When Irish Eyes Are Crying | Business. A single decision sank Ireland, but when I ask Lenihan about it he becomes impatient, as if it isn’t a fit topic for conversation. It wasn’t much of a decision, he says, as he had no choice. The Irish financial markets are governed by rules rooted in English law, and under English law bondholders enjoy the same status as ordinary depositors. That is, it was against the law to protect the little people with deposits in the bank without also saving the big investors who owned Irish bank bonds. This rings a bell. When U.S. Treasury secretary Hank Paulson realized that allowing Lehman Brothers to fail was viewed not as brave and principled but catastrophic, he, too, claimed he’d done what he’d done because the law gave him no other option.
On September 30, 2008, in the heat of the moment, Lenihan gave the same reason for guaranteeing the banks’ debts that Merrill Lynch had given him: to prevent “contagion.” But there was once a time when the wishes of the E.C.B. didn’t matter to Ireland. NAMA Wine Lake. Stephen Collins and Groupthink. Writing in today’s Irish Times, Stephen Collins takes the following from the Nyberg report: It is probably no accident that some of the cheerleaders of the boom have now turned into leading prophets of doom. The same reckless, gambling instinct that fuelled admiration for Seán Fitzpatrick also underpins the “burn the bondholders and damn the consequences” philosophy.If there is one lesson from Nyberg it is the need for prudent economic management in the years ahead, with careful weight being given to the views of the European Commission and our EU partners.
I think it’s worth echoing Kevin O’Rourke’s previous warning about Mr. Collins and his history lessons. Mr. Collins thinks the lesson we should learn from the crisis is “Don’t be reckless. For me, the real message of Nyberg’s report is that Ireland’s economic and political establishment exhibited an extreme form of groupthink during the housing boom. And the report is very clear about the role played by groupthink. Ireland's future depends on breaking free from bailout - The Irish Times - Sat, May 07.
OPINION:Ireland is heading for bankruptcy, which would be catastrophic for a country that trades on its reputation as a safe place to do business, writes MORGAN KELLY WITH THE Irish Government on track to owe a quarter of a trillion euro by 2014, a prolonged and chaotic national bankruptcy is becoming inevitable. By the time the dust settles, Ireland’s last remaining asset, its reputation as a safe place from which to conduct business, will have been destroyed. Ireland is facing economic ruin. While most people would trace our ruin to to the bank guarantee of September 2008, the real error was in sticking with the guarantee long after it had become clear that the bank losses were insupportable.
As a respected academic expert on banking crises, Honohan commanded the international authority to have announced that the guarantee had been made in haste and with poor information, and would be replaced by a restructuring where bonds in the banks would be swapped for shares.