Ireland – Where did the money go?

Fianna Fail Government sacked, now what?

Well that is the €85bn question, the value of the “bailout” to the Irish economy from the IMF / ECB not to mention asset stripping Ireland’s “fund” for Public Sector pensions which is to be filleted as part of the IMF / ECB conditions. No doubt many in Ireland will find this question relevant as they stare into the abyss of default, repossession and plummeting living standards.

As I have already pointed out the € 85bn Bailout may well turn out to be nothing of the sort. It equates to roundly € 55,000 for every productive worker in Ireland. Add to this annual interest servicing costs of € 4,960 per annum and you get the scale of the problem, Ireland’s public and private debt is simply unsustainable. Most reconstructions, Bankruptcy and liquidations, involve substantial debt reduction, a write off of debt before you begin a fresh start. Ireland is in unrealistic denial about being able to service its Public and private debt making the hard stop of debt default inevitable sooner rather than later.

http://daithaic.blogspot.com/2011/02/terrible-default-is-born.html

The Irish Banks are increasingly likely to need most of the €35bn bailout fund set aside to keep them afloat, latest estimates indicate. Experts hired by the Central Bank are in the final stages of examining the bank's loans, with financial sources putting the final bill at between €25bn and €35bn. This would be the worst case scenario as envisaged in the IMF/EU bailout agreed last November. The new Government will have to pump even more money into the banks than the €10bn earmarked by the outgoing administration, Finance Minister Michael Noonan admitted yesterday.



News that the Government will have to put even more cash into the banks is a bitter blow to the Fine Gael-led administration, which had insisted it would put no more money into the banks until "senior bondholders" had been forced to take losses. The HUGE mistake Ireland made was to guarantee not just deposits but ALL the liabilities of Irish Banks. The Hedge Fund Bondholders have been in LMAO mode ever since. Having made their financial bed of nails there is no going back, Ireland will be forced to sleep on it for years to come.

Well I can’t tell you where all the money went but a lot of it went into commercial and trophy property in London bought at overheated asset values. Let me illustrate the case of a London mansion owned by an alleged fraudster which it is suggested will attract bids of more than €23m tomorrow. Located at 31 Brompton Square, Knightsbridge, the mansion was owned by Achilleas Kallakis, a Greek property tycoon who is awaiting trial for an alleged £61m (€70m) fraud. Barclays Wealth, which has a mortgage on the property, appointed insolvency experts Begbies Traynor as the receiver to the property and the receiver has set tomorrow as the closing date for bids.



Mr Kallakis and his business partner Alexander Williams are awaiting trial for an alleged £56m fraud against Allied Irish Banks and £5m fraud against Bank of Scotland. The two have each been charged with two counts of conspiracy to defraud, 13 counts of forgery, five counts of fraud by false representation, two counts of money laundering and a count of obtaining a money transfer by deception. AIB had to write off €63m as a result of losses on loans which it gave the duo between 2003 and 2007 to purchase properties in some of London's most up-market areas.

The Blurb for the property which is advertised as “distressed property” says;

"A magnificent Grade II listed family house, with one of the largest private gardens in Knightsbridge, perfectly positioned in the crescent overlooking the communal gardens of Brompton Square. The property benefits from full planning permission to develop over 23,000 sq ft of accommodation with underground parking. This is a rare opportunity to create one of Central London's largest and finest private residences.”

It then goes on;

“The property benefits from a number of historic planning and listed building consents, the most recent being granted in November 2010. The latest permission finalises the extent of the basement to approve the current building works and allow the creation of further bedrooms, entertainment space, a spa complex with swimming pool, staff accommodation, a car lift and garaging. The basement extension is part complete with the initial ground works, excavation and secant piling concluded.”

What the last bit means is that the property has been transformed from a decent family home with a larger than usual garden in a nice crescent but off a busy road in South Kensington into a subterranean building site. Not just that but the new purchaser will have to buy the props and finish off this building site which has remained dormant for two years; so much so that the property is on the English Heritage at risk register which says;

“House 1824-39, part of Brompton Square layout. A series of planning and listed building consents have been granted for internal alterations and rear extensions. Works to implement the consents came to a halt in December 2008. An urgent works notice to make the building weathertight was served and complied with in December 2009.”




How 31 Brompton Square could look with only another £10m spent

So the blank cheque to finish off almost quadrupling the size of the house to Listed Building standards along with the swimming pool, leisure centre, car lift, staff quarters etc; which take up the full underground garden space could easily come to £10m as restarting such a project after two years is more expensive than starting from scratch. So added to the £20m sale price this would make the house price £30m sterling. So what is it actually worth, this development left unfinished with borrowed money by people awaiting trial on fraud charges?

