A master purveyor of popular misconceptions

Vincent Browne’s late night chat show on TV3 is the best on television. Always amusing, often laughable, Vincent excels at pushing misconceptions on current topics down the throats of his invited guests and demonstrating to us how often he can leave them speechless and unable to correct him.(Of course, some of his guests seem far from expert in the topics in question: Martin Mansergh seems to understand little more about the banking crisis than Vincent himself!).

   Vincent Browne

Vincent

Last night VB insisted that the public should be given an explanation as to why an ignorant and incompetent government should have paid AIB €3.5 bn. for “shares worth only €1.5 bn at the time”. Martin couldn’t answer, nor did other panelists volunteer to, although VB pressed the issue repeatedly for about five minutes.

The reality of course is that VB was referring to ordinary share capital of AIB at the time, which may have been worth €5 bn or so, and therefore the 25% which the taxpayer received should have cost us no more than €1.5 bn or so… Except that we did NOT buy any ordinary shares…we bought Preference shares…and they pay us an enormous 8% interest rate–more than 5 times higher than the interest rate we will be paying the banks on their loan of NAMA property to us…and–In Addition !!–we received the rights (“warrants”) to buy up to 25% of the ordinary shares for an additional tiny sum…less than a euro per share. (That would be enough to enable us to control the bank if we wanted to..)…Extraordinary that no panel member could explain that to Vincent…Perhaps they dont want to let on that we, the taxpayers, are already doing very well out of the two main banks. (We’ve also used them to help fund our nationalised bank, Anglo Irish)

Of course, the more the experts talk down the shares of the banks, the more likely it is that the banks will have to seek capital from the government. Where some other eurozone banks–with similar impairment problems and state subsidies as our banks- are still being valued at 15 times their core earnings or more , the Irish main banks are valued on the market at less than one years core earnings (in AIB’s case anyway–I dont have BOI figures to hand). If the bank needs an extra billion of equity capital then, it is expected to hand over 50% of its shares, whereas it’s eurozone peer bank in the same situation would only have to hand over 6%…So I suppose if some foreign bank comes in and offers two billion for 51%, we would be expected to be extra grateful and hurry to hand over control over tens of billions of euros of Irish depositors money to a foreign bank, and most likely one more in need of deposits than our own banks!!…That’s equivalent to ceding our national economic sovereignty…economic suicide by Irish eejits!

Vincent–do the due diligence…and understand why the existing Irish shareholders of AIB and BOI would be very very glad indeed to take up a rights issue on exactly the same terms as the deal the State negotiated for itself from these two banks, who were brought to their knees by a crisis effecting a third bank. The banks are at the bottom now. NAMA will give them some clarity as to future loss provision requirements. The international economy is improving. And new rules for accounting for future expected loosses will mean a big boost to Irish banks profits over the next few years. Buy the shares, Vincent…or stop complaining about others who do !

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