The Irish Independent reports that the highly influential European Central Bank (ECB) has questioned the way the Government plans to guarantee billions of euros of debt for the banks, saying the scheme may be too generous compared to those of other European countries.
The bank, led by Jean-Claude Trichet, has given the green light to eurozone countries to guarantee short-term bank debt, but only for borrowings running from three months to a year in duration.
Ireland's revised scheme, however, allows even short-term debt of less than three months to qualify for a guarantee -- which has drawn a negative reaction from the Frankfurt-based body.
"Granting government guarantees for bank debt with a maturity of less than three months should be avoided to the extent possible," said the ECB opinion, which was signed by Mr Trichet and passed to the Government before Christmas.
The Government had requested an opinion from the ECB on the scheme in late October.
The ECB said Ireland's banks still faced significant challenges, but that this was not enough reason to allow short-term debt to get a full state guarantee. The bank stated that countries like Ireland had to avoid undermining a single policy on bank rescues in Europe.
"It is essential that the scheme will not impair the implementation of the single monetary policy throughout the euro area," stated the opinion.
The ECB noted how the Irish scheme -- known as the Eligible Liabilities Guarantee Scheme -- had no restrictions on the kind of short-term debt the Government would stand over.
"It is noticeable that, under the draft scheme, there is no stated minimum maturity for any guaranteed liabilities."
The ECB added that the Irish scheme opened up the danger that borrowings of less than three months might be guaranteed in practice. The ECB opinion is clear that it supports a "level playing field" when it comes to governments designing their bank rescue plans.
"Uncoordinated decisions among members states should be avoided as they may involve a fragmentation of the euro area money market," it said.
The ECB has already given opinions on the original bank guarantee scheme -- which was agreed on September 29, 2008 -- and said its latest opinion should be read in the context of that earlier view.
The Government was also quoted in the opinion explaining the need to guarantee even very short-term borrowings.
One reason given was that Irish banks continued to suffer from liquidity problems despite some recent improvements.
Secondly, the Government pointed out that deposits of less than three months were also guaranteed and, thirdly, it was trying to wean banks off this practice in the latest scheme.
The Government was, however, complimented for ensuring the scheme is to be reviewed on a six-month basis and that these reviews would be passed on to the ECB.
The bank also welcomed the Government's commitment to end the practice within five years as it helped to "harmonise'' policies across Europe.
The decision to charge banks for use of the scheme was also praised as fitting with ECB policy, the bank said.
The Irish Independent also reports that the country's leading banks wanted to ensure that NAMA, the toxic loans agency, was not covered under the Freedom of Information (FOI) Act when the bill was being drafted last August.
The Irish Banking Federation (IBF) suggested to the Department of Finance in a confidential submission that there should be an "explicit statement'' that NAMA would not be covered by the FOI Act. Ironically the IBF submission itself has now been released under the act.
The final National Asset Management Agency (NAMA) Act includes no reference to the FOI Act, and a range of curbs are included in the legislation to stop NAMA and banking officials from disclosing details about loans and the developers who hold them.
Explicit
But last August the banks asked the Department of Finance whether something even stronger might be needed.
"Should there be an explicit statement, for the avoidance of doubt, that supply of information is not subject to Freedom of Information legislation,'' said the submission by the banks.
Banks are given protection in the legislation to provide information to NAMA itself and also to help any law enforcement agencies, but beyond these situations the curbs in the act are very severe.
For example, the legislation includes the following provision: "A person shall not, unless authorised by NAMA, a NAMA group entity or the NTMA or authorised or obliged by law to do so, disclose information that he or she knows is confidential information."
Regulatory agencies are entitled to be given information from NAMA on loans and debtors, but there is no provision in the legislation specifically covering the FOI Act, although the opposition did seek such a measure during amendment stage.
Legislation
Another element of the IBF's submission queried the use throughout the bill of the phrase "utmost good faith". Throughout the legislation parties were asked to act with "utmost good faith'', but the IBF queried the need and use of this phrase
"While this is a standard of conduct known and familiar to the insurance industry, it is not typically used in the context of financing,'' said the federation.
