The Roubini verdict on the recapitalisations

Tom McDonnell01/04/2011

Tom McDonnell: Credibility is a hard earned thing. The commentariat is overrun with the views of so-called experts whose predictions have been...mixed.

Professor Nouriel Roubini of NYU, on the other hand, gained fame in the US for his prescient predictions about the economic crash.

So what is Professor Roubini saying about the latest bank news out of Ireland?

“Taking all of the losses of the banking system and putting them on the balance sheet of the government doesn’t make sense,”... “Eventually, the back of the government will be broken.”

Roubini argues that a better solution would be to take the senior secured and unsecured debt of the banks “reduce it, convert it into equity so you recapitalize the banks that way and you’re not adding further losses to the balance sheet of the government. Otherwise, you’re going to have not only a banking crisis, but also a sovereign debt crisis.”

The full article is here

Time will tell if he is right.

Posted in: Banking and finance

Tagged with: banking

Dr Tom McDonnell

McDonnell, Tom

Tom McDonnell is senior economist at the NERI and is responsible for among other things, NERI's analysis of the Republic of Ireland economy including risks, trends and forecasts. He specialises in economic growth theory, the economics of innovation, the Irish and European economies, and fiscal policy. He previously worked as an economist at TASC and before that was a lecturer in economics at NUI Galway and at DCU. He has also taught at Maynooth University.

Tom obtained his PhD in economics from NUI Galway.


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