Socialism for Rich People -or- Capitalism?

(Or NAMA versus a Good Bank)

Richard Bruton’s blog outlines Fine Gael’s alternative to NAMA. Instead of purchasing toxic assets from the banks at a discount, the FG plan would leave them where they are. They would give the banks 16 months to restore their balance sheets or face administration (this ain’t gonna happen for most of them, but happily the banking guarantee would have run out by then). In order to ensure that business and households have continued access to credit they would set up a government run National Recovery Bank. This bank would borrow on the wholesale market and supply our current Zombie retail banks with credit to keep them lending.

This sounds like a better plan all round than trying to rescue all of the indigenous Irish banks. Rather than privatising profits while socialising losses it’s high time we reacquaint those, who took undue risks with other people’s money, with the discipline of the market and capitalism. Bankrupt banks and developers should go bust, the taxpayer should not be lumbered with the bill.

Fine Gael’s Good Bank plan

Hat Tip –

  • Here’s the problems I see:

    1. NRB would be ECB funded – how do we know ECB okay with that?
    2. Up and running within 4-6 weeks – 4-6 weeks of what? Passing the legislation? The minute the bill is drafted there is a timebomb under the banks which currently doesn’t exist because the market is assuming NAMA. If the market panics and kills one or more of the majors the bill has to get passed and the new bank opened.

    Here’s the thing about nationalisation – it’s SIMPLE. You don’t have to worry about valuation of each individual asset, just the bank as a whole, and if you say “No NAMA, no bailout, no guarantee except depositors” then you’re buying a penny stock but with the branch network and staff in place on day 1.

    Then as the bank owner you can root around in not only the assets as with NAMA but the documents granting the loan and find out where the bodies are buried, and meanwhile you have the option of picking a bank or two to survive and either IPO them, do what Gurgiev wants and distribute shares to “taxpayers” or sell them to another bank group. That’s what the boys at say and I trust them more than Bruton or Lenihan.

  • Mack

    I agree temporary nationalisation is a better solution than NAMA. But, do you nationalise all the banks? If so, why?

    If you have to choose, which ones do you choose?

    What if there are no good candidates for nationalisation? (I.e. assuming we don’t do a blanket nationalisation of all banks, some criteria would have to be applied. What I’m getting at here, is that given time new solvent players might enter the Irish market, that would surely cost less than bailing out an insolvent entity by whatever method).

    Won’t nationalisation still lumber the taxpayer with the nationalised banks’ liabilities?

    Incidentally, I think the ECB are pretty much keeping the Irish banks afloat as it is..