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Thread: Without State funds, banks will clam up, most businesses will fail: Kelly

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    Default Without State funds, banks will clam up, most businesses will fail: Kelly

    Without immediate Government funding, bank lending will fall by three-quarters, driving most companies in Ireland out of existence, according to UCD Professor of Economics Morgan Kelly. Writing in the Irish Times today, he takes no prisoners in his analysis of the Government response to the banking crisis.

    Full article

    Adapting the old line about what's good for General Motors being good for America, he says the FF view that what was good for Anglo Irish Bank was good for Ireland has brought the country's banking system to its knees. The cure the Government has chosen will make things worse.

    He says that without immediate Government funding, bank lending will fall by three-quarters, driving most companies in Ireland out of existence.

    Instead of funding the four worthwhile banks that provide households and ordinary businesses with credit, he says 'the Government chose to persevere with a scheme that serves only to keep zombie banks going while starving their customers of credit; and helps nobody apart from some developers and bankers.'

    He castigates the choice, saying that:

    '... it guaranteed the liabilities of even the worst two "banks" without checking what, if anything, their assets are worth. By doing this, the Government has put the taxpayer at risk of substantial losses, and compromised its ability to provide adequate capital to the banks that need to be saved.

    These points are so obvious that it is almost embarrassing to repeat them. Even with the strikingly poor quality of economic advice available to it, the Government knew what should be done, but decided to do otherwise.'


    To see why they made this decision, click on the link.
    Last edited by He3; 24th October 2008 at 03:38 PM.
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    Default Am I correct in thinking that as time goes by

    The losses to the taxpayer will increase by virtue of putting basket cases on life support, which will have the effect of increasing their losses the longer their lives are artificially preserved? If they are rolling over bad loans then the sooner the problem is addressed the cheaper it will be to fix.

    There is no hope of a miracle recovery in property prices that will save the day.

    It is a little like the gambling addict who gambled and lost the grocery money borrowing more to try and win it back on a fixed roulette wheel.

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    Default

    Edit: Sorry the link at the bottom works but the top one doesn't.

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    Quote Originally Posted by Fr. Hank Tree View Post
    Edit: Sorry the link at the bottom works but the top one doesn't.
    Should work now.
    "It is difficult to get a man to understand something when his salary depends upon his not understanding it." - Upton Sinclair.

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    I certainly have the impression that David McWilliams, who was given credit for the 'guarantee' idea, has being keeping a very low profile for the last couple of weeks. Could it be that he now realises what a terrible idea it was to guarantee ALL the banks and not let one or two of the 'bad' ones go under before guaranteeing the more financially secure ones?

    If the Government now must recapitalize the banks, which it looks like they must do, they are stuck with recapitalizing them all. Madness. Say goodbye to the National Pension Reserve Fund as it will have to be used for the banks. By the way the NPRF gets smaller every week while the amount needed to recapitalizing the Banks increases every week.

    We are all doooomed, doooomed I say.
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    Politics.ie Newbie coc's Avatar
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    McWilliams did not say guarantee all banks rubbish and walk away. He suggested guaranteeing the depositors as an initial step. To be followed by forcing the protected banks to declare their losses openly and cleaning up their books (causing massive losses for shareholders and causing builders to be ruined).

    He hasn't been quiet - you obviously aren't reading the papers.

    Prof. Morgan Kelly called this catastrophe two years ago so it would be wise to heed his advice carefully. Will Brian Lenihan?

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    The reason the Government are shying away from re-capitalising the banks from the National Pension Fund, is because it is the nuclear option and would most likely result in FF electoral meltdown for years to come.

    The fact is.. to dip into the fund.. and you'd have to more than dip, you'd practically have to empty it, the Government would need to go into the Dail and change legislation allowing them to get at it.

    Given the current budgetary fiasco, and the increased feelings from a whole host of different sectors, how do you think people would accept the Government telling the country that there is no money for medical cards for old people, no money to decrease class sizes, no money for third level education, no money for a huge number of public services.. and that this is going to get even worse before it gets better...

    And then hand the banks literally billions of euro to get them out of a mess caused by their own greed...

    They'd be lynched ...

    If I was the Minister for Finance, or any FF elected rep... I'd be crapping it right now.. and I'd be makign serious noises about things like nationalising the Corrib field... desperate times call for desperate measures

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    Agreed. But not a penny for the the Builders Bank. Let it fail. It's going to anyway, so why throw good money after bad?

    FF are banjaxed for years now whatever they do. It would be nice if some of them decided to take it like men. Act like statesmen for the year or two they have left. It would stand to them in the long run.

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    I've said it before and I'll say it again - Bye Bye Pension Fund

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    Quote Originally Posted by wysiwyg View Post
    If I was the Minister for Finance, or any FF elected rep... I'd be crapping it right now.. and I'd be makign serious noises about things like nationalising the Corrib field... desperate times call for desperate measures
    1) Right when oil and gas are plummeting?

    2) you think FF councillors in Mayo want to be the ones to tell the locals that although they own it, they are going to do precisely the same thing as Shell?

    3) You think stealing the assets of a major international company wouldn't send capital racing out of the country?

    4) Any idea how much would need to be invested to get the gas ashore, and where exactly would we get this money?

    5) Any idea how long it would be before the revenues start rolling in?

    There's desperate and there is suicidal.

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