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Netsso – your personal single sign on portal to the web

Yes, Netsso is the sponsor of this blog and I’m proud to acknowledge that and not only because I am a shareholder. But, you may ask, why, then, has there been such a long time waiting for the activity of the blog to re-commence?. Sponsor problems?  No, not that..It was me, being too tired for a while and sort of lost interest in writing out my opinions on various issues for my two readers (not counting wife and child).

No, Netsso…the development has been a bit slow, and a hundred or so persons have done a lot of testing, etc… but we think we have a classy item now…like that old bull with the ring in his nose, walking slowly around the first prize ring at the RDS….he’s no sprinter, but you’ve got quality beef there.

I strongly recommend to all my readers. Go register there and play with it for a few days. Enter a few of your favourite web places, which you wish to return to perhaps- not more than 3000, I would advise, and later realise how well Netsso can bring you to these places from any PC, when you double-click the links, without you having to remember your usernames or passwords, or even the names of the webplaces, – give your links some memory-assisting titles-  and some day you will wake up and realise that you’re not using commercial search engines so much any more and that you’ve taken control of your life in that part of the internet which is of most interest to you, your own internet “world”.

Your Netsso links follow you to any PC, delivered to you in private, and always encrypted when you’re not using them. So, one login to Netsso- only one password to remember – and you can then click to all other places. And when you consider that 40% + of all Google searches are for places previously visited by the searcher, and you don’t have to do that any more, and you can put all the internet places you know and like into your Netsso, including your direct links to online files and folders, your web mail, your music tracks, any web address…anywhere with its own url… then you have..a one click entry portal to your whole internet world. A private Single Sign On (SSO) portal to your interNET…

Links: A good review….……

AIB: Noonan fails to honour predecessor’s commitment

Maybe I am doing him an injustice…He seems a good person and generally reliable..Maybe it is my own fault…I did not notice an official, timely and proper withdrawal of the State’s offer in relation to AIB’s capitalisation, perhaps. If so, I am happy to apologise to Mr. Noonan.

But, otherwise it seems to me that the present Minister of Finance is ignoring the commitment made by his late predecessor and referred to more than once on his Department’s website and, widely, elsewhere…to wit…the State will “provide all the capital necessary” to AIB at a share price of 50 cents. He now proposes to put in €5 bn. capital at ONE cent per share, 50 times less than shareholders were reasonably expecting! (Further, he asks, via the Board of AIB, that shareholders should agree to this act of mass financial suicide, which only the irrational shareholders could possibly agree to)

Remember, the share price was still hanging in there around €1.75 a year ago, until the State (NAMA)  decided to pay only half what the shareholders had been reasonably expecting for their assets transferred to that “bad bank”. This immediately wrecked AIB’s plan to survive as a non-majority State owned bank. It also led to a run on deposits, triggered by a further slump in international trust in the quality of Irish government guarantees and promises, quite understandably if you look at the NAMA story, a run which further added to AIB’s difficulties. Then the Min.Finance announced that the State itself will proceed, if necessary, with the full recapitalisation of the bank by the issuance of new shares at 50 cents each. (This had the effect of actually capping the price at 50 cents.) Now they’ve ignored this promise too- thereby adding further reason for international investors lack of confidence in any Irish sovereign promise.

The official incompetence and dishonesty in all of this would be laughable if it were not so serious for the financial welfare of tens of thousands of ordinary, mostly elderly shareholders who own the majority of AIB’s equity. Our government, led by officials and politicians who seem to know little about banking, is the only government in the world which managed to wreck its banks while pretending to “save” them following the Lehman liquidity disaster.  At the very least we can say that, compared to other governments with similar problems, we have been incredibly unsophisticated at managing a financial crisis. (How can these officials possibly present themselves as suitable managers of an international financial services centre?)

What should happen now?

1. Shareholders should vote No…although its probably too late because the vast majority will not and cannot attend the EGM next week – the bank is owned by c. 90,000 small retail investors- and the proxy system will see the Board’s recommendation accepted (- a Board which already shows allegiance to the new incoming State shareholders over the existing small investors)

2. Shareholders should form a Shareholders Action Group of some sort and start fighting back.  In the absence of another, I’m happy to gather initial names of interested participants. Just send an email to  and then check back here next week. (Also, right-click the title of this article and you’ll get an address which you can email to others)

3. As a start to repair the damage which the State has done to AIB shareholders, the Minister should give a bundle of share purchase warrants to existing shareholders, enabling them to repurchase the company over the next few years at a non-ripoff price.

