Here are my Top 10 links from around the Internet at 10 to 9 pm, brought to you in association with New Zealand Mint for your reading pleasure.
I welcome your additions and comments below, or please send suggestions for Monday's Top 10 at 10 via email to bernard.hickey@interest.co.nz.
I'll pop any surplus suggestions I get into the comment stream.
1. It was Sean FitzPatrick's fault - Not the All Black, but the Irish banker.
This BusinessWeek piece on Bloomberg gives a lot of juicy detail on the Irish boom and bust, including how the driving force behind Anglo Irish Bank helped blow up the economy with reckless lending to property developers.
Now where have we heard this story before....and how greatful they were for the government's guarantee in Sept/Oct 2008...
The Irish situation is a complete mess.
Europe will be very lucky to get out of it with the euro intact and without riots, or worse.
The other beast born in the late 1980s was Sean FitzPatrick’s Anglo Irish, which, being a smaller bank amid old standbys like Allied Irish Banks Plc and Bank of Ireland Plc, needed to distinguish itself. Anglo Irish began to aggressively offer loans for property development.
“We’d have a lovely breakfast at 7 in the morning at the Shelbourne, and I’d say to my lender, ‘I need some money,’ and he’d give me 10 million quid,” Simon recalls. “I could have gamed the whole system if I wanted. There was no amount of money I wouldn’t have been lent.”
On Sept. 29, 2008, with shares of financial companies plummeting, the government declared it would guarantee the debts of the banks. Regulators, who had done little for the past decade, didn’t realize the extent of those debts, and bankers didn’t help illuminate the scale of the crisis.
A few days after the guarantee, FitzPatrick said during a radio interview that everything was fine: “The cause of our problems was global, so I can’t say sorry with any degree of sincerity and decency, but I do say thank you,” he said.
Now the British government is offering to help bail them out.
Yikes.
When are Irish and British and German taxpayers/voters going to revolt at using their money to bail out all these banks (who are still paying out big bonuses) ? HT Darryl via email.
George Osborne has pledged to help Ireland after new figures showed British banks have a £140 billion exposure to the beleaguered country. The Chancellor attended crisis talks in Brussels to discuss the growing debt crisis in Ireland with the country under intense international pressure to accept an international bailout.
The new figures - from the Bank for International Settlements - disclose that Britain faces the biggest potential losses from a meltdown in the Irish economy. This country’s banks have lent more than those from any other country to the Irish government, consumers and businesses.
3. This is genuinely sad - India's microfinance industry looks to be in crisis and on the verge of collapse, the New York Times reports. HT Troy via email.
India’s rapidly growing private microcredit industry faces imminent collapse as almost all borrowers in one of India’s largest states have stopped repaying their loans, egged on by politicians who accuse the industry of earning outsize profits on the backs of the poor.
The crisis has been building for weeks, but has now reached a critical stage. Indian banks, which put up about 80 percent of the money that the companies lent to poor consumers, are increasingly worried that after surviving the global financial crisis mostly unscathed, they could now face serious losses. Indian banks have about $4 billion tied up in the industry, banking officials say.
The region’s crisis is likely to reverberate around the globe. Initially the work of nonprofit groups, the tiny loans to the poor known as microcredit once seemed a promising path out of poverty for millions. In recent years, foundations, venture capitalists and the World Bank have used India as a petri dish for similar for-profit “social enterprises” that seek to make money while filling a social need. Like-minded industries have sprung up in Africa, Latin America and other parts of Asia. But microfinance in pursuit of profits has led some microcredit companies around the world to extend loans to poor villagers at exorbitant interest rates and without enough regard for their ability to repay. Some companies have more than doubled their revenues annually.
Now some Indian officials fear that microfinance could become India’s version of the United States’ subprime mortgage debacle, in which the seemingly noble idea of extending home ownership to low-income households threatened to collapse the global banking system because of a reckless, grow-at-any-cost strategy.
4. Bubble generation - Economist Umair Haque has written an excellent piece here on the decline of America. Today's must-read in my view. HT Rob via email. I need to buy Haque's book.
It's the oft-unspoken thought on many lips: America's in decline. The glory days are over, the train's left the station. So: is this a great decline? Unfortunately--probably. And I'd suggest that when you take a hard, serious look into the economy--when you voyage past it's superficial, largely irrelevant position in terms of budgets, "gross product", or "unemployment"--that great decline is deeper and darker than pundits, beancounters, and politicians think, want to admit, or even suspect.
The great crisis is a story of structural decline: a decline that's hardwired into the patterns amongst this great machine's many parts. They've settled, over the last three decades and more, into fundamentally bad, toxic equilibria--where speculation precedes investment, model precedes reality, management and financial jargon is a substitute for real insight, cheap talk substitutes for hard work, and indulgence has replaced inspiration.
5. 'Fight the man' - US Congressional staffer Matt Stoller writes persuasively at Naked Capitalism about how Americans are becoming 'debtcroppers', similar in many ways to the 'sharecroppers of the South who found themselves as slaves to their creditors, who became known collectively as 'The Man'. HT Troy via email.
The tone of political commentary in the US is starting to change, even close to the heart of the political elite.
It's taking on a more urgent and divisive feel. As it should.
