Here's the latest saga on Anglo Promo Notes 'non-payment' in March 2012:
This relates to the past here on the topic.
The point raised, allegedly, by the Department of Finance is as follows: Promo Note was 'settled' not in cash, but by issuance of a bond, so that
- Irish Government issued a bond (which is to say borrowed money) to the IBRC
- IBRC took the bond to the 'market' to obtain cash in exchange for it
- Absent a 'market' for this bond, Bank of Ireland took the bond on for one year and paid the IBRC €3.06 billion (presumably, Bank of Ireland borrowed the funds to do so from the ECB using the bond as the collateral)
- The IBRC paid down the ELA with the money.
- ELA was written down by the required amount in 2012.
Let's re-narrate this in more simple terms:
- Irish Government official went to a restaurant for a working lunch without having any money
- The official, upon consuming lunch, wrote an IOU for €100 covering the bill to her lunch companion who had a credit card with him.
- The credit card was maxed-out, so the second official called his bank and arranged for a 1-day overdraft facility from the bank to cover the bill, using as security the IOU from his lunch companion.
- The credit card owner then used the credit card new facility and paid €100 bill.
- The restaurant recorded payment of €100 bill.
Now, two questions:
Question 1: was the bill paid? Answer: yes. Proof: if no, then the restaurant could claim that no payment was received, so no tax is due on the proceeds from this payment. I doubt the Revenue will be so keen to allow this.
Question 2: did the original official pay the bill? Answer: it depends on which scenario will take place in 1 day: Scenario A: Original official does not intend to settle the debt (IOU) - in which case she defaults on loan from the second official and no payment by her was made under the IOU agreement. Scenario B: Original official honors her commitment, and the original IOU was a form payment.
However, Question 2 is purely academic from the standpoint of whether the lunch was paid for or not - it was paid. Full stop.
Substitute 'Promo Note' for 'lunch' and you have it. Promo note 2012 was paid. QED
I think someone should introduce the concept of "in specie" to Noonan & co.
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