The last recorded house sale in Brompton Square, which is mainly flats, was No. 29 which sold in 2007 some 20 minutes before the credit crunch for £10m. This was of course actually habitable (unlike No. 31) and in walk in condition. You have to ask if I was an Oligarski or a Mid-Eastern Potentate (both troubled classes at the moment) would I want to pay potentially £30m for a shell and a building site in Central London. For £4 – 7m they could buy a similar space in less polluted surroundings on private estates at St. Georges Hill, Virginia Water or Gerrard’s Cross in walk in condition. For £12m they could buy a huge mansion on the Crown estate overlooking Regent’s Park. So I don’t think there is a market for this property at £20m and its value is £4 ½ to 6m, if that, around a quarter of what was borrowed after fees. You really have to ask what valuation criteria did Banks use to lend on property like this that they felt 31, Brompton Square would be worth 3 TIMES the highest price ever achieved on this road at the peak?




Today the 3 storey basement containing the swimming pool, leisure centre, staff quarters and 3 storey garage (with car lift) is a 40 foot deep chasm


Add this in London to the many busted investments bankrolled by Irish Banks such as prestige hotels like the Connaught, Berkley and Claridges as well as the estimated 230,000 unsold new homes in Ireland of which 110,000 are “holiday” homes. Add to this the zombie estates, the zombie hotels built for tax breaks and without customers and the zombie developments then there are so many walking dead in the Irish property world that nobody can reliably predict future asset values or ascertain the reality of security behind current borrowings. The Irish Banks incompetent obsession with lending on property has led to their bankruptcy and the effective nationalisation by the Irish State of Allied Irish Banks, Bank of Ireland, Anglo-Irish Bank, Irish Nationwide and I.L. & P.

It is not a new claim to incompetence by the now bankrupt Irish Banks, indeed Bob Geldof pointed out in his 1986 biography “Is that it” that he was treated with derision when he approached a bank looking for backing for a business proposition, not a property. He later went on to cause outrage by describing Ireland as a “Banana Republic without bananas” and when receiving the civic honour of Freedom of Dublin said that “Modern Dublin and its planning can only be explained in terms of widespread political corruption.” With hindsight as Ireland heads into an extended economic winter paying for hundreds of Brompton Squares even Bob the Gob must be astounded at his gift for understatement.

http://daithaic.blogspot.com/2007/08/bob-geldof-and-me.html


31, Brompton Square today

Robin Hood Tax

I’m grateful to my good buddy on the Blogosphere “The Girl in the Café” (see the site on my Blogroll under Blogs I Like) for the heads up on this excellent video on the Robin Hood Tax. The girl has one of the loveliest sites around and is, let us be honest, a bit of a Bill Nighy obsessive. Indeed the site takes its name from a short movie featuring the self same Bill!

This is a campaign video by Richard Curtis and Bill Nighy, about the Robin Hood Tax, a tiny tax on bank transactions that could raise hundreds of billions for public services and to tackle poverty and climate change at home and around the world. Add your own voice to the campaign at;

http://www.robinhoodtax.org.uk

Barack Obama: We cannot afford to waste money on things we don't need

"This is a moment of challenge for our country. But we've experienced great trials before. And with every test, each generation has found the capacity to not only endure, but to prosper -- to discover great opportunity in the midst of great crisis. That is what we can and must do today. And I am absolutely confident that is what we will do. I'm confident that at this defining moment, we will prove ourselves worthy of the sacrifice of those who came before us, and the promise of those who will come after." - President Barack Obama



From the day I took office, I knew that solving this crisis would not be easy, nor would it happen overnight. And we will continue to face difficult days in the months ahead. But I also believe that we will get through this – that if we act swiftly and boldly and responsibly, the United States of America will emerge stronger and more prosperous than it was before.

Of course, like every family going through hard times, our country must make tough choices. In order to pay for the things we need, we cannot waste money on the things we don't.

My administration inherited a $1.3 trillion budget deficit, the largest in history. And we've inherited a budgeting process as irresponsible as it is unsustainable. For years, as Wall Street used accounting tricks to conceal costs and avoid responsibility, Washington did, too. These kinds of irresponsible budgets – and inexcusable practices – are now in the past. For the first time in many years, my administration has produced a budget that represents an honest reckoning of where we are and where we need to go.

