Meltdown – Should Anglo be wound up?

From the Telegraph

“As the dust settles, it is clear that most of the damage in this crisis – reputational and financial – has been done by just one institution, Anglo Irish Bank,” Mr Honohan wrote in the FT.

The vast bulk of the €33 billion in bank recapitalisation costs will be caused by The Celtic Chernobyl. At Irish Economy Karl Whelan argues the costs proffered in the media to wind down Anglo are unrealistic (€70bn-€100bn), but agrees that the government are between a rock and hard place – having guaranteed all bank liabilities. He does however identify one, less costly alternative

One way of minimising the cost to the Exchequer stemming from the bank would be to wind it down gradually up to 2014, using maturing assets to pay off maturing liabilities. At some point, once the bank has shrunk in size, the government could decide to stop injecting capital and leave the bank to default on its €2.3 billion in subordinated debt.

See Anglo What Are The Options?