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Daily commentary: Will Ireland get a bank debt writedown?

My daily commentary is a bit late today. But here are my thoughts. Two articles in today’s links talk about European banks nationalised by the state and the consequences of those actions. The one in Iceland shows the government paying off its IMF bailout loan early as the devaluation, bank bankruptcy and capital control regime there look to have stabilised the situation already. Iceland has also already returned the capital markets and received investment grade ratings. In Ireland, the euro has meant devaluation and capital controls were impossible. And here the sovereign took over the bad debts. Now the government is looking to rescind some of that debt. Will they get a green light to do so? They should since Ireland has fulfilled all of its promises of austerity and reform. Yet they do have to worry.

Ireland has effectively given up its sovereignty. That’s why it has to go begging to the EU to get approval on government actions while Iceland has been able to do exactly what it sees as right. I should also note that Iceland is now prosecuting the former Prime Minister for his handling of the bank bubble and crisis. In Ireland, there has been nothing like that. To my mind, Ireland looks to have made the wrong choices and Iceland appears to have made better choices. And this is what is most responsible for the differences in economic performance.

That’s it for today. Here are the links. Have a good weekend.

  • Groupon UK boss: we haven’t made the same mistake twice | Media | guardian.co.uk
  • Goldman banker always stuck to principles: former teacher | Reuters

    Greg Smith was a principled and competitive student, the kind of person whose strong sense of right and wrong probably pushed him to resign from Goldman Sachs in a scathing letter to an international newspaper, his former teacher and coach said.

  • Buffett Awards Wall Street-Sized Pay Praised by Dimon – Bloomberg

    Berkshire Hathaway Inc. (BRK/A) Chief Executive Officer Warren Buffett, who has said banker greed helped deepen the U.S. financial crisis, attracts the workers he wants with compensation that competes with Wall Street awards.

  • Why Our Recession Call Stands | News | News and Events | ECRI

    Many have questioned why, in the face of improving economic data, ECRI has maintained its recession call. The straight answer is that the objective economic indicators we monitor, including those we make public, give us no other choice. Let’s start with the current state of the economy.

  • Sex-Deprived Male Fruit Flies Turn to Alcohol, Research Shows – Bloomberg

    Male fruit flies become barflies when rejected by females, choosing alcohol-spiked food more often than their successful brothers in a study that suggests it may be due to a brain chemical also found in humans.

  • Repayment of Treasury and Central Bank debt | News | Publications | Ministry of Finance

    In March, the Treasury of Iceland and the Central Bank of Iceland will prepay loans from the International Monetary Fund (IMF) and the Nordic countries in the amount of 116 b.kr. The transaction represents the prepayment of SDR 289 million (the equivalent of 55.6 b.kr.) to the IMF, and 366 million euros (the equivalent of 60.5 b.kr.) to the Nordic countries. The prepayment amounts to just over 20% of the funding from the IMF and the Nordic countries in connection with the IMF-led Stand-By Arrangement.

  • Gold: A risk asset? – QFINANCE

    the price of gold has been highly correlated with risk assets for much of the last 12 months or so. Surprising, because gold is often seen as hedge against fear, and when markets tumble gold usually goes up – for a bit at least. Not this time round. When investors get really shaken up by the state of the global economy, they don’t turn to gold. They flee to the dollar as the deepest pool of liquidity on the planet. A higher dollar price means you get more gold for your dollar and the price of gold falls. So fear only stimulates the gold price when that fear is to some extent under control. Once anxiety hits the point where there is a scramble to the dollar, then gold loses its lustre and sheds value fast. Does this make it a good hedge?

  • Terminated CBO Whistleblower Shares Her Full Story With Zero Hedge, Exposes Deep Conflicts At "Impartial" Budget Office | ZeroHedge

    the CBO was warned at least by Ms. Pham (and possibly others) over the dangers of precisely the issue that Attorneys General are scrambling to shove under the rug in exchange for a wristslap to all mortgage originators (i.e., the same banks that somehow are now getting bailed out by taxpayers and the GSEs on an annual basis). And just like every other issue that merely gets a cosmetic and very transitory liquidity facelift, nothing ever is actually fixed. As Ms. Pham says: "It is unclear how the recent State attorney generals’ agreement to a proposed yet unpublished terms of the $25 billion robo-signing settlement would repair the chain of title issues that continue to mutate. In January 2011, the Massachusetts Supreme Judicial Court reversed the foreclosure actions of two banks for lacking proof of clear title, followed by a decision in October 2011 that a buyer who purchased a house that was improperly foreclosed upon does not make the buyer the new owner of the house; the sale does not transfer the property."

  • From One Ex-Goldmanite To Another: Nomi Prins Statement On Greg Smith’s Resignation | ZeroHedge

    The inherent conflict of interest that firms such as Goldman possess through enjoying the multiple roles of ‘market-maker,’ ‘securities creator’ and ‘client-advisor’ foster an environment rife with systemic risk. The trading revenue portion of Goldman’s profits, as well as its derivatives vs. assets ratio, is the highest amongst the American bank holding companies. And yet, in the fall of 2008, the Federal Reserve approved Goldman Sachs (along with Morgan Stanley) to alter its moniker from investment bank to bank holding company, thereby allowing it to gain access to federal subsidies and potential ongoing support.

  • How a Whistleblower Halted JPMorgan Chase s Card Collection – American Banker Article

    A midlevel Chase executive who oversaw business process execution employees, Almonte says she was fired after just six months on the job for challenging her superiors about the accuracy of the bank’s credit card records

  • The perils of sleep deprivation – CBS News

    We advanced our clocks an hour for Daylight Saving Time . . . which for most of us means an hour of lost sleep. An hour of lost sleep you can add to the countless others we accumulate . . . hours of lost sleep that can take a toll. Which is why we’ll be hearing some learned pillow talk this morning from Barry Petersen:

  • Tracker mortgages crucial to any deal on resolving bank debt crisis – The Irish Times – Fri, Mar 16, 2012

    Restructuring bank debt would put the Government outside the danger zone for indebted states

  • FT Alphaville » Mayo on Greg Smith and the ABCs of change
  • About 

    Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College. Edward also writes a premium financial newsletter. Sign up here for a free trial.