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Who bankrupted Ireland?

Now across Europe the great blame game will rumble back into play.  Our banks, your banks, their banks, or is it your feckless householders or ours, certainly can’t be theirs, they’re still doing well in Germany.  Expect lots more national stereotypes to be wheeled out for ritual defamation.

So let’s ask who it was took a dump in Ireland?

First, the suspects.

Ireland has three big insolvent banks and several other smaller, equally insolvent financial institutions we won’t bother to mention by name.

Ireland also has a large number of subsidiaries of European, British and American Banks.These subsidiaries are often registered as Irish and therefore on Ireland’s tab not the nation of the parent bank.  This often gets forgotten in the excitement. But it is KEY.

Ireland also houses a very large chunk of the world’s Structured Investment Vehicles (SIV’s) which are the shell companies which house trillions and trillions of dollars and Euros and pounds worth of Collateralized Debt Obligations (CDOs). These are what Warren Buffett described as “weapons of financial mass destruction'” And they are in their own way as hard to find and disarm as the ones we had a fraudulent war over. Anyway I digress.

These CDOs, in turn, house an equal or greater nominal value of Credit Default Swaps (CDS) written upon the CDOs.  I can’t tell you the figures because only the Irish Stock exchange has the otherwise completely confidential paper work and I have serious doubts (from what I have been told in the last week by an insider with first hand knowledge) that the Irish regulator and stock exchange have much of a clue themselves.

So, to the crime.

Some of this will, for legal reasons have to be done in generalized terms with names left out to protect the Innocent – me. But to start with let’s be reasonably specific. Germany was and is very very angry with Ireland for ruining its banks.  That is what a German banker told me this week. She spoke on the guarantee of anonymity as she would suffer all sorts of legal problems if she was identified.  I am sorry that this leaves you just having to trust that I’m not just making this up, but I hope many of you know me well enough to go with it.

In fact it was rumoured in German banks that at the time of the  collapse of Hypo Real Estate, an angry  call was made from the German Premier to the Irish, to complain, to which the answer was … well it was short.  Now this is nothing but a rumour. But it was a rumour in Germany which indicates that some in Germany were and perhaps still are very angry and blame Ireland.

So are they right in their blame?

The same banker told me this. She was aware of instances, and so was everyone else, of banks, German banks, who used to fly their people from Germany to Ireland in order to do deals that were not allowed in Germany.

German banks set up subsidiaries in Ireland.  These subsidiaries were often registered as completely Irish companies.  Back in Germany the German regulator (BaFin) had strict and enforced rules.  Very good rules for the most part. Far, far better than Britain or Ireland.  But these good rules, properly enforced meant German banks could not do many of the most lucrative and in hind sight reckless kinds of deals.

So the German banks would do the figures and work it all out in Frankfurt, then send a banker over to Ireland, get them to sit at ‘their’ desk in Ireland, in the Irish bank, and do the deal there. The legal registration of the deal and the ‘oversight’ were all Irish.  This is known in the financial world as jurisdictional arbitrage.  You and I would call it cheating if we were feeling charitable and lying if we weren’t.

The Banker flies back to Germany, where the German bank hasn’t  done any deal, and therefore has done nothing wrong. The deal was properly overseen and approved by the appropriate Irish financial authorities and the profits would be banked at a very happy Irish bank.  If any management of the ‘deal’ was required an Irish company would be hired, there are many, and an Irish manager often living not far from Cork, would ‘manage’ the money in and out.  I have spoken to such people. Usually I can hear the sweat coming off them as they ask how I got their number and where did I get my information.  To which I would reply that the Internet is a very large place and never, never forgets.

Now my question to you is this.  If it’s a German bank and a German banker doing the deal is it Germany who made the mess?  Or, equally justified, if the deal was actually done in Ireland in an Irish company allowed and no doubt welcomed by Ireland’s financial world, and overseen by Ireland’s wonderful regulators, is it Ireland who made the mess?

Should Germany, have pulled the plug on this racket?  Should Ireland?  Whose losses when they finally came, are they?

If the bank is registered in Ireland as an Irish bank/business, then the loss is on Ireland’s tab.  Depfa was an Irish bank. Just months before its collapse in 2007 it was bought by Hypo, a German bank.  Had that not happened the €180 billion euro loss at Hypo Real Estate would have been Ireland’s loss, dwarfing all other losses. Why was Hypo Real Estate bought by Germany at that moment?

I can’t say for sure. But think about this.  Sachsen Landesbank collapsed due to around $30-40 billion in bad sub prime loans its Irish subsidiary called Ormond Quay had made in the U.S. OrmondOrmond’s collapse caused the immediate collapse of one of Germany’s Landesbanks. Which suddenly sent ripples of fear through all the other Landesbanks as the world woke up to the rampant idiocy that the Landesbanks had been getting up to …in Ireland.

Germany had to step in and bail Sachsen out.  Now lets think about Depfa.  Depfa started life as a German bank. It became listed in London and then in 2002 moved to and registered itself in Ireland in the newly set up  IFSC (Irish Financial Services Centre)  This was like a legal gated community or financial maquiladora. The IFSC was in many ways supposed to be the regulator of what went on in its grounds.  I leave you to decide how well it must have done.

By the way the IFSC was created by Dermot Desmond with the help of Charles Haughey.

So Depfa is now an Irish registered bank.  But it has very close ties to Germany and many German banks and landesbanks. If ever Depfa went down it would certainly have plunged a vast swathe of German banks and landesbanks into a storm of insolvency, that would have dwarfed the fall out from SachsenLB. .  Depfa must not be allowed to go down.

So when in 2007 Depfa was suddenly bought by Hypo Real Estate was it because news of financial problems hadn’t reached Germany and they bought it because they thought it was a great deal and were cheated by those crafty Irish?  OR might Germany have known that a massive crisis was ticking away in Depfa and could see the clock was running down close to zero hour, and realized that if left in Ireland it would not, could not be rescued by Ireland and so would be left to start a chain reaction that would move straight to Germany?  If they thought the latter, do you think it likely that Germany would have just said “Oh Scheisse” and sat waiting for Armageddon, or do you think they would have taken emergency action to bring Depfa under German ownership and jurisdiction where German pockets were deep enough to bail it out and thereby save the rest of Germany’s banking system?

You decide.

