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The bank bailouts made very little sense, the biggest toxic bank, Anglo Irish Bank, was not a retail bank. They specialised in property financing. Letting them

The bank bailouts made very little sense, the biggest toxic bank, Anglo Irish Bank, was not a retail bank. They specialised in property financing. Letting them go under would not have resulted in the Irish Government having to cover huge amounts of deposits. The current majority party (Fianna Fail) has a history of connections to property developers and this connection is what a lot of people though spurred the saving of Anglo. Now more information is bubbling up about the exposure of European banks to Anglo and the other Irish banks. Europe (especially Germany) wants this mess cleaned up because if the Irish Government drops the guarantee then their own banks will have a huge hole in their finances. These were essentially risky investments made by foreign banks that the Irish taxpayer is now being forced to pay back. Bank of Ireland and Allied Irish Bank were profitable (extremely so in the context of the Irish economy) and if kept in government hands would eventually make back their losses. Anglo made it's profits on the back of the property bubble, not something that will be repeated any time soon. This is the perspective of an Irish economist on the debacle: http://www.ronanlyons.com/2011/01/18/the-irish-bank-sandwich-time-for-the-eu-to-face-up-to-reality/ http://www.ronanlyons.com/2011/01/18/the-irish-bank-sandwich...

yequalsx 16y ago
I'm in Berlin now and it appears the Germans feel these so called bailouts are rescuing countries that don't have their affairs in order. I think these bailouts are mostly to prop up German and French banks. Banks in Europe and the U.S. have finally figured a way to socialize their losses and privatize their gains. Big bonuses are still the norm at American banks even though it was their bad bets that led the U.S. to its current economic mess.
- muhfuhkuh 16y ago
  "Big bonuses are still the norm at American banks even though it was their bad bets that led the U.S. to its current economic mess." I agree wholeheartedly, but there are _so_ many people who readily (and hastily) blame "dumb and poor" people who shouldn't have gotten mortgages, Fannie and Freddie (US loan guarantors) who backed those mortgages, and one rogue liberal US representative (Barney Frank) who somehow bullied the entire 500-member legislative branch and then President Bush into allowing more mortgages to be handed out to poor people, thus causing the worldwide financial crisis. Seriously, that's what people actually believe. What can be done to convince them that it's way, WAY more complicated than that?
  - yequalsx 16y ago
    Yeah, it's hard to convince people that the CRA was not responsible for the real estate collapse. There were property bubbles in Spain, Ireland, Britain, etc. The CRA was responsible for those, obviously. It's easy and natural for one to want to collapse a complicated issue into something manageable and understandable. Even if there is no evidence for it.
    - WalterBright 16y ago
      Holding interest rates artificially low, and very favorable tax treatment for real estate investments and gains, clearly added a lot of air to the bubble.
  - yummyfajitas 16y ago
    ...bullied the entire 500-member legislative branch and then President Bush into allowing more mortgages to be handed out to poor people... Huh? Bush was a huge proponent of subsidizing mortgages, and making it easier for people to get loans without down payments. One of his initiatives: http://www.hud.gov/offices/cpd/affordablehousing/programs/home/addi/ http://www.hud.gov/offices/cpd/affordablehousing/programs/ho... Barney Frank and a large cohort of liberal representatives fought tooth and nail against Bush's efforts to more strongly regulate Fannie/Freddie, but that's a separate matter. All Bush wanted was more strict regulations of their risks, mainly interest rate risk. All mainstream politicians were (and still are) in favor of inflating the bubble by subsidizing home ownership.
- benohear 16y ago
  I think both are true: Those countries do not have their affairs in order and it is also propping up the banks.
bsandbox 16y ago
That was my general perspective too.. ie. that Anglo was the biggest source of the problem. So I was surprised to read this line: "In October 2008, the Irish Independent published a list of the five biggest real-estate deals in each of the past three years. A.I.B. lent the money for 6 of the 15, Anglo Irish for just 1, as a co-lender with A.I.B." Clearly the bank guarantee was a disastrous decision, and in hindsight could have been handled very differently. But at the time, as Lehman and AIG and Fannie and Freddie were in chaos, it didn't seem all that outrageous.

yequalsx 16y ago

I'm in Berlin now and it appears the Germans feel these so called bailouts are rescuing countries that don't have their affairs in order. I think these bailouts are mostly to prop up German and French banks. Banks in Europe and the U.S. have finally figured a way to socialize their losses and privatize their gains. Big bonuses are still the norm at American banks even though it was their bad bets that led the U.S. to its current economic mess.

muhfuhkuh 16y ago
"Big bonuses are still the norm at American banks even though it was their bad bets that led the U.S. to its current economic mess." I agree wholeheartedly, but there are _so_ many people who readily (and hastily) blame "dumb and poor" people who shouldn't have gotten mortgages, Fannie and Freddie (US loan guarantors) who backed those mortgages, and one rogue liberal US representative (Barney Frank) who somehow bullied the entire 500-member legislative branch and then President Bush into allowing more mortgages to be handed out to poor people, thus causing the worldwide financial crisis. Seriously, that's what people actually believe. What can be done to convince them that it's way, WAY more complicated than that?
- yequalsx 16y ago
  Yeah, it's hard to convince people that the CRA was not responsible for the real estate collapse. There were property bubbles in Spain, Ireland, Britain, etc. The CRA was responsible for those, obviously. It's easy and natural for one to want to collapse a complicated issue into something manageable and understandable. Even if there is no evidence for it.
  - WalterBright 16y ago
    Holding interest rates artificially low, and very favorable tax treatment for real estate investments and gains, clearly added a lot of air to the bubble.
- yummyfajitas 16y ago
  ...bullied the entire 500-member legislative branch and then President Bush into allowing more mortgages to be handed out to poor people... Huh? Bush was a huge proponent of subsidizing mortgages, and making it easier for people to get loans without down payments. One of his initiatives: http://www.hud.gov/offices/cpd/affordablehousing/programs/home/addi/ http://www.hud.gov/offices/cpd/affordablehousing/programs/ho... Barney Frank and a large cohort of liberal representatives fought tooth and nail against Bush's efforts to more strongly regulate Fannie/Freddie, but that's a separate matter. All Bush wanted was more strict regulations of their risks, mainly interest rate risk. All mainstream politicians were (and still are) in favor of inflating the bubble by subsidizing home ownership.
benohear 16y ago
I think both are true: Those countries do not have their affairs in order and it is also propping up the banks.

bsandbox 16y ago

That was my general perspective too.. ie. that Anglo was the biggest source of the problem. So I was surprised to read this line: "In October 2008, the Irish Independent published a list of the five biggest real-estate deals in each of the past three years. A.I.B. lent the money for 6 of the 15, Anglo Irish for just 1, as a co-lender with A.I.B." Clearly the bank guarantee was a disastrous decision, and in hindsight could have been handled very differently. But at the time, as Lehman and AIG and Fannie and Freddie were in chaos, it didn't seem all that outrageous.