RTE Frontline – No solution to our problems until we recapitalise our banks
I had the opportunity to participate in the audience at last night’s RTE Frontline show with Pat Kenny.
At about 11:58 I point out to Pat how our bankers broke the golden rule of banking by lending out more than they had on deposit.
At about 23:02 I told Pat that until the banks are recapitalised none of the solutions being thrown around can start to work.
I will be getting into the detail of both these statements at tomorrow night’s talk in the RDS, 8pm.
I hope to see you there.
Categories: Opinion
Peter
I was at the RDS. Thanks for a vitally important presentation.
For future reference I think you should confine yourself to the critical areas.
1. Keep your comments on “fractional reserving” to one sentence. Nobody could dispute the fact that their lending policies were dreadful.
2. On Nama your demolition of the BP is very good. One query: are you applying the total estimated write off on the loan books of the six institutions to Nama property loans? This would not seem to be correct
3,You do refer to the fact that current non performing loans of 60% of the Nama loan book will somehow, miraculously, reduce to 20% by the end of the Business Plan period.
Given the fact that all of those loans will be bearing penal interest rates (they
do at the moment, all of the banks are charging rates of 5% plus to property loans) property holdings will have to appreciate by more than this amount each
year if any improvement in the net asset position of the borrower is to occur.
How can 40% come back from the dead?
4. You made few references to the need to reduce the holdings of the bondholders. One of the main problems with underestimating the losses is that it avoids considering what we need to do if a more doomsday like scenario occurs. Maybe we should even look at the larger deposit holders?
5. Your point that interbank loans will be paid off leaving no money to fund lending is crucial. You should stress it more.
Thanks again.
The whole nation should be grateful to you, Peter, for your courage and perseverance in clearly explaining the dangers of NAMA. Furthermore, your analysis of the cause of the credit crisis bears repeating, especially since NAMA backers insist that we need to ‘get credit flowing again’.
Please keep up this great work, in spite of the hostility that you might face. I was appalled by Mary Wilson’s cavalier treatment of you in the recent interview on RTE radio. Was she simply being rude or following a pro-NAMA agenda?