Deliberately making news of news?

There are days when you just want to give up.

Madam, – Are Irish politicians and the Irish media living in cloud-cuckoo-land that they would damage our image further for the sake of headlines or political point-scoring?

Brian Cowen was, of course, wrong to agree to an interview he was not ready for. It was an error of judgment, but to deliberately turn it into a world news event while the eyes of the world are focused on us and the state of our economy is a far greater error of judgment. – Yours, etc,

RICHARD McNAMARA,

Castleknock, Dublin 15.

“Shhhh… If we all stay quiet about that interview heard by 600,000 people we’ll be grand. Someone turn off the interwebs there, don’t let word get off-shore. Pretend to be asleep, all of ye! And keep those journalists off the airwaves, for jaysis’sake!”

Of course, it’s Simon Coveneny and the hacks’ fault that France 24 is broadcasting stuff like the report below (WARNING: contains moments of waffling estate agent and Alan Dukes) to an international viewership.

Or was that recorded pre-Morning Ireland? Indeed it was…

Boone and Johnson on Ireland, again

Click these here words to pass through the intertubes and find your way to the latest analysis of the Irish economic situation by the above named individuals. The pair had other posts on the same topic here, (May) and here (September). They seem to have a more rounded understanding of the Irish situation than many other international commentators.

But markets today think there is a 50% chance that Greece will default within the next five years – and a 25% chance that Ireland will do so. The reason is simple: both Greece and Ireland are likely insolvent.

While the Greek fiscal fiasco is now common knowledge, Ireland’s problems are deeper and less widely understood. In a nutshell: Ireland’s policymakers failed to supervise their banks, and watched (or cheered) from the sidelines as a debt-fueled spending binge generated the “Celtic miracle,” whereby Ireland grew faster than all other EU members and Dublin real estate became some of the most expensive in the world.

[…] To halt this downward spiral, Ireland’s risk of insolvency needs to be put to rest. Either banks need to default on their senior obligations, or the government will need to default alongside the banks.

For those who don’t know, Johnson is ex-Chief Economist at the IMF, Boone is Chairman of Effective Intervention at the London School of Economics’ Center for Economic Performance. The recently published a book on the crash called ‘13 Bankers‘ and they run the widely-read blog Baseline Scenario.

Fás Competency Development Programme

Several months ago as part of a dig into a wider Fás story we obtained copies of documents showing money distributed by Fás via the Competency Development Programme. The CDP was funded by the European Social Fund and National Training Fund.

As has been reported elsewhere a spot-check by the EC into the audit trail Fás was responsible for implementing on the programme raised serious cause for concern. This “audit of the auditing process” resulted in Ireland withdrawing an application to draw down €57m of ESF funds over the last 10 months. Prior to that there were stories about companies who benefited from the programme doctoring course results to brighten up their training standards. Ashfield Computer Training was one such company, earlier this month we published the audit on which this Irish Independent story by Shane Phelan was based.

We did a story on how the CDP was distributed for The Sunday Times last weekend (unfortunately behind a paywall, it’s on page 8, if you’ve a copy). An analysis of the figures available found that almost one-fifth (more than 19%) of funds went to bodies associated with social partnership. Five of the top 10 beneficiaries were social partners, each receiving more than €2m.

IBEC was allocated most funds, €5.6m over the six year period. Chambers Ireland received €5.2m, while the Construction Industry Federation, ICTU and SIPTU benefited by €2.5m, €2.4m and €2.1m respectively.

IBEC, SIPTU and ICTU are all represented on the Fás board. Of the 17 board members, 8 are nominated by IBEC and ICTU.

The Irish Management Institute, National College of Ireland, Dublin Institute of Technology, Optimum Limited and Solar Training Limited completed the top 10. Each benefited by between €1.7 and €4.5m, with the Irish Management Institute topping that list.

PDFs of the CDP documents released to us under FOI nearly 12 months ago are available here. We’re holding onto the spreadsheets for now as we may analyse them further for a later story.


Continue reading “Fás Competency Development Programme”

Breaking up Anglo

I’ve started re-examining the documents released by the Department of Finance in advance of the banking inquiry (remember that?). There are lots of interesting bits, and I will return to many of them. But here is one and it relates to the current events around breaking up Anglo – and the ideas of selling off deposit books mooted some time ago by some economists.

In September 2008, the Government was considering selling the deposit book of Irish Nationwide. Direct link here. In that month, there were four options listed:

1. Do nothing.
2. Ensure an orderly run-off of INBS
3. Break-up of INBS
4. Merge INBS with another institution.

None of these appear to have been acted on, but instead the entire building society, deposits and creditors, was guaranteed.

Merrill Lynch clearly advised that only senior creditors and depositors might be guaranteed, but this action would have clear dangers for sovereign credit ratings. Here is the passage.

Here is part one of the released DoF documents. I’ve marked each document using DocumentCloud. I hope to move away from using Scribd. To view the notes on the document you have to expand it to full screen using the button on the bottom left, or click the notes tab on the top.