So let’s return to our question? Whose fault?  Would Germany be right to be bitter about Depfa/Hypo and others? Or does the blame lie with the Germany banks and Bankers who flew to Ireland to do their mess?  Is it Ireland’s banks mess or Germany’s?  I don’t think we can disentangle the blame.. maybe when the Irish Banks’ books are finally opened we could. But I bet you no one outside the top bankers and politicians, the people who oversaw the creation of the bomb in  the first place, will ever be told what’s really in there.

I can’t say and neither can you,  if the losses are Irish or German. But we can say, the losses never were, and should not ever be,  yours and mine. We, the people, who were told nothing, were not asked nor consulted, whose laws were either ignored, set aside or re-written, we should not be expected to pay for those losses now.

They are bankers losses.  It is NOT a question of Irish or German. It is question of wealthy bankers from all countries not just Germany (almost every nation, Germany, America, Russia, France Britain, we did dirty work in Ireland) and their corrupt Irish helpers versus the people. It is not a question of should the Irish people or the German people pay. Neither people should. It should be the bankers who made the losses who should take them.

DO NOT allow the bankers to set us against each other as a cover for their crime and guilt.

For anyone interested in a very different take on the financial crisis, the failure of the policy of bailing out the banks and what it means for us,  the book, The DEBT GENERATION is now finished and shipping.


75 Responses to Who bankrupted Ireland?

  1. Fungus FitzJuggler III November 18, 2010 at 2:15 pm #

    We aided and abetted their likely crimes. Money laundering is involved in drug people and gun smuggling.

    Good people do not get involved.

    Bring it on! You are going to have to pay for your part in the crimes. When thieves fall out, both get punished!

  2. Unclear November 18, 2010 at 5:02 pm #

    Have you got a picture of a dustbin under your comment dave from france?

    I was wincing at the 'She' too. I don't know why, there are probably thousands of women it could be.

    Anyway, I just wanted to congratulate you on a sensational piece of investigative journalism; the journalists seem too busy wolfing down canapes at corporate sponsored events to achieve anything like it.

    Out of idle curiosity, what do you pitch yourself as when you ring up these unsuspecting people?

    Onwards and upwards, Unclear.

  3. Golem XIV - Thoughts November 18, 2010 at 5:17 pm #


    how to describe myself was exactly the question that stymied me for weeks. How do you call up athe Press Office of a huge legal firm or bank when you can't say you are a journalist from X company? When I make films its fine – "Hello, GolemXIV from the BBC" No problem.

    What I've settled on is to say "I write a financial blog, so my first question for you is does that make me press or just a passer by." And it works. So far people have been very friendly.

    Dealing with individuals I usually try to get an introduction or I suggest they take a look at my film work so they can see I am not a fool or a time waster. Again most people are fairly open.

    Was "she" a mistake. I thought about X but I didn't want to make it seem too melodramatic. And there are lots of women bankers. But if you all think X would be better then I'll go with your feeling in future.

    Glad you like it. There is more to come.

  4. dave from france November 18, 2010 at 6:21 pm #

    Golem , Unclear, — " Just because I'm paranoid, doesn't mean they're not after me … "

    I can say that I'm hesitant about re-posting a couple of paras as they are , with the link, because of that ?

    Maybe it's my french background : Eva Joly's office computers, colleagues' houses burgled to get at computers, and very recently 3 separate journos' computers stolen simultaneously on the Bettencourt affair .

    This thing is more widespread than one bank, so much less likely for them to go on a hunt,and banks are big places too… but still !

  5. Golem XIV - Thoughts November 18, 2010 at 7:04 pm #

    dave from france,

    Which are the ones that raise your antennae? I thought I was being fairly circumspect and protecting the innocent. But if you think I have left myself open I will most certainly look again.

    Tell me which bits.

    Otherwise feel free to spread to whom you wish. I have very little anyone could sue me for and what I do have is in my wife's name or could be very quickly.

    There is one bank in this mess I have refrained from mentioning by name due to legal threats already made.

    But as I say all advice and observations even hunches will be gratefully received and very carefully considered.

    I'm not in Eva Jolly's league…yet. I can always dream.

  6. andrew November 18, 2010 at 8:46 pm #

    Thanks Golem for these fascinating glimpses of the inner workings of the mechanism: exposing this matters more, I think, than exposing individuals and naming names.

    When Iceland went down the pan, it was said that members of ten families were responsible, and that everyone in Iceland knew their names and where they lived. The same thing was said to me by an Irish friend of mine last week. And similarly, a public understanding of what they did and how and by whom they were allowed to do it, is more important than denouncing individuals.
    It's the mechanism that has to be altered, not the cogs replaced.

  7. Dope Addict November 18, 2010 at 11:36 pm #

    I was going to say the same thing, Andrew. This stuff is purposefully arcane & complex so that, by the time the problem can be pinpointed, the perpetrators have already left the scene. As ever, the system needs to change, or different people will do the same thing again.

    The biggest culprit, in those terms, is deregulation of financial markets. Seems that everything springs from that poisoned well. The US did it, Ireland did it.

    Maybe Germany didn't do it, and so while they didn't suffer the immediate effects, everyone's looking to them now to pay for cleaning up the mess. If they couldn't clean out Germany one way, they'll clean 'em out another. Always go after the deepest pockets, or the only pockets with anything left in them.

  8. richard in norway November 18, 2010 at 11:44 pm #




  9. richard in norway November 18, 2010 at 11:46 pm #

    sorry about caps

  10. Pat November 19, 2010 at 5:58 am #

    Your blogging fame has spread to California, where I live. Admittedly your blog was referred to me by a Brit admirer of yours to whom I went for advice on the current Irish situation.

    You said that a large chunk of the world’s SIVs are domiciled in Ireland. If that is so then the Irish Government is the banker to the world’s "Shadow Banking System" and the clearing house for the world’s derivatives, CDOs and CDSs, which are unregulated. Then what is happening in Ireland is not a traditional banking crisis, it is a run on the "Shadow Banking System".

    If this can be proven, the Irish people should take their case to the European Court. Neither the ECB nor the IMF have jurisdiction over activities they do not regulate. The IMF may as well have arrived in Dublin to bail out Ireland’s drug dealers as to bail out the Irish Government in its capacity as banker to the world’s "Shadow Banking System".

    Surely there is a young lawyer somewhere in Ireland who will write the complaint. If they do, he or she may become President one day.

