Chillin' out till it needs to be funded
AS Ireland comes to terms with its failed bailout of bankrupt state banks, the entire Euro zone is watching in animated suspense. Bund spreads are more than 10% for Greece and even Portugal has spreads higher than 5.5% As of March 2009 the Anglo Irish Bank, the Bank of Ireland and Allied Irish had made only Euro 150 bln worth of toxic loans and the credit line extended by the Euro government / ECB extends a mite higher to Eur 440 billion as of June 2010,.
In Ireland’s case the defaults were a direct case of mortgage lending with a n assumed lending to value ratio of less than 75% in reality crossing 100% of the value of the property with “equity releases”(Ref: WSJ) Also at risk were undermining of the problem since its head reared in September 2008 assuming capital inflows of Eur 1.5 bln to Eur 50 billion could somehow solve it and the National debt coming in line would solve the problem with fiscal control. Seemingly, all of this was a paper dream with the elusive PWC again behind it. While in the Satyam case, PWC even admitted culpability with fake documents being seized by the investigators, in Ireland we are nowhere near making these non existent audits accountable and the auditors no where near being striped of their badges or their power which makes discussing these towards an eye on the solution almost impossible.
However as of now, any fiscal prudence by the Irish has been lost in their joining with their banks at the hip and in the method chosen, the purse that pays the bill continues to change hands to a bigger hand which has some more time to get bankrupt and thus try to regain control. Meantime int he US GM has turned around proving quarterly profits of nearly $2 bln ahead of its IPO calendar further in the year