"There is no statutory definition to provide guidance about the level of conduct expected to meet the requirement.
"Clarification in this respect should be provided,'' said the federation. The banks also expressed concern about incidences when NAMA buys some loans owned by a developer, but not others. The banks said this could leave them holding loans with less security than the loans owned by NAMA itself.
"If facilities are crossed secured and NAMA acquires some but not others, will the facilities left in the hands of the participating institutions continue to benefit from the security?'' the federation asked.
The Irish Times reports that the property developer Bernard McNamara, believed up to recently to be one of the wealthiest people in the State, is “no longer a person of significant net worth”, the High Court was told yesterday.
Mr Justice Peter Kelly of the Commercial Court has held over a decision to today on whether to grant a stay on a €62.5 million judgment against Mr McNamara.
The judgment could “trigger” further claims against him that could in turn threaten the survival of his group of businesses.
The court was told Mr McNamara’s group of businesses directly or indirectly supply a livelihood to more than 1,100 people.
One of the top figures associated with the property boom, Mr McNamara, who lives on Dublin’s Ailesbury Road, is behind the Elm Park development on Merrion Road in Dublin, the refurbished Shelbourne Hotel on St Stephen’s Green, and other property and hotel ventures around the State.
He was part of a consortium that bought the Irish Glass Bottle site in Ringsend, Dublin, for more than €400 million, one of the bigger property transactions of the boom. In March 2007 he purchase the Burlington Hotel in Dublin for €288 million.
Yesterday a letter concerning his circumstances was read out in court by John Gleeson, counsel for a group of investors who put €62.5 million towards the purchase of the glass bottle site by a consortium that involved Mr McNamara.
The investors have successfully sought the return of their investment but Mr McNamara and his company, Donatex, are seeking a stay on the order, which was made on December 18th.
In a letter dated December 23rd, 2009, solicitors for Mr McNamara acknowledged that neither he nor Donatex could satisfy the judgments against them. The judgment against Mr McNamara is for €62.5 million and that against Donatex is for €98.14 million.
Mr McNamara “does not at this time have any unencumbered assets. All of the equity in his personal assets has been utilised to support his various businesses and over 1,100 people” who earn their livelihood through him, the letter said.
The solicitors said Mr McNamara would be willing to pay €100,000 per month pending an appeal he would take to the Supreme Court, if a stay were granted.
Mr McNamara and Donatex are seeking to have their investment in the Ringsend project indemnified by the Dublin Docklands Development Authority, which was also involved in the deal.
If Mr McNamara is unsuccessful in this claim, it will effectively “wind up” him and Donatex, said his counsel, Martin Hayden. The registration of a judgment against Mr McNamara could trigger other claims against him, the court was told.
Mr Gleeson said on the basis of the letter read to court, Mr McNamara was “no longer a person of significant net worth”, as he was described in the legal documents drawn up in relation to the Ringsend deal.
Because of the interest payments he is making, Mr McNamara’s position gets worse every day, he said. A stay on the order could prompt other creditors to try to get in first, he said. “They would be foolish not to.”
The Irish Times also reports that Ireland deserves great credit for the manner in which it has faced up to and tackled its fiscal crisis, but current efforts will have to be sustained for up to a decade if the economy is to make a full recovery, according to a leading international economist.
Citi chief economist Willem Buiter yesterday praised Minister for Finance Brian Lenihan's "necessarily tough and well-structured" budget package which managed to find political support while convincing international markets "that Ireland was for real".
However, in an interview with The Irish Times, Mr Buiter - who spoke at a Citi conference in Dublin - warned that the crisis is so big, and the hole in Ireland's public finances so deep, that these efforts will have to be sustained for several years, perhaps a decade, before the economy is restored "to where you thought you were", he said.
