Michael Noonan has decided to make the the bondholders carry a share of the losses, thereby restoring capitalism to its proper place: a risky business, conducted for profit with the corresponding danger of losing money.
We don’t think the Irish taxpayer should have to redeem what has become speculative investment, Noonan is reported to have told the IMF.
It’s ironic that it took a member of what would traditionally be considered a party of the Right to articulate this obvious point. The decision of Lenihan and Cowen to shoulder the debts of Anglo and Irish Nationwide was insane, and should never have been inflicted on the general public.
If you think this is the 20-20 vision that comes with hindsight, let me remind you that people were saying this right from the start. Anglo and Irish Nationwide were not banks in any sense you might ordinarily understand. Anglo was a funding operation for speculators, while Nationwide was a building society taken far beyond its remit by Fingleton. The debts of neither institution properly belonged to the State.
Even the Financial Times, a bastion of orthodoxy, urged the government to impose a debt-for-equity swap on the bondholders, but Lenihan and Cowen stuck to their original script even as the problem grew to cataclysmic dimensions, threatening the survival of Ireland as a country.
If Anglo and Nationwide had been allowed to collapse, it would have made not the slightest difference, except that we and our children wouldn’t now be saddled with enormous debts.
It’s too early to say if Noonan is just sabre-rattling or serious, but I hope he means what he says. When it comes down to it, he’s defending the principles of capitalism, and therefore, in theory, he should have the support of like-minded politicians throughout Europe.