  11. Dexter Midnight November 19, 2010 at 8:08 am #

    Pat said…

    I appreciate your contribution Pat…….keep'em commin'.

  12. Sean November 19, 2010 at 10:48 am #

    Richard,go to your local shops any, the high street, the internet and look at where those goods are made…the money came from asia.

    Where did it go? it went into land prices creating the worlds biggest ever property bubble which gave us a unreal sense of wealth. If we took the money and invested it in real wealth creation then, then there would not be a problem. SO in short the asians worked and saved for it passed it onto us and we blew it up in a bubble.

    Now its good news for politicians that we feel wealthy is it not, it gets them elected and thats the market they are in and to help things along they gave a lot of power to bankers to create mechanisms that inflated that new wealth to even greater heights, in short they turbocharged it.

    And they you are left with a feedback loop, banks borrowing on asset prices, the weight of money inflating those asset prices, banks then lend even more money…and the rest is history.

    So the cause if you like, the cancer at the heart of the problem is Property. And who is in charge of laws relating to property? that help create the market conditions in no small way?

    Now capitalism has a way of dealing with failure, as failure is a big part of the capitalist/market system. it first trys to reorganise then it liquidates….like evolution adapt and survive or die.

    It seems to me banks have neither adapted or died which is the real way to deal with this issue, a betrayal of capitalism.

    The politicians saved the banks in order to save themselves.

    Just to add, the property bubble was a world wide phenomena not just the US and the UK, France, Spain, Germany more or less everywhere.

  13. Tam November 19, 2010 at 11:14 am #


    'The politicians saved the banks in order to save themselves.'

    True, but that's how democracy works. It's (arguably) reasonably good at dealing with issues that happen over lengths of time that correspond to the electoral cycle but less successful with issues that unfold over longer period like the environment or the credit boom that's been unfolding over the last twenty years…

  14. Sean November 19, 2010 at 11:28 am #

    The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.- FRIEDRICH HAYEK.

    I cannot say for Eire, but I can say for the UK, inc Euro rules there is over 11k pages of regulation for banks.

    Your right David its imperative that we all regardless of political or economic opinion get well away from the idea that we can set up perfect systems that will shape the future.

    what works is simple, accountability and that starts with democracy, so if you are truly concerned about the butterfly effect, what we want is smaller states where power is devolved downwards not super national political empires like the EU that nourish and produce the same solutions to the same problems.

  15. Sean November 19, 2010 at 11:34 am #

    Tam, the super cycle of credit started with the ending of bretton woods and dollar link to gold in 1971. I make that 40 years.

    Fiat money is in fact a political currency not and economic one and as a result in the long run money will reflect how well those political decisions turn out. A mirror if you like for ourselves.

    Spain had by contrast to Eire the embodiment to well regulated banks and its potion is much worse than Eires.

  16. Tam November 19, 2010 at 11:47 am #


    I suppose I was thinking about consumer credit when I mentioned 20 years, but fair point!

    On the other hand, this kind of proves my point about the lack of accountability when politicians make long term decisions. You don't see many people (except economics geeks!) blaming Richard Nixon for what's currently unfolding, do you?

  17. Sean November 19, 2010 at 2:03 pm #

    Well Tam, this is the reason I prefer markets to groups of blokes in smoky rooms making choices on our behalf or indeed trying to set prices.

    Fiat money gives politicians and bankers too much power, as they are the ones creating it. On the other hand although sympathetic to the Austrian school and the Gold Standard I don't think we can go back.

    Now this cycle is over it will present problems for both left and right. the end of the property owning democracy ideology and the end of the big welfare systems that we in the west and especially in Europe have created that it underpinned, so both left and right need to start thinking up some options.

    In the new world Mr and Mrs Hong are just as entitled to the worlds resources as we are.

  18. Martin November 19, 2010 at 2:34 pm #

    Top work – quality of post reflected by quality and quantity of comments.
    I love "…. an Irish manager often living not far from Cork …. "
    can I add " …in their stupidly overvalued new-buld …."

  19. Golem XIV - Thoughts November 19, 2010 at 2:51 pm #

    Can I just second what Martin said about the quality of the comments!

  20. andrew November 19, 2010 at 4:15 pm #

    i am largely ignorant of the workings of government and finance so i can only speak in generalities.
    The end of Bretton Woods + dollar link to gold lead to the credit boom, securitization also started at this time ( early 70's). You say Banks neither adapted or died and describe this as a betrayal of capitalism. But maybe securitization in all its forms CD0, CDS, etc – what you call turbocharging value of assets and other people call shadow banking – isn't capitalism atall, but a vampire form of economics that requires the lifeblood – the capital – of capitalism to survive – and slowly sucks it out of banks, nations, whatever are its chosen targets, swapping real capital for artificially inflated ( turbocharged) assets with only a paper value to cover its tracks, until individual banks/ countries one day wake up a husk, with no capital left. The vampire system has removed it safely offshore beyond national boundaries –

    Meanwhile alongside the capitalist system – working economies- still carry on being maintained by our governments who have made the mistake of borrowing from the vampire/shadow systems increasingly large supply of capital, instead of creating wealth. But that capital is not theirs (meaning ours). It's debt.
    . The problem then becomes not so much the need for a fantastic new system but to seperate the bloodsucking shadow system from the host "capitalist" system..at the moment they are both trapped into the same " feedback loop" as you call it. But neither system admits it publicly. In Ireland they are being forced to.

    And if i may pursue this oversimplistic analogy through to its end, how to kill a vampire ? Expose it to daylight…as Golem is trying to do.
    Wouldn't the "daylight" of public understanding, accountability & transparency, if not kill the vampire , at least ensure it scuttled back to its offshore coffin, to pursue its securitzation/ super casino games from its private yachts and beaches ?. It's harder to rip someone off when they know whats going on.

    You are right that "The politicians saved the banks in order to save themselves" and that " Fiat money gives politicians and bankers too much power, as they are the ones creating it". You are right that we can't go back. But what a small nation like Ireland can do is make sure, by rule of law, that the money it creates ( or say 50% of it) from either the " real economy" or from the markets, rests within its national boundaries. The factor that prevents Ireland from making any decisions is surely that is no longer self sufficient – most of its bondholders, major business and property owners, are overseas.

