Tuesday, 20 January 2009

Nationalising Anglo Irish Bank

Two very different views here on the imminent nationalisation of AngloIrish Bank, the first from Morgan Kelly (professor of economics at University College Dublin.)

Facing the imminent collapse of the national financial system, the Government needs to perform a ruthless triage. The worthwhile banks need to be maintained by any means necessary, including nationalisation, while Anglo Irish and Irish Nationwide must be allowed to collapse.

What began as farce has turned swiftly to catastrophe. Last September the Government casually decided to give a small dig-out to some developer pals by guaranteeing the liabilities of Anglo Irish Bank. This spiralled into a proposed nationalisation that would saddle Irish taxpayers with Anglo’s bad debts, which could easily exceed €20,000 per household, and starve the other, worthwhile, banks of the capital they need to survive.

The second from David McWilliamns (future teller & gure)

[snip]there is only one thing the Irish government can do to retrieve the situation. It can quarantine large diseased chunks of the Irish loan book in Anglo. In effect, it can turn Anglo into a financial skip, throwing into the bank all the bad debts of the other banks.

Bank of Ireland and AIB, although they like to hold their noses and look down on Anglo, might actually have a worse bad debt position than the nationalised orphan. This is because, in an effort to catch up with Anglo, the big banks accelerated lending at the top of the market from 2005 to 2008. So they need the financial skip as much as anyone else.

It would be unwise to allow them to get off the hook by throwing all the bad debts into Anglo. Brian Lenihan should raise a huge bond on the international markets to finance the bad loans.

I'm not an economist so I'm really in the dark as to what the answer here is, all I know is, in this Banana-republic, none of those responsible for this fiasco will ever be held accountable ...