David McWilliams continues to question the sanity of the government’s approach to the banking crisis. His latest column, in yesterday’s Sunday Business Post, draws on his experience as a trader in the defaulted-debt market. Echoing remarks made last October by Nobel laureate, Joseph Stiglitz, McWilliams says capitalism should be let run its course and the bank should be wound down.
Yes, the bondholders will lose money, but that happens all the time when businesses fail. It is literally an every day occurrence. Bonds are less risky than shares, so the bondholders will get some of their money back. Shareholders would not be so lucky. But then again, that is capitalism. No one said shares are a sure thing, although many people during the property and credit bubble seemed to think they were.
McWilliams also dispels the myth that armageddon is in store if we let Anglo fail. In fact, the opposite is true. Investors looking at Ireland will want to see a country on the path to recovery. That’s going to be pretty hard with the millstone of Anglo’s debt tied around our necks.
Below is Stiglitz’s interview where he called NAMA “criminal.”