    The conjuring trick Golem describes whereby a German company ( for instance ) can set up in Ireland, make its profit there, then move that profit back to germany…once these mechanisms are publicly understood and acknowledged they can be regulated against. nationally rather than internationally – the " shadow system " cant be regulated against in this way because it is non-national, and acts only in its own self interest, not in the interest of individual nations. But its activities can be contained by individual nations protecting themselves against what ( I think Warren Buffet called )" these weapons of financial mass destruction".

    If the Irish Government had for each deal made within its borders limited the amount of money generated within its borders that is allowed to leave the country, or imposed a percentile minimum which had to remain, it might not have had so many companies like Dell and Google camping out in its back garden, but would it be currently be facing bancruptcy or bailout ?

    Politicians do not want to take measures which will deprive them of their own power or wealth. Might not legislating to keep a certain % of wealth ( both private and public) within national borders ensure both?

    I suggest this in the hope that someone will tell me why it wouldn't work.

  21. RichGB November 19, 2010 at 4:20 pm #

    Here is a useful report prepared by IBM on global business trends. It's got lots of useful graphs!

    Ireland scores highly in three of the graphs.

  22. andrew November 19, 2010 at 5:11 pm #

    rich GB here's a nice graph….


  23. Sean November 19, 2010 at 6:17 pm #

    Andrew, I like the term "vampire capitalism" I am going to use it!

    The feedback loop is a result of the bailout(s) if we had taken a different route either bankruptcy and debt for equity then I accept their would have been chaos for a couple of months while things were worked out, but instead we are going to be spreading it out over decades. No bailout would have been the revolutionary act, to break the loop in the first place.

    Another dimension I suspect in the bailout calculation was China, my guess is a lot of the bondholders are Chinese investors. Govts do seem keen to keep a lid on these lists dont they?

    Its very important we dont confuse symptoms with causes, when you die of cancer you will probably die of a stroke or something but the death certificate will say Cancer. The cancer in this case is the property land price bubble.

    Shadow banking is a symptom, it only comes in to play when the cancer is taking over the body.
    Shadow Banking did not create the cancer.

    As for Germany I have very little sympathy for her, she is the China of Europe. She is gutting domestic demand in order to gain exports, this is mercentialism…and of course getting others to use your currency seriously helps out, and the Euro is the DM mk2, Ireland signed up to German interest rates, she has herself to blame.

    I cannot state this with certainty, but I believe Germany calculates her GDP differently to us, for example a telephone call from NYC to Berlin is counted in Germanys gdp thus if Ireland counted these trades as part of its GDP which it seems it was counted as Germany's then it might have been picked up on a lot sooner, so Germany accountancy rules seem to be to blame.

  24. andrew November 19, 2010 at 7:28 pm #

    m… re symptoms and causes

    i'm not trying to play with terms but wouldnt it be truer to say that the property land price bubble was not the cancer itself but the 60 a day smoking habit ? And that the cancer, the worm in the system that expands to eat the host body, was and is for capitalism securitization….creating value not based on capital ( debt based currency )is for capitalism a kind of anti-matter.

    I think the diagram I posted above is the way that most of europe runs itself.

    For ten years now I've wondered who would be the first to leave the euro. The euro is was introduced as a risk spreading currency…it perhaps artificially stabilized Ireland to the point that the danger signs were picked up/ acted on later than they would have been were Ireland less " dependent" on overseas backers…the euro acts as a cushion, you've got backing, your too big to fail, etc……now things are getting abit wobbly globally, it looks like what is happening in Ireland is a question of europe/ the global markets isolating enough rotten cells in one place to avoid too much contagion. Perhaps as you suggest it's a natural consequence of super states like the EU that when things go wrong, the least important parts are sacrificed for the good of the whole.

    Someone on another post on this blog suggests that the rottenness in Ireland ultimately comes from the american property market laundering alot of CDO etc there unchecked. Golem suggests that any ECB or IMF money paid to Ireland would ultimately go back to Germany and France to pay off THEIR banks…

    Instinctively I feel Its better for countries to be more or less responsible for themslves, and trade with each other, and their economies grow and contract at different speeds, as previous. And the coins were nicer.

  25. Sean November 19, 2010 at 8:07 pm #

    Northern Rock, went down from having provided mortgages. Not as a result of any fancy trading.

    The reason for the run on all the banks was the move to wholesale overnight money markets, this is what has changed over the last 10 years or so prior to the crash. N Wreck went down as a result of having its business model based on wholesale money not because it could not finance its securitisations. The fix to this is deposit insurance.

    The US housing bubble was a 8 Trillion dollar blowout, any system is going to break under that, any system you can imagine you can create.

    Shadow banking is a sideshow, a symptom. if the bubble did not exist you would have never heard of this stuff.

    Dean Baker is you go too guy on all of this, he had the bubble right in 2002!

    The cancer is the bubble, the cancer cells under the microscope are Fiat Money.

  26. Golem XIV - Thoughts November 19, 2010 at 8:44 pm #


    I have to disagree with you here. There was indeed a bubble which relied upon wholesale funding which them dried up. The two questions you have to ask are how did we get a mortgage bubble and how does wholesale funding work? The answer to how does whole sale funding work gives you the answer to why there was a bubble.

    I argue that you won't understand how bubbles in modern finance work if you don't understand their intimate link with wholesale funding. And wholesale funding only works becaues of securitization. Without it we would not have been able to have the global and epic bubble we had.

    So I'm not saying what you identify as key is wrong, I think it is key just like you do. But I am saying that to understand WHY we had a bubble and HOW it works you have to understand securitization and how with it, banking is totatlly different fmor the banking of yesteryear, In fact the only thing they have in common is the name.

    Once you understand it what also comes clear is how this debt crisis is due to the collapse of the debt-backed fiat currency which the banks created for themselves, which they controlled and traded among themslevs but then debased. The collapse of that 'shadow' currency, if you like, IS the present crisis.

    I wrote a series on securitization at the start of August in case you are interested.

  27. Pat November 19, 2010 at 10:42 pm #


    I read your August piece about mortgage securitization. It is very good.

    Let us not forget that it is the contagion of mountains of fraudulent loans created out of thin air in America and sold around the world as Wall Street "securities" that now threatens the next Great Depression.

    As a California mortgage broker I had a front row seat for the whole horror show and started to blog about it in early 2009.

