A Call for a Public Retraction from Garret Fitzgerald

In the last 2 years or more, serious academic economists such as Morgan Kelly, Karl Whelan and other contributors to this blog have been subject to a campaign of anti-intellectual abuse by the ‘leaders’ of public opinion in Ireland.  The ad hominem attacks on Brian Lucey were unforgiveable.  Some of these opinion formers (those who work in the financial services sector) may shortly be unemployed.  Those who remain should be shunned, certainly by academics.

However one name sticks out – former Taoiseach Garret Fitzgerald.  Let me make my personal position clear: I can think of almost no one in Irish public life whom I have admired more. Let us not also forget that he served as a faculty member of the economics department in UCD for part of his career.  Consequently, his “gratuitously condescending comments….. regarding the NAMA dissenters”, to quote Kevin O’Rourke earlier today, were particularly puzzling.

Garret, I know you have the dignity to restore your reputation.  Now do so.

Lenihan Admits Banks Couldn’t Be Saved by the State

On This Week on RTE Radio One, just now, Brian Lenihan has admitted that his banking policies failed in the sense that the banking problem proved too big for the state to solve on its own.

The audio is now available here. Here’s the exchange about the failure of banking policies:

Richard Crowley: Our strategy failed. Could you not admit that now?

Brian Lenihan:  Yes it did in the sense that the banks were too big a problem for the country. I accept that.

Richard Crowley:  And the steps you took were not enough to prevent it.

Brian Lenihan:  The steps could not, given the limited resources a small state has. Yes, I accept all that. But nobody has suggested they were the wrong steps.

The incredibly depressing thing about the banking meltdown is how predictable it all was. Click here for a post from a year ago that links to a presentation I gave to the Labour Party titled “The Banks After NAMA.” A few highlighted phrases:

“government argues that the NAMA loan transfers will fix our banks and get credit flowing. There are good reasons to believe that this is not the case”

“The banks have not developed a sustainable new funding model.”

“more losses to come: The severity of this recession will trigger big losses on mortgages, business loans, credit cards”

“major banks are seriously undercapitalised relative to the size of their balance sheets.”

“the ECB’s unlimited lending policy is likely to come to an end over the next year or so. What then?”

I guess we have an answer now to the last question.

Ireland: A Punt Too Far

This analysis piece in the FT provides a useful timeline of the international dynamics behind the bailout.

BARCAP: An EU/IMF Programme Could End the Irish Crisis

Antonio Garcia Pascual and Piero Ghezzi explain how a combination of a bank restructuring/recapitalisation fund and a line of credit for the sovereign can stabilise the Irish situation in this report.

Note:  In relation to the discussion of the Goldman Sachs report (and presumably similar comments can be made about this report from Barclays Capital), it is certainly sensible to be aware of potential institutional biases. However, the individual economists working at these types of institutions are typically top quality (PhDs from top-level universities, strong academic publication records and/or experience in policy organisations) and, beyond any institutional pressures, have powerful individual career incentives to maintain a reputation for high-quality macroeconomic analysis.

Ireland Handbook from Goldman Sachs

In its latest European Weekly Analyst issue,  the Goldman Sachs team run the numbers on possible bank losses in Ireland (the central scenario has NAMA being too pessimistic about likely losses). In addition, they provide a useful Q&A on the bailout talks.  You can download it here.