LETTER TO TD TOM HAYES IN RESPONSE TO HIS STOCK RESPONSE TO THE REQUEST NOT TO PAY THE BILLION-DOLLAR ANGLO BOND OF NOVEMBER 2nd 2011:
Tom, thanks for your comprehensive reply, which I would now like to fillet point by point:
Thank you for your query regarding Irish Bank Resolution Corporation (IBRC), formerly known as Anglo Irish Bank. You call it what you like, I'm not buying into this alias business, the nom-de-plume; Anglo it was when it helped to demolish the Irish economy, Anglo it will always be to me and mine.
I’d like to state that the obligation on the State to redeem bank bonds arises from the decision of the previous Government to guarantee bank debt under the terms of the guarantee from the 29th of September 2008. Ye knew full well of that decision before the last election, voted en-masse against it; if the same vote on the same issue were to be put to ye now, every man jackass of ye would tick the opposite box, and bow – as the gombeens of Fianna Fail and the Greens did before ye – to the bully-boys of the ECB. There isn't a single TD of principle among ye, not a one.
More specifically, the obligation on the Government to redeem unguaranteed bondholders in Anglo Irish Bank arises from the previous Government’s decision to subsequently nationalise Anglo Irish Bank thereby taking on the responsibility not only for all of its assets but also all of its liabilities. This is your second use of the word ‘obligation’; NOWHERE in the document of last November does it state that we have to bail out the bank bondholders, NOWHERE has anyone from the EU, EC or ECB stated categorically that if we don’t pay these bonds they’ll pull their bank funding. The only ones making those statements are our own – we’re blackmailing ourselves, like the black sheriff in Mel Brooks’ Blazing Saddles, we’re holding the gun to our own heads. ‘A nod is as good as a wink to a blind horse’ says Minister Noonan – sorry Michael, not in this instance. When the bank guarantees were given it was on the back of false information from the banks themselves; that guarantee is invalid. If the legislation isn't already in place to wind up the zombie banks such as Anglo (and I believe it is) it should be done now, and all those bondholders told where to go. If you want to talk of ‘obligations’ Tom, what of your obligation to the Irish people, those whose interests you are supposed to represent - does that not supersede all else? Would you seriously tell me it’s in the best interests of the Irish people to assume the responsibility for these bank bond debts, taken out when all the banks were privately owned, without a single cent of a haircut?
The Minister for Finance has set out the Government position on this issue on numerous occasions. The Minister met with ECB President Trichet on the 17th of September to discuss this specific issue. During the meeting Mr. Trichet voiced his opinion that he is against such action for two reasons:
1. Private sector involvement in Greece had a very quick knock on effect into Italy and Spain and private sector involvement didn’t seem to be the way forward if you were trying to encourage the markets.
2. He also added that Ireland had done particularly well over the summer. He mentioned the narrowing of the bond spreads and he said he felt that anything to do with the burden sharing might knock to the confidence of the market and the spreads would go back out again and that we might lose the ground we had gained. So, what do you expect from a pig but a grunt? What do you think – what did you EVER think – Mr. Trichet was going to say? The major difference between Ireland and Greece, Portugal, Spain, Italy is that their major debt is sovereign, their crazy borrowings from the big German and French banks were by their respective governments - ours was private, €100bn lent to our banks by those foreign financial institutions, private transactions between consenting adults. The bondholders assessed the risk, took the plunge, lost; according to the most basic rules of the bond markets, according to the fundamentals of the capitalist system, they should then have taken their haircut. The EU/EC, though the jack-booted ECB, has decreed otherwise. We are being used as a buffer to prop up the Euro, to protect the big German and French banks. If this IS under threat – as claimed by Minister Noonan - then that is a blatant abuse of its power by the ECB. We should challenge that and expose it for what it is.
The Government and the Minister have always set out that burden sharing with senior bondholders in the former Anglo Irish Bank and Irish Nationwide would only occur with the agreement of the ECB. What is clear from our meeting with Mr. Trichet in September is that the ECB would not favour such an agreement. I'm glad you specified ‘The Government and the Minister’; before ye became ‘The Government and the Minister’, when ye were campaigning in the election, it was a very different story. Then again that isn't the only broken promise from ye.