    Here is one I wrote in May 2009 about the actual nuts and bolts of securitization at a local level entitled “Financial ingenuity, otherwise known as fraud” http://bit.ly/b6By0u

  28. Sean November 19, 2010 at 10:52 pm #

    SO your point is without Securitisation the bubble would not have happened?

    SecZ(lets slice and dice it)turned up in 89/90? and we had property bubbles in the mid 70s and mid 80s before that.

    I am not saying SecZ did not have any impact, but the truth is lenders did not need much help in the stupidity dept. And I could make a counter argument that spreading the risk to Berlin from Ohio saved a lot of pain for the American property market and its economy, probably a bigger collapse.

    Now I accept that these new bits of paper helped pump the ballon up, but again the problem then is insurance not regulation. It seems to me that stuff moved to the shadow banking system because it was cheaper thus more profitable because it was not insured. A good argument for keeping taxes low to reduce costs killing the shadow.

    Airlines and aircraft are very different from yesteryear..so what things change hopefully for the better. Banks have certainly helped me to prosper in my life and been a check on my excesses. I don't have any complaints.

    Nope I will stick with the wall of money from Asia distorting our economies and our senses,not that is their fault. to me this looks like the reverse of 1929, with china as the producer now and the US as the producer in the 20s producing lots of new wealth looking for a place to go.

    As said I believe fiat money is inherently inflationary.

    I am also not happy with the bankers vilification, mortgages are just one aspect of banking. Many aspects of banking are very much to the social good and many bankers work to the social good, lets keep that in mind.

    The human condition is flawed and will always be so, we cannot regulate or legislate that fact out off reality. Bubbles will come again I promise.

    Sure point me in the right direction for your series.

  29. Golem XIV - Thoughts November 19, 2010 at 11:17 pm #


    just read your peice. Your testimony corresponds uncannily to paperwork of smurf mortgage I was given by a gov official in Cleveland last year. Mortgage after mortgage being bought by the same handful of smurf buyers, handled by no more than three lawyers whose names were on evey page, to the same originators and, in Cleveland at least Deutsche lept off the page as being everywhere. Not the only one of the big boys but jumped out at me at the time.

    I'll be reading more. Very fgood of you to post and read those pieces. Please stay in touch. Drop me an email if you like I would love to talk more informally about your first hand views.

  30. Golem XIV - Thoughts November 19, 2010 at 11:30 pm #


    that is indeed my point. Or one of them. Yes we had bubbles. They had bubble centuries ago. And we had and still have bubble now – a property bubble. I am arguing we also, in addition have another mechanism at work – the creation and debasing of a fiat currency which the banks created and accumulated.

    I can't rehash the argument here. But if you do want to take a look here are the url's.




    Please don't misunderstand me, I am not for one moment trying to claim taht people did not go along with the bankers. But I amsaying it was not as simple as saying there were some poor mortgaegs made and better regulation would have fixed it.

    That is what I absolutely reject. This is a systemic problem with a fundamental shift in the nature of banking, money and debt. They mutated and we are living with the results.

    So if you are wedded to the view I reject, then you will find me and my view intesely annoying. I am not out to annoy nor to evangelize. On the other hand I am always delighted to hear what others have to say.

    Whatever you end up concluding, I do thank you for taking the time to come hear and contribute.

  31. andrew November 20, 2010 at 1:46 am #

    Well, you clearly know more about the details than me, and your analysis makes sense, but it feels like you're looking through the wrong end of a telescope …I don't think there would have been self certified mortgages, 100% loans on multiple properties same owner-occupier etc, without mortgage backed securities and credit default insurance. It looks like this mechanism ( MBS)whereby debts become assets on the global markets is what pushed prices and lending up rather faster than they would have risen otherwise, Of course car payment debts and credit card debt etc etc were and are sold aswell, not just mortgages…. it aint just a property bubble, look at chrysler, etc…its a credit bubble. Its a pêrcentage bet on other peoples solvency, or their possible lack of it.. I mean… they even bundle up US student loans to sell !! And then can insure it and get the interest off the loans and the insurance on the loans and the insurance on the insurance on the loans and the loans on the insurance on the insurance of the insurance of the loans….

    One difference between this housing bubble and the previous bubbles seems to be that ( via the futures market) by some sort of labyrinthine and circular route that I can't quite understand, mortgages can be effectively securitized with themselves……and the profits from the security on the loan can become more profitable than the interest on the loan itself, and the value of the securities on loans are sometimes what causes the loan to be issued … I believe this latter is known in the trade as " moral hazard".

    Houses to the securities market, are like credit cards. You can no longer call it REAL ESTATE when your mortgage on your two up two down or your condo is worth more empty as pârt of a portfolio of CDO's sitting in the bottom right hand drawer of the Mr or Mrs Hong you mentioned earlier, or even, (which i suspect to be true rather than know to be true , and which may apply to some properties in Ireland) if that's why the developer built it the first place.

  32. Sean November 20, 2010 at 12:25 pm #

    Not much time today, I will have a better go Sunday.but read this if you have time.


  33. Golem XIV - Thoughts November 20, 2010 at 12:41 pm #

    Will do.

  34. Golem XIV - Thoughts November 20, 2010 at 1:31 pm #

    Hello Sean,

    Read it. I understand his logic of not wanting the banks to be holding too large a concentration of securities – but its a sligtly unconvincing logic. If the loans that have been securitized are good solid laons then there is no problem with teh banks holding what are good investments.

    The only reason not to hold too many is if you have already surrendered to the idea, as he seems to have done, that the securities will be toxic. In which case saying the risk needs to be spread more widely is exactly like saying the way to prevent an epidemic of diseas in a country is for them to have policy of sending all their sick people to ther countries as a way of 'spreading the risk'.

    NO. I don't buy it at all. Cut out the infection. Make the banks who are sick, die. If we don't we are simply inviting their sickness to infect our homes. Whcih is exaclty what we have done and now are seeing th infection ravaging sovereign debt levels.

    No,not a solution AT ALL.

  35. 24K November 20, 2010 at 5:17 pm #

    Is this premeditated? Like MERS? Is there a bigger picture?

    The DeSovereigned Generation.

    Welcome to the buffer zone of switch over to global governance.

    Not on my watch.

  36. Ben Gabel November 20, 2010 at 6:32 pm #

    there's an interesting document available from the independent banking commission. It does summarise the 'official' view of the problems we face.


