Dublin Opinion

[Image taken from http://p.twimg.com/AntBX7KCAAMyRvR.jpg]

Irish outstanding credit remains dominated by finance and real estate - a ratio of 4:1 between these sectors and the rest of private enterprise.

Credit advanced to Financial Vehicle Corporations accounts for 39 per cent of all outstanding credit, and 70 per cent of all financial intermediary credit.

A short introduction to Financial Vehicle Corporations in Ireland is available here.

The names of the Financial Vehicle Corporations listed as resident in Ireland (Q4 2011) are available here as an excel spreadsheet.

[With thanks to jackbethel]

Two weeks ago the Irish State via the Irish Bank Resolution Corporation paid out full value of €2.5 billion to investors in Armoin Residential Securities - a residential mortgage-backed special purpose vehicle set up by Irish Nationwide in 2009 and listed in the IFSC for tax avoidance purposes - these SPVs remain the great untold story of the Irish mortgage sector -

http://www.ise.ie/app/announcementDetails.aspx?ID=11169838

Armoin was given a triple-A rating by Fitch in 2009.

http://www.alacrastore.com/research/fitch-ratings-Fitch_Assigns_AAA_Rating_to_Armoin_Residential_Securities_Limited_s_Mortgage_Backed_Notes-464202_pr_frame

Within 12 months over 8 per cent of the loans within Armoin were in arrears. So, Armoin and Irish Nationwide, instead of following through on the vehicle as void, swapped the defaulting loans for new, performing, loans.

As at 28 February 2010, the percentage of Loans in the Portfolio that were In Serious Arrears was 8.61 per cent.. Because such percentage is greater than 6 per cent., the Issuer was unable to acquire (and Irish Nationwide Building Society (”INBS”) was therefore unable to sell) any New Loans pursuant to the mortgage management and agency agreement (the “MMAA”) dated 9 March 2009 between amongst others, the Issuer and BNP Paribas Corporation UK Limited (the “Security Trustee”) and the mortgage sale agreement (the “MSA”) dated 9 March 2009 between amongst others, the Issuer and the Security Trustee. Such situation was neither in the interests of the Issuer and its Secured Parties (as the increased arrears may ultimately result in losses to such parties) nor INBS (as INBS cannot benefit from the sale of New Loans to the Issuer).

INBS therefore proposed and the Issuer agreed with the consent of the Note Trustee and the Security Trustee that, notwithstanding that the Transaction Documents do not expressly permit substitutions, the Loans In Serious Arrears (amounting to €62,575,018.41 in Principal Balance) (the “Substituted Loans”) be removed from the current portfolio and be replaced (the “Substitution”) with New Loans which are not In Arrears (the “New Portfolio”). INBS certified that such Substitution (as defined below) would be beneficial (and therefore not prejudicial) to the Issuer and its Secured Parties (including the Noteholders).

This was not enough and in 2012 the notes were recalled and paid out at par with interest.

The prospectus for Armoin stated clearly that if Irish Nationwide was not in a position to pay then the investor will lose out - yet the Irish taxpayer paid out full value on an investment from a bankrupt bank, even though the contract itself clearly states that such a risk of non-payment was part of the deal…

“There can be no assurance that Irish Nationwide will have the financial resources to honour its repurchase obligations under the Mortgage Sale Agreement. This may affect the quality of the Loans and their related security in the Portfolio and accordingly the ability of the Issuer to make payments on the Notes.” (p.17)

http://www.ise.ie/debt_documents/fprospectus-armoin%20-%201_8628.PDF

Armoin was transferred to Anglo Irish Bank in 2011, along with Irish Nationwide. This was despite the fact that Armoin was a separate legal entity to Irish Nationwide.

going back to the prospectus:

The Notes will be obligations of the Issuer only and will not be guaranteed by, or be the responsibility of any other person. The Notes will not be obligations of, and will not be guaranteed by, the Note Trustee, the Security Trustee, the Arranger, the Account Bank, the Servicer, the Agent Bank, the Paying Agents, Irish Nationwide Building Society (Irish Nationwide) or any company in the same group of companies as, or affiliated to, Irish Nationwide. The issue proceeds of the Notes will be used by the Issuer to purchase the loans and their related security from Irish Nationwide (the Loans). (p.2)

The Irish State has taken the decision to pay out at par on Irish mortgage-backed securities - of which there is at present somewhere between €50 bilion and €76 billion.

This does not include mortgage-backed bonds which were issued as a separate scheme from 2004 to 2008 (under legislation passed in 2001 and amended in 2007), and of which Bank of Ireland alone has €20 billion securitised.

Irish bank investment strategies…

Figures from the Central Bank of Ireland, table A14.1

History Discussion

Friday 27th April - The Mechanics Institute - 6:30pm

In the special setting of the Mechanics Institute, Middle Street, Galway, three Young Historians will present on their areas of expertise.

John Borgonovo lectures in History at University College Cork. He has published extensively on the Irish Revolution of 1916-1923, including the books, Spies, Informers, and the Anti-Sinn Fein Society: The Intelligence War in Cork City, 1920-1921, and The Battle for Cork, July - August 1922. Later in 2012 he will publish his study of Cork City during the First World War, The Dynamics of War and Revolution.

