Worst decision in the history of the state

I’m going to stick my neck out and make a prediction. I believe that if you ask this question in 5 years time the answer will be NAMA as a catch-all term for the taxpayer support of dysfunctional banks. NAMA fuels the nightmares of the public’s imagination. The amounts are staggering. Effectively Anglo has already cost over 12Bn and could cost another 10Bn. These are just estimates remember. NAMA requires a recovery in the property market to avoid the “fire-sale” losses Lenihan fears in an immediate wind-down.

To say that we could need another 10Bn is like saying that it might be a fine day on March 30th next year. The variables are arguably too complex to give a good prediction. This is partially why Lenihan is so vague about the period in which the promisory note backing the recapitalisation is payable. He just doesn’t know. It assumes a solidity to the rest of the loan book and the Irish economy which appears difficult to justify given what’s transpired over the past 18 months. Ireland Inc’s actual exposure is only limited by the size of the loan book and depositor base. We cannot legally compel depositors to stay with the bank, no matter how tempting the lock-in interest rates are.

But it’s wrong to label NAMA as the worst decision in the history of the state. It’s an effect rather than a root cause. The decision to include Anglo in the guaranteed banks under the terms of the original guarantee was the tipping of a domino that has led to the doubling of our national debt today. The government believed the bullshit suggestion that Anglo would cost the state a mere 1.5Bn. Once we’d made the promise, we felt obligated to remain consistent to the professed rationale that Anglo was systemically important and couldn’t be allowed to collapse. Everything follows from that.

Whatever about witch hunts, Lenihan didn’t make this decision himself. The people of Ireland deserve a forensic examination of the hows/whys of a decision that has proven very costly.