states that the federal government should be pouring more cash into mass transit rather than preserving America’s car culture.

It's unclear how the Democratic campaign will end. But that's fine. Nearly a third of the 50 states have yet to hold a nominating contest. Before they do, we'd like to hear fewer character attacks and a lot more discussion of the nation's many problems after nearly eight years of failed Republican rule. That is the Democrats' comparative advantage, they should start to use it now.

Some sources call the scheme “Iran-contra 2.0,” recalling that Abrams [ SoS Rice's National Security sidekick ] was convicted (and later pardoned) for withholding information from Congress during the original Iran-contra scandal under President Reagan. There are echoes of other past misadventures as well: the C.I.A.’s 1953 ouster of an elected prime minister in Iran, which set the stage for the 1979 Islamic revolution there; the aborted 1961 Bay of Pigs invasion, which gave Fidel Castro an excuse to solidify his hold on Cuba; and the contemporary tragedy in Iraq.

Within the Bush administration, the Palestinian policy set off a furious debate. One of its critics is David Wurmser, the avowed neoconservative, who resigned as Vice President Dick Cheney’s chief Middle East adviser in July 2007, a month after the Gaza coup.

I reported on "Top Rated" Alt-A securities in Evidence of "Walking Away" In WaMu Mortgage Pool. If you have not seen the chart, take a look. It's pretty stunning. 92.6% of a Washington Mutual Alt-A pool of recent vintage was rated AAA. Yet 15% of the whole pool is in foreclosure or REO after a mere 8 months!

"So let us consider the implications for the household sector of price declines of the order of 20 to 30%. The math is simple as I will flesh out in this note: 10 to 15 million households will end up in negative equity territory and will be likely to default on their homes and walk away from them. Then, the losses for the financial system from these massive defaults will be of the order of $1 trillion to $2 trillion"