    Haven't managed to read it all through, but my main thought was that they are accepting written submissions to their consultation.

    Over to you Golem . . . 🙂

  37. Ben Gabel November 20, 2010 at 9:36 pm #

    And, on another front, in france, Eric Cantona is pushing for a mass – bank withdrawal in Dec 7th as a form of bloodless revolution.

    Interesting video at http://www.youtube.com/watch?v=-Uop5R7E314&feature=player_embedded

    I like the bit where he says there's no point 10 million people waving placards, they just all need to go to their local bank and withdraw their cash all at once, 'that'll make them listen to us' he says.

    he might have a point . . .

  38. dave from france November 21, 2010 at 8:06 am #

    Hi Ben, The only cash normally in my Credit Agricole branch is in two ATM's and the pockets of staff and customers. You can get hold of larger amounts than the ATM quantities , but have to give a few days' notice …

    Whatever, the sort of idea to get people thinking!

    And , more importantly, there is the idea of people acting together, in numbers .

    As Cohen recounts, "Farmers who stayed on the land were responding to their bleak circumstances with extreme politics and lawlessness." Across the Farm Belt, hundreds of farmers would show up and stop a foreclosure sale by the force of numbers. Some farmers threatened to call a national strike if Congress didn't act. In Sioux City, Iowa, farmers put wooden planks with nails on the highways to block agricultural deliveries. Cohen writes that in Nebraska, a group of farmers "showed up at a foreclosure sale and saw to it that every item that had been seized from a farmer's widow sold for five cents, leaving the bank with a total settlement of just $5.35."

    georgewashington's blog a few days ago, on the New Deal and civil disobedience …


  39. Dexter Midnight November 21, 2010 at 9:46 am #

    I really think that this Cantona idea ( which to be fair to Golem – he suggested this a long time ago) but Cantona has the profile to bring it to a wider audience – but it must be seen as an opportunity – one that should be seized. Sure, they'll close the banks and pull the plug on the call centres and if necessary they'll lock the doors – but if ever there was an opportunity to make a mass statement of intent this could be it. I think we all should get behind this in whatever way we can.

  40. 24K November 21, 2010 at 10:29 am #

    G I checked the Co-Operative bank out and that sounds like my bank. Asking certain people to leave because of their blinkered views. Turning down money due to dodgy connections. Even my misses was impressed.

    Even i was impressed because she did the searching rather the googling recipes. Recipes for change maybe. I'm chuffed yourself and Cantona thought the same too, that's good company.

    If everybody changed to that bank for example what would happen? Could we just crash 'em?

    I think most people would change given the choice because most people feel helpless regarding the system. Ethical banking is the cornerstone of an ethical world. And the greedy will do anything for profit. Grow organic bread, source local food etc. If that's what people buy the suits will come running, also partly because Delta team have cut them off and forced them back along the Thames this way with a pincer movement.
    "Ready with the nets, on my mark"


  41. Golem XIV - Thoughts November 21, 2010 at 11:26 am #


    I'm pleased you think the Coop bank might work for you.

    As for the power of moving money – we don't need everyone to move to crash the banks. That's the beauty of it. Only a small percentage would be enough.

    In one of the first posts I ever wroet on this blog I advicated people swithcing banks strategically. If people did, they woud absolutely control eth banks.

    Anyway I'm glad its working for you.

  42. dave from france November 21, 2010 at 12:20 pm #

    Golem 11.26 I remember those first posts !

    Strangely enough I was in my small local bank on saturday to do some routine stuff, and they were asking everyone who came in to fill out a form detailing how much they understood various investment strategies, a new EEC reg to protect the consumer .

    Actually only two customers in, and while I was waiting the manager came in, and since she knows me well — our kids were in State kindergarten ( maternelle) together 30years' ago, she kidnapped me to do the form in her office .

    I spread the word on the Irish/German Banking Axis —

    " So the German banks would do the figures and work it all out in Frankfurt, then send a banker over to Ireland, get them to sit at 'their' desk in Ireland, in the Irish bank, and do the deal there. The legal registration of the deal and the 'oversight' were all Irish. This is known in the financial world as jurisdictional arbitrage. You and I would call it cheating if we were feeling charitable and lying if we weren't."

    Hehe !

    Regards frog2

  43. Golem XIV - Thoughts November 21, 2010 at 12:46 pm #


    In another age you would have been SOE. Or perhaps seconded from there as one of Sefton Delmer's propaganda operatives.

    Thanks as always.

  44. Ben Gabel November 21, 2010 at 2:14 pm #

    Words of great wisdom from Adam J Levitin, Associate Professor of Law, Georgetown University Law Centre:

    "We must face the losses from the financial crisis and allocate them sensibly.

    There are only a limited number of places where we can put these losses: homeowners, banks, MBS investors (including many pension funds), or the government.

    There are political choices to be made in any allocation, but failure to make an explicit allocation is also a choice – that the losses will be borne by homeowners and MBS investors.

    We should be cognizant of these choices."

    This is a small nugget of his excellent Testimony to The House Financial Services Committee, Subcommittee on Housing and Community Opportunity: "Robo-Signing, Chain of Title, Loss Mitigation & Other Issues in Mortgage Servicing" which you can read at: http://www.scribd.com/doc/43176437/Panel-Three-Robo-Signing-Chain-of-Title-Loss-Mitigation-and-Other-Issues-in-Mortgage-Servicing

    I like it because he pulls no punches and writes in a really readable style, with a good summary of how all the different bits of the game fit together, from securitisation through mortgage fraud to CDS insurance and systemic collapse of the banking system worldwide.

  45. Golem XIV - Thoughts November 21, 2010 at 2:44 pm #

    For some reason I can't access it. It just won't load. Is it just me?

  46. 24K November 21, 2010 at 2:51 pm #

    Just you dude.

  47. Ben Gabel November 21, 2010 at 4:02 pm #

    try http://www.scribd.com/doc/43176437

  48. dave from france November 21, 2010 at 4:21 pm #

    Ben's 16.02 worked for me . No time to scan 95 pages tho ! frog2

  49. Fauvi November 21, 2010 at 4:33 pm #

    Did the Irish just cave in?