Nonetheless, he described Ireland's "intelligently designed" approach to restoring fiscal stability as a "model of how to do things".
"I think the country deserves great credit and I wish that some of the other euro zone member states that are in similar or worse pickles would sing from your hymn book," he added.
He also said it would be "suicidal" for a "weaker country" to exit the euro region as they would also have to leave the European Union.
"The only risk to the euro zone is not from our weaker brothers and sisters - it's the stronger countries, Germany, saying, 'I am fed up having to face the risk of bailing out the weaker'," he said. For "political and historical reasons", Germany is the least likely country to leave, he said.
Downgrades to Greece's debt late last year renewed concern that some countries may struggle to pay their bills. The Greek budget deficit widened to 12.7 per cent of gross domestic product in 2009, more than four times the European Union limit.
The average euro zone deficit will widen to 6.9 per cent of GDP this year, the European Commission estimates. Mr Buiter said there was a "non-negligible risk" that a euro-area country may "restructure its debt", with a 5 per cent chance that Greece will seek to renegotiate its loans.
"The chance of Ireland defaulting is effectively nil because they have taken the right measures," he said, referring to spending-cut plans announced by the Irish Government. "Greece isn't there yet."
The premium investors demand to hold Greek bonds instead of German bunds has widened to 218 basis points from 30 points two years ago.
The spreads of their Spanish and Irish counterparts over German debt are at least three times what they were in January 2008.
Mr Buiter said he did not see "any threat of inflation" in the 16-nation euro region and did not expect the European Central Bank to raise interest rates this year.
The Bank of England may "start tinkering" in the middle of 2010 and increase its benchmark rate to between 0.75 per cent and 1 per cent by the end of the year, from 0.5 per cent currently, he said.
The Irish Examiner reports that the new president of the Irish Farmers Association, John Bryan, who takes up office today, will highlight the negotiation of the common agricultural policy budget as a major challenge of his presidency.
"The CAP has been of vital importance to both producers and consumers. For an investment of about €100 for each citizen, European consumers enjoy a plentiful supply of high quality safe food at affordable prices," he said.
Mr Bryan said the founding fathers of the European Community would be justifiably proud of the success of the CAP in ensuring food security and quality and in helping to bring down the average weekly spend of household income on food for families from 30% in 1980 to 13% today.
He will also tell the IFA’s 55th annual general meeting in his inaugural address that food security was important when the common agricultural policy was first established and is just as important today.
"In the upcoming negotiations, our Government must strongly defend the record of the CAP, and insist on the maintenance of a fully-funded, index-linked CAP budget for Ireland," he said.
Mr Bryan, who succeeds Padraig Walshe as the IFA’s thirteenth president, said the single farm payment post-2013 must be directed to supporting active farmers.
"Farmers will not tolerate any reduction in their single payment and IFA will use all our resources in Ireland and in Brussels to protect the single payment in its present form," he said.
"In the CAP negotiations, I will also be stressing that food production, based on permanent pasture, as operates in Ireland, is both environmentally sustainable and positive for climate change.
"This must be recognised in the CAP post-2013," he said.
Meanwhile, the IFA’s new Sheep Committee chairman, James Murphy, Fiddawn, Inistioge, Co Kilkenny, said his number one priority will be increasing the incomes of the country’s 30,000 sheep farmers.
Strong viable lamb prices from the factories, the payout of the €18m unused CAP funds for sheep farmers, the rejection of compulsory electronic identification of sheep and a new and properly funded REPS scheme will be his immediate priorities.
The Financial Times reports that David Cameron came under renewed pressure to clarify Conservative tax policy on Monday after signalling that a Tory government would seek to reverse “at least a part” of the impending national insurance increase.
The Tory leader pledged to spell out his party’s policy on national insurance “way before election day” but avoided making a similar commitment on detailing the Conservative pledge to recognise marriage in the tax system. The question of how the tax break for marriage would work “may or may not be” clarified before the country goes to the polls, insiders said.
