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Thread: Obama and Geithner blocked IMF deal to haircut Irish debt.

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    Default Obama and Geithner blocked IMF deal to haircut Irish debt.

    Geithner Blocked IMF Deal to Haircut Irish Debt

    [quote
    ]Was the US Treasury Secretary’s deep sixing of a plan by the seldom-charitable IMF to give the Irish some debt relief Versailles redux? By that I mean the Treaty of Versailles, the agreement at the end of World War I devised by the victors to dismember the German economy. Bear with me as I tease out this conceit.
    Now what, pray tell, does this have to do with Ireland, and Geithner? Geithner is as doctrinaire and short-sighted a defender of bankers’ privileges as the Allied Powers were of their rights to make Germany pay for the costly and bloody Great War.

    We had noted that the Irish could have stared down the EU and held out for a bailout of its banks only, and were mystified at the quick capitulation. Consider this section of a very instructive op-ed by Ireland’s highly respected economist Morgan Kelly in the Irish Times (hat tip reader disgruntled observer):

    On November 16th, European finance ministers urged [finance minister Brian] Lenihan to accept a bailout to stop the panic spreading to Spain and Portugal, but he refused, arguing that the Irish government was funded until the following summer. Although attacked by the Irish media for this seemingly delusional behaviour, Lenihan, for once, was doing precisely the right thing. Behind Lenihan’s refusal lay the thinly veiled threat that, unless given suitably generous terms, Ireland could hold happily its breath for long enough that Spain and Portugal, who needed to borrow every month, would drown….

    Ireland’s Last Stand began less shambolically than you might expect. The IMF, which believes that lenders should pay for their stupidity before it has to reach into its pocket, presented the Irish with a plan to haircut €30 billion of unguaranteed bonds by two-thirds on average. Lenihan was overjoyed, according to a source who was there, telling the IMF team: “You are Ireland’s salvation.”

    The deal was torpedoed from an unexpected direction. At a conference call with the G7 finance ministers, the haircut was vetoed by US treasury secretary Timothy Geithner who, as his payment of $13 billion from government-owned AIG to Goldman Sachs showed, believes that bankers take priority over taxpayers. The only one to speak up for the Irish was UK chancellor George Osborne, but Geithner, as always, got his way. An instructive, if painful, lesson in the extent of US soft power, and in who our friends really are.

    The negotiations went downhill from there. On one side was the European Central Bank, unabashedly representing Ireland’s creditors and insisting on full repayment of bank bonds. On the other was the IMF, arguing that Irish taxpayers would be doing well to balance their government’s books, let alone repay the losses of private banks. And the Irish? On the side of the ECB, naturally.

    In the circumstances, the ECB walked away with everything it wanted. The IMF were scathing of the Irish performance, with one staffer describing the eagerness of some Irish negotiators to side with the ECB as displaying strong elements of Stockholm Syndrome.

    The Stockholm Syndrome point is important. Banks who have engaged in widespread looting and reckless behavior have nevertheless managed to persuade the public that acceding to their demands is virtuous. In a narrow sense, that isn’t wrong, in that healthy communities depend on most people honoring their commitments . But how long will this widespread use of what amount to one sided agreements, where the financiers can break them with little in the way of consequences while ordinary citizens required to adhere to them, continue before the collateral damage engulfs the bankers? This repudiation of basic notions of equity will prove to be as corrosive to the foundations of our society as the German hyperinflation was, although it will take longer to play out. And the economic costs are increasingly evident (hat tip reader Philip Pilkington)
    :
    [/quote]
    http://www.nakedcapitalism.com/2011/...rish-debt.html

    On the Treasury’s Curious Denial That Geithner Blocked Deal on Irish Debt

    This is getting interesting
    . The US Treasury has roused itself to issue a narrow denial of an op-ed in the Irish Independent by one of Ireland’s most highly respected economists (by virtue of his having predicted a very severe housing crash), Morgan Kelly. To recap briefly, Kelly said that the IMF was willing last November to haircut €30 billion of unguaranteed bonds by roughly two-thirds on average, but that Geithner’s disapproval on a conference call killed the idea:

    The deal was torpedoed from an unexpected direction. At a conference call with the G7 finance ministers, the haircut was vetoed by US treasury secretary Timothy Geithner who, as his payment of $13 billion from government-owned AIG to Goldman Sachs showed, believes that bankers take priority over taxpayers. The only one to speak up for the Irish was UK chancellor George Osborne, but Geithner, as always, got his way.

