More economists are coming round to Smart Taxes view …
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On last night’s Prime Time, Brendan Keenan argued that it didn’t matter much how the government dealt with the problem of bad loans at the Irish banks, as long as they got on with doing it, though he noted he would be very reluctant to nationalise. Similarly, David McWilliams said that the key thing was to do something to deal with the bad assets and that it doesn’t matter whether we nationalise or not, i.e. that we needed to produce cleaned-up banks and it didn’t matter who owned it.
Let me explain why I think it does matter how we go about this and who owns the cleaned banks. Start with a few figures. The combined capital of AIB and BOI is currently estimated at about €20 billion, but they are only beginning the process of writing down their bad loans. The fact that their combined market capitalisations are below €1 billion suggests that the market believes these losses will amount to at least €20 billion. Let’s say, just for illustrative purposes, that €30 billion is the figure for losses. Link to article
