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Recession News II

Posted by | Evil Kristos | February 23, 2009 | 1 Comment

While the country is falling apart the government is playing the blame game. They bail out banks with insane amounts of money while at the same time introducing a 10 percent pay cut for public workers. As if this wasn’t enough they announced to reduce the funding on schools for children with special needs. I understand that the government is overspending but this is simply outrageous.

Interesting is where the money goes. Banks struggle all over the world but what happened in Ireland really does deserve a closer look.

It appears that in the process of nationalising the biggest investment bank (Anglo Irish) government and financial regulator failed to notice that the bank had previously made “arrangements” to look a little better on paper. These “arrangements” people like you and me would normally call fraud but that’s only people like you and me.

As usual until this very moment no one was charged with anything; quite the opposite actually. The financial regulator that was in charge at the time has conveniently retired since and as you can guess not without receiving a golden handshake.

Our wise and mighty leader Brian Cowen in the meantime still tries to explain to us what exactly happened when Anglo Irish was nationalised last autumn.

I should probably give you a little background information on the subject, on what happened although that is easier said than done.

Last September and just hours after government had announced their bank guarantee scheme a group of investors deposited 4 billion Euros in the struggling Anglo Irish bank. This alone would have been slightly dishonest but not too bad. What makes it dodgy is that these 4 (and the figure might be closer to 7) Billion Euro were given to the bank as a loan and we can safely assume to make them look better. Irish Life & Permanent – they are the “investors” – knew at the time that this loan was secure since the public would guarantee for it.

Brian Cowen claims that the government was unaware of this transaction when they introduced the scheme. Labour Party leader Eamon Gilmore commented this by saying that the banks were “making a monkey” of Mr Cowen. The Taoiseach on the other hand is trying to convince us that even the board of directors in Anglo Irish wasn’t aware of the transaction which happened – and this has got to be coincidence – on the very day the bank’s financial year ended. With the 4 – 7 Billion from Irish Life and Permanent Anglo Irish looked as if they had done quite well. This was untrue and their denial subsequently has cost a lot of people a lot of money.

Let’s not forget; Anglo Irish was very popular with small investors as well. Some people put their whole retirement fund in to Anglo Irish and their money has literally vanished since.

You might say that this is nothing compared to what happened elsewhere but the story doesn’t end here. There has been another €300 Million investment that only afterwards became public. What basically happened was that Anglo Irish had given a loan to a group of investors (that are now known as the Golden Circle) to buy stock of the bank. This isn’t illegal of course even if we assume that they got a good deal at the stock exchange but now comes the interesting bit. Anglo Irish subsequently got nationalised by the government meaning that the shares worth absolutely nothing. The investors on paper suffered a total loss on their investment. What a strange deal you might think but guess what; the loan was given to these investors with a few rather unusual strings attached.

Although the Golden Circle had offered €75 million of collateral the bank can’t go after it, meaning these investors keep their houses. From what we gather Anglo Irish will write off this loan meaning that this group of investors not only keep their homes they also have no debts. Do we think something smells a bit fishy here? Wait, it ain’t over yet.

These 10 members of the Golden Circle until this very day remain anonymous and with a little luck they won’t just keep their houses and have no debts, there is a good chance that they will get reimbursed. How you might ask and here is what people that know more about the subject guess:

Right now the shares of Anglo Irish are being evaluated. Should they come to the conclusion that Anglo Irish shares at the time of the nationalisation of the bank were worth something than the lucky winners of this little lottery will get some of their money back which – and let’s not forget that – wasn’t their money in the first place.

The loans are written off which makes this repayment a profit. Since technically and on paper these investors have taken a loss they not only won’t have to pay any tax on this profit but they can “use” these losses to save tax on other profits they made. Does this sound a little dodgy to you?

Well I am sure the public servants will be delighted to give ten percent of their wages to help bailing out banks and reimbursing the Gold members. And the children with special needs that now have to go to regular school which probably means that they are steering towards a career in unemployment (which will cost the society more than the few grant it is saving now) will understand that we have to tighten our belts.

The one thing I cannot believe is that there are still people out there who buy a gun to rob a bank. Obviously there are better, more convenient and less dangerous ways to achieve the same. And if you look at the figures the white collar criminals are getting a lot more in return.


One Response to “Recession News II”

  1. Booppyaddelve
    March 2nd, 2009 @ 13:27

    Thank you!

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