4.  The Board should examine and report on the consequences of retrieving AIB’s assets from NAMA, which, in any case, should not have been transferred last year as the shareholders approval to go into the NAMA scheme was based on the understanding that it was part of a solution which would leave them with 50+% ownership, a plan scuttled by NAMA itself. The Board therefore had no authority to make these transfers.

Queen, President should jointly inaugurate “Owen Roe” highway

The rather poor road between the border at Aughnacloy and the city of Derry is to be upgraded into a dual carriageway, substantially at the expense of taxpayers in the Republic. My proposal is that this roadway should be named after Ireland’s greatest unsung hero Owen Roe O’Neill, (c. 1585 – 1649). (I’m sure John Hume would agree…)

Owen Roe., nephew of the “Great” (rebel) Hugh O’Neill, spent 35 years in Flanders, learning the military arts, as Colonel of an Irish Regiment, the political arts, as leader of the Irish exiled Catholic community (after the Flight of the Earls), and the diplomatic arts, as the chief negotiator, on behalf of the emigrees, with European political leaders and governments, including Kings in Spain, Prime Ministers (Cardinal Richelieu) in France and elsewhere, Archdukes in the Spanish Netherlands and Popes. His glittering career is still to be comprehensively written up, but it is widely acknowledged that he was a greatly admired and very talented individual. and of noble and honourable character. Even his military opponents had admiration for him. He eventually gave up a certain senior reward from the King of Spain and the opportunity to establish a fine dynasty in Spain or elsewhere- his grandson was eventually recognised as Conde de Tirone by the Spanish- in order to come back to Ireland and help out in the rising of 1641. From 1642-49 he was singularly successful as General of the Ulster Catholic Army, victor at the great Battle of Benburb (1646) and one of the leaders of the Irish nation. He died from natural causes in November 1649 and is buried in an unmarked grave in the old Franciscan Abbey in Cavan.

When Owen Roe arrived in Ireland in 1642, the revolution had begun and many protestant settlers had been thrown off their lands by catholics, in revenge for their own dispossession a generation earlier. Although the number was later greatly exaggerated, many protestants were brutally murdered by undisciplined catholics. Owen Roe put an immediate stop to these atrocities, court-martialling some officers who had permitted it, buring the houses of some perpetrators and even hanging the worst offenders. Protestant leaders acknowledged his role at the time and in later investigations. Indeed, it could be said that, although he was leader of the “catholic” army, he was the first non-sectarian leader of importance in Ireland. In August, 1649, he even acceeded to a request from the Cromwellian Governor of Londonderry to rescue him and the English protestant occupants of that city from their suffering under a lengthy siege by the Royalist forces of King Charles 1. That siege, never commemorated these days, was of greater duration and was more costly in terms of inhabitants lives lost, than the Apprentice Boys siege of 40 years later. To relieve the people of Derry, Owen Roe began his march from near Clones, Co Monaghan and followed a route approximating the route which the new road will take. The Royalists fled as soon as they heard O’Neill was coming.

The new roadway will pass substantially through the old O’Neill lands of Co. Tyrone. By naming it, appropriately, after one of the great O’Neills, it commemorates also one of the first great non-sectarian leaders of modern Irish history. It will also remind us of a “might of been”…We might have been a united, independent Ireland, taking our place among the colonial powers with other European nations, instead of being a nation scattered to the ends of the Earth, and oppressed by sectarianism and tyranny at home. In October 1649, Owen Roe agreed a treaty with the Viceroy, the Duke of Ormonde, under which their two armies would unite against Cromwell, under O’Neill’s leadership, with every prospect of successfully avoiding the subsequent “Hell or Connaught” settlement imposed by Cromwell. Unfortunately the united army never happened, as Owen Roe died a few weeks later. To quote a poem about him, published in the Ulster Journal of Archaelogy, 1856..