  50. Ben Gabel November 21, 2010 at 5:14 pm #

    The Irish Government has decided that in the future, the Irish people will not spend anything on public services, but give the IMF all their taxes instead.

    This is so the IMF can give lots of money to the Irish banks, who are in a spot of bother as they seem to have misplaced their own money somewhere.

    This wouldn't be a problem, except what they lost wasn't really theirs, it belonged to the German, French and British banks.

    These in turn aren't quite sure how much they had or where they put it, but they're sure the Irish were looking after some of it. And they are sending the heavy mob round unless they get their money back now.

  51. wirplit November 22, 2010 at 11:45 pm #

    The Irish who have been strangely quiet till now faced with all this unfolding horror… a kind of sullen silence as someone described it …will now get to have an election and hopefully real ideas will enter in to the financial debate at last like those in this blog. Its a matter of people not just accepting what they are told and beginning to see that this didn't just happen.
    Even Paxman on Newsnight tonight started to question Capitalism and the way that bankers expect the people to pay out when they screw up. Is something beginning to shift? Events pushing the thinking. I am waiting for so many of the infamous CDOs being housed in Ireland angle to come out…I have not seen that anywhere but here so far…and it strikes me as really important

    By the way I like the term Vampire Capitalism too its way better and more sinister ( and hits the truth) than Casino capitalism as a term. Can we push it into general use?

  52. andrew November 25, 2010 at 8:51 pm #

    erm… what i was trying to argue was that the vampire $ suckers aren't involved in capitalism atall!! rather the opposite !!

    it would be wrong to call such a leach system capitalism, as they don't have any capital of their own , they simply suck other people's capital, create debt, are literally the antithesis of capitalism. I keep reading/ hearing people saying that this is a crisis of capitalism. It's not. It's a small elite playing the system to remove the eponymous capital from the system and replace it with debt, first private then soveriegn debt…the point where it becomes a bloodless coup tieing countries to the market for years.

    I could really not believe it when the Irish finance minister said that his solution was foreign ownership of banks. This is not capitalislm ATALL. This is selling your country down the river to a global aristocracy. Its worse than feudalism, at least that respected borders and allowed for a certain amount of re-patterning later.

    If people ( including myself ) are to understand and maybe even have a chance to change what's happening we have to be more precise and distinct about what terms we speak in. Vampire capitalism is meaningless, even though it sounds good. There are bloodsuckers and there are organisms with blood. There are people who siphon money out of the economy, and there are people who earn money by working within it…The relationship is more or less clear, and which one is expendable also clear. They aren't 'vampire capitalists', just plain old vampires, leaches, sucking life out of their healthy neighbours to survive, to perpetuate their kind….. and It's not a question of " survival of the fittest" as many commentators pretend, its a targeting and hijacking of the "fittest" rubber-stamped by government because it profits them. This is not a left wing or right wing argument, and I respect Golems attempts to un- politicise it.

    What i really don't get, is, governments are being stabbed in the back, and responding…'yeah, stab me in the back some more…that's the way I want to carry on. "

    I guess the choice is between being stabbed in the back and shooting yourself in the foot

  53. Nicholas Shaxson November 26, 2010 at 4:25 pm #

    This is a fabulous post, but there is one point of language where you have to clarify. This is tax havenry. This is what tax havens do: they provide escape routes for bankers and others from the laws of other democratic societies elsewhere. These may be tax laws, financial regulations, criminal laws – you name it. But we need to call this beast by its proper name.

  54. rodgermmitchell November 26, 2010 at 6:24 pm #

    Ireland's bankruptcy was inevitable, the day it joined the EU and surrendered its Monetary Sovereignty.

    The other monetarily non-sovereign EU nations will follow, unless they are given euros.

    Rodger Malcolm Mitchell

  55. Maeve November 26, 2010 at 8:02 pm #

    In Dublin city on Friday night doing a crash course in economics instead of drinking (last week has been a wake up) – believe me, people are starting to see whats happening … its slow, but it will escalate… with our tempers.

    I always knew the bubble was wrong and always suspicious of what was going on in IFSC/banks/property/govt and the cosyness between the various sectors at their golfclubs/racing meets (substitute what you want). `What ordinary people were making in the boom was nothing compared with the top moneygrabbers..

    The Garda are increasing security at the Dail and preparing riot gear for the march tomorrow, but the criminals have left the country and their lackys are behind the gates.

    thanks for your blog – I'll pass it around


  56. Golem XIV - Thoughts November 26, 2010 at 8:20 pm #


    Thank you for reading and commenting. Hope you'll comment again.

  57. Andrew November 27, 2010 at 4:30 am #

    This is just a hunch but there is the smell
    of a pyramid scheme here and the whole house
    of cards came down when those running the scheme
    took out their cut in the form of commissions
    and bonuses (once that happened it was less
    stressful to let things implode than it was to
    maintain the fiction of eternal economic growth)
    and plan for the next cycle.

    Has anyone else noticed that all those financial
    advisors and investors are touting their skills
    as though nothing has happened and are begging
    us to entrust our hard earned dosh with them
    once again?

  58. Mark November 27, 2010 at 6:54 am #

    >German banks, who used to fly their people from Germany to
    >Ireland in order to do deals that were not allowed in Germany.

    Fraud is fraud. People are people. These things are constant. What has changed is the system's entropic balance. Put another way, have you ever wondered why your risk of being fleeced by a Nigerian con rose exponentially when you first got an email address? The Internet dropped the entropic cost of pickpocketing for a living.

    Restating "Parasites, ecosystems and sustainability…" (Horwitz & Wilcox)
    "Since Host–parasite relationships are ecological, invariably involving communities and ecosystems, what does ecological theory,
    including that incorporating complexity theory, tell us? Here we examine three aspects of Host–parasite relationships in this regard: (i) the scaled nature of Host–parasite relationships in ecosystems (ii) the benefits of being parasitised and (iii) the role of Host–parasite relationships in ecosystem functioning."

    Antibiotic solutions which promise to kill the parasites are popular. In the long run, the parasites always evolve, and the antibiotic turns out to be a waste of resources. This is obvious in agriculture, but equally true in finance. The survivors of the antibiotics administered to halt the US 'savings and loan' scandal have become resistant the same antibiotic 20 year later. They are the vectors of our current plague.

