All I have heard from various parties such as the Minister of Finance, the Financial Regulator, Head Of the Central Bank, Bank CEO's etc that the current crisis facing Irish banks is purely a liquidity issue and the banks remain well capitalised and are not facing solvency issues. Yet seeing the market reaction and from talking to foreign investors it is clear that the market does not share that view.
The guarantee should deal with the liquidity issue but there is no doubt the solvency and confidence issue still has to be dealt with.
If the first group of people are right (and they have access to information that we don't) why don't they put their money where their mouth is and instruct the National Pension Fund to bring home funds from abroad and invest in the Irish Banks to build up capital levels and therefore confidence in the sector. The fund could buy preference shares and get warrants to buy common stock like Warren Buffett has done with Goldman Sachs. Holding the preference shares means that they are still protected if all these people are so sure about their analysis and future losses. The big question is how sure are they?
By the way this came to me while standing on a packed train this morning so the idea could be down to lack of oxygen so feel free to tear it apart. (I know its more taxpayers on the line but I think we will end nationalising a couple of banks anyway). I don't necessarily think it is a good idea because I think banks are going to face larger losses than people think but our powers-to-be certainly seem sure about their analysis and also the cost to the banks could be prohibative.
The guarantee should deal with the liquidity issue but there is no doubt the solvency and confidence issue still has to be dealt with.
If the first group of people are right (and they have access to information that we don't) why don't they put their money where their mouth is and instruct the National Pension Fund to bring home funds from abroad and invest in the Irish Banks to build up capital levels and therefore confidence in the sector. The fund could buy preference shares and get warrants to buy common stock like Warren Buffett has done with Goldman Sachs. Holding the preference shares means that they are still protected if all these people are so sure about their analysis and future losses. The big question is how sure are they?
By the way this came to me while standing on a packed train this morning so the idea could be down to lack of oxygen so feel free to tear it apart. (I know its more taxpayers on the line but I think we will end nationalising a couple of banks anyway). I don't necessarily think it is a good idea because I think banks are going to face larger losses than people think but our powers-to-be certainly seem sure about their analysis and also the cost to the banks could be prohibative.