Digest – September 13 2010

Wore a long coat for the first time this week. Winter is here, guys, are we all contented?

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Stephen Kinsella reminds us that the ‘nobody saw it coming’ meme is utterly wrong. Brendan Keenan doesn’t come out of this one too well; “we know what the Irish banks bad loans are, they’re going to be about one percent of their loan books…” Ouch. See video, there’s more.

Peter Stafford vents about the wheels on the bus.

Come Here to Me! is trying to trace details about the owner of a union card from 1918. Interesting post, that.

Michael O’Dotherty in bad journalism shocker. That man is an eejit of the lowest order. Scarlet for’em!

The Cold War, Operation Gladio and Ireland. Some little known history from one of the Cedars.

WORLD Continue reading “Digest – September 13 2010”

FAS Ashfield audit report

More from our FAS file. This is the audit report that was carried out in relation to Ashfield Computer Training (ACT). The company received € 30,264.00 via the FAS CDP scheme in 2006, €464,044.00 in 2007 and €443,361.57 in 2008, a total of €937,669.57. We don’t yet have figures for 2009. FAS director general Paul O’Toole has said that money could not be recovered from Ashfield Computer Training, because the company was liquidated earlier this year.

Critically, the report states, among other things:

no explanation was provided by ACT as to why the date created for the NEWSLETTER document in the Word Processing 2 module was 28 August 2007; two months after the course finished.

In the case of the NEWSLETTER document produced in the Word assessment there were 6 candidates whose documents were identical and contained a series of errors that suggest the document was copied. In the Integrated Applications the consistent use of the same incorrect pie-chart also suggested that the assessment material had been manipulated.

There was material missing from both the printed assessment material and from disk. In the view of Internal Audit, ACT were unable to provide a reasonable explanation as to how learner’s had passed these assessments in the absence of such essential material.

…it is the view of internal Audit that efforts were made on the part of the tutor to ensure that learners, who had not achieved a sufficient level in some assessments, were assisted in achieving a pass level after the assessment was completed.


Banks QE themselves

It seems we have something of an answer as to how Irish banks expect to get through the €30bn funding cliff this month. In the Irish Times today:

IRISH NATIONWIDE has issued €4 billion of Government-guaranteed bonds effectively to itself. It can use the bonds to draw €4 billion in funding from the European Central to help tide it over a key refinancing period later this month.

The building society has €4 billion of debt covered under the original blanket Government guarantee maturing at the end of this month. The bonds will allow the building society to draw fresh funding from the ECB if necessary to repay this debt against a backdrop of heightened funding pressures across the guaranteed institutions.

So what does that mean? Irish Nationwide is issuing bonds (these ones) and then using the bonds as collateral to borrow from the ECB marginal lending facility (MLF), also known as the discount window.

This is not dissimilar from the practice we learned of last week where nationalised bank, Anglo Irish, is using promissory notes issued by the Government as part of recapitalisation (ostensibly long term), as collateral with our own Central Bank in order to fund itself (they dare not go to the ECB?), at a rate of 1:1. This appears to have gone relatively unnoticed, and is buried in Anglo’s interim report, referred to as the Special Master Repurchase Agreement, which comes on top of the Master Loan Repurchase Agreement.

Expect to see other Irish bank create fictitious money in order to fund themselves via the discount window.

It also seems that this type of transaction is nothing new. Back before the September 2008 crisis, it seems that Lehman Brothers were doing something similar. Per the FT back in April 2008:

It was rather elliptically suggested by Bloomberg (from a Morgan Stanley analysis) that Freedom’s notes had been used as collateral by Lehman in the Fed’s primary dealer credit facility. And that that was – in the main – the reason the CLO had been created and successfully closed.

But there’s some confusion. In this article, Bloomberg say Lehman sold the $2.2bn of senior notes in Freedom “in a private placement”, which can’t be true if they’re being used in repos with the Fed by Lehman. As for the equity tranche, it’s unrated, so the NY Fed won’t accept it as collateral.

The WSJ reports that only some of the senior notes may actually have been pledged to the Fed. The small amount was supposed to “test” what the Fed would accept.

Since the test seems to have gone well, can other banks be expected to jump on the CLO bandwagon? JP Morgan is understood to be doing just that – with rumours of senior notes of a recently closed CLO being pledged in the PCDF.
But even if Freedom, and other CLOs, were created with the express intent of pledging notes to get liquid collateral through the PCDF, so what?

And it wasn’t only in the US this was happening. In the UK these are referred to as ‘phantom securities’:

In the depths of the financial crisis, the Old Lady began expanding the bank collateral eligible for use at its various liquidity operations, and starting new ones up. Unsurprisingly, given market conditions at the time, banks flocked to make use of the facilities. In fact, they began creating things specifically for use at the BoE, which the Bank gave the attention-grabbing title of ‘phantom securities.’

Some day, we will eventually we will have to confront reality, and stop this merry-go-round of fiction.