Mr X (April 16th) is shocked that so many innumerates are advocating nationalisation of the banks. The real innumerates are the bankers and policy makers who ignored long-term trends. The Government's approach to the banking system is the financial equivalent of half-pregnancy as it involve nationalisation of bad loans and continuing privatisation of good loans. Even at this late stage, it should go the whole hog and nationalise the main banks. Reasons for not doing so, such as the need for transparency, coming from a totally opaque Government are pure hogwash.
Nationalisation would remove uncertainty, simplify matters, restore confidence and ensure that state funding is used to boost the economy rather than bale out bank shareholders. It would be much less risky as it would eliminate the need to price impossible-to-value impaired loans. These could cost taxpayers tens of billions if transferred at the wrong price to Nama in addition to billions of interest payable on bonds used to purchase the dodgy loans at the outset. The idea of applying a levy on the banks to offset any shortfalls is more hogwash as it will be simply passed on to customers.
Published in the Irish Times on 18th April 2009.
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