    The Irish Independent today reported on the Treasury’s objection:

    The US government last night rubbished a claim that one of its most senior officials “torpedoed” a plan to allow Ireland to write-off some of its bank debts….

    Last night, a senior US official said this report was “inaccurate”.

    The official pointed out the ECB and the European Commission (EC) did not want to impose haircuts on bondholders who loaned money to Irish banks.

    “The ECB and EC were both dead opposed and they are decisive. The US is not a decision maker on European issues,” the official said.

    Ahem. Notice the statement. It does not say that Geithner was against the restructuring, merely that his opposition made no difference.

    But this finesses what Kelly discussed, which is that Geithner effectively undercut the IMF (notice their complete absence from the Treasury account). As Kelly indicated in his op-ed, the Irish strategy was to hold off on a rescue, since Portugal and Spain would need to be dealt with first, and that would improve its bargaining position. As Richard Smith indicated in a series of posts last year, the Irish debt problem was not a government deficit mess but a banking sector lending binge mess, primairly that of Anglo Irish. The notion was to press for a deal that involved a banking sector rescue only rather than channel the rescue through the government, effectively making the taxpayers responsible. As Kelly recounted:

    On November 16th, European finance ministers urged [finance minister Brian] Lenihan to accept a bailout to stop the panic spreading to Spain and Portugal, but he refused, arguing that the Irish government was funded until the following summer. Although attacked by the Irish media for this seemingly delusional behaviour, Lenihan, for once, was doing precisely the right thing. Behind Lenihan’s refusal lay the thinly veiled threat that, unless given suitably generous terms, Ireland could hold happily its breath for long enough that Spain and Portugal, who needed to borrow every month, would drown.

    At this stage, with Lenihan looking set to exploit his strong negotiating position to seek a bailout of the banks only, Honohan intervened. As well as being Ireland’s chief economic adviser, he also plays for the opposing team as a member of the council of the European Central Bank, whose decisions he is bound to carry out. In Frankfurt for the monthly meeting of the ECB on November 18th, Honohan announced on RTÉ Radio 1’s Morning Ireland that Ireland would need a bailout of “tens of billions”.

    Rarely has a finance minister been so deftly sliced off at the ankles by his central bank governor. And so the Honohan Doctrine that bank losses could and should be repaid by Irish taxpayers ran its predictable course with the financial collapse and international bailout of the Irish State.

    And no less than IMF chief Dominique Strauss-Kahn had given coded support in public for the Irish position. This Bloomberg report is from November 13:

    The International Monetary Fund stands ready to help Ireland if needed, its managing director said, as market concern about the country’s debt crisis continues.

    “Everybody knows that the situation with Ireland, it’s a difficult situation,” IMF Managing Director Dominique Strauss- Kahn told reporters today in Yokohama, Japan. “So far I haven’t received any kind of request. I think they can manage well. If at one point in time, tomorrow, in two months or two years, the Irish want support from the IMF, we will be ready.”….

    Strauss-Kahn, who is attending this weekend’s Asia-Pacific Economic Cooperation forum, also told reporters today that Ireland’s debt problems are mostly linked with “one big bank” and are different from those of Greece.

    “It’s not the same thing as Greece’s problem,” which was caused by a lack of economic competitiveness in addition to fiscal woes, he said.

    Notice the strategy of the ECB was to force a rescue on Ireland even though the need was not imminent. So Strauss-Kahn saying that he was ready when the Irish were ready but “I think they cam manage well” was pointedly standing aside from the matter. This is consistent with the Kelly account:

    The negotiations went downhill from there. On one side was the European Central Bank, unabashedly representing Ireland’s creditors and insisting on full repayment of bank bonds. On the other was the IMF, arguing that Irish taxpayers would be doing well to balance their government’s books, let alone repay the losses of private banks. And the Irish? On the side of the ECB, naturally.

    In the circumstances, the ECB walked away with everything it wanted. The IMF were scathing of the Irish performance, with one staffer describing the eagerness of some Irish negotiators to side with the ECB as displaying strong elements of Stockholm Syndrome.

    The bailout represents almost as much of a scandal for the IMF as it does for Ireland. The IMF found itself outmanoeuvred by ECB negotiators, their low opinion of whom they are not at pains to conceal. More importantly, the IMF was forced by the obduracy of Geithner and the spinelessness, or worse, of the Irish to lend their imprimatur, and €30 billion of their capital, to a deal that its negotiators privately admit will end in Irish bankruptcy. Lending to an insolvent state, which has no hope of reducing its debt enough to borrow in markets again, breaches the most fundamental rule of the IMF, and a heated debate continues there over the legality of the Irish deal.

