Madam, - A number of noted academics argue that the Irish banking system needs large injections of capital. They say that "the appropriate and only source of such funds is government, conditional on the true extent of the impairment to the banks loan book being ascertained and made public prior to, and as a condition of, investment" (Opinion Analysis, November 17th).
Unfortunately, they don't appear to consider how bad this impairment may be. What if, after considering the "true extent of the impairment", it is found that the banks' potential losses are so big that the banks are effectively bust. In such circumstances would they still consider investing in them to be a good idea?
They then go on to espouse the beauty of warrants and how the State can get 6 to 7 per cent guaranteed on such warrants. Well, there is no guarantee; and interest can be paid only if the banks are profitable.
They then argue that this investment may have an upside and provide a "good return". Well it might. Or maybe it will be a disaster. Who knows? Again, nothing is guaranteed.
They finish by stating that "such an investment would provide a signal to the markets that the regulatory bodies in the State were convinced of the long-term quality of the banking system" Again, they presume that such State bodies are so convinced and, more importantly, have reason to be so convinced.
It is very disappointing that a group of such noted academics should advance a solution without fully assessing the problem. - Yours, etc,
Madam, - It is most disappointing to read in your paper of the continuing reluctance or inability of the main banks to support small and medium-sized businesses during the current economic downturn. It looks as if this state of affairs will continue because of the banks' huge exposure to the collapsing property market.
A possible solution would be for hard-pressed and capable business men and women to form their own bank on co-operative lines. After all, the co-operative movement was one of the foundation stones of the State. - Yours, etc,