Tory insiders rejected suggestions the confusion over the marriage tax policy – Mr Cameron admitted to having “messed up” on the status of the pledge last week – was delaying the launch of the latest section of the draft manifesto.
The decision not to launch the “broken society” manifesto chapter on Monday was driven by tactical considerations centred on the “grid” designed to maximise the political and media impact of announcements rather than “any need to rewrite things”, one shadow minister said.
Labour sought to step up the pressure on the Tory leader over the perceived lack of clarity on flagship policies, accusing Mr Cameron of adopting a policy of “nods and winks” on tax following his refusal to make a firm pledge to axe the national insurance rise due to take effect in 2011.
George Osborne, the shadow chancellor, said last month his “number one priority is to try to avoid bringing [the national insurance increase] in”, declaring: “That is something you can judge us on between now and 2011.”
Mr Cameron signalled the Tories might – at best – avoid imposing part of the planned one percentage point increase, such as the employers’ element. Reversing the entire rise would cost about £7bn a year, exacerbating significantly the considerable pressure to find spending cuts to tackle the deficit.
“We are looking as hard as we can at public spending programmes and trying to see if we can avoid at least a part of this great big tax rise on Middle Britain and on jobs,” the Conservative leader said. In a separate BBC interview on Sunday, Mr Cameron said he hoped to find a “way of avoiding the most damaging parts of the national insurance increase”.
Aides insisted the apparent rhetorical shift did not mean the Tories had given up on reversing the one percentage point rise in its entirety. “There’s no difference at all between David and George,” one official said.
But the Liberal Democrats accused the Conservatives of sending mixed signals, expressing surprise that the rival party had apparently not decided on the message it wanted to send on centrepiece tax policies.
Vince Cable, the Lib Dem Treasury spokesman, said: “They seem to be getting themselves into extraordinary difficulties under relatively little pressure.”
The FT also reports that the International Monetary Fund inched towards greater involvement in Greece’s efforts to resolve its budget crisis on Monday, announcing that it will send a technical mission to Athens later this week.
The mission will advise the Greek government on pension reform, tax policy, tax collection and budgetary controls – but will not have any role in developing or vetting Greece’s fiscal consolidation plan.
Even the limited IMF involvement is highly sensitive due to market speculation that Greece – which has debts equal to 113 per cent of gross domestic product and last year reported a 12.7 per cent deficit – may ultimately require a joint bail-out from the IMF and the European Union.
The Greek authorities are adamant that they can fix their public finances without IMF money and have told the Fund they do not want it to get involved in negotiations with European partners pressing for tougher actions to cut the deficit.
The IMF has signalled its willingness to provide additional support if Greece – which John Lipsky, deputy managing director, recently described as a member “in good standing” – requests it. But the Fund does not want to impose itself on Greece.
The IMF statement came as Ohli Rehn, the European commissioner-designate for economic and monetary affairs, told the European parliament that shaky public finances in Greece and elsewhere in the eurozone represented a “very serious challenge” to the euro.
Mr Rehn pledged to use “all instruments” to help member states restore their finances and come into compliance with the terms of the stability and growth pact, which sets limits for public finances. But he resisted calls from some MEPs to introduce sanctions against wayward states. Instead, he suggested using “incentives” and “broader surveillance”.
The Greek authorities appear to be moving along two tracks – discussing 2010 fiscal consolidation plans with the European Commission and the European Central Bank – while looking to the IMF for technical advice on medium-term challenges.
These include how to design a more effective system of taxation, how to improve poor tax collection and how to improve weak budgetary controls, as well as how best to overhaul the pension system.
If Greece decides it would like additional assistance from the IMF it could request anything ranging from help developing and auditing its consolidation plan to an officially-blessed IMF programme, which might or might not come with bail-out funds to help bridge any interim funding gap.
People familiar with the situation stress that this week’s IMF mission is not structured to generate information that could help prepare a bail-out. However, it may improve the Fund’s understanding of the underlying problems facing Greek public finances.