The redemption of this specific bond is a matter for IBRC (formerly Anglo Irish Bank) as the redemption of the bond will be made by IBRC and will not be funded by the exchequer. It should be noted that IBRC has recently announced that sale of its $9.2 billion US loan book has begun and that approximately $3.5 billion has transferred to buyers. The money from the sale will allow the Bank to repay these guaranteed bonds and will also allow the Bank to reduce its borrowing, including Emergency Liquidity Assistance (ELA) from the Irish Central Bank. This one, Tom, really sticks in my craw. There are lies, damned lies, and then there are the pronouncements of politicians – this is world championship form, fair dues to ye. As pointed out by yourself above, we – the people – OWN Anglo, 100%, we’ve committed nearly €30bn to it. Every cent that comes into it is ours, every cent that’s paid is from our purse. To state ‘will not be funded by the exchequer’ is simply dishonest Tom, an outright, blatant lie and an insult to the intelligence of the people; our exchequer, our bank, our money, incoming and outgoing.
The Government has made clear that technical discussions are underway with our European partners to find the most cost effective way of resolving the promissory notes that were the means by which the previous Government recapitalised Anglo Irish Bank. It’s not to find the most ‘cost-effective’ way, it’s so our European ‘partners’ can find a way to ensure they get that money, all of it, every red cent.
Through a long negotiating process to the end of July, the Government has successfully reduced the interest costs on the funds that we are borrowing from the EU and IMF by €10 billion over the lifetime of these loans. Utter BS Tom – the Government didn’t reduce the interest costs, the EU/EC/ECB did so all by themselves, a by-product of the Greek bailout, and only when even they could see that the original interest rate was going to leave us very quickly in a position where we wouldn't be able to pay anything. Tom, the interest (or coupon, as it’s known) on every one of these failed bank bonds is already paid by the time of ‘maturity’, so the interest we’re paying on the borrowing to pay the final principal sum is interest on top of interest.
The value of the support that we are receiving from our European partners now and in the future far outweighs any short term gain from imposing burden sharing on these senior bonds. Really? We’re getting support to the value of about €100bn (the final cost of the €70bn bank bonds, when interest is added)?
This support allows us to pay for essential public services for citizens, including amongst others pensions, social welfare, education and health. In 2011, we will borrow over €15 billion to pay for these essential services. Ah yes, the hoary ould ‘How will we pay the Guards, the Nurses, the Teachers’ frightener. The Guards, the Nurses, the Teachers, have all seen drastic cutbacks in their numbers but with no cutback in the service they’re all expected to provide; meanwhile the paper-pushers in the civil services, those up the line from the Nurses for example, stay in place, getting in each other’s way. Tackle the problems of a) the number of top-level civil servants, in the HSE especially, b) the rates of pay for those individuals, c) the pension levels and conditions of those same people, tackle especially the levels of salary/expenses/pensions for yourselves (I know, not hugely significant money-wise in an overall context, but morally – yes) and ye’ll go a long way to tackling that budget deficit.
I hope this response has addressed some of the issues you have raised and I thank you for your communication. No Tom, it hasn’t. Until we get out from under the bank bond debt there won’t be a cent for the banks to lend to business, all their reserves held to pay off these bonds as they come due, and until the banks start lending to businesses there will be no growth. No growth, no hope - you don’t have to be an economist to understand that piling the bank debt on top of our existing Gross Government Debt on top of the borrowing we’re going to need to close the deficit over the next few is going to lead to default – dammit you don’t even need to be a mathematician, it’s simple arithmetic.
I now have a number of questions for you, and if you can't answer them directly, then don’t bother:
1) Justify to the Irish people the unprecedented interference in the most fundamental rule of financial trading, the one we hear time after time on all those glossy ads – the value of your investment can fall as well as rise. That rule wasn’t just broken, it was smashed to smithereens, the bank bondholders getting out not just with their original investment intact, but with full profits.
2) Justify to the Irish people why the institutions whose billions fuelled the inferno that engulfed us should escape without even being singed;
3) Justify to the Irish people the transference of private debt to public shoulders.
4) Justify to the Irish people the failure by this government to stand up to the implied blackmail tactics by the ECB.
5) Justify how a so-called community can tolerate a situation where the big and the strong bully the small and the weak into assuming a debt to the big and the strong that was never theirs.
6) Justify to the Irish people how, less than a week after the HSE announce a 10% cut in funding to those who care for the homeless, due to lack of funds, we can pay €1bn to the vultures who feed on the carcasses of the crippled bonds on the secondary markets.
I could go on Tom, but I won't. Yere actions shame us all now, but they will shame ye for eternity.
Regards, Diarmuid O'Flynn.