Scott Rankin and Rossa White at Davy Research have a new quantitative analysis on what the banking crisis may cost in terms of (i) total system losses and (ii) re-cap costs (taking into account operating profits, capital ratios desired by govt etc.) and (iii) the % of that re-cap cost that may come from the government. They also look at how much of our long-term funding has been successfully done ytd and estimate the trajectory for government debt.
The paper is available here.
Kevin O’Rourke has written a wide-ranging opinion piece in today’s Irish Times: you can read it here.
I have written before about the incisive and articulate contributions of Bo Lundgren, the Swedish Finance Minister in charge during their banking crisis of the early 1990s. Lundgren was in Dublin on Tuesday, giving a talk at the Institute of International and European Affairs and testifying before the Oireachtas Committee on Finance and the Public Service. A productive guy, he also appeared on Morning Ireland. Here’s a link to his interview on that show (scroll down to find it) which has lots of interesting material. I will post a link to the transcript of his Oireachtas appearance when it is put up.
I think there are statements in Lundgren’s Morning Ireland interview which could be probably be latched on to by all sides of the debate on banking being played out on this blog. Rather than attempt to score points on this, I will only note that Lungren argues that a political consensus greatly helps when dealing with a banking crisis (about 7 minutes in).
In the Irish context, perhaps the key issue causing political controversy is the price that NAMA will pay for the assets. In Sweden this was set by an independent Valuation Committee overseen by a cross-party board. The emerging details suggest that the price that NAMA pays will come from a complex valuation process recommended to the NAMA officials by HSBC (the IT today reported that 370 categories of information must be provided by banks on each developer on the loan books so that HSBC can use this information to develop a valuation mechanism.)
In relation to this, let me put forward a suggestion that could potentially lead to all-party support for the government’s approach, which Lundgren viewed as crucial: Appoint a cross-party board to approve NAMA’s pricing of assets being transferred. I think it might be hard for opposition politicians to turn down an offer like this and it could be a way to address well-founded opposition concerns about potential losses to the taxpayer as well as less well-founded concerns such as the idea that NAMA is a bailout for developers.
If the only solid support for NAMA’s pricing mechanism comes from representatives of an unpopular government, then it’s hard to see how this process will be successfully sold to a public that is already highly concerned (not to mention angry) about the potential costs to the taxpayer of solving the banking crisis.
Readers of this blog might recall my support for the establishment of something modelled on the UK Government Economic Service. I was sad to hear of the passing last week of a great Irish economist though perhaps one of the least known – Norman Glass – who was in many ways one of the architects of the GES.
The Guardian obituary is at http://www.guardian.co.uk/politics/2009/jun/29/obituary-norman-glass
Norman was a pioneer in economics within policy circles. He was the first economist in the UK Department of Health for example in the early 1970s. But it was his time at the Treasury where he really made his impact, becoming in effect the Chief Microeconomist and the driver of the microeconomic revival at the Treasury during the early days of Blair and Brown particularly in the aftermath of the Bank of England independence move. The development of the working families tax credit, the innovations in linking labour supply policy and welfare strategies, major initiatives in education and health – Norman was central to all of these moves and to the early success of the ‘New Labour’ era. Norman also developed an interest in the early skills formation agenda, designing SureStart (and later became a vocal critic of what the UK Government did with that programme in letting it become bloated and without direction). On retirement from the Treasury he went on to lead NatCen, perhaps the largest and best social research company in Europe.
Norman was a complete gentleman, quietly interested in what went on in Irish economics, hugely supportive of students and researchers who made contact with him. He is also perhaps amongst the most influential Irishmen of the late 20th century, albeit also one of the most modest and ‘backroom’, completely anonymous in his homeland.
I thought it might be interesting to readers to learn about Norman, but in passing I can’t help but think that as we face up to the consequences of terrible decisionmaking in economic policy over the past 15 years or so, and how little evidence there is of clever thinking in economics within the Irish civil service, one of the most important figures in policy decision making and in creating the infrastructure for economics in Government in the UK system, was an Irish economist. Knowing Norman, I suspect he would have found that funny too!
Over the past couple of months, I’ve been surprised at how little real debate there has been about the government’s Smart Economy strategy. Monday’s Irish Times Innovation supplement had a useful article discussing the economist-free Innovation Task Force that I mentioned last week.
As one might expect, the article contains some enthusiastic comments from some members of the Task Force—industrial policy experts will recognise the idea of the strategy succeeding by “picking winners.” In addition, however, the article also quotes some less enthusiastic economists—me and UCC’s Declan Jordan. The Times also carried another article from Declan, which together with his earlier article from April, represent important contributions to the debate on these crucial issues.