Rebecca,

Those bonds you refer to, being secured by actual assets, are known as ‘covered bonds’. Those bonds usually have a dual security in that they get a general security over the general assets of the bank AND more importantly, are ‘covered’ also by a pool of specific and highest rated individual mortgage contracts. In essence, covered bonds are the most secure bond a bank can issue, and is apparently quite prevalent in europe. Unfortunately for depositors, those bonds rank above everything else! Here in NZ and Australia such bonds have only recently been allowed by governments/central banks. Australia actually had a law prohibiting those bonds…

Re bonds/loans. I think the two terms are used interchangably quite often. Selling bonds=issuing debt. Both involve repayment plus interest at some fixed future date. Selling bonds is not like selling shares, where you are selling title of assets in effect but not the right to convert those assets to a certain amount of cash at some specified date.
I suppose its all down to the fine print of each contract whether such bonds are closer to debentures than to bank loans, i.e if they are secured using the assets of the debt issuer then they're probably more similar to bank loans, in terms of who gets paid first in the event of liquidation.

I think the issue is that even if they were secured – they were secured using our loans from banks (loans being bank's 'assets') rather than our deposits (bank's liability) so surely it was up to those buying the bonds to assess
the worth of those assets and if they made a mistake well tough!
I doubt the were acting 'ultra vires' because they wouldn't have been binding depositors funds with these contracts – it is customer loans (banks assets) that would have been involved.
It is at the point of bank failure that the problems arise. The madness is that ordinary depositers without the means to examine things like loan books or balance sheets are being treated like some sort of trade creditors – i.e ranked pretty low on the scale of who gets paid first in a liquidation.
Ordinary deposit holders should be the first and primary creditors of any bank or similar institution, and any contracts making any creditors preferred to ordinary depositors should be illegal.
As things stand the ordinary depositer has been taking a massive gamble in leaving their money in the bank, for very small returns while the bond holders have been making massive returns for taking no risks at all. It should all be illegal but I sadly don't think it is.

'-bloat the mind with minutiae trivia served at rapid speed'

I really like that! But I think that what truly and fatally 'bloats' the mind to the point of gout – is the self satisfaction and self regard that is promoted (in newspapers and previously 'serious' media especially) for those who can consume the most sought after goods. The minutiae trivia serves for idle moments and those who cannot afford to play 'lets pretend were Hello Magazine 'celebrities.'

There is a generation in this country that is literally transfixed by its own consumerism. It is narcissism, except most of these people are not outstandingly beautiful. Modern advertising saves the day by saying, 'but dont worry you can still be a narcissist, we'll take care of that.'
I also think it is related to the fall in religion – there is a generation that is so truly impressed with itself for throwing off conservative religion- that it cannot see all the babies it might have chucked out with the bath water. Chief amoung which was perhaps the last scraps of Western middle class humility.
(I am not saying religion necessarily breeds humility between people -but I think it does anchor some sort philosphical humility to the meritocratic middle class).
And I would therefore agree with MacPuddock that it is too simplistic to just make Blankfein Dr Evil (although actually when I saw The Inside Job – I thought 'OOOhh I get it – its Revenge of the Nerds Part II'). There are so many people who also just want another bubble to appear so they can go back to navel gazing, mindless consuming.
There is a whole generation in Ireland that is so laughably like some awful characters out of Dickens/Thackeray/Austen that, either its shockingly illiterate, or has absolutely zero self awareness. There is so much Try going on that just being within a 10m radius of these people for more than five minutes leaves you feeling spent. And just by chance that is the generation that gave us the hedge-funder.

Cheers for the tip-off. I'll be tuning in on the 23rd May. His films are always very thought-provoking (if potentially a bit disturbing!).

(The MayFair Set was an excellent analysis of how the British & American Economy financialised itself during the 60s / 70s / 80s)

Paul Mason had a somewhat creepy bout of technophilia the other week:

http://www.bbc.co.uk/blogs/newsnight/paulmason/2011/04/ipad_the_great_nature_theatre.html

To which myself and a few other posters tried to caution against. Foreseeing that obsessiveness with iPads etc could be descending us into this "complete social cultural and intellectual impoverishment". Technology merely serves to:

– distract attention from genuine news
– provide a source of revenue (walled gardens)
– promote further consumption activity rather than production
– bloat the mind with minutiae trivia served at rapid speed
– render our society incapable of lengthy and weighty intellectual discovery and debate

Next on my reading list (after Polanyi) is Lewis Mumford's "Myth of the Machine" (referenced heavily by Neil Postman).

Essentially they are NOT 'supermen', doing what supermen do, an idea that has been promoted by ideas such as the Ayn Rand cult, and the cult of late capitalism, which in many respects, are the natural territory of the undeveloped, immature personality.

It certainly ties in with the social changes we have seen recently, where people have become more assertive and conscious of their capacity to demand recognition and the idea of a service economy and culture. It has two sides to it of course. We are both the served and the servers (most of us at least). At the same time as we access rewards for this perspective( we get 'service', we also suffer consequences such as social disempowerment as 'the servers'. It reminds me of the 'access' to once designer labels, we now see. The snag is that the real exclusive, high status stuff which people really wants, always mutates or moves out of reach, away from ordinary grasp just as we think we are empowered to grasp it. So there is a multi-layerd form of consumerism, which becomes bewildering, and ultimately infects all aspects of our thinking with a largely manufactured consumer complexity masquerading as social complexity.

It is this false reality that must be challenged, so that a corrective process can be started.
I think we have to see something like the whole picture, something that is of course impossible to achieve, although we should be able to approach some kind of wide understanding.
Like Curtis, I am deeply suspicious of the way we adopt technology without much real thought for associated aspects, such as education, and ways to regulate disproportionate power created by early access to technology.
There is a really serious philosophical deficit in our political process and the political players.

Thanks for the link to Morgan Kelly’s article in the Irish Times, which I just read. Unfortunately his entire effort is based on a basic misunderstanding.

“Back when the euro was being planned in the mid-1990s, it never occurred to anyone that cautious, stodgy banks like AIB and Bank of Ireland, run by faintly dim former rugby players, could ever borrow tens of billions overseas, and lose it all on dodgy property loans.”

The Irish banks did not “borrow tens of billions overseas, and lose it all on dodgy property loans”. Kelly is repeating this big lie about the bailout.

The truth is that when each of these banks originated mortgages, bundled and sold them to the investment market, they did not “borrow” from the market – they SOLD an investment product called a mortgage-backed security, otherwise known as a “bond”.

It would be good if somebody of Kelly’s standing understood that.

http://www.irishtimes.com/newspaper/opinion/2011/0507/1224296372123.html

dynamite