The Irish government wants to guarantee the entire liabilities of six banks in this country. Everything. Every single penny will be underwritten by your government, in your name, using your money.
Now. How do you feel about that? Good feeling, isn’t it, knowing that you own a bit of a bank?
Eh, no. Sorry. You own nothing. The banks still own the lot, except that, if it turns out they’ve been completely profligate, or even criminally irresponsible, it won’t matter. Our government, on your behalf, will put up however much money it takes to get them out of jail.
Now, the problem is this. Even though the Minister for Finance has announced to the world that he intends to use our country’s resources to defend the Irish banks to the last, he doesn’t seem to have asked for a look at their balance sheets. He doesn’t seem to know how much trouble they might be in. He doesn’t seem to care.
How do you like that for a bag of rusty ha’pennies? If the banks make a profit, it’s theirs. If they make a loss, it’s yours.
The government has extended a cast-iron guarantee to people who’ve been playing fast and loose with the regulator for years, who may well have all sorts of disastrous, uncollectable loans on their books, and who may well be about to go belly up at any moment. These loans might take the form of advances to property developers whose land-banks are now worthless. Such loans count as assets on the banks’ balance sheets. Assets! And I can tell you now, nobody has revalued them in light of the collapse in the property bubble.
Let me reduce this down to the sort of home-spun simplicities the condescenti detest.
Let’s say somebody in your family had a bad gambling problem, and the bank was about to evict them unless you put up a guarantee. What would you do first if the person with the gambling addiction came to you for help?
Would you agree instantly, and without question, to cover whatever gambling debts they’d run up, no matter how large.
Would you say to this compulsive gambling addict whose word isn’t worth tuppence, Certainly! Take whatever I have and use it for collateral. Take my house. Take my car. Take my children!
Or would you want to know how big these gambling debts were so you’d have some idea what you were getting yourself into?
Would you stake your house on the word of a compulsive addicted liar? That’s what our Minister for Finance is doing, except he isn’t staking the house. He’s betting the entire country.
How do you feel about that? The sweetest insurance deal ever offered.
Tell me this. Did you ever go looking for life insurance? And did the insurance company say to you Certainly! We’ll cover you for anything you like. No need to pay us a premium.
Well. Did they?
And furthermore, were you lucky to find an insurance company that didn’t care what state of health you were in, or whether you were a smoker, or whether you had recently been impaled by a crazed murderer and were about to expire at any minute?
Well, lucky you. You must be an Irish bank.
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