Young people and what only cynics might call ‘homeowners’ have no choice but to jump on the treadmill of debt, as debtcroppers. The goal is not to have them pay off their debts, but to owe forever. Whatever a debtcropper owes, a wealthy creditor owns.
And as a bonus, the heavier the debt burden of American citizenry, the less able we are able to organize and claim our democratic rights as citizens. Debtcroppers don’t start companies and innovate, they don’t take chances, and they don’t claim their political rights. Unclogging our constipated economy is not a complex problem — we must simply wipe out the bad debt that cannot be paid back. The complexity of the problem lies in the politics.
Debtcroppers have no power, except to stop paying their debts. The constituents I worked with on a fraudulent foreclosure eventually did just that. She and her husband, unshackled by panic, began rebuilding their lives, throwing away their indentured servitude to the bank that abused them. They found their dignity, and used the court system to claim their rights as citizens. They fought the man, successfully, and wiped out their debt.
And that is a very scary threat to the creditor class, perhaps the only thing they are really scared of.
6. Is this the trigger for the long awaited bond rout ? - BusinessInsider reports Former Treasury Secretary Bob Rubin as saying he reckons a US Congressional vote on the US budget deficit due early next year could be the trigger for a collapse in the US bond market and a sharp jump in interest rates globally. HT Gertraud.
Warning of the risk of an "implosion" in the bond market, former Treasury Secretary Robert Rubin says the soaring federal budget deficit and the Fed's quantitative easing are putting the U.S. in "terribly dangerous territory."
Speaking at an event at The Pierre Hotel in New York City honoring Sen. Kent Conrad (D-N.D.), Rubin joined the growing number of current and former officials (foreign and domestic) to criticize QE2. The Fed's plan to buy $600 billion of Treasuries "has a lot of risk," he said, calling the international reaction "horrendous."
Rubin, who issued a similar warning about the bond market at The FT's "Future of Finance" conference in October, said Congress' vote on raising the deficit ceiling next spring could be the "trigger" for a rout in the Treasury market. Several Republican and Tea Party candidates vowed to not increase the government's debt ceiling unless Democrats agree to sharp cuts in spending that may not be politically tenable.
A Congressional standoff on the debt ceiling could spook international investors, Rubin said, alluding to a market event similar to the Dow's 778-point plunge on Sept. 29, 2008, when the House initially voted no on TARP.
7. Mark to make believe - Jonathan Weill at Bloomberg details how US banks are continuing to extend and pretend by playing silly buggers with their loan valuations.
Silly.
Buggers.
That bugger silly taxpayers.
Just when it looked like U.S. banks were starting to reveal the true values of their loans, it turns out there’s an accounting loophole they can exploit to keep bad news buried. Ever since new rules took effect last year, lenders have been required to disclose the “fair value” of their loans each quarter. The results have been something of a mystery, though. Some banks show large disparities between these numbers and the loan values on their balance sheets. Others don’t.
One big reason: Thanks to the loophole, they don’t all have to follow the same definition of fair value. My guess is most investors don’t know this. Often lenders’ disclosures don’t clearly explain which approach they’re using, or that companies have a choice.
And of course there's a song to go with it.
8. Here's why the Irish bailout won't work - Wall St Journal's Alen Mattich explains here why it won't work. He says Irish and German voters won't stand for it in the end. Here's hoping.
HT Daryl via email.
Mish has his thoughts here too.
Market participants are giddy today on the great news that Ireland will go deeper in debt in a foolish attempt to bail out the German and UK bondholders who were in turn foolish enough to lend ridiculous amounts of money to Irish banks in various real estate schemes.
The Irish government was of course foolish enough to guarantee all of this foolishness which means that Irish citizens many of whom were sucked into buying property at foolish prices are now on the hook to bail out the bondholders, rubbing salt into the wounds of Irish taxpayers, not all of whom were foolish enough to freely participate in the general foolishness.
9. 'Get ready for it' - BBC reports a consortium of British businesses are warning the government to prepare for a rise in oil prices because of peak oil. HT Gertraud.
The group says a new "peak oil threat" is likely to be felt in the UK within the next five years. Peak oil is the point when the maximum rate of global petroleum extraction is reached, after which the rate of production enters a terminal decline.
The group, the UK Industry Taskforce on Peak Oil and Energy Security (ITPOES) has produced a briefing update called Peak Oil: the implications of the Gulf of Mexico spill. It warns that in the wake of the Gulf of Mexico oil spill, tightened regulation of deep water drilling could see oil prices rise. 'Horrible shocks' Sir Richard Branson, whose Virgin Group is among the members of the industry taskforce, said the disaster in the Gulf had increased the chances of an "oil crunch" in the coming decade.
He said: "The time to take out our insurance policies against such an outcome is now. We must do this to avoid the horrible shocks to the UK economy which will be mirrored in many other parts of the world."
10. Totally compelling video - Americans are starting to get angry and up close and personal with the bankers that are taking their homes off them. In this video a few challenge a Chase bank executive at some public hearings. HT Hugh via email.
11. Totally brilliant video - This is a repeat of a video from John Clarke and Brian Dawe I've used before, but it has new meaning in the wake of the Irish crisis.
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