I think the most interesting element was the triangular discussion with Lundgren, Brendan Keenan and Colm McCarthy. Keenan basically said the only credible reason not to nationalise was the fear that only foreign buyers would be available when they were re-privatised. Colm McCarthy was unwilling to criticise the NAMA plan but he clearly had concerns about the risk to the State’s finances (which would fit with his Bord Snip 2 responsibilities).

He said Sweden had spent 4 - 5 % of GDP in bailing out its banks (which it was later able to recover). McCarthy thought the cost to Ireland might reach four or five times that figure. That implies up to 25% of GDP which might equal €40Bn. if he is talking about the likely GDP for 2009.

Thanks to Karl for writing so assiduously on this.

I note that Frank Barry has raised cronyism as a potential argument against nationalisation and the fear that politicians would be under political pressure to save jobs by not calling in bank loans.

Obviously, a response to this concern is to make any nationalised bank statutorily independent of government.

The concern about indirect political pressure may remain. But that brings us to the real point. The lesson of the last ten years has been not that government has been too close to ordinary voters, but rather that it has been too close to the banks and developers. That’s what has been all over the tribunals and most of the scandals in recent times.

For sure, the danger of cronyism is a factor - but one in favour of nationalisation, not against it.

NAMA is the single biggest decision an Irish government will ever make. If there are any doubts that the current strategy is the best possible way forward for country the Irish economists should make their voices heard loud and clear.

The NAMA should publish the book value of each individual loan, the price paid for the loan, the collateral available and the value of that collateral and any deals reducing the outstanding loan.

Borrowers who are unwilling to be subjected to this level of openness should be given the opportunity to refinance their loans outside the NAMA and the 6 guaranteed banks.

This would allow to the state to quickly reduce its exposure while ensuring that what remains is dealt with in as transparent a way as possible.

However, where political concerns set in is that (as I pointed out to John McHale yesterday) most of our senior politicians and officials appear to be convinced that nationalisation is A Very Bad Thing. Against this background, it’s hard to imagine the pricing of assets that emerges from the NAMA process representing fair market value.

So, one reason to have a full and frank public debate about the strengths and weaknesses of nationalisation as an option is to hope that it can have some influence on those that matter in the NAMA process.

One chance in ten any of this goes ahead as there is no capital to spend anything near 90Bn. HSE was to let bodies go, but …….. couldn’t afford it.
Haven’t we wasted enough talk on this bank business? Pie in the sky, guy!
Remember Iceland!