Saturday, April 18, 2009

Daily Economics 18/04/09: Nationwide fall(bail)out

Nationwide - systemic importance?
In today's Irish Times (here), Mr Cowen makes a ludicrous assertion that Irish Nationwide - or as we can call it - Irish Nationvile. How, Mr Cowen? Care to explain?

Irish Nationvile is not a systemically important organization. It is a mutually-owned closed shop (officially) or Fingleton's fiefdom (unofficially) that has done much good to this economy in the past as a safe-house for dodgy directors loans from the Anglo, a default bank for the most speculative developers, and an exemplary case study for corporate mis-governance. By its size, it is roughly equivalent to 10% of the property loans held by the two laregst banks, or just 6.4% of the property-related loans of our 6-banks system. It has virtually no productive net assets outside property sector so should the society go under, the economy of Ireland will hardly notice if, say, €8-10bn in performing loans were to be bought at a discount by the likes of HSBC or Barclays or Ulster Bank or NIB or whoever steps to the plate. Even BofI and AIB might want to step in and pick up depositors and good lending assets from the ruin.

But letting Nationvile sink - publicly and swiftly - will send two important signals to the international markets and to domestic voters. The first one will be to tell the world that Irish Exchequer is starting to manage its downside risk - throwing Nationwide out of the umbrella of state bailouts will make the case for judging Irish Government banks policies as being informed by economic efficiency rationale, not political expediency that Mr Cowen is so skilled in. The second one will be to tell the voters that there is at least some bound to the recklessness with which the Government is willing to use taxpayers hard earned cash to help its own cronies.

So, in my view, let it sink. Now!

ESB - another systemically important waster?
The Royal Bank of Scotland is toning down its flash headquarters to bring the building down to the early realities of the crisis. Many banks and large companies (including some Irish) are turning away from the posh offices they were planning to move to, but not ESB. The state monopoly that has milked its customers for years (and still does) with the second highest cost of electricity in Europe is planning to 'renovate' its (admittedly ugly) headquarters in Dublin as a package of 'stimulus' economics. To create jobs, so to speak. This amazing fact did not trace across Irish official media (Irish Times and RTE) reporting on the arrogant, in-your-face monopoly's last week's announcement.


Anonymous said...

You also forgot to mention that it was the Bank that was able to offer a no questions asked loan to the Taoiseach's ex-girlfriend.

Perhaps INBS is systemic to FF and given that FF and the nation are one and the same therefore INBS is systemic to Ireland.

Anonymous said...

It also calls to question how much leverage do these financial institutions have over the FF cabal. Is it the case that Fingleton knows where all the bodies are buried? If that is the case then FF has to go as they are acting as an impediment to solving this crisis.