  59. Crange November 27, 2010 at 5:53 pm #

    Thanks for putting some perspective on how the people of Ireland were scammed.
    The IFSC (International Financial Services Centre) was the 'brainchild' of Charlie Haughey and friends. In all of this mess we have heard very little mention of this 'institution' in the media. In my opinion this den of crooks (IFSC) should be investigated by the Irish Fraud Squad except, tragically, the elite who screwed Ireland made sure that no meaningful version of such a force exists.
    Does anyone know where we might get the loan of a Guillotine for a couple of weeks…maybe longer.

  60. Eoin Clarke November 28, 2010 at 11:16 pm #

    Good site guys, I'll drop in from time to time

  61. Maeve November 29, 2010 at 6:20 pm #

    The elite of Ireland and other uber rich international folks have returned to the mansions, estates and Demenses of our previous landlords who we arsed (and sometimes burned) out of here in the last century.

    History repeats itself, also the propensity of the Irish to fight among themselves (tribal clans) while the invader moves in and takes over.

    nothing new…….

  62. Friendlyguy November 30, 2010 at 2:43 pm #

    Fantastic post – I never understood any of this stuff. 99.999% of Irish (and Germans too) probably didn't understand of this stuff.

    Well done!
    BTW, there are a few typos in the article. And when you wrote "Why was Hypo Real Estate bought by Germany at that moment", surely you meant "Why was Depfa bought by Germany at that moment"?

  63. Golem XIV - Thoughts November 30, 2010 at 7:17 pm #

    On the topic of eveolution.

    You may know about the reason Hares have evolved to run faster than fox. It's called teh life lunch rule. If the fox doesn't catch the hare it's lost its lunch. If the hare doesn't escape its lost its life.

    At some point in the unequal struggle between the banks and the people, this rule will kick in and then the bankers had better run for their lives.

  64. Mark December 4, 2010 at 5:06 pm #

    >the bankers had better run for their lives.

    That's a nice moral story, but hardly an evolutionary one. The fox and the hare don't change places.

    The evolutionary story is this: a lot of hares become lunch if the foxes suddenly get faster. The hare population eventually speeds up enough to survive the foxes. If they don't, the fox population is eventually starved and that protects the few remaining slow hares, who happen to be good at hiding.

    And guess what, if there are only a few hares and foxes left, what happens to global warming?

  65. David December 7, 2010 at 4:01 pm #

    I must admit I did not read all of the comments in depth. I would only point out a couple of things.

    The 'bubble' was based on greed. All bubbles are based on greed. The second thing is, in the end there is only paper that says someone is entitled to something. The courts are used to enforce this and empires are built from the paper value.

  66. Inthemix96 February 1, 2011 at 4:11 am #

    David and Teri,

    Got you loud and clear, and thanks for that teri, if i'm near london, I will join you all.

    This is beyond parody at times, some of the bull these folk spew from their mouths is astonishing.

    I mean come off it, how on earth is it in any of our interests to sell off the nations forests? Who thought that pearler up? Who thought we would follow it hook line and sinker?

    As sad as it makes me, you know what? They will sell them anyway, no matter what we say, no matter what we do, it is a done deal. One more nail in the coffin of this once great and proud land.

    As I said earlier, a complete hostile takeover, and not a bullet shot. What have I brought my kids into? Where only the greedy and corrupt prosper, where only the criminal and sociopathic make the real choices? This has got to change, if not for us, then our children, or those not yet born.

  67. Diarmuid February 28, 2011 at 12:31 pm #

    This Sunday, March 6th, 12 noon, even if I'm on my own, the first steps in protest. How have we become so docile?

  68. Basil Mc herb September 17, 2011 at 5:00 pm #

    Being Irish and living in this sod of a place, I wouldn’t refer to Irish regulation but the lack of it. Our Ministers of Finance (brought to new heights (or lows) by that fu*khead Charle Mc Creevey) were the architects of a non existent regulation. We had the head of the central bank who had no qualifications in economics and a financial regulator without a brain or backbone. I hang my head in shame.

    • Chic October 25, 2016 at 7:28 pm #

      By the way the IFSC was created by Dermot Desmond with the help of Charles Haughey.

  69. John F November 24, 2011 at 1:21 am #

    The DepFa story that did the rounds here in Ireland and readily discussed by central bankers is that German Officials demanded €180 billion as the bank was Irish registered. “Its an Irish Bank – thus Irish debt!”. The Irish said no way – but did transfer €10 billion to the Germans post haste…. so the Germans paid €170billion..

  70. nicolas blake November 24, 2011 at 7:41 am #

    Intersting you should name Cork as the epicentre of this scam .Some 40 years ago I lost my house(holiday home ) which was on a small island in Bantry bay (Co Cork) .Why ? ‘cos I received a bill for £4000 for electricity. Why? ‘cos the whole village had plugged into my electicity meter. I refused to pay (as I hadn’t been there for 2years). The rest is history
    The bars of Cork were filled with anti British pro German ex British merchant seamen. Nothing seems to change….. Ireland ..a wonderful place to come from

  71. Ryan November 24, 2011 at 12:00 pm #

    Sorry, but we are just as much to blame as the banks. Not because we are debtors, but because we are voters.

    We keep voting for political parties we know to be corrupt. We knew that asset bubbles were blowing up but all we did about it was whinge on blogs. We did nothing to demand proper oversight of the banks or government borrowing. We took the good times when they came and rode our luck, and when our luck ran out we blame everyone but ourselves, thus ensuring that in 30 years time the whole thing will happen again.

    We the voters are to blame, because we never learn. We are pathetic, easily led whingers that will always look for the easy way out. The best thing about us is that we won’t be around to screw it up forever. We can only pray that our offspring will somehow have learned to have more back-bone than we have.

    • Drishana January 27, 2012 at 12:23 am #

      I agree and disagree with you Ryan. As a German ‘blow-in’ living in Ireland (and someone who has no vote here) I was shocked to hear the discussions in the street when it came to the vote for the treaty… Then at every election I am shocked again. But most shocking is what I see in the media… So given the mass consciousness and apathy how are the chances for your offspring to not only get a feeling for the corruption but understand it and ‘have more backbone’…? Thanks for this blog – it gives me an education.

  72. Patrick Jackson March 4, 2012 at 1:56 am #

    Brian Lenihan bankrupted Ireland by tying our fate to doomed Banks.

    I hope he burns in hell. He certainly isn’t missed by Irish people.

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