STOCK MARKET WATCH -- Friday, 9 March 2012

[Demeter]

22. Are Irish Taxpayers About To Bail Out Goldman? FROM OCTOBER 2010

http://www.zerohedge.com/article/are-irish-taxpayers-about-bail-out-goldman-peter-sutherland-stealing-his-own-people-give-vam

It is deja vu all over again. To little media fanfare the dire financial situation in Ireland is nothing less than a repeat of the Lehman collapse in those dark days of September 2008. With the recent nationalization of half of the country's six big banks, and the blanket guarantee over the rest of them, the Irish government has effectively made sure that bondholders in all banks, even those which such as long insolvent Anglo Irish bank will be made whole by the long-suffering Irish taxpayers. And despite rumors of haircuts for at least sub debtholders, actual facts validating this possibility remain unseen. Which begs the question why is everyone in the world so terrified of taking mark to market losses on even a few billion in debt? Simple: as all of the world's banks, but Europe more so than anyone else, are now caught in the biggest circle jerk ever imaginable, with one entity's liabilities making up another's assets, which in turn are someone else's liabilities, and so forth in a MC Escher (or is that HR Giger?)-esque flow chart of the surreal (as can be seen here), even one dollar of write downs can spiral and affect tens if not hundreds of billions of downstream assets (and thus liabilities). Which explains why the ECB and everyone else in Europe is so intent on preventing a failed auction in Ireland (we previously disclosed that virtually every September auction of Irish bonds was purchased by the ECB, either directly and indirectly): should the banks that are on the hook actually validate their impairment, Europe is one step away from activating its own $1 trillion TARP package. Yet what is amusing is that inbetween the cracks of exclusively European-bank based senior and subordinated bondholders in such bankrupt banks as Anglo-Irish, a familiar name emerges: Goldman Sachs.

Yes, nested quietly inbetween the €4,034,756,880 in face value of Anglo Irish bondholders is the name that managed to pull the strings (via its puppet Hank Paulson) and get bailed out when AIG threatened to make Goldman management and investors insolvent. Is Goldman, via its UK-based Goldman Sachs Asset Management Intl. subsidiary, currently petitioning Brian Lenihan to be the only US-based bank to receive a direct bailout on its Anglo bond position? Or is it, as always behind the scenes, negotiating on behalf of 80 other European banks, among which Lombard Odier, Rothschild, and Deutsche, and achieve what it always succeeds in: escaping scott free, and stuffing taxpayers with the bill? We are confident Irish taxpayers, and drivers of cement trucks, would be fascinated in getting the correct answer.

Guido Fawkes, who managed to obtain the Anglo Irish bondholder list, shares the following commentary:

Anglo-Irish Bank did not represent a systemic risk to the Irish economy, it wasn’t a high street bank like AIB or the Bank of Ireland. If it had been allowed to go the way of Lehmans the only losers would have been shareholders and bondholders. The Irish state stepped in and nationalised a bank that was basically run by crooks lending to property speculators. The Irish people are taking losses that should rightly have been shouldered by bondholders.

Every child in Ireland is being bequeathed a huge debt at birth to protect the interests of foreign, mainly German, bondholders – why? Guido was once a bond trader, it was always understood that sometimes the bond issuer defaults. That is the risk investors take.

So why is Dublin’s political establishment so keen to protect foreign investors at the expense of future generations? Guido has obtained the list of foreign Anglo-Irish bondholders as at the close of business tonight. These are the people whom Dublin’s politicians really seem to care about.

Between them they hold Anglo-Irish bonds with a face-value of €4,034,756,880. Shouldn’t they take the hit rather than future generations of Irish taxpayers? Capitalism is a system of profit and loss, they took the risk of investing in Anglo-Irish Bank. Is the Irish government under pressure from the European Central Bank in Frankfurt to protect German investors?

Spot on question. And as the highlighted area in the chart below demonstrates, we would like to add Goldman Sachs to the list of bailoutees. Surely, few firms in the world deserve to be redeemed as much as god's little helpers.