It's also a budget that begins to make the hard choices that we've avoided for far too long – a strategy that cuts where we must and invests where we need. That's why it includes $2trn in deficit reduction while making historic investments in America's future. That's why it reduces discretionary spending for non-defense programs as a share of the economy by more than 10 per cent over the next decade - to the lowest level since they began keeping these records nearly half a century ago. And that's why on Wednesday I signed a presidential memorandum to end unnecessary no-bid contracts and to dramatically reform the way contracts are awarded – reforms that will save the American people up to $40bn each year.
Finally, because we cannot bring our deficit down or grow our economy without tackling the skyrocketing cost of health care, I held a health care summit on Thursday to begin the long-overdue process of reform.

Our ideas and opinions about how to achieve this reform will vary, but our goal must be the same: quality, affordable health care for every American that no longer overwhelms the budgets of families, businesses and of our government.

Taken from the US President Barack Obama's weekly address to the nation
- 7th March 2009

Just when you thought it couldn't get any worse.

Michael Winner takes it all!

And all this on the day Findus * and World of Leather go into Administration! So we won't be able to sit on red leather settees eating fish fingers to cheer ourselves up!

* Not a Latin name but an amalgam of "Food INDUStries".

Economic Crisis Update

Luckily the Chancellor Gordon Brown and the Deputy Chancellor Alistair Darling have kept on top of events since, led from the front and not looked like rabbits caught in headlights; There is no shubshitite fur eshperience ash Ghordon ofthen sheys!


A financial crisis unmatched since the Great Depression, say analysts

Guardian, London, March 18th 2008

A century after John Pierpont Morgan rescued the New York stockmarket from a 50% sell off in share prices, his blue-blooded Wall Street bank was yesterday once again at the heart of attempts to contain the deepening global financial crisis.

In an echo of the "bankers' panic" of 1907, JP Morgan responded to what is being billed as a meltdown of historic proportions by agreeing to buy its stricken rival, Bear Stearns.

The length and severity of the crisis that broke over global markets last summer has had analysts delving into their history books. George Soros, who was largely responsible for Black Wednesday, the last bout of serious financial turmoil to afflict the UK, believes there has been nothing to match the events of the past nine months since the Great Depression.

Alan Greenspan, the former chairman of the Fed and the man blamed by many for setting off the boom-bust in the US housing market, agrees with the man who broke the Bank of England. Writing in the Financial Times yesterday, Greenspan said: "The current financial crisis in the US is likely to be judged as the most wrenching since the end of the second world war."

The first 25 years after the war were relatively trouble free. Britain had devalued the pound in 1949 and 1967, but the first real systemic threat to the financial system arrived in 1973 with the secondary banking crisis that affected the "fringe banks" that had provided money to speculators during the property boom. When the crash came, the Bank of England launched a "lifeboat" to prevent the crisis spreading.

Similar action by the Federal Reserve in 1998 contained the fallout from the collapse of Long Term Capital Management, a hedge fund that lost money in the aftermath of Russia's decision to default on its debts. By comparison with recent events, LTCM now seems to be a minor market wobble.

Students of the markets say the only recent parallel with the current turmoil is Japan in the 1990s, but other than that they have had to study the 1930s, when 9,000 banks failed, 1907 when JP Morgan told Wall Street enough was enough after a 50% drop in shares, and even to the series of economic and financial upheavals during the final quarter of the 19th century.

New York Fed Warns On Hedge Funds

New York Times - May 3, 2007

In what Reuters describes as its “sternest warning to date” on the state of the hedge-fund business, the New York Federal Reserve said Wednesday that the funds could represent the biggest risk for a financial crisis since 1998, when the implosion of Long-Term Capital Management threatened global markets.

“Recent high correlations among hedge fund returns could suggest concentrations of risk comparable to those preceding the hedge fund crisis of 1998,” according to a paper written by Tobias Adrian, capital markets economist at the central bank.

Regulation — or lack thereof — of the $1.4 trillion industry has become a battle ground for regulators and lawmakers. The meltdown of Long-Term Capital is often cited as a cautionary tale by those arguing for more oversight of the lightly-regulated investment pools. The crisis at Long-Term Capital took the market by surprise and resulted in The Fed forcing an unprecedented $3.6 billion bailout.

The Fed’s latest worry arose from what it described as a rising correlation between the actual returns of hedge funds, which could point to similar trading strategies that excessively concentrate risk on too few market positions.