“Sagest in the council was he, kindest in the hall!
Sure we never won a battle – ’twas Eoghan that won them all.
Soft as a woman’s was your voice, O’Neill ! bright was your eye
Oh! Why did you leave us, Eoghan? Why did you die? ”


The Big, unasked question about NAMA

We have referred before to the essential immorality of the NAMA scheme, under which bank shareholders must accept a valuation of their equity made by state officials and, if that valuation is sufficiently low, hand over their equity to the same state accordingly, even if, ultimately, the state sells off bank assets at an enormous profit, which is likely. Its some sort of state theft of private property, a theme we will return to.

Today we remind our readers of a big unasked question concerning NAMA. Having done a deal with AIB shareholders to take over certain assets at a valuation of c. 30% less than face value, a deal under which the AIB bank would also be required to sell off overseas subsidiaries and raise extra private capital in order to meet high capital ratio standards, NAMA suddenly declared in September 2010 that, after all, it was not going to value these certain assets at the expected valuation, but at half that, i.e. at a discount of c. 60%. That sudden turn caused the shareholders equity to tumble by c. 75%, any prospective private capital to go away, the bank to fall into state ownership and, eventually, a withdrawal of more than 50 billion of deposits, in spite of a state “guarantee” for these deposits. Naturally the banks Chairman and Managing Director resigned and have said nothing since.

NAMA “blamed” the bank for this sudden change of terms of their agreement.They suggetsed that, at a late stage in the valuation of thousands of individual loan assets, the valuations had to be halved. This is in spite of c. 30% of these loan assets being still in the “performing loan” category and c. 20% or more being related to loans against properties in the relatively booming UK market, where UK banks in the same market have had to suffer only a tiny write down on the values of similar assets. This action by NAMA came as a shock to shareholders and many other observers, including the very professional valuers at investment bank Goldman, Sachs, who had been doing their own calculations around the same time and who ultimately concluded, in a report available to but not mentioned in the Irish media, that, even in worst case circumstances, NAMA’s valuations are “unrealistically pessimistic”. Beyond throwing mud at the reputations of senior management in AIB, NAMA have not commented on this extraordinary turn about. Nor has any Irish journalist investigated the matter, although tens of thousands of Irish shareholders have lost billions as a result of NAMA’s unexplained behaviour. Instead NAMA’s feeble explanation has been accepted meekly by our Business and Economics “editors”.

So, what’s the real story? Well, I don’t know, but I’d like to propose a hypothesis: Officials made an awful botch of the NAMA scheme, and, rather than reveal their incompetence, they are simply letting the banks swing. The scheme was Irelands answer to the banks liquidity problems, emanating from the collapse of Lehman Bros. Rather than “rescue” Anglo Irish Bank alone, officials decided to “rescue” all banks, including relatively sound AIB and BOI, by taking over their long term property assets and arranging for the ECB to provide them cash until such time as these assets could be sold off, years later. Profit on AIB-BOI assets would go towards covering the expected greater losses on Anglo and INBS loans. In return for ECB cash the State would issue guarantees on the NAMA bonds, making them eligible for ECB funding.

It all looked pretty good if it could be worked, but, unfortunately, the officials either didn’t understand the proper role and function of the ECB or failed to properly explain to that institution what would be expected of it in the NAMA scheme. By the time the first short term ECB loans to banks were to be rolled over, the ECB twigged what was up and told the government that the Central Bank of Europe was absolutely not going to be used as a fund provider for a government arranged rescue of Irish banks and that the government must go borrow its own funds and provide them to the banks if they wished to continue the scheme. NAMA therefore was immediately told to stop issuing bonds as far as possible and in the meantime to minimise the amount issued, by imposing the maximum haircuts. The result was that AIB was allowed to virtually collapse into state ownership, in the conspiracy of silence of a very few insider officials, who seemed unconcerned by the losses and stress caused to elderly shareholders, including some suicides. The consequences have included a total loss of private international financial market confidence in the credibility of Irish State guarantees, and in the competence of its officials and the loss of €160 billion of deposits from the financial system. Next to go will be the IFSC, an offshore financial center that, like other such centers, requires international confidence in the quality of management and regulation by the local supervisory authorities.

The one successful manoeuvre of our top financial officials has been to shape the academic commentary against the bankers and completely mis-lead the sheeple in the media.

We’ve had the stress tests; now where’s the PR?

