Finally, Ireland is beginning to subscribe to the idea that investors who bought bonds sold by Irish banks must share in the pain of sorting out Ireland’s banking crisis.
Speaking today, Fine Gael’s Richard Burton said that ordinary shareholders in the banks have lost nearly all of their investments, Fine Gael deputy leader:
“Under the NAMA approach there is no sharing of losses by the providers of other capital – subordinated debt and risky funding such as unsecured bonds who made good profits in the good years but who will walk away scot-free under this proposal.”
The NAMA plan will not work because the public will not trust that fair prices are paid for failed property loans, while NAMA will take years longer to deal with them after they have been bought.
Burton also rejected the nationalisation plan strongly pushed by Labour leader, Eamon Gilmore on the basis it “makes it almost certain” that the taxpayer will have to honour every one of the Irish banks’ debts, including bonds”.
“There is a moral hazard in capitalism. They can’t expect to be baled out. That is not healthy. Nor can we get into this notion that a bank is too big to fail,”.
But is this simply rhetoric as Burton acknowledges that if NAMA is up and running before the general election it will be here to stay as, speaking to the Irish Times, he said “Governments are legally liable for the decisions made by past governments. It would be too late to change anything then.”
