ON 16 September Fianna Fail’s Brian Lenihan is set to tell the Dail the price he intends to pay for the banks’ toxic loans. The figure is expected to be more than €50 billion. It could be as high as €70 billion.
This is a truly monumental bailout for the banks. The NAMA bailout is likely to be more than ten times the size of the entire “menu” of cuts proposed by An Bord Snip.
Lenihan is proposing that the banks be paid a “long term market valuation” for the dodgy loans. The horrible irony of this is that Fianna Fail has spent the last decade lecturing the Irish people on the wonders of the capitalist market. Now when it comes to one of the biggest decisions in the history of the State they refuse to countenance paying market prices and instead plan to pay above market valuations.
NAMA will only be able to break even in the long run by significantly increasing these values, that is by inflating another property bubble. A more likely scenario is that the sale of toxic assets over an extended period will leave the taxpayer with ultimate losses running into multiple billions.
Toxic loans should not be bought from the banks in the first place. Wealthy bank shareholders and bondholders are the ones who should pay.
The banks are backed by about €150 billion worth of bonds. The bondholders include enormous capitalist institutions such as sovereign wealth funds, hedge funds and other banks. These outfits must not be bailed out.
The Socialist Party favours “socialist nationalisation” of the banks to tackle the crisis. We use this term to distinguish ourselves from those such as the Labour Party who favour nationalising the banks, injecting public funds to nurse them back to profit, then privatising them once more.
Socialist nationalisation would involve sacking the boards of the banks and putting directly elected representatives from society and from the banks’ workforce, backed by supportive experts, in charge.
It would involve seizing the assets (including personal wealth) of developers unable to repay loans and using these to provide social and affordable housing, community facilities, schools, etc.
That’s the way to resolve the banking crisis in favour of ordinary people rather than at their expense.
By Councillor Mick Barry
