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Politics : The Obama - Clinton Disaster -- Ignore unavailable to you. Want to Upgrade?

To: Hope Praytochange who wrote (38706)	10/4/2010 6:31:51 PM
From: DuckTapeSunroof	Respond to of 103300

Anglo failure would ‘bring down’ Ireland By David Gardner and John?Murray?Brown in Dublin Published: September 29 2010 19:21 \| Last updated: September 29 2010 20:15 ft.com The failure of Anglo Irish bank, the lender at the centre of the country’s financial crisis, would “bring down” Ireland, the country’s finance minister said, as he vowed the government would stand behind the institution as it winds down. Dublin will on Thursday unveil a fresh recapitalisation of Anglo Irish and seek to draw a line under its banking crisis. But doing so will raise the cost of its taxpayer-funded bail-out of the banks to up to €35bn ($48bn) and lift the country’s fiscal deficit to a record expected to be as much as 30 per cent of gross domestic product. In an interview with the Financial Times, Brian Lenihan, finance minister, said Ireland had no choice but to act. “Any Anglo failure would bring down the sovereign. It is systemically important not because of any intrinsic merit in the bank. But because of its size relative to the national balance sheet. No country could contemplate the failure of such an institution,” he said. As part of the new bail-out the finance minister will authorise the immediate transfer of Anglo Irish’s remaining €25.9bn in non-performing property loans to the National Asset Management Agency, the government body set up to house troubled assets from the banking crisis. At one swipe, the move will halve Anglo Irish’s size. The rest of the loans will be wound down over time. On Wednesday Standard & Poor’s, the credit rating agency, downgraded Anglo Irish’s subordinated debt by three notches to triple C and warned there was a “clear and present risk” of a restructuring of the bonds. Earlier this week, Moody’s Investors Service similarly downgraded the bank’s sub bonds, but also downgraded Anglo Irish’s senior bonds by three notches because of the “greater marginal risk” that the government would not support those creditors. In anticipation that Allied Irish Banks may now be targeted by the markets, Mr Lenihan is separately expected to announce a further taxpayer injection of about €2-3bn to help the bank meet the regulator’s year-end deadline to raise €7.4bn. Announcements by Mr Lenihan and the financial regulator will seek to restore calm to the debt markets where Ireland’s cost of borrowing was again at near record levels on Wednesday. With opposition politicians calling on the government to force the banks’ bondholders to share some of the burden, Mr Lenihan restated that Ireland would repay the senior bond holders in full, but said issues around the subordinated bondholders “will be addressed” in Thursday’s statement. Mr Lenihan suggested Ireland was being punished for being “honest” about the calamitous state of its banks. But he was keen to stress Ireland’s financial health was better than other peripheral eurozone countries, pointing out it had borrowings already in place to service its debts and pay for public services until the middle of 2011. He said Ireland’s position was further bolstered by a €24bn sovereign wealth fund, and “a cash pile” of over €20bn. “We are not obliged to go to the markets. We are not under a clear and present constraint,” he said. Some business people believe the government has exacerbated the situation by forcing banks to recognise their property losses in full upfront. But Mr Lenihan said: “It means the banks are cleaned up and ready to operate and there’s no continued uncertainty about them. “Many of the externally owned subsidiary banks that arrived here and helped fuel the property boom have now departed. They’ve said goodbye. So unless the Irish banking sector was repaired, Ireland – like Japan – would have had a zombie banking sector for a whole decade.” Mr Lenihan repeated the government’s commitment to bring the deficit below 3 per cent by 2014. Additional reporting by Jennifer Hughes in London Copyright The Financial Times Limited 2010.