    Now in fairness, what this depicts is a divided Ireland (the Finance Minister versus the governor of the central bank, who also happens to be aligned with the ECB) while the IMF is trying to fight an uphill battle with the ECB to get a more realistic deal. As we have said repeatedly, Ireland is the poster child of “austerity does not work”. Its nominal GDP has fallen 20% since steep budget cuts were implemented, making its debt to GDP ratio worse.

    So why was what Geithner said on the call probably more important than the Treasury spokesperson suggested? First, as anyone who has spent a lot of times in meetings can attest, a person who is seen as influential or knowledgable, even if they do not have a formal decision-making role, can wind influencing a decision. Indeed, the theoretical outsider can has more sway by being perceived to be objective.

    And let us not forget: the US has more votes on the IMF board than any other nation, and Geithner is the US’s governor. Do you think his expressing a negative view of a haircut might have some influence on the IMF?
    http://www.nakedcapitalism.com/2011/...rish-debt.html

    This story needs to get wider coverage in Ireland. I'm very surprised that RTE (Pravda-Lite) haven't mentioned this news story in any of their news coverage to date. I would urge members of the Irish public to boycott Obama's speech in O'Connell Street over his blocking of the haircut on Irish debt. I would also urge you to urge other people to boycott his O'Connell Street speech also.
    Last edited by C. Flower; 12-11-2014 at 07:40 PM.

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    Default Maidir Le: Obama blocked IMF deal to haircut Irish debt. Boycott Obama's speech in O'Connell St - pass the word around

    The whole world banking system is in probability hollowed out and not much more worth while than anglo irish. The idea seems to be to lie and conceal until "growth" kicks in again and takes the pressure off the lie.

    Geithner presumably knows enough to know that an irish default could start a domino run going straight to his door.

    http://www.politicalworld.org/showpo...46&postcount=8

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    Default Re: Obama blocked IMF deal to haircut Irish debt. Boycott Obama's speech in O'Connell St - pass the word around

    sending this to all reporters etc im following

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    Default Re: Obama blocked IMF deal to haircut Irish debt. Boycott Obama's speech in O'Connell St - pass the word around

    A ticketed event, it will be heavily staged, etc.
    Though tickets are free, there will doubtless be pre-emptive purge of undesirables via the application process.

    Scumbag commander of a terrorist army. Worse than Liz. Far.
    Last edited by matt; 11-05-2011 at 11:21 PM.

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    Default Re: Obama blocked IMF deal to haircut Irish debt. Boycott Obama's speech in O'Connell St - pass the word around

    Quote Originally Posted by matt View Post
    A ticketed event, it will be heavily staged, etc.
    Though tickets are free, there will doubtless be pre-emptive purge of undesirables via the application process.

    Scumbag commander of a terrorist army. Worse than Liz. Far.
    and thats some achievement!

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    Default Re: Obama blocked IMF deal to haircut Irish debt. Boycott Obama's speech in O'Connell St - pass the word around

    Quote Originally Posted by Apjp View Post
    and thats some achievement!
    [ame="http://www.youtube.com/watch?v=8mA4HYTO790"]YouTube - Obama is worse than George Bush and Tony Blair says Noam Chomsky[/ame]

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    Default Re: Obama blocked IMF deal to haircut Irish debt. Boycott Obama's speech in O'Connell St - pass the word around

    [ame="http://www.youtube.com/watch?v=igbTr8RWLUY&feature=share"]http://www.youtube.com/watch?v=igbTr8RWLUY&feature=share[/ame]

    someone just posted this to me on facebook... around 4.07 mins in, the CC appears to call RCB a c**t.. is this an edit or for real?

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    Default Re: Obama blocked IMF deal to haircut Irish debt. Boycott Obama's speech in O'Connell St - pass the word around

    Quote Originally Posted by Skrimshander View Post
    http://www.youtube.com/watch?v=igbTr...&feature=share

    someone just posted this to me on facebook... around 4.07 mins in, the CC appears to call RCB a c**t.. is this an edit or for real?
    Come back Bull, all is forgiven!?
    "It is we the workers who built these palaces and cities here in Spain and in America and everywhere. We, the workers, can build others to take their place. And better ones! We are not in the least afraid of ruins. We are going to inherit the earth; there is not the slightest doubt about that. The bourgeoisie might blast and ruin its own world before it leaves the stage of history. We carry a new world here, in our hearts."
    — Buenaventura Durruti

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    Default Re: Obama blocked IMF deal to haircut Irish debt. Boycott Obama's speech in O'Connell St - pass the word around