Sonja Tiernan lectures in History at Liverpool Hope University. She has a PhD from UCD and has held fellowships at the University of Notre Dame, Trinity College Dublin and the National Library of Ireland. Her exhibition on Hilda Tweedy and the Irish Housewives Association is currently on display throughout Dublin City Public Libraries. Her latest book, Eva Gore-Booth: An Image of such Politics, is published in 2012.

Niall Whelehan is an IRCHSS Research Fellow in History at NUI Galway. He holds a PhD from the European University Institute, Florence and has spent periods as a visiting scholar in the USA and Germany. His forthcoming book, The Dynamiters: Irish Nationalism and Political Violence in the Wider World, 1867-1900, examines transformations in revolutionary violence in transnational contexts.

The event will be chaired by Dr John Cunningham, History Department, NUIG.

Admission: €8/€6

Taken on Monday, 17 April 2012

Ah, it could be worse. I could have paid money to read this article:

“Böll was writing about the Ireland of half a century ago, but how much, in its mass psychology and deep culture, has the country really changed since? Were we not, in the boom years, still in the grip of a 19th-century land hunger?”

In the past decade leading to the financial crisis of 2008 property bubbles happened in Spain, France, Australia, Denmark, the UK, the USA and Ireland which illustrates that there is nothing unique or 19th century about Ireland’s ‘land hunger’.

In an April 30th 2011 post on Dublin Opinion Conor points to data from the US, the UK and Ireland.

And in a Jan 2012 post he showed a chart with OECD data from 1970 to 2009 and added:

“That asset price speculative bubble takes off globally in the mid-1990s, as shown above, and Ireland’s position and relationship with it is an integral part to the story of what happened in Ireland during the Celtc Tiger Years - it’s wasn’t all Dells and Amazons, you know?”

In the Socialist Register 2012 David Harvey recently suggested that dynamics of the speculative financial system in the 20th and 21st century with it’s inherent volatility have been closely linked to its absorption within successive land speculation and property bubbles across the world:

“Property market booms and busts are inextricably intertwined with speculative financial flows and these booms and busts have serious consequences for the macro-economy in general as well as all manner of externality effects upon resource depletion and environmental degradation.”

In his article he provides a fascinating account of how the reshaping of the New York skyline with a festoon of landmark skyscrapers is the legacy of one such speculative boom and bust.

But in Ireland it has nothing to do with power relations, the development of capitalism or the broader issues of how capitialists make a buck at the expense of everyone else these days. Instead it’s something almost fascist- like with ideas of a coherent, collective ‘Irish’ identity, as if we are all in contemporary Ireland members of the same inter-genenerational family or slightly broader village community, distantly linked by blood, living in Achill. Pure Irish with our in-breed mentality.

Lord save us from poetasters, establishment columnists and drama critics.

Next week, how Playboy of the Western World tells you all you need to know about the dangers of self-aggrandizement, and how best to resolve family desputes and inter-community strife.

While away in Mayo I was reading Nick Shaxson’s Treasure Islands, which is an excellent guide to everything you would like to know about tax havens, how they developed and how they operate now. Once back curiosity lead me to an old post on the Treasure Island blog that I have linked to before, one which vilifies the official Irish stance on corporation tax. But it also brought me back to the Tax Justice Network’s Secrecy Jurisdiction report for Ireland and I re-read the section on the history of the IFSC, which I clearly just glanced over before, no doubt thinking that it was old news…

Reading it again I realised that I hadn’t paid any attention to the sources.

The biggest early driver of the project was the (now billionaire) financier Dermot Desmond, who put an initial proposal for a financial services centre to the government in 1985, and whose stockbroking firm part-financed the full-scale feasibility study by PWC. Desmond (who also owned some of the original buildings that would become designated to the IFSC project) put this proposal to his friend, the politician Charles Haughey, which led to a policy document launched by Haughey’s party, Fianna Fáil, during the 1987 election campaign, with a promise of 7,500 full-time jobs within five years. Desmond and a business partner
were the anonymous authors of the document. Although the document asserted (p318) that it was “not oriented in any way towards the creation of a tax haven,” reality would demonstrate the exact opposite.

The “voraciously corrupt” Haughey was returned as Taoiseach in March 1987, and by May of that year the government had already chosen the Custom House Dock site in Dublin to host the IFSC. The project was bulldozered forwards by a fixer named Padraic O’hUiginn, Haughey’s right hand man who, according to one official, had Haughey’s authority to “persuade, bully…whatever needed to be done to get the other government departments on board.” Padraic White, then head of the Industrial Development Authority, wrote in his co-authored book Celtic Tiger: the Inside Story of Ireland’s Boom Economy:

“Within the public service, new initiatives tend to develop slowly. These are advanced, after much consultation, and refined, usually by committees. So before a policy proposal finally emerges as government policy, it must survive a high degree
of scrutiny via checks and balances.
. . .
In this instance, the composition of the IFSC committee made the vital difference. So when O’hUiginn turned to any departmental secretary and gently enquired, ‘I presume this is possible,’ there was no place to hide.

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