The New York Times reports that a year after its controversial takeover of Merrill Lynch, Bank of America is discussing settling a troublesome state inquiry into the star-crossed deal and the billions of dollars in bonuses that Merrill hurriedly paid its employees.
As the banking industry braces for a furor over a new round of big bonuses, Bank of America is negotiating with the staff of the New York attorney general, Andrew M. Cuomo, to settle claims that the bank failed to adequately disclose the risks of the takeover to its shareholders, according to people with knowledge of the matter. Mr. Cuomo has also focused on the bonuses that Merrill paid despite its perilous financial condition.
While no settlement has been reached and the talks are continuing, Bank of America’s new chief executive, Brian T. Moynihan, is interested in bringing an end to myriad legal troubles plaguing the bank. The two sides met last Friday to discuss a possible deal.
With talks with Mr. Cuomo’s office gathering force, Bank of America claimed a crucial legal victory in a separate federal case on Monday. A federal judge, Jed S. Rakoff, rejected a request by the Securities and Exchange Commission to broaden its claims against the bank, which center on the Merrill bonuses. The S.E.C. also said it did not plan to bring claims against individual executives at the bank.
The Bank of America-Merrill merger — a pivotal moment in the financial crisis — has caused headaches both for Bank of America and the S.E.C. Judge Rakoff previously rejected an initial $33 million settlement between the commission and the bank, calling the agreement too low and raising questions about the S.E.C.’s investigation. After Monday’s ruling, the S.E.C. is left to pursue a narrow case, while Bank of America executives are trying to resolve various inquiries without dropping their position that its executives did nothing wrong, legal experts said.
“This is one more twist in a very complicated maze of parties with lots of agendas,” said David Skeel, a law professor at the University of Pennsylvania who is watching the bank’s cases. “There’s not an obvious way out for anybody here, the S.E.C. or the bank.”
Judge Rakoff’s latest ruling came on the same day that Mr. Cuomo’s office, which has sought a prominent role in cases stemming from the financial collapse, demanded information on executive pay for 2009 from Bank of America and seven other big banks that received taxpayer bailout funds. In letters to the banks, Mr. Cuomo asked the companies to disclose various details about their bonus payouts. How or whether the banks would comply with that request was unclear.
Bank of America appears to have become more amenable to working with state and federal officials since Kenneth D. Lewis announced his retirement as chief executive, which was effective on Jan. 1. Mr. Moynihan, bank insiders say, hopes to make a clean break with the legal problems left over from the Lewis years. The takeover of Merrill prompted scores of shareholder lawsuits, as well as state and federal investigations, and eventually helped drive Mr. Lewis from his post.
Judge Rakoff’s ruling on Monday barred the S.E.C. from expanding its case but allowed it to file a new one, and the commission said in a statement that it would file a second complaint. That second complaint will focus on Merrill’s gaping $15 billion in losses in the fourth quarter, which were not disclosed before the deal closed. The S.E.C. cases have some similarities to Mr. Cuomo’s, which from the start focused on Merrill’s losses. Such overlap may enable the S.E.C. to join Mr. Cuomo’s office in a global settlement and thus avoid a trial that could be embarrassing should the S.E.C. lose.
Unlike the S.E.C., Mr. Cuomo would like to have individual bank executives held responsible in the case, which could include individual fines. Those fines could come out of the executives’ pensions.
Bank analysts said the bank and its new chief executive were most likely evaluating whether the cost of a settlement was worth it for a clean footing.
“It’s a balance between the attention-grabbing headlines and settling too early,” said John McDonald, an analyst with Sanford C. Bernstein.
The NYT also reports that the technology industry is going retro — moving away from remote controls, mice and joysticks to something that arrives without batteries, wires or a user manual.
It’s called a hand.
