- The leadership in this country is finally getting its hand on the pulse of the financial sector and the economy (a tale that emerged back in March when Minister for Finance, the Governor of the CB and the FR made back to back statements concerning the plans for the banking sector stabilization, and subsequently went on to assure the nation that all is now going to be fine);
- Ireland has turned the corner (we've heard this in its various variants since May 2009);
- With Nama working overtime, lending is about to be restored across the nation;
- There are no more nasty surprises (apart from the ever-shifting capital targets in the Anglo);
- That banks can now sort themselves out and hence there will be no need for a sweeping Guarantee extension comes September;
- That Ireland is so far ahead of the PIIGS curve, it is reckless and dangerous, and erroneous, to claim otherwise.
Pardon my French, but what the h***ll is going on in our circles of power? One would naturally expect the Government and the regulators responsible for the banking sector to be in a daily contact with the institution, like EBS, while it is engaged in a major talks with potential buyers. And one would expect the talks to progress over time, with some clear indications as to whether the deal was likely or not. A sudden release of this new information is, therefore,
- either a reflection of the fact that our banking sector authorities did not have a clue as to the progression of the talks - in which case they once again failed to 'keep their hand' on the patient's pulse; or
- they have at the very least did not disclose pertinent information to the markets and the public as to the state of these talks.
Of course, another remarkable thing about the deal is that it comes on foot of Nama being deployed in the market. Last year, myself, Brian Lucey, Peter Mathews, Karl Whelan and others have warned that nationalization of the failing Irish banks was the least costly option for their recapitalization that should be pursued. Nationalization of EBS would have cost no more than €650-800 million and would have led to a 100% ownership of the bank by the State. In return, we could have imposed a speedy reform on the bank's board and management, and actively repaired its balancesheet.
Instead, we have paid countless millions for it through Nama, shelled out almost €1 billion in direct capital commitments, supplied it with a state Guarantee worth well in excess of €200 million in risk-related implicit costs, and still control only 51% of the bank. We are now left with a quasi-state asset that cannot be reformed and is at a risk of being left to linger like a zombie stuck between private markets and the politicos.
One wonders, will anyone, responsible for Nama and the rest of our banks policy ever be held accountable for this waste?