David McWilliams declared the guarantee for Irish banks as a masterstroke today, claiming that without it on Monday morning Ireland would not have a banking system. McWilliams criticised the banks as having recklessly gambled with a generation of Irish citizens' profits, speculating on interest rates and property markets. He called for the government to encourage re-capitalisation and possibly force consolidation. He accused the U.S and U.K of "playing pass the parcel" while Ireland had the bravery to make an audacious move to save the banking system.
Mc Williams was speaking to the annual conference of the Irish Small and Medium Enterprises Association (ISME) in Croke Park. ISME Chairman J.J. Killian stated, "The biggest boghole that we could fall into is thinking that everything is okay". According to McWilliams, the guarantee was only the first phase in what he described as the beginning of the end of the crisis. The second phase that McWilliams sees as imperative is the Irish government's continued involvement in the banking system. Mc Williams set out that part of the two year process would see the boards and senior management of the banks ousted. In response to a question regarding the culpability of bankers, the government and pension fund managers, he suggested that Ireland may have to look back a generation to those who have a different banking ethos, claiming that it was the greed and reckless nature of the 90's that were at fault. He warned however, against the desire for recrimination without forethought, as this would result in loss of those who still may be of value. McWilliams offered that in a small country like Ireland one cannot change the system without changing the personnel.
Making repeated reference to the Japanese banking crisis of the 1990's which resulted in a 14 year recession McWilliams identifies bad debts as the main obstacle for Irish banks. The government he insists must force the banks to write of these bad debts. To do this the banks need to generate new money. McWilliams sees only three options in the present climate. One option would see the government pump money into the banks in such a way that they gain interest and ultimately find a return, similar to what has been done in the U.S and U.K but working on a better model that would ensure a return. Another choice would be the Warren Buffet/Goldman Sachs model of a massive investor putting money in with stipulations of large interest, excellent returns and choice of shares. The final option would be the sale of Irish banks to foreign ones. McWilliams would prefer to see a combination of these and that the Irish state would have a share. Ideally, Brian Lenehan would see the banks working for him.
McWilliams believes that if we follow this programme Ireland can lift themselves out of recession within two years.
George Lee, who was chairing the conference, called the guarantee necessary but warned that somewhere along the line the Irish taxpayer would have to pay. Lee described the measure as a “sticky plaster”. The budget deficit, which has reached approximately 9.4 million, was mentioned as another consequence of poor management that Irish taxpayers would have to bear. Speaking on McWilliams’ comment that short sellers and investment bankers underestimate the power of a sovereign state to wage war on those who pray on weak sectors, he described the Irish tactic as guerrilla warfare. With the announcement that Greece is to follow Ireland’s lead, it was hinted that the meeting in Paris of the leaders from the largest EU countries would certainly be discussing the actions of Irish Government.
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