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Financial institutions should be left to manage their own delinquent assets

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  • 16-09-2009 11:03am
    #1
    Amhran Nua
    Closed Accounts Posts: 4,124 ✭✭✭


    Dermot Desmond has some interesting commentary on NAMA here, including an interesting solution that costs us nothing:
    Based on the widely rumoured figures, Ireland Inc intends to provide circa €60 billion of bonds to the banks as part of the Nama exercise. The Government could achieve exactly the same impact by guaranteeing €60 billion of bonds issued by the banks themselves. The Government can then charge a completely transparent fee for the use of this guarantee. This leaves all the risk of the existing loans with the existing capital providers and could be implemented in the morning without new quangos, complicated legislation, or additional risk. It should be noted that Ireland Inc is already showing significant profit on its preference share investment in the two main banks.

    ...

    Nama as conceived will do untold long-term damage to Ireland Inc. It will result in paralysis for decades to come. Ireland’s key focus must be to get the economy moving again and start to promote the real economy. Without this tax revenues will continue at the current low levels and unemployment outside the public sector will continue to grow. Everything must be done to avoid ongoing stagnation. If the banks are capable of repaying all Government-guaranteed funds we have achieved everything we want as a country, because it would mean that the economy is functioning again. If they are not capable of making the repayment then Ireland Inc ends up as the owner of the banks at today’s value which is not desirable but is no worse than the position we are in today.


Comments

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    #2
    LostinBlanch
    Registered Users Posts: 2,908 ✭✭✭LostinBlanch


    Very late in the day for him to come out with this now. Why not earlier?

    Still, on the face of it, it has good things like transparency. Something that is anathema to FF.


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    #3
    Amhran Nua
    Closed Accounts Posts: 4,124 ✭✭✭Amhran Nua


    LostinBlanch wrote: »
    Very late in the day for him to come out with this now. Why not earlier?
    He had to sell his BoI stocks first.


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    #4
    cavedave
    Registered Users Posts: 2,164 ✭✭✭cavedave


    Today we still have the same amount of debt, but it belongs to governments. Normally debt would get destroyed and turn to air. Debt is a mistake between lender and borrower, and both should suffer. But the government is socializing all these losses by transforming them into liabilities for your children and grandchildren and great-grandchildren....
    Taleb


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