    'Are you not ashamed to defer to overlords? Bear in mind that President Obama is also responsible for many more deaths than Osama bin laden with all these mysterious drones bombing afghanistanis and pakistanis every other day. Being stopped randomly in the street and searched by the Gardai just because 3 state terrorists are visiting us next week or the week after is disgraceful. We have become a Vichy state led by the Petain's of this country, and we defer to our overlords who are refered to as our 'partners'. What ever happened to the sacred neutrality of our nation? What ever happened to a right to protest against American and English terrorism? What ever happened to not paying out on lost bets to overseas banks and gamblers not even guaranteed by the state? Dont you ever lay awake at night thinking doing all this ***** will mean your govt will be gone very soon? Some how, on a 6 figure salary, I doubt you do.' some of what i just said to gilmore on this matter and others

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    Default Re: Obama blocked IMF deal to haircut Irish debt. Boycott Obama's speech in O'Connell St - pass the word around

    Quote Originally Posted by Skrimshander View Post
    http://www.youtube.com/watch?v=igbTr...&feature=share

    someone just posted this to me on facebook... around 4.07 mins in, the CC appears to call RCB a c**t.. is this an edit or for real?
    It's been removed.
    RTE at the time reported only that RBB refused to retract a statement and was asked to leave - what did he say ?
    Is the last post part of it or a seperate statement (from apjp) ?

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    Default Maidir Le: Re: Obama blocked IMF deal to haircut Irish debt. Boycott Obama's speech in O'Connell St - pass the word around

    Quote Originally Posted by matt View Post
    It's been removed.
    RTE at the time reported only that RBB refused to retract a statement and was asked to leave - what did he say ?
    Is the last post part of it or a seperate statement (from apjp) ?
    When did this happen / not happen ?

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    Default Re: Obama blocked IMF deal to haircut Irish debt. Boycott Obama's speech in O'Connell St - pass the word around

    Last tues.
    The request for Boyd-Barrett to leave came minutes after heated words were changed between the two, when the Ceann Comhairle ordered Boyd-Barrett to stop asking questions unrelated to the visit of Barack Obama, which was being discussed at that time
    http://www.thejournal.ie/boyd-barret...34336-May2011/

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    Default Maidir Le: Re: Obama blocked IMF deal to haircut Irish debt. Boycott Obama's speech in O'Connell St - pass the word around

    Quote Originally Posted by matt View Post
    Last tues.
    The request for Boyd-Barrett to leave came minutes after heated words were changed between the two, when the Ceann Comhairle ordered Boyd-Barrett to stop asking questions unrelated to the visit of Barack Obama, which was being discussed at that time
    http://www.thejournal.ie/boyd-barret...34336-May2011/
    I was listening to that - the CC was out of order - BB was asking a question.
    There is no love lost there. BB I think is a good performer in the Daíl and is not allowing the CC to intimidate him so far.

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    Default Re: Maidir Le: Re: Obama blocked IMF deal to haircut Irish debt. Boycott Obama's speech in O'Connell St - pass the word aroun

    Quote Originally Posted by C. Flower View Post
    I was listening to that - the CC was out of order - BB was asking a question.
    There is no love lost there. BB I think is a good performer in the Daíl and is not allowing the CC to intimidate him so far.
    I was a little confused when watching as RBB was clearly asking a question, regarding the use of money on the upcoming queen and obama visits and whether it (the money) would be best used for something else.

    I freely admit I now little about dail process...but to me, RBB's question seemed legitimate. however, the CC's response was irrational, not to mention extremely ignorant...
    hense my editing question

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    Default Re: Maidir Le: Obama blocked IMF deal to haircut Irish debt. Boycott Obama's speech in O'Connell St - pass the word around

    Quote Originally Posted by C. Flower View Post
    The whole world banking system is in probability hollowed out and not much more worth while than anglo irish. The idea seems to be to lie and conceal until "growth" kicks in again and takes the pressure off the lie.

    Geithner presumably knows enough to know that an irish default could start a domino run going straight to his door.

    http://www.politicalworld.org/showpo...46&postcount=8
    It's all very depressing. Frankly, I wouldn't really blame Geithner or Obama for panicking and trying to shore up the levees. It didn't work too well for them when the US decided Lehmans should go down because of moral hazard.

    I'm inclined to worry that we're damned if we do default, and damned if we don't. Except that I'm wondering, in our case, if fudging along mightn't work for us for various reasons? The Anglozone appears to be feeling sympathetic right now. We could be shored up if the US/UK send enough work our way....

    Sometimes strange and helpful things can happen under carpets and in closets....

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