In the coming months, the likes of Microsoft, Hitachi and major PC makers will begin selling devices that will allow people to flip channels on the TV or move documents on a computer monitor with simple hand gestures. The technology, one of the most significant changes to human-device interfaces since the mouse appeared next to computers in the early 1980s, was being shown in private sessions during the immense Consumer Electronics Show here last week. Past attempts at similar technology have proved clunky and disappointing. In contrast, the latest crop of gesture-powered devices arrives with a refreshing surprise: they actually work.
“Everything is finally moving in the right direction,” said Vincent John Vincent, the co-founder of GestureTek, a company that makes software for gesture devices.
Manipulating the screen with the flick of the wrist will remind many people of the 2002 film “Minority Report” in which Tom Cruise moves images and documents around on futuristic computer screens with a few sweeping gestures. The real-life technology will call for similar flair and some subtlety. Stand in front of a TV armed with a gesture technology camera, and you can turn on the set with a soft punch into the air. Flipping through channels requires a twist of the hand, and raising the volume occurs with an upward pat. If there is a photo on the screen, you can enlarge it by holding your hands in the air and spreading them apart and shrink it by bringing your hands back together as you would do with your fingers on a cellphone touch screen.
The gesture revolution will go mainstream later this year when Microsoft releases a new video game system known at this time as Project Natal. The gaming system is Microsoft’s attempt to one-up Nintendo’s Wii.
Where the Wii requires hypersensitive hand-held controllers to translate body motions into on-screen action, Microsoft’s Natal will require nothing more than the human body. Microsoft has demonstrated games like dodge ball where people can jump, hurl balls at opponents and dart out of the way of incoming balls using natural motions. Other games have people contorting to fit through different shapes and performing skateboard tricks.
Just as Microsoft’s gaming system hits the market, so should TVs from Hitachi in Japan that will let people turn on their screens, scan through channels and change the volume on their sets with simple hand motions. Laptops and other computers should also arrive later this year with built-in cameras that can pick up similar gestures. Such technology could make today’s touch-screen tools obsolete as people use gestures to control, for instance, the playback or fast-forward of a DVD.
To bring these gesture functions to life, device makers needed to conquer what amounts to one of computer science’s grand challenges. Electronics had to see the world around them in fine detail through tiny digital cameras. Such a task meant giving a TV, for example, a way to identify people sitting on a couch and to recognize a certain hand wave as a command and not a scratching of the nose.
Little things like the sun, room lights and people’s annoying habit of doing the unexpected stood as just some of the obstacles companies had to overcome.
GestureTek, with offices in Silicon Valley and Ottawa, has spent a quarter-century trying to perfect its technology and has enjoyed some success. It helps TV weather people, museums and hotels create huge interactive displays.
This past work, however, has relied on limited, standard cameras that perceive the world in two dimensions. The major breakthrough with the latest gesture technology comes through the use of cameras that see the world in three dimensions, adding that crucial layer of depth perception that helps a computer or TV recognize when someone tilts their hand forward or nods their head.
Canesta, based in Sunnyvale, Calif., has spent 11 years developing chips to power these types of 3-D cameras. In the early days, its products were much larger than an entire desktop computer. Today, the chip takes up less space than a fingernail. “We always had this grand vision of being able to control electronics devices from a distance,” said Cyrus Bamji, the chief technology officer at Canesta. Competition in the gesture field has turned fierce as a result of the sudden interest in the technology. In particular, Canesta and PrimeSense, a Tel Aviv start-up, have fought to supply the 3-D chips in Microsoft’s Natal gaming system.
At last week’s Consumer Electronics Show in Las Vegas, executives and engineers from Canesta and GestureTek were encamped in suites at the Hilton near the main conference show floor as they shuttled executives from Asian electronics makers in and out of their rooms for secretive meetings.
Similarly, PrimeSense held invitation-only sessions at its tiny, walled-off booth and forbade any photos or videos of its products.
In one demonstration, a camera using the PrimeSense chip could distinguish among multiple people sitting on a couch and even tell the difference between a person’s jacket, shirt and under-shirt. And with such technology it’s impossible, try as you might, to lose your remote control.