The results of the stress tests are being presented as an urgent and unexpected need for more capital to cover losses by the Irish banks. The reality is that the extra capital required is to protect the banks in the event that something highly unlikely might happen to our economy and society in the medium future. The assumptions underlying the stress tests are not realistic and, if applied in similar tests in other countries would undoubtedly foresee the theoretical failure of dozens, or hundreds, of banks across the UK, Europe and the US.

In our case, our attempt to predict a worst case scenario by using severely cautious assumptions, an attempt one suspects which is prompted more by the need to address our government’s loss of credibility in the last two years rather than that of our banks, is already being seen as reason for further sell off of bank shares and further loss of confidence in our banks. The fact that our Minister of Finance said today that he expects Irish bank paper to be further downgraded – this is being widely reported on the financial ticker tapes- is interpreted itself as a statement of lack of confidence in our banks by our own government !. (Of course this is not new, as we have had a Central Bank Governor stating from his first day in office that he would like to see our banks taken over for some token payments by any foreigners, even Chinese!)

Much of the damage done to our banks has been done by government policy and ill-considered statements by senior officials. The government guarantee, given in consideration of 70 bn takeover of banks assets, has proved to be prettry much worthless. The NAMA fiasco has wrecked participating banks and damaged sovereign credibility. The expectation that ECB could be tapped as a funder of the Irish bank rescue programme has proved to be embarrisingly ill-conceived. Some statements by officials have directly led to loss of deposits in the banks, and in reality the market has shown its opinion of the Irish Government’s guarantee for depositors by taking c. 100 bn euros out of our banks in the last six months

Its time for some PR, folks. If we can spend tens of millions on stress testing, why not spend 5 million or so countering negative reporting and interpretation in the financial markets? We should hire half a dozen foreign spokesmen, in Frankfurt, London, New York, Hong Kong, Paris, to help local journalists properly interpret what the reality is in Ireland, and support these by professionally produced factual data and other PR material in the local offices of the Irish Trade Board and IDA in the 30 countries or so where they operate.

Nobody wants the bank shareholders votes?

I haven’t heard one word of sympathy for bank shareholders (AIB and BOI) during the election campaign, in spite of the injustice done, and still being done, to them. And in spite of their very large numbers. There must be even more votes to be collected from bank bashers and general begrudgers.

As we have pointed out before, the majority of both the main banks was owned by c. 150,000 Irish resident individual “retail” small investors. That’s about 3000 per constituency and on top of that add spouses and family…making a total of perhaps 500,000 votes from bank shareholder families right across the nation. They are not normally wealthy people, but rather typical, but older, middle class…retired public officials, middle managers, retired professionals, farmers, small businessmen…the backbone of our economy and society. Some of them have been severely distressed by the loss of their savings , inability to keep up VHI payments and prospects of  low quality care in later life in public care homes.

What “injustice” you might ask? Well consider: The original NAMA deal  offered their banks liquidity in exchange for long term illiquid assets, at an expected discount of c. 30%. After the deal was done–i.e. banks had made their agreement with NAMA- that state institution lowered the buying price by c. 100%..i.e. paid half the expected price.  This had the effect of devaluing the shares in the banks by so much that, in effect, almost all equity in the banks was passed over to the State.  (So, a decision by officials concerning the possible future value of private property results in the propery being handed over to the officials… in  modern Ireland !) (In the case of AIB, NAMA upped the ante last September, after the AIB directors had all but  completed, successfully, the plan to recapitalise the bank that had been agreed with NAMA…Why has NAMA not been asked to properly explain its sudden change of mind and devaluation of AIB’s assets ? This happened at a time  when the renowned investment bank, Goldman Sachs was preparing its own report on Irish bank asset values, which estimated that NAMA’s valuations were “unrealistically pessimistic”, a report never discussed in the Irish media)

So, shareholders were done, wrecked and wiped out by mysterious decisions made, in their own interest, by officials. Not only that, but NAMA never paid  for the property anyway. Instead, the mechanism by which the banks were to be enabled to borrow liquidity, i.e. the government guarantee for tradable NAMA bonds, never worked out..In reality, the officials so mis-managed the bank support programme in Ireland that the credibility of both the banks and the sovereign Irish nation was  destroyed, to the point where no investor will lend money to the nation, on  any state guarantee, and a 100 bn. of deposits ran out of the banks.

