The statement by Brian Lenihan is here.
The Guardian reported this week on the opening of a fraud investigation in the UK into some of the activities of the UK component of the Icelandic bank Kaupthing: you can read the article here.
Eurointelligence today carries an interesting news report
Sweden proposes stability tax
The Swedish finance minister Anders Borgh has written to his EU colleagues in favour a stability tax levied on banks who proceeds could be used for future bail-outs. Sweden has already imposed a tax of 0.0036% of bank liabilities. FT Deutschland points out that this is not a Tobin tax on bank transactions. Sweden has introduced this tax this year, and expects the revenue from this tax to grow to 2.5% of GDP in fifteen years.
Such a ‘rainy day’ fund would have been helpful during the current crisis (although there is a classic moral hazard counter-argument). Indeed, I had previously suggested the establishment of such a fund as part of Ireland’s preparations for EMU membership, given the fiscal costs that accrue in the event of banking crisis. My contribution can be downloaded here. The difference is that the Swedish fund is financed by a tax on the banking sector, whereas I had in mind a fund to be accumulated from general tax revenues.
Colm McCarthy’s suggestion that an inquiry into what went wrong is gaining some level of support in political circles. While there is plenty of material to digest in terms of what went wrong locally, there is also a lot of interest in understanding what went wrong in the international financial system. Part of the debate concerns the role of economists, especially in terms of forecasting such crises.
More recently, a group associated with the British Academy wrote a letter to the Queen to answer her question to Luis Garicano of the LSE as to “if these things are so large, how come everyone missed it?”, while Robert Lucas defended mainstream macroeconomics in the Economist magazine in this article.
An important dimension of this debate is the relative roles of economists in policy organisations, the financial sector and academia in assessing the risks of a crisis and speaking out on these risks. While some of the debate has focused on the role of academic economists, it is maybe more difficult to evaluate from the outside the performance of economists in policy organisations in providing risk assessment, since their advice is often confidential. In this regard, the external evaluations of the performance of the IMF in previous international crises sets an interesting precedent, with the Independent Evaluation Office now playing this role on a regular basis.
In relation to Ireland, the testimony of Kevin Cardiff of the Department of Finance at a recent Oireachtas Committee hearing is quite interesting in explaining the evolution of the thinking of the Department in the run up to the crisis. You can read the transcript here.
The ECB has released a useful description of the measures taken by each country in rescuing its banking system: you can download it here.