By Christopher M. Quigley B.Sc., M.M.I.I., M.A.
Lastweek, on “black Thursday” the Irishgovernment in essence finally nationalized Allied Irish Bank. In response to the horrific national financial picturepainted by Mr. Brian Lenihan, Ireland’s finance minister, Peter Sutherland, former Irish attorney general, hit the media road. Mr.Sutherland’s mantra was similar to that previously presented by his acolyte Mr.Honohan (head of the Irish Central Bank). This mantra stated that though the figures were lamentable they were “manageable.”Now I have had a great deal of respect for Mr. Sutherland but as current events unfold I must respectively question hisjudgment. He points out that Ireland is not in “desperate” shape. He points outthat: “Ireland has funding up to 2011 and has 24 billion Euros in its Sovereign Wealth Fund.” Thus, in his estimation,Ireland will not go broke until 2013, at least. According to his policy it is“OK” for the government to continue to fully guarantee, and pay as they falldue, “retail” banking bonds. It is my argument that these bonds should have been negotiated down in September of 2008 when the Irish bank guarantee wasfirst issued ( See article: “ A Bank Guarantee Too Far”). Should we adopt the course advised by Mr. Sutherland it is quite conceivable that Ireland will go completely bankrupt around 2013-2014, with no practical strategy for recoveryon offer.
This gruesome fact has even been acknowledged, publically, by nonother than Mr. Bill Clinton former President of the United States of America.
The former attorney general’s approach flies in the face of alternative prudentcouncil and public opinion. This council takes the view similar to that of aged grandparents who have saved all their lives and wish to present a legacy totheir grandchildren. These grandparents want these savings fostered, cherishedand grown. However, Mr. Sutherland wants to treat this treasure as if he were as a spoilt teenager. He seeks to squander it immediately and gamble this resource away on reckless bailing out of bondholders who lent money on risky land deals.Public opinion and international experts have pointed out that these sovereignwealth funds are the base through which Ireland could build its future. These funds could be used to set up a new, free and unencumbered National Irish Commercial Bank. This bank would get Irish credit and Irish commerce moving again. And the maths of this strategy makes sense. Under the new Basle banking agreement banks may lend up to 33 times their unencumbered cash base. This means that thesovereign wealth fund could be used to create credit in the amount of 24Billion multiplied by 33, which equals 792 billion. Almost a trillion Euros.This is the productive legacy the grandparents want for their savings. Not the squandering of hard saved assets wasted on transient speculators. These assets are Ireland’s Phoenix resource. The sovereign wealth fund is a pension fund not a teenage holiday stipend.
If Peter Sutherland’s views continue to be adopted as policy by the Department ofFinance, Ireland without its sovereign wealth fund intact, will be broke and vulnerable. In its inevitable bankruptcy Ireland’s “family silver” will eventually be put on the auction block by the IMF and theECB. Irish banks, airports, power plants, power grids, sea ports, roads, airspace, semi-states, media assets, railways, forests, lakes, water, remaining mineral rights, all will be up for grabs. The only folk with money or credit to fundsuch acquisitions will be the friends, associates and financial alumnae of Mr.Sutherland who, as you may know, is the non-executive chairman of Goldman Sachs International, one of the biggest “vulture” banks in the world.
_________________________________ Christopher M. Quigley B.Sc., M.M.I.I., M.A. QuigleyCompany@gmail.com
An excellent piece of work But I would go further Mr Peter Southerland is nothing more than a carpetbagger and a Goldman Sachs insider . see http://www.rollingstone.com/politics/news/the-great-american-bubble-machine-20100405 “we need Mr Southerlands imput in the irish financial disaster like we need the plague”!