Further, even if the original NAMA bargain was delivered by NAMA, it was immoral, because it clearly put the downside risk- of the target sales price for bank assets not being achieved- onto the shareholders of the banks, but kept all the upside potential gain for the State itself. Should we allow that in modern Ireland? And now that NAMA has in effect reduced the target price to c. half the envisaged level, shouldn’t the shareholders be given a break and a promise that they will be paid any extra profit that NAMA will make on their property, considering that they’ve already had to take such an enormous loss on it?

Service back up, sort of

We moved our server from one data center and replaced it with a new one in a second location. Then the second one crashed and all data was temporarily lost. Now we seem to have everything going again, except music to your right. But keep the faith !

Service Interruption

I regret to advise that this site may not be always accessible during the period up to January 31, 2011. This is due to the need to move to a new server in a new data center, and transfer all operating system, software and files. We regret any inconvenience to our members.

More good news for the banks not mentioned !

This is a post I sent to the blog today. The discussion followed a recent speech by CB Governor Paddy Honohan

When the Governor raised the matter of accounting practices, I thought he was going to tell us some good news. He said:

I have already railed elsewhere against the backward-looking loan-loss provisioning practices encouraged by International Financial Reporting Standards (IFRS) and still all too pervasive in the reporting by most of the Irish banks. …”

But he should know that IFRS is to be changed !!.

Firstly, though, it seems to me that the losses being incurred by our main banks are related NOT to already crystallised losses, but to estimates–including overestimated NAMA figures- related to “marking to market” of tens of billions of euros worth of loans still with many years to run. (Many of the properties, we can be sure, will over time be inflated out of their current loss status). It is for this – estimates of future losses which must be debited to P&L account now – that we must shove out the shareholders and let the State take over the banks. (Uniquely in the world, of course !)

But, IFRS is to be changed. The Governor should have reminded us that the G20 two years ago asked the International Accounting Standards Board to develop a more realistic and less catastrophic accounting treatment for banks’ impaired banking assets ( book losses as opposed to equity trading losses). They did, and proposed their solution to governments a year ago. Their solution basically would permit many banks to re-estimate their loan losses every year and write them off gradually over the remaining maturity periods of the loans (in certain circumstances). This will be enormously helpful to Irish banks and to the capital requirements/ Basle ratios situation. But the EU has refused to agree the new proposals as yet–they probably will agree a version in early 2011- because it doesn’t suit the French/German banks, who derive much of their profit from trading activities, as opposed to banking.

Why didn’t the Governor talk about this, since he raised the topic of accounting treatment of impaired assets?? What’s he trying to hide??

I also dealt with this prospect previously ..

– or scroll down a few posts to see it.

Goldman Sachs says Irish bank losses not so bad

Why don’t they let us see the report published last week by Goldman Sachs, which says, in essence, that we have been far to negative in estimating our financial losses, at bank and national level. As a result, we are forcing the banks to raise unnecessary capital (and the shareholders to consequently take unnecessary losses). Some new capital may be required, but not on the scale indicated by the regulator.

In particular Goldman blames NAMA, as being far too pessimistic in estimating the value of banks assets being transferred to it. Even in a worst case scenario, the organisation is “unrealistically” pessimistic, they say. Our banks, which are forced by our government (-who then takes them over !!-) to face their full losses- and more – up front–uniquely in the world – have not in fact, lost that much more, as a percentage of their total loans, than banks in other countries, whose losses are covered up by government rescue schemes. (This applies in the EU also, where bank losses in every country are effectively cloaked by hidden bail outs). Goldman says:

“…Aggregating over the entire loan book, the assumptions
would give us gross credit losses for domestic banks of
€35bn over the 5-year cycle, which amounts to 8.4% of
total loans, and 22% of GDP (Table 1). This compares
with our colleagues’ estimates of total credit losses
worth 7% of GDP for domestic banks in the US, and
6.5% of GDP in the UK…”

They also say:

“…But if our estimates suggest anything, it is that the
ultimate losses, and the ultimate burden on the Irish
government, will be quite a bit lower than estimated by
NAMA, which is likely to make money on its
investments. Correspondingly, the government will
significantly have over-capitalised the banks, perhaps
by tens of billions of Euros….”

Its extraordinary that our media have not reported this to our people !.

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Video: About NAMA(2009)